Forty Eighth Report Contents

Instruments of interest

Draft Administration (Restrictions on Disposal etc. to Connected Persons) Regulations 2021

25.This instrument proposes changes to address concerns about so-called pre-pack administration or sales. This occurs when a purchaser of an insolvent company’s business is found prior to administration, with the sale executed at or shortly after the appointment of an administrator. According to the Department for Business, Energy and Industrial Strategy (BEIS), there has been criticism of pre-pack sales which happen before the creditors are given an opportunity to vote on the administrator’s proposals to sell a company’s business or assets. Recent examples of pre-pack sales include House of Fraser in 2018 and Debenhams in 2019. While BEIS says that the speed with which a pre-pack sale takes place helps to preserve jobs and the value in the business, there are concerns about the lack of transparency for creditors, and the fact that in many cases the business or assets are purchased by the same owners or others connected with the insolvent company.

26.BEIS explains that voluntary measures that were introduced following an independent review14 into pre-pack sales in 2014 have resulted in some improvement, but that there are still concerns about transparency. This instrument therefore requires that if a person intends to acquire a business or assets from a company in administration within the first eight weeks of administration, and that person is connected to the insolvent company, they must seek an independent opinion from an evaluator on the purchase, unless creditors have approved the sale. The instrument sets out certain requirements for the person acting as evaluator, such as the need for indemnity insurance, and includes measures to prevent a person from obtaining multiple evaluator reports in the hope that one will be favourable. BEIS says that the mandatory referral to an independent third party will provide creditors with greater assurance that such a sale is appropriate in the circumstances of the insolvency.

Draft Audiovisual Media Services (Amendment) Regulations 2021

27.Amongst other changes, this instrument introduces an ambulatory reference to the latest definition of “European works” and the associated guidance, to ensure that UK domestic law references the relevant definition and guidance automatically should this be updated in EU law. The Department for Digital, Culture, Media and Sport (DCMS) says that the automatic reference will not apply if the EU replaces the definition or guidance, as this “would expose the UK to risk of being subject to substantial change in rules it must observe”. According to DCMS, the UK will continue to participate in the European works regime as a signatory to the European Convention on Transfrontier Television as this will benefit the UK production sector.

28.The instrument also replaces a duty on Ofcom to co-operate with regulators in the EU in relation to the requirements of the Audiovisual Media Services Directive (AVMSD),15 with a power to co-operate in relation to harmful online content. DCMS says that the sharing of information by Ofcom with EU regulators is vital to ensuring that UK users remain protected: “as a result of granting Ofcom the power to share information relating to investigations and jurisdiction, regulators in EU and EEA Member States will continue to cooperate with UK regulators”. DCMS adds that through this co-operation, “Ofcom can assist in the protection of UK users from harmful material on platforms established in EU/EEA states … abiding by its commitment to protecting minors from damaging content online”.

29.While replacing a duty on Ofcom to co-operate with regulators in the EU with a power to do so could be considered appropriate in the absence of mandatory reciprocity after EU exit, this nevertheless creates some uncertainty with regard to the effectiveness of tackling online harm: key content providers, such as YouTube, are based and regulated in the EU. We have previously raised concerns about enforcement after the end of the Transition Period and that, as a third country, the UK will now have to rely on informal co-operation with regulators in the EU.16 While the Government have committed to tackling online harm, especially in relation to young people, through an Online Harms Bill, there is currently not a clear timetable for this Bill. Given these uncertainties, we recommended an upgrade of this instrument to the affirmative procedure when it was laid for sifting under the European Union (Withdrawal) Act 2018.

Draft Direct Payments to Farmers (Reductions and Simplifications) (England) (Amendment) Regulations 2021

30.This instrument proposes reductions to the Direct Payments made to farmers in England for the 2021 claim year, following the UK’s exit from the EU and the end of the Transition Period. The reductions are progressive, as set out last year,17 and range from 5% for Direct Payments of up to £30,000 to 25% for Direct Payments of £150,000 or more. This means that for a claim worth £40,000, for example, a 5% reduction will be applied to the first £30,000 (a reduction of £1,500), and a 10% reduction will be applied to the next £10,000 (a reduction of £1,000), with a total reduction by £2,500 to £37,500. The Department for Environment, Food and Rural Affairs (Defra) says that all funding released from these reductions will be re-invested into delivering new domestic schemes so that the same level of funding will be maintained throughout this Parliament. The additional support will be made available through a number of schemes, grants and other types of support for farmers to manage land and their businesses more sustainably.18

31.The instrument also ensures that Direct Payments will be calculated in sterling and changes the rules for the recovery of overpayments and payment entitlements: the current euro thresholds below which the Rural Payments Agency (RPA) does not need to recover overpayments or payment entitlements or charge interest are removed. Defra says that instead, when deciding whether recoveries should be made, the RPA will apply the principles set out in HM Treasury’s Managing Public Money guidance.19

Draft Food and Drink (Miscellaneous Amendments Relating to Food and Wine Composition, Information and Labelling) Regulations 2021

32.The Department for Environment, Food and Rural Affairs (Defra) states that while there will be no changes to policy, some of the amendments made by this instrument will have “real world” effects on food information and the way in which it is presented to consumers. For example, in relation to the origin of meat (excluding beef which is dealt with by separate legislation), the instrument will require the use of a “non-UK” rather than “non-EU” origin designator. This new requirement does not preclude the use of a designator that shows the specific country of origin. The instrument includes a 21-month adjustment period to give businesses time to adjust to the new requirement, with similar legislation planned in Wales and Scotland, so that the continued use of “EU” or “non-EU” origin designators will be allowed across Great Britain (GB) until 1 October 2022.

33.We note that, as consumers will no longer be able to tell whether meat (excluding beef) is from the EU or not after the adjustment period, this may have the potential of reducing key information that is available at present about the origin of a product and therefore about the associated food standards. We also note that after the adjustment period, different requirements will apply in GB and Northern Ireland (NI) where EU requirements will continue to apply as a result of the NI Protocol. Defra told us that “further steps will be taken to continue unfettered access for NI food products to the GB market”.

34.Given the sensitivities around future food standards and the potential impact of different labelling requirements on trade between NI and GB, we recommended an upgrade of this instrument to the affirmative procedure when it was laid for sifting under the European Union (Withdrawal) Act 2018.

Draft Greenhouse Gas Emissions (Kyoto Protocol Registry) Regulations 2021

35.This instrument proposes amendments to ensure that the UK can operate a domestic Kyoto Protocol (KP)20 registry that is independent of the EU-wide software platform, the Consolidated System of European Union Registries (CSEUR), which the UK used until the end of the Transition Period (TP). The Department for Business, Energy and Industrial Strategy (BEIS) says that following the end of the TP, the UK is establishing its own domestic KP registry to replace the CSEUR, so that it can continue to comply with its international obligations under the KP. According to BEIS, the IT platform for the new UK KP registry is currently in development and is due to be operational in Spring 2021. Until then, UK businesses that wish to trade KP units will have to open KP accounts in other countries’ registries.

36.Asked about the impact of this gap on industry, the Department told us that it is not aware of any UK businesses having opened KP accounts in other countries’ registries. We also asked BEIS when in Spring the new UK KP registry would become operational. The Department told us that the intention was for users to be able to register on the system from 1 May 2021, and for the registry to be ready for trading KP units in June 2021. We are publishing further information the Department provided about the new registry and how it will operate at Appendix 1.

Draft Registration of Marriages Regulations 2021

37.These Regulations, in conjunction with other primary and secondary legislation, will modernise the Marriage Act 1949, to enable the introduction of an electronic ‘schedule system’ for the registration of marriages in England and Wales, rather than couples signing a paper marriage register. The details will then be added to an electronic register by the registrar and a paper certificate issued. The schedule system allows more flexibility in the content of the marriage entry, so that the details of both parents of the couple may be entered, including same sex parents’ names, instead of just the father’s name and occupation as now. The General Register Office states that as well as reflecting family circumstances in society today, the move to an electronic system is expected to reduce costs by approximately £34 million over 10 years.

Cumbria (Changes to Years of Elections) Order 2021 (SI 2021/174)

North Yorkshire (Changes to Years of Elections) Order 2021 (SI 2021/175)

Somerset (Change to Year of Election) Order 2021 (SI 2021/176)

38.These three instruments, which have been laid before Parliament together and share an Explanatory Memorandum, reschedule to 5 May 2022 the elections due to take place on 6 May 2021 to the county councils and district councils in Cumbria, North Yorkshire and Somerset. The instruments also extend the terms of office for councillors whose seats would have been up for election and make provision to ensure that any by-elections to fill vacancies on those councils take place.

39.The Ministry of Housing, Communities and Local Government (MHCLG) explains that the rescheduling of the elections avoids the possibility of the electorate being asked to vote for councils while they are at the same time  being given the opportunity to express their views on the possible abolition of those councils as part of proposals to set up unitary authorities in these areas. The postponement also avoids members potentially being elected to serve short terms. MHCLG says that there is precedent for rescheduling elections where unitarisation is under consideration.

Restriction of Public Sector Exit Payments (Revocation) Regulations 2021 (SI 2021/197)

40.This instrument revokes an earlier instrument21 which restricted public sector bodies from making exit payments above £95,000. During the debate of the earlier instrument22 and the passage of the Enterprise Bill,23 concerns were raised that such a cap could adversely affect longer serving and lower earning employees, especially in local government. The Explanatory Memorandum to this instrument states that, following an extensive review, the Government have concluded that “the cap on public sector payments may have had unintended consequences”. Asked for more detail about these unintended consequences, HM Treasury (HMT) told us that:

“[I]t has become clear that there is a risk that — as drafted — the cap may cut across contractual rights in a way that would be difficult to justify in line with our original policy intent. HM Treasury has therefore revoked the 2020 Regulations and, for the time being, redundancy payments will default to those set out in the terms and conditions in employment contracts. We remain committed to taking forward measures at pace to ensure that exit payments represent value for money and ending taxpayer funded six figure payoffs for the best paid public sector workers.”

HMT says that following the removal of the cap, those who received an exit payment which had been capped under the earlier instrument, would be entitled to an additional payment.

Motor Fuel (Composition and Content) and the Biofuel (Labelling) (Amendment) Regulations 2021 (SI 2021/199)

41.Ethanol is a biofuel that can be blended into petrol to reduce greenhouse gas emissions. The standard 95 octane grade, known as “premium” petrol in the UK, is currently blended with no more than 5% ethanol, a grade known as E5. These Regulations require its ethanol content to be increased to no more than 10% (E10) with effect from 1 September 2021. E10 petrol is suitable for the majority of petrol vehicles, but not some older vehicles and some petrol-powered equipment. This instrument therefore also ensures that “super” grade higher octane petrol remains E5 for those that need it.

42.The Department for Transport says in its Impact Assessment that that these changes are necessary to meet future legally binding carbon budgets: the policy could account for around 7% of the additional transport savings required under the fifth carbon budget (2028–2032). Biofuel blending levels are generally driven by a separate government scheme known as the Renewable Transport Fuel Obligation (RTFO) and the Explanatory Memorandum states that the current regulations will only be effective if RTFO targets are increased as soon as possible after E10 is introduced: that is planned for 1 January 2022.

14 Insolvency Service, Graham review into Pre-pack Administration (June 2014): [accessed 4 March 2021].

15 Directive 2010/13/EU of the European Parliament and of the Council of 10 March 2010 on the coordination of certain provisions laid down by law, regulation or administrative action in Member States concerning the provision of audiovisual media services (Audiovisual Media Services Directive), OJ L.95/1, 15 April 2020.

16 See: 30th Report, Session 2019–21 (HL Paper 146) and 32nd Report, Session 2019–21 (HL Paper 159).

17 Defra, The Path to Sustainable Farming: An Agricultural Transition Plan 2021 to 2024 (November 2020): [accessed 4 March 2021].

18 Ibid.

20 The KP is a protocol to the United Nations Framework Convention on Climate Change (UNFCCC), which is an international climate change treaty to which the UK is a party. The KP sets out emission reduction obligations for the EU and certain countries, including the UK.

21 Restriction of Public Sector Exit Payments Regulations 2020 (SI 2020/1122), 25th Report, Session 2019–21 (HL Paper 123).

22 HL Deb, 23 September 2020, cols 1897–1909.

23 HL Deb, 4 November 2015, cols 359 – 380.

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