United Kingdom Internal Market Bill

Debate between Lord Newby and Lord Archbishop of Canterbury

Committee stage & Committee: 5th sitting (Hansard) & Committee: 5th sitting (Hansard): House of Lords
Monday 9th November 2020 Lords Chamber

[Lord Newby (LD)]

My Lords, it is a great pleasure to follow the noble Lord, Lord Howard, and to agree with him—not inevitable, in my case. As he said, this has absolutely nothing to do with whether you think being a member of the European Union, or not, is a good or bad thing.

This afternoon, your Lordships are being invited by the signatories of the clause stand part Motion, including myself, to strike down the whole of Part 5 of the Bill. Although this is inevitably a contentious matter, there are a number of points on which I think there is no serious disagreement. First, there is no serious disagreement that the Bill as drafted provides for the UK to break international law. Ministers have admitted it, and legal opinion—as voiced so eloquently by the noble and learned Lord, Lord Judge, a moment ago—is firmly of that view. Secondly, there is no question but that your Lordships’ House is completely within its constitutional right to delete Part 5 if it thinks fit. If we cannot take a view on a matter of deliberate law-breaking by the Government, we may as well pack up our bags now.

The key remaining question, which we have to decide today before deciding how to vote, is this: is the breach of the law contained in the Bill justified by the circumstances? It is not impossible to think of theoretical scenarios in which, as a country, we might decide to repudiate an international treaty. But is that the case here? In making the case for the Bill, the noble Lord, Lord True, at Second Reading and the Environment Secretary this morning in the media, made two linked, but central, arguments: first, that the clauses are necessary because Northern Ireland must retain unfettered access to the rest of the UK internal market; and secondly, that there was, in the words of the noble Lord, Lord True,

“a balance to be struck”

between maintaining the

“rule of law … and the integrity of this union”.—[Official Report, 20/10/20; col. 1430.]

To this George Eustice added this morning that Part 5 was necessary for “protecting peace and stability” in Northern Ireland. Both arguments are fatally flawed.

First, the concept of unfettered access under the terms of the withdrawal agreement, whether or not there is a deal with the EU, is a complete mirage. Once the Government accepted that there could be no customs border on the island of Ireland, there had to be one down the Irish Sea. Such a border fetters access, even if there is free trade across it, because there have to be checks, in respect of VAT and excise duty, to prevent smuggling and fraud, and there have to be sanitary and phytosanitary checks as well. These checks cost traders time and money, and for many they can make the difference between trading at a profit and trading at a loss, and therefore whether they trade with Great Britain at all.

The Government accept the need for these checks—these fetters. Clause 43(2) of this Bill provides for them, even if it invokes the other illegal provisions of the Bill for VAT, customs, and reasons of biosecurity. The National Audit Office spelled out the problem last week in its report The UK Border: Preparedness for the End of the Transition Period, where it stated that implementing the Northern Ireland Protocol was a “very high risk” because of, among other things,

“the scale of the changes required … and the complexity of the arrangements.”

In other words, the problem of the fetters.

Earlier in the year, the Government made £355 million available to traders in Northern Ireland to mitigate their costs in continuing to trade with Great Britain. Now £355 million is a tidy sum—not to eliminate the fetters but to try to ensure that they chafe less keenly. So let us not hear any more talk of unfettered trade—there will be none.

The Government’s other justification for Part 5 is that if it were not in the Bill, the integrity of the union would be threatened, and peace and security in Northern Ireland would be put at risk. If this were the case, the Government might have a respectable argument. But, as we have heard in many speeches at Second Reading and in Committee, and in the very eloquent comments of the noble and right reverend Lord, Lord Eames, it is the Bill that threatens peace, prosperity, security and stability, not the other way around.

We have heard from many speakers how Part 5, by breaching the Northern Ireland protocol and reimposing elements of a hard border in Northern Ireland, almost inevitably puts some of the key principles of the Northern Ireland agreement under threat—a view, incidentally, that appears to be shared by President-elect Biden. If these fears were realised, does anybody seriously believe that they would not strengthen demands for a border poll in Ireland? And does anybody seriously argue that Part 5 could in any circumstances strengthen the union with Scotland, where the Government and public opinion are as appalled as most Members of your Lordships’ House at the prospect of being part of a country that is willing to flout international law?

So, far from supporting the integrity of the union, Part 5 weakens it, and in doing so fatally undermines the Government’s argument in favour of these illegal clauses. They do not provide unfettered trade; they do not strengthen the union. They were a political manoeuvre by the UK Government to try to put pressure on the EU. They failed to do this, they reduced the UK’s standing as an upholder of international law for no substantive reason whatever, and they simply must be removed.

[The Archbishop of Canterbury [V]]

My Lords, I will speak to Amendment 161, to which I have added my name, alongside the noble and right reverend Lord, Lord Eames, the noble Lord, Lord Hain, and the noble Baroness, Lady Ritchie of Downpatrick. The previous speeches have all been both moving and deeply eloquent, and I shall therefore be very brief.

As the noble and right reverend Lord, Lord Eames, so powerfully explained, the purpose of our amendment is simply to put on the record a concern that this Bill in its current form fails to take into account the sensitivities and complexities of Northern Ireland, and could have unintended and serious consequences for peace and reconciliation. The noble and right reverend Lord spent 20 years as Archbishop of Armagh, between 1986 and 2006, and the force of his words was most remarkable. He has experience of everything from the funerals in small churchyards of those caught up in the Troubles through to negotiations behind the scenes for the Belfast agreement. He speaks with the integrity and authority that those 20 years have earned him, and I trust that the House will listen carefully.

One thing must remain certain in a time of turmoil and uncertainty, and it is the inestimable value of peace. The process of peace and reconciliation in Northern Ireland did not end with the Belfast agreement, as the noble and right reverend Lord, Lord Eames, said. It remains an ongoing process that requires work, and awareness from leaders that almost every decision taken and word spoken in relation to Northern Ireland will have an impact. This Bill must show that it is sensitive to these circumstances.

I will conclude by saying something about the amendments in the names of the noble and learned Lord, Lord Judge, and others, including my right reverend friend the Bishop of Leeds. I will not add much, as the words of the noble Lord, Lord Howard of Lympne, were absolutely convincing and extremely clear. I also associate myself with his important tribute to Lord Sacks, whom we will miss terribly in this House.

Financial Services (Banking Reform) Bill

Debate between Lord Newby and Lord Archbishop of Canterbury

Wednesday 27th November 2013 Lords Chamber

[The Archbishop of Canterbury]

My Lords, I add my support to what the noble Lord, Lord Eatwell, said in specifying these particular contracts, not only for their tax avoidance capacity but because participation in them within the trading community leads to obvious conflicts of interest between their main work during the day, for their employer, and any potential gains or losses they have through the spread betting operations which they are capable of undertaking. In other words, it is very much a cultural problem and it is specifically to do with contracts that are considered to come under the purview of the gaming Acts. That is how I understood this amendment to apply, rather than more generally. From my point of view, I am not certain that it needs to be in the Bill, but it would certainly be useful if the Government were to say that the scope and impact of this should be looked at.

[Lord Newby]

My Lords, the purpose of the amendment is to require the Treasury to undertake a review of the consequences of exempting certain gaming contracts from the rule that used to provide that no gaming contract or wager could be enforced in a court of law. Such a review would consider the national, commercial and economic effects, in addition to the social, cultural and ethical effects, proposed in the equivalent amendment in Committee. I understand my noble friend’s desire to know more about the consequences of what appears to have been an extensive gambling culture in the City of London, which flourished in the derivative markets that expanded significantly following the gaming contracts rule change but was not limited to those markets.

The financial crisis exposed serious problems in derivative markets—particularly, as the most reverend Primate pointed out during our last debate on the equivalent amendment, in OTC activities. Clearly, the proliferation of such activities and the lack of adequate regulation showed up a need for change.

Following extensive international regulatory debate, a set of significant international reforms was agreed by the G20 to address these concerns. It may be helpful if I provide noble Lords with a short update on what they are. They include measures to ensure transparency by requiring all OTC derivatives transactions to be reported to trade repositories, and the requirement for all standardised derivatives to be centrally cleared and, where appropriate, traded on electronic platforms. These reforms are now being implemented in the UK and should go some way towards limiting the risks associated with these instruments.

So far as the wider effects of gaming in the City are concerned, the PCBS undertook an extensive and wide-ranging examination of the professional standards and culture of the UK banking sector. Its final report made a number of findings on the existing standards and culture in the banking sector, and recommendations as to what might be done to improve the position. We are seeking to give effect to those recommendations in this Bill. As the noble Lord will be aware, we will have a debate on the broader cultural aspects of the PCBS’s report next week.

In the circumstances, I am not sure that a formal Treasury review, as proposed by the noble Lord, is the best way forward. In Committee, I suggested to him that a more appropriate way forward to address his concerns might be for him and, possibly, other Members of your Lordships’ House to work with a think tank that specialises in financial services to undertake such a review. The precedent I had in mind was the review of the banking sector undertaken in the previous Parliament. The Future of Banking Commission was chaired by David Davis MP and included not only my colleague Vince Cable but the noble Lord, Lord McFall. That report had a major impact at the time in influencing the consideration of how we should be looking at the banking sector. The advantage of such a structure over a formal Treasury structure is that it enables a wide range of individuals, including serving politicians, to sit on it. That is much more likely to happen if it is done under the aegis of that sort of think tank than if it is initiated by the Treasury. As a result, when the report came out, it commanded a broad degree of public respect.

I take the point made by the noble Lord, Lord Eatwell, and the most reverend Primate the Archbishop of Canterbury about the specific consequences of potential tax avoidance or evasion by people involved in this sector. I undertake to discuss that with my colleagues in the Treasury in the context of measures that might be brought forward in a future finance Bill. I agree that at first sight it appears to be a loophole that we should have a look at. As noble Lords know, the Government have devoted considerable resource and attention to these issues. I am sure my colleagues in the Treasury will be happy to have a look at the issue.

With those suggestions, I hope my noble friend will feel able to withdraw his amendment.

Financial Services (Banking Reform) Bill

Debate between Lord Newby and Lord Archbishop of Canterbury

Tuesday 26th November 2013 Lords Chamber

[The Archbishop of Canterbury]

I have already spoken to the amendment standing in my name. The members of the commission are delighted that the Government are broadly finding agreement with their recommendations, and on all the areas on which the Minister spoke we hope and expect that the government amendments at Third Reading will reflect closely the assurances that we have been given. To ensure that we get this right, we re-emphasise the need to see the amendments as early as possible and reserve the possibility, if we are not content and feel that they do not reflect what has been said, of returning to them at Third Reading. If I have those assurances, I will be happy to withdraw the amendment. I beg to move.

[Lord Newby]

You have those assurances.

[The Archbishop of Canterbury]

I beg leave to withdraw the amendment.

Financial Services (Banking Reform) Bill

Debate between Lord Newby and Lord Archbishop of Canterbury

Tuesday 15th October 2013 Lords Chamber

[Lord Newby]

My Lords, I would not want the noble Lord to think that the Government were being complacent at all about this issue. In particular, I would not want him to think that we were being complacent about the issue of culture. Of necessity, today we have been talking about legislative change but, as we said at an earlier stage, and as the most reverend Primate reminded us at an earlier stage in this debate, the whole question of culture is as important as legislation.

What constitutes culture is a broad, almost philosophical question, but one key thing that is already evident is that some of the more senior managers of some of the bigger banks have recognised that, if we are to get the kind of banking system that the population as a whole is looking for, they need to change their ways. The chief executive of Barclays set out his stall when he was appointed. The way in which he has sought to instil a new culture through the organisation is very impressive. But one challenge that he has, no doubt—we see this not just in the banks but across the world, whenever there is any big change in the way things happen—is how to get a cultural change trickling down the organisation. It is not just a matter of the chief executive, for whom making a statement about culture is relatively straightforward, making that statement; that is happening, to a very acceptable degree. But how can we ensure that the culture that we require of everybody in the banks changes?

One way in which that is going to happen is, one hopes, through the new statement of principles of banking practice that we discussed earlier. If everybody knows when they go into a bank that they are expected to behave in a different way than possibly they thought in the past and they know that, unless they follow a whole series of principles there on a piece of paper, they are liable for disciplinary procedure, they are likely to behave in a more acceptable manner. I am sure that that would be welcome across the country.

The other big thing that we believe can help in terms of culture is the promotion of the mutuals sector that we were talking about earlier. The Nationwide Building Society has always been at the top of the list for customer satisfaction levels, and that shows no sign of diminishing. To the extent that the building society movement continues to grow, so will the culture improve across the system as a whole.

I realise that I have strayed slightly from where the noble Lord started out in terms of derivatives contracts. But for most of the population, it is at the retail end that culture affects them.

[The Archbishop of Canterbury]

My Lords, I am slightly surprised that the Minister should be resistant to what seems to me a very reasonable amendment. One of the dangers that we have faced in the markets over many years is that of parallel markets. The derivatives markets are, as we know, opaque, as has already been remarked on, and we examined them in some detail in the banking standards commission. The computer-driven markets are also very opaque. We examined those markets and remarked that they would constitute the next great crash. When you have these gambling markets on the side that no one quite understands or knows who is participating in them, and which often take place offshore, it seems to me that at the very least there are grounds to hold an inquiry into the effect they are having on market prices through their impact on the shadow market—we should also examine the psychology of the dealers—and on those involved directly in the more regulated market.

One of the great lessons learnt from the events of 2008 was the ineffectiveness of the clearing system for over-the-counter derivatives, which there was no means of settling. That has been one of the major problems for the liquidators of Lehmans. The gambling markets have much the same problem. We are setting up mechanisms—they are being set up internationally—to deal with the settlement of derivatives contracts, but nothing is being done in this parallel market. The noble Lord, Lord Phillips, has made a very useful point, albeit that the hour is late and it is almost 10.40 pm, which may enable this issue to become slightly clearer in terms of understanding what can be done.

[Lord Phillips of Sudbury]

My Lords, I am grateful to the most reverend Primate and to the noble Lord, Lord McFall. However, I am not so grateful to my noble friend the Minister, as I thought that he rather missed the point. The fact that Tom, Dick and Harry can go down to the betting shop or the local casino, run up a debt and be sued for it has nothing whatever to do with the amendment that I propose tonight. As noble Lords have commented, and as is obvious, we are dealing here with huge sums of our money which are gambled, often to the excessive benefit of the gamblers. We do not know how they function and have not looked carefully and closely, as we should, at the impact of this. I refer not so much to the economic impact, although it may be found that the destabilising effects of this market are greater than we realise, but to the ethical, cultural and social effects. For the life of me, I cannot see why a liberal-minded Government should want to staunch such an investigation. I see no downside to it; it would not be expensive and would be simple to operate. It would all be within the purview of the Treasury and it might yield some surprising and valuable results. I therefore hope that the Minister will give this a little further thought, as I am very inclined to bring this back on Report.