Economic Activity of Public Bodies (Overseas Matters) Bill

Lord Deben Excerpts

Committee stage
Tuesday 7th May 2024 Lords Chamber

[Lord Hain (Lab)]

My Lords, I support my noble friend Lord Hendy’s amendment. Not only has he made a very powerful case as a renowned labour rights lawyer, but he has mentioned the question of the Welsh Government’s position, which is something I want to ask noble Lords, and in particular the Minister, to consider. Supposing the Welsh Government faced a decision by the UK Government not to support the steel industry with the support that it needs, we could see the closure of the Port Talbot steelworks, which directly employs just under 3,000 people on wages that are high for the area; indirectly, with the multiplier effect, at least 9,000 workers would lose their jobs, and a whole series of supplier industries would be affected. That would be the equivalent of closing mines in former pit villages, which I experienced as a Member of Parliament in the Neath valley, specifically representing those within the old constituency of Neath for nearly a quarter of a century. Closing the Port Talbot steelworks will be the equivalent of ripping the heart out of that whole area, and, as I have said, the multiplier effect will be devastating. It will be equivalent to closing the mines, particularly in the 1980s and flowing on into the 1990s.

I make that point because, if a steel supplier replacing the collapsed British steel industry was found to have labour standards that were in breach of international law, as my noble friend Lord Hendy has so authoritatively explained, why would—and should—the Welsh Government not have the right to say, “No, we won’t source that steel for infrastructure development”, which the Welsh Government largely have responsibility for in Wales under the devolved powers? Why should they not say, “We won’t do that because of the terrible labour standards, which are out of compliance with international labour law”? Why are they being denied that opportunity? Under this Bill, they will be denied that opportunity, unless the Government are willing to accept my noble friend Lord Hendy’s amendment.

This is a terrible Bill. I am normally on the same side of the argument as my friend, the noble Baroness, Lady Altmann, but this is a terrible Bill, and I will further explain why in the discussion on the next group of amendments. I ask the Minister to consider where the Bill is taking public bodies such as the Welsh Government—and Neath Port Talbot County Borough Council, which might be in the same position. If this Government allow the Port Talbot steelworks to close, with devastating consequences for the area, particularly employees in Neath Port Talbot County Borough Council, it might say, “In any future procurement decisions, we will not source steel from this or that country, replacing the Port Talbot steelworks, because of their labour law standards and their failure to comply with international workers’ rights and other matters”.

I cannot understand why the Government are driving the Bill forward without considering detailed amendments like that of my noble friend Lord Hendy. I know that the Minister has not replied yet; perhaps she will surprise us and say, “Yes, I agree with the noble Lord’s amendment”, or, at least, “I will take it away and look at how we might refine it in a fashion that could be acceptable to the Government and which he might be willing to accept”.

I hope the Minister surprises me by doing that but, if she does not, I ask her, the Government and the Conservative Benches to consider where this country is going on such matters. We are not respecting human rights. That is a matter for the next group of amendments, but we are not respecting our international obligations to uphold workers’ rights—conventions, by the way, that we have signed up to as a UK Government. That does not seem a good place to leave this country, and I hope that the Minister, having listened to the speech by my noble friend Lord Hendy, will agree to look at how she might be able to support his amendment, perhaps in a slightly modified form.

[Lord Deben (Con)]

My Lords, I remind the House of my declaration of interests. It is exactly from that position that I wish to ask a fundamental question of my noble friend. We spend an awful lot of time trying to get companies not to be complicit with the Government of Myanmar, for example, because of their actions. We are proud that there is a whole series of decent private and public companies that make decisions on those grounds. Are we sure that we should be in a position in which we will encourage public and private companies to make decisions on those grounds but specifically exclude the right of elected bodies—and some non-elected bodies, because they have been designated as public bodies—to make those decisions? I find that a very difficult position to support.

Part of the problem is that we are now in a complex and extremely uncertain area, which is why all the amendments before us are of considerable importance. They say that we are putting public bodies—we are not quite sure what they are—in a position where they do not know quite how they should behave, and we are opening them up to the opportunity of people taking them to court because the decision they have made has not been in conformity with what the plaintiffs suggest should have been their decision in relation to international law. At the same time, we are saying to them that they should not take into account the same things most of us would try to get private companies—and public companies, in that sense—to take into account.

We are getting into a real mess here, and I do not see that this is a carefully written Bill. Indeed, my last point is simply that this is a terribly badly written Bill. I do not know who thought it through. We have now had a series of people taking rather different views—as a matter of fact, I am unhappy about the particular way in which Israel is treated in the Bill. We are all taking different views, but we are all saying that the Bill is so badly written that people will not know how to deal with it.

This is a central concern for this House; we need legislation through which we can explain to people what is happening. If I may say to the noble Lords who put the amendments forward, it took a bit of listening to understand what their problem was, to put it bluntly. How on earth are we going to have public bodies coming to decisions when they have to read that to start with to understand what mess they might be in? I hope my noble friend will help me to understand how this Bill will be simple enough for it, first, to be enforced and, secondly, to be proper. At the moment, I feel it is improper, because it is so badly drafted.

[Baroness Noakes (Con)]

My Lords, we should get this into perspective. I say to my noble friend Lord Deben and indeed to the noble Lord, Lord Hain, that this Bill is handling one particular aspect: fundamentally, boycotts and divestment decisions. There is a whole range of law in the Procurement Act, which we passed last year, which sets out the UK’s version of the procurement rules we used to take from the EU—they have been modernised for our own purposes, but they are still hugely complicated.

For a very long time, the Government’s own procurement advice to public bodies was that:

“Public procurement should never be used as a tool to boycott tenders from suppliers based in other countries, except where formal legal sanctions, embargoes and restrictions have been put in place by the UK Government”.


In many ways, this Bill provides a more liberal approach to that blanket proposition, which was in a government procurement policy note and which has been governing procurement for a long time. We need to see this Bill in context and in the light of the rather narrow area it is trying to deal with.

--- Later in debate ---

I want also to highlight to the noble Lord, Lord Purvis of Tweed, that doing business with a country that has breached international law is not always by itself enough to put the UK in breach of international law. Additionally, the Bill contains a power to exclude certain countries and territories from the ban via secondary legislation. The Government will keep their response under review and have made it clear that they regard that provision as important.

[Lord Deben (Con)]

My noble friend is saying that, if a regime controls by force and in the most terrible way the whole economics of a nation, I can advise a private company not to deal with it and remove itself from it, but a public body could not say, “I will not trade with or buy from Myanmar”, unless the Government decide that they will not deal with Myanmar in that sense. I find that morally extremely difficult to take. We are asking private people to do things—I am sure the Government would support that—but we are going to exclude those who are democratically elected or who are looking after, for example, a university. I find that very difficult to take.

[Baroness Neville-Rolfe (Con)]

We are of course dealing with investment and procurement and the public bodies themselves.

Perhaps I should respond to the noble Lord, Lord Collins, who mentioned the Occupied Territories, which we will be coming back to on later amendments. Although the Government recognise the risks associated with—

Economic Activity of Public Bodies (Overseas Matters) Bill

Lord Deben Excerpts

Committee stage
Wednesday 17th April 2024 Lords Chamber

[The Lord Bishop of Manchester]

My Lords, I shall speak in favour of Amendment 54, to which I have added my name. I also support the other amendments in this group. I listened carefully to the previous debate. As other noble Lords have noted, there is a strong overlap between this and the previous group.

Again as others have said, my concern is that, before we pass this Bill, we get clarity on who it covers. I declare a particular interest in that those of us on these Benches, along with other diocesan bishops of the Church of England, do carry out public functions. From time to time, these might bring an individual, in our corporate capacity as bishop of a diocese, within whatever definition of a public body or authority we might eventually land on.

In responding to an earlier group debated before the Recess, the Minister referred to the fact that mayors, police and crime commissioners—and, indeed, Government Ministers—also exercise public functions and hence fall under the scope of the Bill. However, since what these officeholders have in common is that they are elected or appointed primarily to exercise political functions, I can see the logic that maybe they should not use their investment and procurement functions in order to pursue a foreign policy in contrast to that of His Majesty’s Government. Notwithstanding the fact that some diocesan bishops are members of your Lordships’ House, is it really intended that we, along with the small charitable funds for which we are responsible in our corporate personality, should fall under the scope of the Bill? If we place those modest charitable funds with an external investment body, do we have constantly to ensure that that entity does not at any point seek to make restrictions in contravention of the Bill, by investing our money where it should not be—or not investing it where it ought to be?

Other Church institutions are at potentially greater risk of being inadvertently caught up in the scope of the Bill. Noble Lords will be familiar with the Church Commissioners, the body that manages the historic endowments of the Church of England, for the furtherance of the mission and ministry of the Church in perpetuity. It was my great privilege to chair the commissioners’ board, until the end of last year, as the delegated deputy of my most reverend friend the Archbishop of Canterbury. During my tenure, we grew our reputation, alongside our sister pensions board, as being among the world’s leading ethical and responsible investors.

As noble Lords well know, the commissioners require parliamentary approval to spend capital. Indeed, I spoke before the Easter Recess when we brought just such a measure before your Lordships’ House. What noble Lords may not know is that six state officeholders, including the Prime Minister and the Lord Speaker, are ex officio Church Commissioners, notwithstanding that the Government make no contribution to the commissioners’ coffers. Noble Lords will have noted a plea there. The ability of the commissioners’ investment team to deploy assets in furtherance of our mission objectives is not a case of anyone taking taxpayers’ money and using it to pursue their own independent foreign policy, yet, on some readings, these Church bodies may be seen as being within the scope of the Bill. Can the Minister clarify whether such bodies are indeed in scope?

Beyond the Church of England, there are many religious, charitable and other foundations—across a variety of faiths and of no faith—which perform functions in areas such as education. We have heard that referred to before. I am a grammar school boy. I benefited from a scholarship. My widowed mother could never have paid school fees. Such bodies raise and hold endowment funds for such purposes in order to enable students and pupils from less well-off backgrounds, like mine, to fully access and benefit from their services. I know that goes on because I am regularly invited to donate.

What is true of schools is even more true of the endowment funds of universities and colleges. Let us suppose that such an institution receives an offer of funds from a private philanthropist in the UK or beyond who wishes to make some stipulation as to where the endowment may or may not be invested. This is private money. Would this Bill mean that the foundation has to refuse the money, not because the country that it wishes to boycott is already on the list but because it may come on to a subsequent list at some future date?

The simplest way out of this confusion is for the Bill to contain either a schedule of the types of bodies to which it applies, as in the amendment in the name of the noble Baroness, Lady Chapman, to which I have added my name, or to use a definition that points to a well-defined list in existing legislation. The noble Baroness, Lady Noakes, offered that earlier today in the previous group. The advantage of requests under the Freedom of Information Act is that they are ubiquitous and long-standing. I know because I get them all the time and turn them down because they do not apply to me. As we have already heard, this means that most institutions are now very clear as to whether FoI applies to them. The same cannot be said for other definitions, even those contained in the Human Rights Act. So, in responding to this debate, can the Minister let us know how His Majesty’s Government are going to provide the clarity over scope that will be essential for this Bill to become a workable Act?

[Lord Deben (Con)]

My Lords, I declare an interest in the sense that my wife is a trustee of a major public orchestra. It does not receive public money, but I just make the point: if you do not receive public money, are you one of these public bodies? If you do, do you become one, and does that mean that you make a choice, which is quite a serious choice?

I also declare an interest because in my business we advise people on procurement and sustainability of procurement. I say to my noble friend that procurement is a very difficult issue on which to advise, because it is very widespread. What does it mean? It means almost everything from what might be called lavatory rolls at one end to procuring very large numbers of services or products. It can also cover the issue of the orchestra that procures another orchestra from abroad. As the noble Lord, Lord Boateng, said, it might have intended to bring an orchestra from, let us say, Russia to this country; if it then decides not to do so, is that the kind of decision that comes under the Bill?

I also have a concern, as the noble Baroness put forward, that the Secretary of State has an ability to remove from the exceptions things that for most of us are really important. If we are not to be allowed to procure on the basis of sustainability or climate change—things that really are existential issues—we have a serious problem, because on any definition of public bodies, the very bodies we are talking about are the ones that ought to be procuring and investing on those bases. The idea that this is only temporary, that it is in the Bill but can be removed by the arbitrary decision of the Secretary of State—and it could be arbitrary, because there is nothing in the Bill to say it is other than arbitrary—worries me considerably.

I rose not just to say that to my noble friend. I am afraid that the Government have a record of producing Bills that do not appear to have been carefully thought through. If the Bill had been produced to me as Secretary of State for the Environment, I would have sent it back and said, “There are too many questions in this, and I don’t want to have to present it to either House of Parliament because I can’t answer a number of the questions”. I do not blame my noble friend for not being able to answer some of these questions, but they are pretty fundamental, are they not? I just wonder what the Secretary of State responsible for the Bill said when it was brought in front of him. Did he ask what the definition of public body is or what a public function is? If he asked those questions, did he get answers? If he got answers, were they satisfactory, and why do we not have those answers when the questions are asked on the Floor of the House?

My worry is this. Out there large numbers of bodies, some of them very small, are worried that this will affect them. I do not believe that kind of legislation does us any good at all. Precision is absolutely crucial here, and we need to restrict this to a very clear, relatively small number of bodies and have a very clear understanding as to what it means.

If we take sporting bodies receiving government money—I cannot claim to be a sportsman and I declare no interests whatever on this front—it seems to me that if individual sportsmen wish to boycott something, the sporting body probably has to discuss that. If a body discusses that, it seems to me that under this Bill it can easily get itself into a position in which that is improper, if not illegal. Again, I do not see why people should have to ask themselves this question.

We are, at the moment, seeing a very inelegant discussion about individuals’ decisions on tax matters, pretty unfairly in most cases I have heard. It is difficult to understand quite a lot of the detailed tax legislation, but producing this legislation will ask a whole lot of other people to understand very detailed and extremely difficult concepts. I say to my noble friend that all I want is to feel that I could vote for something that I understand, and that other people can understand, which does not reach beyond the necessary areas and actually achieves some good. Those are three perfectly reasonable requests, but I am not sure that the Bill meets any of them so far.

[Lord Warner (CB)]

My Lords, we are dealing with a Bill that is in highly controversial territory. If we have sloppy definitions in the Bill, it will encourage litigation. It would be a strange thing if we passed a Bill with a lot of problems around definitions that causes, over time, more people to raise issues around sources of investment through the courts. With all due respect to the Government of Israel, from time to time they have shown quite an enthusiasm for using litigation to make their points.

Also, picking up from the last group of amendments, we live in a rather different time in terms of who raises money for public services, particularly capital money for investments. If we take health and care, the areas I know something about, there is a lot more interest in the idea of going into the private sector—private equity and PFI being good examples—to try to raise money to build facilities of some kind or another for which the public sector has found it difficult to find the money. People who raise funding and use it to provide public services perform a kind of public function. If we have a sloppy Bill, they leave themselves exposed to probing of where their sources of money come from. You then run the risk of driving these people away from the kind of investments in public service that we may need to get some of our old capital structures improved over time. I suggest to the Committee that if we do not tighten up these definitions, we run a series of risks that are self-defeating to any Government.

--- Later in debate ---

[Baroness Neville-Rolfe (Con)]

It seems to me that the issue here is boycotting a sporting event, and that is not a procurement or investment decision—but I have already undertaken to look carefully at these individual examples, because we all want to understand exactly what we are talking about and to come to the right outcome.

Amendment 24 would carve out community interest companies. While it is not inconceivable that a community interest company might perform a public function, neither the purpose nor the structure of a community interest company naturally lends itself to that. It is not, by and large, what the Bill is designed for.

Amendment 22 seeks to probe whether schools and early years providers, such as nurseries, are in scope of the Bill. I can confirm that all publicly funded schools will be captured by the ban when they are performing public functions, and some early years providers will also be public authorities on that definition. Other early years providers may be captured to the extent that they are performing a public function. However, I will take noble Lords’ concerns on that issue away, because I think it comes into the same category as the other two examples we will be looking at.

Privately funded independent schools—and I think this will probably apply to private universities—will be captured to the extent that they perform a public function. However, they are unlikely to perform functions of a public nature in scenarios where they are captured as hybrid public authorities, which we discussed on the previous group. The ban will ensure that publicly funded schools remain shared spaces for all, and the Bill will ensure that schools and early years providers can remain focused on their core duties, rather than being distracted by divisive campaigns promoted by BDS and others.

[Lord Deben (Con)]

If a Church of England or Catholic school says it will not buy from a country that is persecuting Christians, that is concentrating on its core responsibility. It is not avoiding it; it is what it is there for, which is to uphold the faith. Are we really going to dictate whether or not it should make that decision?

[Lord Roborough (Con)]

My Lords, the Minister has an advisory speaking time of 20 minutes. May I respectfully suggest that we leave any further interventions until the end to allow the Minister to answer as many of the existing questions as possible?

Economic Activity of Public Bodies (Overseas Matters) Bill

Lord Deben Excerpts

Committee stage
Wednesday 20th March 2024 Lords Chamber

[Lord Palmer of Childs Hill (LD)]

I speak to exactly the same issue as did my noble friend. Mine is a simpler amendment. I work on the basis that the Bill will pass in some form or another and if one does a modest, sensible tweak to a Bill, it has a chance of being incorporated into the final version. My Amendment 2 —purely adds one word: “materially”. This would raise the threshold that needs to be met before a decision is deemed to be in breach of this prohibition. If it is not “materially”, things could be prohibited for something very minor. Having “materially” improves the Bill and makes it more logical—we are looking at things of substance, not things that are minor.

[Lord Deben (Con)]

My Lords, I rise merely to ask my noble friend the Minister to be very careful about her responses to this. I have a huge problem in that I cannot think of a speech that I have made in this House in which there has not been some moral content, because that is the way I think. I cannot help that. I am very concerned about the clarity with which the Bill is written. My noble friend and I go back a very long way. I have to say to her that when she was a civil servant working with me, she would not have produced a Bill like this. She would have been very angry if I had suggested that it should be as loose as all this. I am sorry to remind her of that fact. All I am interested in is that we do not unhappily and by accident cause a whole lot of legal cases that are unnecessary and which we never meant to.

I have some fundamental problems, not least with the specifics of this. I may wish at some later point to discuss the speech that was made at Second Reading by my noble friend Lord Wolfson, but the first point I want to make has nothing to do with the nature of the Bill itself or what it seeks to do. It is about precision. This is an imprecise Bill and it needs to be precise if it is not to be extremely malignant. All I ask is for my noble friend to try to understand that we need precision here, even those of us who in general do not come here with an antagonistic view. We just want to know what it is about, and you do not understand that if you merely read the Bill. I do not want this constantly to be in the courts. It would be much better to get it right now.

Covid-19: Lockdown Costs and Benefits

Lord Deben Excerpts

Wednesday 13th March 2024 Lords Chamber

[Baroness Neville-Rolfe (Con)]

I note what the noble Lord says. It is important that these issues are considered fully from every angle. That is why the Government set up the Covid inquiry and why it is looking into many areas.

[Lord Deben (Con)]

If the Government had not acted but had waited for Parliament to discuss the matter, they would have been in serious trouble. Is it not right that the Government acted immediately in the face of an unprecedented challenge?

[Baroness Neville-Rolfe (Con)]

I look forward to the results of the inquiry on these points. We expect to get some findings from module 1 in the not-too-distant future, and module 2 looks at a lot of the points that my noble friend has mentioned.

Climate Change

Lord Deben Excerpts

Monday 24th July 2023 Lords Chamber

[Lord Deben (Con)]

My Lords, I thank the noble Lord, Lord Krebs, for introducing this debate so moderately and reasonably, and I look forward to the maiden speech from the noble Earl, Lord Russell.

I am sure the House will remember that the Global Warming Policy Foundation to which my noble friend Lord Frost adheres used to say that climate change was not happening. Then it said it was happening a bit and now, evidently, it says that it is happening but other people ought to deal with it and we should not be involved at all. We are not talking about that, happily, but I look forward to a debate with my noble friend when I shall be quoting the science and he will be quoting the prejudices.

I have been a businessman all my life—except when I was a Minister—and I am always interested in finding certainties. We have a certainty here: the weather is changing dramatically and we have to sort out our acceptance of it. That means that we cannot talk about deaths, as my noble friend Lord Frost did. I do not think that the families of people who die because of heat are very much cheered by the fact that there are fewer people dying because of cold. The fact is that we have to deal with these problems. We have to do something about our care homes, most—not just many—of which are entirely unsuited for the weather that we are going to have.

We still have not had the future homes legislation to bring new houses up to date. A million and a half crap houses have been built, and the next generation—the people who have paid for them and contributed to the profits of the housebuilders—are the ones who are going to have to change those houses.

We have rising sea levels, but I see very little in this report about how we are going to deal with that. However, I want to concentrate, in my short time, on water. I come from East Anglia, which is now a semi-arid region. The local water company has announced that it cannot produce any connections for new commercial businesses until 2032, because it has not got any water. In south-east England, South East Water has not been able to provide water for quite a number of its people for this part of the year, and we have not got into August yet, nor have we had the kind of withering hot weather we had last year.

We must make sure that we are making the changes that are necessary, and it will be cheaper to do it now than pay the costs and have to do it later. That is the difference. I say to the noble Lord, Lord Krebs, that it is not just 2:10; it is the cost in between times that not having spent lays on our shoulders. We in the Climate Change Committee—I declare my interest as its former chairman—gave the Government a list of things that could be done, and needed to be done. We expected not only that the Government should accept them but that they should be able to measure whether they had done them and that the outcomes would be available for people to know. That has not happened. I say to my noble friend that unless you measure it—I come back to being a businessman—you do not do it.

If this were presented to me as the company report on how we were to deal with the problems of climate change, I would have to say that the person who presented it should be sacked. That is how I feel about this report.

COP 27

Lord Deben Excerpts

Thursday 27th October 2022 Lords Chamber

[Baroness Neville-Rolfe (Con)]

There is no ban. This is a matter for the palace, and I really cannot be drawn on communication between the Government and the monarch. This is a matter for them, but I reiterate that we are very fortunate that our King is so globally identified with nature and tackling climate change.

[Lord Deben (Con)]

Can my noble friend help me? Can we now expect that the Cabinet committee chaired by the Prime Minister will continue, that the Prime Minister will chair it and that it will be regular in dealing with climate change, which, after all, is the biggest material threat to ourselves and the world that exists?

[Baroness Neville-Rolfe (Con)]

I know all that my noble friend has done to help on climate change and his great work chairing the Climate Change Committee. As for the Cabinet committees for the new Government, we will have to wait to find our exactly what they look like.

Detainee Issues

Lord Deben Excerpts

Thursday 18th July 2019 Lords Chamber

[Lord Young of Cookham]

The short answer is that I do not know whether there were people who were aware but did not take the appropriate action. One of the recommendations of Sir Adrian’s report is that in future, if you become aware of any mistreatment, you are under an obligation to report it. On her first point, the noble Baroness is absolutely right that the ISC found no evidence of direct maltreatment by our staff. It is right to pay tribute to our intelligence and security staff, who work hard to keep us safe, often in challenging circumstances. I pay tribute to that work but, against the background of the exchanges we have had, it is right that they should be held to the highest possible standards.

[Lord Deben (Con)]

Is it not rather surprising that only now is it suggested to people that if they become aware of such a matter they should report it? After all, any company that becomes aware of such a matter in its supply chain has a legal requirement to report it and can be held responsible. This is, in a sense, part of our supply chain and I find it extraordinary that we did not take that view before. It is for that reason that I am not surprised that the public as a whole are pretty questioning about the degree to which we are prepared to own up to our responsibility in these circumstances. Perhaps further measures should be taken, merely for public confidence.

[Lord Young of Cookham]

Perhaps it would help my noble friend if I refer to the specific paragraph in Sir Adrian’s letter. He said:

“It was argued in number of responses to the consultation that there should be a post-notification process for individuals who have been mistreated following a failure properly to apply any new guidance or principles. This would enable them to seek redress. Reprieve and Freedom from Torture, in a joint submission, made substantive representations regarding the UK’s international obligations in this regard”.


I will write to my noble friend when I have discovered the other part of Sir Adrian’s recommendations, which builds on the current position, but makes more explicit that there is now an obligation, if people come across mistreatment, to pass it up the chain. I recognise that the paragraph I just read out was not directly relevant to my noble friend’s question.

Securitisation (Amendment) (EU Exit) Regulations 2019

Lord Deben Excerpts

Monday 25th February 2019 Lords Chamber

[Lord Sharkey (LD)]

My Lords, I have only one brief question, which is to do with the transparency SI. I accept that we should approve both the SIs before us, but I regret that there has been no consultation on either instrument. As I remarked earlier, the engagement noted in both EMs is not a satisfactory substitute. However, I was happy to hear the Minister’s response to my suggestion of a more informative account of engagement becoming part of future EMs.

Reading the EM and the impact assessment for the transparency SI highlights one issue: the usual question of reciprocity. The EM for the transparency SI makes it clear that the Treasury can decide which third-country entities can access data on SFTs held in UK trade repositories. I assume that this provision means that all EEA entities currently with access will be allowed continued access. But what about the other way round? As things stand, if we crash out of the EU with no deal, will the UK still have access to data held in the three EEA trade repositories? If not, would it have significant implications for our financial services industry? Have the Government made any estimate of what the consequences of non-reciprocity might be? What assurance have the Government had from the EU, if any, that the UK would be allowed continued access after 29 March?

[Lord Deben (Con)]

My Lords, in the absence of the noble Earl, Lord Kinnoull, I want to declare my interest as chairman of PIMFA, the organisation representing wealth managers and independent financial advisers, and to say to my noble friend that these are two very important SIs which we have to have—there is no doubt about that. This is a branch of our financial industry which was not, as my noble friend said, properly cared for. It did not have the transparency which it needed and it now does. Very sensibly, that was done over the whole European Union, because that is the area over which much of this—not all of it—is served.

It is crucial that we get reciprocity; it would be a serious blow to the industry if we did not. My noble friend reminded us with such elegance that this measure is here only should we crash out of the European Union. Every day, we recognise what a nonsense that would be and how unaware of the facts those who seem to want it really are, but we should not miss the opportunity of reminding the House of this fact.

My noble friend mentioned that all these powers will go largely to the Financial Conduct Authority but that some will go to the Prudential Regulation Authority. Yet again, we have a series of jobs being given to people without any price on them. I am sure that my noble friend will say what he has said on other occasions, which is that the authorities concerned are perfectly aware that they are able to cover this within their current budgets. I am beginning to wonder whether their budgets are not too generous, because they appear to be able to cover so many things without any extra costs. I merely say to my noble friend that it is becoming difficult for the House to recognise how this can be. If those authorities manage to get by for a relatively short period, I have no doubt that they will then ask the industry to pay the cost thereafter.

Again, it is perfectly reasonable to say that the industry is paying the cost towards the European Union at the moment and it will be in much the same place if we bring this to a British system. I have two things to say about that. First, I would rather like to know what that place is, because we do not seem to be told. Secondly, the industry is not in the same place. At present, it is paying towards a system which gives it access to the whole of the European Union. We are now suggesting that it should pay for one which will only give it access to itself. It would have been valuable to see what the difference in cost was there.

Market Abuse (Amendment) (EU Exit) Regulations 2018

Lord Deben Excerpts

Wednesday 23rd January 2019 Grand Committee

I note that this provision was drawn to the special attention of the House by the Secondary Legislation Scrutiny Committee Sub-Committee A in its report published on 9 January. The FCA is the appropriate body to regulate CRAs, given its current regulatory role in market operations and in protecting the integrity of these markets, and it has the necessary resource capacity to effectively carry out its new function.

[Lord Deben (Con)]

When my noble friend says that the FCA has the necessary resource capacity, does that mean that it could do it if it had the money and resources to do it—in other words, if it were intellectually able to do it—or does he mean that it already has the financial and staffing capacity to do it?

[Lord Young of Cookham]

The FCA has been consulted about these regulations. If there were a no-deal scenario, I am advised that it has the necessary resource capacity to effectively carry out its new function. Perhaps I can deal in more detail with my noble friend’s question now.

As I hope I said, the FCA has dedicated the necessary resources to account for the additional work through its 2018-19 business plan, and it will ensure that its considerable experience and technical expertise in regulating the financial services sector is reflected in its new supervisory role in relation to the CRAs.

[Lord Deben]

I am sorry to trouble my noble friend again but who will pay for this? The resources of the FCA are, to a large extent, raised through various kinds of costings. I declare an interest, as set out in the register, as the chairman of PIMFA. Who will pay this bit of its budget?

[Lord Young of Cookham]

My Lords, the chief executive of the FCA, Andrew Bailey, has said that he expects to hold FCA fees steady for a year or so, assuming that there is an implementation period. However, the FCA is able to increase its fees should it need to increase its income in the event of no deal.

--- Later in debate ---

[Lord Deben]

My Lords, I want to make a couple of fundamental points. First, my noble friend uses the word “equivalent”, but of course this is not equivalent. It is equivalent only in the sense that it applies to Britain; therefore, immediately, it is not the same thing. He may say that this is chopping logic, but I think that it is important for us to underline that when you take into British law what has been up to now European law, you assert your control over what happens here but you deny the fact that you had some control over what happens over the whole area. That, therefore, is not equivalent. It may be what people want, but I doubt that people who voted to leave understood the details. Indeed, none of us did until we started to go through it—what I say is not in any way insulting to either side. The fact is that this is much more complex than we thought.

The effect, which I think is important, is that we say of many of the things that we are talking about, “These institutions are international. We are still part of Europe, in the sense that we are working in this space. Therefore, we are going to try, even if we leave the European Union and even if we do so without a deal, to have arrangements that will overcome these problems”. Then my noble friend says, “We will do these things on a discretionary basis”. The problem with a discretionary basis is that it is exactly that. There will be occasions when the British Government—or the FCA—do some of these things and occasions when they do not. My concern is that, by translating where we are now into a national position and not an international position, as far as the financial services industry is concerned—I have declared my interest—we introduce a degree of randomness that we do not have at the moment. At the moment, we know when these things happen. Under the regulations, we will not know, because it will be at the discretion of the British Government to decide what things they will do in common and what things they will not.

The second thing to say is that this is entirely one-sided. We are saying that we will take these powers over the things that we have control of, but we have no deal under which we can get the information and no deal on things over which we have partial control. The noble Baroness who just spoke is absolutely right. There is a real issue about information. How will we know some of these things? If we leave the European Union and do not have information in common, there will be things that affect us which we will not know unless we have a deal which allows—and not only allows but makes—the European authorities to be in a position to tell the Government or the FCA the information that they have.

The third important thing is the whole question of who pays the bill. I am very much relieved by the Minister’s assertion that, for example, credit agencies will pay a fee, as they do at the moment, and that that fee will come to the FCA rather than to the European authorities. But it is important for him to recognise that there is already considerable unhappiness about the unaccountability of the FCA for the charges that it makes. There is no way of monitoring the charges which the FCA makes—no superior court to go to. There is a constant problem with the FCA because many of its charges seem, to those of us who represent people who have to pay them, to be unconnected either with the rise in the cost of living or indeed with the services that are provided. The difficulty with bringing everything back into this country is that there is nowhere to appeal to. The FCA is entirely under its own decision-making process, and says, “We have got enough money, but if we don’t have enough money, we’ll just raise the tariff”. I want to know from the Minister when we will have a situation in which even a group of people with whom I have no very close relationship—namely, the credit rating agencies; indeed, I have some pretty serious complaints about them—ought to have some opportunity to complain about the price that they are charged. I do not see any reference to that, nor indeed has the Minister mentioned it altogether.

My last point is, simply, that of course everything therefore comes into the hands of the Treasury. That is what happens when you nationalise what was and should be an international effort. Everything is decided by the Treasury. When people talked about “taking back control”, what that actually means here is that the Treasury takes back control. I see no opportunity for anybody outside the Treasury to be able to oversee the decisions that are made here. I say to the Minister that I am not at all sure that that is a very cheerful future. It seems that there was a great deal to be said for the much more open way in which the European Union deals with these matters. It is a much more transparent system than the system that we have in this country. One of the pieces of truth which I am afraid has been lost in the debates about Brexit is that in many areas, the European Union has been much more willing to discuss, much more open and much more transparent. We are going to lose all that, and I do not see anything in the Minister’s speech—admirable though it was—that indicates that the Treasury will open itself up to a more transparent system and provide opportunities for people to complain, argue and to know what the details are, and I see no sign that the same will happen with the FCA. This is therefore a further closure of the mechanisms of the financial world, and less transparency and openness. I am sorry that the Government have not taken this opportunity to say, “When the time comes, if we leave the European Union, we will start on a process of opening these things up”. I realise it cannot be part of this SI because it would change the nature of the legislation but I would like to hear something of the willingness of the Treasury to mimic, to some extent, the openness of the European Union, which we are now going to lose.

[Lord Tunnicliffe (Lab)]

My Lords, perhaps I can start by posing the same question on these two SIs as I did before. Are they no-deal only SIs or ones that will be switched off? I am entirely happy for the Minister to reference his previous reply, if that is, in fact, the reply he will give. I have tested these SIs as best I can on the basis of paragraphs 7.1 to 7.9 of the Explanatory Memorandum. Noble Lords will have read these points before as they are the same in every Explanatory Memorandum. They basically say that new policy will not be introduced except where necessary.

Largely speaking, I have found nothing to complain about. However, there were one or two areas I did not understand. I start with the Explanatory Memorandum on the first SI, on market abuse. In paragraphs 2.7 and 2.8 once again I think the problem is that the author knew what they were talking about and I do not. The first sentence of paragraph 2.8 says:

“The decision to keep instruments admitted to trading or traded on EU venues, rather than amending to a UK only scope, was taken because of the close relationship between UK and EU markets”.


I hope that the Minister might expand on that because I find the language of that paragraph, in particular, extraordinarily difficult to understand.

On international co-operation, we have had one reply. I want to press the noble Lord further. We hope that the outcome of this—no matter how badly we do it—is that we are still in this international market and therefore working together not just with the EU but with the rest of the world. As I understand it at the moment, we effectively work with the rest of the world keeping abuse regulations, in particular, up to date through the channels of the EU. How will that be replaced? The abuse regulations, in particular, clearly have to be kept up to date.

The remaining thing to say about the first SI is that it should not be in front of us because of the absurd paragraph 12.5 in the Explanatory Memorandum that says we are going to have an impact assessment but not until we have agreed the instrument. As we know, the noble Lord, Lord Bates, took some stick on that—I think that would be the right term—and your Lordships might moderate that stick by some useful comments. I do not know.

Moving on to credit rating agencies, I have a couple of questions. One is, once again, due to my failure to understand. I did get O-level English—I am not that bad, I hope. My understanding of the three bullet points in paragraph 7.12 of the Explanatory Memorandum diminished as I read through them. In particular, I have no idea what this means:

“The Automatic Certification Process will enable Certified CRAs established outside the EU to notify the FCA of their intention to extend certification to the UK. Like the Conversion Regime, these notifications must be made before exit day”.


I do not know what a “Certified CRA” is.

Finally, paragraph 7.15 covers enforcement and makes reference to criminal actions. It also makes reference to sections in FSMA, which would be a joy if I had an up-to-date copy to check them against. What I would like to be reassured about—or not if it is not true—is whether credit rating agencies are subject to the requirement to have a senior management regime where the clarity of roles is such that if a criminal prosecution was to take place, as referred to in this paragraph, that prosecution could be directed at an individual.

--- Later in debate ---

[Lord Young of Cookham]

It is a very good question, and the answer is that we do not have the exact information as to the exact turnover or number of people employed in the CRAs. I will make further inquiries and see if I can shed some light on that. I might get some in-flight refuelling.

[Lord Deben]

When my noble friend sheds some light on that, would he be kind enough to explain something which is often hidden in this? I do not quite understand why there is an additional cost if we are to do the same thing, only locally, because they must have been paying somewhere else. Could my noble friend make sure that we have an answer that shows which bits are, if you like, real additions and which are a replacement for somewhere else? That is all I want to know.

[Lord Young of Cookham]

Seeing whether one can net it off is a very good question, and I will see whether we can do that—I probably cannot do it on my feet.

To revert to the point made by the noble Lord, Lord Tunnicliffe, about how the £11.4 million cost to the credit rating agencies relates to the size of the industry, we expect credit rating agencies to incur an estimated £10,000 per firm for changes to IT systems and £60,000 per firm for reporting requirements. This is for the five firms that the FCA expects to enter the regime. On top of that, there are familiarisation costs. Perhaps I could write to the noble Lord with more information, seeing whether we can net it off, as my noble friend has just said, by looking at what they have to pay at the moment.

The answer to the noble Lord, Lord Tunnicliffe, about the status of this SI, if there is an agreement, is the same as in the last debate. The SIs would be delayed and may then be repealed or amended as appropriate, depending on what deal we actually do.

The noble Lord asked for an explanation of the third option of paragraph 7.12 of the Explanatory Memorandum. This relates to credit rating agencies’ pre-exit applications to the FCA. All credit rating agencies will need to register with the FCA in order to establish legal entities in the UK following exit. Firms can complete this registration through the automatic certification process. Basically, if you have a credit rating agency which is located outside the EU but which has registered with an EU credit rating agency, it can apply to have that certification extended to the UK in a sort of passporting arrangement.

The noble Lord, Lord Tunnicliffe, asked about the senior management structure of credit rating agencies and whether individuals could be held responsible. It is a good question. The senior managers and certification regime does not currently apply to credit rating agencies; I think that one of the reasons is that they do not actually handle customers’ money, which of course banks and other agencies do. Regulation 22 of the SI applies Section 400 of the FiSMA, which provides that if an offence committed was with the consent or connivance of an officer of the body corporate, or due to neglect on its part, the individual as well as the corporate is guilty of an offence.

Finally, on international co-operation, the MAR SI amends Part 8 of the FiSMA to facilitate international co-operation between EU and non-EU regulators and the FCA. There are existing co-operation provisions for cases of market abuse that we will seek to rely on. Related to that, both the Treasury and the FCA will continue to co-operate internationally with the EU to facilitate identification and enforcement of market abuse, and we are confident that the FCA and HMT can continue this co-operation despite no longer being part of the EU.

Building Regulations and Fire Safety: Government Response

Lord Deben Excerpts

Thursday 17th May 2018 Lords Chamber

[Lord Deben (Con)]

My Lords, we are all deeply concerned that this should not happen again and I welcome what the Minister has read out. In particular, I hope the Government will give a clear indication that the banning of combustible materials is something they would like to do. We have to have a consultation, but, given our debate yesterday on why it is important to make clear in any consultation where the Government believe the future should be, it is important that the Government are very clear about this.

Does my noble friend accept that Dame Judith’s report clearly highlights that inspection and enforcement have a big role to play, and failed in this case? Therefore, I hope I am not extending it too far to say that there is a fundamental problem with the building regulations in general. We have to recognise that building regulations are not being met by new housebuilders, for example, because they are not inspected and the regulations are not enforced. In my view, this is a clarion call to review the way in which inspection and enforcement take place. I hope the Government will say that this is not just about fire safety but about all the other regulations we have passed, which should be enforced. I suppose I ought to declare my interest as chairman of the climate change committee. This is a real issue for us, because we cannot get the enforcement we need for new buildings.

[Lord Young of Cookham]

I am grateful to my noble friend, himself a former Secretary of State at the Department of the Environment with responsibility for building regulations. The Hackitt review has recommended what she calls “gateways”—steps that must be fulfilled before the next stage in the construction process can happen, from design, to planning, to completion. On inspection, there is an interesting section in the report about approved inspectors, where Dame Judith sees a perceived conflict of interest and recommends some changes. On regular inspection, there is a recommendation that high-rise buildings should be inspected rigorously at least every five years for safety. On resources for the planning regime, my noble friend will know that we have recently increased the fees that planning authorities may charge with the increase being ring-fenced for actions such as enforcement.

I should have said in response to the noble Lord, Lord Beecham, that I have the latest figures from the royal borough on the rehousing of the Grenfell survivors. As of 14 May, of the 210 households that needed to be rehoused, 201—95%—have accepted offers of temporary or permanent accommodation. Of those, 138 have moved into temporary or permanent accommodation of which 64 are currently living in temporary accommodation and 74 have moved into permanent accommodation. Kensington and Chelsea Council is spending £235 million on providing the homes needed and we know that the council plans to spend an additional £83 million on top of the £152 million it has already reported spending. It has reported that it has now made over 300 permanent homes available to survivors to give people as much choice as possible.

On the building regulations, Dame Judith’s point was that the problem was not so much the regulations but a failure of the system that supervises and enforces them.