House of Lords (Hereditary Peers) Bill

Viscount Trenchard Excerpts

2nd reading
Wednesday 11th December 2024 Lords Chamber

[Viscount Trenchard (Con)]

My Lords, it is a great pleasure to follow my noble friend Lord Murray, with whose excellent speech I find myself in complete agreement. I thank the noble Baroness, Lady Smith of Basildon, for her introduction of the Bill. I ask, however, whether she agrees that the Bill appears to lead to an undemocratic result that Parliament never contemplated when the Parliament Act 1911 was enacted?

The preamble to the Parliament Act 1911 is interesting. Its second sentence reads as follows:

“And whereas it is intended to substitute for the House of Lords as it at present exists a Second Chamber constituted on a popular instead of hereditary basis, but such substitution cannot be immediately brought into operation”.


Parliament’s intention, as expressed in that preamble was to move a democratic direction. There was to be, first, a future second Chamber based on a popular rather than hereditary basis and, secondly, future legislation to limit and define the powers of the new second Chamber.

Over 100 years later, neither of these events has come to pass. The current Bill will result in an entirely appointed body—the opposite of a body constituted on a popular basis as contemplated in 1911. The idea that an Act of Parliament in 2025 can result in a less democratic body than was contemplated by Parliament in 1911 will strike many as odd. Some may regard it as a matter that would profit from further reflection, perhaps under the aegis of an all-party constitutional conference, as was attempted in 1910 and 1948 in the run-up to the Parliament Acts of 1911 and 1949.

In the debate held in your Lordships’ House on 22 July 1999 on the Standing Orders to be introduced to fill vacancies among the excepted hereditary Peers, the late Lord Bledisloe proposed an amendment which would have allowed the political party groups to enfranchise their life Peers as well as their hereditary Peers in hereditary Peers’ by-elections. I was struck by Lord Bledisloe’s observation:

“One of the unfortunate consequences of the debates on the House of Lords Bill is that, for the first time, Members of the House have been distinguished from each other by virtue of the fact that they are hereditary or life Peers. That division is a great pity and every effort should be made to ensure that it disappears as quickly as possible after the Bill is passed. The process would be greatly assisted if the House recognised that all its Members are of equal value and have a right to an equal say in the election”.—[Official Report, 22/7/1999; col. 1144.]


That division has unfortunately again reared its ugly head as a result of this Bill. Noble Lords are allocated to serve on their Front Benches, to serve on Select Committees, or to stand as candidates for positions as officers of all-party groups, irrespective of the route by which they entered your Lordships’ House.

The Leader of the House has said that this Bill represents a manifesto commitment. That is a little disingenuous. Labour’s manifesto commitment was to do four things now, and then later to consult on proposals to fulfil its commitment to replacing the House of Lords with an alternative second Chamber that is more representative of the nations and regions. Can the noble Baroness explain why she thinks that the Bill before your Lordships today does not in this regard do the precise opposite of what the manifesto argued for?

I believe the former Lord Chancellor, the noble and learned Lord, Lord Irvine of Lairg, was being honest when he declared that the 1999 compromise

“would guarantee that stage two would take place”,

as my noble friend Lord Northbrook and others have said.

“So it is a guarantee that it will take place”,—[Official Report, 30/3/1999; col. 207.]

he said. The binding agreement envisaged that stage two would involve a move to an elected House, or at least the adoption of a significant directly or indirectly elected segment within a reformed House. If such a reform were now to be brought about, as was promised, I would be keen to stand for election in order to continue my work in this place, which I have always regarded as the most enormous privilege.

The Lord Privy Seal rued that the change commenced 25 years ago has still not been completed. So she should withdraw this Bill and replace it with one which would actually lead towards the completion of that process. This would add to the limited legitimacy your Lordships’ House enjoys, which derives in part from history—that we have had a House of Lords for many centuries—and from the effectiveness with which we perform our work of scrutinising and improving legislation.

Human Rights Violations: Consular Assistance

Viscount Trenchard Excerpts

Wednesday 30th October 2024 Lords Chamber

[Lord Collins of Highbury (Lab)]

I can reassure the noble and learned Baroness that, yes, that is the case. We are determined to continue to offer the best possible service to all our citizens who are affected by this. I have been involved in some individual cases myself, so she can rest assured about that.

[Viscount Trenchard (Con)]

My Lords, for the Government to provide consular assistance to British nationals abroad, it is obviously essential that they know who they are. Some years ago, when I lived in Japan, British nationals were required to register their names and addresses with the embassy. I was surprised to hear that that has long since ceased to be the case. Does the Minister agree that it makes sense to reinstitute such a requirement?

[Lord Collins of Highbury (Lab)]

I was just looking at the eligibility criteria and it is quite clear that we offer this service to British nationals overseas. They establish their rights through establishing evidence of their citizenship. I am not sure what further steps we might need to take. The important thing is that people who are resident abroad can rest assured that our consular services will be available to them.

House of Lords: Governance

Viscount Trenchard Excerpts

Wednesday 8th December 2021 Grand Committee

[Viscount Trenchard (Con)]

My Lords, it is a great pleasure to follow my noble friend Lord Robathan, with whose every remark I strongly agree. I thank the Senior Deputy Speaker for introducing this important debate. It is clear that there has been growing unhappiness expressed by many noble Lords as to how the House is run and how decisions are taken. I recognise how difficult it has been to operate the House during the pandemic; credit is rightly due to those who worked hard to ensure that the hybrid House could continue to perform its essential roles of scrutinising legislation and trying to hold the Government to account. We had all hoped that the pandemic would be behind us by now but, alas, the omicron variant has delayed the removal of the remaining precautionary measures. However, I am optimistic that the mutated virus causes infections no more serious than those with which we are accustomed to living anyway, without having to restrict personal freedoms, which the British people will not stand for.

I have always believed that your Lordships’ House is self-regulating, and that decisions to change working practices and the way we do things happen only when supported by a clear majority and after proper debate. Many decisions during the last 21 months have been taken at very short notice and generally without any serious debate. In many cases, it has not been clear who took a decision or when it was taken. Before the establishment of the commission, responsibility was believed to rest in the hands of the Leader of the House, who would operate through the usual channels to determine whether there was support for a particular measure. That is described in the External Management Review, conducted by Keith Leslie, as “leadership by convention”. The review found that your Lordships’ House is “stuck in the middle” between that system and a transparent system of accountability. I fear that accountability for decisions is now even more opaque than it was when Mr Leslie published his review.

There appears to have been a continuing gradual accretion of power to the commission, but that is chaired by the Lord Speaker, who is not accountable to the House. I do not understand why it is not chaired by the Leader, who is so accountable. Furthermore, I do not understand why or how the commission could possibly be responsible for the political direction of the House, as already mentioned by my noble friends Lady Noakes and Lord Strathclyde. I understand that certain changes to our modus operandi were necessary as a result of the pandemic, but I had understood that the House would revert completely to the status quo ante, from which position we could consider carefully whether we wished to introduce any of those, or other changes, on a permanent basis.

In particular, as my noble friend Lord Howard of Rising has already told the Committee, I was given to understand that the clerks would return to their traditional uniforms of court dress and wigs once the need to maintain the hybrid House had passed. I welcome the fact that the clerks have again adopted a uniform, but it is not the same as what they wore before the pandemic. I believe that the clerks should return to their traditional uniforms and not make changes on a permanent basis without a decision by the House. That may not be the most important concern of your Lordships, but the manner in which the decision to change the uniforms was made has upset many.

Similarly, as has already been referred to, the decision by the Services Committee to discontinue the monthly accounts on the grounds that we are not compliant with the payment card industry data security standards is very strange, because other membership organisations with similar numbers of members appear to have had no difficulty whatever in becoming compliant. It is extraordinary that this matter was not quickly rectified months ago.

Many of your Lordships share my preference for the old writing paper. I was told that the old, embossed paper was too expensive, but I believe that the quantity we use today is greatly reduced in this digital age and, on the occasions when we do still need to use it, quality and appearance are important.

As for the changes to the catering facilities and the dining rooms, I understand that some Peers like the present use of the Members’ part of the Peers’ Dining Room as the Bishops’ Bar, but it has no bar. Also, to some extent, it duplicates the Peers’ Guest Room in function. Moving the long table to the guests’ part of the Peers’ Dining Room means that the long table is now clearly visible and audible to guests, which I think is undesirable.

I also refer to the Code of Conduct, which seems to lengthen inexorably at an alarming rate. The inclusion of the requirement to attend “Valuing Everyone” training opens the code to ridicule and resentment.

The need to appoint Tellers greatly restricts frivolous Divisions. Their wands bestow authority. Voting should return to the Lobbies exclusively at an early date.

I shall not labour the House by repeating other changes to which noble Lords have referred, but I ask the Senior Deputy Speaker to act on the opinions of many noble Lords and agree with the Leader, the Lord Speaker, the Clerk of the Parliaments and others a return in all respects to the status quo ante, from which position any permanent changes should be adequately debated and approved before implementation.

Ecocide

Viscount Trenchard Excerpts

Wednesday 21st July 2021 Lords Chamber

[Baroness Bloomfield of Hinton Waldrist (Con)]

That is an interesting question. The UK’s priority, as I said, is to reform the court so that it functions more effectively and to take a leadership role in persuading international parties of the importance of the environment. On the oil and gas industries, the noble Lord will be aware of a number of initiatives, such as the 10-point plan, the White Paper and the North Sea transition deal, which seeks to show the oil and gas industries a pathway to decarbonising and to reskilling many of their workforce towards more environmentally friendly things, such as carbon capture and storage and hydrogen technologies.

[Viscount Trenchard (Con)]

My Lords, the emotive term “ecocide” conjures up horrific images of serious and deliberate crimes against humanity, such as genocide. I understand that an application was made to the United Nations International Law Commission in 2010 that a crime of ecocide be added to the Rome statute, defined as

“the extensive damage to, destruction of or loss of ecosystem(s) of a given territory, whether by human agency or by other causes, to such an extent that peaceful enjoyment by the inhabitants of that territory has been … severely diminished.”

Does my noble friend not agree that it is hard to consider ecocide as so defined as a crime at all, let alone one equivalent to such serious war crimes, if it does not even need a person or a—

[The Lord Privy Seal (Baroness Evans of Bowes Park) (Con)]

My Lords, I am afraid we need to move on. We will hear from the Minister.

House of Lords: Remote Participation and Hybrid Sittings

Viscount Trenchard Excerpts

Thursday 20th May 2021 Lords Chamber

[Viscount Trenchard (Con)]

My Lords, I thank my noble friend Lord Howe for introducing this debate with his customary charm, and I agree with everything he said. I too congratulate all those who have worked hard to ensure that we could operate, after a fashion, through the pandemic.

I wholly agree with what many noble Lords have said about the loss of spontaneity and decline in quality of debate and scrutiny. Under hybrid conditions, advisory speaking times are now risibly short and strictly enforced. This means that noble Lords are unable to add to their prepared speeches to refer to others’ contributions. In debates on Bill stages, since the order of speakers is predetermined and contributions are prepared in advance, many noble Lords speak when they would previously have remained silent because another has already made exactly the same point.

The briefing prepared by the Library in February on the impact of hybrid proceedings on participation makes interesting reading but, strangely, did not include any statistics on voting patterns. However, the Constitution Committee did cover this and the Minister confirmed that noble Lords have, on average, participated in a much higher proportion of Divisions than was the case before the introduction of remote voting. It is, of course, very much easier to vote, wherever you may be and whatever else you may be engaged in at the time a Division is called. I believe that remote voting should be abandoned completely as soon as possible. It seems to me unsustainable for legislators to be permitted to vote remotely, even if they may attend the House for a short time on the same day.

Voting in person makes it likely, or at least plausible, that noble Lords might have participated in discussing the subject of the vote with others, even if they have not participated in the debate in the Chamber. The informal chance meetings and discussions between noble Lords in the corridors, restaurants and Division Lobbies are also an invaluable part of the functioning of the House as a legislature. Physical voting also provides useful opportunities to buttonhole Ministers. Some have argued that it is good and should be made permanent that those with disabilities, in poor health or pregnant should be allowed to continue to participate remotely. However, it remains an unfortunate fact that if a noble Lord’s condition or circumstances prevent his or her attendance and ability to participate fully, it is hard to argue that that Member is fully capable of exercising his or her functions as a legislator. I welcome the fact that it has become easier for those with disabilities to participate fully, but exceptions to physical attendance requirements should be minimised.

Unlike another place, we are a self-regulating House and should reverse the accretion of authority to the chair that has taken place. It is no longer clear whether it remains the role of the Government Front Bench to call the House to order. In the hybrid House, it is often the Lord Speaker or the sitting Deputy Speaker who exercises this function. The time-wasting practice of the Lord Speaker calling on noble Lords to speak should also be discontinued.

The earlier sitting times adopted by the hybrid House make it difficult for those with interests outside the House to participate as they would wish. Of course, noble Lords’ improved technical skills will lead to an increase in job offers. Lastly, I ask whether it is intended to reverse the simplification of the clerks’ dress, which the previous Clerk of the Parliaments told me was a response to the need for a larger pool of Clerks at the Table during the pandemic. I am sure that Messrs Ede & Ravenscroft would have no difficulty in supplying the proper uniforms to all clerks who do not have it. I am keen that we should revert 100% to where we were before the pandemic—tellers, wands, wigs and all. They are all part of the panoply of this great Parliament. From that point, we can reflect on whether we should make any permanent changes.

Covid-19 Update

Viscount Trenchard Excerpts

Thursday 13th May 2021 Lords Chamber

[Baroness Evans of Bowes Park (Con)]

The noble Lord is right to set out the challenge, but I do not think it would be responsible of me to pluck a figure. “I do not know” is the obvious answer—I do not think anyone does. All I can say is that we are working hard with the NHS to tackle these backlogs. It is an absolute priority and we should thank our NHS staff for the incredible work they have done through the pandemic and what they will be doing to help us tackle this backlog.

[Viscount Trenchard (Con)]

My Lords, in declaring my interests as stated in the register, I ask whether my noble friend is aware that organisers of festivals and other live events need more clarity now on the basis on which they can stage events planned for this summer. They are already having to meet planning and preparation costs, but they are exposed to cancellation risks for which no insurance is available on the market. Are the Government still considering setting up a Government-backed insurance scheme?

[Baroness Evans of Bowes Park (Con)]

I thank my noble friend. We are obviously aware of the concerns raised about the challenge of securing indemnity for live events. Reopening when we are confident it is safe to do so will reduce the chance of cancellations and interruption, which is why the rollout of the vaccination programme is so critical. We also want to be sure that any investment or intervention would lead to an increase in activity. At the moment, for instance, we understand that social distancing remains one of the key barriers to activity. I can certainly reassure my noble friend that DCMS officials are working across government and with the affected sectors to understand the challenges and are keeping the situation under review to determine the most appropriate and effective response.

Financial Services Bill

Viscount Trenchard Excerpts

3rd reading & Report stage
Monday 19th April 2021 Lords Chamber

Any efforts to increase transparency and accountability are always welcome. I hope that the Government will reflect on this short debate and, if these are not the particular ways to enhance our financial regulators, come up with other ideas and resources so that we can work out how to be more effective in this vital area as we look to build a national and international reputation for these services.

[Viscount Trenchard (Con) [V]]

My Lords, I declare my interests in financial services businesses, as stated in the register. I would also like to record my sadness and offer my sincere condolences at the passing of both the noble Lord, Lord Dubs, and the noble Baroness, Lady Williams. Both made an enormous contribution to your Lordships’ House over very many years and will be much missed on all sides of the House.

It is a great pleasure to follow the right reverend Prelate the Bishop of St Albans. We agree on so much, but on this question and this amendment I have to take a slightly different view from his. The noble Lord, Lord Sikka, has brought back Amendment 34, substantially in the same form as his Amendment 120 in Committee.

The drafting of the amendment suggests that it is intended that there should be a single supervisory board of both regulators, the FCA and PRA. The Member’s explanatory statement on the other hand states:

“The new Clause will create a Supervisory Body for each of the FCA and the PRA.”


This implies one supervisory board for each of two regulators. That at least makes more sense than a single supervisory board for the two separate regulators, which is an impossible concept, as I pointed out on 10 March.

As the FCA and PRA are not the same organisation—although I sometimes wish they were—each has its own executive board. In the case of the FCA, this is the FCA board. However, the PRA board was replaced four years ago on 1 March 2017 by the Prudential Regulation Committee and the PRA was absorbed into the single legal entity of the Bank of England. I pointed this out to the noble Lord on 10 March, but he has not altered his approach. My noble friend Lady Noakes has also explained these fundamental errors clearly. A supervisory board such as he proposes, charged with exercising oversight over the board of the FCA and the Prudential Regulation Committee of the Bank of England, could not be a single entity. It would have to have two distinct personae, one within the FCA and one within the Bank of England.

My noble friend Lord Howe explained to the noble Lord that both the FCA and PRA must already

“attend … hearings before parliamentary committees, and those committees may also hear evidence from stakeholders about the performance of the regulators.”

He said:

“Parliamentary committees of both Houses are also able to summon the regulators to give evidence whenever they may choose.”


He added,

“the Treasury already has the capacity to order independent reviews into the regulators’ economy, efficiency and effectiveness. Therefore, all told, the amendment would result in a duplication of existing opportunities for scrutiny and oversight of the regulators’ resourcing.”

As I said on 10 March:

“I do not think that such a supervisory board would replace the need for parliamentary scrutiny of the regulators, which will in itself provide appropriate transparency and accountability, rather than the completely crushing, destructive oversight that I believe the noble Lord’s new board would cause.”


The noble Lord said that his new board would

“not duplicate in any way whatever what any parliamentary committee or review board might do. The supervisory board would simply be engaged in day-to-day strategic oversight. Those people would be in the organisation on a permanent basis, observing, requiring reports, making recommendations”.—[Official Report, 10/3/21; cols. GC 723-26.]

Such an advisory board would seriously and negatively impact the operation of the regulators.

The noble Lord has said that he will not press his amendment, which I think is a wise decision because I believe your Lordships would have rejected it as unworkable, impractical and likely to have a negative impact on the attractiveness of our financial markets which provide so many jobs and a large slice of the country’s tax revenues.

[Baroness Kramer (LD)]

I suspect that the noble Viscount, Lord Trenchard, was referring to the loss of the noble Lord, Lord Judd, which was just announced, rather than the noble Lord, Lord Dubs. I join with him; I am still feeling slightly in shock, frankly, at the news. We have all lost too many people of significance to this House over this last year. I think we all want to pay tribute to all of them, but we are all struggling a little with some of the very significant people who will not be here for future debates.

On this amendment, I will speak briefly. I understand where some of the thinking of the noble Lord, Lord Sikka, is coming from, but I cannot say that I see a supervisory board as the answer to the issue he raises. I am much more taken with the proposal made by my noble friend Lady Bowles in Committee, for an expert body—it takes experts to really understand how the regulator functions—regularly to follow the Australian model and review the regulators. This could be every three years; the number of years is not exactly the key issue. It would not second-guess the decisions the regulators have made but look at operations, resources and effectiveness. With the regulator now so detached in many ways, that is essential.

I would want the Treasury to be a good distance from anything like this because, like it or not, the Treasury will always be seen as an influencer of decision-making. An expert view is needed to help us ensure that our regulators are functioning in the way that they need to, given the enormous challenges and responsibilities that they have. With that, I have to say that I cannot support this amendment.

--- Later in debate ---

With that, I will sit down quietly and assure the House that I am not going to move this amendment. But I am very glad and very impressed by the debate that has taken place on all Benches.

[Viscount Trenchard (Con) [V]]

My Lords, it is a pleasure to follow the noble Baroness, Lady Kramer, and I thank her for correcting my earlier incorrect inadvertent reference to the noble Lord, Lord Dubs, to whom I apologise, while expressing my sincere condolences on the death of Lord Judd.

The noble Baroness rightly returns again to the subject of parliamentary oversight, which we have discussed extensively, including on the second day of Report, last Wednesday. My noble friend the Minister has argued that it is difficult to decide definitively how parliamentary scrutiny will work ahead of the conclusions of the future regulatory framework review.

I had put my name to Amendment 37A in the name of my noble friend Lord Blackwell, which provides for timely scrutiny of rules proposed by either regulator, either before taking effect or, at latest, within five days of taking effect. It does not refer to a specific committee of either House or a specific Joint Committee of both Houses, but provides for both Houses to agree and resolve which committees or Joint Committee should be charged with this responsibility.

I prefer Amendment 37A to Amendment 37F, because it does not damage the independence of the regulators. Furthermore, it requires a written response to any prospective rule change before the rule change comes into effect, whereas if the rule change has already come into effect, a written response is required only within 12 weeks of any expression of parliamentary concern.

This does not provide for a consistent approach. In the first case, it shackles the regulators too much, but in the second case seems to provide for a very relaxed response, devoid of a necessary level of influence on the regulators. I regret that the Government have not brought forward their own ideas about parliamentary scrutiny, especially as the House has accepted their proposal to dispense with a separate Third Reading for this Bill. I trust that the Minister will let us know the apparent thinking of the Government on this matter.

I thank the Minister and my other noble friends on the Front Bench for the courteous way in which they have conducted the House’s scrutiny of the Bill. I thank the Bill team for all their work, and will welcome passage of the Bill as it completes its remaining stages.

His Royal Highness The Prince Philip, Duke of Edinburgh

Viscount Trenchard Excerpts

Monday 12th April 2021 Lords Chamber

[Viscount Trenchard (Con) [V]]

My Lords, I join all noble Lords in expressing my sadness on the passing of His Royal Highness the Duke of Edinburgh, who made such an enormous contribution to our nation over so many years. As a former officer of 4th (Volunteer) Battalion, The Royal Green Jackets, I know how much his presence as colonel-in-chief of The Rifles did to ensure the successful merger of the predecessor regiments and the creation of a single identity and spirit drawing on their strengths.

He was immensely knowledgeable about the detail of many strands of our nation’s life. You certainly needed to have your wits about you at all times with him. He had a better understanding of the dynamics of the British countryside than practically any British-born person I have encountered. His leadership of the Game and Wildlife Conservation Trust, as president and then as patron for 57 years, started the initiative to save the grey partridge, which he described as

“our favourite native game-species”.

He said:

“If we can solve the problem for the partridges, we shall be conferring enormous benefits on many other like species which are also in trouble.”


As your Lordships are aware, he was a most accomplished sailor. It is less well-known that he was also an accomplished pilot, as mentioned by my noble friend Lord Glenarthur. On one occasion more than 20 years ago when he flew into Islay Airport, I was asked by my father-in-law to drive him from the apron to the quayside at Port Askaig, where he was due to embark in the Royal Barge and join the other members of the Royal Family. I think it was the last voyage of “Britannia” around the Western Isles.

The journey was some 16 miles along the route agreed in advance between Strathclyde Police and the Royal Household. Across the peatlands to the north of the airport, we observed cutting in progress and Prince Philip revealed his knowledge of the detail of the process and science of distilling whisky, asking many penetrating questions about the differences between the various iconic Islay whiskies.

As we moved into higher ground, he asked me many questions about the deer population, including the average weight of an Islay stag, as they are bigger and heavier than their mainland cousins. Filled with shame that I did not have the facts at my fingertips, I asked him if he wanted to see some large stags, pointing out that we would have to change the approved route I had been instructed to drive him along. He said that he would like me to do that, so I slowed down and performed a U-turn to proceed by the high road. I can still see the faces of the shocked police officers in the following car, who did not expect any unauthorised deviation from the approved route. His Royal Highness certainly possessed a rebellious streak and enjoyed both our decision to change the route and the opportunity to observe some very fine stags during the rest of our slightly extended journey to the quayside at Port Askaig.

As the noble Baroness, Lady Grey-Thompson, and other noble Lords have observed, the Duke of Edinburgh’s Award scheme is an important one of his many creations, for which he will rightly be very long remembered. Indeed, I know from the experience of my own children what an important contribution it made to their broader education. I believe that what it has taught nearly 7 million young people in this country has hugely contributed to the strength of our voluntary sector. Also, if I may say so, it has helped to prepare the British people to make the most of the opportunities offered by global Britain as we embark on this new chapter in our nation’s life. The Duke of Edinburgh’s Award scheme continues to grow across the world, even 65 years after its foundation, and is already present or represented in more than 140 countries.

As many noble Lords have noted, it is only now he has gone that so many people realise how vast is the void that Prince Philip leaves in our national life. But, of course, by far the largest void he leaves is that in the life of Her Majesty the Queen. I am honoured to have the opportunity to speak in this debate and, together with so many other noble Lords, to offer my most sincere condolences to Her Majesty and all members of the Royal Family.

Financial Services Bill

Viscount Trenchard Excerpts

Report stage
Wednesday 24th March 2021 Lords Chamber

[Viscount Trenchard (Con)]

My Lords, the noble Lord, Lord Oates, and the noble Baroness, Lady Hayman, eloquently introduced Amendment 3. There was much discussion on this matter in Committee but I still consider that such a review would place too heavy a burden, and a disproportionate one at that, on the PRA. I thank my noble friend the Minister for the diligent manner in which he has responded to noble Lords’ concerns about raising the importance of climate-change issues in the list of factors to which our regulators must have regard in making rules.

The Government’s credentials as global leaders in the movement away from reliance on fossil fuels are well established and will, I hope, be further enhanced by the G7 meetings and the COP 26 conference later this year. However, this should be kept in perspective and balanced against the need for economic recovery and the needs of industry. There is no point in pricing what remains of our steel industry out of the market if the result would be an increase in imports from countries which have not adopted energy policies as green as ours, especially if the impact on global emissions is negligible.

When I first read my noble friend Earl Howe’s amendments I was puzzled, because it seemed that he was giving with one hand and taking away with the other. I look forward to his clarification of how Amendments 43, 46, 47 and 49 net off against each other.

I am loath to saddle the regulators with increased obligations which go beyond the practices that they have already adopted. The letter from Sam Woods makes it clear that climate change is already an important consideration in the PRA’s supervision and regulation of banks and insurers, under its existing statutory objectives. Similarly, the letter from Nikhil Rathi makes it clear that the FCA is committed to helping market participants manage the risks in moving to a low-carbon economy and supports the commitment to match, at least, the ambition of the EU sustainable finance action plan in the UK. Since the FCA has already decided to recruit a director with specific responsibility for ESG matters, I do not think that Amendment 23, in the name of the noble Baroness, Lady Hayman, is necessary. The remit of the senior manager whom she suggests should be appointed would clash with that of the new director who is already in the process of being recruited.

Amendment 22, in the name of the noble Baroness, Lady Hayman, also goes too far and is too prescriptive. My noble friend the Minister was right when he said to the Committee, on 24 February, that

“it is important that we act carefully and rationally, consult appropriately with interested parties and therefore make progress in the right way.”

He was also right in stating that

“the changes the Bill enables serve to implement a number of vital reforms following the financial crisis. These reforms reinforce the safety and soundness of the UK financial system.”—[Official Report, 24/2/21; col. GC 224.]

Surely we should not amend the Bill in any way that might prevent us giving effect to updated prudential rules. I also agree that there is no evidence that greener means prudentially safer, at least not yet. Therefore, it is not clear that a regulator, whose primary objective is the safety and soundness of financial institutions, should be burdened with disproportionate climate obligations now, especially at a time when it is essential to maintain and enhance the competitiveness and attractiveness of the UK’s financial markets. With regard to individual regulators’ objectives and rule-making powers on climate change-related risks, the ABI recommends the need for holistic debate across stakeholders before adding new objectives to the remit of regulators, given the need to balance the various priorities. I believe that my noble friend’s amendments strike the right balance, and I will support them.

While I agree with the noble Baroness, Lady Bennett of Manor Castle, that biodiversity is important, I believe she wants to go a step too far in her Amendment 44 in adding this to the FCA’s “have regard to.” There are countless other policies that could be added, but too many will muddy the waters and distract the FCA from its efficient operation in performing its core duties and objectives.

[Lord Judd (Lab) [V]]

My Lords, these amendments, and this Bill, are crucial to the future of the United Kingdom. We have heard repeatedly in the arguments deployed of an interaction. There is the need for financial services to be successful and effective because they play such an important part in ensuring the well-being on which the rest of our society depends. That is beyond question. However, we know that they have implications, socially and beyond, for which they need regulation, and this has been well spelled out.

I shall focus on Amendments 3, 22, 23 and 44 in particular. Fossil fuels inevitably have considerable and extensive risks for the climate. There can be no argument about that. They have great implications in terms of climate change, and I am glad to see that Amendment 3 is grappling with this.

Amendment 22 deals with the point I have just made in that climate change poses risks to financial services. Therefore, it is essential to have the right arrangements in place to ensure that those risks are, if not eliminated, minimised.

Amendment 23 makes the point I have often felt strongly about in legislation: it is sometimes crucial to have a specific person carrying a specific responsibility for bringing together the various threads in the policy for which we are aiming and ensure their delivery. It is a good amendment.

I do not share the rather dismissive approach of the noble Viscount, Lord Trenchard, to Amendment 44. My view is that the noble Baroness, Lady Bennett of Manor Castle, deserves considerable commendation for having tabled this amendment. We have happily joined these UN conventions, and our diplomats have usually played a large part in bringing them about, but we sometimes lack the discipline to follow through with what they require of us. At this point in our consideration of the Bill, it is appropriate to talk about the convention and the undertakings we have thereby committed ourselves to on biodiversity. On that issue, I find myself dismayed by the position of the noble Viscount, Lord Trenchard, because we are surrounded by a major crisis. The biodiversity of the world is in danger of collapse, and the consequences have direct implications for the survival of humanity itself. There is urgency about this situation.

In conclusion, I simply make this point: I said that we wanted the financial services sector to be successful and effective, because we recognise its indispensability, but we also must recognise that on climate change, we are long past the age of rhetorical language and theoretical commitment. We have to demonstrate that we have the leverage and the arrangements in place to ensure delivery; if we do not ensure delivery on the measures we want to see to protect the climate, we will be party to a cruise towards catastrophe for the global community. It is vital to have these disciplines, and these amendments spell out how we can bring those disciplines to bear.

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[Baroness Noakes (Con)]

My Lords, in moving Amendment 4, I shall speak to the other two amendments in this group in my name. I am grateful to the noble Baroness, Lady Bowles of Berkhamsted, and the noble Lord, Lord Eatwell, for adding their names to Amendment 6.

I spoke at length in Committee about the problems of tough legacy contracts, and I shall not repeat all of that. To summarise, when Libor ceases to be available at the end of this year there will be a number of contracts which reference Libor but which have not been renegotiated to substitute an alternative rate. We do not know exactly how many contracts are involved, but it is thought to be a significant number. It is not a niche problem; it arises in both the capital market and retail markets and in many different kinds of contract. While sustained efforts by financial services providers have reduced the scale of the problem, it cannot be fully resolved for various reasons, and I think that that has been accepted by all parties.

The Bill helpfully provides for the FCA to ensure that what is known as synthetic Libor will be available for use in those contracts which have not been renegotiated, but two problems remain. First, while the FCA has made synthetic Libor available for use, the FCA cannot change the contracts itself; it requires separate provision in law. Amendment 4 would provide for continuity of contract so that any contract, loan or security referencing Libor will be taken to reference synthetic Libor instead. Secondly, even if references to Libor are regarded as meaning synthetic Libor, there remains a risk of litigation if one or more parties object to the substitution of synthetic Libor and believes that some other fallback is more appropriate. Amendment 5 says that no claim or cause of action can arise due to the use of synthetic Libor. This is a safe harbour provision.

I recognise that the exact drafting of continuity of contract and safe harbour is not straightforward, though I emphasise that my amendments have been drafted with the help of lawyers who are specialists in capital markets, and that they mirror the draft legislation which has been drawn up for New York law by the Alternative Reference Rates Committee. Nevertheless, I have also tabled Amendment 6, which takes a slightly different approach by giving the Treasury the power to make regulations dealing with contract continuity and/ or safe harbour. It does not require the Treasury to do either or both of those things but offers a straightforward method of dealing with the problem in secondary legislation if, for some reason, the Government feel unable to legislate directly at this stage.

I tabled Amendments 4 and 5 in Committee and was met with the expected response that the Government had recently issued a consultation on contract continuity and safe harbour, and that the consultation period had not concluded. The Government would decide what to do once they had considered the consultation responses. The consultation has now concluded, so it is time for the Government to decide what to do. As I understand it, there were only a relatively small number of responses to the consultation, and they are overwhelmingly in favour of proceeding with continuity of contract and safe harbour. I hope that my noble friend the Minster will confirm that.

I had hoped that the Government would table amendments of their own on Report, but life is full of disappointments. The clock is counting down to 31 December this year and those areas of the financial services market which are impacted by tough legacy contracts desperately need some certainty about the way forward. I therefore call on the Government to either accept one of my amendment variants—Amendments 4 and 5 or, alternatively, Amendment 6—or commit to bringing their own amendment forward at Third Reading. If the opportunity of this Bill is missed, it is by no means clear whether there will be a later opportunity in time for the cessation of Libor, which is only nine months from now. I hope that the Government will want to avoid creating a long period of uncertainty and will not let this Bill pass into law without fully dealing with tough legacy contracts. I beg to move.

[Viscount Trenchard (Con)]

My Lords, I apologise for forgetting to declare my interest as a director of two financial services regulated companies.

I support Amendments 4, 5 and 6, ably moved by my noble friend Lady Noakes, whose long experience and mastery of the detail of financial markets and regulation is an invaluable asset to your Lordships’ House. As far as Amendments 4 and 5 are concerned, she presented the arguments very well in Committee and today. I was also impressed by the arguments deployed by the noble Lord, Lord Eatwell, who quoted the FCA’s view that in cases where parties to contracts referencing Libor cannot reach agreement on how those contracts would operate in the event of Libor’s cessation, discontinuation could cause uncertainty, litigation, or loss of value because contracts no longer function as intended.

The Minister recognised that we must reduce contracts referencing Libor as much as possible by the end of this year. Given the vast number of outstanding contracts, clearly that will not be possible, and rightly the Government have initiated a consultation process on this subject. However, does he not agree that the risk of uncertainty and litigation is significant and that there is unlikely to be a better opportunity to legislate in time to mitigate such risks than that which this Bill provides?

In Amendment 6, my noble friend Lady Noakes, supported by the noble Baroness, Lady Bowles of Berkhamsted, and the noble Lord, Lord Eatwell, has offered an alternative method of mitigating these risks. As a rule, I do not like the trend towards taking excessive Henry VIII powers, which greatly reduce the transparency and accountability of the Government. However, if my noble friend the Minister cannot accept Amendments 4 and 5, the alternative—Amendment 6—would in that case be acceptable as being much better than the situation that will otherwise quite possibly evolve with great damage to market integrity and much expensive litigation.

I hope that the Minister has thought more about these issues since our last debate and I look forward to hearing how her thinking has evolved to meet the very sensible points that my noble friend’s amendments would address.

Financial Services Bill

Viscount Trenchard Excerpts

Committee stage
Wednesday 10th March 2021 Grand Committee

[Baroness Bowles of Berkhamsted (LD) [V]]

My Lords, for the purposes of today’s debates I again remind Grand Committee of my financial services interests as in the register.

I have signed Amendments 103 and 104 and agree with the noble Baroness, Lady Neville-Rolfe, so I will not repeat what has already been said. It is a subject that the noble Baroness pursues with diligence, and it is right to do so, even if at times—at least as far as I am concerned—the scope and content of impact assessments are a little disappointing. The amendment relates to the final impact assessments as rules are coming into effect, although, of course, to be useful, impact assessments are needed at each stage. Indeed, if proportionality is to be properly taken into account, that is surely a prerequisite for the regulator.

But returning again to the FiSMA theme, where much of the proportionality, flexibility—call it what you will—will be done on an institution-by-institution basis, so the rules will enable that but not demonstrate how it is to be carried out, I am not sure how that will be properly assessed in an impact assessment based only on the rules. Therefore, it will also be important to be able to capture what actually happens after the rules have come into operation. That might be by way of a retrospective impact assessment after a period of time, and would seem to be another matter that Parliament will need to investigate.

Included in that, it should be relevant to capture the effects of frequency of rule change, which is presently greatly emphasised by regulators and the Government as part of the reasoning behind the Bill, yet somehow I doubt that rule churning was what industry felt it was signing up for by supporting FiSMA. It will be important to understand the scale and nature of that rule tweaking. Amendment 104 gets in part to that with the Government producing a report, but perhaps it should be part of the annual report or an annual impact assessment from the regulators, so that it can be further queried and those regulated can be interviewed by the relevant parliamentary committee. So perhaps the Minister can confirm how this frequency of tweaking will be tracked, what is the Government’s planned part in it and would they support Amendment 104 in particular as part of the way to do that?

[Viscount Trenchard (Con)]

My Lords, I declare again my interests as stated in the register in respect of financial services companies. I am delighted to support Amendments 103 and 104 in the name of my noble friend Lady Neville-Rolfe. My noble friend is a champion of impact assessments and she speaks from experience. The impact of many financial services regulations on smaller firms has been very damaging. I mention just two examples. The unbundling provisions contained within the MiFID II directive, requiring asset management companies to pay separately for research, have been disastrous in their effect on smaller companies with interesting strategies, which have either been forced out of business or forced into mergers where their innovative strategies have not been taken forward. The effects have been less choice for customers and less coverage as a result of the significant reduction in the number of securities analysts, particularly those covering smaller and growth companies.

The effects were predictable, but ESMA ploughed ahead and the FCA acquiesced. It is small comfort now that ESMA itself realises that the unbundling provisions were a mistake, and may move to make changes, but much damage has been done. An impact assessment, such as recommended by my noble friend, would have avoided this.

I also mention the alternative investment fund managers directive. When I worked in Brussels as director-general of the European Fund and Asset Management Association —EFAMA—my French and German colleagues said that they did not think that the EU should move to regulate alternative funds; that was London’s market, and largely London’s alone. Furthermore, it was of interest only to professional investors, who did not need protection from investment risks. They thought that it would be wrong for the EU to try to regulate it. However, three years later, Michel Barnier, as Commissioner for the Internal Market, moved to introduce the AIFMD. Again we were overruled and reluctantly went along with it. An impact assessment might have encouraged the FSA to fight harder against it than it did.

For the reasons so well explained by my noble friend, I support her amendments and look forward to hearing the Minister’s reply.

[Lord Stevenson of Balmacara (Lab) [V]]

My Lords, I am pleased to be part of this debate, which is narrow in some senses but has the capacity to reach quite widely. It is narrow in the sense that it has been framed through Amendments 103 and 104, which I broadly support, about the need to try and get more of an impact assessment model into the way in which we review the changes that may come through as a result of the return to the UK of powers previously exercised at EU level. It also raises much wider issues, which I will come to before I end my short contribution to this debate.

I am sure that the case made by the noble Baroness, Lady Neville-Rolfe, is about good government. Better regulation was always part of the argument she used when she was a Minister. I well remember the discussions we had across the Dispatch Box about intellectual property, in both primary and subsequently secondary legislation. The material on this was much enhanced by the good work done by her civil servants in bringing forward some of the issues raised and trying to give them a quantitative—not just qualitative—feel when the debates were organised. A lot of the work that they do on better regulation does not get properly recognised, and this is a good opportunity to pay tribute to it. As an example, I particularly enjoyed the annual work that I was often asked to do in relation to the setting of the national minimum wage, now the national living wage. It was always accompanied by a formidable document, created mainly I think by the Low Pay Commission but endorsed by civil servants. It went into every conceivable aspect of the way in which the setting of a minimum threshold for wages would, or could, affect the labour market, with particular reference to women and other low-paid groups in society. It was always a red-letter day in my diary when I saw that coming up; I knew that I was going to be given a very meaty topic to research, read up on and debate. I enjoyed the debates that we had on that.

While I say yes to the thrust of what is being said here, and recognise the benefits that will come from good impact assessments, properly debated, particularly in relation to the regulatory framework in the Bill, I wonder whether there is a slight irony here. The substance of what the noble Baroness is saying in her amendment is that better scrutiny of proposals brought forward for legislation—and, of course, for secondary legislation —would happen if there were better impact assessments. I say in passing, and in reverse order, that a secondary instrument is very much a creature of the primary legislation that has preceded it. It is not uncommon to find in SI impact assessments binary choices, usually not very helpful in detailed essence. The proposition set up in the impact assessment is often, “What would happen if this legislation did not go through?” and then “What will happen when it does go through?” In other words, if there is a change in regulations, you impact; no change and you impact the change. You do not get a range of options.

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[Lord Sikka (Lab) [V]]

My Lords, I wanted to provide some examples of the kind of questions which the supervisory board might raise. For example, it could ask the FCA/PRA executive board to explain the delay in securing compensation for the victims of the HBOS and RBS frauds—that could be one question; I shall give a few more examples. It could ask why no one at the board level of HBOS and RBS has so far been prosecuted or why HSBC took 20 hours to respond to calls on its fraud helpline—which is of concern to many people. It could ask whether it was appropriate for the FCA to commission Section 166 reports from organisations involved in antisocial practices, or what progress the FCA had made in dealing with the issues relating to banks forging customers’ signatures. It could ask what policies were being developed to deal with global warming—which, again, is of interest to many people. It could ask what the regulators were doing to protect people from predatory lending practices—payday lending problems have not gone away, as we all know—or to protect businesses, especially small businesses, from excessive charges by credit card companies. It could ask what the PRA was doing to address the shortcomings of the Basel III recommendations. Lastly, as we all know that a remit of the FCA is to promote competition in respect of financial services, the supervisory board could ask how the FCA would do that given that many towns now lack bank branches.

These kinds of probing questions do not interfere with the day-to-day running, but they provide oversight and they push back against regulatory silence and capture. A supervisory board will erode the space for regulators to sweep things under their dusty carpets. It can transform our country and ensure that regulators work to protect the people and address their concerns.

Ministers often say that regulators are there to serve the people, so what objections can there be to empowering people to sit on the supervisory boards and democratise the regulatory structures and our society? Empowering people has a much lower cost than that associated with scandals and financial crisis.

I beg to move the amendment.

[Viscount Trenchard (Con)]

My Lords, I understand that Amendment 120 in the name of the noble Lord, Lord Sikka, seeks to establish a supervisory board for the two regulators. My first thought was that the noble Lord intended that this board should function in the same way as a joint co-ordination committee, as proposed in Amendment 86 in the name of my noble friend Lord Blackwell, which we debated on Monday. The explanatory statement, however, does not suggest that the board would co-ordinate the activities of the two regulators; rather, it would simply monitor the executive boards of the regulators and provide a diversity of views on their conduct.

From his opening remarks, I understand that the noble Lord’s intention is very different. While there have inevitably been some mistakes, I do not recognise the picture that he paints. The regulators have always been willing to learn from what has not gone as well as it might have. As long as the PRA and FCA remain separate organisations with different functions and objectives, it seems to me that this supervisory board would, in effect, have two separate personae or incarnations. It would have to function separately as a supervisory board of the FCA and as one of the PRA. I think it cannot be a part of the legal structure of either regulator or of both regulators. It would seem to duplicate the arrangements for parliamentary oversight which we have discussed and on which I would ask my noble friend the Minister to tell the Committee how his thinking is developing.

The amendment refers to the executive board of the PRA, although the noble Lord, Lord Sikka, should be aware that the board of the PRA was replaced by the Prudential Regulation Committee of the Bank of England in 2017. I do not think that such a supervisory board would replace the need for parliamentary scrutiny of the regulators, which will in itself provide appropriate transparency and accountability, rather than the completely crushing, destructive oversight that I believe the noble Lord’s new board would cause. It would be a cumbersome, expensive and bureaucratic body that would have a negative effect on the future attractiveness and competitiveness of the City of London as a global financial centre, so I cannot support his amendment.