Financial Services and Markets Act 2000 (Regulated Activities) (Amendment) Order 2018

Baroness Kramer Excerpts

Monday 25th June 2018 Lords Chamber

[Lord Lexden (Con)]

My Lords, I shall comment briefly as a member of the Joint Committee on Statutory Instruments. The committee’s recent 26th report drew the attention of the House to this instrument, on the grounds that it appears to make an unusual use of enabling powers conferred by the Financial Services and Markets Act 2000. It is a long-established principle of the joint committee that, where an affirmative instrument imposes new duties significantly more onerous than those that existed before, and where it requires those affected to adopt different patterns of behaviour, there should be a period of at least 21 days between the making of the instrument and its commencement, to give those affected a reasonable chance to adapt to the changes required. This instrument allows only one day.

My noble friend explained that very few firms—possibly only one—would be affected by this change. He also made clear that the Government were responding to a grave concern expressed by the London Stock Exchange that the continued failure to amend the permitted arrangements for alternative investment finance bonds is damaging the competitiveness of UK markets. The committee was unpersuaded that the changes to the law made by the proposed order are so urgent that they must have immediate effect. If the need for amendments was really so pressing, the draft order should have been laid before Parliament much earlier, with a commencement date of 1 April 2018 to coincide with the tax changes referred to in the Treasury’s memorandum

Because of frequent and recurrent poor practice, the Joint Committee on Statutory Instruments has recently published a special report, Transparency and Accountability in Subordinate Legislation, to remind the Government of the need for new law to be published promptly, so that those affected by the changes it makes are protected from being subjected to them before they have had a reasonable opportunity to understand and prepare for them. That is a general principle to which the Government should always adhere. I commend the committee’s important recent report on the major issues of transparency and accountability to my noble friend and all his colleagues in this House and the other place. I hope the House will have a brief opportunity to consider it in due course.

[Baroness Kramer (LD)]

My Lords, I think that we all recognise that Islamic finance—the sukuk market—is the fastest growing global financial sector, with growth of 10% to 12% a year. The current stock is some $3.5 trillion, with $100 billion of new issuance a year. The UK plays a very important role, as the most significant western market. As the Minister said, in June 2014 we became the first non-Muslim country to issue a sukuk.

I have no problems with the content of this statutory instrument. It is an “oh, oops!” and should have been included in the April order. This underscores the complexity we now have in dealing with FSMA 2000. It is now so complex that it is not at all unusual for real issues to fall through the cracks. If ever there was a candidate for a piece of consolidated legislation, it is this whole financial area. In 2012, we found ourselves with a Bill that, when tracked through the legislative trail, required the Governor of the Bank of England to appoint himself. Another issue, which we could not find a way to get rid of, was the Governor of the Bank of England being required to write himself a letter to update himself on what he was doing. Those are slightly humorous examples, but this one is a real “oh, oops!” and I hope that the Government will take that on board.

Picking up the point made by the noble Lord, Lord Lexden, there is a growing sense that the Government do not quite respect the procedures of this House and this Parliament. There is a rationale for saying that there should be a period between an order being approved and it being implemented. In this case, it seems that only one company may be involved, but for that company it makes no difference whether there was one day’s notice or 21. It would have been an opportunity to show that the general procedures of this House are treated with that kind of respect and are followed, unless there is a genuinely exceptional circumstance; I do not think it can be argued that there is in this case. The concerns of the London Stock Exchange would have been met by the approval. It did not require that the order should become effective instantly.