Budget Responsibility Bill

Baroness Lawlor Excerpts

2nd reading & Committee negatived & 3rd reading
Monday 9th September 2024 Lords Chamber

[Baroness Lawlor (Con)]

My Lords, I am grateful to the Minister for his exposition of the Bill. I declare a special interest, having worked on and published a number of independent analyses of the fiscal, monetary and regulatory problems of the UK economy as director of Politeia, the think tank at which I am now research director.

No one with the public finances at heart can fail to support a measure that strengthens transparency and a rules-based approach to the UK’s public finances. I am a devotee of fiscal stability and the need for rules, written or, as in previous times, understood. As the German economist Ludger Schuknecht has explained, many serious problems arise not because of bad rules, but because of the failure to implement the rules by using tools such as medium-term budgetary frameworks, spending reviews, financial risk analysis and independent fiscal councils to help achieve these aims.

But are the Bill and the structures—including the OBR, which it relies on—the way to ensure sustainable public finances and tighter fiscal discipline? I am unsure, and I have the following questions. First, is the Bill requiring an OBR assessment for financially significant measures or empowering the OBR to offer such an analysis, should it deem a measure such, enough to control unsustainable public spending and public debt? Is there any obligation on the Government to change their spending or debt policy if an OBR analysis predicts potentially dire consequences for the economy? If not, there is no fiscal lock, contrary to the Government’s suggestion, but simply fiscal advice. If so, that raises constitutional questions about unelected bodies and the power they exercise.

Secondly, the Government want to allow a higher ceiling for debt as a proportion of GDP by the fifth year of the cycle, from 1% to 1.2% of GDP, made public in advance of the Budget. Should we expect a further relaxation of the three previous rules for fiscal discipline and, if so, which will be relaxed, which will be changed and which will become less transparent? Will further changes be assessed by those who, like me, are sceptical of lax fiscal discipline?

Thirdly, no single forecasting institution can, or should be expected to, take the burden of advising a Government on tax and spending alone. We have heard today of some of the problems with the OBR which it has the modesty to recognise. Will the Government be open and invite other forecasters and assessments, equally independent of the Treasury and the OBR, to be sure to have other views?

Fourthly, what public spending will count as fiscally significant? I know the 1% of GDP measure has been provided, but here are two sorts of public spending that may be open-ended and not fall within the threshold, although they will eventually. The first is public sector pay rises. Rises of 5% or 6% for the 3.5 million public sector workers have been announced, adding to the potential for pay inflation, with other rises reported to be in the offing, including 22% mooted for doctors. Will the Minister agree that such pay rises should prompt an OBR report, particularly if they will likely continue to increase and reach the high threshold?

The second is the costs of immigration. According to Home Office figures, quite apart from legal migration—which is nearer to 1 million this year, net migration being lower—illegal migration via channel crossings amounted to 9,000 illegal immigrants crossing to the UK in July, August and the first week of September. Since no scheme in place is likely to deter these crossings, will the Minister confirm whether the additional management, administrative and legal costs—these have been itemised by previous Governments—for processing individual cases and providing public services, including housing and subsistence, will be averaged in an annual figure and considered as significant in order for an assessment by the OBR?

Spring Budget 2024

Baroness Lawlor Excerpts

Monday 18th March 2024 Lords Chamber

[Baroness Lawlor (Con)]

My Lords, I am glad to follow the noble Lord, Lord Davies of Brixton, and to hear his analysis and comments on NICs. I have a long interest in the contributory system and how it developed in the interwar and post-war years, but I will not speak on NICs today. I also welcome the noble Lord, Lord Kempsell, whose maiden speech brings a flavour of the thoughtful approach to improving government policy that he has deployed in his different roles, most recently in the Prime Minister’s Office; I look forward to his fresh insights in your Lordships’ debates, as he shares his knowledge and experience, including that of the conduct of the country’s affairs at one of the great moments of recent history.

I am grateful to my noble friend the Minister for her helpful discussion of the Budget. I set my comments in the context that was outlined by the noble Lord, Lord Lamont: the modest economic improvements we have seen are to be welcomed and UK growth, although not terrifically high, is better than in many European countries, and our tax burden, although still too high, is less burdensome and onerous than the tax burdens of many of our fellow citizens in Europe. That is the context in which I put my questions to my noble friend.

UK GDP growth has not been very high. By 2028, it is projected to be 1.7%, against an inflation figure of 2%. The ONS estimates that GDP per capita decreased by 0.7% in 2023. The OBR suggests, as highlighted in the Library Note by the Lords research team, for which I am very grateful, that the fall is because of the increase in population. Our population is now over 67 million people. In 1950, it was 50 million people, and it is projected to be 70 million in 2026. Given that the 2023 figures indicate net migration of 672,000 people for this year, can the Minister elaborate on the link between rising population and a decrease in GDP per head and how the Government see projections for GDP per capita and for immigration?

I will move on to public debt and borrowing. I welcome the projected cut in public sector net borrowing as a share of GDP from 3.1% of GDP today to 1.2% in 2028-29. None the less, the figures for public sector net debt, excluding the Bank of England, are more disappointing. It is expected to rise to 93.2%, as a percentage of GDP, by 2027-28 and to fall slightly to 92.9% in 2028-29. Public spending, at 44.5%, is still too high, for the reasons the Minister gave, and because public spending, at these levels, and public debt, require high levels of tax to service both the public spending and debt interest. The Government announced tax cuts in the Budget, but rather than prioritising these, should we not be taking the scythe to the overall levels of public spending and public debt? I do not think this will have a terrific impact on the provision of public services, given that the UN Human Development Index reveals that countries with lower public spending as a proportion of GDP very often have a better output and better public services. Countries such as Switzerland, Canada and other European countries do far better, in health and education outcomes, with far lower levels of public spending as a proportion of GDP.

It is reassuring to hear that inflation is now on the downward trend, but I urge that never again must the Bank of England and its official advisers be permitted to turn a blind eye to the growth of money, and the quantity of money supply, each year; they must be obliged to take account of it. The Economic Affairs Committee of this House recommended in its November 2023 report that to address the errors made in the conduct of monetary policy by the wider central banking community, including the Bank of England, it had heard evidence from a number of witnesses, including those who pointed to the failure to take account of the money supply. The committee recommended:

“The Bank must do more to foster a diversity of views and strengthen a culture that encourages challenge”,


and, given the

“absence of any detailed discussions about money supply in the Bank’s published Monetary Policy Reports … that the Monetary Policy Reports should include discussion of the main monetary aggregates, accompanied by an analysis of their relevance to the Bank’s inflation outlook and the various scenarios the Monetary Policy Committee considers. This would ensure adequate transparency in how the Bank approaches its monetary policy decision-making”.

This advice echoed that of Tim Congdon, an author whom I published—I declare an interest as research director of Politeia. Professor Congdon proposed that whenever money growth is too high or too low, relative to the 2% inflation target, the Governor of the Bank of England be obliged to write a letter to the Chancellor of the Exchequer explaining why the deviant behaviour of the quantity of money will prove compatible with future inflation close to the 2% target that my noble friend the Minister is determined to meet. I conclude by asking my noble friend the Minister what steps have been taken, in light of the Economic Affairs Committee’s recommendations, and whether the Governor of the Bank’s open letter system might now include references to money and require an explanation about why rapid money growth or money contraction will not lead to inflation far beyond the permitted band.

UK Economy

Baroness Lawlor Excerpts

Wednesday 21st February 2024 Lords Chamber

[Baroness Vere of Norbiton (Con)]

As the noble Lord will be aware, the reason interest rates are particularly high is to control inflation. The Bank of England now expects inflation to get back to the target of around 2% in the early summer. If that can happen, then of course interest rates would be able to come down.

[Baroness Lawlor (Con)]

Will my noble friend consider a longer-term anti-inflationary policy such as ensuring that the Monetary Policy Committee of the Bank of England, and the governor, build into their forecasting model a measure to take account of the growth in money supply each year?

[Baroness Vere of Norbiton (Con)]

I will take that idea back to the Bank of England.

Autumn Statement 2023

Baroness Lawlor Excerpts

Wednesday 29th November 2023 Lords Chamber

[Baroness Lawlor (Con)]

My Lords, it is a great pleasure to welcome the Minister to the Front Bench and I wish her every success. I am very glad to follow the noble Lord, Lord Lee of Trafford, with his very interesting suggestions on educating youngsters, particularly on investment and shares, and applaud his work over many years in that area.

I declare an interest as the founder and research director of Politeia, a think tank which has published a great deal on many of the matters raised by your Lordships today and in the Autumn Statement, particularly on levels of tax and public expenditure and their impact on the economy and inflation. Other noble Lords have commented on many aspects of tax and public spending. My noble friend Lady Lea spoke on the wider economic context. My noble friends Lady Noakes and Lord Frost considered the overall context and the impact of the size and power of the state on economic growth. We heard an interesting vignette from my noble friend Lord Dobbs earlier on what happened in the United States economy when we saw success moving from the sunshine state and the north-east and New York down to Texas. There are lessons for this country there.

I welcome the lower inflation figure of 4.6% and the forecast that inflation is due to fall to 2.8% by 2024 and to reach the 2% target in 2025. My noble friend Lord Northbrook commented on inflation and asked very pertinent questions about the role of the Bank of England and its governor. Perhaps I might reflect on questions prompted by the Bank’s remit of the inflation figure target of 2% of GDP. Given that inflation in the 28 years to 2020 was 2%—a rise of 2% in the CPI—what were the authorities in the Bank thinking when inflation went up five times that much over the next two years to reach 11% in October last year? Did they expect it? If not, why not? We might recall the question asked by Her Majesty the late Queen Elizabeth when visiting the LSE at the time of the financial crisis in 2008: “Why did nobody notice it?” It was a question to which economists were then just beginning to turn their attention. Indeed, one answer given in 2021 to our current problems and since was that the rise in inflation was due to external shocks: Covid, the Ukraine war, escalating fuel prices and so on.

The noble Lord, Lord Dobbs, has already referred to the House of Lords Economic Affairs Committee report Making an Independent Bank of England Work Better, and I too congratulate its chairman and committee. The report, published this week, noted the importance of an independent Bank in achieving price stability, but mentioned that public confidence had fallen in the Bank of England, given that inflation has remained above target. While the report referred to supply shocks, it also noted that the

“above-target inflation over this period also reflects errors in the conduct of monetary policy, including an over-reliance on inadequate forecasting models”.

Although not alone among central banks in failing to anticipate the high and persistent inflation, the report suggested that there may be

“a lack of diversity of view in the Bank of England and wider central bank community”,

and that

“Some witnesses … considered that the inflationary potential of elevated rates of money supply growth were given insufficient attention by the Bank”.


Here I agree with the noble Lord, Lord Dobbs, that perhaps Governments pay too much attention to the specialist advisers on whom they rely. The problem raised by the House of Lords Economic Affairs Committee highlights one of the significant changes in the measures and arrangements used by official bodies—that the money supply and the growth in money supply no longer tend to be used or considered to matter. Put less delicately, there may a tendency to groupthink.

The economist John Greenwood recently drew attention to the data available then and now on money supply growth, noting that each period of high inflation was preceded by a rapid growth in the money supply. This is a subject which the monetary economic and former Treasury adviser Professor Tim Congdon has considered over decades. Indeed, in April 2020 in the Wall Street Journal, Congdon predicted the return of inflation in the US with the highest annual rate of money growth since World War II. I welcome the Government’s commitment outlined in the Statement to lower inflation and their support for an independent Bank, but might it now be timely to include in the Bank’s letter a requirement, as Professor Congdon proposed, that the Governor of the Bank of England would write to the Chancellor when

“money growth is too high or too late relative to the 2 per cent inflation target”

and tell the Chancellor

“why the … quantity of money will prove compatible with future inflation close to the 2 per cent target”?

Such a requirement would be fully consistent with the operational independence of the Bank and, combined with other proposals from the House of Lords Economic Affairs Committee, would help the Bank as well as the Government, the Treasury and their economic advisers to take account of the diversity of data and view and ensure the right course is followed. No longer need a potential reluctance to take account of money supply growth be a factor in decisions which can have such a devastating effect on our economy and the lives and livelihoods of the people.

Financial Services and Markets Bill

Baroness Lawlor Excerpts

Report stage
Tuesday 13th June 2023 Lords Chamber

I hope that, this time, I may receive a slightly more positive response from my noble friend. That would be taken by many in the industry as a sign that the Government really are now determined to do what we were promised: replace the cumbersome EU financial services regime with one more suited to our needs and that will ensure that the City holds, and builds further on, its position as the world’s most successful financial centre, ensuring the resumption of the growth in the economy that is so badly needed. I beg to move.

[Baroness Lawlor (Con)]

My Lords, I support my noble friend Lord Trenchard’s Amendment 120, to which I have added my name and which I spoke in favour of in Committee. He then spoke of the history of this legislation, which was unintended by one EU commissioner and then pushed through, for matters of politics, by his successor under José Manuel Barroso: Michel Barnier, who saw it as part of the plan for a banking and monetary union for the EU—a plan that the UK was and is not part of and has no intention of joining.

The whole UK financial sector accounts for 8% of our economy—the same proportion as in the US and Canada—whereas financial services account for only 4% of the two major economies of the EU. The ironic thing about this legislation is that 75% of alternative funds were in UK businesses then, and the funds account for that sort of proportion in our own sector today.

My main concern is that this diverse sector, which has flourished in the UK under UK law, remains under an opaque legislative system. EU regulation is unpredictable and the EU’s system, with the precautionary approach, seems to cover every eventuality but in practice it can fall short. It often favours big players over small and nimble entrepreneurs and the challengers. There is little certainty about transactions in advance, and little predictability as to how the regulators will judge.

We spoke about this in respect of the whole sector in Committee, but it is important for the alternative funds industry in particular. If we move, we need to move away from the way of thinking into which our regulators have crept. They have absorbed this precautionary approach to regulation from the EU—as well they might, after two decades.

I was glad my noble friend suggested that the hope —the intention—is that we will end EU law, but I stressed then, and would like to stress again, the importance of ending the thinking about precaution and hesitation in grasping the opportunities once we are out. That is very important for the regulators in this sector.

I shall just give a few examples. We have in English law an approach to business which, given the principle of contractual autonomy, means that the law honours contracts and contractual arrangements. It does not rely on the subjective principle of good faith, which creates uncertainty for practitioners about the expected moral and other standards of behaviour. In German civil code, parties must observe good faith in both negotiation and in performance of contracts but, without a definition of good faith in German contract law, things are uncertain.

The other aspect of UK law that I think is good for the sector is that it is flexible. This is a very flexible sector, and the judiciary’s ruling, interpreting and developing of law through its application to specific cases in different sectors moves with the times and adapts to innovation—the new structures and transactions of a fast-moving business. But that cannot happen under the rule books or their architects, the courts, or indeed in the thinking, because courts, by contrast, are not subject to the constraints of the legislative process and can react and achieve change more effectively, and this judiciary is recognised globally to be wise, deeply knowledgeable and authoritative.

I took heart from the Minister’s assurance in Committee, and again during the first day of Report, about the intention to revoke all EU laws and replace those that were considered necessary with—I use her words—an “appropriate replacement” before eliminating any aspect of the legacy. But perhaps I could ask her to think again about AIFMD. Waiting for an “appropriate replacement” sounds more like Whitehall-speak for regulation of the type that has been absorbed and reflected by our regulators under the Treasury in recent decades. Perhaps this piece of legislation could be used as a pilot for ending something that, as the noble Viscount said, was not wanted by the sector, and which the Committee warned could have dangerous repercussions for the UK’s role in global markets and in dealing with America. Because of that, there are very good reasons to let it go, because it is not a consumer-facing industry; it is for the sector itself. It can only be to the good if this sector is set free without any replacement, so that it can benefit under the benefits of UK law.

[Lord Moylan (Con)]

My Lords, I will speak only briefly in support of my noble friend Lord Trenchard. It was commonly known, and widely reported in the newspapers at the time, that following the financial crash of 2008, the EU, which has always had its doubts and scepticism—indeed, hostility—about what it referred to as Anglo-Saxon finance, withdrew the indulgence that it had previously shown towards the City of London as part of the European Union and started to enact legislation that was injurious to the City of London, and quite deliberately so, to the annoyance of the Chancellor of the Exchequer at the time, George Osborne, who was reasonably open about his opposition.

This instrument, the alternative funds directive, was the prime example of that, although there were others. It contributed significantly to the fact that there was much more support for Brexit in the City of London than people often wanted to admit at the time, or have admitted since, because they understood that that oppositional turn had taken place and the tide was now flowing against the City. So I agree with my noble friend that it is very difficult to see why, now that we have the opportunity to remove it, we continue not to do so year after year—and there are other examples of that.

I also support the remarks of my noble friend Lady Lawlor. There is a prevalent idea—and not just in financial legislation—that, as we get rid of European Union legislation that we no longer need, we need to replace it with legislation that almost replicates what the European Union was doing. A prime example of that outside the field of financial services is the Procurement Bill, a massively complicated piece of legislation replicating European Union legislation, almost in great detail. In fact, the procurement legislation of the European Union—which was obviously designed for 28 states, not simply for the United Kingdom—was there largely to deal with problems embedded in a history of municipal corruption, which were manifest in various European states but, I am glad to say, of which the United Kingdom has a long, proud history of being pretty free, with one or two exceptions. It was not necessary to replicate it in the detail in which it was done.

There are genuine concerns, certainly among those of us on this side of the House, that insufficient dispatch is being brought to getting rid of injurious legislation that we inherited from the European Union but can now get rid of, and that there is a mentality that the right way to get rid of something is, in effect, simply to re-enact something very similar after a period of consultation. I have great sympathy with what my two noble friends said, and I hope that the Minister, when she replies, will be able to give them some comfort.

Financial Services and Markets Bill

Baroness Lawlor Excerpts

Report stage
Tuesday 6th June 2023 Lords Chamber

I greatly regret the decision of SoftBank to list Arm only in New York rather than pursue a dual listing, which should have been the desired course for what is essentially a British company. We cannot afford to miss other similar opportunities for London. The number of companies listed in London has declined by 40% over the last 14 years. I doubt that putting the FCA in charge of listings will reverse that regrettable decline. I apologise for taking so much of your Lordships’ time, but all of this is very important. I beg to move.

[Baroness Lawlor (Con)]

My Lords, I support Amendment 3A of my noble friend Lord Trenchard. It is important to keep track of retained, revoked or modified EU law for this important sector. Businesses must know where they stand. Unlike the initial intention behind the REUL Bill to revoke all retained secondary legislation identified on the dashboard—some 4,000 or so laws before the Government changed course— financial regulation will be under the Treasury, and will not necessarily be revoked or retained. It may be modified; it may be revoked; it may be retained, but it will be for the Treasury and the regulators to decide.

I approach the amendment, as I did in Committee, in the hope that the Treasury will move rapidly to restore UK law for the sector, which has helped this very important sector to lead in the world over 200 years, rivalled only, as my noble friend Lord Trenchard said, by New York. But since leaving the EU, the UK has been burdened by the complications and costs of dealing with two different legal systems, something I have touched on in the REUL discussions. That is the code-based EU law and its precautionary approach, and common law which is, for want of a better word, an enabling law, under the jurisdiction of and tested by UK courts, and capable of being both precise and nimble to accommodate our entrepreneurs.

In Committee, there were amendments to encourage greater openness by the Treasury and the regulators. My concern is that Treasury thinking is in danger of slipping into the EU approach to legal thinking: that code-based precautionary approach, on which my noble friend Lord Trenchard has touched. Not only does that approach lack transparency, but it is not necessarily clear how it will be operated by the regulators. It is unequal to the fast-moving, innovative markets in the UK, and it is at odds with the competitiveness objective in this Bill. As a result, not only may businesses suffer from a lack of clarity about where they stand and how a regulation will be enforced, but they may feel it best to avoid an activity that could grow their business, increase trade and benefit consumers and indeed the wider economy.

Financial Services and Markets Bill

Baroness Lawlor Excerpts

Committee stage
Thursday 23rd March 2023 Grand Committee

The Government issued a call for input and have committed to explore options for the introduction of a new fund structure, the unauthorised contractual scheme, but I ask the Minister why we do not just go back to where we were before AIFMD and abolish it quickly. Only professional investors may invest in such funds anyway, and the consumer therefore needs no protection. It is not necessary to give the regulators time to consult on replacement rules, because there should not be any, and my amendment would ensure the immediate revocation of the directive and all its associated regulations. The Bill enables the Government and the regulators to do much, but I fear they will change little. It is therefore, in effect, largely an enabling Bill, and there are currently only a few clauses that bring about immediate changes. There is no time to lose; we need to start updating and simplifying the rulebook now. I beg to move.

[Baroness Lawlor (Con)]

My Lords, I support the noble Viscount’s amendment, to which I have added my name. My noble friend referred to the political background of the EU at the time of the AIFMD; he spoke about its impact on the industry, with great knowledge and experience, and about the opposition encountered at the time. I shall say a few words about each, beginning with the policy background, noting other differences between the UK sector and the EU sector, and other concerns raised by the House of Lords European Union Committee at the time.

Although businesses may have learned to live with the directive, as one person in the industry told me, it is not exactly something that helps competition or helps the sector to do as well as it might do—nor has it. At the time, the directive had a policy background. It was portrayed as a response to the financial crisis, but in fact it was already on the cards in the European Parliament in 2008. Discussions took place again in April 2009 at the G7. I see it, in terms of policy, as part of Michel Barnier’s commissionership for Internal Markets and Services between 2010 and 2014, when it was driven through as part of a raft of measures designed to promote EU monetary and banking union, including, for instance, the single supervisory mechanism. Monsieur Barnier’s overall approach was to have a centrally controlled and directed policy for the sector, reflecting the traditional approach of the French state to the economy and brought into the EU at its inception.

So, AIFMD should be considered in that context, rather than as suitable for the UK, which was outside the single currency and the economic union. Our financial model is based on markets, freedom and competition under UK law. Indeed, even in the context of the global direction of the sector leading to cross-border regulatory systems, it was seen from the European legal perspective as potentially having “undesirable effects”, with the need highlighted there to find the right balance between rules and freedom, according to the co-authors of a section in the Alternative Fund Managers Investment Directive, a multi-volume assessment, from a legal perspective particularly, published by Kluwer Law in the Netherlands in 2012. The co-authors of the chapter “Challenges from the Supervisor’s Perspective” were concerned about finding the right balance between rules and freedom.

Here in the UK, that balance has traditionally been struck by domestic law and regulation, which has accommodated innovation, competition and regulated risk in a diverse range of businesses. My noble friend Lord Trenchard spoke about those: hedge funds, private equity and, indeed, property. It has not been under a rule of law with a “one size fits all” approach, such as that of the EU, which reflected a different approach—a precautionary and code-based system of the law—that is ill equipped for our diverse sector.

My noble friend mentioned the differences between the UK and EU sectors. I would just add that, overall, when we look at the context, the UK sector is different in proportion, in size and in composition. Our financial services sector accounts for 8% of the UK economy—the same proportion as that of Canada and the US. By contrast, in the European states—in Germany and France—as well as in Japan, it accounts for just 4%, so half of ours.

Within the sector, the UK AIFs have a particular profile. According to the figures from ESMA collected for 2019—the last year when they were collected—before leaving the EU, the UK’s AIFs accounted for a net asset value of €1,338 billion, compared with €5,468 billion for the EEA 30, so about 20% of the net asset value. As my noble friend Lord Trenchard said, he puts the percentage of UK AIFs as a proportion of the EU at 85%. Other figures suggest slightly less, such as 75%, but it is not worth fiddling over the percentage—it is very significant.

That brings me to my third point. My noble friend mentioned many concerns at the time. I would just raise the concerns of the House of Lords EU Committee in February 2010. Commenting on the alleged or apparent aims to increase the stability of the financial sector and facilitate the single market in alternative investment funds, it noted that the discussions about hedge funds and private equity funds regulation had taken place at the EU level in 2008, with reports by MEPs in the EU Parliament, and before the G20 summit. The committee’s balanced report broadly welcomed and acknowledged the potential for risk and welcomed the co-ordination and supervision of fund managers, which would benefit the single market and the UK economy, as well as the co-ordination and supervision of arrangements. It also welcomed the introduction of passports for the sector.

None the less, it had serious concerns about a number of rather major points. It said that this was a directive designed to cover all non-UCIT funds. It said that there was a failure to acknowledge the differences in how AIFs are structured and operate, as well as a failure of proposed disclosure by managers to supervisors to take account of the different types of AIFs and the fact that the requirements should be proportionate and relevant. Above all, the committee was concerned that the directive should be

“in line with, and complement, global arrangements”.

It added:

“Coordination with the US regulatory regime … is essential to avoid a situation in which the EU alternative investment fund industry loses competitiveness at a global level as a result of regulatory arbitrage.”


To conclude, the AIFMD was designed for a different economic and legal system and is not suitable for the UK’s approach. It was seen at the outset to be unsuitable for our sector—one that is different in proportionate size and composition. It is ill suited to the supervision of individual firms and the diverse composition of the sector. It is also ill equipped for a market system under UK law; rather, UK arrangements should be in line with and complement global arrangements. As was explained by the House of Lords EU Committee in 2010, co-ordination with the US regime is essential.

[Baroness Penn (Con)]

My Lords, through this Bill, the Government are seeking gradually to repeal all retained EU law in financial services so that the UK can move to a comprehensive FSMA model of regulation. Under this model, the independent regulators make rules in line with their statutory objectives as set by Parliament and in accordance with the procedures that Parliament has put in place.

It is not the Government’s intention to commence the repeal of retained EU law without ensuring appropriate replacement through UK law when a replacement is needed. The Government set out their approach to the repeal of retained EU law in the document that I referred to earlier, Building a Smarter Financial Services Framework for the UK, which was published in December last year as part of the Edinburgh reforms. It makes it clear that the Government will carefully sequence the repeal to avoid unnecessary disruption and ensure that there are no gaps in regulation.

The Government are prioritising those areas that offer the greatest potential benefits of reform. They have already conducted a number of reviews into parts of retained EU law, including the Solvency II review, the wholesale markets review and my noble friend Lord Hill’s UK listing review. By setting out these priorities, the Government are enabling industry and the regulators to focus their work on the areas that will be reformed first.

My noble friend Lord Trenchard’s Amendment 246 relates to legislation implementing the Alternative Investment Fund Managers Directive in the UK. As has been noted, the UK is the second-largest global asset management hub, with £11.6 trillion of assets under management; this represents a 27% growth in the past five years. The sector also supports 122,000 jobs across the UK and represents around 1% of GDP. These statistics demonstrate the huge value of this industry to the UK and, while the Government would never be complacent, also suggest that the sector is in good health.

The health of the sector is underpinned by proportionate and effective regulation. The Government believe that this must include an appropriate regulatory regime for Alternative Investment Fund managers. These funds are major participants in wholesale markets; they take influential decisions about how capital is allocated, and it is vital that they are held to standards that protect and enhance the integrity of the UK financial system. Moving simply to repeal the legislation that currently regulates this sector without consideration of replacement could open the UK up to unknown competitiveness and financial stability risks. It could undermine the UK’s reputation as a responsible global financial centre committed to high standards of regulation, which could have significant ramifications for the UK’s relationships with other jurisdictions.

I understand that my noble friend Lord Trenchard has some concerns that the legislation deriving from the Alternative Investment Fund Managers Directive creates unnecessary burdens on innovative UK firms serving professional investors. The Government have not to date seen evidence that the reform of that directive is a widely shared priority across the sector.

[Baroness Lawlor (Con)]

Does my noble friend the Minister agree that UK law would be a better arrangement for supervising the sector than inherited EU law?

[Baroness Penn (Con)]

As I said at the start of my contribution, it is the Government’s intention to move all retained EU law when it comes to financial services into the FSMA model of regulation. That will apply to this area, too, but it is a question of sequencing and priorities. As I referenced before, we have set out our first wave of priorities and are seeking to look at those areas where the greatest potential benefits of reform lie. I am happy to confirm for my noble friend that it is our intention to move all areas of retained EU law on to a UK law basis.

[Baroness Lawlor (Con)]

Just for clarification, will that involve moving away from the precautionary, code-based approach of the EU, which very much influenced the sector post the 1990s and the thinking of our regulators? Will my noble friend confirm that, when the Government review the corpus of retained EU law for this sector, in line with their objects as has been stated, they will pay special attention to the need to rethink the framework of approach rather than simply adopting it? These are different ways of thinking.

[Baroness Penn (Con)]

My Lords, I would not want to pre-empt the approach for any specific area of regulation, but the principles on which we are seeking take forward this work are about looking at regulation and ensuring that we use the opportunities outside the EU to take the right approach to that regulation for the UK. My noble friend talked about the different perspectives taken by regulators in the different jurisdictions. That is right. The aim of moving from retained EU law is not simply to transcribe it into UK law but to ensure that it is well adapted to our own circumstances, too. However, I do not think that I can helpfully pre-empt the approach in each area in this debate, but only talk about some of those wider principles.

I was talking about the intention to move all retained EU law into the FSMA model. We have set out our priorities for the first areas in which we are seeking to do this. The Government have not to date seen evidence that the reform of the Alternative Investment Fund Managers Directive is a widely shared priority across the sector. However, the Treasury would of course welcome representations on this point. We are keen to engage further with industry and understand the sector’s priorities as we work to repeal retained EU law associated with alternative investment fund managers over the medium term.

The FCA also recently issued a discussion paper to consider whether wider changes to the asset management regime should be undertaken in future to boost UK competitiveness using the Brexit freedoms introduced by this Bill. This will allow the Government and the regulators to consider what replacement is appropriate for the legislation before commencing its repeal. For these reasons, I ask my noble friend to withdraw his amendment.

Budget Statement

Baroness Lawlor Excerpts

Thursday 16th March 2023 Lords Chamber

[Baroness Lawlor (Con)]

My Lords, I welcome the chance to speak in your Lordships’ House in the debate on the Spring Budget. I particularly welcome my noble friend Lady Moyo and congratulate her on an excellent maiden speech. I am very grateful to all your Lordships who have spoken in this debate. This is a subject dear to my heart, one on which I have worked for decades at my think tank, Politeia, with economists from Britain, Europe and indeed the United States.

I welcome the Chancellor’s determination to focus on tackling inflation, as I do the Budget and OBR forecasts that inflation in the UK is due to fall from 10.7% in the last quarter of last year to 2.9% by the end of 2023. I also welcome his determination to reduce debt as a proportion of GDP, and the forecast—with all the caveats your Lordships have given about forecasts—that the underlying debt to GDP ratio is due to start falling in 2027. However, I am a little concerned that until then, debt is due to rise from 92% of GDP to almost 95%. It is also heartening to hear that borrowing is due to fall each year, from 5.1% of GDP in 2023-24 to 1.7% in this five-year period.

However, I would like to encourage my noble friend the Minister and the Government to focus on a third problem, to which my noble friend Lord Bridges and other noble Lords have referred: the overall levels of UK public spending as a proportion of GDP. Among the G7 countries, the UK’s public spending, at 48% of GDP, may be smaller than that of other European economies, which ranges from 51% for Germany to 59% for France, but it is still more than the US economy, at 44.9%, and Japan, at 44.1%. We should not take comfort from such figures. The evidence is that economies that significantly reduce levels of public spending and debt and return to sound public finances can boost jobs and enhance growth, countering any effects of cuts. They do not necessarily result in lower outcomes for healthcare or education.

Over the last two decades, the evidence from a number of economists has been compelling. Schuknecht and Tanzi, very early in this millennium, identified expenditure-based consolidation, as did Schuknecht in a later study in 2020. It can have positive effects on the real economy and is more likely to lead to higher growth and lower debt. Antonio Alfonso, in a pre-pandemic analysis—albeit in a period when general levels of public spending across the G7 were much lower than now—showed that countries which kept public spending under 40% of GDP had among the best government performance.

Top of Alfonso’s table came countries with public spending at what now seems an almost magical figure of 32% to 33% of GDP: Switzerland and Austria, which performed well above average. Second, with slightly above average performance, came the next rank of countries: Japan, Canada and the US, whose public spending then was 37% to 40% of GDP. Germany belonged in that group in terms of performance, but its spending was slightly higher at 44%. Third came the UK, with below average performance, yet it spent about as much as Germany did at 43% to 44%. We can, however, take comfort from the fact that we still were ahead of the French, both in performance and public spending; their pre-pandemic figure was 55%.

In the same G7 economies, taking account of measures other than overall government performance, we can take heart from the evidence in areas such as economic stability, administrative performance, income distribution and social expenditure, public infrastructure—where Germany is usually top—health performance and education performance. While some countries did better and some less well, the overall message was equally encouraging: higher public spending does not necessarily lead to better performance in these areas.

It is therefore sensible that public spending plans after 2025 remain by and large unchanged, other than being topped up to reflect the defence spending and childcare changes on which your Lordships have commented with some knowledge. We will also see departmental budgets rise by 1% a year in real terms during this period. Sticking to such levels of public expenditure while raising the NHS and defence budgets will mean squeezes in other areas.

There is much to play for in adopting a more active approach to cutting overall levels of public spending. Not only has Britain’s economy prospered when government spending levels as a proportion of GDP have been kept reasonably controlled at approximately 40%; now, post pandemic, post Brexit, it is even more urgent that we encourage higher growth using the surest tool in our armoury: reducing public spending.

The UK is a market economy which benefits from freedom and competition under the rule of law. It does not prosper, as recent decades have shown, with high spending, high taxation and unnecessary regulation: it misses out on that elusive growth which successive Chancellors have chased and which has featured prominently in your Lordships’ debate today.

This economy prospers as a challenger economy into which new entrants and entrepreneurs can come and take pride, being rewarded, not penalised, for success. The high-tax, high-spending economy must be reversed. The Budget, which is to be welcomed as a step in the right direction, should be seen as work in progress. I hope that my noble friend the Minister and the Government will take a lead from the evidence that we must cut overall public spending to the 40% of GDP level, or less, if this country and its people are to use their talents and flourish, and exploit the freedoms they now have.

Financial Services and Markets Bill

Baroness Lawlor Excerpts

Committee stage
Tuesday 7th March 2023 Grand Committee

[Baroness Fox of Buckley (Non-Afl)]

My Lords, I enthusiastically support Amendment 186. I thought that the noble Baroness, Lady Tyler of Enfield, spelled out extremely articulately the importance of banking hubs and how that name could often be prosecuted for mis-selling. Even banks themselves, in terms of the service that they offer when you go into the few that are still open, can be accused of having only the minimum service required.

The noble Lord, Lord Hunt of Kings Heath, told a heartbreaking story about a 91 year-old but you do not have to be 91 and have a heartbreaking story. Things can just go wrong; your card can stop working or whatever. When you try to solve it on your phone and it does not work, you then go into the bank and, to be honest, you are treated as though you are wasting the bank’s time and as though you have done something wrong. The staff often cannot solve the problem and ask, “Why don’t you solve it online or on your phone?” The answer is that I would have done so if I could have done. In other words, I do not think that it is necessarily a special needs problem, as the noble Lord just said. I think it can happen to anyone. Sometimes, you need human intervention to sort out your banking.

I am also interested in supporting those amendments that would allow access to cash, including Amendments 180 and 181 in the name of the noble Lord, Lord Tunnicliffe. I especially like Amendment 189 from the noble Lord, Lord Holmes of Richmond, and its attempt to make cash critical national infrastructure in the UK; I also support Amendment 189A, which is headed “Access to physical banking services”.

I suppose I am concerned about noting that the importance of cash relates not just to those who struggle with their phones or other technology. This discussion sometimes implies that some of us are just Luddites who cannot cope or do not want to embrace the full excitement of new technology and digital futures. I want to emphasise that I can see the advantages of a cashless society. Mainstream cashless transactions carry certain information about payment participants, what was purchased and when, which can be a huge barrier to money laundering and tax avoidance. That is genuinely important but, for individuals as consumers, it can also mean—this may be slightly different to what others have emphasised—that it helps people with budgeting because they have electronic receipts and can see both what is going in and what is going out. I am rather enthusiastic about those technological steps forward; I do not in any way want to hold back the march of progress, in the way that some have implied.

However, precisely because cashless transactions mean that information about payment participants is available to financial institutions and banks in a different kind of way, they can also give those organisations huge surveillance capability and invasive powers in ways that we did not see so much in the past. It is then not about you taking cash out but about everything having to be recorded. This means that people are not able to do the things you could with discretion. It should be noted—this is not entirely being paranoid—that, in China, financial surveillance is used to censor and restrict people’s freedom to express opinions against the state.

Noble Lords might think that that would never happen in a democracy but, in a later amendment in my name—when I say later, I mean if it ever arrives; it is Amendment 241B, should anyone like to note that, because I do not suppose that anyone will be here to listen to my speech on it—I was inspired by payment processing in fintech companies, such as PayPal, and the move towards everything being cashless, with a cashless society and everything being digitised. This has meant that PayPal, for example, can close down accounts on the basis of politics; in fact, it has done so, so I am not just being paranoid.

There also tends to be a casual assumption that those who want to keep their financial transactions private—that is, by using cash from time to time—might be up to something dodgy, as though the only reason someone might want to be free to choose to use cash is if they are involved in embezzlement or tax fraud. Today, it has been much friendlier than that; people just assume that you are technologically incompetent and old-fashioned, so cannot keep up. We just have to be a bit careful about this. I have also noticed a trend where financial services are judging how individuals are making their purchasing decisions—judging their use of money in a way that they may not have done if were not quite so detailed.

Recently, I was interested that HSBC—my bank—was involved in a report that condemned people’s decisions about how much they spent on gambling and was backing affordability checks. I know that I disagree with some noble Lords in the Room on gambling—I can already see them—as I think that is a legal leisure activity and that you should be able to do what you want. The idea that the bank is saying that it has customers who spend too much on gambling, a perfectly legal leisure activity, and then gives a breakdown of them, indicates that rather than being a dispassionate financial service it is getting involved in things in a way that it perhaps should not. I have never gambled, but my bank could well send me a note about how much I am spending in TK Maxx, saying that has all gone a bit mad.

When we had cash, we took the money out, we spent it on what we wanted and nobody could see. A cashless society creates a slightly different situation. Amendment 186 on accessibility and Amendment 184 on levels of cash acceptance, along with the whole issue of digital exclusion and financial inclusion, are very important but do not quite capture some of the broader political trends associated with this issue.

I am also very sympathetic to the notion of the noble Baroness, Lady Noakes. On the one hand, cash is not a human right—I do not want to get stuck on that, as I am never keen on regulations lasting for ever; a time-limited sunset clause is a good idea—but I am anxious that we do not forget the political trends surrounding this by simply treating it as a technical issue.

[Baroness Lawlor (Con)]

My Lords, if I may come in briefly, I am very sympathetic to the aims of noble Lords who wish to see cash access and banking services available to those who need them and do not use or rely on digital. However, I agree with the aims of the Bill: international competitiveness and growth. I do not think that this Bill’s powers regarding the financial markets and services sector should be used in a blanket way to impose an obligation on service providers to provide a service whose use, by all accounts and evidence, is on the decline.

Not only do I support the two amendments from my noble friend Lady Noakes, but I think we should pay attention to the overall aims for the regulators in this Bill, which are international competitiveness and growth. I urge the Minister to focus on the real problem of access to cash and banking services for many people, and, where there is a problem or gap, to focus the efforts and use the powers of government on trying to deal with the declining number of users in our society—albeit a real group—rather than use the law to impose obligations in a blanket way on the sector, contrary to the aims of competitiveness and growth. As noble Lords have explained, such a move could undermine the competitiveness of the banking sector.

[Baroness Bennett of Manor Castle (GP)]

The noble Baroness appeared to be suggesting that the provision of services, including the cost, should be done by the Government and that the private sector should collect the profits. Could she clarify whether she was saying that?

[Baroness Lawlor (Con)]

I thank the noble Baroness for her intervention. No, I was saying that, when we use the law, we should be very careful not to impose the costs on providers if the aim of the law is to encourage competition. There are reasonable aims which are agreed to by the whole of society. It is a reasonable aim for society to require and want cash access. My heart agreed with the noble Baroness, Lady Tyler, as she powerfully moved her amendment, but we should draw a line between a blanket restriction on providers of these services and finding how government can help and encourage other providers of services to do it. I was just talking to other noble Lords in the Lobby about this. I know of voluntary groups, market groups and social providers which are out there helping such groups and finding ingenious solutions to meet the gap, where there is one.

[Lord Hunt of Kings Heath (Lab)]

My Lords, surely we have a situation in which the market is failing. In essence, the banks are not interested because they take the same view as that of the noble Baroness, Lady Noakes: that this part of the market is dying. They do not want to be involved because they want to be in a dynamic, new market. Faced with that and the 7 million people who use cash each year—in the current cost of living crisis that many people face, cash is used as a budgetary tool—what can we do if the market is clearly not providing? From our point of view, legislation is the only lever we have because none of the regulators seems that interested. Government departments are not; they are engaged in removing cash as much as possible. What is the alternative?

[Baroness Lawlor (Con)]

I thank the noble Lord for his intervention. I do not have an answer—I am sorry to disappoint the noble Lord—but this Bill is not the place for that. Its aims and purposes are to make the UK sector more nimble and competitive internationally so that it can move ahead in a post-Brexit world and we can all benefit from a successful financial sector. Putting caveats, restrictions and obligations on a sector can add costs to customers, consumers and all who use these services. However, I think that that is a good aim and is good to do. We should have a special committee to see how we can encourage use, short of using the law as a big stick on one sector of providers. There are many ways that have opened up in the market that are already providing use, which I can discuss later.

[Lord Tunnicliffe (Lab)]

My Lords, this is a key group for the Labour Party politically; it contains four of our amendments. Amendment 180 would require His Majesty’s Treasury and the FCA to publish a review of the need for

“access to essential in-person banking services”

and to ensure

“a minimum level of access”

to them.

Amendment 181 would require HMT to

“publish a policy statement setting out its policies in relation to the provision of essential in-person banking services, including … support for online banking, and maximum distances people can expect to travel to access services.”

I would be interested to know the Minister’s view on the reasonable distance for an elderly or disabled customer to have to travel to speak to someone from their bank.

Amendment 182 is perhaps the most important. It would compel HMT to

“guarantee a minimum level of access to free of charge cash access”.

Amendment 184 would require the FCA to

“monitor and report on levels of cash acceptance across the UK.”

I set out the crucial importance of free access to cash at Second Reading so I will not do so at length a second time; well, that is what it says here. Nobody has more interest in being speedy than me, or perhaps the Minister, because we have to be here for every minute of this Committee. We are almost in our 27th hour but this group is different from anything else that we have discussed. The rest of it—I cannot think of a polite way of putting it—is about activity that takes place for people like us. Quite a number of people work in the finance industry; we are looking at the nuances of it and how politicians should be involved.

However, the issue of cash is about our society. It is about the poorest and least competent people in our society. Technology has been a substantial disruptor. It is a disruptor that particularly applies to finance. It has allowed financial transactions to become extraordinarily efficient and has created a whole new customer base of people who are comfortable with technology. They have access to a whole new marketplace. We know that the dynamics of that have probably been benign for society.

However, the other problem is that it has created a divide in our society. I ran an organisation that used to have a lot of cash; I am all too familiar with the tremendous impact of approaching a cashless society. In all the knowledge in the world, the last bits are the most expensive bits. Yes, the cost of transactions goes up and so on and so forth, but we cannot afford to create the divide in our society that is emerging. We must support all parts of our society seriously. We must recognise that, in their lives, people sometimes need all banking services. We must recognise that some people simply cannot envisage how to budget without physically seeing it in separate pots. It is clearly a natural reaction if you are running out of money. You can see it there and have confidence because you know that, if you go into the grey world of accounts, banks, overdrafts, loans and things like that, all sorts of horrible things happen. For that group in society—it is probably 10% of our society so it is a substantial number of people—we must find a way of maintaining the public service. We must achieve a minimum service.

The noble Lord, Lord Blackwell, said what all providers of service say: if you are not ultra-efficient, you load the inefficiency costs on to other customers. It so happens that being ultra-efficient does not do much harm to your profit line either. Big businesses such as banks pursue the maximisation of shareholder value. It is in the law. They are supposed to do it, for Christ’s sake. We should not be surprised when they do but I rarely see them turning into charities. We have got to find ways. We do not have to keep all the branches open; even I can work that out. We have to be much more inventive in how we service this need, which is still large, but the way we must do that is by creating duties on the purveyors of financial services as well as rights and constraints.

It is proper for the law to create duties to look after the poorer members of our society. That is why so many people have said that it is important for a variety of needs—resilience and so on—that we maintain it. The banks must play their part. They have enjoyed massive exploitation—I do not use that in a pejorative sense—of information technology, probably more so than any other section of our society. They must recognise that there has to be a cross-subsidy in this situation because we must restore financial equity to all our society.

Financial Services and Markets Bill

Baroness Lawlor Excerpts

Committee stage
Monday 20th February 2023 Grand Committee

[Lord Vaux of Harrowden (CB)]

My Lords, after a number of days in Committee and at Second Reading, it is clear that the major theme of scrutiny of the regulators has emerged and that we have an extraordinary level of cross-party agreement on the Bill—almost unprecedented, as the Minister will see if she turns around and looks behind her.

This is so important because, as the noble Lord, Lord Forsyth, just said, the Bill transfers huge amounts of power to the regulators but does very little to provide Parliament with the means to scrutinise what they do. This has been raised by a number of parliamentary committees, including the EU Financial Affairs Sub-Committee, of which I was a member before it was wound up, and the European Union Committee, among others. The Bill does give strong oversight, scrutiny and direction rights to the Treasury but that is not the same as parliamentary scrutiny.

The Minister said this at Second Reading:

“It is also imperative that the regulators’ new responsibilities are balanced with clear accountability to the Government and Parliament. I assure noble Lords that the Government recognise the importance of parliamentary scrutiny of the work of the Treasury and the regulators.”—[Official Report, 10/1/23; col. 1332.]


However, nothing in the Bill does that. All the Bill does at the moment is make requirements for the regulators to notify the Treasury Select Committee of the consultation and for the regulators to respond in writing to responses to any statutory consultations from any parliamentary committee.

I am sorry, but that is not the same as providing for genuine parliamentary scrutiny of the activities of the regulators. Are the regulators meeting their objectives? Are they protecting consumers from excessive risk and fraud? Are they ensuring stability? Are they carrying out their activities efficiently? Are they encouraging growth and competitiveness? Are they acting in accordance with the climate change rules? Are they horizon scanning for future risks and so on? Nothing in the Bill, as currently drafted, provides for real parliamentary scrutiny as I would understand it.

I am afraid that the noble Baroness has form in this respect. Perhaps I could take her back a few months to the discussions we had around the UK Infrastructure Bank Bill when we queried her reference to parliamentary scrutiny of various documents within that. To paraphrase, she suggested that the more informal parliamentary scrutiny, such as the ability to ask Oral Questions and such like, was sufficient. We seem to be heading down the same way with this Bill. It is not acceptable.

The other day, the noble Lord, Lord Bridges, set out with his usual clarity the three things required for effective scrutiny of the regulators. To paraphrase, they were reporting, independent analysis and parliamentary accountability. There are various amendments in this group and the next group dealing with the third of those: parliamentary accountability. I have added my name to those in the name of the noble Baroness, Lady Noakes, which aim—as she has explained—to create a bicameral committee that will focus specifically on scrutiny of the financial regulators.

I have long argued that financial regulation is such a large subject, so complex, and dealing with such an important sector of our economy, that it deserves a committee dedicated to it. It is just too big to be able to be meaningfully scrutinised by a committee that covers a wider subject area, such as the Treasury Select Committee of the Commons, the Economic Affairs Committee or the Industry and Regulators Committee, as we heard a minute ago. I strongly support the idea of creating a new bicameral committee that will focus specifically on this subject.

Importantly, Amendment 87 from the noble Baroness tries to widen the scope of parliamentary scrutiny. It says that:

“The FSRC—


the new committee—

“may examine or otherwise oversee the administration, policy and operations of”

the various regulators and may examine any consultations and reports issued by them. I am slightly nervous about the word “oversee” as I worry that might imply interference in the independence of the regulators. More importantly, I also want to add that the new committee should consider the impact of the regulators, in addition to administration, policy and operations. As I have said before, it is really important that the scrutiny is forward-looking, that we are horizon scanning for future risks, so I would widen the amendment further rather than it just being backward-looking. As I say, I wholeheartedly support the principle of a new, properly resourced bicameral committee with a much wider remit than the narrow focus that the Bill currently provides to the Treasury Select Committee. As we have heard from the noble Lord, Lord Forsyth, the involvement of this House is incredibly important. There is enormous expertise throughout the House.

I recognise that there are other ways of achieving proper parliamentary scrutiny, as we can see from the various other amendments in this and the next group in the name of the noble Lord, Lord Forsyth. I am not going to get too religious about this. It is clear that there appears to be near-unanimity on the importance of strengthening the arrangements for parliamentary scrutiny of the regulators and of the Treasury, as the Minister said at Second Reading, given the greater responsibility this Bill pushes on to the regulators.

In the interests of time, I am not going to speak on the next group. It would just be repeating what I am saying now. But I hope the Minister will take it as read that I support the theme and concept in the next group. just as I do within this one. What I hope will now happen is that the Minister and all interested Peers can get together between now and Report to try to come up with something mutually acceptable that we can all get behind. Is that something the Minister can facilitate?

[Baroness Lawlor (Con)]

My Lords, it is a pleasure to follow the noble Lord, Lord Vaux of Harrowden, and I support the amendments in this grouping proposed by the noble Baronesses, Lady Noakes and Lady Bowles, the noble Viscount, Lord Trenchard, and others, for the reasons which have been explained. I have an indirect interest in this subject, which I declare. As a founder and research director of Politeia, I have been involved in publishing some analysis on the question of regulation and, indeed, contributed myself on a problem which is very great in Britain now, that of accountability, and more generally this regulatory state into which we have slipped.

My Amendment 175 should be seen as complementary to this grouping. Its aim is slightly different but complementary; it is designed to focus scrutiny ex ante on the rules proposed. The focus is on new, adapted or maintained regulations that are due to come into operation and to consider how consistent, predictable and transparent they will be, as well as how much they will be in accord with the law. Given the fast pace of how the sector works and the speed with which, by necessity, regulators must act and decide things, it is important that we have this external check before rules come into operation. The regulators will have the power to intervene and make new rules within the broad terms of the law, if they judge that they should, without the searching analysis and testing that are needed beforehand. The sector will in most senses be a guinea pig for this process.