Instruments of interest
Draft Occupational Pension Schemes (Collective Money Purchase Schemes) Regulations 2022
3.This instrument, which sets up the regulatory framework for a new type of occupational pension, has been re-laid due to a procedural error. The comment in our 25th Report1 applies equally to the revised version.
Ammonium Nitrate Materials (High Nitrogen Content) Safety (Amendment) Regulations 2022 (SI 2022/29)
4.This instrument allows detonation resistance tests (DRTs) for Ammonium Nitrate (AN) imported from countries outside of the EU to be carried out at ISO accredited laboratories2 in the UK or in the EU until 31 December 2022. Under current transitional provisions following Brexit, for imports from the EU, the competent laboratory can be based in the UK or in the EU, while for imports from outside the EU, the competent laboratory must be based in the UK. According to the Department for Environment, Food and Rural Affairs (Defra), the change is required to deal with the current disruption in the global fertiliser market: increased gas prices have driven up the cost of AN and all fertiliser types globally, leading to a significant reduction in AN production in the EU and producers limiting the supply of AN available for export. The UK is a net importer of fertiliser from the EU; imports from the EU currently account for around 70% of all fertiliser products and 50% of all AN, so this instrument ensures that fertiliser importers and suppliers in Great Britain have easier access to sources of AN from outside the EU.
5.As the Explanatory Memorandum (EM) only provides limited information, we asked Defra why DRTs and detonation resistance certificates are required and what types of AN products are covered by these requirements. The Department explained that:
“[AN] can be volatile and is strictly regulated. The DRT is the method of assessing the stability of the AN and ensuring its resistance to detonation within specified limits. The test is undertaken to ensure that the AN (when properly handled according to HSE guidance) can be safely transported, stored, or handled without exploding. The DR certificate provides evidence that the relevant AN has successfully passed the DR test performed by an accredited ISO laboratory.”
6.We note that because of its explosive characteristics, AN can be used for terrorist purposes. With regard to the types of AN products covered, BEIS explained that:
“This is ammonium nitrate in solid form (or material in solid form, comprising a mixture of components, one of which is ammonium nitrate), where its nitrogen content (derived from ammonium nitrate) is more than 28% of its weight and the material has a total weight of five hundred kilogrammes or more, but does not include material which is a classified explosive.”
7.We are publishing Defra’s full response at Appendix 1. We have asked the Department to revise the EM to incorporate the additional information provided.
Limited Liability Partnerships (Climate-related Financial Disclosure) Regulations 2022 (SI 2022/46)
8.This instrument introduces, with effect from 6 April 2022, new climate-change-related financial reporting requirements for large UK Limited Liability Partnerships (LLPs) with more than 500 employees and a turnover of more than £500 million. According to the Department for Business, Energy and Industrial Strategy (BEIS), the new requirements will apply to fewer than 20 LLPs, which will be accountancy firms, legal firms and some financial services firms.
9.Under the new requirements, these LLPs will have to report climate-related financial information in their Strategic Reports or Energy and Carbon Reports, in line with the recommendations of the industry-led Taskforce on Climate-related Financial Disclosures (TCFD).3 The information will describe any material climate-related risks and opportunities; the governance and risk management approaches to these; how these risks and opportunities impact the strategy and business model; and the targets and performance indicators applied to managing them. We reported on an earlier instrument4 which proposed equivalent changes to the reporting requirements of certain large UK registered companies. The Department says that the new requirements form part of wider efforts to make climate-related financial disclosures mandatory across the UK’s economy, and that they will support the UK’s transition towards net zero greenhouse gas emissions by 2050. According to BEIS, regulatory action is needed: while the TCFD framework is widely supported, levels of disclosure overall are low, and many companies are not disclosing in line with the TCFD recommendations.
10.The Department expects annual net costs of £145.3 million (in 2019 prices) for businesses covered by these Regulations and the earlier instrument. We note that, according to the Impact Assessment, departmental guidance on the new reporting requirements will be around 125 pages long, suggesting a considerable degree of complexity. BEIS expects one-off familiarisation costs of £21,800 per UK parent company and £1,900 per subsidiary in scope of the new requirements. Whilst acknowledging the fundamental importance of addressing issues relating to climate change, we are concerned that these and the earlier Regulations increase further the regulatory burden on UK businesses, affecting their competitiveness and leading to increased costs to consumers.
1 Secondary Legislation Scrutiny Committee, 25th Report (Session 2021-22, HL Paper 137).
2 These are laboratories which have an accreditation under standard ISO 17025.
3 Task Force on Climate Related Financial Disclosures, Recommendations of the Task Force on Climate-related Financial Disclosures (15 June 2017): https://assets.bbhub.io/company/sites/60/2021/10/FINAL-2017-TCFD-Report.pdf [accessed 31 January 2022].
4 Draft Companies (Strategic Report) (Climate-related Financial Disclosure) Regulations 2021, see: SLSC, 19th Report (Session 2021-22, HL Paper 96).These Regulations have now been made as the Companies (Strategic Report) (Climate-related Financial Disclosure) Regulations 2022 (SI 2022/31).