It is a pleasure to follow the hon. Member for North Ayrshire and Arran (Patricia Gibson). I was getting my speech together as I was listening to what she said.
This is of course a very important sector for the UK economy. As the Minister said, REACH regulates not just chemicals but products—everything from the coating on a frying pan to the flame retardants in carpets and sofas, which my Environmental Audit Committee will be looking at very soon—and it is vital in the protection of human health. However, it is also a single market mechanism to ensure the free movement of chemicals across the EU and to enhance innovation in the EU chemicals market.
What British companies are asking themselves, as they look at this statutory instrument, is: what is to stop my EU customers going somewhere else? The answer in this statutory instrument is nothing. We are putting more costs on UK businesses, we are rendering them uncompetitive in the EU market and we are allowing the burden of excess regulation to fall on them both in this country and in their export markets.
What are companies doing in response to that? Many of them have already left. There has been an exodus of small chemical companies. Someone told me that a small mosquito repellent company—obviously, mosquito repellent is a very seasonal product—was concerned about what would happen to its business in the UK, making products predominantly for the EU market. It has shut down its factory, which I think was based in Gloucestershire, and has moved it to Italy. Quietly, it has moved tens of jobs and a manufacturing company out of this country.
REACH regulates about 30,000 substances bought and sold in the EU’s markets, and 60% of the UK chemicals industry’s exports go to the EU. This is our second largest export to the EU after cars. We have seen in the car industry—with Honda’s announcement last week, as with Jaguar Land Rover and Nissan—just how important access to the EU single market is for our automotive industry, as it is for the parts that go into those cars. Of course, chemicals, chromium in particular, are absolutely vital to the automotive and aerospace industry.
We export almost £15 billion of chemicals a year to the EU, and all our businesses have to comply with REACH. So far, companies have made more than 12,000 registrations. The Environmental Audit Committee looked at this back in April 2017, and we have seen this problem coming at us down the track for the past two and a half years. We heard that UK businesses had at that point spent about £250 million on registration. Since then, there has been another registration deadline, in May 2018, for smaller volumes of substances. The estimate now is that about £600 million of UK companies’ money has been spent registering chemicals with the European Chemicals Agency up to last May.
What happens to those sunk costs? What is happening is that those companies now only have their own representative in the EU up to 1 April. As I mentioned to the shadow Secretary of State, my hon. Friend the Member for Workington (Sue Hayman), they will not have registrations if they have handed them over. They are in the very difficult position of not knowing what to do in the next four to six weeks, and I do not think these difficulties can be overstated.
The Minister has said that she is going to spend £13 million on the new HSE database, but the fact is that REACH costs €100 million a year to run. We are therefore going to have a tiny shadow of the European chemicals database here in the UK.
REACH is difficult to transpose into UK law because it is a governance structure, not just a list of substances. Even if it was just a list of substances, our registrations and the intellectual property that goes with them have, in some cases, been lost by UK companies, or transferred to different places and are difficult to track down. So many of the regulations apply to data sharing, co-operation and the facilitation of free trade in chemicals between companies in member states. If we are not in the single market and not in the EEA, we will not have access to that data.
The Minister has said that she wants associate membership of the European Chemicals Agency, but she did not say in her opening remarks whether that is still being pursued, and if so, how progress on that associate membership is going. I understand that Norway is a member of it through its membership of the EEA.
We are clearly duplicating regulation if we have our own version of REACH, and companies trading in the EU and the UK will incur duplicate costs. We are doubling the costs of chemical regulations by leaving the EU. We know that uncertainty is having an impact on long-term investment and decisions. The Chemical Industries Association and the Chemical Business Association have indicated that a significant number of their members are considering moving their operations out of the UK to preserve their European business.
I would certainly prefer to see us remaining in REACH. Again, in the current system planned under this statutory instrument, there is silence on enforcement responsibilities, compliance and whether we remain in lockstep with the EU REACH system. There is no real stakeholder involvement in who gets to decide on that, which I think is very detrimental to the UK’s competitiveness. REACH is the global gold standard in chemicals regulation, and it has been copied by South Korea, Turkey and the USA. My Committee visited the USA and heard about its Toxic Substances Control Act—which, sadly,
President Trump and his various Environmental Protection Agency heads have tried to row back on, but even the ToSCA is now about 10 to 15 years behind the EU.
To come on to the detail of the regulations, a very concerning deficiency in the statutory instrument is in relation to article 10 on the composition of the agency. We are not replicating the committees that inform decisions at the EU level, which will remove vital checks and balances in the form of stakeholder participation. ECHA has a management committee and technical committees, with stakeholders from industry, environmental and health non-governmental organisations, and trade unions permitted to participate in these meetings, but without a vote. There will be no such stakeholder participation in the UK chemicals agency, as formulated under this statutory instrument. This means that the best information will not be available for these discussions, and it will be ruled by fiat, rather than by discussion.
Article 76 of the original EU version created several committees, including one for risk assessment, one for socioeconomic analysis and a member state committee responsible for resolving potential divergences. The draft statutory instrument completely omits that article and replaces it with a much weaker duty to simply take scientific knowledge into account but with no formal standard mechanism comprising standing committees of experts to do so. We will have no committees of experts, or other committees, to take these registrations into account and help the agency to form its opinions.
The same deficiency appears elsewhere, including in relation to title 7 on authorisation. Article 58 concerns the inclusion of substances in annexe 14, but the duty to take into account the opinion of the member state committee is simply removed and the decision left to the Secretary of State. This is what my Committee has been warning against. Important democratic oversight mechanisms are being lost in translation and in the cut-and-paste process, and quietly, through the back door, in half-empty Chambers such as that in which we are sitting this evening, environmental regulation is simply being downgraded.
As I said earlier, I am very concerned about the budget. REACH was very expensive to set up. The Health and Safety Executive is going to run the UK version, but it has experienced considerable budget cuts over the past 15 years. Its annual accounts indicate that it currently spends just over £1 million for chemicals regulation testing in the UK. Page 98 suggests that it receives £1.2 million for provision of REACH services to the Department for Environment, Food and Rural Affairs, but that is a reduction from the £1.4 million it received in 2016-17. By contrast, I repeat that the spend per year for REACH is €100 million.
There is no commitment to mirror EU outcomes on chemical regulation. The draft statutory instrument has no automatic provision for copy across of EU restrictions and further improvements, so the UK’s controls on chemical use could rapidly diverge from those in the EU. If the UK fell behind those in the EU, protection of human health and the environment would be reduced. We do not want to end up in a situation where chemical regulation is diluted.
I have shared my concerns about the outcomes and the stakeholders. My final point relates to the Government’s better regulation agenda, which has a commitment to bring in regulations only if three times the amount of regulation, measured on the basis of cost to companies,
is removed. My Committee has been pressing the Cabinet Office on the issue. In a written statement on 20 June 2018, the then Minister confirmed that the UK still has a deregulation target of £9 billion in this Parliament. That confirmed for the first time that the target would be applied to vast swathes of formerly EU law after the transition or implementation period.
All of the regulations are going to be subject to the bizarre and ridiculous one in, three out rule. If we want to strengthen environmental law, protect new organisms or habitats, or ban a new chemical, the UK must calculate the business cost and ignore the benefits, and then the Department concerned must justify how it fits with the overall reduction target. This rule creates a massive disincentive for Ministers, Departments and civil servants to improve regulation
The National Audit Office report on DEFRA’s progress in implementing EU exit had grave concerns about the long-term function of the UK’s chemical regulatory system. It was very critical, although I acknowledge that some progress has been made. CHEM Trust told me in a meeting that it is also concerned about the rapid warning systems. UK environmental health officers could discover, for example, lead paint on children’s toys or dangerous chemicals in baby products and baby foods, but because of the downgrading of their work, and that of trading standards, we are no longer going out looking for those problems and are very reliant on colleagues in other EU member states alerting us to the need to take such products off the market.
In conclusion, we have been gravely concerned for the past two years. When people voted to leave the EU, they did not vote to have weaker chemical regulation standards or for UK companies to leave the country in order to have better access to EU markets and to not have to pay twice for the same registrations. They certainly did not vote for a flood of cheap imports to come into this country without any customs checks or for our children to be less safe from toxic chemicals. I hope that that is not where we end up. It shows the need for us to have a proper transition period and to remain in the single market and the customs union, to avoid such a devastating outcome.
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