Official Listing of Securities, Prospectus and Transparency (Amendment etc.) (EU Exit) Regulations 2019

Debate between Earl of Kinnoull and Lord Sharkey

Monday 18th February 2019 Lords Chamber

[Lord Sharkey (LD)]

My Lords, I can be very brief. I declare an interest as chair of the Hansard Society, which is almost as obsessed with the effective scrutiny of secondary legislation as the noble Lord, Lord Adonis, is. I agree with everything that the noble Lord, Lord Davies of Stamford, has said about scrutiny, but I also have no objection to this SI per se. After listening to the exchanges, I understand the difference between consultation and engagement, and I support the view of the noble Lord, Lord Adonis, that there should have been consultation as well as engagement on this SI and the other SIs that we are considering today.

[The Earl of Kinnoull (CB)]

My Lords, I rise to put the case for poor old business because once again it is the Government who are being blamed. This SI is about access to capital. Without good access to capital, business is constrained and we do not have the means to create the wealth that we need in our country. I have a lot of experience with prospectuses relating to both equity and debt and I am old enough to remember, and have produced prospectuses for, the 2003 prospectus directive. I have been invited, although I have not actually been, to many conferences to discuss the prospectus directive, the transparency directive and CARD—the consolidated admissions and reporting directive. This is very much in UK capital-raising mode. It is the devil that everyone knows, and these SIs grandfather through for British business a very important route to capital. It is not the only route but it is the listed route to capital here.

Here I want to say something very complimentary about the UK Listing Authority, which many noble Lords probably do not know. I have dealt with listing authorities in other countries as well, and the UK listing authority is exceptionally good. It is good at giving clear guidance and responding swiftly when it needs to give comments on a draft prospectus, and that is certainly not the case in some of the landlocked European places that are trying to snaffle our business. Again, it is of absolute importance that this SI goes through.

Turning briefly to the amendment of the noble Lord, Lord Adonis, I think that of the various amendments that he has tabled today, this is very much the back marker, in that I do not think the case for it is nearly as strong. I note that the original policy note for this came out on 21 November last year and the draft SI surfaced on 12 December and was laid on 21 January. So this is the 89th day that this has been around, because the policy note was spot on that there have not been any changes. In fact, the appearance of the policy note produced a tremendous number of emails into my inbox from all sorts of the expensive lawyers that the noble Lord, Lord McNally, was talking about earlier—

Civil Liability Bill [HL]

Debate between Earl of Kinnoull and Lord Sharkey

Committee: 2nd sitting (Hansard): House of Lords
Tuesday 15th May 2018 Lords Chamber

[Lord Sharkey (LD)]

My Lords, Amendment 92 in this group would require the Lord Chancellor to carry out a review of the impact of any new rate on the extent of the use of PPOs and to lay this report before Parliament. Our amendment has the same general purpose as Amendment 55 and as other amendments in this group.

The noble Lord, Lord Hodgson, has already spoken eloquently to Amendment 55 so I can be very brief. It seems to me that all the amendments in this group are intended to provide a gentle nudge in the direction of PPOs. Their purpose is to create conditions in which the incidence of voluntary uptake of PPOs may increase. Given the scope of the Bill, not to mention the ethical questions that would be created by any reduction in the freedom to choose or not choose PPOs, this is probably as far as we can go.

I hope the Minister will be sympathetic to the thinking behind all of these amendments, coming as they do from various parts of the House. If he is sympathetic, perhaps he would be willing to meet interested noble Lords before Report with a view to drafting an amendment or amendments that he might consider bringing forward or supporting.

[The Earl of Kinnoull (CB)]

My Lords, in supporting Amendment 55, I will speak also to Amendment 92A. I declare my interests as listed on the register of the House, especially those in respect of the insurance industry. I can be very brief, because there have been two brief and excellent speeches before me.

--- Later in debate ---

[The Earl of Kinnoull]

My Lords, I support the noble Lord, Lord Hodgson. A standing panel would be a great advantage to a Lord Chancellor. Quite apart from the hassle of trying to reassemble a panel every whatever the periodicity is and the cost of assembling one—I assume a firm of suitably expensive headhunters would be involved—you would then have to take the panel up a learning curve as to exactly what is required of it, which would take some time. We do not need to go there.

The biggest thing, though, is that if I was the Lord Chancellor and Black Wednesday happened for a second time I would like to ring someone up and say, “Do I need to do anything here?” I would assume that, as Lord Chancellor, I would not be super-familiar with discount rates and things like that because my expertise would lie somewhere else. Having a standing panel that could answer curveball questions and interact as and when would not be expensive. It would probably cost the same as the periodic panel because of all the start-up costs associated with it, and it would be very helpful for a Lord Chancellor if something really bad happened.

[Lord Sharkey]

I have in this group Amendments 74, 87 and 88. Amendment 74 is a probing amendment. It provides the Committee with an opportunity to debate the value of the Lord Chancellor having a decisive role in determining the PIDR. As things stand, that is what he or she has—a decisive role. It is true that the Bill will create an expert panel to advise him and that it sets out the assumptions on which he must make that determination, but it is the Lord Chancellor who makes the decision. This poses the obvious question—why? What are the merits of having a politician making this judgment? What merit is there and what dangers might there be in having this decision in the political arena?

It is true, of course, that the rate decision has many serious consequences—for claimants but also for insurers and for the NHS, as we have discussed. These consequences are far reaching—but so are the consequences of changes to the Bank of England base rate. Changes in the base rate affect everyone who has a mortgage, every borrower and every saver. Some recent changes to the base rate have had dramatic effects on millions of people and continue to do so. For example, millions of people with savings have been dramatically disadvantaged by rate changes since 2007. Equally, millions of mortgage holders have benefited enormously from these changes. But these decisions on the base rate were taken not by politicians but by the MPC—an expert panel. If decisions on such wide-reaching and consequential matters can be taken by an expert panel without political involvement, why have political involvement in the PIDR? Why have the Lord Chancellor involved?

I raised this question when I met Ministers to discuss the Bill. The noble and learned Lord, Lord Keen, commented that the Lord Chancellor’s role was a matter of government policy. I understood that. However, we did not have time to go into the question of why it was government policy or whether there were better alternatives. We did not discuss what grounds the Government might have for maintaining the policy or whether any assessment had been made of alternative arrangements. We now have a little more time to discuss the issue and the merits of removing this role from the reach of politicians for reasons analogous to removing control of the base rate from them. I look forward to the Minister’s reply.

Amendments 87 and 88 are straightforward. They deal with the expert panel itself, as set up in paragraph 5 of the new Schedule A1 to the 1996 Damages Act, inserted by Clause 8(2). This panel is to be consulted by the Lord Chancellor in determining the rate. The Bill specifies the members of the panel as the Government Actuary, or his deputy if the office is vacant, who is to be chair, and four other members appointed by the Lord Chancellor, one of whom must have experience as an actuary, one experience of managing investments, one experience as an economist, and one experience in consumer matters relating to investments. All these roles seem pretty well defined, except possibly the last one. Could the Minister flesh that out a little? Can he give examples of the kind of persons who might qualify as having,

“experience in consumer matters … relating to investments”?

It seemed to us that the panel might benefit from an additional member with different expertise. Amendment 87 would add a member who is medically qualified and has experience of changes in medical science and their effects on life expectancy. The PIDR has a very significant effect on the damages awarded against the NHS for clinical negligence, as we have mentioned. Payouts last year amounted to £1.7 billion and the amount has been rising steeply in recent years.

Awards for clinical negligence frequently have to take into account estimates of life expectancy. The Committee will know that the PIDR has a very significant effect on damages awarded against the NHS for clinical negligence. As I said, payouts amounted to £1.7 billion last year, and much of this was determined by reference to life expectancy. Of course, actuarial methods can and do give an estimate of life expectancy, but for the most part this will be based on extrapolations of current trends. What might not be taken into account is the likelihood of discontinuous change brought about by the speed of advances in medical science. We live in a golden age of medical research. It is not a total exaggeration to say that one hears nowadays almost daily of some remarkable medical breakthrough that will in due course benefit patients by curing disease, improving quality of life and prolonging life itself.

It seems to us that the expert panel would benefit from having first-hand, direct experience of these new treatments and their likely effects. A member with such experience would make a valuable contribution to any assessment of the role played by life expectancy in determining awards. I look forward to the Minister’s thoughts on the matter.

Amendment 88 would impose a duty on the Lord Chancellor to secure that,

“each of the appointed members approaches the work of the expert panel as an expert with the object of recommending a rate of return that is fair to … both claimants and defendants”.

It could be argued, for example, that the last change to the PIDR was not fair to both claimants and defendants in that it produced a huge rise in the amounts awarded to claimants. And it works the other way: there might be rates that a panel thought unfair to claimants. If so, it would be important that that view helped form the recommendations. We see our amendments as allowing a dispassionate view of the effects of a change to the PIDR for both claimants and defendants, and this should have an explicit role in informing the panel’s recommendation. I hope that this is not controversial. In fact, I rather hope that the Minister will be able to demonstrate that the amendment is unnecessary and that the requirement for fairness is somehow already built into the procedure.