Grand Committee
Arrangement of Business
The Deputy Chairman of Committees (Baroness Scott of Needham Market) (LD)
Good afternoon, my Lords. If there is a Division in the Chamber while we are sitting, this Committee will adjourn as soon as the Division Bells ring, for 10 minutes.
Aviation (Consumers) (Amendment) Regulations 2023
(1 year ago)
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Lord Davies of Gower
That the Grand Committee do consider the Aviation (Consumers) (Amendment) Regulations 2023.
The Parliamentary Under-Secretary of State, Department for Transport (Lord Davies of Gower) (Con)
My Lords, these regulations were laid in draft before this House on 16 October 2023. The purpose of this statutory instrument is to restate, using powers under the Retained EU Law (Revocation and Reform) Act 2023, key principles of retained EU case law relating to regulation 261/2004. This will help aviation consumers to receive the same protections they currently have when faced with flight disruptions.
Regulation 261/2004, which will become assimilated law at the end of 2023, sets out the rules on compensation and assistance for air passengers in the event of denied boarding, flight cancellation or long delay. Regulation 261/2004 has been the subject of significant amounts of litigation, and the associated case law has shaped the interpretation of this legislation. However, the retained EU law Act will also make it easier for courts to depart from EU case law after the end of 2023. This means that, without the changes made by this instrument, important principles that protect consumers in the UK would be lost.
The SI codifies four key principles needed to maintain the current protections for air passengers, by inserting them into regulation 261/2004. First, passengers will continue to be afforded the right to compensation under Article 7 of regulation 261/2004 where flight delay results in arrival at the passenger’s final destination three or more hours after the scheduled arrival time.
Secondly, the SI codifies principles that make it clear that the rights to compensation, refunds, rerouting, and care and assistance fall within the scope of regulation 261/2004—not Articles 19 or 29 of the Montreal Convention. The Montreal Convention is an international treaty governing airline liability and relates in part to delay of passengers. This is an important point of clarity that will help passengers continue to receive the rights they are currently entitled to, rather than the more limited rights under the Montreal Convention.
Thirdly, the SI clarifies that, for the purpose of regulation 261/2004, a flight comprised of more than one leg will be treated as a whole if it is booked as a single unit, and that such a flight will be considered as departing from the point of departure of the first leg of the journey. This is important because compensation under regulation 261/2004 is linked to the length of the journey and the territory or jurisdictions covered.
Finally, the SI codifies the principle of “extraordinary circumstances” into a clear definition of that term. Such circumstances may give rise to an air carrier being exempt from the requirement to pay compensation. What constitutes “extraordinary circumstances” is a highly litigated topic, so it is important to codify the EU case law in order to provide clarity. I beg to move.
Lord Jones (Lab)
My Lords, I thank the Minister for his competent and helpful introduction. Complex and dense though these regulations may be, I see no reason not to support them.
To what degree do the regulations impinge on Cardiff Airport? It has often been in the news. How many airport consumers were there this year and last year? How many cancellations were there? Can the Minister give any feedback as to consumer satisfaction? Has there been any discontent? What is his general view of the future? Does the consumer in greater south Wales have any difficulty accessing Cardiff Airport? As a percentage, how many airport consumers instead make for Bristol or Heathrow airports? Perhaps the Minister will write if these questions are not to be answered in this debate.
The purchase of Cardiff Airport by the Senedd, the excellent Government in Cardiff, was controversial to some degree. Might the Minister say what the situation is now? I acknowledge the Minister’s service to Wales when he was a Member in the other place. He represented one of the finest coastlines in Europe—Langland, Oxwich and Three Cliffs come to mind, and he might know that these bays are fine for swimming; it is truly an area of natural beauty.
There is no aviation without the aerospace industry, and the Minister knows that both are vital to the economy of Wales—for example, Airbus, at Broughton, in north-east Wales, where direct employment involves some 5,000 employees. There is also, as he will know, a big aviation interest in south Wales. These two industries involve a great reservoir of national skills, and these skills in Wales are priceless. Airbus, at Broughton, is a world-class centre in wing manufacture. What links are there between Airbus UK and His Majesty’s Government? How are the interests of the consumer represented?
The Explanatory Memorandum is helpful. The regulations are, of necessity, complex, as is the Explanatory Memorandum in parts—all the pages require insight. However, it is very good to see the word consumers writ large.
Lord Jackson of Peterborough (Con)
My Lords, I shall speak briefly in this debate. I feel rather lonely as one of the few English Members here; we have north and south Wales’s finest and other Members as well, and on the Whip’s Bench, of course.
I will add briefly to the comments of the noble Lord, Lord Jones. When I was the special adviser in the Department for Exiting the European Union, this issue was a bone of contention in what later became the trade and co-operation agreement. There was a lot of shroud-waving about this because, of all the issues that were litigated and debated in the run-up to the European Union in/out referendum in 2016, the most acute was how people’s holidays would be affected when they were travelling to and from Europe. For those of us who believed in Brexit, it was always the case that we were not going to enact domestic legislation just for the sake of it, but would assimilate good, practical, sensible and pragmatic legislation where appropriate. I think this is an example of that today.
I particularly welcome the fact that this legislation not only is being enacted in domestic law, particularly on the issue of long delays, but seeks to uplift important case law, including the Sturgeon v Condor Flugdienst case. That goes wider than simply a long delay to a flight; it also considers the material impact that that has on travellers. I therefore strongly welcome the instrument.
It is good that this complements other legislation the Government have brought forward, and they should look at it as protecting the travelling public from monopolistic or oligopolistic behaviour. I know it is not quite within the bailiwick of this statutory instrument, but noble Lords will have seen this week examples of alleged drip pricing by Ryanair, which is price gouging of customers, who are often in a very difficult position—they do not have perfect knowledge in perfect competition, which is the basis of the economic free market. They have excess charges applied to luggage, seat selection, travel insurance, and food and drink. The Minister will have the strong support of many noble Lords from across your Lordships’ House if the Government take a robust attitude to legislation and regulation on this, because it is also an important subject.
It is vital to address delays, particularly for disabled folk, older people and families, but we must not see incremental price gouging and oligopolistic behaviour by rapacious airlines. I hope that the Government—of whatever party after the election next year—address this very important issue.
Baroness Randerson (LD)
My Lords, I welcome the enthusiasm of the noble Lord, Lord Jackson, for more radical legislation on this. The pandemic and the problems that the aviation industry has had in recent years have revealed the shortcomings of the protections that consumers currently have.
I also welcome this legislation. I am pleased to see the level of interest it has exerted here. The noble Lord, Lord Jones, as part of the Welsh community here today, talked about the problems that Cardiff Airport has faced. As a resident of Cardiff, I welcomed last week’s news that Ryanair will fly two routes out of Cardiff—a new set-up that will do something to replace the loss of the Wizz Air flights.
This legislation deals with a significant problem in aviation. I noticed that the Explanatory Memorandum says that, in 2019, 1.5% of UK flights were delayed by more than three hours; that is 31,000 flights. By 2022, that had gone up to 40,000 flights, which was equivalent to 2.6% of flights. In the first nine months of last year, nearly 19,000 passenger complaints were registered. Those are complaints by passengers who have been unable to get satisfaction or any resolution to their problems from the airline. It is very much the case that some airlines are far worse than others at dealing with these problems. This set of problems needs to be dealt with, and I welcome the Government turning their attention to them.
Lord Tunnicliffe (Lab)
My Lords, these regulations establish rules relating to compensation and passenger assistance in the event of denied boarding, cancellation or long delays. The instrument maintains the status quo and aims to offer clarity, following multiple legal challenges. We therefore do not oppose its introduction. Indeed, I thank the Government for bringing forward these regulations.
However, why are we debating these regulations today? As the Joint Committee on Statutory Instruments pointed out, the instrument is within the scope of the negative procedure, so Ministers have decided that the alternative is more appropriate. Can the noble Lord elaborate on this?
Turning to the measures contained in the regulations, I note that their main purpose is to remove ambiguity rather than set new policy. Will the Minister explain which cases these clarifications relate to?
Will the Minister elaborate on the issue of extraordinary circumstances a little more? At first I thought the definition in the instrument was pretty clear, but a number of people have since commented that it is not as clear as it looks and anything that he can add will be helpful. On the drafting process, can the Minister explain what informal consultations took place to prepare this instrument? While I understand that no review clause is required as it is made under the REUL Act, will the Minister explain how the department will monitor its implementation? Given that the Minister in the House of Commons was unable to answer this point, will the Minister say whether the tariffs referenced will be subject to inflationary increases?
Somewhat at the last minute, I picked up recent rumours that some airlines have reacted to the requirement to pay this tariff by substituting vouchers—indeed, in some cases vouchers with expiry dates—instead of cash. That does not seem to be within the spirit of the regulations. Given that the essence of this instrument is to clarify the situation, I would value the Minister’s comments on this. Do the Government believe these rumours are true? If they are, does this instrument in any way help? If not, will he address the issue and go to what I think is the implied standard, which has to be pure cash? I hope the Minister can provide clarity on these points.
Lord Davies of Gower (Con)
My Lords, I thank noble Lords for their contributions to this debate, in which issues that are to some extent technical have been raised.
I will start by responding to the issues about Cardiff Airport raised by the noble Lord, Lord Jones. I well remember Cardiff Airport being taken under Welsh government control. At the time, I was a member of the then National Assembly for Wales. There were sceptical views about it at the time, but the Welsh Government have taken it on and still own it. Indeed, we all wish it well, but it has gone through some difficulties and has been supported financially by the Welsh Government. In answer to his question on cancellations, consumer feedback and access to the airport, I do not have that information to hand, so I will have to come back to him in writing. The Welsh Government will be responsible for a lot of it.
The Government have strong relationships with Airbus UK, for obvious reasons, but more than that I cannot say at the moment.
I thank my noble friend Lord Jackson for his remarks. The instrument is about maintaining current consumer protection for air passengers. The Act’s powers were not considered the appropriate vehicle to undertake a full review of regulation 261/2004. However, the Department for Transport committed to consult further on compensation and payment frameworks for flight disruption in its response to the aviation consumer policy reform consultation. This is a complicated area of law, and any potential reform requires careful consideration and consultation with the European Union under Article 438 of the trade and co-operation agreement.
It was not considered necessary to codify any other EU case law principles, beyond those identified. The four principles restated in this instrument have been identified as necessary to be codified in order to maintain the status quo for consumer rights in relation to flight disruptions—that is, for denied boarding, flight cancellations and long delay. In interpreting retained consumer aviation EU law in the UK, the courts are likely to adopt a purposive approach. This means that the courts will consider the intended purpose of the regulation, rather than solely relying on the literal meaning of the words.
A question came up on consultation. The department has committed to further consultation on regulation 261. I think another question came up from one noble Lord on air traffic management. That is very fact-specific and I cannot at this moment provide specifics in respect of the legislation.
Going back to the retained EU law Act, its powers operate on assimilated law, while restatements such as those that this instrument makes are not assimilated law. Once the instrument is made, any further amendments to the regulation on these precise topics would therefore require primary legislation. It may be possible for certain retained EU law Act powers to be used to further codify assimilated EU case law, in the event that further principles, separate to those in this instrument, are identified as requiring codification. However, it is not considered necessary at this time to codify any other principles of EU case law relating to regulation 261/2004.
Noble Lords asked about informal consultations. We have had sessions with industry and consumer groups on this.
Perhaps I could just cover the consequences of not making this instrument. If it is not made, there would be a reduction in the protections available to consumers when travelling by air under UK law after the end of 2023. For example, UK courts would be more likely to find that passengers subject to long delays—that is, a delay of three hours or more in reaching their final destination—would not be entitled to compensation. Such a reduction in consumer protections would not only be an unacceptable policy but risk breaching the shared objective under Article 438 of the trade and co-operation agreement to achieve a high level of consumer protections for air travel.
I know that some other more technical questions were asked, which I will certainly look at and write on. The noble Lord, Lord Tunnicliffe, brought up a couple of questions which I am not able to answer at the moment, but I will certainly look at them and write to him.
Lord Tunnicliffe (Lab)
I wonder whether the noble Lord could adopt the convention that when he writes to one of us, he copies in everybody who has been part of this debate. I do not know whether he has ever tried to retrieve a document from the Library, but it is an uphill battle.
Lord Davies of Gower (Con)
Absolutely. Of course, I undertake to do that.
In closing, these regulations will help air passengers to receive the same protections they are currently entitled to if their flights are disrupted. Not only is it important for passengers to have protections in place for such instances; it is vital for improving consumer confidence in the sector, following the disruption we saw during and after the Covid-19 pandemic. I will leave it there and commend the regulations to the Committee.
Plant Health etc. (Miscellaneous Fees) (Amendment) (England) Regulations 2023
(1 year ago)
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Lord Benyon
That the Grand Committee do consider the Plant Health etc. (Miscellaneous Fees) (Amendment) (England) Regulations 2023
Relevant document: 1st Report from the Secondary Legislation Scrutiny Committee
The Minister of State, Department for Environment, Food and Rural Affairs, and Foreign, Commonwealth and Development Office (Lord Benyon) (Con)
My Lords, these regulations were laid before this House on 26 October. This instrument amends the Plant Health (Fees) (Forestry) (England and Scotland) Regulations 2015 and the Plant Health etc. (Fees) (England) Regulations 2018 to extend an exemption in certain circumstances from the payment of fees in connection with applications for a phytosanitary certificate.
The 2015 and 2018 regulations set fees for delivery of plant health services in England by the Forestry Commission and Defra respectively. This includes fees for phytosanitary certification services required to comply with entry requirements relating to controlled plant health material. All businesses that use these services are charged a fee to recover the cost of delivery.
Earlier this year, the UK Government and the European Union announced the Windsor Framework. It fundamentally amends the old Northern Ireland protocol to restore the smooth flow of trade within the UK internal market and safeguard Northern Ireland’s place in the union. Under the Windsor Framework, new schemes allow for the smooth movement of retail agri-food goods, plants and seeds for planting, seed potatoes, and used agricultural and forestry machinery and vehicles from Great Britain to Northern Ireland.
Where goods do not move with the new Northern Ireland plant health label or via the new Northern Ireland retail movement scheme, they must meet different requirements including, in the case of plants and plant products, being accompanied by a phytosanitary certificate. These goods move through what is sometimes referred to as the red lane, where fees and certification requirements apply.
For businesses that move goods from Great Britain to Northern Ireland outside of the new schemes, but where the goods remain in the United Kingdom, the UK Government introduced the movement assistance scheme. Introduced in December 2020, the scheme waives the cost of inspections and certification for businesses moving agri-foods from Great Britain to Northern Ireland. This underlines our ongoing support for the agri-food and horticultural sectors in the United Kingdom, as well as for consumers in Northern Ireland.
In September, as part of a package of financial support provided to support the industry with the implementation of the Windsor Framework, we confirmed that the scheme would be extended. This instrument specifically ensures that fees related to issuance of phytosanitary certificates are disapplied until 2025 for goods moving from England to Northern Ireland.
Amendments made by this instrument extend an exemption from the payment of fees for certification services where goods are moving from England to a private business or individual in Northern Ireland. The exemption also applies to movements of goods by private individuals in their passenger baggage.
Although the SI applies in England only, as it is a devolved matter, both the Scottish and Welsh Governments are currently taking forward their own parallel legislation.
This instrument will ensure that trade from England to Northern Ireland is not subject to additional plant health costs until 1 July 2025, giving businesses time to adapt to the new movement routes now available thanks to the Windsor Framework. I beg to move.
Baroness Bakewell of Hardington Mandeville (LD)
My Lords, I thank the Minister for his introduction to this statutory instrument. As he indicated, these regulations cover businesses which are exempt from paying fees to Defra and the Forestry Commission for pre-export and export certification services for products of animal origin and phytosanitary certification for regulations of plants, plant and wood products and other material between England and Northern Ireland. The current fee exemption expires at the end of this month.
This SI is straightforward and will ensure that the movement of goods between England and Northern Ireland continues to run smoothly without the need for cumbersome paperwork and the payment of fees. Apart from removing the expiry date for the current legislation, there is no other change to the movement assistance scheme. The Scottish and Welsh devolved Administrations, having been consulted, plan to lay parallel legislation to amend their devolved fees legislation.
I support these regulations and have a couple of questions. As there was no significant alteration to the SI, no formal consultation took place. I understand this, but will the Minister say what form the informal stake- holder engagement took? The Explanatory Memorandum indicates that this engagement was strongly supportive of the proposed extension, so it would be useful to know just how it took place. I note that a new date of termination of 2025 has been inserted into the EM and I assume that, when we get to that date, the fee exemption might possibly be renewed. Can the Minister confirm this?
Lastly, paragraph 13.2 of the EM states:
“This instrument applies equally to all businesses trading in regulated plant health material between England and Northern Ireland, including small businesses. The costs associated with this trade are not mitigated by the size of the business”.
Does this mean that where costs are incurred they are not proportionate and that small businesses will pay the same as large businesses? I would be grateful for clarification. Apart from these small queries, I am happy with this SI and its provisions.
Baroness Hayman of Ullock (Lab)
My Lords, we support this statutory instrument. I do not think there is any reason for me to repeat why it is required; that was ably introduced by the Minister and referred to by the noble Baroness, Lady Bakewell.
It is important that intra-UK trade is effectively maintained, which this instrument is designed to do. I was pleased to see that Scotland and Wales plan to make parallel legislation; it is important that the devolved Administrations are consulted and move forward with the Government here.
I have one question of clarification for the Minister: why did the extension have to be made? Do the Government believe there is going to be a competitive disadvantage to UK exporters or internal UK suppliers from the fees being applied or do the Government just need more time to get everything ready? It would be useful to understand the reasons for the extension date but, beyond that, we are happy to support this instrument.
Lord Benyon (Con)
I thank both the noble Baronesses for their interest in this issue and their support for this measure. As I described earlier, the amendments in the Plant Health etc. (Miscellaneous Fees) (Amendment) (England) Regulations 2023 are being made to provide an exemption from the payment of fees for certification services where goods are moving from England to a business or private individual in Northern Ireland. The purpose of this instrument is to ensure that trade between England and Northern Ireland is not subject to additional plant health costs until 1 July 2025, giving businesses time to adapt to the new movement routes now available thanks to the Windsor Framework.
The noble Baroness, Lady Bakewell, asked about renewal in 2025. That will of course be a key decision for the Government of the day, who will examine the very facts that I hope respond to the question from the noble Baroness, Lady Hayman, about the purpose of this exemption. Its purpose is to facilitate trade and make it as easy as possible. While the progression from the Northern Ireland protocol to this new Windsor Framework arrangement is being made, we want to resolve as many impediments to trade as we can. As has been said, the movement assistance scheme is extremely popular. Why would it not be? It means that people do not have to pay more money. We want to make sure that we operate as fairly as possible and that people in Northern Ireland can get access to goods as easily as people anywhere else in the United Kingdom.
On the question about consultation, Defra undertook a programme of consultation with its certification and testing delivery partners, including the devolved Administrations, local authorities in England, the Animal and Plant Health Agency, the Forestry Commission, the Soil Association, trade bodies such as the Organic Food Federation, and others. Each organisation reported overwhelming support for the extension among its members and users. Defra also meets frequently with organisations from the whole Northern Ireland agri-food supply chain regarding the implementation of the Windsor Framework. They have also welcomed the extension of this scheme.
From its commencement in 2021, the purpose of the movement assistance scheme has been to support transition to the negotiated end state by maintaining frictionless trade between mainland Britain and Northern Ireland. The scheme achieves this aim by defraying costs of certification and other requirements of the new trading environment, as described by the Windsor Framework and, previously, the Northern Ireland protocol. Delivery of improved SPS inspection facilities, which I visited in Belfast, plus new digital certification solutions will replace direct financial assistance and maintain trade from Great Britain to Northern Ireland.
As I have outlined, the regulations extend the exemption from the payment of fees for phytosanitary certification services where goods are moving in the direction I described. They ensure that the current policy for intra-UK trade is maintained without an additional financial burden to businesses—that addresses a key point that the noble Baroness, Lady Bakewell, raised—relating to certification services provided by Defra and the Forestry Commission.
Payment and Electronic Money Institution Insolvency (Amendment) Regulations 2023
(1 year ago)
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Baroness Vere of Norbiton
That the Grand Committee do consider the Payment and Electronic Money Institution Insolvency (Amendment) Regulations 2023.
The Parliamentary Secretary, HM Treasury (Baroness Vere of Norbiton) (Con)
My Lords, these draft regulations will expand the application of the existing insolvency arrangements for electronic money and payment institutions so that they apply to firms in Northern Ireland and Scottish limited liability partnerships as they already do in England and Wales, as well as for companies in Scotland.
The payment and e-money sectors have expanded rapidly over the last decade, with payment and e-money institutions now holding more than £17 billion of funds belonging to UK consumers. As the sectors have grown, the Government became concerned that the application of standard insolvency procedures to the failure of these firms was leading to negative outcomes for customers. In particular, administration cases involving these types of firms were taking years to resolve, with customers left without access to their money for prolonged periods and receiving reduced money as a result of high distribution costs.
To manage these risks, the Government legislated in 2021 for a special administration regime to provide for the prompt return of client assets should such a firm fail. This regime was delivered through the Payment and Electronic Money Institution Insolvency Regulations 2021 and the accompanying rules. These regulations established the special administration regime in England and Wales, and for companies in Scotland. This regime created special administration objectives that an administrator will have to follow when conducting an administration of a payment or electronic money institution.
The key provisions of this regime include: first, bespoke objectives for an administrator to ensure the return of customer funds as soon as reasonably practicable, to engage with the relevant authorities and to either rescue or wind up the institution in the best interests of creditors; secondly, continuity of supply provisions that will allow an administrator to keep the firm’s key functions operational for customers; thirdly, provisions to ease the transfer of business processes such that a new firm can take on the incumbent’s business and provide continuity for customers; and, finally, bar date provisions to allow the administrator to set a deadline for consumers to claim and thus enable an earlier distribution of customer funds.
The Government originally consulted on the special administration regime from December 2020 to January 2021. This included not only public consultation but pre and post-consultation meetings with industry groups, including the Banking Liaison Panel, as well as extensive work with the FCA. During the consultation process, most respondents expressed support for the proposals and many provided detailed and useful comments which enabled the refinement of policy. For example, the Government introduced additional steps within the special administration regime rules to require administrators to provide a reasonable notice period before a bar date comes into effect. This will allow time for administrators to communicate bar dates to customers and for customers to make claims.
In responding to the original consultation, the Government confirmed their intention eventually to extend the regime to Northern Ireland and to limited liability partnerships in Scotland, but that this would be to a different timetable, reflecting further work that was needed given differences in insolvency law. The Government therefore subsequently consulted extensively with the Scottish and Northern Irish devolved Administrations to produce the regulations being debated here today.
As noted, this statutory instrument is required to ensure that the regime can effectively apply to Scottish limited liability partnerships and to firms in Northern Ireland, ensuring that the regime applies effectively across the whole of the United Kingdom. For example, these regulations ensure that the relevant provisions of the Insolvency (Northern Ireland) Order 1989 apply to the payment and electronic money special administration regime, as they would to any other insolvency proceedings for Northern Irish firms. This mirrors equivalent provisions which ensure that the relevant provisions in the Insolvency Act 1986 apply in England and Wales. This includes provisions around the duties of officers and the powers of the liquidator.
These regulations do not apply the insolvency procedure to Scottish partnerships, as they are sequestrated under the Bankruptcy (Scotland) Act, which is a devolved matter for the Scottish Government. In addition, Scottish partnerships, apart from limited liability partnerships formed in Scotland, do not currently enter administration and would not be within the scope of the regime.
In conclusion, by expanding the application of these regulations to the relevant firms in Northern Ireland and to Scottish limited liability partnerships, these regulations will ensure that we have robust arrangements to manage the potential insolvency of payments and electronic money firms throughout the UK. I beg to move.
Baroness Kramer (LD)
My Lords, this instrument seems to make good sense and we certainly have no intention of opposing it. I have just three questions. First, I understand that it was always anticipated that this regulation would stretch over Northern Ireland and Scotland as well as England and Wales, so it seems very strange that the consultations for Scotland and Northern Ireland were not done in parallel with the consultations for England so that, when the legislation came in, the relevant instruments could all flow immediately, rather than creating a two-year hiatus. Is there any particular reason why that procedure was not followed? It would seem to be the more obvious route.
Secondly, the Explanatory Memorandum makes it clear that there was extensive discussion with the relevant bodies in Northern Ireland and Scotland, and the Minister basically said the same. Was there expected to be any formal approval by the devolved Governments, or was that not relevant in this instance? Can the Minister clarify the position of the devolved authorities in this? From the way she described it, it sounds as though there has been no tension or opposition, but it would be helpful to know whether I have misread that.
My last question is a more fundamental one to do with the hard bar. It is obviously critical to have an efficient and effective insolvency process, and I fully accept that the Government are working to frame that. When I was involved with the transition out of Libor, or dealing with dormant assents, it rapidly became evident that it is very hard to identify anything close to 100% of the relevant claimants. Organisations change their names, they are acquired or sold, there are inheritances—all kinds of actions cloud and obscure relevant ownership and, therefore, relevant claims.
In the two instances that I cited, Libor and dormant assets, a provision was made to ensure that people who appear past the point where the process has fundamentally changed do not lose out because they were ignorant. Some will say that most people were overwhelmingly in support of this in the consultation, but the kind of people who do not know that they have a claim are also probably the kind of people who do not reply to a consultation. The experience with dormant assets and Libor has shown that there is a substantial body of people and, usually, small companies who have a genuine legal claim of some sort. I am interested to know whether any thought was given to making provision for that particular group, which could be excluded by the establishment of a hard bar. I have no idea what the legal responsibilities of the administrators are if a claim is made after a hard bar has been established—whether the claimant loses no matter the basis of their claim. I would like to understand that a bit better.
Lord Livermore (Lab)
My Lords, we also support these regulations. I would like to ask the Minister a couple of questions. First, on how the FCA’s significantly expanded remit will be delivered in practice, can she set out what the Government are doing to ensure the FCA’s greater powers are accompanied by greater accountability? Can she also tell us what steps the Government are taking to ensure that the additional FCA requirements on payment firms and EMIs are proportionate, and explain how the Government will ensure that these requirements do not hamper innovation in the UK’s payment sector?
Secondly, as is often the case with financial services regulation, there seems to have been a significant gap between the consultation, which took place in December 2020 and January 2021—three years ago—and the statutory instrument being brought forward. Can the Minister tell us the reason for this delay?
Finally, I note there is a requirement for this new regime to be evaluated after two years, with a decision then made on whether the regulations should continue to have effect. Can the Minister set out the criteria by which the regime will be evaluated? I thank her in advance for her answers to these questions.
Baroness Vere of Norbiton (Con)
My Lords, I can hear much flapping of papers behind me, so I have no doubt that I will not be able to answer all the questions in full, but I will do my best. I am grateful to the noble Lord, Lord Livermore, for giving me advance sight of some of his questions, which was very helpful. The noble Baroness, Lady Kramer, mentioned that she might ask me a few questions. None of them were difficult—well, one of them was a little difficult, but we will give it a go.
I thank all noble Lords for their consideration of this draft instrument. It is all about taking an established regime and ensuring that it operates everywhere that it should across the United Kingdom by applying to all organisations in Northern Ireland and to limited liability partnerships in Scotland.
Both noble Lords mentioned the timing and why the Government were unable to bring forward all the regulations at the same time. We took the opportunity to bring through the England and Wales regime before the regulations being debated today because it was slightly easier to do so and we wanted to get the regime in place as soon as possible, having done the consultation. There are some quite significant differences in insolvency law. We therefore took a little extra time carefully to consider the legislation before applying this to Scotland and Northern Ireland. In doing so, we worked extensively with the devolved Administrations in both those areas. There was no sort of tension or opposition, and the rules underpinning this regime will have to be set out by those Administrations in due course anyway.
Herein is the slightly tricker question from the noble Baroness, Lady Kramer, which is her “hard bar” question. I will certainly write. One observation I have about these sorts of payment systems is that consumers tend to be much more actively engaged in them. I would have thought it would be slightly easier to get in contact with them because it is a much more immediate system. However, I will definitely write and set out exactly what we are doing to achieve the balance that she rightly set out. It is not our intention to cut anybody off; it is our intention to get money to consumers as soon as possible because, as we know, time costs money and, unfortunately, delays mean that consumers sometimes get back less than they would otherwise.
Turning to the points raised by the noble Lord, Lord Livermore, about the FCA’s greater powers, accompanied by greater accountability, these regulations directly affect only firms that have entered the insolvency process. They have no effect on firms in normal circumstances. It is also worth stressing that the special administration regime is ultimately a process led by an insolvency practitioner and administrator, not by the FCA. However, the FCA does have a role to play in the regime, including a power to direct an insolvency practitioner, but this power can be used only subject to a number of objectives being met.
More broadly, the Government are committed to the operational independence of the financial services regulator, but increased responsibility for the regulators must be balanced with clear accountability, appropriate democratic input and transparent oversight. I am sure the noble Lord is aware that during the passage of the Financial Services and Markets Act 2023, we included a package of measures to increase the accountability of the regulators, including the FCA, to Parliament when exercising their regulatory powers.
On the proportionality of the FCA requirements, the Financial Services and Markets Act 2000 requires the regulators to take into account eight regulatory principles when discharging their functions, including making rules. The second of these is the principle that restrictions should be proportionate to the benefits that are expected from the imposition of that restriction.
The noble Lord made a good point about whether the requirement would hamper innovation. Clearly, this is an area where innovation has been significant in recent times. The payments are essential to the UK economy but are also a major source of the UK’s competitive growth, at the heart of our financial services sector. In July, the Government commissioned an independent review into the future of payments and specifically asked how to catalyse innovation in UK payment systems.
The regulations being discussed today are all about protecting consumers. Our view is that they will strengthen confidence in the sector by improving customer and market outcomes. In addition to the independent review, the Financial Services and Markets Act 2023 includes a new secondary objective for the FCA to facilitate growth and competitiveness. The Government are taking this through across all sectors to achieve that balance between growth and competitiveness and effective and robust regulation.
I think I may have covered the gap between the consultation and this SI. It is all about the differences in law and just taking the opportunity to bring it in as soon as we could, at least for England and Wales. We brought that in during 2021, which is not bad after a consultation which ended in January 2021, so that is a minor pat on the back. I accept that we would have loved to have brought it in at the same time, but a significant amount of additional work needed to happen.
On the review of the regulations and the criteria to evaluate them, under the Banking Act the Treasury is required to conduct a review of this regime. This is due for completion in 2025 and will be an independent review covering whether the regime is meeting insolvency regulation objectives and whether the regulations should continue to have effect. As ever, once completed a copy of the review will be laid before Parliament. We will set out further details of the review in due course.