Financial Services (Implementation of Legislation) Bill [HL]

Debate between Lord Bates and Lord Leigh of Hurley

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

[Lord Bates]

My Lords, I again thank all noble Lords who have taken part in this debate, particularly my noble friend Lord Leigh. His amendment touches on the critical point with regard to the Bill, which is the importance of safeguarding the competitiveness of the UK’s world-leading financial services industry as well as maintaining proportionality in the regulations that govern these markets. These are two of the key reasons this Bill has been introduced. It will ensure that our regulatory system remains up to date in the period following a no-deal exit and that UK firms are not left at a competitive disadvantage as regulations are updated in the EU. I can of course assure my noble friend that the Treasury will exercise its powers under this Bill with competitiveness and proportionality firmly in mind, which my noble friends Lord Flight and Lord Hodgson encouraged, and which my noble friend Lord Deben urged it to do.

When people are talking about the market in the City, people instinctively think of very large institutions, but having worked in the financial services industry, I recognise that it is made up of many small firms delivering outstanding benefits and value to their clients. There are some 58,000 small and medium-sized businesses operating in financial services.

In answer to the points raised by the noble Lord, Lord Adonis, the reason the UK is so successful and the City of London so respected around the world is the strength of the regulatory basis. Reputation and trust are all when it comes to conducting financial services. If people are investing their life savings or pensions with organisations, they need to have confidence that the organisations they are investing in will look after them well and that they will get the return or benefit that they anticipate.

I therefore appreciate my noble friend’s helpful and well-intentioned amendment. However, I am mindful of the difficulties of placing these assurances on a statutory footing, given the difficulties of defining these terms clearly in legislation. In particular, judging the exercise of powers against a hypothetical case—for example, the state of the UK financial market had the UK not left the EU—would be highly challenging. It is also worth noting that many of the files are themselves being designed, with the UK’s input, at the moment, to aid competitiveness and proportionality issues. It is right that we put that on record at this point. My noble friend Lord Leigh set out clearly at the beginning that we pay tribute to the work of the Commission in listening to the voice of small business, a point to which my noble friend Lord Deben returned. Examples are the prospectus regulation listed in Clause 1, which creates a more proportionate regime for all firms, including SMEs, and key measures such as the introduction of a new growth prospectus—a lighter, less burdensome document—to be used by SMEs within the regulation. I hope my noble friend will recognise that the Government are alert to his concerns in this area and support the need to maintain the competitiveness of the UK financial services industry and to ensure that any regulatory burdens are applied to small and medium-sized enterprises in a proportionate way. In the light of these reassurances, I hope my noble friend feels able to withdraw his amendment.

[Lord Leigh of Hurley]

I thank my noble friends Lord Flight and Lord Hodgson for supporting this amendment. They have become the wise old birds. I was very pleased to have two people supporting this amendment who have started financial services businesses in London and grown them to be global financial services businesses. It goes to show the power and expertise that resides in this House.

I thank the noble Lord, Lord Adonis, for his comments. I am sure he was not seeking to stereotype Tories. Curiously enough, although many people would regard captains of industry as natural Tories, one finds that the large multinationals are the companies that want more, not less, regulation because it consolidates their position. From the perspective of small businesses, as the noble Lord, Lord Adonis, said, we look for more appropriate regulation, rather than less regulation.

I am very grateful to him and to my noble friend Lord Bates for picking up my complimentary remarks about the EU Commission. I am a bit worried that I will be drummed out of the ERG after this. Nevertheless, it is true that the Commission has listened. My worry is that it listened to us because we had a voice. However, if we leave under a hard Brexit, we will not have a voice through bodies such as the QCA and therefore, because it does not really understand AIM and other aspects of the financial services industry in London, it will produce inappropriate regulation. We will need a very effective and immediate reaction to that, which I believe the Treasury is capable of doing.

I say to the noble Baroness, Lady Kramer, that the naked short selling by market-makers in the AIM market is essential to liquidity. It is not to be confused with naked short selling by hedge funds, which is a very risky and different proposition. It just goes to show that it is a complicated area. I will be honest: I am not wholly sure that I understand it or how it works but I understand that much—that it is essential to liquidity.

The noble Lord, Lord Tunnicliffe, is right. Essentially this is about unintended consequences; none the less, it is always nice to get into legislation protection for the financial services sector and small businesses.

With the very welcome reassurances from my noble friend Lord Bates, I beg leave to withdraw the amendment.

Online Marketplaces: VAT Evasion

Debate between Lord Bates and Lord Leigh of Hurley

Monday 22nd October 2018 Lords Chamber

[Lord Leigh of Hurley]

To ask Her Majesty’s Government what steps they are taking to ensure that operators of online marketplaces take all reasonable steps to mitigate VAT evasion.

[The Minister of State, Department for International Development (Lord Bates) (Con)]

My Lords, the UK is the first country in the world to make online marketplaces jointly and severally liable for VAT fraud committed on their platforms. Since 2016, HMRC has received around 43,500 VAT registration applications from non-EU based online sellers, which compares with 1,650 in 2015.

[Lord Leigh of Hurley (Con)]

This issue is of course important to UK high street retailers which are facing intense competition from Amazon. Does my noble friend the Minister share my concern that HMRC estimates that the loss of VAT through evasion by foreign online supply companies is between £600 million and £900 million? However, despite having the powers to do so, HMRC has not frozen any funds, it has not blocked any listings and it has not seized one item of stock from warehouses where goods from overseas suppliers are stored awaiting dispatch the next day.

[Lord Bates]

My Lords, I congratulate my noble friend on his commitment and consistency in raising these very important issues which the Government recognise. That is why, for exactly the reasons he has outlined, we were the first country in the world to introduce joint and several liability for market sellers. We have issued more than 3,000 joint and several liability orders since they were introduced and the amount of tax revenue, which is the crucial point raised by my noble friend, is expected to increase to £1 billion over the review period leading up to 2023. However, more needs to be done.

United Nations Relief and Works Agency

Debate between Lord Bates and Lord Leigh of Hurley

Tuesday 4th September 2018 Lords Chamber

[Lord Bates]

I am happy to do as the noble Lord requests. UNRWA currently has a deficit of $270 million, which is unsustainable and needs to be sorted out. It relies too heavily on the United States and has too narrow a base of donors; the finances are not there. We understand that it has sufficient funding to keep the 711 schools open this month, but thereafter we are not sure. These are very serious times; as a result the Government are looking urgently at what more we can do in this area. Because of the vagaries of parliamentary timing between the House of Commons and here, I am not sure whether Minister Burt has yet made his announcement about what we might do, so I am slightly restricted in what I can say. However, we will today be announcing yet another increase in funding to meet the shortfall and ensure that people get the support and help that they need.

[Lord Leigh of Hurley (Con)]

My Lords, it is estimated that the number of Palestinian refugees who are alive today who were displaced in 1948 is around 30,000. However, unique to any refugee situation in the world, the United Nations now defines their descendants as refugees, so the total is over 5 million. Does the Minister agree that a solution to this issue is made almost impossible when refugee status can be inherited in perpetuity? We should bring pressure on UNRWA to rehabilitate, rather than perpetuate.

[Lord Bates]

That comes back to the point, raised by my noble friend Lord Pickles, about the importance of peace dialogue and reconciliation. The plight of Palestinian refugees has been experienced at first hand by many noble Lords, including me, and cannot be denied. In Syria they are doubly blighted by the situation there. This is a group of people in urgent need; this country has never walked by on the other side and will not do so in this case.

Safeguarding in the Aid Sector

Debate between Lord Bates and Lord Leigh of Hurley

Tuesday 20th February 2018 Lords Chamber

[Lord Bates]

I am very happy, as I set out, that we are in contact through the National Crime Agency, which has a dedicated director looking into the aid sector more generally. One of our arguments all the way through has been that the law enforcement authorities for those alleged to be guilty of wrongdoing should be informed, whether they are in Haiti or other countries. It is absolutely right that the authorities should be informed and involved as soon as matters come to light.

[Lord Leigh of Hurley (Con)]

I remind the House that this is not the first time that large charities have brought the sector into disrepute. It was only a short time ago, your Lordships will recall, that Olive Cooke threw herself off a bridge in Bristol because she was being pursued by large charities. At the time, the then Prime Minister asked me, the noble Baroness, Lady Pitkeathley, and the noble Lord, Lord Wallace of Saltaire, to form a short, sharp committee to investigate what had happened and produce our results, which led to the formation of the Fundraising Regulator chaired by the noble Lord, Lord Grade of Yarmouth. We managed to do that in three months, unlike a long investigation. Does my noble friend agree that it is the trustees’ responsibility? The trustees need to know what is going on and the trustees need to be held accountable for the actions taking place in their charities.

[Lord Bates]

The trustees’ responsibilities are onerous, detailed and should be taken very seriously. I would expand further on that, but I am conscious that the time limit has been reached and will therefore save my further comments in writing to my noble friend.

European Investment Bank

Debate between Lord Bates and Lord Leigh of Hurley

Tuesday 31st October 2017 Lords Chamber

[Lord Bates]

One example is the northern powerhouse fund, in partnership with the EIB, but the British Business Bank is there for precisely that purpose, as are the UK guarantees. As the Chancellor said in his Mansion House speech, we still want to explore, as part of the exiting the European Union negotiations, the possibility of our remaining part of the EIB, for the very reason the noble Lord articulates.

[Lord Leigh of Hurley (Con)]

My Lords, the European Investment Fund supplies finance to the venture capital and seed capital industry. London is widely recognised as a centre of excellence for venture capital and seed capital, but the EIF has suspended finance to a number of venture capitalists based in London. Will the Minister write to the EIF to ask why it is depriving British businesses of what is essentially British money?

[Lord Bates]

We are very clear on this. We believe that UK borrowers and companies seeking investment should continue to have equal access on that basis. That is why the Chancellor announced the establishment of the British Business Bank and that it would be increasing its threshold of ability to lend to venture capital funds as part of that. We are absolutely clear: we should have equal access while we continue to be members and continue to negotiate what the relationship will be thereafter.

Financial Services: Regulation

Debate between Lord Bates and Lord Leigh of Hurley

Wednesday 6th September 2017 Lords Chamber

[Lord Leigh of Hurley (Con)]

I beg leave to ask the Question standing in my name on the Order Paper and draw your Lordships’ attention to my register of interests.

[The Minister of State, Department for International Development (Lord Bates) (Con)]

My Lords, the Government are committed to reducing unnecessary regulation in the financial services industry, but also recognise the need for an effective and proportionate regulatory regime to ensure that markets function well and consumers are appropriately protected. The Government do not believe that the FCA is going beyond what is appropriate and necessary to fulfil the Government’s policy.

[Lord Leigh of Hurley]

I thank the Minister for that Answer and I draw his attention to the Queen’s Speech. I am sure he will agree that the commitment to further strengthen our resilient economy, following press reports, means that a specific review in this Parliament of the somewhat opaque policies and procedures of the FCA will be most welcome, in particular to the financial services industry.

[Lord Bates]

We have to recognise that the review that took place in light of the situation that occurred 10 years ago, with the financial crisis, necessitated a wholesale reform of consumer protection and also of the strength and stability, including the systemic strength, of the financial services industry. That was why these radical reforms were brought forward: to put consumer protection at the heart of this and to improve the conduct and authority of the mechanism by which that is done. That comes at a cost, and the cost has to be borne, ultimately, by consumers. That is one reason that it is important that the FCA pays attention, which it does, to the fact that it is required, as well as protecting consumers, to create an efficient and effective market for consumers so that they get good value for money as well as protection.