Crown Estate Bill [HL]

Viscount Trenchard Excerpts

Report stage
Tuesday 5th November 2024 Lords Chamber

[Viscount Trenchard (Con)]

My Lords, I support my noble friend Lord Forsyth of Drumlean in bringing back his excellent and very necessary amendment. I supported his identical amendment in Committee and had intended to add my name to this one too, but I was beaten to it by the noble Baroness, Lady Jones of Moulsecoomb, and the noble Lord, Lord Sikka, who is not in his place. Nevertheless, I entirely and whole- heartedly support this amendment.

I remember that the Minister told your Lordships’ Committee:

“The Government wholeheartedly support the objectives”


behind my noble friend’s amendment. But he clearly did not think it is necessary and has not tabled his own amendment. However, he did acknowledge that the intent of the existing regulations

“is not currently being achieved”.—[Official Report, 22/10/24; col. 565.]

My noble friend Lord Forsyth has rightly tabled this amendment again and has so well explained the serious damage caused to the Atlantic salmon population by open-net salmon farms in Scotland, many of which are not adequately regulated. In particular, my noble friend has drawn your Lordships’ attention to the harm cased by the toxic chemicals used to treat the infestations of sea lice and the damage caused to the wild salmon’s DNA, which is specific to each river system, by interbreeding with escaped salmon from the open-net farms.

It is true that apart from one salmon farm in Northern Ireland, open-net salmon farms are at present confined to Scottish waters. However, we absolutely do not want them in England. I strongly support my noble friend in bringing back this amendment. I should also declare an interest as a salmon fisherman on the River Tamar in Devon. I strongly support the noble Earl, Lord Devon, in bringing up the problem of the oyster farming in the south-west river estuary systems.

Before I finish, I will ask the Minister again the question I asked in Committee concerning the unnecessarily restrictive licences issued for the shooting of cormorants which prey on wild salmon. Does he know how many gamekeepers are employed by the Crown Estate and how many cormorants they are licensed to shoot each year? I look forward to other noble Lords’ interventions and the Minister’s reply.

[The Earl of Kinnoull (CB)]

My Lords, I want to make two very short points relating to the reasoning the Minister gave in response to these amendments earlier. I should also say that my sympathies lie with my noble friend Lord Devon, in that I wish this were a wider aquaculture thing, and that the commissioners were able to consider the environment for all of aquaculture, for the reasons I gave in Committee; I will not repeat them.

The first logical problem I had with the Minister’s response was in relation to how many salmon farms there are and the intention of the current commissioners of the Crown Estate not to do any salmon farming. The difficulty I have is that salmon was an incredibly common thing to be fed to people in Victorian times. We are able to legislate on the Crown Estate for only the first time in 63 years, so if we are legislating for 63 years’ time, I feel that logically we need to think a bit more about protection further than however far out the current commissioners look, which, I imagine, is something like five years.

I feel that we are going to have to improve aquaculture around our waters because of the lack of calories that we are producing for our population. Therefore, it is poor logic to say that we do not need to legislate for salmon because we are not interested in salmon farming at the moment. I hope the Minister might address that in his remarks.

My second logical problem is that the Minister was able helpfully to list a number of statutory instruments in Scotland setting out the rules for salmon farms, but those all apply to salmon farms that have already been established. The problem I was told about by Crown Estate Scotland is that, because it is not really able to look at economic benefit, sometimes it might let through licence holders of lower quality that then create the problems. Then, as the noble Lord, Lord Forsyth, said so eloquently, they are not being held to account by these complicated rules because there is not really a police force. In any event, there is no one to fine, because often the reason that things have gone wrong is that the small entity that owned the farm has gone bust, even though it was, in fact, a subsidiary of a very big entity. That entire list is irrelevant. What matters is not what happens after you have established a salmon farm but the decision to establish it in the first place. I would be very interested in any help the Minister can give on those two logical issues.

Crown Estate Bill [HL]

Viscount Trenchard Excerpts

Committee stage
Tuesday 22nd October 2024 Lords Chamber

[Lord Strathclyde (Con)]

My Lords, I support my noble friend Lord Forsyth and have signed Amendment 37. We have now got to the stage of the debate where this amendment has been grouped with Amendments 37F and 37G from my noble friends Lord Leicester and Lord Douglas-Miller.

This is a really interesting debate, because much of what this involves is in Scotland. Of course, there are aspects of this which are devolved. It might be tempting for the Minister to say that it is nothing to do with him, but I think that would be unwise and unhelpful. I hope that the Minister is not tempted to do that, because Clause 3(1) states:

“This Act extends to England and Wales, Scotland and Northern Ireland”.


It would be helpful to know what discussions, if any, have taken place between the Minister’s department and Scotland Office Ministers about the kinds of issues that have been raised so eloquently by my noble friend Lord Forsyth. I say “eloquently” but I mean vividly as well and, in some cases, very movingly, too.

I am not one of those who has always been implacably opposed to salmon farms around Scotland. What I very much oppose is what my noble friend described and has described in his amendment as lowering “environmental impact” and lowering “animal welfare standards”. It must be in all our interests to ensure that these salmon farms, which provide so much economic activity in relatively marginal areas, should also be run in such a way that we can all be proud of what they are doing.

I look forward particularly to the speech on aquaculture that my noble friend Lord Douglas-Miller will make in a few moments, and that of my noble friend Lord Leicester on offshore energy installations and generation. In the meantime, I do not know whether the Minister will be able to accept my noble friend’s amendment—it would be great if he could—but what I suspect is more likely, and what I would like him to do, is to give a very positive encouragement to this amendment so that perhaps at a later stage the Government might come forward with their own amendment to put right what is clearly a wrong.

[Viscount Trenchard (Con)]

My Lords, I was unable to speak at Second Reading, but I am supportive of the Bill’s objective to enable the Crown Estate to continue to fulfil its core duty of maintaining and enhancing its value.

Amendment 37, as introduced so powerfully by my noble friend Lord Forsyth and to which I have added my name, is a massive improvement to the Bill. I also agree with what my noble friend Lord Strathclyde said in his impressive speech. I suspect that the main purpose of the Bill in the minds of its drafters was to ensure that the Crown Estate should continue to focus on activities which align with wider national needs, including energy security and sustainable economic growth, as the Explanatory Notes make clear. Indeed, the Bill specifically mentions its role as an enabler of offshore wind power generation.

Offshore wind power generation has a part to play in our energy mix, but it may receive too much emphasis as most offshore wind projects produce electricity too far away from where it is needed, and the costs of transmission and storage are often opaque. I would like to see more emphasis on small and so-called advanced nuclear reactors, which can be sited adjacent to data centres and industrial clusters where the energy is actually needed.

It would appear that the Government have introduced this legislation with only one major objective: to encourage and enable the Crown Estate to build more offshore wind farms. This is also evidenced by the announcement of the partnership with Great British Energy. I look forward to learning more about how GBE will operate; there are still relatively few details available. However, it is important in legislating to increase commercial activity in the seabed around our shores that restrictions must be placed on the development of salmon farms in England and Wales, especially given the damaging effects on nature and the environment resulting from salmon farms operated in coastal waters and sea lochs in Scotland. I declare an interest in that I fish in England on the River Tamar, as well as on the Rivers Laggan and Sorn on the Scottish island of Islay. We do not want to see the depleted populations of salmon migrating to English and Welsh rivers exposed to the additional threats posed by salmon farms.

Just over a month ago, my noble friend Lord Forsyth asked in Grand Committee what steps the Government were taking to protect wild salmon populations. I confess to having been underwhelmed by the reply to the debate given by the noble Baroness, Lady Hayman of Ullock, especially on two points: the need to monitor more strictly the harmful activities of some salmon farms, and the quite ridiculous restrictions placed on river-keepers’ ability to control stocks of predators such as cormorants. She noted that some predators are themselves protected so we had to be

“careful about how and when such predators can be managed”.—[Official Report, 12/9/24; cols. GC 170-171.]

I think that the noble Baroness is unaware that the cormorant population has increased from some 2,000 in the 1980s to over 62,000 today. Each bird requires over a pound of fish a day; why are they still protected under the Wildlife and Countryside Act 1981? Why does the EU still protect them under the birds directive? Does the Minister know how many gamekeepers are employed by the Crown Estate and how many cormorants they are licensed to shoot each year?

In replying to the debate last month, the noble Baroness the Minister said that the Government recognised the need for higher standards to be maintained in fish farms. The problems of excessive sea lice escaping fish possessing a very different genetic make-up and a very different DNA construct compared with indigenous fish were raised by several noble Lords in that debate, and spoken to especially powerfully by my noble friend Lord Forsyth just now. What discussions has the Minister had with the Crown Estate about fish farms and about moving to more sustainable methods of farming salmon, especially land-based farms, which are completely isolated from the endangered wild salmon population? As my noble friends Lord Forsyth and Lord Strathclyde have already said, this amendment would very much improve the Bill.

It is fortunate that, until now, English river systems have been, I believe, free of open-net fish farms, but I worry that the encouragement, implicit in the Bill, for the Crown Estate to increase commercial activity might change that—and I believe that this amendment is therefore absolutely necessary. I hope that the Minister will accept it.

[Baroness Jones of Moulsecoomb (GP)]

My Lords, I rise to support the amendment of the noble Lord, Lord Forsyth—words that I never thought I would hear myself speak. I was unable to attend the Second Reading but my noble friend Lady Bennett of Manor Castle did attend. After the previous day in Committee, I was approached by four different Conservative Peers who complained that a Green had not spoken on that day. One of those Peers was the noble Lord, Lord Forsyth, who has consistently, over the 11 years I have been here, complained that Greens speak too much. I hope to hear him express his gratitude today to hear a Green speak.

I support the amendment because, although I am highly suspicious of Conservatives and their environmental credentials, I believe that the noble Lord, Lord Forsyth, is absolutely genuine in his care for salmon—and I support that completely. This is a very sensible amendment, and I cannot see any reason for the Labour Government not to accept it, so I look forward to the Minister’s explanation of why they will not.

These issues of environmental impact and animal welfare standards should be an overarching staple of any check on any Bill or policy that the Labour Government bring forward. I am afraid that these days I have my doubts about the Labour Government’s environmental credentials. We have seen some horrific decisions already in the first 100 days, or three months, so I sincerely hope that the Labour Government will accept this quite simple but, I think, very necessary amendment.

Budget Responsibility Bill

Viscount Trenchard Excerpts

2nd reading & Committee negatived & 3rd reading
Monday 9th September 2024 Lords Chamber

[Viscount Trenchard (Con)]

My Lords, I congratulate the Minister on his appointment, if it is not too late to do so. I was delighted to learn from his interview with the Financial Times that he is working on breaking down

“very big obstacles to inward investment”.

This Bill is intended to contribute to financial stability; I imagine that the Government think that periods of relative financial instability have constrained foreign direct investment. That may or may not be true, but is it not also the case that foreign investors are more likely to invest in countries with relatively low rates of tax and relatively light and proportionate regulatory regimes?

The Government also make much of their democratic credentials but the effect of this Bill is to transfer power away from the democratically elected Government and the Chancellor of the Exchequer—accountable to the House of Commons—to an independent body that is, however well regarded it may be as a fount of prudential wisdom and the most formidable number cruncher bar none, still a quango. There are too many quangos and they have too much power, which has been relentlessly but steadily drawn away from Ministers. Most new substantive Acts of Parliament create a separate independent quango with its own offices, board of directors and substantial costs that are met by either taxpayers or consumers.

I was rather sceptical about the OBR when it was created by George Osborne. I did not believe that there was any chance that it would be a more accurate predictor of the consequences of any fiscal changes on the economy than the Treasury. Graham Stringer, speaking in another place last Wednesday, suggested that George Osborne created the OBR in order to trap an incoming Labour Government, restrict them and slow them down; he described it as

“an odd thing that we see this quango being gilded ”.—[Official Report, Commons, 4/9/24; col. 340.]

Is it not obvious that, as is reported in the media, the existence of the fiscal rules as adjudicated by the OBR severely limits the Government’s choices? Does the Minister agree that these limitations were behind the Chancellor’s decision to cancel infrastructure spending to meet public sector pay demands?

I am not sure that having the OBR really protects us at all from financial instability. I am pretty sure that the average voter does not have a clue what it is or what it does—but we have it, and we should make sure that it is as cost-effective as possible. I am sympathetic to the attempt made by my honourable friend in another place, Nigel Huddleston, who sought to amend the Bill to ensure that any changes in the fiscal rules would trigger a requirement for the OBR to issue a report. As the Government have committed to reduce the national debt, it is also critical that we understand the definition of debt in connection with the application of the fiscal rules. Without certainty in respect of these two points, it is hard to accept that the fiscal lock will be effective.

As was discussed in another place last week, it is also unclear what happens when a fiscal measure intended to be temporary—I understand that this means up to two years—runs on beyond that time limit. The example of income tax was given; it was introduced as a temporary measure in 1799 by Pitt the Younger. I ask the Minister whether there should be constraints on Ministers taking significant decisions on other measures that are not fiscal ones if it is considered that, severally or cumulatively, they may have an effect on GDP of over 1%.

Does the Minister not agree that it would be much better if the revisions to the Charter for Budget Responsibility had been published already? I agree with the noble Lord, Lord Eatwell, on this. Can the Minister tell your Lordships whether there will be an opportunity to debate the changes to be made to the charter in due course? The separation of the charter revisions from the Bill itself gives the impression of undue haste. I am tempted to agree with those who think that the Bill is not necessary and is as much concerned with political theatre as with making changes that will have any real positive effect on the operations of the OBR.

King’s Speech

Viscount Trenchard Excerpts

Monday 13th November 2023 Lords Chamber

[Viscount Trenchard (Con)]

My Lords, it is indeed an honour and a privilege to have this opportunity to debate the gracious Speech, delivered last Tuesday by His Majesty. I thank my noble friend Lord Callanan for his comprehensive introduction to this day’s debate. I also congratulate my noble friend Lord Gascoigne and the right reverend Prelate the Bishop of Norwich on their excellent maiden speeches.

I know that I should not dwell on the trade Bill, which permits our accession to the CPTPP, but I believe our accession will have a positive effect on the economy and that it is therefore appropriate to mention it in today’s debate. As many noble Lords are aware, Japan is the largest economy in the CPTPP. Its Government have been strongly encouraging us to apply for accession for five years for geostrategic reasons, as well as to build on our bilateral comprehensive economic partnership agreement, which already provides a framework that should enable an increase in our trade with Japan. That trade and the economy will also receive a boost from our trilateral joint project, together with Italy, to develop and build a sixth generation fighter jet.

I believe that the Government’s recognition of the need to strengthen the UK’s energy security should also lead them to take advantage of an extremely attractive opportunity to collaborate with Japan and mitigate the huge disappointment that resulted from the cancellation of both Hitachi’s Horizon nuclear power station project at Wylfa, which would have provided 2.7 gigawatts of generation capacity, and Toshiba’s NuGen project at Sellafield Moorside, which was to have created 3.4 gigawatts of additional capacity. The opportunity is provided by Japan’s need to find an international partner to commercialise its high-temperature gas-cooled reactor technology. The UK was identified as Japan’s chosen partner for this more than four years ago, but the Government have put it on the slow train by classifying it as an advanced modular reactor, along with several other technologies that are still on the drawing board or at an earlier stage of development. This technology’s demonstrator has been running for more than 10 years in Japan and is inherently safe.

The gracious Speech heralds the introduction of the Offshore Petroleum Licensing Bill, which I welcome. However, the best and cheapest way to achieve energy security without unduly burdening families and businesses is not to spend more and more on subsidising wind projects, both offshore and onshore, the subsidies for which account for a growing proportion of our increasingly unaffordable electricity bills. The best way to provide much-needed relief to struggling households and businesses is to increase very substantially the future target of 24 gigawatts of nuclear generating capacity by 2050. That figure needs to be double or more. Why can we not be more like France in this regard? Great British Nuclear’s remit needs to be widened to encompass our total energy requirement, rather than just the electricity grid.

I am disappointed that there was no mention of our financial services industry, and no commitment to a smaller state and lower taxes, both of which are desperately needed. The Financial Services and Markets Act enables the Government to take advantage of our freedom to introduce a more agile, less cumbersome regulatory regime to restore competitiveness and growth to the UK’s financial markets. How do the Government intend to achieve that? There is no time to lose, as was well illustrated by my noble friends Lord Bridges, Lady Noakes and Lord Altrincham in their powerful speeches.

I welcome the Government’s commitment to invest more in our gallant Armed Forces. I hope my noble friend will explain in her winding-up speech how the rather lacklustre programme outlined in the gracious Speech will bring about the desperately needed growth and investment in the economy.

Financial Services and Markets Bill

Viscount Trenchard Excerpts

Report stage
Tuesday 13th June 2023 Lords Chamber

Moved by

[Viscount Trenchard]

120: Clause 78, page 90, line 34, at end insert—
“(4A) The Treasury must make regulations under subsection (3) so as to bring section 1 and Schedule 1 into force for the purposes of revoking, within the period of two months beginning with the day on which this Act is passed, the provisions mentioned in that Schedule connected with Directive 2011/61/EU of the European Parliament and of the Council of 8 June 2011 on Alternative Investment Fund Managers.”Member’s explanatory statement
This amendment ensures that the retained EU Law which replaced the Alternative Investment Fund Managers Directive and associated legislation will cease to have effect no later than two months after the passage of the Bill.

--- Later in debate ---

[Viscount Trenchard (Con)]

My Lords, I have tabled Amendment 120 in the same form as I tabled Amendment 246 in Grand Committee, and I am again grateful to my noble friend Lady Lawlor for adding her name in support of it.

I confess to having been rather disappointed by my noble friend the Minister’s response when she replied to that debate. She started by reminding the Committee that throughout this Bill the Government are seeking gradually to replace all retained EU law in financial services,

“so that the UK can move to a comprehensive FSMA model of regulation”.—[Official Report, 25/1/23; col. GC 68.]

She said that the Government were prioritising those areas that offer the greatest potential benefits of reform and mentioned three such areas: the Solvency II review, the wholesale markets review, and the listings review undertaken by my noble friend Lord Hill of Oareford. She provided some statistics which show that the UK is the world’s second-largest global asset management centre, with $11.6 trillion of assets under management, representing a 27% increase in the past five years. My noble friend rightly suggested that the asset management sector is in good health. However, I am bemused that she and the Treasury officials who advise her have already forgotten the controversy over the introduction of AIFMD. She suggested that the Government were not aware of any evidence that reform of the alternative fund sector is a widely shared priority across the sector. She specifically said that it is the Government’s intention to move all retained EU law in the financial services field into the FSMA model and that this will apply to this area too, but not as one of the first wave of priorities.

I agree that reform in the three areas that the Minister recognises as priorities is also a priority, but all of them are more complicated and I do not believe that any of them are candidates for complete revocation without partial replacement. She may remember that I have long advocated the abolition of the unbundling provisions for research contained within MiFID II and have argued for many of the recommendations made by my noble friend Lord Hill with regard to listings. From the beginning, the Solvency II regulations were inappropriate and disproportionately severe for the UK insurance market, many of whose participants believed that they were a deliberate attempt by the EU to damage the London insurance markets. However, none of those pieces of legislation are, in their entireties, candidates for revocation without partial replacement. But AIFMD is such a candidate.

My point is that this Bill is principally an enabling Bill, and it hardly revokes any EU law right away. However, AIFMD was universally resisted by the industry, the regulators, the Treasury and the Bank. It was foisted on us. It is unnecessary, so why do we not get rid of it now? We do not need further consultations on it. It has diverted many small asset managers away from the UK over the years, and the costs and burdens involved in compliance with it are completely disproportionate. Many innovative, so-called alternative strategies are developed by small companies, and I am aware of many that have failed to bring their ideas to market or have been forced to merge with another firm because of these regulations. As I explained in Committee, the motivation for the unexpected introduction of AIFMD was political, driven by French and German allies of Mr Manuel Barroso, who was seeking reappointment as Commission President. Charlie McCreevy, the Internal Market Commissioner at the time, was opposed to the measure.

I wish the Bill had been designed to abolish without delay not just AIFMD but parts of MiFID II, EMIR, et cetera. But AIFMD is the one piece of anti-UK bureaucratic red tape foisted on us by the EU, and more than two years have passed since the end of the transition period. It is depressing that my noble friend suggested that it will, in due course, be replaced rather than revoked. Those who are interested in the story should read A Report on Lessons Learnt from the Negotiation of the Alternative Investment Fund Managers’ Directive by Dr Scott James of King’s College London, prepared for the British Venture Capital Association.

--- Later in debate ---

[The Parliamentary Secretary, HM Treasury (Baroness Penn) (Con)]

My Lords, I am afraid that, as my noble friend Lord Trenchard set out, his amendment has not changed since Grand Committee and neither has the Government’s response, which he so adeptly summarised on my behalf. We are not able to support the amendment for those reasons.

While I recognise all three of my noble friends’ strength of feeling on this issue, it is important that we do not inadvertently damage the UK fund sector or its access to international markets. However, I reinforce the Government’s commitment to revoking all EU law in financial services—but with prioritisation and process. I hope that all three of my noble friends will take heart from the fact that we are on the last amendment on Report and near the end of the process by which we can see the Bill on the statute book. We can then begin the process of the revocation of EU law and its replacement—or perhaps not, depending on the individual circumstances—with an approach that is guided by what is best for the UK and our financial services sector, to support growth in that sector and across the whole country. That is something that we can all support as a result of the Bill. I hope that my noble friend is able to withdraw his amendment.

[Viscount Trenchard (Con)]

My Lords, I thank my noble friend for her reply. I am slightly more reassured than I was by her reply in Committee. I nevertheless do not feel that she yet recognises the very clear point that this regulation was hugely controversial and was opposed by everybody involved in the financial services industry—there were no supporters of it. I am afraid that we have become rather inured to operating under it, but I can assure her that there are still very large sectors of the asset management industry that would be delighted if the Government would show that this is a priority area for revocation when she gets going with the job of revoking EU law and replacing it with a more reasonable UK-friendly alternative regime.

I thank my noble friend for her response. I also thank all those still in the Chamber for their patience in sitting here right to the end and sharing in this final amendment. I beg leave to withdraw my amendment.

Amendment 120 withdrawn.

Financial Services and Markets Bill

Viscount Trenchard Excerpts

Report stage
Tuesday 13th June 2023 Lords Chamber

[Lord Sharkey (LD)]

My Lords, I have added my name to Amendment 105 in the name of the noble Lord, Lord Moylan, and I congratulate him on his determination and persistence. I do not quite understand his dislike of Turkish barbers, but we can deal with that some other time.

His amendment’s simplicity and its direct modification of the regulation is an appealing approach, as is the absence of the word “review”. I was very pleased to see the government amendments in this group, chiefly because, of course, they are government amendments. I am very grateful for the Minister’s clear and long-standing commitment to resolving, or at least ameliorating, the problem. I have only a couple of observations about the government amendments.

The explanatory statement to Amendment 96 says that UK PEPs

“should be treated as representing a lower risk than a person so entrusted by a country other than the UK, and have lesser enhanced due diligence measures applied to them”.

The amendment itself, in proposed new subsection (3)(b), states that

“if no enhanced risk factors are present, the extent of enhanced customer due diligence measures to be applied in relation to that customer is less than the extent to be applied in the case of a non-domestic PEP”.

Neither of those offers a definition or sets an upper limit to what this lesser form of due diligence should be. Is that decision to be left entirely to the financial services companies? If it is, can we reasonably expect uniformity of definition and behaviour?

Why would we expect the banks to significantly change their current behaviour? Would it not be more likely that they will simply water down some minor aspect of the diligence they currently feel is due and carry on otherwise much as they do now? In a way, that is what is happening anyway. The banks mostly ignore the FCA’s current guidance, as set out in paragraph 2.35 of FG17/6. The FCA, in response to that, applies no sanctions. Nowhere in the government amendments is there mention of sanctions for non-compliance with the new arrangements.

Given the rather cavalier disregard some banks have displayed towards the current guidance, do we not need some sanction for future non-compliance, or a way of making the FCA properly enforce its own guide- lines? What use are guidelines if they are not enforced? I would be very grateful if the Minister could say how a workable definition of “lesser due diligence” is to be arrived at and how the new regime may be enforced.

[Viscount Trenchard (Con)]

My Lords, I declare my interest as a director of two investment companies, as stated in the register. I was interested to hear the remarks of my noble friend Lord Forsyth of Drumlean about American Express. He said that he had had a gold credit card with that company since 1979. Well, I had a gold card issued by American Express in 1978. I was very proud of having that card. I did not use it often, but it is one of those cards that clears automatically every month so there is no danger of running up unpaid debts and paying 20% or 30% interest.

In November 2021, I missed an email from them asking me for KYC information, including my passport details, proof of address and a utility bill, and I omitted to reply. I then got another email a month later—with no telephone call or letter through the post—saying that my account will be closed down. I telephoned them and, after waiting for three-quarters of an hour or so, I spoke to someone who agreed that they did not really need KYC information on me, but if I supplied it and uploaded it to their website, my account would not be cancelled, and all would be fine. I duly did that, but the account was still cancelled in about February 2022. I was not happy about this, because, as I said, I rather liked my gold card issued in 1978, so I took issue with them.

Over the past 15 months, I have spoken with them about six times; I have been on the chat function about six times. I now have two names of individuals and an email address I have been corresponding with, but my account is still cancelled—although they still send me a monthly statement through the post giving me a credit balance. I will print out the Hansard report of this debate and attach it to my next email to American Express, because I am not giving up on this.

[Lord Clarke of Nottingham (Con)]

I will not make a speech giving my experience of American Express, but it is remarkably like that of my noble friends Lord Trenchard and Lord Forsyth. I decided that I could not be bothered with such outrageous burdens being placed on me. Having had my card from some time in the 1970s, I have allowed them to cancel it. Having heard of my noble friend’s experience, I am rather glad that I just let it go and reverted to using my Barclays visa card on all occasions.

[Lord Naseby (Con)]

I will take my noble friends’ points further. My experience was identical to that of my noble friend Lord Forsyth. Frankly, I have cancelled the whole thing; Barclaycard does a far better job.

[Viscount Trenchard (Con)]

Both my noble friends have a much more sensible approach to this matter.

I echo the other remarks of my noble friend Lord Forsyth, whose Amendment 101 I was minded to support. I too am most grateful to my noble friend the Minister for listening to the opinions of your Lordships expressed in Grand Committee. I added my name to Amendment 227 in Grand Committee, tabled by my noble friend Lady Noakes. Her amendment was debated on 13 March alongside Amendment 215, tabled by my noble friend Lord Moylan and other noble Lords. I would have added my support to my noble friend Lord Moylan’s Amendment 105, but it was too popular and there was no room.

My noble friend the Minister will recognise the disproportionate difficulties which UK PEPs must endure as a result of the money laundering regulations 2017. On balance, I would have preferred to be excluded by virtue of being a UK citizen, but my noble friend has decided that exclusions will apply to domestic PEPs, which does not sound so nice, but will achieve the same outcome.

Unfortunately, it will take years for British citizens resident abroad who are connected to UK PEPs to be released from similar regulations in many different jurisdictions. For example, my son has found it impossible to be appointed as a bank account signatory in Taiwan and South Korea. However, my noble friend the Minister’s amendment should make the life of UK PEPs easier. I am interested to see whether, in a year’s time, the amendment proposed by my noble friend Lord Moylan will be the triumphant, most successful and best one of these. In any event, I am most grateful to her for taking up this point, as she said she would.

[Lord Eatwell (Lab)]

My Lords, we seem to be predominantly discussing personal experiences at the moment, so I declare an interest as the former chairman of the Jersey Financial Services Commission.

The definition of a politically exposed person in Amendment 96 refers to persons

“entrusted with prominent public functions by the United Kingdom”.

Presumably, that would not apply to the Crown dependencies, since they are not part of the United Kingdom. I think that this is a mistake; it should be corrected by the Government, given the important role many UK citizens play in the Crown dependencies and in the financial services industry in the Crown dependencies. Would the Minister agree to take this away and see whether the omission of the Crown dependencies is just an error that has been made in drafting this amendment.

--- Later in debate ---

I have not made a long and impassioned speech about Ukrainian soldiers unnecessarily running around the battlefield in soft-skin vehicles. Nevertheless, these are exceptionally important defence and security matters. If the Minister does nothing about it, they will surely bite her or some other Minister, hard, at some point in the future. My question for the Minister is this: is it the settled policy of His Majesty’s Government that the complete integrity of the money laundering regulations is more important than facilitating the supply of armoured fighting vehicles to Ukraine? I beg to move.

[Viscount Trenchard (Con)]

My Lords, I declare an additional interest as stated in the register as a provider of geostrategic advice to Safe Security (SSL) Ltd. I will not repeat the arguments so well put by my noble friend Lord Attlee, who has given much voluntary military service over the years. I have added my name to my noble friend’s Amendment 98, but I also support both Amendments 99 and 100.

The Export Control Organisation at the former Department for International Trade grants export licences for controlled goods for military purposes. Its online export licensing system is called SPIRE. The organisation’s website states:

“We advise that you register your company on SPIRE, benefits include: More Control … Time Saving”.


I understand that it takes much time to obtain a SPIRE licence, but I am not convinced that it saves any time in carrying out this control business. It is of course right that companies wishing to receive licences to conduct this kind of business should be properly vetted and undergo the most stringent checks. However, once they have done that and been granted SPIRE accounts, why do they then find that the money laundering regulations prevent banks opening accounts in order to execute this kind of business under any circumstances?

In Committee, my noble friend the Minister acknowledged that

“the government process for the granting of export control licences focuses on the end use of goods rather than the source of funds paying for them”.

She told the Committee that the Treasury has

“engaged with the Export Control Joint Unit, the Financial Conduct Authority and other partners on this issue”.

She said that she was

“not aware of a systemic issue”,—[Official Report, 21/3/23; col. GC 297.]

but would “act to address it” if the Government identified one. I rather think there is a systemic issue here, because banks run a mile when anyone, particularly an SME, tries to open a bank account to do this kind of business. Banks are not aware of the SPIRE system and give absolutely no recognition to any licence granted under it to a prospective customer. The result of this, at least in some cases, is that the business is being carried out in other jurisdictions, such as Finland, that do not apply these regulations in such a stringent manner. This obviously deprives the Exchequer of corporation tax revenues and results in the official statistics understating the extent of British support for Ukraine.

This does not apply only to military equipment but includes the provision of vehicles to be used as field ambulances. I want to ask the same question of my noble friend the Minister as that asked by my noble friend Lord Attlee: do the Government think that absolute observation of the money laundering regulations is more important than permitting those who are licensed to do this business to do so?

[Baroness Kramer (LD)]

My Lords, we should thank the noble Earl, Lord Attlee, for raising a set of significant issues. I have no specialist knowledge in this area, but I am very well aware that SMEs generally are disadvantaged under our current framework arrangements. As the Minister will know, individuals and micro businesses—usually a small sole trader or somebody of that ilk—fall within the FCA’s regulatory perimeter, but the SMEs that have just been described fall outside of it.

Therefore, where there are gaps or where their treatment is completely inappropriate, they have nowhere to turn. In those circumstances, they face significant disadvantage compared to their competitors across the globe. So I hope the Minister will understand that this is a reflection—I think “tip of an iceberg” was the correct term—of something that is quite systemic in many different ways, and an area where the Treasury, and the regulators, need to focus attention.

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[Lord Davies of Brixton (Lab)]

My Lords, I support the amendment. We will return to these issues on Thursday, when we discuss the regulations in Grand Committee. However, it is worth mentioning to the House the clash today between this Bill and a meeting of the Economic Affairs Committee, of which the noble Baroness, Lady Kramer, and I are members. By chance, the committee was interviewing the Governor of the Bank of England. The issue of this arrangement arose, and the governor was quizzed on these very issues. It will be useful on Thursday to explore further why and how this action was taken. The governor provided a justification, but, in the light of his remarks, it will be worth while exploring these issues in more detail when we get the regulations.

[Viscount Trenchard (Con)]

My Lords, the noble Baroness, Lady Kramer, and the most reverend Primate have retabled as a single amendment—Amendment 106 —the two amendments that were debated in Grand Committee: Amendment 241C on ring-fencing, and Amendment 241D on the senior managers and certification regime.

As my noble friend Lady Noakes said during that debate, these amendments are trying to set in stone for all time the conclusions of the report of the Parliamentary Commission on Banking Standards. Times change, and I cannot support this amendment because it introduces an inappropriate degree of rigidity.

As my noble friend also pointed out, the lesson of the HSBC and Silicon Valley Bank episode was that the ring-fencing rules were not, after all, considered inviolable. It was necessary to provide HSBC with special statutory exemptions from the ring-fencing rules to enable it to acquire Silicon Valley Bank. That exemption has brought permanent changes to the ring-fencing regime for HSBC which affect it alone. Can my noble friend say whether that means it has a permanent competitive advantage over rival ring-fenced banks in the UK?

In any case, I rather doubt whether the introduction of ring-fencing has reduced the risks to which bank customers’ deposits are exposed. I disagree that it is therefore important to make it very difficult to weaken the ring-fencing regulations in any way. As I said in Committee, I worked for Kleinwort Benson for 23 years, for a further 12 years for Robert Fleming and then for Mizuho. All three banks operated both commercial and investment banking businesses. Internal Chinese walls between departments made it quite impossible for customers’ commercial banking deposits to be diverted to risky investment banking activities. As I said in Grand Committee, there is no positive correlation between the two cash flows of retail and investment banking. It follows that universal banks are in fact gaining diversification benefits. There is little global evidence that splitting up the banks has made them less likely to get into trouble.

Following the Lehman shock, is it not interesting that the US Government did not go for the reintroduction of a kind of Glass-Steagall Act? I am not convinced that ring-fencing is a good thing, and in general I am opposed to market distortions of this kind, which actually make the consumer less safe rather than safer. Ring-fencing also makes it harder for smaller banks to grow, because they must compete for a small pool of permitted assets against the capital of the larger banks. Will the Government conduct a review of the effectiveness of ring-fencing?

As for the senior managers and certification regime, I am sceptical as to whether it has been effective, because there is no hard evidence that it has been used as the stick that was originally intended. Most well-run banks operate in a collegiate manner, and I think it rather odd to attempt to attribute personal responsibility to managers and directors of banks for the decisions and actions of those banks, beyond the responsibilities that the directors carry in any event.

The SMCR has especially inconvenienced foreign banks operating in London. As an example, I refer to the Japanese megabanks. It used to be their practice to assign a very senior executive to London to take responsibility for all the bank’s activities in the UK and in most cases the whole EMIR region. Often, this might be the executive’s last major management position before retirement, and would typically be for two to three years leading up to his retirement date. Such executives have typically worked for 40 years or more for that bank and have managed regulated financial businesses in Japan for many years. However, the FCA has consistently been extraordinarily slow in approving those executives under the SMCR.

Therefore, the Japanese banks have given up on this strategy and feel compelled to appoint as head of their UK and EMIR operations not the person most appropriate for the job, but the most senior person who has already been working in London for three years or so, merely in order to meet the criteria of the SMCR regime. This has caused considerable inconvenience, because it is unreasonable to send a trusted senior executive overseas for five or six years in the last years of his active career, rather than a more reasonable stretch of two to three years. I know that the SMCR is much resented by Japanese and other foreign banks and I ask my noble friend if she will agree to conduct a review of how it is being implemented by the FCA.

[Lord Eatwell (Lab)]

My Lords, I must say that, listening to the noble Viscount, Lord Trenchard, just now, I think he has given strong arguments in favour of this amendment—strong because what the amendment asks for is accountability to Parliament on the performance of the ring-fence and the SMCR. If that accountability existed, the noble Viscount would have the opportunity to present his views in a framework, which might then have greater effect than, I am afraid, his speech had without such a mechanism.

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There will be no cost to the Government in ensuring that mortgage prisoners are treated in the same way as borrowers in the rest of the market. Taken together, these changes will tackle the harm being caused to mortgage prisoners and their families. It is surely time for the Government to acknowledge their moral obligation to help solve the problem they have created and do something to relieve the plight of mortgage prisoners. I beg to move.

[Viscount Trenchard (Con)]

My Lords, I am pleased again to support the noble Lord, Lord Sharkey, in his noble quest to protect mortgage prisoners, as I did when he tabled a similar amendment in Grand Committee.

I appreciated the commitment of my noble friend Lord Harlech in his winding up that the Government would consider the proposals of Martin Lewis, the LSE and the APPG on Mortgage Prisoners that have been put forward. As he said, mortgage prisoners are the forgotten victims of the financial crash. The banks were bailed out at the expense of these borrowers. Furthermore, the margins between the Bank of England base rate and typical standard variable rates have expanded by more than double.

The problem is that the unlicensed lenders that bought the mortgage books of this group of borrowers do not offer the fixed-rate products that are available to borrowers in the active market. I stress that my motive in supporting the noble Lord’s amendment is to support this group of genuine mortgage prisoners, who are unable to switch to a new fixed-rate mortgage despite having been up to date and not missed any payments.

The Government have acknowledged the detriment caused to mortgage prisoners. This Bill offers an opportunity to provide them with some relief from the difficulties that they are trying to cope with. I hope to hear from my noble friend some concrete plan to assist them as the Government have done for many disadvantaged groups—as a result of the Covid pandemic, for example. I look forward to the Minister’s reply.

[Baroness Bennett of Manor Castle (GP)]

My Lords, I rise briefly, having spoken on this issue both in Committee and back in the last financial services Bill, just to put a human face on this. In doing that, I remind the Minister of the representatives of the mortgage prisoners whom we heard from at the meeting in the Treasury a couple of months ago.

The face I have chosen to put on is that of 63 year- old Jacqueline Burns, who spoke to the I newspaper in April about what her life is like now that she is a mortgage prisoner. She said:

“I am cutting back on food because I can’t afford to eat … I am so stressed out right now, I am at the end of my tether”.


The story, as Ms Burns told the I, was that she bought her home in Cambridgeshire for £69,000 in 2006 from SPML, which was an arm of Lehman Brothers. Ms Burns remembers that the broker “was really nice” and “pushed me … towards SPML”. We can all probably imagine why that was. The situation in which Ms Burns now finds herself is that she is on the standard variable rate and owes £109,000; remember that she paid £69,000 for the house. Because of the rise in interest rates, her mortgage payments have gone up from £333 a month to nearly £700 a month. She simply cannot pay.

She is in this situation because of a failure of government regulation, and because of arrangements made by the Government that made a significant profit. There is a huge moral responsibility. If we think about the costs that must be being imposed on the NHS by people who eventually become homeless and need council homes et cetera, it is clear that the Government should look not just at their moral responsibility; they also need to ensure that people get a fair deal and do not end up—even if the Government are not thinking of anything else—costing the taxpayer a great deal.

Financial Services and Markets Bill

Viscount Trenchard Excerpts

Report stage
Thursday 8th June 2023 Lords Chamber

As I said, while reporting is being introduced around important matters, that is not the same as independent probing to find out about what is not reported. That independent probing, such as it is, will now be left to Parliament’s committees. I appreciate the amendments that the Government have offered, which will be talked about in the next group, but it is clear that if we are to do the kind of scrutiny that gets anywhere near that which I was involved in in the European Parliament, it has to be funded so that the committees can have expert assistance and not just one clerk. That is particularly relevant when we look at the committees in this House of Lords. We already have history here of requests for a sub-committee being declined because there is competition for such things. That has to be fixed. It is no good us having legislation changed to enable us to do scrutiny and then us being impotent to do it, either because there is something else that is sexier for a committee or because there are not the resources to fund it properly.

[Viscount Trenchard (Con)]

My Lords, I too thank my noble friend the Minister for again responding to the strong views expressed within your Lordships’ House and for introducing the amendments that she has. I also agree with what my noble friend Lord Holmes said.

I also thank the noble Baroness, Lady Bowles of Berkhamsted, for the introduction of my noble friend Lord Bridges’ Amendment 64 and the others in that group. I supported his amendments in Grand Committee and am pleased to do so again today. My noble friend set out with his usual clarity, as did the noble Baroness, why we should support these amendments, and I will not waste your Lordships’ time in repeating them.

As my noble friend Lord Forsyth of Drumlean said in Committee, in order for Parliament to be able to hold the Treasury and the regulators to account, it is necessary to have an independent source of information. The proposed office would provide that. It is also welcome that the main duties of the office will include a duty to prioritise the analysis of regulations that restrict competition, negatively affect competitiveness and add compliance costs.

I do not believe that the new office would be a regulator of the regulators. Rather, it would be a means to ensure that the regulators really do get on with the job on which they are behind schedule—the promise made in 2016, in the general election manifesto and many times since that we will take advantage of our regulatory freedoms to eliminate or simplify those regulations which do not suit our markets and which place a disproportionate burden on market participants. We should not do this at the expense of standards, but to recast the rulebook in common law style will make it much easier for firms to maintain the high standards on which the regulators, the Treasury and noble Lords will all insist. The proposed office would greatly assist in ensuring that this will happen.

I also note—although we will discuss this in the next group—that, ideally, the office would deal principally with a Joint Committee of both Houses rather than two separate committees which might compete with each other. That would double the work and the costs that the office and the regulators would have to bear in carrying out their duties.

I believe the creation of an independent office such as the one proposed would be more helpful than the creation of a multiplicity of panels, which may be set up by statute but remain panels of the entities of which they form part. These are also duplicated between the two regulators, which doubles the cost and time taken by the regulators, and by the relevant committees of your Lordships’ House, in discussing with them.

I hope my noble friend the Minister is prepared to consider further the creation of something which is truly independent of the regulators. I think we have too much legislation by statute to require entities to negotiate with panels of which they are a part, which conceptually I find rather odd in any case.

[Lord Vaux of Harrowden (CB)]

My Lords, this is the first of two groups that seek to improve the level of parliamentary scrutiny and accountability. Arguably, I think the groups are the wrong way around from a logical point of view, but we are where we are. We had long debates on this in Committee, and it was clear that accountability and parliamentary scrutiny was probably the single biggest issue on which Members from across the House felt that the Bill fell woefully short, particularly given the huge amount that is being transferred to the responsibility of the regulators by the Bill.

We heard in Committee of the need for three legs to the whole process of scrutiny and accountability: reporting, independent analysis and the parliamentary accountability elements. This group is about the second leg—the independent analysis that will support the parliamentary scrutiny and accountability. The Government have listened, and that is welcome, but I am sure I am not alone in finding what they have proposed to be rather thin gruel.

The Government have introduced a number of amendments which enhance the role of the various policy panels, in particular the cost-benefit analysis panel. These are welcome, but I am afraid they really do not go far enough. Other noble Lords, especially the noble Lord, Lord Holmes of Richmond, have tabled further amendments to enhance and support the role of the panels. Again, that is very welcome but not, I think, sufficient. Despite these improvements, the panels remain appointed by the regulators and are not genuinely independent.

I remain strongly drawn to the amendments in the name of the noble Lord, Lord Bridges of Headley, introduced by the noble Baroness, Lady Bowles, to which I have added my name, to create a genuinely independent office for financial regulatory accountability. As I said, so much responsibility is being handed to the regulators that it must make sense to have a genuinely robust system of oversight over the regulators, not just responding to consultations about proposed changes to regulations that the Government have put into the Bill but a much more holistic oversight of the whole regulatory direction—something that deals with what the noble Viscount, Lord Trenchard, referred to as the multiplicity of panels. We need to draw this all together, and we need to be much more forward-looking about the direction of regulation, rather than backward-looking as to what is proposed.

This is such an important matter and such a huge volume of work that, if we are to scrutinise it effectively, we need to have something such as the proposed office for financial accountability to enable parliamentary committees and others to carry out the meaningful scrutiny. The noble Baroness, Lady Bowles, talked about the need for resources; we will come on to that in the next group, but she is quite right. This would really help because, if the independent information were available to the committees, it would save them the job of doing all the sifting and all the rest of it, and they would be able to concentrate on the bits that really matter.

Even with the amendments proposed by the Government, I do not think that we get anywhere near that real scrutiny. I am sorry to hear that the noble Lord, Lord Bridges, does not intend to push these amendments; I would have liked him to do so and would have supported him if he had. I hope that he will continue to use his influence as the chair of the Economic Affairs Committee to push for a similar approach.

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[Lord Vaux of Harrowden (CB)]

My Lords, I added my name to the amendments by the noble Lord, Lord Forsyth, so I thought I would stand and associate myself completely with his comments. I am delighted that the noble Baroness has effectively accepted the proposal. I will add my voice to say this: the subject of financial services is so huge, complex and important that it really requires a dedicated committee, whether a Joint Committee or committee of this House, not just to be part of, say, the Industry and Regulators Committee or the Economic Affairs Committee. It is much too big a subject to be covered by a committee that is not dedicated to the subject—and, if you have a dedicated committee, it must be properly resourced.

The Government rightly say that this is a matter for Parliament, but let us be realistic: they have huge influence on what happens there. I really hope that the Government and whoever the powers-that-be in this House who make these decisions are—even as the chair of the Finance Committee, this is still slightly opaque to me—are listening. This is so important. We must go ahead and must resource it properly.

[Viscount Trenchard (Con)]

My Lords, I strongly agree with what my noble friend Lord Forsyth has said. I also put my name to his Amendment 25 and other amendments, and I think that he is entirely right.

I also thank the Minister for responding to the concerns expressed on all sides of the House and for recognising that the parliamentary oversight of the regulators may need to be done by a Joint Committee of both Houses. Like the noble Lord, Lord Eatwell, I had also noticed that the amendment says not “or” but “and”, so there is a danger that there might be three committees doing the same thing, which would treble the work required by the regulator and, presumably, by the witnesses and experts who would be called to assist.

Also like the noble Lord, Lord Eatwell, I had the experience of serving on the 1999 Joint Committee of both Houses. This was established by resolution of your Lordships’ House and another place separately but was effectively driven, or at least strongly encouraged, by the Government at the time. The noble Lord, Lord Burns, was a most effective chairman of the Joint Committee, and it was a pleasure to serve on it under his leadership. An added benefit of that Joint Committee was that it enabled noble Lords with an interest in financial services to work much more closely with Members of the other place and concentrated the expertise of both Houses in one committee. I agree with the noble Lord, Lord Eatwell, that it would be a seriously bad outcome were there to be two committees tasked with this huge job.

I also refer to what the noble Baroness, Lady Bowles, said. I was in Brussels at the same time that she was chairman of the ECON, the economic affairs committee of the European Parliament. I often visited the European Parliament at that time. I was struck by the large number of staff and the great facilities available to the committees to carry out their role of scrutinising the legislative proposals brought by the Commission. We have not experienced that burdensome type of work: in the past, under the European model, all our financial services regulation was in primary legislation. It will now be given to the regulators. We therefore need more resources than have been available to us to scrutinise and supervise them properly. This is really important.

Noble Lords should also be grateful to the Minister for restoring equality of involvement between another place and your Lordships’ House. I thought that this was an unfortunate precedent for this type of legislation, particularly as many noble Lords have recent and continuing involvement with financial services firms. I look forward to the Minister’s winding up.

Financial Services and Markets Bill

Viscount Trenchard Excerpts

Report stage
Thursday 8th June 2023 Lords Chamber

[Viscount Trenchard (Con)]

My Lords, I declare my interests as a director of two investment companies, as stated in the register. I agree to some extent with what the noble Lord, Lord Eatwell, said, but I am not sure I can agree that the United Kingdom’s financial markets are uniquely peculiar in any sense. It is true that we do not have such a large domestic hinterland as the United States, but compared with financial centres such as Switzerland and Singapore, we have a rather larger domestic hinterland. I do not think what he said is therefore so relevant as he perhaps believes.

Furthermore, I agree that our high standards and what used to be called “my word is my bond”, which was what I was taught on day one when I went to work for Kleinwort Benson in the City, are very relevant. We have always been proud, and rightly so, of the very high standards and honourable way, in the main, in which our financial institutions have conducted their business. Indeed, competitiveness of the market depends, to a degree, on maintaining those high standards. But competitiveness also depends on having clear, comprehensible and proportionate regulation, and in recent years our regulation has become too cumbersome, particularly after the FSA was split into two regulators. If you are a dual-regulated company, it is a nightmare to have to report much the same information but in different formats to the two regulators. This is why the time spent by executive committees of operating financial companies in the City is so greatly taken up by compliance, reporting and regulatory matters, rather than innovation and the development of new businesses to attract more international companies to do their business in London, thus providing more revenue for the Exchequer and more jobs for British people, and indeed for non-British people to come and work here.

I support the Government’s amendments to strengthen the reporting requirements of the regulators, and Amendments 40 and 41 tabled by my noble friend Lord Holmes of Richmond. I agree with those noble Lords who have thanked the Minister most sincerely for her response to concerns expressed across the House about accountability and scrutiny. However, the British Insurance Brokers’ Association has expressed concern that the Bill, as drafted at present, largely allows the regulators to decide how to fulfil the reporting requirements for the competitiveness and growth objective.

Clause 37 acts as a backstop that allows the Treasury to compel additional reporting. What assurances can the Minister give that the Government’s response to the ongoing consultation on the appropriate metrics for the regulators to publish will lead to concrete changes to which metrics are published, given that the Bill will have been passed by the time the Government respond to the consultation? Given that it will not be possible to include any details of specific metrics or how the Treasury will exercise its powers in Clause 37 in primary legislation, how can the Government ensure that the consultation will lead to a sufficient challenge to the regulators, allaying concerns about them marking their own homework in their reporting? Will the Minister also give assurances that the Government’s response to the consultation will reflect the parliamentary debate in this area, where noble Lords have consistently stressed the need for extensive metrics to be published by the regulators with regard to the new objectives?

[Lord Davies of Brixton (Lab)]

My Lords, I do not want to run the risk of repeating myself, but I have made plain in previous debates my concern about the inclusion of the competitiveness objective in this legislation. Just to be clear, I think it has no place, but I welcome these provisions that there should be a report on the competitiveness objective. My concern is that the wording does not get to the heart of the problem that I believe exists, which is the interaction between the competitiveness objective and the other objectives. My reading of the way this is worded is that the report just has to talk about the competitiveness objective and does not have to say how it affected the other objectives. Maybe the Minister in her reply could allay my concerns and make it clear that the regulatory bodies are required to look across the whole gamut of their obligations when reporting on the competitiveness objective.

Financial Services and Markets Bill

Viscount Trenchard Excerpts

Report stage
Tuesday 6th June 2023 Lords Chamber

Moved by

[Viscount Trenchard]

8A: Clause 24, page 38, line 23, leave out “aligning with” and insert “having regard to”
Member’s explanatory statement
This amendment, and the amendment to Clause 24, page 39, line 2, in the name of Viscount Trenchard, amends the role of international standards in relation to the growth and competitiveness objective.

--- Later in debate ---

[Viscount Trenchard (Con)]

My Lords, Amendments 8A and 8B were originally tabled by my noble friend Lady Noakes. In moving Amendment 8A, I remind your Lordships of the interesting debate on this matter in Committee on 1 February. I repeat that we are, in many fields, especially financial services, a leader in the formulation of international standards and best practice. The FCA says on its website:

“We contribute to and implement international standards, and supervise and enforce rules based on them in the UK”.


I believe that the UK’s influence in IOSCO, the recognised standard setter for securities regulation, has been enhanced now that we sit at the table in our own right, rather than as a member state of the EU. The same is surely true with regard to our influence within the International Association of Insurance Supervisors.

I support the new competitiveness and growth objective—although I think it should have been of equal importance with the regulators’ primary and operational objectives—but I continue to believe that it is rather curiously drafted. I am still not sure what the Government mean by

“aligning with relevant international standards”.

First, the word “relevant” is very subjective. We all know that there is often a lack of consistency as to what different people consider relevant. I already worry that the competitiveness and growth objective will be subjugated to the primary objectives, depending on which standards the regulators may choose to exempt them from the need to have regard to.

Secondly, surely the amendment is drafted in a way that gives too much weight to policies developed outside the UK, which are claimed by some to be international standards. Does my noble friend want to see a position where the PRA, for example, can ignore the secondary objective on the grounds that it is following international standards, where those standards are not core to the primary objective? International standards are a highly subjective concept and it is not at all desirable for the UK to have to adhere to everything that claims to be an international standard. The competitiveness and growth objective is already circumscribed by its status as a secondary objective. Using the PRA as an example, this means that it has only to,

“so far as reasonably possible, act in a way which … advances the competitiveness and growth objective”.

If the PRA considers that adherence to certain international standards is necessary, they are already covered by its primary objective. However, if an international standard is not necessary for the primary objective, why should such an international standard crowd out the competitiveness and growth objective?

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[Lord Eatwell (Lab)]

My Lords, I will address the amendments proposed by the noble Viscount, Lord Trenchard. In some way, they are part of the whole privileging of the competitiveness objective, but I do not want to talk about that. I will talk specifically about his concern about aligning with international standards.

I suggest that the success of the development of international financial markets since the 1970s has been predicated entirely on the development of an international regulatory system. It was first stimulated by the Herstatt Bank crisis in the summer of 1974, which led to the establishment of the Basel committee on settlement risk. Since then, we have developed a whole international financial infrastructure of regulation—the Basel committees, IOSCO and, most importantly today, the Financial Stability Board. That, by the way, was a British idea that has greatly aided the stabilising of international financial markets.

These committees, as the noble Viscount, Lord Trenchard, pointed out, are not part of any form of international law or treaty. They are what is known in the trade as “soft law”. They are laws that countries agree it is in their mutual benefit to align with, and failing to align is against the benefit of individual countries as well as of the system as a whole. It has been the judgment of His Majesty’s Government that it is in the best interests of the United Kingdom to align with international standards.

But there are other international standards with which we align. Take the Paris-based Financial Action Task Force. Would the noble Viscount, Lord Trenchard, suggest that we do not align with the international anti-money laundering police? It is essential that we agree to align with this framework of international financial regulation, which we have been such an important element in creating.

[Viscount Trenchard (Con)]

My Lords, I am grateful to the noble Lord for giving way, but I want to correct him for criticising me for opposing all international standards. The ones he has chosen to mention are not ones that I objected to specifically. I was just saying that in general international standards are not defined.

[Lord Eatwell (Lab)]

I suggest to the noble Viscount that, in fact, the whole corpus of international soft law on finance is generally known in the trade as the international standards, and those who work in the regulatory community would immediately relate to the proposals of those particular institutions. As the noble Lord pointed out, occasionally Basel standards have not been followed. This is true in the United States, where only international competitive banks follow Basel committee standards. The US has learned painful lessons over the last year or so with the collapse of Silicon Valley Bank and others that did not follow Basel standards. The relaxation of standards was one of the elements that led to that particular collapse. Alignment with international standards and the institutions which—I say again—Britain has done so much to help develop is an important part of the maintenance of financial stability in this country.

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[Baroness Penn (Con)]

It is a joint report from the City of London and the Government that provides analysis of a number of the areas that the noble Baroness covers in her amendment.

I was just moving on to the Financial Stability Report, which is published twice a year by the Bank of England’s Financial Policy Committee, setting out the committee’s latest view on the stability of the UK financial system and what the committee is doing to remove or reduce any risks to it and make recommendations to relevant bodies to address systemic risks.

I hope that noble Lords will agree, although I am sure that not all do, that a well-regulated and internationally competitive financial services sector is a public good for the UK and something that we should continue to support. I therefore hope that my noble friend Lord Trenchard will withdraw his amendment and that other noble Lords will not move theirs when they are reached.

[Viscount Trenchard (Con)]

My Lords, I thank all noble Lords who have taken part in this short debate. The noble Baroness, Lady Bowles of Berkhamsted, talked about the senior managers and certification regime. Does she know that the Japanese banks have given up sending senior directors to London because they cannot get authorised, so they have to promote people who are already in London? All three main megabanks are now doing that because they are so exasperated with the difficulty of getting their senior officers approved by the FCA.

I entirely agree with what the noble Baroness said about the problem of the uneven playing field between listed companies and listed investment trusts. That is an urgent problem that needs to be addressed now. The FCA, with its current culture, is just not responsive to that type of situation. Everybody is aware of that, and it is why some of us are pushing so hard for a more determined effort to change things. I think that if the competitiveness and growth objective had been given equal status with the stability objectives and the other consumer protection objectives, we might have got somewhere nearer that, but I know that not all noble Lords agree.

The noble Baroness, Lady Bennett of Manor Castle, and the noble Lord, Lord Davies of Brixton, supported Amendment 10 to leave out the competitiveness objective and Amendment 112 to reduce the size of the financial services sector. If you leave out the competitiveness objective, you will not have much of a financial services sector, so we would not need both amendments.

The noble Lord, Lord Eatwell, always speaks with great authority. We served together on the original Joint Committee on Financial Services and Markets under the excellent chairmanship of the noble Lord, Lord Burns, in 1999, and it was hugely successful. I take the noble Lord’s point, but I still do not think that we should be bound to align to an international standard just because it is a Basel committee standard; we should have to have regard to it. I say to the noble Lord, Lord Livermore, that some of the other jurisdictions that he mentioned do not subordinate their competitiveness objective to the main stability objectives.

I am grateful for my noble friend’s reassurance and beg leave to withdraw my amendment.

Amendment 8A withdrawn.

Financial Services and Markets Bill

Viscount Trenchard Excerpts

Report stage
Tuesday 6th June 2023 Lords Chamber

[Lord Sharkey (LD)]

My Lords, I shall speak first to Amendment 1 and then to Amendments 116 and 117. The Bill gives the Ministers and regulators power to shape our financial services regimes, but it does not allow for any meaningful parliamentary scrutiny of the changes that Ministers and regulators may introduce into law. This is another very clear example of what the noble Lords, Lord Hodgson of Astley Abbotts and Lord Blencathra, and their committees, warned about—the significant and continuing shift of power from Parliament to the Executive. The DPRRC report says in its introduction:

“We have concluded that it is now a matter of urgency that Parliament should take stock and consider how the balance of power can be re-set”.


It goes on to highlight the problem of what it calls

“Legislative sub-delegation of power: where ministers can confer powers on themselves or other bodies”,

which is precisely what this Bill is about. The report, called Democracy Denied?, goes on to say:

“we conclude that conferring legislative sub-delegation of power is potentially a more egregious erosion of democratic accountability than a simple delegation to a minister”.

The Minister is aware of these concerns. In our previous discussions, she has noted, by way of compensation no doubt, that there will be opportunities for Parliament to be consulted and for post-hoc accountability reviews. Neither of those things, desirable though they may well be, is a substitute for meaningful legislative scrutiny. This scrutiny is what Amendment 1 proposes to introduce, and I am very grateful to the noble Lords, Lord Hodgson of Astley Abbotts and Lord Lisvane, and the noble and learned Lord, Lord Thomas of Cwmgiedd, for adding their names to the amendment.

The amendment is based on the Amendment 76 of the noble and learned Lord, Lord Hope, to the REUL Bill, which your Lordships agreed to on 17 May by 231 votes to 167. This amendment was discussed at ping-pong in the Commons 10 days ago, and was rejected by the Government on three grounds. The first was that the Government do not accept the principle that Parliament should be able to amend statutory instruments. The second was that the scrutiny proposed would take up too much parliamentary time. The third is the really rather astonishing and disappointing view of the reach and capability of our Joint Committees. I shall not comment on that last point, except to say that it is obviously mistaken, as many of us here could attest.

The objection against taking up too much parliamentary time seems pretty odd, as scrutiny is obviously the essence of our role. In any case, that objection may, if one is charitable, have some force in the case of the monster that is the REUL Bill, but surely has none in the case of this much shorter and more coherent Bill.

As for the Government’s not accepting the principle that Parliament should be able to amend statutory instruments, that surely needs qualification. We have heard that qualification discussed in the preceding business. There are two examples of Acts of Parliament containing provisions for the statutory instruments that they generate to be amended—the Census Act 1920 and the Civil Contingencies Act 2004. Both those Acts allow for SIs to be amendable in the way that our Amendment 1 proposes, only by agreement of both Houses. There are no free-standing or wide-ranging powers.

The Government seem to be sticking to this rather confected set of objections to parliamentary scrutiny. Noble Lords who were here for the preceding ping-pong on the REUL amendments from the noble Lord, Lord Anderson, will have heard the repeated resistance to parliamentary scrutiny. That is despite the SLSC’s calling for the REUL Bill to contain

“an enhanced scrutiny mechanism that enables Parliament to decide that an instrument makes changes of such policy significance that the usual ‘take it or leave it’ procedures—even if affirmative—relating to statutory instruments should not apply but that a further option should be available, namely a procedure by which the Houses can either amend, or recommend amendments to, the instrument”.

The Bill before us is essentially a financial services carve-out from the REUL Bill and it suffers from the same lack of effective scrutiny provisions. What was necessary for parliamentary scrutiny of the REUL Bill is also necessary for this. Our Amendment 1 responds to the SLSC’s call. It brings in a sifting process. It allows a Joint Committee discretion over what constitutes substantial change to preceding retained EU law. It requires a debate on the Floor of each House if the Joint Committee makes a finding of substantial change or that there has been insufficient public consultation. It also allows SIs generated by the Bill to be amended if, and only if, both Houses agree. This is not a prescription for frequent and casual intervention but a narrowly drawn means of altering SIs on those rare occasions when both Houses find the case compelling.

The amendment returns a measure of meaningful parliamentary scrutiny to the Bill. It allows careful parliamentary scrutiny of proposed changes to our critically important financial services regime. Without it, there would be none; Ministers and regulators would decide, and Parliament would be bypassed yet again.

I turn to Amendments 116 and 117. These amendments, taken together, would allow either House to insist on an enhanced form of scrutiny for SIs it deemed likely to benefit from more detailed examination and debate, as well as from recommendations for revision. The usual SI procedures, as we all know, do not allow this and do not constitute parliamentary scrutiny in any meaningful sense: we cannot amend and we do not reject. The super-affirmative procedure set out in Amendment 117 would allow a measure of real, detailed scrutiny, a means of hearing evidence and a means of making recommendations to Ministers. It would not allow the amendment of SIs: that power remains exclusively with the Minister.

Identical amendments were debated in Committee. The noble Baroness, Lady Noakes, who is not in her place, added her name to the amendments and spoke in support; so did the noble Viscount, Lord Trenchard, and the noble and learned Lord, Lord Thomas of Cwmgiedd. The noble Lord, Lord Tunnicliffe, also not in his place, commented:

“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”.—[Official Report, 23/3/23; col. GC 329.]


I think he meant that as a compliment, but it is not entirely clear.

The super-affirmative procedure is appropriate here because, for example, Clause 3 allows for very significant policy changes to be made that could be significant in the context of the restatement of EU law, as the noble Baroness, Lady Noakes, noted in the debate. The Minister thinks that the super-affirmative procedure is unnecessary and promises instead that

“the Government will seek to undertake a combination of formal consultation and informal engagement appropriate to the changes being made”.—[Official Report, 23/3/23; col. GC 331.]

That is not even a real commitment, with the phrase “will seek to undertake”, and it is certainly nothing close to meaningful parliamentary scrutiny. We need the super-affirmative procedure, and I commend these amendments to the House. I beg to move Amendment 1.

[Viscount Trenchard (Con)]

My Lords, I declare my interests as a director of two investment companies as stated in the register. I listened with interest to the noble Lord, Lord Sharkey, in bringing forward his Amendment 1 and other amendments. I feel strongly, as he has suggested, that what has been agreed for the REUL Bill should also be acceptable for this Bill. Indeed, one of my later amendments makes the same point. As he said, the Bill is in some sense a carve-out from the REUL Bill dealing exclusively with financial services. As for his other amendments, I will not repeat the arguments I made in Committee, but I look forward to hearing whether the Minister can give any greater assurance to the House today than she did at that time.

[Lord Hamilton of Epsom (Con)]

My Lords, I support Amendment 1. My noble friend Lord Hodgson of Astley Abbotts does not seem to be with us, but I have collaborated with him over the retained EU law Bill, and I know his views are that Parliament has been collectively losing control of its agenda and that parliamentary sovereignty has been undermined. He has been chairman of the Secondary Legislation Scrutiny Committee, and he notices that more and more business goes through both Houses under statutory instruments. That is not really what we should be going along with in either House, and it is disappointing that the other House does not seem to worry too much about the fact that it is losing its sovereignty and its power to control legislation. That seems to be a fact we have to deal with.

I have repeated this very often, but unlike most people in your Lordships’ House, I campaigned to leave the EU. I often wonder what would have happened if the people who were really concerned about the fact that we were getting all this legislation from the EU—inevitably, I accept—which we could neither amend nor reject knew that we would substitute it with stuff in respect of which the Executive are given all the power that had previously lain in Brussels. If we had campaigned in the country and told people that that was what was going to happen, I am not at all certain that the referendum would have been won by the leave campaign.

It strikes me as very odd that when we talk about taking back control, it seems to exclude Parliament. It does not seem to have a desire—particularly the other place—to actually take back control of legislation, which is what I think we should be doing. It is time we brought this to a halt. I do not have any great optimism that that is going to happen, but I would be more than happy to support the noble Lord’s amendment if he presses it to a Division.

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Moved by

[Viscount Trenchard]

3A: After Clause 6, insert the following new Clause—
“Report on retained EU law
(1) Within six months of the passing of this Act and every six months thereafter the Treasury must prepare a report containing, for each of the items of retained EU law listed in Schedule 1, whether it has been revoked and, if not, when it is expected that it will be revoked.(2) The report must be laid before each House of Parliament.(3) This section ceases to have effect after a report showing that all the items of retained EU law listed in Schedule 1 have been revoked.”Member’s explanatory statement
This amendment requires a progress report on the revocation of EU law covered by the Bill.

[Viscount Trenchard (Con)]

My Lords, Amendment 3A requires the Treasury to report every six months on the progress it is making in its challenging task of revoking, improving or retaining each of the items of retained EU law listed in Schedule 1 to the Bill.

This amendment and my other amendment in this group were originally tabled by my noble friend Lady Noakes, who is not in her place today. She is providing support to her husband, who is to undergo an operation this week, and she is unable to participate in our Report debates. Noble Lords on all sides of the House will miss her wise counsel and informed contributions to the Bill and to other Bills before your Lordships’ House. I am sure all will join me in sending our very best wishes to my noble friend’s husband for a successful procedure and a full recovery, and we look forward to welcoming her renewed participation in our work when she is able to resume her attendance.

In Grand Committee my noble friend moved an amendment that would, on 31 December 2026, have activated an automatic revocation of the legislation listed in Schedule 1 in order to incentivise the Treasury and the regulators to get on with the job. This would have been more consistent with the scheme of the retained EU law Bill as it was then drafted. Needless to say, my noble friend the Minister rejected the sunset clause and, during that debate, we learned that, while the Government have identified some priority areas, they have absolutely no plan or timetable for completing the task.

Noble Lords will be aware that my noble friend Lord Callanan indicated the Government’s support for my noble friend Lady Noakes’s recent amendment to the REUL Bill, which was adopted by your Lordships’ House at Third Reading. This requires reports on progress and future plans for retained EU law, until the Bill’s powers expire—at which point anything left remains on the statute book as assimilated law. The amendment also requires the Government to keep the retained EU law dashboard to be updated until 2026. These requirements seem to cover financial services legislation, so we shall have visibility of the status of that legislation and the Government’s plans until the last report under the retained EU law Bill, the report to 23 June 2026. In addition, there will be no obligation to update the dashboard after that date.

--- Later in debate ---

[Baroness Penn (Con)]

My Lords, I join noble Lords in wishing my noble friend Lady Noakes and her husband well, and I look forward to her return to this House. As my noble friend Lord Trenchard noted, she worked with our noble friend Lord Callanan on amendments to the retained EU law Bill to introduce similar reporting standards to those in Amendment 3A. I can confirm that the reporting requirements in the retained EU law Bill already apply to the retained EU law repealed through Schedule 1 to this Bill, so the reports that the Government prepare under that obligation will include the Treasury’s progress in repealing retained EU law in Schedule 1.

I reassure my noble friends that through the Bill the Government are asking Parliament to repeal all legislation in this area, and we expect to commence it fully. The revocation is subject to commencement, and each individual piece of legislation listed in the Bill will cease to have effect only once the Treasury makes an SI commencing the repeal. As I noted in Committee, this is being taken forward in a carefully phased and prioritised way to deal with retained EU law, splitting it into tranches and prioritising areas that will provide the most concrete benefits to the UK. The implementation will take place over a number of years, which means that we are prioritising those areas with the greatest potential benefits of reform. We have demonstrated intent and action in this area. We have conducted a number of reviews into parts of retained EU law, including the Solvency II review, the wholesale market review and the UK listings review by my noble friend Lord Hill of Oareford, which my noble friend Lord Trenchard referred to in his Amendment 3B. The whole- sale markets review reform in Schedule 2 demonstrates the Government’s pace and ambition for reforming retained EU law, and that is very much the case.

I turn to Amendment 3B. Of course the Government must think carefully before choosing to replace EU law, and understand the impact of any replacement. The Government have consulted extensively on their approach to retained EU law relating to financial services, and there is broad consensus in the sector behind the Government’s plans, as I have already noted. However, I do not believe that an explicit mandatory statutory obligation to consult impacted parties is required. The powers in the Bill to designate activities under the designated activities regime are closely modelled on the secondary powers which already exist in FiSMA, especially the power to specify regulated activities. This existing power does not have an explicit statutory obligation to consult. I think the Government have already demonstrated that they will always consult when appropriate and will always approach regulating a new activity carefully. We can see this in the Government’s consultation on the regulation of funeral plans in 2019, and in draft legislation related to “buy now, pay later” published in February.

My noble friend Lord Trenchard referred to the listings review and implementing its results but, again, the Government have already consulted extensively. They launched a consultation in July 2021 that ran until September this year, and the proposals on listing reforms received broad support across the industry. The Government have already published a draft statutory instrument to illustrate how the new powers in the Bill could be used to bring forward a new regime in this area, so I believe that the Government have already demonstrated that they will consult properly when using the regulated activities order power. Therefore further amendments in this area are not necessary, so I hope my noble friend is able to withdraw Amendment 3A and will not move Amendment 3B.

[Viscount Trenchard (Con)]

My Lords, I thank all noble Lords who have taken part in this debate. In particular, I thank my noble friend Lady Lawlor for her support, and I entirely agree with what she said about the need to move back to our former common law-based approach. The noble Baroness, Lady Kramer, suggested that this would mean not just common law but going back to a simple, light-touch regulatory system. I am advocating going back not to a light-touch regulatory system but to a system based on common-law principles which also maintains the high standards for which the City is renowned across the world. Such a system is pursued also in the United States, Australia and many other countries with which we are doing more and more in financial services, including many CPTPP countries.

I am nevertheless grateful for the noble Baroness’s support, at least on Amendment 3B. I was not sure about the noble Baroness, Lady Chapman, but she was at least interested in both amendments and, I think, supported the need for increased accountability to Parliament.

I speak to the financial services industry and know many people in it. I have some outside interests, which I have declared, which involve me in it. I simply do not agree that all participants in the industry blame Brexit for the difficulties it faces. Rather, there are large parts of the financial services industry—in banking, insurance and asset management—which are waiting for us to reap the benefit of the upside of being free to develop our own regulatory regime. We have suffered the downside, which we knew would happen; we believe that reaping the benefits of the upside will be necessary to ensure that London can maintain its leading position. I very much hope that we can rely on the support of the parties opposite, as well as my noble friends, in seeking to ensure that that happens.

I am to some extent reassured by my noble friend the Minister’s words and her response to these amendments. She went further than I have heard her go before in saying that it is the Government’s intention to repeal all the EU retained law in—I think—Schedule 1, and that she has prioritised some areas. However, there are other areas that she has not prioritised. One of the those is the alternative investment fund managers directive and all its associated legislation, which was opposed universally by practitioners and—at the time—by the Treasury as well as by the regulators. Nevertheless, it was foisted on us by the EU for political reasons. I am very disappointed that few people in the Treasury seem to recognise how many small investment management companies have gone out of business or not succeeded in introducing new products because of the cost and burden of complying with this regulation. This is why, later in the Bill—I will not speak to it today —I have again brought back my amendment dealing with that issue. It is just one example of bits of EU legislation that, six years after the Brexit vote, I believe this Bill should deal with immediately.

I thank my noble friend for her partial reassurance and, in the circumstances, I am happy to withdraw my amendment.

Amendment 3A withdrawn.