Crown Estate Bill [HL]

Lord Thomas of Cwmgiedd Excerpts

Report stage
Tuesday 5th November 2024 Lords Chamber

Today I ask the Minister a question of principle. Now that we have two Labour Governments—one in Cardiff and one in London—which one is responsible for making decisions about the use of Wales’s natural resources, especially with such a strong statement having been made in the Welsh Government’s programme for government? Does he believe that it should be the UK Government or the Welsh Government who make the decisions about Wales’s natural resources? Does he believe that it is fair that Scotland has vastly greater powers than Wales in this area? I ask the House to show support for Wales today and support the devolution of the Crown Estate to Wales by backing this amendment.

[Lord Thomas of Cwmgiedd (CB)]

My Lords, I will speak briefly because so much has been said already, particularly by the noble Lord, Lord Murphy of Torfaen, about the structure of the two amendments before us.

I thank the noble Lord, Lord Hain, in his absence, and the Minister for making a step forward; it may be small, but it is a step. It is an important recognition for the people of Wales that Wales is different. It is interesting that, in the last debate, we talked almost exclusively about English salmon and its difference from salmon in Scotland—no one seemed to mention Wales at all. It reminded me of the Encyclopaedia Britannica entry for “Wales”: “See England”. Part of the debate we had earlier exemplified that. Wales needs to be recognised as being different; it is a proud and long-established nation with its own resources, people and interests. I welcome what the Minister has done, along with the noble Lord, Lord Hain, and I am grateful to him.

I will make two further comments before turning to Amendment 6. It is very important that the commissioner is not seen to be a patsy. He or she must be able to stand up for Wales. My experience has been that, when people have been appointed to represent and give advice about Wales, they can make a very powerful difference—we see this in many committees and bodies across the UK—but they have to be visible. The people of Wales will expect two things. First, the advice must be transparent: what are they saying about the advice they are giving about Welsh resources? Secondly, when looking retrospectively at the advice given, they must say what the benefit to Wales has been. I do not see how you can give advice without explaining the benefit. Therefore, I hope that there will be full transparency in the Crown Estate commissioner’s report.

That is why this amendment may be much more important than is appreciated. It inserts the opener into the can by beginning to explain how Wales will be treated in the new way in which the Crown Estate commissioners will work, recognising Wales and Northern Ireland as having different and separate interests. I am deeply grateful to the Minister. He told us last week that Wales will look forward to benefits from the Budget, but I did not expect this benefit.

I support Amendment 6, because that is where we are going. As the noble Lord, Lord Murphy, said, it is what the people of Wales want. I can see the possible argument that maybe now is not the right time—but when is ever the right time?

Wales is a poor country, much poorer than England; you only have to spend time in Wales and in London to appreciate the huge disparity of wealth. In the 19th century, Wales had a natural resource that never benefited it properly by long-term investment. The same must not happen again. So I support Amendment 6 but I am extremely grateful to the Minister for Amendment 11.

Crown Estate Bill [HL]

Lord Thomas of Cwmgiedd Excerpts

Committee stage
Monday 14th October 2024 Lords Chamber

Whatever the composition of our new Senedd, I hope that the increase in Members will mean a return to the surefootedness of earlier years, when the National Assembly, as it was then, dealt efficiently and competently with EU objective 1 funding. Our enlarged new Senedd will have the confidence to carry out an increased number of functions, including the devolved Welsh functions of the Crown Estate commissioners. Many of us will continue to press for the devolution of further powers to Welsh Ministers, including the devolution of justice. Over 25 years we were told that devolution is a process, not an event. I hope those words come to fruition.

[Lord Thomas of Cwmgiedd (CB)]

My Lords, I rise briefly to support the amendments in the names of the noble Lord, Lord Wigley, and the noble Baroness, Lady Smith Llanfaes, respectively. I do so, following what has been said by a number of others on some detailed points, because there is an important constitutional issue and an interesting constitutional test for this Government.

It seems clear to me that in our union, it is accepted as things stand that the Crown Estate is not a union function. That is shown by the fact that it has been devolved to Scotland and therefore is quite unlike monetary policy, defence or other matters that are union functions. I see the powerful argument, advanced by the noble Lord, Lord Macpherson, that our constitution should be slightly different—that this should be seen as an energy issue and reserved to the central Government—but this is not the current position and we must address things as they are. Therefore, it is very clear that when the Government look at this question, they must do so from the point of the constitution. This is a power capable of devolution and the question therefore arises, if it can be devolved to Scotland, why is it not devolved to Wales?

It is also important that we stand at a turning point in devolution. I had hoped, and still hope, that the advent of this new Government means that we think for the first time in a long time about the structure of our union—that we look on it as something that should be based on principle and good co-operation between the nations. The latter is extremely important in this policy area, bearing in mind the current constitutional structure. I keep on using the word “constitutional” because we sometimes forget that what is critical to our country is good governance based on a sound constitution.

It is said by the Scottish authority that runs the Crown Estate that they

“invest in property, natural resources and people to generate lasting value for Scotland”.

Why cannot that be given to Wales? It has been said in the past that the Welsh are not up to it, or that London knows better. I am delighted that those arguments are not being run, and I hope they are consigned to the dustbin of history. However, the Minister said the following on Second Reading:

“devolving … would significantly risk fragmenting the energy market, undermining international investor confidence and delaying the progress towards net zero by … 10 to 20 years, to the detriment of the whole nation”.—[Official Report, 2/9/24; col. 1021.]

That is similar to what the noble Lord, Lord Hain, quoted in relation to the position of the last Government. So much, possibly, for new thinking.

It is important to analyse those phrases; there is no evidence to support any of them. I hope it is not unkind to say that the use of the phrase “undermining investor confidence” is often the resort of a politician in distress. Even if there was anything in any of these points, their argument does not touch on the issue of principle: that the management of the Crown property in Wales, historically acquired by the English Crown from the Welsh people, should be for the people of Wales and the money obtained should be transparently accounted for as a distinct amount and used for their benefit, in a way decided by the Government of Wales.

Those are two key points of the devolution of the Crown Estate: management and money. If it is good enough for the Scots, why is it not right for the Welsh? It will be interesting to see how the Minister argues that specific point of constitutional principle.

The Minister knows, from his own considerable experience, that it is of course possible to run things in co-operation. What is promised by this new Government is a new approach to the union: co-operation between the Governments in Edinburgh, Cardiff, Belfast and London. If there are benefits from matters such as gearing up together to deal with the energy market then that is possible through joint ventures or other arrangements, but it in no way detracts, it seems to me, from the issues of principle—that the management of property in Wales should be for the Welsh Government and the money should go back to Wales.

In relation to that, as someone who comes from the industrial area of Wales, I know it is important to recall what happened in the last century and the century before last. Wales possessed enormous mineral wealth that drove the supplies of energy which powered our industrial revolution. Let us hope that now that there are alternative means of generating the power that is driving our present economy, the people of Wales will not be short-changed as they have been in the past.

[Baroness Ritchie of Downpatrick (Lab)]

My Lords, as a follow-on to what the noble and learned Lord, Lord Thomas, said in relation to Wales, if the Crown Estate is devolved to Scotland, why should it not be devolved to Northern Ireland? The Crown Estate plays a critical role in the stewardship of our seas and terrestrial environment. As well as large landholdings, the estate manages the seabed around England, Wales and Northern Ireland, along with 50% of our coastline, and it will support the tripling of the electricity sector’s capacity, with the deployment of 125 gigawatts of offshore wind by 2050.

During Second Reading, I pointed out that, in the Northern Ireland context, the electricity industry is managed on an all-island basis, north-south, through the all-Ireland electricity market. I received a very helpful response from the Minister, my noble friend Lord Livermore, in relation to this issue. Could he give some thought to the devolution of the Crown Estate to Northern Ireland, in the context of the electricity market and how the electricity supply is managed? Can he say whether there will be a connection and co-operation with the Irish Government on the Great British energy market and the all-Ireland energy market and the Irish Sea?

Financial Services and Markets Bill

Lord Thomas of Cwmgiedd Excerpts

Report stage
Tuesday 6th June 2023 Lords Chamber

[Lord Thomas of Cwmgiedd (CB)]

My Lords, I had the privilege of adding my name to this amendment because it seems to me, as has just been said, that this is such an important Bill for our nations. It also has this distinguishing feature. Regulation of financial services and matters of this kind is extremely complicated; it is very easy to get them wrong. Why do the Government not feel that they need the expertise of this House, which was so evident during the Grand Committee hearing on aspects of financial services? That completely defeats my understanding of the way in which we should have good government.

[Baroness Altmann (Con)]

My Lords, I add my support to the amendment so excellently moved by the noble Lord, Lord Sharkey, and I thank my noble friends Lord Hamilton and Lord Naseby, who have spoken about the dangers that are entailed if we do not introduce measures such as this amendment into the Bill. There is a risk of executive power-grab. I am not at all saying that that is the intention, but the possibility of that would be opened and surely, as we have just argued in the previous legislative discussion, it is so important that we ensure that Parliament has control, not a few Ministers. That is what I hoped we were going to do when we were revising the laws that had been adopted from the EU.

Financial Services and Markets Bill

Lord Thomas of Cwmgiedd Excerpts

Committee stage
Thursday 23rd March 2023 Grand Committee

[Lord Thomas of Cwmgiedd (CB)]

My Lords, I too support these amendments. I cannot usefully add anything in relation to the super-affirmative procedure. It seems that this an admirable proposal—but I want to say a few words about the proposed new subsection in Amendment 241G, introduced by the noble Lord, Lord Sharkey.

To begin with, it seems that, if Parliament authorises the alteration, as Parliament can do anything—as one is taught from one’s earliest days—it must be able to do something as minor, in theory, as this. Furthermore, as she always does, the noble Baroness, Lady Noakes, made a very good point that this is a very important step, but why is this not the Bill to start? There are three reasons. First, the financial services industry is of vital concern to the UK. Secondly, these instruments are drafted not by parliamentary counsel but by no doubt very competent lawyers in the Treasury—but there is a difference. Thirdly, it seems that, if the draftsman knows that bits can be corrected, that is a very good supervision of the drafting process.

However, although this is in theory a minor step, it is surprising to say that Parliament can amend statutory instruments and there are obviously consequences for our procedures. It might be appropriate for this Committee or someone—I am not sure how it is done—to say, “The appropriate committees and the clerkly authorities in this House should report on the practicality of doing this”. If it is a procedure, how likely is it to be used? More importantly, we can always find an excuse to say, “Let’s push it down the road”. This is the admirable place to start an important reform for our most important industry.

[Lord Tunnicliffe (Lab)]

My Lords, I do not formally have a view on these amendments. It seems that they would have wide-ranging implications, and I shall consult with colleagues throughout Parliament about how we should come back to this issue. If a piece of legislation is proposed and supported by the noble Lord, Lord Sharkey, the noble Baroness, Lady Noakes, and the noble Viscount, Lord Trenchard, you have to think that it is pretty wide-ranging—in fact, close to impossible. Whether this is the right place to address this issue is a much bigger question than whether it is a good idea. It seems a pretty good idea, but I shall listen to the Minister’s response to the key point about the right place and the right mechanism.

Financial Services and Markets Bill

Lord Thomas of Cwmgiedd Excerpts

Committee stage
Monday 20th February 2023 Grand Committee

I should add that I support the amendments proposed by my noble friends Lord Lilley and Lord Forsyth because I think it is important to have external legal scrutiny of what is going on. My proposal aims for greater consistency with and predictability under the law before the rules become operative; as the CRA indicates, this would not cause undue delay to rules becoming operative. The aim is to avoid the potential for poor rules—that is, rules that lack transparency and predictability or are inconsistent with the law—being applied before that happens so that all concerned, including Parliament, those in the sector and the regulators themselves, can avoid the obstacles and consequences of operating in the dark.

[Lord Thomas of Cwmgiedd (CB)]

My Lords, I will make three brief points in support of this amendment.

First, from a constitutional perspective, it is essential that the accountability is to Parliament. It is subdelegated from us. It seems inconceivable to me that any legislative body should give power to a body that is not accountable to it. That is the first constitutional point.

Secondly, it seems to me that the Treasury is not the right body to do this job—partly for the reason I have given and partly because some of the objectives that are already in the Bill span areas way beyond the Treasury’s competence. One can certainly see on climate change, for example, a real worry that, if the Treasury is left in charge, there will be all kinds of considerations—short-term, mainly; certainly not long-term—that will not be able to examine precisely whether the regulators are doing what they should be doing.

Thirdly, we cannot ignore the vast pace of change. It is difficult to stand back and appreciate that many of the things we have developed over the centuries are having to be changed within a few years. The financial markets is one area where change is enormous, such as in dematerialisation and the use of digital assets. This morning we debated electronic trading documents in this Room. Therefore, we need such a body. I am afraid that whoever joins this committee will find it very hard work but that is no excuse not to set it up, because it must be absolutely on top of things and gingering the regulators. I hope the regulators will come to see that this is good. We cannot have delay and, without a special committee to do it, that is what will happen.

[Lord Bridges of Headley (Con)]

My Lords, I will make a couple of points quickly. In so doing, I once again declare my interests as an adviser to and shareholder in Santander and, more appositely, as current chairman of the Economic Affairs Committee.

I want to pick up on the noble and learned Lord’s excellent points. If I may be very frank, I was disappointed that in the Minister’s response to the previous group he consistently referred to accountability to the Treasury. We are talking here about accountability to Parliament. This is what matters; it is what concerns so many noble Lords who take a great interest in this debate. There is just nowhere near enough of that in the Bill. I am very disappointed by the tone and approach that the Government seem to be taking, so far, to what I see as a highly constructive set of amendments, especially my noble friend Lady Noakes’s amendment, which I entirely support. I have two brief points to make about the committee structures of this House and of the other place.

As we have seen and are already seeing, the remit of committees here and in the other place is not set up to handle and scrutinise the avalanche of regulation coming out from all the regulators. It is nowhere near adequate to handle the consultations, let alone everything else. They do not have the resources either. It is imperative that the Bill is amended to reflect this. I very much hope that when my noble friend responds she will give this amendment some warm words of support, go away and think of ways in which she might support it. I will be speaking again in support of my noble friend’s other amendments.

Financial Services and Markets Bill

Lord Thomas of Cwmgiedd Excerpts

Committee stage
Monday 6th February 2023 Grand Committee

[Lord Flight (Con)]

My Lords, might there be a case for the regulators to play a more active role in addressing fraud?

[Lord Thomas of Cwmgiedd (CB)]

My Lords, I want to make just four points on fraud, which damages the markets so greatly and damages individuals. The amendments reflect the four points. First, we need a strategy. I do not see how we can go forward any longer without one. I have two comments on strategy. First, the bodies to be consulted should include lawyers and accountants, not because there might be a bent lawyer or bent accountant in the fraud but because often it is their failure to see a flaw in the system that has caused the fraud. Therefore, they need to be part of those consulted. Secondly, five years is a long time for a new strategy. We need some form of accountability for the performance of the strategy in the meantime.

My second point is the object, the principle or the duty—however you put it—of the regulators looking into fraud. This seems critical, and there are two primary reasons for this. First, there is the prevention of fraud. I have too often been told after a fraud has come to knowledge and things are being done about it by those in the market, “Oh, the return was too good to be true. Him? We would not have touched him with a bargepole.” Regulators ought to be able to pick that up, and the duty on them ought to emphasise that responsibility.

Secondly, if fraud occurs—and it is bound to—the expertise of the regulators is needed to guide the way in which prosecutions take place. These days, because virtually everything is documented, you cannot move money. In the old days you could take a suitcase of cash somewhere, but you cannot do that any more. You need someone who can interpret what is usually the defence, “Yes, I did this but I wasn’t dishonest”. The skill and expertise of those in the market who can point to and make clear why it was so obviously dishonest are critical.

Thirdly, dealing with fraud is expensive. If you are accused of fraud, you have nothing to lose by spending all you have in defending yourself. If you fail, that was the end anyway, so you might as well have tried to save your money. If you are successful, you generally get most of it back. In a sense, there is an imbalance. Therefore, I warmly support the amendment saying that the Treasury should hand over the cash. There is no conflict of interest there, because the decision on the level of fine is made by the court. That is a good idea.

Fourthly and finally, the idea of criminalisation is essential. It is often nice to be able to pay tribute to the wisdom of His Majesty’s Treasury. One of the most effective tools in its armoury in relation to sanctions has been criminalisation, because that is what frightens people. Therefore, criminalising the failure to act would be a welcome step, and is something that I hope His Majesty’s Treasury, with all its wisdom, will see the force of.

[Lord Naseby (Con)]

My Lords, I support Amendments 67 and 75—obviously, as I added my name. I will speak only to Amendment 67. I have spent nearly 50 years in Parliament, legislating on issues that needed urgent attention. I cannot think of any issue more important in monetary affairs, now or in previous years, than the one before us in this group of amendments.

In particular, I am very grateful to the UK Finance Annual Fraud Report, which highlights in some detail what is happening. Indeed, one of the paragraphs at the end says that the Bill before us, which the Government proposed, will legislate to deal with it. Look at the figures and the sheer scale of it:

“Most notable is the rise in impersonation scams and in authorised push payment (APP) fraud overall. In 2021 communications regulator Ofcom found that eight out of ten people that were surveyed had been targeted with scam texts or phone calls, intended to convince them that they were from trusted organisations such as banks, the NHS or government departments.”


The report goes on to say:

“The majority of APP fraud starts with some type of social engineering. As well as scam texts, phone calls and emails, more and more of us are paying for goods and services remotely”,


which opens the door to the fraudsters.

I will say no more other than this. My friend the noble Baroness, Lady Bowles—I greatly respect the work she does in this area—has produced a very simple amendment, but it is very powerful and clear and I highly recommend it to His Majesty’s Government.

Financial Services and Markets Bill

Lord Thomas of Cwmgiedd Excerpts

Committee stage
Wednesday 1st February 2023 Grand Committee

[Lord Holmes of Richmond (Con)]

My Lords, I rise to speak to Amendment 74 in my name, but before I do so, I give my wholehearted support to the amendments in the name of my noble friend Lord Lilley and those in the name of my noble friend Lady Noakes, particularly Amendment 72, which is excellent.

My Amendment 74 can be summed up in one word: proportionality—simply that—no more, no less. Disproportionality does not reduce risk or increase consumer protection, and it certainly has nothing to say about optimising the resources of any organisation. Amendment 74 seeks to simply insert the proportionality concept, as does Amendment 72 in a broader sense—rightly. I hope my noble friend the Minister will respond positively when she comes to sum up.

[Lord Thomas of Cwmgiedd (CB)]

My Lords, I will make three brief observations. First, in this context, we are looking at the mandate that we are giving the regulator. One obviously could look at rules by some ex ante supervision, but that is not how this will work. Leaving it all to accountability after the horse has bolted is not the right way to proceed. It is very important that we give attention to the scope of the mandate.

Secondly, there is an obvious illustration as to the scope of the mandate in the proposal from the noble Baroness, Lady Noakes: proportionality. I would be astounded if anyone disagreed with that proposition, because only a fool would argue that you should make disproportionate legislation.

It seems to me that, in looking at this, we ought to know how the people given the mandate by Parliament intend to operate. Do they intend to produce consistent and predictable rules? I would imagine that they do intend to. They may agree with many of these objectives, but it is very important for the Committee to know the Government’s view of the form of regulation—the mandate—before we decide on what should happen. We also need to know how they are going to do it, because you always ask your agent how they will do something. If we were informed, there might be much less dispute.

[Baroness Bowles of Berkhamsted (LD)]

My Lords, I have Amendment 70 in this group, which was also referenced by the noble Baroness, Lady Noakes, who supported and signed it. It would insert a regulatory principle of efficiency that the PRA and FCA must ensure that their supervisory and approval interactions are efficient from the perspective of the regulated entities and in comparison with regulators in comparable countries. Clearly, it overlaps with some of the issues that we have already discussed, but it gets to the heart of the matter as to how and for whom the regulators are thinking, and whether they recognise what their impact is.

My Amendment 122 establishes that a corresponding report is required, which must include how they have undertaken this efficiency comparison, including the periodicity of the comparison and its outcome.

Amendment 144 is another go at inserting the same principle into the bank’s supervisory roles. It will not have escaped the notice of those who have read all the amendments that a similar amendment also appears in other places and formats, in part as a response to the layering of objectives to make sure that they actually happen. The point is really to find the best place for this, not to keep repeating it, but I had several bites at the cherry.

As I said, the substance of my amendment has already been discussed in the previous group, but I wanted to bring out the perspective point. The regulator itself might be very efficient at the expense of the industry it regulates—for example, by using the same template letter at the start of institutional approval processes, without any regard for proportionality or without saying anything useful about what might already have been presented at an extensive, exploratory, preliminary meeting. I recognise the traps that the regulators are trying not to fall into, but this has to be looked at from the other side.

As I said before, when the Industry and Regulators Committee was looking at competitiveness, there was a constantly repeated complaint from industry about delays over routine approval matters, including staff appointments, which caused delay and costs in day-to-day matters. These issues keep coming up, both in real life and in the amendments from noble Lords from around the House, including from the Government’s side. I therefore hope that the Minister and Government will help us to address them as we proceed on the Bill. It is obviously a matter to which we will return on Report, probably in more than one way. Therefore, some preliminary discussions with the Minister would be very useful.

I must also comment on the proposals from the noble Lord, Lord Lilley. If you look at all his amendments, you will see that he is also a victim of the need to insert the same thing all over the place in FSMA in order to make it happen—and I appreciate that there are bigger and more developed amendments to come. My concern is whether the amendments achieve the objectives they set out to. I see the attractiveness of predictability, but I think that some of the concepts underlying these kinds of amendment are about reintroducing thinking in the regulator and in industry. By having layer on layer of complex rules, starting at the top, drilling down, then making the next one slightly different and providing lots of tick boxes, you can get certainty. But everybody says they want principles. I thought the idea was to have principles and then to discover that, if you did not take some reasonable precautions, there may be some regulatory actions against you. I have had these kinds of conversations with some of the authors of these proposals.

This almost goes back to where it used to be, when there was unlimited liability, but you took a little more care, because you might be for the high jump. You had to think about what you would do and consider the harm, instead of looking at a set of rules, against which you could put a little compliance tick that took away the thought and judgment that should be going into what you are doing in such an important industry. This cannot be tick-box. I fear that this is driving in the same direction. If I heard correctly, even the noble Lord, Lord Lilley, talked about these broad principles needing more detail underneath.

These amendments do not solve what some of those who have spoken in this group have told me that they want them to solve. I fear that this will be static rather than agile, yet after Brexit we keep saying that we want our regulators to be agile to new things and able to adjust. One cannot be both agile and wholly predictable, because you have to respond to new circumstances.

--- Later in debate ---

This has been a really interesting discussion on the issues before us, particularly the discussion of the amendments in my name of my noble friend. We have also seen that there can be a wide range of views on how to tackle some of these issues and a need to avoid unintended consequences. The Government have given the approach that we are taking in the Bill very careful consideration and extensive consultation, but of course we will continue to listen to the debates in Committee because on this area we are all trying to achieve the same objective.

[Lord Thomas of Cwmgiedd (CB)]

Would the Minister be able to get the views of the FCA and the PRA on this matter? It would be interesting, in examining consistency and all these issues, to see if—hopefully—they could do that in no more than two pages.

[Baroness Penn (Con)]

Is the noble Lord referring to their views on the question of proportionality and efficiency, or on a specific case?

[Lord Thomas of Cwmgiedd (CB)]

On the specific question of drafting rules, what do they think their mandate is? Do they accept that the rules have to be proportionate and clear? It would just be very useful to know how they see their new approach to things. I think it can be done in two pages, but that is a good test.

[Baroness Penn (Con)]

I am sure that the regulators have provided some of those views already. For example, they gave evidence during the Commons Committee stage of this Bill. I do not want to speak for them but I absolutely undertake to the Committee to seek that from the regulators, and obviously it will be down to them as to how they wish to deal with the request. With that, I hope that noble Lords will not press their amendments.

Financial Services and Markets Bill

Lord Thomas of Cwmgiedd Excerpts

Committee stage
Monday 30th January 2023 Grand Committee

[Baroness Kramer (LD)]

My Lords, in light of all the pressures we have—the speeches were so brilliant—I will not try to add to them, other than to say that I very much support the amendments in this group.

[Lord Thomas of Cwmgiedd (CB)]

I will make one brief observation and declare my interest as chairman of the Financial Markets Law Committee. It seems to me that the real problem, which both amendments rightly seek to address, is to give SMEs an effective remedy. The courts system—for various reasons—and the costs that lawyers charge make it almost impossible for SMEs to take on the banks. Therefore, there seems a good deal of force in the arguments that have been put forward. I would be grateful if the Minister were able to tell us what the attitude of the regulators, particularly the FCA, would be to extending the position in this way. It is very important for the Committee to know what they think of this amendment. Really, the object of it is to cure a deficiency in the way in which our legal system functions.

[Lord Tunnicliffe (Lab)]

My Lords, once again, the arguments for these amendments seem quite persuasive, and I look forward to the Minister’s reply. Having probably been responsible for this legislation in the past—since I failed to duck most of it—I cannot remember for the life of me why SMEs are excluded. Before addressing the amendments, I would be grateful if the Minister could explain the thinking behind the law as it stands.

Financial Services and Markets Bill

Lord Thomas of Cwmgiedd Excerpts

Committee stage
Wednesday 25th January 2023 Grand Committee

[Lord Davies of Brixton (Lab)]

My Lords, I thank the noble Baroness, Lady Noakes, for pointing out that the process here differs from that in the retained EU law Bill. Could the Minister in her response set out more clearly the differences between the process here and the process in the other Bill, and the reasons for the differences?

[Lord Thomas of Cwmgiedd (CB)]

My Lords, I have just one brief point. I agree with the comments so far made that this may not be the appropriate place to deal with the whole problem of delegation, because this deals with revocation, although the amendment sensibly deals with what is inevitable, which is the replacement. It seems to me that parliamentary scrutiny is essential. We need to come back to this time and time again.

It is essential because, unlike the position of a Minister or that of a Government, we have, first, the issue of the accountability of regulators and, secondly, we do not want to politicise regulators. That is Parliament’s job. Therefore, we have to scrutinise this whole area, where we are moving financial services to regulators and away from being dealt with largely through a political process in the European Union. We are hoping to make great improvements, but the one thing we are losing is the input of the political process. One cannot pretend that the direction of financial services policy is not a political question as well as a regulatory question. Politics should be for this House and, although I hate to use this word, we should not taint the regulators with politics.

[Baroness Kramer (LD)]

My Lords, I must agree with every word that the noble and learned Lord, Lord Thomas, has just said. I thank my colleague and noble friend Lord Sharkey for putting this amendment where it is, because the fundamental constitutional issue that underpins this Bill is probably one of the most crucial that we will address, not just in the next days of debate but, frankly, as a Parliament. I think that if the public had any sense of the authority that is now, in a sense, being passed to regulators without accountability—and to some extent to the Treasury without accountability—frankly, they would look at us and say to Parliament, “That is a dereliction of duty. We expect you to be responsible”.

This is not just a political process but part of a fundamental democratic process. As others, including the noble Lord, Lord Naseby, have said, what could be more fundamental than framing an industry that not only determines so much of our national economy but, when it goes badly wrong, can completely undermine that whole economy. I very much support the amendment brought by my noble friend. I know that it was tabled to trigger discussion and I look forward to the further debate that we will have later.

Financial Services and Markets Bill

Lord Thomas of Cwmgiedd Excerpts

2nd reading
Tuesday 10th January 2023 Lords Chamber

[Lord Thomas of Cwmgiedd (CB)]

I congratulate the noble Lord, Lord Ashcombe, on his maiden speech and in particular on drawing our attention to the importance of the insurance industry to London’s financial centre—which is often overlooked. I too welcome the Bill warmly and express my interest as chairman of the London Financial Markets Law Committee. I draw attention to that interest because, in the few minutes I have, I would like to ask some questions about the central issue in the Bill: the extent of delegation. How do we do it? How to we make it accountable? One must bear in mind that regulators have two functions. The first is to make law that is binding on us; the second is to interpret and enforce that law when there is a dispute.

I wish to ask four questions. First, are the powers that Parliament is giving to the regulators and delegating to them ones that they can exercise more appropriately than Parliament? The answer to that is generally “yes”, but when we look at certain detailed provisions we must ask: are they being asked to make political decisions—which would be wrong—or are we consigning decisions where we just have to hope that they do what they are asked because there is no accountability? The first question is intricately linked to accountability and a judgment on what is right.

Secondly, have we given the regulators a sufficiently clear mandate for the regulations they are to make? As the noble Lords, Lord Butler and Lord Sharkey, pointed out, there are some contradictions in the Bill. Should we examine those and give clearer guidance? We should not complain hereafter if they tell us, “We’re independent, go away”. Another question which particularly interests lawyers is: are we to give more clear direction as to the type and format of regulation? Are they to follow what has become the traditional European and, to an extent, British Government way of writing long screeds of guidance rather than following good, Victorian principles of short, clearly drafted legislation? It is a question we ought to ask ourselves. Vast rulebooks are a complete disincentive to proper regulation. The more we delegate, the clearer the answer to that question has to be.

The third question we have to ask ourselves is: are we sure that enforcement and punishment for breaches are sufficiently independent of the regulators that make law? When we make law, we do not interpret it or punish people for breaching it; we give that to independent people. The more power we give regulators, the more we have to be satisfied that the interpretation is independent. You do not want a rulebook where people turn around and say, “I know it’s not clear, but we know what it means because we wrote it”. That is bad lawmaking. Of course, if we have not got that bit right and we do not have proper accountability, there is another problem.

That ties in with the fourth question. We must ask, in respect of all these provisions: is there sufficient accountability to Parliament, to outside bodies or through an independent enforcement agency separate from the lawmaking part? Having spent much of my professional life dealing with the fallout of regulatory failure, I have no doubt that most regulators are competent and hard-working and that they try their hardest to achieve a good result. However, their life is extremely difficult and, if I were a regulator, I would welcome with open arms proper scrutiny. They need all the help they can get. If you are truly independent—having spent much of my life as a judge, I have had to be independent—you always welcome people who cast a critical eye from the outside. The regulators, therefore, ought to welcome scrutiny and not oppose it.