Financial Services (Implementation of Legislation) Bill [HL]

Lord Davies of Oldham Excerpts

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

[Lord Davies of Oldham (Lab)]

My Lords, Her Majesty’s Opposition support this Bill in principle. The Government have every right, indeed they have a duty, to prepare against the possibility of a no-deal Brexit. A few months ago, when work on the M20 lorry park was first considered, it occasioned some surprise in the nation which had not realised that the Government might need to take constructive action against a no-deal outcome. After all, the Prime Minister had reassured us that negotiations were making satisfactory progress and few Members of Parliament had canvassed the idea of no deal as a good policy for the Government.

However, things have changed over time. Now, of course, the weakness of the Government’s case for the development of our position as a result of the negotiations means that a considerable element in the governing Conservative Party looks upon no deal as better than some other possibilities. Such an outcome is totally rejected by the Prime Minister, so her Government are setting out to mitigate the calamity of no deal against a background where they continue to expect a better result.

For the nation, however, these preparations take on a different salience: there is no certainty about the future and no deal is a possibility, however disastrous that would be for the economy and the country’s welfare. So we have this modest Bill to ensure that “in-flight” legislation in Brussels can be safely implemented in the crucial sector of the financial services industry; no one is in any doubt of the importance of the industry’s contribution to the welfare of the economy. The Bill updates the regulatory regime and seeks to minimise the problem of the year, or possibly two years, after no deal. It reflects the fact that a considerable amount of UK financial services legislation has been part of European law for a long time. Its applicability to the United Kingdom is therefore entrenched in our laws. This has provided a significant place for UK leadership. My noble friend Lady Liddell identified just how much the UK has contributed to the development of policy in Europe—the result of what is widely recognised as the advanced and sophisticated level of financial services in London and several other major cities of the country. It has been a prime mover of improvement in the development of legislation and regulation.

There will of course be an unquestionable loss when the UK quits the European Union. No one is saying for one moment that the industry will not flourish and play a significant role in our economy but it will be increasingly difficult for us to play the enhanced leadership role in Europe that has been the case in recent years. As we all appreciate, there are competing parties from other countries who are also very interested in securing control and power that they can exert over the industry.

As the noble Lords, Lord Hodgson and Lord Sharkey, pointed out, the problem with this legislation is that the legislative initiatives put forward significantly increase the power of the Government. There is a crucial phrase, which noble Lords have referred to on more than one occasion in this debate: the power for the Treasury to make adjustments where it considers appropriate. Of course, the Treasury will decide where this will be of benefit for the United Kingdom and where it will work best in the context of this country. The Treasury will defend itself with that phrase in the legislation, but it does not alter the fact that what are posited through delegated legislation as relatively minor transfers of powers in fact give the Treasury very considerable latitude.

We recognise that the powers last for only a short period—namely, two years—with a sunset clause attached to the legislation, and of course we approve of the fact that some gesture is made towards parliamentary scrutiny by the indication that the SIs will be subject to the affirmative procedure. However, the scope for government policy to develop in this process is considerable, and that has already been illustrated by the anxieties expressed by the noble Baroness, Lady Bowles, and my noble friend Lady Liddell.

Also drawn to our attention has been the case put forward by the UK Sustainable Investment and Finance Association. It wants to know, as I am sure we all do, where two pieces of in-flight legislation in which it has a significant interest appear in the list. If to govern is to choose, this certainly suggests that the Treasury can already operate with a heavy hand, even at this very early stage. Can the Minister clarify this position today? If not, rest assured that this and the other issues that have cropped up in this very well-informed debate will be the subject of considerable discussion and debate, as well as intensive scrutiny, in Committee.