Date laid: 31 January 2019
Parliamentary procedure: affirmative
The main purpose of these draft Regulations is to introduce a national framework for the endorsement and adoption of International Financial Reporting Standards (IFRS) after the UK’s withdrawal from the EU. Subject to further Regulations, the power to endorse and adopt IFRS after exit is to be transferred to a Board hosted by the Financial Reporting Council (FRC). In the context of a recent review of the performance of the FRC and the Government’s commitment to fundamental reform, the Sub-Committee is of the view that the Secretary of State will need to satisfy himself as to the FRC’s ability to provide effective oversight of this important function.
The draft Regulations are drawn to the special attention of the House on the ground that they give rise to issues of public policy likely to be of interest to the House.
4.The Department for Business, Energy and Industrial Strategy (BEIS) has laid these draft Regulations with an Explanatory Memorandum (EM).
5.The main purpose of the instrument is to introduce a national framework for the endorsement and adoption of International Financial Reporting Standards (IFRS) after the UK’s withdrawal from the EU. The instrument also proposes a number of consequential amendments and transitional provisions in relation to European Public Limited-Liability Companies (also known as Societas Europaea or SEs) which, under separate Regulations, will automatically convert on exit day to a new UK corporate form, UK Societas. These amendments are not explored further in this report.
6.BEIS states in the EM that “it is in the UK’s interest to maintain convergence with IFRS after EU Exit”, highlighting that “the standards are used globally, by over 140 jurisdictions including 15 out of the 20 G20 countries” and that “IFRS bring consistency to financial statements and are widely recognised by investors who value the transparency afforded in company reporting and the ability to compare the financial statements of companies in the world”. BEIS concludes that the “instrument is therefore consistent with the UK Government’s policy that after departure from the EU, the UK will retain its reputation as a global hub for business”.
7.Under the current arrangements, as set out in the EU’s International Accounting Standards (IAS) Regulation (“the IAS Regulation”), decisions on the endorsement and adoption of IFRS rest with the European Commission. The international accounting standards in the UK on exit day will be those which were endorsed and adopted by the European Commission as having effect immediately before exit day.
8.BEIS explains that without a UK framework for endorsement and adoption of IFRS, any future revisions to existing standards or the adoption of new standards would not be possible and UK standards would quickly become out of date. This instrument therefore proposes to transfer the power to decide on the endorsement and adoption of IFRS for use in the UK after exit to the Secretary of State. The use of this power is to be subject to a prescribed process, including compulsory assessment criteria and requirements to consult on and publish final decisions. The Department explains that under the proposed criteria, IFRS cannot be adopted for use in the UK, for example, if they are contrary to established principles for financial reporting: the standards must provide a “true and fair” view of an undertaking’s financial position, as required by section 393 of the Companies Act 2006, and be conducive to “long term public good”. These principles are set out in Article 3 of the IAS Regulation. The instrument also includes a statutory duty on the Secretary of State to report to Parliament annually on the discharge of the functions provided for in the Regulations.
9.The instrument proposes a further power for the Secretary of State to sub-delegate the decision-making function in relation to IFRS to another body. This body is not specified in the draft Regulations, but the instrument proposes a duty for the body to report on its activities annually to the Secretary of State, and for the Secretary of State to lay these annual reports before Parliament. The Department explains that the policy intention is for a subsequent instrument, subject to the affirmative procedure, to delegate the IFRS decision-making function to a UK IFRS Endorsement Board which is to be “hosted” by the Financial Reporting Council (FRC), the UK’s regulator of auditors, accountants and actuaries. While BEIS has said that the intention is that the Board should be operationally independent, we question whether its relationship with the FRC as its “host” will readily lend itself to achieving this intention.
10.We asked BEIS about the expected timetable for establishing the Board. The Department told us that:
“The statutory instrument to sub-delegate the decision-making function [ … ] is expected to be laid in Parliament before the summer recess. It was not possible to take the power to delegate the IFRS endorsement function and use it in the same Statutory Instrument, which is why we need to use two Statutory Instruments. Due to lack of Parliamentary time between now and exit day we will not be able to lay the second SI before March 2019. Looking at the forward programme from the International Accounting Standards Board on changes to the IFRS standards in the next few months, we expect the number of changes to the standards that the [Secretary of State] will need to endorse and adopt to be minimal.”
11.The Sub-Committee notes the recent review and report on the performance of the FRC and the Department’s commitment to reform it fundamentally. Against this background, we asked whether the Department is confident that the FRC (or a successor body) will have the capacity to host the Board and whether the proposed approach will be effective and guard the public interest. We were told that:
“The Department is currently working with the FRC to build capacity to set up the new Endorsement Board (EB) in time for EU Exit. We have worked extensively with stakeholders including businesses, their advisers and investors as well as other market regulators in developing this approach. Stakeholders input helped ensure that robust consultation and transparency requirements as well as a specific consideration of the long term public good are included in the SI [Statutory Instrument]. In addition, stakeholder input helped us define the extent of the FRC’s role in relation to the new Endorsement Board–the FRC is setting up the infrastructure to host the Board and to provide oversight, but the policy intention is that the Board members and the Chair will be operationally independent. In addition, the Chair of the Endorsement Board will be recruited by the public appointments process. We believe these measures will help ensure that the new Endorsement Board is operationally independent from the FRC. As a result, we can be confident that the approach will be effective and will guard the public interest.”
12.These draft Regulations propose important changes to the way IFRS will be endorsed and adopted in the UK after EU exit. The policy intention is to delegate this function to a Board hosted by the FRC. We note the Department’s explanation regarding capacity-building at the FRC and the planned operational independence of the Board. Given the recent criticism of the performance of the FRC, however, and the Department’s commitment to fundamental reform, it will be important that the Secretary of State satisfies himself as to the FRC’s ability to provide effective oversight in this important area. We draw the draft Regulations to the special attention of the House, on the ground that they give rise to issues of public policy likely to be of interest to the House.
Date laid: 4 February 2019
Parliamentary procedure: affirmative
UK consumers travelling in the EU currently have the guarantee of surcharge-free roaming. This means consumers can use their mobile devices to make calls, send texts and use mobile data services for no more than they would be charged when in the UK. This surcharge-free roaming, known as “Roam Like at Home”, is underpinned by the EU Roaming Regulation. The EU Regulation also regulates the charges mobile operators can charge each other for providing roaming services.
The Department for Digital, Culture, Media and Sport (DCMS) states that the requirements on UK mobile operators to guarantee surcharge-free roaming for customers in the EU are inoperable after exit. This is because the UK will no longer be part of the EU regulatory system for mobile roaming that limits the charges that EU operators can place on UK operators. DCMS states that costs of regulating retail roaming charges without harmonised wholesale charges might lead to roaming becoming unaffordable for many operators. The instrument therefore removes the requirement on UK mobile operators to guarantee surcharge-free roaming for customers in the EU after exit.
Other consumer protections that are not contingent on membership of the EU regulatory framework are retained. These include the current transparency obligations on mobile operators to inform customers travelling abroad that they have reached 80% and 100% of their data allowance; and the financial limit provisions set out in the Roaming Regulation, converting the €50 limit to £45 so that, after spending £45, the customer is not able to consume any more data until they make an active choice to continue.
The draft Regulations are drawn to the special attention of the House on the ground that they give rise to issues of public policy likely to be of interest to the House.
13.The Department for Digital, Culture, Media and Sport (DCMS) has laid these draft Regulations with an Explanatory Memorandum (EM) and Impact Assessment (IA). DCMS states that this instrument is being made in order to address deficiencies arising from the withdrawal of the UK from the EU in legislation relating to mobile roaming, to ensure that the legislation continues to operate effectively after exit.
14.The EU Roaming Regulation (“the Roaming Regulation”) regulates the charges that mobile network operators charge each other for providing services in other EU Member States (“wholesale charges”). It also regulates the charges that mobile network operators can charge their customers (“retail charges”). The Roaming Regulation applies across the EU and the European Economic Area (EEA).
15.The main provision in the current Roaming Regulation states that consumers cannot be charged more for using mobile services when travelling in the EU than they would be in their home Member State (that is, roaming is surcharge-free). The Roaming Regulation also sets out transparency obligations on mobile operators, requiring operators to inform their customers when travelling abroad when they have reached 80% and 100% of their data allowance, and to take reasonable steps to protect customers from paying roaming charges for inadvertently accessed roaming services. In addition, the Roaming Regulation sets a financial limit that caps the spend of customers’ mobile data roaming overseas: after spending €50, the customer will not be able to consume any more data until they make an active choice to continue.
16.The instrument removes the requirement on UK mobile operators to guarantee surcharge-free roaming for customers in the EU after exit. However, DCMS says that mobile operators will not be prevented from making and honouring commercial arrangements with mobile operators in the EU - and beyond the EU - to deliver the services their customers expect, including roaming arrangements. Surcharge-free roaming for UK consumers travelling in the EU may therefore endure due to commercial pressures or customer expectations. The IA notes that “Some mobile operators (3, EE, O2 and Vodafone) have stated that they have no current plans to change their approach to mobile roaming after EU Exit”.
17.The Roaming Regulation was first adopted in 2007, putting caps on wholesale and retail roaming charges for voice calls; its provisions have been extended over time to cover text and data services and have consistently pushed down the wholesale charges operators can charge each other and the retail charges they can charge their customers. The Roaming Regulation has now evolved so that consumers can “Roam Like at Home” (RLAH), meaning retail roaming prices cannot exceed a consumer’s normal, domestic prices. This retail obligation is underpinned by caps on the wholesale charges which European mobile operators can charge one another for handling roaming traffic.
18.The IA states that “RLAH has only been in force since June 2017 and so we do not yet have more than a year’s worth of data to evaluate the impact of this change. However, consumers have embraced RLAH. Latest research shows a fourfold growth in data roaming since the measure was introduced.”
19.The IA also states that: “Following the UK’s exit from the EU, the existing EU regulations which enable UK mobile network operators access to capped wholesale rates in Member States will cease to apply. The arrangements that replace these rules will be subject to negotiation between the UK and EU”. In the event of ‘no deal’, DCMS says that no new arrangements with the EU would be in place at the point of exit, and that this instrument therefore aims to correct deficiencies in the retained Roaming Regulation in the event there is no negotiated arrangement. The House may wish to press the Minister about the implications, in particular, of the disapplication of capped wholesale rates for those living near the border between Northern Ireland and the Republic of Ireland who may be exposed to a risk of inadvertent roaming.
20.In the IA, DCMS explains that the purpose of the instrument is to ensure, in the event of ‘no deal’, that:
“UK mobile operators would not face ‘one-sided’ regulation, i.e. the risk that the retail rates they can charge are capped, but there is no control over the rates they have to pay out to EU network operators - known as ‘wholesale rates’. Therefore the SI would avoid a situation in which UK operators potentially face significant losses. It therefore mitigates the risk that mobile operators deactivate roaming capability (which they could do to protect themselves against the losses mentioned above). In addition, the SI would also reduce the risk of legal challenge arising from the imposition of one-sided regulation. Finally, it would allow operators some flexibility: in a competitive market they might decide it is in their commercial interests to continue with EU surcharge-free mobile roaming. They might also be able to secure appropriate commercial arrangements with EU operators to allow surcharge-free roaming to endure. The SI ensures there is no legal ambiguity upon EU Exit, replacing business uncertainty with legal clarity”.
21.The EM states that the Government have engaged with a wide range of stakeholders, including consumer, industry and regulatory bodies, in the process of developing the instrument; and that mobile operators have commented that, if there were no cap on the charges EU operators can apply to UK operators, any increases in costs would likely be passed on to customers, and that a limit on the costs that could be passed on to customers would affect the sustainability of certain roaming services. According to the EM, this might mean that roaming services could be removed altogether from some customers. We are concerned about the Government’s uncertainty on this issue. The House may wish to ask the Minister to provide a fuller explanation and greater clarity about the numbers likely to be affected.
22.The EM refers to discussions with consumer bodies, who expressed concerns that the removal of the requirement for UK operators to offer surcharge-free roaming would lead to the reintroduction of higher charges for customers travelling to the EU. The consumer bodies proposed that the Government should maintain surcharge-free roaming for UK customers - a proposal which the Government did not accept because of the view that the costs of regulating retail roaming charges without harmonised wholesale charges (after EU exit) may lead to roaming becoming unaffordable for many operators.
23.We obtained additional information from DCMS about views expressed in consultation and we are publishing that information at Appendix 1 to this report.
24.The EM states that the impact on businesses that offer mobile roaming services will be to incur a limited one-off cost when familiarising themselves with the limited changes to regulations and converting the €50 financial limit to £45 for automated notifications to customers.
25.The IA states that:
“[i]f operators were to pass on costs as roaming surcharges, consumers (both business and individuals) would be able to consume fewer roaming services at a similar price [ … ] UK operators losing access to capped wholesale rates is a function of no longer being party to the EU Roaming Regulation. It is not a function of this SI. Other costs, such as those potentially arising from operator market power, are too uncertain to quantify.”
26.We asked DCMS whether it had done any modelling of the possible effects on consumers’ bills of removing the guarantee of surcharge-free roaming. The Department said that the IA accompanying the instrument did not evaluate the possible effects of removing the EU guarantee of surcharge-free roaming, but that it did compare the options of either explicitly removing or explicitly retaining retail caps on roaming after the caps on wholesale charges fall away. DCMS said that the IA highlighted some other potential impacts on consumers, including possible costs if operators re-introduced roaming surcharges independently of changes to wholesale prices, and a possible loss of consumer access to any roaming services. However, it added that “[t]he impact assessment discusses why these effects are too uncertain to quantify.” The House may wish to invite the Minister to explain why the possible effects of removing the EU guarantee of surcharge-free roaming were not evaluated, and press for further information on the likely impact on individual and business users.
27.DCMS has laid this instrument to prepare for the possibility of a ‘no deal’ exit from the EU, which would mean that no new arrangements with the EU would be in place at that point. Leaving the EU in such circumstances would mean that the wholesale rates which EU network operators charge UK operators would become unconstrained by regulation, and also that the rate which UK network operators charge EU operators would similarly be unconstrained. Harmonised wholesale charges, under the EU Roaming Regulation, have underpinned the offer of surcharge-free roaming. The instrument therefore removes the requirement on UK mobile operators (contained in the retained Regulation) to guarantee surcharge-free roaming for customers in the EU after exit. Given the potential significance of the draft Regulations for consumers and business users, we draw them to the special attention of the House on the ground that they give rise to issues of public policy likely to be of interest to the House.
Date laid: 7 February 2019
Parliamentary procedure: affirmative
With more than 600 pages, this is an exceptionally large and complex statutory instrument. According to the Department for Business, Energy and Industrial Strategy, the purpose is to ensure that there is no reduction in product safety or accuracy, or consumer protections, in a possible ‘no deal’ withdrawal of the UK from the EU. The instrument proposes amendments to a total of 38 legislative measures on product safety and metrology, including primary legislation, to correct deficiencies which arise from EU exit. The instrument had to be corrected and re-laid because of legal drafting errors in an earlier version of the draft Regulations.
While the Sub-Committee notes that there is an underlying policy coherence in the draft Regulations, we are concerned about the Department’s decision to combine so many different legislative measures in a single statutory instrument. We have raised these concerns with the Department and are not persuaded by its view that this approach has made the instrument more accessible and has assisted Parliament. We find that the chosen approach undermines the Sub-Committee’s ability to scrutinise the instrument effectively and reduces the time that is available to Parliament to debate the instrument and ask questions. We question whether the Department may have chosen this approach for its own convenience, rather than in the interest of Parliament or those affected by the proposals. We call on the Government to avoid combination instruments in the future, where the resulting size and complexity make it difficult to scrutinise and debate the proposals.
The Sub-Committee is also concerned about the uncertainty in relation to the impact that leaving the EU’s product safety regime in a ‘no deal’ scenario could have on UK consumers and businesses.
The draft Regulations are drawn to the special attention of the House on the ground that they give rise to issues of public policy likely to be of interest to the House.
28.The Department for Business, Energy and Industrial Strategy (BEIS) has laid these draft Regulations with an Explanatory Memorandum (EM) and an Impact Assessment (IA), as part of the Department’s contingency planning for a possible ‘no deal’ withdrawal from the EU. The Sub-Committee has also been provided with five factsheets which highlight and summarise some of the key aspects of the proposed changes.
29.BEIS says that the objective of the instrument is to ensure that there is no reduction in product safety or accuracy, or consumer protections, after EU exit. The Department explains that current requirements in relation to product safety and metrology (that is, products used for scientific and industrial measurement) will be maintained by retaining the appropriate EU obligations in UK law, so that products placed on the UK market must continue to meet substantially the same essential requirements. This is to provide continuity and certainty for business and maintain consumer confidence in the safety and accuracy of the relevant products.
30.The instrument proposes amendments to a total of 38 legislative measures on product safety and metrology, including primary legislation, to correct deficiencies which arise from EU exit. The instrument covers a substantial part of the manufacturing sector and a wide range of different product areas, including cosmetics, machinery, pressure equipment, electrical and electronic equipment, toys, measuring instruments and civil explosives. The IA estimates that around 63,000 UK manufacturers are involved in these industries, accounting for around £54 billion of the UK’s economy Gross Value Added (GVA), and that £63 billion worth of goods from these industries was exported to other EU countries in 2017, with around £104 billion imported from the EU.
31.This is the second version of the instrument that has been laid. Legal drafting errors in an earlier version required correction and relaying of the draft Regulations (see paragraph 57). The earlier version of the instrument was laid without an Impact Assessment (see paragraph 36).
32.According to BEIS, current product safety and metrology legislation places an obligation on manufacturers, importers and distributors to ensure that the products they place on the market are safe or accurate and comply with the relevant statutory requirements.
33.The Department explains that the current legislative framework consists of general requirements that apply to all consumer (non-food) goods, and specific requirements that apply to specific product categories, such as electrical goods and toys. The underlying principle, as set out in the General Product Safety Regulations 2005, is that all products must be safe under normal or reasonably foreseeable use. In the case of product-specific legislation, the legislation follows a framework developed at EU level and applied with adaptations to different product areas. Under this legislative framework, the manufacturer is responsible for undertaking an assessment of the product and for making a declaration that the product is compliant with the essential requirements. For some products, manufacturers may self-certify that the product meets the requirements. Products that present a greater risk are required to undergo an assessment by a third-party conformity assessment body known as a Notified Body (NB) that will produce the evidence for the manufacturer to provide a Declaration of Conformity. The product can then be marked with a conformity marking to demonstrate that the manufacturer attests that the product complies with the statutory requirements. In the EU this is commonly the CE (Conformité Européenne) marking, with other or supplementary markings used for certain products such as aerosols and measuring instruments.
34.The system currently operates on the basis of mutual recognition within the EU. National accreditation bodies within Member States ensure that all NBs meet the requirements set at EU level to ensure consistency and competence of NBs across the EU. Any business can then use any approved NB in any Member State to conduct their conformity assessment before placing products on the EU market. The UK statutory national accreditation body for NBs is the UK Accreditation Service. The main enforcing authorities are the Secretary of State, local authority trading standards and the Health and Safety Executive (HSE). They have specific duties and powers in relation to checking compliance with the statutory requirements to ensure the safety of products.
35.While this instrument largely proposes technical amendments to address deficiencies in retained EU legislation, several of the suggestions are more significant. They include proposals to:
36.The original instrument was laid without an IA. The EM to the original instrument stated that an IA with further analysis would be published to assist Parliament in its consideration of the instrument and to inform parliamentary debate. The Sub-Committee expects an IA to be published at the same time as the instrument is laid before Parliament; the Sub-Committee can scrutinise legislation effectively only once all relevant information is available. This is particularly important where the proposed legislation is complex as is the case with this instrument.
37.We raised this concern with the Department. BEIS told us that the expected impacts had been found to be de minimis and that there was therefore no requirement to publish a full IA, but, given the size and scale of the instrument, and in the interest of transparency, it was always the intention of the Department to publish an assessment of the impacts ahead of debate. The Sub-Committee notes that the Department has now laid an IA, alongside the corrected instrument and a revised EM. While we welcome that an IA has now been provided, we reiterate the general point that, where an IA is to be provided alongside an instrument, it is essential that it is laid at the same time as the instrument so that proper scrutiny can be undertaken within the standard timetable.
38.The Department has assessed the costs directly associated with the instrument to be largely familiarisation costs in relation to the new legislation and estimates these familiarisation costs to be around £19.6 million for some 241,000 businesses, equivalent to approximately £80 per business. While other additional transition and annual costs, including for the cosmetics industry, are referred to, the IA highlights that the wider impacts caused by the interaction between the UK’s withdrawal from the EU and the UK’s new product safety and metrology regime are out of the IA’s scope, as they are not caused by the changes proposed in the instrument but by EU exit itself. These wider costs include, for example, the potential requirement for UK manufacturers to arrange conformity assessments from an EU NB for products that they wish to export to the EU, or the costs of relabelling products.
39.The IA explains that while the Department has “regularly engaged with stakeholders and wherever possible [has] provided quantitative evidence”, this type of evidence “has been limited and difficult to source”, as “businesses are still unsure how they will respond in a ‘no deal’ situation and it is difficult to predict how they might behave”. The Department adds that “[c]osts may be commercially sensitive and therefore not available and many of the products affected do not have sector focussed manufacturing or trade data making it difficult to provide quantifiable direct costs”.
40.We take the view that the purpose of contingency regulations is to address the consequences of a ‘no deal’ exit. This includes setting out as comprehensively as possible how relevant stakeholders are likely to be affected in practice, including possible financial costs. The House requires this type of information to make an informed decision on whether the approach chosen by the Government represents the most effective solution in the circumstances.
41.The factsheets provided to the Sub-Committee explain that the UK will lose access to key EU databases, including the Rapid Alert System for Serious Risk (RAPEX) and the Information and Communication System for Market Surveillance (ICSMS), in a ‘no deal’ scenario. This impact is not mentioned in the published IA or EM. While the EM refers to the creation of a new UK market surveillance database that is to provide a mechanism for rapid product safety alerts and product recalls, it is not clear from the material provided by the Department whether the loss of access to information contained in the EU’s databases could lead to a reduction in protection of UK consumers. We raised this with BEIS who told us that:
“Information from RAPEX and other EU databases form only a small portion of the intelligence used by UK market surveillance Authorities. They also use a variety of other intelligence sources, including that received from cooperation with Customs Authorities, Border Force, from businesses and consumers to determine whether a product should be checked. Loss of access to EU databases therefore will not prevent UK market surveillance authorities from effectively conducting checks on products on the domestic market. Both ICSMS and RAPEX have public facing access that provides information on EU product safety issues and product recalls. We take the extra precaution of adding RAPEX updates to the BEIS Product Recall Campaign site.”
42.While we note the information provided by the Department, it is not clear whether access to the publicly facing elements of the EU product safety databases provides the same timely intelligence and safeguards in relation to product safety issues and product recalls as access to the databases themselves.
43.The IA also notes that leaving the EU’s CE marking system would impact on UK NBs which currently award new CE marks for products by UK and international manufacturers to be sold in the EU but will no longer be able to do so in a ‘no deal’ scenario. We asked BEIS for more information on this potential loss of business for UK NBs. The Department told us that:
“There are 176 Notified Bodies based in the UK in 2019. […] BEIS analysis suggests that in 2017 there were around 4,000 members of staff employed in support of Notified Body activity in the UK. […] We do not currently have data on the proportion of Notified Body activities which relates directly to products sold in the rest of the EU. In part this is because a product that requires assessment for sale in the rest of the EU also requires assessment for sale in the UK – i.e. there is no difference in process or requirements. However, from our engagement with Notified Bodies and manufacturers we do know that the access to the EU market that UK Notified Bodies provide is a very important part of the service they provide. […] The Government recognises the valuable role UK Notified Bodies play, which is why our no deal plans give them a clear ongoing role in ensuring products sold in the UK comply with the relevant rules.”
44.The Department added that:
“The Political Declaration on the Framework for the Future Relationship, published on 25 November 2018, sets out that both the UK and EU are committed to a comprehensive partnership, with as close a trading relationship in goods as possible. It also sets out that ‘the Parties envisage comprehensive arrangements that will create a free trade area, combining deep regulatory and customs cooperation underpinned by provisions ensuring a level playing field for open and fair competition’. This text refers to common principles in the field of conformity assessment, i.e. the approval of products.”
45.The Sub-Committee notes that there is considerable uncertainty in relation to the impact that leaving the EU’s product safety regime could have on UK consumers and businesses, including UK NBs that currently award new CE marks but will no longer be able to do so in a ‘no deal’ exit. We are particularly concerned about the impact that the loss of access to EU product safety databases could have on UK consumers. We regret that the Department has not provided more information about this and the risk it poses.
46.At over 600 pages, this statutory instrument is exceptionally large and complex. The Sub-Committee believes that this size of instrument may be unprecedented. BEIS provides an explanation in the EM, highlighting that having all amendments covering different product areas and metrology in one instrument “will enable Parliament to consider [the proposals] in the round” and provide users with a “single piece of domestic legislation that contains all requirements”. The Department adds that a key reason for the length of the instrument is that technical annexes from current EU Directives, setting out many of the detailed provisions, have been reproduced in the schedules. According to BEIS, the annexes account for more than 200 pages of the instrument.
47.Given the exceptional size and complexity of the instrument, we raised concerns about this approach and its impact on the transparency of the legislation and Parliament’s ability to scrutinise the proposals with the Minister for Small Business, Consumers and Corporate Responsibility and Secretary of State. The Minister told us that:
“We saw clear advantages in the bundling approach as the framework for product safety and metrology is substantially the same over nearly all the products; therefore, the amendments are being laid together because there are so many cross-cutting issues.”
48.With regard to parliamentary scrutiny, the Minister explained that:
“We have considered the impact on Parliament and conclude that the consolidated approach of one SI [Statutory Instrument] has the benefit of reducing pressure on Parliamentary time because it allows for one debate on the same issues that arise in respect of the different product areas. An alternative approach of separating similar product areas into smaller bundles or individual SIs would result in multiple debates and considerable repetition.”
49.On the accessibility and transparency of the instrument, the Minister explained that:
“Whilst the size of the SI could be considered unusual, it will allow all the issues to be discussed in the light of the whole product safety and metrology landscape. Thereby increasing transparency and providing reassurance to MPs and consumers alike that we are not making fundamental policy changes or reducing protections in any way as a result of action to move EU law into UK domestic law on exit from the EU.”
50.The Minister added that:
“lt also provides a single, coherent framework for businesses who have to comply with this legislation and regulators, such as Trading Standards, that advise and enforce across the wider product safety and metrology system. Departments were advised by PBL [Parliamentary Business and Legislation Committee] to take a common-sense approach to SIs, balancing the need for Parliament to undertake effective scrutiny, whilst making sure the legislation is coherent and understandable to the public. I am satisfied the right balance has been struck in this case.”
51.The Sub-Committee does not find these arguments convincing. The Department’s intention to reduce pressure on parliamentary time by bundling a large number of different legislative measures into a single instrument, has the practical effect of shortening debate in Parliament, thereby reducing the opportunity for Members to scrutinise the proposals and ask questions.
52.As for the suggestion that bundling enhances transparency, we do not think that those reading this large instrument along with its single EM, would find it clearer and more accessible than if it were divided into smaller instruments, with separate EMs for each. The Sub-Committee is of the view that in this case, the Department may have bundled many different legislative measures into a single combination instrument for its own convenience rather than to assist Parliament or those affected by the legislation. We are not persuaded that the approach the Department has chosen with this large instrument makes for accessible and transparent legislation and supports effective parliamentary scrutiny by this Sub-Committee and by way of debate.
53.While we note that there appears to be an underlying policy coherence in the instrument, we remain concerned that the exceptional size and complexity of this instrument make it difficult for the Sub-Committee to scrutinise the instrument to the standard to which the House is accustomed. We strongly urge the Department to avoid a bundling approach in the future where this undermines the ability of Parliament to carry out effective scrutiny.
54.We also wrote to the Leader of the House of Commons and the Parliamentary Under Secretary of State for Exiting the EU to ask about the Government’s use of combination instruments in the particular context of preparing the statute book for EU exit, where it is the Government’s declared intention to reduce the number of statutory instruments that need to pass through Parliament ahead of exit day. We asked about the underlying rationale and decision-making process in relation to combination instruments, in the context of this instrument and another large “portmanteau” instrument that combines a significant number of disparate policy areas in a single statutory instrument and has also been reported to the House. We were told that:
“It is up to individual departments, and ultimately the Ministers who make the SIs, to assess the appropriateness of the composition of each instrument. […] A large amount of the statutory EU Exit instruments involve minor amendments or technical fixes and are designed to maintain the status quo and minimise disruption. They do not include major changes in policy, where possible. Departments may therefore decide to consolidate changes in a single instrument, to assist the understanding of those changes both by Parliamentarians and industry stakeholders that are affected by the legislation. […] All secondary legislation - not least that relating to exiting the EU - has to be accessible and usable. In some cases, having a number of separate instruments that are closely related or cross-cutting would be to the detriment of that. […] We will share your letter with all SI Ministers to make them aware of your concerns.”
55.We welcome that the Government will share our concerns about combination instruments with Ministers who have responsibility for secondary legislation. We remain concerned, however, that where the bundling of many different measures into a single statutory instrument leads to exceptional size and complexity, as with this instrument, it is a challenge to effective parliamentary scrutiny and risks compromising the accessibility of the law. We would not like this instrument to set a precedent and urge the Government to avoid laying further large, combination instruments in the future.
56.The Sub-Committee also notes that there are considerable risks to adopting a bundling approach. Should the House seek to object to one element of an instrument, the entire instrument would be under threat. In addition, there is a risk that if a single serious drafting error has been made, the whole instrument may have to be withdrawn, corrected and re-laid before Parliament.
57.This is what happened with this instrument: as set out in paragraph 3.2 of the EM, legal drafting errors in the original instrument were significant enough to require withdrawal, correction and re-laying of the draft Regulations. This has delayed parliamentary scrutiny of the instrument and has led to additional work for this Sub-Committee and the JCSI. The Sub-Committee notes that combination instruments carry a considerable risk that a single serious drafting error may require the whole instrument to be withdrawn, leading to delay and additional work for Parliament. We call on the Government to assess this risk and the possible impact on Parliament carefully when considering the case for combination instruments.
58.BEIS explains that it did not undertake a public consultation as the instrument is limited to addressing deficiencies in retained EU and UK law after EU exit and does not propose significant policy change. The Department also says that it wanted to minimise any sensitivities in relation to the negotiations with the EU. Technical input was provided by the Office for Product Safety and Standards, HSE and other relevant government bodies.
59.The Department states that it consulted informally a cross-representation of stakeholders, including trade associations and other industry representative bodies across the product areas covered by the instrument. According to BEIS, stakeholders were supportive of the need to maintain a functioning product safety and metrology regime which mirrors the current framework as closely as possible, and were particularly interested in the establishment of a UK marking and the lead-in time business will have to implement any new marking requirements.
60.We asked the Department whether during its engagement with stakeholders it had sought views on the bundling approach taken with this instrument, and whether stakeholders had supported this approach. The Department explained that:
“Yes, the bundling approach was discussed with stakeholders, but none raised concerns about the approach nor the size of the legislation. The approach was understood by stakeholders, given the similar cross-cutting issues, and stakeholders supported that these be discussed across all the product areas, to avoid potential risk of inconsistent approach if debated separately.”
61.The Sub-Committee regrets the approach the Department has taken with this instrument. While we note that there appears to be an underling policy coherence in the instrument, we are not persuaded by the Department’s view that its approach has made the legislation more accessible and has assisted Parliament. On the contrary, the exceptional size and complexity of the instrument inhibit effective parliamentary scrutiny of the proposals (both by this Sub-Committee and by the House in debate), carry a considerable risk that the whole instrument may have to be withdrawn if a single serious drafting error has been made (as happened in this case), and reduce the accessibility of the legislation. We find that the Department may have chosen the approach for its own convenience, rather than in the interest of Parliament or those affected by the proposals.
62.We are concerned that this instrument could set a precedent of combining large numbers of legislative measures into a single statutory instrument. We call on the Government to avoid such an approach in the future. Where the Government do consider that there is a case for a combination instrument, it is essential that the rationale for the approach is explained clearly and that comprehensive and accessible supporting information is provided in the EM and, where appropriate, the IA when the instrument is laid before Parliament.
63.As to the substance of this instrument, we are concerned about the uncertainty in relation to the impact that leaving the EU’s product safety regime in a ‘no deal’ scenario could have on UK consumers and businesses. We are particularly concerned about the impact that the loss of access to EU product safety databases could have on UK consumers and regret that the Department has not provided more information about the risk that this poses.
64.The House may wish to explore these concerns further with the Minister. We draw the draft Regulations to the special attention of the House, as they give rise to issues of public policy likely to be of interest to the House.
4 Publicly traded companies in the UK are required to apply IFRS as endorsed and adopted by the EU to their consolidated accounts. All other companies must either produce their accounts using IFRS or UK Generally Accepted Accounting Practices (UK GAAP) which is a UK specific set of accounting standards set by the Financial Reporting Council. Some companies use IFRS on a voluntary basis.
5 The European Public Limited Liability Company (Amendment etc.) (EU Exit) Regulations 2018 ().
6 Regulation EC No. .
7 These standards are set out in Commission Regulation (EC) No. .
8 Department for Business, Energy and Industrial Strategy, Independent Review of the Financial Reporting Council (18 December 2018): [accessed 20 February 2019].
9 Regulation (EU).
10 The Impact Assessment (IA), p 2 states: “the EU Roaming Regulation applies to the EEA - the Member States of the EU plus Iceland, Liechtenstein and Norway. Subsequent references to its impact on the EU have EEA application”.
11 IA, p 2.
12 IA, p 6. See also European Commission, Report on the implementation of the Regulation on roaming on public mobile communications networks within the Union (14 December 2018) : [accessed 20 February 2019].
13 IA, p 7.
14 IA, p 2.
15 Gross Value Added is the measure of the value of goods and services produced in an area, industry or sector of an economy.
16 Department for Business, Energy and Industrial Strategy, Using the UKCA marking if the UK leaves the EU without a deal (February 2019): 20 February 2019]. [accessed
17 The two Chairmen of the Sub-Committees have written to HM Treasury (HMT), as the absence of an Impact Assessment has been a concern in relation to some of the statutory instruments that HMT has laid before Parliament recently. The letter has been published on the Committee’s website: [accessed 20 February 2019].
18 This correspondence is published on the Sub-Committee B publications page: [accessed 20 February 2019].
20 The Home Office has laid the draft Law Enforcement and Security (Amendment) (EU Exit) Regulations 2019. This instrument has 24 Parts and over 75 pages covers a wide range of disparate policy areas such as child pornography, counter-terrorism, extradition and football disorder. See Sub-Committee A, , Session 2017-19 (HL Paper 292).