Companies face new UK levies to fund post-Brexit regulators

17 July 2017 12:56pm
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14 July 2017. By Matthew Holehouse.

Companies operating in the UK might face new fees to register products or secure operating licenses, under plans prepared by ministers to fund regulators after Brexit.

Legislation published yesterday to prepare the UK statute book for Brexit includes granting ministers the power to levy charges on companies to fund regulators.

The bill grants ministers broad executive powers to create new regulators, or enhance the remit of existing bodies, as the UK exits the EU's regulatory regime. This might include transferring powers for airworthiness certification from the European Aviation Safety Agency to the UK Civil Aviation Authority, or transferring the task of monitoring overseas supply chains from the European Food Safety Authority to its UK counterpart.

Up to 10 new agencies might need to be created, UK officials said.

Some public bodies already have the ability to raise revenue through charges, such as the Financial Conduct Authority and the Prudential Regulation Authority.

Extending these powers more widely will "mitigate the burden on the general taxpayer to pick up the cost of all functions transferred from the EU to the UK," notes accompanying the European Union Withdrawal Bill said.

This might include "a fee for issuing a license or approving a product," or mimic fees charged by the EU, the memorandum said.

Ministers would also be empowered to create "tax-like charges, which go beyond recovering the direct cost of the provision of a service to a specific firm or individual, including to allow for potential cross-subsidization or to cover the wider functions and running costs of a public body, or to lower regulatory costs for small- or medium-sized enterprises," the note said.

Lawmakers are divided on the creation of broad ministerial powers, and the ability to raise new fees will likely trigger intense debates in Parliament. The proposal will be subject to an "affirmative scrutiny procedure," meaning it requires a motion of approval in both chambers of Parliament to go ahead.

Cash woes

UK agencies — already hit by cuts to government spending — have warned they lack the funds to take on more functions.

The Competition and Markets Authority warned in its annual report, published this week, that it must be "sufficiently resourced for a greater caseload" that will arise following Brexit. However, legal experts say increased revenue from competition fines and merger filing fees could cover its costs.

The UK Food Standards Agency currently relies on EU intelligence and information databases, and on the EU's inspection regime for foreign food imports. "The FSA budget does not include money to replicate the functions of these agencies," warned an internal budget memo published in March.

The Medicines and Healthcare Products Regulatory Agency, the UK's medicines regulator, also fears a cash shortfall after Brexit, including the risk of losing grants and contracts from the European Medicines Agency.

A budget memo from December noted that millions of pounds in licensing fees that the regulator currently collects from drug manufacturers to test products for the EU-wide market could be at risk if the UK adopts a "fast follower" model after Brexit — a scenario that would see the UK regulator rubber-stamp authorizations already granted by the EU without conducting its own full approvals process.

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