Supply and Appropriation (Anticipation and Adjustments) (No. 2) Bill

Lord Davies of Oldham Excerpts

2nd reading (Hansard): House of Lords & 3rd reading (Hansard): House of Lords
Thursday 14th March 2019 Lords Chamber

[Lord Bates]

That the Bill do now pass.

[Lord Davies of Oldham (Lab)]

My Lords, it is not customary for the Opposition to make any comments on the appropriations Bill and, in normal circumstances, we would not. There is no question of us seeking to delay the Bill as this is, appropriately, a House of Commons issue. But I ought to congratulate the Government in this week when their whole strategy has been an utter and total failure; I ought to congratulate the Minister on finding a Bill on which there is unanimous support.

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

I am grateful for the noble Lord’s support. We would love to have his support on the withdrawal agreement, and then we could all have a happy future.

Brexit: Economic Impact

Lord Davies of Oldham Excerpts

Wednesday 20th February 2019 Lords Chamber

[Lord Davies of Oldham (Lab)]

My Lords, is it not amazing, with the Government’s industrial strategy on the point of collapse and our car industry showing the enormous stresses and strains of the way the Government run the economy and their attempt to secure Brexit on appropriate terms, that Ministers can trot out these ridiculously optimistic propositions on how the economy will fare? Is it not the case that all the Government’s proposed options would have a serious, negative effect on the British economy? Has the Chancellor not already accepted that they will amount to a loss in GDP of at least 4%? Worse still, the Bank of England said that no deal would have an even more adverse effect than the financial crisis. The Government contemplate a considerable loss. Is it not totally irresponsible to threaten to act in a way that no proper Government would contemplate, in threatening the possibility of no deal?

[Lord Bates]

I do not accept that, as the noble Lord would anticipate. There are reasons to be positive about the UK’s prospects, particularly if we leave with a deal. The analysis showed the severely negative impact that no deal would have on the UK economy, which is why we want to avoid it at all costs and why a responsible approach from the Opposition, if they care about the economy and jobs, would be to support the deal.

Finance (No. 3) Bill

Lord Davies of Oldham Excerpts

2nd reading (Hansard): House of Lords & 3rd reading (Hansard): House of Lords & Committee: 1st sitting (Hansard): House of Lords & Report stage (Hansard): House of Lords
Thursday 7th February 2019 Lords Chamber

[Lord Davies of Oldham (Lab)]

My Lords, this has been an excellent debate, although the participation numbers are a long way below the usual ones. That is a reflection of the exhaustion which Brexit has brought on noble Lords as we have discussed whether we can see the future of the economy with any accuracy at all in the context of that issue. I think a number of noble Lords are holding their weapons ready for the point which the noble Baroness, Lady Kramer, referred to; we cannot be far off another Budget and a clear economic Statement which will take account of whatever deal the Prime Minister succeeds in bringing back to the nation before 29 March.

The Minister sought to put a number of issues in context—a context that I could scarcely recognise. When will the Government face up to the many failures in their economic strategy of nearly a decade? Their long-term economic plan disappeared as a concept embraced by their Members of Parliament and noble Lords, but a great many of its characteristics have persisted. In particular, the Government still follow a broad strategy of considering austerity to be good for the nation. It was directed, in the first instance, at clearing up the deficit, which was meant to be cleared by 2015. The latest target date appears to be somewhere around 2025. However, the OBR and a number of interest groups in the country think that remains a challenging target. It is a measure of the Government setting out a clear objective and falling many years short of reaching it.

The Government have presided over the slowest recovery since the 1920s. The key indicators of investment, growth and productivity still place us among the lowest of the advanced economies. The Minister referred to the growth rate of 1.6%. My goodness, what an achievement. It is lower than in any other advanced country and a long way below the levels of economic growth to which we had been accustomed before the financial crash. The Government have had nearly a decade to recover from that calamity, but have precious little to show for it.

We consider that the alternative strategy is obvious. We need to borrow in order to invest, so that instead of being starved of resources—particularly in respect of the regional imbalance of resources from the Government—our economy will be able to get the resources necessary for growth. There is no doubt that austerity is not yet over. This Bill offers tax cuts for the richest members of our society and welfare cuts for the less fortunate. We are facing the challenges of Brexit with low investment, low wages and low productivity. The Minister mentioned the recent increase in wage rates, but that is the first year in which the Government have been able to say that for a decade. It is quite clear that the Government’s progress is very slow.

Meanwhile, our public services are suffering. Our Armed Forces have had severe cuts; our police numbers are drastically down, while violent crime is up. But contrast the restrictions on public sector pay with what happens in the private sector. Last year, the chief executives of FTSE companies averaged an 11% pay increase on what was a pretty big number beforehand. When will the Government face up to the fact that they cannot expect to build a good society unless they build a fair society? In the real world, outside the FTSE top earners, homelessness has doubled, use of food banks has increased significantly and the number of rough sleepers has increased, and not just in our northern towns and cities, where it is sometimes suggested so many are neglected, but in London itself. Even Westminster has seen growth in these numbers.

The report of the United Nations special rapporteur on extreme poverty and human rights condemns the UK as a two-speed society, where the very richest flourish yet there are many in poverty. Two-thirds of children growing up in poverty are in households where there is at least one earner. That says something about the payment of wages at the lower end of society. I suggest it will not do for the Government to do anything other than take considerable responsibility for creating this situation. The rapporteur went on to say that it was absolutely scandalous for so many children to be poor in a 21st-century economy. It reflected “a social calamity” for our country and “an economic disaster”.

That is what we think in Her Majesty’s Opposition. We will halt the rollout of universal credit, which has been identified so accurately by noble Lords in this debate; particularly the noble Lord, Lord Morrow, who identified for the Minister some pretty challenging figures on how the Government address low-income families and those dependent on benefits. I hope the Minister will respond to what was, after all, an extremely detailed and significant contribution.

The Government’s record shows little success in improving productivity. I have stood at this Dispatch Box for the past 10 years opposite a succession of Ministers, including Ministers who certainly knew what they were talking about on productivity. They were not able to persuade their Governments and their colleagues to do anything about the appalling levels of British productivity that have sustained through to today. It means that, although the Government have put money into apprenticeships—there is much criticism in industry and commerce about the nature of these apprenticeships and the funding for them—they also slashed the improvement of vocational skills, for which they were directly responsible, and hammered the further education colleges. Although we have seen universities make considerable progress in tackling the tuition fees issue, FE colleges have had a devastating onslaught from this Government. It is clear that they are the biggest losers in education spending.

That is to say nothing of the fact that schools are stressed by inadequate resources. In an economy which needs new schools, it is depressing that adult learners—people who recognise that they need to improve their skills and change the potential of their economic role in society—are down from 5.1 million to 1.9 million. The Government should be ashamed of that figure. If the Government is serious about the tax take, it is clear we need a well-resourced HMRC.

I very much enjoyed the contribution of the noble Lord, Lord Turnbull. He asked specifically about loan charge schemes, and he also identified that the digitisation of tax was misdirected when it expected organisations with such small turnovers to be able to cope. The whole position needs to be rethought. We have a report coming out shortly, to which the noble Lord, Lord Turnbull, referred, but nevertheless, this is pretty obvious incompetence by the Government in this area.

The Government also have a very poor record on climate change. Their response has been to cut support for solar energy and slash the subsidies for onshore wind. This is done against a background where we all know that climate change is going to make big demands on the resources of our society. We are also all obliged to look through a glass darkly on the question of Brexit and its implications for the economy.

I am not expecting the Minister to respond on the Brexit issue at great length today. In the other place, they are going to get another dose next Wednesday. Many noble Lords have indicated that they have said pretty much all that can be said about Brexit. But we still have not entered the final act and cannot, at this stage, predict exactly what it will be. The one prediction we all hope will not be fulfilled is to crash out of the European Community without agreement.

My noble friend Lady Quin asked a specific question of the Minister on the taxation position of a museum. Having been a Member of the other place, she knows as well as anyone here that it is not within the power of this House to render a ready solution to this by any direct action we can take. Nevertheless, I hope the Minister can give some response.

I thank all noble Lords who have participated. I particularly appreciated the contributions of my noble friend Lord Chandos. He did what I thought was necessary at this stage in the debate: he looked at the wider issues to which the Government need to respond. The Minister has got quite a lot to answer, and I am sure he is looking forward to the opportunity as much as we are looking forward to listening to him.

[Lord Bates]

What a kind invitation from the noble Lord. I hope not to disappoint.

The noble Viscount, Lord Chandos, expressed the hope that we might get a day off from the relentless grind of Brexit. I am afraid that we were not quite able to deliver. Brexit was mentioned in the contributions of the noble Lords, Lord Tunnicliffe, who opened, and Lord Davies, as he wound up, and in between by the noble Baronesses, Lady Quin and Lady Kramer. They talked about the uncertainty of the times and the noble Lord, Lord Tunnicliffe, said that these were not normal times—to which the answer, which they have heard many times, is therefore to remove the uncertainty and back the deal, so that we can move on to negotiating the future economic relationship with our friends in the European Union. We could also then remove the necessity to plan for no deal, Yet, so long as no deal remains even as a possible option, it would be remiss of any Government acting responsibly not to plan for that eventuality—although we hope with all our hearts that that outcome does not occur.

This has been an excellent debate and I therefore want to use what time I have available simply to address some of the points raised during the course of it. First, the noble Lord, Lord Davies, talked about income inequality. I should say that income inequality is now lower than it was in 2010 and lower than at any point under the previous Labour Government, in which he was a distinguished Minister. Compared with 2010, there are 1 million fewer people, including 300,000 fewer children, in absolute low income. Moreover, in the context of this legislation the Government’s policy continues to be highly redistributive. In 2019-20, households in the lowest income decile will receive over £4 in public spending for every £1 they pay in tax, while those in the highest income decile will contribute on average over £5 in tax for every £1 that they receive in public spending.

The noble Viscount, Lord Chandos, asked about the reclassification of student loans and its impact. After its review of the treatment of student loans in government finances, the Office for National Statistics has decided that some of the spending on student loans will be included in the deficit when the money is first lent to students. This is a technical accounting decision by the ONS and, although the noble Viscount was very critical of it, I stress that we operate on independent advice in this respect. We support the independence of the ONS and commend its diligence in recognising this.

The noble Baroness, Lady Kramer, talked about Making Tax Digital. I will come back to some of the points raised by the noble Lord, Lord Turnbull, in this respect. She focused on the specific impact on SMEs, on behalf of which she has been a consistent advocate. As the noble Lord, Lord Turnbull, mentioned, that is why only businesses with a taxable turnover above the VAT threshold, which is currently £85,000, will be in the scope of Making Tax Digital. The noble Lord is of course a former distinguished Permanent Secretary at the Treasury, among other things, and he talked about the work done by the committee. He said—I think I have this right—that it would be nice if a Minister were to say, “You did us a good turn there” when the committee advised on making changes and delaying implementation. Having been given that invitation, I am very happy to say that it did a good job there. It did a good turn not just in giving advice to the Government but for small businesses, in terms of how they will be affected.

With respect to all noble Lords, I think that the House will have found the technical analysis of marginal tax rates by the noble Lord, Lord Morrow, very thought-provoking. I will want to take that away and reflect further on it with colleagues. However, the Government are committed to making work pay. The noble Lord said that hard work should be incentivised, and we can all echo that. He said that it was a key measure of aspiration; again, I think we would echo that. In fact, it was part of the rationale for the introduction of universal credit.

The Budget announced that the personal allowance would be increased to £12,500. We are also investing an additional £1.7 billion per year in universal credit to increase the work allowance for working families and disabled claimants. The national living wage will rise to £8.21 from April 2019. In total, it will have delivered a pay rise of £2,750 for a full-time minimum wage worker since its introduction in 2016.

I am hesitant about reading out more such responses, not because they are not right but because I sense that the mood of the House and, certainly, our mood on the Front Bench—my noble friend Lord Young is with me—is that the noble Lord’s analysis is worthy of further consideration. I am delighted that the Financial Secretary to the Treasury and Paymaster-General said in response to the Budget debate that he would write substantively and reflect on that matter. I will take back to him the noble Lord’s contribution today to ensure that that response encompasses some of the points which he has raised.

A number of comments were made on the health of the economy. The noble Viscount, Lord Chandos, talked about the wide range of allowances and then criticised me for not responding to my noble friend Lord Horam in the Budget debate on his point about the 1,200 allowances which exist. Allowances have been used by successive Governments to incentivise right behaviour in certain areas. This Budget is no different, because it increases the annual investment allowance to £1 million for two years, thus significantly increasing the amount of relief given to businesses that do the right thing by investing in their own businesses and therefore increase our productivity—which the noble Lord, Lord Davies, was concerned about—and increase our tax revenues and growth.

One of the allowances referred to related to the issue raised by the noble Baroness, Lady Quin, whom I thank for giving me advance notice. She declared her interest as the chair of the board, but I should declare an interest as having been a beneficiary of the museums of Tyne and Wear as a child and as an adult. I am a frequent visitor to the Shipley Art Gallery, which is a fantastic treasure trove of different art, from old masters to modern, contemporary and regional art, as well as crafts and ceramics. I have enjoyed that since I was taken there as a child at school—education is a key part of it. Anything which enhances the wonderful town of Gateshead, which she and I care for, and its cultural heritage—which is not just the Shipley but the Baltic Centre for Contemporary Art, the Sage, a music centre and the Angel of the North—is welcome. It really is becoming a cultural centre.

The noble Baroness came up with some innovative suggestions as to how the Interpretation Act 1978 could be invoked in the matter that she raised. We have looked carefully at that, and my advice is that the existing legislation is unambiguous and cannot be interpreted in any other way. Any changes would require primary legislation. However—the former Permanent Secretary will be watching carefully what I say here—I think that the spirit and intention behind that measure were clear. Manifestly, it was intended that organisations such as the Tyne & Wear Archives & Museums should be able to benefit from it. The challenge I ask her to leave me with—I have already commenced informal discussions with the Financial Secretary to the Treasury—is how we go about correcting that. Clearly, if it requires primary legislation, which is the current advice, that limits our options as to how quickly we can move, but if there are other ways to do it, we would want to do so. I know that the noble Lord, Lord Davies, echoed his support for efforts in that area and I give her a commitment that it is an anomaly that we want to resolve.

The noble Baroness, Lady Kramer, talked about local authorities. I am conscious that time is short, but loan charges is a hugely important issue that was also raised by my noble friend Lady Noakes in the Budget debate. I wrote to her, and copied in the noble Baroness, Lady Kramer, having gone back to the department and looked again at it. There is no requirement on an individual who is not an employee to use a disguised remuneration loan scheme. The tax system expects people to take responsibility for their own tax affairs and if an arrangement looks too good to be true, then it probably is. Hundreds of thousands of people work and pay tax as self-employed workers or through their company without using highly contrived tax avoidance schemes.

The noble Lord, Lord Turnbull, drew attention to what was new Clause 26. The Government chose to accept new Clause 26 during the passage of the Bill and will lay a report in line with the requirements of that new clause no later than 30 March—that is probably going to be a busy day in Parliament. The report will include a comparison with the time limits for the recovery of lost tax relating to disguised remuneration loans. HMRC is working to help people put things right but can only help those who come forward, so we encourage people to come forward. For those people who settle, there are schemes, depending on the income threshold, whereby people can make those tax settlements over a five to seven-year period. As for why taxpayers do not have the right to appeal against advance payment notices and follower notices, Parliament granted HMRC these powers to discourage tax avoidance. Advance payment notices prevent tax avoiders gaining an economic advantage by holding money during the time it takes to complete lengthy tax litigation. Importantly, these rules in no way affect a taxpayer’s right to appeal their tax liability.

The noble Baroness, Lady Kramer, and the noble Lord, Lord Turnbull, spoke about future plans for Making Tax Digital. The Government set out a vision for modernisation of the tax system through Making Tax Digital in 2015 and our vision remains unchanged. There will be no further Making Tax Digital mandation until the system has been shown to work well. The sub-committee recommended an independent review of HMRC’s powers. The Government agree that HMRC has to balance the collection of tax with important taxpayer safeguards—again, this was raised by the noble Baroness, Lady Kramer, and the noble Lord, Lord Turnbull. The powers review was a major project designed to support the merger of Her Majesty’s Customs and Excise and the Inland Revenue. It took seven years and concluded in 2012. There has been no such fundamental change to the department since which might justify a further review. However, the Government keep the tax system under review and note the sub-committee’s recommendation to update the power review in line with principles about the digital age.

I have tried to address noble Lords’ questions. I will review the record of the debate, which has been of a very high quality with lots of points of insight, and if I have missed anything, I will follow up in the usual way and write to those who spoke in the debate. I beg to move.

Brexit: Outstanding Commitments

Lord Davies of Oldham Excerpts

Wednesday 6th February 2019 Lords Chamber

[Lord Bates]

In that sense, that is correct. The range of the figure in the financial settlement is between £35 billion and £39 billion. The OBR has put it at the top end of that range. When we went into that negotiation, one thing the European Commission wanted to do was discount the rebate, which is a significant element of our contributions and benefits the UK. That was included in the final calculations, so I believe it represents a good settlement, alongside the withdrawal agreement, and should command support on all sides of the House.

[Lord Davies of Oldham (Lab)]

My Lords, is it not right for us to assume that the majority of British people who voted to leave the European Union did so because they had a different perspective on the future of the United Kingdom—particularly on control over decisions? The idea that the country is full of animosity towards the European Union—when, after all, the initiative to leave was taken by us—is false. Therefore, the people expect us to meet the obligations that we entered into as far as the European Union is concerned.

[Lord Bates]

I am very happy to agree with that sentiment. We want a deep, ongoing relationship with our European friends; part of that means honouring what we signed up to. This was what we signed up to at the Council meeting back in November, and we should support it.

Financial Services (Implementation of Legislation) Bill [HL]

Lord Davies of Oldham Excerpts

3rd reading (Hansard): House of Lords
Wednesday 6th February 2019 Lords Chamber

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

My Lords, that is a good question. We had hoped that it would be gazetted before then, in which case we could then have made the amendment that we talked about. I was grateful for the noble Lord’s suggestion on that. I cannot say that we have had an explicit conversation about this aspect, but it is going to arrive. Providing that it passes your Lordships’ House, it will be heard in the Commons I think on Monday next week. The same principle would apply—that if it is gazetted we will put it in there. That was certainly the spirit of what we agreed. I will make absolutely sure that the Economic Secretary and the Financial Secretary, who are dealing with this in the other place, are apprised of the commitment that I gave and which we will seek to honour.

[Lord Davies of Oldham (Lab)]

My Lords, I am grateful for that answer, which shows that the Government are on top of the issue—against a background where we must all recognise that time is somewhat short with regard to this legislation. The SI relates to a service industry that is a crucial part of our economy. We could not afford any situation in which a gap occurred; I am sure that the Minister is seized of that fact.

We are all aware of the fact that there are not many days left to the point where we are due to leave the European Community, yet there is still a very large number of SIs to be considered. Slips such as this, which are minor, can be remedied reasonably quickly by appropriate action, as the Minister indicated. But slips such as this could be costly if we are right up against the wire with regard to the legislation we are seeking to pass. We must all be conscious of the fact that the Government’s programme between now and the end of March is pretty demanding, to put it mildly. So, although I accept entirely what the Minister said and am reassured by the promptness of the Government’s response, this is an indication that there is many a slip between cup and lip, and the Government do not have much time for a monumental programme.

[Lord Adonis (Lab)]

My Lords, when the Minister spoke on 4 December at Second Reading, he said that the Bill was part of a package of measures and statutory instruments to ensure that the financial services industry would be covered in the event of no deal. He said specifically:

“That stability and continuity is being delivered by the 60 or so statutory instruments that Her Majesty’s Treasury is introducing under the European Union (Withdrawal) Act 2018”.—[Official Report, 4/12/18; col. 934.]


Will the Minister tell us how many of those 60 or so statutory instruments have been laid before Parliament, and would he be in a position to write to me to tell me what the timetable is for laying those that have not yet been laid before Parliament before 29 March?

Financial Services (Implementation of Legislation) Bill [HL]

Lord Davies of Oldham Excerpts

Report stage (Hansard): House of Lords
Tuesday 29th January 2019 Lords Chamber

Moved by

[Lord Davies of Oldham]

2: Clause 1, in subsection (1A)(b), leave out “major” and insert “significant”

[Lord Davies of Oldham (Lab)]

My Lords, the Minister is to be congratulated on the way in which he has handled this Bill. In Committee, we raised several significant issues and pressed him to consider our arguments carefully. He has certainly done that and has brought back to the House Amendment 1, a position with which we are in agreement.

We are mindful of the background that all these efforts are being conducted against. This very afternoon, the House of Commons is struggling to achieve a position, and the Prime Minister hopes to achieve a position in which this Bill will be utterly redundant because we will have left the European Community with an agreement. But it is obviously right that, in an area of such importance to our economy as the services industry, we have legislation in place that takes account of the extremely serious situation that would arise if we left the European Community without a deal.

The Bill would, however, play its part in fulfilling the regulatory machinery necessary for the services industry, but without doubt additional work would have to be done at that stage. Given that we have done a great deal to help create European law in this area, it would be remiss if we left the services industry without effective regulation and less equipped than it was while we were part of the European Union, if in fact we leave without a deal.

As he would expect, I join the Minister in paying tribute to my noble friend Lord Tunnicliffe, who has played a significant part in examining the Bill and producing insights into what could be done, upon which the Minister has been able to build quite successfully. I also pay tribute the noble Lord, Lord Sharkey. He has stayed involved with the Bill and has offered the best possible advice on a number of occasions. His persistence and insights on these issues have been invaluable, together with those of the noble Baronesses, Lady Kramer and Lady Bowles, both of whom have played a significant part in these discussions.

We are grateful to the Minister for the way he has handled this Bill. He appreciated the anxieties that we articulated as best we could both at Second Reading and in Committee. He has met the most crucial point of all: that the Government were initially seeking powers for the Treasury that could not be justified. Subsequently, the Delegated Powers and Regulatory Reform Committee came to share that position, as it made fairly clear in a detailed submission to the House. That obviously informed our contribution to the debate. However, the Minister has gone a considerable way to allaying the anxieties that we have expressed about the Bill and I am therefore very much in favour of his amendment.

I turn to Amendment 2, to which I am meant primarily to speak. I have only a short comment because there is not a great deal at issue. It again gives me the opportunity to appreciate the efforts of the Minister. We had a useful meeting with him that ironed out all but the narrowest of differences. There is not much in the difference between “significant” and “major” but I am strengthened by some help from the other place. Apparently, in her speech to the House of Commons this afternoon, the Prime Minister said that she would return to Brussels to seek a significant change to the Brexit withdrawal agreement. She did not use the word “major” but “significant”, a word that we are seeking to enjoin the Minister to appreciate. However, I will not press that rather minute point.

[Lord Sharkey (LD)]

My Lords, we welcome all the government amendments to the Bill. We particularly welcome Amendment 1, which greatly improves the Bill’s structure and clarity. As we pointed out in Committee, it was not helpful to try to deal with two different categories of legislation via one mechanism. Amendment 1 puts that right.

Proposed new subsection (lA)(a) deals with settled EU legislation now in force in the same way in which Section 8 of the European Union (Withdrawal) Act does and narrowly restricts the adjustments that can be made. Proposed new subsection (lA)(b) deals with legislation not yet in force in the EU but under current discussion—legislation that is in flight. Here the adjustments are less constrained. I note the Minister’s comment that the legislation contained in subsection l(2)(e) dealing with the prospectus regulation may come into force before Third Reading and could therefore be moved at that stage into the proposed new subsection (lA)(a), leaving only the in-flight legislation in the schedule to be covered by proposed new subsection (lA)(b).

In their amendment, the Government have significantly tightened the meaning of the previously rather controversial word “adjustments”, as it applies to the in-flight legislation in the schedule. Their amendment sets down what in this context adjustments may and may not do. When it comes to what adjustments may do, the new wording has it right. The changes are,

“to reflect, or facilitate the transition to, the United Kingdom’s new position outside the EU”.

I think this is close enough to the restrictions in Section 8 of the European Union (Withdrawal) Act. When it comes to what adjustments may not do, the new text states that they may,

“not include changes that result in a provision whose effect is different in a major way from that of the legislation”.

I am pleased that this is a much tighter restriction than that contained in the original text but I have some concerns about the use of “major”, which is why I have added my name to the amendment in the name of the noble Lord, Lord Davies, which proposes the word significant in place of major. In the ordinary use of those words, “significant” imposes more constraint than does “major”. It seems to be entirely possible for some difference in effect to be significant without in itself being major. An OED definition of “significant” is:

“Sufficiently great or important to be worthy of attention; noteworthy”,


and seems to support this view. Unfortunately the OED also defines “major” as “important, serious or significant”.

The real issue is how the word “major” will be interpreted in practice by the Treasury, and probing that is the purpose of Amendment 2. What will it mean when applied in this context? In particular, what tests will the Treasury apply to the differences contemplated in proposed new Section (1A)(b) of the Government’s amendment to determine whether they are major? I would be very grateful if the Minister could set out explicitly what those tests will be.

--- Later in debate ---

I thank my noble friend Lord Hodgson for his brief intervention in offering his support. I hope that those words of clarification on the Government’s intent in their use of the word “major” will be helpful and reassuring to the noble Lord, Lord Davies, to the extent that he feels able to withdraw his amendment and to support the government amendment standing in my name, which his original amendments were the inspiration behind.

[Lord Davies of Oldham]

My Lords, the Minister’s reply puts me a little on trust in that, until I read Hansard tomorrow, I am not too sure I will be able to follow the detail with sufficient accuracy. I was somewhat appalled as I was thrust back to my old tutorial days as a rather vulgar split infinitive came right in the middle of one of the denser parts of the Minister’s text. But I know that he has set out to meet the challenges that we have put in our questions to him, so I will more than give him the benefit of the doubt—I beg leave to withdraw my amendment.

Amendment 2 (to Amendment 1) withdrawn.

Financial Services (Implementation of Legislation) Bill [HL]

Lord Davies of Oldham Excerpts

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

The Government are looking to give themselves quite unnecessarily wide powers in this Bill. It is surely unnecessary, as well as unwise, to allow HMT to create new policies and laws for our critical financial services industry without full, proper parliamentary scrutiny. The promised consultations are no substitute for primary legislation. Nor, emphatically, is our affirmative SI procedure. We should restrict this Bill’s delegation of powers in the light of departure from the EU to do two things: to rectify any defects in retained EU law, and to incorporate into UK law elements of the specified in-flight legislation. Amendment 3 is aimed at imposing those restrictions.

[Lord Davies of Oldham (Lab)]

My Lords, there is no need for me to repeat the arguments put forward in respect of the earlier measures considered here, so I will speak predominantly to Amendment 5. I looked carefully at the Minister’s summing up at the end of Second Reading. These issues had been articulated widely and we did not think that the Minister was at that time in a position to make forthright improvements, but we are worried now because we are now in Committee and we all recognise the privations of time. It seems to me that, with issues as serious as they are, the Minister ought to consider whether there is a basis for discussion between us outside the Chamber to resolve what, after all, is an essential part of the Bill but is not satisfactory, as it reads at present, to the Opposition parties.

Amendment 5 limits the adjustments—I notice that the word “adjustments” covers a multitude of potential activity and I am not sure that I am entirely happy with that as a defence of where the Government expect the Treasury to go—that the Treasury may make to specified EU financial services legislation to,

“adjustments in connection with the withdrawal of the United Kingdom from the EU”.

At present there is no restriction on these adjustments: they could be made in the context of circumstances other than the main purpose of the Bill. We must all recall that this is a Bill of a very specific kind; namely, to cope with a no-deal situation, with the expectation on the Government’s side that it will not become law—that is, it will not be necessary for it to become law because a deal will have been achieved. That is a position that verges on the optimistic at this point, but of course it will be clarified by debates both in this House and in the Commons over the next few days.

As currently drafted, the Bill allows the Treasury to make any adjustments it may consider appropriate. That is the dreamland of the Treasury. I should think it is probably the dreamland of any adviser to the Minister, or any Minister, on any Bill, that he should have that capacity; that there should be provision for adjustments to be made subsequently. Of course, these will be adjustments that the Treasury—the Government—considers to be appropriate. That is scarcely anything other than a pretty outrageous position to adopt.

I also want to comment on Amendment 7, which limits the adjustments—that word again—that the Treasury may make to provisions of specified EU financial services legislation

“to preventing, remedying or mitigating deficiencies in retained EU law”,

and prevents the regulations under Clause 1 from making policy changes,

“other than to reflect the United Kingdom’s new position”,

if we have a deal and have left the EU, vis-à-vis the European Union. The wording of this amendment comes directly from what the Minister said to the House at Second Reading. It comes from the Government’s own explanation of the powers they are using under the EU withdrawal Act for onshoring SIs. I cannot see how the Government can resist accepting the concept of this amendment. They surely do not want to arrogate to themselves powers different from those defined in Amendment 7, which follow the position the Government have adopted up to now. But the Minister must be sufficiently anxious that, in addition to the amendments we have just discussed, from both the Liberal Benches and ours, we have real anxieties about the way in which the Bill stands before the House. The response we received at Second Reading satisfied none of us; otherwise, we would not have felt moved to table these amendments. We will need to make progress because as far as the Opposition are concerned, these are central issues to the Bill if it eventually becomes law.

[Baroness Liddell of Coatdyke (Lab)]

My Lords, at Second Reading it was obvious to many of us across the House that the Bill was a useful safety net for in-flight legislation. As such, there was a spirit of collaboration and helpfulness. However, since then we have received the report of the Delegated Powers and Regulatory Reform Committee, which is quite scathing about some of the inconsistencies in the Bill. I quote from paragraph 5:

“Furthermore, the assumption that the Bill will only apply in a ‘no deal’ scenario has led in our view to inconsistencies in the drafting of the Bill”.


I still recognise the importance of getting the Bill on to the statute book but we cannot allow it to become a blank cheque. It is important to recognise that there are inconsistencies in the Bill. Indeed, the Delegated Powers Committee drew attention to the comments it had made during its consideration of how HMRC was covered in the withdrawal Bill, saying:

“We judge powers not on how the Government say that they will use them but on how any Government might use them”.


The Minister is an extremely honourable man, probably one of the most honourable in your Lordships’ House. It would be of enormous value to the Committee if we could get this cleared up. It may not be possible at this stage but certainly by Third Reading we should at least have something in the record of the debate that deals with these inconsistencies on a sequential basis. Noble Lords have already referred to some of the difficulties. There will be further opportunities to explore these in the amendments that we will be considering in due course. But this is an important and necessary piece of legislation and it does not help anybody to have gaps left in it that can create difficulties for the future.

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Moved by

[Lord Davies of Oldham]

10: Clause 1, page 2, line 1, leave out “8(5) and (7)” and insert “8(7)”

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[Lord Davies of Oldham]

My Lords, I can be brief because we have already had at least four debates this afternoon on the exact issues that this amendment and Amendment 11 in my name and that of my noble friend Lord Tunnicliffe deal with. It all revolves around the fact that we are not prepared to give the Government and the Treasury primary powers over issues that would normally require primary legislation just because this Bill has some exceptional qualities to it. It does indeed have exceptional qualities, as has been pointed out on all sides. It is meant to have a lifetime of a bare two years. The vast majority—I will withdraw that remark; I cannot qualify it. Some people who have spoken today have sought to make some improvements to the Bill but I do not have the slightest doubt that they hope that the Bill will never be necessary and that we will not crash out of the European Union without an agreed position.

Two debates ago, the noble Baronesses, Lady Bowles and Lady Kramer, did exactly what we seek to do with this amendment—that is, to identify just where our limits are with regard to the intention in the Bill and to point out that it is misconceived because it attributes to the Treasury powers that we ought not to allow it to have. We thought that we had spotted the area where the debate would flare up most significantly in Henry VIII powers terms, but in fact these issues have already been discussed without the need to mention that moniker too often.

I therefore move this amendment on the basis that the Committee and the Minister know only too well the strength of feeling on all sides that this Bill cannot be a Trojan horse to allow the Treasury and the Government to introduce measures that they would ordinarily introduce through primary legislation but which they are trying, through the enabling quality of this Bill, to introduce through statutory instruments and Treasury adjustments. We have debated this matter long and hard. We all know where we stand and I therefore beg to move, although I do not expect too much in the way of contributions in support.

[Baroness Kramer]

I will just say from these Benches that we agree.

[Lord Bates]

My Lords, first, I am sure that I speak for the whole Committee in thanking the noble Lord for his succinctness in presenting his amendment. I recognise the old adage that everything needs to be said but not everyone needs to say it. That is a good principle. In following him in that spirit, I will put on the record a few comments that I believe will be helpful for our wider debates.

We appreciate the concerns across the Committee regarding the Henry VIII powers and, where they are proposed, it is clear that their necessity must be well evidenced. In the case of the financial services legislation, to which the power in this Bill will apply, I hope that noble Lords will accept the need for such a power.

An inability to amend existing primary legislation such as the Financial Services and Markets Act 2000 will render it impossible to implement this necessary body of legislation. Further, as noble Lords will be aware, the exercise of many functions under financial services legislation is carried out by the independent regulators—the Financial Conduct Authority and the Bank of England. The capacity and expertise of the financial regulators will be absolutely crucial to the effective implementation of these pieces of legislation and, consequently, to the resilience and prosperity of the financial services sector here in the UK.

The amendment would remove the ability to delegate to the regulators because, as a general rule, a power to make secondary legislation does not include a power to sub-delegate. An inability to effectively delegate powers to the regulators in implementing the legislation contained in this Bill would severely undermine the value of transposing the original legislation into UK law. In many cases, it would effectively render legislation unenforceable, and the Bill would simply not be able to achieve its central goal of ensuring that the UK continues to be an attractive and competitive place to do business in the immediate two-year period post exit, in the unwelcome and unlikely event of a no-deal scenario. Given this context and the context of the previous debate, I invite the noble Lord to consider withdrawing his amendment.

[Lord Davies of Oldham]

My Lords, I beg leave to withdraw the amendment.

Amendment 10 withdrawn.

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[Baroness Kramer]

I want to make one very quick comment to add to those of the noble Lord, Lord Sharkey. There is a real danger that the pattern within this Bill becomes a precedent, and that for future financial legislation we in effect see this process of Treasury decision enacted through statutory instrument. This sunset clause would make that impossible. It would make sure that this was, in effect, a one-off, and that there was a return to normal practice following the end of four years.

[Lord Davies of Oldham]

My Lords, it is time to be kind to Ministers when one gets to this end of the Bill. My advice to the Minister is to indicate what a logjam of SIs there would be four years on from the consequences of this strategy. I understand entirely, and sympathise very much with the intent behind the amendment, but if I were the Minister I think I would point out a few of the practical difficulties.

[Lord Bates]

There speaks the voice of experience. From his time speaking from this side of the Chamber, the noble Lord has perhaps pre-empted some of the concerns that we would have about this proposal, but let me put them on the record.

I am grateful to the noble Lord for giving us an opportunity to debate this important area. In implementing files under the Bill, it will be necessary to amend existing legislation to reflect updates to the regime. Should all powers under the Bill lapse at a stroke, without replacement, the legal effect on amended legislation would be unclear.

At a time when we should be seeking to provide industry with clarity and certainty, I am afraid that the amendment would have the unfortunate and unintended effect of providing just the opposite. Rather than minimising the cliff-edge risks, it would create a new series of cliff-edge challenges to be faced in the coming years. The potential for this legislation to lapse without replacement does not provide certainty to firms. Compliance with new regulatory regimes can be costly, and it would have a negative effect on firms’ confidence in the Government’s ability to set effective and proportionate regulation should we implement vital legislative reform only for it to drop away after a given period.

I appreciate the noble Lord’s concern that regulations made using this power will have a lasting effect on the structure of the UK’s financial services regulatory framework. This is why the power can apply only to a limited set of important files, which have been set out on the face of the Bill. In a no-deal scenario, implementing those files could be crucial to avoid conceding a competitive advantage to businesses operating in EU-based markets or to remain compliant with the Basel rules and meet our G20 commitment to international standards.

The noble Lord is clearly right, however, in pointing out that this cannot be a long-term model for a regulatory framework. Beyond this temporary solution, once we have left the EU in a no-deal scenario, the Government recognise the clear need for an approach that balances parliamentary oversight of financial services legislation with maintaining the flexibility and competitiveness of our regime. To that end, we will take forward proposals for a sustainable, long-term model in due course.

It is perhaps worth pointing out also that the Small Business, Enterprise and Employment Act 2015 requires the inclusion of a statutory review clause in secondary legislation that regulates business if the legislation continues to have effect five years after its entry into force. When taking forward SIs under the Bill, the Government will therefore be under a duty to make provision to undertake a post-implementation review after five years or to publish a statement that it is not appropriate in the circumstances to do so. In this light, I hope that the noble Lord will feel able to withdraw this amendment.

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I realise that these matters are rather complex and may have become more so as the debate has gone on. I wonder whether the Minister would be prepared to meet me and others before Report to discuss the issues further. In the meantime, I beg to move.

[Lord Davies of Oldham]

My Lords, I, too, raised this issue at the conclusion of my speech at Second Reading. I quite understood, with the vast range of issues that the Minister had to respond to on that day, his feeling unable to go into great detail on this one. That is why I was delighted to sign up to the amendment put forward by the noble Lord, Lord Sharkey. The Minister has a real case to answer here, and I hope that we will have a constructive response.

[Lord Bates]

My Lords, I hope I can oblige the noble Lord, Lord Davies, with a constructive response to end Committee. I thank all noble Lords who have taken part. I understand that several Members have received representations from the sustainable finance industry. This amendment seeks to add to the Bill’s Schedule two EU files that complete the European Union sustainable finance package.

As I have mentioned already, the Government acknowledge that the power being sought in this Bill is broad. That is why it has been designed with a number of safeguards and limitations in place. One of these is for the power to be limited to a specified set of EU legislative proposals, named on the face of the Bill. In order to focus the power as narrowly as possible, the list of files in the Schedule to the Bill was determined through an assessment of the importance of files to the stability and competitiveness of the UK’s financial services sector. The noble Lord, Lord Sharkey, highlighted this as one of his concerns when moving his amendment. In short, these are the files that we believe will be the most important for market functioning and UK competitiveness in a no-deal scenario.

I will, of course, be very happy to meet the noble Lord, and the noble Lord, Lord Davies, on this issue. I think we are already going to be meeting quite a bit between now and next week. I have listened carefully to the arguments in favour of the merits of adding these files to the Schedule, and I undertake to reflect on the matter ahead of returning to it on Report. In the light of this, and of the discussions that will take place, I invite the noble Lord to consider withdrawing his amendment at this stage.

High Street Banks

Lord Davies of Oldham Excerpts

Wednesday 19th December 2018 Lords Chamber

[Lord Bates]

Modernisation is indeed happening and challenger banks are making a big contribution to the way that banking services are delivered. The reality is that digital online banking is now conducted by 71% of the population. Next year, mobile apps will overtake digital banking in service delivery. That is leading to changes in our high streets, communities and villages. They need to be taken into account, but so too does the changing way in which we pay for services.

[Lord Davies of Oldham (Lab)]

My Lords, the banks are closing 12 branches a week and yet those who are taking the decisions at the highest level are undoubtedly enjoying city bonuses which are well over 20% this year. Instead of talking about mitigation, why do the Government not think in terms of some machinery to control the situation and introduce an element of fairness to communities? We believe that banks should be permitted to close only after local consultation and the Financial Conduct Authority has given its assent.

[Lord Bates]

I understand the point about consultation but that was the whole point of Professor Griggs’ review and the new access to banking standard, which is upheld by the Lending Standards Board. We cannot be in the position of asking whether we are going to subsidise five of the six banks to remain open with taxpayers’ money. We have decided to respond by coming up with an arrangement for the Post Office to be the place of choice for people to transact their personal, face-to-face banking needs. I think that that is a better way forward.

Student Tuition Fees and Maintenance Loans

Lord Davies of Oldham Excerpts

Tuesday 18th December 2018 Lords Chamber

[Lord Davies of Oldham (Lab)]

My Lords, this may be a technical issue but the decision helps to make the Government clean and honest in a crucial respect. The Minister will appreciate that what it does is to end the fiscal illusion of keeping student debt off government books.

The amount is not trivial: the ONS identifies £12 billion, which is just about equal to the sum the Chancellor treated as a windfall from the OBR when he was constructing his Budget. Of course, it gave him the chance to go on a small spending binge, mainly to the advantage of the better-off in our community, rather than those in greater need. Will the Minister explain how the Government will respond to this rupture in their fiscal targets? As I say, it is not a minor figure. What damage do the Government anticipate will be done to future student prospects and the service our higher education community provides? He will know that the decision has occasioned considerable anxiety in those circles. Does he welcome the end to the Government’s rather despicable practice of selling off part of the student loan book for a song, thereby ensuring that government coffers are filled but that the taxpayer foots the bill in the long run?

[Lord Bates]

It is not correct to say that student loans are not on the Government’s books. Of course, the national debt does take into account the full cost of student loans—they are listed there. The question at issue, which was addressed by the ONS, was whether the repayment rates should be reflected in the deficit—the total is in the debt but not in the deficit—and it came down on the side of believing that that ought to be recognised in the year in which the loan takes place, rather than waiting until the end of 30 years to figure that out.

We do not mark our own homework on this. We follow the existing rules, as all Governments have done. The ONS has offered a view and made a recommendation, and we will follow that through.

Financial Services (Implementation of Legislation) Bill [HL]

Lord Davies of Oldham Excerpts

2nd reading (Hansard): House of Lords
Tuesday 4th December 2018 Lords Chamber

[Lord Davies of Oldham (Lab)]

My Lords, Her Majesty’s Opposition support this Bill in principle. The Government have every right, indeed they have a duty, to prepare against the possibility of a no-deal Brexit. A few months ago, when work on the M20 lorry park was first considered, it occasioned some surprise in the nation which had not realised that the Government might need to take constructive action against a no-deal outcome. After all, the Prime Minister had reassured us that negotiations were making satisfactory progress and few Members of Parliament had canvassed the idea of no deal as a good policy for the Government.

However, things have changed over time. Now, of course, the weakness of the Government’s case for the development of our position as a result of the negotiations means that a considerable element in the governing Conservative Party looks upon no deal as better than some other possibilities. Such an outcome is totally rejected by the Prime Minister, so her Government are setting out to mitigate the calamity of no deal against a background where they continue to expect a better result.

For the nation, however, these preparations take on a different salience: there is no certainty about the future and no deal is a possibility, however disastrous that would be for the economy and the country’s welfare. So we have this modest Bill to ensure that “in-flight” legislation in Brussels can be safely implemented in the crucial sector of the financial services industry; no one is in any doubt of the importance of the industry’s contribution to the welfare of the economy. The Bill updates the regulatory regime and seeks to minimise the problem of the year, or possibly two years, after no deal. It reflects the fact that a considerable amount of UK financial services legislation has been part of European law for a long time. Its applicability to the United Kingdom is therefore entrenched in our laws. This has provided a significant place for UK leadership. My noble friend Lady Liddell identified just how much the UK has contributed to the development of policy in Europe—the result of what is widely recognised as the advanced and sophisticated level of financial services in London and several other major cities of the country. It has been a prime mover of improvement in the development of legislation and regulation.

There will of course be an unquestionable loss when the UK quits the European Union. No one is saying for one moment that the industry will not flourish and play a significant role in our economy but it will be increasingly difficult for us to play the enhanced leadership role in Europe that has been the case in recent years. As we all appreciate, there are competing parties from other countries who are also very interested in securing control and power that they can exert over the industry.

As the noble Lords, Lord Hodgson and Lord Sharkey, pointed out, the problem with this legislation is that the legislative initiatives put forward significantly increase the power of the Government. There is a crucial phrase, which noble Lords have referred to on more than one occasion in this debate: the power for the Treasury to make adjustments where it considers appropriate. Of course, the Treasury will decide where this will be of benefit for the United Kingdom and where it will work best in the context of this country. The Treasury will defend itself with that phrase in the legislation, but it does not alter the fact that what are posited through delegated legislation as relatively minor transfers of powers in fact give the Treasury very considerable latitude.

We recognise that the powers last for only a short period—namely, two years—with a sunset clause attached to the legislation, and of course we approve of the fact that some gesture is made towards parliamentary scrutiny by the indication that the SIs will be subject to the affirmative procedure. However, the scope for government policy to develop in this process is considerable, and that has already been illustrated by the anxieties expressed by the noble Baroness, Lady Bowles, and my noble friend Lady Liddell.

Also drawn to our attention has been the case put forward by the UK Sustainable Investment and Finance Association. It wants to know, as I am sure we all do, where two pieces of in-flight legislation in which it has a significant interest appear in the list. If to govern is to choose, this certainly suggests that the Treasury can already operate with a heavy hand, even at this very early stage. Can the Minister clarify this position today? If not, rest assured that this and the other issues that have cropped up in this very well-informed debate will be the subject of considerable discussion and debate, as well as intensive scrutiny, in Committee.