(5 years, 5 months ago)
Commons ChamberI beg to move amendment (a), in line 1, leave out from “House” to end, and add
“declines to approve for the purposes of section 5 of the European Communities (Amendment) Act 1993 the Government’s assessment of the medium term economic and fiscal position as set out in the latest Budget document and the Office for Budget Responsibility’s most recent Economic and Fiscal outlook and Fiscal Sustainability Report, because it does not contain detailed analysis of the impact of the Withdrawal Agreement and the Framework for the Future Relationship with the EU on the UK’s economic and fiscal position; and calls on the Government to publish an assessment containing that analysis immediately.”.
I was curious to hear the Chief Secretary to the Treasury start by saying she is so glad that this is the last statement she will ever have to make to the EU. I cannot agree, and the Scottish National party cannot agree either. It is surreal to be standing here days from the original day of departure from the EU attempting to fulfil this legal obligation as though things were business as usual. These past few days prove beyond any doubt that we could not be any further from business as usual in this House; we are absolutely through the looking glass. Events are developing every day around what kind of country we are going to be left with; there are grave concerns about the future from every aspect of civic society. So I certainly do not share the Chief Secretary’s optimism that there is a bright future ahead.
The Chief Secretary talked about young people. Young people are the most pro-EU group in this country, and it is their future that this Government want to take away, so shame on her for not recognising the limitations that young people will face when they want to set up businesses, when they want to trade with the EU, when they want to travel and advance their education and opportunities in life.
I do not wish by way of proposing the amendment to diminish the work that the Office for Budget Responsibility does. My colleagues on these Benches and I will always welcome efforts to make public accounts more transparent and independent. The OBR has conducted this analysis rightfully and properly within its remit, but unfortunately this is precisely the reason why the SNP cannot support the approval of this statement tonight: because the OBR can only make forecasts on the basis of stated Government policy regardless of whether the policy is likely to be achieved or, as the hon. Member for North Dorset (Simon Hoare) said, whether it is his party against the Government, or whether in fact the right hon. Member for West Dorset (Sir Oliver Letwin) is now the Prime Minister, because who knows? It is a Dorset thing; Dorset is leading the rebellion against their own Government. That is very interesting—and I see how happy the hon. Member for North Dorset is to be doing so. It is an absolute shambles when a Member who ought to be supporting the Government ends up leading the charge against them—although that is not at all uncommon these days; it is part of the whole madness of this Government.
The latest OBR fiscal sustainability report was published on 17 July 2018. It does not reflect the reality of the Prime Minister’s proposed deal, which was published much later, on 25 November 2018. In the OBR’s outline of the assumptions made in its economic and fiscal outlook, it is clear that the terms of the UK’s departure from the EU are unclear and that there is “no meaningful basis” on which to predict the nature of the relationship between the UK and EU. That is the situation in which we have we remained.
I checked and I have £3.52 in my purse and I would be as well throwing it down the stank as putting it on any outcome of the UK leaving the EU, so it would be an understatement to say that I could find it risky to endorse a fiscal spending plan based on one assumption of our future relationship with Europe. It is ludicrous for MPs to be asked to approve this motion without having any sight of any analysis of the Prime Minister’s deal. It is our job in this place as MPs to scrutinise the UK Government, but we are not being given the opportunity to do so effectively.
The Prime Minister has said that such an analysis of her deal does exist. She confirmed it in a letter to my colleague, the right hon. Member for Ross, Skye and Lochaber (Ian Blackford), so why will the Prime Minister not share the details of that analysis with the House? Is it because she knows, as we all know, that the economists are right and her deal will be bad for GDP, public finances and the living standards of all our constituents?
GDP growth has gone from being the highest in the G7 before the EU referendum to the lowest today. Imports have been slower than for other G7 countries, despite an unprecedented drop in the value of sterling, and it is interesting that for some time now the exchange rate on the cash machines at Glasgow airport, which I see when I come down to London every week, has been taken off, because nobody would take any money out if they saw how dreadful it was.
Inward and outward foreign direct investment have dropped, with some analysis suggesting that the drop in inward FDI is as much as 19% compared with a no-Brexit scenario, and we are starting to see job losses on a regular basis across these islands. It is no coincidence that this is happening. The Brexit job loss index says that more than 200,000 jobs have been lost already, without the UK having even left. In a no-deal scenario, Scotland can expect to lose 100,000 jobs, according to research by the Fraser of Allander Institute, which is based in my constituency. Speaking of my constituency, I recall hearing from a significant business there on Friday afternoon. It says that it is going down from a five-day week to a four-day week, that it has laid off temporary staff and that it is losing orders because of the uncertainty of this Government. It is unacceptable that businesses the length and breadth of these islands are being put into this position because of an internal dispute within the Tory party.
The OBR has not explicitly modelled the effects of a no-deal Brexit on the economy, but the London School of Economics has suggested that if the UK Government were to stick to their frankly unreasonable targets for reducing net migration, it would not be unreasonable to expect a long-term decline in output and productivity. The UK Government’s shambolic Brexit deal would also be hugely damaging, because EU nationals contribute hugely to our society and our economy. The Government’s aim to reduce the number of EU nationals here by 80% would have a massive impact on the UK’s economy, on population growth and, quite frankly, on our ability to survive as a country. The Government do not want poor people to have children—they have brought in the two-child limit—and they do not want people to come to this country and build their lives here, but we have an ageing population. Where do they think we are going to get the people from? I have absolutely no idea, and neither do they.
On top of all this, income inequality has risen since the Brexit vote to the extent that on two occasions the OBR could not predict the levels of tax that the Treasury was going to receive from the 1% in society. The tax windfall that the Chancellor is celebrating is not a sign that the economy performing well; it is a sign of deep-seated inequality, which is worsening under the UK Tory Government.
I am sure the hon. Lady is aware that, according to the Institute for Fiscal Studies, an extra £5 billion will be required to maintain services in line with population growth, along with an appropriate number of people to support those services.
The hon. Gentleman makes an excellent point, and he is absolutely correct. Without people, the economy will falter. That is the economic reality.
The Resolution Foundation has said that the income tax take is up 8% so far this year, but that that is coming from the very highest earners. The wages at the bottom continue to stagnate. If the OBR cannot openly predict the short-term economic performance, it is unreasonable to ask the House to sign off on its guidance. It is more difficult now for families to survive on the money they have. Since the vote, the cost of bread is up 11%, the cost of butter is up 23% and the cost of milk is up 11%—and we still have not left the EU. If people cannot afford to put bread and butter on the table, this economy is heading for the drain.
It is a well-established fact that Scotland did not vote for or particularly want to leave the EU. I checked just before I stood up to speak, and 13,920 of my constituents have now signed the petition to revoke article 50. The Prime Minister has consistently ignored attempts by the Scottish Parliament to find any kind of compromise solution, such as staying in the customs union and the single market, which would limit the damage of this hard Tory Brexit. If she wants to drag Scotland out of the EU against its will, she should have the bottle to come to this House and present the analysis that she says exists. She should have the courage to tell people that it will cost jobs and businesses and that she cannot make guarantees about the future.
If the Prime Minister does not believe that her Brexit deal can stand up to scrutiny in this House, the UK Government need to face up to reality and ditch Brexit altogether by revoking article 50. They are throwing good money after bad on no-deal planning, on fridges, on staged traffic jams and on botched ferry contracts, when they could be spending that money on lifting the awful austerity cuts that we have seen over the past nine years. The Chief Secretary to the Treasury talks about going round the country and listening to people’s public spending priorities, but I bet none of them talked about spending £33 million on Eurotunnel due to the shambles created by the Secretary of State for Transport, or about the £1 billion to bribe the Democratic Unionist party in an attempt to keep the Government in power.
Day after day in my constituency, I see the impact of this Government’s callous approach to cost-cutting. I see the benefits freeze, which is expected to cost families £800 a year, on top of the £900 a year that the Bank of England says Brexit is already costing every family. I see the two-child policy, which leaves families nearly £3,000 a year worse off if they have a third child and which makes a woman with three children on a 16-hour contract work the equivalent of 45 hours to make up the difference. I also see the thousands of pounds a year being lost by the WASPI women who are no longer entitled to their side of the pension bargain, having had their pensions cruelly stolen by previous Governments and by this one as well. How can any Minister look the population in the eye and say, “There is no money for you,” when the Government are asking us to sign a blank cheque for a hard Brexit?
I am a lifelong campaigner for Scottish independence and scarcely have I seen a clearer case for it than the shambles of the Conservatives and the incompetence of the Labour party in opposing them. The UK Government’s incompetence is changing hearts and minds all over Scotland on the merits of independence, and I hope that there will soon be an opportunity for the people of Scotland to take matters into their own hands.
I am glad to rise to support my right hon. Friend the Chief Secretary to the Treasury. I serve on the Treasury Committee, and it is a pleasure to follow my right hon. Friend the Member for Gainsborough (Sir Edward Leigh), who is so optimistic. I am also glad to follow the hon. Member for Glasgow Central (Alison Thewliss), who always speaks from the heart.
Do Labour Members and SNP Members welcome the fact that, despite their concerns about Brexit, Forbes recognises the UK as the No. 1 place to do business? The UK is currently the second highest location for inward investment in the world and the highest in Europe. The market believes that the UK has a future after Brexit; Opposition Members do not.
Does the hon. Gentleman not agree that there is no deal as good as the deal that the UK currently has as an EU member state?
I do not agree with that, actually. The Treasury Committee has discussed the fact that the UK has the highest employment growth in Europe, which is an inexplicable miracle. Mark Carney, the Governor of the Bank of England, could not explain why it is happening. This country is a jobs miracle because this Government believe in private enterprise. Opposition Members do not believe in private enterprise. They believe in the crushing hand of the state, which damages business and does not build it up.
In my constituency, we have 1.2% unemployment. We have the highest employment levels we have ever had. The oil and gas industry expects £200 billion-worth of future investment because it is optimistic about business. This Government’s Treasury is supporting the oil and gas industry and backing much of the fiscal policy that is making this the most attractive place to do business.
This is so difficult because the Opposition parties simply cannot get their heads around the Conservatives being the party that supports aspiration, which is instinctively what we do. Many Conservative Members are, like me, self-made businessmen. We are the party of enterprise, and I am living proof of that enterprise.
(5 years, 5 months ago)
Commons ChamberWhen will the Government end state-sanctioned age discrimination and ensure that everybody, including those under 25, are entitled to a real living wage?
As I have said many times, the most important thing for under-25s is to ensure that they get into the workforce and establish a pattern of work.
(5 years, 5 months ago)
General CommitteesIt is a pleasure to see you in the Chair, Mr Sharma. I very much agree with what has been said by the Labour Front-Bench spokesperson, the hon. Member for Stalybridge and Hyde. I do not want to delay us from all the exciting statements still struggling on in the Chamber, but I want to raise a couple of points.
The Minister will not be surprised to hear me say again that this is not what Scotland voted for and not what Scotland’s financial sector needs. Our interests are not best served by being taken out of the EU single market and customs union. The deal we have as a member state is particularly good for financial services. Nothing that the Prime Minister can negotiate will come anywhere near what we have at the moment. Nevertheless, we need to ensure that what comes into place does not undermine all the progress made since the financial crash. We cannot allow Brexit to be an excuse for any kind of backsliding on that regulation and on the progress made. I would like assurances from the Minister that none of the provisions in the SI would allow those kinds of things to happen.
I understand that a few concerns were raised in the Lords about the SI and the landscape in which it would sit. It has been raised before in Committee that we have all these financial services SIs coming through but no comprehensive picture of what the full jigsaw will look like when it is put together, or even if the pieces of the puzzle fit neatly. It would be good to hear a bit more from the Minister about the Government’s intentions. We have so much coming through at the moment that we need some clarity to ensure that nothing falls through the gaps, be it for purposes that are innocent or otherwise. We need to ensure that the system does not allow anything like that to happen.
In the Lords, Baroness Bowles said that
“by the time we have ploughed through all 60 statutory instruments that we are told we have to deal with, and then whatever other number we may get regarding corrections and re-workings—some of which are coming along now—FSMA will be even more incomprehensible on the legislation website, and so too will be any sensible comparison of how EU legislation has been retained with regard to the EU originals… It is actually quite a mockery to make a fuss about the accessibility and clarity of wording in individual documents while it remains impossible to find out their cumulative effect.”—[Official Report, House of Lords, 25 February 2019; Vol. 796, c. 33.]
We need to get to that cumulative effect.
The hon. Member for North East Hampshire made an interesting point about the fees and the powers going to the Bank of England. I have raised the issue of fees before, and it would be good to get more clarity on the scale, size, scope and application of the fees and how they would work. It seems that here and in all our other financial services SIs it is the Bank of England, the FCA and other bodies that are getting powers, not Parliament, which, as I am sure he would agree, is barely taking back control. I am sure that is not his intention with Brexit.
The hon. Gentleman is nodding his head.
Are there any resource implications, as indicated by the fees, for the Bank of England or the FCA, that would have to be recouped through the fees? How many more people would be needed to process these types of uncertificated securities? Do the Government have any idea how many people and what processes they might need? Is there a cost they would affix to that which we could see and understand?
The Minister mentioned the consultation process. It would be interesting to know what changed with that process. Can he give any narrative on where he started out and where he ended up, and were any substantial changes made as a result? I continue to be concerned that there is not enough ability for people to engage and for organisations and those concerned about uncertificated securities to come and give their views and seek changes. The biggest problem with the SI and the way the process works is that we cannot amend it—we accept it or reject it, but we cannot amend it. It is difficult to see where corrections might come from and what tracking there is of that.
(5 years, 5 months ago)
Commons ChamberI would be happy to meet the hon. Lady. We are investing in port infrastructure, as indeed in other infrastructure projects across the south-west. I believe it was she who asked the Chancellor in the lead-up to the Budget to make that national commitment to Dawlish, for example. We are keen to listen to her opinions in this respect, and I would be very happy to meet her.
The Government have made a very strong commitment to tackling money laundering. Recent initiatives include the creation of the economic crime strategic board and the National Economic Crime Centre. We have also strengthened anti-money laundering supervision through the creation of the Office for Professional Body Anti-Money Laundering Supervision, and we are reforming suspicious activity reports and tackling the abuse of Scottish limited partnerships.
The Economic Secretary to the Treasury knows better than most of us about the nefarious impact of Russia, and I send my best wishes to his constituency, to the Skripals and, most of all, to the family and friends of Dawn Sturgess, one year after the Salisbury attack.
Yesterday, Prince Charles ended up being drawn into the troika laundromat scandal, with money linked via a maze of shell companies back to the Magnitsky case. Criminal and legitimate money is sloshing around together in our banking system. What are the Government doing to close the loopholes and stop legitimising the proceeds of kleptocracy?
I thank the hon. Lady for her kind remarks about my constituency. I am familiar with the reports that appeared in The Guardian yesterday evening about the case to which she has referred. Following the response by the Financial Action Task Force to a two-year review of our standards in the United Kingdom, the Government recognise that we are world leaders in this regard, but there are some outstanding concerns about reports of suspicious activity in the banking sector. Work is ongoing, and I will take a close interest in it.
(5 years, 5 months ago)
Commons ChamberI thank my right hon. Friend for her questions. To reiterate, there is no connection between the loan charge and IR35; they are two distinctly different aspects of Government taxation policy. The purpose of my statement, in making it clear that we will not be actively or aggressively looking at previous activities in this area, was to show that we recognise that we need to get this right and that we need to support employers and contractors as we go through this process. That is the approach that we will take.
We should have been debating the Financial Services (Implementation of Legislation) Bill this evening, but the UK Government are clearly feart. Can the Minister tell us when the Bill will return to the House? We were told that it was vital, urgent and necessary in the event of a no-deal Brexit, yet today we find that that urgency has evaporated. The statement today is nothing but a fig leaf to cover the embarrassment that the UK Government feel over the amendment tabled by the right hon. Members for Sutton Coldfield (Mr Mitchell) and for Barking (Dame Margaret Hodge). The Government should have acted on this after the Sanctions and Anti-Money Laundering Act 2018, but on public registers of beneficial ownership, they have taken their lead from the Prime Minister and kicked the can down the road to 2023.
On IR35 and the loan charge, what assessment has the Minister made of how many people were forced into the system by their employers and what action has been taken by the employers involved in those cases? How many people were separate from that and perhaps knowingly used the system to avoid tax? It seems to me that they are two separate classes of people who should be recognised and treated differently as we go forward.
On compliance and enforcement, this Government have a poor record because they have already closed HMRC offices in Scotland, the local knowledge of which played a vital and valuable role in enforcement, ensuring no avoidance or evasion and enforcing compliance. My hon. Friend the Member for Cumbernauld, Kilsyth and Kirkintilloch East (Stuart C. McDonald) has asked this before, but will the Minister put the plans to close the HMRC office in that constituency on hold because it plays a vital role in the tax avoidance, evasion and compliance regime?
Finally, will the Minister act to make Companies House part of the anti-money laundering regime, which would close a huge loophole in the system that allows people to register companies falsely? Will he take action on Scottish limited partnerships, which are still allowing people to hide money and move it around? The last time I asked about SLPs, thousands of people still had not registered as a person of significant control but had not been fined. Does he not have an interest, as a Treasury Minister, in having that significant amount of money in the Treasury coffers rather than going unpaid?
The hon. Lady asks about when today’s business will return to the House. That will be a matter for the business managers and the usual channels in the usual way. She asks about the loan charge and, specifically, about those who would be impacted by it, and I can tell her that, of the £1 billion that has been received by HMRC via pre-loan charge settlements, some 85% of those settlements by value came from companies, rather than from individuals. HMRC will go for companies in the first instance.
The hon. Lady raises the issue of HMRC offices up and down the country. We are going through a transformation programme, as she will know, reducing the number of offices from 170, some of which had fewer than 10 staff, to produce 13 state-of-the-art hubs that will move our tax authorities into the 21st century, and so much more can be done through analysis, computers and intelligent interventions. I was privileged last week to visit our new office in Bristol, which will be the hub for the south-west of England. It is a truly stunning building that will house a state-of-the-art approach to tax collection.
The hon. Lady mentions Scottish limited partnerships and urges the Government to act. She will know that we have already taken action in that respect. The main point remains that we have been successful in keeping our tax gap as one of the lowest in the world, safeguarding and protecting some £200 billion of tax, which, let us not forget, is there for a purpose. Taxes support our vital public services, our doctors, our nurses, our brave servicemen and women, and our police force. We need that money, and that is why I am proud of our achievements in that area.
(5 years, 6 months ago)
Public Bill CommitteesI beg to move,
That—
(1) the Committee shall (in addition to its first meeting at 9.25 am on Tuesday 26 February) meet—
(a) at 2.00 pm on Tuesday 26 February;
(b) at 11.30 am and 2.00 pm on Thursday 28 February;
(2) the proceedings shall (so far as not previously concluded) be brought to a conclusion at 5.00 pm on Thursday 28 February.
It is a pleasure to serve under your chairmanship, Sir Edward, and I am sure that of Mr Austin too. I look forward to the scrutiny of the Bill and to our debate in Committee.
Question put and agreed to.
Resolved,
That, subject to the discretion of the Chair, any written evidence received by the Committee shall be reported to the House for publication.—(John Glen.)
Clause 1
Power in respect of EU financial services legislation with pre-exit origins
I beg to move amendment 2, in clause 1, page 1, line 2, leave out “may” and insert—
“, in respect of a piece of specified EU financial services legislation, within six months of that legislation being implemented in the European Union, or immediately if more than six months has passed before this section coming into force, must”.
This amendment would require regulations to be made to apply specified EU financial services legislation in domestic law within six months of that legislation being implemented in the European Union.
With this it will be convenient to discuss amendment 3, in clause 1, page 1, line 3, leave out “, or similar, ”.
This amendment would only allow for corresponding provision to EU financial services legislation, not similar provision, to be made.
It is a pleasure to see you in the Chair, Sir Edward. I shall keep this relatively brief. I am pretty sure that the Government know the concerns of the Scottish National party and other Opposition Members about the scope and powers of the Bill.
The amendment would require the UK Government to change regulations in line with European Union standards, as opposed to merely allowing them to make such changes. The UK is reliant on the EU for trade in services, and has become increasingly so since the referendum, according to Office for National Statistics figures for trade, which show that the EU makes up almost half of the UK’s service exports. Brexit risks displacing thousands of jobs in the vital financial services industry, despite institutions drawing up and triggering contingency plans to prepare for the UK’s exit from the EU.
The more that UK regulations differ from those of the EU single market for services, the harder it will be to continue to work alongside our friends in Europe. The UK Government are consistently trying to remove democratic control over the Brexit process—they had to be taken to court to give Parliament a role, they introduce statutory instruments at the last minute before adequate scrutiny can take place and they threaten us all with a no-deal Brexit in a dangerous game of Brexit Russian roulette. The amendment would therefore limit the powers given to the Treasury under the legislation to diverge from EU standards.
I thank the hon. Member for Glasgow Central for that contribution. I will respond to amendments 2 and 3 together. As she pointed out, they relate to the Treasury’s discretion to domesticate specified EU financial services legislation and the limitations on implementing said provisions.
Amendment 2 was tabled by the hon. Lady and by the hon. Member for Lanark and Hamilton East and would require the relevant EU legislation to be implemented in the UK within six months of that legislation being implemented in the European Union. The amendment would limit the Government’s discretion unnecessarily and in a way that might have an adverse impact on the UK’s financial services sector.
As the Committee will appreciate, the purpose of the Bill is to give the Government the necessary powers to implement certain pieces of in-flight EU legislation in a timely manner. Mandating implementation within a certain time limit, however, is simply an unnecessary constraint. That is particularly the case given the uncertainty about a no-deal scenario. There might be files that, as it unfolds, are no longer suitable for UK markets, so mandating the UK to implement legislation that in its final form may be unsuitable for or damaging to the UK financial services is inappropriate, in particular as we will not be able to influence the final form of the files in the schedule, which are still in negotiation.
The power to adjust under the Bill is limited; it will not allow the Treasury to alter substantially the intent of files. I do not think it appropriate for the Bill to compel the implementation of legislation that has not yet been drafted and will not have UK input in its final stages.
Amendment 3 seeks to restrict the Government to implementing only corresponding EU provisions, as opposed to corresponding or similar provisions. As was discussed at length in the Lords Bill Committee, “corresponding” is taken to mean
“‘identical in all essentials or respects’. The term ‘similar’ means ‘having a resemblance in appearance, character, or quantity without being identical’. In practice, of course, the legal interpretation of the two terms can vary, with some judging that ‘corresponding’ affords a wider latitude…on the basis of the current drafting…it will be possible to exercise the power only to achieve the aim of the original EU legislation, with an option to make adjustments to account for the specificities of UK markets, rightly reflecting the fact that we will no longer be a member of the EU. It will not, therefore, allow for wholesale changes to the character and intent of the current legislation.”—[Official Report, House of Lords, 8 January 2019; Vol. 794, c. 2138.]
I reassure the Committee that the formulation “corresponding, or similar” is well established and has been used, to provide recent examples, in the Pension Schemes Act 2015 and the Recall of MPs Act 2015. I hope that that will reassure the Committee regarding the limitations that will apply in the formulation “corresponding, or similar”, for which there are precedents. In short, the current wording is already intended to ensure that the powers under the Bill cannot be used to create substantively new policy outside the bounds of the original EU legislation. Without that discretion to implement files in a corresponding or similar way to original EU legislation, the Bill’s power is essentially unworkable. I hope that, in light of those reassurances, hon. Members will withdraw amendments 2 and 3.
I would like to press the amendment to a vote.
Question put, That the amendment be made.
I beg to move amendment 4, in clause 1, page 1, line 9, leave out “the Treasury consider appropriate” and insert
“the Treasury and the House of Commons consider appropriate as defined in sub-paragraphs (i) and (ii)—
(i) any proposed adjustments must be approved by a motion of the House of Commons prior to regulations being laid in draft in accordance with subsection (8)(a), and
(ii) if the House of Commons agrees a motion that certain adjustments be made, the Treasury shall consider that to be an expression of agreement by the House that those adjustments are appropriate.”
This amendment would only permit adjustments to be made that have been pre-approved by the House of Commons.
This amendment also addresses the extra powers that the Bill gives to the Treasury. Clause 1(1)(b) talks about the Treasury considering things “appropriate”. We think that a wider definition of “appropriate” is needed, because the drafting gives the Treasury a good deal more power. The amendment asks for a bit more information on that and for more powers to be given to the House of Commons, with a motion being needed for any adjustments to be made.
I thank the hon. Lady for the amendment. It requires adjustments to files under the Bill to be pre-approved by the House of Commons before the Government introduce the relevant statutory instrument. The Government recognise the importance of parliamentary scrutiny surrounding any adjustments that might be made to the relevant EU legislation covered by the powers within the Bill, but any proposed adjustment to files under the Bill will undergo robust parliamentary scrutiny.
First, each statutory instrument will need to be approved by both Houses under the affirmative procedure. That would require laying the relevant statutory instrument before Parliament and then an accompanying explanatory memorandum, setting out the policy intent, before the debate on the SI, and well ahead of implementation. This is the established process for scrutinising such statutory instruments and that is why it is the model we have chosen to follow.
Secondly, the Government have made a clear commitment to consult on each of the SIs laid under the Bill, as appropriate, as stated by the Cabinet Office guide to consultation. Thirdly, the Government publish impact assessments for statutory instruments as a matter of course, and those tabled under the provisions in this Bill will be no different. That will include analysis of economic impacts and equalities considerations, where relevant.
Finally, the additional reporting mechanisms in the Bill will require the Treasury to publish a report at least one month ahead of laying any SI, outlining any adjustments or omissions and the reasons that any adjustments are considered to be appropriate, alongside a draft of the SI. That will allow Parliament, including any interested Select Committees, to scrutinise and report on the proposed content.
In the Government’s view these reporting requirements, alongside the use of the affirmative procedure with each SI laid, afford sufficient and appropriate parliamentary scrutiny for the proposed adjustments to files in the Bill. I remind the Committee that the Joint Committee on Statutory Instruments will be scrutinising all SIs produced under this Bill, as part of the usual procedure. The JCSI’s role is to ensure that a Minister’s powers are being used in accordance with the provisions of the enabling Act. It reports to the House any instance where the authority of the Act has been exceeded or any that reveal unusual or unexpected use of the powers, where the instrument might require further explanation, or where it has been drafted defectively. It is vital that the Government retain the latitude to make these adjustments to files in a timely way, given that without this power the utility of the Bill is seriously compromised.
In consideration of the strengthened reporting requirements and scrutiny procedures in the Bill and the importance of making adjustments to files in a timely way, I hope that the hon. Lady will feel able to withdraw her amendment.
I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
I beg to move amendment 11, in clause 1, page 1, line 14, leave out from “(g)” to “does” in line 16.
This amendment would amend the definition of “adjustments” to restore its natural meaning, while retaining the prohibition on major changes.
I beg to move amendment 5, in clause 1, page 2, line 10, leave out subsection (4).
This amendment would disapply section 8(5) and 8(7) of the European Union (Withdrawal) Act, which allow regulations to do anything, with some exceptions, that can be done by an Act of Parliament.
With this it will be convenient to discuss amendment 14, in clause 1, page 2, line 12, at end insert
“as though section 8(5) of that Act read ‘Regulations under subsection (1) may make any provision that could be made by an Act of Parliament apart from amending any primary legislation.’”
This amendment would prevent regulations under this Act amending any primary legislation.
Again, amendment 5 seeks to limit some of the sweeping Henry VIII powers that the Government are taking under this Bill, as they did with the European Union (Withdrawal) Act 2018. We seek to disapply sections 8(5) and 8(7) of the withdrawal Act, which allow regulations to do anything, with some exceptions, that can be done by an Act of Parliament. We would very much like to see the Government bringing back some proper, primary legislation as part of a wider strategy on financial services, rather than putting all these out in the way that they are. As I have argued at different stages—and I do not seek to repeat all the arguments here—the Government are giving themselves a huge amount of power under this Bill. We would like to pull that back somewhat, which is what this amendment seeks to do.
I rise to speak in support of amendment 14. It is a pleasure to serve under your chairmanship, Sir Edward, and to follow the hon. Member for Glasgow Central. I very much agree with the sentiments she has expressed. Labour’s amendment 14 is similar in intent to the SNP’s amendment 5, albeit that it would achieve its outcome through a different route; but we will support the SNP’s amendment if it is pushed to a vote, as well as our own.
As members of this Committee will be aware, we have consistently expressed our concerns about the proliferation of Henry VIII powers created through secondary legislation during the process of preparations for no deal. Indeed, that was one of many reasons why we voted against this Bill on Second Reading. The transposition of EU regulations, as mentioned by my hon. Friend the Member for Stalybridge and Hyde, is not an apolitical technical process, necessarily.
During the process of debating the different no-deal SIs that have already been passed through the House, there has been contention on a wide range of issues, including the resourcing and capacity of our regulators to carry out the tasks that heretofore have been carried out by EU bodies; the regulators’ capacity and accountability when levying fines as provided via the new legislation; the ability of Government to alter criminal convictions, which has been provided by part of this process; the setting of thresholds at UK level that previously were set at EU level involving complex sets of calculations; the discretion provided to regulators to apply or disapply EU-level decisions, with reference not to onshored EU legislation but instead to the objectives of those regulators; and many more. We have talked about all of those within the Delegated Legislation Committees and they are significant. It is our contention that they should not have been dealt with through secondary legislation.
I thank the Opposition spokespeople for their contributions. I also thank the hon. Member for Colne Valley for her maiden Bill Committee speech. I did not agree with much of what she said, but I will address the substantive points that were made.
Amendment 5 seeks to remove the ability under the Bill for regulations to make any provision that could be made by an Act of Parliament. Amendment 14 is more targeted, seeking to remove only the power to effect changes to primary legislation when implementing the EU files in question. An amendment with a similar effect to amendment 5 was moved and then withdrawn by those on the Labour Front Bench in Committee in the Lords.
I appreciate that there are many concerns across the House about Henry VIII powers, as the hon. Member for Oxford East set out. It is clear that, where they are proposed, their necessity must be well evidenced. In the case of the financial services legislation to which the power in the Bill will apply, I feel that such a power is necessary.
An inability to amend existing primary legislation—the Financial Services and Markets Act 2000, for example—would make it impossible for the UK to implement the relevant EU legislation. Therefore, both these amendments would render the Bill completely ineffective. Furthermore, as Committee members will be aware, the exercise of many functions under financial services legislation is carried out by the independent regulators, the Financial Conduct Authority and the Bank of England. That was always intended. The capacity and expertise of the financial regulators will be crucial in the effective implementation, where appropriate, of that legislation.
Amendment 5 would remove the ability to delegate to the regulators, because as a general rule, a power to make secondary legislation does not include a power to sub-delegate. An inability effectively to delegate powers to the regulators would completely undermine the value of transposing the relevant EU legislation into UK law.
I acknowledge the wider points made about the undesirability of no deal, but this is a contingency arrangement and I believe that the Government have set out clearly the rationale for use of these powers and how they will be used in the circumstance of no deal, which would be wholly different from anything that we are familiar with. Given this context, I hope that the hon. Members will feel able to withdraw their amendments.
I would like to press my amendment to a vote.
Question put, That the amendment be made.
I appreciate the Minister’s acceptance and reassurance that the levels of consultation and impact assessments are crucial to this process, and I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
I beg to move amendment 6, in clause 1, page 2, line 37, leave out “4” and insert “8”.
With this it will be convenient to discuss the following:
Amendment 7, page 2, line 38, leave out “6” and insert “3”.
Amendment 8, page 2, line 40, leave out “6” and insert “3”.
Amendment 9, page 2, line 42, leave out “1 month” and insert “2 weeks”.
The amendment would increase the frequency with which the UK Government must report on the use of these powers, which would be a step forward for transparency about the new powers taken by the Treasury. The Lords raised various issues in Committee, and the Government took those on board on Report by accepting amendments that require more detailed and frequent reporting from the Treasury about its proposals and use of powers, and on extending those reports and requirements to financial regulators, the Bank of England, the Prudential Regulation Authority, and the Financial Conduct Authority, where powers are sub-delegated to them. Our amendment seeks to build on work done by the Lords to try to hold this centralising Government to account for the Henry VIII powers that they are taking.
The timeline for when these pieces of EU legislation will be introduced and how they will be implemented is not clear. Regular reporting will enhance that transparency, allowing us to keep track of the measures as they come through, and an eye on the implications of the legislation for financial services in the UK.
I am grateful to the hon. Lady for her explanation of amendment 6. The Government clearly recognise the importance of parliamentary scrutiny and our reporting obligations under the Bill, as evidenced through concessionary amendments made in the other place. The Bill commits the Treasury to the following reporting and scrutiny obligations, which include obligations to,
“publish a report at least one month ahead of laying any SI, outlining any adjustments or omissions and the reasons any adjustments are considered appropriate, alongside a draft of the SI…to publish six-monthly reports on the exercise of the powers provided by the Bill”.
That will reflect on how powers have been exercised in the previous reporting period. We will also state how the Treasury intends to use those powers in the upcoming reporting period, and
“require the regulators (the Bank of England and the Financial Conduct Authority) to report on their use of any powers sub-delegated to them using the powers in this Bill”.
That will be every 12 months.
The significant bolstering of reporting requirements in the other place reflects the Government’s commitment to the transparent use of the powers in the Bill. To intensify further the reporting requirements as requested by the amendment would result in the Treasury’s being required to produce up to 25 separate reports in two years, in order to domesticate up to 17 pieces of EU legislation. The Government believe that that is completely unnecessary.
The six-month reporting period for the Bill has been accepted in the Lords, and it would bring no real benefit to add further unnecessary reporting requirements. I appreciate the commitment to proper scrutiny across the Committee, but given the strengthening of the Bill’s reporting requirements that has already taken place, I suggest that the hon. Lady withdraw her amendment.
On the basis of what the Minister has said, I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
I beg to move amendment 10, in clause 1, page 3, line 7, at end insert—
“(d) making an assessment of the economic impact of any adjustments made by the regulations in reliance on subsection (1)(b) to the specified EU financial services legislation to which the regulations relate.”
This amendment would require, in each reporting period, an assessment to be made of any adjustments made in reliance on subsection (1)(b).
With this it will be convenient to discuss new clause 2—Report on the provisions of regulations under this Act—
“(1) Prior to making any regulations under this Act, the Treasury must publish a report on the impact of the provisions of those regulations.
(2) A report under this section must consider, in respect of the regulations proposed to be made—
(a) the impact of those provisions on households at different levels of income,
(b) the impact of those provisions on people with protected characteristics (within the meaning of the Equality Act 2010),
(c) the impact of those provisions on the Treasury’s compliance with the public sector equality duty under section 149 of the Equality Act 2010, and
(d) the impact of those provisions on equality in different parts of the United Kingdom and different regions of England.”
This new clause would require a report to be made on the impact of any regulations under this Bill before any such regulations are made.
The amendment would require the Government to prepare a report outlining the impact of any regulatory divergence from the EU as its regulations under this Bill are introduced. It has been accepted that the majority of this Bill’s impact will only be known after the Brexit date of 29 March, if indeed that is still the date. I have not checked my phone; who knows what has happened in the interim? All kinds of things may happen while we are in this room. Who knows?
The Minister spoke earlier about some of the in-flight legislation not being suitable or appropriate, because the UK will no longer be part of the process of making that legislation. He accepts that this is putting a lot of power in the Government’s hands in deciding what fits and does not fit, what we need to take on, and what we do not need to take on. The appropriateness of whether it will have significance to different industries, and whether we think they are appropriate, is all in the Government’s hands.
As the hon. Member for Oxford East has often said on this, it really does amount to a political decision. It is a political choice to decide which of those things are appropriate to different financial services organisations. The amendment would give a bit more clarity on the impact assessment of those decisions—political choices—that the Government intend to make. If we are going to diverge, that has an impact on how we are then able to conduct business with the EU. We need to have a better understanding, for each of those regulations, of how that will have an impact, financial and otherwise. We need a bit more clarity on what that impact will be.
This amendment gives us more opportunity to do that—to hold the Government to account on a continuing basis, and to make sure that we have a full understanding as a parliament on what the impact of the Government’s political decisions will be.
I rise to support the Opposition’s new clause 2, which is similar in intent to the SNP’s amendment 10. I would like to associate myself with many of the comments by the hon. Member for Glasgow Central. It is a pleasure to follow her in this debate. Labour’s new clause 2 is broader in scope than amendment 10, but it pushes in the same direction.
Our new clause would require the Treasury, prior to making any regulations under this Bill, to publish a report on the impact of the provisions of those regulations. In particular, we specify that the report should cover the following aspects: first, the impact of the provisions on households at different levels of income; secondly, the impact of provisions on people with protected characteristics as defined in the Equality Act 2010, with which I am sure we are all familiar; thirdly, the impact of the provisions on the Treasury’s compliance with the public sector equality duty with which I am sure, again, Members are familiar; and finally, the impact of the provisions on equality in different parts of the UK and different regions of England. The new clause underlines the pressing need for a greater understanding of the impact of legislation such as this on the real economy and on the people who work within it and are impacted by it.
Throughout this process, the Opposition have been concerned about the lack of impact assessments being provided for different pieces of legislation, yet even when they have been provided to us, they have often been highly restricted in scope as well as often arriving late in the day. Often, the main element receiving consideration within the impact assessments has been the familiarisation costs to business of the different measures. That has rightly been criticised by my hon. Friend the Member for Wallasey (Ms Eagle), and indeed last night by the Chair of the Treasury Committee. They both pointed out that the formula for calculating even familiarisation costs is highly mechanistic, relying solely on an assessment of the time spent reading each word of the new regulations, rather than a proper consideration of the level of impact of new regulations on different business practices, for example. Indeed, the Chair of the Treasury Committee has suggested that a better approach might be to ask firms for an assessment of what their adjustment costs will be, then produce a proxy based on that assessment. That could be a sensible way forward. I appreciate that the formula is currently set across Government, rather than just by the Treasury, but surely the area needs to be considered in a much broader context. We have tried to broaden the debate by specifying the elements that need to be taken into account in assessing the Bill’s impact, in line with our general approach to economic decision making.
Financial regulations often come across as a very rarefied area, but we all know that, as my hon. Friend the Member for Colne Valley pointed out, the consequences of getting them wrong can be enormous, especially for specific groups. Whether or not we agree—personally I do not—that cuts to social security were necessary to reduce the deficit that had been created by measures that followed the financial crisis, the burden of those cuts has clearly had an uneven impact on different groups.
The areas of regulation covered in the Bill could have highly disparate impacts. Arguably, the process of financialisation and the intensification of investment banking compared with relationship banking—boring banking, as we might call it—have helped to fuel the imbalance in lending. Over recent years, there has been an enormous move in the UK banking system away from loans to small and medium-sized enterprises and towards loans for real estate. That process has been much more marked outside London and the south-east—it has had a regional impact. The Bill covers some of the instruments that were involved in that process. Capital requirements also have an impact on the structure of banking and its regional distribution, so it is very important that we consider the issues properly.
Finally, I have a question for the Minister about his understanding of the impact of the better regulation provisions. I had assumed all along, as I am sure many other hon. Members did, that those provisions would not apply to this process, given the Government’s stated intention not to water down regulations. As hon. Members will be aware, the better regulation approach specifies “one in, three out”: for every new regulation introduced, three regulations must go. The same issue came up in a debate last night on a very different subject, albeit one that also related to no deal: the REACH etc. (Amendment etc.) (EU Exit) Regulations 2019, the no-deal provisions on the registration, evaluation, authorisation and restriction of chemicals—another incredibly complex body of legislation.
We do not have a clear answer from the Minister on the matter, so I would appreciate his assurance that the better regulation provisions will not apply to the process. If they did, it would counteract any claims made in this Committee or elsewhere that there would be no watering down. The issue is particularly relevant to new clause 2, because the better regulation process focuses only on the costs to business; it does not consider the costs, from a regional perspective, of not regulating, or the potential countervailing benefits to other groups. I have been informed that the better regulation provisions will not be applied to Grenfell-related fire safety regulations. Will the Minister confirm that they will not apply to this process, either?
If we suddenly find that the “one in, three out” provisions apply in this case, we will be in very different territory. There will be even more need for a proper impact assessment, because to an extent it will counteract some of the mechanistic impacts of the “one in, three out” process.
I thank the hon. Members for Glasgow Central and for Oxford East for speaking to amendment 10 and new clause 2. I shall discuss them together, because although they differ in key aspects—the former looks backwards at the impact of regulations, while the latter looks forward—we have a similar response to both. The intentions behind them are sound, because it is only right that the Government make regulations with an understanding of their expected impact, but I suggest that they are both unnecessary in the context of the Bill.
As hon. Members know, the Government publish impact assessments for statutory instruments as a matter of course, and it will be no different for those introduced under the powers in the Bill. The impact assessments will include analyses of economic impacts and equalities considerations where relevant.
I acknowledge the challenges of publishing impact assessments for the SIs closely associated with the Bill. I have explained on several occasions in Delegated Legislation Committees, and I reiterate now, that we have done this in a compressed timeframe. Every SI that has gone through the Regulatory Policy Committee—I think there have been five of them—has been registered green. I note the concerns raised by the hon. Member for Oxford East and last night by my right hon. Friend the Member for Loughborough (Nicky Morgan) about the mechanism for evaluating the familiarisation costs. I am pleased that the hon. Member for Oxford East today acknowledged that this is a cross-Whitehall provision.
I will reflect on the points that the hon. Lady has made about the application of the better regulation “one in, three out” rule in respect of this process. I confess that I am not able to give her a definitive statement this morning; I will need to write to her. We have done what we can, and the Treasury is committed to meeting our obligations on impact assessments to enable parliamentary scrutiny. In line with the duties under the Equality Act 2010, and with Cabinet Office guidance, regulations will be made with the equality duty in mind, and any impacts identified will be included in the relevant impact assessments in the usual way.
I remind the Committee that the Government are required in legislation to produce reports ahead of and looking back at the publication of SIs under the Bill. Such reports will of course include, where relevant, the expected and realised impacts of the legislation that is introduced. I hope that, in the light of those assurances, the amendment will be withdrawn and the new clause will not be pressed.
I would still like to press amendment 10 to a vote, because we need to understand better the impact that divergence will have. It is one thing to say, “This is the impact of this bit of legislation,” but we need to know the wider impact of divergence for particular industries.
Question put, That the amendment be made.
We support new clause 1, which helps us hugely to move forward to a point of clarity. It makes sure that when we take on new pieces of legislation for the different regulatory bodies, we try to get rid of any loopholes and inconsistencies, and that everybody knows exactly what the landscape looks like. It is important that the Government lay out where they intend to go with it. A draft consolidated financial services piece of legislation would be useful, to give everyone the clarity that they require.
Clause 1 comprises the core substantive content of the Bill. In a no-deal scenario, the Bill gives the Government the power to implement, in whole or in part, a specified list of EU legislative proposals or in-flight files. In many cases, the UK has strongly supported the proposals throughout their negotiations and has played a leading role in shaping them over a number of years.
The files fall into two categories. The first relates to the pieces of legislation that have been agreed while we have been a member of the European Union, but that will not have come into force prior to the UK’s exit from the EU on 29 March. Those files are listed in clause 1(3)(a), (b), (c), (d) and (f). In a no-deal scenario, there would be no way to implement them in a timely manner, as each would require primary legislation. Clause 1 gives the Government the power to domesticate those files, in whole or in part, via affirmative statutory instruments. Furthermore, as was clarified following concerns expressed in the House of Lords about the breadth of powers, the Government have the power to fix deficiencies.
The second category of files relates to those still in negotiation. The UK has played a leading role in shaping them so far and they could bring significant benefits to UK consumers and businesses when they are implemented. Those files are set out in subsections (3)(e) and (g), incorporating the schedule. Clause 1 also gives the Government the power to domesticate those files, in whole or in part, via affirmative statutory instruments. The UK will not be at the negotiating table when the files are finalised, however, so we will not be able to advocate for the interests of the specific nature of the UK’s financial services sector as negotiations are concluded. The Bill, therefore, provides the Government with the ability to fix deficiencies within the files and to make adjustments to them that go beyond the deficiency-fixing power.
Again, following concerns raised in the other place, the Government have clarified the nature of those adjustments and have stated that they cannot depart in a major way from the original EU legislation. However, the Government will have some flexibility to make adjustments to take account of the UK’s new position outside of the EU. It is only right that the UK retains the latitude to ensure that pieces of legislation finalised after we have left the EU reflect the interests of the UK’s financial services industry, and this Bill must tread the line between giving sufficient powers to enable the Government to effectively implement the legislation and imposing appropriate restraints to reassure Members that safeguards are sufficient.
I put on record my thanks for the collegiate way in which Opposition Front Benchers in the Lords worked with us to arrive at the present drafting and set of safeguards without division. Those safeguards are set out in subsections (7) to (10) of clause 1, and include a two-year sunset clause; a requirement for the affirmative procedure in every instance in which the power is used; strong reporting requirements on Government, including a requirement to publish a draft SI alongside a report detailing omissions and adjustments at least one month before laying it before the House; and a further requirement to publish a report twice a year setting out how the power has been exercised in the previous six months, and how the Treasury intends to exercise it in future.
I should note at this stage one issue to which we may return on Report. Members will note that subsection (3)(e) is not included among those files deemed settled. The Commission was required under the prospectus regulation to adopt delegated acts in January of this year; that has not yet happened, and as such, we do not yet know the content of that delegated legislation. Should the Commission adopt those acts prior to Report, we will seek to amend the Bill accordingly, limiting any adjustments that may be made to the fixing of deficiencies.
Clause 1 is the heart of this short Bill. It is the duty of responsible Government to prepare for all outcomes, and the Bill will provide us with the critical ability to implement legislation that maintains the functionality, reputation and international competitiveness of our financial sector. It is a key part of our no-deal preparations, and without this clause, I am afraid that there would be no Bill to take forward. I recommend that the clause stand part of the Bill.
I will now turn to new clause 1, which is suggested, essentially, as an alternative. The Government believe that the new version of clause 1 tabled by the Opposition is inappropriate as an alternative to the current version, as it does not as drafted provide the Government with any means of domesticating legislation through the Bill. As has been set out a number of times over the course of this and other debates on the Bill, there exists a body of in-flight EU legislation that the UK will want the ability to implement in a timely manner in the period following EU exit, in order to maintain the functionality, reputation and international competitiveness of our financial sector.
New clause 1 does not include any powers to domesticate EU legislation. It compels the Treasury to bring a motion before the House to debate a document stating what EU legislation it proposes to domesticate, but it does not include the necessary mechanism through which those measures can be implemented subsequent to the House’s approval. As such, the Bill would become a hindrance rather than a help—a means for debate without the necessary powers—and the Treasury would be left, having sought the approval of the House of Commons on those pieces of EU legislation it wishes to domesticate, needing to again seek approval by introducing primary legislation or, indeed, another version of this Bill. That would undermine the purpose of the Bill by not enabling the UK to implement important EU legislation in a timely manner when necessary. It would leave the UK lagging behind international counterparts on the issue of financial services regulation—something that I am sure Opposition Front Benchers would not wish to happen—and our financial services industry would then be at a competitive disadvantage at a crucial period in our country’s history.
Even if new clause 1 were amended to include a power to implement the legislation, I suggest that it is an unsuitable alternative to the current procedure. It requires the Treasury to collate into a single document the legislation it wishes to implement, alongside any adjustments it wishes to make and explanations of why those adjustments are necessary. That document would then be debated by the House through the aforementioned motion.
My objections to that extra layer of procedure are, in part, identical to those rehearsed earlier in my objections to amendment 4. Under the Bill as drafted, there will be extensive opportunity for scrutiny of the legislation before it is implemented. During the Bill’s passage through the Lords, we inserted the requirement to publish a draft SI alongside a report detailing any adjustments and the justification for those adjustments one month prior to laying it before the House. The publication of those draft SIs will allow Members to seek a debate on the proposed content, should they so wish. Indeed, the draft SI and the accompanying report seem essentially similar in function to the document that this new clause would require the Treasury to produce. I should also note that publication of those draft SIs will allow Parliament, including any interested Select Committees, to scrutinise the proposed content.
I sympathise with what I suspect is the intention behind the new clause. I imagine, and perhaps the hon. Member for Stalybridge and Hyde will confirm this, that the consolidated document is an attempt to make sense of all the pieces of financial legislation that form part of this essential Brexit planning for a no deal. This Bill addresses a specific issue; it is vital for the UK’s financial services industry that these 17 key pieces of legislation can be domesticated in a timely manner in a no-deal scenario. It will not be possible for the Treasury to set out in a single consolidated document its intentions for all these pieces of legislation prior to their final publication.
We simply do not know what the final version of each file will look like. It would mean the Treasury’s having to wait until all legislation in the Bill was finalised at EU level before producing this document. That would potentially lead to intolerable delays and to the UK financial services sector’s lagging behind its international competitors during this crucial period.
That is why, in the current draft of the Bill, the Treasury has committed to six-monthly reports that will set out how we have used the powers under this Bill in the preceding six months, as well as how we intend to use them in the subsequent six months. That should provide a clear and timely overview of how the Government are using the powers provided for in this Bill. In light of that, I ask that the hon. Members refrain from pressing the new clause as an alternative.
(5 years, 6 months ago)
Commons ChamberI thank the Minister for all his work on these financial services SIs. I have debated some of them and the hon. Member for Oxford East (Anneliese Dodds) has debated some, but he has had to debate almost all of them. That is a terrible burden for one man to have to bear, and it illustrates that this process is hugely time consuming. It is eating up massive amounts of all our time. We might hope that we will not need to use these statutory instruments, but as we head towards Brexit, and with the Prime Minister’s announcements over the past 24 hours, it feels as though things are getting more and more perilous the closer we get.
In many cases it feels very much like we are rearranging the deckchairs on the Titanic, because we are less than five weeks from exit day and the Government are quite clearly running down the clock. We should be under no illusions that while a no deal is an absolute catastrophe, the deal being proposed is not good enough either. There are no merits to a no-deal Brexit plan for financial services, but whatever deal can be cobbled together, it will be nowhere near as good for financial services as what we have at the moment. Removing passporting, which is part of what this legislation is all about, will have a huge impact on financial services and how they operate.
It is no secret that I have very different opinions from many on the UK Government Benches, but this is no longer a question of differing opinions. The reality is that no competent Government would have let things get to this stage. We should not be coming here at the very last minute to discuss such legislation. The Minister was up front in saying that there were errors in the legislation, but that smacks of a process that is not good enough. Some things have been picked up as incorrect, but there may be other things, because this is a substantial SI. We have got it pretty late in the day, and it is incredibly detailed and complex.
I would like the Prime Minister to recognise the urgency of the situation and extend article 50, taking no deal off the table, to give us more time on all this. Ideally, I would like us to stay in the single market and the customs union, because that would make things hugely simpler, certainly for financial services and for everybody else in other sectors of the economy too.
The Scottish Government have been doing their best, preparing as best they can, but they cannot mitigate everything. We do not yet have the Treasury’s full analysis of the Prime Minister’s Brexit deal, despite this House having voted on it twice. Last week the Scottish Government invested in their own analysis, which was published last week in a report by our chief economist. The results were damning. It said that Scotland could see a fall in GDP by 7% in the first two years after Brexit. That would be an enormous blow to our industries and jobs and to the household incomes of the people of Scotland. To put things in context, the 2008 recession saw Scotland’s GDP fall by 5.7%. This shambolic UK Government, in hock to the most extreme elements on their Benches, are doing this on purpose.
The analysis looked at only the first two years after Brexit, but the long-term effects could be sustained and long lasting. The Fraser of Allander Institute in my constituency has conducted one of the most comprehensive studies to date of the effects of migration on the UK economy. Migration is a huge issue for the financial services sector, which has much talent from around the world that needs to be able to move backwards and forwards without any difficulties. The effect of reduced migration after Brexit will lower Scotland’s GDP by 9% over the next 20 years. Reduced migration is very much the intention of the Prime Minister’s deal—it proposes to slash immigration by 80%. That will have a massive impact. [Interruption.] Government Members may sigh, but this will have a huge impact on our financial services—on the skills and talents of people coming to live and work in Scotland. The London bubble may well be fine, but as we get further away from that bubble, the impact will be greater—on Edinburgh, on Aberdeen and on Glasgow. It will mean fewer of the working-age population contributing to the economy and enriching our lives. It is an unforgiveable, ideological obsession, which has no evidence to support it.
The impact of no deal is very serious indeed, and many businesses in my constituency are gravely concerned about their futures. This SI, as the Minister says, is intended to offer consistency for businesses in the event of a no-deal cliff edge. However, relying on transitional provisions such as the temporary permissions regimes offers very little in the way of reassurance for businesses. We are being encouraged to rush through significant pieces of legislation, right, left and centre, without proper scrutiny for those businesses to engage with, and the effects will be felt by nearly 60,000 businesses. It is just not possible for each of those businesses—small and large businesses and businesses of varying different types and of varying different sectors—to have their say on this to explain exactly how it will affect them. The effects will impact them, yet they will not have the opportunity to fully engage in the process.
The hon. Member for Oxford East (Anneliese Dodds) said that the temporary permissions regimes allows companies to provide services in the UK for up to three years after 29 March. I agree very much with what she and the right hon. Member for Loughborough (Nicky Morgan) said about the consistency of this process. We are seeing so many different pieces of legislation and so many different SIs, and that is causing inconsistency, which is a worry. Some firms may find that, for one part of their business there is one date, but for another part there is another date. That will cause additional confusion.
Furthermore, businesses may well infer from these stopgap measures that the Government are expecting chaos after Brexit, and that is a position I would find it difficult to disagree with. It is no wonder that, in this context, we are seeing investment in UK businesses grinding to a halt. Ernst & Young noted that £800 billion of assets have been moved from the UK to Europe since 2016, which is absolutely terrifying.
This SI also deals with mortgages. It talks about covering contracts after Brexit, but only if they are secured on residential property in the UK. There are different measures for properties outside the UK, which means yet more complication for people to deal with. The instrument also deals with investment firms and insurance. The impact assessment says that branches of EEA banks authorised in the UK will be treated in the same way as third country branches are treated now. That is yet more red tape and more paperwork. The SI deals with consumer credit, which is, of course, hugely important to all of our constituents in their daily lives. Those are just some of the highlights of this very complex SI, and they illustrate just how much more difficult things will be than they are at the moment.
The hon. Member for Oxford East mentioned scrutiny. Part 8 of the SI covers the setting of fees by the Bank of England, the Financial Conduct Authority and the Prudential Regulation Authority. In effect, we are saying to those organisations, “Right, you go ahead and set your fees.” We will lose any idea of scrutiny over this. I am sure that those organisations will set reasonable fees, but can we be certain about that? We are giving that power to them. We are taking that power away from ourselves. There are no Brexiteers here saying, “Oh, we talked about taking back control.” Actually, we are not taking back control; we are losing any sense of control over this because we are delegating it all to those organisations. They may well have to report back, but we are still losing direct control.
The issue of familiarisation costs has been mentioned. A total of £1,900 per firm does not sound huge, but, as was mentioned earlier, it is affecting 59,200 firms, which is hugely significant. We should consider the fact that this is costing industry £110 million. This is money that industry should not have to be thinking about. Should we get to this Brexit cliff edge that the Prime Minister appears to be leading us towards, they will be spending this huge amount of money when they could have been investing it in other things, such as staff and research and development. This money is just being sucked up by Brexit, and we will be left all the poorer.
Let me return now to this idea of transitional provisions. As the provisions are transitional, it means that, at some point, we will have to come back to them. All of these SIs and pieces of legislation that we have been working on and divvying up will have to be revisited. That does not fill me with any great joy; I am sure that it does not fill the Minister with any great joy. As other Members have said, we need to see the UK Government’s wider plans. Where is the White Paper on financial services that will cover all of these things comprehensively, that will set out our direction of travel, and that will set out the principles of our financial services? It is hugely important to have these principles in place. In 2008, at the time of the crash, financial services lost their way. As part of the EU, we put these principles in place to get us back on track. We cannot see any dilution of those principles as we go forward, because we will end up in exactly the same disastrous place. I question the process and the legislation, but I remind the House that it is in the Prime Minister’s gift to withdraw the option of a no-deal Brexit. If she did that, it would render everything that we are talking about today completely useless, but we would be in a better place.
On the substantive content, I have a point to which I would like to draw the House’s attention. In a letter to the Treasury, the Financial Markets Law Committee highlighted an area of legal uncertainty arising from the textual content of the SI. Section 137R(4) of the Financial Services and Markets Act 2000 grants the FCA the power to make rules applying to authorised persons in relation to communications by or approved by them if it considers that such rules are required to ensure compliance with certain “listed requirements”. The legislation goes on to explain that “listed requirements” means requirements under the law of the UK that appear to the FCA to correspond to the requirements of various EU legislation.
This definition leaves considerable scope for interpretation. I have raised in this House and in Committee my concerns about the nature of the withdrawal Act and the erosion of parliamentary scrutiny that it brings. It does appear that we are handing an awful lot of latitude to a public body in this example cited by the FMLC. It recommends that a more specific list, such as that included in the original drafting, would be more useful, albeit altered to reflect UK legislation. If we are to be in this position facing a no-deal Brexit, despite all evidence showing the damage that that will cause, we need to have more robust and more detailed plans in place.
Fundamentally, everybody in this House knows the position of the Scottish National party. In Scotland, we voted to remain in the EU. We have worked very hard on building up our financial services sector in Scotland. It is an important, high-skill and high-pay sector, which drives many of our towns and cities. To face the prospect of crashing out without a deal is an absolutely appalling situation. Everybody working in this sector deserves better than the plans that the Prime Minister has put forward and they certainly deserve better than a no deal, and she should take that off the table.
(5 years, 6 months ago)
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It is not really a matter of order but very poor taste, and I expect somebody as culturally sophisticated as the hon. Gentleman to behave better than that.
The Scotch Whisky Association recently reported that the value of Scotch whisky exports to Mexico last year was £131.5 million—which is up 18.5% on 2017—and that Mexico is the fourth largest export market by volume for Scotch whisky. However, the Under-Secretary of State for Exiting the European Union, the hon. Member for Daventry (Chris Heaton-Harris) has confirmed by letter to the Procedure Committee that the Government
“do not…expect to replicate the existing Mexico spirits agreement in time for 29 March”.
What assessment has the Financial Secretary made of the impact that will have on geographic indicators for Scotch whisky and on the wider Scottish economy?
This Government totally understand and get the significant importance—not just to Scotland but to the entire United Kingdom—of Scotch whisky exports, which account for some 20% of all exports of food and drink from our country. That was also signalled in our recent Budget, which once again froze duty on Scotch whisky. The hon. Lady can rest assured that we will make sure that we do the right thing by Scotland’s most important export.
(5 years, 6 months ago)
General CommitteesIt is nice to see you in the Chair, Sir Henry, and to be with all my colleagues again as we hurtle towards Brexit. It is a joy.
I will pick up where my colleague on the Labour Front Bench, the hon. Member for Stalybridge and Hyde, left off: the consultation process is not clear. The draft explanatory memorandum to the draft instrument says:
“HM Treasury has not undertaken a consultation on the instrument, but has engaged with relevant stakeholders on its approach to Financial Services legislation under the EUWA—
EU withdrawal Act—
“including on this instrument”.
Does the Minister have a list of those he has consulted, and is he able to share it with the Committee? It would be useful to get an idea of just how broadly the Government have consulted, to see if anything has been missed or if there are other organisations that would have liked to contribute to the drafting of the instrument. Without a formal way for the Government to tell us those things, we have to take their word for it that it has been done as thoroughly as it could have been, as I have said before.
As the Minister probably expects—it is my usual refrain when more powers are moved to the FCA and the Treasury—it will be useful if he can tell us how many staff are involved in this and what the scrutiny mechanisms for MPs will be as we go forward. It is not really taking back control if we take powers back from ESMA and from the EU and hive them off to the FCA and to the Treasury, with MPs losing any kind of control over the process. That is not adequate at all.
According to the explanatory memorandum, first, changes for firms resulting from the UK PRIIPs KID regulation are expected to be minimal, and secondly, the UK regime will be operationally equivalent to the EU regime, so that firms manufacturing or advising on PRIIPS for sale to UK investors will continue to be subject to the same obligations as currently. The Government propose to achieve that by making minor, technical amendments to UK PRIIPs KID regulation to make it effective in the UK and to limit its scope to PRIIPs made available to UK retail investors.
However, there will be minor differences in the content of the KID between the two regimes. For example, the UK regulation specifies that references to the “competent authority” of the PRIIP manufacturer in the KID is deleted, and that the mandatory statement on the impact of tax legislation on the investor’s pay-out must specifically refer to UK legislation, as opposed to a more generic reference to the retail investor’s home member state. It also seems likely that the difference between the two regimes will widen with the passage of time after exit day. How does the Minister intend to continue alignment in the years ahead? Maybe there will be more clarity on that when the consultation comes back.
For that reason, it appears that, after Brexit, PRIIP manufacturers will need to prepare two KIDs for the same PRIIP where there that PRIIP is made available to retail investors in both the UK and the EU, which seems to me to be additional red tape. The Brexiteers railed against all this terrible red tape, but here we are tangling ourselves up in yet more of it. In some ways, it seems an overly onerous requirement for businesses. I am also worried about any dilution of measures designed to improve fair competition and consumer welfare.
It is ridiculous that the Government continue to play Brexit out and move us closer to the cliff edge, with the Prime Minister unable to give a date for when she will bring anything—in whatever form—back to the House. Meanwhile, we continue to plan for a no-deal Brexit, which seems to get closer to reality by the day. I urge the Minister to use what I am sure is his considerable influence in Government to act in the national interest and extend article 50 until more robust plans are in place.
I thank the hon. Members for Stalybridge and Hyde and for Glasgow Central for their thorough examination of the matters. I will endeavour to give them a thorough response.
I acknowledge the concerns that both hon. Members expressed about the consultation or engagement process with industry. I cannot fortify the Committee with a list of individual companies that have been consulted, but it is worth explaining that engagement process.
Although we did not formally consult on the measures, we established a cross-sectoral working group with representatives from the financial services sector to discuss the European Union (Withdrawal) Act 2018 and financial services onshoring issues. That group is chaired by TheCityUK and has representation from several trade associations that cover different parts of the financial services sector across the United Kingdom. It also includes a number of law firms.
In the time I have been doing this job, my strong determination has been that TheCityUK is a highly respected trade association—it is really a trade association of trade associations—so is well placed to co-ordinate the group, given that its remit covers all sectors of the financial services and related professional services industry, including banking, insurance, asset management, legal services, advisory, market infrastructure, private equity and wealth management. We are confident that through that engagement through TheCityUK, we have reached all the major sectors of the financial services sector.
The Government’s impact assessment says that
“between 3,000 and 4,000 PRIIP manufacturers (UK, EU and third country) operate in the UK on a regular basis”.
That is a considerable number. Is the Minister certain that they are well covered in the organisations that he mentioned?
Yes I am. The green impact assessment, which was issued on 8 February, also identifies that the familiarisation costs will be £150 per firm and that there will be a range of costs between £510,000 and £680,000.
I concede that this is an unique exercise in preparation for an outcome that the Government do not wish to have, and I hope that it will not need to be used. We had to take a view, however, about how to do it efficiently in a relatively compressed time period and I am convinced that we have done the best that we could have done in the circumstances.
We have shared working drafts of the legislation as it has progressed to identify any unintended consequences and to help industry to understand how the sector would need to respond. We have published almost all our statutory instruments before they have been laid on a dedicated section of our website with contact details for stakeholders to contact us. I am not saying that it is perfect, but I draw the Committee’s attention to the remarks of Miles Celic from TheCityUK, who noted that there is an industry-wide recognition that all parties—industry, Government and regulators—are operating in an uncertain and time-constrained environment where doing nothing is simply not a feasible option, and that these are exceptional circumstances that require a unique response.
On some of the other points, there was sensitivity about the transfer of functions to the FCA. As the national competent authority, the FCA has been instrumental in making strong representations on PRIIPs. It formally rejected the early iterations and delayed the implementation of the first draft that came out in 2016, so it was implemented on 1 January 2018. I set that out in detail to the Front-Bench colleague of the hon. Member for Stalybridge and Hyde. Frankly, the FCA is capable, as it is now doing, of responding to last year’s call for evidence, looking into the key concern of the industry around the methodology for calculating the information displayed in a KID—particularly relating to performance information and risk estimation, as well as transaction costs—and coming forward with suggested changes.
On the hon. Gentleman’s point on equivalence and the appropriateness of the changes to the Financial Services and Markets Act, in a situation in which we leave the EU without a deal, we cannot favour EEA countries of the basis of our close proximity. We will have to treat all third countries the same way. The hon. Lady’s point on the need to resist duplicate but different regulatory requirements is wise. Whatever happens, it is my determination to try to avoid that, because the common framework that exists in this area holds a lot of value for the industry.
I also point out that EU national competent authorities collaborated fully in the construction of these regulations, and the FCA was one of the leaders in that. Any amendments to fix the exit deficiencies would have to be made known to the Treasury, and any new binding technical standards derived from this ongoing review will also have to come from the Treasury and will have to be laid under the affirmative procedure.[Official Report, 18 March 2019, vol. 656, c. 4MC.]
I think I have covered most of the other points made. The FCA’s resources have been covered in previous Committees, but for the record the FCA set out in its 2018-19 business plan the proportion of its resources to be used for forthcoming exit work. As of December 2018, it has 158 full-time employees working on Brexit. I cannot break that down, because I do not think that the FCA has, but that is a significant increase from 28 nine months earlier. It will bring forward a new plan in 2019-20.
(5 years, 6 months ago)
General CommitteesIt is a pleasure to see you in the Chair, Sir Edward, and to join everyone here today.
I share a lot of the Opposition’s concerns. They have been well expressed in previous Committees and yesterday on the floor of the House. We are concerned about the Government giving themselves more powers under this SI. This is a pattern in all these SIs and the Bill yesterday. The Government are giving themselves more powers and taking that power away from us as MPs. This is by no means taking back control, but giving themselves all the control and giving the Treasury very specific powers as well.
I have a couple of questions. The Minister said that equivalence cannot be assumed, but I would argue that the SI should have assumed that the UK would automatically grant equivalence to EU regulations in the absence of any kind of practical reasons standing against that. Failing to provide that automatic reassurance is another example of the UK Government’s sowing mistrust in our European partners. The EU can revoke equivalence at any time, so it would be an act of good faith for the Government to say that for their part they would not do so, and that might be of some assistance.
Further to that, there is an additional burden on the Treasury, the Prudential Regulation Authority and the Financial Conduct Authority. Can the Minister tell me how many staff are working on equivalence assessments within those institutions? Knowing how many people are working on it would give a good idea of the Government’s intention to use these powers. If there is nobody working on it, or one person in a cupboard at the back of the hall somewhere, perhaps one could say that they are not going to be looking at it, or they are not going to be using these powers, but if there is a squad of 50 working on it, that is quite different, not least because of the additional expense that that would impose.
It seems a little like the instrument, because it is not specific and is a bit broader, is intended to paper over the gaps that other statutory instruments might have left. Is its purpose to cover things in a more general sense?
We are running out of time, getting closer and closer to Brexit. The rhetoric around no deal is ramping up, which is certainly not helping to reassure businesses in Glasgow Central, Scotland or anywhere else. We have to face the reality that the UK Government are not ready to leave. Article 50 must be extended. We are running out of road here, and the risk is that we will end up with no legislation to cover things that need to be covered in the event of no deal, which seems increasingly likely.
I thank the hon. Members for Stalybridge and Hyde and for Glasgow Central for their observations. I will first attend to the general points about readiness and the intention of the Government, which is clearly to secure a deal.
I assure hon. Members, as I have on previous occasions, that there is no secret agenda in the Treasury to grab power. The SI is about contingency arrangements for the unwelcome outcome of no deal. We take this responsibility very seriously. An impact assessment was published on 7 February stating that there will be no new operational requirements for firms owing to the draft instrument.
I will now seek to address the specific points raised by Opposition Front-Bench Members. The hon. Member for Stalybridge and Hyde asked, in essence, why we need these extraordinary powers to grant EU and EEA equivalence on exit day. It is important to stress that this temporary power is intended only to mitigate cliff-edge risks and to support UK market activity and the continuity of cross-border business. The power is time limited; it will expire 12 months after exit day, which was determined following engagement with the industry and regulators. Thereafter, any further equivalence decisions regarding the EU and EEA will need to be made by regulations via the negative procedure.
The hon. Gentleman asked about the resources in the Treasury. The Treasury has been preparing to take on these additional functions and is well equipped, given its existing responsibility for financial services policy. We have worked closely with the FCA and the PRA during the development of the draft instrument, and we are confident that we are well placed to make future equivalence decisions.
The hon. Gentleman asked about the appropriateness of the Treasury making equivalence decisions, rather than the regulators. Under the EU’s equivalence framework, the European Commission is responsible for making jurisdiction-level equivalence decisions. The European supervisory authorities are responsible for providing technical assessments to the Commission when requested and for making firm-level recognition decisions on third country firms. Our approach will ensure that there is a functioning equivalence framework in the UK after exit that mirrors the current split in responsibilities between the Commission and the ESAs, with the Commission’s function transferring to the Treasury and the ESAs’ functions transferring to the relevant regulatory authorities. That is consistent with what we have done in the other SIs.
The hon. Gentleman asked whether a central register of equivalence decisions will be created. All decisions will be laid in Parliament and published on gov.uk, so they will be publicly available. There are no plans at this point to have a central register, but the process is intended to be completely transparent.
The hon. Member for Glasgow Central asked whether Parliament would be consulted on a decision to revoke equivalence. In the future, equivalence decisions will be made and revoked by regulations subject to the negative procedure. This is a well-established procedure that allows Parliament to scrutinise proposed secondary legislation and to object if it has concerns, including about any decision to revoke an equivalence decision.
The hon. Lady asked about good will towards the EU and what will be the best decision. Clearly, we share a common heritage; the United Kingdom as a whole, including the excellent financial services located in Glasgow and Edinburgh, has contributed richly to the development of the EU regulations. We will obviously start from a common starting point. However, decisions around equivalence will be matters for both sides to come to terms with, and we will seek to do the best thing for the UK financial services industry in whatever prevailing conditions exist. We cannot anticipate that degree of co-operation, so we cannot make decisions proactively, as we might wish to do had we a deal and an implementation period, which would allow us to work such things out—as we intend.
I understand what the Minister is saying, but surely it is in our interest—ours and the EU’s—if we want to continue to interact as we do now, to do things in a similar way.
Absolutely it is, but what we cannot do until we have a deal is to determine what no deal would look like. It is therefore appropriate for me, as the Minister responsible for the UK financial services industry, to seek to reserve those powers, as the Commission is doing now—largely.
The hon. Lady caught me out, as she has often done before, when she asked about the number of people working on equivalence at the regulators. All I can say is that the Treasury is confident that the regulators have in place the resources to meet that function and they have devoted significant time to preparing for changes. I do not have a specific figure, but I am confident in their overall provisioning for that programme of work. I draw attention to schedule 1, which sets out the files in question.
The statutory instrument is needed to ensure that the UK has a clearly defined equivalence framework once outside the EU and is able to support the continuity of cross-border business in any scenario, and that the legislation functions appropriately if the UK leaves the EU without a deal or an implementation period. That is not our intention, but I am confident that, given the engagement we have had with the regulators and the industry, the SI is required. I hope that the Committee has found our sitting informative and will now support the draft regulations.
Question put and agreed to.