Draft Equivalence Determinations for Financial Services and Miscellaneous Provisions (Amendment etc) (EU Exit) Regulations 2019

Jonathan Reynolds Excerpts

Tuesday 12th February 2019 General Committees

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

It is a pleasure to serve under your chairmanship, Sir Edward. Once again, the Minister and I are here to discuss a statutory instrument that makes provision for a regulatory framework after Brexit in the event that we crash out without a deal. I will spare the Minister the full list of our concerns; I think we are somewhere around 15 through the list, but these events are almost daily now, so he is aware of our concerns. It is enough to say that the Opposition would like to put on record our worries that the process of transposing this legislation has not been as accessible or as transparent as it should be.

Last night in the main Chamber we debated the Financial Services (Implementation of Legislation) Bill—the “in-flight” financial services Bill—which the Opposition voted against. One of the reasons for opposing that Bill is that the combination of work happening in Delegated Legislation Committees, along with the “in-flight” Bill, is creating a patchwork of new rules. We believe that is inherently vulnerable to clashes, gaps and inconsistencies.

That is also our view of today’s instrument. Clearly, the objectives are the right ones, but the Minister and I have already voted on a great number of items of regulation where in some instances the Government have transferred powers to the Financial Conduct Authority, the Prudential Regulation Authority, the Treasury or the Bank of England, so it is not entirely clear why we now need this separate instrument, to pass distinct powers to grant equivalence arrangements separate to the decisions that we have already taken in each of those specific instruments. Once again, while there is a sunset clause in this legislation, it is worrying that the Treasury is trying to give itself powers to keep in its back pocket to deploy should it decide that they need to be exercised.

Will the Minister clarify why we need stand-alone powers of this kind and which regulations he feels they would be used in reference to? What is the relationship between this general set of regulations on equivalence and the specific statutory instruments that we have already debated and which already relate to the transfer of powers? Why has the Treasury been given powers to make labour-intensive evaluations of regulatory standards in other countries, as opposed to that going to the Financial Conduct Authority, the Bank of England or the Prudential Regulation Authority? Is the Treasury properly resourced for this work? If not, will it receive extra resources for what it is being asked to do? Will there be a publicly available central register of all equivalence decisions, so that domestic and external market participants can have ready access to up-to-date information, along with the accompanying rationale for the decisions that have been made?

I note that these powers can be used before exit day, with a view to taking effect on 29 March. The Minister directly referred to this near the end of his speech. That is an uncomfortable proposition and distinct from some of the legislation we have already passed. With just 33 working days to go until we leave the European Union, can the Minister indicate in what context they would be used during this period and why that would be felt to be necessary? I believe the words that he used were that the Government need to be “nimble” in that scenario, but as parliamentarians we need more reassurance about that and about the general scope and intention of this legislation. I hope the Minister can provide that for us.