Financial Services (Implementation of Legislation) Bill [Lords]

Alison Thewliss Excerpts

2nd reading: House of Commons & Money resolution: House of Commons & Programme motion: House of Commons & Ways and Means resolution: House of Commons
Monday 11th February 2019 Commons Chamber

[Alison Thewliss (Glasgow Central) (SNP)]

It is a pleasure to be in the big room today, rather than up in a small Committee Room, debating these important issues of financial regulation.

I would like to correct the Financial Secretary slightly. He mentioned lots of cities but not my home city of Glasgow and its contribution to financial services. It was a shocking omission, not least because I am sitting across from him and because of its importance to Glasgow and to Scotland. Scotland’s financial sector outstripped London’s last year when it came to jobs growth. It grew by 6.6%, to 161,000 employees in Scotland. Many of my constituents, as well as others across Scotland, rely on the sector for their jobs and businesses, as do many secondary businesses.

The financial sector is also important because of the increased tax base it brings to Scotland. All citizens in Scotland benefit from the funding for public services to which the financial services sector contributes. It makes up 8.9% of the Scottish economy and provides a crucial source of funding for schools, hospitals and local government. It is vital that the sector is allowed to continue to flourish and that the appropriate regulatory safeguards are upheld to ensure we do not see a repeat of the 2008 financial collapse.

It is important to understand the context in which the Bill is operating. The in-flight legislation is part of regulatory reform that resulted from the 2008 crisis and its purpose is to prevent history from repeating itself. We in the SNP cannot allow any watering down of regulation as a result of Brexit, and I am concerned that the Bill may be too broad and sweeping and could leave gaps that could be exploited by those who wish to do so.

I appreciate that we are, in effect, doomsday planning here this afternoon in the event of a no-deal Brexit but, as we see with the continuing chaos in the UK Government, that doomsday clock is getting a good deal closer to midnight every day. Applying rushed legislation to a bad scenario will not help matters. We need to get this right and, if there is not time to get it right, the Government must face the reality of the situation we face. It is within their power to avoid a no-deal Brexit by extending article 50 and ruling out a no-deal Brexit until adequate protection is in place.

There is a good deal of vagueness in the Bill—this point was made in the Lords and has been made again today—because it grants UK Government Ministers worryingly wide scope to legislate. Clause 1(1)(a) grants the Treasury the power to make provisions “corresponding, or similar, to” provisions in EU financial services legislation. Which is it—is it corresponding or similar to? The phrasing leaves space for policy changes beyond the scope of what secondary legislation should be able to do.

Clause 1(1)(b) gives the Treasury powers to make adjustments to the specified legislation it considers appropriate. What criteria are being used to scrutinise and judge the appropriateness of a policy? The wording also leaves the door open for unscrutinised discretion on the part of Ministers and organisations that they may delegate these powers to. The standard is not good enough, given the importance and impact of the Bill and what it is trying to achieve.

The Bill gives Ministers wide latitude to make policy changes using delegated legislation. That conflicts with the position laid out in the EU withdrawal Act, which prohibits such changes because they greatly reduce the opportunity for Parliament to scrutinise policy. The Government have acknowledged that passing legislation without a substantive debate in Parliament is undesirable. We cannot allow this to slip past.

There is a legitimate concern that the Bill leaves scope for regulators to diverge from European technical standards, which could ultimately contribute to the undermining of the EU principle of equivalence. Many businesses rely on meeting these requirements to access EU markets. The Financial Markets Law Committee has raised that issue directly with the Treasury, along with wider concerns about the potential market uncertainty caused by the unreliable nature of British technical standards as a result of this legislation. The Treasury has attempted to address some of those concerns in its policy note, which outlined the safeguarding mechanisms for the Bill, but sadly those still fall woefully short of what is expected.

Subjecting SIs to the affirmative resolution procedure is no substitute for bringing primary legislation before Parliament because there is no scope to amend them. The Treasury has also committed to engaging with key stakeholders, but, as the Opposition spokesperson mentioned, if previous efforts are anything to go by, this is not reassuring. We have all sat in Delegated Legislation Committees where it feels like the only stakeholder engagement is asking the opinion of a select few. We cannot ignore the needs of businesses and the wider public at such a precarious time.

More care should be taken to gather the experiences of the business community and the wider population before making decisions that could impact on them. It has been difficult throughout this process to gather evidence because statutory instrument Committees cannot take evidence, and we will not be taking evidence on the Bill either, meaning that we will lack the ability to scrutinise this in many different respects.

It has been said many times inside and outside the House that leaving the EU is the will of the people. That is definitely not the case in my constituency or the rest of Scotland, which voted 62% to remain, but even if it were, I would find it difficult to accept that people who voted for Brexit want this—there are gey few Brexiteers here today trying to defend this policy. Tory Ministers are being given unfettered power to legislate with no parliamentary scrutiny, which is way outside any mandate the Government feign to have.

The Bill makes a mockery of the leave campaign promises of taking back control, because this Parliament and each of us as MPs will have less control than we had before. It allows for the creation of new laws via statutory instruments, but these will be adjusting or augmenting primary legislation passed not by this House but by the institutions of the EU. The Chair of the Treasury Committee made an excellent point in her letter about the measures in the Bill that will allow the Government to choose to implement only those EU files, or parts of those files, that they deem beneficial to the UK and to make adjustments to legislation to fix deficiencies and take account of the UK’s new position outside the EU. That sounds like a policy choice—choosing to implement only those files, or parts of files, deemed beneficial to the UK. It would involve the Government deciding which files are beneficial to the UK and so allow them to do what they said they would not do.

After Brexit, the UK Government will have no seat at the European table, as these in-flight directives proceed, on issues that will impact on businesses across these islands. Weirdly, we are delegating scrutiny of these policies to the EU when we are not going to be members any longer. We have heard in Delegated Legislation Committees about how the UK is a great leader in financial services with great expertise, and we have heard how influential and involved our officials have been in making regulations for financial services—the Economic Secretary referred to this in his letter—but this influence is being chucked away for glib slogans on the side of a bus.

We will be losing influence on matters that will disproportionately affect financial services in this country, adopting legislation from another jurisdiction that we have chosen actively not to be a part of and then leaving it up to the Treasury to decide what we take and what we leave, and perhaps not even the Treasury—perhaps the Financial Conduct Authority or some other organisation whose work we are even less able to scrutinise. It is completely unacceptable, and I see no Brexiteers here willing to defend it—not one bit of it. Where are they now?



The UK Parliament, and our own elected representatives in this place, will not have a say in the detail. We are passing into the hands of Treasury officials the ability to determine the position at some point in the next two years. If we want to continue to operate in the EU market, we will have to comply with those rules. Nothing, absolutely nothing, that we introduce—deal or no deal—will be as good, as seamless and as hassle-free as the passporting deal that financial services have now, while the UK is a full member state of the EU. The Treasury cannot deny that fact.

Scotland has worked hard to get to where we are now. In Edinburgh, in Glasgow and in places throughout Scotland, financial services firms are working hard, investing and doing so much to promote their talents. There is no doubt in my mind, and in the minds of the hundreds of constituents who have emailed me, of their concerns about Brexit. They believe that things would be better all round if the Government acted in the best interests of the country, and revoked article 50.

I strongly agree with the hon. Member for Stalybridge and Hyde (Jonathan Reynolds). The principled position is to oppose the Bill. The Government are taking plenty of powers unto themselves, which is outrageous in the context of “taking back control” and all the other glib utterances that we heard at the time of the EU referendum. They say, “Just trust us, and it will be fine.” I am sure I can trust them, and perhaps it will be fine, but we cannot be assured of that. We should not give up our own role as Members of Parliament, which is to scrutinise all these matters.

--- Later in debate ---

[John Glen]

I am happy to respond to my hon. Friend’s intervention. I acknowledge his expertise in this area and his excellent article in the Investors Chronicle this week. I would point out that, just last summer, the FCA issued a call for input and sought industry views on the next steps for packaged retail investment and insurance products—PRIIPs. That consultation closed on 28 September and the FCA is reviewing the responses carefully. It will publish a statement in the first quarter of this year. When I next see the chief executive of the FCA, I will challenge him on that publication date.

Let me turn to the substantive thrust of the concerns raised in the debate. The first relates to the desirability of no deal. As I have said, we do not want a no-deal scenario, but we need to be responsible and to plan for all eventualities. Our priority remains getting approval for the deal that we have negotiated with our European partners, which will deliver on the democratic choice of the British people.

Turning to the other preparations, we have now laid 50 statutory instruments before Parliament. The allegation from the hon. Members for Oxford East (Anneliese Dodds) and for Stalybridge and Hyde (Jonathan Reynolds) was that there had been no coherence to the Government’s work, but as the hon. Lady will know, we will have had 53 statutory instruments. We have more debates tomorrow and on Wednesday, and I think several more next week. We are addressing the deficiencies in all the major EU files and the relevant domestic legislation. This will ensure that we have a functioning financial services regime at the point where we leave the EU in a no-deal scenario. Our aim throughout this work has been consistently to minimise disruption for firms and their customers and to provide a smooth transition when we leave the EU.

The hon. Member for Glasgow Central (Alison Thewliss) made a point about the breadth of the power in this legislation. We have worked hard to ensure that this is a clearly defined power and that changes cannot be made such that the implemented files depart in a major way from the original legislation. However, the Government will retain some flexibility to make adjustments to take account of the UK’s new position outside the European Union. The amendments proposed by the Government require the Treasury to publish draft SIs at least one month in advance of laying, as well as a report detailing where there have been omissions and changes and giving the justification for those changes. We believe that the report will allow parliamentarians to scrutinise the changes before the SIs are laid. If the UK were forced to take on EU legislation either in whole or not at all, it is likely that we would be able to domesticate very few of these files in good time, so even the positive aspects of the reforms would be delayed. This is a pragmatic measure to deal with the reality of a very undesirable situation, and our approach has been endorsed by the industry, with which we have engaged in the preparation of the Bill.

[Alison Thewliss]

The Minister talks in his letter about how things are deemed to be beneficial for the UK, but he and I will have very different opinions on what would be beneficial for the UK, or indeed on whether Scotland should be part of the UK, so how can he say that that is not a policy decision?

[John Glen]

We are talking about a no-deal scenario, which we cannot fully anticipate or set out in legislation. However, there would be a full discussion and additional legislation in those circumstances.

For the benefit of the House, I want to clarify the industry engagement that has been undertaken on this Bill. The Treasury engaged with industry ahead of the introduction of the Bill, and the financial services industry has been expecting many of the files for some time. For example, the industry will be generally supportive of the changes that will be implemented with the European market infrastructure regulation regulatory fitness and performance programme—EMIR REFIT—file, which introduces changes to regulations for clearing and reporting requirements, to make them more proportionate and to provide further clarifications. We have been engaging to deliver what the industry expects.

With respect to accepting EU laws after exit, the Bill is not about accepting such laws wholesale. We will be able to implement only those pieces of legislation that are beneficial to the UK, because we will be able to choose the files, or specific provisions within those files, that we are going to implement. For those files that we have already agreed at EU level but not yet implemented, we will be able to fix deficiencies similar to what was done in relation to the European Union (Withdrawal) Act 2018. For those files on which negotiations will be ongoing at the point of exit, we will be able to make some adjustments to them to take account of the fact that we will not be around the negotiating table when they will be finalised.

Moving on to the model for financial services regulation more generally, the Government of course recognise that this legislation should apply only for an interim period while we consider a sustainable, longer-term approach that balances the need to ensure appropriate parliamentary oversight of financial services legislation after leaving the EU with the need to maintain the flexibility and competitiveness of our regulatory regime. That is why the model in the Bill would apply only for a temporary, non-extendable two-year period post exit, specifically in a no-deal scenario, and to specified EU files only. The Government will take forward our approach for a sustainable long-term model in due course.

Turning to the points made by the hon. Member for Wakefield, the UK has publicly led on the development of sustainable finance, as she set out, and the Government are committed to the sustainable finance agenda and are a leader in green finance. That is why we have included these files in the Bill. We recognise that the files form part of the EU’s response to the Paris climate change agreement and the UN sustainable development goals. The Government support the aims of the files and do not consider them harmful to industry at their current stage of development. As such, we were pleased to add them to the schedule to the Bill, and we thank the noble Lords who recommended their inclusion.

I stress again that this legislation involves a temporary measure, with the delegated power limited by a two-year sunset clause and subject to the affirmative procedure in each and every instance of its use. Following constructive engagement in the other place, the Bill is clearer about the power contained within it and has much stronger reporting requirements than at its introduction.

I thank all right hon. and hon. Members for their contributions to this debate. I am sure that we can agree on the importance of continuing to support the UK’s world-leading financial services industry in any future scenario. I look forward to discussing the Bill further in Committee, and I commend it to the House.

Question put, That the Bill be now read a Second time.

Sport in the UK

Alison Thewliss Excerpts

Monday 4th February 2019 Commons Chamber

[Stephen Kerr (Stirling) (Con)]

It is a pleasure to follow my hon. Friend the Member for East Renfrewshire (Paul Masterton), and may I say to my hon. Friend the Member for Moray (Douglas Ross) how much I enjoy watching him perform his duties as an assistant referee? We are very proud of what he has done to carry Scotland’s saltire into international arenas. I think I can say, without fear of contradiction, that that is also true of Opposition Members.

It is an enormous privilege to be the Member of Parliament for Stirling, and that privilege takes on even more gloriousness when we consider the contribution that Stirling makes to the sporting life of the United Kingdom. We have already heard about Sir Andy Murray, but Stirling has also produced other great competitors, such as the legendary Billy Bremner. Who can forget how fierce a competitor he was in football? We also have Gary and Steven Caldwell, the famous brothers—by the way, we bought their parents’ house from them. We also have the renowned jockey, Willie Carson, who is also a star of “A Question of Sport” and “I’m a Celebrity…Get Me Out of Here!”

Anna Sloan is also from Stirling, and she is Scotland’s pride in curling, which I am glad to have heard mentioned so often. The Scottish National Curling Academy is based at the Peak in Stirling and has produced Olympic and Commonwealth gold for Team GB and for Scotland. The Stirling Smith Museum has the oldest curling stone in the world, dating from 1511, and we also have the oldest football in the world, which was found in the rafters of Stirling castle and dates from the time of Mary Queen of Scots.

That is the history, but Stirling also has a proud football tradition. We have Stirling Albion and other great clubs, such as Milton football club, which is based in Bannockburn and plays in the Scottish Amateur Football Association’s Caledonian League and does fantastic work with the community.

When it comes to swimming, Stirling is a superpower. If Stirling had been a country at the Commonwealth games, we would have been in the top five for medals in swimming and 17th in the overall medal table, ahead of 23 other countries.

Basketball has been mentioned a few times. The Stirling Knights have won 19 national titles and produced 30 players for Scotland. They are winners. They have won the Scottish cup, the league cup and a youth tournament in Spain.

Stirling County is an incredible rugby club with an incredible legacy and tradition. It has produced great players for Scotland and has a big Scottish cup game with Hawick, I think, a week on Saturday.

Let me pause on Stirling county cricket club, because I have an affection for that particular institution. My son Jared played cricket for Stirling county. I pay tribute, as did the hon. Member for Cardiff Central (Jo Stevens), to the people who make sport happen in our communities. I want to mention specifically Raymond Bond, who for years and years nurtured the talent of young people in Stirling to play cricket. It is people like Raymond Bond whom I pay tribute to in my speech tonight. They are the people who make this country the superpower that it is when it comes to sport. We should nurture that in our constituencies.

[Alison Thewliss (Glasgow Central) (SNP)]

The hon. Gentleman makes a very good point about people who volunteer and get things going. Will he also congratulate Ammar Ashraf, the community engagement co-ordinator for Cricket Scotland, who is doing an awful lot to bring people into the sport in communities?

Draft Solvency 2 and Insurance (Amendment, Etc.) (EU Exit) Regulations 2019 Draft INSURANCE DISTRIBUTION (Amendment) (EU EXIT) Regulations 2019 DRAFT FINANCIAL CONGLOMERATES and Other Financial Groups (Amendment Etc.) (EU Exit) Regulations 2019

Alison Thewliss Excerpts

Monday 4th February 2019 General Committees

[Alison Thewliss (Glasgow Central) (SNP)]

It is a pleasure to see you in the Chair, Sir Henry, and to join all hon. Members for another Delegated Legislation Committee. I look forward to the 30 more to come; I am sure it will be a delight for us all to spend so much time together.

I agree with an awful lot of what the hon. Member for Stalybridge and Hyde said, and I share his concerns about the way in which this secondary legislation is being made, about scrutiny and about the plans as we go ahead. As an SNP Member, I do not want Brexit to happen and I certainly do not want a no-deal Brexit—that is not what Scotland voted for. In July last year, TheCityUK reported that the number of financial services jobs in Scotland rose 6.6% to 161,000 in the preceding year, outstripping London, which had a rise of 5%. Financial and related services now account for 8.9% of the Scottish economy, so it is no small business that we are talking about, but an essential component that we have to get right. The particular strength of my home city of Glasgow is insurance; I have a strong interest in keeping those insurance companies functioning in Glasgow, with all their employees.

I am glad to see that there is an impact assessment for the draft Solvency 2 and Insurance (Amendment, etc.) (EU Exit) Regulations 2019; that is helpful. The familiarisation cost for those alone is £230,000. I appreciate that for some companies, that is not a huge amount of money, in the wider scheme of things, when it is divided up. It is, however, additional money that they have to come up with. I note also that the provisions place an additional burden on the Prudential Regulation Authority. It would be interesting to know from the Minister exactly how that is being met in the PRA; how many extra staff and financial resources will be required for the additional regulatory burden? More insurance firms will fall into PRA supervision, and there will be increased regulatory and compliance costs for UK firms as a result. It would be interesting to know whether he can put any kind of figure on that, because it may be additional resource that firms have to find, outside the familiarisation costs.

I note the ABI’s concerns about duplication; it says that this will be an additional burden, which could place firms at a disadvantage to their European counterparts. The ABI’s points about those issues were well made, and the hon. Member for Stalybridge and Hyde made most of those points. The ABI wants some assurance about the long-term future of the regulatory structure, and it wants to be part of the review. It says that new regulatory architecture should be within a defined timescale at the end of the process. We are going into a pretty uncertain period, and it needs to know what will happen in advance, for planning and other things.

The impact assessment states:

“The impact on individual firms will depend on the exposures they have, which we do not currently hold information on. Therefore, it is not possible to quantify the estimated impact on the insurance industry in the time available to complete this legislation.”

That comment goes to the heart of the situation we are in. We are building this legislation but we do not have time to deal with it, and there is a prospect of no deal looming. That is a huge worry for many firms and their employees, who do not know what they will be dealing with.

On the draft Insurance Distribution (Amendment) (EU Exit) Regulations 2019, I am concerned about the consumer welfare aspect, because of the powers that the Treasury gives itself to adopt delegated acts, and to make regulations about conflicts of interest, inducements and assessments of suitability, appropriateness and reporting to customers. Can the Minister tell us a wee bit more about how he will ensure that consumers do not lose out as a result of this change and what the intended framework will be in the years ahead?

I note that in order for the PRA and the FCA to carry out their functions, the draft Financial Conglomerates and Other Financial Groups (Amendment etc.) (EU Exit) Regulations 2019 remove the requirement on firms to report to the ESAs and replace it with a requirement to report to the UK regulators. It would be good to get a bit more detail on how that process might work, because there is a change from one thing to another. It would be good to know what kind of notice firms require for that, and how easy it will be.

There will also be a transitional cost. I believe it is below the threshold for the impact assessment, but it would still be good to get more of an idea of what it will be. Again, for some firms there may well be duplication—having to report twice—and that would be another additional cost. Any additional information on what that cost might amount to for firms would be useful.

As the hon. Member for Stalybridge and Hyde said for the Opposition, we do not seek to vote against these statutory instruments. However, I reiterate my concern that they are incredibly late in the day, that we do not have much time left and that it is very difficult to get a real handle—besides the very helpful briefing from the ABI—about their impact, because things are moving very fast.

Draft Interchange Fee (Amendment) (EU Exit) Regulations 2018

Alison Thewliss Excerpts

Tuesday 22nd January 2019 General Committees

[Alison Thewliss (Glasgow Central) (SNP)]

It is a pleasure to join you here in Committee again, Mr Hanson. I echo a lot of the concerns that the hon. Member for Stalybridge and Hyde expressed about the scheme.

It seems to me that, as with all things to do with Brexit, we are moving backwards. The EU and the EU Commission have moved over many years to reduce fees to make transactions simpler. What we are doing here, particularly with the statutory instrument and the prospect of a no-deal Brexit in the offing, is going backwards—reducing the benefits that our citizens have, and their ability to carry out transactions, to work, travel and live across different countries and to carry out their business.

I seek a couple of points of clarification. My understanding is that the explanatory information differentiates between credit cards and debit cards, but that differentiation is not within the SI itself, which mentions only credit card transactions—

“0.3% of the value of the transaction for any UK credit card transaction.”

In the explanatory information, debit cards are differentiated from credit cards. I would like to understand from the Minister why that is the case. Obviously, it would be to the detriment of debit card users were they to pay that higher fee because they are not recognised in the legislation.

A briefing that I found on the legal firm Bird & Bird’s website mentions that higher interchange fees could be passed on to consumers, “either directly or indirectly”, as it says in the explanatory memorandum. Bird & Bird says that “indirectly” is perhaps

“a reference to the fact that UK merchants may increase their retail prices in order to recoup the increase in interchange fees.”

Baroness Bowles mentioned in the Lords that before the EU interchange fee was introduced in 2015, the cost passed on to goods across the EU was €9 billion in 2011 alone. I would like to know from the Minister the estimated cost of the fee to ordinary people buying things in shops, because he has not provided explanatory information on the basis that it does not make the £5 million threshold. That might be a cost to business, but what is the cost to consumers? It is unclear from what the Government have provided what the cost will be to consumers of increased interchange fees.

Bird & Bird goes on to say:

“The reference to ‘directly’ would seem to be a reference to surcharging. However it is not clear to us how this would be possible since the Consumer Rights (Payment Surcharges) Regulations 2012 prohibit merchants from surcharging consumer cards altogether (whether in relation to transactions that are subject to interchange fees caps, or not).”

I would be curious to hear from the Minister what “directly” refers to, because it does not seem to me that it is something that is permitted—certainly it is not as far as Bird & Bird is concerned.

Bird & Bird also noted the reference in paragraph (2) of regulation 11, “Final provisions”, to article 16 on universal cards. Bird & Bird says that

“it is proposed to keep the article on ‘universal cards’ under the UK regime—however this article is not relevant to the UK. It is relevant to a situation where consumer credit cards and consumer debit cards are ‘not distinguishable’”.

They definitely are within the UK. Bird & Bird goes on to say that that is

“applied exclusively (or at least primarily) in France.”

Bird & Bird is therefore not quite clear why that is being passed through. I appreciate that the Minister said that the instrument was not about making changes but about transposing things. However, it is transposing something that is not actually relevant. May we have further clarification on that?

May we also have a bit of clarity on how the matter will be monitored in future? The provision is for the event of no deal. We hope very much that that will not be the case, but if it is, the increase in UK-EEA cross-border transaction fees would be set by Treasury regulation. Will the Minister give more clarity on how that oversight of Treasury regulation would be carried out? Is this matter just for the Treasury to go off and decide? When we find that consumers are suddenly being charged more, how do we then question and monitor that in the years ahead? What is the Government’s plan for this area?

It just seems to me that this measure is giving too much power to commercial companies. The Government say that this matter will be a commercial decision for companies, but that will almost certainly be—because these things almost always end up being—to the detriment of our constituents. I would like to see a bit more pressure on the Government to keep a bit more control over these interchange fees, rather than letting the market decide, because as I said and as was pointed out before in the Lords, the market deciding ended up with customers losing out quite a lot.

We can all remember—it was not very long ago, indeed—that if we travelled and tried to make transactions, we would always get a fee on our bills. That fee has been reduced and the situation has improved over time. So I do not see why the Government should allow companies to decide this matter, when it has been EU regulations over the piece that have managed to drive down these fees, to the benefit of all of us in this country.

Finally, I just ask the Minister to rule out no deal, because we do not want to get to no deal. We do not want this piece of legislation that we have been poring over actually to end up being used, because that would be a disaster for all of us, right across these islands, and I hope very much that we do not get to a no-deal situation. It would be useful to hear more from the Minister on that issue.

--- Later in debate ---

[John Glen]

We have to remember that this is in a no-deal situation; we would be outside and without the scope of the EU regulations of which we are currently a part. We would have no regulations for maintaining the caps within the UK. All we are doing is domesticising that existing provision as far as we can, within a UK environment. In our engagement with industry and with the PSR, it has been recognised that this is necessary but it is not the final solution. That is why there would need to be further innovation and policy work subsequently, as I have set out.

In conclusion, the SI is needed to ensure that the UK continues to have a functioning legislative and regulatory regime for payment card interchange fees in the event of a no-deal scenario. I have reiterated my belief that that should not be the outcome we secure in the end, but I hope I have dealt with the points raised. I will return to the hon. Member for Glasgow Central on her specific concern about the Bird & Bird note, and I shall make that available to the Committee.

[Alison Thewliss]

I thank the Minister for his offer to write and for the welcome letters he has sent after previous inquiries. Does he accept, however, that this is completely inadequate? We came here this morning with serious questions, and we are being asked to approve the SI without any impact assessment. It is great that the Minister will write to us, but that will be after we have voted.

[John Glen]

I draw the hon. Lady’s attention to the de minimis assessment that was passed as per the rules of the House and that sets out the impact of this SI, as well as to the consequences of our engagement with industry and the regulator that suggest that it is necessary in a no-deal scenario. The hon. Lady refers to specific legal drafting, which I am confident can be addressed. There is scope within the SI programme, in the last four or five SIs, for us to address any issues that have been raised, but the regulations have been scrutinised by the Lords Committee and no points were raised. I do not take her concerns lightly, but when referring to legal drafting I do not want to give an ad hoc response when that would clearly be problematic. I hope that members of the Committee have found this morning’s sitting as informative as I could make it, and that they will join me in supporting the regulations.

Question put and agreed to.

Taxation of Low-income Families

Alison Thewliss Excerpts

Wednesday 16th January 2019 Westminster Hall

[Alison Thewliss (Glasgow Central) (SNP)]

It is a pleasure to see you in the Chair, Sir David. I must say that as a feminist, I feel as though I have fallen down some kind of vortex to the 1948 film “Every Girl Should Be Married” in this debate. I fundamentally disagree with many of the arguments that hon. Members have put forward so well; I respect their right to do so, but they have ignored the elephant in the room, which is that lots of the stresses and strains on our society are caused by austerity, not by whether people are married or not. That is a personal choice.

Tax is often thought of as a boring, dreaded thing—a duty to be avoided, something best left to stuffy men in suits. However, like all economic tools, tax is a mechanism that opens up opportunities to shape the kind of society we want to live in. It incentivises good behaviour and punishes what some would consider to be bad behaviour. The UK Government’s tax system remains quite a blunt tool with which to tackle income inequality. It is riddled with loopholes that benefit the wealthy, and according to figures from the Institute for Public Policy Research, the UK is the fifth most unequal country in Europe when it comes to income.

The tax system is very gendered. In its analysis of last year’s Budget, the Women’s Budget Group said that raising the income tax threshold is not a policy that helps women. It argues that 70% of those taken out of the higher rate of tax, and 73% of higher rate taxpayers who will benefit from raising the higher rate threshold, are men. We cannot claim that this will benefit women in any particular way, especially those in low-income jobs. According to the Joseph Rowntree Foundation, minimum household budgets have risen by about a third since 2008 for most types of household. Inflation is sky high, wages are being squeezed and a no-deal Brexit would see an additional 6.4% of lower incomes being spent on food. That is a penalty that most families cannot afford.

I mention families, because they are central to what many Members have talked about. The hon. Members for St Austell and Newquay (Steve Double), for South West Bedfordshire (Andrew Selous) and others have mentioned universal credit and the impact of the 16-hour rule. Figures from the Church of England show that a single mum with three kids, who is working 16 hours, would have to work 45 hours to make up for the cuts that the Conservative Government have made to the benefits system. What impact would a single mum working 45 hours have on family life? When is she actually going to see her kids? Who is going to tuck them into bed at night? That is not going to happen.

I have been working on a campaign for the removal of the two-child limit in the universal credit system, for which I would welcome hon. Members’ support, if they wish to give it. There was some movement from the Secretary of State last week, but it will still be in place for children born after 6 April 2017. The disincentive within the system is rife. Someone with two children who wants to get remarried, into another family, will lose out, because that will cause a change to benefits. If that person, once they have remarried, wants to have a child in that new family, they will not get the child element of universal credit, which is nearly £3,000. If any Government Member wants to speak to their colleagues in the Department for Work and Pensions and get them to get rid of this policy, that would be welcome, because it is a disincentive. If a family has four children, there is actually an incentive under this policy to separate and become two families with two children each, rather than one family with four children, thereby saving a huge amount of money. That needs to be removed from the universal credit system. If hon. Members are serious about it, they need to ask their colleagues in the DWP to do that.

Nobody mentioned the impact of the immigration system on families. I get many people coming to my surgeries who, because of the minimum income threshold in the immigration system, cannot bring a spouse to live here. I met a chap who is working two jobs at the moment, but cannot meet the threshold to bring his wife and his child over from another country. That is separating families. The number of Skype families out there, who are not being well served by this Government, who claim to support families, is an absolute scandal and we should do something about it. The stress of living in poverty probably contributes more to the break-up of families than anything else.

The report by Philip Alston, the United Nations special rapporteur on extreme poverty and human rights, which Conservative Members never want to mention, says:

“Families with two parents working full time at the national minimum wage”—

that is the Chancellor’s pretendy living wage, because it is not a living wage that anyone can live on—

“are still 11% short”—

11% short—

“of the income needed to raise a child.”

[Andrew Selous]

There is no disagreement on these Benches that poverty leads to family breakdown, but in the impact assessment for the Child Poverty Act 2010, brought in by the last Labour Government, there was also a recognition that family breakdown leads to poverty. Does the hon. Lady accept that it is circular and that the one leads to the other, both ways?

[Alison Thewliss]

I would accept the hon. Gentleman’s arguments far more if he would argue for an end to austerity, for an increase to low wages and for the minimum wage to be equalised. At the moment the thresholds for 16 and 17-year-olds and for 18 to 21-year-olds are very different. The gap between the lowest paid—those on the UK’s pretendy living wage—and the people at the top of the age threshold is increasing. It has got wider over the last three Budgets because increases at the top of the scale have not been met with increases at the bottom of the scale. It should be a fair wage for everybody. A 21-year-old parent does not get enough income in to support a family, and that will bring additional pressures to bear on what they can bring in and provide. People who have spoken today have entirely missed the point.

Treating families as a unit within the tax system, as often happens with universal credit, has been widely criticised by women’s organisations because it removes women’s agency. It also removes women’s ability to provide for their families. Under the universal credit system, a woman is disincentivised from leaving a relationship, because all the money goes to the man—the main earner in the household. I appreciate that the Secretary of State has said that she is looking at this issue, but it creates a risk. That also exists within the rape clause of the two-child policy, where the only way a woman can claim this vile clause is to leave the relationship. Women’s organisations across the board say that the most dangerous time for a woman is when she leaves a relationship; that is when she is most likely to be murdered. There is serious stuff about women’s place in this policy.

I was glad to hear that the hon. Member for South West Bedfordshire is not calling for the abolition of independent taxation. I am relieved about that. Individuals should be able to exist within the system by themselves, for a very serious reason, which leads on from my point about universal credit. Incentivising marriage is disincentivising separation. There may be very reasonable grounds for separation, particularly in cases of domestic abuse. The marriage allowance, which benefits the higher earner in a family—almost always the man, as I have laid out—exacerbates inequality. To take this to its logical conclusion, if a man assaults his partner, so she cannot go to work, or he prevents her from working through coercive control and financial control, which we know a lot more about and which the Government have said they want to tackle in the Domestic Abuse Bill, he effectively gets a tax break for doing so. That is why this should have no place in the taxation system. It is important that women have agency and are able to get money in. When money is taken away from women, that agency is removed, as well as their ability to look after themselves.

I had many more things I wanted to say about this policy. I had a whole speech written out about other things. We need to recognise that indirect taxation is also a huge issue. VAT disproportionately affects low-income families. According to the latest figures, those at the bottom end of the income distribution now pay nearly one third of their income in indirect taxes. The poorest fifth pay 31% in taxes such as VAT, alcohol and fuel duties, which is much higher than the 13% paid by the richest households. As I have been sitting here, I understand that the European Parliament has finally agreed to abolish the tampon tax. That is something that the UK Government have now delayed for almost four years. I hope that, now that the Minister has the green light that apparently the UK Government were waiting for, that tax on women will go as soon as possible.

While we can talk about taxes and marriage, the real elephant in the room is austerity and the cuts that have been made to women’s budgets. Women need to have agency; that is the most important thing for families across the UK.

--- Later in debate ---

[The Financial Secretary to the Treasury (Mel Stride)]

It is a great pleasure to serve under your chairmanship, Sir David. I thank my hon. Friend the Member for Stafford (Jeremy Lefroy) for securing this debate and my hon. Friend the Member for Congleton (Fiona Bruce) for her insightful contribution. I also thank my hon. Friend the Member for Bolton West (Chris Green) for his involvement in the important report issued this morning. I can assure all present that it will be carefully digested by Ministers in the Treasury.

At the heart of the matter lies the issue of fairness in the taxation system and the way in which the benefits system operates in our country. Also at the heart lies the central point that many speakers have made this morning as to whether the tax and benefits system appropriately incentivises aspiration—a Conservative ideal—and effectively incentivises employment, including incentivising people to go out and get jobs. And of course there is the impact of all those matters on the crux of the issue, which is the social impact of these measures on the stability of the family unit. I, the Treasury and the Government more broadly certainly recognise that all those points are of critical importance. I am particularly proud that Conservative Members chose to secure this debate and were instrumental in producing such a thoughtful and detailed report. It is the Conservative party that believes most strongly and passionately in the issues that lie at the centre of the matters we are debating today.

Having accepted that the matters are important, I also accept the many examples given in the debate today on the way in which the system does not work effectively. The most important has been the very high level of marginal tax rates. Several examples were chosen of particular circumstances involving individuals and children and the make-up of families to illustrate that we can, under certain circumstances, have marginal tax rates as high as 73% or even beyond. I accept that that is deeply undesirable. That is not the same thing as suggesting that the entire system is broken. If we chose different examples we might get far lower marginal tax rates than those that have been rightly highlighted in the report and in the debate today. Indeed, the OECD has indicated that across the universe of low-income families in this country, we are above average when it comes to making sure that net income is received by those families. However, there will always be more to do, which is why this debate is important.

We should not overlook the fact that we have a very progressive tax system. Some 28% of all income tax is paid by the top 1% of earners. In the previous Budget, we met our manifesto commitment to increase the personal allowance to £12,500 one year early. It will come in next year and take millions of the lowest paid out of tax altogether. In case it is felt that only the lower paid face very large rates of marginal income tax, we must bear in mind that, under the current system, once someone earns beyond the large amount of £100,000, the personal allowance is tapered away at a rate of £1 for every £2 earned. At that point in the income distribution, wealthy people pay a marginal rate if we include national insurance of 63%. A necessarily complicated tax system, because it tries to do many things at the same time, throws up all sorts of deeply unsatisfactory anomalies. The complexities of the tax system and the interaction with the benefits system means a complicated challenge ahead.

Low tax matters. My hon. Friend the Member for South West Bedfordshire (Andrew Selous) put it eloquently. Low taxes matter for reasons other than fairness. They drive the economy, jobs and entrepreneurship. They make sure that we have, for example, halved the level of youth unemployment since 2010. He cited the very good example of Greece and other countries where they have taken a different way and have paid the consequences. The Government remain committed to lower taxes and to simplifying them to the extent possible and to making sure that the anomalies raised today are addressed.

On the benefits system, much has been said about universal credit. We all recognise that when the Labour party was in government, its benefits system was overly complicated. People had to go to the DWP, to the local housing authority and to HMRC to qualify for a variety of benefits, but we have simplified that to one benefit. When it comes to making work pay, which lies at the heart of many of the arguments, universal credit does exactly that. People no longer have the 16-hours-of-work cliff edge, beyond which they lose all their entitlement.

[Alison Thewliss]

Will the Minister give way?

[Mel Stride]

Extremely briefly.

[Alison Thewliss]

Does the Minister accept the research by the Church of England that a single mum with three kids will have to work 45 hours to make up for his cuts?

[Mel Stride]

The point I was coming on to was the taper. In 2016, we announced a reduction in the taper rate from 65% to 63%. My hon. Friend the Member for Congleton called for it to be reduced further to 50%. That is a deeply desirable move if it can be achieved, but we must recognise the cost of doing so. The cost of having gone from 65% to 63% is £1.8 billion across the scorecard period. I do not have the figure to hand, but it would be absolutely enormous if we went to 50%. With great respect to Members, even the examples of where we could do more, such as tax relief on higher-rate pensions or the changes to child benefit and the way in which that might operate, would be dwarfed by any such move. We have to recognise, as my hon. Friend the Member for South West Bedfordshire explicitly did, the costs of making the changes that have been proposed.

The Conservative party introduced the national living wage. We should be enormously proud of that fact. It goes up by 4.9% in April, so those in full-time employment will take home £2,750 more than they did in 2010[Official Report, 31 January 2019, Vol. 653, c. 6MC.]. The marriage allowance is an example of exactly what the report calls for. Among the measures are a transferability of allowance to make provision for those who stay at home to look after children or elderly relatives. It transfers at a rate of 10%, provided the person is not a higher or additional-rate taxpayer. Once again, it is focused on the lowest paid in our society. We spent time reflecting on child support. We will spend £6 billion more per year by 2020, and we brought in tax-free childcare. If someone is on universal credit, they are able to claim back up to 85% of the cost of childcare.

In the remaining couple of minutes, I will respond directly to the overarching request made of me this morning, which is that I go back to the Treasury with the report and the comments made in this debate and look genuinely and deeply at the issues raised. I can give an unequivocal commitment to do precisely that because, despite what is going on in the House at the moment and the important vote tonight, certain things must continue uninterrupted. Our essential quest for social justice and the Conservative party’s commitment to the family and a society that is at ease and at one with itself, must not be diminished. The House has my commitment to do exactly as I have said. I will engage in the form that my hon. and right hon. Friends wish me to to make sure that we push forward on the important issues raised today.

Draft Alternative Investment Fund Managers (Amendment etc.) (EU Exit) Regulations 2018 Draft Venture Capital Funds (Amendment) (EU Exit) Regulations 2018 Draft Social Entrepreneurship Funds (Amendment) (EU Exit) Regulations 2018

Alison Thewliss Excerpts

Wednesday 9th January 2019 General Committees

[Alison Thewliss (Glasgow Central) (SNP)]

It is a pleasure to see you in the Chair, Mr Sharma. I wish all members of the Committee a happy new year, as this is the first time I have seen them this year.

I echo many of the comments of the hon. Member for Oxford East, particularly about the impact assessments. It is deeply concerning that we do not have the detail on the three instruments before us. The Minister knows that I look at the impact assessments in great detail, as I have quoted figures from them in previous Delegated Legislation Committees, and it is extremely concerning that we are expected to approve the measures with no real idea of their financial impact or the implications for the number of organisations involved—all that detail that is so useful when it comes to our considerations in Committee. The Government must do something about that. We have lots of these instruments coming up, and although I appreciate the time pressures and difficulties of the situation, if we do not have that information we really are making these decisions blind. That is not acceptable, certainly not in a democracy and certainly not given the seriousness of the situation.

I was struck by the very helpful and considered contribution of the hon. Member for Basildon and Billericay, which was based on his extensive experience of the matter. He talked about it being now highly likely that the provisions in the draft orders will take effect. The language in the notes provided for such instruments has also changed significantly from last year. Instead of saying that it is highly unlikely that the provisions will be needed, it now says that the Government have every confidence that a deal will be reached and an implementation period will be in place, but that it is their duty to plan for all eventualities, including a no-deal scenario. That is a significant shift from where things were last year, and we can see the difficulties that it will cause, particularly if, as the hon. Gentleman says—he knows far more about this than I do—the draft orders are not adequate for the task at hand.

The Minister talked about consultation responses. The draft orders have gone out for consultation and responses have come back. We do not really have any idea how many people were consulted and how many responded, or the substance of those responses. It strikes me that other Committees that look at legislation get evidence; it is published and we can see it. However, for these Committees we do not get evidence. I trust the Minister on many things, but we have to trust his saying that all the responses were fine, because we, as members of the Committee and members of the Opposition, have no idea about their substantive content.

If concerns were raised similar to those of the hon. Gentleman, we will not see them, because we have not seen that evidence. I ask the Minister to think about that, and to ask if anything more can be done to give us more access to the consultation responses. Unless we attempt to go out and contact all possible organisations, which we cannot really do as ordinary Members or as party spokespeople, and unless we are specifically given that information, we will not know it. It is difficult for us to get it. I appreciate that the Government have a different job to do in asking for that evidence, but for us to seek it ourselves is impractical, given the speed of the passage of these SIs.

The Minister helpfully mentioned the total number of staff at the FCA, which was good to hear. If he can give us any more detail as to how many might work on the provisions in each of the separate instruments, that might also be useful. I am always looking for more information about how many staff at the FCA will be required to work on these provisions, should they be implemented. We need an idea of the capacity there and how difficult or otherwise it might be to keep control over these draft orders should they be implemented.

I reiterate concerns I have raised before about the extensive powers that the Treasury is taking for itself in the future. I appreciate very much the Minister saying that Parliament has the option to scrutinise further, through a written statement or through an SI to extend any future powers if required. However, I am not quite certain how effective that will be. We need some idea of Parliament’s role in all of this as we go forward, because if changes are made in the EU, changes will obviously need to be made here so that we have a degree of equivalence in standards, because otherwise things will completely fall apart. It would be good for Parliament to scrutinise these provisions as we go forward.

It would be useful to know the level of consultation with organisations in Scotland. I am always interested in that. Some of the draft orders will have an impact in Scotland. It would also be useful to know the Government’s response to the concerns of the hon. Member for Basildon and Billericay about communication, timing and accuracy. I appreciate that we are under the pressure of time. It might be useful to extend article 50 to give us more time, but in the meantime it would be good to know the answers to these questions and to those that others have raised. There are real concerns about the scrutiny of these provisions now and in the years ahead.

Finance (No. 3) Bill

Alison Thewliss Excerpts

3rd reading: House of Commons & Report stage: House of Commons
Tuesday 8th January 2019 Commons Chamber

[Peter Dowd]

My hon. Friend is right, and the reality is that we are not going to get it from the Conservative party—it is as simple as that. It seems incapable of doing anything that is in any way constructive for the social fabric of our country.

The Government now pick and choose whichever target provides cover for their devastating treatment of children across the UK, including—when it suits them—using the very targets that they themselves scrapped. That is why new clause 1 is so important. The Government can no longer be allowed to ignore the plight of millions of children across the country.

The statistics do not lie. They show quite clearly that, prior to the Conservative Government coming to power in 2010 with their Liberal Democrat partners, child poverty in the UK was falling. The new Social Metrics Commission, which draws on the widest possible set of poverty measures, states concretely that there are now half a million more children living in relative poverty than there were just five years ago. The whole country knows that austerity is to blame, and we all know who introduced austerity—it was the Government.

[Alison Thewliss (Glasgow Central) (SNP)]

I completely agree with the point that the hon. Gentleman is making. Does he agree that the two-child cap, which will apply to all new universal credit claimants from 1 February this year, and other measures that the Government are pushing mean that up to an additional 3 million children will apparently go into poverty?

[Peter Dowd]

The hon. Lady is right. The Government appear to want to put misery upon misery on families and children.

Despite the claims from Conservative Members, austerity was not some necessity nobly chosen by the Government of the day, but a political and ideological choice—it is as simple as that. If it was the only option, why did the United States not embark on a similar venture? Why did the likes of Germany and France not undertake a similar level of spending cuts, or Japan, or, for that matter, Australia? [Interruption.] Conservative Members are chuntering, but those are the questions that we need answering.

Draft Payment Accounts (Amendment) (EU Exit) Regulations 2018

Alison Thewliss Excerpts

Wednesday 19th December 2018 General Committees

[Alison Thewliss (Glasgow Central) (SNP)]

It is a pleasure to see you in the Chair, Mr Rosindell. I agree with many of the comments by the hon. Member for Oxford East; I will not reiterate them all. To pick up a point that was made earlier, yes, we need to do this. Late in the day though it is, we need to be prepared for the worst, because it seems the worst is coming.

I have a few concerns about the SI. It mentions that power to enforce compliance will be moved to the FCA. I have asked other Ministers in other Committees whether the FCA has the capacity to do that. If we say it has to but it does not have the capacity, clearly there will be a huge gap in our financial system, which we cannot afford.

I also note that there are issues with the cross-border opening of accounts. The explanatory memorandum states at paragraph 2.14 that the SI

“removes the requirements for PSPs to facilitate the cross-border opening of accounts”,

and at paragraph 2.17 that

“it will be at the discretion of the nine designated credit institutions whether to offer non-sterling services to customers of a payment account with basic features, and they can continue to charge a reasonable fee for those services.”

Will the Minister say a little more about how the cross-border opening of accounts will work in the event of a no-deal Brexit? What will happen to people who have existing accounts?

I declare a slight interest—my parents have an account in France. Will that account continue to function? Will they be allowed to make transactions? Will arrangements be put in place for the millions of people with accounts across Europe, and will those arrangements be reciprocal? If we do something at this end, we cannot guarantee that individual EU member states will not make different decisions. We may have 27 different approaches as a result of what we do here, and the Minister needs to tell us a wee bit more about what discussions have been had about that.

It seems clear to me that people will get less of a service. They will also get less protection, for the reasons the hon. Member for Oxford East mentioned to do with advice agencies and everything else. How will people continue with their business or personal banking in the event of their bank accounts being closed with two months’ notice? Will they be able to get another bank account, or will the door be firmly closed to them? How do they go about restarting all the transactions that happened through their old account, if they have no certainty that the new account will be good in the future?

As I have noted previously in SI Committees, under the Government’s hostile environment, many non-EU nationals in this country have been prevented from having bank accounts to make it as difficult as possible for them to live here. I have just come from the Chamber, where the Home Secretary made a statement about immigration that suggested to me that European economic area nationals in this country will be treated in pretty much the same despicable way as non-EEA nationals. What assurances can the Minister give us that the draft regulations will not be used as part of a hostile environment for EU nationals?

It would be good to have clarity about the number of people affected by the draft regulations. What research has been done on exactly how many EU nationals hold bank accounts in the UK and how many UK nationals hold bank accounts in EU countries? We need to know that to know how many people will be impacted. As the hon. Member for Oxford East said, we have not seen an impact assessment. We really ought to have one.

I note finally that the European Commission seems to have been trolling the UK Government today. It tweeted earlier that it is making cross-border payments in euros across the EU easier and cheaper, which is more of a future than the UK is willing to offer its own citizens and citizens of EU countries.

--- Later in debate ---

[Robert Jenrick]

The hon. Lady is absolutely right, and I will come on to that as my final comment. First, I will answer what I think was the final comment from the hon. Member for Glasgow Central, in respect of potential discrimination against EU nationals resident in the UK. What she suggests is not the case under this statutory instrument. Any resident of the United Kingdom who is legally resident in the United Kingdom will have access to a basic bank account, just as they would if they were living elsewhere in the EU.

[Alison Thewliss]

This is the very point that I was making, though. The issue is the “legally resident” part. I have many non-EU national constituents who end up in dispute with the Home Office, and who could fall foul of being not seen to be legally resident. The Government are now throwing EU nationals into that pot as well, and there is every risk that they could be not legally resident in the eyes of the bank or in the eyes of the Home Office. That is the problem with this situation.

[Robert Jenrick]

With respect, the hon. Lady is not correct. The position under this statutory instrument will be exactly the same as the position today. Anyone legally resident in an EU country and anyone legally resident in the United Kingdom after exit day will have access to a basic bank account, so nobody will be disadvantaged as a result of the SI. The Treasury is working very carefully to ensure, for example, that bank accounts are available to those who are homeless and to ex-offenders as they leave prison. The Government are working carefully with difficult and vulnerable groups to ensure that they have basic bank accounts, but people must be legally resident in the UK. It goes without saying that we cannot legislate for those people who are illegal. We have to work on the premise that this will apply only to those who are legally resident in the UK, just as the existing EU rules do.

The hon. Member for Oxford East asked about the impact assessment. We have prepared an impact assessment, as she would expect, and we hope to publish it shortly. The impact assessment is with the Regulatory Policy Committee for consideration, along with a series of other statutory instruments. Together, they form the second tranche of statutory instruments coming from the Treasury. This is the first one, as I understand it, from that tranche that has come before the House. We will publish the assessment once the committee’s opinion has been received. We have tried to ensure that impact assessments have completed all the usual processes in time to be published before debates, but that has not always been possible, for the reasons that the hon. Lady helpfully gave. The sheer quantity of statutory instruments coming forward is placing pressure not just on the civil service, but on the Regulatory Policy Committee, which is a relatively small organisation. These statutory instruments are being prepared at pace, to ensure that we have a robust stand-alone regime in place before March 2019.

This statutory instrument is needed to ensure that consumers in the UK continue to benefit from the regulation of the payment account market, and that the legislation functions appropriately if the UK leaves the EU without a deal or an implementation period. I hope that the Committee has found this afternoon’s sitting informative and will join me in supporting the regulations.

Question put and agreed to.

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

Alison Thewliss Excerpts

Monday 17th December 2018 General Committees

[Alison Thewliss (Glasgow Central) (SNP)]

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

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

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

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

The impact assessment is clear:

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

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

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

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

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

Draft Capital Requirements (Amendment) (EU Exit) Regulations 2018 Draft Bank Recovery and Resolution and Miscellaneous Provisions (Amendment) (EU Exit) Regulations 2018

Alison Thewliss Excerpts

Wednesday 12th December 2018 General Committees

[Alison Thewliss (Glasgow Central) (SNP)]

It is a pleasure to see you in the Chair, Ms Buck.

I want to pick up where my colleague the hon. Member for Stalybridge and Hyde left off. This week, we have lurched closer to the prospect of a no deal Brexit due to the incompetence of the UK Government and Back Benchers who are more interested in feathering their own nests than in the interests of the country as a whole. It is utterly ridiculous for my constituents to see all these shenanigans as the clock ticks and we get ever closer to the point where the UK leaves without a deal.

We have the ridiculous prospect of the Prime Minister touring EU capitals only to find, as was totally predictable and inevitable, that people are not interested in speaking to her—the deal is already done as far as the EU is concerned. All of this is a distraction at a time when we should be focusing on the economy and on those people at the very bottom who are losing out massively as a result of UK Government policies.

We are here today to look at these statutory instruments in further detail, which is hidden away in these Committees rather than being scrutinised in a more open way. It is interesting to look at both instruments and their wider implications such as the familiarisation costs, which I mentioned at a previous SI Committee. The capital requirements regulations will have a total familiarisation cost of £1.7 million, which is absolutely huge. Businesses are being asked to bear those costs as a result of a decision that was not theirs. It will have a huge impact.

The FCA estimates that around 800 businesses will be affected. The Bank of England estimate is 209, so some 1,009 businesses will be affected. I ask the Minister, as I often do, how that is being communicated to those businesses because the clock is ticking, and they need to know and make preparations. The Fraser of Allander Institute mentioned yesterday in its report that small businesses are under-prepared for the prospect of a no-deal Brexit. For a long time, perhaps we hoped that that might not happen, but who knows whether that will remain the case? The Government have a job of work on their hands to ensure that all those businesses are aware of what might happen in the event of a no deal Brexit, and what it will mean for each and every businesses across this country.

The Financial Markets Law Committee is concerned, as I am, about the regulatory burden on the Bank of England, the Prudential Regulation Authority and the Financial Conduct Authority. How will they cope with the additional work coming to them? They are concerned about the recognition in UK law as things progress, withdrawing from the shared protections we have in the EEA and the impact on the market as a whole.

[Sir Oliver Heald]

Under the withdrawal Act, of course, EU law just comes into our law on the day we leave, but it would be ineffective in this area because there are a lot of references to institutions that we will no longer be in. Does the hon. Lady agree that the regulations are needed?

[Alison Thewliss]

I do not dispute that they are needed. I am not sure that Brexit is needed, but that is a different argument for a different day. The note mentions that the FCA and PRA will be updating the rule books in time for exit day. I want to press the Minister a wee bit more about what stage the preparations are at, and whether the expectation is that they will be ready in time. What progress has been made?

As to the capital requirements and, under the CRR, the binding regulations to co-operate and share information with EEA authorities, removing them and moving to a more discretionary system within it obviously means there is a question as to how we maintain the rigour of the system. If it is going to be sharing on a discretionary basis rather than being obliged to do so as part of the system, how will we ensure that things are going to work properly and as well as they can work at the moment? How do we prevent the slide towards another financial crash in a system that is more discretionary rather than one that obliges us to do certain things?

I want to mention research from the London School of Economics, and concerns about the impact that everything that is happening has on the UK’s voice in the shaping of the regulations:

“The weakened UK voice means that opposition to greater harmonization and EU calibration of international standards may be less strong in the Council than it was over the original CRD IV negotiations. Conversely, while the UK can be expected to support the proposal to lift certain of the contested CRD IV remuneration rules from smaller and less complex firms, other Member States may be less accommodating and more influential.”

Again, that relates to the loss of the UK voice in all such matters. We end up in the worst of all worlds as a result of the decision. We become rule takers and have less influence over the things that affect financial services, which are a huge part of the economy of the UK and my constituency. I hope the Minister addresses those concerns.

--- Later in debate ---

[John Glen]

My right hon. and learned Friend is of course correct. We are creating as smooth as possible a scenario in a no-deal situation. The costs would be much greater if we did not do so. However, I stress that we seek to maintain close relationships with all third countries.

[Alison Thewliss]

Will the Minister tell me a bit more about how the costs have been communicated to the 1,009 businesses and the 350 businesses that will be affected?

[John Glen]

As I mentioned, the regulations were laid on 21 August and 8 October. There was engagement with industry during that intervening period, and those costs will have been made clear during that time. We have tried to be as transparent as possible and to engage as closely as possible with different trade bodies and, through them, with firms, so that there is an understanding of the costs.

The Government believe that the regulations are needed to ensure that prudential and resolution regimes applying to banks, building societies and investment firms work effectively if the UK leaves the EU without a deal or an implementation period. We do not want to lose the progress in establishing these regimes that we have made over the last 10 years. I hope the Committee has found this sitting informative and will join me in supporting the regulations.

Question put and agreed to.

Resolved,

That the Committee has considered the draft Capital Requirements (Amendment) (EU Exit) Regulations 2018.

Draft Bank Recovery and Resolution and Miscellaneous Provisions (Amendment) (EU Exit) Regulations 2018

Resolved,

That the Committee has considered the draft Bank Recovery and Resolution and Miscellaneous Provisions (Amendment) (EU Exit) Regulations 2018.—(John Glen.)