Government Spending
Debate between Lord Bethell and Baroness Kramer
Lord Bethell
My noble friend puts it very well. Debt is central to the Government’s plans. We will maintain a clear set of rules to anchor our fiscal policy and keep control of our debt. But we have to face up to the challenge of productivity to invest in education, skills, and the physical and public service infrastructure of the country, and the opportunity presented by low rates of interest is one that we should review and take seriously.
Baroness Kramer (LD)
My Lords, the IFS has been very clear that the Government are now set to blow through their fiscal ceiling next year with excessive borrowing. I will pick up the point made by the noble Baroness on the Minister’s own side. Having seen that Labour failed to keep an adequate cushion in 2008, therefore setting us into a pattern of bust and austerity, why are this Government going on a spending spree that repeats exactly that pattern—and in a context of Brexit, when the economy would be weaker than it has been in decades?
Lord Bethell
I am not sure that the noble Baroness can have it both ways. The need for investment in physical infrastructure, training and skills is urgent. Keeping a lid on debt is also important. I note that the IFS also recommended in the report to which she referred that the Government should delay setting any fiscal rules until greater certainty over EU exit was confirmed. In the meantime, the Government are pushing hard for a deal and will continue to do so.
Prospectus (Amendment etc.) (EU Exit) Regulations 2019
Debate between Lord Bethell and Baroness Kramer(4 years, 6 months ago)
Grand CommitteeRead Full debate Read Hansard Text
Lord Bethell
I thank noble Lords again for an incredibly detailed analysis of a complex but very important SI. I share the small prayer made by the noble Lord, Lord Tunnicliffe, at the end there. I look forward to the end of this debate to find out whether his prayer has been answered in the ongoing negotiations. In the meantime, we will put prayer to one side and focus on trying to secure this SI. I will talk about some of the very detailed things that were raised but also some of the larger things.
On equivalence, I completely understand what the noble Baronesses, Lady Bowles and Lady Kramer, and the noble Lord, Lord Tunnicliffe, are talking about in terms of the ongoing regime. The strategy is very much that, under a no-deal scenario, which would be hugely regrettable and is not government policy, there is the largest amount of alignment possible with the current situation to provide market security and avoid any kind of cliff edge or calamity. That is very much the view supported by regulators, by industry, by government and by our partners in the EU. What kind of regime the City will have after that will be a matter for a debate that will occur here in Parliament, principally. There remains on the statute book a huge amount of protections for the City. They are not addressed in this or any of the other SIs, but I reassure noble Lords that the debate will be lively and will engage everyone involved in the financial services industry. This SI is simply trying to protect the industry in a no-deal scenario. That is its intention; it does not seek to creep further than that.
For those who wish to engage in the technical debate on equivalence, can I share a little advertisement from my Treasury colleagues for an important consultation that they are undertaking? They are issuing a call for evidence on a long-term review of the regulatory framework and the key issues which we will need to consider for a regime which operates outside of the EU. For those who wish to engage in a formal review, this is a wonderful platform and opportunity. We should be very happy and thankful to hear noble Lords’ views on the future of equivalence as part of that process.
I emphasise that it is very much the intention of the Government, in a deal or no-deal scenario, to work closely with EU member states. There is nothing in this SI, or in the strategy that it is part of, that precludes or in any way diminishes the determination of the Government to work with other EU states to have the best possible regulatory framework for the financial services industry.
Moving on to one of the detailed questions raised by the noble Baroness, Lady Bowles, she asked what would happen when there were flaws in a prospectus that has been passported into the UK prior to the UK’s departure, given that the recourse to the original approving regulator would be different or gone. The answer to a seemingly short and straightforward question is a little long; I have two or three of these, for which I apologise, but let me give noble Lords the full answer.
Under the EU prospectus regulation, if a significant new factor, material mistake or material inaccuracy which may impact on the investors’ assessment of the securities being offered arises, the issuer must produce a supplement to the prospectus or the registration document to address this. Currently this supplement must be approved by the relevant EEA regulator. The transitional provisions introduced in this instrument mean that prospectuses passported into the UK prior to exit day will be treated as if they were originally approved by the FCA. However, after exit, this means that the FCA will be required to approve any supplements for prospectuses or registration documents that are passported into the UK prior to the UK’s departure.
I hope that that addresses the question. I am happy to share that document with the noble Baroness if she wishes, as it is quite detailed.
The noble Baroness, Lady Kramer, and the noble Lord, Lord Tunnicliffe, raised questions about the extension of public body exemptions to all third parties. I will provide a little reassurance on that point. This is absolutely in no way a dramatic loosening of the regulatory regime to allow some kind of Learjet sales bonanza for crackpot securities to bonkers regimes. There is an extremely strong financial promotions regime already on the statute to which all these securities will remain subject, set out in instruments such as the Financial Services and Markets Act, which, as noble Lords will be aware, imposes strong restrictions on the marketing and promotion of securities. This allows existing arrangements with EEA countries to roll over. It is not possible under global trade arrangements to provide favourable treatment for EEA countries over other third-party countries. This is a natural and necessary extension, and it will be held under very close review. We have worked closely with the FCA in drafting this instrument to ensure that investors remain suitably protected. We believe that this approach offers the most appropriate balance.
Baroness Kramer
Can I just ask a favour of the Minister? It seems that the protection is the prospectus; that is exactly what is being tossed out. Might it be possible to provide us later with a note that directs us to the various protections? That would be helpful.
Lord Bethell
I am very happy to provide that, and we will make sure that the noble Baroness is sent that material.
The point I was really trying to make is that the FCA is fully aware of this change in the regime and has put in place the resources necessary to track and review this important development. On the specific case of Syria, which is an extreme example of the natural concern around this point, I assure the noble Lord that these public bodies will not be allowed to be used to break international sanctions or criminal law.
On crowdfunding, the noble Baroness, Lady Kramer, asked about the potential loss of prospectus passporting. I assure her that the loss of prospectus passporting will not prevent any organisations, such as crowdfunding organisations, raising funds in the UK as well as the EU. It is just that any prospectus will need to be approved in the UK by the FSA; that is the principal change.
The noble Lord, Lord Tunnicliffe, asked a couple of short but precise questions for which, I am afraid to say, there are long answers; I will just trot through those. He asked about paragraph 2.14 and the update to the existing equivalence direction. This instrument transfers the power from the European Commission to Her Majesty’s Treasury to make equivalence decisions in respect of the EU prospectus regulation as of exit day. Such determinations are to be made through statutory instruments and are therefore subject to the usual parliamentary scrutiny procedures. If equivalence decisions were laid before Parliament on exit day, there would be a lag between their application in UK legislation and exit day itself. I hope that answers that question.
Secondly, on paragraph 2.20, he asked about the difference between the transitional provisions for registration documents and others introduced by this instrument. I will share with noble Lords a slightly long answer. Under the EU prospectus regulations, there are separate passporting regimes for registration documents and prospectuses. Given this, the instrument introduces separate transitional provisions for registration documents and prospectuses passported into the UK prior to the UK’s departure from the EU. However, the effect of these transitional provisions is almost identical. That is, they provide that documents approved by an EEA regulator and passported into the UK prior to exit will remain valid for use in the UK until the end of their normal period of validity. However, registration documents are valid only as a constituent part of the prospectus. Any prospectus that utilises a passported regulation document in the UK will still require FCA approval. On that note, I think we have drawn to a close on the questions.