European Union (Withdrawal Agreement) Bill

Baroness Kramer Excerpts

Report: 2nd sitting (Hansard - continued) & Report stage & Report: 2nd sitting (Hansard - continued): House of Lords
Tuesday 21st January 2020 Lords Chamber

[Baroness Kramer (LD)]

My Lords, I had not expected to speak to this amendment, and I will be exceedingly brief. I do not want to take attention away from the healthcare issues that have been raised by my colleagues.

In this House we all know that when legislation is passed it is later used as a precedent. We have here a clause that effectively permits the Government by negative statutory instrument to change a huge raft of primary legislation passed by both Houses of this Parliament. If I had described that to a neutral person without mentioning that it was a move by the UK Government I think they would have assumed that it was being moved by Putin, Erdoğan or someone else who sees a democratic structure as a mechanism that they can reshape to assert government control over the general democratic process.

I am extremely concerned by this precedent and its extraordinary scope. It fits in with a pattern of a government approach to this Parliament that is diminishing the other House even more than this House. I think we can see in this, in the attitude towards negotiations, in the Government’s position on devolved assemblies, which we just heard, and in their attitude towards future trade negotiations that they are in a sense patterning themselves after local government, where an executive cabinet can make all the rules, the assembly can scrutinise—scrutiny only: that is its role, and I refer to the other House as well—and raise issues, but the executive can simply ignore it. I think this is an exceedingly dangerous road. This legislation and this cause advance that process, and everyone in this House, regardless of the party to which they are affiliated and which they support, needs to take on board that pattern which is being developed and which Clause 41 underpins. It requires a very serious rethink before we lose what we have had and it is too late to regret it.

[Lord Warner (CB)]

My Lords, I have added my name to this amendment for a reason which keeps coming up in our debates: they are all about trust and whether we can trust the Government to behave in a reasonable way. A lot of the amendments that have been put down have been about trying to ensure that—if I may put it as crudely as this—the Government behave well in carrying out these negotiations. We have seen a kind of emotional blindness, if I may put it that way, in the discussions we have had on immigration systems and physical documents that people who have a right to live here can use. This seems to be another piece of work in which we have to table an amendment to try to ensure that the Government behave properly and well in these negotiations.

It is quite extraordinary. Having agreed these reciprocal healthcare arrangements with the EU countries and Switzerland so recently, I cannot understand why we should not just be able to use this amendment to ensure that there are no rapid changes. The Government almost seem to forget the huge number of people who in their daily living move for holidays between the other 27 EU countries and Switzerland, as though that does not matter. This is an important part of people’s lives. They book their holidays assuming the system will not change. Particularly after this recent piece of legislation, no one has told them there is a risk that something may change.

The Government are bringing on themselves a mood in which people will be suspicious of what they are up to. They will raise a lot of anxieties totally unnecessarily. In my experience of government, if you allow rumours to be fostered they spread around quite quickly. What we are trying to do with this amendment is to remove the temptation. The Government would be wise to listen, unless the Minister can give a level of assurance that will remove any suspicion that somehow, because of the way they behave, the Government are up to something.

Brexit: Positions on the Pound

Baroness Kramer Excerpts

Monday 30th September 2019 Lords Chamber

[Lord Callanan]

I am tempted to reply that if I knew how currencies were going to move, I would be betting on the exchanges myself, but of course I do not because it is a floating market mechanism. The noble Lord is of course welcome to do so if he wishes.

[Baroness Kramer (LD)]

Perhaps the Minister can help us more on the conflict of interest issue. I am sure that he will confirm that there has been extensive short selling against the pound—that is not illegal—on scales that we have not seen before, and short selling against the shares of major companies in the UK. Does he not agree that there is short selling on the grounds that a no-deal Brexit will do so much damage to the UK economy that, by betting against Britain, some people stand in a position to make millions? Does he consider it to be a pure coincidence or one worth exploring that many of those short sellers—I think they take the name of “vultures” by their own choice—were also donors to Boris Johnson’s leadership campaign and are donors to the Tory party? Does that need examination?

[Lord Callanan]

I really did think that the noble Baroness was better than that, but obviously not. These instruments are not just a speculation tool. Companies can use shorting as a hedging tool to protect themselves from future fluctuations, it can be used by big multinationals and, as she will be well aware from her time in government, the existence of the financial markets in the City of London is of great benefit to the United Kingdom. We gain 11% of our tax revenues from those liberal markets and we should not do anything to damage those trades.

Brexit: Non-Disclosure Agreements

Baroness Kramer Excerpts

Thursday 14th March 2019 Lords Chamber

[Lord Callanan]

I know that the noble Lord takes a close interest in these matters, but it remains the case that we do not want to leave with no deal. We do not think that is an advantageous situation. There will clearly be a lot of turbulence if that happens. But we have been open about the consequences. The problem is that the EU will not engage with us on many of the technical preparations necessary because it takes the view that it has negotiated a withdrawal agreement.

[Baroness Kramer (LD)]

My Lords, I think the Minister will find that many in this House have had conversations with businesses that have said to them directly that they cannot describe the impact of Brexit on their business to politicians or the public, or speak out openly, because they are bound by NDAs that they have signed with the Government. Will he go back and look again at these NDAs in some detail, perhaps himself, and put some pressure on his lawyers, because it is very clear from all the conversations that eventually it will surface and become public that these are not just covering narrow, commercially sensitive issues? They are stretching far more broadly because the Government prefer to keep so many issues secret when they should be transparent.

[Lord Callanan]

I am afraid I do not agree with the noble Baroness. She cannot expect me to comment on hearsay or private conversations she might have had. If she gives me specific examples of where agreements have been used inappropriately, I will of course look at them.

Brexit: Preparations and Negotiations

Baroness Kramer Excerpts

Monday 23rd July 2018 Lords Chamber

[Baroness Kramer (LD)]

My Lords, the White Paper is in tatters, the country is riven and, frankly I fear that we face a no-deal Brexit. I can see no sensible way forward other than a people’s vote. I say this after getting reinforcement for that view from an unexpected quarter: namely, a series of conversations with leaders in the financial services sector, who are quite frankly in shock. Most will not put their heads above the parapet, which I really regret at this stage, when I think it would be very helpful and important—but I understand their reluctance to scare investors, customers and employees.

My noble friend Lord Newby quoted the key statement in the White Paper, which is that,

“the UK and the EU will not have current levels of access to each other’s markets”.

How can a Government wilfully draw red lines which hurt our primary industry in its primary non-domestic market—indeed, a market that accounts for roughly one-third of the total financial services sector? I discussed with the City a year ago the benefits that financial services bring to the UK: £76 billion a year in taxes—think what that delivers in terms of the public sector—and some 2 million jobs. The City told me: “We have been abandoned by May. We are not a popular industry and they will not go in to bat for us”. I wrote down that quote. The required battle is frankly not with the EU—because the financial services sector is very satisfied with the current arrangement and, if it could get a single market in financial services, that would answer so many of its difficulties. The battle, frankly, is with the Brexiteers.

I find when I talk to Brexiteers that they live in a world of delusion, where something called “different regulation”—let us be honest and admit that “different regulation” is faux for “deregulation”—brings some mythical great opportunity. It is telling, when I go around to talk to people and ask what regulation they would remove, that the only one that gets suggested is removing the cap on bankers’ bonuses.

[Lord Forsyth of Drumlean]

I declare my interest as the chairman of a bank. I will give the noble Baroness an example of a regulation: the regulation that increased the capital weighting for lending to housebuilders from 100% to 150%, making less money available to build the houses the Government say they need and making housing and mortgages more expensive.

[Baroness Kramer]

I understand that we are to stay within international standards, however—and the noble Lord will know that that is Basel-derived.

[Lord Forsyth of Drumlean]

I am grateful to the noble Baroness. She will also know that the United States does not implement those Basel standards and that we are required to do so because of the European Central Bank.

[Baroness Kramer]

Then I draw to the noble Lord’s attention the constant reaffirmation that we intend to stick to Basel standards. If we do not and we go for this broader deregulation, some honesty from the Government would be very relevant, frankly, at this point in time, and I will tell him why. The reason why I am so concerned about the lifting of the bankers’ bonuses cap is that it is a return to animal spirits and excessive risk taking, which we certainly cannot afford.

The noble Lord will know, if he talks to the asset managers and many of the other institutions that underpin financial services in the UK—I talked to the largest of those asset managers only a week ago—they will say that, if there is any move to deregulate, they will leave London for reputational reasons. They cannot afford the risk of being based and regulated in what is perceived to be an environment that is moving towards lighter-touch regulation. I understand that the reputation they have earned over the past years matters more than just about anything else.

I accept that financial services are complex and that different activities are impacted differently by Brexit. Purely domestic financial services—retail banking, for example—are pretty much untouched. But the opposite is entirely true for services sold from the UK directly to EU customers, and the White Paper makes it quite clear that these activities will move to the EU 27. They include commercial and specialty insurance, trade-related banking services—perhaps the noble Lord, Lord Forsyth, would add others to the list of banking services—and large parts of fintech that are very much tied to passporting and to the e-commerce directive. Ironically, when the UK has third-country status, because of the way local rules work within the EU, it will be less burdensome to sell to UK clients from the EU than it will be—not for all, but for many services—to sell to the EU from the UK. That is a powerful incentive to make that move—certainly for those core sales to EU companies, but more broadly.

Finally, we come to the capital and wholesale markets, which are at the heart of the City of London and underpin the financial services industry in the UK. These are, essentially, capital raising, and even more so because we are the global leader in FX trading and derivatives trading. We can easily forget that London is a global centre not despite but because of its role as the regional powerhouse for all the EU countries and for the euro. With the wholesale markets comes a further ecosystem of asset management and treasury operations, since senior managers prefer to be in one place, so they co-locate absolutely key operations.

I accept that no other capital or city in the EU could take London’s capital and wholesale markets away tomorrow. If the EU were to strip EU and euro activity out of London, it would go largely to New York. But that is day one. Read everything that Barnier says about financial markets, look at the rule changes put in place by the ECB and ESMA and it is clear that the EU has a 10 to 15-year strategy to build its capacity and leach these activities slowly into the EU. The battle is not really between London and the EU. It is a battle between Frankfurt and Paris to receive that business over the next 10 to 15 years.

One could say, “Why shouldn’t they?”. It is the EU economy—not the UK economy—that generates the core customers for so much of financial services that are, almost uniquely, wrapped up with financial stability issues. Could the EU rely on a UK regulator in a financial crisis when the whole point of Brexit is to put the UK interest first? If some businesses leave London and go to New York, why should the EU care? We are both third countries. So I believe that the consequences of any kind of leach are devastating over time—but financial services is an industry of the future, not the past, and it is key to opportunities for our young people, to our tax base and to our prosperity.

I quickly turn to two last issues. The first is timing. The political chaos in the Tory party, which makes a “no deal” prospect more likely, is having an immediate impact. Firms in the group that I described, which are selling services to the EU, have prepared for a move. They have licences in place, they have leased office space and they have optioned technology—but so far they have moved few people. Many pressed the go button after the Chequers fiasco and the disappointment of the White Paper. I hope, too, that we will look at this whole immigration issue. I would love to pick that up but I do not have time.

I urge the Government, even at this late stage, to find a way to stay in the single market for financial services. Nothing else will do and, quite frankly, if they cannot do it, they should tell people the consequences and let them have the final say.

European Union (Withdrawal) Bill

Baroness Kramer Excerpts

Report: 3rd sitting (Hansard): House of Lords
Wednesday 25th April 2018 Lords Chamber

[Lord Callanan]

My Lords, it is my pleasure to lead on this group of amendments. They are simple, short and, I hope, demonstrate again that the Government are listening to debate in the House.

The Government’s clear intention has been to make bespoke provision in relation to all financial matters in the Bill. It was introduced with a specific power to make provision in relation to fees and charges in Schedule 4. I know that that power is not without controversy and we shall debate it in full later on Report.

The powers in clause 7(1) and (9) could never, even if it were appropriate to remedying a deficiency or implementing the withdrawal agreement, make provision for a charge, as such measures contain an element of taxation prohibited in the exercise of these powers. That distinction is the distinguishing feature of a charge and why, at the time of our accession to the EU, specific provision for charges was included in the Finance Act 1973. The Government are tabling these amendments to prohibit the powers in Clause 7(1) and (9) from imposing or increasing fees, so as to provide clarity on the distinct purposes of these powers and those in Schedule 4.

The powers in Clause 7(1) and (9) will still be able to repeal fees regimes that are no longer needed, reduce fees and make amendments to pre-exit powers to provide for fees and charges. An example would be correcting a deficiency in an existing fee-setting power, such as a reference to a directive which is no longer appropriate. They will not, however, be able to impose or increase a fee or charge themselves.

These amendments respond to amendments and questions which were raised in debate in Committee. As I have said, we have reflected on this and taken steps to ensure that the stringent scrutiny provisions we are applying to Schedule 4 cannot be circumvented. This was never our plan but I can feel the mood of the House and I know that the word of a Minister only goes so far. I hope that these amendments demonstrate that we are keen to put questions beyond doubt where we can. I beg to move.

[Baroness Kramer (LD)]

This is another opportunity to thank the Minister because some peace of mind will now be provided about the structure of Clause 7. We understand now that the Government have stepped away from any capability to introduce new or increased fees.

I also thank the Minister for clarifying what a charge is. Many in this House have been trying to understand exactly how it could be framed. I hope the fact that he has now described it in the House will, in effect, put that definition on the record so that no future Government will attempt to use the word “charge” in order to circumvent these various constraints. Again, on this occasion, I thank the Minister.

[Baroness Hayter of Kentish Town]

To make sure that the Minister blushes fully, we, too, will take the opportunity to say again that we think that this is a good improvement. We thank those who have been involved in the drafting of the amendment and we support it.

European Union (Withdrawal) Bill

Baroness Kramer Excerpts

Committee: 10th sitting (Hansard - continued): House of Lords
Monday 26th March 2018 Lords Chamber

[Lord Tyler (LD)]

My Lords, I endorse the contributions of the noble Lord, Lord Lisvane, and the noble and learned Lord, Lord Judge, and draw attention to the work of the Delegated Powers and Regulatory Reform Committee, on which the noble Lord, Lord Lisvane, and I sit. One of the things the committee found most uncomfortable was the extent to which Ministers have played games with words in their explanatory memoranda. We were particularly critical of the reference in Schedule 4 to tax-like charges. The committee stated:

“A ‘tax-like charge’ means a tax. Taxes and tax-like charges should not be allowed in subordinate legislation. They are matters for Parliament, a principle central to the Bill of Rights 1688”.


It is not so late and therefore I shall indulge in some further remarks. My only really respectable connection with your Lordships’ House is that of my ancestor, the great Bishop Jonathan Trelawny, the Cornish folk hero who was one of the seven bishops to defy James II’s attempts to impose rules upon this country without Parliament’s acceptance. His portrait is in the Peers’ Guest Room—he is the one at the end with the Beatles haircut.

I make that point because I am amazed and ashamed that Members of the House of Commons have not seen the dangers in this part of the Bill. I speak as a former Member of the House of Commons. This issue goes back to not just the Bill of Rights and the Glorious Revolution of 1688, but far earlier. Reference was made to the Bill of Rights in previous exchanges in Committee. The short-circuiting of the most basic responsibility and role of the House of Commons of approving taxes seems to me an extremely important issue. We should not allow this precedent to be pursued in this Bill. It is the historic role of the House of Commons. I recall that when we had exchanges about tax credits, the former Chancellor of the Exchequer, Mr George Osborne, sought to short-circuit and get round the normal process by which the House of Commons decides financial matters. I remember at the time that the noble Lord, Lord Forsyth, referred, I think, to ship money and Charles I, saying that the last time a member of the Executive sought to short-circuit Parliament, he lost his head.

[Baroness Kramer (LD)]

My Lords, I shall add a very quick word because so much has already been said. There is an irony in Schedule 4 which may interest the Committee: namely that the power to provide for fees and charges has been handed to Ministers by means of either secondary or tertiary regulation, depending on which part of this measure you are looking at. Paragraph 3 of Schedule 4 states:

“A Minister of the Crown may only make regulations under paragraph 1 with the consent of the Treasury”.


The irony of that is, frankly, extraordinary because it shows where the Government intend the power of the land to lie. We have always suspected that the Treasury is handed some of the greatest powers that are denied to Parliament. If it is considered fit for the Treasury to be able to intervene in fees and charges, then surely it is Parliament’s right to be able to intervene, scrutinise and monitor those fees and charges.

[Baroness Hayter of Kentish Town]

My Lords, I do not think that the noble Lord, Lord Tyler, was threatening to cut the right reverend Prelate’s head off because of this. However, what may have been a threat to the Minister was to me a great delight: the promise of the noble and learned Lord, Lord Judge, that he will do this with knobs on when we come back on Report. I look forward to that.

European Union (Withdrawal) Bill

Baroness Kramer Excerpts

Monday 19th March 2018 Lords Chamber

[Baroness Burt of Solihull (LD)]

My Lords, I support the amendment of the noble Baroness, Lady Hayter, from these Benches. I would very much appreciate it if such a meeting could be arranged; I would love to be included.

I want to emphasise the importance of the UK’s insolvency framework to British trade and investment, especially where cross-border insolvencies between the UK and EU are concerned. We need to ensure that the benefits of our existing arrangements can continue, post Brexit, and we need an agreement in place before we exit the EU. We have a strong insolvency framework in the UK, as the noble Baroness, Lady Hayter, mentioned, and some good reforms to corporate insolvency in the pipeline. They would make our rules fit for purpose for both domestic and international markets, as well as underpin the UK’s attractiveness as a place to do business by supporting trade, investment, lending, productivity and entrepreneurship.

Brexit risks creating barriers to resolving cross-border insolvencies between the UK and the EU. We cannot allow that to happen. We need to ensure automatic reciprocal recognition for insolvency judgments and appointments, post Brexit. Unfortunately, we have slipped down the World Bank rankings in resolving insolvency from 13th to 14th; frankly, now is the worst time to be heading in the wrong direction. Life will be tough enough, post Brexit, so let us not risk losing out on the international investment our robust insolvency framework currently attracts. The amendment’s reporting requirements would ensure that no one is allowed to take their eye off the ball.

[Baroness Kramer (LD)]

My Lords, does the Minister agree that this particular set of issues is absolutely crucial to small businesses? He will know that many small businesses are happy to export to the European Union because they have protection in case of insolvency; it is as solid as if there were an insolvency from a customer or supplier literally round the corner or down the street.

There are many reasons why those companies choose not to export to many of the markets where we so often hear there are such extraordinary opportunities. It is because—especially for small businesses, I am afraid—there are long histories of non-payment. Large businesses can afford to retain international lawyers in different locations across the globe and across borders. Large companies—especially multinationals—frequently have contacts in governments, at the appropriate level, to make sure that their interests are protected, but that very rarely applies to small businesses, so this protection is crucial.

[Lord Keen of Elie]

My Lords, I share the concerns that the amendment raises about the consequences of failing to maintain our co-operation with the EU in matters of civil justice, in particular, in this present context, matters of insolvency. On the matter of meetings with officials and others, the noble Baroness, Lady Hayter, may recollect that we discussed this topic when we met last week, albeit briefly. It might be that I am not the appropriate individual with whom more specialist bodies would wish to take this matter forward, but I would be content to pass on her request for a meeting to BEIS. I am confident that it will have no difficulty arranging that for the convenience of all parties.

Clearly, should we fail to agree a replacement for our current arrangements when we leave the EU the impact will be felt by both the UK and EU member states. I therefore believe that it is in our mutual interest to agree a close and comprehensive arrangement regarding insolvency, as well as other matters of civil judicial co-operation.

I do not think I can accept the suggestion from the noble Baroness, Lady Kramer, that a small company in the UK can trade as if it is as solid as a domestic supplier that it was supplying in the context of the insolvency regulations. They do not work quite as simply as that. The insolvency regulations as restated in 2015 determine that the insolvency regime for each country stands alone. Each member has its own rules, but the recast 2015 regulations identify the debtor’s centre of main interest and treat that as the principal proceedings for the purposes of insolvency. For example, if we have a centre of interest for a company in the United Kingdom and a liquidator is appointed in the United Kingdom, that appointment would generally be recognised throughout the EU. That is certainly a step better than the insolvency regimes that operate internationally beyond the EU, such as the UNCITRAL rules, where there is not that element of recognition and it is necessary to take further steps if judicial co-operation is secured by way of litigation in each individual country. I recognise the benefits and advantages of the EU regime, although some would say that it is far from perfect or uniform.

There is a clear need for effective dispute resolution and effective jurisdictional recognition when a company enters insolvency or needs to restructure. Indeed, in its absence those who suffer will be the creditors of the company, because the cost of carrying out the insolvency process will be increased. The UK has already said in its position paper, Providing a Cross-Border Civil Judicial Cooperation Framework, published last August, that we wish to continue with substantively the same principles of co-operation as we already have in civil judicial co-operation, including insolvency. As the noble Baroness, Lady Hayter, observed regarding the implementation period, the transition agreement from the EU referred at paragraph 63 to at least a starting point for that for insolvency processes which commenced before the exit date. We wish to build on that and ensure that we can maintain a suitable regime. We have no difficulty with that and we believe that the EU 27 will also recognise the importance, relevance and advantages of maintaining a single insolvency regime with the United Kingdom after our exit date. As I said, that would be based, as we hope it is at present, on identifying any debtor’s centre of main interest and treating it as the primary place from which insolvency proceedings should emanate and be recognised in the other EU states.

Of course, all of this involves a degree of reciprocity. That is why it will have to be the subject of the ongoing negotiation. We consider that at the end of the day we will have the means to persuade the EU 27 that it is in everyone’s interest that, in general, civil judicial co-operation should be maintained. In the context of the present amendment, that should include the insolvency regime. I hope that what I have said will reassure the Committee and the noble Baroness, Lady Hayter, that we are committed to seek and retain current co-operation with the EU on cross-border restructuring and insolvency following our exit from the EU. In that context, I invite the noble Baroness to withdraw her amendment.

--- Later in debate ---

[Baroness Kramer]

I have a question for clarification. Is it now correct for us to interpret, when the Prime Minister or any member of the Cabinet says that there will be a meaningful vote, that the vote will be between whatever has been agreed—good, bad or indifferent—and no deal, and that that is the only choice? Will the Minister explain how that becomes a meaningful vote in the context of the understanding of anybody in either House?

[Lord Callanan]

When we have negotiated the deal it will be an extremely significant moment. We will put that deal to both Houses in a Motion to approve or not, as the case may be. This House has already considered the issue of a second referendum and rejected it. The public rejected it in the last general election.

European Union (Withdrawal) Bill

Baroness Kramer Excerpts

Committee: 7th sitting (Hansard - continued): House of Lords
Wednesday 14th March 2018 Lords Chamber

Moved by

[Baroness Kramer]

183: Clause 9, page 7, line 17, at end insert—
“( ) No regulations may be made under this section until the Chancellor of the Exchequer has published a statement setting out a strategy for retaining membership of the European Investment Fund.”

[Baroness Kramer (LD)]

My Lords, in the absence of the noble Lord, Lord Adonis, I am moving this amendment because it is an important amendment in an important group. I suspect that the noble Lord will want to make a more substantial speech than I will, but these amendments would essentially require the Government to have a strategy for how they build or retain engagement with the European Investment Bank and the European Investment Fund post Brexit.

[The Deputy Chairman of Committees (Lord Haskel) (Lab)]

Order. Could the noble Baroness tell the Committee to which amendment she is speaking?

[Baroness Kramer]

I am speaking to Amendments 183 and 187, which would require the Government to create a future strategy to retain engagement with the European Investment Bank and the European Investment Fund. On all sides of this House, Members have appreciated the value of both those bodies; their contribution to the UK has been substantial. In 2016, the European Investment Bank contributed support in excess of £5.5 billion to a very wide variety of projects, ranging from schools in Yorkshire to Crossrail. The European Investment Fund has played an absolutely key role in the development of new start-up companies in the UK, particularly in fintech—an area I am very close to—which received some £2 billion between 2011 and 2015. The Government have not yet made it clear to any of those in the business world, including those who rely on these sources, what the future framework will be either to continue a relationship with those two bodies or to replace them with an alternative source of funding.

From time to time the British Business Bank has been mentioned as a possible route to provide those mechanisms. However, I point out to the Government that businesses certainly need reassurance in that area if the Government intend to pursue that strategy. The British Business Bank is in no way geared up to make loans on the scale of the European Investment Bank, nor does it enter into the role that the European Investment Fund pursues, which has been very much to fund venture capital, which in turn flows into this range of start-ups.

I would like to hear from the Government how they see the future framework of the British Business Fund. Your Lordships will remember that in 2016, the Government were pursuing a strategy of essentially privatising that operation. It was widely understood that a number of companies—JPMorgan, Nunes, Deloitte and Norton Rose—were advising on the transfer of all the assets of the British Business Bank to an investment vehicle, to be called the “British Income and Lending Trust”, which would then be floated on the London Stock Exchange and its shares made available to investors. That would have been, in effect, the end of the British Business Bank, and the Government took that as a strong position. Its actions were ended somewhat abruptly because of legal complications surrounding the privatisation of the Green Investment Bank. I regret the Government’s decision, but the complications at that point led to the delay in the same strategy being applied to the British Investment Bank.

Can the Government give us clarity on the future of our relationship with the EIB and the EIF and, if they have decided that those roles will now be picked up by the British Business Bank, can they give us assurances about what the nature of this will be or say whether a delayed privatisation will take place? Can they also tell us where the British Business Bank will get funding from and on what scale, and whether it will get both the mandate and the resources to enable it to move into this field, which is far wider than the field it is currently engaged in? Without that, we will compromise not only our vast infrastructure projects, which are absolutely critical to any kind of economic growth, but also our start-ups, and particularly that very important area of tech and fintech which has been utterly dependent—you cannot find a single fintech in the UK which has not had funding through the EIF source.

[Lord Adonis]

My Lords, I think the noble Baroness was speaking to Amendment 183, but that is grouped with Amendments 167, 187 and 227BC, which relate to the European Investment Fund and the EBRD.

We had a brief discussion about the European Investment Bank on 28 February, in which I made comments, which I will not repeat—at columns 731 and 732—about the value of the EIB, particularly for infrastructure investment, where it is a key partner, both in its own right for the investments it makes but also, crucially, in catalysing private sector investment. It acts as a strong guarantor of the determination of the state and partners to take projects forward. In my experience as a Minister, having EIB support for projects has been crucial in putting together funding packages from the public and private sectors, including different public sector partners, to make it possible for projects to go forward. Therefore, the big collapse in EIB lending—particularly the significant collapse after the notice under Article 50 was served—is of immense concern. The collapse is partly because it has been difficult getting projects going, but also because the European Investment Bank itself has withdrawn from engagement in projects because it is not at all sure of the security of its investments after 29 March next year.

--- Later in debate ---

[Lord Callanan]

We are having a serious debate about the EIB. The noble Lord is demeaning the subject before the House.

The British Business Bank has already raised the limit on the amount that it can invest in venture capital funds from 33% to 50%. It has also brought forward the £400 million of additional investment that was announced in the Autumn Statement. As a result, we expect it to have doubled its investment in venture capital this financial year. We have also broadened the range of the UK guarantee scheme by offering construction guarantees for the first time. I hope that that addresses the noble Baroness’s question.

[Baroness Kramer]

Perhaps I could just press the Minister on that, although I appreciate that he may not have an answer. In terms of volume, what he has discussed does not meet the need. Businesses are concerned that we may not end up with an appropriate relationship with the EIB and the EIF. Are the Government looking at similar programmes but on a relatively minor scale?

[Lord Callanan]

I do not have an answer to that question. I will come back to the noble Baroness on that. I have only the figures that I outlined to her.

I hope that I have reassured the noble Lord enough not to press whichever amendment he wished to move.

--- Later in debate ---

[Lord Tunnicliffe (Lab)]

My Lords, the most significant actor in forecasting the development of the UK economy is, of course, the Office for Budget Responsibility. It is mandated to provide two forecasts each year, yet there has been no updated forecast on the impact of Brexit since the Economic and Fiscal Outlook of November 2016. Uncertainty about how the Government will respond to the choices and trade-offs they face during the withdrawal negotiations renders forecasting extremely difficult. There has been no meaningful basis on which to form a judgment on the final outcomes.

The Government have given the OBR short shrift, referring it to the Prime Minister’s Florence speech as definitive. In that speech, Theresa May said the UK would seek to achieve a deep and special partnership with the EU and that this should span a new economic relationship. Not surprisingly, the OBR did not consider that a basis on which to update its analysis. However, the OBR did set out to forecast the outcome for certain parameters of the negotiations. It made several key assumptions about what will happen when the UK leaves the EU next March. New trading arrangements with both the EU and leading states will slow down the pace of import and export growth over the 10 years following the 2016 referendum.

The Treasury Select Committee finds this situation highly unsatisfactory, given that the OBR is required to produce regular reports analysing the risks surrounding the economic outlook for the UK. Committee members saw no reason why the OBR should not provide an update, the rationale being that it already has information on migration flows and can assess the likely state of the public finances, plus the OBR has already formed the judgment that,

“the consequences of Brexit on economic growth, whether positive or negative, are likely to be so substantial as to dwarf the impact of the financial settlement”—

a settlement that has so exercised members of the Cabinet through and since the referendum campaign.

While the Select Committee report came too late to be considered in the other place during its debates on the European Union (Withdrawal) Bill, it is being discussed tonight. The amendment in my name and the names of my noble friends Lord Davies of Oldham and Lord Judd offers this opportunity and calls on the OBR to publish a fresh economic outlook, something that would incorporate the terms of the withdrawal agreement and inform Parliament’s conclusions on whether to act on the outcome of the negotiations. Challenging as this task might be, a flow of firm and up-to-date information will obviously be in demand over the course of this year. Parliamentarians have the right to ask the OBR, the best placed institution, to provide the information we so clearly require. I beg to move.

[Baroness Kramer]

My Lords, I shall say only a few words because of the lateness of the hour, but I support this amendment. The Government have continually used the argument that they cannot provide detailed forecasts of the impact on the UK economy, jobs and other opportunities either because they do not know the full clarity of what the end agreement will look like or because any disclosure might compromise their negotiating position. I have always found that a little strange. Having negotiated trade agreements on our behalf for 40 years, there is, in fact, more expertise about the impact of these arrangements on the other side of the channel than there is on this side, so we are really not fooling anybody in any of the discussions that we have.

Setting that aside, at the point that the noble Lord, Lord Tunnicliffe, describes, neither of those arguments stands any more. We will have completed our negotiations and will know the details of what we have negotiated. Do the Government not agree that transparency is both possible and crucial at that moment and, therefore, that the analysis that the noble Lord just described is vital and owed to Parliament and the British people?

[Baroness Goldie (Con)]

My Lords, I thank the noble Lord, Lord Davies, in his absence for this amendment and thank the noble Lord, Lord Tunnicliffe, for moving it and speaking to it. The Office for Budget Responsibility’s remit is clearly defined in legislation, under the Budget Responsibility and National Audit Act 2011, as being,

“to examine and report on the sustainability of the public finances”.

In doing so, the OBR must produce at least two forecasts per financial year, which must include the impact of government policy where it can be quantified with reasonable accuracy.

The Government expect the OBR to include the impact of the withdrawal agreement alongside its forecast of the UK’s economic and fiscal outlook as soon as sufficient information is available. That would contribute to the transparency which the noble Baroness, Lady Kramer, is looking for. But the Government cannot dictate when that might be. This is the important distinction. It is therefore not appropriate to request the OBR to produce analysis specifically for a legislative debate, as this will draw the OBR into political debate, which could undermine its reputation as an independent and objective institution.

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[Baroness Kramer]

But this will surely be one of the most important debates and most important votes ever held in this House. Is the noble Baroness suggesting that it is not appropriate and necessary for the OBR to provide the information that probably only the OBR is capable of providing to make sure that that vote is taken with the best knowledge available? That would be extraordinary.

[Lord Tunnicliffe]

Surely the OBR is up to its ears in political debate. It produces the document on which Parliament discusses the Budget, taxation and all parts of the economy. The OBR is part of the political process. It is a neutral and independent part of the political process, but it is not without the political process.

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[Baroness Kramer]

This is a crucial point. It decides whether or not Parliament is in a position to make an informed vote, which is absolutely at the base of democracy. Does the Minister realise that she is inviting this House on Report to provide for a change in the statutes of the OBR to require it to produce that report and to provide it with the appropriate resources, if it needs additional staff, to be able to do it in a timely way so that the vote can be an informed one?

European Union (Withdrawal) Bill

Baroness Kramer Excerpts

Committee: 6th sitting (Hansard): House of Lords
Monday 12th March 2018 Lords Chamber

[Baroness Thornton (Lab)]

This benefits all patient populations, and is particularly important for paediatric and rare cancers—diseases which, precisely because they are uncommon, are among the hardest to research and treat. You therefore need a larger pool than the 66 million people who live in this country: Europe has a combined population of 510 million to draw on. That is nothing to do with trust; it is to do with how clinical trials need to be carried out. You need a larger pool of patients to test these drugs.

I was pleased to add my name to the amendment in the name of the noble Lord, Lord Patel. I raised this issue in my speech at Second Reading and will mention only one additional matter, which is to do with rare paediatric illness; tumour types which affect relatively few people; and rare cancers which translate to over 20% of all cancer diagnoses across the world. If the UK is to make progress on therapies for paediatric and rare cancer, it is vital that we can work closely with EU nations on clinical trials. Cross-border collaboration is crucial to paediatric and rare cancer clinical trials. Some 75% of clinical trials in the EU involve cross-national collaboration, rising to 86% for rare disease trials. As noble Lords have remarked, that is because of the patient population across Europe. We will be doing a huge disservice to our children, and to the cancers which threaten a few of them, if we fall out of this system. It is as simple as that.

The BEACON clinical trial system is an example of how cross-national collaboration is fighting back against rare paediatric cancers. Neuroblastoma is a form of cancer that affects around 100 children, mostly under the age of five, every year in the UK. More than half the children with aggressive forms of the cancer will see it return and, for these children, there are few treatment options left. In 2013, Cancer Research UK scientists and paediatric cancer specialists launched the BEACON-neuroblastoma trial to find the best chemotherapy treatment for children and young adults with recurring neuroblastoma. To do this, it is bringing together clinicians and scientists from 10 European countries and two international consortia, with funding from Cancer Research UK and European partners. It is a fantastic example of successful European collaboration. The rarity of this neuroblastoma and the low number of patients means that trials could not have happened in a single European country. It is vital that this type of cancer trial—

[Baroness Kramer (LD)]

Given the noble Baroness’s expertise on this issue, I wish to ask her a question. As I understand it, medicine is becoming more and more personalised and customised. Therefore, by definition, the pool for a far wider suite of diseases is becoming smaller and smaller because of that much narrower customisation and personalisation. Therefore, the situation with rare diseases today is about to become the norm across a very wide range of diseases. Does the noble Baroness read it that way?

[Baroness Thornton]

I absolutely agree with the noble Baroness. In fact, several noble Lords who are much more expert on this have already mentioned that aspect. The noble Baroness is absolutely right. I do not think I need to say anything more. I think this amendment is the remedy. I hope that the Government will respond positively to it. The case is unanswerable.

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[Lord Turnbull]

If something generates a surplus, it is equivalent to a tax and should be covered by the same legislative understandings about taxes.

There is a third category, where a conscious policy relates the fee not according to how much it costs to administer that piece of service to a business or a household but to something like wealth or income. The most egregious example of this was the recently introduced change in the schedule of probate charges, where larger estates are being asked to pay not what it costs to administer the probate but according to the size of the estate, producing charges many times greater than the pure costs. We need to decide in this amendment whether all fees and charges should be treated as taxes—that would be the simplest thing—or whether it is possible to make a distinction between those fees which are purely covering costs and those which go beyond, either in the total or in their social distribution. I hope that the Minister will agree to come back to this House with amendments which make that distinction.

The issue will resurface when we get to Amendments 348 and 349, which deal with Schedule 4, where we have the possibility that secondary legislation could be used to introduce fees and charges by a body that was itself created by secondary legislation. I should say that that would put us not just in double jeopardy but jeopardy squared. We are going to have to deal with the problem of these two points in our work on the Bill.

[Baroness Kramer]

My Lords, I have put my name to Amendments 86 and 127. I will be very brief because the noble Lord, Lord Turnbull, has described the problem we have over fees, charges and legislation. I remember that, when I was on the board of Transport for London and we brought in the congestion charge, it was the alliterative nature of the word “charge” that led us to use it, rather than any legal definition. So my answer to the noble Viscount, Lord Hailsham, is that there may well be legal definitions but I think they are now observed in the breach on many an occasion.

[Viscount Hailsham]

The community charge was clearly a tax and not a fee.

[Baroness Kramer]

The noble Viscount gives a superb example. We can think of parking charges and a whole wide variety. That is why it is really important that there is clarity over when a statutory instrument is the appropriate mechanism and when, frankly, it is not. The Bill as it stands does not give that clarity.

I also put my name to these amendments for another reason. Most in this Committee will remember the time of the tax credit debacle, a major policy change that most of us regarded as a change that should have been introduced as part of a welfare Act. The Government sought to accomplish that through a statutory instrument attached to a Finance Bill. Because of the nature of charges and money-type instruments, it is very possible to use them to affect very broad policy issues and not just the narrow issue of revenue raising. That is why Amendment 127, for example, is an important amendment, as are others in this category. We are all concerned about the inappropriate use of Henry VIII powers, since this Government have actually tried to use these to achieve those much broader policy ends in the past. We have to be sure that we are not leaving a mechanism by which that could be repeated, because that really would be a coach and horses through many of the concerns and issues that have been raised.

[Lord Lisvane (CB)]

My Lords, I support the amendments in the name of the noble Baroness, Lady Hayter of Kentish Town, and I shall speak to Amendment 126, which is in my name and those of my noble and learned friend Lord Judge, my noble friend Lord Pannick and the noble Lord, Lord Tyler. Amendment 126 would bring Clause 8 into line with Clauses 7 and 9.

Taxation matters can be dealt with by statutory instrument. For example, they can restrict relief from Customs and Excise duties or VAT under the Customs and Excise Duties (General Reliefs) Act 1979. But taxation, as it is normally and properly understood, is undoubtedly a matter for primary legislation. What is troubling here is the potential width of these powers and the lack of indication of how the Government intend to use them.

The Delegated Powers Committee’s 12th report says:

“At committee stage in the House of Commons, the Parliamentary Under-Secretary of State for Exiting the European Union (Mr Robin Walker) indicated that the power to tax by statutory instrument in clause 8 was needed because the power was not available under clause 7”—


that is true enough. It continued by saying that,

“furthermore, taxation might be needed to ‘comply with international arrangements’”.

The committee then pointed out, and I entirely endorse what it said:

“The question which remains unanswered is why taxation by Ministers in statutory instruments is an acceptable alternative to taxation”,


approved by Parliament, with the normal rigour of the process, in primary legislation.

The Minister will need to give your Lordships some very hard examples of why a statutory instrument would be used and not primary legislation. If that is not known at this stage, the withdrawal and implementation Bill we are promised might well be the vehicle for making those changes in primary legislation, if the precise requirements are known at that stage. But this potentially wide power to tax by statutory instrument is, as I say, more than troubling. I am not suggesting that indications of how a power is expected to be used will in themselves suffice, although they should give your Lordships a clue to why the power is required, which is perhaps a more important question to address. What matters, of course, is what ends up in the Act. The use of the power then will not be trammelled by reassuring indications of how, at this stage, it is expected to be used.

Perhaps I may finish by enlarging on my noble friend Lord Turnbull’s masterly catalogue of fees and charges and their various characteristics, to add another category. In the financial procedure of the House of Commons, a fee that is levied and then applied for the good of the industry as a whole is not treated as a tax, so it does not require ways and means cover. As I say, that is merely a footnote to my noble friend’s excellent speech.

European Union (Withdrawal) Bill

Baroness Kramer Excerpts

Committee: 6th sitting (Hansard - continued): House of Lords
Monday 12th March 2018 Lords Chamber

[Baroness Kramer (LD)]

Perhaps the Minister could help me with a clarification. As I understand it, the FCA and others have the powers he just described as a consequence of a cascade that comes, as he said, from higher levels of legislation that originated in a democratic process. They therefore have safeguards, frameworks, constraints, mitigations and appeals processes—all kinds of characteristics sitting around them. How do the powers of sub-delegation which the Minister described relate to any of those structures of cascade or framework, since we are supposedly leaving the EU?

[Lord Callanan]

I am not sure that the powers originated in a democratic framework; a lot of them came from EU legislation introduced by regulation which takes automatic effect through the European Communities Act. We could have an argument about whether that is a democratic framework, but perhaps now is not the time.

[Baroness Kramer]

My Lords—

[Lord Callanan]

Let me make some further progress and see whether it responds to the noble Baroness’s questions.

Some of the powers to make legislation that will be transferred under the powers in the Bill are integral parts of regimes currently managed at the EU level; for example, where the European Commission currently legislates to add to or remove active compounds from lists of biocidal products. Where sub-delegated or transferred legislative powers are crucial to the functioning of a regime, it would not be appropriate for those powers to be subject to a sunset. That would only postpone rather than remove the requirement in the limited time available before exit for either a regular flow of primary legislation to keep regimes up to date or a suite of primary legislation to design equivalent powers to those which the Government intend to transfer under this Bill.

Perhaps I may address the three elements of Amendments 350 and 351 tabled by the noble Baroness, Lady Hayter. First, I turn to the scrutiny of the exercise of the powers by Ministers of the Crown in Schedule 4. We have laid out in Schedule 7, which I know we will debate at length another day, provisions for the scrutiny of those powers. Our position is that the powers should indeed be subject to the affirmative procedure where Ministers are creating new fees and charges regimes, or where we seek to grant an authority the power to set its own fees and charges. It is the sort of framework being established in which this House rightly takes a great interest. All this is of course possible under Schedule 4 only in relation to new functions that we are transferring from the EU or setting up on exit under the powers in the Bill. We have not provided for the adjustment of these, or for existing fees or charges, to be subject to the affirmative procedure. In years to come, there will be many such adjustments as technology cuts costs and inflation raises them. This ebb and flow can make a real difference to businesses, but does not normally represent a matter requiring debate and division within this House.

Nevertheless, I accept the point made by the Delegated Powers and Regulatory Reform Committee that the raising of a fee not by 1% or 2% but by, let us say, 13,000% would be a substantial matter. I trust, however, in the expertise of the Secondary Legislation Scrutiny Committee and the Joint Committee on Statutory Instruments to draw this House’s attention to such matters. I remind noble Lords that the negative procedure for statutory instruments does not mean no scrutiny at all, nor does it prevent debate. Nevertheless, if I have not addressed sufficiently the noble Baroness’s concerns on this point, I would be more than happy to discuss further how we might do so. As I said at the start, we are looking closely at this issue and expect to come back to it on Report.

Secondly, these powers are vested also in the devolved Ministers—we do not have the noble Lord, Lord Wigley, with us to make his regular point about devolved matters. While the scrutiny of the powers is important and, as I have just set out, the Government have tried to ensure that the most important of the regulations made under them will be affirmative, it is not for this House to dictate scrutiny to the devolved legislatures. The Bill contains a starting base of procedures for the devolved exercise of powers. While the devolved Administrations are competent to change these following Royal Assent, discussions continue with them about any alterations they may think it appropriate to make in the Bill. It would also not be appropriate for us to require the devolved Ministers to seek our approval for their statutory instruments—I am sure the noble Baroness did not intend this to happen.

My third point regards the sub-delegation of the power to provide for fees and charges. It bears repeating that any instrument providing for this will have to be affirmative, can delegate this power only to a body being given a new function under this Bill, and will have to set out the conditions for the exercise of that power.

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[Viscount Trenchard (Con)]

My Lords, I listened with interest to the amendment proposed by my noble friend Lord Carrington of Fulham and supported by the noble Baroness, Lady Falkner. I accept that my noble friend is trying to be helpful to the Government, but for various reasons I nevertheless feel unable to fully support his amendment. I understand well that the amendment reflects the proposals put forward by the IRSG in its paper published last September, prepared in collaboration with Hogan Lovells. That report has been endorsed by TheCityUK and the City of London Corporation, which support IRSG.

The reasons why I cannot support the amendment are, first, that it is not appropriate or helpful to put into legislation, at this stage, the detail of any future regulatory collaboration with the EU, let alone on financial services. Secondly, the report which the amendment would require the Government to prepare, like other reports which other amendments discussed today have called for, would be quite onerous and time-consuming. Thirdly, it is not helpful for our negotiators if we argue against ourselves, and especially unhelpful to incorporate amendments into law which appear to accept that it is desirable, even necessary, to treat continuing alignment with EU regulations as being a greater priority than aligning our regulations with those of the SEC in the United States, the FSA in Japan, or other regulators in other countries with significant financial markets. Fourthly, the Government have already stated their intention to negotiate an implementation period following exit day when things would be largely the same, including, as I understand it, for the financial services sector. This amendment appears to assume that everything changes on exit day.

In his excellent recent speech at the Mansion House, the Chancellor referred to a framework to supervise,

“separate evolution of rules to deliver the same results”,

and to resolve disputes. I believe there is a danger that this would place too much pressure on UK regulators to continue to align completely the UK’s rule book with that of the EU 27. This would make it more difficult to agree any kind of mutual recognition of standards with other financial regulatory regimes around the world. For example, the City Corporation and Tokyo Metropolitan Government have recently entered into a memorandum of understanding to collaborate more closely on financial services, and this could be developed in future to include some kind of mutual regulatory recognition of standards.

Of course, the City will survive if there is not a deal which covers financial services. The EU regulators have forced upon us Solvency II, AIFMD and MiFID II, to name but three directives which have cost the City dear in terms of higher costs, fewer jobs and fewer revenues than would otherwise have been the case. We should not agree to align more closely to EU rules than to US rules, Japanese rules or the rules of any other major financial centre in the world. Once our regulators recover their independence from the EU regulators, their influence in shaping best practice rules at the global level will be enhanced, not diminished. Of course, while the inclusion of financial services in our FTA would be better than its exclusion, our negotiators need to be very aware of the significant upside for the City in recovering our regulatory independence.

The amendment, in proposed new subsection (2)(a), refers to the degree of alignment “necessary” between the regulatory provisions of the EU and UK. I submit that this is a rather subjective concept. What is important is that our regulators will establish the best regulatory regime for our markets, retaining the highest standards for which London is rightly held in high regard and participating fully in discussions with regulators of the other major financial markets, within IOSCO and other bodies, with a voice commensurate with the size and scope of our markets.

As my noble friend Lord Hill of Oareford said in his interesting speech at Second Reading, our withdrawal from the EU is allowing Europe already to move in directions that we have traditionally resisted, whether that is a financial transactions tax, more screening of overseas investment or more centralisation of supervision of financial services. As we now have to choose between effectively remaining in the single market and being free to make our own rules where we want to, we must surely place a greater priority on being able to shape our own future than on preserving the status quo.

Mark Hoban, chairman of IRSG, has proposed a forum for regulatory alignment, referred to by my noble friend, whereby the UK and the EU can work together to implement new global and international standards. That is fair enough, although I do not think it is in the City’s interests to do this with the EU exclusively. Furthermore, my noble friend’s amendment is silent on the proposed forum’s relevance to new global and international standards and relates only to a perceived need to maintain regulatory alignment with the EU alone. If I were a banker in the EU 27 or the finance director of a major EU 27 company wishing to raise money in the capital markets, I would certainly not want the EU to impede my access to the UK’s financial markets, but I have not yet heard of any proposed EU regulation or directive requiring the Commission to continue to align closely to UK regulations.

My noble friend’s amendment indicates a frame of mind which I believe casts us too much in the role of supplicant, where we do not need to be. Does the Minister recognise that the City would worry less about the downside and show more confidence in the upside of Brexit if the Government showed more leadership and enthusiasm for the City’s role as the leading international financial centre, unfettered by the EU’s cumbersome and somewhat dirigiste regulatory framework, while maintaining the high standards and proportionate regulations that provide the necessary protections and financial stability for investors and borrowers, but without burdening market participants with unnecessary costs or with measures that inhibit the innovation that has helped to make London the great success it is?

[Baroness Kramer]

My Lords, the noble Viscount, Lord Trenchard, speaks a commonly held Brexiteer view. I take a very different view—that if we were to follow the course he just recommended, in 10 years’ time the UK would no longer be the premier centre for financial services in Europe, and certainly not for those generated within the EU, which is one of the largest economic and trading blocs in the world, and perhaps the most important as regards feeding financial services.

I understand the amendment in the name of the noble Lord, Lord Carrington, but I cannot support it because, as I think he would say, it is quite limited. Financial services depend not just on passporting: for the asset managers it is delegation, for the fintechs it is the e-commerce directive, and for the insurance and trading world it is the mutual recognition of contracts. There are so many complex features at so many different levels that create the ecosystem that has enabled London to thrive, essentially on the basis that it has sitting behind it the resource of a 28-country 510 million population who turn to it as their primary financial centre. However, the way in which the Government respond to Lord Carrington will be critical. It is a matter of timing.

The industry, as the Minister well knows, has been in some despair to try to persuade the Government that how they structure the relationship, should Brexit take place, is absolutely critical. The large companies in the industry have been going ahead with contingency planning that, so far, has been in a relatively preliminary phase. They have identified new real estate, taken out leases, and negotiated licences and other authorisations that they need to be able to expand either their field of business or to be able to expand business. However, almost every one of them has said, I think to many noble Lords in this House, that by the end of March—we are now talking about a matter of days—they will have to push the button on the next phase. That is the fitting out and purchasing of the very extensive and expensive equipment that has to go in, and the setting up of the recruitment process to staff out those new operations. From that there is no return. We therefore reach a point of no return for a significant portion of financial services which will be transferred to continental Europe with, frankly, no possibility of reversal, in a very brief period of time.

The industry has coalesced around the idea of mutual recognition as the one possible route. If we leave the single market—that is key; if we stay in the single market, it is not an issue, although the Government say that we will not—mutual recognition is the only possible route to limit the damage. It is nowhere near equivalent to the access that we have today, but it could perhaps be negotiated so that the damage is to some degree limited. Every major company I have talked to says that it does not understand how this new form of mutual recognition will work. It seems highly problematic. I have said in this House before that when the EU first began to bring together and create aspects of the single market in financial services, it began by using mutual recognition. However, it turned out to be completely inadequate to deal with the complexity of so many different kinds of issues, so much competition, so much size and so much depth.

So mutual recognition is seen not as a successful strategy but as the failed strategy for these arrangements that is now being revived in a new form. Because the industry is listening, it is important that we get from the Government something that provides some meat and bone on how this mutual recognition could function. If we do not hear that today, we will in many ways be accepting that we will not have any kind of significant arrangement around financial services, and the consequences for this country, which is essentially a service economy in which financial services are the most significant part and the largest exporter, will be highly significant. We need to understand today whether we are looking at something that is real and has the prospect of achieving success or whether we are simply tossing around an idea that has PR attractions but, frankly, offers no meaningful route to keeping access to the European market for our financial services industry.