Financial Services and Markets Bill

Lord Hodgson of Astley Abbotts Excerpts

2nd reading
Tuesday 10th January 2023 Lords Chamber

[Lord Hodgson of Astley Abbotts (Con)]

My Lords, I need to begin by reminding the House that I have two interests. I am an approved person under the FCA rules, and I chair a regulated firm.

The Bill is big and important. I always felt that the task of trying to create a Europe-wide regulatory structure to deal with the many different types of financial markets—from quite small and unsophisticated to quite big, as we see in London—was going to be a big ask. Therefore, I was not surprised when we found a number of pinch points, many of which did not operate to London’s advantage. Given that the Bill’s strategic objective is to onshore our regulation, to get rid of one size fits all and to operate within a risk-based assessment framework appropriate to London, I support the Bill.

There are lots of things I would like to talk about, but I have only five minutes. I would like to talk about cash and the role of MiFID II, but I will focus on process. Here I follow the noble Lords, Lord Sharkey and Lord Butler. How do we get from here to there? What is the process to be followed? How is it envisaged that Parliament will play a role in the process envisaged under Chapter 1, Revocation of Retained EU Law? As the noble Lord, Lord Butler, pointed out, this Bill is a carve-out of a much larger Bill that will come before your Lordships’ House in a few weeks.

I chair the Secondary Legislation Scrutiny Committee and we have been taking evidence from Ministers on some of the practical aspects behind the Government’s thinking. I suspect that not many of us—not even my noble friend Lord Forsyth—who voted for Brexit thought that this risked handing powers from Brussels to Whitehall without any serious effective parliamentary scrutiny or involvement along the way.

I have made a rough count of the number of regulations listed in Parts 1 to 3 of Schedule 1; there are, I think, 246. Some of these will be technical and of no significance; others will not. It is this fact that makes the Bill a framework Bill. At the moment of passing the Bill, Parliament will not know what it is signing up to. That is really important. Will all of these 250 or so regulations be treated in the same way? There appears to be no triaging process to sort the important ones from the less important ones. I fear that the idea of saying “Affirmative resolutions go this way, and negative resolutions go that way” may not be sufficient in as complex an exercise as this.

There is a widespread view—again, pointed out by the noble Lord, Lord Butler, in his remarks—that the existing parliamentary powers for scrutinising secondary legislation are inadequate for the increasingly heavy weights being placed upon them. When my noble friend the Minister comes to wind up, will she tell the House what supporting documentation will be made available in respect of each regulation, to aid parliamentary scrutiny? Under current law, any regulation that carries an impact of more than £5 million is required to have a specific impact assessment, tabled at the time the regulation is laid. If this is now not to be the case, there is a real danger of Parliament being effectively muted.

Secondly, an important statutory requirement is the provision of post- implementation reviews. Post-implementation reviews decide where hope and expectation met reality and how they clashed. If we are not going to have post-implementation reviews—PIRs—then the opportunity for improving government performance will be greatly missed.

Finally, there is the question of tertiary legislation. Tertiary legislation is where the Government hand away the pen to another body, usually having very little if any democratic accountability. Despite that, the laws and regulations that these bodies produce bind us all just as tightly as any other law. Can my noble friend the Minister confirm my understanding that, under Clause 4, all tertiary legislation will be subject only to the negative procedure? If I am right about that, then I am afraid I shall regard this as a very disappointing response.

To conclude, I support the direction of travel of the Bill but, as we enter this brave new world, we should at the same time not allow the role of Parliament to examine, scrutinise and hold the Government to account to be further reduced.