Financial Services and Markets Bill

Lord Butler of Brockwell Excerpts

2nd reading
Tuesday 10th January 2023 Lords Chamber

[Lord Butler of Brockwell (CB)]

My Lords, it is a particular pleasure to start by congratulating the noble Lord, Lord Remnant, on his maiden speech. As it happens, I have often heard him speak before, but always in a frivolous context, so I was awaiting his speech today with particular interest—and he did not disappoint. As the noble Lord, Lord Grimstone, said, his expertise will be a great asset to this House as we consider the Bill.

The regulatory issues have been well identified in the speeches that have been made. There seems to me to be three types of balance: the balance between freedom and regulation; the balance between regulatory independence and the role of the Executive; and the balance between the Executive and Parliament. It is particularly important that we get this balance right in debating this Bill about an industry which is of such huge importance to the British economy and where international competition is so very strong.

I welcome the Bill; it has much to be commended in it. In the first place, it is based on a proper examination of the regulations inherited from the EU. That included extensive consultation with practitioners in the future regulatory framework review between 2019 and 2022. In this respect, it is markedly different from the cavalier attitude taken by the Government in other areas of inherited EU law in the Retained EU Law (Revocation and Reform) Bill. Secondly, although I have not always agreed with the noble Lord, Lord Forsyth, on Brexit, I think it is a particularly important and welcome benefit of Brexit that the United Kingdom has the freedom to establish our own regulatory regime without being bound by some of the more ponderous regulations of the European supervisory authorities. However, that freedom needs to be exercised with prudence.

There has been much reference to the provision in the Bill to give regulators a new statutory objective to promote the international competitiveness and growth of the UK economy with special reference to the financial services industry. That objective has been generally welcomed, but as the noble Lord, Lord Sharkey, said, the Government owe us an explanation. Before the 2008 crisis, the Financial Services Authority, the predecessor of the FCA and the PRA, had a duty merely to “have regard to” the competitiveness of the UK financial services sector. In the post-mortem on the 2008 crisis, the Treasury recognised this obligation as a factor in regulatory failure leading up to that crisis and, as the noble Lord, Lord Sharkey, said, it was consequently removed from the regulatory remit by the Treasury and Parliament. Just over a decade later, Ministers are seeking to give the regulators a stronger statutory requirement to make sure that their regulatory activities promote the international competitiveness of the financial services sector, not just to have regard to it. I ask the Minister to explain, in replying to the debate, why the Government have concluded that this reversal is safe.

In the proceedings on the Bill we will be debating the degree of delegation of powers to regulators, the balance between the Treasury’s power to make recommendations to the regulators and the regulators’ independence, and the mechanisms for Parliament to oversee these important operations. However, we have to recognise that parliamentary control, to which there has been much reference, is made worse by Parliament’s own procedures. Even when Parliament is given a role in approving statutory instruments, Parliament’s inability to amend such instruments, and its unwillingness to reject them, makes such power purely nominal. The remedy for that lies in our own hands.

Having said that, I believe that there is much to support in the Bill. Although there are plenty of issues for the House to consider and debate, I regard this as an important Bill, and I welcome it.

Cross-Government Cost Cutting

Lord Butler of Brockwell Excerpts

Tuesday 6th December 2022 Lords Chamber

[Baroness Penn (Con)]

The noble Lord will know that we have increased the budgets in the health service, but that does not reduce the need to look for efficiencies. I pay tribute to the work of Dame Kate Bingham in delivering the results from the vaccine task force. We are now living in a different world from the one in which she did her work. I am sure we will look to learn the lessons from her work and take it forward in the most appropriate way.

[Lord Butler of Brockwell (CB)]

My Lords, in following up the question from the noble Lord, Lord Young of Cookham, could the Minister also carry out an audit of the number of special advisers?

[Baroness Penn (Con)]

I do not believe that it is within my responsibilities to carry out an audit of special advisers, but I will take the noble Lord’s point back to the department. I should probably declare an interest as a former special adviser myself; I would not be best placed to undertake such work.

Brexit: Financial Services (European Union Committee Report)

Lord Butler of Brockwell Excerpts

Thursday 9th February 2017 Lords Chamber

[Lord Butler of Brockwell (CB)]

My Lords, I declare my interests as noted in the report. After the figures of potential job losses given by the noble Lord, Lord Shutt, I hope to cheer the House up a bit. I have come to think that since the report which we are discussing was published in December, the impression it gave about the problems presented by Brexit for the UK’s businesses and financial services is perhaps too pessimistic.

As a member of the sub-committee which produced the report under the courteous and skilful chairmanship of the noble Baroness, Lady Falkner, I believe that it correctly reports the importance of our financial services to the UK economy; the unreliability of the equivalence and passporting regimes which enable UK financial institutions to provide services to the rest of the EU; and the need for a regime to ensure that UK financial services do not face a cliff edge when the UK leaves the EU. All that is correct, but the reason why I have become more optimistic is that this report is understandably UK focused. It is about what UK businesses want and need and not so much about what EU businesses want and need. When the issue is considered from the EU perspective, more grounds for optimism emerge. The reference to avoiding a cliff edge implies that there is a sharp fall on the other side of the cliff, but when the interests of the EU partners are taken into account, I wonder whether that implication is correct.

The report received many representations from outside—for example, from the British Banking Association—which urged the need for a transition period to avoid the cliff edge, which has already been referred to. It is widely recognised that the phrase “a transition period” has two meanings. It can mean an extension of the period in which existing arrangements continue to apply while a new bilateral agreement is negotiated. It can also mean a period after a new bilateral agreement is reached before it comes into effect so that businesses on both sides have time to adjust to the new arrangement. Certainly a transitional period—in both senses of the phrase—is better than a cliff edge, but a rapid agreement respecting the mutual interests of both sides is better than either. The refrain that we most insistently hear from businesses is that they want certainty and they want it as soon as possible.

A report by an official working group for the European Parliament’s Committee on Economic and Monetary Affairs, seen by the Guardian newspaper, warns of the importance of the London market to the EU partners. According to the Guardian, it says:

“The exclusion of the main European financial centre”—


that is, London—

“from the internal market could have consequences in terms of jobs and growth in the EU. It is in the interest of EU 27 and the UK to have an open discussion of this point”.

It is relevant that, while 5,500 UK firms benefit from passports for trading financial services in the EU, more than 8,000 EU firms benefit from passports for trading into the UK. It does not follow that we can take equivalence and passporting regimes for granted but I believe it does follow that the EU partners have an interest in not using them in a vindictive manner.

I do not go along with TheCityUK in its view reported last week that Brexit will enable London to become more attractive to worldwide businesses by tearing up those parts of the EU regulatory regime which UK firms find finicky and burdensome. It will still be necessary for the UK to retain harmony with EU regulations. This may involve conforming to regimes and requirements which we will have no formal role in formulating but it does mean that we will have a mutual interest in keeping close to each other. Since the UK has often been a leader in formulating effective regulation, this is likely to be in the interests of both sides. Certainly, when the UK’s approaches have differed from those of our EU partners in the past, it has not been because the UK has been less rigorous.

Those are important issues for companies but there are also important issues for individual citizens. One illustration is the provision of insurance. It would be tedious for UK motorists if they had to start applying for green cards again or pay extra insurance for trips to Europe because it is no longer recognised that UK insurance policies provide the same minimum cover as their EU counterparts, but it would also be tedious for European motorists if their policies were no longer accepted in the UK. A similar point applies to the European health insurance card.

The old injunction against cutting off one’s nose to spite one’s face is particularly apt in both the UK’s and the EU’s approach to these matters. In all these areas we must hope that the negotiations take proper account of the mutual interests of both sides and are not driven by ideology.

Small Business, Enterprise and Employment Bill

Lord Butler of Brockwell Excerpts

Wednesday 11th March 2015 Lords Chamber

[Lord Deben (Con)]

My Lords, I must confess that I find myself in a very difficult position. Your Lordships will know that I usually have views on things and people will know pretty clearly which side I am on. I find this one of the most difficult things to come to terms with because, for example, having some experience of employment in France I am perfectly clear that the unemployment rates there are very strongly affected by the stupidity of French employment laws. We in this country have had a much more open way of dealing with employment and, although we may think that zero-hours employment is not the ideal form of employment, it has certainly provided people who would otherwise not have a job with one.

As an employer who does not use this employment in any circumstance, I can honestly say that that is because I am privileged to run businesses which have been able to hold their head well above water during this depressing time. Businesses which have not been able to do that would not have been employing anybody if they could not have managed their way through recession in the way that they have done, through the use of employment practices of this kind. My concern is that this House should be very careful about making decisions that replace a form of employment with these disadvantages with no employment at all. I am sorry, but that is the issue. We are, I think, in danger if we say to ourselves, “This is what we would like to see, and we don’t see why we shouldn’t see it, and therefore we must see it”. I have a problem with that.

On the other hand, I accept very strongly that there is a difficulty for the single parent who has to make all sorts of arrangements in advance if they are to do a job at all. This Government have been absolutely right in trying to find ways in which we could encourage such women back to work. They do that not only because it contributes to society but because it also contributes to the women themselves. There is nothing as depressing as trying to live on a very small income and not being able to get out of that very closed-in situation. Those of us who have been lucky enough to bring up children in relative comfort and with two parents know how important it is for one or other of you—usually your wife—to hand the child to the other and say, “Look after it, I just have to have a moment”. That is the nature of bringing up children, and I have every sympathy with that.

I wonder, though, whether we should be careful and mindful of what the amendment says and whether the Minister will think on this: we do not want to do something that replaces less than good employment with no employment at all. The issue that the noble Baroness raised is very important. I am not sure that the amendment is right, but it is not an issue which we can just leave and let it go on. We really do have to see whether we can find proper evidence for a way of doing this that is not going to have the downside that I suggested. Is it possible for the Minister to give us some suggestions as to what she might do to meet the gravamen of the case in a way that does not have the downside that my noble friend Lord Stoneham has put forward? Is there a way in which we could get better evidence and find a more precise way of helping people, particularly the women concerned?

I think that it is very difficult for young people. But, in the end, young people are normally resilient enough to overcome those difficulties and I am not sure that I would risk anything to remove that. However, there is a specific case here for a specific group of people. I wonder whether the Minister can find a way through that, because otherwise I, along with my noble friend Lord Stoneham, think that the balance is just too dangerous for us to step over. But I would still like us to do better than that. Perhaps the Minister will find a way of helping me, for a rare time, find a clear answer to what seems a very difficult problem.

[Lord Butler of Brockwell (CB)]

Does the noble Lord recognise that all that this amendment does is force the Government to make regulations? In making those regulations, they can find a way of doing precisely what he is asking the Minister to do—to meet this problem in those areas where it needs to be met without damaging the principle of zero-hours contracts.

[Lord Deben]

I think that I am being tempted to answer in an uncharacteristically charming way. The people who are going to make these decisions are, if I may say so to an old friend and civil servant of mine, civil servants. I want this House to be a little bit careful about that, because very few civil servants have ever run any business in their life. It is one of our biggest problems that we have a system in which business is not understood by those who make most of the decisions. I want to know much more about what this regulation would be. If we agree to an open-ended provision that regulations shall be made, I am not sure that I would be happy to trust such regulations without a closer understanding of what they would be.