European Union (Withdrawal) Bill

Baroness Kramer Excerpts

2nd reading (Hansard): House of Lords
Wednesday 31st January 2018 Lords Chamber

[Baroness Kramer (LD)]

My Lords, it is intimidating, frankly, to hear the breadth of experience that has been brought to this debate, but I will do my best to speak from my much narrower experience. I spent the last couple of weeks heavily engaged in the anti-money laundering part of the Sanctions and Anti-Money Laundering Bill. That has very much shaped my whole approach to this Bill, because the premise of that anti-money laundering part was the powers that currently go through a democratic process at European level: the fourth anti-money laundering directive was subject to consultation, scrutiny, debates within the European Parliament and votes in Council. The whole thrust of that Bill was that those powers should be repatriated to the UK, transferred not to this Parliament to treat in a similar democratic manner with primary legislation but directly to Ministers to make their decisions and enact them simply through regulation. That was an extraordinary shift.

This House negotiated with the Government. There were people anxious about the issue, led by the Law Lords—or rather our specialists in constitutional law, such as the noble and learned Lord, Lord Judge—but it was much broader than that. The Government made significant amendments, but it took two votes in this House to take out of that Bill the clauses that gave Ministers the power to create criminal offences and sentences—in one part of the Bill with imprisonment for up to 10 years, in the other with imprisonment for up to two years—by regulation alone.

I do not know how the Government will deal with those issues when that Bill goes to the other place, but when we read the European Union (Withdrawal) Bill and we hear the Government say that they will use their Henry VIII powers in very narrow ways, largely for technicalities, we recognise exactly the language that we heard during the debates on the Sanctions and Anti-Money Laundering Bill, which in practice, in the eyes of almost everyone in this House, had a dramatically wide scope. In the case of that Bill, and I think this is illustrative, it was not just to achieve some immediate transposition of powers from Europe to the UK; the new system for exercising powers over anti-money laundering policy and frameworks was to be in perpetuity.

You can imagine that I take very seriously that part of Clause 9 in which the Government seek powers to change any piece of primary legislation, including the EU withdrawal Bill itself, and any of the limitations and constraints within it. It is with that hat on and with that concern that I will come to the Committee stage. I will be fighting particularly the Henry VIII powers to levy taxes, fees and charges, but I am sure that this House will tackle the issue far more broadly and recognise the significance of doing so.

In her opening speech, the noble Baroness, Lady Evans, talked about the importance of giving certainty. Who could disagree with that? It is critical. To me, though, certainty would mean that we knew what the Government’s plans were for the outcome of Brexit. The financial services sector, with which I am extensively engaged, has been denied even a position paper to outline what the Government’s preferred end position would be and to provide some sort of structure. That industry is part of the backbone of our economy.

We understand that there will be a transition period, largely a standstill, and that is welcome, but it is vital that individuals and businesses know now what it is meant to be a transition to. I talked last week to an inshore fisherman in Northern Ireland. He has to decide now whether to sell his boat because, following Brexit, all the good inshore fishing territories will be in southern Ireland and, if he does not sell his boat now, in a year or two it may be worth nothing. I talked to an architect, who told me that a Dutch client would like to engage him in a long-term development in the Netherlands. Will his qualifications be recognised? Will he be able to deliver his services from a UK base? He does not know, but he must decide now. A US company is seeking to do a five-year interest rate swap that it would normally clear through the London Clearing House, but will that be a valid swap in five years’ time or will the CCP with LCH be an unauthorised body, and will the company be in significant trouble with the regulatory authorities in the US? These are real decisions. Little companies, individuals and big companies alike have to be able to make decisions and act on contingency plans. For that, they must have clarity from the Government.

I realise that in a politically riven Government fudge is seen to have a great advantage, but we are at the point where that can be sustained no longer. I hope that the Government will see that certainty should apply not just to the measures in the Bill but to those broader issues as well. We must take the opportunity to use the Bill to make sure that people will be able to look at that final deal. The possible impacts on individuals, companies and people’s daily lives are across such a broad spectrum that surely, in a democracy, the people should have the final say.

European Union (Withdrawal) Bill

Baroness Kramer Excerpts

Committee: 1st sitting (Hansard): House of Lords
Wednesday 21st February 2018 Lords Chamber

[Baroness Kramer (LD)]

Perhaps I could make a suggestion to the noble Lord. If he were to go to 100 Parliament Street and sit and read the assessment, he would indeed see the comparison between being in a customs union and being in a free trade agreement. If he were to look at Hansard again and read about the damage to the economy that my noble friend Lord Newby described, he would find a great deal of that detail which explains that the free trade agreement route still leaves an unbelievably damaged country, in every region, especially the north-east, and in virtually every single industry sector.

[Lord Lamont of Lerwick]

There are calculations that say that. No doubt when the noble Baroness comes to make her speech, she will give arguments. I am not going to be persuaded by just a piece of paper with a statistic.

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[Lord Lamont of Lerwick]

I do not know whether the noble Lord misheard me, whether I misspoke or whether he misunderstood. I was not talking about having a free trade agreement with Korea but about the free trade agreements that Korea has signed with other countries across the globe.

Another point about a customs union is that it is not just a question of collecting tariffs. A lot of regulations go with it and there is a vast range of non-tariff controls on goods—you obviously have to have definitions. We would not be able to divert from these at all if we remain members of a customs union, or even to depart from them in our own domestic market. If we did that, the goods that were allowed in which had circulated in the other countries of the customs union would be in contravention of them. Again, I put it that there are some advantages which have to be put into the balance of the argument for leaving the customs union.

One mystery about this amendment is that if you are in the customs union, there is the collection of the tariff revenue where the individual countries are allowed to retain only 20% of the revenue. The rest of it goes to the EU, so would we be outside the EU and paying 80% of the revenue on the external tariff to the EU? That does not seem to make a lot of sense.

It is also possible to be outside the customs union and to have a free trade agreement with the EU. That is precisely what Norway, Iceland and Liechtenstein do but of course, to come to the noble Baroness’s point, if that is regarded as a cost you have to offset against it the fact that you have rules of origin. People have pooh-poohed the technology argument but is that really going to be such an insurmountable thing to do? Switzerland exports per capita five times as much to the EU as we do, and it has to operate rules of origin on many sectors when it sells goods to the EU. That does not seem to have had any inhibiting effect.

[Baroness Kramer]

My Lords—

[Lord Lamont of Lerwick]

I would like to make a little more progress, as this is taking rather a long time. The rules of origin are one of the points for consideration. I know that a lot of British industry is worried about this but I noticed what Mr Azevedo, the Secretary-General of the World Trade Organization, said in a newspaper interview that he gave the other day. He pointed out that a large part of Britain’s trade, because we have a bigger percentage of trade with the rest of the world than some other European countries, already has to observe these requirements of documentation and rules of origin. He did not see that there would be a big problem in switching the rest of our trade to a similar regime.

I have also met representatives of some of the companies that run ports in this country, some of which operate on a WTO basis and some of which obviously operate on an EU basis. But when I talked to the management—I do not want to name them because they would not want to be too involved in political controversy—I was told that they did not see a huge difficulty in moving from one administrative system to another. Whether people agree with that or not, I put it to your Lordships that that is what the argument is all about: a trade-off between that and a free trade agreement with access to the market. It is not clear that the advantage is all one way.

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[Lord Adonis]

My Lords, I do not think that the noble Lord should intervene to cut short this debate. There are many amendments that have not yet been spoken to and my noble friend on the Front Bench has not had a chance to speak. Many other noble Lords seek to speak, too. The Minister should speak at the end of the debate after noble Lords who wish to speak have had a chance to do so. These are the most important issues that will face this country over the next generation and I do not think that we should be told by the Government Chief Whip that we have been speaking for too long.

[Baroness Kramer]

My Lords, I shall speak to Amendment 89 to which I had the privilege of adding my name. I want to draw the House’s attention to that amendment because it addresses a constitutional issue. We are back to the issue of Henry VIII powers. This is to prevent the Government using Henry VIII powers in statutory instruments in order to drive through a separation from the customs union and from the single market rather than bringing those issues directly to this House for its decision. That is exceedingly important.

In supporting that argument, I want to underscore the importance of the customs union and the single market in response to the arguments put forward by the noble Lord, Lord Lamont. He said that without the customs union we can achieve what we need through a free trade agreement. What he did not say is that free trade agreements do not include services—or do so only at the margin. Our economy is an 80% service economy and a free trade agreement along the pattern and lines of other free trade agreements across the globe would leave us without the ability to sell our services freely as we do today across the European Union. Now the single market in services is not yet complete, but it is fairly close to completion and there is a great deal of opportunity.

The Government turn and occasionally say that there will be a mechanism to do this called mutual recognition. But within this House there are Members who will remember in the early days of Thatcher the development of the single market. This country thought that the route to be able to open up the single market and access across Europe was mutual recognition. But it was not effective, which explains the move towards regulation and harmonisation that currently overwhelmingly underpin our trade with the EU.

The EU has been very clear that it cannot see a way forward along the lines of mutual recognition except in fairly narrow terms. We have an example that the Government often cite with Switzerland where there is in effect mutual recognition through an equivalency agreement. But in December, when that agreement needed to be extended to provide for MiFID II, the EU would agree only to a one-year arrangement because it needed to be underpinned by a great extension of institutional arrangements to deal with disputes and a whole range of other issues.

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[Lord Green of Deddington]

Perhaps I may make a brief point. The noble Baroness is absolutely right about India. What is missing from this discussion, and the noble Lord, Lord Davies, referred to it, is that in the future we will be able to substantially reduce migration from the European Union, much of which is low paid and therefore of less value, and that will give us some leeway when talking to countries such as India.

[Baroness Kramer]

The answer that I give to the noble Lord, Lord Green, is one that would be given by many people in this House. To reduce immigration to the tens of thousands means not only drastically and dramatically reducing European migration; it means drastically and dramatically reducing migration from elsewhere in the world. That is the reality that our employers in the various industry sectors face.

I will tell the noble Lord one more thing if we are talking about inconsistencies. Let me go back to the point I made to the noble Lord, Lord Lamont, about going to 100 Parliament Street, which I recognise. I will attempt to ensure that I do not breach the confidential content of the papers, but in the various scenarios, every one of which is frankly quite scary, there is a discussion about potential mitigations. Without breaching confidentiality I cannot define those mitigations—as I say, noble Lords should read the papers for themselves—but if one were to follow them, the speech that Michael Gove gave to the National Farmers Union is in absolute and complete contradiction to the mitigations. The speech given by David Davis about rising to higher standards is in complete contrast to the identified mitigations. The speeches or the comments that Theresa May has made about not weakening the rights of the workforce of the UK are completely contradicted. That is one of the reasons I recommend that people from this House should read the papers because all the contradictions in the statements being made are finally pulled together.

[Baroness Humphreys (LD)]

My Lords, at this stage of the debate and with the indulgence of the Committee, I wish to return to the debate on Amendment 6 in the name of the noble Lord, Lord Wigley. I thank him for his eloquent introduction to the debate.

The amendment calls on the Secretary of State to lay before Parliament a report outlining the effect of the UK’s withdrawal from the single market and customs union on the UK economy. That the Government have tossed away the UK’s commitment to the single market and customs union without seeking an impact assessment or providing evidence for this has to be a cause of real concern. There can be no doubt that membership of the EU single market and customs union has been of benefit to Wales. If the noble Lord, Lord True, will allow me, I wish to refer to my Second Reading speech in which I pointed out that it has given us tariff-free access to a market of 500 million people, it takes more than two-thirds of our exports and the freedom of movement for citizens and goods has led to the success of many of our industries.

The creation of a single market was at the UK’s insistence. We helped to create it, we have benefited from it and, until recently, we have wholeheartedly supported it. The Government’s position on the single market and customs union is confusing, to say the least. They appear to want all the advantages of both while rejecting the institutions themselves. I have to say that I find the attitude of the Government and of the hard Brexit supporters to be almost anarchic. There is a certain gung-ho, jingoistic element to their desire to crash out of the EU, the single market and the customs union with no parachute or safety harness to protect the country—straight into the arms of the WTO.

Those who advocate the WTO option have, according to experts, made a basic but fatal mistake. Their obsession with tariffs has blinded them to the difficulties presented by non-tariff barriers such as border checks, visual inspections and physical testing. Industries that now rely on integrated supply chains working to a “just in time” regime could find that their systems start to snarl up and eventually grind to a halt.

We would be turning the clock back to the world of 1988, the year that Margaret Thatcher made her speech opening the single market campaign. It makes for interesting reading:

“We recognised that if Europe was going to be more than a slogan then we must get the basics right. That meant action. Action to get rid of the barriers. Action to make it possible for insurance companies to do business throughout the Community. Action to let people practise their trades and professions freely throughout the Community. Action to remove the customs barriers and formalities so that goods can circulate freely and without time-consuming delays. Action to make sure that any company could sell its goods and services without let or hindrance. Action to secure free movement of capital throughout the Community. All this is what Europe is now committed to do”.


All this we have succeeded in doing, so what has changed? It seems that the advantages we have gained by being members of this massive free trading bloc have been sacrificed on the altars of two perceived problems: lack of control of immigration and loss of sovereignty. But in reality, the Government have failed to control immigration from outside the EU, which they have always had the power to do. They have also failed to use the powers available under EU guidelines to control immigration from within the EU, and they have failed to admit to the benefits to this country that have come in the wake of immigration over the years. The Government have themselves admitted that there was never a loss of sovereignty. Along with 27 other nations, we pooled our sovereignty to come to common decisions on policies.

In throwing away all the benefits of the single market and customs union without providing the evidence to support their case, the Government are adding to the sense of injustice felt by many and to the concerns that this decision has been based on politics and preconceived views rather than what this amendment calls for, which is what is proven to be beneficial to the people of Wales and the UK.

European Union (Withdrawal) Bill

Baroness Kramer Excerpts

Committee: 6th sitting (Hansard): House of Lords
Monday 12th March 2018 Lords Chamber

[Baroness Thornton (Lab)]

This benefits all patient populations, and is particularly important for paediatric and rare cancers—diseases which, precisely because they are uncommon, are among the hardest to research and treat. You therefore need a larger pool than the 66 million people who live in this country: Europe has a combined population of 510 million to draw on. That is nothing to do with trust; it is to do with how clinical trials need to be carried out. You need a larger pool of patients to test these drugs.

I was pleased to add my name to the amendment in the name of the noble Lord, Lord Patel. I raised this issue in my speech at Second Reading and will mention only one additional matter, which is to do with rare paediatric illness; tumour types which affect relatively few people; and rare cancers which translate to over 20% of all cancer diagnoses across the world. If the UK is to make progress on therapies for paediatric and rare cancer, it is vital that we can work closely with EU nations on clinical trials. Cross-border collaboration is crucial to paediatric and rare cancer clinical trials. Some 75% of clinical trials in the EU involve cross-national collaboration, rising to 86% for rare disease trials. As noble Lords have remarked, that is because of the patient population across Europe. We will be doing a huge disservice to our children, and to the cancers which threaten a few of them, if we fall out of this system. It is as simple as that.

The BEACON clinical trial system is an example of how cross-national collaboration is fighting back against rare paediatric cancers. Neuroblastoma is a form of cancer that affects around 100 children, mostly under the age of five, every year in the UK. More than half the children with aggressive forms of the cancer will see it return and, for these children, there are few treatment options left. In 2013, Cancer Research UK scientists and paediatric cancer specialists launched the BEACON-neuroblastoma trial to find the best chemotherapy treatment for children and young adults with recurring neuroblastoma. To do this, it is bringing together clinicians and scientists from 10 European countries and two international consortia, with funding from Cancer Research UK and European partners. It is a fantastic example of successful European collaboration. The rarity of this neuroblastoma and the low number of patients means that trials could not have happened in a single European country. It is vital that this type of cancer trial—

[Baroness Kramer (LD)]

Given the noble Baroness’s expertise on this issue, I wish to ask her a question. As I understand it, medicine is becoming more and more personalised and customised. Therefore, by definition, the pool for a far wider suite of diseases is becoming smaller and smaller because of that much narrower customisation and personalisation. Therefore, the situation with rare diseases today is about to become the norm across a very wide range of diseases. Does the noble Baroness read it that way?

[Baroness Thornton]

I absolutely agree with the noble Baroness. In fact, several noble Lords who are much more expert on this have already mentioned that aspect. The noble Baroness is absolutely right. I do not think I need to say anything more. I think this amendment is the remedy. I hope that the Government will respond positively to it. The case is unanswerable.

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[Lord Turnbull]

If something generates a surplus, it is equivalent to a tax and should be covered by the same legislative understandings about taxes.

There is a third category, where a conscious policy relates the fee not according to how much it costs to administer that piece of service to a business or a household but to something like wealth or income. The most egregious example of this was the recently introduced change in the schedule of probate charges, where larger estates are being asked to pay not what it costs to administer the probate but according to the size of the estate, producing charges many times greater than the pure costs. We need to decide in this amendment whether all fees and charges should be treated as taxes—that would be the simplest thing—or whether it is possible to make a distinction between those fees which are purely covering costs and those which go beyond, either in the total or in their social distribution. I hope that the Minister will agree to come back to this House with amendments which make that distinction.

The issue will resurface when we get to Amendments 348 and 349, which deal with Schedule 4, where we have the possibility that secondary legislation could be used to introduce fees and charges by a body that was itself created by secondary legislation. I should say that that would put us not just in double jeopardy but jeopardy squared. We are going to have to deal with the problem of these two points in our work on the Bill.

[Baroness Kramer]

My Lords, I have put my name to Amendments 86 and 127. I will be very brief because the noble Lord, Lord Turnbull, has described the problem we have over fees, charges and legislation. I remember that, when I was on the board of Transport for London and we brought in the congestion charge, it was the alliterative nature of the word “charge” that led us to use it, rather than any legal definition. So my answer to the noble Viscount, Lord Hailsham, is that there may well be legal definitions but I think they are now observed in the breach on many an occasion.

[Viscount Hailsham]

The community charge was clearly a tax and not a fee.

[Baroness Kramer]

The noble Viscount gives a superb example. We can think of parking charges and a whole wide variety. That is why it is really important that there is clarity over when a statutory instrument is the appropriate mechanism and when, frankly, it is not. The Bill as it stands does not give that clarity.

I also put my name to these amendments for another reason. Most in this Committee will remember the time of the tax credit debacle, a major policy change that most of us regarded as a change that should have been introduced as part of a welfare Act. The Government sought to accomplish that through a statutory instrument attached to a Finance Bill. Because of the nature of charges and money-type instruments, it is very possible to use them to affect very broad policy issues and not just the narrow issue of revenue raising. That is why Amendment 127, for example, is an important amendment, as are others in this category. We are all concerned about the inappropriate use of Henry VIII powers, since this Government have actually tried to use these to achieve those much broader policy ends in the past. We have to be sure that we are not leaving a mechanism by which that could be repeated, because that really would be a coach and horses through many of the concerns and issues that have been raised.

[Lord Lisvane (CB)]

My Lords, I support the amendments in the name of the noble Baroness, Lady Hayter of Kentish Town, and I shall speak to Amendment 126, which is in my name and those of my noble and learned friend Lord Judge, my noble friend Lord Pannick and the noble Lord, Lord Tyler. Amendment 126 would bring Clause 8 into line with Clauses 7 and 9.

Taxation matters can be dealt with by statutory instrument. For example, they can restrict relief from Customs and Excise duties or VAT under the Customs and Excise Duties (General Reliefs) Act 1979. But taxation, as it is normally and properly understood, is undoubtedly a matter for primary legislation. What is troubling here is the potential width of these powers and the lack of indication of how the Government intend to use them.

The Delegated Powers Committee’s 12th report says:

“At committee stage in the House of Commons, the Parliamentary Under-Secretary of State for Exiting the European Union (Mr Robin Walker) indicated that the power to tax by statutory instrument in clause 8 was needed because the power was not available under clause 7”—


that is true enough. It continued by saying that,

“furthermore, taxation might be needed to ‘comply with international arrangements’”.

The committee then pointed out, and I entirely endorse what it said:

“The question which remains unanswered is why taxation by Ministers in statutory instruments is an acceptable alternative to taxation”,


approved by Parliament, with the normal rigour of the process, in primary legislation.

The Minister will need to give your Lordships some very hard examples of why a statutory instrument would be used and not primary legislation. If that is not known at this stage, the withdrawal and implementation Bill we are promised might well be the vehicle for making those changes in primary legislation, if the precise requirements are known at that stage. But this potentially wide power to tax by statutory instrument is, as I say, more than troubling. I am not suggesting that indications of how a power is expected to be used will in themselves suffice, although they should give your Lordships a clue to why the power is required, which is perhaps a more important question to address. What matters, of course, is what ends up in the Act. The use of the power then will not be trammelled by reassuring indications of how, at this stage, it is expected to be used.

Perhaps I may finish by enlarging on my noble friend Lord Turnbull’s masterly catalogue of fees and charges and their various characteristics, to add another category. In the financial procedure of the House of Commons, a fee that is levied and then applied for the good of the industry as a whole is not treated as a tax, so it does not require ways and means cover. As I say, that is merely a footnote to my noble friend’s excellent speech.

European Union (Withdrawal) Bill

Baroness Kramer Excerpts

Committee: 6th sitting (Hansard - continued): House of Lords
Monday 12th March 2018 Lords Chamber

[Baroness Kramer (LD)]

Perhaps the Minister could help me with a clarification. As I understand it, the FCA and others have the powers he just described as a consequence of a cascade that comes, as he said, from higher levels of legislation that originated in a democratic process. They therefore have safeguards, frameworks, constraints, mitigations and appeals processes—all kinds of characteristics sitting around them. How do the powers of sub-delegation which the Minister described relate to any of those structures of cascade or framework, since we are supposedly leaving the EU?

[Lord Callanan]

I am not sure that the powers originated in a democratic framework; a lot of them came from EU legislation introduced by regulation which takes automatic effect through the European Communities Act. We could have an argument about whether that is a democratic framework, but perhaps now is not the time.

[Baroness Kramer]

My Lords—

[Lord Callanan]

Let me make some further progress and see whether it responds to the noble Baroness’s questions.

Some of the powers to make legislation that will be transferred under the powers in the Bill are integral parts of regimes currently managed at the EU level; for example, where the European Commission currently legislates to add to or remove active compounds from lists of biocidal products. Where sub-delegated or transferred legislative powers are crucial to the functioning of a regime, it would not be appropriate for those powers to be subject to a sunset. That would only postpone rather than remove the requirement in the limited time available before exit for either a regular flow of primary legislation to keep regimes up to date or a suite of primary legislation to design equivalent powers to those which the Government intend to transfer under this Bill.

Perhaps I may address the three elements of Amendments 350 and 351 tabled by the noble Baroness, Lady Hayter. First, I turn to the scrutiny of the exercise of the powers by Ministers of the Crown in Schedule 4. We have laid out in Schedule 7, which I know we will debate at length another day, provisions for the scrutiny of those powers. Our position is that the powers should indeed be subject to the affirmative procedure where Ministers are creating new fees and charges regimes, or where we seek to grant an authority the power to set its own fees and charges. It is the sort of framework being established in which this House rightly takes a great interest. All this is of course possible under Schedule 4 only in relation to new functions that we are transferring from the EU or setting up on exit under the powers in the Bill. We have not provided for the adjustment of these, or for existing fees or charges, to be subject to the affirmative procedure. In years to come, there will be many such adjustments as technology cuts costs and inflation raises them. This ebb and flow can make a real difference to businesses, but does not normally represent a matter requiring debate and division within this House.

Nevertheless, I accept the point made by the Delegated Powers and Regulatory Reform Committee that the raising of a fee not by 1% or 2% but by, let us say, 13,000% would be a substantial matter. I trust, however, in the expertise of the Secondary Legislation Scrutiny Committee and the Joint Committee on Statutory Instruments to draw this House’s attention to such matters. I remind noble Lords that the negative procedure for statutory instruments does not mean no scrutiny at all, nor does it prevent debate. Nevertheless, if I have not addressed sufficiently the noble Baroness’s concerns on this point, I would be more than happy to discuss further how we might do so. As I said at the start, we are looking closely at this issue and expect to come back to it on Report.

Secondly, these powers are vested also in the devolved Ministers—we do not have the noble Lord, Lord Wigley, with us to make his regular point about devolved matters. While the scrutiny of the powers is important and, as I have just set out, the Government have tried to ensure that the most important of the regulations made under them will be affirmative, it is not for this House to dictate scrutiny to the devolved legislatures. The Bill contains a starting base of procedures for the devolved exercise of powers. While the devolved Administrations are competent to change these following Royal Assent, discussions continue with them about any alterations they may think it appropriate to make in the Bill. It would also not be appropriate for us to require the devolved Ministers to seek our approval for their statutory instruments—I am sure the noble Baroness did not intend this to happen.

My third point regards the sub-delegation of the power to provide for fees and charges. It bears repeating that any instrument providing for this will have to be affirmative, can delegate this power only to a body being given a new function under this Bill, and will have to set out the conditions for the exercise of that power.

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[Viscount Trenchard (Con)]

My Lords, I listened with interest to the amendment proposed by my noble friend Lord Carrington of Fulham and supported by the noble Baroness, Lady Falkner. I accept that my noble friend is trying to be helpful to the Government, but for various reasons I nevertheless feel unable to fully support his amendment. I understand well that the amendment reflects the proposals put forward by the IRSG in its paper published last September, prepared in collaboration with Hogan Lovells. That report has been endorsed by TheCityUK and the City of London Corporation, which support IRSG.

The reasons why I cannot support the amendment are, first, that it is not appropriate or helpful to put into legislation, at this stage, the detail of any future regulatory collaboration with the EU, let alone on financial services. Secondly, the report which the amendment would require the Government to prepare, like other reports which other amendments discussed today have called for, would be quite onerous and time-consuming. Thirdly, it is not helpful for our negotiators if we argue against ourselves, and especially unhelpful to incorporate amendments into law which appear to accept that it is desirable, even necessary, to treat continuing alignment with EU regulations as being a greater priority than aligning our regulations with those of the SEC in the United States, the FSA in Japan, or other regulators in other countries with significant financial markets. Fourthly, the Government have already stated their intention to negotiate an implementation period following exit day when things would be largely the same, including, as I understand it, for the financial services sector. This amendment appears to assume that everything changes on exit day.

In his excellent recent speech at the Mansion House, the Chancellor referred to a framework to supervise,

“separate evolution of rules to deliver the same results”,

and to resolve disputes. I believe there is a danger that this would place too much pressure on UK regulators to continue to align completely the UK’s rule book with that of the EU 27. This would make it more difficult to agree any kind of mutual recognition of standards with other financial regulatory regimes around the world. For example, the City Corporation and Tokyo Metropolitan Government have recently entered into a memorandum of understanding to collaborate more closely on financial services, and this could be developed in future to include some kind of mutual regulatory recognition of standards.

Of course, the City will survive if there is not a deal which covers financial services. The EU regulators have forced upon us Solvency II, AIFMD and MiFID II, to name but three directives which have cost the City dear in terms of higher costs, fewer jobs and fewer revenues than would otherwise have been the case. We should not agree to align more closely to EU rules than to US rules, Japanese rules or the rules of any other major financial centre in the world. Once our regulators recover their independence from the EU regulators, their influence in shaping best practice rules at the global level will be enhanced, not diminished. Of course, while the inclusion of financial services in our FTA would be better than its exclusion, our negotiators need to be very aware of the significant upside for the City in recovering our regulatory independence.

The amendment, in proposed new subsection (2)(a), refers to the degree of alignment “necessary” between the regulatory provisions of the EU and UK. I submit that this is a rather subjective concept. What is important is that our regulators will establish the best regulatory regime for our markets, retaining the highest standards for which London is rightly held in high regard and participating fully in discussions with regulators of the other major financial markets, within IOSCO and other bodies, with a voice commensurate with the size and scope of our markets.

As my noble friend Lord Hill of Oareford said in his interesting speech at Second Reading, our withdrawal from the EU is allowing Europe already to move in directions that we have traditionally resisted, whether that is a financial transactions tax, more screening of overseas investment or more centralisation of supervision of financial services. As we now have to choose between effectively remaining in the single market and being free to make our own rules where we want to, we must surely place a greater priority on being able to shape our own future than on preserving the status quo.

Mark Hoban, chairman of IRSG, has proposed a forum for regulatory alignment, referred to by my noble friend, whereby the UK and the EU can work together to implement new global and international standards. That is fair enough, although I do not think it is in the City’s interests to do this with the EU exclusively. Furthermore, my noble friend’s amendment is silent on the proposed forum’s relevance to new global and international standards and relates only to a perceived need to maintain regulatory alignment with the EU alone. If I were a banker in the EU 27 or the finance director of a major EU 27 company wishing to raise money in the capital markets, I would certainly not want the EU to impede my access to the UK’s financial markets, but I have not yet heard of any proposed EU regulation or directive requiring the Commission to continue to align closely to UK regulations.

My noble friend’s amendment indicates a frame of mind which I believe casts us too much in the role of supplicant, where we do not need to be. Does the Minister recognise that the City would worry less about the downside and show more confidence in the upside of Brexit if the Government showed more leadership and enthusiasm for the City’s role as the leading international financial centre, unfettered by the EU’s cumbersome and somewhat dirigiste regulatory framework, while maintaining the high standards and proportionate regulations that provide the necessary protections and financial stability for investors and borrowers, but without burdening market participants with unnecessary costs or with measures that inhibit the innovation that has helped to make London the great success it is?

[Baroness Kramer]

My Lords, the noble Viscount, Lord Trenchard, speaks a commonly held Brexiteer view. I take a very different view—that if we were to follow the course he just recommended, in 10 years’ time the UK would no longer be the premier centre for financial services in Europe, and certainly not for those generated within the EU, which is one of the largest economic and trading blocs in the world, and perhaps the most important as regards feeding financial services.

I understand the amendment in the name of the noble Lord, Lord Carrington, but I cannot support it because, as I think he would say, it is quite limited. Financial services depend not just on passporting: for the asset managers it is delegation, for the fintechs it is the e-commerce directive, and for the insurance and trading world it is the mutual recognition of contracts. There are so many complex features at so many different levels that create the ecosystem that has enabled London to thrive, essentially on the basis that it has sitting behind it the resource of a 28-country 510 million population who turn to it as their primary financial centre. However, the way in which the Government respond to Lord Carrington will be critical. It is a matter of timing.

The industry, as the Minister well knows, has been in some despair to try to persuade the Government that how they structure the relationship, should Brexit take place, is absolutely critical. The large companies in the industry have been going ahead with contingency planning that, so far, has been in a relatively preliminary phase. They have identified new real estate, taken out leases, and negotiated licences and other authorisations that they need to be able to expand either their field of business or to be able to expand business. However, almost every one of them has said, I think to many noble Lords in this House, that by the end of March—we are now talking about a matter of days—they will have to push the button on the next phase. That is the fitting out and purchasing of the very extensive and expensive equipment that has to go in, and the setting up of the recruitment process to staff out those new operations. From that there is no return. We therefore reach a point of no return for a significant portion of financial services which will be transferred to continental Europe with, frankly, no possibility of reversal, in a very brief period of time.

The industry has coalesced around the idea of mutual recognition as the one possible route. If we leave the single market—that is key; if we stay in the single market, it is not an issue, although the Government say that we will not—mutual recognition is the only possible route to limit the damage. It is nowhere near equivalent to the access that we have today, but it could perhaps be negotiated so that the damage is to some degree limited. Every major company I have talked to says that it does not understand how this new form of mutual recognition will work. It seems highly problematic. I have said in this House before that when the EU first began to bring together and create aspects of the single market in financial services, it began by using mutual recognition. However, it turned out to be completely inadequate to deal with the complexity of so many different kinds of issues, so much competition, so much size and so much depth.

So mutual recognition is seen not as a successful strategy but as the failed strategy for these arrangements that is now being revived in a new form. Because the industry is listening, it is important that we get from the Government something that provides some meat and bone on how this mutual recognition could function. If we do not hear that today, we will in many ways be accepting that we will not have any kind of significant arrangement around financial services, and the consequences for this country, which is essentially a service economy in which financial services are the most significant part and the largest exporter, will be highly significant. We need to understand today whether we are looking at something that is real and has the prospect of achieving success or whether we are simply tossing around an idea that has PR attractions but, frankly, offers no meaningful route to keeping access to the European market for our financial services industry.

European Union (Withdrawal) Bill

Baroness Kramer Excerpts

Committee: 7th sitting (Hansard - continued): House of Lords
Wednesday 14th March 2018 Lords Chamber

Moved by

[Baroness Kramer]

183: Clause 9, page 7, line 17, at end insert—
“( ) No regulations may be made under this section until the Chancellor of the Exchequer has published a statement setting out a strategy for retaining membership of the European Investment Fund.”

[Baroness Kramer (LD)]

My Lords, in the absence of the noble Lord, Lord Adonis, I am moving this amendment because it is an important amendment in an important group. I suspect that the noble Lord will want to make a more substantial speech than I will, but these amendments would essentially require the Government to have a strategy for how they build or retain engagement with the European Investment Bank and the European Investment Fund post Brexit.

[The Deputy Chairman of Committees (Lord Haskel) (Lab)]

Order. Could the noble Baroness tell the Committee to which amendment she is speaking?

[Baroness Kramer]

I am speaking to Amendments 183 and 187, which would require the Government to create a future strategy to retain engagement with the European Investment Bank and the European Investment Fund. On all sides of this House, Members have appreciated the value of both those bodies; their contribution to the UK has been substantial. In 2016, the European Investment Bank contributed support in excess of £5.5 billion to a very wide variety of projects, ranging from schools in Yorkshire to Crossrail. The European Investment Fund has played an absolutely key role in the development of new start-up companies in the UK, particularly in fintech—an area I am very close to—which received some £2 billion between 2011 and 2015. The Government have not yet made it clear to any of those in the business world, including those who rely on these sources, what the future framework will be either to continue a relationship with those two bodies or to replace them with an alternative source of funding.

From time to time the British Business Bank has been mentioned as a possible route to provide those mechanisms. However, I point out to the Government that businesses certainly need reassurance in that area if the Government intend to pursue that strategy. The British Business Bank is in no way geared up to make loans on the scale of the European Investment Bank, nor does it enter into the role that the European Investment Fund pursues, which has been very much to fund venture capital, which in turn flows into this range of start-ups.

I would like to hear from the Government how they see the future framework of the British Business Fund. Your Lordships will remember that in 2016, the Government were pursuing a strategy of essentially privatising that operation. It was widely understood that a number of companies—JPMorgan, Nunes, Deloitte and Norton Rose—were advising on the transfer of all the assets of the British Business Bank to an investment vehicle, to be called the “British Income and Lending Trust”, which would then be floated on the London Stock Exchange and its shares made available to investors. That would have been, in effect, the end of the British Business Bank, and the Government took that as a strong position. Its actions were ended somewhat abruptly because of legal complications surrounding the privatisation of the Green Investment Bank. I regret the Government’s decision, but the complications at that point led to the delay in the same strategy being applied to the British Investment Bank.

Can the Government give us clarity on the future of our relationship with the EIB and the EIF and, if they have decided that those roles will now be picked up by the British Business Bank, can they give us assurances about what the nature of this will be or say whether a delayed privatisation will take place? Can they also tell us where the British Business Bank will get funding from and on what scale, and whether it will get both the mandate and the resources to enable it to move into this field, which is far wider than the field it is currently engaged in? Without that, we will compromise not only our vast infrastructure projects, which are absolutely critical to any kind of economic growth, but also our start-ups, and particularly that very important area of tech and fintech which has been utterly dependent—you cannot find a single fintech in the UK which has not had funding through the EIF source.

[Lord Adonis]

My Lords, I think the noble Baroness was speaking to Amendment 183, but that is grouped with Amendments 167, 187 and 227BC, which relate to the European Investment Fund and the EBRD.

We had a brief discussion about the European Investment Bank on 28 February, in which I made comments, which I will not repeat—at columns 731 and 732—about the value of the EIB, particularly for infrastructure investment, where it is a key partner, both in its own right for the investments it makes but also, crucially, in catalysing private sector investment. It acts as a strong guarantor of the determination of the state and partners to take projects forward. In my experience as a Minister, having EIB support for projects has been crucial in putting together funding packages from the public and private sectors, including different public sector partners, to make it possible for projects to go forward. Therefore, the big collapse in EIB lending—particularly the significant collapse after the notice under Article 50 was served—is of immense concern. The collapse is partly because it has been difficult getting projects going, but also because the European Investment Bank itself has withdrawn from engagement in projects because it is not at all sure of the security of its investments after 29 March next year.

--- Later in debate ---

[Lord Callanan]

We are having a serious debate about the EIB. The noble Lord is demeaning the subject before the House.

The British Business Bank has already raised the limit on the amount that it can invest in venture capital funds from 33% to 50%. It has also brought forward the £400 million of additional investment that was announced in the Autumn Statement. As a result, we expect it to have doubled its investment in venture capital this financial year. We have also broadened the range of the UK guarantee scheme by offering construction guarantees for the first time. I hope that that addresses the noble Baroness’s question.

[Baroness Kramer]

Perhaps I could just press the Minister on that, although I appreciate that he may not have an answer. In terms of volume, what he has discussed does not meet the need. Businesses are concerned that we may not end up with an appropriate relationship with the EIB and the EIF. Are the Government looking at similar programmes but on a relatively minor scale?

[Lord Callanan]

I do not have an answer to that question. I will come back to the noble Baroness on that. I have only the figures that I outlined to her.

I hope that I have reassured the noble Lord enough not to press whichever amendment he wished to move.

--- Later in debate ---

[Lord Tunnicliffe (Lab)]

My Lords, the most significant actor in forecasting the development of the UK economy is, of course, the Office for Budget Responsibility. It is mandated to provide two forecasts each year, yet there has been no updated forecast on the impact of Brexit since the Economic and Fiscal Outlook of November 2016. Uncertainty about how the Government will respond to the choices and trade-offs they face during the withdrawal negotiations renders forecasting extremely difficult. There has been no meaningful basis on which to form a judgment on the final outcomes.

The Government have given the OBR short shrift, referring it to the Prime Minister’s Florence speech as definitive. In that speech, Theresa May said the UK would seek to achieve a deep and special partnership with the EU and that this should span a new economic relationship. Not surprisingly, the OBR did not consider that a basis on which to update its analysis. However, the OBR did set out to forecast the outcome for certain parameters of the negotiations. It made several key assumptions about what will happen when the UK leaves the EU next March. New trading arrangements with both the EU and leading states will slow down the pace of import and export growth over the 10 years following the 2016 referendum.

The Treasury Select Committee finds this situation highly unsatisfactory, given that the OBR is required to produce regular reports analysing the risks surrounding the economic outlook for the UK. Committee members saw no reason why the OBR should not provide an update, the rationale being that it already has information on migration flows and can assess the likely state of the public finances, plus the OBR has already formed the judgment that,

“the consequences of Brexit on economic growth, whether positive or negative, are likely to be so substantial as to dwarf the impact of the financial settlement”—

a settlement that has so exercised members of the Cabinet through and since the referendum campaign.

While the Select Committee report came too late to be considered in the other place during its debates on the European Union (Withdrawal) Bill, it is being discussed tonight. The amendment in my name and the names of my noble friends Lord Davies of Oldham and Lord Judd offers this opportunity and calls on the OBR to publish a fresh economic outlook, something that would incorporate the terms of the withdrawal agreement and inform Parliament’s conclusions on whether to act on the outcome of the negotiations. Challenging as this task might be, a flow of firm and up-to-date information will obviously be in demand over the course of this year. Parliamentarians have the right to ask the OBR, the best placed institution, to provide the information we so clearly require. I beg to move.

[Baroness Kramer]

My Lords, I shall say only a few words because of the lateness of the hour, but I support this amendment. The Government have continually used the argument that they cannot provide detailed forecasts of the impact on the UK economy, jobs and other opportunities either because they do not know the full clarity of what the end agreement will look like or because any disclosure might compromise their negotiating position. I have always found that a little strange. Having negotiated trade agreements on our behalf for 40 years, there is, in fact, more expertise about the impact of these arrangements on the other side of the channel than there is on this side, so we are really not fooling anybody in any of the discussions that we have.

Setting that aside, at the point that the noble Lord, Lord Tunnicliffe, describes, neither of those arguments stands any more. We will have completed our negotiations and will know the details of what we have negotiated. Do the Government not agree that transparency is both possible and crucial at that moment and, therefore, that the analysis that the noble Lord just described is vital and owed to Parliament and the British people?

[Baroness Goldie (Con)]

My Lords, I thank the noble Lord, Lord Davies, in his absence for this amendment and thank the noble Lord, Lord Tunnicliffe, for moving it and speaking to it. The Office for Budget Responsibility’s remit is clearly defined in legislation, under the Budget Responsibility and National Audit Act 2011, as being,

“to examine and report on the sustainability of the public finances”.

In doing so, the OBR must produce at least two forecasts per financial year, which must include the impact of government policy where it can be quantified with reasonable accuracy.

The Government expect the OBR to include the impact of the withdrawal agreement alongside its forecast of the UK’s economic and fiscal outlook as soon as sufficient information is available. That would contribute to the transparency which the noble Baroness, Lady Kramer, is looking for. But the Government cannot dictate when that might be. This is the important distinction. It is therefore not appropriate to request the OBR to produce analysis specifically for a legislative debate, as this will draw the OBR into political debate, which could undermine its reputation as an independent and objective institution.

--- Later in debate ---

[Baroness Kramer]

But this will surely be one of the most important debates and most important votes ever held in this House. Is the noble Baroness suggesting that it is not appropriate and necessary for the OBR to provide the information that probably only the OBR is capable of providing to make sure that that vote is taken with the best knowledge available? That would be extraordinary.

[Lord Tunnicliffe]

Surely the OBR is up to its ears in political debate. It produces the document on which Parliament discusses the Budget, taxation and all parts of the economy. The OBR is part of the political process. It is a neutral and independent part of the political process, but it is not without the political process.

--- Later in debate ---

[Baroness Kramer]

This is a crucial point. It decides whether or not Parliament is in a position to make an informed vote, which is absolutely at the base of democracy. Does the Minister realise that she is inviting this House on Report to provide for a change in the statutes of the OBR to require it to produce that report and to provide it with the appropriate resources, if it needs additional staff, to be able to do it in a timely way so that the vote can be an informed one?

European Union (Withdrawal) Bill

Baroness Kramer Excerpts

Committee: 10th sitting (Hansard - continued): House of Lords
Monday 26th March 2018 Lords Chamber

[Lord Tyler (LD)]

My Lords, I endorse the contributions of the noble Lord, Lord Lisvane, and the noble and learned Lord, Lord Judge, and draw attention to the work of the Delegated Powers and Regulatory Reform Committee, on which the noble Lord, Lord Lisvane, and I sit. One of the things the committee found most uncomfortable was the extent to which Ministers have played games with words in their explanatory memoranda. We were particularly critical of the reference in Schedule 4 to tax-like charges. The committee stated:

“A ‘tax-like charge’ means a tax. Taxes and tax-like charges should not be allowed in subordinate legislation. They are matters for Parliament, a principle central to the Bill of Rights 1688”.


It is not so late and therefore I shall indulge in some further remarks. My only really respectable connection with your Lordships’ House is that of my ancestor, the great Bishop Jonathan Trelawny, the Cornish folk hero who was one of the seven bishops to defy James II’s attempts to impose rules upon this country without Parliament’s acceptance. His portrait is in the Peers’ Guest Room—he is the one at the end with the Beatles haircut.

I make that point because I am amazed and ashamed that Members of the House of Commons have not seen the dangers in this part of the Bill. I speak as a former Member of the House of Commons. This issue goes back to not just the Bill of Rights and the Glorious Revolution of 1688, but far earlier. Reference was made to the Bill of Rights in previous exchanges in Committee. The short-circuiting of the most basic responsibility and role of the House of Commons of approving taxes seems to me an extremely important issue. We should not allow this precedent to be pursued in this Bill. It is the historic role of the House of Commons. I recall that when we had exchanges about tax credits, the former Chancellor of the Exchequer, Mr George Osborne, sought to short-circuit and get round the normal process by which the House of Commons decides financial matters. I remember at the time that the noble Lord, Lord Forsyth, referred, I think, to ship money and Charles I, saying that the last time a member of the Executive sought to short-circuit Parliament, he lost his head.

[Baroness Kramer (LD)]

My Lords, I shall add a very quick word because so much has already been said. There is an irony in Schedule 4 which may interest the Committee: namely that the power to provide for fees and charges has been handed to Ministers by means of either secondary or tertiary regulation, depending on which part of this measure you are looking at. Paragraph 3 of Schedule 4 states:

“A Minister of the Crown may only make regulations under paragraph 1 with the consent of the Treasury”.


The irony of that is, frankly, extraordinary because it shows where the Government intend the power of the land to lie. We have always suspected that the Treasury is handed some of the greatest powers that are denied to Parliament. If it is considered fit for the Treasury to be able to intervene in fees and charges, then surely it is Parliament’s right to be able to intervene, scrutinise and monitor those fees and charges.

[Baroness Hayter of Kentish Town]

My Lords, I do not think that the noble Lord, Lord Tyler, was threatening to cut the right reverend Prelate’s head off because of this. However, what may have been a threat to the Minister was to me a great delight: the promise of the noble and learned Lord, Lord Judge, that he will do this with knobs on when we come back on Report. I look forward to that.

European Union (Withdrawal) Bill

Baroness Kramer Excerpts

Committee: 11th sitting (Hansard): House of Lords
Wednesday 28th March 2018 Lords Chamber

[Baroness Goldie]

The noble Baroness is quite right: there may be an overlap of issues where there is the desire to legislate positively about something as well as taking into account something that is no longer relevant. What I am saying is that where there is a patent misfit because something no longer applies to UK law, I think it is sensible in those circumstances to let the Minister try to ensure that there is no confusion, in that it does not make its way into what is in public view as representative of the body of law.

[Baroness Kramer]

Surely there is nothing wrong with a Minister proposing that something is not relevant and appropriate, but to make the final decision on that with no capacity for challenge is completely out of order. That is not a responsibility that should be placed on any member of the Executive.

[Viscount Hailsham]

Before my noble friend responds to that, I wish to make a similar point. If a direction is published, that is after the event; whereas if it has to be done by regulation, that in effect gives everyone the right to say that the Minister has got it wrong. That would be prospective rather than retrospective. Does the regulation procedure not have that advantage? It gives people the right to say the Minister has got it wrong.

European Union (Withdrawal) Bill

Baroness Kramer Excerpts

Report: 3rd sitting (Hansard): House of Lords
Wednesday 25th April 2018 Lords Chamber

[Lord Callanan]

My Lords, it is my pleasure to lead on this group of amendments. They are simple, short and, I hope, demonstrate again that the Government are listening to debate in the House.

The Government’s clear intention has been to make bespoke provision in relation to all financial matters in the Bill. It was introduced with a specific power to make provision in relation to fees and charges in Schedule 4. I know that that power is not without controversy and we shall debate it in full later on Report.

The powers in clause 7(1) and (9) could never, even if it were appropriate to remedying a deficiency or implementing the withdrawal agreement, make provision for a charge, as such measures contain an element of taxation prohibited in the exercise of these powers. That distinction is the distinguishing feature of a charge and why, at the time of our accession to the EU, specific provision for charges was included in the Finance Act 1973. The Government are tabling these amendments to prohibit the powers in Clause 7(1) and (9) from imposing or increasing fees, so as to provide clarity on the distinct purposes of these powers and those in Schedule 4.

The powers in Clause 7(1) and (9) will still be able to repeal fees regimes that are no longer needed, reduce fees and make amendments to pre-exit powers to provide for fees and charges. An example would be correcting a deficiency in an existing fee-setting power, such as a reference to a directive which is no longer appropriate. They will not, however, be able to impose or increase a fee or charge themselves.

These amendments respond to amendments and questions which were raised in debate in Committee. As I have said, we have reflected on this and taken steps to ensure that the stringent scrutiny provisions we are applying to Schedule 4 cannot be circumvented. This was never our plan but I can feel the mood of the House and I know that the word of a Minister only goes so far. I hope that these amendments demonstrate that we are keen to put questions beyond doubt where we can. I beg to move.

[Baroness Kramer (LD)]

This is another opportunity to thank the Minister because some peace of mind will now be provided about the structure of Clause 7. We understand now that the Government have stepped away from any capability to introduce new or increased fees.

I also thank the Minister for clarifying what a charge is. Many in this House have been trying to understand exactly how it could be framed. I hope the fact that he has now described it in the House will, in effect, put that definition on the record so that no future Government will attempt to use the word “charge” in order to circumvent these various constraints. Again, on this occasion, I thank the Minister.

[Baroness Hayter of Kentish Town]

To make sure that the Minister blushes fully, we, too, will take the opportunity to say again that we think that this is a good improvement. We thank those who have been involved in the drafting of the amendment and we support it.