Local Authorities (Mayoral Elections) (England and Wales) (Amendment) (England) Regulations 2019

Lord Young of Cookham Excerpts

Thursday 14th February 2019 Lords Chamber

Moved by

[Lord Young of Cookham]

That the draft Regulations laid before the House on 12 December 2018 be approved.

Motion agreed.

Representation of the People (Election Expenses Exclusion) (Amendment) Order 2019

Lord Young of Cookham Excerpts

Thursday 14th February 2019 Lords Chamber

Moved by

[Lord Young of Cookham]

That the draft Order laid before the House on 17 December 2018 be approved.

[Lord Young of Cookham (Con)]

My Lords, the election expenses exclusion order brought forward today aims to make significant improvements to the electoral framework. The order proposes that expenses that are reasonably attributable to a candidate’s disability, and which are reasonably incurred, are excluded from a candidate’s electoral spending limits.

Examples of such expenses include, but are not limited to, British Sign Language interpretation for hearing-impaired candidates, the transcription of campaign material into Braille for visually impaired candidates and specialist equipment. This order will also exclude expenses funded from grants provided through the Government’s interim EnAble Fund for Elected Office from electoral spending limits. This £250,000 interim fund will support disabled candidates and help cover disability-related expenses that people might face when seeking elected office, such as those I have listed.

The Government are committed to ensuring that the diversity of the United Kingdom is sufficiently represented in public office. Around one in five of the UK population has a disability, but disabled people remain insufficiently represented in our Parliaments, Assemblies and councils. The proposed changes will help to create a level playing field between candidates with disabilities and candidates without disabilities, enhancing equality of opportunity.

Alongside the proposals put forward today, I will remind the House of the other work being taken on to increase the number of disabled people in public office. This includes the review by my noble friend Lord Holmes of Richmond into opening public appointments to disabled people. We welcome his report’s recommendations, which suggest improvements across each of the key points of the appointment process, from the data the Government hold to attracting applicants, the application process and interviews and assessments. We are confident that the recommendations will enable the Government to understand better the issue, improve the disability data we hold for public appointees and pinpoint effective approaches to increasing the proportion of disabled public appointees. We are currently assessing how these recommendations might be implemented.

The order brought before the House today has a wide remit of application. It will apply UK-wide to all UK parliamentary elections, including by-elections. In England, the order will also apply to local government elections, Mayor of London elections, London Assembly elections, mayoral elections and combined authority mayoral elections. In Northern Ireland, it will apply to Northern Ireland Assembly elections. I can tell noble Lords that the Government plan to lay a second statutory instrument this year to widen the application of this provision to police and crime commissioner elections across England and Wales.

I will turn briefly to the detail of the proposed changes. The election expenses exclusion order excludes expenses that are reasonably attributable to a candidate’s disability and which are reasonably incurred, by substituting a new paragraph 7(a) in Part 2 of Schedule 4A to the Representation of the People Act 1983. Part 2 of Schedule 4A to that Act sets out a list of matters that are “excluded” from being “election expenses” and therefore are not taken into account when calculating a candidate’s electoral spending limits. This ensures parity with electoral spending limits for non-party campaigners. Schedule 8A to the Political Parties, Elections and Referendums Act 2000 excludes reasonable expenses incurred that are reasonably attributable to an individual’s disability from electoral spending limits of non-party campaigners.

I would like to allay concerns about whether the change will require candidates to disclose any disability. It will not. There will be no legal obligation for candidates to report their disability-related expenses. Candidates can declare these expenses if they wish so to do. I would also like to allay concerns that this exclusion could be misused by individuals who want to manipulate their electoral spending limits. The provisions are clear: this exclusion can be used only for expenses that are reasonably incurred and reasonably attributable to a candidate’s disability. Any breach of the spending rules for candidates can be referred to the police and prosecutors for investigation. The order will not give candidates with a disability an advantage. Its purpose is to create a level playing field in respect of electoral spending limits, so that candidates with a disability are not disadvantaged by that disability in standing for election.

We have consulted on the elections expenses exclusion order with the Electoral Commission, the Welsh Government, the Scottish Government and the Northern Ireland Office. There has been cross-government collaboration between the Cabinet Office and the Government Equalities Office. All the consulted stakeholders have been supportive of the proposals. We have also kept the Parliamentary Parties Panel informed of the position with the order.

On a final point, I would like to highlight that it is important that the order is in place as soon as possible so that it can apply at the local government elections in England on 2 May. This order will therefore come into force on the day after the day on which it is made. I commend this order to the House.

[Lord Shipley (LD)]

I thank the Minister for explaining this order and I want to record that I agree with it. It is entirely appropriate that any disability-related expenses in elections should be exempt from spending limits, on principle. That is because it helps disabled candidates to stand for election on equal terms with others. I noted the Minister’s comments about some objections that may have been raised on some of the details—but none is more important than the overall principle of equality of opportunity.

[Lord Kennedy of Southwark (Lab Co-op)]

My Lords, I am very happy to give the order my full support. I was glad that the noble Lord mentioned the political parties panel, because I was going to ask him about it. There is no mention of political parties at all in the consultation referred to in the Explanatory Memorandum. I know that the noble Lord mentioned it in his contribution, because I was going to ask him about it. The bodies listed in the Explanatory Memorandum do not pay election expenses and do not fill out election returns. I am glad that he covered that point. It is important that we keep the political parties informed on all these matters. They can often inform the Government’s thinking in a positive and helpful way. Since the noble Lord answered my question, that is fine. I am very happy to support the order.

[Lord Young of Cookham]

My Lords, I have had a remarkably easy time—oh, I am sorry.

[Lord Campbell-Savours (Lab)]

I will be very brief, so do not worry. Paragraph 14.3 of the Explanatory Memorandum refers to the EnAble Fund for Elected Office having,

“robust checks and balances in place to ensure that grants are allocated to eligible applicants”.

It then sets out the process to ensure that happens, because, obviously, public money is being expended. However, in the case we are discussing here, I will quote paragraph 14.1:

“There are no plans to monitor or review the statutory instrument … monitoring or reviewing of the statutory instrument is difficult to implement and unnecessary”.


The Minister referred in his contribution to “reasonably incurred” and “reasonably attributable”. Whenever I see “reasonably” I always think of the courts. What happens if there is a challenge on the basis that an expense has not been “reasonably incurred” or “reasonably attributable” and therefore should have been declared as part of the base limit? What happens in the event that that is breached?

[Lord Young of Cookham]

My Lords, I obviously spoke too soon when I said I had had a reasonably easy ride. I am grateful to noble Lords for their broad support for the measure. On the issues raised by the noble Lord, Lord Campbell-Savours, as I said, we are extending an exemption that already applies to non-party campaigners to those standing for public office. I am not aware that the existing exemption for non-party campaigners has given rise to the difficulties he presents, but he asked about the precautions we are taking to make sure that this is not abused. The EnAble Fund for Elected Office has robust checks and balances in place. There is an initial triage process—a meeting with the applicant, in person where possible. During these checks, applicants will be asked to confirm that they have a disability that necessitates reasonable adjustments to enable them to stand for election. In addition, applicants intending to stand for election will undergo a verification process to ensure that their intention to stand is genuine.

A risk confronts anybody who stands for elected office and misuses the expenses regime, as we discussed yesterday: they stand to be disqualified if they have not incurred expenditure reasonably. Those definitions, as I think I said, are already on the statute book in relation to non-party campaigners. I do not think that there has been any difficulty.

Motion agreed.

Election Expenditure

Lord Young of Cookham Excerpts

Wednesday 13th February 2019 Lords Chamber

[Lord Rennard]

To ask Her Majesty’s Government what assessment they have made of the merits of providing greater clarity in legislation about what constitutes (1) constituency expenditure on behalf of a candidate and (2) national expenditure on behalf of a party, following the verdict of R v Mackinlay, Gray and Little.

[Lord Young of Cookham (Con)]

My Lords, the Government believe that the law governing elections should be clear and operate effectively. We are working closely with the Electoral Commission on new codes of practice for election expenses. These will be informed by the issues that arose in the recent case, including the question that was referred to the Supreme Court. In the first instance, this will provide greater clarity for those taking part in our democratic process.

[Lord Rennard (LD)]

Since the judgments of the Supreme Court and the Southwark Crown Court confirmed that many of the common practices in recent general elections were illegal, saying, “We did not know that it was against the law to classify expenditure targeted at an individual constituency as national expenditure”—thereby trying to avoid the constituency expenditure limits—will no longer be a strong defence in court. In those talks with the Electoral Commission and the parties, will the Minister seek not just clarity in the law and improved guidance but to uphold properly the principle of a level playing field in constituency campaigning, so that it is not possible for one party to seek to buy a seat in Parliament?

[Lord Young of Cookham]

I entirely agree with the principle that the noble Lord has just enunciated. I was looking at the Corrupt and Illegal Practices Prevention Act 1883, which enshrined the principle to which he referred. The preamble states that,

“if its provisions are honestly carried out, the length of a man’s purse will not, as now, be such an important factor”.

I am afraid that a woman’s purse did not get a mention, it being 1883. The text continued,

“and the way will be opened for many men of talent, with small means, to take part in the government of the country, who have been hitherto deterred from seeking a seat in the House of Commons by the great expense which a contest entails”.

That principle is timeless, even if the language may not be.

[Lord Kennedy of Southwark (Lab Co-op)]

My Lords, does the Minister agree that while guidance, codes and statutory instruments may deliver some of the change we need, it is only through primary legislation that we will get the electoral law fit for purpose?

[Lord Young of Cookham]

That is why, in my Answer, I said that in the first instance, the code of practice will provide greater clarity for those taking part in our democratic process. At the meeting attended by the noble Lord and six other noble Lords yesterday, the point was made that there may be some inconsistency in the primary legislation, which may need addressing. What I have said does not preclude a more radical look at primary legislation, as the noble Lord suggested.

[Baroness O’Neill of Bengarve (CB)]

My Lords, does the Minister agree that the primary threat to the integrity of elections in this country is not because of failure by the political parties but because of anonymous online targeting of our fellow citizens, whereby people cannot trace the source of funds or what is happening? What do the Government plan to do about that?

[Lord Young of Cookham]

The noble Baroness raises a valid point. The Electoral Commission produced a report last year, Digital Campaigning: Increasing Transparency for Voters, which had recommendations along the lines suggested by the noble Baroness. The DCMS Select Committee in another place is looking at exactly this issue, and when we have its report, we will see whether fresh legislation is needed in order to provide greater transparency on who is paying for what.

[Lord Hayward (Con)]

First, I declare a personal interest, in that I know well all three individuals named in the Question. I follow the noble Lord, Lord Rennard, in seeking clarification, particularly in relation to the upcoming local elections on 2 May. There is uncertainty for both candidates and agents. Will the Electoral Commission and other bodies urgently seek to provide as much clarification as possible, so that, where possible, that element of uncertainty is removed?

[Lord Young of Cookham]

My noble friend raises a good point. The recent guidance by the Electoral Commission was issued before we had the judgment of the Southwark court. Certainly, the commission might see whether that guidance might be updated to help candidates and agents in the light of the judgment of the Supreme Court and the Southwark case.

[Lord Stunell (LD)]

My Lords, does the Minister agree that it is vital to retain a robustly independent Electoral Commission with political input but with a majority of independent members, and that we never return to the bad old days when the rules were decided by the party which formed the Government in the House of Commons?

[Lord Young of Cookham]

Yes. Before we had the Electoral Commission many of its responsibilities were discharged by the Home Office, which was, of course, run by political animals; namely, Ministers. It enhances confidence in the democratic process to have an independent commission, such as the Electoral Commission, in charge of the rules. We have no intention of departing from the principles which underpin the Electoral Commission. I think I am right in saying, as the Opposition spokesman at the time, that my party supported its establishment.

[Lord Leigh of Hurley (Con)]

Despite my noble friend’s last answer, does he think that the Electoral Commission provides good value for money, with a budget of £17 million a year and 200 staff, which is more than most of the organisations it regulates?

[Lord Young of Cookham]

It is within my recollection that at the beginning of the coalition Government, when all public bodies were put under scrutiny, the Electoral Commission was asked to reduce its core expenditure by 30% in real terms—a very substantial target—so it had to make economies. I hope that, like all public bodies, it will seek efficiencies in every way possible. I note from its most recent annual report and accounts that it underspent by just over £1 million last year, and that money was returned to the taxpayer.

Money Laundering and Transfer of Funds (Information) (Amendment) (EU Exit) Regulations 2018

Lord Young of Cookham Excerpts

Thursday 7th February 2019 Lords Chamber

Moved by

[Lord Young of Cookham]

That the draft Regulations laid before the House on 29 November, 6 December and 13 December 2018 be approved.

Relevant document: 11th Report from the Secondary Legislation Scrutiny Committee (Sub-Committee A). Considered in Grand Committee on 23 January

[Lord Tunnicliffe (Lab)]

May I just refer back to our previous exchange on this matter? When we last discussed credit rating agencies, I asked what would happen if there was a deal and I got a somewhat amorphous answer. Can the Minister be clearer than he was in his original answer on this point? I have asked this question in every SI debate that I have attended and I have received a slightly different answer from each Minister concerned, so it would be good to know whether the Government have a unified position on this.

Looking at the Explanatory Memorandum, which was discussed in Grand Committee, there is the registration process and the three bullet points. The first two points were that there would be a conversion regime with automatic registration, and that the registration regime would be available to new legal entities. The third, however, which nobody seemed able to understand, was that the automatic certification process would enable certified CRAs established outside the EU to notify the FCA of their intention to extend the certifications to the UK. Like the conversion regime, these notifications must be made before exit day. The Minister’s answer, which I checked in Hansard, was again a little woolly.

Finally, there is the whole issue of how the law relates to the staff of credit rating agencies. We have improved the control of financial services and banks by having a senior management regime. I understand that that regime does not extend to credit rating agencies. The Minister went on to say that other regulations do, but I believe that those other regulations have the same sort of weak reservations that were there in 2008 and allowed the shambles in the money market. It seems somewhat deficient, because what happened in that period, as we know, and the reason nobody was prosecuted, is that everyone said, “It’s not me, guv”. There was not a clear single point of responsibility for the various exceptions to be made.

[Lord Young of Cookham (Con)]

I am grateful to the noble Lord, who has maintained his reputation for holding the Government to account on statutory instruments. I understand exactly why he sought to raise these issues. He referred to my comment that we would “switch off” the SIs in the event of a deal. It is a phrase that appears in some of the briefing for Ministers, so I hope it was not the wrong thing to say. To help the noble Lord, I will set out in more detail the process of switching off.

As we set out in the White Paper on the EU withdrawal agreement Bill, that Bill will amend the European Union (Withdrawal) Act 2018 so that the conversion of EU law into retained EU law takes place at the end of the implementation period instead of on exit day. While the UK remains subject to EU law, and before the conversion of EU law into UK retained law, there is no requirement for most instruments relating to our exit from the EU to be enforced. I come to the question the noble Lord asked: the intention, therefore, is that the EU withdrawal agreement Bill will contain provision to delay all relevant SIs—including these—that enter into force on exit day until the end of the implementation period. The Bill will also ensure that Ministers can revoke or amend the SIs as appropriate so that they deal effectively with any deficiencies arising from the end of the implementation period. Some provisions may remain in effect, such as powers that allow us to prepare for the end of the implementation period.

The noble Lord raised two other issues in the Moses Room on 23 January. One question was on the process of CRAs registering before exit day. The CRA SI includes an automatic conversion regime for UK-based CRAs with an existing ESMA registration, and a temporary registration regime, or TRR, for CRAs establishing a new legal entity in the UK. To enter the conversion regime, a CRA will simply need to notify the FCA 20 days prior to exit day. A CRA that meets the criteria will enter the TRR if it has submitted an advanced application that has not yet been determined to the FCA prior to exit day. Basically, these regimes will help to ensure there are no gaps between the UK leaving the EU and UK-based CRAs not being registered with the FCA. The FCA will be provided with powers to start the preparatory work for registering UK CRAs prior to exit day.

The third issue the noble Lord raised is another that he touched on in his intervention in the Moses Room. He asked about the senior management structure of credit rating agencies and whether individuals could be held responsible. As I said then, it is a good question. The senior managers and certification regime does not currently apply to credit rating agencies. One of the reasons is that they do not actually handle customers’ money, which banks and other agencies do. Regulation 22 of the SI applies Section 400 of the FSMA, which provides that if an offence committed was,

“with the consent or connivance of an officer”,

of the body corporate, or due to neglect on its part, the individual as well as the corporate is guilty of an offence.

[Lord Tunnicliffe]

Part of that answer jarred a little with me then and jars now on repetition—the part that says it is because they do not handle customers’ money. Looking back at the disaster of 2008, one has to recognise that the credit rating agencies were a substantial part of that disaster. The fact they were giving very high ratings to essentially junk stock was one of the issues that compounded the crisis. As a minimum, I would be grateful if the Minister would take this issue back to the Treasury and recognise that it might be an unfortunate hole in the legislation.

[Lord Young of Cookham]

I understand why the noble Lord is pressing me on this. As I said, the senior managers and certification regime does not currently apply to credit rating agencies. The noble Lord makes a good point; I hope he is now satisfied with some of the answers I have given. In answer to his last intervention, although the regime does not currently apply to CRAs, we will of course take his suggestion on board and see whether in future that might be amended. I beg to move.

[Lord Tunnicliffe]

I thank the noble Lord for his courteous replies and his help.

Collective Investment Schemes (Amendment etc.) (EU Exit) Regulations 2019

Lord Young of Cookham Excerpts

Monday 4th February 2019 Grand Committee

Moved by

[Lord Young of Cookham]

That the Grand Committee do consider the Collective Investment Schemes (Amendment etc.) (EU Exit) Regulations 2019

[Lord Young of Cookham (Con)]

My Lords, as this instrument has been grouped, I will speak also to the Long-term Investment Funds (Amendment) (EU Exit) Regulations 2019. The Treasury has been undertaking a programme of legislation to ensure that if the UK leaves the EU without a deal or an implementation period, there continues to be a functioning legislative and regulatory regime for financial services in the UK. The Treasury is laying SIs under the European Union (Withdrawal) Act to deliver this, and a number of debates on these SIs have already been undertaken here and in another place. The SIs being debated today are part of this programme and have been debated and approved in the other place.

These SIs will fix deficiencies in UK law on investment funds to ensure they continue to operate effectively post exit. The approach taken in this legislation aligns with that of other SIs being laid under the EU withdrawal Act, providing continuity by maintaining existing legislation at the point of exit but amending where necessary to ensure that it works effectively in a no-deal context.

Turning to the substance of these instruments, noble Lords may remember previous debates relating to alternative investment funds and their subcategories on 16 January. Those instruments, along with these being debated today, will ensure there is a functioning legislative and regulatory system for investment funds in the UK. The first instrument focuses specifically on the regulation of Undertakings for Collective Investments in Transferable Securities, commonly known as UCITS, which are funds aimed at retail investors. The second instrument relates to long-term investment funds, a further subcategory of alternative investment funds that promote long-term investment, such as in infrastructure and small and medium-sized enterprises. In a no-deal scenario, the UK would be outside the EEA and the EU’s legal, supervisory and financial regulatory framework. Retained EU and domestic law relating to the regulation of UCITS and long-term investment funds needs to be updated to reflect this.

I will begin with the collective investment schemes regulations. First, this instrument removes references to the Union and to EU legislation that will no longer have legal effect, replacing them where appropriate with references to the UK and UK legislation. It removes obligations to co-operate with EU authorities and defunct references to the EEA passporting system. However, as set out in FSMA and other legislation, it maintains the ability for co-operation between authorities which may be in the interests of both the UK and the EEA.

--- Later in debate ---

[Baroness Kramer (LD)]

My Lords, we have allowed my noble friend Lady Bowles to go off to her committee today so I am afraid that there is somebody on these Benches with a far less-detailed knowledge of the intricacies of the relevant pieces of legislation. That may be of some relief but she will be back on future occasions so the respite is only temporary.

We have no objection to these two SIs, although I would like to probe around them a little. Clearly the UK Government should make this move because, frankly, EEA UCITS with a presence here in London suddenly fleeing because of a lack of temporary permissions would be a hole beneath the waterline for the future of fund management in London. The measure is absolutely necessary. The vast majority of those funds have said that if they had to go back and apply again as third countries for third-country permissions to keep their existing funds in place, they would prefer to exit. That is the situation with which we are dealing so the Government’s move is appropriate.

However, noble Lords will be aware that a great deal of money has already fled London. Two or three weeks ago, EY provided a report setting the number of assets to have left the City, primarily funds, at around £800 billion. With the latest Barclays announcement, that takes the number to about £1 trillion, which is a reasonable amount of assets under management to have left because of Brexit. So that everybody understands, I say that this is not about people being disloyal or unpatriotic. One of the companies involved, Somerset Capital Management—co-founded by Jacob Rees-Mogg—domiciled two recently launched funds in Dublin, apparently because of the demands of various clients. Clearly, a great deal of the movement out of London has been client-led.

That is a problem because conglomeration is a very powerful factor in driving this industry forward. Losing something like £1 trillion of funds under management and finding that many players are playing double-handed, with a presence in both London and somewhere else—typically in Dublin but perhaps in other places in the EU 27—puts into doubt a future never before doubted: that London would dominate in this area. Did I understand correctly from the Minister—and do I understand correctly from reading the instrument—that the transitional arrangements described are simply to provide continuity for existing London-domiciled EEA UCITS? Has there been any assessment of the likelihood of new funds to open choosing London for their headquarters? Has there been any assessment of whether the limited reach of the regulations means that, if we leave on 29 March, funds to open later in the year are far less likely to be London-domiciled because they will have to apply through a third-country process? I would be interested to understand that.

In a sense, that leads me on to the impact statement, which is peculiar. The Minister is absolutely right that the statement is recent: I think it went online on Friday and was printed only today. The costs are defined in the summary as “Unknown: likely significant”. But the description which follows that brief table says that the only really quantifiable costs on businesses are,

“marginal compared to the … costs arising from the UK leaving the EU”—

thank goodness, as this is one tiny area—and that they,

“mainly consist of familiarisation costs”.

Has there been any attempt in that estimate of significance to estimate the changing pattern of investment for new funds that will follow, because of the limited nature of this new SI? From a cost perspective, I do not know whether that has been included in the numbers.

The benefits are described as “significant” but, again, we have no numbers around any of that. I suppose that one person’s significant differs from another’s but it seems that it is significant compared to having nothing to protect us from a cliff edge. I can certainly understand that that is significant but it seems peculiar, frankly, to suggest it as a benefit. The status quo is clearly the benefit; there are no costs and there is no reduction in the future location of funds in the UK. A benefit that basically avoids the damage of a cliff edge seems a terribly odd description.

Finally, I saw the humour on the Minister’s face, and I share it, at the second SI, which deals with long-term investment funds. Since, as I understand it, this is a continuity and rollover SI and there are no funds, can he help me with the logic of why we are bothering with it? I do not mind it being on the statute book but it seems slightly redundant to provide for the continuity of nothing. I thought that the Minister might help me in this context with these issues, but we will of course oppose neither instrument.

[Lord Young of Cookham]

I think I can help the noble Baroness on that. There are no UK-based funds of this nature but there are some based in the EU—about five—that market into the UK. Those are the ones that will be able to apply for a temporary passport.

[Baroness Kramer]

I find that very helpful and I thank the Minister for saying that.

--- Later in debate ---

[Lord Young of Cookham]

I am grateful to all noble Lords who have taken part in this debate for their broad support for the statutory instrument before us. The noble Baroness, Lady Kramer, implied that she was not well informed on financial matters, but we all know that not to be the case. I agree with what she said about the TPRs. These are sensible measures, not least for seeking to keep the City of London’s pre-eminent position in financial markets at the forefront of our priorities.

The noble Baroness mentioned the migration of funds. I, too, saw the EY report. The £800 billion figure was an estimation of firms’ stated intentions rather than of actual assets transferred. The report states that the estimate is a “modest” sum when compared to the total assets of the UK banking sector, which stand at almost £8 trillion. None the less, it underlines the case for taking forward measures such as this to prevent any unnecessary migration of funds out of the UK. She also asked whether new funds could be established. The answer is that where there is an umbrella fund with lots of sub-funds, an existing umbrella fund with a sub-fund approved under the TPR can then get another sub-fund approved subsequently because it shares the same governance structure as the original one, so it has already been validated. Otherwise, a brand new one would have to start from scratch, in the way that the noble Baroness implied.

The noble Baroness asked about the impact assessment, She is quite right that it was published recently. These impact assessments focus narrowly on the changes that these SIs make and how businesses will need to respond. They do not deal with the broader economic impact of leaving the EU. The whole point of these SIs is to try, wherever possible, to maintain stability and continuity and minimise the amount of turbulence for firms involved. An impact assessment for the EU withdrawal Act deals with the impact of the parent Act; the Government have also published analysis of the potential economic impact of a range of scenarios, including no deal. These SIs mitigate the impact of leaving the EU without a deal. As the noble Baroness said, if they were not in place, there would be substantially more disruption and turbulence for the industry as a whole.

I think I have dealt with temporary marketing permissions. New EEA UCITS that are not sub-funds with temporary permissions, as I have just described, will have to use the third-country regime to market into the UK after exit day. The instrument does not change the process for authorising UK UCITS; that remains the same. There should be minimal change for the domestic industry.

The noble Lord, Lord Tunnicliffe, reiterated his opposition to no deal, which I understand and which he has made absolutely clear on earlier occasions. The best way to avoid no deal is to agree a deal; as I think he knows, the Prime Minister wants to meet others to identify what would be required to secure the backing of the House.

I think I answered the question from the noble Baroness, Lady Kramer, about removing LTIFs, in that some market and want to go on doing so. It will allow for EEA funds that market into the UK before exit day to continue to do so through the temporary marketing permission regime. The noble Lord, Lord Tunnicliffe, is right that it can be renewed at the end of three years. The TMPR can be extended only by the Treasury, pursuant to an FCA assessment on the effect of extending, or not extending, on financial markets, funds in the TMPR and the FCA’s objectives. It must also go through the House.

I was asked, if reciprocity is so important that they can continue marketing into this country, what about the reverse? The answer is that we can legislate only in relation to EEA funds and managers that passport into the UK. We cannot, through our own unilateral action, oblige them to do the same to us. That is why we are seeking to agree a deep and special partnership with the EU, as well as an implementation period—important for both of us—so we can have this reciprocity.

[Baroness Kramer]

On reciprocity, we know that some temporary permissions are now being provided by the EU. For example, the London Clearing House has been given 12 months. Does the Minister anticipate temporary permissions in this area? Some guidance would be extremely helpful for the industry.

[Lord Young of Cookham]

The noble Baroness makes a valid point. The answer may become available before I sit down. I agree that it would be of great value to firms based in this country if they could continue marketing into the EU in the event of no deal. I have just been handed the answer to an earlier question, which I have already replied to off the cuff. There may be some more in-flight refuelling.

On the response of industry to what we are doing, I draw the Committee’s attention to the remarks of Richard Withers, the head of government relations for Vanguard in Europe—one of the world’s largest asset management firms. He said that the collective investment scheme regulation that the Committee is debating now is a well-considered and well-drafted piece of secondary legislation, which removes possible disruptions to the UK public’s long-term investment and pension savings activity while also ensuring that the UK remains an attractive and pre-eminent target market into which global fund management companies distribute their products.

On the last point, it looks as if I may not be able to give a response to the very good question aimed at what representations are now being made by the Government or City institutions to encourage the EU and the relevant authorities there to do to us what we are in the process of doing to them. If I have not got the information by the time we reach the end of the next statutory instrument, I will write to the noble Baroness, Lady Kramer. I beg to move.

Motion agreed.

Financial Markets and Insolvency (Amendment and Transitional Provision) (EU Exit) Regulations 2019

Lord Young of Cookham Excerpts

Monday 4th February 2019 Grand Committee

Moved by

[Lord Young of Cookham]

That the Grand Committee do consider the Financial Markets and Insolvency (Amendment and Transitional Provision) (EU Exit) Regulations 2019.

Motion agreed.

Long-term Investment Funds (Amendment) (EU Exit) Regulations 2019

Lord Young of Cookham Excerpts

Monday 4th February 2019 Grand Committee

Moved by

[Lord Young of Cookham]

That the Grand Committee do consider the Long-term Investment Funds (Amendment) (EU Exit) Regulations 2019

Motion agreed.

Over the Counter Derivatives, Central Counterparties and Trade Repositories (Amendment, etc., and Transitional Provision) (EU Exit) Regulations 2018

Lord Young of Cookham Excerpts

Monday 4th February 2019 Grand Committee

Moved by

[Lord Young of Cookham]

That the Grand Committee do consider the Over the Counter Derivatives, Central Counterparties and Trade Repositories (Amendment, etc., and Transitional Provision) (EU Exit) Regulations 2018.

[Lord Young of Cookham (Con)]

My Lords, as this instrument has been grouped, I will speak also to the Financial Markets and Insolvency Amendment and Transitional Provision (EU Exit) Regulations 2019.

As with the instruments we have just debated, these two instruments are also part of the same legislative programme to ensure that if the UK leaves the EU without a deal or an implementation period there continues to be a functioning legislative and regulatory regime for financial services in the UK.

Turning to the substance of the over-the-counter derivatives, central counterparties and trade repositories SI, many noble Lords will be familiar with the European market infrastructure regulation known as EMIR, which the EU implemented in 2012. It is Europe’s implementation of the G20 Pittsburgh commitment in 2009 to regulate over-the-counter derivative markets in the aftermath of the financial crisis, reduce risk and increase transparency in derivative markets. It should be noted that EMIR, and the financial markets and insolvency SI which we will come on to in a moment, concern activities that mainly take place on financial markets. EMIR imposes requirements on firms that enter into any form of derivative contract and establish common organisational, conduct-of-business and prudential standards for trade repositories and central counterparties. Central counterparties, for example, stand between counterparties in financial contracts, becoming the buyer to every seller and the seller to every buyer. They guarantee the terms of a trade, even if one party defaults on the agreement, thereby reducing counterparty risk.

This SI addresses deficiencies within EMIR and related UK legislation to ensure that after the UK has left the EU an effective legal supervisory and regulatory framework for over-the-counter derivatives, central counterparties and trade repositories remains. This instrument is the last of three key SIs that fix deficiencies in EMIR, and it follows two SIs which have already been debated in your Lordships’ House and which have subsequently been made: the central counterparties SI and the trade repositories SI.

Firstly, the SI continues key requirements of EMIR that include the clearing obligation, which requires firms to clear certain types of derivative contracts at a CCP, the reporting obligation, which requires firms and CCPs to report derivative trades to a registered or recognised trade repository, and margin requirements, which compel firms to put forward money to cover the costs associated with trades. In order to have a framework in place to facilitate these requirements the relevant functions are transferred from the European Commission to the Treasury, and from the European Securities and Markets Authority—ESMA—to the UK regulators, namely the Financial Conduct Authority or FCA, the Prudential Regulatory Authority, known as the PRA, and the Bank of England.

Secondly, the power of granting equivalence decisions for non-UK trade repositories is transferred from the European Commission to the Treasury and functions for recognising non-UK trade repositories are transferred from ESMA to the FCA. The SI also transfers powers from the Commission to the Treasury with regard to equivalence decisions on over-the-counter derivative requirements and whether non-UK markets are recognised for the purpose of trading exchange-traded derivatives.

Thirdly, a temporary intragroup exemption regime provides continuity by ensuring that exemptions from EMIR requirements for intragroup transactions will continue after exit day. The regime will last three years from exit day to allow time for consideration of an equivalence decision by the Treasury and for the FCA to determine a permanent exemption. This period can be extended by the Treasury if necessary. Under the MiFID II legislation, there is an exemption from clearing and margining for certain energy derivative contracts, and this exemption is maintained by this instrument. Finally, EU processes which will become redundant are removed and replaced with equivalent UK processes.

I turn now to the financial markets and insolvency SI. This instrument, broadly speaking, concerns insolvency-related protections that are provided to systems and central banks under the EU settlement finality directive, or SFD. Systems are financial market infrastructure, such as central counterparties, central security depositories and payment systems, which provide essential services and functions relied upon by the financial services sector.

Currently, if an EEA-based system is designated under the SFD and receives funds or securities from a system user—for example, a UK bank—those funds or securities cannot be clawed back in the event of the UK bank being subject to insolvency proceedings. Importantly, this framework also benefits system users, who could receive services on less favourable terms, or not at all, if the EEA system were not protected from UK insolvency law. In certain cases, membership of a system is contingent on these protections. Designation is therefore important as it facilitates the smooth functioning of, and confidence in, financial markets.

In order to become a designated system, a system must be approved by its designating authority—the Bank of England, in the case of the UK. The Bank then informs ESMA, which places it on the EU register of designated systems. The SFD provides similar protections to central bank functions across the EEA. Collateral received by an EEA central bank in accordance with its functions, such as emergency lending, cannot be clawed back if the relevant counterparty to the central bank is subject to insolvency proceedings.

The relevant EU laws—the SFD and the financial collateral arrangements directive—are implemented in the UK via the Financial Markets and Insolvency (Settlement Finality) Regulations 1999, the Companies Act 1989, the Financial Collateral Arrangements (No. 2) Regulations 2003 and the Banking Act 2009. Should the UK leave the EU without a deal or an implementation period, there will be no framework for the UK to recognise systems designated in EU member states, which in turn may risk continuity of services from those designated systems for UK firms.

This SI therefore establishes two main measures to mitigate these risks and ensure that settlement finality protections continue to operate effectively following the UK’s withdrawal. First, this SI establishes a UK framework for designating any non-UK system, while maintaining existing designations for systems that were designated by the Bank of England before exit day. To do this, the Bank of England’s powers to designate, and charge fees to, UK systems will be expanded to non-EEA systems, such that they can be designated under UK law. Moreover, the Bank will be able to grant protections to non-UK central banks, including EEA central banks, which already receive protections under the SFD. This will help maintain the effect of the current framework, providing continuity to UK firms accessing systems and central banks, while assisting UK firms in accessing the global market.

Secondly, the SI establishes a temporary designation regime. This provides temporary designation for a period of three years to existing designated EEA systems that intend to be designated under the UK’s framework. The purpose of temporary designation is to allow time for designation applications to be processed by the Bank of England while ensuring continuity of access for UK firms to relevant EEA systems immediately after exit day. The SI also gives the Treasury the power to extend this regime should more time be required to consider these applications.

The Treasury has been working very closely with the regulators in the drafting of the instruments. It has also engaged the financial services industry on these SIs and will continue to do so going forward. The Treasury published these instruments in draft alongside Explanatory Notes to maximise transparency to Parliament, industry and the public. That took place on 22 October and 31 October 2018 respectively for the Over the Counter Derivatives, Central Counterparties and Trade Repositories (Amendment, etc., and Transitional Provision) (EU Exit) Regulations 2018 and the Financial Markets and Insolvency (Amendment and Transitional Provision) (EU Exit) Regulations 2019. Furthermore, the Treasury published the impact assessment that accompanies these SIs, providing further transparency regarding the reasons behind, and foreseen impacts of, these proposals.

The Government believe that the proposed legislation is necessary to ensure the smooth functioning of financial markets in the UK if the UK leaves the EU without a deal or an implementation period. I hope that noble Lords will join me in supporting the regulations. I beg to move.

[Lord Sharkey (LD)]

My Lords, as the Minister noted, the first SI—dealing with OTC derivatives, CCPs and trade repositories—was published in draft on 22 October last year. The second, dealing with financial markets and insolvency, was published in draft on 31 October last year. The impact assessments for these SIs are contained in a consolidated batch of nine HMT impact assessments, which themselves rely occasionally on references to IAs for other SIs. That batch was published on 29 January, three months after the publication of the drafts and two working days before we were scheduled to debate them. Even one working day beforehand, last Friday morning, the IAs were not available in the Printed Paper Office. Can the Minister explain the very late appearance of the SIs and why the PPO did not have copies by Friday? Can he reconcile this late publication of IAs with giving Parliament proper time for scrutiny? Can he assure the Committee that future Treasury IAs will be published in good time and lodged with the PPO?

The consolidated IAs contain a headline assessment of cost and benefits. As to costs, there are three headings: “Total Transition”, “Average Annual” and “Total Cost”. In each case, the IA estimates the costs as “Unknown: likely significant”. This is unsatisfactory and raises the question of whether HMT understands the role that IAs play in parliamentary scrutiny. It is of no help that the consolidated IA reckons the benefits to be “significant” but declines to attempt to quantify them. In the remaining 52 pages of the impact assessment there is no real detailed examination or quantification of likely costs and benefits, apart from a reading time-based estimate and a passing reference to the trade repositories SI where costs are estimated, apparently, at £500,000 per TR. I say “apparently” because there is a typo in the cost reference for these TRs, so it is not clear whether the figure is meant to be £50,000 or £500,000. Perhaps the Minister can clear that up. I think that it would help the Committee in its scrutiny of future Treasury SIs if consolidation was avoided and we returned to individual impact assessments in proper form for each SI.

Turning to each SI, I found it quite hard in parts to follow the EM for the OTC derivatives, CCPs and TRs SI. I would be grateful for some clarification from the Minister. In paragraph 6.1, the EM notes that the SI revokes two pieces of delegated legislation. Will the Minister expand on what these are and why they are being revoked? The EM does not say why—or if it does, I could not find it. In paragraph 7.7, the EM explains that:

“As a general principle, the UK would need to default to treating EU Member States largely as it does other third countries, although there are cases where a different approach would be needed including to provide for a smooth transition to the new circumstances”.


The EM does not explain what these cases may be or what the different approach might be. Will the Minister tell the Committee what these cases are, or may be, and what different approaches will be needed, and why?

Paragraph 7.12 of the EM states:

“Where the Commission has taken equivalence decisions for third countries before exit day, these will be incorporated into UK law and will continue to apply to the UK’s regulatory and supervisory relationship with those third countries—with the exception of those taken under Article 25 EMIR as set out in the CCP Regulations”.


Will the Minister explain what these exceptions are and why they exist?

In paragraph 7.16, the EM notes that the SI introduces a power that allows the FCA to suspend the reporting obligation for up to one year, with the agreement of HM Treasury, where there is no registered UK TR available. Surely the Treasury must know how likely this is and who it will affect. Again, the EM and the impact assessment do not help—or at least did not help me. Will the Minister say how likely this suspension is, who it will affect and what its consequences and impact might be?

I turn briefly to the second instrument, the financial markets and insolvency regulations, which is, by comparison, a model of clarity and straightforwardness. My only question relates to paragraph 1.76 of the impact assessment, which explains that the relevant EEA systems will be required to notify the Bank of England, before exit day, to enter the regime. What happens if they do not? What risks does this generate, and what procedures are in place to mitigate them?

I realise that I have asked quite a few quite detailed questions, and if the Minister prefers to respond in writing I would be happy, as long as we have the answers before the SIs reach the Chamber. I emphasise that I feel strongly that the consolidation of IAs makes proper parliamentary scrutiny significantly more difficult, and the very late production of IAs, as in this case, really does not help.

--- Later in debate ---

[Lord Tunnicliffe]

No, that is very good. It might turn my casual question into quite a substantial one.

I notice that all the Treasury SIs that the Committee has discussed say that there will be no consolidation and no guidance. I do not know how we can carry on like this. I have found it absolutely impossible to understand the overall scene that these SIs relate to. The scrutiny that one is able to give is therefore entirely dependent on the Explanatory Memorandums. As a generality, these assume quite significant previous knowledge and it is an uphill battle to get a feel for these SIs and to give them the appropriate scrutiny.

[Lord Young of Cookham]

My Lords, I am grateful to all noble Lords who have taken part. I detected no objection to the basic premises on which these SIs are based. I will sweep up some of the points raised in earlier debates that are also relevant to this one.

The noble Lord, Lord Tunnicliffe, asked about the FCA’s resources to cope with the new responsibilities being imposed on it. We are confident that the FCA is making adequate preparation and is effectively resourced ahead of March this year. In its 2018-19 business plan, a significant proportion of its resources are already focused on the forthcoming exit, including arrangements to implement any necessary changes. It has increased its staff numbers in response to increases in the scope of its regulatory activity, including EU withdrawal. It will publish its 2019-20 plan this spring, setting out its planned work for the coming year. As I said in response to an earlier SI, the chief executive of the FCA, Andrew Bailey, has said he expects to hold FCA fees steady for a year or two, assuming there is an implementation period. If there is not, it can increase its fees should it need to do so in the event of no deal.

The noble Lord, Lord Sharkey, asked about the impact assessment being published late. This issue was raised in another place and was dealt with by my ministerial colleague John Glen. We do recognise the importance of making impact assessments available for parliamentary scrutiny. We find ourselves in a unique situation. While we have tried to ensure that these impact assessments are published before debates, this has not always been possible. We acknowledge that some firms will incur costs as a result of these SIs but, as the noble Baroness, Lady Kramer, said in an earlier debate, the situation for these businesses would be much worse in the absence of this legislation. As a whole, these SIs will reduce costs to business in a no-deal scenario as without them the legislation would be defective. In response to the points raised by both noble Lords and the noble Baroness, we have agreed to undertake further analysis of these SIs in the event that we leave the EU without a deal and they come into effect.

The noble Lord, Lord Sharkey, asked whether we could have independent assessments for SIs. I understand that, but there are some complex interdependencies between some of the SIs. Also, the work that the regulators are undertaking cannot always be neatly pigeonholed between the SIs. Given that, it has not been possible to fully quantify the impact of the individual SIs at this stage. However, this is something that Miles Celic, the chief executive of TheCityUK, noted in a letter to the RPC in November. As I said a moment ago, we are committed to undertaking further analysis of the impact of these instruments at an appropriate point, should they come into effect, either in the event of leaving without a deal—

[Lord Tunnicliffe]

We hear that explanation and I have great sympathy for the civil servants involved with this task. However, will the Minister at least have the grace to admit that it was entirely in the Government’s hands to decide when to start this process? If they had started it earlier we would not be in this mess now. We have had impact assessment after impact assessment delivered after we have approved the instrument. That is not satisfactory and I doubt whether the Treasury will be able to catch up.

[Lord Young of Cookham]

I plead guilty as charged. As I said a moment ago, we recognise the importance of parliamentary scrutiny. We will try to do better and make sure that the relevant impact assessments are available in time.

[Lord Sharkey]

I asked about the absence of the impact assessments from the Printed Paper Office. That is the route by which most of our colleagues get the information. They were transmitted electronically to some noble Lords on 29 January, but they were not available in printed form until this morning. That seems a very odd lapse.

[Lord Young of Cookham]

Again, I take that seriously. Would the noble Lord allow me to make some inquiries within the machinery of government in this House to find out what exactly went wrong there? I understand that they were delivered to the Printed Paper Office on Friday.

[Baroness Kramer]

Having gone to the Printed Paper Office myself well into the afternoon, I know that if the Printed Paper Office had received them, it was not aware it had, so there is something there that needs investigation.

[Lord Young of Cookham]

We need a post-mortem on this, which I will authorise.

In response to the question put by the noble Lord, Lord Sharkey, regarding the numbers on the impact assessment, and how they relate to trade repositories, I say that there are eight trade repositories operating in the EEA that are in scope of familiarisation costs. The impact assessment confirmed that we anticipate that the IT costs for those TRs will be approximately £10,000 to £15,000 per TR—although this cost is also dependent on the size of the TR—and, for firms that will need to update their systems, £5,000 per firm. Costs to the FCA associated with supervising the trade repositories, as well as new IT systems to connect to trade repositories, would be approximately £500,000 per trade repository, although this cost is also dependent on their size. The impact assessment also acknowledged that there may be other costs associated with trade repositories connecting to the Bank of England.

I think it was the noble Lord, Lord Tunnicliffe, and it may have also been the noble Lord, Lord Sharkey, who asked about the FCA’s power to suspend the need to report if there were no trade repositories. That is most unlikely. There are a number of trade repositories in the UK and there are arrangements in the legislation to passport them so they carry on. There are also arrangements for relatively speedily authorising any new TRs. It was slightly odd that a city such as the City of London did not have any TRs, so we think it most unlikely that the FCA will utilise its power to suspend reporting obligations against that background.

In the earlier debate, the noble Baroness, Lady Kramer, asked me whether the EU was considering reciprocity to UK funds in a no-deal scenario. The EU has not done the same for UK funds passporting into the EU, but many UK asset management firms operate EU fund ranges, and they have welcomed the creation of the temporary marketing permission regime, which enables them to market them into the UK.

I was asked what happens to an EEA system that does not notify the Bank of England of entering the TDR. Such a system will not enter the temporary designation regime and it will therefore not have recognition for UK insolvency law purposes. A notification is not an onerous requirement; the Bank of England provided details of this last autumn. The noble Lord, Lord Tunnicliffe, pointed out that under Section 8 we cannot create any new criminal offences, or, I think, create new taxes or new public authorities, and I am confident that nothing in the SIs goes against that restraint.

[Lord Tunnicliffe]

The appropriate paragraph does say that you are substituting one set of criminal offences with another. I can find it and read it if you like; it is a real question. I think the answer is in the word “relevant”.

[Lord Young of Cookham]

The noble Lord asked a good question: is the creation of a criminal offence consistent with the withdrawal Act? Section 8 outlaws the creation of a relevant criminal offence. This is defined in Section 20 of the Act as an offence with a possible prison term of more than two years. The criminal offence in this SI is not caught by that definition, so it is permitted.

Following an intervention from the noble Baroness, Lady Kramer, I was asked about unilaterally recognising EEA systems as central banks with no EU-wide reciprocal action. Extending settlement finality protections unilaterally reduces the risk that UK firms will be refused access to EEA financial market infrastructures, known as systems, and central banks once the UK leaves the EU. It also reduces the legal uncertainty and settlement risk these systems and central banks would face regarding UK law without such protections, so it ensures that the UK remains an attractive place to do business in a global context and supports broader financial stability.

I am conscious that I might not have answered all the penetrating questions from the noble Lord, Lord Sharkey, or some others that have been raised. If I have not, I will write to noble Lords, I hope with an authoritative reply.

Motion agreed.

Social Housing

Lord Young of Cookham Excerpts

Thursday 31st January 2019 Lords Chamber

[Lord Young of Cookham (Con)]

My Lords, I am grateful to all noble Lords who have taken part in what has been a very constructive debate, as the noble Lord, Lord Kennedy, has just said. In particular I am grateful to the noble Lord, Lord Whitty, for choosing it and for introducing it with a very eloquent non rant.

It is almost 40 years since my first speech as a housing Minister in 1981. The noble Lord, Lord Whitty, was then working for the General, Municipal, Boilermakers and Allied Trades Union prior to running the Labour Party. The noble Lord, Lord Shipley, was a Newcastle city councillor keeping tabs on the noble Lord, Lord Beecham, who was entering his middle period as the leader, and a youthful noble Lord, Lord Kennedy, was waiting to be able to vote in his first general election. Affordable housing was a priority for the Government then and it remains a priority for the Government today.

It was during my time as a housing Minister in the 1980s that I met the noble Baroness, Lady Osamor. She was campaigning for the renovation of the Broadwater Farm estate and, as important, for the empowerment of the local community and an improvement in its relations with the local authority and with central government. I remember meeting community leaders, of whom she was one, and the charismatic Dolly Kiffin. It is good to renew her acquaintance after all those years. I commend her on her speech and look forward to her future contributions.

An occasional partisan note has crept into our debate. As noble Lords know, I am the least partisan of Ministers. Perhaps I may just put one or two statistics before your Lordships to redress the balance; this debate is about social housing. Between 1997 and 2010, the stock of social housing fell by 420,000. Since 2010, the overall stock of social housing has increased by 79,000. Some 12,440 local authority dwellings were built between 2010-11 and 2017-18, up from 2,920 over the previous 13 years. The briefing we all got from the Home Builders Federation said that housing output was up by 78% in the last five years and that the supply has risen to its fourth highest level since 1971. For the year ending March 2018, the planning system granted permission for 359,000 new homes. There is more in my brief which I will not deploy because I want to answer the debate and because we are in no way complacent about the task ahead.

I would like to make two general points about social housing. First, there has been much emphasis on the need for more housing at social rents, a point made by the noble Lords, Lord Kennedy and Lord Shipley, as opposed to affordable rents. I understand the case, but there is a trade-off between rent levels on the one hand and the number of homes that can be built on the other. For the sake of argument, let us assume that an extra £1 billion became available. On average across England, we would expect either to build 12,500 homes at social rents or twice that number—25,000—at affordable rents: double the number of homes to house those in housing need. Moreover, approximately two-thirds of social housing tenants receive housing benefit to support the payment of their rent. So I understand why housing Ministers want to maximise supply, and I plead guilty to this. More recently, the Government have recognised the case for social rents in areas of high demand, a point made in this debate, and we have turned the dial back to provide a minimum of 12,500 new social rent homes. But those who call for a major reversion to traditional social rents must recognise the cost in lost output, and that is true whatever the level of investment available.

The second general point is one that has not been made at all in this debate: if you are in housing need, of course the number of new social homes built is relevant and the more the better. But someone in housing need is eight times more likely to be rehoused through a re-let of an existing social home, than through a new home. So increasing the number of re-lets is a key ingredient in helping those in need. Without changing the rules on security of tenure, I am all in favour of a dialogue between social landlords and their tenants where the tenants’ circumstances have improved substantially, partly as a result of having a decent home, so that they are now in a position to consider home ownership and explore Help to Buy, shared ownership, which was mentioned by the noble Lord, Lord Thurlow, and other home ownership options.

That is also why I have always been a keen supporter of portable discounts—basically, turning the discount that a social tenant is entitled to under right to buy into cash so that the tenant can buy a home. It has a number of benefits. It widens the choice of home that the tenant can buy beyond just the one he is in. It secures a re-let at a fraction of the cost of new build, and of course it does so more quickly. Moreover, it does not erode the stock of social houses, a point made by many noble Lords. The concept is being tested through the current voluntary right-to-buy pilot for housing association tenants in the Midlands; the discounts are funded by central government. I hope housing associations consider whether this has a greater role to play in tackling waiting lists.

On this, and in response to points made by the noble Lord, Lord Whitty, I was interested to read in last week’s Inside Housing an article by Mark Henderson, the chief executive of Home Group, supporting voluntary right to buy. He said that 87% of his tenants wanted to own their own homes. He went on to say:

“At Home Group, for example, we want to go a step further”,


than the national federation’s offer of replacing one for one.

“We will be able to build two homes for every home sold, including at least one for social or affordable rent. This means that”,


voluntary right to buy,

“will lead to a net increase in the amount of affordable homes in an area, alongside helping customers achieve their aspirations of homeownership”.

I hope other housing associations might consider following his lead.

This brings me to right to buy and the points made by many of those who have spoken, including the noble Lord, Lord Whitty, and the noble Baroness, Lady Blackstone, about the use of right-to-buy receipts. Since the reform of the housing revenue account and the introduction of self-financing in April 2012, a proportion of receipts is paid to the Treasury to reflect the reduction in the amount owed to the Treasury and as part of the self-financing settlement, but also to tackle the budget deficit. However, noble Lords will know that we have just undertaken a consultation on the use of right-to-buy receipts. We are considering the responses and how to take these forward. I will ensure that all the points made by noble Lords about more flexibility and the use of capital receipts are taken on board before we come to a final decision on that. Capital receipts could be used for the purposes the noble Baroness, Lady Watkins, suggested, namely, regenerating existing local housing stock. The noble Lord, Lord Kennedy, asked whether local authorities that have transferred their stock can borrow. Yes, they can. They can borrow through their general fund in line with the prudential code. If they want to, they can then on-loan to a third party for housing development.

I turn to rough sleeping, a topic covered by many noble Lords, including my noble friend Lord Garel-Jones, the noble Lord, Lord Pendry, the noble Baronesses, Lady Lawrence and Lady Warwick, and others. Many referred to the tragic death of a rough sleeper on our own doorstep a few weeks ago. Under the first rough sleepers initiative, which was launched in 1990 and which my noble friend Lord Garel-Jones mentioned, the number of people sleeping rough in central London fell by more than half—from an estimated more than 1,000 before the initiative began to around 420 in November 1992. The model was taken forward by the incoming Labour Government and extended to other parts of the country, but the challenge today is as acute as ever.

In response to my noble friend, there are four ingredients to a successful strategy. The first is prevention. The Homelessness Reduction Act, backed by £1.2 billion and piloted through this House by the noble Lord, Lord Best, should give people the help they need earlier and reduce homelessness. Secondly, we need outreach workers with the skills to build up confidence and trust with the rough sleepers and persuade them to abandon that lifestyle. Thirdly, we need direct access hostels with all the necessary support services such as health—mentioned by the noble Baroness, Lady Lister—and the resources to deal with the underlying problems. Fourthly, we need move-on accommodation so that people can put their lives back together and re-enter the mainstream.

I join the right reverend Prelate the Bishop of Chelmsford in praising those who do heroic work: Centrepoint, The Passage, St Mungo’s and Change Grow Live. Initiatives such as No Second Night Out are particularly important and worthy of support. I pay tribute and wish every success to my ministerial colleague in the department, Heather Wheeler, committing to halve rough sleeping by 2022 and—in response to the question asked by the noble Lord, Lord Sawyer—end it completely by 2027. It is an ambitious agenda, backed up by £100 million in funding for the first two years, and in December we published a delivery plan showing how we intend to deliver on the 61 commitments made.

I am grateful to the noble Lord, Lord Bird, for his contribution outlining the consequences of ending rent control. When I bought my copy of the Big Issue today from Phil in Great Peter Street, he asked to be remembered to the noble Lord. Phil suggested that those in the Victoria area who are recruiting staff could do well to call in on the nearby hostel where Phil stays, where they would find some motivated and hard-working employees who deserve a break, like him.

Many noble Lords spoke about encouraging local authorities to build, and we want to see councils deliver a new generation of homes. We have abolished the housing revenue account cap, and my noble friend Lord Porter deserves credit for the role he has played in securing that freedom. We hope that will enable them to double delivery to around 10,000 homes per year by 2021-22.

The noble Lord, Lord Whitty, criticised stock transfer, when a local authority transfers its stock to a housing association. This can happen only where the tenants have voted for it. In many cases, after they voted for it, the regeneration of a stock took place at a faster rate than would have taken place under the local authority— so I do not think that is a fair criticism of housing policy.

Removing the borrowing cap will help to diversify the housebuilding market, with councils better able to take on projects and sites that private developers might consider too small. To further help councils build, we are providing a longer-term rent deal for five years from 2020 that provides local authorities with a stable investment environment to deliver the new homes.

I was struck by the phrase “long-term” in the noble Lord’s Motion—a challenge to all Administrations accused of short-termism. I agree with him that if we are to make faster progress we need to give those who supply social housing greater certainty. That is why in September the Prime Minister announced a £2 billion long-term funding pilot, starting in 2022, which will boost affordable housing by giving housing associations the long-term certainty they need and will move away from the stop/start delivery that has characterised previous approaches to funding. This funding certainty makes it more viable for the larger housing associations—many noble Lords have key roles to play in housing associations—to take risks and invest in more ambitious projects and larger sites, with the funding guaranteed beyond the current spending review.

We recognise that our commitment to increase the supply of homes requires a modern construction industry—a point raised by my noble friend Lady Bloomfield, who talked about off-site construction. The strategic partnerships we are developing with housing associations are being used to promote modern methods of construction. This is supported by our £4.5 billion home building fund providing support to builders using modern methods of construction, which will, we hope, help to address the shortage of skilled on-site construction workers in addition to encouraging custom builders and new entrants to the market.

My noble friend Lord Garel-Jones suggested that we should build up rather than along and pointed to the difference between our cities and many in Europe. It so happens that yesterday the Secretary of State for Housing announced that, as part of a fresh initiative, 78 homes will be built on London’s rooftops by the summer after Homes England agreed a £9 million funding deal with Apex Airspace Development. This follows our revised NPPF supporting opportunities to use the airspace above existing buildings. These will be built off-site then winched into position to minimise disruption to existing residents.

Many noble Lords referred to poor standards in the private rented sector. The noble Baroness, Lady Donaghy, asked about selective licensing, which is basically a scheme to drive up standards and safety in the private rented sector, where they are known to be poor. Last year, at the invitation of the noble Lord, Lord Kennedy, I got up very early one morning and went to Newham with the noble Lord, the Mayor of Newham, Rokhsana Fiaz, and the police to see how selective licensing was enforced—basically, by going into premises that are as yet unlicensed but suspected of being tenanted. What struck me—and, I am sure, the noble Lord—was the appalling conditions many tenants were living in, paying extortionate rents, but also the sensitivity of the team from Newham in explaining to frightened tenants exactly what was going on and what their rights were. I was deeply impressed that morning.

Since 2015, eight schemes have been approved by the Secretary of State for Housing: one was rejected but it then successfully reapplied. In response to the noble Baroness, a review is under way: we are due to publish it in the spring and I will make sure that the chartered institute report to which she referred is fed into it before we come to any conclusions.

My noble friend Lady Bloomfield raised a number of important points on planning, investment and construction. Last year we updated the NPPF to tackle unaffordable house prices in many areas across the country. The framework sets out a new way for councils to calculate the housing needs of their local communities. We are working closely with other government departments and local authorities to identify and free up public sector land to maximise the amount of affordable housing built on it. The community trust partnership mentioned by my noble friend is one model that can help bring private sector investment alongside local authorities and provide experience to increase affordable housing.

One of the key points that has arisen during the debate—which I will certainly raise with the Secretary of State—was the cost of land and the Land Compensation Act 1961. At the moment we have the CIL, the infrastructure levy, and Section 106, both of which seek to capture the value of land. Many noble Lords, including the noble Baroness, Lady Blackstone, and the noble Lords, Lord Shipley, Lord Best and Lord Judd, said that we ought to go further and do more. We are committed to capturing increases in land values to reinvest in local infrastructure, central services and further housing. That is why we are at the moment making important changes to ensure that the existing mechanisms for securing funding for infrastructure and affordable housing work as effectively as possible. I take seriously the comments and suggestions made during the debate.

I am conscious that I will not be able to get through everything in the time available but, quickly, on public sector land, an issue raised by the noble Baroness, Lady Warwick, the aim of the programme is to release land with a capacity for at least 160,000 homes in England from the central government estate by 1 March 2020. The noble Baroness asked what the percentage of affordable might be. The answer is, as I think she knows, that local authorities set their own percentages in their local plan. It is a matter for them, having assessed local need, to judge what should happen on new developments.

On supported housing, I was interested in the speech of the noble Baroness, Lady Healy. There is a need for specialist and other supportable, affordable housing for older and vulnerable members of society. We have delivered 34,000 new supported homes in England since 2011 and, together with the Department for Health and Social Care, we continue to make funding available for investment in new supported housing. Our announcement last summer that the housing costs for supported housing would continue to be made by housing benefit has been greatly reassuring to those active in the market. I hope it will be welcomed by the sector and unlock fresh investment.

I apologise for not dealing with all the questions. I have many good replies in front of me which, sadly, I do not have time to read out but which I will answer.

The Government support the case for delivering more affordable housing and are committed to doing so. We want to support the delivery of the right homes, be they for rent, ownership or supported housing in the right places. We have listened to the sector and to today’s debate. We have introduced a number of measures to create a more stable investment environment. We have abolished the HRA borrowing caps; announced longer-term funding; increased our affordable homes programme to £9 billion; announced social rent funding; and set long-term rent certainty. We are not complacent but now is the time for councils and housing associations to step up and deliver the affordable housing that communities need. I thank all noble Lords again for their contributions to this debate.

Digital Mapping: Restrictions

Lord Young of Cookham Excerpts

Thursday 31st January 2019 Lords Chamber

[Lord Fox]

To ask Her Majesty’s Government whether they place restrictions on commercial companies seeking to digitally map towns and cities in the United Kingdom; and if not, why not.

[Lord Young of Cookham (Con)]

My Lords, there are no restrictions on the creation of mapping databases of the UK. The UK has world-leading mapping data and this is an area of competitive advantage, offering significant economic opportunities. In 2018, the Government created the Geospatial Commission to elevate this strength and it is currently developing a UK-wide strategy to realise the opportunities. As part of this, it will consider both risks and opportunities for current arrangements for access to mapping data.

[Lord Fox (LD)]

I thank the Minister for his Answer. This is privately gathered data. There is at least one major high-definition survey going on, financed by a foreign-owned company that bases its services on Russian mapping software. Every day, data is processed in places such as Nairobi. This is not Google Maps; it is high-definition software pinpointing our civil infra- structure. The Minister seems relatively unconcerned about this. Can he assure your Lordships’ House that a risk analysis will be carried out on the security nature of this data and some sort of strategy provided around how it is controlled within the obviously important commercial interests going on in this country?

[Lord Young of Cookham]

I understand the noble Lord’s concern. He has tabled a number of Written Questions on the subject. In view of his concern, I have gone back to those responsible for security and received an assurance that those responsible for our critical national infrastructure are not asking for the restrictions on commercial mapping that the noble Lord seeks.

[Lord West of Spithead (Lab)]

My Lords, precision digital mapping and the metadata associated with it are crucial in establishing nodal analysis and targeting, nodal analysis being identifying the one or two spots within water, energy and transport systems that, when taken out, can bring a nation to its knees. Bearing that in mind, could the Minister let us know exactly who is looking at this to make this decision? It is pretty critical and, as a nation, we went to immense efforts to discover people who might be our enemies so that we could do them harm. We do not want to open ourselves up to people to do us harm.

[Lord Young of Cookham]

Again, I understand the noble Lord’s concern. Access to critical national infrastructure sites is, of course, heavily restricted. Ordnance Survey, as the Government’s national mapping agency, is the only mapping organisation that has right of access to property for the purpose of mapping under the Ordnance Survey Act, passed by your Lordships’ House in 1841. But in view of the concern that the noble Lord has expressed and that of the noble Lord, Lord Fox, I will go back to double-check the information I have been given. Of course, much of this information is already obtainable through satellites and Google street survey. The Soviet Union has mapped the UK since the 1940s. One has to be realistic about the amount of information already available—satellites can identify objects that are 30 centimetres long.

[Lord Dubs (Lab)]

My Lords, would the Minister care to comment on the following? I was returning in a taxi from outside London to London. Going up my road, the driver was able to tell me the colour of my front door—he knew exactly what it was. Is that a healthy situation to be in?

[Lord Young of Cookham]

I hope it enabled the noble Lord to reach his destination. The geophysical data available helps people in their everyday lives. Noble Lords waiting for a 159 bus can use their iPhones to see when that bus will be coming. Noble Lords who might have forgotten where they parked their car can use their mobile phones to identify it. Noble Lords who go jogging in the morning can see whether they are going faster or slower than other noble Lords on the same circuit. One has to recognise that there are real advantages from having this geophysical data. I would not be concerned if everybody knew the colour of my front door.

[Lord Wallace of Saltaire (LD)]

My Lords, during the Second World War—a period in which many members of the Conservative Party still appear to live—a suspicious foreigner taking pictures of houses would have been stopped by some doughty Britain such as Mark Francois and challenged in case he was a German. There were, and surely still are, some security questions to answer. Is it not proper for the Government to promise us a review of this? In the meantime, could the Minister tell us whether British map readers, satellite users and so on can discover as much detail about houses and critical national infrastructure in Russia and China as they now can about us?

[Lord Young of Cookham]

On the first question raised by the noble Lord, I refer back to my original Answer. I said that part of this is about considering both risks and opportunities for current arrangements for access to mapping data. In this country, because of the excellence of Ordnance Survey, there are relatively few commercial marketing organisations doing this work. Most of them build on the data from Ordnance Survey and add value to it. What knowledge we have of critical installations in Russia is a matter for the MoD, rather than a humble Minister in the Cabinet Office. But in the light of the views expressed on both sides I will go back and double-check the information that I have been given.

[Lord Harris of Haringey (Lab)]

My Lords, I fear that this is a case of your Lordships’ House trying to shut a stable door that has long been open. The Minister has highlighted our increasing dependence on global navigation data, whether while jogging or whatever else it may be. But this is about not just noble Lords jogging or trying to find their cars but about the maritime world, trains and everything else that depends on GNSS data. How far have the Government got in implementing the recommendations of the Blackett review of the extreme dependence of our national infrastructure on GNSS data, in particular in the financial sector, which would collapse if that data was interrupted?

[Lord Young of Cookham]

The noble Lord makes a valuable point. As I said in my original reply, we have established a new Geospatial Commission and it has a number of objectives. If one looks at its five objectives, which I will not read out, one will see that they include the issue that he mentioned. At the risk of using jargon, which I criticised the last time I was here—and because he makes a valuable point—high-quality, cross-cutting geospatial data and ecosystems are fundamental building blocks of our vibrant and innovative digital economy.