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

Lord Deben Excerpts

Tuesday 1st October 2019 Lords Chamber

[Baroness Bowles of Berkhamsted (LD)]

My Lords, again, I declare my interests as listed in the register—in particular, as a director of London Stock Exchange plc.

I shall start where the Minister finished, in the sense that he said that there had been constructive engagement with stakeholders and industry. I acknowledge that that is true, and I also acknowledge that HMT has, by and large, done a very good job with the full range of statutory instruments, a great many of which some of us have had the pleasure of looking at. However, I have a comment to make on the others, and I say this because the Minister is relatively new to his post. Previously, once there was a final version, this was sent to those of us who were engaged on the SIs with a little more notice than we have had in this case—perhaps to look up a few things and occasionally even to find a few more mistakes than we have been able to this time.

I recognise that this is an unusual time, with our having been dragged back when perhaps the Government had not expected that—although that was obviously the right thing to do—but if any more SIs are lined up, can the Government try to give us a little more notice of the final versions? That would make things far smoother for us. We are rather large stakeholders but are not really being consulted until it is in the final form. We sometimes have only a couple of days to look at it. The Government are giving far more time to the people who do not have to make decisions than those who do. In general with secondary legislation, it is very important that this can be done with much more time at our disposal.

I do not have a great deal to say. I agree that, by and large, these are relatively small changes. It gives us a nice list of things that I need to go and look at in the Criminal Justice Act—it raises my curiosity about what regulated markets are defined elsewhere. Obviously, if it is a question of bad behaviour, we want to catch that globally, not just within the EEA. I assume that we have some definitions of regulated markets, such as in the United States and elsewhere. Maybe that can be answered for me, but I will have to go and have a look.

Something jumped out at me slightly in the amendments to MiFID, where it is being redefined to refer just to the UK systematic internalisers, rather than reading “EU systematic internalisers”. It says that that was previously a mistake and should have been localised to the UK. We have had several instances where things were deliberately UK-wide and EU-wide sometimes—the question was whether it would be a symmetric or asymmetric case. In some ways, this reflects back to the whole criminal justice thing: we are catching bad behaviour in the whole of the EEA and they presumably want to catch it in the UK, even if by an EU firm.

Was it previously a mistake that it covered the whole of the EU or has there been a slight change of policy from the UK’s perspective? Are we saying, “Okay, we are going to narrow this down so that you have to do it in the UK, rather than allowing you to do it in a wider range of locations”? I would like to know that. We have previously picked up on things and asked, “Why are you allowing these to be EU-wide?”. That is the only point I really have to make, other than repeating the fact that it would have been nice if the Explanatory Memorandum had been slightly updated.

Oh, yes—there was also a point on solvency. I note that the PRA becomes in charge of the risk-free rates. I hope that there will be some co-ordination there so that we do not end up having a completely different risk-free rate from the rest of the EU. That might be a rather difficult situation. I cannot resist saying that I hope the PRA makes a better job of the risk-free rate than the Government have of the discount rate.

[Lord Deben (Con)]

My Lords, I remind the House of my declaration of interests, particularly my chairmanship of the association representing financial advisors.

I apologise to the House—but not to my noble friend, because he has not heard the comments that I have carried through all the debates on these statutory instruments. I would not like this statutory instrument to pass without us yet again making the point that this is rubbish. We should not be here. This is a nonsense. The more you read about it, the more you realise what a nonsense it is. The truth is that we are kindly giving other people the opportunity to do things that we have always done, and we will not be able to do them unless we are prepared to take the same rules as everyone else. So the whole thing is a nonsense. I am sorry that my noble friend the Minister has to present it. He will do so charmingly and nicely and will not be rude about it, but I do not want him to go without some people on this side of the House, as well as others, saying that we should not be here. We have spent hours and hours on debate. He very rightly thanked all the people who have helped him, but they should not have been wasting their time. We have spent an enormous amount of time doing something wholly deleterious to the United Kingdom. In the whole of my long life I cannot remember an occasion on which that has been so obvious.

This happens to be a worse Government than those who have preceded them in this situation, but the fact remains that we should not be here, because what is being proposed is bad for Britain. We are not taking back control; we are putting ourselves into a position in which other people will have control and we will have no say in it at all.

That is the first point about this very small and unimportant series of amendments. The second point is this: as the noble Baroness has so often said before and has said again today, it is utterly impossible for people to keep up with the minutiae, or with the very fact that the Government has had yet again to make changes. I noticed a very elegant phrase that my noble friend used: “Like all legislation, when we went through it again there were things that we needed to change”. Of course there are, if you keep on legislating entirely unnecessarily at great length in order to damage our country. That is what is so serious. Of course, it is true that we have found yet more examples. I imagine that the noble Baroness, Lady Bowles, with her considerable knowledge, will find some more, and we will go and tell the Government how nice it would be if they added all these other things.

The third reason I intervene is simply that the financial services industry is an important part of the United Kingdom’s economy; it does some very important things. Over many years, it has become respected throughout the world for its knowledge and under- standing. There have, of course, been occasions when things have gone wrong. I am the last person to defend that. But we have an established reputation throughout the world. I say to my noble friend the Minister that this is another example of us undermining that reputation for no good reason at all.

Of course, we will pass this and go through the motions yet again, but I resent having to spend good time on bad proposals. I resent it not just for myself, noble friends or noble Peers opposite; I resent it for all those decent civil servants who have spent their time not improving this country, not extending its influence, not making things better for Britain—but undermining it, in what I know they will have tried to make the least damaging way. The fundamental process is deeply damaging. I do not think that this House should pass these things without reminding the Government, including even so charming a Minister as we have, of the nonsense that we are engaged in.

[Baroness Kramer (LD)]

My Lords, I am going to add a few words of comment. I suspect that the noble Lord, Lord Deben, has said everything that I would love to have said but I will narrow down and make a few more detailed comments. I want to pick up again the issue of divergence that I raised earlier. I fully understand that these are on the whole very minor changes to the statutory instrument and we are certainly not going to oppose them. I can see that they are tidying up.

However, two things struck me, one of which was addressed by my noble friend Lady Bowles: that we end up with a different risk-free rate within the UK from that being used, essentially, within the EU. I suppose people will say that that is a version of taking back control. As far as I am concerned, it is once again a mechanism for trouble and regulatory arbitrage. I am slightly worried that it does not seem to be accompanied—perhaps I have missed this—by any kind of mechanism to make sure that there is a great deal of common thinking and consultation around an issue like that. Choosing a different risk-free rate can rock the markets dramatically, quite frankly, and one can see that in the wrong hands there is a potential danger for this to be used as a competitive tool rather than as a tool to provide financial stability. I am just concerned that nothing in this SI really addresses that issue, though it has had the virtue of drawing our attention to the fact that this now becomes a pretty major problem.