Government Spending
Debate between Lord Davies of Oldham and Lord Bethell
Lord Bethell
My Lords, I was desperately searching for something I could possibly agree with in the noble Lord’s analysis, but there is nothing. The Chancellor is taking extremely pragmatic, well-judged decisions on investment in infrastructure for the country. These investments have been called for by business, the trade unions and professional groups. His decisions are thoroughly sensible and are supported by many noble Lords on all sides of the House.
Lord Davies of Oldham (Lab)
My Lords, how do we know that the Chancellor is involved in judicious taking of decisions? He introduced a spending round without any suggestion about how it would be paid for. He was then given, by the grace of the Prime Minister, a date for a Budget. That has now been abandoned. Meanwhile the Office for Budget Responsibility, which is under an obligation to give an objective analysis of the Government’s proposals with regard to the economy and which is likely to produce a very different analysis from that which the Minister has presented to this House today, cannot pronounce until there is a Budget. Are not the Government glib on spending but entirely evasive on how they intend to pay for anything?
Lord Bethell
The last spending round was based on the Office for Budget Responsibility’s forecast in March. As the noble Lord said, there will be a further report from the Office for Budget Responsibility when there is the next Budget.
Customs Legislation and Amendments: Impact Analysis
Debate between Lord Davies of Oldham and Lord Bethell
Lord Davies of Oldham (Lab)
My Lords, I am grateful to the noble Lord for repeating the Statement. We have had a significant debate on Brexit under a number of headings this afternoon, and perhaps this one, the most precise of the lot, is likely to cause the most pessimism. This is HMRC indicating what will be the costs to business, and it has made it quite clear that the costs will be very significant.
Large companies importing and exporting in high volumes will face a cost of £28 for filling in the forms for each load imported, and this will take an employee on average one hour and 45 minutes. If the work is outsourced, HMRC estimates that the cost will rise to £56 for each consignment, based on the average charges of freight forwarders. This is HMRC getting down to nuts and bolts and being as accurate as it can—and it can only fill all involved in the health of our economy with considerable anxiety.
This of course is based on a no-deal Brexit. However, from the tenor of the discussions this afternoon in the House, it seems that there is a growing opinion that we are heading somewhat remorselessly towards no deal—or, to put it more accurately, none of us can see that any progress is being made towards an agreement with the European Union.
Left out of the analysis was any reference to the financial services industry. We cannot overestimate the significance of that industry to the overall health of our economy. So, although this is parlous as far as industrial goods and manufactures are concerned, we do not know the picture for a very significant part of our economy—and can only, therefore, I am afraid, be anxious about it.
What we are witnessing now is a process that reflects the failure of the Government, ever since they established their notorious red lines and made up their mind that they were going to set objectives that the European Union was unlikely to meet.
There is one additional feature on which the noble Lord did not make any comment. I do not blame him for that, because it is not directly related. Another aspect of a no-deal Brexit is that it is estimated by the Institute for Fiscal Studies that government debt will rise to its highest level for half a century. Bearing in mind that this takes into account the inevitable debt we ran into during the financial crash of 2008 to 2010, if this will be worse as a consequence of no deal, we can only yet again, I am afraid, tremble at the prospect, and at the same time redouble our efforts to ensure that the Government, even at this very late stage, strike a deal that is better than no deal.
Lord Bethell
I completely endorse the noble Lord’s sentiment. It is very much the Government’s policy to strike a deal and I, like others in the Government, very much hope that will be successful. The Government’s efforts are very much focused on that objective.
Let me strike at the heart of the question. The noble Lord started by saying that this report articulates what will happen, but actually it articulates what may happen under very strict circumstances. I pay tribute to the officials who prepared such a detailed report for its transparency and integrity. The report in no way dodges or mitigates for several areas in which performance may be considerably better than the headline figures.
First, there are areas in which easement by British government policy will help improve performance. There are three of those easements: the delay in the submission of customs declarations, which we discussed last night; a period of grace to get a guarantee in place to cover additional duties; and the phasing-in of pre-arrival requirements for the entry summary declarations. Secondly, we do not know what the EU will do to improve the situation and, thirdly, the behaviour of importers may introduce new efficiencies. With those in mind, I am hopeful that the headline figures may prove higher than those if a no-deal Brexit were ever to occur.
Financial Services (Miscellaneous) (Amendment) (EU Exit) (No. 3) Regulations 2019
Debate between Lord Davies of Oldham and Lord Bethell
Lord Davies of Oldham (Lab)
My Lords, there is not much else to say. It is the case, as the noble Lord, Lord Deben, indicated, that we have spent a considerable period of time dealing with the financial services industry on the question of a no-deal exit from the EU. He was absolutely right when he said we were in danger of diminishing the reputation of the industry, and of London, throughout the world. The most specific and important fact is that we are diminishing the position of London in relation to Europe just as we were absolutely clear that on the whole question of the development of financial services the British voice was heard with a great deal of sympathy in Europe. Just at the point when we were, if not taking control then showing the necessary leadership for the benefit of the whole of the European community and confirming and consolidating the position of the City of London, we take this step to end it all.
The Minister has probably not come totally armed with the facts of where we are with regard to the whole debate on Brexit, but now and again, prior to his accession to his position, he will have heard a few comments on where we are all at with regard to Brexit. It is the case that most noble Lords in this House who have taken a keen interest in the issue are absolutely shattered and exhausted by the amount of work that has been necessary, and of course the great danger is that so much of it is going to be utterly wasted and detrimental to the nation’s interests.
The Minister will want us to concentrate rather more on the immediate issue of this instrument. The regulations were flagged as an instrument of interest by the Secondary Legislation Scrutiny Committee in its 58th report. The committee expressed its concern that while this incident is presented as an innocuous tidying up exercise on past efforts, the exercise is actually fairly complex. This single statutory instrument makes changes to 15 items of legislation. The Minister already knows this, but he will not mind my reading it into the record. It includes a sub-delegation of powers and extends a ministerial power of direction. A saving grace is that the measure is subject to the affirmative procedure. That provides some safeguard, as the noble Baroness, Lady Bowles, indicated.
Financial services regulation is a complicated matter at the best of times. Amending legislation in this manner is of little help to anyone who is seeking to understand the rules of the game. Primary legislation, including the Financial Services and Markets Act, has been continually amended throughout its lifetime. This process has been repeated at the European level. Every time these changes are made, regulatory authorities such as the FCA and the Bank of England update their own guidance, adding another element of complexity. That is not to say that regulation is not important; we on these Benches would scarcely advance that argument. But we are dealing with a very complex field, and our job is not made any easier by the Treasury’s approach to this exercise.
My noble friend Lord Tunnicliffe, who has played such a significant part with regard to the SIs relating to a no-deal exit, and of course those colleagues on the Liberal Democrat Benches who have also pursued these issues with great diligence, had a meeting with the Economic Secretary to the Treasury in late February to discuss the kind of concerns that have been expressed today. At that meeting, Mr Glen, the Economic Secretary, committed to producing a summary of the EU exit SIs passed up to that point, with what we hoped was a genuine commitment to a plain English explanation of the effect on key pieces of legislation and guidance. We do not know whether that document has ever been provided. Given the number of changes that have been made, I assume—or at least hope—that somebody in the Treasury has maintained an overview of the situation. Would the Minister, who of course comes new to all this, commit himself to chasing this up with the department? A great deal of work was invested in this and it reflected the sheer complexity of the issue and its significance for the industry that we are dealing with. The Minister will reap a reward for his time in taking advantage of the offer I have made to him, to which I am sure his civil servants will be only too glad to respond.
I know that the Treasury has worked with bodies such as the FCA and the Bank of England when drawing up these instruments, but I wonder whether the Minister could shed any light on what else the department is doing to assist regulators during these particularly challenging times, when so much is in a state of flux, yet people need clear, accurate and legal decisions. Complex the industry may be, but there is a great deal at stake in its welfare, and at the present time we are not sure that the Government are bent on the correct course at all.
Lord Bethell
My Lords, I would like to thank everyone for participating in a really meaty discussion about an SI that is incredibly detailed in nature. The discussion got under the skin of some very serious issues.
I shall start by tackling head-on the comments made by the noble Baroness, Lady Bowles, about the late notice or delivery. I completely sympathise and understand her point. With a mopping-up SI such as this, one wants to capture the latest changes that have been processed, and therefore there is a pressure to have the SI as up-to-date as possible and that mitigates against early delivery. However, I agree with her sentiment that it is preferable for these things to be delivered early, and I will try to ensure that the department achieves that.
I do not want to raise the curiosity of the noble Baroness, Lady Bowles, too much about the CJA—that could be dangerous for the department—but I reassure her that the concerns she had were just about an omission. We need to reflect that Gibraltar and the EEA will be separate jurisdictions but that market abuses will still be caught in the same way as now. The changes that refer to the CJA simply capture that.
I will try to provide some reassurance on systematic internalisers. As the House knows, this instrument amends MiFID legislation so that the ability to meet the shared trading obligation using a systematic internaliser requires such trades to be made through a UK systematic internaliser after exit. This change in scope is consistent with the overall onshoring approach; it does not try to create something different. Once we are outside of the EU single market and joint supervisory framework, UK regulation will need to reflect that.
The noble Baroness, Lady Bowles, also asked about Solvency II and the risk-free rate. I reassure her that the risk-free rate will be calculated on the same basis as now. The change is that it will be published by the PRA instead of the EIOPA. That will be the principal change from this SI.
The noble Baroness, Lady Kramer, asked about equivalence with Singapore. We will carry over all the EU’s existing equivalence decisions, including that for Singapore. I can explain that we are speaking to Singapore about that jurisdiction recognising the UK in the same way. I understand that talks are progressing well, and I hope to be able to provide good news to the House at a future date.
The noble Lord, Lord Davies, asked about a plain English explanation. I reassure him that we provided an overview to noble Lords earlier this year, but I am happy to provide any further information that he may require and to chat about that at a later date.
The noble Lord, Lord Davies, also asked whether adjusting to all these changes is a substantial challenge for industry. That is linked to the heartfelt and moving appeal about this entire process from my noble friend Lord Deben. I take my noble friend’s comments on board, but I have a different perspective. In life, you often have to spend a significant amount of your time providing for and protecting yourself against things that you hope will not happen. That is a basic fundamental in life. That view is shared by not just me but the financial services industry, which urges this House, Parliament and the Government to pursue these measures with great energy and in great detail, to ensure that there is full protection against a possible no-deal Brexit.
At times, it feels like a waste of energy and a distraction, but that does not detract from the value of the work that has been put in. I have not been sitting here for the 50 SIs and I do not have the scars on my back like many in this room, but I still value enormously the expertise, time and passion that have gone into making such a good job of this whole exercise. I endorse the work of Parliament, industry and the officials working on all of this and reassure the House that it is taken extremely seriously by the Government. In that vein, I commend these regulations to the House.