Financial Services (Implementation of Legislation) Bill [Lords]

Debate between Greg Knight and Anneliese Dodds

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

[Anneliese Dodds (Oxford East) (Lab/Co-op)]

My hon. Friend the Member for Stalybridge and Hyde (Jonathan Reynolds) set out very clearly and comprehensively the problems with this Bill in his opening remarks. I do not want to repeat them all, but I will summarise the core reasons why the official Opposition cannot support the Bill.

The Conservative Government often mix their metaphors when presenting their Brexit process. This Bill, for example, part of what the Government have described as an onshoring process, is presented as dealing with those so-called in-flight measures that have not yet landed. In my brief remarks, I want to explain why many of us are confused about the identity of the pilot of this plane, quite how far and fast the plane will go, and indeed whether it should be on the runway in the first place. I suppose that it is at least a relief that the Transport Secretary is not in charge, given last weekend’s revelations.

First, who will decide which parts of in-flight EU legislation will be implemented? This is straightforward for those Bills that have already been passed at EU level but not yet implemented—those taxiing on the runway. In that case, the Bill commits itself to implementation in the UK, not least given that UK Ministers and MEPs would have been fully involved, one would hope, in all aspects of that legislation, with Government only able to fix deficiencies in that legislation.

The picture is, however, far less clear for legislation still under discussion at EU level, and thus to a certain extent still up in the air. In that regard, we are informed that this Bill will enable

“the Government to choose to implement only those EU files, or parts of those files, which it deems beneficial to the UK”.

They will be able to

“adjust the legislation as it is brought into domestic law to fix any deficiencies or, in the case of files still in negotiation, to ensure that it reflects the UK’s position outside of the EU.”

How exactly they might do so, and what that reflection might encompass is left unclear. The right hon. Member for Loughborough (Nicky Morgan), Chair of the Treasury Committee, rightly raised this earlier in an intervention on the Minister, and I am disappointed that she did not receive a sufficiently clear response to that question; I will return to that point later. Indeed, there is no indication here that that deviation from EU practice will even be flagged up to this place, let alone go through a different decision-making process as a result. Instead, it is expected that, as usual with this Government, sadly, statutory instruments will be used. Clause 1(1)(b) even states that the Government can make

“any adjustments the Treasury consider appropriate”,

a power that was initially open-ended but that, quite rightly, was amended in the other place.

The point remains that it will be difficult for Parliament to be aware of any deviations from EU practice. The Conservatives may well respond by stating that industry would be quick to point them out. Frankly, I am grateful for industry’s engagement with this process, to the extent that it has been able to input, and it is essential that, as mentioned by my hon. Friend the Member for Stalybridge and Hyde, we preserve our strong and successful financial services sector, and our regulations must reflect that. However, I reiterate a point I have made before: there is no organisation in the UK with an explicit mandate to promote financial stability and the consumer interest in financial services, a role which is filled within the EU by the Finance Watch. It is unsurprising therefore that Finance Watch has put on the record its concerns that the current approach to Brexit could be used as a means to undermine financial regulation, pointing to, for example, the Chequers agreement’s phraseology of the UK pushing for greater liberalisation of financial services, investment and procurement markets post Brexit.

The second reason to reject the Bill concerns its peculiar status among the rest of the so-called onshoring process. The flight path here is bedevilled with interactions with numerous other legislative processes, from those embedded in the 40 statutory instruments that have already been laid before Parliament to the additional 20 yet to go, and with only 34 working days between now and 29 March, as rightly underlined by my hon. Friend the Member for Stalybridge and Hyde.

By contrast, with the extraordinarily rushed process being adopted here, the Government’s powers under this Bill can be exercised for up to two years—yes, two whole years after Brexit. That is in a context where the Government have no clear plan for financial services regulation post 29 March. Rather than this confusion of legislation—short-term, long-term and of indefinite duration; primary, secondary affirmative and secondary negative—we surely need to have some consolidated legislation covering this area. This confusion is of course part of a pattern, sadly, over recent years from Conservative Ministers, with Acts in 2012, 2013, 2014 and 2015 having to correct or amend existing provisions. Indeed, we have been informed that there may well be correcting amendments to be considered even after the 60 statutory instruments and this Bill are passed.

Of course we had a good example of the deficiencies even within this Bill, as rightly pointed out by my hon. Friend the Member for Wakefield (Mary Creagh), in relation to the legislation governing environmental indicators and reporting, which was initially missed off the schedule. I pay tribute to her for raising this essential issue of green finance and greening finance and how it was initially missed out of these proposals.

I found the Minister’s response to the hon. Member for Bromley and Chislehurst (Robert Neill) rather peculiar; I note that the hon. Gentleman is no longer in his place, but I felt he made an important point. He asked whether the UK would keep in step with emerging provisions from the EU, such as in the area of non-performing loans. The Minister suggested in response that alignment in this Bill was rejected due to the content of those proposals, when his Bill, however, was presented as inclusive of all financial services legislation that was in-flight aside from those elements that we had specifically opted out of, such as those relating to banking union, which we do not participate in of course and which is presumably the real reason why non-performing loans legislation is not included here.

My hon. Friend the Member for Wakefield highlighted in her remarks the non-scientific nature of the assessment by this Government of which measures will be deemed in-flight or otherwise. We have had no indication of the criteria to be used for that from Government. The discussion we have had, albeit in this brief debate, has pointed up that all we have as a Parliament currently as an indication of this Government’s approach to regulating financial services in the future is this Bill and the no-deal SIs—no overall plan, no indication of how the different pieces fit together, and above all no clarity around how we will be able to keep in step with the EU27 in relation to emerging issues like green finance and cryptocurrencies.

[Sir Greg Knight (East Yorkshire) (Con)]

On the issue of no clarity, can the hon. Lady tell the House why her party did not oppose the Bill in the other place or suggest any changes to it there?

[Anneliese Dodds]

It is my understanding that there was significant challenge from my party in the other place, and in fact changes were made, including for example a clearer indication of the circumstances under which those adjustments could be made by the Government. Initially that was very open-ended, but we supported and pushed for much more clarity on that. We would have liked to have seen change in other areas, and perhaps clarification in additional areas. We have not had that, however, which is why it is necessary to oppose the Bill at this stage.

Finally, this legislation is of course only required because of the Conservative Government’s recklessness in persisting with a commitment to keep no deal on the table, as rightly underlined by the hon. Member for Glasgow Central (Alison Thewliss). We have seen very clearly today from the preliminary estimates of GDP growth for the final quarter of last year how this determination to prioritise ideology over national interest is harming our country. The contribution to GDP from business investment was negative for the fourth quarter in a row; that is a clear sign that uncertainty surrounding the Government’s Brexit strategy is acting as a real drag on the economy. The construction sector actually contracted this quarter, and after two consecutive quarters of negative growth, the UK manufacturing sector sadly is now officially in recession. So 2018 had the worst annual GDP out-turn since the then Chancellor’s disastrous 2012, and economists are forecasting that even worse could well come.

The flight into the buffers that would be represented by a no-deal Brexit is still being countenanced. Any responsible Government would take that plane off the runway once and for all.