Financial Services (Miscellaneous Amendments) (EU Exit) Regulations 2020

Lord Purvis of Tweed Excerpts

Thursday 18th June 2020 Lords Chamber

[Lord Purvis of Tweed (LD)]

My Lords, the Minister in outlining these measures said that it is important that we are coherent and in good order. By “coherent”, I think she meant that we should be in good functioning order, but there is no coherence as in good policy regarding the Government’s direction of travel. The changes may be modest and minor, as she indicated, but they speak to a wider and major impact on our economy.

Two things this week summarised neatly this Government’s philosophical approach to the future of our economy. The first was the great fanfare about the opening of trade talks with New Zealand and Australia; the second is the rather mouse-like way that these changes, which may be technical in nature but will have a significant impact, are being handled. The first of those, the new trade talks, came with an assessment of what the impact would be on UK GDP. The Financial Times put it today at a homeopathic 0.01% over 15 years, though some estimates suggest that it could actually cost the economy 0.01%. The FT went on:

“If you’re in the UK, nip out and buy a bag of crisps after reading this and you might well have done more for the British economy than a New Zealand trade deal.”


These regulations, with—rightly—no government promotion, show piece by piece a dismantling of the UK’s relationship with the most well-developed and successful financial services single market ever devised in the world, whether it be combined funds, the ability to market across country to our biggest market or having a common view on how funds are invested sustainably, on how we continuously drive up ethics in investment and on how services and products within the UK can be easily passported to the most well-developed market in the world. It is clear that the approach of this Government is a real and present danger to our economy.

I am sure that the Minister will not take my word for it, and I know that the Government like listening to Americans, so let me use what the Chamber of Commerce of the United States said of the UK in its report about the Atlantic economy published earlier this year:

“In terms of FDI trends, UK-based EU institutions are decamping for other parts of Europe. According to Reuters, financial firms in the UK have opened over 300 subsidiaries in the EU with an estimated 7,000 workers to staff these operations, in order to avoid any disruptions to financial market access after the transition period. According to preliminary data from the UN, total world FDI flows to the UK declined 6% in 2019 due to a lack of large M&A deals targeting the country.”


Another indicator—just one of many—is that the £3.5 billion German digital bank, N26, pulled out of the UK because of losing passporting rights to operate here using a German banking licence.

It seems a long time ago, on 27 February, that Chancellor Sunak wrote to the EU saying that he saw no reason why equivalence assessments could not be completed by the end of June. Can the Minister confirm that we have carried out what we could consider to be equivalence assessments, and will the Government make them public? Clearly, if the Government said that they saw no reason why they could not be carried out, we should have sight of them.

The EU was rightly sceptical about this, because, only a week earlier, Sajid Javid, the Chancellor’s predecessor, told the EU that it was the Government’s policy to seek “comprehensive, permanent equivalence decisions”. Can the Minister confirm that that is still the position?

On Regulation 21, on the ending of marketing passports, which had been considered vital by another previous Conservative Chancellor, what assessment has been done of the economic impact of losing those marketing passports? And what economic impact assessment has been carried out for the changes to combined fund management and delegated funds?

Let me give one real example of this, because it is not simply academic. I was contacted to raise in this debate an issue relating to the 40,000 combined funds across the UK which are used for diaspora disbursement by people who work within the UK and the EU but send money to some of the poorest areas of the world. They are extremely concerned that there will be major disruption to those diaspora funds, so can the Government guarantee that some of the changes down the line for the operation of the combined funds will not see any disruption to those that are focused on social aims?

On sustainability, as mentioned by the Minister, Regulation 22 creates elements of confusion as to what sustainability-related disclosures there will have to be in the UK. These are set out clearly in the EU, but we will no longer be compelled to operate under a straightforward and common system, and we will have to set our own. What will they be? If we are no longer participating in a joint committee on standards, how will we operate?

On equivalence, combined funds and others, and integrated markets, we are leaving an integrated market that we currently lead. We are replacing duties to co-operate with simple options. We are creating uncertainty over sustainability, ethics and standards, and there is a great lack of clarity as to what the Government’s intentions are for this fundamentally important market for the United Kingdom.