Financial Services Bill

Viscount Trenchard Excerpts

Committee stage & Committee: 2nd sitting (Hansard) & Committee: 2nd sitting (Hansard): House of Lords
Wednesday 24th February 2021 Grand Committee

[Viscount Trenchard (Con)]

My Lords, I declare my interests as stated in the register. I support both Amendments 10 and 26 in the name of my noble friend Lady Noakes. They do not mean that Parliament would be seeking to usurp the role of the regulators, or to attempt to rewrite MiFID II which, according to Forbes Magazine, has required 30,000 pages to explain its regulations.

It is right that the Bill enables our regulators to act quickly and flexibly to respond to changes in the markets or the introduction of new financial products. However, without the scrutiny formerly carried out by the European Parliament of each and every detail of regulations and directives, it is necessary that Parliament should have oversight of the regulators’ work. My noble friend is right that we need to agree the optimum balance and how this will be done before the powers conferred upon the PRA and FCA are made available for them to use.

Amendments 18 and 19 in the name of the noble Baroness, Lady Bowles of Berkhamsted, are motivated by a desire to continue to align to EU regulation, even though there are no expectations that the EU will make any further significant equivalence declarations in the short term. Amendment 19 places a large, poorly defined burden on the FCA to show where and how its draft rules have been influenced. It is clear that the FCA will consider many external factors in drafting its rules. As your Lordships know, it is intended to agree a basis on which both regulators will be made accountable to your Lordships’ House and another place for the way in which they carry out their work. Accordingly, I think it would be too restrictive on the FCA if this amendment were supported. It would also create uncertainty over the Bank of England’s ability to act quickly as necessary in exercising its macroprudential responsibilities.

Similarly, Amendment 20 seeks to allow committees of your Lordships’ House and another place to publish a report on proposed Part 9C rules. It is not clear which committees these will be in the future. It would slow down changes that the FCA will want to make quickly, which could be damaging to the standing and competitiveness of the City. Perhaps my noble friend can tell the House how the Government intend to amend the Bill in order to provide for the necessary scrutiny of acts of the regulators. I am not sure that that would be the effect of Amendment 22, in the name of the noble Lord, Lord Sharkey. The Government’s intention, which I support, is that we should move away from the cumbersome, codified nature of rules. I would expect the PRA to try to make rules that are shorter and clearer than the regulations they replace. It would not always be appropriate for them to include the full text of the general rules to be replaced.

Amendment 27, in the name of the noble Baroness, Lady Bowles, seems to place a very heavy demand on Parliament to become closely involved in what our regulators do at international conferences, in a way that might be too restrictive on their freedom to participate fully at those conferences. This would be likely to weaken British influence on the outcomes of discussions and decisions made at such conferences.

In Amendment 38, the noble Baroness, Lady Bowles, seeks to duplicate other arrangements which will be made to institute the necessary parliamentary accountability and again appears motivated by a desire to continue to align to EU rules. If the Government can bring forward an amendment to increase the attention that the PRA is required to give to the competitiveness of the markets, as strongly proposed by several noble Lords on Monday, I would suggest that Amendment 38 might be unnecessary.

While considering this matter, can the Minister confirm that it remains the Treasury’s intention to advise the Bank of England not to adopt a similar measure to the EBA to permit banks to capitalise software investments for the purpose of stress testing? This is one example of where, instead of equivalence, we will have higher standards than the EU, although regulatory standards are often not two-dimensional, high or low.

The effect of Amendment 39 is surely to transfer back to Parliament the detailed rule-making powers. Quite apart from the fact that neither your Lordships’ House nor another place is equipped to carry out such detailed, line-by-line scrutiny, the amendment would seriously slow down rule-changing, removing agility and flexibility from the regulators.

Amendment 40 in the name of the noble Lord, Lord Tunnicliffe, does not remove the ultimate power to change rules from the regulator but introduces a cumbersome process involving the issuance of reports by committees of both Houses. Does the noble Lord intend these committees to be new standing committees, and how will they be resourced? I also note that in the case of a draft being laid, say, a week before Parliament rises in July, it might be three months before 20 sitting days of either House have elapsed.

I do not understand the intention of the noble Lord, Lord Sikka, in introducing Amendment 71—a requirement separately for the Treasury Committee in another place to assess the FCA’s conduct prior to the appointment of a new chief executive.

My noble friend Lord Blackwell’s Amendment 85 makes an interesting proposal as to how the regulators should be made accountable to Parliament. Does my noble friend Lord Howe think that, as far as your Lordships’ House is concerned, scrutiny would come from an existing or soon to be established Select Committee, such as the strangely named Industry and Regulators Committee, or whether a new standing committee should be set up to exercise these functions?

The noble Lord, Lord Bruce of Bennachie, in his Amendment 137 seeks to place a statutory duty to consult the devolved Administrations over a reserved matter. We await with bated breath the publication of the Dunlop review, which should inform us of how the Government intend to manage relations with the devolved Administrations in the future, including on reserved matters. However, I cannot support the noble Lord’s amendment, which is unnecessary and provocative to certain elements within the devolved authorities.

I look forward to other noble Lords’ contributions and the Minister’s reply.

[Lord Sikka (Lab) [V]]

My Lords, I will speak to Amendment 71, which is in my name and supported by the noble Baronesses, Lady Bennett of Manor Castle and Lady Bowles of Berkhamsted, and the right reverend Prelate the Bishop of St Albans.

The amendment seeks to strengthen the effectiveness of financial regulation and calls for scrutiny of the FCA’s conduct by the Treasury Committee prior to the appointment or reappointment of its chief executive. It effectively calls on the committee to act as a guide dog to the watchdog. We all know that effective regulation is a necessary condition for protecting people from malpractices, holding miscreants to account and promoting confidence in the finance industry.

The FCA has failed to deliver robust and effective enforcement and it needs to be helped. Its failures are documented everywhere. The recent report by Dame Elizabeth Gloster on the collapse of London Capital & Finance noted that the FCA did not discharge its functions in respect of LCF in a manner that enabled it to effectively fulfil its statutory objectives and that there were significant gaps and weaknesses in its practices. From my perspective, even more damning was the revelation that FCA staff were not even trained to read financial information to recognise unusual or suspicious transactions.

Another report on the scandal-ridden Connaught Income Fund concluded that the FCA’s regulation of the entities and individuals was not appropriate or effective. We are still awaiting the report on the Woodford Equity Income Fund, when thousands of investors are trapped. Regrettably that is not an independent investigation, but we await the outcome with considerable interest.

The FCA failed to act in the case of Carillion, a company that collapsed in January 2018. Carillion inflated its balance sheet and profits through aggressive accounting practices. These included the use of mark-to-market accounting, enabling the company to leave at least £1.1 billion-worth of worthless contracts on its balance sheet. It failed to amortise £1.57 billion of good will, which was effectively worthless. The company was disseminating that misleading information to the markets but the FCA took no action whatever. Curiously, on 18 September 2020, nearly 21 months after Carillion’s collapse, the FCA issued a warning notice saying that the company and some of its directors had recklessly misled markets and investors over the deteriorating state of its finances before the company collapsed. Where was the FCA for all the earlier years while Carillion was publishing that misleading information? It was nowhere to be seen.

There is now considerable public evidence that the banks have been forging customers’ signatures to alter key documents and repossess customers’ businesses and homes, and that evidence has been published in the mainstream media. I understand that there are over 500 documented cases and the FCA has not even started any investigation. A senior Metropolitan Police fraud officer wrote to the Treasury Select Committee in 2017, stating that the executive boards of some of the most prominent banks were “serious organised crime syndicates”, yet that has not resulted in any action by the FCA.

The bank RBS has systematically defrauded its customers but the FCA has been dragging its feet, often pushed by parliamentary committees and others to do its job. In November 2013 a 20-page report prepared by Lawrence Tomlinson summarised this abuse of bank customers and small businesses at RBS’s global restructuring group, or GRG. The Tomlinson report stated that rather than nurturing small businesses, the bank actually pulled the financial rug and sent them to premature bankruptcy. GRG operated from 2005 to 2013, and at its peak handled 16,000 companies with total assets of around £65 billion. A proportion of those companies were not viable but a great number were and had never defaulted on loans. The FCA’s approach was to bury its own Section 166 report on the RBS frauds. In February 2018, the Treasury Committee ignored the FCA’s reluctance and published the report. The committee said:

“The treatment of vast numbers of SME customers placed in RBS’s Global Restructuring Group was nothing short of scandalous.”


In June 2019 the FCA published what it described as its final report on the investigation into RBS’s treatment of small and medium-sized businesses. The co-chair of the All-Party Parliamentary Group on Fair Business Banking and Finance said:

“This report is another complete whitewash and another demonstrable failure of the regulator to perform its role.”


The timidity of the FCA is also evident from the long-running HBOS frauds, which show no sign of resolution. In 2013, a report codenamed “Project Lord Turnbull” was published by Sally Masterton, Lloyds senior manager in credit risk oversight in the regulation and governance section of its risk division. It was prepared in response to inquiries made during Thames Valley Police’s investigation into the frauds at the Reading branch of HBOS, and also covered the period before the 2007-08 banking crash and bailouts and the subsequent takeover of HBOS by Lloyds Banking Group. The report noted that HBOS executives had “concealed” asset-stripping frauds at its Reading branch ahead of the bank’s takeover by Lloyds in 2008. The FCA did nothing to bring fraudsters to book.

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

My Lords, the noble Lord, Lord Tunnicliffe, has reminded us that this is the clause where the legislation on the CRR gets waived away into rules without any legislative replacement. This follows the pattern that the Government proposed in their consultation: once there are rules from the regulators, the statutory instruments are revoked.

Paragraph 2.25 of the Financial Services Future Regulatory Framework Review states:

“The default approach would be for any retained EU law provision that is in scope of the regulators’ FSMA rule-making powers to be taken off the statute book to become the responsibility of the appropriate regulator.”


Therefore, although there may be consultations on replacement rules at the point of revoking the SIs, there are no checks further down the track, so at some time further on all the rules could be revoked too. As a practical matter, that will not happen, but it is possible that for some things big changes could happen. It is probably more of a worry when it is happening to the wider generality of financial services legislation than with standards that are underpinned by Basel provisions, but I make this point because the Minister said on Monday at the start of Committee that everything is being listened to in the context of the consultation, although I must say that his replies so far do not inspire too much confidence.

It may seem convenient to have a more flexible arrangement of having regulators doing everything and not bothering Parliament with statutory instruments, and the view being pushed by the Government seems to be that Parliament should not become too bothered by rules because they contain frightening Greek letters such as Σ that really just indicate some very simple sums that could easily be explained in a sentence. Underlying that is that there should not really be challenge, only fig leaves and what the noble Lord, Lord Holmes, called the rear-view mirror.

Even though I have no great love of statutory instruments as a measure for showing parliamentary consent, there is a qualitative difference compared with rules, and I want to flag up that this clause is where the notion that we will no longer have any firm policy against which to hold the regulator accountable is endorsed. From here on, the regulator makes the policy, and there is no policy guidance between the regulator’s rules and the simple objectives, have-regards clauses and perhaps a few generalised statements, such as supporting UK economic growth. I do not like this sparseness, and it is ridiculous to suggest that rules are constantly, rapidly needing change. That is not true and not internationally sustainable.

To some extent the Government acknowledge this, otherwise there would not be the statement in the consultation that some things may have to be put into SIs as a consequence of equivalence decisions. So other countries can measure our standards, but not Parliament. How embarrassing. I heard what the Minister said in reply to my equivalence information point in the first group today. He said that such things may have to stay out of the public domain—at least until they become a statutory instrument—but I never suggested that they be public, just that there should be some sharing with Parliament about the policy direction. I am pretty sure that the EU will take the view that regulator rules alone are not enough and are potentially too transient when it comes to such a large financial centre as London, not least when it comes to looking at the lavish use of “bespoke”, which was always one of Brussel’s most hated words because it thought, and I tend to agree, that it was tailoring cut to flatter and trick the eye. That is fine for clothes, but not so good for financial services rules.

As I want to mark resistance to this passing of all policy to the regulators so they end up held accountable only to their own rules, I support the noble Baroness, Lady Bennett, in the suggestion that Clause 3 does not stand part.

[Viscount Trenchard (Con)]

My Lords, I understand the purpose of Amendments 24 and 25, in the name of the noble Lord, Lord Tunnicliffe, but do they suggest that he would like to stick with the enormously detailed and prescriptive provisions of the CRR as they are in retained EU law? The Government’s intention to transfer most of the provisions of the CRR into more flexible rules is right. The PRA will be able to react more quickly if it needs to change particular rules, and this should reduce the risk of failure of banks in the future.

The Government have been clear that the UK’s regulators are the right people to set the detailed, firm-level rules to implement the remaining Basel standards. Of course, as discussed in previous debates, and supported by noble Lords on all sides of the Committee, we need proper parliamentary oversight of the PRA before it starts to use its new powers. The wording in the noble Lord’s amendments suggests that he wishes to reduce the degree of flexibility that the Treasury will grant the PRA, but I think that that might be counterproductive. Does he not accept that, as we move to a simpler, more flexible, outcomes-based regulatory framework, there should be less detailed prescriptive rules?

The noble Baroness, Lady Bennett of Manor Castle, wants to retain all the CRR rules in legislation. I cannot agree with her approach, which might damage the attractiveness of the City as a financial centre. She referred to Singapore-on-Thames, which is becoming a fashionable way to describe a light-touch regulatory regime, but is she not aware that Singapore is one of the best and most strictly regulated centres in the world? It is strict, yes, but much simpler and less cumbersome and bureaucratic. Does the Minister agree that we need to return to a simpler, different, more flexible and agile regulatory style?

[Baroness Kramer (LD)]

My Lords, I do not have a great deal to say but there are a couple of points that I would like to make. First, the two probing amendments from the noble Lords, Lord Tunnicliffe and Lord Eatwell, make a great deal of sense to me, so I hope that the Government will pay attention to them and provide some substantial answers.

However, what struck me more than anything else was that this was an opportunity to comment on Clause 3. That suddenly dawned on me as I looked at the language both in the Bill and in two amendments which appear in later groups. One I have added my name to and the other is in my name only at this point in time. The first, in the name of my noble friend Lord Oates, looks at capital adequacy ratios for investments in fossil fuel relating to exploitation and exploration. The other amendment, which stands in my name and is in what could loosely be called a regulatory group, deals with MREL thresholds for medium-sized banks.

It occurred to me that this is the last time that we will be able to raise issues such as these in government time in this House if the Bill passes with Clause 3 in it. All the rules issues detailed in Clause 3, which are in effect fundamental to policy, will be transferred to the book of the regulator. Were I to look for an opportunity to raise these issues, which I shall follow up on in later debates on the Bill, the Government would say to me either, “You’re out of scope”, or, “Those are dealt with by the regulator, so wait a year or two and the regulator might do a consultation on one of these issues, then you can make your opinions heard.” They might say to me, “Write a letter to the Treasury Select Committee and see whether it considers the issue important enough to take up its very precious time, in dealing with its very heavy workload, by picking up your issue as part of one of its broader consultations.”

If ever we needed a graphic illustration of the loss of authority of Parliament and the loss of accountability to it, this is the time to illustrate and say it. I am really curious to hear from the Minister how he feels that that is justified and why he will explain to me that the amendments we have tabled are such an irritant to him that he is quite determined that never again will they fall into the scope of a debate on government time.

Financial Services Bill

Viscount Trenchard Excerpts

Committee stage & Committee: 1st sitting (Hansard) & Committee: 1st sitting (Hansard): House of Lords
Monday 22nd February 2021 Grand Committee

[The Deputy Speaker (Baroness Henig) (Lab)]

I have received a request to speak after the Minister from the noble Viscount, Lord Trenchard.

[Viscount Trenchard (Con) [V]]

My Lords, I declare my interests as stated in the register. I apologise to the Minister and the Committee for failing to get my name on the speakers’ list for this group on time and appreciate been given a chance to speak after the Minister. In the circumstances, I will confine my remarks to Amendment 1, introduced by the noble Lord, Lord Sharkey, with whom I often agree. However, on this occasion I strongly agree with what my noble friend Lord Blackwell said.

On the duty of care, the FCA has itself, as other noble Lords said, consulted on this question and provided feedback in November 2019. Many respondents thought that, rather than further complicating the FCA’s responsibilities, with the commensurate risk of increased litigation, it would be better to let the newly introduced senior managers and certification regime settle down.

I suggest that there is already evidence of cultural change in many regulated companies as a result of this, and that those who think we should not at this time bring in changes likely to make the FCA more cautious in the exercise of its functions are correct. It surprised me that while many respondents thought that the FCA should be given a duty of care, most of them thought that the duty should not be enshrined in law because it would lead, inter alia, to duplication of existing obligations, the loss of regulatory agility, and costs, delay and the stress of litigation for consumers. Even the adoption of a non-statutory duty of care would have many of the same effects. Surely the thing we most want to avoid, to ensure that the City retains its position as one of the two leading global financial centres, is a loss of regulatory agility.

[Baroness Penn (Con)]

My Lords, I believe that contribution has put another side of the argument. It is the balance between these two perspectives that the Government seek to strike. We also think the FCA is in the right position to strike it, with its obligations to protect consumers and its detailed understanding of the markets that it regulates.

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[The Deputy Chairman of Committees (Lord Russell of Liverpool) (CB)]

I have received requests to speak after the Minister from the noble Viscount, Lord Trenchard, and the noble Baroness, Lady Neville-Rolfe. I call first the noble Viscount, Lord Trenchard.

[Viscount Trenchard (Con) [V]]

My Lords, I am grateful to the Committee for once again permitting me to speak after the Minister. Even though I have my name to two amendments in this group, I had not realised that the procedural change that the House is about to approve at 8 o’clock this evening—which I think is rather strange—now prevents one from doing so unless one takes an additional step, in a narrow window, of specifically putting one’s name down to individual groups as well.

I had wanted to speak in support of Amendment 2 in the name of my noble friend Lord Bridges of Headley, as moved so ably by my noble friend Lord Blackwell, and to Amendment 6, ably moved by my noble friend Lady Neville-Rolfe. I thank my noble friend Lord Holmes of Richmond for his kind words, and most heartily thank my noble friend Lord Hunt of Wirral both for what he said and for quoting from my 2012 speech on this subject.

Your Lordships may wonder why I have added my name to two different amendments which seek to achieve approximately the same result. This is because there are many ways to raise the importance of competition and the competitiveness of markets, and I have in my mind some further variations of the theme. In any case, I strongly believe that we must move quickly to maximise the attractiveness of London’s markets to be sure that the City, including our wider financial services industry, will remain one of the truly leading global financial centres, with all that that means for our prosperity as a nation.

I had wanted to speak properly and fully within this debate but am now hesitant to do so, as I am sure my noble friend the Minister will appreciate. I had wanted to make several points, and wished to explain why I think the noble Lord, Lord Sharkey, the noble Baroness, Lady Bennett of Manor Castle, and, indeed, the noble Baroness, Lady Kramer, are so wrong in believing that the FSA’s having regard to competitiveness was a cause of the financial crisis, or that competitiveness, of itself, heightens inequality. Either Amendment 2 or Amendment 6 would be an improvement to this Bill. I would like to ask my noble friend the Minister which of the two he prefers, because they are not precisely the same. In any case, as my noble friends Lord Mountevans and Lord Hunt have said, there is strong expectation and hope that the Government will do more to secure the City’s future in relation to improving the competitiveness of the markets.

[Earl Howe (Con)]

My Lords, I am grateful to my noble friend Lord Trenchard, and sorry that he was not able to enter the main list of speakers for the reasons that he stated. I hope that we will hear more from him in later debates but I also hope that he will take some encouragement from the actions that the Government are already taking to promote the competitiveness of our financial services independently of any conclusions reached from the FRF review. Those are proof of the Government’s commitment and intent to put actions where our words have been. I very much look forward to debating his ideas further in the course of these Committee proceedings.

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[Viscount Trenchard (Con) [V]]

My Lords, again, I am grateful to the Committee for allowing me to speak after the Minister. I will speak only to Amendment 73 because it introduces another subjective concept: “unconscionable conduct”.

I searched for instances of “unconscionable” on the FCA’s website and found only one: John Griffith-Jones, the former chairman of the FCA, for whom I have the highest regard, said in a 2014 speech:

“In 1951 in the Money Lenders Act we described a 48% interest rate as ‘unconscionable’.”


It occurs to me that, as recently as 2018, the main banks were charging 1p per £7 borrowed per day for arranged overdrafts. This was about 50% per annum, but it was not disclosed; indeed, when the banks stopped telling people what their APR was and instead started telling them what the fee per £7 borrowed per day was, this was welcomed by the FSA, which thought that requiring to tell consumers the real interest rate was unhelpful because they would not understand it.

Now that the banks have reverted to informing customers of real annual interest rates, albeit in very small print, the cost of an arranged overdraft has gone down from around 50% to around 40%, which is possibly still unconscionable in today’s world of negative interest rates. As such, I certainly do not think that we should rely on the FCA to decide what is and is not unconscionable. Does the Minister agree that the banks should make clearer what real interest rates on overdrafts are?

[Baroness Penn (Con)]

My Lords, clarity around all terms and conditions is, of course, to be welcomed. I agree with my noble friend that one challenge with these amendments is potentially introducing new concepts, which might need to be defined through regulation, where we think that there are existing protections in place and the effect could be duplicative.

Covid-19 Update

Viscount Trenchard Excerpts

Wednesday 14th October 2020 Lords Chamber

[Baroness Evans of Bowes Park (Con)]

I have never and will never comment on Cabinet meetings, so I have said as much as I can in answer to the noble Baroness. I also said, with regard to the decisions being made, that we will continue to take advice from a wide range of scientific and medical experts, but we will also have to look at the wide economic policy implications of decisions. That is why we believe that the tiered approach, which comes into effect only today, is correct at this time.

[Viscount Trenchard (Con)]

My Lords, the Prime Minister is right to have resisted the call by some for a return to a full lockdown, and I congratulate him on insisting on retaining a balanced approach. However, it is important to note that the death toll, while rising, is nowhere near the same percentage of known infections that it was in late March. That suggests that the mortality rate attributable to Covid alone is lower than we thought at that time. If the mortality rate remains at a relatively low level compared to infections, can my noble friend confirm that the Government will take early steps to lift restrictions on the hospitality and other affected sectors, providing a platform for economic recovery?

[Baroness Evans of Bowes Park (Con)]

I can certainly assure my noble friend that our priority is to ensure that we bear down on this. As I said, the number of people testing positive for Covid has quadrupled in the last three weeks, there are more people in hospital with Covid now than there were when we went into lockdown and, worryingly, infections among older people are rising. However, of course, part of this tiered approach is very much also to ensure that businesses such as hospitality can function in areas where the disease is perhaps not as prevalent in the community.

House of Lords (Hereditary Peers) (Abolition of By-Elections) Bill [HL]

Viscount Trenchard Excerpts

2nd reading & 2nd reading (Hansard) & 2nd reading (Hansard): House of Lords
Friday 13th March 2020 Lords Chamber

[Viscount Trenchard (Con)]

My Lords, it is a great honour to follow my noble friend Lord Young but, alas, on this issue, I am afraid that I take a different view. I regret that the noble Lord, Lord Grocott, has again seen fit to introduce his petty little Bill, even though he did it in a most charming and entertaining way. It is clear that he has an obsession with this matter and his dogged determination to bring it up again and again does the reputation of your Lordships’ House no good, especially at this time, when the public think we should be discussing other matters. While I have great respect for the noble Lord and admire his courage in sometimes adopting a position at odds with the official position of his party, I believe that on this issue he is beginning to sound like an old vinyl gramophone record with the needle stuck in the groove.

I am still opposed to the Bill because it seeks to unpick the basis on which your Lordships’ House accepted the 1999 reforms. My noble friend Lord Salisbury said at the time:

“I shall once again trespass on your Lordships’ patience by reminding the House of what I saw as the purpose of the agreement I came to with the noble and learned Lord and the Prime Minister. The purpose was to try to pour some sand into the Government’s shoe. It would be an irritation to them. Those of us who suspected—no doubt entirely wrongly—that the Government all along wanted to stick at a stage one nominated House saw it as an incentive to ensure that that intention never materialised.”—[Official Report, 22/6/1999; cols. 789-90.]


The danger that the House will stick at a stage 1 nominated House is as great today as it was in 1999. The minor changes to the methods of appointment to your Lordships’ House since 1999 do not in any way even begin to represent what stage 2 was intended to mean; neither do they in any way resemble what was meant in 1911 by

“a Second Chamber constituted on a popular … basis.”

I do not want to argue the merits of the hereditary system or to say that if we were inventing a new second Chamber, we would design a House as currently constituted. I do not accept that it was clearly understood in 1999 that 92 hereditary Peers would be allowed to wither on the vine. I thought it most likely that no agreement on stage 2 would be quickly forthcoming and therefore it was likely that 92 hereditaries would continue to sit for some considerable time.

My objection to the Bill is simply because it breaches the conditions upon which the hereditary Peers—who enjoy no more or less democratic legitimacy than the life Peers—accepted the stage 1 reform carried out in 1999. All your Lordships are entirely lacking in democratic legitimacy. That does not mean that your Lordships’ House lacks all legitimacy. Legitimacy derives from other concepts also, including history and geography. The democratic legitimacy in another place rightly and naturally gives it the right to decide what shall be the law of the land.

It is of course true that the by-election procedures, especially in respect of Labour and Liberal Democrat vacancies, may seem to many ridiculous. Does my noble friend the Minister agree that the Government should move quickly to propose a change to the Standing Orders which would enfranchise all life Peers so that they would also be entitled to vote in future by-elections for vacancies in their respective party blocs?

Business of the House

Viscount Trenchard Excerpts

Thursday 4th April 2019 Lords Chamber

[Earl Attlee (Con)]

My Lords, my anxiety about going into Committee on the Bill today is that we will be doing so without the benefit of political commentators writing in broadsheet newspapers, without watching important television programmes and, most importantly, without taking account of academic constitutional experts. We will be sailing blind.

[Viscount Trenchard (Con)]

My Lords, I should like to speak in favour of the amendment in the name of my noble friend Lord Ridley. I had wanted to speak in favour of the two previous amendments but, because of the closure Motions, I was unable to do so.

I strongly agree with my noble friend that this House will not bring itself into disrepute in the country at large by using all the manoeuvres and powers available to it to prevent this Bill being passed by your Lordships today. The Bill has been passed improperly in another place, which has usurped powers reserved to the Executive in a way that is quite unforgivable when this country faces a difficult situation involving negotiations with the European Union and time is running out.

The Bill is designed to remove from the Prime Minister the ability to exercise the royal prerogative powers remaining to her to resist instructions by the European Union with regard to her request for an extension. She should be entitled to refuse a very bad deal. The European Union is likely to agree to her request for an extension—even for a long extension, God forbid. There is a huge majority in the country for bringing this matter to a conclusion as soon as possible. Any agreement with the European Union that resulted in a delay of another year or two years would be unwelcome, with ensuing costs to business, continuing uncertainty and the inability to make investment decisions that provide jobs for people. That is already happening—this situation is already costing companies more than might have been the case. Companies have got ready for no deal. I did not want no deal; I wanted a sensible, agreed deal—a Canada-plus-type deal.

I shall not, however, speak about Brexit now, as this is a procedural debate. It is quite proper for your Lordships’ House to have a procedural debate in circumstances where the House of Commons has broken its conventions, even on a matter of huge constitutional importance.

Furthermore, I am not sure that the Motion in the name of the noble Baroness, Lady Hayter, is right. It says,

“further to the resolution of the House of 28 January that Her Majesty’s Government should provide sufficient time for this House”,

but it then goes on to contradict that. As I understand it, Her Majesty’s Government did not provide the time; the time was stolen by the noble Baroness and her associates, just as the time was stolen in the House of Commons.

We are seeing a complete breakdown in the rules by which our parliamentary democracy operates. In those circumstances, it is not correct for noble Lords opposite to suggest that this House will bring itself into disrepute or be regarded as overstepping the mark. This House is defending the majority of the people who want what they voted for to be delivered, and the Bill is designed to prevent that. It is quite improper for proper debate on the Bill to be truncated in the way proposed by the noble Baroness, Lady Hayter, and I strongly support the amendment of my noble friend Lord Ridley. It is a reasonable amendment: it suggests that we debate the Bill over three days, taking one or two stages on each day. That is quite a reasonable compromise, and I very much hope that your Lordships will support it.

[Lord Scriven (LD)]

My Lords, we are going round in circles. The irony of me saying this is that we are tying ourselves up in knots. I therefore ask that the Question be now put.

Motion

European Union (Notification of Withdrawal) Bill

Viscount Trenchard Excerpts

2nd reading (Hansard): House of Lords
Tuesday 21st February 2017 Lords Chamber

[Viscount Trenchard (Con)]

My Lords, it is a great privilege to be able to take part in this debate, which is of such enormous historical importance. In 1975, believing that we had joined a trading bloc, I voted in favour of remaining a member of the EEC. However, it has been clear for many years now that we have been somewhat reluctant passengers on the European train, and our partners have been irritated by the brake that we have sought to apply to the political and federalist aspects of the project. As Sir Winston Churchill said in 1953 in relation to the embryonic European institutions,

“we are with them, but not of them”.—[Official Report, Commons, 11/5/53; col. 891.]

I have spent a large part of my working life overseas, especially in Japan. I was always clear in my mind that the firm I represented, Kleinwort Benson, derived its standing and the trust of its clients in no small part from the fact that it was a British firm headquartered in the City of London. It was nothing to do with the fact that the UK was a member of the EU.

I have also worked in Brussels as director-general of EFAMA, the trade association for the investment management industry in Europe. By 2006, it was already clear that the European regulators, the predecessors of EBA, ESMA and EIOPA, were intent on harmonising regulation across Europe. The diminution of the UK’s influence over European regulation accelerated after the financial crisis and the eurozone crisis, but it is increasingly at the global level that the interconnected major financial markets will develop the optimum regulatory framework and the influence of our own national regulators will surely be restored and enhanced after their subordination to EU regulators comes to an end.

Unlike the noble Baroness, Lady Kramer, I believe that the City’s success owes nothing to the EU and its future prospects are brighter and more secure freed from the European yoke and its somewhat dirigiste ways. My experience in Brussels increased my doubts that the UK could ever commit to the vision of Europe to which the European institutions aspire. However, I believed that the UK could and should reform the EU and our relationship with it from within. David Cameron tried to do this, but what he was offered as a new settlement was too far away from what I believe would have been in the UK’s interest. With some reluctance, I abandoned hope that we could reform the EU and our relationship with it from within, and decided to support the campaign to leave.

It was very clear from debates in your Lordships’ House and in another place that the European Union Referendum Act was not intended to ask the people to advise. It was clear that Parliament agreed to ask the people to decide this question. I agree with what Charles Moore wrote in the Daily Telegraph on Saturday:

“The judges in the Supreme Court and the Divisional Court had the greatest difficulty in understanding the point—plain to the most ordinary voter—that a government decision to invite the people to decide something by referendum is of great constitutional significance, not a sort of footnote”.


It seems clear that Tony Blair suffers from a similar difficulty. The noble Lord, Lord Kerr of Kinlochard, was wise in his drafting of Article 50, in so far as it provides that the Union shall negotiate the arrangements for a member state’s withdrawal, taking account of the framework for its future relationship with the Union. This clearly means that the UK’s future trading relationship with the Union, in both goods and services, should be agreed alongside the terms of withdrawal. One idea which may well have merit is that we should enter into a treaty of collaboration with the EU which would govern our future bilateral relationship and would contain a number of pillars within which we would commit to collaborate as closely as our mutual interest will allow.

I would ask the Minister if he thinks that proposing such a treaty has merit in that it could help create a more positive background for the negotiations that lie ahead, helping to facilitate the best possible agreement on free and unencumbered trade between our markets in both goods and services. It goes without saying that the rights of EU citizens who have made their homes and lives in this country must not be altered in any way, but I shall oppose any attempt to amend this Bill because I believe that would restrict the Government’s flexibility in negotiating the best possible agreement for our future relationship. Furthermore, the Government have made a commitment that both Houses will be asked to approve both the terms of withdrawal and the agreement before they are put to the European Parliament.

I do not underestimate the challenges that lie ahead, but I am confident that the Government will find the right way forward and that the opportunities that this historic decision will unlock outweigh the disadvantages of being shackled to a regional trading bloc with a different outlook on the world to our own.

Outcome of the European Union Referendum

Viscount Trenchard Excerpts

Tuesday 5th July 2016 Lords Chamber

[Viscount Trenchard (Con)]

My Lords, I agree wholeheartedly with the views expressed by my noble friend the Lord Privy Seal in her opening remarks. It is not helpful that some noble Lords seem to be suggesting that the question of whether we stay in or leave the EU can be reopened or should be subject to additional conditions being met such as a parliamentary vote or a referendum on the terms of our departure. The position is clear. One year ago the Government were elected on the back of a promise to hold a referendum on the subject. The Prime Minister stated that the question was of such importance that the people should take the final decision. Your Lordships’ House and another place assented to the Prime Minister’s view and the referendum was held. It produced a clear majority vote to leave. Members on both sides of the debate have made exaggerated claims. Surely it is now incumbent on noble Lords to play their part in securing the best way forward for this country and to make the most of the new opportunities that our decision to leave offers us.

The country needs a Government who are confident in our future and will act with confidence. I was fortunate to represent a British bank in Japan during most of the 1980s. The high regard in which the United Kingdom under Baroness Thatcher’s leadership was held by Japanese leaders of business and government during that period was of inestimable assistance to me in my task of securing access to the Japanese financial markets for the firm I represented, and through the British Chambers of Commerce and the European Business Council in Japan for other foreign businesses. I will travel to Japan next week and will meet the leaders of several companies that are major investors in this country, and shall carry a positive message about the future opportunities for them.

Of course I do not want to give the impression that I think it will all be plain sailing. Like other noble Lords, I welcome the creation of the new unit of government under my right honourable friend Oliver Letwin to negotiate Brexit. The unit must immediately be given powers to obtain full information from all departments of state on our interactions with the EU so that decisions on how to proceed can be based on hard facts and not on myths. I agree with the most reverend Primate the Archbishop of Canterbury, my noble friends Lord Lawson and Lord Lamont and others that the Government should give immediate and clear assurances about the endurance and permanence of the rights of residence of the citizens of other EU states who are living here and who have made this country their home.

There is much anxiety about the single market and what will happen to our trade with it in both goods and services if we leave. Some people argue that we should leave the EU but remain a member of the single market. They argue that our trade in goods and financial services will be seriously harmed if we do not negotiate continued access to the single market. If membership of the single market is so important, why has its trade with many non-EU countries grown so much faster than ours has? We can continue to grow our trade with the EU under WTO rules as a fallback position in our negotiations. If free movement of people is a prerequisite of access to the single market, we should walk away from it.

In any case, why is free movement of people essential to a free trade area? Is it only essential because the leaders of the European Commission and other European institutions think that the EU is a state and that its citizens obviously therefore have the right to live and work anywhere within its borders? Freed from EU procurement rules, the UK Government will again be able to level the playing field and award infrastructure contracts to British companies rather than state-owned foreign companies which can circumvent state aid rules. There are many harmful directives governing the way we run our businesses, such as the EU utilities directive. Social legislation, such as the working time directive, which is damaging to job creation, can be repealed or amended.

I was delighted to learn that the Chancellor has continued his policy of lowering corporation tax in a giant downwards move of 5%, to a rate of 15%. That level is not so different from the Irish level of 12.5%. Perhaps the Irish will decide to rejoin the United Kingdom, with equivalent status to Scotland, when their EU membership requires them to harmonise their corporation tax rate at a much higher level. That would of course remove any talk of a “hard border”.

Freed from EU regulation the Government could do more to help the economy. How about creating tax-free enterprise zones around ports and airports? And the Government really cannot put off a decision on the third runway at Heathrow any longer. The Government could create tax-free or low-tax enterprise zones, some of them linked to the northern powerhouse project. We will be able to take many such new initiatives when freed from the shackles of EU rules.

Trading with the EU under WTO rules as a fallback position would not be so bad, given that the total paid in tariffs would be considerably less than the cost of our EU membership. The lower pound would also help our exporters reduce the deficit. It is highly questionable whether the single market in services is about trade liberalisation at all. As the late Ronald Stewart-Brown of the Trade Policy Research Centre concluded in his excellent report of March 2015, the single market in services, especially financial services and insurance, is much more about EU integration through EU-wide supervision and regulation.

As for passporting, the European regulator has recommended that the EU’s fund management passport should be extended to Guernsey and Jersey. If the regulatory regimes in these two non-EU states are good enough for ESMA, surely our own FCA should be good enough too. In any case, passporting rights are significant only for the fund management and insurance sectors, whose aggregate exports to the rest of the EU, at £5.9 billion in 2013, were less than 9% of the UK’s financial services and insurance exports worldwide, at £68.5 billion.

The Swiss Government are shortly to start renegotiating their trade agreements with the EU, following the decision of the Swiss people in a referendum to end free movement of people. That means that the two largest financial services markets in Europe will be setting up new arrangements for trade at the same time. This will surely provide an incentive for EU negotiators to honour the commitments they have made under the GATS, which confers rights on all WTO members.

We will have a very strong hand in negotiating a comprehensive new trade agreement with the EU covering goods and services. It should not be as difficult as many claim. After all, we start from a zero-to-zero tariff position. Furthermore, we might decide not to terminate our annual net contribution of some £10 billion immediately but to run it down over a reasonably small number of years. We will surely also wish to remain a member of European programmes such as the Horizon 2020 science programme, of which there are 15 non-EU members.

I hope that the new Government will move swiftly to start to work out a new relationship with the EU, which is what the people voted for and what many on the remain side also want. That would be good for industry and for the City and we will even get on better with our European neighbours, too.