Money Market Funds (Amendment) (EU Exit) Regulations 2019

Debate between Lord Adonis and Baroness Kramer

Monday 25th February 2019 Lords Chamber

[Baroness Kramer (LD)]

My Lords, like my colleagues on these Benches, I support this statutory instrument. It is necessary: to put it in technical terms, British investors in money market funds would be in a right pickle if we did not pass it, because, as the Minister has said, the domestic market is tiny.

However, I want to raise an issue which is repeated in many of the other statutory instruments before us. Paragraph 2.8 of the Explanatory Memorandum states:

“When the UK is no longer a member of the EU single market for financial services, it would not be appropriate for UK authorities to be obliged to share information or cooperate with the EU on a unilateral basis, with no guarantee of reciprocity”.


I understand the emotional tag behind all this, but there is a wise old saying which goes: “An eye for an eye and we all go blind”. The 2008 financial crash and many of the other problems that we have had have come through fragmentation of regulation and the lack of information transfer between regulators in different locations and countries. I really do not understand why we are not seeking to do everything in our power to make sure that information flows continue. A money market fund that is being regulated by the FCA under the new statute following any kind of no deal might well be in the same family as other such funds being marketed in the EU 27. Therefore, something that flags up an issue or concern with one may well reflect through to the other, because it could be core to the administration and deep within the overarching family. Will the Minister explain the consequences of putting up any kind of barrier to existing information transfer and what risks we might be taking on? I am exceedingly concerned about fragmentation.

[Lord Adonis (Lab)]

The noble Baroness had made an important point. We surely have an interest in giving unilateral assurances on transfer of information, because we have such a big interest in the health of our own financial services industry. Anything which ensures that dodgy practice is exposed and information exchanged in respect of it is in our interests, even if—by a complete failure of our negotiating capacity, which unfortunately the Government are guilty of the whole time at the moment—we do not get any reciprocal rights in respect of these transfers of information. The noble Baroness’s question is very well made.

I have a question about the impact assessment. On page 17, it says that the familiarisation costs in respect of this instrument are estimated at £340 per firm and that the total cost is £7,200. Do I deduce from that that only 21 firms are affected, or is there an error and it should really read £7.2 million or something? That seems to be a point of some importance.

Benchmarks (Amendment and Transitional Provision) (EU Exit) Regulations 2019

Debate between Lord Adonis and Baroness Kramer

Monday 18th February 2019 Lords Chamber

[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?

Data Protection, Privacy and Electronic Communications (Amendments etc) (EU Exit) Regulations 2019

Debate between Lord Adonis and Baroness Kramer

Monday 18th February 2019 Lords Chamber

[Lord Adonis]

My Lords, I hope that it is close, because meanwhile we have another seven of these instruments to consider today and the whole of the Order Paper for Wednesday has, I think, another dozen of them. We also have hundreds more coming next week. Perhaps I may say to the noble Lord that I hope that this can be resolved extremely quickly and that we can find a satisfactory way forward, because the issue of the lack of impact assessments seems to be entirely arbitrary. We have some on the later instruments that will be introduced by the noble Lord, Lord Bates, but there are none on these. However, no formal consultation has been carried out on any of the instruments.

[Baroness Kramer (LD)]

I have some fear that I will raise the noble Lord’s blood pressure even higher, but if he takes a look at the impact assessments that are provided, I think that he will be shocked by their inadequacy. They do not move us very far on from having no impact assessment at all.

[Lord Adonis]

My Lords, I do not think that it is possible for my blood pressure to be higher on these matters. However, I hope that the blood pressure of the House is high, because we are supposed to be legislating on behalf of the country, and the proceedings of your Lordships in respect of these no-deal statutory instruments are an absolute farce. I do not think that the procedures of the House are working well. The fact is that the two chairs of our relevant sub-committees cannot even agree on a letter to send to the Treasury in respect of the handling of consultation. The fact that it is about six months after we started getting the initial flow of statutory instruments on this matter coming to the House is in itself deeply unsatisfactory and is not a good commentary on the way our parliamentary proceedings are working. Moreover, the fact is that what we get are bromides from the Government that there is no change, based on there being no impact assessments, no consultation and a complete misreading of what the situation is in any event, because it involves a denial of all of the negative consequences that will flow from leaving the European Union, which of course is the underlying fact that they should be grappling with in the first place when conducting consultations and impact assessments. It is deeply unsatisfactory.

The right thing for this House to do would be to reject these instruments. We should not be a party to such an abuse of our constitutional procedures as is taking place with these no-deal instruments. What we will be faced with, though—I feel this pressure myself—is that we could crash out of the European Union in an unconscionable act of misgovernment in the course of five weeks’ time, so we have to do our level best to ensure at least that there is a statute book in place for that eventuality. But I and other noble Lords want to put on the record that the situation we are faced with, and which gets worse with every debate that flushes out more facts about what is actually happening, is a complete abuse of our constitutional procedures.

European Union (Withdrawal) Bill

Debate between Lord Adonis and Baroness Kramer

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

[Baroness Kramer]

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

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

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

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

[Lord Adonis]

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

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

European Union (Withdrawal) Bill

Debate between Lord Adonis and Baroness Kramer

Committee: 1st sitting (Hansard): House of Lords
Wednesday 21st February 2018 Lords Chamber

[Lord Adonis]

My Lords, I do not think that the noble Lord should intervene to cut short this debate. There are many amendments that have not yet been spoken to and my noble friend on the Front Bench has not had a chance to speak. Many other noble Lords seek to speak, too. The Minister should speak at the end of the debate after noble Lords who wish to speak have had a chance to do so. These are the most important issues that will face this country over the next generation and I do not think that we should be told by the Government Chief Whip that we have been speaking for too long.

[Baroness Kramer]

My Lords, I shall speak to Amendment 89 to which I had the privilege of adding my name. I want to draw the House’s attention to that amendment because it addresses a constitutional issue. We are back to the issue of Henry VIII powers. This is to prevent the Government using Henry VIII powers in statutory instruments in order to drive through a separation from the customs union and from the single market rather than bringing those issues directly to this House for its decision. That is exceedingly important.

In supporting that argument, I want to underscore the importance of the customs union and the single market in response to the arguments put forward by the noble Lord, Lord Lamont. He said that without the customs union we can achieve what we need through a free trade agreement. What he did not say is that free trade agreements do not include services—or do so only at the margin. Our economy is an 80% service economy and a free trade agreement along the pattern and lines of other free trade agreements across the globe would leave us without the ability to sell our services freely as we do today across the European Union. Now the single market in services is not yet complete, but it is fairly close to completion and there is a great deal of opportunity.

The Government turn and occasionally say that there will be a mechanism to do this called mutual recognition. But within this House there are Members who will remember in the early days of Thatcher the development of the single market. This country thought that the route to be able to open up the single market and access across Europe was mutual recognition. But it was not effective, which explains the move towards regulation and harmonisation that currently overwhelmingly underpin our trade with the EU.

The EU has been very clear that it cannot see a way forward along the lines of mutual recognition except in fairly narrow terms. We have an example that the Government often cite with Switzerland where there is in effect mutual recognition through an equivalency agreement. But in December, when that agreement needed to be extended to provide for MiFID II, the EU would agree only to a one-year arrangement because it needed to be underpinned by a great extension of institutional arrangements to deal with disputes and a whole range of other issues.