Financial Services Act 2021 (Prudential Regulation of Credit Institutions and Investment Firms) (Consequential Amendments and Miscellaneous Provisions) Regulations 2022

Debate between Lord Teverson and Lord Tunnicliffe

Tuesday 5th July 2022 Lords Chamber

[Lord Teverson (LD)]

We on these Benches thank the Minister for her excellent and long explanation of this. Otherwise, we have no comment on this SI.

[Lord Tunnicliffe (Lab)]

My Lords, I thank the Minister for introducing these regulations. They build on the Financial Services Act, which was generally not contentious legislation. Arguments took place about the transparency of rule-making by the regulators, but the introduction of the investment firms prudential regime and several other changes were seen as sensible steps forward.

One suspects that the forthcoming financial services and markets Bill will be slightly more controversial. Much media speculation about the forthcoming Bill suggests that it will simply deregulate, rather than regulate in a smarter way. Our departure from the EU undoubtedly presents opportunities for our world-leading financial services sector. However, we must not put the stability of the sector at risk in the pursuit of relatively marginal gains. Many of the protections put in place after the 2008 global crisis were sensible. Financial institutions have become accustomed to them. They provide confidence to customers. When we see the Bill, I hope that they will not have been swept away. That would expose the Government and the public to unnecessary risk.

Turning back to the regulations before us today, I am pleased to say that we are generally supportive. They contain largely technical amendments to ensure that IFPR, Basel III bail-in procedures and securitisation regulations operate more effectively in the UK context. We have played a leading role in developing many of these policy frameworks at the international level, whether as an EU member state prior to our exit or as a member of other organisations and committees.

Can the Minister comment on how the Treasury and regulators will be assessing and reporting on the impact of the various changes once they have taken full effect? What, if any, role will there be for Parliament, beyond the day-to-day work of Select Committees, for example, as these impacts become apparent? Can she also comment on the anticipated timescale for the implementation of Basel III.1? We expect consultation on the final part of the framework shortly, but can she confirm whether it is the intention to implement reforms alongside international partners? If that is the case, what would happen if another key jurisdiction, such as the European Union, were to postpone its implementation date?

I turn to other areas covered by the regulations. Can the Minister comment on what work is being undertaken to assess the impact of current bail-in procedures and thresholds on mid-tier and challenger firms? UK Finance has called for changes to the threshold for smaller banks, as well as a sliding scale depending on institutions’ total assets. Is the Treasury looking at these suggestions in partnership with the regulators? Might we see something on this topic in the forthcoming primary legislation?

Finally, this statutory instrument corrects a number of deficiencies in retained EU law that were not identified during earlier tidying-up exercises. There is a consistent theme across different policy areas: departments prioritised changes to the retained law that were day-one critical, setting aside less fundamental tweaks until appropriate vehicles became available. Should we expect further corrections to retained EU law in future SIs, or is the Treasury confident that all deficiencies have now been captured? Have there been any practical issues for either the regulators or the financial institutions as a result of the failure to correct deficiencies in a more timely manner? How do these amendments fit into the Minister for Government Efficiency’s drive to repeal vast swathes of retained EU law?

In this field, many instruments contain essential technical information. They were not, as is often stated, forced upon us; rather, they came out of processes led by UK Ministers. With that in mind, can the Minister confirm whether the Treasury has been given any targets to reduce the volume of its retained EU law by the Cabinet Office? If so, what will that process look like?

UK Infrastructure Bank Bill [HL]

Debate between Lord Teverson and Lord Tunnicliffe

Committee stage & Lords Hansard - Part 1
Tuesday 14th June 2022 Lords Chamber

[Lord Teverson (LD)]

My Lords, I will briefly speak to my Amendment 11, which is also around energy efficiency but focuses particularly on the built infra- structure in this country, which is what most of us are probably talking about. I have no objection to the broader definition, but I like the specific issue of built infrastructure. The noble Lord, Lord Deben, is absolutely right that big boys’ toys are always the focus; big nuclear is probably the ultimate example of that, although I am quite confident that it will never be built because of financial reasons, apart perhaps from Sizewell C in his back garden.

We have a bad track record in this area; it has not only been ignored but the green homes grant, which finished last year, was described by the Public Accounts Committee at the other end as a “slam dunk fail”. A great opportunity was unfortunately missed. Built infrastructure accounts for some 25% of our emissions nationally, so this is a really straightforward way to make a difference on climate change, which is one of the main objectives of the UK Infrastructure Bank. I reinforce the messages from other Members across the House. I also very much agreed with the noble Baroness, Lady Bennett, on some of the infrastructure, such as roads.

We really need to take advantage of the most cost-effective way of achieving decarbonisation of our economy, through energy efficiency and by taking on the challenge of the built infrastructure in this country, on which the UK Infrastructure Bank can be a major player. It is estimated that we will spend some £37 billion of public money over the coming years on the energy price crisis. That money will all go on standing still; instead, we need to invest money to make sure that those energy bills come down in future and that we decarbonise the economy through energy efficiency. This bank ought to be a major part of that target.

[Lord Tunnicliffe (Lab)]

My Lords, there is very little in this group that I can object to in principle. We debated the definition of infrastructure at Second Reading, with concerns expressed on all sides that items such as buildings or energy efficiency are not in the Bill. As we are doing this, I took to my own conscience and realised that we have not done the loft—the problem is all the stuff in it. Anyway, by subcontracting that a bit, we got it out.

The noble Baroness, Lady Bennett, raises an interesting point about mass transport in her Amendment 18, while the noble Lord, Lord Holmes, raised a variety of issues including air quality, social infrastructure, data and skills training. I said at Second Reading that it is vital we get the bank’s objectives and definitions of infrastructure correct from the start. That remains my view. The bank will not be effective if its mission statement is ambiguous. However, for that very reason, it is also important that the Bill does not simply become a long shopping list.

I hope the Minister can confirm that the current definitions include—even if not explicitly—many of the initiatives raised by noble Lords. It is inevitable that there will be a composite amendment on Report which once again seeks to embrace many of the important ideas we have discussed in this group. I also hope she will take a number of these suggestions away. It may be suitable for the Government to amend the Bill, but there may be other ways forward.

UK Infrastructure Bank Bill [HL]

Debate between Lord Teverson and Lord Tunnicliffe

Committee stage & Lords Hansard - Part 2
Tuesday 14th June 2022 Lords Chamber

[Lord Tunnicliffe (Lab)]

My Lords, I will briefly speak to my Amendment 32 before offering a brief response to the other amendments in this group. I have already raised the subject of jobs, and I am not convinced that the Government are giving this the weight that it deserves. As I mentioned previously, the strategic steer already offered to the bank makes only passing reference to the creation of jobs and no reference to what those roles should look like. There is a significant gap that needs to be closed, and the Treasury’s formal statement of the bank’s strategy priorities is the ideal means of doing that.

I am once again struck by the sensible nature of many of the suggestions made by other amendments in this group. The noble Lord, Lord Vaux, for example, has made a strong case for strengthening the status of the operating principles and for ensuring that any updates to those principles are subject to the affirmative procedure. The noble and learned Lord, Lord Thomas, put the whole thing succinctly by saying that the framework document needs to go into the Bill. I accept that it may not go in wholly, but its essence needs to go in. I commend to the Minister previously present, and to the Minister present now, that we must convey that to government. Let us not have an ugly scrap on Report but try to reach a consensus on this. If we do not get a consensus, those in the Chamber now will make a consensus of it and force it through.

The questions posed by the noble Baroness, Lady Bennett, are also interesting. The investments made by the bank will cut across different departments, and it therefore makes sense for there to be some role for those other bodies. I am not entirely convinced that we need a formal role for these other departments, but this could make governance matters more complicated than they need to be. However, I hope that one of the Ministers present—I cannot keep up—can clearly outline how the cross-cutting nature of the bank’s work will be recognised by the Treasury.

[Lord Teverson (LD)]

My Lords, I would gently challenge the noble Lord, Lord Tunnicliffe, on jobs. I have long experience in the far south-west—a deprived area that needs levelling up—of European funding, which always had jobs as its major output. The challenge is not normally jobs because, in the sort of areas that need levelling up, the jobs created by employers are normally low-grade jobs, so that is what you get. The real challenge, particularly on a levelling-up agenda in deprived areas, is actually careers, productivity and high-paid jobs. It is very easy to fill in a jobs return on jobs that are not very skilled or high grade, whereas we need to improve and raise the whole base level. I understand exactly what he is trying to get but I think it is a fundamental problem that we look at these issues in relation to grants, funding regimes, loans or other such systems. That is just a comment from my experience in Cornwall and the far south-west.

--- Later in debate ---

[Lord Tunnicliffe (Lab)]

My Lords, yet again, I have to concede that I agree with the noble Baroness, Lady Noakes, on Amendments 54 and 58. I will not labour that further.

The bank could, in time, play a significant role in our fight against climate change, and we very much hope that it will. Given the urgency of the green transition and the Government’s stated commitment to levelling up, carrying out the first review of the bank after 10 years makes no sense. I was pleased to sign Amendment 60, which would bring this forward to three years. However, let me be clear that, like a number of other noble Lords, I am not wedded to any particular number. The noble Baroness, Lady Noakes, may win the day with four years, or we may settle for something else entirely. What has been clear from this short debate is that the current decade is simply not acceptable. There are also some differences of opinion on frequency. Once again, I do not think it matters exactly where it ends up, if, in the end, the result is that we see these documents more frequently than currently envisaged.

[Lord Teverson (LD)]

Could I just ask the Minister one thing before she replies? Ten years is just ridiculous, so is this the one thing where the Government will say, “Right, we’ve listened to the House and we’ll make it three years. Look, guys, we’ve done the deal”, and then the Bill goes down to the other end? Is that the plot?

[Lord Tunnicliffe (Lab)]

That is what my original notes envisaged, but I simply could not believe that they are that clever.