Financial Services and Markets Bill

Debate between Baroness Lawlor and Lord Moylan

Report stage
Tuesday 13th June 2023 Lords Chamber

[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.

Higher Education (Freedom of Speech) Bill

Debate between Baroness Lawlor and Lord Moylan

Consideration of Commons amendments
Tuesday 21st March 2023 Lords Chamber

[Lord Moylan (Con)]

My Lords, I am conscious that, as a Conservative Back-Bencher loyally supporting the Government in season and out, I am probably a Member of this House worthy of least consideration when it comes to discussing the contents of this Bill. Despite my having taken part at every stage in its progress so far, I think I am forgiven for being somewhat confused.

We started out with a proposal for a statutory tort, which I am going to call “hard tort”. I turned out to support it, not only out of loyalty but because I strongly believe in it. On Report, recognising that there were some concerns about it, I had the privilege to table an amendment that had previously been tabled in Committee by my noble friend Lord Sandhurst, which would have retained the tort but allowed a judge to stay proceedings and instruct mediation to take place. I thought that a good compromise that could have been accepted, and I am going to call that “middle tort”.

However, my noble friend the Minister pre-empted me to some extent by coming forward with a proposal which allowed the tort to be accessed only after every possible complaints procedure had been exhausted; we might call that “soft tort”. Your Lordships’ House voted for “sort tort”, and then went with the noble Lord, Lord Willetts, and voted to remove the clause all together in addition, which we can call “no tort”.

Today I have turned out loyally, because I am encouraged to do so, in order to vote for “hard tort”. Here I am, and with only half an hour to go I see that the noble Lord, Lord Willetts, has now moved to the “soft tort” position and I am expected to give my support to it. So this is not simply a question of “how do you manage your team?”—that is a minor consideration and purely a whipping matter—but of what it is we are actually saying to the world with these goings on.

The noble Lord, Lord Triesman, said that the important thing here is that the Bill sends a signal to universities. It does in my view send a signal to universities: that this Parliament and this Government are not as concerned about how universities conduct themselves to maintain freedom of speech, as a principle and as an activity, as the Government originally said they should be. That is clearly the signal it sends, and as I have said before in Committee, strong emphasis is being placed on the role of the regulator because regulators are subject, wherever they appear, to capture by those being regulated. That is very much why those who support this, and the university leaders, are very comfortable with it.

Like the noble Baroness, Lady Fox of Buckley, I note that in the various choices between “hard tort”, “mid tort”, “soft tort” and “no tort”, at the end of this debate we will still have no idea. My noble friend has said that when it returns to the Commons, as it must, there will be scope for further compromise. Who knows what is going to come back—“hard”, “mid”, “soft”, nothing? Anything could come back to us from the Commons because clearly, the Government do not know what they want to do about this.

I strongly suggest to noble Lords that not only have we misconducted ourselves, as far as the management of this is concerned, but we are sending a very poor signal. It is most regrettable that we will agree to the amendment in the name of my noble friend Lord Willetts today. Like the noble Baroness, Lady Fox of Buckley, I very much hope that, when the Bill comes back from the Commons, someone will have found their backbone and the tort will have been restored.

[Baroness Lawlor (Con)]

My Lords, I apologise that I did not speak in the earlier debates on this matter because, as I recall, I had not made my maiden speech. I simply add my voice to those who regret my noble friend Lord Willetts’s Motion A1, which I do not support because, as other noble Lords pointed out, it waters down the small protection that existed with the original Clause 4 for academics in many institutions.

An institution has great power: it has powers of office, of man and woman power, of employment and of funds. The original Clause 4 gave a simple and cheaper way for an individual academic who was suffering because his or her freedom of speech was under threat. I assure noble Lords that it is under threat in many universities, and especially the one I know best: my own university, Cambridge. Hardly a day goes by without threat after threat reaching the newspapers of academic freedom being impinged on. I draw noble Lords’ attention to Arif Ahmed’s publications and submissions to an earlier Committee on the Higher Education (Freedom of Speech) Bill. The problem has not stopped.

For those reasons, I am worried about Motion A1 going through. It will make life much more expensive for individual academics, who often plough a lonely furrow against top-heavy and powerful institutions. I would like to restore the original Clause 4, which gives a straightforward and cheaper alternative to someone taking action against an institution. I do not believe that there will be vexatious causes that involve universities or institutions in long and litigious claims that cost money and time, because existing law covers these matters in many respects. Cheaper claims can be dealt with under protocols before action or by agreement.

So Clause 4 is necessary not only for free speech but for free thought. It is not just about student union bodies, although they should observe this; it is about how academics pursue their subjects and whether their reading lists and courses are in line with official thinking—universities have a powerful officialdom. For those reasons, I remind my noble friend Lord Willetts of his having to be smuggled into the University of Cambridge not many years ago. I do not believe that my noble friend’s amendment would prevent that happening again. I thank noble Lords for their attention.