Financial Services (Implementation of Legislation) Bill [HL]

Baroness Liddell of Coatdyke Excerpts

2nd reading (Hansard): House of Lords
Tuesday 4th December 2018 Lords Chamber

[Baroness Liddell of Coatdyke (Lab)]

My Lords, like other noble Lords, I welcome the introduction of the Bill. It is not the most exciting piece of legislation we will consider in this House, but it is pretty vital in the event of a no-deal exit. Taking up points that have been made by other noble Lords, it also points to the intensity of the negotiations that have been taking place outside the Brexit scenario on future financial services regulation. There is poignancy in it as well because for more than 20 years the British voice in the councils of Europe on financial services legislation has been dominant. We have helped to craft that legislation and regulation over those years, and this legislation points out how critical that is. It also reminds us that we are about to move from being rule makers to rule takers. This is one of the steps along the way. I know that that irritates the Brexiteers, but it is a statement of fact.

I am very conscious that a number of points have been made by other noble Lords. There is one specific question that I would like to ask because some confusion has been caused. I think all of us who are speaking on this Bill have been approached by members of the sustainable investment community. I have a difficulty: the number of pieces of in-flight legislation that they refer to does not match the number of pieces of in-flight legislation that the Minister has referred to in this Bill. Particularly in relation to sustainable investment, there is a reference at point 2.52 in the very helpful policy note that the,

“proposal aims to enhance the transparency and comparability of low carbon benchmarks”.

That comparability is an area where there could be widespread interpretation, and it would be helpful if the Minister could give us some idea of the parameters within which that comparability would take place.

Moving to the last part of the policy document, which refers to the European supervisory authority review and the action that the Government will have to take post exit, I would like to see some indication of the timescale that the UK would be considering in making regulatory changes to allow for the exchange of information and delegation to function smoothly. That is a pretty critical part of the functioning of markets. I would be grateful to have some guidance on this; it would be useful because this is not really covered by the sunset clause in the Bill.

There are a number of points that will no doubt be teased out as we go through Committee, and most of them have been referred to before. I too was a bit confused by the use of the word “similar” in the first clause, conscious as I am that I am sitting beside a former Lord Chancellor. It would be useful to have a much clearer definition of what “similar” actually means.

It is important to get this legislation on the statute book as quickly as possible. I hope it is not needed, but again it causes us to reflect on how significant financial services are. It is regrettable that in the political declaration and indeed in the withdrawal Act we do not have any proper explanation of the nature of the regulatory compromises that will be made, particularly in relation to going from passport into equivalence. A big gap is opening up there. I do not expect the Minister to answer that but it is something that we need to have at the back of our minds as we look at this legislation.

Financial Services (Implementation of Legislation) Bill [HL]

Baroness Liddell of Coatdyke Excerpts

Committee: 1st sitting (Hansard): House of Lords
Tuesday 8th January 2019 Lords Chamber

[Lord Davies of Oldham (Lab)]

My Lords, there is no need for me to repeat the arguments put forward in respect of the earlier measures considered here, so I will speak predominantly to Amendment 5. I looked carefully at the Minister’s summing up at the end of Second Reading. These issues had been articulated widely and we did not think that the Minister was at that time in a position to make forthright improvements, but we are worried now because we are now in Committee and we all recognise the privations of time. It seems to me that, with issues as serious as they are, the Minister ought to consider whether there is a basis for discussion between us outside the Chamber to resolve what, after all, is an essential part of the Bill but is not satisfactory, as it reads at present, to the Opposition parties.

Amendment 5 limits the adjustments—I notice that the word “adjustments” covers a multitude of potential activity and I am not sure that I am entirely happy with that as a defence of where the Government expect the Treasury to go—that the Treasury may make to specified EU financial services legislation to,

“adjustments in connection with the withdrawal of the United Kingdom from the EU”.

At present there is no restriction on these adjustments: they could be made in the context of circumstances other than the main purpose of the Bill. We must all recall that this is a Bill of a very specific kind; namely, to cope with a no-deal situation, with the expectation on the Government’s side that it will not become law—that is, it will not be necessary for it to become law because a deal will have been achieved. That is a position that verges on the optimistic at this point, but of course it will be clarified by debates both in this House and in the Commons over the next few days.

As currently drafted, the Bill allows the Treasury to make any adjustments it may consider appropriate. That is the dreamland of the Treasury. I should think it is probably the dreamland of any adviser to the Minister, or any Minister, on any Bill, that he should have that capacity; that there should be provision for adjustments to be made subsequently. Of course, these will be adjustments that the Treasury—the Government—considers to be appropriate. That is scarcely anything other than a pretty outrageous position to adopt.

I also want to comment on Amendment 7, which limits the adjustments—that word again—that the Treasury may make to provisions of specified EU financial services legislation

“to preventing, remedying or mitigating deficiencies in retained EU law”,

and prevents the regulations under Clause 1 from making policy changes,

“other than to reflect the United Kingdom’s new position”,

if we have a deal and have left the EU, vis-à-vis the European Union. The wording of this amendment comes directly from what the Minister said to the House at Second Reading. It comes from the Government’s own explanation of the powers they are using under the EU withdrawal Act for onshoring SIs. I cannot see how the Government can resist accepting the concept of this amendment. They surely do not want to arrogate to themselves powers different from those defined in Amendment 7, which follow the position the Government have adopted up to now. But the Minister must be sufficiently anxious that, in addition to the amendments we have just discussed, from both the Liberal Benches and ours, we have real anxieties about the way in which the Bill stands before the House. The response we received at Second Reading satisfied none of us; otherwise, we would not have felt moved to table these amendments. We will need to make progress because as far as the Opposition are concerned, these are central issues to the Bill if it eventually becomes law.

[Baroness Liddell of Coatdyke (Lab)]

My Lords, at Second Reading it was obvious to many of us across the House that the Bill was a useful safety net for in-flight legislation. As such, there was a spirit of collaboration and helpfulness. However, since then we have received the report of the Delegated Powers and Regulatory Reform Committee, which is quite scathing about some of the inconsistencies in the Bill. I quote from paragraph 5:

“Furthermore, the assumption that the Bill will only apply in a ‘no deal’ scenario has led in our view to inconsistencies in the drafting of the Bill”.


I still recognise the importance of getting the Bill on to the statute book but we cannot allow it to become a blank cheque. It is important to recognise that there are inconsistencies in the Bill. Indeed, the Delegated Powers Committee drew attention to the comments it had made during its consideration of how HMRC was covered in the withdrawal Bill, saying:

“We judge powers not on how the Government say that they will use them but on how any Government might use them”.


The Minister is an extremely honourable man, probably one of the most honourable in your Lordships’ House. It would be of enormous value to the Committee if we could get this cleared up. It may not be possible at this stage but certainly by Third Reading we should at least have something in the record of the debate that deals with these inconsistencies on a sequential basis. Noble Lords have already referred to some of the difficulties. There will be further opportunities to explore these in the amendments that we will be considering in due course. But this is an important and necessary piece of legislation and it does not help anybody to have gaps left in it that can create difficulties for the future.

[Lord Adonis (Lab)]

My Lords, my noble friend Lady Liddell has made an extremely important point. As the debates and scrutiny have progressed and further information has become available on the Bill since it was initiated, the concerns have become greater.

In my experience with legislation, as Ministers—particularly Ministers of the calibre of the noble Lord, Lord Bates—explain issues to the House and seek to meet concerns, there is normally a narrowing of points of difference. But in this case the points of difference have expanded as it has become clear that the extent of the powers granted under the Bill is much greater than originally explained; they were, as my noble friend said, to do with in-flight provisions. As we have elucidated the scale of the potential breadth of these powers, the concern has become greater, not only because of the report which my noble friend referred to but because we have now been able to look at the list of measures to which they will apply. We have also been able to study the Minister’s speeches at Second Reading, which have led me to be considerably more concerned than I was before.

In his opening and closing speeches at Second Reading, the Minister said, in essence, that in the event of provisions coming forward which are not to do with continuity or in-flight but are basically to do with us either anticipating changes that will be made by the European Union or implementing those which have been made in the institutions of the European Union—to which we may or may not have agreed ourselves—the Government have the right to implement them on their own judgment, by decree, provided that it is within a two-year period. I think we will be pressing the Minister time and again—and, to be blunt, this may well lead to him losing significant parts of the Bill on Report—on the fact that there is a complete answer to the situation in which he finds himself.