General regulation making power for excise duty purposes etc

Taxation (Cross-border Trade) Bill – in a Public Bill Committee am 2:45 pm ar 1 Chwefror 2018.

Danfonwch hysbysiad imi am ddadleuon fel hyn

Photo of Jonathan Reynolds Jonathan Reynolds Shadow Economic Secretary (Treasury) 2:45, 1 Chwefror 2018

I beg to move amendment 85, in clause 45, page 31, line 24, at end insert—

‘(3A) The power to make regulations under this section—

(a) insofar as it is exercised to replicate or apply, with or without modifications, any EU regulations mentioned in section 47(1), ceases to have effect after the end of the period of two years beginning with exit day; and

(b) insofar as it is exercised to make provision of the kind described in subsection (2)(k), ceases to have effect after the end of period of five years beginning with exit day.”

This amendment, together with Amendment 86, limits the duration of certain delegated powers under Clause 45 to periods aligned with other proposed limitations relating to withdrawal from the EU and to customs unions.

With this it will be convenient to discuss the following:

Amendment 86, in clause 45, page 31, line 25, at end insert—

““exit day” has the meaning given by section 14(1) (interpretation) of the European Union (Withdrawal) Act 2018 and subsections (2) to (5) of that section apply to the term under this section as they apply to the term in that Act.”

See explanatory statement for Amendment 85.

Clause 45 stand part.

Amendment 135, in clause 48, page 33, line 29, at end insert—

“(5A) No regulations may be made under section 47 unless a draft has been laid before, and approved by a resolution of, the House of Commons.”

This amendment requires regulations under Clause 47 to be subject to the affirmative procedure.

Amendment 136, in clause 48, page 33, line 30, leave out “47” and insert “46”.

This amendment is consequential on Amendment 135.

Clause 48 stand part.

Photo of Jonathan Reynolds Jonathan Reynolds Shadow Economic Secretary (Treasury)

The Member’s explanatory statement for amendment 85 states:

“This amendment, together with Amendment 86, limits the duration of certain delegated powers under Clause 45 to periods aligned with other proposed limitations relating to withdrawal from the EU and to customs unions” in parallel legislation. In many ways, it continues the conversation we had during debate on the last group.

Effectively, the amendment would introduce a sunset clause to clause 45: a measure to prevent the indefinite extension of delegated powers by HMRC commissioners where they relate to excise duty. We have discussed many times—in some ways, we have discussed it in every debate—the democratic implications of the Bill. The addition of sunset clauses has been proposed by many partners as a solution to the need to safeguard against potential abuses of the powers in the Bill. As has been said many times, the House of Lords Delegated Powers and Regulatory Reform Committee, in its report, said clearly that the Bill transfers substantial powers to the Executive—that is not in doubt on any side of this Committee. The question is whether they are proportionate and whether appropriate safeguards are in place.

I listened carefully to the Minister during discussion of the last set of amendments about the differences between the European Union (Withdrawal) Bill and this Bill, but I must say that I am not convinced that the differences are substantial enough to envisage a completely different set of amendments’ appropriateness in terms of the use of sunset clauses. As the Lords Committee said,

“the Treasury’s delegated powers memorandum acknowledges that the Bill has been drafted to cater for various contingencies that might never materialise, for example, if the UK leaves the EU without a negotiated agreement.”

I do not agree that the European Union (Withdrawal) Bill and this Bill represent such wildly different circumstances that one set of amendments is appropriate for the other Bill but not for this one. The Opposition are firmly in agreement with the Lords Committee that a sunset clause is an appropriate manoeuvre to redress the balance of power. We must bear in mind that the use of delegated powers carries a risk of abuse by the Executive, which is not something the Opposition could ever support. Rather, it is our duty at this stage to check the powers of the Executive and ensure that we are not giving them carte blanche to change the balance of power permanently in their favour.

I also stress that the amendments offer generous provision in terms of timing. It varies for each item, with sunset clause terms of either two years or five years from EU exit day for the powers in question. That should give the Government ample opportunity to adapt, even if we face the nightmare “no deal” scenario. It makes little sense to the Opposition that such provisions are included in the European Union (Withdrawal) Bill, but that there are no corresponding provisions in this Bill. Adding these provisions to the Bill would be an important step in providing a much-needed check to delegated powers.

Amendments 135 and 136 relate to the subsequent regulations relating to changing excise duty, and would make them subject to the affirmative procedure. The rationale is to add a necessary layer of democratic scrutiny to the extensive powers being granted to HMRC. I fear that Government and Opposition Members will never reach agreement on that point, and that we will perhaps have to return to it. However, we believe that that has been a consistent problem with the Bill, and we are duty bound to raise it.

Together, this group of amendments would make small but highly significant changes to help promote greater democracy, transparency, certainty and accountability in the Bill. Our intention is not to hamstring the Executive, but to ensure that checks and balances are maintained for those in power. As we decide on our new post-Brexit customs framework, we must guarantee a system that is constitutionally robust enough to deliver the democratic control that those who voted to leave the European Union sought.

Photo of Mel Stride Mel Stride Financial Secretary to the Treasury and Paymaster General 3:00, 1 Chwefror 2018

Clause 45 provides powers to make changes to ensure the UK has a fully functioning excise regime after EU exit. The powers mean that the UK will be able to implement a range of negotiated outcomes. They also ensure that, after EU exit, we retain the same ability to legislate for excise that we have now.

EU legislation impacts on a number of areas of the excise regime. One example is the existing holding and movement regime for excise goods, which is based on a framework set up by the European Union. It allows the free movement of goods while ensuring excise duty is collected in the country of consumption. The UK needs the ability to make changes to the excise regime to reflect a range of negotiated or non-negotiated outcomes. The power will also ensure that, after EU exit and the repeal of the European Communities Act 1972, we maintain the same ability to legislate for excise as we have now.

The clause gives the Government a power to make regulations generally for the purposes of excise duty on alcohol, tobacco and fuels. It includes, among other matters, when the excise duty becomes due, who will be liable for excise duty, reliefs and the rules around the holding and movement of excise goods. It also ensures that, after EU exit, the Government have the same ability to legislate for excise as they have now. It does not, however, enable HMRC to set excise duty rates.

The excise regime is largely set out in secondary legislation made under various existing powers. However, we can anticipate that the primary legislation that underpins it may need to be amended. The clause allows any regulations made under this section to amend or repeal primary legislation using secondary legislation. It does not allow secondary legislation to amend or repeal provisions in the Bill.

Any negotiated outcome could include key administrative features such as the collection, control, management and enforcement of excise duties. Changes could also be needed in those areas if there is no negotiated agreement. The goods it could be applied to are alcohol, tobacco and fuels.

On repeal of the 1972 Act, we will retain the legislation made under it, but we will no longer have the power to amend that legislation. Clause 45 will ensure there are no gaps in HMRC’s powers to deliver the necessary changes to the excise regime as a consequence of EU exit. For example, the Government made consequential amendments to primary legislation in the last substantive overhaul of key excise secondary legislation in 2010. They relied on the powers provided for by the 1972 Act, which will not be available in future. The power could also be used to ensure that there are clear arrangements in place so that goods in transit between member states before EU exit are not subjected to additional controls or requirements after EU exit.

The power has, however, been limited in a number of ways. It does not allow any changes to duty rates. Clause 49 ensures that the power is no wider than necessary. It is limited to making provisions in respect of the excise duties on alcohol, tobacco and fuels. Those are the duties most impacted by EU legislation and EU exit. It is important that the Government can act quickly in case of changing circumstances, but it is also vital that Parliament is able to scrutinise the use of these powers. Clause 48 sets out the proposed scrutiny arrangements.

Amendments 85 and 86 seek to limit the duration of the power contained in clause 45 where it is exercised to replicate or apply EU regulations. They also intend to limit the duration of the power to make provision for excise duties in connection with the UK forming a customs union with other customs territories. The Government oppose the amendments. The Bill is drafted to cater for a range of long-term outcomes from negotiations on the future relationship with the EU. We do not yet know the outcome of negotiations with the EU or exactly when the final outcome will be confirmed. It would therefore not be prudent to include a sunsetting clause.

The clause provides the Government with the power to legislate for the excise regime to implement the outcome of negotiations. Just as importantly, it ensures that we can legislate for excise in the future—after exit—with the same flexibility we have now. It is essential that we have a fully functioning excise system on EU exit and the powers contained in the clause are necessary to achieve that.

If the amendments are accepted, after the relevant sunset period the Government’s ability to legislate quickly to respond to changing circumstances and future business processes will be limited. For example, the current excise duty suspension arrangements secure the movement of goods through a number of different countries, potentially over a large geographical area. On leaving the EU, the movement of excise duty suspended goods may be permitted only within the territory of the UK. The clause may allow further simplifications for compliant traders if the risks to revenue are considered to be lower in the United Kingdom.

Amendment 85, relating to subsection (2)(k), refers to clause 31, which allows for arrangements that establish a customs union, as we debated, between the UK and territories outside the UK to be given effect by Order in Council. If the UK forms a customs union with any other customs territory, the Government may need to adapt the excise regime accordingly to ensure that the UK can enforce and maintain the operability of the excise duty regime. For example, if an arrangement is made with any territory where free movement of goods is allowed now or in the future, the UK may wish to ensure that excise duties can be controlled and collected without customs formalities at the border, as is now the case. The requirement to make such arrangements may not be limited to the period following EU negotiations or the implementation period.

Clause 48 sets the procedure for making regulations under clauses 44 to 47. The powers in clauses 44 to 47 are necessary to ensure the alcohol, tobacco and oils excise duty regimes continue to function as required after EU exit. The clause ensures the use of those powers is subject to appropriate scrutiny. It also includes provision to streamline procedures where the new excise powers are combined with some existing powers. That gives the Government the flexibility to make the changes to the excise regime needed after EU withdrawal. A smaller number of statutory instruments will therefore be required and the legislation will remain accessible to users.

Clause 48 sets the procedure for exercising the powers in clauses 44 to 47 and gives further detail to their scope. On procedure, the clause sets out four scenarios in which regulations made using the powers will be subject to the made-affirmative procedure: first, where the changes amend or repeal any Act of Parliament; secondly, where changes extend the descriptions of goods on which excise duty is chargeable; thirdly, where changes extend the cases in which stamping or marking of goods is required; and fourthly, where changes restrict any relief or rebate. In all other cases, the negative procedure applies. That is in line with the existing approach to excise regulation-making powers.

A large number of changes need to be made to excise secondary legislation to maintain a functioning excise regime after exit. The Government plan to use existing powers as well as the new powers in the Bill. Clause 48(7) will streamline procedures to allow existing excise powers and the new powers to be combined in some cases. The streamlining applies only if regulations made under the existing powers would be subject to the negative resolution procedure—not where the affirmative procedure is to be used. Such streamlining gives Government the ability to maintain a functioning excise system after EU withdrawal. It reduces the number of statutory instruments to be laid on the same subject matter, making more efficient use of parliamentary time and limiting fragmented legislation, which is harder for business and its advisers to follow.

In some cases, that will have the effect that some provisions that are currently subject to the negative resolution in the Lords and Commons will be subject to the negative procedure in the Commons only. However, Commons-only scrutiny is in line with the convention that tax legislation is not subject to Lords scrutiny. The majority of excise regulation-making powers created in recent times are similarly subject to Commons scrutiny only. For example: the alcohol wholesaler registration scheme, introduced in 2015; the raw tobacco approval scheme, introduced in 2016; and the remote gaming duty, introduced in 2014. Members can be assured that, if the Government combine powers, they will not do so to make a trivial provision only to remove Lords’ scrutiny and bring this special procedure into play.

Amendments 135 and 136 seek to require that regulations made under clause 47 are subject to the draft affirmative procedure. Clause 47 gives the Government the power to exclude or modify EU rights, powers, liabilities and obligations relating to excise duty that continue to have effect in UK law after exit by operation of clause 4 of the European Union (Withdrawal) Bill. Some of those rights and obligations will no longer be appropriate after exit. Some may need amendments to deal with the outcome of negotiations with the EU. Therefore, this power has a part to play in ensuring that we have a fully functioning excise regime.

The power in clause 47 is targeted and proportionate. It is specific to the areas saved by clause 4 of the European Union (Withdrawal) Bill, and in addition, it may only be exercised in relation to excise duties on alcohol, tobacco and fuel. It is appropriate and proportionate that the power should be subject to the negative procedure and not the affirmative procedure. That reflects the specific nature of the power in the clause and the speed with which regulations may be required.

The Bill ensures that the scrutiny procedures that are applied to the exercise of each power are appropriate and proportionate. They take into account the technicality of the regulations and the frequency with which they are likely to be made.

Clause 48 ensures that the scrutiny procedures that apply to the exercise of the powers in part 4 are appropriate and proportionate. As far as is practical, the procedure that applies to excise regulations made under these powers is in line with the approach to procedures on existing excise powers.

Photo of Jonathan Reynolds Jonathan Reynolds Shadow Economic Secretary (Treasury)

There is clearly a fundamental difference of opinion about these clauses. We absolutely support the right and ability of the Government to possess the requisite powers on exit to set the regime that is required. What is in dispute is whether those powers should remain on the statute book for a long time.

It seems entirely reasonable that the Government could come back to legislate for the power that they need in future, rather than giving themselves such a fundamental transfer that changes the balance of power between Parliament and the Government, but we may have to return to that question. Further groups of amendments are on the selection list that cover sunset clauses, so I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 45 ordered to stand part of the Bill.

Clause 46 ordered to stand part of the Bill.

Clause 47