Draft Financial Services (Miscellaneous) (Amendment) (EU Exit) Regulations 2019

(Limited Text - Ministerial Extracts only)

Monday 18th March 2019 General Committees

[The Economic Secretary to the Treasury (John Glen)]

I beg to move,

That the Committee has considered the draft Financial Services (Miscellaneous) (Amendment) (EU Exit) Regulations 2019.

May I say what a pleasure it is to serve under your chairmanship, Mr Bailey? As the Committee will be aware, the Treasury has been undertaking a programme of legislation to ensure that, if the UK leaves the EU without a deal or an implementation period, there continues to be a functioning legislative and regulatory regime for financial services in the UK. The Treasury has been laying statutory instruments under the EU (Withdrawal) Act 2018 to deliver that, and most of them have now been debated and approved and are in place for exit day should they be needed. The SI being debated today is one of the final parts of the programme. I believe it is the 51st SI and the 31st debate in which I have taken part.

The instrument revokes a number of pieces of UK domestic law and retained EU law that it would not be appropriate to keep on the statute book after exit. It also makes amendments to a number of financial services EU exit SIs to reflect other instruments that have been laid as part of the wider legislative programme, corrects minor errors identified in legislation after making and makes amendments to ensure consistency between EU exit instruments.

Turning to the substance of the SI, it has five main components. First, the SI amends UK domestic law to ensure continuity with other legislation that has been amended under the 2018 Act. Specifically, it makes amendments to primary and secondary legislation that does not fall within the remit of changes made by other instruments. Specifically, the SI removes references to EU institutions and regimes in four Acts of Parliament: the Insolvency Act 1986, the Financial Services and Markets Act 2000, the Income Tax Act 2007 and the Corporation Tax Act 2009. The amendments will ensure that provisions that are irrelevant in a UK-only context are not retained on the UK statute book. The SI also makes minor technical amendments to seven pieces of secondary legislation to reflect changes made by other legislation. For example, it updates the definition of “credit institution” as introduced by the Financial Services and Markets Act 2000 (Amendment) (EU Exit) Regulations 2019.

Secondly, the SI makes minor technical amendments to 12 other financial services EU exit instruments that have been previously debated by the House. A number of the amendments are being made in this instrument because they are consequential on other instruments that have only recently been made, such as the Equivalence Determinations for Financial Services and Miscellaneous Provisions (Amendment etc) (EU Exit) Regulations 2019. A minority of the amendments correct drafting errors and improve the clarity of drafting. For example, a duplicate provision is omitted from the Bank of England (Amendment) (EU Exit) Regulations 2018, as the same amendment is made by the Deposit Guarantee Scheme and Miscellaneous Provisions (Amendment) (EU Exit) Regulations 2018.

At this point, it would be appropriate for me to acknowledge the enormous amount of work done by my colleagues in the Treasury to minimise the number of amendments that have been necessary. We are talking about 10 or 12 in 1,000 pages of SIs.

Thirdly, the SI revokes three UK statutory instruments that relate to EU regimes that will not be applicable to the UK in the event of a no-deal exit, given that they implement EU law that is being revoked at exit day under separate instruments.

Fourthly, the SI makes amendments to or revokes retained EU law to ensure consistency with other EU exit instruments that have been made and to remove references to EU institutions that will no longer be relevant post-exit. For example, part of regulation 33 revokes EU regulations providing for functions and administration of the European Central Bank.

Finally, the SI makes transitional and saving provisions to address deficiencies that arise from the UK’s withdrawal from the EU and to limit disruption to the financial services industry if the UK leaves without a deal. For example, a minor change is made to article 7 of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001, which excludes deposits held in lawyers’ client accounts from being regulated under financial services law, as they are already regulated by the Law Society. European-registered lawyers are currently included in the exemption, and the SI ensures that the exemption will continue for a limited period after Brexit. A transitional regime is also made for group supervision under the Solvency 2 and Insurance (Amendment, etc.) (EU Exit) Regulations 2019, so that where a group is supervised by an EEA supervisor, the relevant provisions that impose requirements on the Prudential Regulation Authority as a group supervisor do not apply for a period of two years after exit day.

The Treasury has worked closely with the financial services regulators in the drafting of the EU exit instruments amended by the instrument. We have also engaged extensively with the financial services industry on the instruments to which the SI relates. In summary, the Government believe that the proposed legislation is necessary to ensure that the UK has a coherent and functioning financial services regulatory regime once it leaves the EU, and that the legislation will continue to function appropriately if it leaves the EU without a deal or an implementation period. I hope hon. Members will join me in supporting the regulations, which I commend to the Committee.

--- Later in debate ---

[John Glen]

I thank the hon. Member for Stalybridge and Hyde for his comments. I acknowledge the courteous and thorough way in which he has gone about his work. Where there have been differences between us, he has raised them in the spirit of constructive scrutiny, and he has worked extremely hard with his team. As someone who was responsible for supporting the shadow Chancellor in a previous era, I know how challenging it is to do that sort of work, so I pay tribute to his office and those who have supported him. I will thank my hon. Friends at a later point, because I still have more to do.

The hon. Gentleman raises significant and substantive points. I cannot assist him with respect to the timing of the Financial Services (Implementation of Legislation) Bill. I acknowledge that the Bill is outstanding, but at this point in time I am not in a position to give him the information he seeks.

The hon. Gentleman referred to the move from negative to affirmative process. I undertake to write to him about that. My understanding is that it was moved in that direction because of the sheer volume of small amendments. I reassure him that it was always envisaged when this process was designed, and when I saw that spreadsheet back in October, that there would be mop-up measures given the nature of the complexity of the exercise.

I reassure the hon. Gentleman that there have been no meaningful policy changes through this SI. These are technical changes, often to remove reference to the EU, and the drafting errors are a significant minority. Nevertheless, I will reflect fully on his comments and where I can offer him some more substantive words of reassurance I will do so.

Having given that response, I hope that the comments I made on the necessity for this SI in ensuring a functioning and coherent legislative and regulatory regime for financial services have been heard. I commend this regulation to the Committee.

Question put and agreed to.