S T A N D I N G C O M M I T T E E O F T Y N W A L D C O U R T O F F I C I A L R E P O R T
R E C O R T Y S O I K O I L B I N G V E A Y N T I N V A A L
P R O C E E D I N G S D A A L T Y N
Constitutional and Legal Affairs and Justice Committee
Brexit
HANSARD
Douglas, Monday, 14th May 2018
PP2018/0093 CLAJ-BX, No. 2/2017-18
All published Official Reports can be found on the Tynwald website:
www.tynwald.org.im/business/hansard
Published by the Office of the Clerk of Tynwald, Legislative Buildings, Finch Road, Douglas, Isle of Man, IM1 3PW. © High Court of Tynwald, 2018 STANDING COMMITTEE, MONDAY, 14th MAY 2018
Members Present:
Chairman: Mrs J P Mrs Poole-Wilson MLC Mr L L Hooper MHK Mr C R Robertshaw MHK
Clerk: Mr R I S Phillips
Contents Procedural ...... 29 EVIDENCE OF Mr Charles Coué, Collector of Customs and Excise, and Ms Lucie Kennedy, Team Leader Legal and Policy, Customs and Excise Division ...... 29 The next witnesses were called at 11.30 a.m...... 37 EVIDENCE OF Hon. Geoffrey Boot MHK, Minister, Mr Richard Lole, Chief Executive, and Ms Janice Skinner, Brexit Policy Manager, Department of Environment, Food and Agriculture ...... 37 The next witnesses were called at 12 noon...... 44 EVIDENCE OF Hon. Laurence Skelly MHK, Minister, and Mr Mark Lewin, Chief Executive, Department for Enterprise ...... 44 The Committee sat in private at 12.32 p.m...... 52
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Standing Committee of Tynwald on Constitutional and Legal Affairs and Justice
Brexit
The Committee sat in public at 10.30 a.m. in the Legislative Council Chamber, Legislative Buildings, Douglas
[MRS POOLE-WILSON in the Chair]
Procedural
The Chairman (Mrs Poole-Wilson): Good morning and welcome to this public meeting of the Constitutional and Legal Affairs and Justice Committee. I am Jane Poole-Wilson MLC and I chair this Committee. With me are the other members of the Committee, Mr Laurie Hooper MHK and Mr Chris Robertshaw MHK. We are assisted today 5 by the Clerk of Tynwald, Mr Roger Phillips. The Constitutional and Legal Affairs and Justice Committee is a Standing Committee of Tynwald with a wide scrutiny remit. Today we will be hearing evidence from a number of Government officials on the topic of Brexit and its implications for the Isle of Man. By way of background for anyone listening who is not familiar with the topic, on 10 23rd June 2016 the United Kingdom voted by a simple majority of 52% to leave the European Union. The Isle of Man did not have a say in this referendum. Although the Isle of Man is not a member of the European Union, we do have a relationship with the European Union through Protocol 3 to the UK’s Act of Accession. In summary, Protocol 3 enables us to trade industrial and agricultural goods freely with EU member states and it also restricts access to certain EU 15 provisions for those defined under it as ‘Manxman’. Protocol 3 will fall when the United Kingdom leaves the European Union in 2019. Before I begin, could I please ask you to ensure that any mobile phones are off or on silent so that we do not have any interruptions; and for the purposes of Hansard, I will also be ensuring that we do not have two people speaking at once.
EVIDENCE OF Mr Charles Coué, Collector of Customs and Excise, and Ms Lucie Kennedy, Team Leader Legal and Policy, Customs and Excise Division
20 Q40. The Chairman: First of all, we welcome Mr Coué. Thank you for attending today. Before we begin, I would just like to remind you that we have allowed 30 minutes for this hearing today, and if we do not need that long that is fine but if we get to 11.30 I will have to bring the session to a close.
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For the record, please could you state your name and the capacity in which you are 25 appearing here today.
Mr Coué: Yes, my name is Charles Coué and I am the Collector of Customs and Excise in the Isle of Man, a Division of the Treasury.
30 Q41. The Chairman: Thank you very much. Perhaps if we could start, please, Mr Coué, with a general question just telling us a little bit about your current work streams in connection with Brexit and in particular focusing on what you are doing around scenario planning for the potential likely outcomes of Brexit.
35 Mr Coué: Okay. First of all, I would say there exists a historic longstanding relationship with the United Kingdom for VAT customs and excise purposes and that is all laid out under the Customs and Excise Agreement 1979. As a result, we have always had a close working relationship with HM Revenue and Customs and, because of the revenue sharing arrangements that lie underneath the agreement, we also have a close working relationship with HM Treasury. 40 Under the 1979 Agreement, the UK and the Isle of Man are a single VAT area and goods moving between the two territories are treated neither as imports or exports, effectively making us a customs union with the UK. At a very early stage post the UK vote to leave the EU, Customs and Excise Division’s normal quarterly meetings with HMRC and HMT became supplemented by a number of face-to-face 45 roundtable meetings with representatives from HM Revenue and Customs, HM Treasury, the Department for International Trade Department, the Department for Exiting the EU and Customs representatives from other Crown Dependencies, Jersey and Guernsey. More recently, Customs and Excise Division has been engaging with HMRC on what have been termed technical meetings. Here we have been able to discuss and prepare for the 50 practical implications of Brexit, which from a customs and excise perspective revolve around retention of the 1979 Customs and Excise Agreement, continued access to the electronic customs import/export system known as the Customs Handling of Import and Export Freight (CHIEF), and the Customs Declaration System (CDS). That is a transition that was already in place prior to Brexit. They were moving from CHIEF to CDS, so we were already in training on that 55 work with them. But also we have been speaking with the Department for International Trade. One of their agencies, the Export Control Agency, runs another electronic system that our traders all rely on, called SPIRE, through which you can apply to get export licenses and things of that nature. Another stream is to continue to operate the Isle of Man’s own entry processing unit, which 60 is a facility that sits within CHIEF or CDS, and going forward another workstream is the application of the new UK tariff which will replace the EU tariff. That is possibly our largest area of work. Another area is the continued co-operation with other customs agencies with regard to exchange of information in relation to international trade. 65 We have been also looking at the practical areas of work, such as the handling of parcels, freight and passengers over the potential new borders, and of course discussion around our own legislative workstream – the things that we needed to change, to update, to take account of consequential changes from Brexit. We also have to consider the resource and infrastructure implications of a hard Brexit, such 70 as the manning of physical border checks and the facilities at our ports to be able to effect those checks. Of course, there is also the post to control and we have to raise and collect customs and VAT import duties on items arriving in through the post – packages, parcels. And with online cross-border shopping increasing year on year, we will continue to see increasing volumes of goods arriving through the post and it will be Customs and Excise Division’s job to ensure that
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75 the correct import taxes are paid before the items can be delivered and so enter into free circulation. Essentially, Customs and Excise’s role is to police our external borders to ensure that goods entering the Isle of Man, and so the UK, from third countries meet any rules governing their importation and that the import taxes are properly accounted for and calculated. Our Brexit 80 preparations therefore primarily revolve around those objectives.
The Chairman: Okay, thank you very much. Mr Hooper, did you want to come in there?
85 Q42. Mr Hooper: Yes. You have talked there about considering the potential implications of various outcomes of the Brexit negotiations. I am just wondering if you could expand a little bit on that – whether you are doing any kind of scenario planning, how much you are doing. Just if you could go into a bit more detail, really, on that process.
90 Mr Coué: Well, we have been working with different agencies – Isle of Man Post, for example – in relation to having to man on a more regular basis. We are already there at the post sorting office every day in the mornings, but we will probably have to extend beyond that and possibly beyond one officer, so we are looking at the potential for two or maybe even three officers in the future. 95 Basically, every item, every package that comes in – of which we handle currently around 180,000 packages a year – need to be X-rayed. If they are coming from third countries they should carry a customs declaration form on the outside, which should describe the contents and what the value is. We have to raise charges and we have to hold on to that package until somebody has come in and paid the charge and we can release it. Of course, with the advent of 100 Brexit there will be a lot more countries where packages that currently come in do not have to have charges raised will have to have charges raised. Therefore, the infrastructure side of that means that we need secure facilities to hold on to a considerable number of packages at any one time at the post office.
105 Q43. Mr Hooper: How many transactions get processed at the moment, then, through the EPU that are affected by tariffs? And are you planning for any kind of increase post Brexit? There was some evidence given to a UK Select Committee by the Permanent Secretary of HMRC, who was talking about an anticipated potential fivefold increase across the UK. Have you got similar kind of anticipations for the Island? 110 Mr Coué: Yes.
Q44. Mr Hooper: And do you think we are built up, we are capable of dealing with those kind of increases, or is that all part of the workstream? And if it is part of the workstream, if you 115 could expand on that a little bit.
Mr Coué: Well, it is part of the workstream. Clearly at the moment we have very little, other than fast freight and post, that comes directly from third countries into the Isle of Man. Of course we have yachts and aircraft which arrive sometimes directly; we already are staffed 120 sufficiently to look at that. But yes, with the potential for a lot more traffic coming in and potentially the … It depends on whatever the scenario with Ireland happens to be, but potentially we could be looking at policing the border not only for traffic from Dublin but also from Belfast. So yes, we have had preliminary discussions with the Chief Secretary about possible additional staffing requirements. 125 It is very difficult to go ahead and put those in place ahead of really knowing what the outcome
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is there, but I envisage that if we have a hard Brexit and we have to police both the ports and the increasing post we would be looking at in the order of 10 to 15 additional staff.
Q45. Mr Robertshaw: Can I outline my understanding of our current customs agreement as it 130 relates to this discussion – and perhaps you could then correct me if I am wrong? My understanding is that the current agreement recognises that an element of our purchasing power goes to online purchases and therefore comes in through the mail, and that hopefully there is a recognition that the Isle of Man has a predilection for online purchasing perhaps somewhat greater than a population of equal size in the UK. 135 What I am not clear about, though, is to what extent that current agreement recognises that some of our purchases are from EU countries. Does it do that, or does it ignore it?
Mr Coué: It does that. The current mechanism – the Final Expenditure Revenue Sharing Arrangement – essentially is based on consumption in the Isle of Man, whether the goods are 140 actually consumed, used or enjoyed here. So, no matter where they are purchased from – anywhere in the world – if they are consumed, used or enjoyed here in the Isle of Man then we measure that through the likes of what is going on … It has just started. The Household Income and Expenditure Survey will give us the data about where people spend and what they spend on. It does not matter whether you buy a kettle here in Douglas or you buy one over the 145 internet from a UK firm or you have it sent in from China – whichever way it is, we know that that is going to be used in the Isle of Man, we know how much it costs and we know therefore what the amount of VAT that should be accounted for in relation to it is. We therefore, based on that consumption data, calculate all the VAT that is due to the Isle of Man and that is what we then put in place with the UK and that forms the basis for the Isle of Man’s share. 150 Q46. Mr Robertshaw: Fine. So will the Household Survey give you the opportunity to try to identify to what degree purchases are currently being made outside the EU area?
Mr Coué: Yes, it will. 155 Q47. Mr Robertshaw: I think in reply to Lawrie’s question you were talking about perhaps – if I have understood you correctly – 10 to 15 staff to control this whole process up at the post office or wherever you decide to do it. But do we have an understanding of the value of VAT our current Customs Agreement enjoys in recognition of purchases online outside of the UK? In 160 other words, what is the cost revenue comparison?
Mr Coué: No.
Q48. Mr Robertshaw: We don’t have that? 165 Mr Coué: It is not necessary for us to know that. We just need to know the total consumption; we do not actually need to know how it is broken down, only what the commodity is.
170 Q49. Mr Robertshaw: But once Brexit has occurred, then there is a differentiation, isn’t there?
Mr Coué: We still just need to know how much is being consumed, used or enjoyed, what its value is and what the commodity is. Where it is actually purchased from makes no difference to 175 the Revenue Sharing Arrangement. We are due the VAT on that consumption, no matter where it is purchased from.
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Q50. Mr Robertshaw: That is now, but once Brexit occurs, then our customs union with the UK remains intact. But how could we expect, within a customs agreement with the UK, a 180 revenue return from an item purchased from the Isle of Man direct from an area outside the UK’s customs union? That is where I am confused.
Mr Coué: Because when those items enter into the area of the UK’s customs union they will be subject to import duty and VAT. 185 Q51. Mr Robertshaw: Before they get to the Isle of Man?
Mr Coué: Well, possibly, but those that come directly to the Isle of Man are the things that we will raise charges on ourselves, and the charges that we raise we will put back into the 190 revenue sharing arrangement. So, if we collect £1 million ourselves it goes into the pot, but our share is still based on what our consumption is, not how much we have contributed to the pot.
Mr Robertshaw: I understand now, Charles, thank you.
195 Q52. Mr Hooper: Just picking up on that and returning somewhat to the question of the EPU, you said you are anticipating an increase in the number of transactions, and obviously there will be more work with those transactions as well if the UK decides to impose different tariffs to what are currently in place. My understanding is there is quite a tight timescale for delivery of the upgrades to the systems that are involved, all the computer systems in this. Where do we 200 stand in our element of that? Are we on track? Obviously when March 2019 hits and we have the Brexit date, in theory we may need to be fully up and running then. Are we on track for that?
Mr Coué: Well, we are totally reliant on the UK getting the changes made because we sit on their system. CHIEF is their system; we are a user of it. Our EPU sits within that system, so as 205 they transform that from CHIEF to CDS, which was the journey we were already on with them, our EPU will continue to exist within that electronic system. So, provided they deliver it in time for March 2019, then it will be fine; and if they do not, they will have to have their own fall-back provisions as to how they are going to manage around that.
210 Q53. Mr Hooper: Yes, that was going to be my follow-up question. I would imagine you are in regular dialogue, then, with the UK about how work is progressing on this, because it is quite an important aspect of what we do. Have you received any indications from them that things maybe are not on track, or that things are on track? And then, picking up on your last comment, what is the fall-back? What is the contingency that we have got in place in case the worst 215 happens and they are not ready?
Mr Coué: Well, they will continue with their CHIEF system rather than transferring to CDS. If both are run in parallel, they will just have to keep CHIEF running. That is the fall-back, I imagine. The real work for us is not so much about the electronic systems, because those are things 220 which are available to our traders to use. If you are an Isle of Man based international trader and you want to import or export things, then you use CHIEF to do that, or CDS. What we need to ensure here in the Isle of Man is that whatever the tariffs and the countervailing duties or anti- dumping duties, any of the rules around what can or cannot be imported and how much should be charged on it, we have got to make sure that the legislation matches that in the Isle of Man. 225 I could not say to you, ‘You’re bringing in some golf clubs from America – the duty on that is 12% and before we can release them to you, you have to pay it.’ And then you say to me, ‘Well, I know – on CHIEF, or whatever, it tells me the tariff for that, but where does it say in Isle of Man law that that is the rate of the tariff?’ So it is matching whatever the new tariff system is, because at the moment the tariff is set by the EU and it is automatically applied directly to the
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230 Island, so we do not have to worry about following it; it is here. Post Brexit we have to worry about how we follow the UK’s tariff and that is an area of negotiation and discussion we have been having with them. There are three main ways we could do it. We could use our existing legislation, which provides for us to make secondary legislation to follow any changes in relation to Customs and 235 Excise. That is one, but probably the least desirable because it will involve even more staff required to keep up with the number of changes if you imagine how many tariff lines there are or how many commodities there are. The second one: we have requested the UK to introduce a thing called a permissive extent clause into the customer’s bill, which would then allow us to go to them and say, ‘We would like 240 you to apply the tariffs directly to us.’ The third option is that we would use some sort of ambulatory measure in our own legislation to point out whatever their legislation is that sets the tariff and to follow it as it changes.
245 Q54. Mr Hooper: Would I be right, then, summarising from your perspective, the biggest risk that we are facing in your space post Brexit is a legislative risk on the one hand, but then a resourcing risk in how do we deal with putting the relevant staff in place actually when it comes to the systems – and you are okay with all the systems, but actually it is the staffing, the resourcing behind that staffing and then the legislation and the resourcing behind how we deal 250 with that, that is the biggest risk for you?
Mr Coué: It is, yes.
Q55. Mr Robertshaw: Is the UK government inclined to want to co-operate fully in terms of 255 your preferred route? You indicated ambulatory rather than us specifically dealing with it in secondary legislation. Are they likely to resist that or be comfortable with the suggestion from our end?
Mr Coué: Well, we are still hoping to hear back from them as to having this permissive extent 260 clause. That would be the most desirable and we have not had a yes or a no yet, so we are waiting.
Q56. Mr Robertshaw: Because they are themselves incredibly busy anyway. (Mr Coué: Yes.) Have you any fear that we might get … Remember Protocol 3? It sort of got tagged on at the end 265 as a ‘by the way’. Are we possibly in that scenario here if we are not careful, through no fault of our own?
Mr Coué: No, because ultimately we can apply all the tariff measures ourselves through our own legislation; it is just that it is going to require more work at our end to be able to achieve 270 that, but it is achievable.
Q57. The Chairman: Just on the two options that you said were preferable to having to apply everything through our own secondary legislation, you mentioned the permissive extent clause and the alternative is the ambulatory provision. What would you say is the advantage and 275 disadvantage of the second and third options for which way we might go?
Mr Coué: I suppose the main advantage of having it applied to us is that there is less chance of us ever missing anything. If they suddenly decide to in some way apply something new that is not through something we have pointed our ambulatory legislation at, then it leaves a loophole 280 there, but I think ultimately it is also just potentially the work. There would be more work for us to do if we were creating the legislation for the ambulatory legislation.
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Essentially, all measures that we have considered will work, but through it being the easiest and the least likely to create a possible gap, it would be the permissive extent laws.
285 The Chairman: Okay, thank you.
Q58. Mr Robertshaw: Could you just give us a quick few minutes, because we are obviously tight for time … I am aware to some extent of the transmission from CHIEF to CDS, but could you give us a further little explanation as to what SPIRE is? I am not as familiar with that. You 290 mentioned SPIRE earlier on.
Mr Coué: SPIRE is the electronic system that is operated by the Export Control Organisation. If you want to export anything from the UK that may require a licence, you go on to SPIRE to find out. It is a bit like going to look at the tariff to see how much should be charged if it needs to be 295 charged, is it free of charge. The same thing with SPIRE: it tells you about all the other non- revenue regulations around import and export.
Mr Robertshaw: Thank you very much.
300 Q59. Mr Hooper: Probably an unusual question to ask, but do you see, as a result of this process and the fact that we are obviously tied to the UK with our Customs Agreement … What we do is exactly what they do, but there are some advantages to people coming to the Isle of Man at the moment because of the way we approach our VAT. So the processing and operational side of the thing more than anything else – do you see any potential opportunities 305 as a result of the whole Brexit process purely from a customer’s perspective? Anything that we could be looking to be doing here locally, that whilst we need to maintain complete parity with the UK we could try and maybe get a little bit of an edge on them? Probably a cheeky question to ask.
310 Mr Coué: It is a very difficult question to answer. Potentially the UK after Brexit … It is saying at the moment that its chosen path is to retain a VAT system very similar to the EU. However, they will have the opportunity to tweak it. Over the past few years there have been things where the UK would have liked to have treated VAT in a particular way but the EU have said it must be done in a different way. I think on occasion they have even been taken to task over 315 making a change. Going forward, there may be the opportunity for them to change some of those rules, which could advantage us but I do not particularly see that it would advantage us over the UK, although if you look at the exempt sectors – banking and insurance – they have asked for years for some changes and things to make it less costly from a VAT angle for them. That is a possibility, I suppose, from the UK’s point of view which we could benefit from, but to 320 actually come up with something specifically for ourselves which was different to the UK – other than retaining the likes of a 5% rate – I cannot see that the opportunity would really be there.
Q60. Mr Robertshaw: My last question because we are running out of time, but – again I ask this out of ignorance – as I understand it, with VAT being fundamentally an EU type of taxation 325 system which the UK is going to continue with, and given that again I understand that part of the – and correct me if I am wrong – UK’s contribution to the EU is measured against its VAT revenue, in our Customs Agreement with the UK is there any element, even though we are not in the EU, that the UK contributes an element of revenue from the Isle of Man into the EU; and as such, is there therefore an opportunity for us to tweak our Customs Agreement? I hope that 330 question makes sense. Does it?
Mr Coué: The thing we are talking about is the EU’s own resources and that is calculated as 0.3% of the net VAT pool of any of the member states. So, because our share of that is part of
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the UK’s net VAT pool, then whenever the net VAT is left over – the revenue for Government – 335 0.3% of that is paid as a contribution to the European Commission.
Q61. Mr Robertshaw: Do we have an understanding of what that would be in our terms, then?
340 Mr Coué: Well, it would be 0.3% of our share of the revenue.
Mr Robertshaw: Right, okay, got it – whatever that is.
Mr Coué: Whatever that is, yes. I hope you are not going to ask me! 345 Mr Robertshaw: Get your calculator out!
Q62. The Chairman: We do need to bring things to a close, but one final question, if I may. We understand and we are sorry to hear that you are due to be retiring in the near future, and 350 given what you have talked about in terms of the amount of work and also the various issues that the Department is facing, I just wondered if you could talk a little bit about whether you have any thoughts on key person risk in your area and how to manage through what looks like it is going to be quite an intensive period of work and change.
355 Mr Coué: Yes, well, in one sense probably the most key person risk to us is our legislation. Recently, Ray Todd, who was with us for many years, retired, and Lucie Kennedy, who has been here today, has replaced Ray. We have also brought in an extra member of staff to that team. So the legislation is probably our greatest risk and I think that we are amply ready for that. Certainly when it comes to matters of legislation I would turn to Lucie to ask for her assistance on that; 360 she is very good. The other side, the customs borders and what have you, there we have got two longstanding members of staff who are very well versed in all of those and they will be there throughout the whole of the passage of Brexit. So I do not have concerns that my leaving will leave any sort of lacuna, that people will not 365 know what to do. It is very clear – I think Government has a staff survey and one of the things in the staff survey is to ask ‘Do you understand what your job is and what you are there to do?’ and I am pleased to say that in every staff survey we have a 100% record that everybody is very clear what they need to do and why they are there to do it, and I am sure that Brexit and me going will not change that. 370 Q63. Mr Robertshaw: Are you confident that we will be able to keep our capacity, going forward, about having a generalist grasp across the whole landscape of VAT regulations … will be retained in your Division in the way it has been done so eminently well in the last 20 or 30 years? 375 Mr Coué: I very much hope so. I think I leave behind a deputy who still has, I think, somewhere in the region of 10 or 12 years left to go, and the head of our VAT Assurance Team probably also similarly has at least 15 years to go. So there is a good base of people who understand all of this. 380 Also, because of the changes to the revenue sharing arrangements and the new FERSA – this year being a new base year for that – we have had a project running to make sure that we get all the data in that we need and we have made an actual FERSA project manager post, which is another member of staff in Customs and Excise, so I think retention of knowledge in all these areas is safe.
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385 The Chairman: Thank you. Anything else?
Mr Robertshaw: No.
390 The Chairman: Okay, thank you very much, Mr Coué, for your time this morning.
Mr Coué: Thank you.
The next witnesses were called at 11.30 a.m.
EVIDENCE OF Hon. Geoffrey Boot MHK, Minister, Mr Richard Lole, Chief Executive, and Ms Janice Skinner, Brexit Policy Manager, Department of Environment, Food and Agriculture
Q64. The Chairman: We continue with this morning’s evidence session from a number of Government officials on the topic of Brexit and its implications for the Isle of Man. 395 Now we would like to welcome Mr Boot, Mr Lole and Ms Skinner. Thank you for your attendance here today. I would just like to ask if you could please make sure any mobile phones are switched off or turned to silent; and for the purposes of Hansard I will be ensuring that we do not have two people speaking at once. I would also like to start by reminding you that we have allowed 30 minutes for this hearing today, so if we get to 12 p.m. I will have to bring the 400 session to a close. For the record, please could you each state your name and the capacity in which you are appearing here today.
The Minister for Environment, Food and Agriculture (Mr Boot): I am Geoffrey Boot, Minister, 405 DEFA.
The Chairman: Thank you.
Mr Lole: I am Richard Lole, Chief Executive, DEFA. 410 Ms Skinner: I am Janice Skinner, Brexit Policy Manager, DEFA.
The Chairman: Thank you. Mr Hooper. 415 Q65. Mr Hooper: The first question I would like to ask you: in your submission to the Committee, one of the things that you stated was that the UK is wishing to ensure the Crown Dependencies are not in a position to compromise any trade agreement reached with either the EU or a third country. That flagged up to me that perhaps there may be situations where the 420 Island has a slightly different set of needs to the UK and there may be opportunities the Island may wish to take advantage of that the UK is either not aware of or maybe is not really something that is high on their list. Something that was discussed recently with the Chief Minister by this Committee was the potential for expanding our entrustment provisions, and really I was just wondering what DEFA’s position was when it comes to the possibility of
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425 exploring opportunities that may exist through getting more entrustment to the UK to really engage in our own trade negotiations and get our own trade agreements in place.
The Minister: First of all, Chairman, if I may just say I did have a statement prepared. It is normal that I can make a statement before we start on the detailed questioning, but it is at your 430 discretion, obviously.
Q66. The Chairman: In this case, Minister, it was really the fact that we have got such a short hearing period that we wanted … If we get through the questions, by all means if there are additional things you would like to say to the Committee – or you could always send it to us as 435 well.
The Minister: We will see how we go. Going to Mr Hooper’s question, there is quite a lot of meat on that, really, in terms of where we are going. Obviously, from the Isle of Man Government perspective we have been engaging 440 with the UK for quite a long time at quite high a level. The Chief Minister, for instance, has been visiting the UK almost weekly on occasions and taking different Ministers with him. We are engaging at all levels and we have commitment … In fact, there is a letter from the UK from David Davis, which actually clarifies that. I do not know whether you have got quick access to his statements on that, which might help clarify the situation, Janice? Here we are.
The report also calls on the Government to continue to fulfil its constitutional obligations to represent the interests of the Crown Dependencies in international relations, even where these differ from those of the UK.
445 And later:
We shall take full account of the Crown Dependencies’ interests in the negotiations.
That is quite a big commitment and certainly our experience with DEFRA, where we are meeting … I do not know – how often?
Mr Lole: We are currently meeting in a formal sense every two months typically, and other 450 more informal meetings with DEFRA officers certainly monthly, and then conference calls in between. So there is a very close understanding of each other’s position.
The Minister: And it is fair to say that they are sharing as much as they know. If you watched the political programmes over the weekend, Brexit remains as opaque and uncertain as ever, so 455 we are shooting at a really moving target all the time. Going to the latter part of your question, you are talking about negotiating our own trade agreements. I think the practical situation is that we are 84,000 people and any trade agreements … We would be part of a World Trade Organisation situation if that is the way things run, but nearly everything that we do goes through the UK. Trying to negotiate our own 460 agreements I think would be fraught with difficulty. Richard, do you have any feeling for that?
Mr Lole: I think we would share the view that I think Della Fletcher expressed when she was in front of you last time, which was that at the moment we do not see a need for entrustment and believe that negotiation through the UK is likely to be as effective as anything else. 465 Obviously circumstances change, but that was the position laid out at that point.
Q67. Mr Robertshaw: Thank you. I think the Policy Review Committees, Minister, are very aware of the fact that we do not want you to have to replicate the statements you have already made to other Committees, and as I sit on the two we have agreed that what we will do is try to
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470 avoid that today and focus on a particular area in the short time that we have got, so that you do not have to keep saying the same thing to us. Where we would like to look this morning … Thank you very much to the Chief Executive for that very informative letter that he sent us, and I would like to go through, on behalf of the Committee, one or two of those points that you have kindly raised. 475 It has become very clear to the Policy Review Committees that DEFA is very much in the frame in terms of Brexit. You are really, in terms of work burden, the lead Department to a great extent. If I may address the Chief Executive, you talk in your letter about 71 pieces of secondary legislation that need amending before Exit Day. Well, two questions. Before Exit Day? And to what extent are those amendments laborious or time consuming for you? Could you talk us 480 through that?
Mr Lole: Briefly – and then I think Janice may be able to add a little bit more of the detail – we effectively have obviously had to schedule those and we are hoping at the next political meeting to agree a set of priorities around that. And so we will be prioritising the legislation that 485 is necessary for trade purposes first, and then there are more and more granular aspects that need tidying up. Not all of those pieces of legislation are of a significant concern, but they are all areas where we have not kept exact pace with where the EU has gone. I think our last legislation person starts within a matter of days and we will then be in a position to say that is the plan, that is what we need to do, those are the top priority and let’s 490 get on with them and bring them forward as fast as we can.
Ms Skinner: It was over about 14 months the gap analysis was undertaken to ascertain the 71 minor – well, not necessarily minor pieces of legislation, but there are certainly 71. Some of those 71 might end up in one single Order, so we might amend 12 in one Order because it might 495 just be a few minor amendments. But there are some big gaps, more so because the EU have recently produced a new regulation replacing most of the animal welfare, plant health food and feed, and food hygiene items. It is EU Regulation 2017/625, which came into effect last April, and that is actually repealing 77 items of EU law and consolidating them. That is having a massive effect across most of what we have done, so we need to take that on board as well. 500 Q68. Mr Robertshaw: So is your Minister going to be up and down, up and down?
Ms Skinner: I think so, yes, I’m afraid!
505 The Minister: I think it is fair to say that as we get nearer Brexit the fact that we basically had equivalency or complied with some of the EU legislation and we have relied a little bit on the UK for that, the UK are now looking at this more granularly in terms of how we might have to comply with WTO. They do not want the Crown Dependencies to let them down in that process as part of it, so they are being more analytical about where we are and we are having to look at 510 what we are doing to make sure that we are in compliance. The one that comes to mind straightaway is the Montreal Treaty, in terms of refrigerant gases. We have basically had equivalency on that, but now we need to do our own piece of work on that. At the moment, we are not able to export refrigerant gas, which is not very good because we cannot dispose of it on Island. 515 Q69. Mr Robertshaw: And these 71 pieces of work – depending on how many times you have to be up and down in Tynwald – is this before Exit Day? On Exit Day? Is there an active date? Would that co-ordinate with Exit Day, or would you be able to do it anyway, as a matter of course, before Exit Day? I am not quite clear there.
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520 Ms Skinner: It depends on when Exit Day is, of course. If it is a hard Brexit, Exit Day will be 29th March 2019 and there is absolutely no way we could get that legislation up to date.
Q70. Mr Robertshaw: I am sorry to talk over you. The 71 pieces, you could not get them by that date? 525 Ms Skinner: It would be, I think, nigh on impossible unless we threw extra resources at what we have. If Exit Day is, as proposed, with a transition to 31st December 2020 – as the EU and the UK have sort of agreed, but who knows – we have got that two-year transition period in which to get other things up to date. So it is all a bit up in the air at the moment. 530 Mr Robertshaw: I understand where you are coming from, because it was just the ‘before Exit Day’ in your letter that I thought, ‘Wow, that’s a bit of an ask, really.’
Q71. The Chairman: Just a point of clarification. Perhaps I have misunderstood this, but some 535 of what you are talking about almost sounds like it has been triggered by the prospect of Brexit but it is actually more urgent than Brexit. The point you are making about what we can and cannot do, have I misunderstood that?
The Minister: Well, no, I think Brexit has triggered an analytical look at the way we interact 540 with the UK and that is a trigger, but when Janice is saying we could not, obviously if we had to we would have to. At the end of the day it would be difficult, but it would be a prioritisation situation and we would have to enable trade or transfer of material in some cases. We would just have to do it – it is as simple as that, really.
545 Q72. The Chairman: So the prioritisation you are talking about is the things that absolutely have to happen irrespective of Exit Day?
The Minister: Some of these things are going to happen now that they been exposed, as it were. It is not that we have not been compliant; it is just that the paperwork might not be as 550 thorough as it could be in terms of looking at where we are. So it will be a useful exercise in any case, but it will be a matter of prioritisation to make sure that we can do certain things if there is a hard Brexit.
The Chairman: Thank you. 555 Mr Robertshaw: Time flies when you’re having fun.
The Minister: When you’re having fun.
560 Q73. Mr Robertshaw: So the second part of your letter, which concerns the 21 pieces of secondary legislation requiring application, which is different to the 71 – is it in addition to the 71? Okay, right, thank you. I have got that as a yes?
The Minister, Mr Lole and Ms Skinner: Yes. 565 Q74. Mr Robertshaw: Just for the tape. What are they are about? Have we not applied stuff we should have done, or what?
Ms Skinner: It would appear to be the case, yes. I think that since the European Communities 570 (Isle of Man) Act 1973 came into being there has been quite a lot of lack of understanding about what actually applies to the Isle of Man under Protocol 3 and somebody has said, ‘Actually, we
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don’t need something to do with biocidal products.’ In my research I found something going back to 2004 when the Attorney General said, ‘Actually, you don’t need this,’ but now it transpires that we actually do. So it is stuff that we have not historically applied because it is an 575 immense amount of legislation for maybe three people who were dealing with this type of stuff.
Q75. Mr Robertshaw: Have you any concerns in terms of those 21 areas not applied? Are they, in their application, going to cause any concern for anybody who is subject to that legislation that thus far has not even known about it? Have you any concerns there? 580 The Minister: Can I just say it is not quite as black and white as that, because we have looked at things in the past from a practical situation, from the Manx situation, as to whether Protocol 3 does not oblige us to do a lot of the things that we do. We do it because we want equivalency in terms of exporting or importing or working with the EU environmental standards etc. So we 585 have not had to do all of this stuff. Basically, we have done a lot of it because it is the right thing to do and when we are trading with the EU – the UK is the front door to the EU – we need to have done that in equivalency terms. So we have not done anything wrong; we have just applied sensible solutions to rafts of legislation that, frankly, we did not need to adopt at that particular time. I think that would be a 590 fair assessment.
Mr Lole: I think that would be a very good assessment. I think you could segment them between areas that we have addressed in other ways, but that does not necessarily mean we have the exact same wording in the legislation. We have used lots of policies. In some of the 595 agricultural examples we have used the Agricultural Support Scheme to require compliance with things without necessarily therefore having to put the legislation in place. So it is about tidying it up, and that is back to that comment about prioritisation. There are areas associated with trade where we do need to get the exact wording to ensure we can demonstrate compliance and I think some of this is simply driven by … We have done a really 600 good audit on where we are and similarly the UK have, so they have identified situations where we need trade products with them but we are not actually complying with the standards that they have for trade.
Q76. Mr Robertshaw: Taking you back to my point, will there be any need for any sensitivity 605 testing on your part to make sure that any of the applications of these 21 pieces do not impact in a way that would be detrimental to trading companies etc?
Mr Lole: We have done quite a lot of work with businesses that we saw being directly affected, certainly on the more high-priority pieces of legislation, but there is more to do. 610 Q77. Mr Robertshaw: Thank you very much indeed. Turning to the next element of your letter, international obligations, you have specifically raised the issue of waste. Could you talk to us about that? There seem to be concerns about international obligations about waste and we are not complying. Perhaps if I have 615 misunderstood your letter forgive me, but could you talk to that a little bit?
The Minister: I have already mentioned the Montreal Treaty, which is specifically mentioned there, but there are are a number of other areas. Richard, would you like to …?
620 Mr Lole: If I have a broad comment, then Janice may wish to pick up detail. There is an awful lot of EU legislation which we are excluded from under Protocol 3, especially associated with the environment. We have signed up to obligations and they bring a sliding scale of expectation, and so we are to be compliant at different levels by different terms
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in the future, whereas the EU may have moved at a faster pace. So there are places where we 625 are compliant with international obligations but we are not compliant with the current EU position on it because they have chosen to adopt things faster. The Montreal Treaty is a good example of that. Where that involves us trading products with the EU – well, with the UK but they are part of the EU – the UK are rightly saying actually we should probably be compliant with the EU’s standards on those matters because it is about trade of products. 630 Q78. Mr Robertshaw: Do we have any areas there where application of part of those regulations will cause difficulties for us?
Mr Lole: If we carried on with the Montreal example, as the Minister mentioned earlier, since 635 that issue emerged the UK have said we probably should not be sending redundant fridges and redundant refrigerant materials until we are compliant with their standards, so we need to establish a register and various other things to enable that piece of trade to take place. So there is currently a stockpile of fridges.
640 Q79. Mr Robertshaw: That was one example. Have you any others that are of concern to you, that stand out?
The Minister: There are a number of conventions that we are signed up to where there may be issues, but one that did flag up is EURATOM, which is the transfer of radioactive material. You 645 think, ‘Radioactive material? Where does that impact on us?’ Well, if you think about it, the Hospital uses quite a lot of radioactive material, so it is one of those areas where if we cannot import or send spent material back to the UK, then we have problems in the very near future. These are the sort of examples of where we need to tidy up at the moment. We are continuing to do that, but there are deficiencies in terms of the reciprocal agreements. So yes, there are 650 and will be other areas.
Q80. Mr Robertshaw: I do not know whether we have already covered this, but you also mentioned there is difficulty in ascertaining which agreements we are actually signed up to. Is that encapsulated in what we have already discussed, or is that a separate element? 655 Mr Lole: We believe we now have a comprehensive list of the international obligations that we are signed up to.
Mr Robertshaw: Thank you very much indeed. 660 The Chairman: Mr Hooper.
Q81. Mr Hooper: We have spent 20 minutes talking about legislation, and from reading the letter and from that discussion it seems to me that the biggest risk facing the Department from a 665 Brexit perspective is the legislative risk – that you do not get enough legislation in in time, you do not have the resources to bring the legislation forward. And also you say you have been engaging with industry about the potential impacts if we do not get some of these things sorted. It all seems to be about the potential negative impact. From my perspective DEFA is one of the Government Departments that are outward looking, 670 you are one of our outward faces, so one of the things I would be interested in is how much resourcing has been allocated to looking at what potential opportunities may come out of Brexit. You have talked about additional resources being applied to your legislative team and to your Health and Safety Directorate, but I am not seeing a lot of talk or a lot of resourcing going towards actually what is out there for the Island, how can we make this work for us, what could 675 be the potential upside of Brexit.
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Obviously you guys are very focused on the potential downside, which I do fully appreciate, but what is there that you are doing to try and capture the upside potential?
The Minister: I think, in terms of resource, we put in a Treasury bid and we have got three 680 extra individuals involved, allocated one and a half posts within the Department and reallocated their work loads. So we are working hard on that. When it comes to opportunities, there are some potential opportunities. There is a tendency to dwell on the negativity and there is quite a bit of negativity if we do not get it right, but there will be opportunities. 685 For instance, the fisheries sector, the London Convention, the UK has already served notice on that and that will mean that the historic access … Boats from France, Belgium and various other places will no longer have access to UK territorial sea, which includes the Isle of Man. The quota system under the EU fisheries policy will – but we are not sure – presumably fall or be renegotiated, which means there may be more quota available and some species that we are 690 not able to catch at the moment because we do not have any quota, because we sit within the UK gambit. The Fisheries Management Agreement (FMA), which we work with the devolved jurisdictions around the Irish Sea, is well past its sell-by date and needs revisiting. It will give us an opportunity and we have already prepared a position paper for DEFRA in the UK in respect of 695 that. There will be opportunities to actually seize more control, I hope, of our territorial sea. We still want some historic access to persist both ways because if we get more quota – scallops are the big thing at the moment and whelks, but that may not last forever and it may change, so we may want historic access to some of the waters around us. But yes, there will be opportunities there and I am really looking forward to being able to renegotiate the FMA because there is 700 great potential there for improvement. So yes, there are opportunities. If we move forward, at the moment some of the markets, the scallop market for instance, we are very reliant upon Europe but we have been more outward facing. We are selling a lot of whelks to South Korea. There are implications if we come out of the EU – or the UK comes out of the EU. We do piggyback on some of their trade agreements but maybe we would be more 705 outward facing ourselves in terms of new markets and opening new markets that may offer us new opportunities in the agricultural and fisheries sector.
Q82. Mr Hooper: That brings me almost full circle to where we started. Everything you have described there, we are almost wholly reliant on the UK, UK waters, UK quotas, UK trade 710 agreements, which brings me right back to my first question. Are there not real opportunities here for us, in some cases, to be exploring new markets that the UK possibly is not looking at, is not actively engaged with, and is it maybe something DEFA would or should be looking at in regard to its own departmental policy on trying to get the ability to negotiate some of our own external-facing trade agreements? 715 The Minister: I will ask Richard to put some detail on this, but if all the EU agreements fail – and we will be reliant on the agreements that the UK reach with the EU – and it is a very hard Brexit, then we are going to fall back on to WTO trade rules. We have a WTO agreement at the moment, but I am not sure how that sits with the UK. Richard, can you add some detail to that? 720 Mr Lole: The UK are busy re-establishing individual membership of the WTO. I am not sure that is the right terminology, but that is the practicality of what they are doing as they come out of Europe where their membership has been through Europe. Thinking about the specifics of in what scenario might we want to negotiate differently to the 725 UK, for the most part the markets that we seem to be identifying to be higher priority for us – and some examples of that would be South Korea, where we are selling a lot of whelks and
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America, where we are now selling an increasing amount of cheese – fortunately the UK is also keen to access those markets. If we found ourselves looking at a really key market that was not a priority for the UK, we 730 might have different views. The Minister identified their commitment to represent our wishes even if they are different, so in theory they would still make those negotiations. I think everyone is going to be quite thinly spread and I am sure they will prefer to be led by their own priorities, but it is really important to acknowledge that so far they have been really keen to listen, they have shown understanding of the areas that we are concerned about and have shown 735 commitment that they would still take part. That is the reason that we have not seen entrustment as a necessary way forward.
The Chairman: I am mindful that we are almost at the end of our time. Did you have –?
740 Mr Robertshaw: But we could always drop you a line. I do not think my final question was particularly key. I will leave it.
Q83. The Chairman: Can I thank you very much. Is there anything else that you wanted to add for us? 745 The Minister: Following Mr Robertshaw’s comment, if you have any more detail that you want, please feel free to write to us and we will be happy to furnish you with that.
Q84. The Chairman: And if you would like to send us a copy of your statement, Minister, as 750 well?
The Minister: I will indeed. Thank you very much.
The Chairman: Thank you very much for your time.
The next witnesses were called at 12 noon.
EVIDENCE OF Hon. Laurence Skelly MHK, Minister, and Mr Mark Lewin, Chief Executive, Department for Enterprise
755 Q85. The Chairman: Good morning and welcome to the continuation of this morning’s evidence session where we hear from a number of Government officials on the topic of Brexit and its implications for the Isle of Man. Now we would like to welcome Mr Skelly and Mr Lewin. Thank you for attending today. Can I first of all explain for the purposes of the record that as Mr Hooper is a Member of the 760 Department for Enterprise he has recused himself from this part of the hearing. Can I also ask people, please, to check that their mobile phones are switched off or turned to silent to avoid any interruptions. Mr Skelly and Mr Lewin, I would like to remind you that we have allowed 30 minutes for this hearing today, so I will be bringing the session to a close at around 12.30. 765 For that reason also, with the previous evidence sessions we have had this morning we have not invited opening statements. Because of the short time period for questioning, we have just progressed to our questions. For the record, first of all, though, please could you each state your name and the capacity in which you are appearing here today.
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The Minister for Enterprise (Mr Skelly): Yes. Laurence Skelly, Minister of the Department for 770 Enterprise.
Mr Lewin: And Mark Lewin. I am the Chief Executive of the Department for Enterprise.
Q86. The Chairman: Thank you very much. 775 Perhaps if we could begin, please. As a Government Department that has a very outward- facing role and indeed has recently undergone a restructure to enhance that outward-facing role, could you tell us a little bit about the work that you are doing, particularly using the new agency structure, to ensure a good understanding of the issues that different sectors face with Brexit. 780 The Minister: Yes. Gura mie eu, Caairliagh. First of all, I appreciate you highlighting the fact that we have gone through a major restructure. I would also highlight that we have treated this matter with utmost priority. Ever since it was announced, we have actually been engaged very early with regard to the 785 implications for the Isle of Man. I think we have been involved with four different interim reports, some pre-Brexit announcements and others post, so there are four different reports that we have been involved with. Very clearly our role and responsibility is understanding what those future trade relations are going to be. Right the way through the process of the transition, moving towards the executive 790 agency model we have actually focused in at having Brexit has a standing item. As a Department we have it as a standing item every two weeks, the executive agencies will also have it on their agenda and we have been planning for this change right from the get-go. We have regular meetings with industry, the 20 different sectors, as you know, that we do represent, and we have now channelled that into the four executive agencies. So you have the 795 finance, which is clearly outside; you have the digital, which has a lot of that outside; then you have e-business, which carries a lot of the other sectors; and of course the Visit, which is the tourism sector. So we have a number of face-to-face meetings. We are also very heavily involved with the cross-Government work so that we can feed in the input that we have from industry to the EU Advisory Group, which is obviously cross- 800 Government. So we are very much focused in on understanding what the implications are and also exploring what those opportunities are as well as those are changing.
Q87. Mr Robertshaw: I hope you will be reassured that the Policy Review Committees are also establishing how we can work together and contribute to the whole process of finding our 805 way through this very opaque world that we are entering into and that hopefully we can make a positive contribution to the whole process. (The Minister: Thank you.) To follow on from the Chairman’s comments, what from your departmental perspective, are the issues emerging that you would like to point us towards from the various sectors?
810 Mr Lewin: If I could start, Madam Chair – and again, thank you for giving us the opportunity to talk about this really important topic today – you said in terms of an opaque … That is one of the challenges, actually navigating a way through what can be a really complex topic that continually moves and continually has different sides to coming to that. As the Minister said before, we spend a lot of time with industry. We talk often in the here 815 and now about things they are facing today – either challenges in terms of helping them fulfil their full potential or, in some cases, opportunities they see and how do we as a Government make sure we can create the right environment for them. So, apart from right from the early days when Brexit became not just an idea but a reality, we have spent time partly talking about some of the topics, some of the thoughts on the kind of 820 scenarios there might be, but also from them, getting it from their own perspectives. A lot of
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businesses that are here that have tentacles or stakeholders out in other jurisdictions will have their own thinking as well, and what we try to do as a Department is bring that together and then we play that out and check it and bring it forward. In terms of challenges, part of it is navigating and simplifying that down. There are clearly 825 some of the main challenges around things like access to skills. That is a challenge we know we face today and we know it is a hugely important part of our future. As a Department, as a Government, we are committed to working with industry to address that and to help. Again, all those businesses that have confidence and are looking to grow, how do they make sure they access that talent? We are competing in a global space for these skills, so we absolutely have to 830 make sure that through all of these scenarios we are still able to secure the skilled workers we need going forward. On the opportunities side, obviously our main strategy, our main principle here, is to preserve what we have today. That came out right from day one from industry in terms of a frictionless and tariff-free mechanism for goods. But as that conversation flows and as the UK 835 enters into new relationships, is there an opportunity in there for us, from a service perspective, to improve our access to markets? That has come out right from two years ago as one of the early opportunities. Underneath that, what the Department tends to look at is … Individual sectors, from financial services through to, again as the Minister said, some of digital businesses, have their own views 840 of what either the risks might be or some of the opportunities that come out, and we have been working to first of all make sure, where we get it coming from an individual business or from an individual sector, that can be sense checked and rolled up and then we can feed that up ultimately through the likes of the Department and then through to the likes of the Chief Secretary’s EU Advisory Group. If that has policy options or impacts that we would want to 845 further discuss or consider, then it can go right through to the Council of Ministers. But at this stage a lot of it is still very early-stage ideas. One of the challenges, in terms of keeping the topic alive, is we have talked about them, we have recorded them, we have produced the four reports and we share that with industry, but until we get some clarity as to what some of those end points might look like … One of our roles is to keep it alive, but it goes 850 through these peaks and troughs with whatever the main topic at the time will be.
Q88. Mr Robertshaw: I appreciate that it is a difficult environment we are all in, one way or the other, because of the opaque nature of the circumstances, but what is emerging for us, our Policy Review Committees, is the degree to which DEFA in particular has a significant level of 855 exposure at a whole range of levels, as they have discussed – you may have caught it there at the end – and as you will know anyway, legislation, but also specifically both threats and opportunities perhaps for the fishing industry should the circumstances emerge that might be reasonably anticipated. Are you working with DEFA in terms of perhaps what might be verging, to a degree, on a 860 reinvention of our fishing sector and redirection of our targeting, redefinition of our territorial waters and the degree to which investment would have to go in at that point to give confidence for that sector to move forward? I know that it is opaque, but also there is a degree of need for scenario planning. Is that something you are able to do?
865 Mr Lewin: The Department for Enterprise looks after a number of sectors: we have got financial services; in this context manufacturing is a big component of the discussion; the visitor economy through tourism; our digital economy. DEFA lead on the fisheries side, so we are aware of it and there are some overlaps – the Department has jointly supported things like the Food Matters Strategy – but very much DEFA lead on that and lead on that liaison so that industry 870 does not get it from multiple points.
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The Minister: It is important to also recognise that there are opportunities there – there is no doubt about that – across a host of different sectors. What we are doing is having those discussions usually behind closed doors because those opportunities would probably not benefit 875 from being in open discussion at this particular time. So we are very much aware of opportunities that are there in a host of different sectors. In DEFA’s case we would be working very closely with them to be able to support them, and a lot of that would feed into also the EU Advisory Group so that we can highlight where there are risks and opportunities. 880 Q89. The Chairman: Just taking that point about the opportunities and also some of the sensitivities around talking about them in public at the moment, one of the things that we have heard from DEFA this morning is the challenges of the Isle of Man trying to capitalise on its own opportunities by separately trying to negotiate beyond what the UK is looking for. 885 I suppose I am interested in hearing from you, as far as you can, about where we have opportunities that perhaps do not all align – so we might have sectors in the Isle of Man and their particular opportunities do not necessarily align – and what the strategy approach is, how Government is working in a cross-departmental way, whether through the EU Advisory Group, in order to try and assess and develop a coherent strategy that takes account of the different 890 potential opportunities and that also tries to influence the UK as far as possible to see that these opportunities can be progressed.
The Minister: Yes, absolutely, and that has always been the case about being prepared – consider the options, consider the alternatives – and that is the strategy right from the start for 895 us, and for that clearly understanding the regulations and standards and also the relationships you mentioned with regard to the UK. We have actually resourced a new policy lead and he would be here with us today, only he is in London meeting HM Treasury regarding financial services with regard to Crown Dependencies’ issues there. So we are very much alive to this ever-changing scenario and what we are trying to do is to play out all those to understand where 900 the best position is for us. We also have another stream, of course, with regard to legislation, which is very important, clearly; in our case probably not as big. We do have areas with regard to the intellectual property that we need to ensure because we have a lot of global outward-facing businesses here, so if there are any EU-related aviation, maritime … those are obviously big industries also 905 for us and the legislation connected to that. We need to ensure that we do have the right position for the Isle of Man in these particular areas. Partnerships are important – the UK, which we just touched on, but also beyond that the WTO – understanding our adherence there in terms of regulations. There are also the opportunities around the Commonwealth which are now starting to open up and be explored 910 due to our involvement now with the Enterprise and Investment Council and the Business Forum. So those partnership relationships are going to be very critical going forward.
Mr Lewin: If I could just add to that, there are roundtables to talk about if there are areas where our interests may not align with the UK, but the roundtables are hugely useful in terms of 915 bringing together the UK government and the Crown Dependencies to talk about specific topics, to better understand. It starts with understanding. Again, most of our business and most of our trading activity actually is with the UK and it is quite hard to imagine scenarios where we have a different type of relationship at the end and the complexity that might give, either through goods or through services ultimately flowing 920 through the UK. But it is, as you say, about influence and being at the table, participating, making sure we come to the table armed with a good understanding of what we have today, a good understanding of what might be happening and how that plays. One of the work streams is making sure that, for example on the WTO, the UK really commits to that relationship, that we
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understand what those commitments are in terms of goods and services and make sure as part 925 of that is there anything in there that we would want to call out as being different – the work permit review is an example that was in that space – that we understand it, we declare it and we can therefore make sure, as those conversations progress, it does not come as a surprise at the 11th hour.
930 Q90. Mr Robertshaw: We are already halfway through our half an hour, so we need to clatter on a bit, I think. You mentioned legislation. We have heard from DEFA. I think they talked about 92 items that they are focused on. We all know historically that drafting issues and legislation is a bit of a constraint for us. Have the various Departments of Government, do you think, got a clear 935 understanding across the piece as to when we go from ‘We don’t know where we are’ to ‘Go’, that we can get all this collaborative legislation through? Can we get the camel through the eye of the needle, do you think? Is there an understanding? I suppose it would be the European Advisory Group focused on this. Are we going to find ourselves in a bit of a mess there, do you think? 940 The Minister: It is a massive issue, to say the least. For us, employment law, intellectual property, aviation and maritime are our key areas. And whilst yes, there is a significant commitment, we are feeding that in and it will be all about prioritising, from our perspective politically, to be able to drive those through. 945 So we are preparing for it and I think this is the whole point from the get-go. As I said, the strategy is always that we are looking at all the implications, we are looking at legislation as one of those very key work streams. From our perspective it is probably not as big as potentially the likes of DEFA in terms of how much their commitment is there, but what we are doing is ensuring that … In terms of that preparation I alluded to earlier, we now have a new policy lead 950 so that we can actually stay on top of this. Because it was a standing item in the Department, a standing item for the executive agencies and we have a lot of cross-Government work, we need to make sure we have got somebody who is absolutely on point and we have got a very experienced individual who has taken up that role.
955 Q91. Mr Robertshaw: Thank you for that, but let me ask the question in a slightly different way. Is there anybody in executive Government aware of the position from a legislative point of view right across the landscape, rather than departmentally?
Mr Lewin: The Attorney General attends the Chief Secretary’s EU Advisory Group as a place 960 to bring that together. And if you pick up on the Minister, the four things of particular interest to us around employment law, intellectual property, maritime and aviation, for each of those – take maritime and aviation – we are quite familiar with bringing legislation forward, orders, all the time really, in terms of latest standards, and all four of those tend to draw not just from an EU perspective but more from an international perspective. So even as this pans out there is a 965 good recognition and many of those standards will still survive or be re-ensconced in whatever that new world looks like. The Withdrawal Bill that is now out for consultation was, from my perspective, a good example of how that has come together into one place to make sure it first of all provides the mechanism we need but also has some enabling functions in there, just in case there are things 970 that come to light further down the line.
Q92. Mr Robertshaw: Thank you very much for that. Going back to my question, should we be approaching the AG to ask him whether there is across-the-piece understanding of the volume that is going to come from all the Departments?
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975 Q93. The Chairman: And I think as well we have heard from DEFA that for their 92 pieces of legislation at their next political meeting they will have their prioritisation, some of which they are clear will probably need to happen ahead of Brexit Exit Day, whenever that is, but some of which will be later. Does the Department for Enterprise have a similar prioritisation of what needs to be done and when? 980 The Minister: Will – it has not come forward yet.
Mr Lewin: Yes, as I said, a lot of it comes from international standards – or watching them, more of the case at the moment, as to … We have not got a predetermined list of ‘this is going 985 to change’, but we know the principal mechanisms, the orders that will need to be looked at as and when that comes out. But it is on a completely different scale for us compared to DEFA. There is a significant amount of legislation that is relevant to them that they are having to work through.
990 Q94. The Chairman: To Mr Robertshaw’s point, I think it is helpful to see across Government what needs to be done and how it is going to be managed and progressed.
Mr Lewin: Again, on our four we already have policy people who, because they move already on a regular basis – so in our Aircraft Registry there is an individual who understands the 995 legislation, the orders; the same in maritime and the same in employment law and intellectual property – we have that lined up. So, from our perspective it will not be a case of having to do a prioritised list that we can only deal with and then cut it off.
Q95. Thank you. You have touched on, a couple of times, WTO and the UK’s increasing 1000 engagement there and our position. To guide us on this one, could you talk to us about the Isle of Man’s position in relation to WTO compared to the other Crown Dependencies? A little bit of advice would be appreciated there.
Mr Lewin: The Isle of Man joined as a member through the UK – in, I think, 1997 the option 1005 came forward. It is not something that we have used or particularly looked at in the past, but it certainly came to light last year as a decision that clearly was fortuitous. We do not want to end up in a hard Brexit where WTO rules are applying, but it is the ultimate safety net as to how countries would trade. We have a benefit as being a signatory to that through the UK. At the time, the other Crown Dependencies did not, so they are now in a position of looking for … That 1010 bottom level actually is not in place, so from their perspective one of their priorities will be to make sure that is in place. From our perspective, as I said before, the UK is going through a process of really relooking at that. There is a whole series of commitments around all the schedules to make sure that they are fully understood, because under the single market they have not been as relevant in the EU 1015 context and we have been working with the Department for International Trade to understand and make sure for each of all of those schedules – it is one of the things the Department has gone through to look at – is there anything in here that would give us concern if there was a commitment made, or conversely is there something we wish to declare by way of a different situation for us? That has been a process that we have been doing over the last four months or 1020 so.
Q96. Mr Robertshaw: Has anything significant emerged from that?
Mr Lewin: No, not at this stage. The work is still ongoing, but there are areas that we would 1025 want to draw attention to – for example, things like the work permit regime, where we have a
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process that allows free movement of people but from an employment perspective we have an additional control mechanism on top of that.
Q97. Mr Robertshaw: If then, Chair, we can move on to the staffing issues, you touched on 1030 availability of expertise in a whole range of areas and industries and the way our work permit and immigration rules work. Are you comfortable with where we stand, that we can exercise ourselves sufficiently to access those services and technical capacities that we need in the future? Or do you think that we will need to look again at our immigration rules and our relationship in that area with the UK? 1035 The Minister: I think it is a very good point because this is all about access to skills ultimately, and yes, we want that access and we need to maintain that access. Whether that be from the EU or elsewhere is another matter, of course. With regard to immigration, that is an issue that we raised some time ago and of course we just had the Order laid last month that will give us more 1040 opportunity in this particular space, because it may not just be the EU. Our businesses look globally for business, and that is what is interesting. When you go through these reports and you start to drill down to industry specifics you will see that the Isle of Man deals an awful lot with the UK, 80% to 90%, but some of them are very globally facing, these industries and specific businesses. So, equally I think we do, as an Island, need to look at the skills rather than where 1045 they are coming from. But we are alive to this. The free movement of those skills was a very early issue, obviously, for the UK and clearly our opportunity on the back of that stands to benefit at the same time.
Mr Lewin: I think those reforms that have just streamlined the worker route clearly today are 1050 very helpful in an international context, but going forward from an EU perspective will be hugely important as well to make sure that employers have a well-understood and easy path to navigate where they are unable to find skilled labour in the local market.
Q98. Mr Robertshaw: So would it be or could it be in our gift as a jurisdiction to adjust our 1055 immigration rules from the EU so that they are different from the UK but serve our purpose? Or is that just howling at the moon?
The Minister: No, I would not say so.
1060 Mr Lewin: It is probably one more for the Chief Secretary, where immigration sits. We support the employment side of that. We are a Crown Dependency, so there is a limit on how much we can interpret those rules, but that is why we can make … From our perspective now, going forward we can control our own shortage occupation list, so we can determine what are the skills that are needed in our economy and we can therefore help the path that is relevant to 1065 that, which might be different to the UK’s path. We might be looking for a different type of skill and in the UK they have determined that is no longer a critical skill that is in shortage. The actual process will still be very much linked to manage this part of the UK process. So there is a limit on how far we can go, but what we can do is make it really relevant for our businesses here. So if our key sectors … the digital economy, hugely and competitively fought 1070 for, but how do we make sure our businesses here can determine, right across a whole range of skills, those jobs are listed as shortage of occupations?
Q99. Mr Robertshaw: And are you comfortable that the necessary level of co-operation with the UK would be accessible? 1075 Mr Lewin: Yes.
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The Minister: Yes, we do, and in very much a general sense the Government priority of growing the economically active, from our point of view, is looking at that, where those 1080 shortages are. The shortage occupation list is quite critical and if we can align our immigration laws to what other nations use, the points-based system, that would allow us hopefully to be able to fulfil those roles in the immediate term. Obviously, mid to longer term we need wider strategies with our education to build upon. It is something we are very alive to. We have contributed to the Cabinet Office with regard to 1085 their changes in the new immigration law and so far, as far as I am aware, the feedback from the UK has been being receptive.
Q100. Mr Robertshaw: How does the EU Advisory Group actually work in relation to all of this? 1090 Mr Lewin: It considers, I guess, things that come up. So we as a Department will bring up either an issue or latest thinking or sentiment from our perspective and it will bring things down. It will bring feedback from the likes of the roundtables, feedback from what is happening in the political environment in the UK or EU, further afield, and is a forum to consider what ultimately 1095 we need to go forward by way of policy papers, decision papers, briefing notes. So it is a real conduit. From my perspective it is usually useful because I sit with the Chief Executive of DEFA, sit with the Attorney General, sit with the Chief Secretary, External Relations, Customs. It is the forum where we can all come together not just to talk but actually to make decisions about the next set of decisions we will ultimately need to make – policy papers, briefing papers. 1100 Q101. The Chairman: Can I ask on that, to what extent do the decisions that are made then at that EU Advisory Group level then inform all of the separate roundtables that you go away and have with the UK? Is the policy then for the Isle of Man being driven out of that EU Advisory Group, as opposed to individual Departments? 1105 Mr Lewin: At the EU Advisory Group the policy will flow up in terms of the Council of Ministers if it is a national decision to make. The roundtables, of which there are a number … The Cabinet Office, External Relations in particular through the Brussels side, will represent at most of, in fact all of those roundtables and that is where we get some of the joining up to make 1110 sure that we hear from financial services, the Common Travel Area, fisheries. So there is always a common representative flows through all of those and there will be different experts at each of them to make sure that the people at the coalface understand what we are talking about.
Mr Robertshaw: I suppose this has to be my last question, Chairman. 1115 The Chairman: Yes, I think so. Time is running out.
Q102. Mr Robertshaw: We have been enjoying ourselves so much! We are obviously talking to the Crown Dependencies. Do we talk to Gibraltar at all about the 1120 circumstances they are in and examine their pressures and tensions, just out of an interest?
Mr Lewin: At an industry level we are competitors on a number of fronts and we do discuss. From a regulatory perspective, our regulators will meet up and will discuss at a perspective as to what opportunities we might be presented with or the challenges we face. We have not, 1125 certainly at our level in our Department, reached out to our equivalents. I do not think it would be particularly appropriate and they are in a completely different situation.
Q103. Mr Robertshaw: I suppose I ask the question from the standpoint that elements of turmoil may very well come out of where we end up. We are finishing off where we started on
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1130 the opaque bit, and I think it has already been touched on by the Chairman, and by Mr Hooper before with DEFA, and that is examining where opportunities may emerge in the future.
Mr Lewin: We have already seen that in the … Again, it goes through peaks and troughs but in some of the areas where there has been some uncertainty in Gibraltar we have seen 1135 businesses that have a foot in both, there and here, move here. We have seen some businesses start to test the water here. I think on the e-gaming, where the licence allows them to have disaster recovery mechanisms here, then they have taken that as an early, tentative step to prepare themselves. But others, we have absolutely seen people and equipment move from that jurisdiction because of the uncertainty they face. 1140 The Minister: Industry intel has been very valuable to us, I have to say, especially because we have international businesses here that could have a foot in different jurisdictions. It comes back to the opportunity issue: what may be a threat to one jurisdiction might be an opportunity to another jurisdiction. So yes, we are very alive to that and our liaison groups through the 1145 agencies going forward will be the area where we will pick that up and then feed that into the EU Advisory Group, and if we do need to consider legislation changes or any other changes, that is where we would make those recommendations and bring it forward in the appropriate manner.
1150 Mr Robertshaw: Thank you.
Q104. The Chairman: Just to close, as time is against us now, there is a huge amount of work going on and a huge amount of work to be done. I suppose my last question is really just that sense of prioritisation, because an opportunity in the way you have just described coming to the 1155 EU Advisory Group … that reassurance, I suppose, that from a cross-governmental perspective, where a real opportunity is there, we channel our resource and our strategic planning to … For example, if legislative changes need to be made or other steps taken, how that is managed – just interested in your final thoughts on that.
1160 The Minister: From my perspective, any support that we have asked for or has been requested has been given across Government, so I think it is recognised from the Government, from the top down, that we do need to treat this as a priority. We have it as a standing item in our Department but if there are any resources that are needed for this, to date they have always been given. So we would prioritise that as necessary. We are very alive to it and what we are 1165 trying to do is to be able to seize on those opportunities that do present themselves. And from an executive level?
Mr Lewin: Yes, that is essentially what the Department does each and every day. We listen and we speak to industry for ideas. Some are Brexit, some are not, but our ability then to take 1170 that forward and say, ‘How can we help? Is it policy? Is it legislation? Is it resources? Is it research?’ We do that, and we are doing it in some cases directly relating it to what we are hearing on this topic, but in others if we see an economic opportunity or we see a business opportunity that we can support that is right for us, then we will move quickly to try and support that. 1175 The Chairman: Thank you both very much for your time today. The Committee will now sit in private.
The Committee sat in private at 12.32 p.m.
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