Official Listing of Securities, Prospectus and Transparency (Amendment etc.) (EU Exit) Regulations 2019
Lord Adonis Excerpts(5 years, 10 months ago)
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Lord Adonis
At the end insert “but this House regrets that no consultation was undertaken on this instrument despite the impact on businesses, particularly those involved in capital markets.”
Lord Adonis (Lab)
My Lords, perhaps also for the avoidance of doubt I should make it clear to the noble Lord, Lord Sharkey, that this is not a fatal amendment; it is a regret amendment. I have laid other amendments to the later statutory instruments.
The noble Lord, Lord Lilley, who made a fleeting appearance in our proceedings earlier, said that I have a reputation in the corridors of the House for being obsessive about these statutory instruments. I take that as an extreme compliment because, in my experience of politics, it is only the obsessive people who tend to get things done. Indeed, it is because of the Brexit and Eurosceptic obsessives, whose work goes back now 30 years, that we are in this mess to begin with. If it was not for obsessive anti-Europeans and Brexiters we would not be here. It is time for obsessive moderates like myself to start asserting ourselves. Unless the obsessive moderates assert themselves, the obsessive extremists, who seem to have taken charge of both our major political parties at the moment, will triumph. That is not in the national interest. I plead guilty to being an obsessive. I shall be obsessive about many more of these instruments, both this evening and for many days to come, because it is in the public interest that we are.
When the Minister, for whom I have great respect—I never cease to be astonished that he and the noble Lord, Lord Young, are still members of this Government as they are one of the most extremist Governments I have ever observed in my political lifetime—says that these regulations are necessary in order that we do not crash out with no deal, it is the Government of which he is a member that have a unilateral power to end no deal. This evening the Government could end the prospect of no deal by either making clear that they will apply for an extension of Article 50 or by using the power that they have to unilaterally revoke Article 50. For the noble Lord to try to cast on us the responsibility for a no-deal Brexit, which is entirely the creation of Her Majesty’s Government, is a true Alice in Wonderland situation.
Lord Bridges of Headley (Con)
I should declare an interest as I am an adviser to Banco Santander and take considerable interest in these matters. Is the noble Lord saying that the finance industry, including UK Finance, agrees with him that there has been no consultation whatever?
Lord Adonis
My Lords, there has been no public consultation. The bank to which the noble Lord is now an adviser may have been consulted. I do not know. He can perhaps tell us—because private sources of information are the main ones—whether it has been one of the organisations which have been engaged with privately by the Government.
Lord Bridges of Headley
I had not had direct contract with the Government on these matters. However, I shall read to the noble Lord a newsletter that has just come into my inbox from the CEO of UK Finance:
“We are working closely with members and partners with regard to onshoring, to emphasise continuity with EU law and to avoid sudden and unpredictable legal changes in the UK in light of a ‘no-deal’ outcome. We have to date assessed close to 40 legal instruments relating directly to financial services which have been published and/or laid in Parliament, with a handful more to come. We have also responded to a number of onshoring relating consultations issued by the Financial Conduct Authority … and the Bank of England”—
a point that I am sure the noble Lord will have heard Sam Woods make to the Select Committee in the other place last month. Therefore, what precisely does he mean when he says “no consultation”? Does he mean “no consultation” or “extensive engagement”?
Lord Adonis
I mean precisely what the Government themselves say in paragraph 10 of the Explanatory Memorandum of these regulations:
“HM Treasury has not undertaken a consultation on the instrument”.
That is what I mean.
Lord Bridges of Headley
The noble Lord needs to be very clear, because that paragraph then goes on to say that the Treasury,
“has engaged with relevant stakeholders on its approach to financial services legislation under the European Union (Withdrawal) Act 2018, including on this instrument, in order to familiarise them with the legislation ahead of laying”.
Therefore, there has been extensive engagement. Perhaps the noble Lord would be very precise on this matter.
Lord Adonis
My Lords, I read the words of paragraph 10 very precisely. Regarding the engagement with stakeholders, the noble Lord should be very careful about making himself a defence industry for the Treasury on these matters. The reality is that there has been engagement with stakeholders—it says so here. However, the only way that we will know about the engagement is if those who have been engaged with relay that to us. If they are fortunate enough to have former Ministers such as the noble Lord retained for these purposes, those people may tell the House via a circular route what has been happening. However, the way in which our parliamentary processes should work is that the consultation should be conducted formally and publicly, with the results being formally published and reported. That is not happening in the regime that is being set up at the moment.
The noble Lord is a former Minister in the Cabinet Office. It is the rules of the very department in which he was a Minister that require in all other circumstances, apart from these no-deal regulations, a formal 12-week public consultation. I am surprised that he should somehow think that it is adequate for that to be replaced by engagement with relevant stakeholders, undefined in paragraph 10.1. The noble Lord has aided the House greatly by starting to read out some of those who have been consulted with. There is no other way, apart from his intervention, in which we would have known who these stakeholders were. The way that this whole process is being conducted at the moment is utterly inadequate.
Lord Bridges of Headley
I am making the point that the noble Lord’s amendment—I am obsessive about these things—includes the words “no consultation”. This House should be absolutely aware that there has been plenty of engagement. I am sure that if he were to write to UK Finance and others, he would find out more. I totally accept the point that several on the Liberal Democrat Benches have made about the inadequacy of some of the processes. I was fully aware of that when we started and that point was well made. However, it is very important that when we have these debates we are very accurate. As far as I understand it—I have not been directly involved in this matter at all myself—there has been quite extensive engagement, so I would like the noble Lord to make that clear to the House.
Lord Adonis
My Lords, the noble Lord said that I should be precise and accurate. My amendment to the Motion says that,
“this House regrets that no consultation was undertaken on this instrument”.
Paragraph 10.1 of the Explanatory Memorandum in respect of these regulations says:
“HM Treasury has not undertaken a consultation on the instrument”.
Those are the exact words, so I cannot understand at all the point that the noble Lord is making. He is trying to excuse the fact that there has not been a consultation by saying that there has been a lesser form of engagement. However, that engagement is not a substitute for formal public consultation. Is he suggesting that it is an adequate substitute?
Lord Bridges of Headley
I am more than happy to rise on this point. Obviously I would much rather not be in this situation, having voted to remain, but, given the time that we have, I think that the Treasury has done an extremely good job with the level of consultation that it has undertaken, as have the regulatory bodies. I completely understand the desire of the noble Lord and others in this House to have proper scrutiny of this SI, but I just wish to make sure that all Members of this House are aware of the situation. The noble Lord is quite right that there has been no formal consultation but there has certainly been extensive engagement and it is very important that we make that clear.
Lord Adonis
I am grateful to the noble Lord for making that clear. However, perhaps I may also make it clear to him that the time we have available is down to the Government. It is not because of some extra-terrestrial force that has been at work; it is because of the Government that we are operating within these confines. It is therefore absolutely appropriate that noble Lords who do not accept that we should be in this straitjacket in the first place do not accept for a moment the point that the noble Lord has just made—that dispensing with normal parliamentary and government procedures in respect of consultation is satisfactory because we are limited for time.
Lord Bates
Again, I thank noble Lords for their contributions to this debate, which has been very useful and has focused on two themes, as will I. The first is about process, the second about the level of consultation or engagement. I will try to put some points on the record and address the specific technical points raised by the noble Baroness, Lady Bowles, and the noble Lord, Lord Tunnicliffe.
What we are doing here is onshoring the regulations that already exist, which have gone through a scrutiny process involving the European Commission and regulators in the EU, the European Parliament and our own House. We are onshoring those to the UK. These are exceptional circumstances; they are not normal circumstances in which we are doing it.
The criticism seems to be: why have we waited so long? It is worth putting on the record here that the powers by which we are undertaking this process were set out in some detail by the EU withdrawal Act. I think I said, wrongly, that there were only 10 hours of consideration about the Section 8 process. In fact there were 12 hours of consideration of this process, which was then adopted by both Houses of Parliament.
However, the EU withdrawal Act did not get its Royal Assent until 26 June. I tried to find out—given that the enabling power we had was available on 26 June last year—when the first of our SIs was laid under this process, given that the charge that has been made is that the Treasury has been somewhat dilatory in its approach. The first SI was laid on 16 July. That is not exactly a long gap between Royal Assent, having the power and actually beginning the process. We started debating these for the first time—the noble Lord, Lord Tunnicliffe, the noble Baroness, Lady Kramer, and many familiar faces will remember our first hour in the Moses Room talking about the broad principles—on 17 October, and we have been going more or less every week since then with new SIs coming through.
I want noble Lords, particularly my noble friend Lady Altmann, who I know has a great deal of expertise in this area, to feel reassured that what we are dealing with here are rules and regulations which the industry was already operating by, but under a different regulatory system, that we are now bringing onshore and applying fixes using powers and scrutiny that were set out by the EU withdrawal Act. In a timely process, we have brought that forward. I cannot claim that that will satisfy everybody, but it is worth putting that position on the record.
On whether it was consultation or engagement, in many ways we are discussing the words and phrases of it. What we are talking about here is not a normal consultation. I readily accept the point made by the noble Lord, Lord Adonis, that the rules on consultation are laid down by the Cabinet Office. As set out, they involve a particular process. That is why we are always very careful when we say “consultation” at the Dispatch Box; it has a particular formula attached to it. We might instead say “engagement”. We have consistently used the term “industry engagement” through this process. As came out in the contributions from the noble Earl, Lord Kinnoull, and my noble friend Lord Leigh, industry has been almost the wind in our sails, urging us to get on with this, because of the consequences of not having these safeguards in place, leading to a cliff edge. There has been a push. My noble friend Lord Bridges highlighted the report by Stephen Jones in his UK Finance newsletter. I see my noble friend Lady Wheatcroft in her place, so I hesitate to summarise it in this way, but in terms of the City there are effectively only two main bodies: there is UK Finance, which represents a substantial body of financial services, and TheCityUK. My noble friend Lord Bridges referred to UK Finance.
Lord Adonis
Everything that the Minister has said is based on the premise that we are dealing with a no-deal situation. All the bodies to which he has referred, given the choice between no deal, a deal and not having Brexit at all, would infinitely prefer having no Brexit or having a deal. The circumstances in which the Minister seeks to justify the use of what are essentially exceptional decree-making powers on the part of the Government are circumstances entirely of the Government’s own making.
Lord Bates
This is a separate debate. The noble Lord is moving his amendment, expressing regret from your Lordships’ House that there has been no consultation with industry on this measure. That is what his amendment says, as my noble friend Lord Bridges pointed out. I am not trying to raise the temperature to the same level as perhaps existed earlier in the Chamber; I am trying to maintain it at a level where we are focusing on the legitimate scrutiny which the noble Lord and the noble Lord, Lord Davies, are applying to this process. My noble friend Lord Bridges talked about UK Finance; I was about to quote TheCityUK.
Lord Bates
The official position here is that, under international trade law, we cannot favour some countries’ public bodies and not others. It is all or nothing. I take it that I may have other opportunities this evening—perhaps into early morning—to put on record the words of Miles Celic, chief executive of TheCityUK, and of the Investment Association, responding to the engagement which they have had with us. A lot of the issues which have been raised will come up again and I will respond to them then.
Lord Adonis
My Lords, the longer this debate has gone on, like so many of our debates on these no-deal regulations, the clearer the case has become for having this consultation. In the last 15 minutes, prompted by my noble friend Lord Tunnicliffe, a very important issue has arisen about the distinction between EEA and non-EEA states when it comes to the new listings and publications regime. The noble Baroness, Lady Kramer, brought up the exceedingly important policy point underlying it. This is not my area—my role is simply to facilitate the proper scrutiny by Parliament of these important changes to the law—but it has become ever clearer as this debate has gone on, let alone all the others we have had, why there should have been proper consultation.
Some noble Lords have said that these are exceptional circumstances. I repeat the point that, first, these are exceptional circumstances of the Government’s own making. We are not talking about acts of God here; these are acts of the Government and the Government could correct these acts. The second point was made by the noble Baroness, Lady Altmann, and is incredibly important. The precedents we are setting in the examination of the statutory instruments and the processes we require to put in place, given that we are going to have a cascade more—particularly if we do indeed Brexit at the end of this process, because we are going to have literally hundreds of these, year by year—will all be cited.
The noble Lord, Lord Bridges, says that it is all very well, we have engagement not consultation, and the noble Earl is relieved that his industry is not actually going to be trashed by this regulation, although there are many others that will do so in due course if we Brexit. He says that we should get on with it and that the people he knows are very grateful that they have at least had the opportunity to engage. I tell the House that, once these precedents start to be cited, we can wave goodbye to the normal Cabinet Office processes and procedures for conducting consultations. That is what will happen. That is what always happens once you start sliding down this kind of slippery slope.
The Minister quoted TheCityUK in respect of this instrument. It is important to understand TheCityUK. I have been reading its representations and what it thinks about how the Government have handled the Brexit process in relation to financial services. Shortly after the Brexit referendum, in September 2016, the same guy the Minister quoted said:
“While at this stage it is too early to talk about conclusions from the Brexit negotiations, access to the single market on terms that resemble, as closely as possible, the access the UK currently enjoys is the top of our list”.
That is what this organisation said.
Then, when the Government published the political declaration with the withdrawal agreement at the end of last year, which marked a significant retreat from the objectives that were set out before in terms of mutual recognition, TheCityUK said:
“Mutual recognition would have been the best way forward. It is regrettable and frustrating that this approach has been dropped before even making it to the negotiating table”.
That is what these vital sectors of our economy think about what is happening at the moment. The fact that they are clutching at the straws of having no-deal regulations in place that prevent catastrophe if we leave in five weeks’ time with no arrangement whatever with the EU is no excuse at all for the way this whole business is being handled and for the discarding of our normal processes and procedures.
I make no excuse for detaining the House at this hour. I would be very happy to carry on these debates with the Minister into the early hours if it would bring about change in government policy. He is normally very open to these matters, so maybe it is an invitation to keep going for a long period, because we might then get proper processes of consultation and engagement in place. As a poor substitute for that, I beg leave to test the opinion of the House.
Benchmarks (Amendment and Transitional Provision) (EU Exit) Regulations 2019
Lord Adonis Excerpts(5 years, 10 months ago)
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Lord Adonis
Leave out from “that” to the end and insert “this House declines to approve the draft Regulations because no consultation has taken place on them despite Her Majesty’s Government’s economic assessment indicating that transition and associated costs will be significant”.
Lord Adonis (Lab)
My Lords, the same issues basically apply on this regulation as on the last and I am not going to repeat the arguments. However, I would like to ask the noble Lord a question about the impact assessment which is published alongside the instrument. The costs in respect of this benchmark regulation, although considerable for each individual firm at £520, are less considerable overall because it is a much smaller number of firms. However, the footnotes to the impact assessment say:
“This refers to the current number of approved benchmark administrators. Given the regime is not yet fully in force, we expect this number may increase”.
Can the Minister give some indication of what level the number is expected to increase to? Again, I am not familiar with this sector and I do not know whether we are talking about it increasing by dozens or hundreds. However, I would like to get some sense of whether the total burden which this regulation alone is going to impose on the sector is in the thousands of pounds or the millions of pounds. It would be useful to have the figures. I would be grateful if the noble Lord could tell us what the estimate is, as the new benchmarks regime comes into place, of how these numbers will increase, so that we can put on the record a more accurate sense of what the actual burden is going to be.
Baroness Kramer (LD)
My Lords, I have a really serious question that I want to put to the Minister. I am concerned that one of the effects of this SI—I am not going to oppose it because I think that we have no choice but to allow it through—is to separate ESMA from the UK regulators of benchmarks administered in the UK. In this House and elsewhere, and I am sure that I have said it myself, we frequently talk about the excellence of UK regulators, but I am afraid that the history of the UK regulation of benchmarks is one where we frankly have to hang our heads in shame. The Libor scandal, which was finally exposed six or seven years ago, had clearly been a scandal in play for at least a decade. It represented a prolonged period in which Libor particularly, but other benchmarks as well, was being manipulated by the banks to achieve particular outcomes.
The regulator did not identify the problem and, when the regulators decided that they must act after much of this was exposed—primarily by US regulators and in the US media—found that at the time it was not even illegal to manipulate a benchmark in the UK. Consequently, the regulators were pretty powerless. I think that a couple of people have been brought to account, but very few of those who were engaged in or knew about this process—and certainly not the raft of senior management that benefited from the exceptional profits that led to higher pay for chief executives and others, year after year. It was a huge scandal.
Immediately after the scandal was exposed, the United States took the view that the UK regulators were so weak and so essentially complicit in this area that the US itself, particular for any dollar-denominated transactions, should become the locus of benchmarks. Obviously the UK fought back, because it is an iconic role seen as significant to underpinning the UK’s status as a global player in financial services. While I do not know many of the details, I believe that the link to ESMA—the reassurance that there is more than one set of regulator eyes covering the way in which benchmarks have been administrated—has been important in keeping the primary benchmarks in play in London.
I understand that the role of this SI is to say that benchmarks administered in the EU can still be used in the UK—that is almost the sole purpose. But, as I say, I am concerned that the future standing of the UK as the locus of most of the benchmarks used across the globe in nearly every transaction, no matter where that transaction takes place, is potentially undermined by the kind of separation that the Minister has just described. Is he aware of any aggressive moves by the United States to say that the situation is changing? We now have the UK regulator standing alone once again. We certainly hear from the UK a great deal of language about how regulation needs to become lighter touch and should not be so heavy-handed, and how we should be much more inclined to allow greater risk taking and greater profit taking. Will this become the occasion where the United States acts to use its weight, its authority and its legislative force to try to undermine London as a locus? Should there be something in the whole language that surrounds this of an ongoing co-operation and element of supervision that continues to involve ESMA to provide a defence for London in this arena?
Lord Adonis
My Lords, I shall not press the amendment. I am extremely grateful to, and flattered by, the compliment paid by the noble and learned Lord, Lord Mackay. He said that he does not understand my opposition to these regulations, but he will appreciate that there is no way in which I could conceive of being a Minister proposing to put arrangements in place for a no-deal Brexit. I would regard that as a fundamental betrayal of the national interest. Therefore, if he accepts as a premise that the whole activity that the state is engaged in at the moment is, in my view, fundamentally illegitimate, he might accept that the course that I am pursuing is at least logical.
Lord Mackay of Clashfern
Perhaps I should respond by saying that I did understand that. Fundamentally, the noble Lord, Lord Adonis, believes that his wisdom is superior to that of the 17 million who voted the other way.
Lord Adonis
And I am very anxious that they should have an opportunity to cast their vote on the deal which they can now see but which they did not know about three years ago because it did not exist. I am fairly confident that if the electorate of this country had any idea that three years ago they might have been putting in place arrangements for a no-deal Brexit, they would not have gone anywhere remotely close to the situation that we have today. However, on that note, I beg leave to withdraw.
Public Record, Disclosure of Information and Co-operation (Financial Services) (Amendment) (EU Exit) Regulations 2019
Lord Adonis Excerpts(5 years, 10 months ago)
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Lord Adonis
At the end insert “but this House regrets that no consultation was undertaken on these Regulations.”
Lord Adonis (Lab)
I do not have anything to add on consultation or assessment, but the Minister just said that discussions with the EU about a new regime are in progress. He was speaking extremely quickly, but I think he said that good progress was being made. Could he tell the House whether he expects that an agreement will be reached by 29 March? I beg to move.
Lord Sharkey (LD)
We support this statutory instrument, but I have a couple of quick questions. In paragraph 2.7, the EM notes that:
“In certain exceptional instances, a similar requirement to seek consent from the originating regulator applies where the confidential information originated from a third-country regulatory authority”.
That seems a little opaque. I could not find anywhere in the SI what these exceptional circumstances might be. That may well be my fault but I would be grateful if the Minister could point me at the relevant parts of it or, even better, explain what these circumstances are.
Finally, I was puzzled as to why the SI’s introduction of transitional provision, described in paragraph 2.16 of the Explanatory Memorandum, was necessary. That paragraph says:
“In addition, this instrument introduces a transitional provision so that any confidential information that was received on or before exit day will continue to be treated in line with the relevant provisions in EU regulations and directives as they had effect before exit day”.
That raised two questions for me. The first is one of necessity. Would this eventuality not be covered by the general transposition of EU law into UK retained EU law? The second is to do with the wording of the paragraph in the EM, which refers to information received on exit day. But we are scheduled to leave the EU at 11 pm on exit day, so what happens to confidential information received between 11 pm and midnight on exit day?
Lord Bates
Again, I thank noble Lords for their scrutiny and questions. I give notice that I may need to write on one or two of them, if they would accept that, but I will say a little about how the negotiations are going. In my enthusiasm to communicate the details of this instrument to the House, I perhaps went a bit fast but I did indeed say that the negotiations were going well.
UK and EU authorities have made good progress in their discussions on a memorandum of understanding, which includes essential provisions for confidential information-sharing and co-operation. It is our hope that these will be in place by exit day. Both UK and EU regulators recognise the importance of effective co-operation and are working hard to finalise co-operation agreements. We fully expect these agreements to be in place by exit day, as part of preparations to deal with a no-deal scenario. More broadly, Members will be well aware of the top priority we have attached to putting in place a range of transitional arrangements, designed to mitigate the impact of no deal.
The noble Lord, Lord Sharkey—eagle-eyed as ever—spotted the gap between 5 pm and 11 pm. I am guessing that it is a standard cut-off point—a sort of close-of-business setting on the day in question—but perhaps that is not the case. I am told that exit day is defined in the EU withdrawal Act as 11 pm on 29 March, specifically; yes, I am aware of that. I think the point was made that it says 5 pm but there might be something else winging its way to me.
The noble Lord, Lord Sharkey, also mentioned confidential information and made a good point on that. Under Section 348 of FiSMA, “confidential information” means information which,
“relates to the business or other affairs of any person”,
that was received by the FCA, the PRA, the Bank of England, the Secretary of State or specified people instructed or employed by them for the purpose of discharging their functions; and it is not prevented from being confidential information because, for example, it has already been made available in public.
I will take advice from my noble friend Lord Young and perhaps just pause there with the assurance that I will write and follow up on this, and thank noble Lords for their contributions.
Lord Adonis
At this late and extreme hour, the noble Lord, Lord Sharkey, seems to have discovered a missing six hours in the regulatory regime that is going to govern the financial services industries of the United Kingdom and Europe, and what might happen for the exchange and disclosure of confidential information. Assuming that those six hours can be repaired overnight, I beg leave to withdraw.
Packaged Retail and Insurance-based Investment Products (Amendment) (EU Exit) Regulations 2019
Lord Adonis Excerpts(5 years, 10 months ago)
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Lord Adonis
Leave out from “that” to the end and insert “this House declines to approve the draft Regulations because no consultation has been undertaken despite Her Majesty’s Government’s economic assessment indicating transition and associated costs will be significant.”
Lord Adonis (Lab)
I have nothing to add to my remarks on the previous regulations. The issues are exactly the same, regarding consultation and the conduct of assessments.
Lord Tunnicliffe (Lab)
When I read the SI with care, it seemed straightforward and to do its work. I was seeking to see if there was any new policy, and the new policy that I discovered was the Venezuela point. I hope the Minister will be kind enough to write to me explaining whether “all countries” has that worldwide application and why the Treasury does not perceive that there is any danger in such an extension. Other than that, I am entirely content for this SI to go through.
Lord Bates
I am happy to give the noble Lord that assurance; I will write and be clear on that question. I thank the noble Lord, Lord Adonis, for not pressing his amendment.
Equivalence Determinations for Financial Services and Miscellaneous Provisions (Amendment etc) (EU Exit) Regulations 2019
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Lord Adonis (Lab)
Was the noble Lord in the House to hear the exchanges between the chair of Sub-Committee A and my noble friend Lord Rooker about a letter which apparently is going to be sent to the Treasury, but has not been made available to your Lordships, complaining about the way that consultation and impact assessments have been conducted? It came out only in the course of debate that this letter is in preparation: apparently, the chairs of the two Select Committees cannot agree on the terms of the letter, even though we are in the midst of debating literally dozens of these statutory instruments. Does he not think it would have been a good idea if we had had this letter before this debate? If the relevant authorities of the House are about to write to the Government fundamentally questioning the way that the Government have approached the process of consultation and assessing the impact of these regulations, surely it is not satisfactory for us to be considering these regulations in advance of the completion of that process.
Lord Deben
I was indeed in the House to hear that exchange. It was an amazing, remarkable exchange and another example of the total removal of this whole discussion from reality. It was so unusual that I left the House to recover some sense of sanity. First, it is obviously true that we should have had that letter. We thought that the letter, according to a senior member of the committee, had gone. We were then told by the chairman of the Joint Committee that it was almost gone, or nearly gone, or on the way to going. We did not understand whether it would go or whether it still had to be recovered and discussed. The fact of the matter is, I can think of no more appropriate role for the House of Lords than to tell the Treasury that it needs to be very much more precise and correct in its treatment of this House and of the other place. The answer is that it must at least give the figures, and to do that, it has to have a useful impact assessment, not one which is merely a matter of form.
Lord Adonis
My Lords, the noble Lord is a distinguished parliamentarian of long experience. Does he not worry that the tone of self-congratulation which we always adopt in this House for the way we conduct scrutiny and the excellence of our processes is coming under serious strain as a result of this no-deal regulation process? The earlier exchanges raise fundamental questions as to whether we are fit for purpose in the way that we are conducting this process ourselves. If it has taken us six months into this no-deal regulation process even to seek to agree an approach to the Government on how they should conduct consultations and impact assessments, does that not fundamentally question the whole process which we are ourselves adopting in holding the Government to account? Earlier a noble Lord made reference to horses bolting and stable doors being closed. Already 100 or so of the statutory instruments have bolted before the Select Committees of this House have been able to agree on what the procedure should be for considering them, let alone whether they are adequate in their own terms.
Lord Deben
I feel philosophically and religiously opposed to self-congratulation, so of course I will not suggest that we should congratulate ourselves. As I said earlier, it is quite clear that our processes do not admit the proper consideration of the issues being put before us. However, the second thing which is quite clear—and after this, I really will sit down—is that the world outside thinks that we are absolutely barmy and wonders what on earth Parliament as a whole is doing. The world outside has become less and less willing to accept that our system is fit for purpose. We all know that all political parties—I mean all of them—are not seen by the vast majority of the population as in any way reflecting what they think, want and expect. We are engaged in a serious situation, and one of the sadnesses is that, if we are trying to do the job as well as we can, we have to be involved in them. However, we are involved in them in a way which may well mean that we are ourselves part of the very situation which is undermining the whole reputation of this, the oldest of Parliaments.
Lord Adonis
My Lords, I have amendments down in respect of the later statutory instruments, and on the substance of this statutory instrument I do not have much to add to what we have heard so far from the two noble Lords. However, the earlier exchanges raise significant questions. I put on record my hope that when we have the next string of these statutory instruments on Wednesday, the chairs of the two sifting committees might address us on what their procedure will be in respect of the handling and processes of consultation and impact assessments for regulations. I hope that the letter which is to be sent can be agreed—apparently there is a dispute between the chairs of the two sifting committees—and sent tomorrow. It sounds urgently necessary that it should be agreed and sent; indeed, that should probably have happened six months ago, not now. At least we are shutting the stable door after only half the horses have bolted, which I suppose is better than after all of them have left. I put on record that if the letter can be agreed, it is important that it is circulated to your Lordships before the debates on Wednesday, because it will have an important bearing on our proceedings. It may even be possible to slightly shorten our proceedings as a result. I feel obliged to make a speech on each of these statutory instruments about the inadequate processes of consultation and impact assessment, but if the relevant committees of your Lordships’ House are making these points about all the statutory instruments and requiring the Government to improve their regime in respect of all of them, we will not have to go through this gruesome process, statutory instrument by statutory instrument.
Financial Services (Implementation of Legislation) Bill [HL]
Lord Adonis ExcerptsWednesday 6th February 2019
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Lord Davies of Oldham (Lab)
My Lords, I am grateful for that answer, which shows that the Government are on top of the issue—against a background where we must all recognise that time is somewhat short with regard to this legislation. The SI relates to a service industry that is a crucial part of our economy. We could not afford any situation in which a gap occurred; I am sure that the Minister is seized of that fact.
We are all aware of the fact that there are not many days left to the point where we are due to leave the European Community, yet there is still a very large number of SIs to be considered. Slips such as this, which are minor, can be remedied reasonably quickly by appropriate action, as the Minister indicated. But slips such as this could be costly if we are right up against the wire with regard to the legislation we are seeking to pass. We must all be conscious of the fact that the Government’s programme between now and the end of March is pretty demanding, to put it mildly. So, although I accept entirely what the Minister said and am reassured by the promptness of the Government’s response, this is an indication that there is many a slip between cup and lip, and the Government do not have much time for a monumental programme.
Lord Adonis (Lab)
My Lords, when the Minister spoke on 4 December at Second Reading, he said that the Bill was part of a package of measures and statutory instruments to ensure that the financial services industry would be covered in the event of no deal. He said specifically:
“That stability and continuity is being delivered by the 60 or so statutory instruments that Her Majesty’s Treasury is introducing under the European Union (Withdrawal) Act 2018”.—[Official Report, 4/12/18; col. 934.]
Will the Minister tell us how many of those 60 or so statutory instruments have been laid before Parliament, and would he be in a position to write to me to tell me what the timetable is for laying those that have not yet been laid before Parliament before 29 March?
Lord Foulkes of Cumnock (Lab Co-op)
My Lords, before the Minister answers those questions, may I ask one of my own in relation to the report of the Delegated Powers and Regulatory Reform Committee? Will the Minister tell the House whether and how the recommendations in paragraphs 8, 16 and 19 of that report have been dealt with?
Venture Capital Funds (Amendment) (EU Exit) Regulations 2018
Lord Adonis Excerpts(5 years, 11 months ago)
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The Minister of State, Department for International Development (Lord Bates) (Con)
My Lords, I beg to move the second Motion standing in my name on the Order Paper.
Lord Adonis (Lab)
My Lords, I was not able to speak in Grand Committee on these statutory instruments because the Grand Committee and the Chamber were both considering no-deal statutory instruments at the same time. Having now read the debates on these regulations, I see that the three statutory instruments that relate to alternative investment funds were all dealt with together. The noble Lord said:
“The Government have undertaken an impact assessment on these instruments, which we hope to publish shortly”.—[Official Report, 15/1/19; col. GC 82.]
This was not picked up by noble Lords in the later discussion, but the obvious point arising is this: if there is going to be an impact assessment that relates to these instruments, should not the House see it before we approve the statutory instruments rather than after? The noble Lord did not say why the impact assessment on these three instruments concerning venture capital funds is going to be published after we have been invited to approve the regulations. Will he expand on that for the House?
Lord Bates
As I said in Grand Committee, whose debate I took note of, an impact assessment will be published shortly. The position has not changed in regard to that. But of course that was in relation to a wider debate that the noble Lord, Lord Tunnicliffe, and the noble Baroness, Lady Bowles, took part in where they recognised that we sought to transpose a body of EU law into UK law so that we avoided a cliff edge that would be damaging and very costly for financial services. The answer remains the same as I gave in Committee.
Lord Adonis
I understand the explanation, but I do not find it satisfactory. Why is the House being invited to approve these statutory instruments without the impact assessment that relates to the very statutory instruments that we are invited to approve? The Minister simply restated the fact that the impact assessment will be published after we have been invited to approve the regulations. That is unsatisfactory. Surely we should have the impact assessment before we approve these statutory instruments rather than after. He has not explained why that is not possible.
Lord Bates
I realise that the noble Lord is pressing his point and he may find the answer—that the impact assessment will be published shortly—unsatisfactory. Of course the reality is that we are dealing with a volume of statutory instruments to avoid that cliff edge and to avoid costs, because the industry very much supports this process; we agreed it with industry because it wants to avoid that cliff edge. Because we are transposing what is already in existence into UK domestic law to avoid that cliff edge, industry recognises that if it followed those rules before it will follow the same rules thereafter, so the financial impact will be limited. That has been the accepted position throughout this process when we have been going through secondary legislation. None the less we are committed to publishing impact assessments. We are doing that. They are scrutinised by the Regulatory Reform Committee and will be published shortly.
Lord Adonis
My Lords, the Minister has not answered the fundamental question of why we cannot have the impact assessment before we approve these regulations rather than after. I think that the House knows the answer, which is that the impact assessment is not ready. Because of the very hurried nature of the no-deal regulatory planning that the Government are engaging in, he is none the less trying to railroad these regulations through the House this afternoon. I understand the reason, but it is not a satisfactory reason. In no other context would noble Lords find it acceptable to be asked to approve regulations before we have actually seen the impact assessment to which the regulations apply. All the Minister has done now, three times, with the elegance of expression that he always deploys, is simply to restate the fact that the impact assessment has not been completed and is not ready. That is not a satisfactory response.
Lord Bates
I tried to give a response that explained the situation. Usually in this situation, we are transposing one law that is operating today and saying that that law, which is currently in EU legislation, will be brought onshore and will operate after 29 March in the unlikely event that there will be no deal, to avoid a cliff edge. Therefore, it is the same law. Our view—and I think this is the general view when this has been debated because it applies to all the statutory instruments—is that we are discussing relatively small de minimis amounts, but there is still a process that we need to go through whereby those impact assessments are prepared, submitted to the Regulatory Reform Committee and then released, and they will be released shortly.
Lord Trefgarne (Con)
I believe this matter came before the Secondary Legislation Scrutiny Committee. I apologise that with 300 pieces of secondary legalisation I do not always remember every detail of every one of them but, be that as it may, the SLSC often asks for changes to the impact assessment, as I believe happened on this occasion. The impact assessment has therefore been published; it is just that a further edition has been asked for.
Lord Adonis
So it has been published and the noble Lord can therefore make it available to the House.
Lord Bates
We submit these things. First, I pay tribute to my noble friend Lord Trefgarne’s work in the Secondary Legislation Scrutiny Committee. It is doing an incredible amount to scrutinise this volume of work. In chairing those two committees, my noble friend Lord Trefgarne and the noble Lord, Lord Cunningham of Felling, are doing incredible work. They considered these regulations, as did the other place, as did the Committee, and they did not feel there was a reason to object to this SI, which is needed by the industry to prepare in the unlikely event that we leave the European Union on 29 March without a deal. That is why we arrive at this point.
Lord Bates
I am surrounded by expertise and am trying to listen attentively with both ears to the guidance offered. Effectively, this position was set out in advance. It was very clear from the EU withdrawal Act. Section 8 said what must happen in preparing secondary legislation. The House then met several times to establish a procedure which would give that level of scrutiny. It involved a sifting committee, the Joint Committee on Statutory Instruments and my noble friend’s committee, the Secondary Legislation Scrutiny Committee, and we agreed that they would each have different roles. One would test whether an instrument should be affirmative or negative. Then they had to be laid. This SI was laid on 29 November. It was considered by the Secondary Legislation Scrutiny Committee on 10 December, which raised no concerns. It was then considered by the House of Commons and then by the House of Lords. That is the position. I think the system is working well, given the incredible strain which the noble Lord referred to in terms of the offices of this House. We are ensuring that an industry that is crucial to this country is protected in the unlikely event that there is no deal.
Lord Adonis
My Lords, with very great respect, the noble Lord has not answered the question, which is about the impact assessment. It is not about the wider issues to do with the—
Lord Taylor of Holbeach
This is a point of order. In debate it is customary for Members to speak only once. The noble Lord has made a point. The House has listened to his point. If he wishes to press his point, he has to press his point. I ask him to accept that, on what has been approved by the committees and has been presented to the House today, he should be prepared to accept the word of the Minister.
Lord Adonis
My Lords, the noble Lord was intervening on me. It is not a question of accepting the word of the Minister; the Minister has not replied to the point. Indeed, the noble Lord, Lord Trefgarne, has added further confusion because he said that the impact assessment is available and it has just not been laid before the House, whereas I took the Minister to say that the impact assessment was not available. He told the Grand Committee last week that it would be published shortly. He is clearly still not in a position to lay it before the House. The House is being expected to agree a statutory instrument that will have a vital impact on a major national industry and we do not know the basis on which we are agreeing it. There is confusion between the noble Lord who chairs the relevant committee and the Minister as to whether an impact assessment is even available. The point that my noble friend Lord Rooker made seems to be completely correct. Essentially, we are legislating in the dark this afternoon, and that is a wholly unsatisfactory situation.
Lord Trefgarne
My Lords, perhaps I may have your Lordships’ permission to speak once more. In fact, the initial impact assessment was, I believe, withdrawn with the promise of another one, and it is the second one that we await.
Alternative Investment Fund Managers (Amendment etc.) (EU Exit) Regulations 2018
Lord Adonis Excerpts(5 years, 11 months ago)
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The Minister of State, Department for International Development (Lord Bates) (Con)
I beg to move.
Lord Adonis (Lab)
My Lords, I should register the same point, which is that we are expected to agree another statutory instrument without the impact assessment that applies to it, and that situation is wholly unsatisfactory.
Lord Pannick (CB)
My Lords, does the Minister agree that it is highly desirable that impact assessments are published prior to instruments of this nature being put before the House? Will he give an undertaking that in relation to further statutory instruments that process will be followed?
Interchange Fee (Amendment) (EU Exit) Regulations 2018
Lord Adonis Excerpts(5 years, 11 months ago)
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Lord Adonis (Lab)
My Lords, I wish to press the Minister further on these regulations, not in respect of the impact assessment, which in relation to these regulations was de minimis, but in respect of the fundamental issue of the interchange fees that will be charged as a result of these regulations to holders of UK credit and debit cards when they seek to use those cards in the wider EEA. Of course, I would have raised this issue in the Grand Committee last week but for the fact that the Grand Committee and the Chamber were both debating EU no-deal regulations at the same time, and, even with my many abilities, I cannot be in two places at once.
The big issue that arose from the debate was that the Government have chosen to apply the caps on fees applying to debit and credit cards which can be charged to traders only within the United Kingdom. They are not proposing to apply those caps to the wider EEA, even in respect of holders of UK credit and debit cards, who could therefore be subject to higher charges either directly by being charged surcharges by traders when they seek to use their cards on the continent or by those higher charges being passed on to traders, who will then put up their prices.
The noble Baroness, Lady Bowles of Berkhamsted, who had played a significant role in the European Parliament on the original interchange regulations that led to these regulations, raised a whole series of concerns in Grand Committee about their asymmetric application. She raised exactly the concerns that I have raised as to what might happen to holders of UK credit and debit cards within the wider EEA if these regulations are passed. She probed the Minister on this crucial policy decision; we are told that these are just rollover regulations but a crucial change is being made to the policy position in respect of credit and debit cards once these regulations go through: the caps on credit and debit cards will now apply only within the United Kingdom; they will not apply within the wider EEA. Holders of UK credit and debit cards could, as I said, be faced as a result of these regulations with a very substantial change in the position after 29 March and be subject to higher charges.
It came out in the debate in Grand Committee that this was a policy choice by the Treasury. It would have been perfectly possible for the Treasury to decide that we would continue to apply the same caps to UK issuers of credit and debit cards within the wider EEA—the same caps as apply within the UK—but a policy decision had been taken not to do so because of the decision to go for symmetrical rather than asymmetrical regulation. I bring this out because it is a huge policy issue; it could have a very significant impact on the lives of British people when they seek to use their credit and debit cards across Europe after 29 March in the event of no deal.
In the normal course of events, this House would seek to debate—at some length, I should imagine, given the interests at stake—this policy change. It would have been subject to proper analysis and scrutiny, but instead there was a 15-minute debate in Grand Committee last week and we are now being invited to pass these regulations on the nod. Why? Because of the urgency of passing no-deal regulations. That situation seems wholly unsatisfactory. The very least I can do on behalf of the wider public is to draw out these issues; the public need to be aware that they could face increases in prices or in their credit and debit card charges after 29 March, purely as a result of these interchange regulations.
Lord Bates
I am grateful to the noble Lord for raising that point. It was a point of debate on a technical matter relating to whether you treat a country as a third country, which we believe we have no option but to do since we will no longer be in the European Union. At the end of what was a very constructive debate, with some assiduous scrutiny in Committee by the noble Lord, Lord Tunnicliffe, and the noble Baroness, Lady Bowles, I undertook to write to the noble Baroness copied to the noble Lord, Lord Tunnicliffe, responding to precisely that point. I can confirm that I did that this morning; the letter went off and a copy is now in the Library. I would be happy to make a copy available to the noble Lord, Lord Adonis, as well if that would help.
Lord Adonis
My Lords, I am sorry to intervene again, but that response could not be more unsatisfactory. Noble Lords seeking to engage in the debate this afternoon on this fundamental issue are supposed to rely on a letter sent to two noble Lords this morning and placed in the Library of the House—a letter of which none of us was aware and could not conceivably have been aware of when we came into the House. That is the basis on which we are supposed to agree fundamental changes to the law, which could have a big impact on holders of credit and debit cards after 29 March. I place on record once again that, when you probe beneath the surface, this no-deal planning that we are engaged in—which is supposed to be technical—involves, if we have no deal from 29 March, fundamental changes to the terms of trade in respect, here, of just one aspect; a whole load of others are coming. All this has been smuggled in with no debate and no proper scrutiny; we are expected just to take the word of the Minister that he has properly considered it.
The issue at stake is not a question of explanation; the Minister can explain it for as long as he likes. The fact is that there is a fundamental change of policy taking place. That fundamental change could lead to higher prices being levied on UK holders of credit and debit cards after 29 March, in the event of no deal, if they seek to use those cards on the continent. It seems wholly unsatisfactory that we should agree to that situation with no debate whatever.
Lord Bruce of Bennachie (LD)
My Lords, the noble Lord, Lord Adonis, makes a very serious point. We have only just achieved the abolition of these charges on credit cards, for which the Government tried to claim credit when in fact it was an EU regulation that achieved it. We are effectively being told that, not only with no deal but possibly even with a deal, these charges could or would be introduced. I believe this should be much more fully debated. The noble Lord has a point when he says that something as fundamentally radical as this, which the public will be very cross about when they find it happening, should not go through just on the nod.
Financial Services (Implementation of Legislation) Bill [HL]
Lord Adonis ExcerptsTuesday 8th January 2019
(5 years, 11 months ago)
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Baroness Liddell of Coatdyke (Lab)
My Lords, at Second Reading it was obvious to many of us across the House that the Bill was a useful safety net for in-flight legislation. As such, there was a spirit of collaboration and helpfulness. However, since then we have received the report of the Delegated Powers and Regulatory Reform Committee, which is quite scathing about some of the inconsistencies in the Bill. I quote from paragraph 5:
“Furthermore, the assumption that the Bill will only apply in a ‘no deal’ scenario has led in our view to inconsistencies in the drafting of the Bill”.
I still recognise the importance of getting the Bill on to the statute book but we cannot allow it to become a blank cheque. It is important to recognise that there are inconsistencies in the Bill. Indeed, the Delegated Powers Committee drew attention to the comments it had made during its consideration of how HMRC was covered in the withdrawal Bill, saying:
“We judge powers not on how the Government say that they will use them but on how any Government might use them”.
The Minister is an extremely honourable man, probably one of the most honourable in your Lordships’ House. It would be of enormous value to the Committee if we could get this cleared up. It may not be possible at this stage but certainly by Third Reading we should at least have something in the record of the debate that deals with these inconsistencies on a sequential basis. Noble Lords have already referred to some of the difficulties. There will be further opportunities to explore these in the amendments that we will be considering in due course. But this is an important and necessary piece of legislation and it does not help anybody to have gaps left in it that can create difficulties for the future.
Lord Adonis (Lab)
My Lords, my noble friend Lady Liddell has made an extremely important point. As the debates and scrutiny have progressed and further information has become available on the Bill since it was initiated, the concerns have become greater.
In my experience with legislation, as Ministers—particularly Ministers of the calibre of the noble Lord, Lord Bates—explain issues to the House and seek to meet concerns, there is normally a narrowing of points of difference. But in this case the points of difference have expanded as it has become clear that the extent of the powers granted under the Bill is much greater than originally explained; they were, as my noble friend said, to do with in-flight provisions. As we have elucidated the scale of the potential breadth of these powers, the concern has become greater, not only because of the report which my noble friend referred to but because we have now been able to look at the list of measures to which they will apply. We have also been able to study the Minister’s speeches at Second Reading, which have led me to be considerably more concerned than I was before.
In his opening and closing speeches at Second Reading, the Minister said, in essence, that in the event of provisions coming forward which are not to do with continuity or in-flight but are basically to do with us either anticipating changes that will be made by the European Union or implementing those which have been made in the institutions of the European Union—to which we may or may not have agreed ourselves—the Government have the right to implement them on their own judgment, by decree, provided that it is within a two-year period. I think we will be pressing the Minister time and again—and, to be blunt, this may well lead to him losing significant parts of the Bill on Report—on the fact that there is a complete answer to the situation in which he finds himself.
Lord Hodgson of Astley Abbotts (Con)
The noble Lord has already referred to the two-year sunset clause. Does he accept that in the short run, the imposition of the Brexit deadline will require things to be done quickly, and in those circumstances, if the sunset clause were shorter, would he be happier?
Lord Adonis
My Lords, the sunset clause is for two years, which is nearly half a Parliament. The fact that there is a sunset clause does not somehow legitimise everything that takes place in that period. There is no case for these provisions at all. Let us be clear that we are talking about further changes to the existing law; these are the provisions that are causing such difficulty for many of us in the House. We are prepared to grant the Minister powers to simply transpose existing provisions into UK law—indeed, I am not even sure that under the European Union (Withdrawal) Act he needs legal powers for that. The key issue here is that it all concerns further changes to the law. The statute book constantly needs to be capable of being updated; the whole purpose of Parliament is to debate further changes to the law, and we have established procedures which go back to time immemorial for doing that. They involve Second Reading, Committee, Report and Third Reading stages in both Houses of Parliament.
There is no reason whatever for subverting those principles simply because the Government are overloaded, which is essentially the argument at the moment. The answer is either not to make those changes in law, if effectively they can be made only by exercising powers by decree, or to create the necessary time to do so, which means the Government having the right priorities in what they put before Parliament. We always have to set priorities. As a former Minister, I know that what you do and do not put in the Queen’s Speech and the legislative programme is a matter of priorities. If necessary, the House must sit for longer.
Finally, if it comes down to whether this House should sit somewhat longer to debate major changes to the law of the land on financial services, I for one feel that it is our duty to sit here, debate these changes and not give the Government the power to legislate by decree. I hope that the noble Lord, Lord Hodgson of Astley Abbotts, feels the same because he has been responsible for financial services regulation in the past. That is effectively the power being granted here, potentially in significant areas that are not to do with simply transposing existing or in-flight European law into UK law. I am sorry to say this to the Minister, but the objections to the Bill are fundamental, not incremental. He may well find that, unless he can meet those objections, substantial parts of the Bill will be removed by the House on Report.
The Minister of State, Department for International Development (Lord Bates) (Con)
My Lords, I thank noble Lords for contributing to the debate and speaking to their amendments. Let me set out the Government’s position regarding the amendment moved by the noble Baroness, Lady Bowles, and the amendments spoken to by the noble Lords, Lord Sharkey and Lord Davies. I will then come back to some of the points made during the debate by the noble Baroness, Lady Liddell, and the noble Lord, Lord Adonis.
I will speak to Amendments 1, 3, 5 and 7 together, if I may. They relate to the breadth of the amending power, which was central to the speech of the noble Lord, Lord Adonis, and the ability to account for the UK’s specific position outside the EU for the two years in which the power would operate. As I understand it, Amendment 1, moved by the noble Baroness, Lady Bowles, stems from her concern—repeated by all Members who spoke in the debate—that the power is currently drafted too broadly. The amendment would require that no legislation can be made under this Bill which is corresponding but not similar, or vice versa, to the original EU legislation. It is clearly important that we go into the precise definition of each term, as they have different interpretations and implications. In doing so, I hope that we will add to the body of information that can be referred to in future to clarify the Government’s intent in this process.
First, we take “corresponding” to mean “identical in all essentials or respects”. The term “similar” means “having a resemblance in appearance, character, or quantity without being identical”. In practice, of course, the legal interpretation of the two terms can vary, with some judging that “corresponding” affords a wider latitude. However, it is nevertheless clear that on the basis of the current drafting, any exercise of the power would need to be limited in subject matter and purpose. It will be possible to exercise the power only to achieve the aim of the original EU legislation, with an option to make adjustments to account for the specificities of UK markets, rightly reflecting the fact that we will no longer be a member of the EU. It will not, therefore, allow for wholesale changes to the character and intent of the original legislation.
For example, if the Government were implementing a file on pensions regulation, they would need to seek to achieve the same purpose, even with adjustments, and remain focused on that subject matter—not extend it to another policy, such as insurance. However, the Bill provides the ability to best reflect UK circumstances in the implemented legislation, which is key. The intent is to clarify that, in a no-deal scenario, the UK has the tools to ensure that it remains an attractive and competitive place to do business and continues to implement the latest international standards, with regulation that reflects the best interests of UK markets and those international standards. The wording suggested in the amendment would allow provisions to be made under this Bill only should they be corresponding and similar. This would require the legislation as it is implemented to fulfil two different legal standards simultaneously. We consider that this would be a highly uncertain legal bar to pass and in some cases it may even make the power essentially unworkable.
I would also like to reassure the Committee that the formulation “corresponding, or similar” is well established and has been used—to provide recent examples—in the Pension Schemes Act 2015 and the Recall of MPs Act 2015. I hope that this will reassure the noble Baroness regarding the limitations that will apply and the formulation “corresponding, or similar”, for which there are precedents. In short, the current wording is already intended to ensure that the powers under this Bill cannot be used to create substantively new policy outside the bounds of the original EU legislation.
I turn to Amendment 3 tabled by the noble Lord, Lord Sharkey. I understand that this comes from a similar place, intending as it does to forbid the Government’s amending legislation in such a way that it would create significant new policy separate from the original EU legislation, a concern also expressed by the noble Lords, Lord Adonis and Lord Davies. I hope that my response to the amendment of the noble Baroness, Lady Bowles, will provide noble Lords with some degree of the reassurance that is needed. As drafted, the Bill would not allow the Government to significantly alter, expand or run contrary to the primary purposes of that original legislation.
I turn now to Amendments 5 and 7, tabled by the noble Lords, Lord Tunnicliffe and Lord Davies, and spoken to by the noble Lord, Lord Davies. They would limit the power in the Bill to make adjustments in a similar manner to the limitations in the EU withdrawal Act—limiting changes to legislation purely to a fixing of legal deficiencies. I understand the concern across the Committee that the power in this Bill goes beyond that of the EU withdrawal Act. I have already touched on the importance in a no-deal scenario of ensuring that European Union legislation implemented in domestic law best serves the interests of UK financial services, so I will not rehearse the same arguments again at length. However, I will reiterate that we cannot be certain about what files will look like once they are finalised or of the context in which the files will be implemented. The powers in the EU withdrawal Act are strictly limited, and the purpose of the legislation we are making under the Act is to ensure that there is a workable legal framework in place at the point of exit and to minimise disruption to financial services firms and their customers who currently operate under the existing EU rules. It is therefore appropriate to keep any changes made on exit day to a minimum.
There is a fundamental difference between this legislation and the EU withdrawal Act, and this comes directly to the point raised by the noble Lord, Lord Adonis. The withdrawal Act deals only with the legislation which has been agreed at the EU level, with the UK present at all stages of the negotiations. As my noble friend Lord Hodgson pointed out in his intervention, this Bill provides a temporary solution, specifically in a no-deal scenario, to deal with the dynamic regulatory landscape for the financial services industry after the UK has left the EU negotiating table and taken its own path. This is a different challenge that requires a different solution.
Lord Adonis
I am grateful to the Minister for giving way. In that case, why should there not be primary legislation?
Lord Bates
For the points I will come to in a minute, which the noble Lord has slightly pre-empted. Obviously he has read the wind-up speech I gave at Second Reading—the arguments about volume of legislation and timeliness remain consistent—but I will come back to that.
Lord Bates
I thank the noble Baroness for her intervention. There is a difference between the two elements and between the use of “adjustments” and the terms used earlier, “similar” and “corresponding”. Effectively, they relate to the two different groups that we have here. The first group is those for which we have been party to the negotiations and to agreeing. Following engagement, we know that the industry is keen to see those transposed into UK law, and we support it in that respect. Then there are those other elements that are incomplete, the final shape of which we do not yet know. Once the final shape is known—in all likelihood, that will be after the date in this scenario and once we have left the European Union and the negotiating table—we will have the power to adjust. Those are the two different elements.
Lord Adonis
My Lords, the noble Lord speaks as if there is not that power at the moment. There is: it is the power to introduce primary legislation. The Government do not lack this power; it is the power the Government have, in all cases, to recommend to Parliament changes in the law. What he has not made the case for is why the power should be given to the Government to make these changes by decree, which is, let us be clear, what Orders in Council amount to, with just a straight yes/no power in respect of the whole provision. He has not made that argument at all.
The Minister says that it is restricted, but the restrictions are entirely unsatisfactory. There is a time restriction of two years, which is more than enough time for the Government to do what they like with large parts of the statute book. The second, to which the Minister has just referred as though it is some kind of safeguard, are the measures listed in Schedule 1. But the list is incredibly extensive. These are fundamental and wide-ranging changes to the law, which in many cases, as the noble Lord himself has just said, we will not have played a part in agreeing within the democratic institutions of the European Union. Effectively, the Minister is saying that we will neither have played a part in agreeing them within the democratic processes of the European Union, nor will this Parliament have a proper role to play. The only people who will agree them are the Minister, the Chancellor of the Exchequer and a few officials in the Treasury, and we will then be expected to rubber-stamp them. I am afraid that that is totally unsatisfactory.
Lord Bates
That is not the case. I accept that the noble Lord is presenting a caricature of the situation that proves a particular point, but of course that is not what will happen. First of all, certain guarantees are presented in terms of reporting, which we will come on to again later. There are certain processes in terms of scrutiny of secondary legislation, not only by the Secondary Legislation Scrutiny Committee, which does incredible work and of course has a role set out in Standing Orders as to how it must scrutinise secondary legislation. Also, the affirmative SIs must be debated in your Lordships’ House. In addition to that, we have also undertaken that there should be proper engagement with the industry in talking about this and with other stakeholders too. There is a wide range of things.
We will delve deeper into some of the points in the noble Lord’s own amendments later. I appreciate that the role and purpose of Committee is to elicit from the Government further explanations about what these terms mean. We may have a difference about whether the noble Lord’s view is shared by the Front Bench, and whether all these matters should be dealt with by primary legislation in 15 Bills or by secondary legislation, which has been the convention, particularly when it comes to financial services.
Lord Bates
Her Majesty’s Government are, of course, very frugal and are always willing to take free legal advice, particularly when it comes from such a distinguished source. I shall add that suggestion to the others that I will take away. We appreciate it. Oh, something has miraculously appeared. It cannot be in response to the last suggestion—that would be far too quick—but is in response to the point made by the noble Baroness, Lady Kramer. “Adjustments” applies to both provisions, but the limitations come from “corresponding, or similar” and the limitation implied by the word “adjustments” itself in the glossary. Just for clarification at this stage, let me add the definition that we are working to so that people can see it. “Adjustments” means that it will be possible to exercise the power to achieve the aim of the original EU legislation only with an option to make adjustments to account for the specificities of UK markets, rightly reflecting the fact that we will no longer be a member of the EU. It will not therefore allow for wholesale changes to the character and intent of the original legislation. “Adjustments” is an inherently limiting word. With that, and with the commitments that I have given to reflect on the comments made by noble Lords and the legal advice that has been given, I invite the noble Baroness to withdraw the amendment—
Lord Adonis
What the Minister has said was clearly written for him by the Box: “‘Adjustments’ is an inherently limiting word”. Will he explain to the House how it inherently limits?
Lord Bates
The noble Lord is familiar with the way this works. I used to sit on that side of the House while he was having similar words prepared for him. Adjustment leads to an altered version of the original. Changes that produce something completely different go beyond adjustments. Dictionaries make it clear that adjusting is about making small changes to achieve a desired fit or to adapt to a new situation. I hope that helps.
Lord Adonis
Therefore only small changes can be made, not large changes. My reading of the provisions in the Schedule is that they involve large, not small, changes.
Lord Bates
I am getting a certain sense of déjà vu having sat through the early morning debates on the EU withdrawal Bill, as it was at that stage, on words such as “appropriate”. I do not particularly want to rehearse them here. It is very important that, when we use terms, the Government are required to define what they mean by them. I have presented what we believe is meant by “adjustments”, which is that it is inherently limiting in capacity. Should we wish to clarify that further, we will do so on Report. Similarly, if noble Lords have further suggestions, they are at liberty to table amendments suggesting additional wording at future stages.
Lord Adonis
Let us be grown up about this. The Minister knows that people disagree about the meaning of “limited” in these contexts. I do not think that we think that the Minister’s assurance that the provision will be limited amounts to much, because then we will of course have a big argument about what “limited” means. The only way we could have a meeting of minds on this would be if there were some satisfactory procedure for deciding what “limited” means. The procedure which comes to mind is an independent committee, such as the Delegated Powers and Regulatory Reform Committee. The Minister is extremely open-minded about suggestions from the Committee. Would he suggest introducing an amendment on Report giving the committee responsible for deciding on these regulatory powers the power to decide whether in fact a regulation meets the word “limited” in respect of adjustments?
Lord Bates
I am not going to direct what committees of this House opine on—it is certainly not within my powers to do so—and of course they are at liberty to express their views. From a constitutional point of view, having placed on the record, as a Minister of the Crown, our belief of the interpretation and meaning of the word “adjustment” in this context, I think that, when assessing an affirmative statutory instrument against the measures in this Bill, bodies such as the Secondary Legislation Scrutiny Committee will seek to link the two to test whether that is in fact the case. I am sure that the very fact that I have made that remark will be picked up in years to come as the various statutory instruments make their journey through your Lordships’ House. However, we will of course reflect on all these elements between now and Report.
Lord Adonis
Before the noble Baroness sits down, I just want to say that all the points she has made, and made extremely well, seem to me to be met by my noble friend Lord Davies of Oldham’s excellent Amendment 7. Most of the problems the Minister has encountered could be solved by him simply accepting it, because what Amendment 7 says is that:
“Regulations made under subsection (1) shall be limited to preventing, remedying or mitigating deficiencies in retained EU law”.
I have not yet heard a good argument put before the Committee, least of all by the Minister, for why we should not accept that amendment. The Minister says he wishes to discuss it further; I am not exactly sure what there is further to discuss, because unless my noble friend Lord Davies or the noble Baroness resile from this amendment, it is a very clear-cut position of principle, which seems to me to be fundamental to the maintenance of our proper parliamentary procedures.
So would the noble Baroness agree that the right position is for the Liberal Democrats and my noble friends to stick resolutely by Amendment 7, and unless the Minister is prepared to meet us on that, we should simply vote on that and seek to carry it, I hope with support across the House, because it is fundamental to the operation of parliamentary sovereignty? On Report, we should not get involved in a long technical discussion about how much additional power we might grant the Minister simply because he has put a proposal on the table in the first instance which is straightforwardly outrageous.
Baroness Bowles of Berkhamsted
I thank the noble Lord for his question. He will recall that I reserved my position on that amendment but said that I thought it is the default if we cannot find something workable that gives more flexibility to the Government. I will come on to why there may be a case for flexibility in the next group, where I have a set of amendments related to it, but I can give noble Lords a preview in that I think it is quite difficult to define what that flexibility should be, and so it is going to take a lot of work to better Amendment 7. What the noble Lord suggests as the common position might well come, but we have a duty to explore further. There is more to mine away at within this Bill, and so I will not give an absolute yes to that question. Furthermore, there may be others within the group who want to consider the points. With that, in order that we can move on, I beg leave to withdraw my amendment.
Baroness Bowles of Berkhamsted
My Lords, as I explained, I have three amendments in this group. They fit together as a set, but Amendment 2 can also be a useful standalone provision.
Amendment 2 would delete the words “or any of the provisions” from line 4. On its own, that amendment is intended to prevent the cherry picking of favourite bits of the legislation. Taken to its extreme, such cherry picking would even enable the cherry picking of revocations of prior legislation—such revocations might appear in the schedule because they are amendments to other pieces of legislation. So you might be able to enact them without any kind of replacement.
More generally, EU legislation is interwoven with checks and balances, and if some are left out, the nature of the legislation can be changed or rendered ineffective, for example if penalties are taken out or time limits changed. The DPRRC makes a similar point in its paragraph 17, which says that,
“the overall effect of the legislation might vary quite substantially depending on which provisions are implemented and which … are not”.
Whether on its own or in combination with other amendments, it would be a useful amendment to rule out the prospect of simply cherry picking.
Amendment 4 is a linguistic amendment that links to Amendment 6. It might not actually be necessary, but I tabled it to deal with the kind of omissions that might be necessary—for example, taking out things that are not relevant to the UK. An obvious one would be something to do with monetary union, which is not relevant to us. The amendment’s purpose is to clarify that “adjustments”—that nebulous word; maybe we need something else—includes omissions. Then, whether it is an adjustment, change, omission or whatever we want to call it, all become subject to the same controls I would put in with Amendment 6 and elsewhere. This does not work if you try to do it using the wording appearing earlier in the clause. It looks a bit bizarre to take out the possibility of omissions in one place and put it in somewhere else, but this is just to ensure that one could establish that the conditions imposed apply to all of it. At the time of drafting I thought it clearer to reference “omissions” than “provisions not provided for” or something of that nature.
The more substantive Amendment 6 states that any omission or adjustment made under subsection (1) that is not subject to similar conditions as those in the withdrawal Act—that could be tightened up to refer to a particular provision of that Act—and does not fall under that kind of provision is,
“only to be considered appropriate if the Treasury has at least three months previously laid before Parliament a report on the policy and reasons for omission or potential omission”.
Here I am, as I said I would try to do, crafting something using the ideas of the reports in subsections (8) and (9) so that, if the Treasury comes forward with some proposal, Parliament is not surprised by it because it has been laid out and possibly even debated and understood.
That would be very helpful, but, having put forward this suggestion as to making flexibility, I came to the conclusion that I do not think that that on its own is sufficient. It still gives far too wide a leeway for change because the kind of reporting we get when statutory instruments to do with EU exit are brought before us—the Minister will know that we spend hours on them in this Chamber and in Grand Committee—is a bit perfunctory. Anyway, even if they are reported, it does not mean that they can be stopped. Maybe I have not got this right. My point is that one still needs to have some other overarching provision that stops things going too far, which might come back to Amendment 7, in which case all these other ones would not be necessary, to my noble friend Lord Sharkey’s Amendment 3 or, when we get to the next group, to my Amendment 8.
I am trying to find a way to give the Government the possibility for flexibility, because I know as well as anybody else what EU legislation could look like in the absence of a strong input from the UK. I have said before that I know what it would look like if I had not been there. I concede that we have to have some defences. If the defence is not to be primary legislation, to go through it all again—and I am very conscious of the volume of that—then there need to be some guidelines. It cannot be just a simple free-for-all. We need to know what is going on, and the reporting has a huge input there, but we have to be able to say no if the departures are substantive. I beg to move.
Lord Adonis
My Lords, I understand what the noble Baroness is seeking to do: to tease out from the Government whether they are prepared to agree to new reporting requirements, which would be helpful. There is nothing in the new reporting requirements which I think is objectionable. On the contrary, the more the Government are prepared to explain their policy to Parliament, the better. I know the noble Baroness said she and her colleagues are considering what their stance will be when it comes to Report. Can I recommend Amendment 7 in the name of my noble friend Lord Davies of Oldham? It is significantly superior in this respect. It makes a clear distinction of principle between Orders in Council which are,
“limited to preventing, remedying or mitigating deficiencies in retained EU law”,
and, because they are so limited, an Order in Council procedure is justifiable; and changes to the law that go beyond that, and which, as a matter of principle, should be subjected to the primary legislation procedure. The Liberal Democrats do not want to give decree-making powers to the Government, so I cannot see an argument for not subjecting substantive changes in the law that go beyond,
“preventing, remedying or mitigating deficiencies in retained EU law”,
to primary legislation, as my noble friend Lord Davies of Oldham sets out in his Amendment 7. I encourage the noble Baroness and the Liberal Democrats to be true to their liberal principles and not to give dictatorial powers to the Government, and to support my noble friend’s Amendment 7.
Lord Hodgson of Astley Abbotts
My Lords, I have put my name to this amendment. My noble friend has raised an important point about Brexit itself and its implications for the regulatory regime. I do not propose to follow up on his technical discussion, but there is a wider point to be made. Here, I will draw on the remarks of the noble Baroness, Lady Kramer, who said that, in the two-year period during which the Bill provides powers, things will happen. We can set out our regulatory stall, but our strategy for regulation needs to become clearer during the two years in which the Act will be in effect.
It is important that the Government do some serious thinking about how this country will present itself to the world via its financial services as part and parcel of the new regime. Noble Lords will know that, for a number of years, I was a director of one of the self-regulatory organisations which governed the City before the passage of the Financial Services and Markets Act. A wise old bird once told us that we should think about it like a high jump. If you set the bar too low, everybody can clear it and you will attract to your market all sorts of undesirable characters and firms, and there will inevitably be failures and problems, which will damage your overall reputation and therefore you will lose your world standing. By contrast, if you set the bar so high that nobody can get over it without enormous cost, bureaucracy, time and difficulty, you may have a market relatively free of failure but it will have very many fewer participants. I encourage the Government to think about how we set that high-jump bar for regulations, given the comments my noble friend made in his opening remarks.
The only other point I want to make is this: regulation tends to be on an upward lockstep. For the most part, regulators do not have a reverse gear. Few regulators come along and say that, given that the world has changed, they no longer need the powers they have because they can do a perfectly satisfactory job without them. Rather, they are left with those powers, which then have to be enforced and have a cost. The commercial vessel then gets more and more barnacles and slows through the water, and it is never able to go in for a hull clean.
My remarks are not an argument against regulation per se. They urge the Government to have regular reviews of regulation to ensure that it is properly focused and achieves a worthwhile result.
Lord Adonis
My Lords, the longer the noble Lords, Lord Leigh and Lord Hodgson, spoke, the more concerned I became about their intentions in relation to the powers proposed in the Bill.
I fully accept the noble Lords’ perfectly reasonable intentions. We can have a debate on the right hygiene bar for the regulation of financial institutions—if Britain leaves the European Union, it will be a debate. The Foreign Secretary, Jeremy Hunt, opened it last week in his speech in Singapore, when he set out a vision of Britain being Singapore-on-sea, with a light-touch regulatory regime, offshore from Europe, ready to start competing—as I took it—on a lower bar. It perhaps will not be as low as the hygiene level mentioned by the noble Lord, Lord Hodgson, that starts to discredit us as a reputable financial centre, but he clearly wants it to be lower—he is a Tory, and generally speaking this is what Tories want. There is no great secret around what it is that the noble Lords, Lord Leigh and Lord Hodgson, want.
The crucial issue, however, is how the noble Lords’ intentions relate to the capacity of the Government, under this Bill, to effectively legislate by decree. If the Government want to make big changes in our regulatory regime, they should be debated openly and fully in this House and in the House of Commons. Indeed, if they are substantial departures from existing practice, the more difficult it will be to deliver paragraph (b) in the amendment, which states that,
“financial services regulations do not impose a disproportionate burden on small listed companies”.
That is all the more reason why they should go through the full and proper legislative procedures of this House: Second Reading, Committee, Report and Third Reading. That way, we can debate whether the hygiene level of the noble Lord, Lord Hodgson, is satisfactory. They make no argument whatever for giving the Government the power to rule by decree.
Lord Hodgson of Astley Abbotts
For the Hansard writer, I did not say “hygiene”, I said “high jump”.
Lord Adonis
I did not hear the noble Lord across the Chamber, but it does not affect the point. He wants to vary the level of the bar—that is the issue. I do not object in principle: he has a right as a parliamentarian to put forward proposals for changing the level of the bar. However, I object strongly that the Government should be allowed to make those changes by decree, the power that is given to them by this Bill, but we will return to that on Report.
At the moment, the intentions of the European withdrawal Act are elaborately debated in this House, precisely to meet the objective rightly set out by my noble friend Lord Tunnicliffe: that there should be a transposing of European legislation to British law and any further changes to the law should be sufficient only to prevent, remedy or mitigate deficiencies in retained EU law. That is a limited objective which justifies the power of the Government to do this by Orders in Council. As soon as we get to much wider political objectives—the kind that the noble Lord has just set out and as set out by this amendment—it completely undercuts the justification for this Bill. The justification for this Bill should surely not be for major departures of this kind in the law and the regulatory regime to be made by Orders in Council rather than by the full, open and proper debate which is necessitated by introducing primary legislation.
Lord Flight
My Lords, first, I declare my interest in the register. I want to make a small point, to which no one has referred so far. There is quite an importance in the various trade and regulatory bodies to discuss with the Treasury, and potentially with the regulator in the EU, what makes sense and what does not. That is a check on the Government having too much power where they will potentially have to do things in a way that is not approved by the noble Lord, Lord Adonis.
Lord Adonis
Lord Adonis
My Lords, my Amendments 11A, 11B, 12A and 15A seek to establish fuller procedures for the consideration of any changes to the law that the Government might wish to make that go beyond simply transposing European law in the shape of seeking advice from the House of Commons Treasury Select Committee, the House of Lords Secondary Legislation Scrutiny Committee or any other committee charged by the House of Commons or the House of Lords with fulfilling similar functions, as well as advice from the Bank of England.
Given the gravity of the issues that are potentially at stake in these changes in the law over and above simply transposing existing European law, advice from these committees is essential because we have to make significant decisions where the only power that we have is to say yes or no to statutory instruments. We will not tease out the issues, as we do in the normal course of Committee debates such as this. As one long experienced both as a Minister and as an opposition Member going through that process, I know that it is hugely valuable for the House at large in coming to understand and get to grips with the issues at stake. However, by definition those processes will not be available under this Bill because its whole purpose is to give the Government the power to legislate by means of statutory instruments, which are either subject to no debate whatever in this House or subject to only a short debate with the power to say yes or no.
In those circumstances, imposing on the Government a requirement to seek advice first from the Treasury Select Committee, our own delegated legislation Select Committee and the Bank of England, and to make that advice available to Parliament, would be both an important means of informing your Lordships and Members of the House of Commons about the issues at stake and, to be blunt, a check on the Government’s acting without seeking proper advice, while exposing their proposed changes in the law to proper scrutiny.
Lord Bates
I agree, in that spirit, to take back that point and look at it in the wider context of my opening remarks in responding to the noble Lord, Lord Adonis. I hope that he will feel able to withdraw his amendment at this stage, because we will return to these issues in some detail at Report, hopefully with some more to say.
Lord Adonis
My Lords, I am grateful to the Minister for that characteristically open-minded and engaging response. I would welcome the opportunity for further discussions. The interaction between my amendments and Amendment 7 is crucial. If Amendment 7 is carried, the scope of the changes we are talking about reduces so markedly that the need for advice also reduces. In particular, if Amendment 7 is carried, it is not clear to me that the generality of the issues in the Schedule would come before the House in the form of statutory instruments anyway; they would come before the House in the form of primary legislation.
Primary legislation is of course subject to all those processes of parliamentary scrutiny and decision-making that deal with the underlying concern that there will not be enough exposure of the issues at stake to debate and consultation. The interaction between Amendment 7 and my amendments is crucial. A good deal of the case for my amendments depends on what the Government and the House decide to do in respect of the issues raised in Amendment 7.
However, the wider issue that has come out in this debate and comes up time and again in this House is well worth us considering further on Report: namely, how Parliament deals with secondary legislation and statutory instruments. The point made by the noble Lord, Lord Deben, my noble friend Lord Tunnicliffe and the noble Baroness, Lady Bowles, is completely right. I thought it was neatly put by my noble friend: there is far too big a gulf between the way we consider statutory instruments and the way we consider primary legislation.
The noble Lord, Lord Hodgson, mentioned bars. We have a very high bar for changing the law by primary legislation, with hour after hour of debate—in discussing this two-clause Bill we are now in our fourth hour of Committee. We have had a Second Reading, and we will have Report and Third Reading. Those procedures are tried and tested.
When it comes to secondary legislation, much of which introduces changes to the law—particularly under this Bill, potentially—that are equivalent to changes brought about by primary legislation, our consideration of these changes is cursory. It is a brief debate if you are lucky when a statutory instrument is debated by the House, and there is no power to amend it. As my noble friend Lord Tunnicliffe said, if we try to reject it we will get immediately into a constitutional crisis because there cannot then be the process of reconciliation between the two Houses that takes place in the case of ordinary legislation.
Time and again we come up against this issue. To be blunt, time and again we duck it, because there is no great desire on the part of the Government to give us powers to amend statutory instruments or to have more elaborate procedures for discussing them, precisely because that would, in fact, make your Lordships more powerful on statutory instruments because we could then amend them and ask the House of Commons to think again. The issues raised by the Bill and all the requirements to do with leaving the European Union put this in stark relief, because a very substantial part of the legislative business of Parliament over the next two to three years if we leave the European Union will be conducted by means of statutory instruments, including all the fundamental changes to the financial regulatory system set out in the Schedule.
The conclusion I draw from all this is precisely the same as that of the noble Lord, Lord Deben: we are at one on the fundamental issue that we should not be leaving the European Union in the first place. One of the reasons why we should not be doing so is that we are not taking back control but giving the Government unprecedented powers to rule by decree—which is, of course, farcical. We have far more control at the moment, from the combination of our established procedures for primary legislation when it comes to our changes in the law, plus all the democratic processes we have within the European Union in respect of changes to the law made at the European Union’s behest, than we will ever have by leaving it and having no role to play in the changes recommended or brought about by the EU, and then having to go through this truncated rule by decree process in this Bill and the EU withdrawal Act.
So the right response to all the debate we have had today is not to leave the European Union and to have a people’s vote to give us the opportunity to express the ever more pronounced view of the public that this whole thing is deeply antipathetic not just to the best interests of the country but to our proper parliamentary procedures. But it is probably going a bit too far to press the Minister to accept that whole case just in responding to my one amendment, so just for now I will beg leave to withdraw.