Elections Bill

Lord Ashton of Hyde Excerpts

Lords Hansard - Part 1 & Committee stage
Thursday 10th March 2022 Lords Chamber

[Baroness Meacher (CB)]

My Lords, I beg to move.

[Lord Ashton of Hyde (Con)]

Now we have a debate, which the Minister can answer.

[Lord Stunell (LD)]

I thank noble Lords and join in the general confusion about where we are up to. I speak in favour of the two amendments in this group tabled by the noble Baroness, Lady Meacher. They seem to be a ranging shot on one of the most important issues embedded in this Bill.

I hope that noble Lords will excuse me if I take this opportunity to explore what the amendments do and why it is so important that they and other matters relating to Clauses 14 and 15 are given serious consideration. These provisions are at the heart of the matter which I want to speak about. The question is really: is the United Kingdom to retain, as one of its trusted institutions and symbols of democratic legitimacy, the Electoral Commission, or is it to join an increasingly long list of countries that have, step by step and little by little, eroded their democratic base, undermined trust in their electoral processes and cast doubt on the legitimacy of their elected representatives?

The Electoral Commission was set up as a direct result of recommendations by the Committee on Standards in Public Life, on which I serve. The committee is chaired by the noble Lord, Lord Evans of Weardale, and its first chairman was Lord Nolan. People refer frequently to the Nolan principles but those are in the guardianship of the Committee on Standards in Public Life; so, we believe, is the Electoral Commission. It is a body which emerged from recommendations presented to the Prime Minister by the CSPL. It has since been overhauled and reviewed by the CSPL and there have been changes made in legislation, again based on recommendations made directly by the CSPL. In a report last year, the Committee made further recommendations to the Prime Minister about changes that needed to be made in response to the inquiry and the evidence that it took. All those recommendations were designed to make the Electoral Commission a more effective body, with clear and specific recommendations on how that should be done in each case.

The Electoral Commission was set up on the advice of the CSPL. It was updated on advice from the CSPL, and the Government have before them clear recommendations from the CSPL on how it could be improved further. Our report strongly emphasised what every piece of evidence showed: that to maintain trust in the electoral integrity of our democratic processes, it was essential that the Electoral Commission retains its independence from political interference—interference from any political party or faction, but particularly from the party in power at any one time. Unfortunately, Clauses 14 and 15 take our country in the wrong direction. The two amendments tabled by the noble Baroness, Lady Meacher, try hard to pull it back from the brink, so yes, they have our support.

At Second Reading, I asked whether the Minister would be ready to hand over to a future radical-left Government the powers that the Bill, in its present form, would give them. He is far too skilled an operator to answer that question, but it is very hard to believe that he would. It could start off with something as innocuous as a requirement for the Electoral Commission to have regard to the Government’s manifesto policies; levelling up, for instance, or maybe levelling down, as will surely be achieved as a completely accidental by-product of other provisions in the Bill.

In many areas, but particularly Clauses 14 and 15, the Bill seems to have been drawn up by people who have never been in opposition, which is startling because the Minister has plenty of experience of that, having lived as an oppressed political minority in the Liberal Democrat-run London Borough of Richmond upon Thames. The Minister may protest that there is to be a comprehensive consultation with various bodies before any strategy statements come into force. Of course, the amendments of the noble Baroness, Lady Meacher, very much bear on the question of the terms and conditions on which such a strategy report might be made.

The Minister might refer me to the elaborate wording of proposed new Section 4C, which is in Clause 14. But when I pointed out to him at Second Reading, as many noble Lords did, that practically every outside body that had expressed an opinion on these changes had strongly advised against them, and that the CSPL itself, which created the commission, had said that our electoral processes must be overseen by an independent regulator protected from political pressures and separate from the Government, and that it must demonstrate its impartiality and effectiveness at all times, the Minister’s reply was that the Government take a different view.

Noble Lords should bear in mind that five bodies must be consulted, according to proposed new Section 4C, before any such strategy document moves forward. It would be interesting to know what they will do when they get their first strategy statement. Actually, we do not have to wonder, as they have already commented on the proposals in front of them. Two opted out in disgust, which is why the Scottish and Welsh amendments flow in the next group. The Public Administration and Constitutional Affairs Committee has strenuously protested and recommended that the Government take these provisions out of the Bill. That is three of them. The Speaker’s Committee is packed with Cabinet Ministers, which is an offence when it is the budget holder for the Electoral Commission—a matter we shall talk about later. It is also worthy of note that all but one of the Electoral Commissioners jointly wrote an open letter of protest, pointing out that this fundamentally undermines their legitimacy and our democratic system. Therefore, of the five consultees in proposed new Section 4C, four have expressed vigorous dissent with the proposal and one is packed with Cabinet Ministers.

Interestingly, neither the CSPL or any local government institution was consulted: the one which created the electoral commission, and the people who will receive the benefit of its administration above anybody else. What we learn from this is that a fig leaf of consultation, even when we have a benign regime such as this, is not a safeguard. Under a less benign regime, as seen from the Minister’s viewpoint, that fig leaf could be gone in the space of a short consultation. I repeat my question: is the Minister completely at ease with the provisions in these two clauses? I and my noble friends are certainly not.

A look at the international stage may help noble Lords to understand our deep unease more clearly and explain why we are so strongly in favour of the Minister giving a fair wind, at the very minimum, to the amendment of the noble Baroness, Lady Meacher.

Dissolution and Calling of Parliament Bill

Lord Ashton of Hyde Excerpts

3rd reading
Thursday 24th February 2022 Lords Chamber

[Lord Ashton of Hyde (Con)]

My Lords, I have it in command from Her Majesty the Queen to acquaint the House that Her Majesty, having been informed of the purport of the Dissolution and Calling of Parliament Bill, has consented to place her prerogative, so far as it is affected by the Bill, at the disposal of Parliament for the purposes of the Bill.

Motion

Moved by

Protocol on Ireland/Northern Ireland: Impact on UK Internal Market

Lord Ashton of Hyde Excerpts

Thursday 18th November 2021 Lords Chamber

[The Deputy Speaker (Lord Haskel) (Lab)]

My Lords, the time allowed for this Question has elapsed.

[Lord Ashton of Hyde (Con)]

My Lords, as we have failed to reach the end of the list on the previous two Questions, I implore noble Lords to keep their questions to half a minute, as recommended by the Procedure Committee. That will allow my noble friend to answer even more questions than he is already doing.

Political Parties: Expenditure Limits

Lord Ashton of Hyde Excerpts

Monday 22nd February 2021 Lords Chamber

[Baroness Bennett of Manor Castle (GP) [V]]

[Inaudible.]

[Lord Ashton of Hyde (Con)]

The noble Baroness is muted at the moment.

[Baroness Bennett of Manor Castle (GP) [V]]

Apologies, my Lords—I will try again. In recent general elections, the wealthiest and largest political parties have used their very generous national party spending limits—in 2019, it was close to £19 million—to cover a variety of non-national costs, including targeting a lot of individual constituencies with generic leaflets, billboards, et cetera. Independent candidates and smaller rising parties do not have this additional spending option. Will the Government be open to consider rebalancing the two types of spending limit in the interests of fairness as well as to prevent swing seats being barraged with messaging? Will they put far tighter limits on individual contributions to political fundraising, so that we do not all get the politics a few people pay for directed towards a small percentage of the population?

European Union (Future Relationship) Bill

Lord Ashton of Hyde Excerpts

3rd reading & 2nd reading & Committee negatived & 2nd reading (Hansard) & 2nd reading (Hansard): House of Lords & 3rd reading (Hansard) & 3rd reading (Hansard): House of Lords & Committee negatived (Hansard) & Committee negatived (Hansard): House of Lords
Wednesday 30th December 2020 Lords Chamber

Bill read a second time. Committee negatived.

[Lord Ashton of Hyde (Con)]

My Lords, I have it in command from Her Majesty the Queen to acquaint the House that Her Majesty, having been informed of the purport of the European Union (Future Relationship) Bill, has consented to place her prerogative and interest, so far as they are affected by the Bill, at the disposal of Parliament for the purposes of the Bill.

Bill read a third time.

Equivalence Determinations for Financial Services (Amendment etc.) (EU Exit) Regulations 2020

Lord Ashton of Hyde Excerpts

Wednesday 2nd September 2020 Grand Committee

[The Minister of State, Cabinet Office and the Treasury (Lord Agnew of Oulton) (Con)]

My Lords, the Treasury has been undertaking a programme of legislation to ensure that after the end of the transition period there continues to be a functioning legal and regulatory regime for financial services in the UK. The Treasury is laying SIs under the European Union (Withdrawal) Act 2018 to deliver this legislative programme and the majority of these SIs have already been approved in this place and in the House of Commons.

As part of this financial services legislative programme before exit day the Treasury laid the Equivalence Determinations for Financial Services and Miscellaneous Provisions (Amendment etc) (EU Exit) Regulations 2019, commonly known as the Equivalence Regulations 2019. Those regulations were designed to ensure that if the UK left the EU without a transition period, the UK would have a fully functioning equivalence framework from exit day. The additional time afforded by the transition period has provided us with the opportunity to put in place supplementary measures in the Equivalence Regulations 2019 to ensure that the UK continues to have a robust and functioning equivalence framework for financial services, both during and after the end of the transition period.

The measures in the instrument being debated today complement the Equivalence Regulations 2019 by creating additional stand-alone powers in this instrument for the UK-relevant financial services regulators—the Bank of England and the Financial Conduct Authority in this case—which are appropriate for those regulators in the transition period. They also make minor amendments to the earlier 2019 regulations, again as appropriate for the transition period. This SI will, finally, make minor amendments to add to the powers available to the regulators after the end of the transition period and to correct errors in earlier financial services EU exit legislation.

I am grateful that this SI was raised as an instrument of interest by the Lords Secondary Legislation Scrutiny Committee in its July report and for the question that the committee raised. I intend to address the question now and in the course of the debate.

The instrument being debated concerns the UK’s future regime for equivalence, a process to determine that another country’s regulatory and supervisory regime is equivalent to the UK’s corresponding regulatory framework. Recognising the regulatory equivalence of third countries is a key component of financial services regulation. Equivalence of determinations can help to reduce regulatory burdens on firms and can facilitate cross-border market access. This may lead to increased competition that can benefit both UK firms and consumers by engendering healthy market incentives to lower prices and offer innovative products.

At present, equivalence functions are performed by the European Commission and the European supervisory authorities. At the end of the transition period, these functions will be transferred to HM Treasury and the UK regulators as provisions in retained EU law. During the transition period, equivalence determinations can be made for EEA states via powers within the 2019 equivalence regulations. This instrument provides a UK equivalence framework that is appropriate for use during the transition period in relation to the EU’s existing framework. It allows the UK financial services regulators to complete the associated actions that mean that HM Treasury equivalence determinations taken during the transition period can take full effect at the end of that period.

This is a technical SI that provides for the UK’s transition to its new position outside the EU. I will turn now to the main categories of fixes that are being introduced here. The first three changes provide UK regulators with the appropriate powers to complete the associated actions to ensure that HM Treasury equivalence determinations can take effect fully at the end of the transition period. Currently, the 2019 equivalence regulations allow HM Treasury to make equivalence determinations by direction during the transition period for EEA states where these directions would not enter into force until the end of the transition period. As part of the equivalence process, almost all equivalence provisions in retained EU law will require UK financial services regulators to conclude co-operation agreements with the relevant regulatory authority or authorities for that EEA state before the determination can take effect.

There is currently no mechanism to allow regulators to undertake this during the transition period. Where the Treasury has made an equivalence determination by direction, this SI will make transitional provision for UK financial services regulators to have the power to enter into relevant co-operation agreements with the appropriate EEA regulatory authorities before the end of the transition period. These co-operation agreements would come into effect at the end of the transition period for the necessary provisions in retained EU law.

In addition, as part of the direction-making process, almost all equivalence provisions require regulators to issue recognition or registration decisions for non-UK firms. Where the Treasury has made an equivalence determination by direction during the transition period, this instrument puts in place a regime for firms to make an application to the appropriate regulator, and for that application to be processed. It will therefore ensure that regulators have the power to process applications and issue recognition and registration decisions during the transition period to come into effect at the end of that period for the necessary provisions in retained EU law.

This SI will also give regulators the power to request fees from applicants for such regulatory decisions. I appreciate that the House of Lords Secondary Legislation Scrutiny Committee questioned whether there is enough time for UK regulators to establish co-operation agreements with EEA regulators once an equivalence determination is made and then process applications made by EEA firms. I am pleased to say that regulators have a period of one year to process applications from EEA firms once the required co-operation agreements have been established. Both the Treasury and the regulators consider this to be ample time for the regulators to decide any applications.

Secondly, this SI will amend the Credit Rating Agencies (Amendment etc.) (EU Exit) Regulations 2019, which in turn make provision for the onshoring of the EU credit rating agencies regulation. The amendments will onshore powers to enter into co-operation arrangements currently held by the European Securities and Markets Authority, such that in the future they will be held by the FCA. The amendments also make provision for existing EU equivalence determinations that will form part of retained EU law by operation of Section 3 of the European Union (Withdrawal) Act 2018.

Finally, two minor but necessary amendments are made to the Central Securities Depositories (Amendment) (EU Exit) Regulations 2018. The first relates to a provision which stipulates that equivalence may be granted only to states that have a regime for the recognition of central securities depositories authorised in other states. The amendment ensures that the UK is one of these states. The second amendment ensures that the Bank of England has the appropriate timescales to make recognition decisions for central securities depositories.

In summary, the Government believe that the proposed instrument is necessary to ensure that there is an appropriate equivalence framework for financial services during the transition period and to complement that already put in place by the 2019 equivalence regulations. I hope that colleagues will join me in supporting these regulations, and I commend them to the Committee.

[Lord Ashton of Hyde (Con)]

My Lords, we have no room for manoeuvre on time for this debate, so I would be grateful if Peers could keep to time and ideally go slightly short.

EU: Customs Arrangements

Lord Ashton of Hyde Excerpts

Wednesday 8th July 2020 Lords Chamber

[The Deputy Speaker (Lord Alderdice) (LD)]

Lord Caine?

[Lord Ashton of Hyde (Con)]

The noble Lord needs to unmute.

[The Deputy Speaker]

There seems to be a problem with the hub. We shall move on to the noble Viscount, Lord Waverley.

Elections: Personal Data

Lord Ashton of Hyde Excerpts

Wednesday 18th April 2018 Lords Chamber

[Lord Cormack (Con)]

My Lords, how many desk officers are dealing with this problem?

[The Parliamentary Under-Secretary of State, Department for Digital, Culture, Media and Sport (Lord Ashton of Hyde) (Con)]

Quite a few!

[Lord Young of Cookham]

I have had some in-flight refuelling from my noble friend to my left who has responsibilities for DCMS and, in a nutshell, his answer was “Lots!”.

Queen’s Speech

Lord Ashton of Hyde Excerpts

Tuesday 24th May 2016 Lords Chamber

[Lord James of Blackheath (Con)]

My Lords, I will talk entirely on the subject of LIBOR, but under separate headings. I am sorry that LIBOR was not in the gracious Speech, because there is an urgent matter which should get the close attention of your Lordships’ House. We are facing the prospect of an enormous smash-and-grab raid from the USA on our quite legitimate LIBOR interests. It falls to this House to take a very keen interest in this. I declare an interest: in 1958 I joined Lloyds Bank and was put on a LIBOR training course. I must be one of the very few people to have been on one of those. I do not recommend it, but it was something to remember.

At the moment, there are 10 international LIBOR markets. The London market trades in dollars, euros and yen. I am not too sure why we have the yen, but we appear to have a concentration of Japanese banks so we are big in that currency. The Americans do not like it; they want the yen entirely for themselves. So they have launched an initiative to persuade us that we are totally criminal and corrupt in our handling of this market. They have persuaded and leaned upon the Serious Fraud Office—of which I am not a fan—to move for the extradition of the leading yen market manager from this country to theirs, where they were promising him a 30-year prison sentence. He was not terribly happy with that. As a result, the SFO persuaded him, under great duress, to accept that it would put him on trial if he would rat upon his broker friends in this country. The SFO would then get a series of rapid convictions which would make it look very good—something it likes to do and has few opportunities for. It has all gone horribly wrong for everybody concerned.

We need to take note of where we are today. William Dudley is an American gentleman who is president and chief executive of the Federal Reserve Bank of New York, an organisation which some of your Lordships will be aware is neither federal, nor a reserve bank, nor a bank at all. It is a very dubious proposition indeed; you should take a very long spoon if you ever go anywhere near it. The LIBOR market is now running at $350 trillion a day—I did not know there was that much money in the world either—and Mr Dudley is claiming that this should be subject to an average rate of 0.37% per day. As far as I can see, the average rate throughout the entire period of his complaint has never varied by more than 0.1% either way, so what on earth he is talking about I do not know. But then we notice with great interest that he is proposing that the British, because of their corrupt and dishonest management of LIBOR in the yen sector, should hand it all over to something called the OBFR, which, would you believe, is the New York Federal Reserve Bank’s own overnight bank funding rate. Is that not a strange coincidence? Of course, it will then milk that market rotten.

Meanwhile, the Serious Fraud Office fell into the trap of believing that it should go along with this and started legal proceedings against the unfortunate man who was the principal yen manager for UBS in London. Eventually, he was put on trial under the threat of extradition if he did not go. The trial began at Southwark Crown Court in November last year, and it was followed by a second one. There have been three LIBOR trials and I will talk only about the first two because the other one is still sub judice and I will say nothing about it. But LIBOR 1 was concerned entirely with Mr Tom Hayes. His trial lasted 12 weeks, at the end of which he was convicted.

The judge had the great idea that he could get a bigger sentence by working on the basis that every dialogue that had taken place with a broker was a separate crime and that he could therefore tot these up into consecutive sentences, and he gave him 14 and a half years in the slammer. This was reduced on appeal to 11 and a half years, which is where it stands presently, but was then subject to a separate confiscation order, which the SFO originally claimed should be for £2 million—the entire lifetime earnings of Mr Hayes. Subsequently, that went back to court and it has now been ruled that the figure shall be £880,000 because the rest of it has been spent on legal aid anyway and that is all that is left, and if he does not pay it by 1 July this year he will incur the remainder of the three-year sentence which was taken off in the first appeal. The Supreme Court has refused any consent for a retrial or appeal on the facts of this case, but now we have two extraordinary things.

In the second LIBOR trial, the actual brokers with whom Mr Hayes was dealing were put on trial—they had not been allowed into the first court case, in which he had expected them to stand alongside him—and were acquitted by the second jury. So we have this odd situation that Mr Hayes has been convicted of conspiracy with six people who have been proven innocent of conspiracy with him. That, apparently, does not constitute terms for an appeal, which I think is extraordinary. The second thing is that the FCA has decided that this matter is so important—quite rightly, too—that it should conduct a separate investigation through its Regulatory Decisions Committee into whether this represents a bigger chain of dishonesty through UBS and whether it should now disqualify or proceed against it. I discovered only last week that the FCA has decided that there is no charge of dishonesty or malpractice against UBS at all, that the information that was given by Mr Hayes to his manager was correct, and that they have all behaved completely correctly. By my count—

[Lord Ashton of Hyde (Con)]

My Lords, I am sorry to interrupt my noble friend. I am sure he is coming to a conclusion. He is two minutes over. I am aware it is an advisory speaking time but most noble Lords have stuck within it. I feel he has material for a full day’s debate. I hope that he will bring his remarks to a conclusion soon.

[Lord James of Blackheath]

I will sum up and conclude. We have to resolve this in some way. We do not have the Supreme Court among us directly now but surely we can ask it to consider reintroducing either a proper appeal process or a retrial, either of which would lead us to some form of justice. Alternatively, why can we not pass this to the newly formed Criminal Cases Review Commission and ask it to get its teeth into it? Meanwhile, we should suspend the remainder of the confiscation process and we should probably give serious thought to having a serious talk with the SFO and asking it to clean up its act for the future. I rest my case.

Bank of England and Financial Services Bill [HL]

Lord Ashton of Hyde Excerpts

Tuesday 3rd May 2016 Lords Chamber

6: Clause 11, page 11, line 24, at end insert—
“( ) In the case of an examination under section 7D(1)(b), subsection (1) also applies to documents in the custody or under the control of—
(a) the company to which the examination relates;
(b) the auditor or auditors of that company.”

[Lord Ashton of Hyde (Con)]

My Lords, I beg to move that this House do agree with the Commons in their Amendments 1 to 6. In moving them, I shall speak also to Amendment 12.

In the other place, the Government made small changes to the provisions relating to the National Audit Office’s powers to carry out value-for-money studies of the Bank. As we have discussed in previous debates, these clauses deliver an important increase in the accountability of the Bank and its operations.

The NAO’s new powers are subject to a bespoke policy carve-out, designed to protect the independence of the Bank’s policy decisions. The Government have made two small but important technical changes to ensure that the NAO’s new powers are applied consistently across all areas of the Bank. These changes have been agreed by both the NAO and the Bank.

The original drafting of the Bill did not give the NAO the power to carry out value-for-money reviews of Bank subsidiaries unless they were indemnified by the Government. This was not the Government’s policy intention.

The first change ensures that the NAO is able to carry out value-for-money studies, not only of the Bank itself, but also of all the Bank’s subsidiaries, whether or not they are indemnified by the Government. The amended clauses will also allow the NAO to carry out value-for-money studies of any other company in which the Bank has an interest, but only if that company is indemnified by the Government.

The second change ensures that the policy carve-out applies consistently across all areas of the Bank. Under the previous drafting, the NAO’s powers to review the Bank’s indemnified subsidiaries and other companies came from the National Audit Act 1983. That means that its review of these companies would not be covered by the policy carve-out. The Government have amended the Bill to address this inconsistency.

On Amendment 12, the Government also made a small amendment to the clauses in the Bill relating to the Monetary Policy Committee. The Bill reduces the minimum frequency of MPC meetings from monthly meetings to “at least 8” meetings in every calendar year. The Warsh review assessed that this new timetable,

“strikes the balance between timeliness and probity”,

and brings the MPC into line with other leading central banks, including the US Federal Reserve and the European Central Bank. The amendment made in the other place adjusts the reporting requirements of the MPC to match the new meeting timetable. At the moment, it is required to submit a monthly report and so, without this change, the committee would be obliged to produce reports even when it has not had meetings.

I hope that noble Lords will agree that these are sensible changes, and I commend the amendments to the House.

[Lord Higgins (Con)]

My Lords, I had not realised until now that I am a wild enthusiast for a bespoke policy carve-out. The amendments reflect the considerable extended debates that we have had previously in your Lordships’ House, and I am very glad that they are now effectively implemented by the amendments that we have in front of us. There was a real problem with the relationship between the National Audit Office and the Bank of England. It is very fortunate that that seems to have been resolved now in a way that is satisfactory to both sides.

In a former incarnation, I was much involved in extending powers of the National Audit Office so that it did not merely act as an auditor but could look into the economy, efficiency and effectiveness of the bodies that it was investigating. I certainly think that there is a strong case for it including the Bank of England in its remit. To clarify one point on this, there are some aspects of the Bank’s operation that really need to be looked at. The present Governor of the Bank of England has taken to issuing forward guidance on interest rates, which I must say has not been an enormous success. Anyone who has followed that advice will almost certainly have lost money, depending on the precise timing. I think that he should consider very carefully whether it is an appropriate approach for the Bank to take—and perhaps the National Audit Office should do so, too.

I am not entirely clear what is covered by the expression “Bank company”. In particular, does it include the body—I have forgotten its name for a second—responsible for managing the enormous quantity of gilts purchased as a result of the quantitative easing operation? Will the National Audit Office have the power to inquire into how that very substantive—indeed, enormous—quantity of gilts is managed?

Overall, however, this is a very welcome change—and I am particularly glad that the Treasury is proposing to finance the operation. As it pointed out in the notes that come with the Bill, it should increase the likelihood of a value-for-money study being undertaken relative to the Bank of England. This change reflects the work that your Lordships did at earlier stages, and is very much to be welcomed.

[Lord Davies of Oldham (Lab)]

My Lords, we have come a considerable distance from what was in the original draft of the Bill that came before us on the role of the National Audit Office. Quite rightly, the Government have responded to the very strong opinion of this House that the proposals in the Bill were far from satisfactory, and we are grateful to them for the extent to which they have moved on these issues. This House played a significant role in identifying the real difficulties in their original Bill for the National Audit Office being remotely able to carry out its proper duty in assessing whether on all occasions the Bank of England was providing value for money.

The noble Lord, Lord Higgins, has moved across an important boundary in indicating that the NAO ought also to look at issues of policy regarding the Bank, which we know the Bank is resistant to. The Government still maintain that position, although we sought to press that here and my colleagues in the Commons were interested in the issue as well, not least if issues cropped up under freedom of information queries, where the role of the NAO in relation to the Bank would inevitably be limited under the proposal.

Nevertheless, the Government have moved a considerable distance on this matter. We are pleased to say that although not all our proposals, here and in the other place, were accepted by the Government, we nevertheless feel that significant progress has been made in that the NAO has been able to draw up with the Bank of England a memorandum of understanding on how these issues are to be tackled in future. We appreciate the fact that the Government have moved a considerable way from their original proposals to a much more satisfactory position, although I will listen with great interest to the Minister’s response to the noble Lord, Lord Higgins.

[Lord Ashton of Hyde]

My Lords, I am grateful to my noble friend Lord Higgins and the noble Lord, Lord Davies, for their comments and for their support for these amendments. My noble friend’s views on the governor’s role in giving forward views are well known; he has expressed them before in debate on the Bill. We have listened to his views but they are not specifically a part of this Bill. On the question of whether “Bank company” includes the asset purchase facility and therefore allows the NAO to make value-for-money reviews, the answer is yes. Amendment 3 is the amendment that deals with that.

I am glad that the noble Lord, Lord Davies, has acknowledged that we have been in listening mode and that we have moved. We are always happy to listen to sensible suggestions, and I am grateful for his acknowledgement of that.

Motion on Amendments 1 to 6 agreed.

--- Later in debate ---

Moved by

[Lord Ashton of Hyde]

That this House do agree with the Commons in their Amendment 9.

9: After Clause 27, insert the following new Clause—
“Money laundering
(1) In any regulations or orders transposing money laundering measures contained within Directive (EU) 2015/849 of the European Parliament and of the Council of 20 May 2015 (or in relation to any subsequent EU amending or successor measure) the Secretary of State shall have a duty to ensure, insofar as such regulations relate to institutions regulated by the Financial Conduct Authority—
(a) reasonable regard and due prominence is given to—
(i) Preambular (33),
(ii) Article 13(2),
(iii) Article 15, and
(iv) Article 16 and Annex II;
(b) clarity is achieved with respect to the meaning and interpretation of “prominent public function” in the context of money laundering;
(c) reasonable regard and due prominence is given to Article 22 which recognises that a PEP may have no prominent public function; and
(d) any interpretation of “adequate” in Article 20(b)(ii), and “enhanced” in Article 20(b)(iii) takes account of, and gives due prominence to, the provisions in Article 13 on risk sensitivity.
(2) The Financial Services and Markets Act 2000 is amended as follows.
(3) After Part 20B insert—
“PART 20C
MONEY LAUNDERING
333U Anti-money laundering: guidance
(1) The FCA must, prior to relevant regulations coming into force, issue guidance to regulated entities on the definition of one or more categories of “politically exposed persons” (“PEPs”).
(2) Guidance under subsection (1) must include, but need not be limited to—
(a) a requirement to take a proportional, risk-based and differentiated approach to conducting transactions or business relationships with each category of PEP that may be defined; and
(b) specified categories of persons to be—
(i) included and
(ii) excluded
from any definitions of PEPs.
(3) The Secretary of State may, by regulation, make provision about—
(a) the guidance issued, amended and/or reissued under
subsection (1);
(b) arrangements for complaints about the treatment of individuals by regulated entities to be received, assessed and adjudicated by the FCA, where—
(i) a person was treated as though he or she was a PEP (and he or she was not),
(ii) a person who is a PEP was treated unreasonably in disregard of guidance under subsection (1), particularly in regard to specific elements required under subsection (2)(a), or
(iii) a person was refused a business relationship solely on the basis of that he or she is a PEP,
(c) circumstances in which—
(i) compensation payments are to be required from, or
(ii) financial penalties are to be imposed on regulated entities where complaints under paragraph (b) are upheld.
(4) For the purposes of subsection (1), “relevant regulations” means regulations transposing into UK law measures that EU Member States are required to implement to combat money-laundering (or subsequent regulations amending those regulations) that contain references to PEPs.
(5) The power to make regulations under subsection (3) is exercisable by statutory instrument which may only be made after a draft of any such instrument has been laid before, and approved by a resolution of, each House of Parliament.””

[Lord Ashton of Hyde]

My Lords, the amendment addresses the important question of how the banks are treating politically exposed persons, or PEPs, in the light of new global standards for anti-money-laundering and counterterrorist financing. I know that this issue has interested many noble Lords, directly and in respect of their families and close associates. I can tell the House that the Government share those concerns, which is why we have accepted this amendment to the Bill.

The Government intend to implement new money-laundering regulations by June 2017 at the latest. We will consult on the new regulations later this year. Organised crime, international corruption and terrorism cross national borders, so co-ordinating with our neighbours and Governments around the world is vital. We do this through the Financial Action Task Force, which revised its global minimum standards in 2012. At the same time as being robust, the UK’s anti-money-laundering and counterterrorist financing regime must be proportionate if it is to be effective and command public support. Resources must be focused on higher-risk areas and individuals, in line with accepted practice.

The Government have always encouraged banks to take a sensible and proportionate approach to this issue. They should apply appropriate “know your customer” measures that are tailored to reflect the risk posed by individual customers. I believe that several Members of this House and the other place have experienced difficulties with their bank accounts. No one should have their banking facilities refused simply because they have been identified as a PEP.

In addition to its focus on proportionality, the amendment addresses guidance on PEPs and the handling of certain PEP complaints. The Government will consult later this year on new money-laundering regulations and we will ask specific questions about the provision of guidance and the adjudication process. We will fully consider the letters that noble Lords have already sent to us on this topic when preparing our response to the consultation.

The Government’s anti-money laundering and counterterrorist financing regime is making the UK a more hostile environment for illicit finance. The amendment will ensure that a strong message is sent out about applying the rules in a proportionate and sensible manner and I commend it to the House. I beg to move.

[Lord Sharkey]

My Lords, as the Minister said, this House has frequently discussed the problems with the banks’ treatment of customers under their interpretation of the EU PEP rules. Each time we have done so, it has been quite clear that there are plenty of examples of banks frequently acting aggressively and disproportionately. It is quite clear that by unreasonably closing accounts, or threatening to, they cause real distress and the Government agree, as the Minister said, that the banks are ultimately at fault. In response to an Oral Question from my noble friend Lord Clement-Jones on 14 October 2014, the Minister, the noble Lord, Lord Deighton, said:

“I absolutely accept the criticisms that are made where banks behave disproportionately. It happens too often and we should work with them to fix that”.—[Official Report, 14/10/14; col. 115.]

It clearly has not been fixed and is probably getting worse as the banks anticipate the new EU directive.

Discussing this amendment on Report in the Commons on 19 April, Harriet Baldwin said that,

“if the transposition of the EU directive into domestic legislation is mishandled, a wide range of other people could be affected. It could adversely affect tens of thousands of people, including civil servants, city workers and even, as has been described, the families of armed forces officers serving our country abroad”.—[Official Report, Commons, 19/4/16; col. 853.]

The Minister was right to warn of this possibility.

On Sunday, the Sunday Times ran a large and prominent article on the case of Alan Charlton. Mr Charlton retired from the FCO three years ago after 35 years’ service. He is our former ambassador to Brazil. His bank threatened to shut down his account as part of what the paper describes as the bank’s “crack-down” on PEPs. It is a little ironic that the bank in question is HSBC, so recently fined $1.9 billion for being what the US Senate described as,

“a conduit for drug kingpins and rogue nations”.

It is a case of closing the wrong stable door.

--- Later in debate ---

[Lord Tunnicliffe (Lab)]

My Lords, I, too, have some sympathy with the concern about PEPs. My bank managed to be very surprised that my son had repaid a debt. There is no question that banks have overreacted in this area. In general, banks seem to overreact to regulation. They do not seem properly to understand proportionality at individual level. It reminds one that one does not have a right to a bank account, and suddenly one realises that one would be a non-person without one. So it is right that we look for some protection for politically exposed persons—who could be in a very widespread group.

However, one must not lose sight of the fact that the Panama papers revealed just how widespread money laundering is and how much of it happens among politically exposed persons. As far as I know, no politically exposed person has been revealed in the UK, but in the wider world money laundering is a fact and it feeds terrorism and corruption.

We welcome this amendment as an effort to produce proper proportionality on this subject, but the balance must be maintained—and, just as we must be concerned about PEPs, we must be concerned about potential crime and the maintenance of public confidence in officials.

[Lord Ashton of Hyde]

My Lords, I am grateful to noble Lords who have replied. There seems to be unanimity that this is a serious issue that needs addressing and at least a partial acknowledgement that this is a start. We have accepted this amendment because we acknowledge that there needs to be a sensible approach to this problem.

The noble Lord, Lord Sharkey, mentioned that guidance exists already. In many of my replies to noble Lords, I am going to fall back on the fact that, having begun the process with this amendment, a lot will depend on the consultation about the regulations that we will bring in before 2017. I urge noble Lords to take part in that consultation so that all the points that have been made today and the concerns that people have heard about can be brought into that consultation so that we can get a sensible set of regulations, which this House will be able to look at, in place before 2017.

The noble Lord, Lord Sharkey, mentioned penalties. Again, the degree of penalties will obviously be part of the consultation and will be included in the regulations when they come in due course.

[Baroness Browning (Con)]

Can my noble friend confirm to the House that the consultation will not be a three-week consultation issued in the middle of the long Summer Recess?

[Lord Ashton of Hyde]

The consultation will be conducted under the Cabinet Office rules for consultations—so it will be more than three weeks. I cannot today tell noble Lords when it is going to start. The Treasury accepts that this is an important issue and has accepted the amendment. It wants people to contribute to the consultation—so, although I cannot give an exact date for when it will start, it will be a proper consultation.

[Lord Naseby (Con)]

My noble friend says that he is not in a position to indicate when the consultation shall start—but we are in May 2016, nearly half way through the year. That suggests that, if we are not very careful, it will be the back end of 2017 before anything happens. The noble Baroness, Lady Kramer, raised a particular family issue; and the noble Lord, Lord Wright, who is not in his place, raised one last year, if not the year before, relating to one son in Singapore and another in the USA. This is not a matter that we can just put into the long grass. I know that my noble friend is not doing that, but it is getting very near the outfield. I suggest that he should come back to the House and tell us exactly when the consultation will start and when we will get some substantive recommendations out of it.

[Lord Ashton of Hyde]

I can reassure my noble friend, because the date that the regulations have to be brought in is June 2017, so the consultation will take place in the second half of this year. It will be implemented before June 2017. I think that that is pretty clear and there is no question of it being put into the long grass. I have subsequently learned that the consultation will be 12 weeks and it will be after July—so I hope that my noble friend will be reassured by that.

My noble friend Lord Flight basically implied that any enhanced due diligence for all Peers, MPs and MEPs would be ridiculous. The directive and the Financial Action Task Force do not agree. They think that anyone who is an MP should have some form of enhanced due diligence. Of course, there is a huge range that can take place within enhanced due diligence. The point of the amendment and the regulations will be to make sure that there is a true difference. A Back-Bench Peer who may not have the position to influence corrupt acts—although every Peer and MP has access to people, so they are not exactly like every citizen—will have some form of enhanced due diligence, but it should be proportionate. The way that this will be done will ensure that.

The banks are in absolutely no doubt about the Government’s view on this. The Chancellor has personally written to the heads of the large banks, and the Economic Secretary to the Treasury has written to colleagues. Every bank now has a contact person with whom Peers, MPs and MEPs can get in touch if they feel that the enhanced due diligence is too great.

[Lord Higgins]

Before my noble friend comes to his peroration, perhaps I could ask this. All this consultation is taking place against the background of an impending referendum on whether we remain a member of the European Union. Am I wrong in thinking that all this depends on European directives, and that if the vote were to go in favour of our leaving the European Union we would have to look at the whole thing again?

[Lord Ashton of Hyde]

Even if that took place, we would be a member of the European Union for at least two years under the arrangements. But this is based on our staying in; if we did not, we would have to look at a great many things in addition to anti-money laundering procedures—and I am not sure that this would even be top of the list.

I am sorry to hear about the problems that the noble Baroness, Lady Kramer, has had with her family—but, as I said, the proportional nature of the enhanced due diligence for politically exposed people will be taken account of. The amendment is a good start and I commend it to the House.

Motion on Amendment 9 agreed.