Grand Committee
(5 years, 10 months ago)
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Arrangement of Business
(5 years, 10 months ago)
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The Deputy Chairman of Committees (Baroness Fookes) (Con)
My Lords, I must remind you that, if there is a Division in the House, we will adjourn for 10 minutes. It seems highly unlikely.
Bank Recovery and Resolution and Miscellaneous Provisions (Amendment) (EU Exit) Regulations 2018
(5 years, 10 months ago)
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Lord Bates
That the Grand Committee do consider the Capital Requirements (Amendment) (EU Exit) Regulations 2018 and the Bank Recovery and Resolution and Miscellaneous Provisions (Amendment) (EU Exit) Regulations 2018.
The Minister of State, Department for International Development (Lord Bates) (Con)
My Lords, Her Majesty’s Treasury is in the process of laying statutory instruments under the European Union (Withdrawal) Act in order to deliver a functioning legislative and regulatory regime for financial services in the event of a no-deal scenario. The two SIs being debated in this group are part of this programme and will fix deficiencies in UK law relating to the UK’s prudential regime, which ensures that financial institutions hold sufficient capital and appropriately measure and manage their risks, and also relating to the UK’s bank resolution regime, which ensures that the UK authorities have the necessary tools to manage the failure of a bank, investment firm or building society in an orderly way. The approach taken in these SIs aligns with that of other SIs being laid and debated under the withdrawal Act by maintaining existing legislation at the point of exit to provide continuity but amending it where necessary to ensure that it works effectively in a no-deal scenario.
The first statutory instrument being considered today concerns the capital requirements framework, which aims to prevent the failure of financial institutions by setting prudential rules that apply to banks, investment firms and building societies. These rules are currently set through the EU capital requirements regulation and the EU capital requirements directive. The second statutory instrument relates to the bank recovery and resolution directive, which sets out the requirements that ensure that firms’ failures can be managed in an orderly way, avoiding the need for costly public bailouts. In a no-deal scenario, the UK would be outside the European Economic Area and outside the EU financial services framework. To ensure that the legislation continues to operate effectively in the UK once the UK has left the EU, these SIs will make amendments to retained EU law in relation to the capital requirements regulation and the bank recovery and resolution directive so that the legislation will continue to function effectively in a no-deal scenario.
I note that, in line with the general approach taken to the onshoring of EU legislation, both statutory instruments will transfer a number of functions currently within the remit of EU authorities, particularly the European Banking Authority and the European Securities and Markets Authority, to relevant UK bodies. These functions, such as the development of detailed technical rules on certain provisions of the regulations, will now be carried out by appropriate UK bodies: the Financial Conduct Authority, the Prudential Regulation Authority or the Bank of England. For example, the responsibility for binding technical standards under the bank resolution and recovery regime is being transferred to the Bank of England, given that it is the UK’s resolution authority. The PRA and FCA have extensive experience in setting firm-specific rules for international firms, and are therefore the most appropriate domestic institutions to take on these functions from the European supervisory authorities. The regulators are undertaking public consultations on the changes that they propose to make to binding technical standards.
These statutory instruments further confer regulation-making powers on the Treasury to replace delegated powers that were previously conferred on the European Commission, in line with the approach taken in other Treasury legislation.
The draft capital requirements regulations 2018 make changes primarily to the retained EU capital requirements regulation but also to certain domestic secondary legislation implementing the EU capital requirements directive. First, they introduce changes to the group consolidation regime. When the UK leaves the EU, we will also leave the EU supervisory regime. This means that we will need to limit the geographical scope of the capital and liquidity consolidation rules to the UK, rather than on an EU-wide basis as currently. This will introduce a new layer of liquidity consolidation in the UK, though it will not affect the application of consolidated capital requirements, which are currently calculated at the member state level.
Secondly, the draft regulations remove preferential capital treatment currently available for exposures to certain EU institutions and assets, including sovereign debt. The EU capital requirements regulation currently applies a zero-risk weighting to certain categories of EU assets such as sovereign debt. This means that firms do not have to hold capital for their exposure to such assets and are therefore incentivised to invest in them. In line with our general cross-government approach, it is our policy not to grant the EU unilateral preferential treatment in the absence of an assessment of equivalence after exit day. We will therefore end the preferential capital treatment for EU assets currently subject to the zero-risk weighting.
Finally, the draft regulations introduce changes meaning that UK regulators will no longer have to obtain approval from EU institutions before using macroprudential tools to address systemic risks, including in a financial crisis. This is appropriate given the UK would be a third country and will need the UK regulators to be able exercise macroprudential functions effectively in times of financial stress.
I turn now to the bank recovery and resolution statutory instrument, which amends the Banking Act 2009 and related domestic and retained EU legislation by making the following principal amendments. First, the draft regulations amend the scope of the UK’s third-country resolution recognition framework to include EEA-led resolutions. This ensures that, in a no-deal scenario, the same approach will be followed for both EEA and third countries in recognising third-country resolution actions.
Secondly, this statutory instrument removes deficient references requiring UK regulators to follow the specific operational and procedural mechanisms set out in the BRRD to co-operate with the EEA authorities. The removal of these references will not, however, prevent UK regulators from co-operating with their EEA counterparts after exit. UK regulators will remain able to share information with EEA authorities in the same way as they currently do with authorities in third countries such as the United States. Additionally, the UK will continue to participate in international crisis management groups which enhance co-operation between home and host authorities of systemically important banks.
Finally, the draft regulations address deficient cross-references to the BRRD in UK legislation and ensure that delegated regulations retained by the European Union (Withdrawal) Act continue to be in a workable form following exit.
To summarise, the Government believe that these statutory instruments are needed to ensure that the regulatory regime applying to banks, building societies and investment firms works effectively if the UK leaves the EU without a deal or an implementation period. I commend the regulations to the Committee.
The Deputy Chairman of Committees (Baroness Fookes) (Con)
My Lords, before the debate begins, it may be helpful if I explain that the rather quaint little hats sitting on the ends of some of the microphones are an indication that they are not working.
Baroness Drake (Lab)
Thank you. On the assumption that I do not have a little hat on my microphone, I should say that when I read through these two sets of draft regulations and their Explanatory Memoranda, they were a depressing reminder of the consequences of leaving the EU with no Brexit deal in place.
The regulations allow the Treasury and relevant regulators to take steps to ensure that, in the event of no deal, the UK has a functioning financial services regulatory regime, can protect consumers and ensure financial stability. At the heart of that stability are the prudential standards developed in the aftermath of the 2008 financial crisis, measuring and mitigating risk through maintaining adequate capital reserves and establishing an effective recovery and resolution framework. No one who can recall the vivid fear of a financial meltdown in 2008 can fail to understand the importance of a robust system of prudential regulation. The capital adequacy and resolution regime for banks and other financial institutions was the subject of considerable debate and scrutiny post 2008.
These SIs make amendments to certain aspects of the capital requirements regulation, to ensure that it continues to operate effectively after Brexit day, and to certain other statutory instruments that implement the capital requirements directive. Key changes for when the UK leaves the EU include: amending the geographical scope of supervisory consolidation of capital and liquidity reporting processes to restrict it to the UK; transferring functions from the European supervisory authorities to the UK regulators; transferring responsibility for all binding technical standards from those European authorities to the UK regulators; and macroprudential measures that ensure that the tools available to national regulators in the event of systemic risk, for example an asset bubble, remain available to the UK regulators.
The draft SI which addresses the onshoring of the bank recovery and resolution framework post Brexit aims to ensure that the UK special resolution regime is,
“legally and practically workable on a standalone basis”,
when the UK leaves the EU. The draft regulations also make further provisions on contractual recognition of bail-in, with new Bank of England powers to make technical standards on requirements for recognition. The Bank of England, the Prudential Regulation Authority and the FCA are expected to consult on changes to their rules affected by these regulations, and the special resolution regime code of practice will be updated. These are matters of significance that will have to be addressed with urgency.
Obviously, if the UK were to crash out of the EU with no deal, I would certainly want the Treasury and regulators to take action to protect the UK’s financial stability. Any Government faced with a no-deal exit will have to firefight and move quickly to protect the national interest. Those would be exceptional times. However, it is 12 December 2018, and we are due to leave on 29 March 2019. Ignoring Christmas, that gives us about 12 weeks to introduce measures to ensure continuing confidence in the UK financial services regulatory regime. Delivering such a challenge in such a tight timetable requires a great deal of assurance.
I therefore want to ask the Minister four questions. Will the Treasury, the PRA and the FCA have sufficient staffing resources with the necessary level of skill and expertise to deliver what is needed by 29 March? The Bank of England, the FCA and the PRA will update their rules and relevant binding technical standards to mirror the changes introduced by these SIs and consult on their proposed changes. Is there sufficient time to identify and make all the necessary changes required by 29 March, as well as fit in the promised consultation? What happens if there is not sufficient time? Finally, under these regulations, to what extent will the PRA and the FCA have the authority to weaken the binding technical standards currently required to be met by firms to a standard below those currently applied?
Baroness Bowles of Berkhamsted (LD)
My Lords, probably few if any other people would stand up and say that CRD IV is their favourite piece of legislation, but for a variety of reasons it is my favourite. I do not mean to alarm the Minister or his officials by that, because we seem to have stuck within the rules of onshoring and the transfer of powers in the way with which we are now familiar. However, inevitably that process opens the door to future changes without it having to return to Parliament, as is the case in the EU, because a lot can be done via the interpretation of binding technical standards—if not immediately then at the next stage. It is not entirely clear from the explanation and from what is set out in the Explanatory Memorandum whether the binding technical standards will essentially just replicate what we have at the moment or whether they will make additional policy changes; that is, is it going to stay entirely within the “no policy change” of the withdrawal Act, or will changes be made simultaneously or subsequently?
For now, I want to concentrate on two points of personal interest. The first is the change to what counts as zero-risk weighted sovereign debt. This has long been a pet subject of mine and now it has become mainstream—in particular, that zero-risk weighting is actually inappropriate for eurozone sovereign debt because the European Central Bank cannot print money, although it has done a pretty good approximation of that in recent years. It would be interesting to explore a little more the effect of moving the zero-risk weighting from non-UK sovereign debt, given that sovereign debt is the main tier 1 liquid asset for banks. Will that mean that there is an incentive to reduce diversification in liquid assets?
More generally, how are banks currently dealing with sovereign debt in their risk calculations? The international banks most likely to have other EU sovereign debt can, and probably should, be using internal models to calculate risk rather than rely on the standard model and therefore the zero-risk weight. However, when I looked at this a while ago, the risk allocated in that way seemed to be pretty minimal, and I wonder whether that is still the case. Will minimal risk in the internal models be affected once the near-zero justification has gone? Also in the past some large banks have availed themselves of permanent partial use as a standard model under Articles 149 and 150 of the CRR, the reasoning being that it would otherwise be rather complicated due to holding a lot of different sovereign assets. Of course, Articles 149 and 150 will now apply only to UK sovereign debt, so what will happen there? Can the Minister also advise whether any UK banks are still using Article 150?
The second point I want to raise out of interest is the country-by-country reporting which comes from Article 89 of the directive and has the distinction of being enshrined in the EU withdrawal agreement as part of the BEPS commitments. The particular matter I want to highlight is that the onshoring has replaced the reference to the EU directive 2006/43/EC on statutory audits and annual accounts with the words:
“International Standards on Auditing (United Kingdom and Ireland) issued by the Financial Reporting Council Limited or a predecessor body”.
Frankly, I wish that it had not done that. At present, we have both the Kingman inquiry into the future of the FRC and the Competition and Markets Authority inquiry into audit, which encompasses the FRC and standards matters. I would expect a certain amount of criticism of the way in which the standards as applied in the UK under the FRC have not measured up to the company law of either the UK or the EU. So is that a future-proof amendment, given that the inquiry reports possibly as soon as next week?
On bank recovery and resolution, I am very happy to see the FSB key attributes referenced as a default. I spent quite a lot of time in Brussels having to wave those around during negotiations when things were going in slightly the wrong direction from time to time. As a practical matter, does the Minister consider that there is a substantial difference caused by being in only the international crisis management groups of a bank rather than in the full EU resolution procedures? I repeat my references to what the BTS are going to be doing, given the reference in paragraphs 7.19 and 7.20 in the Explanatory Memorandum. Does that suggest two lots of consultation, or is it just the same lot?
Lord Tunnicliffe (Lab)
My Lords, I thank the Minister for presenting these two instruments. I cannot but agree with the early paragraphs of the Explanatory Memorandum—which is the same in all these Explanatory Memorandums—that, essentially, if these instruments end up being used, it will be in a no-deal scenario, which would be disastrous for the United Kingdom.
Having had an original career in aviation, I intellectually accept that it is right and proper to prepare for all credible scenarios. That is what we are doing today, and we will do it in the usual polite way about another 40 times between now and the end of March. But, today of all days, one has a feeling that the no-deal scenario has crept a little closer, and I have almost a sense of being asked to dig my own grave against the possibility that extreme Brexiteers will win the day and we will end up in a no-deal situation.
The European Union (Withdrawal) Act highly limits what we are doing here, and I hope that the constraints of that Act are being fully respected. We are not here, frankly, to debate the merits of the instrument; we are here to debate whether it stops within the agreed constraints, which are rehearsed in many places. Perhaps the strongest sentence is in paragraph 7.4 of the Explanatory Memorandum, which states:
“These SIs are not intended to make policy changes, other than to reflect the UK’s new position outside the EU, and to smooth the transition to this situation”.
The process called for by the Act, in a sense, divides into two. The first part of the process, which is true of all the things we discuss today, is to reassign responsibilities—in other words to recognise that appropriate authorities are necessary for the business of the various Acts to work and they have to be moved from EU institutions into UK institutions. The second is to make policy changes within the strict limitations of the sentence that I just read out.
Discharging our narrow duty to ensure that the Government have stuck to the rules is very difficult to achieve. In theory, we could go through each SI, line by line, regulation by regulation and Act by Act to see if that is possible. I recognise that the wisdom of the noble Baroness allows her at least in part to do that, but I am afraid that with our available resources that is not possible. A poor second to that is to skim the document and look at its structure and the language that it uses.
Let me take the bank recovery and resolution SI first. It looks as though the reassignment of responsibility has been discharged because, in page after page, one finds that it takes a responsibility from an EU institution and moves it to a UK institution. However, the area that I am particularly concerned about is where the instrument uses entirely new language, because it seems to me that, where there is entirely new language, I have no way of knowing whether policy variations have accidentally arisen. Therefore, I am very surprised to see areas of entirely new language, because I would have assumed that the object of the exercise is to take rules presently in place and translate them into English law.
The most dramatic example of that is on pages 41 and 42 of the bank recovery and resolution SI, where there are two pages of fresh language that talk about the recovery plan that institutions must put in place. Now, I assume that the requirements for that plan are already effectively enacted at this time. Why, then, is it not written over—or whatever the right term is—or why is it not referenced back into the law as it exists today, so that we can see that there is no change in policy? I ask that question to see whether there is any new thinking buried in the text, and I would value an assurance from the Minister that there is good reason why those parts of the instrument are written in fresh language, as opposed to being cross-referenced to language that already exists.
In the second SI, on capital requirements, there is a clear policy change, which is there because the situation demands it. The change, as has already been spoken about, is the recognition of EEA countries as not being of zero risk and hence requiring a capital buffer. In a no-deal scenario, after 29 March such sovereign debt will have to be assigned a risk factor. Surely this will put UK banks at a commercial disadvantage. It is no good to give as an excuse, as is done in the impact assessment—and it was great to see an impact assessment, by the way, so I must put that on record—that most institutions will use the “internal ratings based” approach. While assigning risk to EEA loans is not mandatory with the IRB banks, if they do not take account of the fact that, for other purposes, such assets will be recognised as having some degree of risk, one would hope that this would be challenged by the regulators. Does the Minister agree with that analysis? Why did the impact assessment not look at some way of maintaining the status quo? For instance, it might have contained a statement that the sovereign debt of EEA countries would be treated as zero risk, or it could have included an order-making power for the Treasury to define individual countries as having zero risk.
Lord Bates
I thank noble Lords for bringing their considerable expertise to bear on the important regulations before us. I will address some of the points raised.
First, the noble Baroness, Lady Drake, asked whether there is sufficient time for the regulators to put the consultation in place. I am confident that regulators are making adequate preparations and effectively allocating resources ahead of March 2019. They have been actively participating in a wide range of groups developing these technical and regulatory rules. They have also chaired a number of committees and task forces, and have considerable experience in implementing EU legislation. This means that the responsibilities of EU bodies can be reassigned effectively and efficiently, providing firms, funds and their customers with confidence. Since October, regulators have begun consulting, and I am confident that they will complete their consultations ahead of exit day. The noble Baroness also asked whether the regulators have adequate resourcing for a no-deal scenario. I repeat my confidence that the regulators are making adequate preparations and have the resources and expertise to ensure that this happens.
The noble Baroness, Lady Drake, also asked whether the capital requirements regulation statutory instrument will decrease the level of accountability for the Prudential Regulation Authority or the Financial Conduct Authority. Although certain functions, such as the mandate to develop binding technical standards, are being transferred to the regulators from EU authorities, such functions are currently carried out not by the Commission or the UK Government but by agencies with specific expertise in setting and calibrating firm-specific macroprudential rules. The Treasury will work closely with regulators in the development of binding technical standards; those standards will also be subject to consultation, ensuring that key stakeholders’ views are taken into account. Regulators will not be able to make significant policy changes.
The noble Baroness, Lady Bowles, asked whether there is a substantial difference in being in only the crisis management groups. Nothing in the SI will change the UK’s ability to co-operate with third countries on planning for executing the resolution of cross-border banks. The majority of the work takes place in international crisis management groups designed to facilitate international co-operation through bodies such as the G20. Of course, we are a key part of the financial stability group’s work on key priorities. There is an existing robust framework in UK law for resolution co-operation with third countries, such as the United States.
The noble Baroness, Lady Bowles, spoke a great deal about the loss of zero-risk weighting on EU debt calculation. It could seem as if that were a new policy. When we leave the EU, the EU will treat us as a third country, without any special arrangements to treat the UK differently. The UK Government have said that we will also treat the EU as a third country; we are therefore being consistent with other SIs that have been passed through your Lordships’ House. Since sovereign debt already attracts a very low risk weight, the change in capital requirements should not be significant. None the less, we have discussed the risks associated with the loss of zero-risk weighting on EU sovereign debt for the industry, and we understand that the issue will affect only a small number of firms. The exact impact cannot be estimated because firms will change their capital holdings and restructure.
We are also developing broad transitional powers for the regulators that will allow them to phase in new requirements gradually. The regulators are already consulting on a proposal to delay all changes to risk weights. This would eliminate any cliff-edge risks and give firms additional time to prepare for these changes.
The noble Baroness, Lady Bowles, asked about the reference to a predecessor body in the statutory instrument. This was inserted to ensure that we have a consistent approach across every file being onshored. The wording is drawn from existing UK statutes, such as the Payment Services Regulations 2012.
The noble Lord, Lord Tunnicliffe, asked whether the SIs make policy changes. As I said in response to the noble Baroness, Lady Drake, they are not intended to make policy changes other than to reflect the UK’s new position outside the European Union if we leave in March 2019 in a no-deal scenario.
The noble Lord also asked whether UK firms would be disadvantaged by the changes in risk weights. I made detailed reference to that in my previous answer to the noble Baroness, Lady Bowles, but since sovereign debt already attracts a very low risk weight, the change in capital requirements should not be significant. As I mentioned, regulators are consulting on a proposal to delay all changes to risk weights, which would eliminate a potential cliff edge.
The noble Lord then drew the Committee’s attention to page 41 of the BRR SI and asked whether the relevant section existed beforehand and, if so, why it was not cross-referenced. The insertion of Schedule A1, on page 41 of the SI, addresses deficiencies stemming from the UK’s departure from the EU and does not bring about any policy changes. In particular, it corrects a reference in the Bank Recovery and Resolution Order 2014 to the requirements of the directive with regard to resolution plans. This will not be appropriate after exit day as the directive will not have the force of law in the UK. To ensure that such information can still be referenced, we are bringing this content into UK law. The schedule uses text from the relevant sections of the directive but with some minor additional fixes, as is allowed under the EU withdrawal Act, to take account of the UK’s exit from the EU. For example, references to “central banks” will be replaced by references to the UK’s central bank, the Bank of England.
I will of course review the official record of our debate today to see whether there are any questions which I have not answered. I thank noble Lords again for their contributions.
Payment Accounts (Amendment) (EU Exit) Regulations 2018
(5 years, 10 months ago)
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Lord Bates
That the Grand Committee do consider the Payment Accounts (Amendment) (EU Exit) Regulations 2018.
Relevant document: 6th Report from the Secondary Legislation Scrutiny Committee (Sub-Committee A)
The Minister of State, Department for International Development (Lord Bates) (Con)
My Lords, as in the previous debate, this statutory instrument is part of the Treasury’s legislative programme which aims to ensure that there continues to be a functioning UK legislative and regulatory regime for financial services in the unlikely event that the UK leaves with neither a deal nor an implementation period.
The statutory instrument will fix deficiencies in UK law in the Payment Accounts Regulations to ensure that they continue to operate effectively post exit. The payment accounts directive had three main objectives: first, to improve the transparency and comparability of fees related to payment accounts; secondly, to facilitate the switching of those accounts; and, thirdly, to ensure access to payment accounts with basic features. The Payment Accounts Regulations 2015 transposed the directive into UK law.
Many noble Lords will be familiar with payment accounts, as they are the day-to-day bank or building society accounts that we use to hold funds, to make and receive payments, and to withdraw and deposit cash. In the UK, the most common form of payment account is a current account.
In a no-deal scenario, the UK would be outside the European Economic Area and the EU’s legal, supervisory and financial regulatory framework. The Payment Accounts Regulations 2015 therefore need to be updated to reflect this to ensure that the provisions work appropriately in a no-deal scenario.
The draft regulations are concerned mostly with removing references to the EU. Therefore, the impact on customers and businesses will be minimal. However, I will go into more detail on three changes to which it may be helpful to draw the Committee’s attention.
The first is that this draft instrument transfers the responsibility for making technical standards for customer documents setting out fees and charges associated with a payment account from the European Banking Association to the Financial Conduct Authority.
Secondly, the draft instrument removes the requirement for payment service providers to facilitate the cross-border opening of payment accounts. This means that payment service providers will no longer be required to provide certain information relating to a customer’s payment account—for example, direct debits or closing balance—or transfer a balance to an EU payment service provider when the customer wants to switch from a UK payment account to an EU payment account. Repealing this provision does not affect the ability of UK customers to open payment accounts abroad.
Lastly, the SI makes changes to the regulations governing payment accounts with basic features, which are more commonly known as basic bank accounts in the UK. For those who may not be familiar with this financial inclusion product, a basic bank account is a fee-free bank account, with no overdraft facility but which otherwise has the same features as a standard current account. The nine largest current account providers in the UK must offer these accounts to those who are unbanked in the UK or who are ineligible for a standard current account.
As the UK will no longer be a member of the EU’s single market for financial services after exit day, the instrument removes the requirement on the nine providers to offer these products to customers resident in the EU or to offer EU currency services on any basic bank account as standard. It will therefore be at their discretion whether to continue to offer basic bank accounts to customers resident in the EU after exit day or keep existing accounts of EU residents open.
The Secondary Legislation Scrutiny Committee was concerned that, should the nine providers choose to make use of these changes and close the basic bank accounts of customers resident in the EU, customers would be placed into financial difficulty as a result. I assure the Committee that this is unlikely to be the case because the nine providers must give customers at least two months’ notice in writing if they plan to close the account, which should give customers adequate notice to open another account.
Furthermore, a customer’s right to a basic bank account is EU-wide, so these customers should be able to open a basic bank account in the member state in which they reside. The nine providers have also signed a 2014 agreement with the Treasury that makes clear that basic bank accounts are designed to help the less affluent and most vulnerable in our society. The Government therefore expect that providers will have due regard to the spirit of this agreement when making any changes to its basic bank account policy.
In summary, this Government believe that the proposed legislation is necessary to ensure that the Payment Accounts Regulations 2015 will continue to function appropriately if the UK leaves the EU without a deal or an implementation period. Most importantly, this means that fee-free basic bank accounts, which are a key financial inclusion product, remain available and robustly regulated to customers legally resident in the UK who are unbanked or ineligible for other payment accounts. I hope this introduction will have been helpful to noble Lords, and I commend the regulations to the House.
Baroness Drake (Lab)
My Lords, this SI is part of the series providing contingency planning for the no-deal Brexit scenario. The Payment Accounts Regulations 2015 established a right of access to a basic bank account with basic features for customers legally resident in the EU, which were fee-free for services in sterling, with EU currency services provided at a reasonable fee. The Explanatory Memorandum advises that this SI seeks to ensure that those regulations operate effectively in the UK in the event of no deal and continue to deliver the existing three main objectives of, first, transparency and comparability of fees on day-to-day payment transactions such as cash deposits, withdrawal and card payments; secondly, the facilitation of account-switching; and, thirdly, ensuring access to accounts with basic features for EU residents. Paragraphs 2.2 and 2.12 of the Explanatory Memorandum set out what I have just described.
Baroness Bowles of Berkhamsted (LD)
I thank the noble Lord, Lord Bates, for his introduction and the noble Baroness, Lady Drake, for drawing attention to the report of the Secondary Legislation Scrutiny Committee’s Sub-Committee A, on which I sit, so I do not have to do it. With the state of my voice, that is welcome.
The issue of note here is that an obligation to service non-UK residents is removed. Many of these will probably be UK nationals and will probably come to the UK sometimes, even though they are resident elsewhere. I am sure that this will be an inconvenience and that is greatly regretted. In the interests of saying that this is not being reciprocated, there has been a lack of generosity of spirit in this statutory instrument. Can the Minister confirm whether there would be any supervisory pressure, under “know your client” provisions, for these accounts to be closed? Will supervisors make it more awkward and put pressure on the banks so that closure is de facto the most likely event?
I also remind the Committee that one of the purposes of this legislation was to ensure that basic bank accounts could be opened in advance for people who were moving around for the purposes of work. Otherwise, you get into a Catch-22 situation where you cannot get a permanent place of residence until you have a bank account and you cannot get a bank account until you have a permanent place of residence. While I was an MEP, I got this in my postbag. Indeed, one of my own children had this problem. We were constantly having to intervene to get these things sorted. If we want to encourage talent and still allow it to come to the UK, why make it awkward? I am sure that those who come for big and well-paid jobs may find that they can open accounts, but what about the more ordinary person? I think that, actually, this is a very bad measure.
Lord Tunnicliffe (Lab)
My Lords, I thank the Minister for presenting this instrument. When I first read the Explanatory Memorandum, I thought it was good and it convinced me that, broadly speaking, the instrument was doing its job. Then my noble friend Lady Drake decided to share her speech with me and I realised that perhaps I had not fully understood it, but by this point in the proceedings, the Minister had enough questions to answer anyway without me inventing any more.
The point that has come out of the last two speeches is important. The Government often conclude that an impact is minimal because it affects quite a small number of people. The problem with that attitude is that for the people it affects, it affects them 100%. If you cannot get a basic bank account, that is pretty close to catastrophic in the modern world, so I hope that the Minister will have good answers to my noble friend’s points.
My question is one that runs through many of these SIs—the lack of formal consultation. The consultation paragraph states that there has been discussion with “relevant stakeholders”. One has an uncomfortable feeling that the relevant stakeholders are in fact the financial institutions themselves and not the key relevant stakeholders—the consumers. I would be grateful if the Minister could tell us who the relevant stakeholders were and whether they included consumer representatives, and, if not, why not?
Lord Bates
I thank noble Lords for their contributions. They rightly focused on basic bank accounts and the impact on people who are potentially vulnerable. I will try to offer some reassurance.
The noble Lord, Lord Tunnicliffe, and the noble Baroness, Lady Drake, asked about the consultation. The Treasury engaged with UK Finance, the Financial Conduct Authority and the Payment Systems Regulator to ensure awareness of these changes. The Treasury published the draft instrument and Explanatory Note on 31 October. We also notified leading consumer groups after the publication of the draft instrument to ensure awareness of these changes. We have not received any questions since publication. That may well change as a result of noble Lords’ comments today.
The noble Baronesses, Lady Drake and Lady Bowles, asked how many consumers and basic bank accounts will be affected by the changes. Customers legally resident in the UK, whether UK citizens or otherwise, who hold a basic bank account at one of the nine designated providers will not be affected, as the SI ensures that the nine providers must continue to offer these to qualifying customers.
The noble Baroness, Lady Drake, asked specifically about the impact of the SI on consumers. The impact on the majority of holders of payment accounts in the UK will be minimal. Basic bank account customers may experience a reduction in service as their providers are no longer required to give them access to, for instance, non-sterling EU transactions, although they may still choose to do so if they wish. It will be at the discretion of the providers whether they continue to offer new basic bank accounts or keep existing ones open for customers resident in the EU. We expect that that will affect very few. I accept the point made by the noble Lord, Lord Tunnicliffe, and the noble Baroness, Lady Drake, that it may have an impact on those people and I will try to give some reassurance in that respect.
The noble Baroness, Lady Drake, asked why it was necessary for the SI to remove the EU residency requirement. Maintaining that obligation on the nine basic bank account providers would be inappropriate in a no-deal scenario when the UK will no longer be part of the EU single market for financial services. She also asked what happened to UK expats who live in the EU and whether they could open new basic bank accounts. Eligibility for basic bank accounts is dependent on residency, not citizenship, so that would be a matter for the member state and the laws that apply there.
The noble Baroness, Lady Drake, requested an assurance that residents will not be in financial difficulty. The spirit of the 2014 agreement, to which I referred in the previous debate, is to provide for the most vulnerable in society. The Government expect banks to honour that agreement in making any changes. The noble Baroness also asked whether the statutory instrument prevents the cross-border opening of accounts. The changes in this statutory instrument only remove the requirement for firms to provide certain support to customers who wish to switch their payment account from the UK to the EU. They do not affect a UK customer opening an account in the EU.
Humane Trapping Standards Regulations 2019
(5 years, 10 months ago)
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Baroness Vere of Norbiton
That the Grand Committee do consider the Humane Trapping Standards Regulations 2019.
Baroness Vere of Norbiton (Con)
My Lords, the regulations amend the Wildlife and Countryside Act 1981 to implement trap welfare requirements contained in the Agreement on International Humane Trapping Standards—AIHTS—in Great Britain. The EU is a party to the agreement, but there is no implementing legislation at the EU level. Under EU law, the UK is therefore obliged to implement the welfare standards directly.
Council Regulation (EEC) No. 3254/91, commonly known as the Leghold Trap Regulation, prohibits the introduction into the EU of wild-sourced pelts and manufactured goods incorporating such pelts originating in countries that catch animals using leghold traps or trapping methods that do not meet international humane trapping standards. In 1997, the EU concluded two international agreements—the agreement with Canada and Russia and an agreed minute with the USA—to establish humane trapping standards and facilitate trade between the parties in wild-sourced pelts and manufactured goods incorporating such pelts.
The agreement requires that: the UK establish appropriate processes for testing and certifying traps in accordance with the humaneness standards and procedures set out in the agreement; manufacturers identify certified traps and provide instructions for their appropriate setting, safe operation and maintenance; and trappers be trained in the humane, safe and effective use of trapping methods. In the UK, the trapping standards apply to five species: badger, beaver, stoat, pine marten and otter. Of these, only the stoat is regularly and widely trapped in the UK; it is also the only species for which lethal traps are commonly used.
A UK-wide consultation on implementation of the agreement took place in March and April 2018. While stakeholders were broadly supportive of welfare improvements, most trap users opposed the implementation of the agreement because they believed that there would not be sufficient numbers of compliant stoat traps available in time. In response to these concerns, the Government agreed to delay implementation specifically in relation to stoats for a further year, until 1 April 2020. This is a pragmatic step that provides a clear signal to manufacturers and trap users that they must transition to compliant traps for stoats, while recognising that they will need time to do so.
Implementation will impact primarily on those who sell, manufacture, import or use stoat traps in the UK, as most stoat traps will need replacing. The total cost on business is calculated to be £1.2 million. We have existing legal mechanisms in place for regulating the use of traps. The agreement simply improves the standards with which traps must comply before they can be used, and extends the scope of existing trap offences to two additional species; namely, stoats and beavers.
Implementation does not require the introduction of new offences or penalties, and the existing licensing mechanism would allow compliant traps to be used. Licences are already required to trap all UK species covered by the agreement, except for stoats and beavers, and we propose that the trapping of stoats using compliant traps should be permitted under a general licence. This will result in negligible costs to the licensing authority and will provide the least burdensome approach for trappers.
The Government are committed to the highest standards of animal welfare. As the Prime Minister has set out, we will make the United Kingdom a world leader in the care and protection of animals as we leave the EU. This agreement contains minimum trap humaneness standards and rigorous trap-testing procedures, creating an internationally recognised benchmark for trap welfare. It is important that we implement these standards in Great Britain. I beg to move.
Baroness Bakewell of Hardington Mandeville (LD)
My Lords, I am grateful to the Minister for introducing this statutory instrument so comprehensively, and for her time in providing a briefing. I note that the only animals covered by this SI are stoats and that badgers, beavers, pine martens and otters are excluded.
It is reassuring that in Part 3 of the SI, under the amendment of the Pests Act 1954, leghold traps are not permitted and have been banned for some considerable time, as the Minister said. The EU prohibits the use of leghold traps and bans the introduction into the EU of pelts from countries which catch animals by means of leghold traps or trapping methods which do not meet international human—humane, sorry—trapping standards. It is essential that these standards are maintained in the UK once we have left the EU. I am encouraged that the Government consider that reliance on the spring trap approval system for the purposes of implementing Article 2 should be made more transparent, and that to improve clarity, the regulations amend Section 8 of the Pests Act 1954 and Section 50 of the Agriculture (Scotland) Act 1948 to make it clear that the Secretary of State and the devolved Minister would not approve or authorise the use of a leghold trap.
However, paragraph 6.7 of the Explanatory Notes indicates:
“In exceptional circumstances, the use of non-AIHTS compliant traps is possible under Article 10 of the Agreement … on a case by case basis”.
This case-by-case basis is allowed by means of a licence. As the Minister said, the agreement covers the EU, Canada and the Russian Federation, and a total of 19 species, only five of which occur in the wild in the UK.
Existing stoat traps do not meet the AIHTS and the Government are proposing that they will not implement the more humane traps until April 2020. This is too far away; the regulations could be implemented much sooner. Consultation has been ongoing for some considerable time, starting with several years of informal consultation with key users, followed by, as the Minister said, a UK-wide six-week public consultation, which ended on 30 April this year.
As has been said, stakeholders were broadly supportive of welfare improvements but opposed the agreement because gamekeepers and trappers did not believe that the compliant traps would be sufficiently available in time. There was also general disagreement with welfare groups over the perception that the agreement facilitated the wider use of traps and the international trade in fur.
Had the Government begun the implementation as soon as the consultation in April this year closed, with a view to starting in January 2019, there would have been time for the industry to ensure that it had a sufficient supply of compliant traps for gamekeepers and trappers. It is simply not acceptable to allow non-compliant traps to be used for a further 15 months, causing unnecessary suffering to stoats. I am not in any way defending the stoat, which is a pest and eats both eggs and young birds that have been bred for shooting, but it is important that they are dispatched in a way that causes minimum suffering. While there is a cost to gamekeepers of changing their traps to comply with the legislation, it should be borne by those engaged in the shoots.
Paragraph 14.1 of the Explanatory Notes indicates that monitoring and compliance will be done by the police and the Crown Prosecution Service. I fear this is extremely unlikely. Police budgets, much like those of local government, have been systematically slashed over several years to the point where the police prioritise crimes against the person and property. It is simply not feasible to expect our overstretched police forces to monitor and ensure gamekeepers’ compliance with the legislation.
Defra has indicated that a list of traps certified as meeting the new standards will be publicly available on GOV.UK. When is this likely to happen? Given that monitoring of the new agreement is likely to be minimal at best, the sooner the standards are publicly available, the sooner gamekeepers and trappers can begin the process of changing over.
There is no mention in the Explanatory Memorandum of who the licensing authority will be, which it states will incur negligible costs. Who issues such licences? Do they cover a specified area of land? Are they limited to a certain number of stoats or are they unlimited?
I also note that new Section 16 (3ZD)(e) of the Act indicates that an authority in another country or territory designated for the purposes of the international trapping standards agreement could be a certifying authority. Can the Minister throw some light on exactly what this means? I look forward to her response to my questions.
Baroness Jones of Whitchurch (Lab)
My Lords, I thank the Minister for her explanation. Of course, anything which improves animal welfare and protects animals from inhumane and cruel trapping is to be welcomed. However, I have some concerns about the Government’s implementation of the EU agreement on human—humane—trapping standards. When I first read the SI, I thought that it said “human trapping standards”, which I thought was the badgers’ revenge, but that is beside the point. There are some points of detail that I would like clarified.
First, all EU member states were obliged to implement the requirements of the AIHTS. The deadline for implementation was 22 July 2016. Can the Minister explain why the UK missed that original deadline? She will be aware that, a month before that deadline passed, the people of the United Kingdom voted to leave the EU. However, until exit negotiations are concluded, the UK will remain a full member of the EU and all the rights and obligations of EU membership remain in force. Why are the Government only now implementing the regulations, over two years after the deadline and just months before the UK’s departure from the EU?
Secondly, the Minister will be aware that many animal welfare organisations opposed the implementation of the agreement because they thought it would facilitate the wider use of traps and the international trade in fur. What steps are being taken to ensure that all fur imported from other countries in the EU—as well as Canada, Russia and the USA, which signed up to the new agreement—will meet these supposedly more humane trapping standards to which they have signed up? Have all the other EU countries bound by this agreement introduced the ban into their domestic legislation? If any have not done so, should we be refusing to allow fur imports from those countries?
Baroness Vere of Norbiton
My Lords, I thank the noble Baronesses, Lady Bakewell and Lady Jones, for their contributions. It was my pleasure to meet both of them beforehand so I had some sight of some of the questions that would arise, but not all of them. I can cover some of the issues now, but I know that I will have to write on at least one of them. I will probably write to both noble Baronesses but I am afraid that particularly the last point made by the noble Baroness, Lady Bakewell, went over my head.
The species included in the standards are the ones most commonly trapped for their pelts. There are numerous regulations around trapping and snaring and so forth, but we are focused solely today on those species that are predominantly trapped for their pelts, which is why this agreement was reached in the first place. That is where the 19 species come from. Foxes are not included because they are not commonly trapped for their pelts. Foxes are usually controlled for other reasons, such as pest control. Only a small number of those 19 species exist in this country, which is why the regulations we are talking about today cover those species.
I was asked about the two different types of badger, which may have to go into my letter. Actually, I have a response. The European badger is the same as the UK badger. They are protected. It is very rare that a licence would be granted for those badgers.
The noble Baroness, Lady Bakewell, mentioned leghold traps. They are banned—they have been banned since 1950—so we will obviously make sure that we do not have those sorts of traps in this country.
The non-compliant element—Article 10 of the agreement—is an issue that both noble Baronesses raised and deserves more focus. In exceptional circumstances the use of non-AIHTS-compliant traps is possible. It permits derogations to be granted only on a case-by-case basis. We do not expect that to happen often, and only if they are not applied in a manner that would undermine the objectives of the agreement. Indeed, if we were to agree a derogation, we would have to notify the agreement’s joint management committee, so it is quite a serious issue. An example of where we might grant a derogation would be where no certified live-capture trap design was available and one needed to be tested, or someone wanted a trap design to be considered for certification for a particular species.
Related to that, the noble Baronesses mentioned home-made traps. Again, that is not something that we expect will be particularly common, but it might occur. However, those home-made traps will have to meet the same standards as other traps. They will need to be certified by the relevant competent authority.
I will partly take the point about timing on the chin. There has been a delay in implementing this. When these standards first came into play, it was not clear whether or not the EU would make legislation around this area. When we realised that the EU was not going to do that, a number of legislative options were available to us, and we considered them all. Then there were various breaks in Parliament, as noble Lords will know. Also, within that time there has been research into compliant stoat traps and an evaluation of how the stoat is finally dispatched. We certainly wanted to examine all the research and evidence. We needed to speak to the stakeholders, but it is not our intention to overregulate the countryside and to force people into changes that they simply cannot make because the traps are not available. Therefore, we felt that the year’s grace was appropriate.
The spring trap regulations come into force in January so obviously they will be available. We aim to get a list of the traps, which will be updated as new traps are certified, on to the GOV.UK website as soon as possible thereafter.
On the licensing authority, there are two types of licences for trapping. The general licence is for people involved in low-risk activities such as conservation and the welfare of protected species. Those people need nothing more than a general licence, but if they have that licence obviously they must meet the conditions and comply with the terms of the relevant licence and therefore the law. The class licence is for activities that require a specific skill or experience to avoid any risk to the environment or the welfare of the protected species. A number of concerns were raised today around that area.
Again, you do not have to apply for a class licence. However, to act under the authority of a class licence, you must first register with the licensing authority to show that you have the required skill. Of course, that can be enforced—people can check that you have the required skill to operate a class licence. In England, the licensing authority is Natural England; in Scotland, it is Scottish Natural Heritage; and in Wales, it is Natural Resources Wales. They already issue these licences in other regards and we do not expect there to be a significant increase when it comes to extending these to stoats.
Moving on to fur, this SI is not about all fur; it is about trapped fur. The regulations within the EU extend to all different types of imported fur. It is expected that importers comply with those regulations but that is beyond the regulations we are talking about today. The noble Baroness also mentioned fur farms, which we have banned in this country. Certainly, as we leave the EU, an opportunity will arise for us to consider any further action that we may wish to take. Obviously, I would not dream of making a commitment at the Dispatch Box today.
Baroness Jones of Whitchurch
I asked whether all the other countries in the EU have implemented this domestic legislation, as obviously that will affect whether we accept imports from them.
Baroness Vere of Norbiton
Yes, I believe they have, as have Canada, Russia and the US. I think we are slightly behind the curve on this one.
I would like to cover the issue raised by the noble Baroness about how stoats die. I knew that she was going to bring that up so I had a little look. These traps are more humane because the time to death is shorter and the force of the death action is stronger. These lethal traps most commonly use the power of a coiled spring, which asserts a striking force on the trapped animals, usually on their heads. It is usually administered by a strike bar that crushes the head. Prior to that, the animal has stepped on a plate in order for that action to happen. Some other modern traps use new technology, such as carbon dioxide or electricity, to dispatch the animal; furthermore, they might use captive bolts or impalers. I would like to get across to noble Lords today that modern lethal traps are effective within seconds. The animals will not be left languishing for many minutes while death occurs—that is one of the reasons why we feel that these regulations are so important. While stoats may not always be our friends, the traps dispatch them in a friendly fashion.
Finally, the noble Baroness discussed training. I do not want to overregulate the countryside on this one. The people who will be subject to these regulations are already gamekeepers and trappers—they know how traps work. All we are asking is that the manufacturers provide instructions that allow a gamekeeper to understand what the trap does and how it works. Many of the traps are species-specific and there will be different requirements for where you put the trap, such as in a tunnel, and all sorts of different things. In our view, it is sufficient for the manufacturers to provide instructions. They will be available at the time of purchase, as well as online. The instructions must be available for the life of the trap, and these traps last quite a long time. We have spoken to the manufacturers and the retailers and they are happy to provide this information. Of course, we will make sure that they do when we certify their traps for inclusion in the list.
I think that brings us to the end of this statutory instrument. It is an important one in terms of improving our animal welfare and I beg to move.
Anti-social Behaviour, Crime and Policing Act 2014 (Amendment) Order 2018
(5 years, 10 months ago)
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Baroness Manzoor
That the Grand Committee do consider the Anti-social Behaviour, Crime and Policing Act 2014 (Amendment) Order 2018.
Baroness Manzoor (Con)
My Lords, this order was laid before both Houses on 5 November 2018. It adds Transport for Greater Manchester to the list of bodies that can apply to the courts for a civil injunction to address anti-social behaviour. It may assist the Committee if I give some background and context to the order.
The Government introduced the Anti-social Behaviour, Crime and Policing Act 2014 to provide the police, local authorities and other local agencies with a range of powers to enable them to effectively tackle and prevent anti-social and nuisance behaviour. These powers include a civil injunction which can be issued by the courts against any person aged 10 years or over whose behaviour has caused or is likely to cause harassment, alarm or distress to others. An injunction can include prohibitions to stop the perpetrator behaving anti-socially and positive requirements to get them to address the underlying causes of their behaviour. At present, the bodies which are able to apply to the court for an injunction are as follows: the police, including British Transport Police; local councils and housing providers; Transport for London; the Environment Agency and Natural Resources Wales; NHS Protect and the West Midlands Combined Authority.
The draft order before us today amends the 2014 Act to add Transport for Greater Manchester to the list of bodies which can apply to the courts for an injunction under Section 5 of the Act. This change follows a request from the Mayor of Greater Manchester, Andy Burnham, and will help ensure that Transport for Greater Manchester can take swift action to address anti-social behaviour taking place on Manchester’s transport network.
Transport for Greater Manchester is the passenger transport executive body responsible for the co-ordination and management of public transport across the 10 districts that make up the county of Greater Manchester. Transport for Greater Manchester owns the Metrolink tram system that runs through seven of the 10 districts that make up the county of Greater Manchester. It also owns and operates a total of 22 bus stations and provides a range of other bus services. The number of passenger journeys made using the Metrolink network in 2017 was 40 million. On its bus services in 2017, there were a total of 196 million passenger journeys.
Transport for Greater Manchester reports challenges with anti-social behaviour across its transport network. In April 2015, to address concerns about anti-social behaviour, it established the TravelSafe Partnership with Greater Manchester Police and with support from transport operators. The TravelSafe Partnership provides a dedicated team of police officers, special constables and security staff who regularly patrol the region’s transport network to reduce anti-social behaviour and provide high visibility reassurance to passengers and staff. Despite taking steps to reduce anti-social behaviour on the transport network across Greater Manchester, it remains a challenge. The most recent statistics show that in 2017-18 there were a total of 1,692 incidents of anti-social behaviour, which included incidents of intimidating, threatening and abusive behaviour towards passengers and staff.
Transport for Greater Manchester would now like to go a step further in keeping its passengers and staff safe by applying for civil injunctions direct from the courts, which currently it cannot do. The Government believe that the Mayor of Greater Manchester and Transport for Greater Manchester have put forward a strong case for this change, which will also bring their powers in this area into line with those of comparable bodies such as Transport for London. The Government recognise that anti-social behaviour can have a negative and debilitating impact on victims. It is right that the Government therefore do all they can to assist organisations such as Transport for Greater Manchester to take direct action against anti-social individuals on their transport systems, so that they can protect the public. I beg to move.
Lord Paddick (LD)
My Lords, I do not think I will be able to speak for very long. I thank the Minister for explaining the order. As she has explained, a civil injunction can be taken out against those causing others harassment, alarm or distress, and the order adds Transport for Greater Manchester to those able to apply directly to the courts for these injunctions, as Transport for London can. Clearly, if the West Midlands and London have this ability, there is no reason that Greater Manchester should not have it as well.
However, perhaps the Minister can explain to the Committee how the injunctions are used in practice. How are they enforced once they are granted? How effective have they been in London, where they have been available to Transport for London for some time? How many times have they been used, and to what effect? I have tried to find out. I consulted the chair of the Transport Committee of the London Assembly and she did not know of any issues around the granting of these injunctions, but it would be useful to know whether this is an effective measure, based on experience in other areas that have had these injunctions for some time.
Lord Kennedy of Southwark (Lab Co-op)
I am happy to support the order. The noble Lord, Lord Paddick, asked a pertinent question, which we would like to hear the answer to, about the experience of using these orders elsewhere. But giving the transport authority in Manchester the powers that they have in the West Midlands and here in London is certainly a good thing. As the Minister said, the Mayor of Greater Manchester has applied for these and made a strong case, and the Government have listened to that. I am happy to support the order and I have no questions for the Minister.
Baroness Manzoor
I thank both noble Lords for their support of this important SI. I am sorry to hear that the voice of the noble Lord, Lord Paddick, is going, but perhaps not as sorry as I should be, since it means that he did not have the opportunity to ask too many detailed questions.
The noble Lord asked about the evidence base in relation to London. I do not have the information to hand but I do know that the order allows the organisations to go to court to get a civil injunction against an individual for anti-social behaviour. If they are an adult, they could be put in prison. For children over the age of 10 who misbehave, the order can put in place various deterrents to further reduce misbehaviour on trains. But I will see if we have anything specifically on London. I am not getting a nod from the Box. I do not have that detail, so I will have to write to the noble Lord in relation to London. I do not think that we collate that data centrally. We meet various agencies on a regular basis and the reports are that the injunctions are being used to good effect. That is all I can say at the moment.
If I can get more detail—there is no inspiration behind me either—then at least the fact that the London mayor has applied for these orders says that they can be used to try to reduce the detriment being caused by anti-social behaviour on the transport system. With that, and with the Committee’s support, I ask noble Lords to agree the Motion.
Blood Safety and Quality (Amendment) (EU Exit) Regulations 2019
(5 years, 10 months ago)
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Lord O’Shaughnessy
That the Grand Committee do consider the Blood Safety and Quality (Amendment) (EU Exit) Regulations 2019.
The Parliamentary Under-Secretary of State, Department of Health and Social Care (Lord O’Shaughnessy) (Con)
My Lords, in proposing these regulations, I want to explain that they are made under powers in the European Union (Withdrawal) Act 2018 to make necessary arrangements for the UK Blood Safety and Quality Regulations. This statutory instrument will correct deficiencies in those regulations so that the UK is prepared if we leave the EU without a deal on 29 March 2019.
Current regulations set out the safety and quality requirements that cover all the steps in the blood transfusion process, from donation, collection, testing, processing and storage to distribution. The short shelf life of these products means that an uninterrupted process of donation and processing is needed to ensure that the UK has a safe and continuous supply of blood and blood components. As a responsible Government, we have been preparing for all scenarios, including the unwanted but potential outcome that we leave the EU without a deal in March 2019. This instrument will ensure that the regulatory regime in relation to blood safety and quality continues to function effectively after exit day in that scenario. It is vital to make these legislative changes to provide a functioning statute book that allows for the continued donation and processing of blood and blood components such as plasma and platelets to facilitate a wide range of essential and often life-saving treatments.
In moving these regulations, I want to be clear that they are limited to the necessary technical amendments to ensure that the legislation is operative on EU exit day. No policy changes are made through these regulations and we do not have any intention of making any at this point.
The main changes that the instrument will introduce are as follows. It transfers relevant Commission powers contained in the EU blood directives to the Secretary of State in relation to England and to the devolved Ministers in relation to the devolved areas. In addition, the Secretary of State may, with the consent of the relevant devolved Ministers, make regulations on their behalf. This will enable future updates to the blood safety and quality legislation to respond to emerging threats, changing safety and quality standards and technological advances. It contains modifications to how the annex to the blood directive should be read post Brexit. This is necessary to ensure that the requirements set out in the annex, which are referred to in our domestic legislation, continue to apply and function properly post exit. It also makes minor changes to amend EU-related references or EU obligations that will no longer be appropriate or will be redundant once the UK has left the EU.
Blood is a devolved policy area, so I am pleased to say that we have obtained the devolved legislatures’ consent to the provisions contained in this draft instrument. I beg to move.
Baroness Thornton (Lab)
My Lords, I thank the Minister for introducing these regulations. Given the state of the Brexit negotiations, deals and other matters that are going on in Parliament at the moment, it is probably just as well that we have this before us. However, I have to say, as I said to the Minister about the previous instrument we discussed, that it was there in case we crash out of the EU. This is really quite a waste of all our time and Parliament should not have to do this.
The regulations seem to be very straightforward. They will: amend or omit references to EU/EEA member states and third countries; omit provisions relating to EU obligations that will no longer be relevant to the UK; transfer relevant Commission powers under the EU blood directive to the Secretary of State in relation to England and the devolved Ministers in relation to the devolved areas, as detailed in paragraphs 7.12 to 7.15; and, as the noble Lord said, modify how the annex to Commission Directive 2005/62/EC is to be read after exit.
Baroness Walmsley (LD)
My Lords, I agree with the noble Baroness, Lady Thornton, that we should not be having to do this. If Parliament was clear that it would not sanction a no-deal Brexit, we would not need to do so. My concern is that if we leave the EU, no longer will there be an obligation on the Secretary of State to communicate with the blood regulatory authorities in EU member states. Obviously, I welcome the fact that blood establishments and blood banks will need to ensure that blood and blood components from the UK continue to conform to the current EU testing requirements, as well as meet the equivalent quality and safety standards implemented by the UK Blood Safety and Quality Regulations 2005. However, I noticed that the Minister said, “for the moment, anyway”, when he mentioned that fact. It concerns me a bit that future Governments could change those standards. I hope that they would not want to change them for the worse in an attempt to sell a lot of blood products to countries with lower standards than us.
As a resident of Wales, I was pleased to hear that the devolved Administrations were engaged in consultation on the changes included in this instrument, which has been adapted to incorporate the changes and comments that they have proposed. That is fine, but I am concerned that in extremis, if there were to be difficulty in getting supplies in a timely way, the devolved Administrations would have to use products chosen by Westminster. I bring that up because this morning I heard about a parallel situation from some clinicians in Wales. They told me that they import quite a lot of hip joints, but the hip joints chosen for use in Wales are different from the hip joints chosen for use in England. They said that the NHS in Wales understands that if there was a problem of supply, it would have to use the hip joints chosen by England because they would be the only ones that it could get. I wonder whether the Minister can tell me whether the same situation would apply to blood products.
I know that the UK is largely self-sufficient in the supply of blood and blood components. Occasionally, we export rare frozen red blood cells in small quantities and import about 6.5% of our plasma units from the EU every year. In this context, I am concerned that regulation 16A of the 2005 regulations is being omitted from this SI. The regulation requires the maintenance of the communication of serious adverse events or reactions between the Secretary of State and the other blood regulatory authorities in EU member states. However, once the UK leaves the EU, obviously it will not be an EU member state and therefore no longer will there be an obligation on the Secretary of State to communicate with the blood regulatory authorities in the EU member states, nor them with us.
In the light of problems that we have had with blood products in the past—for example, blood contaminated with HIV and hepatitis C—what arrangements will be put in place to ensure that in the future we will communicate with the remaining 27 EU countries and that we will hear from them in relation to our work over here if any adverse situations arise with blood and blood products? We are still dealing with the fallout from blood products that were contaminated with HIV and hepatitis C. People have suffered for many years and I know that they are still trying to get the compensation that they feel they deserve. I hope the Minister is able to reassure me about both of those two elements.
Lord O'Shaughnessy
I thank both noble Baronesses for their questions. I do not quite agree that this is a waste of time; after all Parliament voted both for a referendum and for a withdrawal Act, so we have to prepare for every eventuality even when we hope that they will not happen. This SI is particularly important for the continuity of this important medical product.
To deal with the questions posed by the noble Baronesses, communication with agencies is absolutely happening. It is being co-coordinated by NHS blood and transport—sorry, I always say “blood and transport” because it transports the blood; I mean NHS Blood and Transplant—as well as the relevant agencies in the devolved Administrations. We know that sometimes relationships between the DAs and Westminster can be strained, but I think it is fair to characterise them as being positive and co-operative on this and other health-related issues. We are making sure that all agencies are involved in that process, with central co-ordination and collaboration and consent from the DAs.
Regarding reassurance for people with rare diseases in respect of imports, the whole point here is that we would be operating to the same standards as the EU. In a no-deal scenario, we would also be accepting, as it were, the regulatory standards and approvals of the EU to ensure that such products were not impeded on their way into our country. As the Committee will know, a range of activities are going on to ensure continuity of supply through the borders.
On the point made by the noble Baroness, Lady Walmsley, there is nothing untoward about my comment that there is no policy change at this moment. The critical point here is that under the Bill we are limited to technical changes to address flaws in the legislation that emerge as a result of technical flaws moving from one situation to another. Of course any future Government can change policy; I cannot bind the hands of any Government of any kind in future years. However, I can tell noble Lords that we have no intention of watering down the standards, so please be reassured on that point.
On the question from the noble Baroness, Lady Thornton, about when this would happen, in a no-deal scenario it would happen from 30 March 2019, so it would be from day one onwards.
I turn to the remaining issues raised by the noble Baroness, Lady Walmsley. In Wales we effectively have a single market in blood products—that is one way of putting it—all working to agreed standards. From that point of view, there is no difference in the products that are used in different domains. I understand her point about hip replacements but I am not sure that it is an exact analogy. Of course the beauty of devolution is that we have choice and experimentation.
Lastly, on the important point about communications with the EU, the reason why that has been removed is that it is a reciprocal obligation. Obviously it is illogical to have a reciprocal obligation that can be fulfilled only by one side.
Baroness Walmsley
I accept that, of course, but what I want to know is what is going to be put in its place.
Lord O’Shaughnessy
Indeed. In a no-deal situation, if we picked up the kinds of concerns she has described, we have very good pharmacovigilance and other monitoring systems in this country. We would communicate that information with our European neighbours and we would hope and expect them to do that in return. However, of course we have no way of obliging them to do so in a no-deal scenario. We are absolutely committed to communicating with them not only about blood products but about all medicinal products and devices; that is our moral obligation. In a deal scenario, we would share that information anyway by dint of being part of a common regulatory authority. That is also true of the implementation period and it is our stated ambition in the White Paper for the period afterwards. I can reassure the noble Baroness that it is our intention to continue with the communication. Although, in part because of the phase we have reached in the negotiations, it is not possible to confirm that in a no-deal scenario there would be a bilateral or multilateral arrangement around communications, I am confident that all sides would want that because it is to no one’s benefit not to share the information. I am sure that that would happen.
I hope that I have provided answers to the pertinent questions put to me by the noble Baronesses and commend the regulations.
Human Fertilisation and Embryology (Parental Orders) Regulations 2018
(5 years, 10 months ago)
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Lord O’Shaughnessy
That the Grand Committee do consider the Human Fertilisation and Embryology (Parental Orders) Regulations 2018 and the Human Fertilisation and Embryology Act 2008 (Remedial) Order 2018.
Relevant document: 14th Report from the Joint Committee on Human Rights
The Parliamentary Under-Secretary of State, Department of Health and Social Care (Lord O’Shaughnessy) (Con)
My Lords, by way of background, parental orders are an important mechanism that transfer the legal parenthood of a child born through a surrogacy arrangement from the surrogate and her partner, if she has one, to the intended parents. The effect of such an order is that the child born to the surrogate is treated in law as the child of the applicants for the parental order and that any parental rights of the surrogate and her partner are extinguished. This confers legal certainty of parenthood, parental responsibility and decision-making on behalf of the child to the intended parents. As noble Lords will be well aware, parental orders were introduced for married heterosexual couples only as part of the Human Fertilisation and Embryology Act 1990. This was extended by the 2008 Act to same-sex couples, civil partners and couples in long-term relationships where the relevant criteria were satisfied.
I am sure we all agree that surrogacy has an important role to play in our society, helping to create much-wanted families where that might otherwise not be possible. It enables the provision of an altruistic gift to people who are not able to have a child themselves and can help people to have their own genetically related children. The UK Government recognise the value of this in the 21st century, where family structures, attitudes and lifestyles are increasingly diverse. We have also recognised that the existing legislative framework has not kept pace with this social change and have therefore asked the Law Commission to review all surrogacy-related law and make proposals for improvement as part of a three-year project.
In the meantime, a more immediate piece of legal reform needs to be addressed. As noble Lords know, in 2015 there was a legal challenge by a father who had a child through a surrogacy arrangement in the USA who could not apply for a parental order because he was single. The High Court found that the Act was in breach of Article 14 of the European Convention on Human Rights combined with Article 8. In May 2016, the court made a declaration of incompatibility. The declaration related to the lack of any provision enabling a person in the position of the applicant, who was not in a long-term relationship, to apply for a parental order. The Government of the day made a commitment to rectify the incompatibility by means of a remedial order made under the power in Section 10 of the Human Rights Act 1998. The order inserts a new Section 54A into the Human Fertilisation and Embryology Act 2008 to provide for and set out the criteria for parental order applications from one applicant. The new section largely mirrors Section 54 of the 2008 Act, which provides for applications from couples.
Lord Winston (Lab)
My Lords, forgive me for a brief intervention. I do not have any problems at all with the basic notion of what is in front of us. It is possible that I was the first person to do a surrogacy agreement using IVF, so I have a certain amount of background in this rather murky subject.
One thing that slightly concerns me is the issue of paternity or maternity genetically, because we now have a situation where children can normally trace their genetic parent. That is on the birth certificate. Here we have a slightly odd situation. For example, particularly with a gay or lesbian couple, or where someone has not only had their uterus but their ovaries removed, someone may end up receiving a donor egg which is then implanted into the surrogate mother after fertilisation. So an embryo could be put into a surrogate mother who is happy with that, but it is not genetically her embryo.
I am just trying to raise the issue of clarity. Given that Parliament in its wisdom decided that people should be able to trace their genetic mothers, someone who had given an egg in that situation could suddenly be presented with a child they did not know they had, even though their own treatment had failed 20 years or earlier. When the Minister wraps this up, can he provide some clarity on what would happen, because there is human rights issue both ways here?
Baroness Barker (LD)
My Lords, I thank the Minister for introducing this debate in the way that he did and giving the background to the instruments before us today. I should declare that I am a member of the All-Party Parliamentary Group on Surrogacy. I have a long-standing interest, fuelled by many a night sitting listening to the noble Lord, Lord Winston, as we went through various bits of legislation but principally by the work done by Surrogacy UK in 2016 when it produced a report. There was a debate in December of that year. Baroness Warnock was no longer a Member of your Lordships’ House, but the noble and learned Lord, Lord Mackay of Clashfern, was. Those of us who had been involved in legislation on this matter from the beginning in the 1980s accepted that the overall legislative framework we now have is not really fit for purpose, not least because of the many scientific advances that have happened in the intervening years. As the noble and learned Lord, Lord Mackay, observed in that debate in 2016, there are now many more ways in which families, as well as children, are created.
The Minister was right that the original stimulus for the legislation was the case of a man who in 2015 had a child by surrogacy abroad, brought the child back and found that the child’s status was incompatible with our law at the time, which stated that parental orders could be made only in respect of a couple. That was two and a half years ago. In the meantime, others have found themselves in similar limbo. The courts have had to make what are essentially temporary orders. Those orders are above all for the welfare of a child: a child is being cared for by somebody who is not their legal parent and has no legal responsibility for them. We should not lose sight of that.
This measure is a welcome step forward which offers a degree of certainty not only to individual parents or intended parents who find themselves in this position but to the children. I am pleased that the Law Commission is now undertaking an extensive review of the legislation. The All-Party Parliamentary Group on Surrogacy is conducting its own hearings on the matter. For just a small all-party group, the hearings have been extremely interesting. We have had a huge number of people give evidence, some with very conflicting views. I think that we will end up with an interesting report that feeds into that work. My guess is that the Law Commission will take about two years to produce a report.
My reason for mentioning all that is that time ticks by for individuals as we debate these matters. I do not suggest for a moment that we should do anything in a rush, but, at the same time, it is incumbent on us to deal with some matters urgently, because to do so is in the interest of individuals.
There are some ways in which a single person applying for a parental order will be still be left outside these remedial orders. I understand that a case is before the courts at the moment of a woman whose relationship with the biological father of a child has broken down. She is now in the position of being a single person who has no biological relationship with the child but nevertheless wishes to have parental responsibility. Another tragic case is before the courts in which one member of a couple has died subsequent to the fertilisation process having taken place.
However long the Law Commission takes to do its work, which it should do extensively and thoroughly, I think that we will continue over the years to have a small number of cases that are intensely important both for intended parents and for children. It is therefore likely that we will find ourselves back in this House making more revisions of regulations of this kind before we get the comprehensive review of surrogacy law that we need so that practitioners, medics, intended parents and children all have a better understanding of where we should be legally in this day and age.
Viscount Craigavon (CB)
My Lords, I will say a few words, partly reflecting what the noble Baroness, Lady Barker, said. I spoke on this subject in her debate some time ago.
We should be extremely grateful to the Law Commission for taking on this, in my opinion, very difficult and rather controversial work. Only an organisation like that is going to bring this to some sort of conclusion, but as the noble Baroness, Lady Barker, said, it will take considerable time, and understandably so—we do not want to hurry it. However, one or two problems are going to slip through the net before it reaches its conclusion. The noble Baroness, Lady Barker, mentioned particular problems and some of them might be resolved, as she said, by further orders but some will still be in difficulties because some women simply do not have the time to spare in their reproductive cycles to wait for these problems to be solved.
There is another example, similar to what the noble Lord, Lord Winston, was saying. In rather rare cases of cancer, the treatment disallows women from being able to be genetically connected to the child who is being born. That is another example where we might be in difficulties over the long time period we have. I very much welcome these regulations, and I hope the department will keep an eye on difficult cases that come up. We will be looking after them as well.
Baroness Thornton (Lab)
My Lords, on this occasion I thought I would let the experts go first—it is called delegation. Like all other noble Lords, I welcome these regulations. I think it is my first experience of a remedial order. As a bit of an anorak in these matters, with 20 years in your Lordships’ House, it is very exciting when you find yourself with a parliamentary procedure that you have not come across before. It is also interesting that the remedial order has then led to the statutory instrument that flows from it. We have also made all the right authorities happy.
I welcome the fact that the Law Commission is reviewing surrogacy. It is a three-year project, so the noble Baroness, Lady Barker, is right in what she said. In the time that I have been involved in doing health work in your Lordships’ House, every year or so we come back to some or other tweak, which is either down to medical science having advanced or, as my noble friend Lord Winston has said, technology having advanced. When my noble friend was speaking, I was reflecting on the fact that you can use the myheritage.com website to track down your genetic relatives from all over the world. If they are there, they will pop up. I suspect that will happen—not that we can legislate for that—and I suspect that the noble Baroness, Lady Barker, is right when she says that we will probably be back before the Law Commission has finished its work and certainly before the results of its work have been considered by the Government—whichever Government it is by then—brought forward and put into legislation.
Lord O’Shaughnessy
I am very grateful to all noble Lords who have spoken. One of the great joys of working in this House is that we are privileged to have access to such expertise, be it scientific, policy or legislative. We have had a very good, if short, debate in which there were some interesting questions which I shall try to answer. The noble Lord, Lord Winston, made a point about tracing the genetic parents in the case of a donated gamete. I shall read out what it says in my pack to make sure that I get the wording right and then I am going to make an addendum which I think is also correct.
If a child is conceived via an HFEA-licensed clinic with donor gametes, it may be able to access information about the donor in line with the responsibility of the clinic to provide information under the HFE Act, but this would depend on the parents informing the child of the circumstances of their birth. Of course, that would be so that the child was aware that they could ask, but at the point at which they became aware, via their parents or anyone else, they would then have a right to that information. I think the point the noble Lord made was that however the line goes to the genetic forebear, the child would have the right to pursue it. Of course, it would rely on the child being aware of the circumstances of their birth and so on, and we cannot force that on somebody, but they would be able to trace it.
Lord Winston
Does that mean that the birth certificate would be like a normal birth certificate under those circumstances?
Lord O’Shaughnessy
Yes, because the court retains a copy of the original birth certificate. I am going to need to clarify this because it is tricky and there is a danger if I try to describe it now. I do not want to do that. I think the noble Lord is asking for clarification, but I am going to need to write to him, if he will accept that, to clarify the situation.
Baroness Barker
I hope I am going to be helpful. If I am right, I think that at the point at which a parental order is given, a new birth certificate is issued. That rather mirrors the procedure under adoption, which is the same. The point is that a child always has the right to find out their genetic history but they may not know the means of their birth. From all the things that I have listened to in this House, that makes them probably like a good 40% of people who were not adopted or the result of fertilisation but who have a different father from the one they thought they had; I do listen.
Lord Winston
I do not want to delay things, but surrogacy is a special situation because the child is developed in another uterus, so there are epigenetic factors which may act on that child’s development. We are now beginning to understand—for example, from the study that I am involved with in Singapore—that things which happen when the baby is in utero can affect cognitive development and other sorts of development later in life. It is therefore slightly different from a normal donated gamete in a usual IVF setting or simple artificial insemination. That is why I wondered whether there will be clarity about the exact nature of the bearing mother as opposed to the genetic mother, because that seems to be important. Is that recorded on the certificate?
Baroness Barker
I am glad that over the years I have had to do my homework because I am now going to be in debates with the noble Lord, Lord Winston. I think that the issue is covered by the licensing of the clinics which are under an obligation to maintain a record if they are HFEA-licensed in this country. I believe that in certain jurisdictions abroad to which people go for surrogacy, notably California and Canada, clinics are similarly required to meet certain standards of record-keeping.
Lord O’Shaughnessy
That is absolutely right. It is fantastic to be able to bow to the wisdom of noble Lords. In effect, although this is a rather inadequate way of describing it, there is a paper trail of whether it is the surrogate parent—the original genetic donor, if there is one, that is different from the parent who subsequently gets the parental order—when that is done through licensed clinics. The child has a pre-existing right to pursue that information and they are able to do so, if they want to, when they become aware of the circumstances of their birth. I think I have got that right. The noble Baroness, Lady Barker, is nodding, which means I can be confident.
I congratulate the noble Baroness on her tenacity in pursuing this issue and I congratulate other noble Lords as well. It has taken longer than it should have done to make this remedial order; I can only reflect on how much has happened in the last two and half years, which may be some of the reason behind that. The department is very aware of the need to watch this space. There are court cases going on. Clearly it would be inappropriate for me to comment specifically on them but, as the noble Viscount, Lord Craigavon, pointed out, thorny and difficult cases will continue to emerge and we need to deal with them as they arise if they have policy implications. We also need to ensure that we keep up the impetus through the Law Commission review, which I understand will be two years of inquiry and then a year of drafting legislation. That is why it will take three years; these things have a natural pace to them. The critical point is that at the end of the process, the Government—as the noble Baroness, Lady Thornton, pointed out, whoever is in government at that point—should then be in a position to take that legislation forward. One would hope that if the Law Commission has done its work, that is something on which there is a pre-existing consensus and we can all move forward.
I am incredibly grateful to noble Lords for their wisdom and sagacity. This has been a very high-quality debate. I will provide the specific clarification to the noble Lord, Lord Winston, and circulate it to other noble Lords who have taken part in the debate. I thank them once again for their contributions.