Financial Services and Markets Bill

Lord Eatwell Excerpts

Report stage
Tuesday 6th June 2023 Lords Chamber

[Baroness Kramer (LD)]

My Lords, I will make very few comments on this group of amendments. I accept that they are technical. I find some of them distasteful, particularly those that enhance the scope of the competitiveness and economic growth agendas. I fear very much that the underlying concept and construct will lead us back in the direction of the kind of risk taking that created the crisis that we went through so badly in 2008 and 2009. However, given that our attempts to turn around those objectives have not won support from other parts of the House, there is no sensible reason for me to object to these more technical amendments, other than to say that it is a sad day and that many of us will be revisiting this, if we live long enough, when we hit the next financial crisis.

[Lord Eatwell (Lab)]

My Lords, I will make two points on these technical amendments. As the Minister said, central counterparties are fundamental institutions in maintaining the stability of financial markets. This measure, to continue the role of overseas-based central counterparties, is enormously sensible. But there is an issue that has not been addressed. What if the overseas central counterparties decide not to provide services to UK firms—if they decide, following the UK exit from the European Union, that they will withdraw from providing such a service? What provision has His Majesty’s Government made for providing those services in those circumstances?

Secondly, I echo the point that the noble Baroness, Lady Kramer, made about the competitiveness and economic growth objective that is being incorporated as a subsidiary objective. As a subsidiary objective, it is unobjectionable. What is striking in the government amendments that we will debate is the way in which it is continuously privileged, such that it no longer remains subsidiary; extra reports and consideration will now be required, all focused on one objective. This is a serious mistake, because the statutory objectives of the regulatory authorities will change with circumstance over time. Writing into law that one objective should be privileged is a significant error. The primary and secondary objectives make sense, but overegging the position of a subsidiary objective is a mistake.

My main point at this time is to ask the Minister what measures provide central counterparty provision in those areas where overseas central counterparties decide not to act for UK firms.

[Lord Harlech (Con)]

My Lords, I am grateful for both contributions to this short debate. The noble Lord, Lord Eatwell, brought up the competitiveness issue, which is something we will come on to at a later stage in the proceedings on the Bill. In answer to his point about overseas CCPs, that would be a commercial decision for that institution to make. However, the idea of the run-off regime is to provide time for UK firms to wind down their operations and make alternative arrangements.

--- Later in debate ---

[Lord Forsyth of Drumlean (Con)]

My Lords, it is late, so I will not repeat the arguments which have been made by the noble Lord, Lord Tyrie, and the noble Baroness, Lady Kramer. The amendment seems to be a very sensible measure, and if my noble friend cannot accept it, the noble Lord suggested a compromise of at least consulting on this. However, I am not sure that many people would say that this was not a sensible proposal. The amendment has certainly been very carefully drafted. We are on Report, and I have some sympathy with my noble friend on the Front Bench being faced with this, but it merits very serious consideration and would be very much welcomed in the City.

[Lord Eatwell (Lab)]

My Lords, I apologise for missing the introduction from the noble Lord, Lord Tyrie; I was caught out by the Whips’ rearrangement of business. Fortunately, I read his pamphlet on this matter, so I have a good idea what he said.

[Lord Harlech (Con)]

My Lords, I am afraid that the noble Lord, Lord Eatwell, was not here for the opening comments from the noble Lord, Lord Tyrie.

[Lord Eatwell (Lab)]

I am probably the only Member of this House who has been a member of the Regulatory Decisions Committee and I might have some observations to make.

[Noble Lords]

Hear, hear!

[Lord Harlech (Con)]

Clearly, the House wants to hear the noble Lord’s remarks, so please continue.

[Lord Eatwell (Lab)]

If the Whips had not rearranged the business so peremptorily, one would not have been caught out.

[Lord Harlech (Con)]

The business has not been rearranged; the Order Paper says,

“at a convenient time after 7.30pm”.

[Lord Eatwell (Lab)]

My Lords, as a founding member of the Regulatory Decisions Committee of the Financial Services Authority who served from 2001 to 2006, I reflect on the fact that at that time the FSA took extraordinary care in preparing the documentation that was submitted to the RDC. This clearly had an effect on the way in which the RDC prepared itself. This is an important element in ensuring that our regulatory system is not only fair but seen to be fair. Having read with care the pamphlet from the noble Lord, Lord Tyrie, I support the arguments that he made there, which I am sure he recently repeated in the House.

[Baroness Altmann (Con)]

My Lords, I support all the work that the noble Lord, Lord Tyrie, has put into this amendment. He has worked for so many years and has so much knowledge on this subject. If my noble friend cannot accept the amendment today, I urge her to come back at Third Reading if possible, perhaps with the Government’s own proposals for at least a consultation, which would be a reasonable compromise. There is a strength of feeling on this issue.

As the noble Lord said, the FCA has already been clipping the RDC’s wings. We can see dangers and that there is huge support for proper independence on a statutory basis. We do not want the City to become an oligopoly; we need to protect some of these smaller firms for healthy competition. What is the Government’s objection to this proposal?