Disability-inclusive Development

Lord Bates Excerpts

Thursday 13th December 2018 Lords Chamber

[The Minister of State, Department for International Development (Lord Bates) (Con)]

My Lords, I thank all who have taken part in this debate, which has very much brought us together. My noble friend Lady Anelay led it in her characteristic style, with great expertise and knowledge drawn from being a distinguished Minister in the Foreign Office and the Department for International Development. Her ongoing passion has been expressed through the All-Party Parliamentary Group on Street Children. She spoke about people with disabilities being invisible and in the form of statistics.

The noble Lord, Lord McConnell, focused his contribution on the sustainable development goals and the need to make sure that, although there might be explicit references in only five of the 17 goals, there are, through No One Left Behind, implicit references in all of them. My noble friend Lord Holmes reminded us of that great parliamentary moment, which I think will go down in history, when Secretary of State Penny Mordaunt was the first to announce the disability summit in British Sign Language at the Dispatch Box. He also spoke about how technology, far from creating barriers, can remove barriers and create great inclusion. The noble Baroness, Lady Thomas, spoke about access to education by women and girls, particularly in conflict situations. My noble friend Lord Shinkwin talked about the disability strategy having a clear sense of purpose and urgency, bringing people together.

My noble friend Lord McColl reminded us to approach all our dealings, strategies and actions with a sense of humility. He reminded us of the struggles that we went through to provide a decent service for people with disabilities as recently as the 1980s. My first job in government was in 1993 when I was appointed Parliamentary Private Secretary to the then Minister for Disabled Persons, Nicholas Scott. Some of the work that we did then paved the way for the Disability Discrimination Act, which was ground-breaking legislation. On a personal note, that Act and the Modern Slavery Act are probably the two pieces of legislation that I am most proud of being associated with.

My noble friend Lady Jenkin, who has done extensive work in promoting female involvement in our democratic processes, reminded us of the Voice & Vote exhibition in the Upper Waiting Hall organised by Sightsavers. In democracies, exercising a vote and standing for election are very powerful ways in which people can become visible and ensure that their needs are addressed fully.

The noble Lord, Lord Bruce, made a very profound point, saying that it was important to get better at involving people with disabilities in driving forward these changes, both in DfID operations and in programme delivery in-country. The noble Lord, Lord Collins, talked about how education was critical in giving people a pathway out of poverty. However, people with disabilities are the most excluded of all groups from that important right, and that needs to be addressed.

My challenge in the remaining eight minutes is to respond to 22 questions and to read the speech that has been prepared. I should say to my noble friend Lord McColl that since the 1980s the nature of the Civil Service has changed dramatically, particularly in the Department for International Development. They are very much focused on the “service” part of their title.

There are an estimated 1 billion people with a disability worldwide—that is, 15% of the global population—yet people with disabilities and their families are still poorer than people without disabilities in every social and economic area. My noble friend Lady Anelay reminded us that during the UK Government’s first ever Global Disability Summit in July 2018, which the noble Lord, Lord Collins, and many others were party to, the world promised to do more for disabilities. The Secretary of State for International Development—the former Minister for Disabled Persons and currently the Minister for Women and Equalities across government —said that the UK will take a lead in working towards a fairer world in which no one is left behind. At DfID we have been working diligently on this and have already met a significant number of the commitments that we made at the summit. Over 170 Governments made commitments, and civil society and private sector organisations made new global and national commitments at the summit, with over 320 organisations signing our Charter for Change.

The noble Lord, Lord Collins, mentioned the importance of civil society, particularly trade unions, in raising the issue of increased access for those with disabilities. We must work together with our partners and hold each other to account and, as the noble Baronesses, Lady Anelay and Lady Thomas, reminded us, learn from one another. Alone, we cannot achieve our vision of a world where all people with disabilities are engaged, empowered and able to access and enjoy their rights on an equal basis, but, together, we can. Unless all truly put disability inclusion at the heart of everything they do, we will not eradicate poverty and deliver on the sustainable development goals, as the noble Lord, Lord McColl, mentioned, or uphold and implement the UN Convention on the Rights of Persons with Disabilities, referenced by the noble Lord, Lord Collins, and others. That is why the new disability inclusion strategy, which my noble friend Lord Shinkwin referred to, lays out how we can raise our ambition beyond the summit and build on our achievements to date.

The strategy identifies four thematic areas where DfID can make a significant difference and where we will focus our work. The first is ensuring that all children with disabilities can access high-quality education—my noble friend Lord Shinkwin gave some powerful personal testimonies as to how things were in this country not so long ago, while the noble Baroness, Lady Thomas, urged us to take more action in that regard. The second area is working with other Governments to ensure that social protection systems, referred to by my noble friend Lady Jenkin, are inclusive of people with disabilities and their families. Thirdly, we should ensure that people with disabilities have access to economic opportunities, as the noble Lord, Lord Collins, mentioned. Finally, we must promote a fully inclusive humanitarian response in conflict situations, as mentioned by the noble Baroness, Lady Thomas.

The strategy highlights three cross-cutting themes that will run through our work. The first is tackling stigma—the noble Baroness, Lady Thomas, gave testimony in relation to Pakistan, and the noble Lord, Lord Bruce, spoke of his personal experience in his work with DeafKidz International, an organisation that I have visited and am enormously impressed by. The second theme is empowering women and girls and, the third, enabling access to life-changing technology, of which my noble friend Lord Holmes reminded us. I pay tribute to the work of my noble friend through the Global Disability Innovation Hub and share his pride at the worldwide legacy of the London Olympic and Paralympic Games. We have also committed to step up our efforts on mental health and psychosocial disabilities, an area that has been seriously neglected by the international community for too long.

Let me try to answer as many of the specific questions asked in the debate as possible. My noble friend Lord Shinkwin asked about education. We will support millions of children with disabilities out of school and are delivering targeted interventions to improve learning outcomes. The noble Baroness, Lady Thomas, asked about conflict situations in Somalia. Our office in Somalia is developing an action plan on disability inclusion. It will do more to get reliable and comparable data on disability and push its partners to prioritise the issue. The noble Baroness talked also about women’s and girls’ access to education. We are committed to supporting women and girls with disabilities who are marginalised both for their gender and their disability. The Girls’ Education Challenge has supported 40,000 girls with disability into education and we will continue that work.

My noble friend Lord Holmes asked how we could make greater use of technology. Access to appropriate assistive technologies such as wheelchairs, prosthetics, hearing aids and glasses—mentioned also by my noble friend Lord McColl—is a key enabler and can be transformative. We have now launched with the Global Disability Hub the AT 2030 programme, which we hope will take action towards that end. The noble Lord, Lord McConnell, asked whether we could assist countries to integrate the disability strategy into their own policies. Across the department, every country team will be expected to meet a set of standards by the end of 2019, including standards on leadership, engagement with disabled people’s organisations, influencing programmes on collecting data and shaping systemic reform.

My noble friend Lady Anelay asked what progress had been made on the global tracker on the International Disability Alliance website. A database of all commitments made at the summit is being developed on the IDA website, to be launched early next year. The “one year on” report is looking at initial progress made against the commitments and will be published later in 2019. My noble friend asked about progress on disaggregation of data. Key international partners made commitments at the summit to collect and use disaggregated data. For instance, the World Bank committed to include the Washington Group’s short set of questions for disability aggregation in at least 12 countries, with the upcoming household surveys reporting back to the bank by 2020. My noble friend asked what measures we were taking to ensure that the strategy addressed the needs of street children. Street children are among the most vulnerable people in the world. We have said that we will intensify our commitments to protect them. Our support around the world helps us develop systems, services and policies to that end.

The noble Lord, Lord Bruce, asked how many disabled people were employed by DfID. As part of the disability strategy, we have committed to increasing the attraction, retention and career progression of people with disabilities within DfID. One of our aims is to ensure that our workforce reflects the proportion of disabled people within the wider UK population. It is not compulsory for staff to declare that they have a disability. In September 2018, about 9% of staff within DfID confirmed to us that they had a disability. Our aim is to reach 12% in the next few years.

My noble friend Lord McColl asked how we were leading the way as an example to developing countries. We have some of the strongest equalities legislation in the world, including the Equality Act 2010, which my noble friend Lady Jenkin also referred to. The Government do not limit themselves to upholding the rights of disabled people in the UK; they champion disability rights across the world.

With my 12 minutes up, I thank again my noble friend Lady Anelay for leading a powerful and persuasive debate which, in this week of all weeks, has brought all sides of this House and all persons in it together.

Bank Recovery and Resolution and Miscellaneous Provisions (Amendment) (EU Exit) Regulations 2018

Lord Bates Excerpts

Wednesday 12th December 2018 Grand Committee

Moved by

[Lord Bates]

That the Grand Committee do consider the Capital Requirements (Amendment) (EU Exit) Regulations 2018 and the Bank Recovery and Resolution and Miscellaneous Provisions (Amendment) (EU Exit) Regulations 2018.

[The Minister of State, Department for International Development (Lord Bates) (Con)]

My Lords, Her Majesty’s Treasury is in the process of laying statutory instruments under the European Union (Withdrawal) Act in order to deliver a functioning legislative and regulatory regime for financial services in the event of a no-deal scenario. The two SIs being debated in this group are part of this programme and will fix deficiencies in UK law relating to the UK’s prudential regime, which ensures that financial institutions hold sufficient capital and appropriately measure and manage their risks, and also relating to the UK’s bank resolution regime, which ensures that the UK authorities have the necessary tools to manage the failure of a bank, investment firm or building society in an orderly way. The approach taken in these SIs aligns with that of other SIs being laid and debated under the withdrawal Act by maintaining existing legislation at the point of exit to provide continuity but amending it where necessary to ensure that it works effectively in a no-deal scenario.

The first statutory instrument being considered today concerns the capital requirements framework, which aims to prevent the failure of financial institutions by setting prudential rules that apply to banks, investment firms and building societies. These rules are currently set through the EU capital requirements regulation and the EU capital requirements directive. The second statutory instrument relates to the bank recovery and resolution directive, which sets out the requirements that ensure that firms’ failures can be managed in an orderly way, avoiding the need for costly public bailouts. In a no-deal scenario, the UK would be outside the European Economic Area and outside the EU financial services framework. To ensure that the legislation continues to operate effectively in the UK once the UK has left the EU, these SIs will make amendments to retained EU law in relation to the capital requirements regulation and the bank recovery and resolution directive so that the legislation will continue to function effectively in a no-deal scenario.

I note that, in line with the general approach taken to the onshoring of EU legislation, both statutory instruments will transfer a number of functions currently within the remit of EU authorities, particularly the European Banking Authority and the European Securities and Markets Authority, to relevant UK bodies. These functions, such as the development of detailed technical rules on certain provisions of the regulations, will now be carried out by appropriate UK bodies: the Financial Conduct Authority, the Prudential Regulation Authority or the Bank of England. For example, the responsibility for binding technical standards under the bank resolution and recovery regime is being transferred to the Bank of England, given that it is the UK’s resolution authority. The PRA and FCA have extensive experience in setting firm-specific rules for international firms, and are therefore the most appropriate domestic institutions to take on these functions from the European supervisory authorities. The regulators are undertaking public consultations on the changes that they propose to make to binding technical standards.

These statutory instruments further confer regulation-making powers on the Treasury to replace delegated powers that were previously conferred on the European Commission, in line with the approach taken in other Treasury legislation.

The draft capital requirements regulations 2018 make changes primarily to the retained EU capital requirements regulation but also to certain domestic secondary legislation implementing the EU capital requirements directive. First, they introduce changes to the group consolidation regime. When the UK leaves the EU, we will also leave the EU supervisory regime. This means that we will need to limit the geographical scope of the capital and liquidity consolidation rules to the UK, rather than on an EU-wide basis as currently. This will introduce a new layer of liquidity consolidation in the UK, though it will not affect the application of consolidated capital requirements, which are currently calculated at the member state level.

Secondly, the draft regulations remove preferential capital treatment currently available for exposures to certain EU institutions and assets, including sovereign debt. The EU capital requirements regulation currently applies a zero-risk weighting to certain categories of EU assets such as sovereign debt. This means that firms do not have to hold capital for their exposure to such assets and are therefore incentivised to invest in them. In line with our general cross-government approach, it is our policy not to grant the EU unilateral preferential treatment in the absence of an assessment of equivalence after exit day. We will therefore end the preferential capital treatment for EU assets currently subject to the zero-risk weighting.

Finally, the draft regulations introduce changes meaning that UK regulators will no longer have to obtain approval from EU institutions before using macroprudential tools to address systemic risks, including in a financial crisis. This is appropriate given the UK would be a third country and will need the UK regulators to be able exercise macroprudential functions effectively in times of financial stress.

I turn now to the bank recovery and resolution statutory instrument, which amends the Banking Act 2009 and related domestic and retained EU legislation by making the following principal amendments. First, the draft regulations amend the scope of the UK’s third-country resolution recognition framework to include EEA-led resolutions. This ensures that, in a no-deal scenario, the same approach will be followed for both EEA and third countries in recognising third-country resolution actions.

Secondly, this statutory instrument removes deficient references requiring UK regulators to follow the specific operational and procedural mechanisms set out in the BRRD to co-operate with the EEA authorities. The removal of these references will not, however, prevent UK regulators from co-operating with their EEA counterparts after exit. UK regulators will remain able to share information with EEA authorities in the same way as they currently do with authorities in third countries such as the United States. Additionally, the UK will continue to participate in international crisis management groups which enhance co-operation between home and host authorities of systemically important banks.

Finally, the draft regulations address deficient cross-references to the BRRD in UK legislation and ensure that delegated regulations retained by the European Union (Withdrawal) Act continue to be in a workable form following exit.

To summarise, the Government believe that these statutory instruments are needed to ensure that the regulatory regime applying to banks, building societies and investment firms works effectively if the UK leaves the EU without a deal or an implementation period. I commend the regulations to the Committee.

[The Deputy Chairman of Committees (Baroness Fookes) (Con)]

My Lords, before the debate begins, it may be helpful if I explain that the rather quaint little hats sitting on the ends of some of the microphones are an indication that they are not working.

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[Lord Bates]

I thank noble Lords for bringing their considerable expertise to bear on the important regulations before us. I will address some of the points raised.

First, the noble Baroness, Lady Drake, asked whether there is sufficient time for the regulators to put the consultation in place. I am confident that regulators are making adequate preparations and effectively allocating resources ahead of March 2019. They have been actively participating in a wide range of groups developing these technical and regulatory rules. They have also chaired a number of committees and task forces, and have considerable experience in implementing EU legislation. This means that the responsibilities of EU bodies can be reassigned effectively and efficiently, providing firms, funds and their customers with confidence. Since October, regulators have begun consulting, and I am confident that they will complete their consultations ahead of exit day. The noble Baroness also asked whether the regulators have adequate resourcing for a no-deal scenario. I repeat my confidence that the regulators are making adequate preparations and have the resources and expertise to ensure that this happens.

The noble Baroness, Lady Drake, also asked whether the capital requirements regulation statutory instrument will decrease the level of accountability for the Prudential Regulation Authority or the Financial Conduct Authority. Although certain functions, such as the mandate to develop binding technical standards, are being transferred to the regulators from EU authorities, such functions are currently carried out not by the Commission or the UK Government but by agencies with specific expertise in setting and calibrating firm-specific macroprudential rules. The Treasury will work closely with regulators in the development of binding technical standards; those standards will also be subject to consultation, ensuring that key stakeholders’ views are taken into account. Regulators will not be able to make significant policy changes.

The noble Baroness, Lady Bowles, asked whether there is a substantial difference in being in only the crisis management groups. Nothing in the SI will change the UK’s ability to co-operate with third countries on planning for executing the resolution of cross-border banks. The majority of the work takes place in international crisis management groups designed to facilitate international co-operation through bodies such as the G20. Of course, we are a key part of the financial stability group’s work on key priorities. There is an existing robust framework in UK law for resolution co-operation with third countries, such as the United States.

The noble Baroness, Lady Bowles, spoke a great deal about the loss of zero-risk weighting on EU debt calculation. It could seem as if that were a new policy. When we leave the EU, the EU will treat us as a third country, without any special arrangements to treat the UK differently. The UK Government have said that we will also treat the EU as a third country; we are therefore being consistent with other SIs that have been passed through your Lordships’ House. Since sovereign debt already attracts a very low risk weight, the change in capital requirements should not be significant. None the less, we have discussed the risks associated with the loss of zero-risk weighting on EU sovereign debt for the industry, and we understand that the issue will affect only a small number of firms. The exact impact cannot be estimated because firms will change their capital holdings and restructure.

We are also developing broad transitional powers for the regulators that will allow them to phase in new requirements gradually. The regulators are already consulting on a proposal to delay all changes to risk weights. This would eliminate any cliff-edge risks and give firms additional time to prepare for these changes.

The noble Baroness, Lady Bowles, asked about the reference to a predecessor body in the statutory instrument. This was inserted to ensure that we have a consistent approach across every file being onshored. The wording is drawn from existing UK statutes, such as the Payment Services Regulations 2012.

The noble Lord, Lord Tunnicliffe, asked whether the SIs make policy changes. As I said in response to the noble Baroness, Lady Drake, they are not intended to make policy changes other than to reflect the UK’s new position outside the European Union if we leave in March 2019 in a no-deal scenario.

The noble Lord also asked whether UK firms would be disadvantaged by the changes in risk weights. I made detailed reference to that in my previous answer to the noble Baroness, Lady Bowles, but since sovereign debt already attracts a very low risk weight, the change in capital requirements should not be significant. As I mentioned, regulators are consulting on a proposal to delay all changes to risk weights, which would eliminate a potential cliff edge.

The noble Lord then drew the Committee’s attention to page 41 of the BRR SI and asked whether the relevant section existed beforehand and, if so, why it was not cross-referenced. The insertion of Schedule A1, on page 41 of the SI, addresses deficiencies stemming from the UK’s departure from the EU and does not bring about any policy changes. In particular, it corrects a reference in the Bank Recovery and Resolution Order 2014 to the requirements of the directive with regard to resolution plans. This will not be appropriate after exit day as the directive will not have the force of law in the UK. To ensure that such information can still be referenced, we are bringing this content into UK law. The schedule uses text from the relevant sections of the directive but with some minor additional fixes, as is allowed under the EU withdrawal Act, to take account of the UK’s exit from the EU. For example, references to “central banks” will be replaced by references to the UK’s central bank, the Bank of England.

I will of course review the official record of our debate today to see whether there are any questions which I have not answered. I thank noble Lords again for their contributions.

Motions agreed.

Payment Accounts (Amendment) (EU Exit) Regulations 2018

Lord Bates Excerpts

Wednesday 12th December 2018 Grand Committee

Moved by

[Lord Bates]

That the Grand Committee do consider the Payment Accounts (Amendment) (EU Exit) Regulations 2018.

Relevant document: 6th Report from the Secondary Legislation Scrutiny Committee (Sub-Committee A)

[The Minister of State, Department for International Development (Lord Bates) (Con)]

My Lords, as in the previous debate, this statutory instrument is part of the Treasury’s legislative programme which aims to ensure that there continues to be a functioning UK legislative and regulatory regime for financial services in the unlikely event that the UK leaves with neither a deal nor an implementation period.

The statutory instrument will fix deficiencies in UK law in the Payment Accounts Regulations to ensure that they continue to operate effectively post exit. The payment accounts directive had three main objectives: first, to improve the transparency and comparability of fees related to payment accounts; secondly, to facilitate the switching of those accounts; and, thirdly, to ensure access to payment accounts with basic features. The Payment Accounts Regulations 2015 transposed the directive into UK law.

Many noble Lords will be familiar with payment accounts, as they are the day-to-day bank or building society accounts that we use to hold funds, to make and receive payments, and to withdraw and deposit cash. In the UK, the most common form of payment account is a current account.

In a no-deal scenario, the UK would be outside the European Economic Area and the EU’s legal, supervisory and financial regulatory framework. The Payment Accounts Regulations 2015 therefore need to be updated to reflect this to ensure that the provisions work appropriately in a no-deal scenario.

The draft regulations are concerned mostly with removing references to the EU. Therefore, the impact on customers and businesses will be minimal. However, I will go into more detail on three changes to which it may be helpful to draw the Committee’s attention.

The first is that this draft instrument transfers the responsibility for making technical standards for customer documents setting out fees and charges associated with a payment account from the European Banking Association to the Financial Conduct Authority.

Secondly, the draft instrument removes the requirement for payment service providers to facilitate the cross-border opening of payment accounts. This means that payment service providers will no longer be required to provide certain information relating to a customer’s payment account—for example, direct debits or closing balance—or transfer a balance to an EU payment service provider when the customer wants to switch from a UK payment account to an EU payment account. Repealing this provision does not affect the ability of UK customers to open payment accounts abroad.

Lastly, the SI makes changes to the regulations governing payment accounts with basic features, which are more commonly known as basic bank accounts in the UK. For those who may not be familiar with this financial inclusion product, a basic bank account is a fee-free bank account, with no overdraft facility but which otherwise has the same features as a standard current account. The nine largest current account providers in the UK must offer these accounts to those who are unbanked in the UK or who are ineligible for a standard current account.

As the UK will no longer be a member of the EU’s single market for financial services after exit day, the instrument removes the requirement on the nine providers to offer these products to customers resident in the EU or to offer EU currency services on any basic bank account as standard. It will therefore be at their discretion whether to continue to offer basic bank accounts to customers resident in the EU after exit day or keep existing accounts of EU residents open.

The Secondary Legislation Scrutiny Committee was concerned that, should the nine providers choose to make use of these changes and close the basic bank accounts of customers resident in the EU, customers would be placed into financial difficulty as a result. I assure the Committee that this is unlikely to be the case because the nine providers must give customers at least two months’ notice in writing if they plan to close the account, which should give customers adequate notice to open another account.

Furthermore, a customer’s right to a basic bank account is EU-wide, so these customers should be able to open a basic bank account in the member state in which they reside. The nine providers have also signed a 2014 agreement with the Treasury that makes clear that basic bank accounts are designed to help the less affluent and most vulnerable in our society. The Government therefore expect that providers will have due regard to the spirit of this agreement when making any changes to its basic bank account policy.

In summary, this Government believe that the proposed legislation is necessary to ensure that the Payment Accounts Regulations 2015 will continue to function appropriately if the UK leaves the EU without a deal or an implementation period. Most importantly, this means that fee-free basic bank accounts, which are a key financial inclusion product, remain available and robustly regulated to customers legally resident in the UK who are unbanked or ineligible for other payment accounts. I hope this introduction will have been helpful to noble Lords, and I commend the regulations to the House.

[Baroness Drake (Lab)]

My Lords, this SI is part of the series providing contingency planning for the no-deal Brexit scenario. The Payment Accounts Regulations 2015 established a right of access to a basic bank account with basic features for customers legally resident in the EU, which were fee-free for services in sterling, with EU currency services provided at a reasonable fee. The Explanatory Memorandum advises that this SI seeks to ensure that those regulations operate effectively in the UK in the event of no deal and continue to deliver the existing three main objectives of, first, transparency and comparability of fees on day-to-day payment transactions such as cash deposits, withdrawal and card payments; secondly, the facilitation of account-switching; and, thirdly, ensuring access to accounts with basic features for EU residents. Paragraphs 2.2 and 2.12 of the Explanatory Memorandum set out what I have just described.

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[Lord Tunnicliffe (Lab)]

My Lords, I thank the Minister for presenting this instrument. When I first read the Explanatory Memorandum, I thought it was good and it convinced me that, broadly speaking, the instrument was doing its job. Then my noble friend Lady Drake decided to share her speech with me and I realised that perhaps I had not fully understood it, but by this point in the proceedings, the Minister had enough questions to answer anyway without me inventing any more.

The point that has come out of the last two speeches is important. The Government often conclude that an impact is minimal because it affects quite a small number of people. The problem with that attitude is that for the people it affects, it affects them 100%. If you cannot get a basic bank account, that is pretty close to catastrophic in the modern world, so I hope that the Minister will have good answers to my noble friend’s points.

My question is one that runs through many of these SIs—the lack of formal consultation. The consultation paragraph states that there has been discussion with “relevant stakeholders”. One has an uncomfortable feeling that the relevant stakeholders are in fact the financial institutions themselves and not the key relevant stakeholders—the consumers. I would be grateful if the Minister could tell us who the relevant stakeholders were and whether they included consumer representatives, and, if not, why not?

[Lord Bates]

I thank noble Lords for their contributions. They rightly focused on basic bank accounts and the impact on people who are potentially vulnerable. I will try to offer some reassurance.

The noble Lord, Lord Tunnicliffe, and the noble Baroness, Lady Drake, asked about the consultation. The Treasury engaged with UK Finance, the Financial Conduct Authority and the Payment Systems Regulator to ensure awareness of these changes. The Treasury published the draft instrument and Explanatory Note on 31 October. We also notified leading consumer groups after the publication of the draft instrument to ensure awareness of these changes. We have not received any questions since publication. That may well change as a result of noble Lords’ comments today.

The noble Baronesses, Lady Drake and Lady Bowles, asked how many consumers and basic bank accounts will be affected by the changes. Customers legally resident in the UK, whether UK citizens or otherwise, who hold a basic bank account at one of the nine designated providers will not be affected, as the SI ensures that the nine providers must continue to offer these to qualifying customers.

The noble Baroness, Lady Drake, asked specifically about the impact of the SI on consumers. The impact on the majority of holders of payment accounts in the UK will be minimal. Basic bank account customers may experience a reduction in service as their providers are no longer required to give them access to, for instance, non-sterling EU transactions, although they may still choose to do so if they wish. It will be at the discretion of the providers whether they continue to offer new basic bank accounts or keep existing ones open for customers resident in the EU. We expect that that will affect very few. I accept the point made by the noble Lord, Lord Tunnicliffe, and the noble Baroness, Lady Drake, that it may have an impact on those people and I will try to give some reassurance in that respect.

The noble Baroness, Lady Drake, asked why it was necessary for the SI to remove the EU residency requirement. Maintaining that obligation on the nine basic bank account providers would be inappropriate in a no-deal scenario when the UK will no longer be part of the EU single market for financial services. She also asked what happened to UK expats who live in the EU and whether they could open new basic bank accounts. Eligibility for basic bank accounts is dependent on residency, not citizenship, so that would be a matter for the member state and the laws that apply there.

The noble Baroness, Lady Drake, requested an assurance that residents will not be in financial difficulty. The spirit of the 2014 agreement, to which I referred in the previous debate, is to provide for the most vulnerable in society. The Government expect banks to honour that agreement in making any changes. The noble Baroness also asked whether the statutory instrument prevents the cross-border opening of accounts. The changes in this statutory instrument only remove the requirement for firms to provide certain support to customers who wish to switch their payment account from the UK to the EU. They do not affect a UK customer opening an account in the EU.

International Development: Co-operation with the EU

Lord Bates Excerpts

Tuesday 11th December 2018 Lords Chamber

[Lord Bruce of Bennachie (LD)]

My Lords, I beg leave to ask the Question standing in my name on the Order Paper and draw attention to my entry in the register of interests.

[The Minister of State, Department for International Development (Lord Bates) (Con)]

My Lords, the political declaration sets out a vision for our future relationship with the EU. It provides for future UK-EU dialogue on development co-operation and for further discussions on how we might contribute to EU instruments in areas of mutual interest. Any further participation will be subject to the structure of EU instruments in the next multiannual financial framework post-2020, and to adequate UK oversight and participation for UK organisations.

[Lord Bruce of Bennachie]

My Lords, the UK delivers around £1.5 billion of its aid through EU institutions, which amounts to about 12% of the EU budget, and it is rated good or very good under DfID criteria. Given the challenging objective under the UN of ending absolute poverty by 2030 and leaving no one behind, and that the Government state that we share the same concerns, values and commitments to the sustainable developing goals as the EU, will he ensure that we continue to work closely with the EU in partnership? Will he give an absolute commitment that, whatever form Brexit takes, there will be no disruption to programmes, which could cause the poor to suffer or even die?

[Lord Bates]

I am very happy to reiterate the commitment on the important matter of humanitarian programmes in the unlikely event of a no deal. The more general point is covered in paragraph 108 of the political declaration, which talks about and articulates that very clear ambition. Of course, the EU itself is in a process of change in the instruments available. The EDF is coming to the end of its lifetime, and there is now discussion about a new neighbourhood instrument. We want to see what shape that takes before making any longer-term decisions, but the noble Lord is absolutely right to say that our interests and those of our European friends are very much aligned in this area.

[Lord Forsyth of Drumlean (Con)]

My Lords, would my noble friend agree that one of the biggest barriers to prosperity and development for developing countries is the European Union’s customs union, which results in their products being made less competitive and unable to reach our markets?

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[Lord Bates]

One of the things that we can be incredibly proud of relating to the poorest countries in the world is the work done to give tariff-free, quota-free access to UK markets and to the EU for about 100 of the poorest countries in the world. We are committed to replicating that. In fact, we have already done so through the cross-border trade Act, which has already passed through your Lordships’ House.

[Lord Lea of Crondall (Lab)]

My Lords, would the noble Lord agree that if the EU did not exist, this sort of Question would be a very good reason for inventing it? I give the examples of Burundi and Gabon, which each have only about one person competent to deal with a whole number of areas. Would it not be ridiculous if each European country came and told them that the criteria for auditing and testing were to be done 27 different ways? It is vital that this kind of co-ordination continues, preferably by the EU with British participation.

[Lord Bates]

Actually, for the vast majority of interventions of the type the noble Lord mentions we are talking about not EU but UN systems where we seek to have greater harmony. A lot of the things we seek to do with the sustainable development goals are a UN commitment. Our climate change ambitions are driven by a UN framework. There are lots of things that we work together on, but they tend to be more supranational, rather than in large bodies such as the European Union.

[Lord Collins of Highbury (Lab)]

My Lords, the fact is that the political declaration says very good words about the EDF and the need for Britain’s participation. Clearly, the Government have signed up to that. We are all a bit tired of the mantra that it is all subject to negotiation and these are all hypothetical questions. I ask the noble Lord to set out before the House now what the Government aspire to. How do they see participation and what do they see as the likely costs? Will we be able to control those costs? Because I think the public are being hoodwinked.

[Lord Bates]

We propose to leave the European Union on 29 March with a deal and that will then lead to the negotiation of a framework. During the implementation period that is proposed, we will continue to be party to the European Development Fund. When the new neighbourhood instrument is developed, we will evaluate it in light of our priorities and whether our European friends will allow a third country to be party to it. If so, we might continue to participate in it, but one thing is for sure: whatever happens in the course of Brexit, our overall commitment to the world’s poorest, as a leader in this area, will not be shaken at all.

[Baroness Sheehan (LD)]

My Lords, our EU membership has allowed the UK not only to magnify the impact of our aid but also to influence EU development policy to suit our own objectives. Therefore, potential impacts if the UK leaves the EU include a reduction in the global impact of the UK’s ODA and a reduction in value for money. Has DfID made any attempt to evaluate this, both in monetary terms and in terms of the damage done to our part in delivering the global SDGs?

[Lord Bates]

What we have made clear—I made it clear myself at the Foreign Affairs Council on development which I attended in Brussels two weeks ago—is that we believe that the future partnership needs to focus much more on three areas: peace and security; migration, and delivery of the sustainable development goals as part of that; and climate change. We believe that to focus on those and on the least developed countries will be the best way forward. We are making those arguments now because we will continue to be a strong member of the European Union until 29 March.

[Lord Grocott (Lab)]

Given that one crucial element of a successful overseas development policy is to get the aid as rapidly as possible to the front line where it is needed, can the Minister tell us whether any study has been made of whether that is best accomplished via the European Union, with whatever bureaucracy may be involved in that, or by the money and the support going directly to the field—to the mine clearance or whatever it might be—directly from the British Government to the people that need it in the front line?

[Lord Bates]

Indeed. Most of these funding mechanisms are commissioning organisations, either European or through DfID; therefore funds do not actually get delivered by the European institutions. Rather, they commission organisations such as UNICEF or the ICRC to deliver that work on the ground. Most of it is done, essentially, through co-operation through the United Nations: that is what we are all working together for and, of course, that will be subject to no change whatever.

Syria

Lord Bates Excerpts

Wednesday 5th December 2018 Lords Chamber

[Baroness D’Souza]

To ask Her Majesty’s Government what plans they have to support and provide resources for reconstruction programmes in Syria.

[The Minister of State, Department for International Development (Lord Bates) (Con)]

My Lords, while the conflict in Syria is ongoing, the UK’s focus is on delivering life-saving humanitarian aid to those affected. At the same time, we are making every effort to achieve a political settlement that ends the suffering and helps provide stability for all Syrians in the wider region.

[Baroness D’Souza (CB)]

I thank the Minister for his Answer. The needs in Syria today are both huge and urgent. More than 50% of medical and educational facilities are in ruins, as is some 30% of the housing. But some organisations are operating in Syria outside the Assad regime; for example: MSF, the White Helmets, Syria Relief and the umbrella body UOSSM. In addition, the ICRC, which holds a long-standing tradition of neutrality and therefore responds to need wherever it finds it, is doing what it can to ensure continued access to essential services including, in some areas, infrastructure services. These bodies cannot always tick all the boxes that DfID requires to release aid, but they do provide accountability through multiple networks at ground level. Will the Government commit to some flexibility in allowing aid via these channels, so that what infrastructure remains can be maintained and further deterioration prevented?

[Lord Bates]

Certainly I recognise the figures that the noble Baroness outlined about the damage to infrastructure, which were set out in the World Bank’s Toll of War report. I can also confirm that British taxpayers have contributed some £2.71 billion since 2012, making us the second-largest contributor—and this our largest response to any humanitarian situation. When funding goes into a conflict situation, there is a well-established protocol that extra layers of due diligence and tests are needed. If that is not the case, funding to provide humanitarian aid could be diverted into perpetuating the very conflict that we are seeking to resolve. That is the reason that the restrictions and tests are so strict, but we continue to keep the discussions under review and will hopefully work with respected partners in the future.

[Lord Anderson of Swansea (Lab)]

My Lords, estimates of the costs of reconstruction range from $250 billion and $1 trillion. As Russia is responsible for much of the damage, directly and indirectly, has there been any indication at all that it is prepared to pay its share of the costs of reconstruction?

[Lord Bates]

There has not been any indication of that and, of course, the conflict is ongoing. It is vital that all parties to the conflict bring their efforts to bear to stop the ongoing suffering. We believe that, while the suffering and conflict continue, there cannot be a meaningful discussion about how to begin the reconstruction, because that requires a Government we can deal with, and we do not have one at the moment.

[Baroness Sheehan (LD)]

What assurances do the Government have that funds going to programmes run by the UN via Damascus are carried out according to core principles of development and transparency, and do not benefit the Syrian regime’s cronies?

[Lord Bates]

As I was saying, that is kept under review by DfID, by the Independent Commission for Aid Impact and by the National Audit Office. ICAI produced its report in May this year. It found that we were doing what we could in very difficult circumstances. The reality on the ground is that the checks that have to be made are being made in a context that is not Switzerland but Syria in the middle of a conflict situation. It is very difficult to get a 100% level of assurance while still helping people in need.

[The Lord Bishop of Coventry]

My Lords, given the powerful words of the most reverend Primate the Archbishop of Canterbury and His Royal Highness the Prince of Wales at yesterday’s service in Westminster Abbey to mark the contribution of Christians to the Middle East, and in particular His Royal Highness’s moving account of Christians returning to Syria to rebuild not only their homes and schools but their gifts to society—schools, orphanages and hospitals—can the Minister give an assurance that responsible organisations that provide support for returning Christians and other minorities also have the support of the Government? Will the Minister join me in commending the Muslim children who will be joining Christian children to light 1 million candles on New Year’s Day as a sign of their hope for their country and for a shared future together?

[Lord Bates]

I am very happy to do that. It is indeed a message of hope in this situation. I had the opportunity yesterday to meet some of the clergy and patriarchal representatives who were visiting that initiative. I pay tribute to all involved in organising it. Their stories of what was going on on the ground and what they had gone through were quite horrific and a testament to their ability to keep their light flickering in the darkness that surrounds them.

[Baroness Cox (CB)]

My Lords, will the Minister ensure that adequate aid is given to the areas controlled by the Syrian Government? Many thousands of Syrians of all faiths wish to return to their homes in these areas because they are now safe from jihadist attacks, but they desperately need help with reconstruction. On a related issue, given that massive amounts of UK aid money has been given to jihadist-related organisations in Syria, as illustrated by the BBC “Panorama” programme, will the Government publish information on who are the recipients of UK taxpayers’ money?

[Lord Bates]

I must say to the noble Business that I completely reject the accusation that funding has been going to jihadist organisations. That is not borne out at all by the investigations that we have carried out. We have very strict procedures in place. But it is a terribly difficult situation and above all we need all parties to put maximum pressure on the parties to the conflict to rekindle the UN Geneva process so that we can move towards a credible political solution.

[Lord Collins of Highbury (Lab)]

My Lords, I very much welcome the Minister’s response in relation to ensuring ongoing humanitarian support. In this conflict that has to be our number one priority. Can the Minister update the House, particularly on the Rukban camp on the Jordan border, where we were able to get aid and support in at the beginning of November? What is the latest situation and what are we doing with the Government of Jordan to ensure that support is given also to those who cross the border?

[Lord Bates]

It is a particularly difficult situation there. One humanitarian aid convoy got in in November, but that is nowhere near enough to provide for the people there. We are seeking to remind the Syrian regime of its obligations under international humanitarian law to allow access. We are also working with Jordan and as part of that we will be hosting a Jordan conference in London on 28 February next year, where we hope to make progress on a whole range of those issues.

Financial Services (Implementation of Legislation) Bill [HL]

Lord Bates Excerpts

2nd reading (Hansard): House of Lords
Tuesday 4th December 2018 Lords Chamber

Moved by

[Lord Bates]

That the Bill be now read a second time.

[The Minister of State, Department for International Development (Lord Bates) (Con)]

My Lords, I begin with some context to explain why the Government have brought the Bill forward at this time. The Government have been clear that we do not want or expect a no-deal scenario but it remains the role of a responsible Government to continue to prepare for all possible outcomes. This includes the unlikely event that we will reach 29 March next year without a withdrawal agreement or an implementation period.

I have updated noble Lords a number of times on how the Treasury will ensure that we have an effective financial services regulatory regime in the event of no deal. That stability and continuity is being delivered by the 60 or so statutory instruments that Her Majesty’s Treasury is introducing under the European Union (Withdrawal) Act 2018. These will ensure that all relevant existing legislation continues to operate effectively, minimises disruption for firms and protects financial stability.

We need to do more than just ensure that our regime continues to function. The UK’s position as a global financial centre is critical to our prosperity and benefits businesses and consumers across the UK. We need appropriate regulation in place, with the right balance between protecting stability and fostering competitiveness. We aim to be the safest and most transparent place to do business, leading the race to the top and always championing high regulatory standards in financial services markets.

In the unlikely event of no deal, thanks to the hard work of both Houses, we will have brought on to our statute book a vast and highly technical body of EU financial services legislation. We thank both Houses, but both Houses should thank our remarkable civil servants for their incredible work in preparing this great volume of legislation with such accuracy and detail.

However, the powers under the European Union (Withdrawal) Act relate only to EU legislation operative on exit day. Numerous pieces of legislation—or files, which I will refer to later—will not be covered by the withdrawal act powers. They include those that are either already agreed but not yet operative on exit day, or those still under negotiation but which will be operative soon after our departure. There are also provisions in the Bill that relate to non-operative provisions, which it would not make sense to bring into UK law alone.

In many cases, the UK strongly supported these laws when they were being negotiated and played a leading role in shaping them over a number of years. These laws provide up-to-date tools to deal with financial stability risks, ensure that our firms can operate on a level playing field with firms on the continent, allow the UK to meet its G20 commitments and maintain the highest international standards, and provide all-important business certainty and continuity.

As part of this ambition, the Treasury undertook extensive engagement with our financial services industry while negotiating these laws. The sector has been expecting many of these proposals for several years and has been preparing to implement and gain the benefits of them. For example, the prospectus regulation will reduce the financial and regulatory burden for companies wishing to fulfil their financing needs on public markets, while maintaining high standards of investor protection. The UK has been a strong supporter of the reform of the prospectus directive and engaged closely in the development of this regulation.

Implementation is critical to ensure that the UK retains its reputation as an attractive destination for capital. If we are to retain our position as the world’s leading financial centre in the unlikely event of a no deal, it will be vital that the Government can implement the key policies in these EU files in a timely way. Global markets adapt and evolve at pace. We cannot afford for our high regulatory standards to fall behind those of other major financial services jurisdictions. That is what the Bill seeks to address. It will do so in two main ways. First, it allows the Government to implement in the UK a specified list of the most necessary EU financial services legislative proposals in the pipeline through statutory instruments subject to the affirmative procedure. Noble Lords will find the full list and purpose of these files in the policy note published by the Treasury.

Secondly, and importantly, the Bill is only for a situation in which we leave the EU without a deal. It will allow for the Government to choose to implement only parts of these pieces of legislation and make adjustments and improvements as they are brought into UK law. I acknowledge that this is a broad power, but let me be clear on two fronts. In the event of leaving the EU without a withdrawal agreement and without a future economic partnership, the UK will not countenance accepting EU laws wholesale. It will therefore be vital to ensure that any legislation implemented in the UK can be adjusted to work best for the UK markets outside the EU in a no-deal scenario. The Bill is and can be only a stop-gap measure to minimise disruption in the event of no deal for a time-limited period. The Government fully recognise the need to establish a more sustainable process for updating financial services regulation following our exit from the EU and will come forward with proposals in due course.

In recognition of the breadth of powers sought in the Bill, it is subject to a number of strict safeguards. First, as I have stressed, this is strictly a temporary solution and will be limited by a non-extendable sunset clause at two years after a no-deal exit, ending on 29 March 2021. Secondly, the power will be subject to the affirmative procedure in every instance of its use, providing Parliament a guaranteed opportunity to debate, discuss and scrutinise the Government’s approach to implementing these files. Thirdly, the Treasury will be mandated to produce and publish annual reports on the exercise of the power. Finally, the power will be subject to limitations as in Section 8(5) and (7) of the European Union (Withdrawal) Act 2018. It cannot therefore be used to impose taxation, make retrospective provision, create some criminal offences, establish a public authority or amend the Human Rights Act or the devolution settlements.

It is crucial that we press ahead with preparations to ensure that, in the event of no deal, we can protect and enhance the UK’s position as a global financial centre. The Bill is an essential part of those preparations, providing us with the critical ability to implement legislation important to maintaining the functionality, reputation and international competitiveness of our financial sector.

I hope that noble Lords will recognise the Bill as the Government taking a responsible approach in their contingency planning. I look forward to this Second Reading debate on the Bill’s contents and to responding to noble Lords’ questions and scrutiny at its conclusion. I beg to move.

--- Later in debate ---

[Lord Bates]

My Lords, I agree with the noble Lord, Lord Davies: this has been a well-informed debate, representative of the deep expertise in your Lordships’ House, which has been on full display. The areas of agreement were effectively two: recognition of the necessity of preparing for a no-deal scenario, and a united view that we hope never to be in the position of having to exercise the powers in this Bill.

The noble Lord, Lord Sharkey, began our debate by expressing concern about the range of powers, in particular those to include and exclude files. My noble friend Lord Hodgson questioned whether this was a stopgap measure and said that it could not be a substitute for longer-term legislation and a solution in this important area. The noble Baroness, Lady Liddell, having remarked that this is not the most exciting legislation to come before your Lordships’ House, recognised the importance of the financial services industry, to which it relates. She also recognised the role that the United Kingdom has played over many years in the European Union in shaping financial services regulations.

The noble Baroness, Lady Bowles, teed up what will be, if we are fortunate to secure a Second Reading, a Committee stage debate on words such as “implementation”, “proportionality”, “corresponding”, “similar”, “appropriate” and “adjustments”. It will be important to flesh out exactly what is meant by those terms.

My noble friend Lord Leigh talked about the impact of regulations in financial services on small and medium-sized enterprises. He also became perhaps the first Peer to announce in your Lordships’ House his forthcoming listing on AIM. I do not know whether it is appropriate to comment on that, but I wish him well—he is probably getting worried because I wished him well; it was a personal wish.

The noble Baroness, Lady Kramer, talked about the strong role of the financial services in underpinning the fiscal base of the economy, tax revenues and public services. She said it is vital that we retain that strength and continue to exert scrutiny. The noble Lord, Lord Davies, talked about the oft overlooked fact that, when we talk about the financial services, we are talking not just about the City of London but about a national industry, with hugely important centres in Bristol, Leeds and Edinburgh. He also reminded us of the international competitive nature of financial services, and that the UK’s leadership can never be taken for granted but must be earned and restated.

With that, let me move on to some of the points that were raised in the debate. The noble Lord, Lord Sharkey, asked why, if this is so important, other departments are not doing the same, specifically the Department of Health and Social Care. We have already put in place many of the legislative building blocks to deliver our exit from the EU. Since the European Union (Withdrawal) Act received Royal Assent, the Government have started laying statutory instruments to ensure a functioning statute book in all scenarios. Any requirements for further legislation in other areas will be announced in the usual way. I realise that that is not quite the answer that the noble Lord was looking for—or that I anticipated as I began reading out the note. His was a specific question, asking that I speak with colleagues in the Department of Health and Social Care, and I will certainly do that and find out how the particular legislation he referred to might be handled.

The noble Lord, Lord Sharkey, also mentioned the powers to adjust. As the final outcome on these files is still unclear, we need to make sure that we can bring them into UK law in a way that works best for UK markets. This could, for example, include areas where final parts of legislation could, if unchanged in a no-deal scenario, present inconsistencies with the UK regulatory framework, global standards or the UK’s position as an open, global financial market. It is important that we have the power to correct inconsistencies when bringing these into UK law.

The noble Lord then asked why we had chosen some files rather than others. The Bill provides the UK with an interim means to domesticate key EU financial services files that are in the European legislative pipeline. Those are the files that we believe will be the most important for market functioning and UK competitiveness in a no-deal scenario. Those in-flight files not listed on the face of the Bill include those that apply only to eurozone members, which we would never have implemented as a member state, those that the UK has opted out of, and those where there is not a critical need to implement the legislation in the narrow window of time covered in the Bill.

The noble Lord went on to ask what was meant by the word “appropriate”. Once we leave the European Union, we will lose our ability to influence the outcomes of files at a European level—something to which the noble Lord, Lord Davies, and the noble Baroness, Lady Liddell, also referred. As such, we will require the ability to ensure that the files or parts of the files implemented best suit the needs and the structures of the UK financial services market. The power to make appropriate adjustments to legislation is therefore designed to enable the UK Government to ensure that the implemented legislation is the best fit for the UK.

The noble Baroness, Lady Bowles, similarly asked about the power to adjust. The power will only allow the Government to make adjustments to files and not to make entirely new financial services policy not covered within the files. The power will also have to be exercised with the purpose of making similar or corresponding provision to specific lists of files set out in the Bill, so the subject matter of the regulations will naturally be limited. This is simply about ensuring that we implement legislation that is the best fit for the UK.

The noble Lord, Lord Sharkey, asked what was meant by “some criminal offences”. The limitation in the Bill mirrors that in the European Union (Withdrawal) Act. It prohibits the creation of criminal offences for which an adult can be sentenced to a period of more than two years in prison.

The noble Baroness, Lady Liddell, asked about the comparability of low-carbon benchmarks. This is an important issue and I realise that a number of noble Lords have received representations on it. I undertake to look at it specifically and write ahead of Committee.

My noble friend Lord Hodgson asked about the reporting duty of the Government and whether that would include a statement on why a power is used. The report will provide an overview of how the power has been used in the first year and how the Government propose to use the powers in the second year. In the meantime, the Government will undertake extensive engagement and co-operation with key stakeholders throughout the process, ahead of and during each use of the power, and Parliament will have the opportunity to debate every SI under the affirmative procedure. He also asked whether it would be advisable for the Treasury to consult transparently ahead of each use. We agree, which is why, within the policy note accompanying the Bill, we have committed to undertaking extensive engagement and co-operation with key stakeholders throughout the process, ahead of and during each use of the power. In that term “stakeholders”, we very much include Parliament and your Lordships’ House.

The noble Baroness, Lady Bowles, asked whether it would be helpful to change the wording to “corresponding and similar”. This is classic territory for Committee and a well-worked amendment around that will elicit a more in-depth and appropriate response from the Minister at that point. She asked a specific question, which was also referred to by the noble Baroness, Lady Kramer: namely, whether the power could be used to remove the bankers’ bonus cap. While remuneration policies were introduced as part of the EU’s Capital Requirements Directive IV, they are due to be updated through the Capital Requirements Directive V, which is included in the Bill. The Bill allows us to choose not to implement certain files or to implement parts of them. At this point we are not proposing specific policy changes or decisions. Before bringing forward any secondary legislation using the powers in the Bill, we will engage with a wide range of stakeholders, including the financial services sector.

The noble Baroness, Lady Bowles, asked about legislation regarding pension firms. Again, this is something that might best be covered in a letter ahead of Committee. She also asked why we do not just do this through primary legislation in order to get proper parliamentary scrutiny. Given the number of files in question and the potential requirement to implement them at pace to respond to market developments and meet international obligations, it would not be feasible to rely exclusively on primary legislation in every instance. The Bill requires the use of the affirmative resolution procedure for every statutory instrument made. She went on to ask why the Government will not make a full report about concerns and the approach to policy in this Bill. At this point it is very difficult to say which files or parts of files we would seek to implement and whether and what adjustments would be made. This is because we do not know the exact context in which these decisions will be made and what the final versions of many of the files will look like.

My noble friend Lord Leigh asked about the potential negative impacts on, for example, CSDR. We recognise that there are aspects of these files that are currently under development which different parts of the sector may not fully support. The Bill allows us to choose not to implement files, to implement parts of them and to correct deficiencies in them, as well as to make adjustments to ensure that the legislation works best for the UK, subject to appropriate safeguards.

The noble Baroness, Lady Kramer, asked about the so-called Henry VIII powers being used. Of course we understand the concerns around the breadth of powers, and that is why we have included a number of safeguards within the Bill to address them, including explicitly listing the relevant files on the face of the Bill and sunsetting the powers to two years, consistent with the European Union (Withdrawal) Act.

The noble Lord, Lord Davies, asked about adjustments to powers. It would be possible under the terms of the power only to make adjustments to any EU file we would be implementing and not to completely change its intent. This power would allow us to make provisions which are broadly equivalent to the original file and which therefore seek to achieve a similar outcome in a way that best fits the UK. However, it would not be possible for the Government to use this power to implement something completely different from the original file.

Again, I thank noble Lords for their contributions to the debate.

[Baroness Kramer]

This may be extremely petty, so I ask for the compassion of the Minister. However, subsection (9) is completely incomprehensible. Three of us read it and we came up with entirely different conclusions as to what it meant in terms of both the preparation and publication of this report. Is he able to provide clarity now or else to do so by the time we get to the Committee stage? It may not be contentious at all—it is just that it is impossible to work out exactly what it means.

[Lord Bates]

I can understand that. It is a fairly short Bill, but I will undertake to write a more substantial letter between this Second Reading and Committee if it is granted by your Lordships’ House. I will cover and expand further on that point.

We will carefully consider all the points which have been raised in this debate. I thank noble Lords for bringing their expertise and knowledge to bear on this important piece of legislation. I request that the Bill now be given a Second Reading.

Bill read a second time and committed to a Committee of the Whole House.

Global Fund to Fight AIDS, Tuberculosis and Malaria

Lord Bates Excerpts

Monday 3rd December 2018 Lords Chamber

[Baroness Barker]

To ask Her Majesty’s Government what assessment they have made of the results achieved in saving lives by the Global Fund to Fight AIDS, Tuberculosis and Malaria.

[The Minister of State, Department for International Development (Lord Bates) (Con)]

My Lords, the Global Fund to Fight AIDS, Tuberculosis and Malaria has helped to save 27 million lives since 2002. Deaths caused by the three diseases have been reduced by one-third in countries where the Global Fund invests. Despite impressive progress, however, there are significant challenges which require us to go beyond “business as usual” to achieve the 2030 targets.

[Baroness Barker (LD)]

I thank the Minister for his Answer. Successive UK Governments should be proud of the role this country has played in the Global Fund, which has a huge effect, not just by keeping millions of people alive, but also on the search for new medicines and vaccines. What do the Government intend to do to support the Global Fund in its upcoming sixth replenishment?

[Lord Bates]

The noble Baroness is right. This is an area where we can be proud cross-party of the commitment that has been made since the fund was started in the early 2000s. Successive Governments have committed to this, and the UK is now a leading force in this whole area. We are coming up to a crucial moment with the sixth replenishment of the Global Fund, which will take place next year. The investment case will be presented to potential donors in New Delhi in February and then it will be important for all countries to step up to the plate. The UK’s position—I am absolutely confident of this without prejudging it—will continue to be one of leadership and commitment, because it is working.

[Lord Cashman (Lab)]

My Lords, does the Minister agree that it is vital we maintain our commitment to the Global Fund and encourage other partners to do so if we are to achieve our ambition of zero HIV diagnoses by the year 2030 in line with the sustainable development goals?

[Lord Bates]

That is absolutely right. On the sustainable development goals to which all 193 nations are signed up, goal 3.3 is the specific commitment. If it is going to be met, nations will have to step up and put more funds on the table to ensure people get the treatments that are needed. In 2017, those diseases killed approximately 2.6 million people, so we are a long way off 2030. We have the technologies, but we need to make sure the resources are there so that they are delivered.

[Baroness Hayman (CB)]

My Lords, there is another commitment to which the Government are a party and that is the commitment made at the Commonwealth Heads of Government Meeting to halve malaria in the Commonwealth by 2023. The Global Fund has been absolutely crucial so far in the enormous achievements that we have made against malaria but, as the Minister said in his Answer to the Question, the achievements are in jeopardy if we do not go forward. Can he be even more positive about both the Government’s commitment to the sixth replenishment round and to persuading other Governments to meet their commitments too?

[Lord Bates]

I think that that is one reason we were party to the high-level meeting in the margins of the UN General Assembly in September, which sought to gather some momentum behind this issue. There are other challenges with malaria, which the noble Baroness, as someone who has championed this cause over many years in this House, will know, and they include antimicrobial resistance and insecticide resistance. The challenges, particularly in relation to malaria, are getting more difficult, and that is why we need the resources.

[Lord Black of Brentwood (Con)]

My Lords, can my noble friend tell us what plans the Government have to improve access to HIV treatment for children? Globally, only 52% of children living with HIV have access to antiretrovirals and, tragically, half of those without treatment will die before their second birthday. There will soon be a high-level discussion on scaling up early HIV diagnosis and treatment for children. Will the Government be sending a delegate to it?

[Lord Bates]

I cannot give an answer on that point, but I am very happy to write to my noble friend. He is absolutely right. We believe that this issue will be addressed in the investment case. It is also touched upon in the political declaration that accompanied the UN General Assembly high-level meeting. However, I will certainly write to him on the specifics of the issue and I thank him for raising it.

[Lord Collins of Highbury (Lab)]

My Lords, as many low-income countries graduate to middle-income countries, that could have a disproportionate effect on women and girls in particular where programmes require ongoing funding. Is DfID working with the Global Fund to ensure that transition policies are complementary and that no one is left behind?

[Lord Bates]

The noble Lord is right. Some middle-income countries, such as China, India and Indonesia, show the highest incidence of TB. The highest incidence of HIV/AIDS is to be found in South Africa, with an increasing number of instances in the countries of central and eastern Europe due to drug-related infections, so this has to be part of the overall effort. The noble Lord and I have often talked about the fact that the SDGs are very important because they focus on eradicating the disease rather than focusing on a particular geographic area.

[The Earl of Listowel (CB)]

My Lords, how has the Global Fund contributed to reducing the transfer of HIV/AIDS from mother to infant, and what progress has been made with regard to reducing maternal transfer?

[Lord Bates]

I do not have a specific answer to that, so perhaps I may deal with it in my written response to my noble friend Lord Black.

[Baroness Sheehan (LD)]

My Lords—

--- Later in debate ---

[Viscount Ridley]

My Lords, further to the question from the noble Baroness, Lady Hayman, about malaria, my noble friend will be aware that malaria mortality has halved in this century, which is a remarkable achievement. Seventy per cent of that reduction was due to a surprisingly low-tech innovation—namely, the insecticide-treated bed net, although, as my noble friend said, resistance is becoming a problem. Is he aware of research that is going on to improve the efficacy of insecticide-treated bed nets, and is this something that the British Government support?

[Lord Bates]

I am aware of the research. Precisely because of the insecticide and antimicrobial resistance that I mentioned, this issue will be addressed in our antimicrobial resistance strategy, which will be refreshed next year. However, I know that my noble friend takes a close interest in this technology, and I would be grateful if he would keep us informed of any initiatives or new ventures that he is aware of.

Brexit: Bank of England Report

Lord Bates Excerpts

Thursday 29th November 2018 Lords Chamber

[Baroness Kramer (LD)]

My Lords, I beg leave to ask the Question of which I have given private notice.

[The Minister of State, Department for International Development (Lord Bates) (Con)]

My Lords, the Bank of England’s analysis has been produced for the Treasury Committee and Parliament, and it is rightly produced and presented by the Bank independently of government. The analysis shows that under an economic partnership similar to the Government’s deal, there could be an improvement in the economy’s performance for the next five years compared to the Bank’s latest forecast. Over the long term, our economy will remain fundamentally strong. We are confident that the deal we have agreed provides certainty, is the best available for jobs and prosperity and allows us to honour the result of the referendum.

[Baroness Kramer]

My Lords, in its scenario looking at terms closest to the May deal, the Bank of England analysis actually shows that GDP by 2023 will be nearly 4% below the pre-referendum trend—below what it would have been under remain. Will the Government now tell the British people very clearly that their chosen deal leaves the country not just marginally but significantly poorer, less productive and with a smaller economy than remaining in the EU? Will the Government now treat the country fairly and allow the people to vote with this full information at hand?

--- Later in debate ---

[Lord Bates]

Similar claims were made before the referendum took place. The choice that will be faced by Parliament—by the House of Commons on 11 December —is between the deal that the Prime Minister has negotiated and no deal. The focus should be on that. The Bank of England analysis and that produced by the Government yesterday to inform that debate show that the deal proposed is overwhelmingly better than no deal. That is what we will work towards.

[Lord Davies of Oldham (Lab)]

My Lords, in producing the report, the governor is fulfilling his obligation in preparation for the Treasury Select Committee, as the Minister has indicated. So let us have no nonsense about the fact that the governor is exceeding his powers in any respect. We would expect the Bank of England to be well informed about the present situation and to be in a position to offer warnings to the Government. The basis of the warnings is the preparedness of British industry and commerce to adjust to the catastrophic position of a no-deal Brexit and to the Government’s proposed position. Is it not clear that the Minister needs to convey to his colleagues that there is enormous anxiety about the lack of preparation for the development of deals, which will be far below the level anticipated when the negotiations began? The governor is quite right to have identified in his report the Bank of England’s anxieties.

[Lord Bates]

The noble Lord is absolutely right: the Bank of England has a statutory duty to inform its own analysis and to look at the worst-case outcomes to ensure that the economy is resilient to meet them. That is for the Financial Policy Committee and the Monetary Policy Committee to undertake, and they do so routinely. What is different about this analysis is that it was prepared at the request of the Treasury Committee in another place to inform the wider debate that it will have. Next week, the committee is taking evidence from the Chancellor of the Exchequer, and that will all be thoroughly debated ahead of the vote on 11 December.

[Lord Howell of Guildford (Con)]

My Lords, I greatly admire the economic acumen of the noble Baroness, Lady Kramer, and I agree that these long-term projections for GDP are a bit scary—but they are probably not very accurate. However, is she not, along with many other people, confusing the narrow and misleading measure of GDP with the real drivers of our welfare and prosperity? Does my noble friend agree that many economists today realise that, to measure our welfare and prosperity, we have to look at much wider factors that assess our national dynamism and innovation? Economists today are facing an economics revolution, and are putting in its place the wrong-headedness of focusing just on the old GDP figure, which frankly belongs to another age.

[Lord Bates]

We do indeed need to look at a range of figures. The most reliable measure is what business is doing. Businesses are hiring people, which is why we have record levels of employment; businesses are exporting, which is why we have record levels of exports; and businesses from overseas are investing in Britain, which is why we have the largest stock of FDI in Europe. That is the true evidence that we need to look at.

[Lord Lea of Crondall (Lab)]

My Lords, is it not surprising that someone should say that by using the measure of GDP, which is consistent with the OECD and every other major nation’s measure—one could discuss reconciling income, output and expenditure at some other point—the Governor of the Bank of England is inventing some sort of false crisis? Is it not the case that the charge concerning Project Fear has been replaced not by evidence and forecasting for the future but by decisions by industry, which are now being announced? In Britain, FDI decisions—not forecasts—are down 80%.

[Lord Bates]

The noble Lord has great expertise in economic analysis. He will recognise, therefore, that what we are discussing today is a scenario: it is a tool that is used to assess and stress-test risk. What is being put forward here is a worst-case scenario. I am not a pessimist; I am an optimist and a believer in the best possible outcome. I believe that that is the Prime Minister’s deal, which I hope will be supported.

[Lord Lilley (Con)]

My Lords, is my noble friend aware that the report assumes that imports into this country will decline by 15% because of what it calls additional customs checks? However, customs checks are carried out on the basis of risk. The customs computer selects 1% of consignments for physical checks. The head of Customs and Excise and the head of sanitary and phytosanitary services have said that there will be no additional checks post Brexit because there will be no additional risk attaching to imports into this country. We were told that the Bank of England was acting independently of the Government: is it acting in ignorance of the Government’s own policy?

[Lord Bates]

We do not want to detract from the fact that the Bank of England has a duty to stress-test the economy against a range of possible outcomes. Normally those scenarios are considered in private to inform the work of the various committees of the Bank in reaching their decisions. Perhaps uniquely in this case, they have been made public along with the assumptions which underpin them, as my noble friend has highlighted. However, these are worst-case assumptions. It is right that the Bank should look at a range of outcomes, but it is also right that we should consider other analyses, such as the analysis the Government produced yesterday.

[Lord Grocott (Lab)]

My Lords, in answering the first question the Minister referred to the mismatch between predictions made prior to the referendum about the growth of the economy and what happened subsequent to the referendum—not subsequent to now but subsequent to the referendum. There were numerous forecasts. Will he helpfully put the various forecasts that were made—including from the Treasury and the then Chancellor, for example—in the Library so that we can see the evidence that the Liberal Democrats’ spokesman was asking for and have the facts about the colossal mismatch between previous economic forecasts on this issue and what has actually happened?

[Lord Bates]

We were covering that very point when the Office for Budget Responsibility produced its forecast along with the Autumn Budget. This showed that the forecast made in April about what would happen was underscored, and actually we achieved more. It increased its forecast going forward because it believed there would be more employment, more taxes and less debt.

[Lord Forsyth of Drumlean (Con)]

My Lords, in defence of the Governor of the Bank of England, can my noble friend confirm that these are not forecasts but scenarios whereby the Government think of three impossible things that could happen before breakfast and then ask the banks to plan accordingly to show that they would have the capital required to meet those extreme conditions? To present these as forecasts is misleading and undermines the Bank of England in carrying out its responsible activities.

[Lord Bates]

My noble friend has immense experience in the financial services sector and banking. What he sets forward is precisely the position. These should not be misinterpreted. They should be placed in the wider debate going forward and not taken out of context. I wholeheartedly agree with him.

Health: Tuberculosis

Lord Bates Excerpts

Thursday 29th November 2018 Lords Chamber

[Lord Collins of Highbury]

To ask Her Majesty’s Government what action they are taking to support the global fight against tuberculosis, in the light of tuberculosis being the leading cause of death globally among people living with HIV/AIDS.

[The Minister of State, Department for International Development (Lord Bates) (Con)]

The UK is a global leader in the fight against TB and HIV and fully recognises the interrelationship between these diseases. We are the second-largest funder to the Global Fund to Fight AIDS, TB and Malaria, which provides treatment for people with TB and those living with HIV. We are accelerating research on prevention and treatment, and strengthening health systems to improve access to quality healthcare, including for TB and HIV.

[Lord Collins of Highbury (Lab)]

I thank the Minister for that response. Between 2000 and 2014, implementation of the collaborative TB/HIV activity saved an estimated 8.4 million lives. Will the Minister tell us what steps the Government are taking to ensure that their bilateral investments in HIV programmes support the integration of TB and HIV services, as recommended by the WHO?

[Lord Bates]

As the noble Lord knows, most of our giving, which is very generous, on behalf of the British taxpayer is through the global fund, and we believe that that multilateral body is the most effective way of delivering support. We are the second-largest donor to it, giving £1.2 billion in the current round, which is helping to treat 2.2 million people, so we continue to keep that as our focus. Of course, we will keep under review the advice from the World Health Organization about whether there are specific bilateral programmes that we ought to support more.

[Lord Alton of Liverpool (CB)]

My Lords, can the Minister update the House on the reply he gave me on 2 November about the serious shortage of TB drugs in Uganda? While he is doing that, could he return to the question asked by the noble Lord, Lord Collins, about the integration of HIV and TB services, as recommended by the World Health Organization? Are we doing that? What are we doing about the $1.3 billion funding gap in research?

[Lord Bates]

I believe that the specific case in Uganda, which the noble Lord raised with me, has now been resolved through the Global Drug Facility. A six-month supply of the drug has been provided, following the closure of the factory in China which was the principal supplier. We keep that under review through the World Health Organization. The noble Lord also asked what more we could be doing in that area to close the funding gap. The Secretary of State, Penny Mordaunt, attended a very successful UN General Assembly high-level meeting specifically on tackling TB at the margins, where a target was set for a level of treatment and funding. At that event, the Secretary of State also announced further funding, from us, of £7.5 million for the TB Alliance.

[Baroness Sheehan (LD)]

My Lords, earlier this year I visited a lab in London that is at the centre of efforts to develop HIV and TB vaccines, run under the auspices of the International AIDS Vaccine Initiative. Since then, breakthrough clinical trials have shown that an effective TB vaccine could be possible but, despite this, the Government no longer fund this work. Yet we know that without vaccines, we will not end the epidemics. Will the Minister revisit this decision so that we can support UK science and deliver on our SDG promise to end TB by 2030?

[Lord Bates]

We work closely with my noble friend at the Department of Health and Social Care on the specifics of vaccines. DfID has funded some candidates for potential vaccines in the past. It is a very long-term project. There is such demand for scarce resources that we have to allocate them correctly, but if there are promising candidates for a vaccine we would very much want to look at the possibility of funding them.

[Lord Berkeley of Knighton (CB)]

My Lords, I was rescued from the clutches of this disease by wonderful NHS treatment. Does the Minister agree that TB can remain dormant in the human body until a time of great stress or malnutrition? Therefore, it is the combination of drug efficacy and, I am afraid, poverty that can exacerbate this problem.

[Lord Bates]

That is very true, and that is why the vast majority of cases of TB around the world—an estimated 10 million new cases in just the past year, leading to the potential deaths of 1.6 million people—are predominantly in low-income countries, which is also where the UK aid budget is focused most.

[Lord Black of Brentwood (Con)]

My Lords, does my noble friend agree that the greatest barrier to tackling HIV and its comorbidities, such as TB and hepatitis, is the continuing burden of the criminalisation of homosexuality in so many countries, which makes proper health education almost impossible? Will he restate the Government’s strong and very welcome commitment to tackling that scourge of criminalisation?

[Lord Bates]

We will of course do that. I think some 72 countries around the world criminalise same-sex relationships to some, degree and 36 of those are Commonwealth countries. That is why we mentioned that at the Commonwealth Heads of Government Meeting. We have to strike a note of some humility there; in some of the conversations I had at that meeting, it was pointed out to me that the legislation came from British colonial rule. We therefore need to be humble and careful in how we approach the matter, but it is absolutely right that we should highlight that these laws should be changed. They are something from the past and they inhibit the tackling of this prevalent disease.

[The Lord Bishop of St Albans]

My Lords, it is good that we are such a major donor to those trying to solve this problem. Nevertheless, as the noble Lord, Lord Alton, pointed out, there is still a huge funding gap. What attempts are being made to draw together international partners to give this a much higher priority, and in particular to ensure that we can fund these relatively low-cost, very effective TB drugs, which are making such a difference?

[Lord Bates]

The best thing we can do is lead by example. That is what we were trying to do in organising the high-level meeting in the margins of the UN General Assembly in September, and we can do that by deciding how we allocate our resource. However, it is for a lot of other wealthy countries to step up to the plate. A commitment was made by all those who attended and signed the political declaration at the UN General Assembly that they would treat 40 million people between 2018 and 2022. If that is to happen, there needs to be an awful lot more money in the system. The UK can do its bit, but other countries need to do more.

Central Securities Depositories (Amendment) (EU Exit) Regulations 2018

Lord Bates Excerpts

Wednesday 28th November 2018 Lords Chamber

Moved by

[Lord Bates]

That the draft Regulations laid before the House on 31 October and 6 November be approved.

[The Minister of State, Department for International Development (Lord Bates) (Con)]

My Lords, these are two out of around 60 financial services SIs being laid by the Treasury under the EU withdrawal Act. They form part of the preparations being undertaken to ensure, in the event that no deal has been agreed when we leave the European Union in March 2019, that a functioning legislative and regulatory environment will continue to be in place for the financial services sector. They deliver on a commitment made last December, when the Treasury announced that it would provide functions and powers to the Financial Conduct Authority in relation to trade repositories, and to the Bank of England in relation to non-UK central securities depositories, to enable them to manage in an orderly manner any cliff-edge risks arising from a no-deal scenario.

Trade repositories and central securities depositories provide services in the UK under EU regulation. Should the UK leave the EU without a deal or an implementation period, trade repositories and central securities depositories would be unable to provide services to UK firms until they had the appropriate permissions under the UK’s domestic regimes, given that the UK would be outside the single market for financial services. The SIs seek to ensure that there will continue to be a functioning regulatory regime and mitigate any disruption in the provision of services in that scenario.

First, I will discuss the trade repositories SI. Trade repositories collect and maintain records centrally on derivative transactions. Derivatives are financial instruments that can be used to hedge against risks such as interest rate fluctuations or asset price volatility.

The European Markets Infrastructure Regulation, known as EMIR, requires all information on European derivative transactions to be reported to trade repositories registered or recognised by the European Securities and Markets Authority. If trade repositories were unable to provide services to UK firms post exit, those firms would be unable to fulfil their reporting requirements under the UK’s regime and the UK regulators would lose access to valuable data used to monitor the UK market for financial stability risks.

The SI therefore introduces a number of measures to mitigate against that risk and ensure a smooth continuation of services from trade repositories to UK firms. First, it establishes a UK framework for the registration of UK trade repositories, while maintaining the same regulatory criteria for new UK trade repository applicants. To do that, ESMA functions relating to registration of trade repositories will be transferred to the Financial Conduct Authority. That includes the mandate to make technical standards specifying the information to be provided by trade repository applicants. The FCA is already familiar with the reporting requirements under EMIR, due to its role in supervising UK firms, which are subject to existing EU reporting obligations. That means that it is the most appropriate UK authority to take on that role.

Secondly, the SI provides powers to the FCA to consider applications ahead of exit day so that a trade repository can provide services in the UK as soon as possible following exit. Thirdly, it establishes a “temporary registration” regime for eligible trade repositories that will allow them to continue to provide services to the UK by forming UK-based subsidiaries. That provides temporary registration for a period of three years to UK trade repositories that are part of a group containing an ESMA-registered trade repository, the purpose being to allow additional time for their application for permanent registration to be considered by the FCA and to ensure continuity of services to UK firms. To enter the temporary regime, an eligible trade repository must, ahead of exit day, submit an application to the FCA for registration and set up a new legal entity in the UK.

Finally, the SI creates a conversion regime whereby UK trade repositories, currently registered by ESMA, are deemed to be registered by the FCA from exit day. To enter the regime, a UK trade repository must notify the FCA of its intention to be registered ahead of exit day. The conversion regime therefore ensures smooth continuity of services from UK trade repositories to firms.

--- Later in debate ---

[Lord Tunnicliffe (Lab)]

My Lords, I will take the statutory instruments in order, starting with the central securities depositories regulations. A characteristic of these SIs is that they tend to have two parts. I wish I had the same interests to declare as the noble Baroness because then I would come to this knowing something about it. Starting from scratch is quite a battle. My analysis of these SIs is broadly that there is a bit about the transfer of functions and a bit about the transitional provisions. They are more or less in those two groups. The transfer of functions is unexceptionable, except that I am not at all convinced that the Treasury should be solely responsible for the equivalence decision. That is a view that I shall take all the way through. The noble Lord does not have to answer me on this SI because I will bring it up on the last one, by which time a note might have arrived from the Box.

The transitional provision is more complex in all the SIs, but in particular with this one. When you dig into it you discover that apparently there is only one UK CSD and its transition will be little more than a formality, which is good to hear, since these organisations are so important in our lives. Non-UK CSDs have a more complex transition process, but, as far as I understood it, that was okay.

Similarly, the transfer of functions for the trade repositories is straightforward, except for my caveat on the Treasury’s role. I understand that there are five UK trade repositories, covered by paragraph 7.18 of the Explanatory Memorandum. Once again, it looks as though that is pretty well a formality. I found the non-UK TRs transfer regime more complicated, but the one feature I saw is that some new TRs—if they ever emerge—seem not to be fully registered for up to three years. Can the Minister explain why such a long period is necessary?

[Lord Bates]

I thank the noble Lord and the noble Baroness for their scrutiny of the statutory instruments. I will respond first to the noble Baroness, Lady Bowles, who asked about the difference between the current system and the onshoring SI. Before the CSDR, the recognised clearing house regime under the FSMA applies. After exit and the end of the transition regime, the onshored CSDR regime, which is more extensive, applies for any CSD.

The noble Baroness asked for more detail on how that process will work. The Bank of England sent a letter to non-UK CSDs, setting out the process through which CSDs may notify the Bank of England to enter a transitional regime following the UK’s withdrawal from the EU. The process is proportionate and straightforward, with questions we do not expect to be onerous for CSDs to answer. Non-UK CSDs are encouraged to indicate to the Bank of England their intention to notify from the point at which they receive the letter—so the letters have been sent. The Bank of England will treat these indications as notifications at the point that the legislation is made. We are therefore confident that non-UK CSDs will be able to make these notifications in good time. One specific element is that a non-UK CSD will continue to be subject to the existing requirements under the FSMA until the Treasury has made a decision on jurisdiction. Once that happens, these CSDs will be required to provide an application to the Bank of England six months after the Treasury decision. There is a requirement for non-UK CSDs to notify the Bank before exit day of their intention to continue to provide services in the UK following exit.

The noble Baroness asked about the familiarisation costs included in the regulations. I was looking at the algorithm in Annexe 5 and she made some points about that. I am happy to confirm that the familiarisation costs in the impact assessment cover only these instruments. They do not include FCA consultations or the broader impact of leaving the EU—just the specific provisions in this SI.

[Baroness Bowles of Berkhamsted]

May I go back to the point about when CSDs switch from being under the present UK regime to being under the new regime? It seems a bit peculiar. Is it the situation that while they are currently running under the UK regime, once they start to run under the onshored CSDR there will be an equivalence decision and they will then be under a tighter, more extensive regime? It seems very strange that as soon as you have recognised a country as having equivalence, you then require more rather than less—or have I misunderstood something?

[Lord Bates]

I certainly would not suggest that the noble Baroness has misunderstood anything. I will work my way through the pile: I have a feeling that I will have an answer for her very shortly.

She asked what would be amended if there were an implementation period. The legislation would not come into effect in March 2019 in the event of an implementation period. It would be amended to reflect the eventual deal on the future relationship, or to deal with a no-deal scenario at the end of the implementation period. Amendment would depend on agreement being reached with the EU.

The noble Lord, Lord Tunnicliffe, asked if was appropriate that the Treasury is the only body responsible for equivalence decisions. The Treasury takes the role of the Commission in equivalence decisions, but will be informed by advice from the FCA as necessary. As to why the regime will last for three years, the TRRs provide sufficient time for the FCA to be satisfied that the new TR fully meets the requirements set out in the draft Over the Counter Derivatives, Central Counterparties and Trade Repositories SI, of which he and I have fond memories and which was published on 22 October. Three years was judged the most suitable duration period, based on consultation with the FCA. The timescale aligns with other temporary regimes such as the CCP temporary recognition regime.

The noble Lord, Lord Tunnicliffe, asked specifically about the transitional regime for central securities, and the noble Baroness, Lady Bowles, also referred to it. The transitional period is intended to allow non-UK CSDs to continue to provide services in the UK after exit. UK CSDs that have applied for authorisation prior to exit day will be automatically entered into the transitional regime. There is a requirement for non-UK CSDs to notify the Bank before exit day of their intention to continue to provide services in the UK following exit. Any non-UK CSD that fails to notify the Bank may be subject to public censure. A non-UK CSD that has notified the Bank and entered the transitional regime can continue to provide CSD services in the UK on the current basis for a certain period. For a CSD that has made an application for recognition to the Bank of England, that period ends when the application is decided. For a CSD in a jurisdiction that the Treasury has determined to be equivalent and that has not made an application to the Bank of England, that period extends to six months after the Treasury’s equivalence determination. I think that is a partial answer to the question raised by the noble Baroness, Lady Bowles.

The noble Lord, Lord Tunnicliffe, also asked why the Government are not bringing into UK law the settlement discipline regime. Certain CSDR provisions on settlement discipline do not come into force until after exit day. As a result, they cannot be considered retained EU law and are beyond the scope of the European Union (Withdrawal) Act 2018. Returning to the question asked by the noble Baroness, Lady Bowles, she said that it seems strange that once a country has been found equivalent, more is required of that CSD. Equivalence is a decision on the alignment of another country’s regulatory regime. This is a decision of the Treasury. The recognition of a specific CSD is a more technical decision at the level of that CSD, and that is made by the Bank of England.

[Lord Tunnicliffe]

Before the noble Lord sits down, I am fascinated to know what “public censure” looks like.

[Lord Bates]

Of course, that would be what the regulators engage in in the rigorous upholding of the rules that govern activities in their respective areas, whether it is the Bank of England, the Financial Conduct Authority or the Prudential Regulatory Authority. Any reprimand of any shortcoming they observe would be regarded as a matter of public censure.

I am grateful to noble Lords for their comments. I commend both these SIs to the House.

Motion agreed.