Child Trust Funds
John Glen Excerpts(5 years, 1 month ago)
Westminster HallRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Westminster Hall is an alternative Chamber for MPs to hold debates, named after the adjoining Westminster Hall.
Each debate is chaired by an MP from the Panel of Chairs, rather than the Speaker or Deputy Speaker. A Government Minister will give the final speech, and no votes may be called on the debate topic.
This information is provided by Parallel Parliament and does not comprise part of the offical record
The Economic Secretary to the Treasury (John Glen)
It is a pleasure to serve under your chairmanship, Sir Christopher. I congratulate the hon. Member for Bishop Auckland (Helen Goodman) on securing this debate; I recognise that she has taken a keen interest in the issue and has been a doughty campaigner on matters of childcare and child poverty, following her 11 months as a Minister in the last Labour Government. I also acknowledge and will try to address the points made by other hon. Members.
The Government share the commitment of hon. Members of all parties to supporting people to save at every stage of life, irrespective of income or background. Financial inclusion is one of my key priorities as Economic Secretary, and in the past year I have met many organisations and experts in the field. I strongly believe that learning financial skills at a young age equips young people to make better decisions when they are older, so I am pleased to have this opportunity to set out the Government’s view.
The Government introduced junior individual savings accounts in place of child trust funds in November 2011, providing continued tax incentives to encourage families to put money away for their children’s future. Under legislation introduced in 2015, existing child trust fund accounts can be transferred into a junior ISA, providing families with the flexibility to choose the right option for their child. The Government also sought to make specific provision for children in care; as the hon. Lady pointed out, we contracted the Share Foundation to work with local authorities to open a junior ISA account on behalf of looked-after children.
The Government currently pay £200 into the accounts of children who have been in care for at least one year. The Department for Education has provided the Share Foundation with funding totalling £531,624 for that administration, and 120,000 payments of £200 have been made to children in care since 2012. We want those children to leave care with money to their name and the means to continue saving as they become independent. I should stress that junior ISAs are just one element of our work to promote financial education among young people. We want all children to enter the world of work understanding the importance of budgeting and saving, so financial literacy is now taught as part of the citizenship curriculum for 11 to 16-year-olds.
Let me turn to the so-called lost child trust funds, which were the core of the hon. Lady’s speech. There are many complex and overlapping reasons for the lack of engagement, but the Government are working with industry to actively seek holders of the accounts. Child trust fund providers are required to send regular statements to the child’s last known address and are taking steps to trace those who have moved. They have a statutory obligation to send such statements on the child’s seventh, 10th and 15th birthday, but in line with Financial Conduct Authority guidance, most do so annually.
The national insurance notification letter that HMRC sends to all 16-year-olds has recently been amended to include details about how child trust funds can be located; the hon. Lady referred to the size and colour of the font used, which is clearly a matter that I can take on board and examine. I also draw hon. Members’ attention to HMRC’s online tracing tool, which is available via gov.uk. Of course, people can still contact HMRC by telephone or post if they so choose.
Chris Ruane
May I put to the Minister the same question that I put to my hon. Friend the Member for Bishop Auckland (Helen Goodman)? The Share Foundation was able to give her statistics on the distribution among socioeconomic groups, but when I tabled questions to the Treasury asking for exactly the same information, it was not available. When I asked for estimates by nation and region, that information was not available. When I asked what additional resources had been allocated to assist in locating child trust fund accounts, that information was not available either. Can the Minister supply it today?
John Glen
I am grateful for that question about the regional and income breakdown of the distribution of child trust funds. Such information is published by HMRC and discriminates by region and county and by whether additional contributions were made; no income distribution data is collected by HMRC. I am happy to look into the matter further; if I can give the hon. Gentleman any more information, I will write to him.
Looking to the future, approximately 6 million child trust funds have not yet been transferred to junior ISAs. The first of those accounts will mature next September, and a further 55,000 will mature every month thereafter until 2029. What young people choose to do with their money is ultimately a matter for them, but we want them to engage in the process so that they can make the best decision for their individual circumstances.
Helen Goodman
As I have explained to the Minister, the problem is that people cannot use the Government website to access their accounts if they do not have a payslip, a P60 or a passport. Will the Minister address that point? Hundreds of thousands of young people will be in that situation.
John Glen
The key question is how an individual child knows what they have. The hon. Lady’s allegation is that this money is lost, but it is not lost; it is just that the individuals have not come to the point at which they can engage with it, which will happen at age 16 when they get a letter with their national insurance number. At 16, they are allowed to make decisions about their investment choices for that fund, and at 18 they can access it. They get the letter, along with their national insurance information, at 16, the age when they can start making individual decisions about that money. I think it has been suggested that the Share Foundation should interrogate data from the Department for Work and Pensions, cross-reference it with HMRC’s, and somehow write to these individuals—
Tonia Antoniazzi
What plans does the Minister have to encourage eligible parents, and children when they turn 16, to access this money? Is it not the responsibility of the Government to do some kind of public awareness campaign to say, “Hey, look—here’s your investment that the Government made for you. This is how you access it.” Let us make this a can-do exercise.
John Glen
The key point is that children have access to this money when they are 18, but can influence decisions about it from the age of 16, when they are paying tax and have a national insurance number. They will gain that access mechanism when they secure their national insurance number. The hon. Member for Bishop Auckland made a point about how this issue should be depicted on the form when 16-year-olds get their NI number, but that number provides the key to unlock awareness of, and access to, the fund that has been invested for them.
Helen Goodman
I do not like to denigrate my former profession, but I do not think the Minister has been very well briefed. According to the Share Foundation, the lost accounts of the most wealthy number 54,000, the middle income 560,000, and the poorest 444,000. Those are not families in which the child is already 16 to 18; it includes all families. It means that the addressee has gone away. We do not know whether the address we have got is the right address for that group of people.
John Glen
The point I am making is that all individuals, no matter what their background is, will gain access to the funds at the point when they can gain their national insurance number, by reference to the letter that has been provided. I have had extensive conversations with my officials, and I note the hon. Lady’s reference to bureaucrats. She worked for over 20 years at the Treasury—I have the highest regard for it and the accuracy of the material it has given me.
No funds or accounts have been lost. All child trust funds have been managed by child trust fund providers—either by the original provider with which the account was set up, or by a subsequent provider to which the funds have been transferred. There are 69 providers currently managing child trust funds, and the Share Foundation’s analysis appears to be based on accounts held with just one provider: the Share Centre, which represents only 1.5% of the number of accounts. The hon. Lady might want to contradict that by extrapolating the data to all of them, but the Government are working together with the industry to encourage child trust fund holders to re-engage with their accounts.
As I said, we have developed an online tracing mechanism and recently amended the national insurance notification letter to 16-year-olds to include a reference to child trust funds. That happened in January in order to take into account the points raised. Any account holders who are unable to retrieve their account details online are encouraged to contact HMRC directly.
Helen Goodman
I have just explained to the Minister that to get through to the website, people must have other documents that—by definition—16-year-olds do not and cannot have. The system is not working. The Minister needs to rethink how the website works!
John Glen
I do not think that the hon. Lady’s raising her voice in an aggressive manner is going to help anyone. I have just set out the Government’s position and explained the detail of the provision. The hon. Lady has extrapolated some figures from one piece of analysis by one of the providers, which is not a reliable way of carrying on. I have told her about the action we took in January.
The issue is not just about the online portal, but about being able to call up HMRC. Last year’s Budget included a commitment to consult on draft regulations that will ensure that investments currently held in child trust fund accounts can retain their tax-free status after maturity. The consultation will take place later this spring, when the Government will lay regulations before the House, well in advance of the first accounts maturing in September 2020.
In summary, both junior ISAs and child trust funds allow parents and guardians to save on behalf of their children, tax free. People have the option to convert their child trust fund into a junior ISA, and we are working with providers to reunite dormant accounts with their intended owners. However, all remaining child trust funds will continue to enjoy tax-free status, even after they mature. The amount that young people can save in child trust funds and junior ISAs will increase by the rate of inflation in April—it is currently £4,260 a year.
Chris Ruane
I agree with my hon. Friend the Member for Bishop Auckland that the system is not working. As a way out, would the Minister consider meeting people who have sufficient knowledge—I would include my hon. Friend—or perhaps citizens advice bureaux, the Share Foundation and a panel of parents, so that some answers can be given to the questions that have been raised?
John Glen
On behalf of the Under-Secretary of State for Education, my hon. Friend the Member for Stratford-on-Avon (Nadhim Zahawi), who is the Minister responsible for this area and is currently before a Select Committee, I would be very happy to offer a meeting with hon. Members to discuss this matter further. It is his responsibility, and I am sure he would be very happy to attend.
We have made efforts to provide young people with savings to draw on as they reach adulthood, and we hope this encourages further saving at every stage of life. The points made by the hon. Member for Bishop Auckland on access have been comprehensively addressed by the Government’s sending a letter to 16-year-olds.
Helen Goodman
Will the Minister take on board my suggestion of writing to the recipient of the child benefit when the person turns 18? The Government writes to every mother across the entire nation, and that would be an opportunity to catch them in the net.
John Glen
The key point here is: when does somebody have access to make investment decisions as a young person? It is when they turn 16, and then they can access it when they are 18. Trying to overlap the letter with the mother when actually it is about the beneficiary, who is the child, is not the route to go down.
Draft Uncertificated Securities (Amendment and EU Exit) Regulations 2019
John Glen Excerpts(5 years, 1 month ago)
General CommitteesRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Economic Secretary to the Treasury (John Glen)
I beg to move,
That the Committee has considered the draft Uncertificated Securities (Amendment and EU Exit) Regulations 2019.
It is a pleasure to serve once again under your chairmanship, Mr Sharma.
The Treasury is laying this statutory instrument under both the European Union (Withdrawal) Act 2018 and the European Communities Act 1972. The Treasury has been undertaking a programme of legislation to ensure that if the UK leaves the EU without a deal or an implementation period there continues to be a functioning legislative and regulatory regime for financial services in the UK. This draft SI is part of that programme. It has been debated by the House of Lords and was approved on 25 February. The SI also uses the powers in section 2(2) of the European Communities Act to amend UK law as necessary to ensure that the directly applicable EU central securities depository regulation, or CSDR, operates effectively in the UK.
The draft regulations amend the Uncertificated Securities Regulations 2001, or USRs, which concern the registering and transfer of securities such as bonds or shares electronically on computer-based systems. Certain requirements within the USRs are also subject to the CSDR, which creates a common authorisation, supervision and regulatory framework for central security depositaries, or CSDs, across the EU. The SI makes the necessary changes to UK legislation to ensure that the EU regime operates effectively in the UK. The instrument also contains provisions to address deficiencies in UK law and retained EU law that arise due to the UK’s withdrawal from the European Union.
The changes to the USRs that implement CSDR will come into effect on the day after the draft regulations are made in Parliament in any scenario. However, the changes made under the EU (Withdrawal) Act to fix deficiencies in the legislation arising as a result of the UK’s withdrawal from the EU will only come into effect on exit day in the event that the UK leaves without a deal or an implementation period.
First, the draft regulations make amendments to ensure that the USRs align with both the EU regulation and the UK implementing legislation concerning the CSDR. That includes authorisation and recognition of CSDs and article 49 of the CSDR. Article 49 allows issuers the right to issue securities into a CSD in any European economic area member state. Accordingly, amendments have been made to ensure that no provisions in the USRs are incompatible with that right. By removing the duplication between CSDR and USR requirements for operators of relevant systems, the instrument provides clarity to the industry in the area. Further, USR operators now gain operator status by virtue of gaining authorised CSD, EEA CSD or third-country CSD status for CSDR purposes, not via the USR recognition regime, which will be revoked by this SI.
Secondly, the SI will provide transitional provisions for UK operators of systems that were approved under the USRs before 30 March 2017, when the period for CSDs to apply for authorisation or recognition under the CSDR began. That transitional power ensures that operators can continue to operate under the previous USR regime, pending their authorisation or recognition as a CSD under the EU CSDR regime. The SI also inserts a provision into the UK’s Central Securities Depositories Regulations 2014 that grants the Bank of England the power to charge fees to third-country CSDs. That is considered necessary in relation to its new role in recognising third-country CSDs following exit day. That role was granted by the Central Securities Depositories (Amendment) (EU Exit) Regulations 2018, which have been agreed by this House.
Finally, the draft regulations amend article 15 of the EU short selling regulation to change its scope from the EU to the UK. The change ensures legal certainty on the scope of that provision after exit day. To maximise transparency, the Treasury has worked closely on the instrument with the Financial Conduct Authority, the Bank of England and industry. The Treasury consulted on changes to the uncertificated securities regulations as part of implementing the CSDR in 2015, and undertook an informal consultation with industry in October 2018. The current form of the instrument, which includes EU exit changes, was laid on 17 January 2019.
Provisions relating to the consultation are dealt with in parts 1 to 4. Part 5 of the instrument deals with the EU exit changes.
Mr Ranil Jayawardena (North East Hampshire) (Con)
On the consultation that the Treasury has undertaken, I note that the instrument provides for a requirement for a statutory review within five years. Does the Minister have a position on how soon it may be necessary to review the instrument?
Mr Jayawardena
What discussions have there been between the FCA, the Treasury and the Bank to determine the level of the fees the Bank can charge other than to meet the expenses incurred?
John Glen
I am sure that my hon. Friend will understand that the Bank of England routinely issues fees under many financial services regulations. This power is consistent with that general responsibility and will be exercised in consultation with those subject to the fee, as in all the other areas of regulation the Bank engages with.
Regulators and industry have welcomed the Government’s approach to the SI. The Government believe that the proposed legislation is necessary to ensure the smooth functioning of UK financial markets if the UK leaves the EU without a deal or an implementation period. Relevant parts of the SI are also needed in any scenario to ensure the effective functioning of the CSDR. I hope that colleagues will join me in supporting the regulations, which I commend to the Committee.
John Glen
I thank the hon. Members for Stalybridge and Hyde and for Glasgow Central for their observations, and I welcome their broad agreement with the main elements of the SI. Both made significant observations on the fees. Why does this SI contain a provision on the Bank of England fees? As a result of the UK leaving the EU and the changes made by the Central Securities Depositories (Amendment) (EU Exit) Regulations 2018, the Bank of England will have the power to recognise third-country CSDs. On why the Bank of England collects fees for the FCA, this SI concerns the Bank of England fees only. The assessment of other countries charging fees is a decision for other jurisdictions, so I do not have any clear observations on that.
The hon. Member for Glasgow Central asked how the SI had changed since the 2015 consultation draft. A central aim of this instrument is to implement the right, under article 49 of the EU CSD regulation 2014, for issuers of securities to use a CSD established in any EU member state. The 2015 consultation draft instrument contemplated that the uncertificated securities regulations might be extended to apply to securities governed by a foreign law.
Following industry feedback, the Treasury changed its approach so the uncertificated securities regulations would not be extended to foreign law-governed securities where article 49 is used. In order to avoid duplication and to provide legal certainty, the 2015 consultation draft instrument removed provisions from the existing uncertificated securities regulations, which are now governed by the EU central securities depositories regulation 2014. This element has not changed.
The hon. Lady asked about the regulators’ resourcing and the impact of taking on provisions of this SI. We are confident that the regulators are making adequate preparations and are effectively allocating resources ahead of the end of March. They have considerable experience and technical expertise. We have participated in a large number of groups with them and I am confident they are well resourced and ready for all outcomes.
I acknowledge the broader points made by all three Members about the Bank of England’s fee-raising powers. I will evaluate thoroughly what has been said, and where I can bring greater clarity following discussion with officials, I will write to the Committee if that is appropriate.
The Government believe that the proposed legislation is necessary to ensure the smooth functioning of financial markets in the UK if it leaves the EU without a deal or an implementation period. Relevant parts of this SI are also needed in any scenario to ensure the effective functioning of the CSDR. I hope my comments clarify matters sufficiently and that the Committee will be able to support these regulations.
Question put and agreed to.
Draft Mortgage Credit (Amendment) (EU Exit) Regulations 2019
Draft Financial Services (Distance Marketing) (Amendment and Savings Provisions) (EU Exit) Regulations 2019
John Glen Excerpts(5 years, 1 month ago)
General CommitteesRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Economic Secretary to the Treasury (John Glen)
I beg to move,
That the Committee has considered the draft Mortgage Credit (Amendment) (EU Exit) Regulations 2019.
The Chair
With this it will be convenient to consider the draft Financial Services (Distance Marketing) (Amendment and Savings Provisions) (EU Exit) Regulations 2019.
John Glen
It is a pleasure to serve under your chairmanship, Mrs Moon. As the Committee will be aware, the Treasury has been undertaking a legislative programme under the auspices of the European Union (Withdrawal) Act 2018 to ensure that if the UK leaves the EU without a deal or an implementation period, there continues to be a functioning legislative and regulatory regime for financial services in the UK. A number of debates—some 29, I believe—have been undertaken in this place and in the House of Lords about statutory instruments that are part of that programme.
That figure includes the two SIs that are to be debated today, which fix deficiencies in UK law relating to the regulation of consumer buy-to-let mortgages and the distance marketing of consumer financial services. These two SIs were debated and approved in the House of Lords on 5 March 2019. The approach taken in this legislation aligns with that of other SIs that have been laid before the House under the withdrawal Act: to provide continuity by maintaining existing legislation at the point of exit, but amending where necessary to ensure that the regime works effectively in a no-deal context.
The first SI, the draft Mortgage Credit (Amendment) (EU Exit) Regulations 2019, concerns the regulation of consumer buy-to-let mortgages. Many members of the Committee will be familiar with the Mortgage Credit Directive Order 2015, which implemented the 2014 mortgage credit directive in the UK. That order established a national framework regulating consumer buy-to-let mortgage contracts. A consumer buy-to-let mortgage is a loan that can be offered to a borrower who is letting out their home, but not for the purpose of business or as an investment. In the event of a no-deal exit, the UK would be outside the European economic area and the EU’s legal, supervisory and financial regulatory framework. The mortgage credit directive order therefore needs to be updated to ensure that provisions work properly in a no-deal scenario.
This SI makes three main changes to the regulatory regime of consumer buy-to-let mortgages. First, it amends the territorial scope of regulated consumer buy-to-let lending, so that in future it applies only to lending relating to property in the UK, not in the EEA. That change will apply to a very small number of loans, and will not affect consumer buy-to-let lending relating to land in the EEA that was entered into before exit day, which will continue to be covered by Financial Conduct Authority regulation.
Secondly, the SI amends the rules on consumer buy-to-let foreign currency mortgages. A foreign currency mortgage is a loan denominated in a different currency to that of the borrower’s income or assets. The SI equips lenders who lend to UK borrowers through a consumer buy-to-let foreign currency mortgage with the option to allow borrowers to convert their loan into pounds sterling, in order to meet the requirement to protect borrowers from exchange rate risk. Under current arrangements, the 2015 order prescribes that when a lender protects a borrower from exchange rate risk by allowing that borrower to convert the loan into a different currency, that currency must be that of the EEA state in which the borrower is resident, or the currency in which the borrower holds their main income or assets. Once the UK leaves the EU, the pound sterling will no longer be an EEA currency, and this provision has been made to ensure that UK borrowers with those types of loans can continue to convert them into pounds sterling.
Thirdly, the SI transfers from the European Commission to the Treasury the responsibility to update the remarks and assumptions that accompany the calculation of the annual percentage rate of charge. The APRC is a standardised calculation of the cost of credit that provides the borrower with the total cost of the mortgage over its full term. It is necessary to confer this power on the Treasury to ensure the APRC remains accurate post-exit. On 22 November 2018, the Treasury published this SI in draft form, along with an explanatory policy note to maximise transparency for Parliament and the industry.
Turning to the draft Financial Services (Distance Marketing) (Amendment and Savings Provisions) (EU Exit) Regulations 2019, this statutory instrument will fix deficiencies in UK law related to the distance marketing of consumer financial services, such as by telephone, email or fax, to ensure the regime operates effectively post exit.
The UK’s regulatory regime for the distance marketing of consumer financial services stems from the EU’s distance marketing directive. Currently, EEA financial services firms that carry out distance marketing from an EEA establishment to UK consumers are not subject to the UK’s distance marketing regime. This is on the basis that such firms are subject to equivalent regulation in their own EEA state, as the distance marketing directive operates on a country of origin basis. As a result, the UK’s distance marketing regime, which consists of both FCA rules and the distance marketing regulations, applies only to firms undertaking activity from a UK establishment. Broadly, firms operating from an establishment in the UK, and which undertake regulated activity, are subject to FCA distance marketing rules, and firms undertaking unregulated activity from an establishment in the UK are subject to the distance marketing regulations. Nevertheless, some of the distance marketing regulations apply to all activity, whether regulated or unregulated.
Should the UK leave the EU without a deal, retained EU and domestic law relating to the regulation of distance marketing and financial services needs to be amended to ensure that such provisions operate effectively. By making these changes, we will ensure firms continue to supply consumers with the information that they need to make decisions about financial services products.
To address deficiencies stemming from exit, the regulations will remove EU references that will no longer have legal effect. However, they will maintain the distance marketing regime as set out in the distance marketing directive. More materially, and to ensure that consumers continue to receive the appropriate information from firms undertaking distance marketing, they expand the scope, where necessary, of the Financial Services (Distance Marketing) Regulations 2004, which will now cover certain EEA firms that will operate in the UK post exit under one of the temporary permission regimes that have previously been debated by the House.
Passporting EEA firms operating in the UK are regulated to the same standard in their home state, as they will be subject to the distance marketing directive and, as a result, the UK’s distance marketing regime does not apply to them. However, the onshored distance marketing regulations will now cover certain EEA firms that will operate in the UK post-exit under a temporary permission. FCA rules will also be amended where appropriate, ensuring that such firms will be subject to the UK’s distance marketing regime and that consumer protection is maintained.
The Treasury has worked closely with the Financial Conduct Authority in the drafting of the regulations. It has also engaged with the financial services industry, and will continue to do so going forward. On 12 December 2018, the Treasury published the distance marketing regulations in draft, along with an explanatory policy note to maximise transparency for Parliament and the industry.
In summary, the Government believe that the proposed legislation is necessary to fix deficiencies arising as a result of the UK’s withdrawal from the EU, both to maintain compliant practices for UK mortgage lending activity and so that the UK distance marketing regime continues to protect consumers, and to ensure that the legislation continues to function appropriately if the UK leaves the EU without a deal or an implementation period. I hope colleagues will join me in supporting the regulations and I commend them to the Committee.
John Glen
I thank the hon. Member for Stalybridge and Hyde for his questions, which I shall seek to address. On the mortgage credit regulations, the amendments to the territorial scope of regulated consumer buy-to-let lending and the effect they will have on contracts, lending relating to land in the EEA outside the UK that was entered into after the implementation of the mortgage credit directive but before exit day, and which is currently supervised under the consumer buy-to-let regime, will continue to be covered by FCA regulation under that regime. The regulatory status of post-exit lending to consumers relating to any property outside the UK will be decided under the regulatory regime for consumer credit, as is the case currently for lending relating to property outside the UK. The hon. Gentleman referred to the impact assessment. A de minimis impact assessment was undertaken for both draft instruments and found that the changes made are technical and will have minimal impact on business.
The hon. Gentleman referred to assumptions concerning the APRC. Assumptions behind the APRC cover a wide range of influences that affect credit agreements, ensuring that the APRC reflects the commercial situation of the UK mortgage market, and that it is calculated in a uniform manner. I am not quite clear about his point on further comments that might be made, but I will endeavour to examine his comments carefully, and where I can offer further substantiation, I will do so.
The hon. Member for Feltham and Heston, in her interaction with the shadow Minister, made observations about consumer protections. The changes proposed in the draft regulations do not affect existing consumer protections and the FCA will continue to regulate consumer buy-to-let loans taken out in relation to an EEA property outside the UK before exit day. The regulatory status of post-exit lending to consumers relating to any property outside the UK will be decided under the regulatory regime for consumer credit, as is currently the case for property outside the EEA.
On the draft distance marketing regulations, the hon. Member for Stalybridge and Hyde referred to a review launched within the EU in December 2018. The Treasury will take a close interest in that in all circumstances. Obviously, if we leave with a deal, we will face a different scenario in how we onshore the regulations, which will ultimately depend on the passage of the in-flight files Bill. However, no reduction in our regulatory oversight is intended as a consequence of the draft regulations.
I will look very carefully at the text of the hon. Gentleman’s speech, and if he raised any other points that I have not responded to, I will seek to get back to him, but I do not think I can add anything else at this point. In conclusion, the regulations are needed to ensure that legislation concerning consumer buy-to-let mortgages continue to function appropriately if the UK leaves the EU without a deal or implementation period, and that consumers continue to receive the appropriate information in distance marketing about the financial services products that they might seek. I hope the Committee finds those explanations at least adequate, and that we might now be able to agree the draft regulations.
Question put and agreed to.
DRAFT FINANCIAL SERVICES (DISTANCE MARKETING) (AMENDMENT AND SAVINGS PROVISIONS) (EU EXIT) REGULATIONS 2019
Resolved,
That the Committee has considered the draft Financial Services (Distance Marketing) (Amendment and Savings Provisions) (EU Exit) Regulations 2019.—(John Glen.)
Draft Investment Exchanges, Clearing Houses and Central Securities Depositories (Amendment) (EU Exit) Regulations 2019
John Glen Excerpts(5 years, 1 month ago)
General CommitteesRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Economic Secretary to the Treasury (John Glen)
I beg to move,
That the Committee has considered the draft Investment Exchanges, Clearing Houses and Central Securities Depositories (Amendment) (EU Exit) Regulations 2019.
It is a pleasure to serve under your chairmanship again, Mr Davies. The Treasury has laid this statutory instrument under the European Union (Withdrawal) Act 2018 and the European Communities Act 1972. The Treasury has undertaken a programme of legislation to ensure that if the UK leaves the EU without a deal or an implementation period, there will continue to be a functioning legislative and regulatory regime for financial services in the United Kingdom. This statutory instrument, which was debated and approved by the House of Lords on 25 February, is part of that programme.
The regulations address legal deficiencies in parts of the domestic legislation that outline certain regulatory requirements for recognised investment exchanges, European economic area market operators, central counterparties and central securities depositories operating in the UK. Those entities facilitate the trading, clearing and settlement of financial instruments, and are therefore significant for the functioning of the UK’s financial markets. Amendments introduced through the instrument are generally technical and do not intend to make policy changes, other than where appropriate to reflect the UK’s new position outside the EU and to ensure a smooth transition.
I will describe the key amendments that the instrument makes to the Financial Services and Markets Act 2000. First, as a consequence of the UK exiting the EU, the European Securities and Markets Authority will no longer carry out functions to determine whether third-country CCPs and CSDs can provide services in the UK post-exit. Those responsibilities are being transferred to the Bank of England through other statutory instruments that have previously been debated in Committee. To ensure that the Bank of England can carry out those new functions effectively, the instrument contains appropriate consequential amendments to reflect that in domestic law.
As the definition of a third-country CSD will change—to refer to any CSD located outside the UK, rather than any CSD located outside the EEA—the instrument deletes redundant references to the term “EEA CSD”. The instrument also provides the Bank of England with the appropriate supervisory powers over third-country CSDs, such as the power to require information and to inspect any UK branch of a third-country CSD.
Secondly, in line with those changes, a provision within FSMA that currently applies to the Prudential Regulation Authority is being extended to the Bank of England. The relevant provision places a duty on the Bank of England to take such steps as it feels are appropriate to co-operate with other persons, whether in the UK or elsewhere, who have similar regulatory or financial stability functions. That provision is being extended to the Bank of England to ensure that co-operation continues in relation to the new functions that it is taking on as part of the legislation.
Thirdly, the instrument removes the FSMA provisions that relate to the exercise of EEA passporting rights by EEA market operators into the UK, and the provisions that allow recognised investment exchanges to make passporting arrangements into EEA states, given that the UK will be a third country in a no-deal scenario. That means that any EEA market operator currently operating in the UK via a passport could no longer do so from exit day, just as UK-recognised investment exchanges could no longer passport into EEA states.
Instead, EEA market operators that currently make use of passport rights can, if they wish, make use of the third-country regimes for investment exchanges that are provided for in UK law to carry on their activities in the UK. For example, they may seek to apply to the Financial Conduct Authority to become a recognised overseas investment exchange. The FCA published information that outlines how firms can do that on its website on 14 September 2018.
Fourthly, the statutory instrument removes obligations that relate to information sharing and co-operation with EU authorities, again to reflect the UK’s position outside the EU in a no-deal scenario. That is consistent with other statutory instruments previously approved by Parliament under the EU (Withdrawal) Act, and does not preclude the UK authorities from co-operating with their EU counterparts in the future.
Specifically, this instrument removes the obligation for the FCA to inform ESMA and the competent authorities of EEA member states when it suspends or removes a financial instrument from trading on a venue that falls under its jurisdiction. However, the FCA will still be required to make such decisions public. In addition, the FCA will no longer be obliged to require venues under its jurisdiction to suspend or remove a financial instrument from trading if the FCA becomes aware that the same instrument has been suspended or removed from trading in an EEA member state.
Finally, this instrument makes a number of amendments and consequential amendments to other legislation, principally the Financial Services and Markets Act 2000 (Recognition Requirements for Investment Exchanges, Clearing Houses and Central Securities Depositories) Regulations 2001. These amendments make various necessary changes to those instruments, such as amending definitions to ensure consistency with definitions used in other EU exit SIs, including the Markets in Financial Instruments (Amendment) (EU Exit) Regulations 2018, the Central Counterparties (Amendment, etc., and Transitional Provision) (EU Exit) Regulations 2018 and the Central Securities Depositories (Amendment) (EU Exit) Regulations 2018, all of which have previously been debate in this place.
The Treasury has been working closely with the FCA, the Bank of England and industry in respect of these instruments, to maximise transparency. Regulators and industry have welcomed the Government’s approach to this SI. This instrument was first published, with accompanying explanatory notes, for sifting on 30 November 2018. Following a recommendation from the European Statutory Instruments Committee, it was re-laid under the affirmative procedure on 17 January 2019.
In summary, the Government believe that the proposed legislation is necessary to ensure the smooth functioning of financial markets in the UK, if the UK leaves the EU without a deal or an implementation period. I hope that colleagues will join me in supporting these regulations, which I commend to the Committee.
John Glen
I thank the hon. Member for Oxford East for her questions. She opened in familiar fashion, with respect to the challenge of volume, flow and transparency. I am sympathetic, to a point, about the volume, which we have both had to tolerate. However, this process was set out in earlier legislation. I accept that there is a dispute over the appropriateness of this mechanism, but these SIs are scrutinised prior to being laid. She made several points on the powers of transfer; the resourcing, preparation and workload of the Bank of England; advice and assistance regarding the EEA; and the requirement for co-operation. I shall endeavour to answer them thoroughly.
On whether the Bank of England will have adequate resourcing to take on the new responsibilities granted to it by the draft instrument, I am confident that it is making adequate preparations and effectively allocating resources ahead of 29 March 2019. It has considerable experience and technical expertise in regulating financial services to high standards, has actively participated in a wide range of groups to develop technical policy and regulatory rules, and has chaired several committees and taskforces. My officials have expressed no doubts with respect to that process. Although I accept that these changes are a burden on the Bank, it is very qualified to deal with them. On resourcing, the transfer of functions from ESMA to the Bank is provided for in separate SIs. I have been in regular contact with the Bank and am satisfied that its resourcing issues are resolved through its budgeting process. It has mechanisms to increase that when necessary.
The hon. Lady said that the impact assessments do not take account of the wider impact of no deal, but the impact assessments for these SIs focus narrowly on the changes they make and how businesses will need to respond. It is perfectly reasonable for the hon. Lady to assert that the wider impact of leaving the EU without a deal has not been assessed as part of this impact assessment, and I recognise that that impact is a contested space. However, an impact assessment for the EU (Withdrawal) Act deals with the impact of the parent Act, and the Government also published in November 2018 an analysis of the potential economic impact of that range of scenarios. I must stress that these SIs mitigate the impact of leaving the EU without a deal. If they were not in place, industry would face substantially greater disruption and greater cost if we left without a deal.
Anneliese Dodds
I am grateful to the Minister for his explanation, but the point I was trying to get at was not about the scope of the impact assessment in terms of different types of no-deal scenarios. I was asking why it is believed that this SI would not impact on an overseas investment exchange. The impact assessment states that any cost would be triggered by that overseas operator’s deciding that it still wants to operate in the UK, rather than by the requirements of this SI. That strikes me as a little bit peculiar.
John Glen
The issue of hypothecating the cost of a decision made by an entity in another jurisdiction as a consequence of this SI is arguably stretching the range of what would be appropriate and in scope. I think we have assessed that the cost of making this application is £50,000, if I am not mistaken, but I will look into that further and write to the hon. Lady if I can provide further clarification.
It is worth my exploring two further points regarding the co-operation requirements. The PRA has an existing duty under FSMA to co-operate with other authorities, whether in the UK or elsewhere. The SI applies that duty so that the Bank of England is subject to a duty to co-operate with other bodies that undertake similar functions in connection with the Bank’s functions under the European market infrastructure regulation, the central securities depositories regulation and the securities financing transactions regulation. The Bank has discretion in how it carries out that duty. Clearly, the Treasury cannot bind how other countries co-operate with UK regulators, but the duty did not exist previously, so we have put that in for those three dimensions.
On the application process, the hon. Lady cited what the European regulators have done. As I think I have said, the FCA published on 14 September 2018 a direction clarifying the way in which an application to become an ROIE would be made. That direction states that the application should be made as soon as possible and not later than six months before the applicant wishes an ROIE recognition order to take effect. The length of the application process varies on a case-by-case basis and depends to a large extent on the quality and timeliness of the information that each applicant provides. There is no mandated application form; the FCA looks to firms to provide written evidence that they are held to requirements in their home jurisdiction that have equivalent effect in the UK regime.
Anneliese Dodds
That is enormously helpful. Can the Minister clarify whether any of them have actually applied in this case? If they need that designation before they can operate and we are in theory leaving on 29 March, surely they need to have started by now.
John Glen
From memory, I think 55 could have applied and I believe 10 have successfully applied in the previous three or four months. If I have made an error, I shall correct it promptly. Regarding why we have not recognised EEA CCPs, this SI does not deal with recognition of overseas CCPs, but I will write to the hon. Lady to clarify the situation.
I hope that deals with the points raised. The Government believe that this legislation is necessary, and I hope the Committee has found my points of clarification sufficiently illuminating to allow us to pass these regulations.
Question put and agreed to.
Draft Financial Services (Gibraltar) (Amendment) (EU Exit) Regulations 2019
Draft Gibraltar (Miscellaneous Amendments) (EU Exit) Regulations 2019
John Glen Excerpts(5 years, 2 months ago)
General CommitteesRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Chair
Hon. Members will have recognised that there are in fact two instruments to be discussed today. If it is the will of the Committee to consider the two together, the Minister will move the first instrument now and the second one later.
The Economic Secretary to the Treasury (John Glen)
I beg to move,
That the Committee has considered the draft Financial Services (Gibraltar) (Amendment) (EU Exit) Regulations 2019.
The Chair
With this it will be convenient to consider the draft Gibraltar (Miscellaneous Amendments) (EU Exit) Regulations 2019.
John Glen
It is a pleasure to serve under your chairmanship, Mr Gray. As the two instruments are to be taken together, I will also speak to the draft Gibraltar (Miscellaneous Amendments) (EU Exit) Regulations 2019.
As the Committee is aware, and as with the previous statutory instruments we have debated, these SIs are part of the legislative programme under the European Union (Withdrawal) Act 2018 that aims to ensure that, if the UK leaves the EU with neither a deal nor an implementation period, there will continue to be a functioning legislative and regulatory regime for financial services in the United Kingdom.
Gibraltar holds a special place within the British family, because of not only our shared history, which stretches back over 300 years, but the priorities and values that we share today. The UK Government are steadfast in their commitment to maintaining our close relationship, which will remain unchanged following the UK’s and Gibraltar’s parallel withdrawal from the EU.
The instruments deliver on the commitment made at the Joint Ministerial Council with the Government of Gibraltar in March 2018. The UK guaranteed that the access of Gibraltar’s financial services firms to UK markets will continue until 2020 in any scenario. In a no-deal scenario, both the UK and Gibraltar will be outside the European economic area and outside the EU’s legal, supervisory and financial regulatory framework. Since the current market access arrangements between the UK and Gibraltar are underpinned by the EU framework, the UK-Gibraltar framework would become deficient without the SIs.
The SIs update existing UK legislation and make amendments to other EU exit legislation to make special provision for Gibraltar, ensuring that UK legislation relating to Gibraltar operates effectively in a no-deal scenario. The draft Financial Services (Gibraltar) (Amendment) (EU Exit) Regulations 2019 deal primarily with the Financial Services and Markets Act 2000 (Gibraltar) Order 2001, known as the Gibraltar order. Along with section 409 of FSMA, the legislation modifies EU passporting rights to allow market access for authorised financial services firms between the UK and Gibraltar. It applies to a range of authorised firms and, importantly for Gibraltar, includes those in the insurance industry.
Subsequently, since domestic legislation is derived from EU law, in a no-deal scenario, passporting arrangements between the UK and Gibraltar will become deficient. The draft SI amends domestic legislation, including the Gibraltar order and section 409 of FSMA, to retain existing passporting arrangements between the UK and Gibraltar until at least 2020 after we leave the EU. That is in line with the Government’s previous commitment. The provisions are therefore sunsetted and will cease to have effect at the end of 2020.
At the JMC in March 2018, the UK Government also announced that they will work closely with the Government of Gibraltar to design a long-term permanent framework for market access beyond 2020. That will similarly be based on shared high standards of regulation enforcement and regulatory co-operation. Although the duration of market access in the SI is contingent on the introduction of a replacement framework, the UK Government are committed to preventing a potential cliff edge in Gibraltar-based firms’ access in 2020 and to providing clarity to Gibraltar’s market. Accordingly, the SI includes a power to extend existing market access arrangements by one year at a time from the end of 2020. This will be supported by a ministerial statement on progress towards the replacement framework between the UK Government and the Government of Gibraltar.
Currently, EEA firms passporting into Gibraltar also have the ability to onward passport into the UK, and vice versa. Consistent with the general removal of EEA passporting provisions in the event of our leaving without a deal, the SI also removes provisions enabling such access. It will have no impact on UK or Gibraltarian firms.
The draft Gibraltar (Miscellaneous Amendments) (EU Exit) Regulations 2019 relate to non-passporting arrangements between the UK and Gibraltar in financial services that support the market access arrangements. Various references across legislation in retained EU and UK law treat Gibraltar as if it were an EEA state in relation to such arrangements. For example, Gibraltar, like other EEA states, has home-state responsibility in the event of a Gibraltar-based firm becoming insolvent in the UK. Gibraltar-based firms are also included within existing treatments for policyholder and deposit protections, as well as in the EU payments regime for euro transactions.
As a result of the UK’s withdrawal from the EU, the arrangements between UK and EEA states will change to reflect the new relationship, but we need to ensure that our existing arrangements with Gibraltar are not affected. The draft regulations therefore make bespoke amendments to EU-derived financial services legislation and to other EU exit SIs to maintain the current treatment of Gibraltar. The draft regulations also make a set of broad provisions that save relevant matters in remaining EU-derived and EU exit legislation that relate to Gibraltar so that regulatory arrangements between the UK and Gibraltar can be treated as they were before exit.
The provisions specifically ensure that Gibraltar-based firms, UK-based firms, Gibraltar trading venues, and provisions related to the arrangements between the UK and Gibraltarian regulators continue to be treated in UK law as they were before exit day. Additionally, these broad savings provisions allow the rights or obligations that are dependent on the function of an EU body to instead be performed by the appropriate UK regulator or the Treasury.
Lastly, the SI makes minor amendments to the Prudential Regulation Authority’s existing powers of intervention over Gibraltarian insurers operating in the UK. That will allow the PRA, where necessary and appropriate, to address risks of disruption that could threaten the financial stability of the UK. No changes are being made to the Financial Conduct Authority’s powers in relation to Gibraltar-based firms.
The Treasury has been engaging closely with the Government of Gibraltar on the legislation, and it supports the approach taken in the SIs. It has also engaged with the PRA and the FCA in drafting the SIs and has shared with the financial services industry drafts of them ahead of their publication. On 19 December 2018, the Treasury published the draft Financial Services (Gibraltar) (Amendment) (EU Exit) Regulations 2019. The draft Gibraltar (Miscellaneous Amendments) (EU Exit) Regulations 2019 were published on 7 February 2019, with an updated explanatory policy note on the two Gibraltar SIs.
The Government of Gibraltar are also undertaking their own contingency preparations for Gibraltar’s withdrawal from the EU to ensure that UK firms currently operating in Gibraltar retain their market access in the event of our leaving the EU without a deal and to maintain current regulatory arrangements.
Before I conclude, I draw the Committee’s attention to a small mistake that has been discovered in the draft Gibraltar (Miscellaneous Amendments) (EU Exit) Regulations 2019—unfortunately, mistakes happen from time to time. Where they are found, I have always been transparent about the need to put an explanation on the record. Shortly after the draft SI was laid, a small typographical error was found in regulation 10(3), which inserts proposed regulation 4C into the Solvency 2 and Insurance (Amendment, etc) (EU Exit) Regulations 2019. Paragraph 2(a) of that proposed regulation refers to
“UK law which implemented or the Solvency 2 directive”.
It should read, of course, “UK law which implemented the Solvency 2 directive”. That typographical error will be corrected before the draft SI is made.
The draft regulations are necessary to ensure that Gibraltar-based financial services firms can continue to passport into UK markets as they do now and that existing regulatory treatments in relation to Gibraltar continue to function effectively after exit day if the UK leaves the EU without a deal or an implementation period. I hope colleagues will join me in supporting the regulations, and I commend them to the Committee.
John Glen
I thank the hon. Member for Oxford East for the thoroughness of her scrutiny, and will endeavour to answer the questions she has raised. On the general points that we have rehearsed a number of times, I remind the Committee that everything we have done through these SIs has been within the scope of the withdrawal Act. I understand that having 30 debates in three months has been unusual; it has not been a desirable process, but it has been a necessary one.
The hon. Lady made a number of points about the delay following the Joint Ministerial Council in March last year. That delay did not cause problems for Gibraltar, and the financial services industry in Gibraltar has welcomed these SIs. There has been a lot of dialogue over the year, and the Government of Gibraltar have been closely engaged with the SIs and are content with the approach we have taken.
The hon. Lady raised concerns about the overall regime in Gibraltar. Gibraltar complies with EU and global standards on tax transparency. It has received the same rating for tax transparency from the OECD’s global forum as Germany, the United States and the United Kingdom, and because of its status within the EU, it follows all EU directives relating to tax avoidance and tax transparency. I recognise that there are bigger issues about the final regime we end up with, which will be scrutinised outside of the scope of this Committee.
We have undertaken consultation throughout the EU exit process, and have been committed to engaging with the Gibraltar Government. On a ministerial level, that engagement has been structured through the JMC on Gibraltar-EU negotiations. As for contingency preparations, the Government of Gibraltar have received both SIs positively, and we have had deep discussions over the past year at official and ministerial levels.
Some other points were made about the nature of the fix for insurance. Of course, the vast majority of the financial services industry in Gibraltar relates to insurance. We did things this way because it was a pragmatic solution that did what was necessary, based on conversations with the PRA and the FCA. The second statutory instrument is essentially a horizontal fix that deals with all the deficiencies in terms of references to Gibraltar.
As I have acknowledged in previous debates in recent weeks, there is no one way to do this. Given the resources and timetable available, and given that it is a contingency arrangement for no deal, we have taken pragmatic steps that are in line with the expectations of the Gibraltarian Government and that deal with the risks that existed. Obviously, we hope that we will enter an implementation period and have time to develop a fuller solution for the long term, beyond the end of 2020. One in six UK motorists has insurance contracts from Gibraltar, so it was important to put an emphasis on insurance.
I do not think any other specific issues were raised. I have dealt with the degree of co-operation. In the light of that, I hope the Committee will support the regulations as being necessary in the circumstances that I have set out.
Question put and agreed to.
DRAFT GIBRALTAR (MISCELLANEOUS AMENDMENTS) (EU EXIT) REGULATIONS 2019
Resolved,
That the Committee has considered the draft Gibraltar (Miscellaneous Amendments) (EU Exit) Regulations 2019.—(John Glen.)
Oral Answers to Questions
John Glen Excerpts(5 years, 2 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Alison Thewliss (Glasgow Central) (SNP)
The Economic Secretary to the Treasury (John Glen)
The Government have made a very strong commitment to tackling money laundering. Recent initiatives include the creation of the economic crime strategic board and the National Economic Crime Centre. We have also strengthened anti-money laundering supervision through the creation of the Office for Professional Body Anti-Money Laundering Supervision, and we are reforming suspicious activity reports and tackling the abuse of Scottish limited partnerships.
Alison Thewliss
The Economic Secretary to the Treasury knows better than most of us about the nefarious impact of Russia, and I send my best wishes to his constituency, to the Skripals and, most of all, to the family and friends of Dawn Sturgess, one year after the Salisbury attack.
Yesterday, Prince Charles ended up being drawn into the troika laundromat scandal, with money linked via a maze of shell companies back to the Magnitsky case. Criminal and legitimate money is sloshing around together in our banking system. What are the Government doing to close the loopholes and stop legitimising the proceeds of kleptocracy?
John Glen
I thank the hon. Lady for her kind remarks about my constituency. I am familiar with the reports that appeared in The Guardian yesterday evening about the case to which she has referred. Following the response by the Financial Action Task Force to a two-year review of our standards in the United Kingdom, the Government recognise that we are world leaders in this regard, but there are some outstanding concerns about reports of suspicious activity in the banking sector. Work is ongoing, and I will take a close interest in it.
Mr Philip Hollobone (Kettering) (Con)
Can the Minister quantify the amount of extra tax that the Government have collected since 2010 that would otherwise have been unpaid, as a result of the measures they have taken to tackle money laundering?
John Glen
I cannot give my hon. Friend the exact figure, but we are anxious to crack down on suspicious activity when reports give us reason to believe that further measures are necessary. We have taken action in improving cross-governmental co-ordination, and we are working closely with the Home Office on the suspicious activity reports.
Catherine McKinnell (Newcastle upon Tyne North) (Lab)
The Financial Secretary was unable to answer this question yesterday, so I shall ask it again. Can the Economic Secretary explain why, although the call for evidence on extending corporate liability for economic crime closed two years ago, we have yet to receive a response or see any action?
Sir Desmond Swayne (New Forest West) (Con)
May I suggest that the answer to the question from my hon. Friend the Member for Kettering (Mr Hollobone) is £185 billion?
Sir Vince Cable (Twickenham) (LD)
Britain is now a world leader in financial transparency and dealing with money laundering owing to the public register of beneficial ownership. What action do the Government propose to take to stop those standards being undermined by Crown dependencies, which rely on the British passport and British defence protection, but operate in a much more opaque manner?
John Glen
We are committed to introducing those registers by 2023. Since 2017, we have worked closely with law enforcement agencies through the mechanism of the exchange of notes with the overseas territories, and that has led us to unexplained wealth orders and the forfeiture of bank accounts.
Chris Philp (Croydon South) (Con)
The Economic Secretary to the Treasury (John Glen)
The Government have worked hard to build a stronger, fairer economy. The economy has grown continuously for the past nine years, employment is currently at a record high, unemployment is currently at its lowest rate since 1975 and real wages are rising.
Chris Philp
It is welcome that 75% of those new jobs are full-time and only 3% are zero-hours contracts. It is also welcome that the minimum wage has gone up by 38% since 2010, but what assurance can the Minister give that the policy of dramatically increasing the minimum wage to help the poorest in our society will continue?
John Glen
I can confirm that the national living wage will rise again this year, to £8.21. I can also tell my hon. Friend that later this year the Low Pay Commission will be set a new remit for beyond 2020. We want to be ambitious, with the ultimate objective of ending low pay in the UK while protecting employment for lower-paid workers.
Gareth Thomas (Harrow West) (Lab/Co-op)
I suspect the Minister knows that it will be more difficult to increase jobs in services businesses if we replace single market membership with a free trade agreement. Will he set out for the House what estimate he has made of the scale of the difficulty, particularly that facing financial services businesses that want to increase jobs in the current Brexit situation?
John Glen
Financial services are well protected and ready to engage on arrangements for beyond the implementation period, but the Government are not complacent in respect of the whole economy. We have made a series of interventions through our productivity fund to meet the challenges of the next generation.
Jonathan Reynolds (Stalybridge and Hyde) (Lab/Co-op)
Whenever the Government table self-congratulatory questions like that one, there is a need to put on record what is really happening out there. Six million jobs in the UK pay less than the real living wage, 3.8 million people are in insecure employment and 2.5 million people work less than 15 hours a week. Economic growth, where it exists, is so geographically unequal that it does not reflect the reality of what people see around them. Let me ask, on behalf of those people: what is this Government’s strategy for in-work poverty and insecure employment?
John Glen
I thank the hon. Gentleman for his question. This Government’s strategy is to relentlessly pursue growth in the economy and opportunities for all. We have seen 18.3% growth since 2010, and a record 32.6 million people in work. We will continue to prioritise interventions around technical education, cuts in business taxes and support for new technologies to recognise the new jobs that need to be provided for.
Neil Coyle (Bermondsey and Old Southwark) (Lab)
The Economic Secretary to the Treasury (John Glen)
The decision to freeze most working-age benefits for four years from 2016-17 was one of a number of difficult financial decisions that were taken, but to assist claimants who are affected by debt, the Government announced, as part of the 2018 Budget package, a reduction from 40% to 30% in the maximum rate at which deductions can be made from universal credit awards. That change will help 290,000 claimants.
Neil Coyle
I thank the Minister for his reply. This morning, the Select Committee on Work and Pensions visited Charles Dickens Primary School in my constituency to talk to parents, children and teachers about the impact that the benefits freeze and other welfare cuts have had on local families, many of whom have been pushed into debt, poverty and destitution as a direct result of Government policy. Will the Government listen to the Select Committee and lift the benefits freeze one year early?
John Glen
The Government have been very responsive to representations over the last two Budgets. There are 637,000 fewer children in workless households than in 2010. We made a number of interventions in the last Budget to increase the availability of interest-free advance loans to those who need them. We are listening, and continue to listen, to the concerns of the sector.
Julian Sturdy (York Outer) (Con)
Nicky Morgan (Loughborough) (Con)
The Treasury Committee will today publish the Economic Secretary’s letter to me of 30 January on the current solution to problems faced by mortgage prisoners. This solution requires the private sector to be receptive to providing new mortgages to mortgage prisoners currently trapped with inactive lenders. What update can Ministers provide on the promised Treasury officials’ work with those lenders?
The Economic Secretary to the Treasury (John Glen)
I can tell my right hon. Friend that I am in conversation with the Financial Conduct Authority about its move to a relative rather than an absolute test. I note that there are a range of views out there about how this problem can be dealt with. The FCA has said that it will come back later this spring with its response, and I am happy to meet my right hon. Friend to discuss her concerns further.
Helen Goodman (Bishop Auckland) (Lab)
This morning, the Financial Times entitled its editorial, “UK territories need to embrace transparency”, prompted by the Government’s decision to pull a vote they knew they were going to lose last night. Does the Chancellor of the Exchequer not feel that he is completely out of kilter with the spirit of the modern age?
John Glen
Some amendments were tabled on Thursday, and given the constitutional implications of those amendments, I think it is right that the Government work across Departments—with the Ministry of Justice and the Foreign Office—and have dialogue with the Crown dependencies and overseas territories to resolve the matter as the amendments suggested.
Ms Esther McVey (Tatton) (Con)
Adding to the calls of colleagues, may I ask the Chancellor to ensure that more money is provided for schools? Schools across the country desperately need it, particularly in Cheshire, which is the lowest funded.
John Cryer (Leyton and Wanstead) (Lab)
Personal debt is now higher than it has ever been in British history. Household debt is now also higher than it has ever been and has increased by nearly £1,000 in the past year alone. How sustainable is that?
John Glen
That is why the Government are concerned that the establishment of a single financial guidance body should happen quickly this year. Some £56 million is spent on debt advice to 530,000 people. This is an area I take very seriously, and I will be going to the credit union conference on Saturday to outline some more policy initiatives.
Several hon. Members rose—
Draft Transparency of Securities Financing Transactions and of Reuse (Amendment) (EU Exit) Regulations 2019
John Glen Excerpts(5 years, 2 months ago)
General CommitteesRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Economic Secretary to the Treasury (John Glen)
I beg to move,
That the Committee has considered the draft Transparency of Securities Financing Transactions and of Reuse (Amendment) (EU Exit) Regulations 2019.
May I start by saying what a pleasure it is to serve under your chairmanship again, Mr Davies? The draft regulations—like the draft Securitisation (Amendment) (EU Exit) Regulations 2019, which were debated this morning—are part of our programme of legislation under the European Union (Withdrawal) Act 2018 to ensure that if the UK leaves the EU without a deal or an implementation period, there will continue to be a functioning legislative and regulatory regime for financial services in the UK.
The draft regulations will fix deficiencies in EU law on securities financing transactions to ensure that it continues to operate effectively after the UK leaves the EU. They are aligned with the approach taken in all 52 of the statutory instruments that I have laid before Parliament under the 2018 Act: providing continuity by maintaining existing legislation at the point of exit, but amending it where necessary to ensure that it works effectively in a no-deal context.
The draft regulations concern securities financing transactions, in which securities such as equities are used to borrow cash or vice versa. A common type of SFT is a repo—repurchase transaction—in which a party sells an asset to another party at one price and commits to repurchasing it at a different price on a later date. SFTs were not regulated before 2015; there were major concerns about their effect on the economy, especially because during the financial crisis repurchase transactions were associated with increases in leverage and exacerbating boom and bust cycles in the economy.
After the Financial Stability Board identified significant risks associated with such instruments, the EU passed the securities financing transactions regulation to introduce a framework under which details of SFTs must be reported to trade repositories, which are effectively databases for reporting transactions. Under the regulation, such information must then be disclosed to investors, and national regulators are required to act where they identify risky practices by firms.
The regulation is therefore crucial to protecting financial stability and ensuring that the benefits of SFTs remain available to firms that use them and to the wider economy. On exit day, it will be transferred to the UK statute book under the 2018 Act. In a no-deal scenario, however, the UK would be outside the European economic area and outside the EU’s legal, supervisory and financial regulatory framework, so the legislation would no longer be operative.
The draft regulations will make the necessary amendments to ensure that the relevant provisions continue to work properly in a no-deal scenario. First, they will amend the treatment of EEA branches of financial services firms in the UK, so that after the UK leaves the EU, EEA branches operating in the UK must report their transactions to a UK trade repository. That means that they will be treated in the same way as other third-country branches operating in the UK, which is consistent with the approach that we have adopted in other financial services SIs laid under the 2018 Act.
Secondly, the draft regulations will amend the list of entities that have access to data on securities financing transactions reported to UK trade repositories. EU bodies will be removed, making the list UK-specific to reflect the UK’s status as a third country outside the EU in a no-deal scenario. That will not preclude UK entities from co-operating with EU entities in future.
Finally, the draft regulations will transfer to the Financial Conduct Authority the European Securities and Markets Authority’s responsibilities relating to the requirements for the registration of trade repositories, and will amend the rules so that they continue to work in a domestic context. That is appropriate, given the FCA’s current role in supervising and regulating SFTs.
Because of limitations in the powers available under the 2018 Act, one of the main provisions of the securities financing transactions regulation cannot be domesticated at this stage: the requirement for firms to report details of SFTs to trade repositories. Depending on the type of institution concerned, that requirement will not apply until 12 to 21 months after the EU’s publication of relevant regulatory technical standards. Those standards have not yet been published, so the requirement could not be included in the draft regulations, since it will not be
“operative immediately before exit day”,
in the wording of the 2018 Act. However, we have introduced separate legislation—the Financial Services (Implementation of Legislation) Bill, or “in-flight files Bill”, which had its Committee stage yesterday—to ensure that the requirement will apply in a domestic context in due course.
In drafting the regulations, the Treasury has worked closely with the Prudential Regulation Authority and the Financial Conduct Authority. We have also engaged with the financial services industry, and we will continue to do so. On 19 December, we published the regulations in draft, with an explanatory policy note to maximise transparency to Parliament and industry. Prior to publication, we shared a draft with the industry for technical analysis, and we incorporated its feedback into the final draft.
In summary, the Government believe that the draft regulations are necessary to ensure that the UK has a workable regime for securities financing transactions, and that the legislation will continue to function appropriately if the UK leaves the EU without a deal or an implementation period. I hope that colleagues across the parties will join me in supporting the draft regulations. I commend them to the Committee.
John Glen
I very much respect the points made by the hon. Members for Bootle and for Inverness, Nairn, Badenoch and Strathspey. I will respond to each of the 10 or 11 points that have been raised in succession. The opening remarks of the hon. Member for Bootle concerned the process with respect to the volume and flow, the adequacy of the resourcing, the capacity and transparency.
I will address all of those points, but I will say that the SI is needed to ensure that the EU law on securities financing transactions continues to operate effectively if we leave without a deal or an implementation period. It is not the policy of the Government to get to that point, because we are seeking a bilateral agreement with the EU that would expand the scope of cross-border activity beyond existing equivalence and ensure structured dialogue to manage regulatory change. Our proposal for a future UK-EU relationship in financial services seeks to be both negotiable and ambitious, but it is obviously prudent and necessary for us to have no-deal preparations such as these.
The hon. Member for Bootle commented on the onshoring project and the powers used. The 2018 Act does not give the Government the power to make policy changes, as has been spelled out in this SI, beyond those needed to address deficiencies arising as a result of exit. They are limited and seek simply to onshore existing provisions into domestic regulators and fix deficiencies as they exist.
The hon. Gentleman then referred to the reliance on secondary legislation. Those of us who have sat through a number of such Delegated Legislation Committees in recent weeks, including the Whip, my hon. Friend the Member for Calder Valley (Craig Whittaker), all recognise that, under the powers granted by 2018 Act to make all these financial services statutory instruments, restrictions are in place to ensure the appropriateness of their use. The central objective of the SIs is to provide, as far as possible, legislative continuity for firms. No policy changes are intended; the exercise is an intelligent onshoring one.
Mr Ranil Jayawardena (North East Hampshire) (Con)
May I probe the Minister a little further? He talks of onshoring policy, not changing it. The FCA is picking up a number of different roles under the draft regulations, particularly on enforcement, so will he assure us that there will be no resulting policy deviation in relation to the penalties that might be imposed?
John Glen
I am happy to say that the FCA has been intimately involved in the whole process. Its objective is to provide continuity to the market and to ensure that appropriate scrutiny of market activities is undertaken. No extension of power is given to the FCA through this process. As the national competent authority, it is simply taking on more responsibilities that were often elsewhere previously.
Mr Jayawardena
I thank the Minister for that answer. May I probe further? Given that the FCA is taking on those responsibilities, is it recruiting more people to undertake that work? If so, is it making good progress in doing so?
John Glen
Yes. I can tell my hon. Friend that, for example, 158 individuals or full-time equivalents in the FCA are now working on Brexit matters, which contrasts with 28 such individuals or full-time equivalents in March last year. It will shortly be setting out its plan for 2019-20, which will set out how it is allocating resources. The FCA has the power to increase the levy should it require additional resources.
I have sought to address the issue of the reliance on secondary legislation with the inherent restraints placed on the Government in the process. The hon. Member for Bootle went on to ask whether the change in the SI to how branches are treated will lead to duplicative requirements for firms, but firms are simply reporting the same information at the same time using the same template to the UK and EU authorised trade repositories, so yes, there is duplication, but it is straightforward—exactly the same form is sent to two institutions simultaneously.
The hon. Gentleman asked about the suspension of reporting for one year. The draft SI, like other financial services SIs, does not make changes beyond what is necessary to ensure that we have a functioning regime after exit. With regard to the powers to make regulatory technical standards, that reflects an approach that applies across the entire body of onshored legislation. In addition, the SI will ensure that regulators have sufficient flexibility to avoid cliff-edge risks for firms.
The hon. Gentleman asked about the robustness of the SIs and drew attention to the admission that I made on Monday on the Floor of the House about some minor typographical drafting errors, including one or two that happened previously. There are, I think, 1,000 pages of the SIs. My officials and I have done our best, we have acknowledged where those mistakes were made, and we have corrected them as quickly as we could, but they were not meaningful in their substantive legal effect, with the exception of one case, which has now been corrected. We have engaged with industry on the content of the SIs. We usually—I cannot remember circumstances in which we have not—publish the drafts of the SIs in advance of laying them before Parliament, and we have allowed an iterative process to exist.
The hon. Gentleman asked, in connection with regulation 4, whether we should use an SI to allow the FCA to issue penalties. The 2018 Act allows that in limited circumstances, with safeguards, including the affirmative procedure. The FCA needs the power properly to supervise trade repositories. He then asked about resourcing, but I have discussed that in response to my hon. Friend the Member for North East Hampshire.
The hon. Member for Bootle also asked about consultation. We published a document in June that set out our approach and emphasised the aim of ensuring continuity. That was widely welcomed. The draft regulations were published on 19 December, so people have had two months to examine them.
On the unavailability before the debate of a consolidated text, it is not normal practice for the Government to provide consolidated texts for debates on secondary legislation. I think that the hon. Gentleman was making a wider point about the overall need for all financial regulations. Frankly, that would be very difficult to achieve, given the wide range of contingency arrangements that are needed. However, the National Archives will publish an online collection of documents capturing the full body of EU law as it stands on exit day.
The SNP spokesman, the hon. Member for Inverness, Nairn, Badenoch and Strathspey, made a point about the volume of capital moving outside the UK and asked what the Government’s response was to that. The Treasury is in frequent contact with firms and regulators about their contingency planning for EU exit. Although we have been clear that passporting will come to an end after we leave the EU, we are seeking a relationship with the EU that allows for continued cross-border trade in financial services, as set out in the White Paper. Although I acknowledge that there has been movement of some capital and execution of contingency arrangements, there is a great deal of resilience to the City of London and financial services in the United Kingdom. We need to draw a distinction between wholesale movement of jobs, and capital being located somewhere else but still being acted upon in the United Kingdom and the City of London.
The hon. Member for Bootle asked about discretion for mutual co-operation arrangements and market access. The Government’s priority is to exit the EU with a deal that ensures continued co-operation with EU institutions on all regulatory matters, including SFTs. However, we are working hard to ensure that, in the no-deal scenario that we are seeking to cover ourselves for, we can maintain a degree of co-operation with the EU. Like all such SIs, the draft regulations ensure that we are prepared for all scenarios.
I believe that I have answered the points that were raised. I recognise the wider political point about the adequacy of this process, but I hope that Members have found this Committee sitting informative, will respect the answers I have given and will be able to support the draft regulations.
Question put.
Draft Securitisation (Amendment) (EU Exit) Regulations 2019
John Glen Excerpts(5 years, 2 months ago)
General CommitteesRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Economic Secretary to the Treasury (John Glen)
I beg to move,
That the Committee has considered the draft Securitisation (Amendment) (EU Exit) Regulations 2019.
It is a pleasure to serve under your chairmanship, Mr Hanson.
This statutory instrument is part of a programme of legislation under the European Union (Withdrawal) Act 2018 aimed at ensuring that, if the UK leaves the EU without a deal or an implementation period, there continues to be a functioning legislative and regulatory regime for financial services in the UK. The SI will fix deficiencies in EU law on securitisation to ensure that it continues to operate effectively after the UK leaves the EU. The approach taken in the legislation aligns with that taken in other SIs laid under the EU withdrawal Act, providing continuity by maintaining existing legislation at the point of exit, but amending where necessary to ensure that it works effectively in a no-deal context.
The SI concerns securitisation, a process by which financial assets such as loans can be pooled into a single financial instrument called a security, which can then be sold to investors. Securitisation allows banks to transfer some of the risk associated with the assets they hold to investors, freeing up regulatory capital to facilitate further lending. Securitisations can themselves be used to finance business activities and reduce the concentration of financial stability risks.
To respond to concerns about the opaqueness and complexity of securitisation transactions, the EU adopted the securitisation regulation, which is based on international standards agreed by the Basel Committee on Banking Supervision. The EU securitisation regulation simplifies and consolidates a patchwork of earlier rules, and introduces the concept of a securitisation that is “simple, transparent and standardised”, also referred to as an STS securitisation. Under the regulation, those are incentivised through preferential capital treatment. The securitisation regulation is important for protecting domestic financial stability while ensuring that the benefits of those instruments to firms and the wider economy remain available.
The securitisation regulation will be transferred to the UK statute book by operation of the EU withdrawal Act on exit day, but in a no-deal scenario the UK would be outside the European economic area and outside the EU’s legal, supervisory and financial regulatory framework, and that legislation would no longer be operative. The SI makes the necessary amendments to ensure that the provisions continue to work properly in a no-deal scenario.
The SI amends the geographical scope of the EU regulation to ensure that UK investors can continue to have access to the EU market for STS securitisations and to global securitisation markets more broadly. Under the current EU regulation, all parties involved in an STS transaction must be located in the EU. The SI amends that to allow UK counterparties to continue to participate in cross-border STS securitisations where some of the parties are located anywhere in the world, expanding the current scope. That approach is appropriate because most securitisations are structured across borders, and it ensures that third countries are treated equally in the event of a no-deal scenario.
For UK securitisation markets to have maximum depth and liquidity while being subject to the same strict rules introduced by the securitisation regulation, it was important not to constrain the UK market by requiring all parties to be located in the UK. I recognise that that expansion of scope is likely to arouse concerns, but it is also clear that the SI requires at least one of the parties to a securitisation to be located in the UK. The overall effect of that change in scope is to support liquidity in domestic securitisation markets while ensuring that UK supervisors retain effective oversight of securitisation as a whole.
The SI also introduces a transitional regime for the recognition of EU STS securitisations in the UK during a two-year period after the UK leaves the EU. That ensures that UK investors can continue to participate in the EU market for STS securitisations for that limited period. Any STS recognised by the EU during that two-year period will continue to be recognised in the UK until its maturity.
The SI also clarifies the definition of “sponsor” in the securitisation regulation to ensure that, when a sponsor wishes to delegate day-to-day portfolio management to a third party, that third party can be located anywhere in the world and not just in the EU. The securitisation regulation currently limits the location of the delegated firm to the EU. The European Commission has acknowledged that that is an unintended effect and is currently developing an EU-wide solution.
Finally, this SI transfers several functions carried out by the European supervisory authorities to the Financial Conduct Authority and the Prudential Regulation Authority. Most importantly, the SI transfers responsibilities for the authorisation and supervision of trade repositories and the publication of STS notifications to the Financial Conduct Authority. That is appropriate given the FCA’s considerable experience in supervising securitisations and it has been preparing for that role in anticipation of the regulation going live on 1 January this year. The Treasury has worked very closely with the PRA and the FCA in drafting the instruments. It has also engaged the financial services industry and will continue to do so. On 19 December, the Treasury published the instrument in draft, along with an explanatory policy note, to maximise transparency to Parliament and industry. An impact assessment was published on 19 February.
In summary, this Government believe that the proposed legislation is necessary to ensure that the UK has a workable regime regulating securitisations, and that the legislation will continue to function appropriately if the UK leaves the EU without a deal or an implementation period. I hope colleagues will join me in supporting the draft regulations, which I commend to the Committee.
John Glen
I acknowledge the points made by the hon. Members for Stalybridge and Hyde and for Glasgow East. I accept the wider concerns raised about the extensive use of this mechanism. I have never described it as the perfect solution, but it is a necessary solution to the risk of a no deal situation. I am determined that, by the time we get to the end of this process on 11 March, we will have a functioning regulatory regime in place, but the volume of SIs has been considerable. It was a blessed relief when the hon. Member for Glasgow East convened a three-hour debate on bank closures the other week and gave me a change of venue.
The hon. Member for Stalybridge and Hyde raises three specific points. The first was the removal of preferential treatment for exposures to national promotional banks and how that affects UK firms holding such exposures. Under the EU securitisation regulation, exposures to national promotional banks are exempt from the requirements, so in a no-deal scenario the UK would fall outside the scope of the exemption in the EU and domestic institutions such as the British Business Bank would not be able to benefit from the EU’s exemptions.
This SI removes the exemption for EU national promotional banks such as the one the hon. Gentleman mentioned, ensuring that under the domestic regime only UK national promotional banks would be able to benefit from the exemption. This is in line with the Government’s general approach to treating the EU as a third country if there is no deal and no implementation period. We have raised the point with industry and we understand that it is not likely to create significant difficulties for UK firms.
The hon. Gentleman went on to raise an issue that has been raised previously, and perfectly reasonably, about the adequacy of the resources of UK regulators to handle their new responsibilities. It is important to make clear to the Committee that the purpose of the EU securitisation regulation is to encourage and to ensure that the mistakes of the financial crisis in respect of securitisation are not repeated. By keeping securitisations simple in form and making them more transparent, that will be achieved.
Under the regulation that applied from only January this year, the PRA and FCA already carry out most of the functions conferred on them by this SI. The main responsibilities transferring into the FCA relate to the authorisation and supervision of a small number of trade repositories and the publication of STS notifications on its website. It is not anticipated that that will create a significant new burden. The FCA has specialist securitisation expertise and has made extensive preparations, including training for supervisors in anticipation of the implementation of the regulation and the onshoring of the requirements. It has also carried out an assessment of the resource implications and will keep those under review to ensure that it can deliver on its responsibilities, so I do not have any significant or meaningful concerns about that.
As to checks being made to ensure that the developments in regulation are scrutinised, it is worth noting that the SI does not make any substantive policy changes. To ensure that the UK regime is operative after exit, the UK regulators maintain full oversight of UK STS securitisations after exit, and will have sufficient enforcement powers where there is non-compliance. The regulators will monitor the market, and the Financial Policy Committee will also play a role in ensuring the functioning of the regime.
The hon. Member for Glasgow East raised the issue of moving high volumes of capital out of the UK. The Treasury is in frequent contact with firms and regulators regarding their contingency planning for EU exit. The political declaration reflects the full ambition of our proposals, set out in the White Paper, and is a strong and credible basis for moving our negotiations with the EU forward into the implementation period, to achieve a deal that works in our mutual interests. I acknowledge the significant footprint of financial services firms in Scotland, and in Edinburgh and Glasgow particularly. We believe that what is set out will serve their interests well. While we have been clear that passporting will come to an end after we leave the EU, we are seeking a relationship that will allow for cross-border trade in financial services, and allow firms to continue European operations within the UK.
I think that those were all the points that were raised. The SIs being brought forward are needed, and the one before the Committee is particularly needed, to ensure that EU law on securitisation continues to operate effectively in the UK if we leave the EU without a deal or implementation period, which is not the Government’s policy. I hope that the Committee have found this morning’s sitting informative and will join me in supporting the regulations.
Question put and agreed to.
Financial Services (Implementation of Legislation) Bill [ Lords ] (First sitting)
John Glen Excerpts(5 years, 2 months ago)
Public Bill CommitteesRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Chair
Welcome to our Committee, which I am sure will be enlightening and good natured on this lovely sunny morning. Obviously, we have to ensure that electronic devices are silent, that no banned substances are being consumed—such as tea and coffee—and all that sort of thing.
We will now begin line-by-line consideration of the Bill. The selection list for today’s sittings is available in the room. Please note that the decisions on amendments do not take place in the order in which they are debated but in the order in which they appear on the amendment paper. The selection and grouping list shows the order of debates. Decisions on each amendment are taken when we come to the clause that it affects.
I first call the Minister to move the programme motion standing in his name.
The Economic Secretary to the Treasury (John Glen)
I beg to move,
That—
(1) the Committee shall (in addition to its first meeting at 9.25 am on Tuesday 26 February) meet—
(a) at 2.00 pm on Tuesday 26 February;
(b) at 11.30 am and 2.00 pm on Thursday 28 February;
(2) the proceedings shall (so far as not previously concluded) be brought to a conclusion at 5.00 pm on Thursday 28 February.
It is a pleasure to serve under your chairmanship, Sir Edward, and I am sure that of Mr Austin too. I look forward to the scrutiny of the Bill and to our debate in Committee.
Question put and agreed to.
Resolved,
That, subject to the discretion of the Chair, any written evidence received by the Committee shall be reported to the House for publication.—(John Glen.)
Clause 1
Power in respect of EU financial services legislation with pre-exit origins
Alison Thewliss (Glasgow Central) (SNP)
I beg to move amendment 2, in clause 1, page 1, line 2, leave out “may” and insert—
“, in respect of a piece of specified EU financial services legislation, within six months of that legislation being implemented in the European Union, or immediately if more than six months has passed before this section coming into force, must”.
This amendment would require regulations to be made to apply specified EU financial services legislation in domestic law within six months of that legislation being implemented in the European Union.
Alison Thewliss
It is a pleasure to see you in the Chair, Sir Edward. I shall keep this relatively brief. I am pretty sure that the Government know the concerns of the Scottish National party and other Opposition Members about the scope and powers of the Bill.
The amendment would require the UK Government to change regulations in line with European Union standards, as opposed to merely allowing them to make such changes. The UK is reliant on the EU for trade in services, and has become increasingly so since the referendum, according to Office for National Statistics figures for trade, which show that the EU makes up almost half of the UK’s service exports. Brexit risks displacing thousands of jobs in the vital financial services industry, despite institutions drawing up and triggering contingency plans to prepare for the UK’s exit from the EU.
The more that UK regulations differ from those of the EU single market for services, the harder it will be to continue to work alongside our friends in Europe. The UK Government are consistently trying to remove democratic control over the Brexit process—they had to be taken to court to give Parliament a role, they introduce statutory instruments at the last minute before adequate scrutiny can take place and they threaten us all with a no-deal Brexit in a dangerous game of Brexit Russian roulette. The amendment would therefore limit the powers given to the Treasury under the legislation to diverge from EU standards.
John Glen
I thank the hon. Member for Glasgow Central for that contribution. I will respond to amendments 2 and 3 together. As she pointed out, they relate to the Treasury’s discretion to domesticate specified EU financial services legislation and the limitations on implementing said provisions.
Amendment 2 was tabled by the hon. Lady and by the hon. Member for Lanark and Hamilton East and would require the relevant EU legislation to be implemented in the UK within six months of that legislation being implemented in the European Union. The amendment would limit the Government’s discretion unnecessarily and in a way that might have an adverse impact on the UK’s financial services sector.
As the Committee will appreciate, the purpose of the Bill is to give the Government the necessary powers to implement certain pieces of in-flight EU legislation in a timely manner. Mandating implementation within a certain time limit, however, is simply an unnecessary constraint. That is particularly the case given the uncertainty about a no-deal scenario. There might be files that, as it unfolds, are no longer suitable for UK markets, so mandating the UK to implement legislation that in its final form may be unsuitable for or damaging to the UK financial services is inappropriate, in particular as we will not be able to influence the final form of the files in the schedule, which are still in negotiation.
The power to adjust under the Bill is limited; it will not allow the Treasury to alter substantially the intent of files. I do not think it appropriate for the Bill to compel the implementation of legislation that has not yet been drafted and will not have UK input in its final stages.
Amendment 3 seeks to restrict the Government to implementing only corresponding EU provisions, as opposed to corresponding or similar provisions. As was discussed at length in the Lords Bill Committee, “corresponding” is taken to mean
“‘identical in all essentials or respects’. The term ‘similar’ means ‘having a resemblance in appearance, character, or quantity without being identical’. In practice, of course, the legal interpretation of the two terms can vary, with some judging that ‘corresponding’ affords a wider latitude…on the basis of the current drafting…it will be possible to exercise the power only to achieve the aim of the original EU legislation, with an option to make adjustments to account for the specificities of UK markets, rightly reflecting the fact that we will no longer be a member of the EU. It will not, therefore, allow for wholesale changes to the character and intent of the current legislation.”—[Official Report, House of Lords, 8 January 2019; Vol. 794, c. 2138.]
I reassure the Committee that the formulation “corresponding, or similar” is well established and has been used, to provide recent examples, in the Pension Schemes Act 2015 and the Recall of MPs Act 2015. I hope that that will reassure the Committee regarding the limitations that will apply in the formulation “corresponding, or similar”, for which there are precedents. In short, the current wording is already intended to ensure that the powers under the Bill cannot be used to create substantively new policy outside the bounds of the original EU legislation. Without that discretion to implement files in a corresponding or similar way to original EU legislation, the Bill’s power is essentially unworkable. I hope that, in light of those reassurances, hon. Members will withdraw amendments 2 and 3.
Alison Thewliss
I would like to press the amendment to a vote.
Question put, That the amendment be made.
Alison Thewliss
I beg to move amendment 4, in clause 1, page 1, line 9, leave out “the Treasury consider appropriate” and insert
“the Treasury and the House of Commons consider appropriate as defined in sub-paragraphs (i) and (ii)—
(i) any proposed adjustments must be approved by a motion of the House of Commons prior to regulations being laid in draft in accordance with subsection (8)(a), and
(ii) if the House of Commons agrees a motion that certain adjustments be made, the Treasury shall consider that to be an expression of agreement by the House that those adjustments are appropriate.”
This amendment would only permit adjustments to be made that have been pre-approved by the House of Commons.
This amendment also addresses the extra powers that the Bill gives to the Treasury. Clause 1(1)(b) talks about the Treasury considering things “appropriate”. We think that a wider definition of “appropriate” is needed, because the drafting gives the Treasury a good deal more power. The amendment asks for a bit more information on that and for more powers to be given to the House of Commons, with a motion being needed for any adjustments to be made.
John Glen
I thank the hon. Lady for the amendment. It requires adjustments to files under the Bill to be pre-approved by the House of Commons before the Government introduce the relevant statutory instrument. The Government recognise the importance of parliamentary scrutiny surrounding any adjustments that might be made to the relevant EU legislation covered by the powers within the Bill, but any proposed adjustment to files under the Bill will undergo robust parliamentary scrutiny.
First, each statutory instrument will need to be approved by both Houses under the affirmative procedure. That would require laying the relevant statutory instrument before Parliament and then an accompanying explanatory memorandum, setting out the policy intent, before the debate on the SI, and well ahead of implementation. This is the established process for scrutinising such statutory instruments and that is why it is the model we have chosen to follow.
Secondly, the Government have made a clear commitment to consult on each of the SIs laid under the Bill, as appropriate, as stated by the Cabinet Office guide to consultation. Thirdly, the Government publish impact assessments for statutory instruments as a matter of course, and those tabled under the provisions in this Bill will be no different. That will include analysis of economic impacts and equalities considerations, where relevant.
Finally, the additional reporting mechanisms in the Bill will require the Treasury to publish a report at least one month ahead of laying any SI, outlining any adjustments or omissions and the reasons that any adjustments are considered to be appropriate, alongside a draft of the SI. That will allow Parliament, including any interested Select Committees, to scrutinise and report on the proposed content.
In the Government’s view these reporting requirements, alongside the use of the affirmative procedure with each SI laid, afford sufficient and appropriate parliamentary scrutiny for the proposed adjustments to files in the Bill. I remind the Committee that the Joint Committee on Statutory Instruments will be scrutinising all SIs produced under this Bill, as part of the usual procedure. The JCSI’s role is to ensure that a Minister’s powers are being used in accordance with the provisions of the enabling Act. It reports to the House any instance where the authority of the Act has been exceeded or any that reveal unusual or unexpected use of the powers, where the instrument might require further explanation, or where it has been drafted defectively. It is vital that the Government retain the latitude to make these adjustments to files in a timely way, given that without this power the utility of the Bill is seriously compromised.
In consideration of the strengthened reporting requirements and scrutiny procedures in the Bill and the importance of making adjustments to files in a timely way, I hope that the hon. Lady will feel able to withdraw her amendment.
Alison Thewliss
I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Jonathan Reynolds
It is a pleasure to serve under your chairmanship, Sir Edward, and to open the debate for the Opposition. I would now like to speak to amendments 11, 12 and 13, which aim to address some of our wider concerns about the powers being given to the Treasury in this Bill. In the Opposition’s view, the Bill lacks the necessary checks and balances that would prevent it being subject to the potential exploitation of its stated objectives. I express my gratitude to my colleagues in the Lords who began this process and achieved some important initial restrictions on those powers. However, we believe that further controls can be added to ensure that the powers cannot be abused.
I will address this group in two parts. Amendments 11 and 12 would alter the language in the Bill to prevent material changes taking place and restrict the nature of the adjustments that can be made. Amendment 13 explicitly prevents any deregulation under the Bill. Those changes of language are significant and important, because they specify in the Bill clear limits on what alterations and adjustments fall within acceptable realms. We must exercise such caution because included within the Bill, as specified in the in-flight list, are fundamental pillars of the post-financial crisis regulatory regime. That list includes critical rules which are designed to strengthen our financial markets and infrastructure, to prevent a repeat of the disastrous events of 2008, of which we still feel the consequences today. Those include the capital requirements directive V, the bank recovery and resolution directive II, and the central counterparty recovery and resolution regulation. Those regulations have played a central role in promoting integrity in financial markets.
The capital requirements directive, for example, sets out the asset buffers that systemically important financial institutions must hold, and in what ratios. That is to prevent a repeat of the events of 2008, so that banks do not enter a downward spiral at times of market stress and put the public purse at unacceptable risk again. Given the costs involved for banks, the regulations often involve significant negotiation and lobbying to find an agreeable level of capitalisation with which banks feel they can reasonably comply. Last year, for example, the Basel Committee on Banking Supervision granted concessions to United States banks after a long process of lobbying by those banks, which resulted in flexibility in how the rules were ultimately applied.
I will not comment on whether that was the right or wrong decision, but that is a clear example of the interests that will need to be managed in such a process. It does not seem right to the Opposition that the Treasury could be lobbied on such a matter with fairly limited public transparency and that the subsequent changes could then be channelled directly into an SI for which the Treasury is responsible for drafting. In truth, although the current Treasury can reassure us in good faith that that will not be the case, we simply do not know how things might change or who the Government or Ministers might be in future.
Since the referendum result, we have heard noises about deregulation—faint, though they may be—and in our view, the Bill must be built to withstand the pressure that may come. That is why we have explicitly specified in amendment 13 that deregulation cannot be enabled as part of the Bill. That builds in vital protections for a regulatory framework to which we have already signed up at a European level. There will no doubt be reasonable disagreement about what constitutes a weakening or a lightening of the regulatory framework, but we are inserting an important direction to lawmakers and a clear signal to consumers that their interests will continue to be protected.
In truth, we simply do not know how things might change if we crash out of the EU without a deal. I and my Front-Bench colleagues have highlighted in Delegated Legislation Committees the complications that could be associated with capital requirements in such a situation. Capital requirements could be susceptible to problems with the removal of preferential treatment of Euro sovereign debt. At present, EU Government debt is treated with the same risk weighting as UK Government debt. If we crash out without a deal, the preferential treatment of EU sovereign debt will instantly change—it will no longer receive preferential treatment. The reverse would apply for UK sovereign debt.
Evidently, that could be highly disruptive and one would expect big institutions to recalculate their capital ratios and recapitalise when there has been no real change in the risk that they hold. Such a change would inevitably have an impact on how we ultimately implement the capital requirements directive V, as the status quo will have changed so dramatically from when it was first agreed. There must however be safeguards on the underlying process so that that dialogue can be publicly assessed.
I feel therefore that the amendments are reasonable, proportionate and would command public confidence. We might press them to a vote, subject to the Minister’s response.
John Glen
I start by thanking the hon. Gentleman for his explanation of the intent of the three amendments, which I shall address in turn.
I must confess that I was surprised to see amendment 11. The language that it seeks to remove was inserted as a concession to the Labour Front Bench on Report in the Lords. Indeed, the language was directly inspired by an amendment to the Bill tabled by Lord Tunnicliffe and Lord Davies of Oldham in Committee in the other place. Our original drafting reflected the Government’s position that the word “adjustment” is inherently limiting. Following concern in the other place, however, we agreed to insert this language—along with a further limitation, to which we will turn in amendment 13—to clarify what was meant by the term.
Under this wording, as agreed in the other place, the Government will be able to make only adjustments that reflect or facilitate the transition to the United Kingdom’s new position outside the EU, but that does not include changes that result in provisions whose effect is different in a major way to that of the legislation. The new wording clarifies limitations on the power to make adjustments, while, crucially, still allowing for some changes that may be needed, as the UK will have been neither at the negotiating table when the files were finalised nor advocating on behalf of the UK financial services industry during that process. Lord Davies’s position on Report was that he and Lord Tunnicliffe were content with the amended drafting. In light of that, I ask the hon. Gentleman to withdraw amendment 11.
On amendment 12, I am reminded of another debate that took place during the Bill’s passage through the Lords. That debate centred around the Opposition amendment that sought to replace “major” with “significant”, which was later withdrawn. Lord Sharkey, who spoke to that amendment, noted that subsequent to its tabling, he had realised that his dictionary defined “major” as “significant”. I note that the Oxford English Dictionary in turn defines “material” as “significant”. It is therefore clearly possible to interpret all three words as in essence meaning the same thing, in which case the amendment does not have the effect desired by those who tabled it.
Thelma Walker
Thank you for calling me, Sir Edward. Who would know that this is my first Bill Committee?
I rise again to speak on the amendment and the new clause in the names of my hon. Friends the Members for Oxford East and for Stalybridge and Hyde. The global financial crisis showed us all the devastating human cost of inadequate regulation and excessive risk taking in the banking system. We need a clear demonstration from the Government that they have learned from past mistakes, are serious about financial reform and will do everything in their power to ensure that financial stability is placed at the heart of our regulatory agenda. I fear that the Bill represents the exact opposite of such sentiments.
The Government are undertaking a series of far-reaching Brexit-related changes through statutory instruments. Secondary legislation is something that only lawyers, parliamentarians, policy makers and a handful of others are familiar with. For that reason, it is important that that sort of legislation is used only for technical, non-partisan, uncontroversial matters, such as to fill in details, but that is not what has happened in the past few weeks, as the Government have realised they have not planned properly for Brexit.
As a relatively new MP—who would guess?—I have sat on numerous Delegated Legislation Committees and been profoundly shocked as the Government have forced through complex and opaque EU financial regulation, adapting it, adjusting it and transferring powers to financial institutions in the UK. My constituents expect there to be proper time to call for evidence, to consider the different bodies that might be given powers to take forward EU regulations, and to ensure that definitions in the regulatory regime are appropriate.
When financial regulation goes wrong, we all suffer the consequences, so we all should have the right to have a say. That is the cornerstone of our democracy. Our communities have been made to pay these past painful years for a crisis they did not cause. Nine long years of Tory failure have left our economy weak and unprepared for the future. People across the UK are suffering as a result of this Government’s failed austerity programme, which has undermined the very fabric of our society and left public services at breaking point. Can the Minister give an absolute and firm guarantee that my constituents will not be worse off as a result of the Bill, and that the powers in it will not be used for the purpose of deregulation?
John Glen
I thank the Opposition spokespeople for their contributions. I also thank the hon. Member for Colne Valley for her maiden Bill Committee speech. I did not agree with much of what she said, but I will address the substantive points that were made.
Amendment 5 seeks to remove the ability under the Bill for regulations to make any provision that could be made by an Act of Parliament. Amendment 14 is more targeted, seeking to remove only the power to effect changes to primary legislation when implementing the EU files in question. An amendment with a similar effect to amendment 5 was moved and then withdrawn by those on the Labour Front Bench in Committee in the Lords.
I appreciate that there are many concerns across the House about Henry VIII powers, as the hon. Member for Oxford East set out. It is clear that, where they are proposed, their necessity must be well evidenced. In the case of the financial services legislation to which the power in the Bill will apply, I feel that such a power is necessary.
An inability to amend existing primary legislation—the Financial Services and Markets Act 2000, for example—would make it impossible for the UK to implement the relevant EU legislation. Therefore, both these amendments would render the Bill completely ineffective. Furthermore, as Committee members will be aware, the exercise of many functions under financial services legislation is carried out by the independent regulators, the Financial Conduct Authority and the Bank of England. That was always intended. The capacity and expertise of the financial regulators will be crucial in the effective implementation, where appropriate, of that legislation.
Amendment 5 would remove the ability to delegate to the regulators, because as a general rule, a power to make secondary legislation does not include a power to sub-delegate. An inability effectively to delegate powers to the regulators would completely undermine the value of transposing the relevant EU legislation into UK law.
I acknowledge the wider points made about the undesirability of no deal, but this is a contingency arrangement and I believe that the Government have set out clearly the rationale for use of these powers and how they will be used in the circumstance of no deal, which would be wholly different from anything that we are familiar with. Given this context, I hope that the hon. Members will feel able to withdraw their amendments.
Alison Thewliss
I would like to press my amendment to a vote.
Question put, That the amendment be made.
Jonathan Reynolds
I beg to move amendment 15, in clause 1, page 2, line 35, at end insert—
“(c) that draft was laid more than 1 month after the Treasury conducted a public consultation that was promoted to trade unions, regulatory institutions, service users, and any other stakeholders the Chancellor of the Exchequer considers appropriate.”
This amendment obliges HM Treasury to undertake wide-ranging consultation on their proposed implementation of EU legislation, to ensure appropriate public scrutiny on any regulatory divergence.
We have already discussed in Committee today the Opposition’s concerns about the transparency and suitability of the process that we are legislating for in the Bill; clearly, the concerns are quite widely shared across all Opposition parties. That is why we also propose amendment 15, which would mandate the Treasury to undertake full consultation before each regulation is transposed. That would provide an opportunity for better public scrutiny than the statutory instrument process normally affords. It would allow consumer groups, trade unions and academics, alongside a wide range of stakeholders, to give their input and identify where there might have been regulatory divergence that was not immediately apparent. The mandatory consultation would allow any adjustments to be openly debated and scrutinised. Such consultation is essential to maintaining a transparent process where the Treasury is being given powers in this manner.
Consultation and proper impact assessments have become major issues in the process so far of transposing existing EU legislation. I therefore urge hon. Members to support the amendment. It would empower the public and consumer institutions with an essential layer of scrutiny on a set of unprecedented powers being assumed by the Treasury.
John Glen
I thank the hon. Gentleman for his comments. The Government have committed to following Cabinet Office principles on consultation, and they have made clear their commitment to consult on each SI laid, as appropriate. As a matter of course, the Government publish impact assessments for statutory instruments, and that will be no different for those brought forward under powers in the Bill. Those assessments will include an analysis of economic impacts, and equalities considerations where relevant. In line with duties under the Equality Act 2010 and with Cabinet Office guidance, regulations will be made with that equality duty in mind, and any impacts identified will be included in the relevant impact assessments in the usual way.
The Government are already required by legislation to produce reports ahead of, and looking back at, the publication of SIs under the Bill, and those reports will include any inspected and realised impacts of the legislation. That commitment to rigorous reporting and transparency about the Bill’s powers, and the potential adjustments to files and proposed SIs, is evidence that the current Bill contains appropriate provisions for proper scrutiny. I hope that that provides reassurance about the Government’s commitment to transparency in the public and parliamentary spheres, and in that light I ask the hon. Gentleman to withdraw his amendment.
Jonathan Reynolds
I appreciate the Minister’s acceptance and reassurance that the levels of consultation and impact assessments are crucial to this process, and I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Alison Thewliss
The amendment would increase the frequency with which the UK Government must report on the use of these powers, which would be a step forward for transparency about the new powers taken by the Treasury. The Lords raised various issues in Committee, and the Government took those on board on Report by accepting amendments that require more detailed and frequent reporting from the Treasury about its proposals and use of powers, and on extending those reports and requirements to financial regulators, the Bank of England, the Prudential Regulation Authority, and the Financial Conduct Authority, where powers are sub-delegated to them. Our amendment seeks to build on work done by the Lords to try to hold this centralising Government to account for the Henry VIII powers that they are taking.
The timeline for when these pieces of EU legislation will be introduced and how they will be implemented is not clear. Regular reporting will enhance that transparency, allowing us to keep track of the measures as they come through, and an eye on the implications of the legislation for financial services in the UK.
John Glen
I am grateful to the hon. Lady for her explanation of amendment 6. The Government clearly recognise the importance of parliamentary scrutiny and our reporting obligations under the Bill, as evidenced through concessionary amendments made in the other place. The Bill commits the Treasury to the following reporting and scrutiny obligations, which include obligations to,
“publish a report at least one month ahead of laying any SI, outlining any adjustments or omissions and the reasons any adjustments are considered appropriate, alongside a draft of the SI…to publish six-monthly reports on the exercise of the powers provided by the Bill”.
That will reflect on how powers have been exercised in the previous reporting period. We will also state how the Treasury intends to use those powers in the upcoming reporting period, and
“require the regulators (the Bank of England and the Financial Conduct Authority) to report on their use of any powers sub-delegated to them using the powers in this Bill”.
That will be every 12 months.
The significant bolstering of reporting requirements in the other place reflects the Government’s commitment to the transparent use of the powers in the Bill. To intensify further the reporting requirements as requested by the amendment would result in the Treasury’s being required to produce up to 25 separate reports in two years, in order to domesticate up to 17 pieces of EU legislation. The Government believe that that is completely unnecessary.
The six-month reporting period for the Bill has been accepted in the Lords, and it would bring no real benefit to add further unnecessary reporting requirements. I appreciate the commitment to proper scrutiny across the Committee, but given the strengthening of the Bill’s reporting requirements that has already taken place, I suggest that the hon. Lady withdraw her amendment.
Alison Thewliss
On the basis of what the Minister has said, I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Anneliese Dodds
I rise to support the Opposition’s new clause 2, which is similar in intent to the SNP’s amendment 10. I would like to associate myself with many of the comments by the hon. Member for Glasgow Central. It is a pleasure to follow her in this debate. Labour’s new clause 2 is broader in scope than amendment 10, but it pushes in the same direction.
Our new clause would require the Treasury, prior to making any regulations under this Bill, to publish a report on the impact of the provisions of those regulations. In particular, we specify that the report should cover the following aspects: first, the impact of the provisions on households at different levels of income; secondly, the impact of provisions on people with protected characteristics as defined in the Equality Act 2010, with which I am sure we are all familiar; thirdly, the impact of the provisions on the Treasury’s compliance with the public sector equality duty with which I am sure, again, Members are familiar; and finally, the impact of the provisions on equality in different parts of the UK and different regions of England. The new clause underlines the pressing need for a greater understanding of the impact of legislation such as this on the real economy and on the people who work within it and are impacted by it.
Throughout this process, the Opposition have been concerned about the lack of impact assessments being provided for different pieces of legislation, yet even when they have been provided to us, they have often been highly restricted in scope as well as often arriving late in the day. Often, the main element receiving consideration within the impact assessments has been the familiarisation costs to business of the different measures. That has rightly been criticised by my hon. Friend the Member for Wallasey (Ms Eagle), and indeed last night by the Chair of the Treasury Committee. They both pointed out that the formula for calculating even familiarisation costs is highly mechanistic, relying solely on an assessment of the time spent reading each word of the new regulations, rather than a proper consideration of the level of impact of new regulations on different business practices, for example. Indeed, the Chair of the Treasury Committee has suggested that a better approach might be to ask firms for an assessment of what their adjustment costs will be, then produce a proxy based on that assessment. That could be a sensible way forward. I appreciate that the formula is currently set across Government, rather than just by the Treasury, but surely the area needs to be considered in a much broader context. We have tried to broaden the debate by specifying the elements that need to be taken into account in assessing the Bill’s impact, in line with our general approach to economic decision making.
Financial regulations often come across as a very rarefied area, but we all know that, as my hon. Friend the Member for Colne Valley pointed out, the consequences of getting them wrong can be enormous, especially for specific groups. Whether or not we agree—personally I do not—that cuts to social security were necessary to reduce the deficit that had been created by measures that followed the financial crisis, the burden of those cuts has clearly had an uneven impact on different groups.
The areas of regulation covered in the Bill could have highly disparate impacts. Arguably, the process of financialisation and the intensification of investment banking compared with relationship banking—boring banking, as we might call it—have helped to fuel the imbalance in lending. Over recent years, there has been an enormous move in the UK banking system away from loans to small and medium-sized enterprises and towards loans for real estate. That process has been much more marked outside London and the south-east—it has had a regional impact. The Bill covers some of the instruments that were involved in that process. Capital requirements also have an impact on the structure of banking and its regional distribution, so it is very important that we consider the issues properly.
Finally, I have a question for the Minister about his understanding of the impact of the better regulation provisions. I had assumed all along, as I am sure many other hon. Members did, that those provisions would not apply to this process, given the Government’s stated intention not to water down regulations. As hon. Members will be aware, the better regulation approach specifies “one in, three out”: for every new regulation introduced, three regulations must go. The same issue came up in a debate last night on a very different subject, albeit one that also related to no deal: the REACH etc. (Amendment etc.) (EU Exit) Regulations 2019, the no-deal provisions on the registration, evaluation, authorisation and restriction of chemicals—another incredibly complex body of legislation.
We do not have a clear answer from the Minister on the matter, so I would appreciate his assurance that the better regulation provisions will not apply to the process. If they did, it would counteract any claims made in this Committee or elsewhere that there would be no watering down. The issue is particularly relevant to new clause 2, because the better regulation process focuses only on the costs to business; it does not consider the costs, from a regional perspective, of not regulating, or the potential countervailing benefits to other groups. I have been informed that the better regulation provisions will not be applied to Grenfell-related fire safety regulations. Will the Minister confirm that they will not apply to this process, either?
If we suddenly find that the “one in, three out” provisions apply in this case, we will be in very different territory. There will be even more need for a proper impact assessment, because to an extent it will counteract some of the mechanistic impacts of the “one in, three out” process.
John Glen
I thank the hon. Members for Glasgow Central and for Oxford East for speaking to amendment 10 and new clause 2. I shall discuss them together, because although they differ in key aspects—the former looks backwards at the impact of regulations, while the latter looks forward—we have a similar response to both. The intentions behind them are sound, because it is only right that the Government make regulations with an understanding of their expected impact, but I suggest that they are both unnecessary in the context of the Bill.
As hon. Members know, the Government publish impact assessments for statutory instruments as a matter of course, and it will be no different for those introduced under the powers in the Bill. The impact assessments will include analyses of economic impacts and equalities considerations where relevant.
I acknowledge the challenges of publishing impact assessments for the SIs closely associated with the Bill. I have explained on several occasions in Delegated Legislation Committees, and I reiterate now, that we have done this in a compressed timeframe. Every SI that has gone through the Regulatory Policy Committee—I think there have been five of them—has been registered green. I note the concerns raised by the hon. Member for Oxford East and last night by my right hon. Friend the Member for Loughborough (Nicky Morgan) about the mechanism for evaluating the familiarisation costs. I am pleased that the hon. Member for Oxford East today acknowledged that this is a cross-Whitehall provision.
I will reflect on the points that the hon. Lady has made about the application of the better regulation “one in, three out” rule in respect of this process. I confess that I am not able to give her a definitive statement this morning; I will need to write to her. We have done what we can, and the Treasury is committed to meeting our obligations on impact assessments to enable parliamentary scrutiny. In line with the duties under the Equality Act 2010, and with Cabinet Office guidance, regulations will be made with the equality duty in mind, and any impacts identified will be included in the relevant impact assessments in the usual way.
I remind the Committee that the Government are required in legislation to produce reports ahead of and looking back at the publication of SIs under the Bill. Such reports will of course include, where relevant, the expected and realised impacts of the legislation that is introduced. I hope that, in the light of those assurances, the amendment will be withdrawn and the new clause will not be pressed.
Alison Thewliss
I would still like to press amendment 10 to a vote, because we need to understand better the impact that divergence will have. It is one thing to say, “This is the impact of this bit of legislation,” but we need to know the wider impact of divergence for particular industries.
Question put, That the amendment be made.
Alison Thewliss
We support new clause 1, which helps us hugely to move forward to a point of clarity. It makes sure that when we take on new pieces of legislation for the different regulatory bodies, we try to get rid of any loopholes and inconsistencies, and that everybody knows exactly what the landscape looks like. It is important that the Government lay out where they intend to go with it. A draft consolidated financial services piece of legislation would be useful, to give everyone the clarity that they require.
John Glen
Clause 1 comprises the core substantive content of the Bill. In a no-deal scenario, the Bill gives the Government the power to implement, in whole or in part, a specified list of EU legislative proposals or in-flight files. In many cases, the UK has strongly supported the proposals throughout their negotiations and has played a leading role in shaping them over a number of years.
The files fall into two categories. The first relates to the pieces of legislation that have been agreed while we have been a member of the European Union, but that will not have come into force prior to the UK’s exit from the EU on 29 March. Those files are listed in clause 1(3)(a), (b), (c), (d) and (f). In a no-deal scenario, there would be no way to implement them in a timely manner, as each would require primary legislation. Clause 1 gives the Government the power to domesticate those files, in whole or in part, via affirmative statutory instruments. Furthermore, as was clarified following concerns expressed in the House of Lords about the breadth of powers, the Government have the power to fix deficiencies.
The second category of files relates to those still in negotiation. The UK has played a leading role in shaping them so far and they could bring significant benefits to UK consumers and businesses when they are implemented. Those files are set out in subsections (3)(e) and (g), incorporating the schedule. Clause 1 also gives the Government the power to domesticate those files, in whole or in part, via affirmative statutory instruments. The UK will not be at the negotiating table when the files are finalised, however, so we will not be able to advocate for the interests of the specific nature of the UK’s financial services sector as negotiations are concluded. The Bill, therefore, provides the Government with the ability to fix deficiencies within the files and to make adjustments to them that go beyond the deficiency-fixing power.
Again, following concerns raised in the other place, the Government have clarified the nature of those adjustments and have stated that they cannot depart in a major way from the original EU legislation. However, the Government will have some flexibility to make adjustments to take account of the UK’s new position outside of the EU. It is only right that the UK retains the latitude to ensure that pieces of legislation finalised after we have left the EU reflect the interests of the UK’s financial services industry, and this Bill must tread the line between giving sufficient powers to enable the Government to effectively implement the legislation and imposing appropriate restraints to reassure Members that safeguards are sufficient.
I put on record my thanks for the collegiate way in which Opposition Front Benchers in the Lords worked with us to arrive at the present drafting and set of safeguards without division. Those safeguards are set out in subsections (7) to (10) of clause 1, and include a two-year sunset clause; a requirement for the affirmative procedure in every instance in which the power is used; strong reporting requirements on Government, including a requirement to publish a draft SI alongside a report detailing omissions and adjustments at least one month before laying it before the House; and a further requirement to publish a report twice a year setting out how the power has been exercised in the previous six months, and how the Treasury intends to exercise it in future.
I should note at this stage one issue to which we may return on Report. Members will note that subsection (3)(e) is not included among those files deemed settled. The Commission was required under the prospectus regulation to adopt delegated acts in January of this year; that has not yet happened, and as such, we do not yet know the content of that delegated legislation. Should the Commission adopt those acts prior to Report, we will seek to amend the Bill accordingly, limiting any adjustments that may be made to the fixing of deficiencies.
Clause 1 is the heart of this short Bill. It is the duty of responsible Government to prepare for all outcomes, and the Bill will provide us with the critical ability to implement legislation that maintains the functionality, reputation and international competitiveness of our financial sector. It is a key part of our no-deal preparations, and without this clause, I am afraid that there would be no Bill to take forward. I recommend that the clause stand part of the Bill.
I will now turn to new clause 1, which is suggested, essentially, as an alternative. The Government believe that the new version of clause 1 tabled by the Opposition is inappropriate as an alternative to the current version, as it does not as drafted provide the Government with any means of domesticating legislation through the Bill. As has been set out a number of times over the course of this and other debates on the Bill, there exists a body of in-flight EU legislation that the UK will want the ability to implement in a timely manner in the period following EU exit, in order to maintain the functionality, reputation and international competitiveness of our financial sector.
New clause 1 does not include any powers to domesticate EU legislation. It compels the Treasury to bring a motion before the House to debate a document stating what EU legislation it proposes to domesticate, but it does not include the necessary mechanism through which those measures can be implemented subsequent to the House’s approval. As such, the Bill would become a hindrance rather than a help—a means for debate without the necessary powers—and the Treasury would be left, having sought the approval of the House of Commons on those pieces of EU legislation it wishes to domesticate, needing to again seek approval by introducing primary legislation or, indeed, another version of this Bill. That would undermine the purpose of the Bill by not enabling the UK to implement important EU legislation in a timely manner when necessary. It would leave the UK lagging behind international counterparts on the issue of financial services regulation—something that I am sure Opposition Front Benchers would not wish to happen—and our financial services industry would then be at a competitive disadvantage at a crucial period in our country’s history.
Even if new clause 1 were amended to include a power to implement the legislation, I suggest that it is an unsuitable alternative to the current procedure. It requires the Treasury to collate into a single document the legislation it wishes to implement, alongside any adjustments it wishes to make and explanations of why those adjustments are necessary. That document would then be debated by the House through the aforementioned motion.
My objections to that extra layer of procedure are, in part, identical to those rehearsed earlier in my objections to amendment 4. Under the Bill as drafted, there will be extensive opportunity for scrutiny of the legislation before it is implemented. During the Bill’s passage through the Lords, we inserted the requirement to publish a draft SI alongside a report detailing any adjustments and the justification for those adjustments one month prior to laying it before the House. The publication of those draft SIs will allow Members to seek a debate on the proposed content, should they so wish. Indeed, the draft SI and the accompanying report seem essentially similar in function to the document that this new clause would require the Treasury to produce. I should also note that publication of those draft SIs will allow Parliament, including any interested Select Committees, to scrutinise the proposed content.
I sympathise with what I suspect is the intention behind the new clause. I imagine, and perhaps the hon. Member for Stalybridge and Hyde will confirm this, that the consolidated document is an attempt to make sense of all the pieces of financial legislation that form part of this essential Brexit planning for a no deal. This Bill addresses a specific issue; it is vital for the UK’s financial services industry that these 17 key pieces of legislation can be domesticated in a timely manner in a no-deal scenario. It will not be possible for the Treasury to set out in a single consolidated document its intentions for all these pieces of legislation prior to their final publication.
We simply do not know what the final version of each file will look like. It would mean the Treasury’s having to wait until all legislation in the Bill was finalised at EU level before producing this document. That would potentially lead to intolerable delays and to the UK financial services sector’s lagging behind its international competitors during this crucial period.
That is why, in the current draft of the Bill, the Treasury has committed to six-monthly reports that will set out how we have used the powers under this Bill in the preceding six months, as well as how we intend to use them in the subsequent six months. That should provide a clear and timely overview of how the Government are using the powers provided for in this Bill. In light of that, I ask that the hon. Members refrain from pressing the new clause as an alternative.
Jonathan Reynolds
I appreciate the Minister’s point that clause 1 is essentially the whole of the Bill that we are discussing, but we do intend to press new clause 1 to a vote as an alternative, for the reasons that I outlined. If I can explain to hon. Members who have not been on a Bill Committee before, under advice from the Chair I understand that if existing clause 1 were accepted then he could not then offer us a vote on new clause 1, because we would have accepted that entirely. Therefore, we will vote against clause 1 stand part in order to move new clause 1.
Question put, That the clause stand part of the Bill.
The Chair
As the Opposition spokesman made clear, new clause 1 is an alternative, so we now proceed to clause 2.
Clause 2
Extent, commencement and short title
John Glen
I beg to move amendment 1, in clause 2, page 3, line 42, leave out subsection (4).
This amendment removes the privilege amendment inserted by the Lords.
I shall speak only briefly on this amendment, as it is a standard form amendment removing the privilege amendment inserted by convention into all Bills that begin life in the House of Lords and have consequences for the public purse. The privilege amendment, as I am sure members of the Committee are aware, recognises that it is the constitutional right of the Commons to initiate legislation that relates to revenue raising or expenditure, and so forbids Acts that are introduced in the Lords from engaging in these activities.
As stated in the explanatory notes accompanying the Bill, regulations made under clause 1(1) could result in money flowing into, or out of, central Government funds. Further, regulations made by virtue of clause 1(4) could lead to provision for the charging of fees. Such financial matters are among those in respect of which the Commons claims the privilege to initiate legislation, and so the privilege amendment was inserted in the Lords. This amendment simply clears it away to enable regulations under, or by virtue of, the Bill to make provisions having consequences for public finances.
Jonathan Reynolds
We were interested, having never been on a Committee for a Bill that has been to the Lords already, in exactly how this worked. We were slightly worried at one point that the Minister was seeking to usurp the Bill of Rights 1689 by trying to make Treasury regulations without recourse to primary legislation; I am relieved to see that he is not seizing power in such an inappropriate way. I understand now that it is a pro forma amendment and I understand why such a process works in the Lords before it comes back to us. We therefore have no objection to this amendment.
Amendment 1 agreed to.
Question proposed, That the clause, as amended, stand part of the Bill.
John Glen
Clause 2 is simply a technical clause that extends the powers granted in clause 1 across England, Wales, Scotland and Northern Ireland. Financial services policy covered in the Bill relates entirely to reserved matters. It also enables the Act to come into force on the day on which it is passed, as we know of at least one file—the prospectus regulation—that will likely need to be implemented soon after EU exit. I therefore recommend that the clause, as amended, stand part of the Bill.
Question put and agreed to.
Clause 2, as amended, accordingly ordered to stand part of the Bill.
New Clause 2
Report on the provisions of regulations under this Act
“(1) Prior to making any regulations under this Act, the Treasury must publish a report on the impact of the provisions of those regulations.
(2) A report under this section must consider, in respect of the regulations proposed to be made—
(a) the impact of those provisions on households at different levels of income,
(b) the impact of those provisions on people with protected characteristics (within the meaning of the Equality Act 2010),
(c) the impact of those provisions on the Treasury’s compliance with the public sector equality duty under section 149 of the Equality Act 2010, and
(d) the impact of those provisions on equality in different parts of the United Kingdom and different regions of England.” .—(Jonathan Reynolds.)
This new clause would require a report to be made on the impact of any regulations under this Bill before any such regulations are made
Brought up, and read the First time.
Question put, That the clause be read a Second time.
John Glen
The schedule contains a list of financial services files that are essential for ensuring the continued competitiveness and functionality of UK markets. Those files consist of 13 EU legislative proposals that are currently in negotiation and may enter into the EU Official Journal up to two years post EU-exit.
It is not an exhaustive list of all in-flight EU financial services legislation. In order to bring before both Houses a Bill that was as narrow in scope as possible, a triage process was undertaken to settle on files deemed essential to the ongoing functionality, reputation and international competitiveness of our financial sector in the crucial period following a no deal. Some in-flight legislation, for example, relates solely to the eurozone, so it would be inappropriate to include it in the Bill. I extend my thanks once more to the Lords, who suggested expanding the list to include the remaining two sustainable finance files, which was a suggestion that we were happy to accept.
In short, the files in the schedule are those that we believe will be most important for market functioning and UK competitiveness in a no-deal scenario. I recommend that the schedule be the schedule to the Bill.
Question put and agreed to.
Schedule accordingly agreed to.
Anneliese Dodds
I beg your pardon, Sir Edward, but I would like to ask for the Chair’s clarification if I may. We wish to clarify whether it is the case that as clause 1 was ordered to stand part of the Bill, new clause 1 falls, and that that is why we have not had a vote on it. Is that the case?
Exiting the EU (Financial Services)
John Glen Excerpts(5 years, 2 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Economic Secretary to the Treasury (John Glen)
I beg to move,
That the draft Financial Services and Markets Act 2000 (Amendment) (EU Exit) Regulations 2019, which were laid before this House on 31 January, be approved.
The Treasury has been undertaking a programme of legislation to ensure that, if the UK leaves the EU without a deal or an implementation period, there continues to be a functioning legislative and regulatory regime for financial services in the UK. The statutory instrument being debated today will fix deficiencies in the Financial Services and Markets Act 2000, commonly referred to as FSMA, and subordinate legislation made under FSMA, which are an important part of the UK’s regulatory framework for financial services.
A key function of this legislation is to define the “regulatory perimeter” that sets out the activities and financial institutions that are in scope of UK financial services regulation. In a no-deal scenario, the UK would be outside the EU’s supervisory and regulatory framework, resulting in deficiencies in the existing legislation. Specifically, many provisions in the legislation set the scope of regulated activities based on firms being authorised and operating across the single market, or by referring to definitions in EU law, which will no longer be workable after exit.
As Members will be aware, the EEA Passport Rights (Amendment, etc., and Transitional Provisions) (EU Exit) Regulations 2018, which Parliament has approved, begin the process of removing legislative provisions that facilitate passporting in the UK, as well as providing for a temporary permissions regime allowing EEA firms to continue their activities for a limited period after exit day, giving them time to become UK-authorised.
While the SI being debated today does not alter the underlying policy of the UK’s legislative framework for financial services, many of the proposed changes in it are necessary to complete the task of removing passporting-related provisions and to define the UK’s regulatory perimeter as a regime operating outside the EU. Many of the definitions of regulated activities in FSMA, and in the Regulated Activities Order 2001 made under FSMA, include the EEA in their scope and rely on definitions in EU law to operate. To reflect the UK’s new position outside the EU, the SI will amend the territorial scope of those definitions where needed, so that they apply only to the UK after exit.
As well as setting the general regulatory perimeter, FSMA and subordinate legislation contain some specific provisions that are important to the UK’s regulatory regime. For example, provisions in FSMA specify certain important functions for which authorised firms must obtain approval from the Financial Conduct Authority or the Prudential Regulation Authority, under either the approved persons regime or the senior managers and certification regime. FSMA currently exempts EEA firms from elements of those UK conduct regimes, which would no longer be safe or appropriate once the UK is outside the EU’s single market. The SI therefore removes this exemption for EEA firms.
Some of the changes proposed in this SI are also necessary to ensure that UK regulators can continue to carry out their statutory functions. As I have mentioned, this SI will complete the process of removing passporting-related provisions. This will mean that some firms and fund managers may face new requirements as result of these necessary changes. The SI therefore creates some transitional arrangements to mitigate disruption to those EEA firms and their consumers. For example, some of these transitional provisions relate to certain financial instruments, financial documents or contracts that have been issued or entered into pre-exit, ensuring that they continue to operate effectively after exit for an appropriate period.
Even with the specific transitional arrangements we are making in this and other onshoring SIs, firms will still be faced with a large volume of regulatory changes that they will need to adapt to in a no-deal scenario. This could cause significant disruption to the financial services sector and consumers immediately after exit, and firms will need more time to adjust to these new requirements. To prepare for this scenario, this SI creates a temporary transitional power that allows the UK regulators to defer or modify changed requirements for firms.
This temporary power is designed to replicate the adjustment time that firms would have if the implementation period in the proposed withdrawal agreement were ratified. For that reason, the temporary transitional power would be available for two years from exit day. Any directions made under the transitional power would therefore expire at the end of that two-year period, after which firms would have to comply with all new requirements in legislation. The UK regulators are best placed to decide how to phase in onshoring regulatory changes, working with the firms they supervise and using their supervisory judgment. I am particularly grateful to the members of the Treasury Committee, who took the time to scrutinise this temporary transitional power in the recent hearing that took place on 29 January. I am pleased that the Committee acknowledged the need for the temporary power, with the Chair concluding that
“although this is unprecedented, these powers are needed in order to make sure our financial services sector works, whatever might happen”.
The Treasury has been working closely with the regulators in the drafting of this SI. It has also engaged industry on the SI through a cross-sectoral working group with representatives of the financial services sector. That group is chaired by TheCityUK and has representation from a number of different trade associations and law firms. Industry has expressed support for the provisions in this SI and welcomed the proposed transitional arrangements as prudent and pragmatic.
Before I conclude, I would like to draw the House’s attention to two minor mistakes that have been discovered in the SI and the explanatory memorandum that accompanied it. Unfortunately, mistakes do happen from time to time, and where they are found it is important that an explanation is put on the record. Shortly after the SI was laid, a small typographical error was discovered in regulation 202(2)(a); it refers to the “Prudential Regulatory Authority”, whereas of course it should read the “Prudential Regulation Authority”. A correction slip will shortly be made to put that right.
In preparation for this debate, a minor inaccuracy was discovered in paragraph 2.55 of the explanatory memorandum. This SI removes the exemption from the requirement for a financial prospectus to be approved by the Financial Conduct Authority if it has been approved in another European economic area state. This amendment is correctly explained in paragraph 2.55, but the paragraph also says that the SI makes transitional provision for prospectuses approved by an EEA regulator before exit day. Although there will be such a transitional provision, it is not made in this SI; it is made in the Official Listing of Securities, Prospectus and Transparency (Amendment etc.) (EU Exit) Regulations 2019, which were debated in the other place on 18 February and in this House on 19 February. I apologise for the mistake, but hope the House will agree that this is a very minor mistake that does not alter the substance of the explanation provided in the explanatory memorandum. However, I will be re-laying the explanatory memorandum to ensure that the mistake is corrected.
In summary, the Government believe that the proposed legislation is necessary to ensure that there is a functioning legislative framework for financial services regulation in the UK after exit.
John Glen
It is a pleasure to respond to the hon. Member for Oxford East (Anneliese Dodds), my right hon. Friend the Member for Loughborough (Nicky Morgan) and the hon. Member for Glasgow Central (Alison Thewliss). By the end of this process, we will have discussed 53 SIs for the financial services in 30 discrete debates. In each one of them, there are some common themes to the remarks. I appreciate that this is not a desirable process to go through, but it is a unique process. It is a process that we have responsibility for at this time, but I hope that we will not need to use or to rely on its outcomes. None the less, this SI is needed to ensure that we do have a robust and functioning legislative framework for financial services regulation after exit. I am determined that I will, to the best of my ability as a junior Treasury Minister, deliver this programme of SIs.
Hon. Members have raised a number of specific points, which I will now address. The hon. Member for Oxford East asked why we have chosen to transfer powers to the FCA. This is consistent with our overall approach to onshoring. Only existing EU functions are being transferred to UK regulators, apart from the temporary transitional tool. I have written to the hon. Lady with a full explanation of the consolidated text, and I will send that explanation to her shortly in addition to the other replies that I have given to her.
In response to the point made by my right hon. Friend the Member for Loughborough, in practice there is a logistical challenge in putting everything together, conducting multiple streams of consultations simultaneously and delivering in each discrete area what is required as a fix for the undesirable outcome of no deal. Despite the enormous effort by my officials in the Treasury to get this right, it would have been very challenging to set out the architecture proactively from the outset. This FSMA SI makes many consequential amendments that were needed to follow on from previous SIs, which is why it was set out late. How the FCA will use these powers will be set out later this week, providing a lot more clarity on that matter.
The hon. Member for Oxford East asked about insurance business transfer. We consulted the insurance sector on these business transfer transitionals, and it confirmed that this was the right approach and helped to develop the provisions. We have worked collaboratively with different industry sector representatives throughout.
The hon. Member for Glasgow Central raised a specific legal point—a dispute about the wording. I will have to look at the matter and write to her. In the round, we have used TheCityUK as a convening trade association to bring relevant bodies together, and it has been very thorough in its work. The regulators are already consulting the industry, and firms have responded positively. The regulators, including the Prudential Regulation Authority, will shortly be setting out the outcome of those consultations. I think that I have covered the point raised about the consolidated Bill.
I acknowledge that FSMA is an important part of the UK’s framework for financial services regulation, but amending FSMA using secondary legislation is standard and happens several times a year. I accept the remarks of the hon. Member for Glasgow Central concerning the unusual nature of this—it is necessarily so because of what we are trying to do to prepare for a no-deal situation—but EU directives have been implemented using secondary legislation since the UK joined the EU. For financial services, that has often involved amending FSMA. Parliament approved the secondary legislation powers in FSMA itself to task the Treasury with keeping the FSMA regime up to date, such as the power to amend the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001.
Let me turn to the points made by my right hon. Friend the Member for Loughborough, who chairs the Treasury Committee. I welcome the opportunity to be scrutinised many times by her Select Committee. Regarding the methodology for calculating the familiarisation costs, there is a cross-governmental set of guidance from the Cabinet Office, but I will write to my right hon. Friend with specific details. Clearly, the cost per word varies but we have a method for describing that across Government, and we have used that method. We have drawn on the better regulation guidance and we have consulted on the impact assessment across Government.
My right hon. Friend asked whether the Government will provide regulators with powers to make the commencement of cliff-edge risks consistent. This is exactly what the temporary transitional power is for: the regulators will be able to phase in the vast majority of changes consistently. I said before the Select Committee that it would be important to lay any directions in the House of Commons Library and the House of Lords Library, and that I would ensure that the Treasury Committee was notified.
The hon. Member for Oxford East mentioned the point made by Lord Lexden. Lord Lexden used to work with me at the Conservative Research Department, and he was always very good at picking out errors. I shall look carefully at his remarks and see whether there is an appropriate response.
The hon. Member for Glasgow Central raised the issue of charging fees and the powers given to the regulator. The fee-setting powers and controls in this instrument reflect the existing powers that the regulators have in legislation. There is no meaningful change in the powers; the extension is consistent with the current role of the regulators. The hon. Lady also asked why the House has not been given enough time properly to scrutinise this legislation. I respectfully say that we have done as much as we can in the time available. We have engaged constructively with firms and we published these SIs well in advance of laying them before the House. It has been a significant iterative process. I do not describe it as a perfect process, but it has been quite thorough.
Overall, this SI will ensure that we have the necessary functions and powers in the Treasury and in our regulators in the event that the UK leaves the EU without a deal or an implementation period. This has been a tough process. I pay tribute to my opposite numbers on the Opposition Front Benches.
Joseph Johnson (Orpington) (Con)
I recognise that my hon. Friend is doing valiant work, but does he acknowledge that this process of moving to a new regime is proving extremely unsettling for players in the financial services sector? A recent report by Ernst & Young estimates that £800 billion-worth of assets and people have moved to other jurisdictions since the referendum as a consequence of our decision to move to a precarious, patchy and one-sided regime of equivalence that is a very poor substitute for our current system of passporting. What assessment has he made of news from the Amsterdam regulator last week that it is boosting the resources of the Dutch Authority for the Financial Markets by 10% to cope with the additional work that it is receiving as a result of our painful decisions?
John Glen
The process that we have gone through with these no-deal SIs has been as thorough as possible in the circumstances. My hon. Friend is making a wider point about the desirability of being in this situation and the need actually to secure deal. During the implementation period, we will have maximum opportunity to determine the method for securing equivalence, which we envisage would be by June next year. I recognise that there is uncertainty, but despite some pretty grim suggestions over what would happen with jobs, the City of London is resilient. Although it has made contingency arrangements, as would be expected, we have not seen large numbers of jobs drain away from the City as some would have anticipated. We need to secure the deal and then work through the issues with regard to the implementation period.
I pay tribute to the work of the hon. Members for Oxford East and for Glasgow Central, and the scrutiny of the Select Committee, throughout this process. I know that we still have a number of SI debates to go, with two on Wednesday and several more next week, but I hope that I have explained the rationale for this particular SI and that the House will be able to support these regulations.
Question put and agreed to.
Resolved,
That the draft Financial Services and Markets Act 2000 (Amendment) (EU Exit) Regulations 2019, which were laid before this House on 31 January, be approved.