Draft Markets in Financial Instruments (Amendment) (EU Exit) Regulations 2018

Alison Thewliss Excerpts

Monday 17th December 2018 General Committees

[Alison Thewliss (Glasgow Central) (SNP)]

It is a pleasure to serve on the Committee with you in the Chair, Mr Sharma. I begin by agreeing with the hon. Member for Stalybridge and Hyde (Jonathan Reynolds); I will support him in that vote. There is ample time for this to be debated on the Floor of the House, if that is wished for. This afternoon we are debating pornography regulations there. If we can debate those there, I do not know why we cannot do the same for something almost as important—MiFID II and this statutory instrument.

There are so many issues that this statutory instrument encompasses that deserve great and serious attention from Members across the House. All Members should be allowed to participate in the debate, not just the small, dedicated crew here. Issues such as the significant data gap are of huge concern. It worries me greatly that between the FCA not having this information and having it, there is ample opportunity for our systems to be exploited. What assurance can the Minister give that that cannot happen? The response to the financial crash showed that gaps in oversight between regulators, the Bank of England and the UK Government can have disastrous consequences. We must hear some assurance that there will be ongoing discussions with all involved to ensure there is no gap for those who wish to exploit one. That would be incredibly serious.

As always, I stress that Scotland’s financial sector, which includes firms and workers in my constituency, has been clear that the interests of this sector are best served by us staying in the EU single market and the customs union. Ten years on from the crash, our financial services sector needs urgent reform—not new problems originating from the decision to go for a hard Brexit. Instead of planning how to minimise the damage, we should use our time to plan a successful future within in the EU, where we can use our skills to make things better, rather than starting from scratch with skills we do not yet have. That seems a huge waste of time and resources.

The hon. Member for Oldham East and Saddleworth picked up on the point that I usually make in Committee about the skills and resources of the FCA and all the other institutions. This draft SI sees a wheen more powers and responsibilities heading towards those institutions—and huge costs. I very much thank the Minister for the opportunity to meet the FCA, which the Labour Front-Bench spokesperson mentioned. I was not able to be there this morning, but I will certainly take up that invitation in the new year, because it is important to get its perspective.

The impact assessment is clear:

“The direct cost to the FCA of developing and adapting IT systems in order to carry out its new and revised responsibilities under the transaction reporting and transparency regimes is estimated at £3.5m to £4m”.

It also talks about the operational challenges for the FCA of the transparency regime. A whole load of other areas are mentioned in the impact assessment, which hon. Members would do well to have a look at. That is significant; it is a huge amount of money that we do not need to be spending on doing this. It is money that would be better spent in other ways.

I am also concerned about the costs to business. As I mentioned, huge costs are outlined in the Government’s impact assessment. Familiarisation costs are a staggering £9.6 million in total; that will affect 3,300 UK firms and 1,650 EEA firms. That is significant. Furthermore, there are the monetised non-familiarisation costs to business. The cost of changes to reporting requirements is £8,750,000; changes to IT systems are £1,750,000 as a one-off cost; and transition costs are £16,750,000. That is huge. On the back page, there are recurring costs to business, year in, year out. Changes to reporting requirements will mean an £8,750,000 recurring cost to firms, and changes to IT systems will mean a cost of £1,750,000. Those are huge costs to business. I would be interested to know how much was anticipated before we got into Brexit. How much was known beforehand? I bet that not an awful lot was known or anticipated.

The hon. Member for Stalybridge and Hyde mentioned the four-year transitional period without a review clause. I, too, am concerned. How do we ensure any degree of scrutiny or transparency? Where is the House of Commons in that process? Basically, we are saying, “Yes, you guys go off for four years. Do what you like, and come back to us if you need to do it any sooner or any longer.” We are losing sight of scrutiny. It sticks in my craw that some people said that we were taking back control from unelected bureaucrats, but here we are handing it over to the nameless, faceless suits in the FCA. Again, that is certainly not what was argued in the campaign.

Lastly, the hon. Gentleman mentioned the Keeling schedule. Every day is a school day in this Committee, but it is very interesting that that has been used in such a limited sense. It is significant that the schedule goes through such a huge document line by line, tracking the changes. For that reason, for reasons of scrutiny, and to ensure clarity about all issues, I support the Labour Front-Bench spokesperson in favouring an open debate on the Floor of the House. I will vote with him this afternoon.