Financial Services and Markets Act 2000 (Regulated Activities) (Amendment) Order 2018
Lord Jones Excerpts(6 years, 6 months ago)
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The Minister of State, Department for International Development (Lord Bates) (Con)
My Lords, the UK and London are world-leading financial centres, providing access to a wide pool of investors and international capital. This is built on the expertise of the UK’s financial services sector in providing products that meet the needs of a variety of economic actors in the UK and around the world. The UK has therefore sought to establish itself as a leading western centre for Islamic finance, illustrated by the UK becoming the first western country to issue a sovereign sukuk, or Islamic-equivalent bond, in 2014. The UK attracts business and investment from Muslim and non-Muslim countries around the world, supporting growth and jobs in the UK, as the UK’s financial services framework accommodates Islamic finance instruments alongside their conventional equivalents.
The Government are committed to ensuring that this continues to be the case. Changes were made to the law in 2010 to define alternative finance investment bonds, which cover sukuk, as a specified investment. More recently, we took measures in the Finance Act 2018 to afford such instruments the same tax treatment enjoyed by conventional bonds when traded on new types of trading venue. This was accepted by the House, but the specified investment definition in financial services legislation requires updating to match the tax change.
The order in front of the House today does exactly that and ensures that there is an alignment of the tax and regulatory treatment of alternative finance investment bonds to provide certainty, clarity and consistency for issuers of these instruments in UK markets. The order adds two types of financial trading venue—so-called multilateral trading facilities and organised trading facilities—to the list of permitted venues for alternative finance investment bonds. Conventional bonds can already be traded in these venues. The order also amends the Financial Services and Markets Act 2000 (Carrying on Regulated Activities by Way of Business) Order 2001 so that a person administering a benchmark, as specified in the regulated activities order, will be regarded as carrying on the activity by way of business. This technical amendment is consequential on the coming into force of the EU benchmarks regulation which was given effect in February of this year by the Financial Services and Markets Act 2000 (Benchmarks) Regulations 2018.
The order tracks an amendment made by the Finance Act 2018 which came into force on 1 April 2018. This left a gap in the treatment of alternative finance investment bonds in financial services regulation. We intend to close that gap as quickly as possible in the interests of certainty, clarity and consistency. Similarly, the amendment to the “by way of business” order is the final part of the legislation needed to complete the implementation of the EU benchmarks regulation into UK law. We wish to reassure issuers of and traders in alternative finance investment bonds that these instruments will be legally recognised in UK markets, giving certainty to the market. The London Stock Exchange has warned that continued failure to update the legislation for alternative finance investment bonds in regulation is causing issuers to look elsewhere.
The changes do not cause any new costs for business, as the regulatory framework for alternative finance investment bonds has been in place since 2007. The Financial Conduct Authority confirmed that there is currently only one firm in the UK authorised to operate a trading venue of the type which might be impacted by the proposed amendments. Instruments of this nature are very sophisticated and highly unlikely to be traded in this manner by anyone without a significant level of expertise in financial services—in other words, firms authorised by the Financial Conduct Authority.
We have a situation where differing treatment in regulation and taxation is afforded to alternative finance investment bonds compared to their conventional counterparts. This is unintended from a policy perspective and the Government want to act quickly to address this gap to protect the competitiveness of the UK markets. For that reason, I beg to move.
Lord Jones (Lab)
My Lords, I thank the Minister for his assured and persuasive introduction. I recollect him in another place, where I realised that he always mastered his brief. My remarks will be very brief; I have but one question. The Explanatory Memorandum refers, at paragraph 10.1, to the impact on voluntary organisations and charities being minimal. Can the Minister give an instance of a charity or voluntary organisation, to facilitate further understanding of his introduction?
Lord Lexden (Con)
My Lords, I shall comment briefly as a member of the Joint Committee on Statutory Instruments. The committee’s recent 26th report drew the attention of the House to this instrument, on the grounds that it appears to make an unusual use of enabling powers conferred by the Financial Services and Markets Act 2000. It is a long-established principle of the joint committee that, where an affirmative instrument imposes new duties significantly more onerous than those that existed before, and where it requires those affected to adopt different patterns of behaviour, there should be a period of at least 21 days between the making of the instrument and its commencement, to give those affected a reasonable chance to adapt to the changes required. This instrument allows only one day.
My noble friend explained that very few firms—possibly only one—would be affected by this change. He also made clear that the Government were responding to a grave concern expressed by the London Stock Exchange that the continued failure to amend the permitted arrangements for alternative investment finance bonds is damaging the competitiveness of UK markets. The committee was unpersuaded that the changes to the law made by the proposed order are so urgent that they must have immediate effect. If the need for amendments was really so pressing, the draft order should have been laid before Parliament much earlier, with a commencement date of 1 April 2018 to coincide with the tax changes referred to in the Treasury’s memorandum
Because of frequent and recurrent poor practice, the Joint Committee on Statutory Instruments has recently published a special report, Transparency and Accountability in Subordinate Legislation, to remind the Government of the need for new law to be published promptly, so that those affected by the changes it makes are protected from being subjected to them before they have had a reasonable opportunity to understand and prepare for them. That is a general principle to which the Government should always adhere. I commend the committee’s important recent report on the major issues of transparency and accountability to my noble friend and all his colleagues in this House and the other place. I hope the House will have a brief opportunity to consider it in due course.
Lord Bates
My noble friend should not apologise for a contribution such as that, which is very welcome. I know that she follows these matters closely and is an outstanding trade envoy to Jordan and to other parts of the Middle East. This instrument carries a strong message: that the UK and London are very much open for business.
The noble Baroness, Lady Kramer, was quite right to highlight the importance of this particular market, worth $3.5 trillion now, but it is also the fastest growing element. If we desire, as we do, to seek to retain our position as the world’s pre-eminent financial market, we need to be as strong in areas of Islamic finance as we are in other areas of finance. Whether it is Masala or rupee-denominated bonds from India or renminbi-denominated bonds from China, this is a great financial centre and we want to keep it that way. That is why we are introducing this instrument.
I want to prioritise my remarks, if I may, by taking probably the most important point first. Several noble Lords raised the 26th report of the Joint Committee on Statutory Instruments. I put on record that I accept that we have not met the standard that we would want to set ourselves for conduct in this. I know there is concern in the committee that, with a lot of SIs about to come down the track, we must maintain very high standards and be held correctly to them. I draw your Lordships’ attention to the substantive response we made which presents the reasons for the provision, contained in appendix 4 of the report. I reiterate to members of the committee—including my noble friend Lord Lexden—that we do take on board the criticism and will look at ways to ensure that this type of situation does not happen again.
Let me turn to some of the points raised in the debate. The noble Lord, Lord Tunnicliffe, undersells himself. Having stood frequently on the other side of the Dispatch Box from him, I know that he is nothing if not assiduous and sharp in getting to the heart of the issue. His point on the Explanatory Memorandum is reflected in the text of the Joint Committee’s report. It falls into the category of things that we need to do much better. The amendment was very narrow and technical, and I do not envy the officials who then had to produce the Explanatory Memorandum. However, I take on board his point.
Similarly, the noble Lord, Lord Jones, drew our attention to paragraph 10.1 of the Explanatory Memorandum. Its reference to the impact on,
“business, charities or voluntary bodies”,
as minimal is standard wording. We certainly would not expect, in instruments of this nature, charities to get involved, but that does not mean to say that they cannot. Despite his great build-up, I am struggling to come up with an example of a charity or voluntary organisation that might want to take advantage of this. I do not know if he has one in mind but, if not—
Lord Jones
I could not bring myself to take advantage of the Minister. I have been a Minister and have been in the same predicament, but if I were challenged in such a way, I would never have such facility or charm as he has.
Lord Bates
I think I should just sit down now. The noble Lord is very kind.
I will deal with some of the points raised by the noble Baroness, Lady Kramer, and then I will come back to the noble Lord, Lord Tunnicliffe. The noble Baroness asked whether a sukuk could be an asset-backed security as they are not always a sovereign bond. That is exactly right. We keep our regulatory framework under constant review to make sure that it can adapt to emerging market practice. As for it becoming difficult to comprehend, this is not an easy task given its size and complexity. The Government have no current plans to do so, but will revisit the topic later.
The noble Baroness asked about compliance with Islamic principles, which the noble Lord, Lord Tunnicliffe, also touched on. As secular entities, UK regulators do not operate on Islamic compliance. We set the framework to allow consumers to decide what to do with this. We operate on the basis of no barriers but no favours for these types of instruments.
Licensing Act 2003 (Royal Wedding Licensing Hours) Order 2018
Lord Jones Excerpts(6 years, 7 months ago)
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The Minister of State, Home Office (Baroness Williams of Trafford) (Con)
My Lords, I move on to something which I hope all noble Lords will feel very cheerful about supporting. This order makes provision to relax licensing arrangements and allow licensed premises to extend their opening hours on Friday 18 and Saturday 19 May, from 11 pm until 1 am the following mornings, to mark the occasion of the royal wedding.
On Saturday 19 May, His Royal Highness Prince Henry of Wales will celebrate his wedding to Ms Meghan Markle. I am sure that noble Lords will agree with the Government that this is a nationally significant event, for which people will want to come together to celebrate. Section 172 of the Licensing Act 2003 allows the Secretary of State to make a licensing hours order to allow licensed premises to open for specified, extended hours on occasions of exceptional international, national or local significance. Licensing hours have previously been extended for Her Majesty the Queen’s 90th birthday celebrations in 2016, the FIFA World Cup in 2014, the Queen’s Diamond Jubilee in 2012 and the royal wedding of Prince William and Catherine Middleton in 2011.
The extension will apply to premises licences and club premises certificates in England and Wales, which license the sale of alcohol for consumption on the premises. These premises will be allowed to remain open without having to notify the licensing authority and police via a temporary event notice, as would normally be the case. Premises licensed to provide regulated entertainment will be able to do so until 1 am on the nights covered by the order, even where those premises are not licensed to sell alcohol. This includes, for example, venues holding music events or dances as well as theatres and cinemas.
Premises which sell alcohol for consumption off the premises, such as off-licences and supermarkets, are not covered by the order. Premises which provide late-night refreshment—the supply of hot food or hot drinks to the public between the hours of 11 pm and 5 am—but do not sell alcohol for consumption on the premises will not be covered by the order; such premises will only be able to provide late-night refreshment until 1 am if their existing licence already permits this.
The order has the same terms as the equivalent orders relating to the celebrations for the Queen’s 90th birthday in 2016, the Diamond Jubilee in 2012 and the royal wedding in 2011. The relaxation is for a limited period and we believe that this is appropriate to celebrate an occasion of this sort. I hope noble Lords will agree with the Government that the licensing hours order is an appropriate use of the powers conferred on the Home Secretary by the Licensing Act 2003.
Lord Jones (Lab)
My Lords, the Minister should be congratulated on bringing forward a very cheerful order. I fully support her proposals. The impact assessment is very helpful and the evidence base is exceptionally helpful. I did not know that there were 155,000 licensed premises in our nation. One learns that a TEN is a temporary events notice and that it costs £21; and that an LHO is a licensing hours order. The department has clearly worked very hard to present this set of papers, which, as orders go, is very informative, ahead of the usual run of matters. Of course, it relates to a very cheerful event; surely a royal wedding is a splendid reason for a celebration, whether it is in the pub, the club or the restaurant. It is a very cheerful reason for having a better time than usual. One can only wish His Royal Highness and his charming fiancée all the very best.
Lord Paddick (LD)
My Lords, we welcome these orders. Can the Minister tell us why there is not an extension to the opening hours on the day of the wedding, bearing in mind that most licensed premises are only allowed to sell alcohol from 11 o’clock in the morning? The wedding does not start until 12 o’clock. Does she not feel that it would, perhaps, have been a good idea to allow early opening on the wedding day? Of course, there will be differences of opinion around the House as to whether people should be up drinking until 1 o’clock in the morning the day before a wedding, but bearing in mind that this has become a custom and that it is a similar order to those for the other events outlined by the Minister, we are happy to support these regulations.
Wales: Economy
Lord Jones Excerpts(12 years, 1 month ago)
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Lord Jones
My Lords, I thank the noble Lord, Lord German, for obtaining this debate. I congratulate the noble Baroness, Lady Randerson, on her appointment to the Front Bench. It was deserved and her tenure in the Welsh Assembly Government was successful and much respected.
The Welsh Assembly has come of age; it has much to be proud of and, with hindsight, the handover from Westminster to Cardiff was seamless—truly an exceptional achievement in the history of governance in Britain. The First Minister is proving to be a safe and shrewd pair of hands—indeed, quite a statesman. The Education Minister is a genuine reformist. He certainly wants better things for schoolchildren, university students and students at FE colleges. Mrs Hart, with a challenging economic brief, has the gift of decisiveness, and we know that she is in charge. The Secretary of State for Wales knows Wales like the back of his hand. He has a good pedigree, coming as he does from Rhosllanerchrugog in the north-east, and I can imagine him discussing matters in Cardiff Bay with the First Minister in their first tongue, Welsh. These two parliamentarians can collaborate for better things for Wales. Certainly, their hands are on the levers of power, and together they can deliver for Wales.
Scotland will gain more devolved powers, if not independence. I would expect the Welsh Assembly to gain more devolved powers on the back of those Scottish gains, but probably not on the Scottish scale. Whatever, the consequence of Scottish gains means that better relations between Westminster and Cardiff are going to be an absolute priority. Wales and Westminster will need to work ever more closely together to deliver better things for the people of Wales.
To enhance the Welsh Assembly and for better working there, I would prescribe more Assembly Members. They would create a bigger Assembly gene pool and perhaps more competition for places in Cabinet. They would enhance self-esteem in the Assembly and make for a better working relationship with London. More Members in Cardiff Bay would guarantee more dissent and, arguably, more difficulties for Cabinet Ministers, but dissent and competition make for a more mature parliamentary Assembly, wherever that Assembly may be. I should like to see more questioning, more dissent, more competition and more Assembly Members for the good of the Assembly and for the good of Wales.
Perhaps I may turn to economic issues. We must keep what remains of our steel industry. I have in mind particularly the once iconic Shotton steel plant. Shotton was once an industrial town of 14,000 steelworkers—now, arguably, just 400. However, I pay tribute to the great achievements in productivity at Port Talbot. Our aerospace industry is the world’s best, and much of it is in Wales. I have in mind Airbus at Broughton. Its 7,000-strong workforce is based on high-tech skills and it pumps more than £7 million weekly into the north-east Wales and Cheshire economies. Where aerospace in Wales is concerned, what workshare we have, we must keep. When BAE bailed out of Airbus and cashed its chips for its £4 billion and invested in north America, that was a wrong call. It left the British side of Airbus without a champion at the highest table. We are now effectively contractors, not partners. That was the consequence when BAE left. What workshare we have, we must keep.
It is good to have plans to invest in Wales’s railways. I want the Wrexham-Birkenhead line to be electrified. It would enhance economic activity along a Wirral-Deeside-Wrexham axis. I agree that there must be huge investment in south Wales in the railway system, but there must be investment in the north. The electrification of the Birkenhead to Wrexham line is long overdue and would provide a huge injection to economic activity in the north-east of Wales.
To face the economic challenges of the future, I want even more skills training and retraining in Wales. We should aim for even more quality apprenticeships. I hope that we can aim for more engineering jobs, particularly engineers, but we also need to give priority to those aspects of manufacturing that are described as high end.
Let us give a fair wind to enterprise zones. We made a great start in north-east Wales. We have a fine chairman, Askar Sheibani, who is making good progress. However, I should like to see that progress made throughout Wales. The enterprise zones can be a huge opportunity. Let our banks give more assistance to small and medium enterprises, and to entrepreneurs. Let them encourage and generously assist where they might. It is time that our banks helped SMEs. We need to give emphasis to a living wage; we do not have a good record in Wales for wage rates. A living wage should be a great priority. Advanced manufacturing centres should be established in our sub-regions. In the enterprise zone in Deeside, the chairman, Mr Sheibani, wants an advanced manufacturing centre with links to world-class universities. Such centres would benefit Wales greatly in the immensely competitive global situation in which we find ourselves. We should acknowledge and encourage our established blue-chip companies, and should not take them for granted. I would like to think that they might expand and that they will always be able to encourage and mentor industries alongside them.
If only we could have our Welsh Development Agency back. It was a great success and won manufacturing work for the people of Wales. When we put it down and dismembered it, we let able, experienced and successful managers to go to regions in England and elsewhere, and be competitors for the work that we never got after we put the agency down. I might be forgiven for some bias, because I legislated the agency into being. I pay tribute to the huge endeavours of the noble Lord, Lord Roberts of Conwy, for the people of Wales, but I remember that in debates in Grand Committee and elsewhere on the agency’s likely birth, he was at fault. He will allow me to tell him that.
North-east Wales is a case in point. We now have an enterprise zone. The FE colleges of Yale and Deeside will merge to form a 22,000-student force with a £64 million budget. We have the new university of Glyndwr and the mature university of Bangor available to us. I think that HE and further education can combine the expertise available from the centres of learning to mentor and nurture our small and medium enterprises. Lastly, the great industrial parks of Deeside and Wrexham can only benefit from their proximity to our universities.
Lord Carlile of Berriew
My Lords, it is a great pleasure to follow the noble Lord, Lord Aberdare. I agree with everything he said. He focused on Welsh universities, and I would like particularly to mention the work done by the University of Glamorgan. It is doing a remarkable job in converting the old skills of mature students into new skills for new industries. However, we are not seeing those new skills being put to work to best effect. I also congratulate my noble friend Lord German on obtaining this debate and on his lucid opening speech. I, too, look forward to the reply to the debate from my noble friend Lady Randerson, whose presence on the Front Bench and expertise about Wales adds to your Lordships' House. In both my noble friends Lord German and Lady Randerson we have two experts on Wales with great experience from the Welsh Assembly Government.
In your Lordships' House and, indeed, in the other place there is much knowledge and wisdom on the Welsh economy. I am not sure that it is always used to best effect in the formation of government policy. This includes my noble friend Lord Roberts of Conwy, who served as a Minister for many years and knows the interstices of Wales inside out. It includes the noble Lord, Lord Rowe-Beddoe, who was chairman of the Welsh Development Agency for a number of years, and it also includes the current Member of Parliament for my old constituency of Montgomeryshire, Glyn Davies, who served as chairman of the Development Board for Rural Wales for several years. It also includes the noble Lord, Lord Jones. I twice tried to unseat the noble Lord in what was then called East Flintshire. Even when my noble friend Lord Thomas of Gresford, as he now is, and I supported the suggestion that the Olympic Games should be brought to Wrexham, we failed dismally in our attempt to unseat the noble Lord, Lord Jones. It was a good idea for the day, while it lasted.
Lord Carlile of Berriew
I am grateful to the noble Lord.
We have heard in this debate so far about south Wales and north Wales and we are going to hear a little from me about mid-Wales, which should never be forgotten. I wish to remind your Lordships that industry, business and commerce in Wales are not merely about the M4 and A55 corridors. There is an enormous amount of Wales and a fine population in between.
Certainly in my time as Member of Parliament for Montgomeryshire, the Welsh Development Agency and the Development Board for Rural Wales provided much assistance to investment in Wales—especially the DBRW in rural Wales. Advanced factories were built and occupied. Perhaps they have had their time but they were a very good idea. Unfortunately, many of the businesses that occupied those factories and many of the businesses that took assistance from the WDA and the DBRW turned into small permanent businesses, not sizeable permanent businesses. As I see it, that is the failure of economic policy in Wales over the years. It has all been too small, too sporadic and too impermanent.
One major gap in Wales was eventually identified by John Redwood when he was Secretary of State for Wales. It is, I am sure, the only thing that I agree with him about or have ever agreed with him about—apart, possibly, from the idea that it was probably better if he did not try to sing the Welsh national anthem in Welsh. John Redwood identified—and my noble friend Lord Roberts of Conwy was a Minister at the time—the absence of a venture capital industry in Wales, and there remains no venture capital industry in Wales. Those of us who have had any dealings with sovereign wealth funds abroad or larger investment schemes know that Wales rarely features in the conversation because there is nothing specific about Wales as a place where venture capital can develop and be invested advantageously.
The banks in Wales are showing as much lack of imagination today as they showed five, 10, 15 or 20 years ago. They are fee-driven and risk-averse. I do not believe that the banks in Wales show the same attitude to new industry, particularly small and medium-sized enterprises, as they show in many parts of England. They are rarely proactive in presenting the availability of their funds to new industry in Wales. They should be following government policy and doing so but, unfortunately, they are not.
The venture capital industry has a great opportunity in Wales. Its biggest contribution would be the establishment of large new businesses, but in order for that to be achieved the Government need to introduce or establish something like venture capital champions who would be able to go out to the world outside and hunt down investment funds which are available both in the United Kingdom and abroad, thereby strengthening Wales as an investment point and making it one of the first places where companies should look if they have funds to invest.
For well over 10 years now I have been a non-executive director of one of the very few listed public companies in Wales, Wynnstay Group plc, which has operated successfully and steadily in a sector which remains unfashionable—the agriculture industry. We should not forget that there is a large agriculture industry in Wales. For every Rachel’s Organics there are potentially another 10 companies of a similar kind. In rural mid-Wales there are entrepreneurial farmers but, to be frank, there are not many of them, and few of those would claim to be entrepreneurial. However, given the encouragement of venture capitalists with imagination, we could build up a large dairy sector so that Wynnstay Group plc would be one of the smaller companies, not the biggest, in its sector in Wales.
I remind those who care to read this debate—it is very welcome to have a debate on Wales in your Lordships’ House without the inhibition of embarrassing the Assembly or embarrassing ourselves by trespassing on the Assembly—that there are many advantages to investment in Wales. It has a reliable workforce. In Wynnstay, the company to which I referred, the churn of employees, in statistical terms, is almost nil. Once a company is established in Wales, it becomes a family too. The noble Lord, Lord Jones, referred to the Shotton steelworks. I have friends in Wales whose families were in the Shotton steelworks for three generations, including the noble Lord, Lord Jones, and there may be families with a longer connection. We have a very reliable workforce with very little churn.
I think it is fair to say, without a cliche and without sounding sentimental, that people who go to work in Wales go there to work and, therefore, the productivity of Welsh industry is high and the workforce loyal. The typology of a Welsh company is stability. I cannot think of an investor who, when he or she decides to invest in building a new factory somewhere, is not looking first for stability, which we offer. That is not said often enough on our behalf. I support the Question in this debate, which urges the Welsh Assembly Government and the United Kingdom Government to go out and look for work in Wales on the basis of its undoubted virtues.