Exiting the European Union (Financial Services)

Debate between John Glen and Craig Tracey

Monday 18th February 2019 Commons Chamber

[John Glen]

I have listened carefully to the hon. Members for Oxford East (Anneliese Dodds) and for Aberdeen North (Kirsty Blackman) and my hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake), and I will endeavour to respond substantively to their points as succinctly as I can.

Before I get into the detail, it is important to set the context. The Treasury’s role is to take through the House the statutory instruments, 53 of which relate to financial services, that would be needed in a no-deal scenario, as well as the in-flight files Bill. Those two activities constitute the Treasury’s necessary intervention to ensure that if a deal is not forthcoming—obviously, the Government’s expectation and what we are working towards is that one will be—we will have a functioning regulatory regime in place. These two SIs sit underneath the powers taken in the withdrawal Act, and they do not seek to change the legislative effect. They seek to onshore legislation that already operates through our membership of the EU.

[Craig Tracey (North Warwickshire) (Con)]

The Minister has talked a lot about the importance of financial services, and I completely agree with that. There is often a perception that financial services are all London-centric, but the insurance industry, for example, employs 300,000 people, and two thirds of those are around the UK. It is fair to say that getting this legislation right will protect all our constituents across the country.

[John Glen]

My hon. Friend is right: 63% of the 1.1 million jobs in financial services are outside London. It is important that we have this provision in a no-deal situation.

The hon. Member for Oxford East opened her remarks with concerns about the purpose of a debate on the Floor of the House. I am happy to have a debate on the Floor of the House or in Committee tomorrow morning, tomorrow afternoon, Wednesday morning or Wednesday afternoon, just as I was happy to have the debate last week on securitisation, which was also a business-as-usual SI.

A range of points have been raised, and I am happy to try to tackle them. The hon. Member for Oxford East talked about there being no policy explanation in the explanatory memorandum for the disclosure regulations. The explanatory memorandum clearly sets out the reasons for the amendments, which are essentially to make consistent the safeguards that apply to EEA and non-EEA regulators. She asked about the consolidated text not being available for the debate. It is not normal practice for the Government to provide consolidated text for secondary legislation debates, but I will look carefully at her remarks and write to her if I can give any more clarification.

The hon. Lady asked about the reliance on secondary legislation. As I said, the central objective of the SIs is to provide legislative continuity as far as possible for firms, and the withdrawal Act does not allow policy changes beyond what is necessary to ensure that legislation is operable on day one of leaving the EU. I note the areas where she alleges that there is that effect. I will look carefully at that and give her more clarification if I can, as I have always done in our debates in Committee.

The SIs are subject to the usual scrutiny provided by the Joint Committee on Statutory Instruments and the Secondary Legislation Scrutiny Committee. Additionally, in the case of financial services SIs, the Treasury has taken the step of publishing drafts of the legislation in advance of laying, to maximise transparency about the provisions and ensure that stakeholders are aware of the changes. I note the hon. Lady’s comments about the EY report, and I also recall the remarks of the deputy governor of the Bank of England, Sam Woods, with respect to contingency arrangements made by firms in the City. That is broadly being played out at the moment. It is an uncomfortable process, which is why it is imperative for us to get the deal that is the Government’s policy, although it is right that we make these arrangements in case that does not happen.

The hon. Members for Oxford East and for Aberdeen North asked about the impact assessment of the disclosure regulations. The legislation on the disclosure of confidential information primarily relates to how the UK, EEA and third country authorities disclose confidential information with one another. There is nothing in these regulations that will require firms to change how they do business.

The definition of money market funds has been updated to reflect that, in a no-deal scenario, only those funds that have been authorised under this UK regulation at this point may use the strict designation of money market funds—the hon. Member for Oxford East rightly explained the genesis of it—and to allow those funds that are permitted through the temporary permissions regime to use that designation.

The hon. Members for Oxford East and for Aberdeen North also asked about the FCA’s resourcing. For the House’s edification, the FCA has a total of 158 full-time employees working on Brexit; that number increased from 28 in March last year. The hon. Member for Oxford East asked about Gibraltar. The SI dealing with Gibraltar has been laid and will be debated in due course.

I have addressed a number of the common themes raised by the hon. Members for Oxford East and for Aberdeen North. I will now briefly turn to the comments from my hon. Friend the Member for Thirsk and Malton. He used the debate to rehearse some of his normal themes about bank regulation. I always listen carefully to what he says. We had a conversation last week, and I will write to him on the matter he raised and reflect carefully on his comments.

These SIs are required to ensure safe disclosure of confidential information in the event that the UK leaves the EU without an agreement, that the regulation of money market funds continues and that the legislation functions appropriately if the UK leaves the EU without a deal. The approach taken in these SIs aligns with other SIs that we have laid and will ensure a smooth transition, to reflect the UK’s new position outside the EU. I hope that Members across the House will join me in supporting them in the Lobby.

Question put.