Packaged Retail and Insurance-based Investment Products (Amendment) (EU Exit) Regulations 2019

Debate between Lord Bates and Lord Adonis

Monday 18th February 2019 Lords Chamber

[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.

[Lord Adonis]

I beg leave to withdraw the amendment.

Public Record, Disclosure of Information and Co-operation (Financial Services) (Amendment) (EU Exit) Regulations 2019

Debate between Lord Bates and Lord Adonis

Monday 18th February 2019 Lords Chamber

[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.

Official Listing of Securities, Prospectus and Transparency (Amendment etc.) (EU Exit) Regulations 2019

Debate between Lord Bates and Lord Adonis

Monday 18th February 2019 Lords Chamber

[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.

--- Later in debate ---

[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.

Alternative Investment Fund Managers (Amendment etc.) (EU Exit) Regulations 2018

Debate between Lord Bates and Lord Adonis

Tuesday 22nd January 2019 Lords Chamber

[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.

Venture Capital Funds (Amendment) (EU Exit) Regulations 2018

Debate between Lord Bates and Lord Adonis

Tuesday 22nd January 2019 Lords Chamber

[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 Adonis]

My Lords, I am sorry to labour the point but—

[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—

Interchange Fee (Amendment) (EU Exit) Regulations 2018

Debate between Lord Bates and Lord Adonis

Tuesday 22nd January 2019 Lords Chamber

[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.

Financial Services (Implementation of Legislation) Bill [HL]

Debate between Lord Bates and Lord Adonis

Committee: 1st sitting (Hansard): House of Lords
Tuesday 8th January 2019 Lords Chamber

[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.

--- Later in debate ---

[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.

--- Later in debate ---

[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.

--- Later in debate ---

[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.

Student Tuition Fees and Maintenance Loans

Debate between Lord Bates and Lord Adonis

Tuesday 18th December 2018 Lords Chamber

[Lord Bates]

We of course looked at the report, as I am sure the ONS did, and its recommendations were influential. I take the point my noble friend makes about the interest rate at one level, but at another, it is graduated so only those earning more than £45,000 a year will pay the full 3% above RPI. Those earning over £25,000 would pay only RPI. All of these things can be looked at in the post-18 education review, which is under way and due to report next year.

[Lord Adonis (Lab)]

My Lords, when is the review is expected to report? Could the Minister also give us the Government’s precise percentage figure for the proportion of loans expected to be repaid? My understanding is that the assumptions regarding that percentage are declining, which is part of the reason why the ONS has made this judgment.

[Lord Bates]

As I said, the Augar review is due to report during 2019. It was set up in February 2018 by the Prime Minister and it will report to the Chancellor, the Prime Minister and, of course, the Secretary of State for Education. Regarding the assumptions, the ONS still has some work to do, as it said in its announcement; it will not come out with the correct figure until September next year. The working assumption on the amount of loans that will not be repaid, as used in the current calculations, is 45%. It is a matter for the OBR and the ONS to review that when they make their recommendations, which we will follow.

Academies Bill [HL]

Debate between Lord Bates and Lord Adonis

Tuesday 13th July 2010 Lords Chamber

[Lord Bates]

Let me correct that for the record in Hansard. There was no suggestion of that at all.

[Lord Adonis]

My Lords, I congratulate the noble Lord, Lord Hill, on his Amendments 6 and 7. He has gone as far as he reasonably should to meet the concerns about consultation in respect of new schools. He will obviously explain his response to the particular issues to do with funding raised by my noble friend Lord Knight. I do not regard the concerns raised on other issues to be matters of substance. The noble Baroness, Lady Walmsley, was concerned that the definition of what constituted a replacement school in subsection (4) of the proposed new clause might mean that a school which just had a somewhat larger age range did not constitute a replacement school, but my reading of the amendment is that, if that were the case, it would then be a new school and so would still be subject to the consultation arrangements which are encompassed in the other amendments tabled by the noble Lord, Lord Hill. Either way, whether it constitutes a replacement school or whether it constitutes, in the wording of Amendment 6, “an additional school”, it is captured by requirements for consultation that are equivalent.

Regarding the concern raised by the noble Lord, Lord Phillips of Sudbury, about the subjective nature of the consultation, I do not read the amendment as being entirely subjective. He is the lawyer and I am not, but my reading of subsection (2) of the proposed new clause is that because the Secretary of State must take into account the likely impact of establishing the additional school on maintained schools, academies and institutions within the further education sector, he will have to be satisfied that there has been a consultation in respect of them. It would not be possible for the Secretary of State to take into account the impact on those institutions unless they had been consulted. My reading of subsection (2) of the new clause proposed by the Government’s Amendment 6 is that it substantially limits the subjective scope, because the Secretary of State would need to be satisfied that they had been consulted in order to be able to evaluate the impact.