Financial Services Bill

Debate between Lord Eatwell and Baroness Neville-Rolfe

Committee stage
Monday 1st March 2021 Grand Committee

[Lord Eatwell (Lab)]

My Lords, the provisions in the Bill dealing with relations with Gibraltar raise a number of intriguing questions. The probing amendment in the names of my noble friend Lord Tunnicliffe and myself is really seeking some answers. The Bill in effect creates a single financial market with Gibraltar, even to the extent of offering customers of Gibraltarian entities access to the Financial Services Compensation Scheme. In doing so, it forges a single market with a different jurisdiction, a jurisdiction that includes a different regulatory authority and notably—as the wording of the amendment in the name of the right reverend Prelate the Bishop of St Albans suggests—a fiscal jurisdiction that diverges significantly from that of the UK. I welcome the right reverend Prelate’s amendment.

When this country was a member of the European single market, there was, in essence, a single regulatory regime in the UK and Gibraltar, although the implementation of EU directives was not entirely uniform. In the Bill, the provisions on Gibraltar have been presented as a continuity measure. However, the UK’s new-found ability and declared intention to deviate from EU rules signals a substantial shift in our regulatory framework and potentially in its interplay with that of Gibraltar. The first part of Amendment 47 asks the Treasury to present in detail its assessment of how compatible the regulatory systems in the UK and Gibraltar actually are. It is important that people have confidence in the firms that will be allowed to operate in the UK. The Gibraltar authorisation regime, as it is called, being introduced by the Bill seeks alignment of law and practice in the UK and Gibraltar, but it does not prohibit Gibraltarian divergence.

I turn to the impact assessment. It is pointed out that the Gibraltarian authorisation regime will be established by a mix of primary legislation, secondary legislation, regulators’ rules, MOUs, policy statements and guidance. Given the unique nature of the creation of the single financial market, it is important that Parliament has the opportunity to assess this plethora of measures; hence the need for a Treasury statement in 12 months’ time.

It is further noted in the impact assessment that about 20% of motor insurance policies in the UK are written with Gibraltar-based insurers. When replying to the debate, will the Minister tell the Committee why he thinks that might be? What are the peculiar advantages of Gibraltar that have attracted such an extraordinarily high proportion of this UK business, and will those peculiar advantages continue as a result of the Bill?

At a time when the entire regulatory framework is under review, the Government might consider this to be the time to reassess the financial services relationships with the Crown dependencies as well. I am aware of the very different legal status of the Crown dependencies from that of Gibraltar and the fact that, given that the Crown dependencies were never members of the European Union, the UK’s exit does not pose the same range of new problems. However, the Minister will be aware that the financial services provided in the Crown dependencies are a vital part of the financial infrastructure of the UK, in particular with respect to the flow of liquidity into the London markets. Will the regulatory framework review cover the issue of the financial market relationships between the UK and the Crown dependencies? The regulatory framework review could take note, for example, of the fact that many regulatory practices in some Crown dependencies, such as the registration of beneficial ownership, are significantly superior to current practice in the UK. Given that the UK Government happily promote financial relations with Gibraltar, even though the Gibraltarian fiscal regime is significantly different from that in the UK, are they considering some enhancement of financial relationships with the Crown dependencies by, say, extending access to the Financial Services Compensation Scheme?

[Baroness Neville-Rolfe (Con)]

My Lords, we have been making slow progress, so I will be brief. I rise to question the appropriateness of these amendments on Gibraltar and the Crown dependencies. I appreciate that the second amendment in the group, Amendment 47, tabled in the name of the noble Lord, Lord Tunnicliffe, is probing in nature and I look forward to the Minister’s reply.

Amendment 46 is extraordinary. It targets Gibraltar with new and additional requirements at a time when it is facing particular challenges following Brexit and with a new treaty with the European Union still under negotiation. It seems that there are three arguments against these proposals. First, Gibraltar is autonomous and has its own democratically elected Government, setting their own regulations and taxes. Secondly, reporting regimes on businesses and the individuals who run them are burdensome and costly, and divert management effort from serving customers and building for the future. Thirdly, in the case of Gibraltar we are talking about our good friends. Many British people love and support Gibraltar. Its Government is well led, as I know from taking evidence from the First Minister to the EU Committee of this House and visiting him and his Government with the committee. I know that they have demonstrated their commitment to meeting international standards on issues such as illicit finance, tax transparency and anti-money laundering. I do not believe that there is a case for making things more difficult for Gibraltar’s businesses or those involved with proposals of the kind in this group.