Draft Financial Services (Miscellaneous) (Amendment) (EU Exit) (No. 3) Regulations 2019

Jonathan Reynolds Excerpts

Monday 9th September 2019 General Committees

[Jonathan Reynolds (Stalybridge and Hyde) (Lab/Co-op)]

It is always a pleasure, Sir Edward, to see you in the Chair.

We now know that this is one of the last chances the Opposition will have to be heard on the matter of a no-deal Brexit, given the Government’s decision to prorogue Parliament this evening. The Opposition’s concerns about our crashing out without a deal are well known. That is why we have spent the small amount of time available to us since the summer recess working hard across parties to prevent the Government from imposing that outcome on the UK.

What will also be well known to those who have served on such Committees before are the Opposition’s objections to the use of statutory instruments to prepare us for no deal through an opaque and rushed process. The Minister and I stood opposite each other in Committees considering dozens of instruments in the run-up to the original exit date in March 2019. Today, we stand closer to the cliff edge than ever before, with a Prime Minister who is seemingly prepared to sacrifice our economic stability and perhaps even the rule of law.

I believe that the instrument in front of us tonight, which is a patchwork of tidy-ups and corrections, shows that we were vindicated in our criticism of the Government’s approach. I am sorry to say that I do not believe the Government have always treated this process with the care and respect it demands. That is in no way a personal criticism of the Minister, who I think is one of the relatively few members of the Government who understands what is at stake, but it is a criticism of the Government as a whole. I say that because we now stand here looking at this legislation in a different way; we stand here on the cusp of no deal occurring, which the Government now believe is a perfectly acceptable outcome.

I just look at this SI and reflect that our country’s economy is 80% services and that our financial sector is the envy of much of the world. We are about to lose market access to all EU member states and, crucially, under no deal we will lose the good faith required to overcome that. That is 10% of the revenue from our most important sector. Although we all acknowledge that the single market in services is not what it could be, as Sir Ivan Rogers has repeatedly pointed out it is more integrated in the single market than it is, for instance, between different US states or between different Canadian provinces. Crucially, no deal will put us years away from correcting those problems in a trade deal.

However, the in-flight Bill was pulled at the last minute in March and has never returned to the Chamber. The then Financial Secretary to the Treasury even addressed the House that evening without addressing why. Does this statutory instrument correct that? I do not think it does. Now that the House is being prorogued, that Bill will surely fall, so how can the Government possibly argue that we are in a position to leave without a deal when there are such significant legislative gaps in our contingency plans?

It is not just the Opposition who have outlined these concerns. The House of Lords Secondary Legislation Scrutiny Committee—I think the Minister mentioned it, but he perhaps undersold its criticism—said:

“These Regulations are the third time HM Treasury…has made changes to existing financial services legislation, and the Committee hopes that HM Treasury has not under-estimated the challenge which is posed to financial services firms in taking on board so many amendments to the core legislation for the sector…the range and magnitude of the changes are significant: the Regulations make changes to 15 items of legislation and include a sub-delegation of powers to UK regulators and extend a ministerial power of direction. The Committee reiterates its concern about the scale of the challenge facing financial services firms in adjusting to these changes.”

If this statutory instrument is being discussed tonight, with mere hours to go before Parliament is suspended, how can the proper consultation have taken place with the financial services sector? As the Lords Committee noted, there is a significant extension of ministerial power, which bestows on the Treasury the power to grant MiFIR—markets in financial instruments regulation—exemptions to EEA central banks. It has to be alarming that this is suddenly being swept in at the last moment. Why, Minister, has it not been addressed before now?

What other omissions will there be? One stakeholder has already raised with us the fact that neither the statutory instrument that establishes the temporary permissions regime in relation to the Financial Services and Markets Act 2000, nor the statutory instrument in relation to the Electronic Money Regulations 2011 and the Payment Services Regulations 2017 appears to apply to payment services provided by an EEA bank in the UK. “Regulated activities”, as referred to in the EEA passport rights regulations, do not include payment services. It therefore seems that there is no authorisation for that to continue, which will be enormously disruptive—unless the Minister can provide some assurances to the contrary today or perhaps in correspondence.

There is in this statutory instrument a whole list of items of retained EU law that are now irrelevant or surplus to requirements. My question remains: how are we only identifying those items now?

Therefore, the Opposition cannot support this statutory instrument today and will vote against it. We have argued against using secondary legislation in this manner since the no-deal process began, and this instrument serves to validate our criticism. The Opposition refuse to use the Government’s final few hours of parliamentary time before the undemocratic Prorogation of Parliament to further enable any no-deal scenario. We will do everything in our power to prevent such a disastrous outcome, which we believe would be so damaging to the UK’s core national interests.