Financial Services (Implementation of Legislation) Bill [HL]

Lord Sharkey Excerpts

Report stage (Hansard): House of Lords
Tuesday 29th January 2019 Lords Chamber

[Lord Davies of Oldham (Lab)]

My Lords, the Minister is to be congratulated on the way in which he has handled this Bill. In Committee, we raised several significant issues and pressed him to consider our arguments carefully. He has certainly done that and has brought back to the House Amendment 1, a position with which we are in agreement.

We are mindful of the background that all these efforts are being conducted against. This very afternoon, the House of Commons is struggling to achieve a position, and the Prime Minister hopes to achieve a position in which this Bill will be utterly redundant because we will have left the European Community with an agreement. But it is obviously right that, in an area of such importance to our economy as the services industry, we have legislation in place that takes account of the extremely serious situation that would arise if we left the European Community without a deal.

The Bill would, however, play its part in fulfilling the regulatory machinery necessary for the services industry, but without doubt additional work would have to be done at that stage. Given that we have done a great deal to help create European law in this area, it would be remiss if we left the services industry without effective regulation and less equipped than it was while we were part of the European Union, if in fact we leave without a deal.

As he would expect, I join the Minister in paying tribute to my noble friend Lord Tunnicliffe, who has played a significant part in examining the Bill and producing insights into what could be done, upon which the Minister has been able to build quite successfully. I also pay tribute the noble Lord, Lord Sharkey. He has stayed involved with the Bill and has offered the best possible advice on a number of occasions. His persistence and insights on these issues have been invaluable, together with those of the noble Baronesses, Lady Kramer and Lady Bowles, both of whom have played a significant part in these discussions.

We are grateful to the Minister for the way he has handled this Bill. He appreciated the anxieties that we articulated as best we could both at Second Reading and in Committee. He has met the most crucial point of all: that the Government were initially seeking powers for the Treasury that could not be justified. Subsequently, the Delegated Powers and Regulatory Reform Committee came to share that position, as it made fairly clear in a detailed submission to the House. That obviously informed our contribution to the debate. However, the Minister has gone a considerable way to allaying the anxieties that we have expressed about the Bill and I am therefore very much in favour of his amendment.

I turn to Amendment 2, to which I am meant primarily to speak. I have only a short comment because there is not a great deal at issue. It again gives me the opportunity to appreciate the efforts of the Minister. We had a useful meeting with him that ironed out all but the narrowest of differences. There is not much in the difference between “significant” and “major” but I am strengthened by some help from the other place. Apparently, in her speech to the House of Commons this afternoon, the Prime Minister said that she would return to Brussels to seek a significant change to the Brexit withdrawal agreement. She did not use the word “major” but “significant”, a word that we are seeking to enjoin the Minister to appreciate. However, I will not press that rather minute point.

[Lord Sharkey (LD)]

My Lords, we welcome all the government amendments to the Bill. We particularly welcome Amendment 1, which greatly improves the Bill’s structure and clarity. As we pointed out in Committee, it was not helpful to try to deal with two different categories of legislation via one mechanism. Amendment 1 puts that right.

Proposed new subsection (lA)(a) deals with settled EU legislation now in force in the same way in which Section 8 of the European Union (Withdrawal) Act does and narrowly restricts the adjustments that can be made. Proposed new subsection (lA)(b) deals with legislation not yet in force in the EU but under current discussion—legislation that is in flight. Here the adjustments are less constrained. I note the Minister’s comment that the legislation contained in subsection l(2)(e) dealing with the prospectus regulation may come into force before Third Reading and could therefore be moved at that stage into the proposed new subsection (lA)(a), leaving only the in-flight legislation in the schedule to be covered by proposed new subsection (lA)(b).

In their amendment, the Government have significantly tightened the meaning of the previously rather controversial word “adjustments”, as it applies to the in-flight legislation in the schedule. Their amendment sets down what in this context adjustments may and may not do. When it comes to what adjustments may do, the new wording has it right. The changes are,

“to reflect, or facilitate the transition to, the United Kingdom’s new position outside the EU”.

I think this is close enough to the restrictions in Section 8 of the European Union (Withdrawal) Act. When it comes to what adjustments may not do, the new text states that they may,

“not include changes that result in a provision whose effect is different in a major way from that of the legislation”.

I am pleased that this is a much tighter restriction than that contained in the original text but I have some concerns about the use of “major”, which is why I have added my name to the amendment in the name of the noble Lord, Lord Davies, which proposes the word significant in place of major. In the ordinary use of those words, “significant” imposes more constraint than does “major”. It seems to be entirely possible for some difference in effect to be significant without in itself being major. An OED definition of “significant” is:

“Sufficiently great or important to be worthy of attention; noteworthy”,


and seems to support this view. Unfortunately the OED also defines “major” as “important, serious or significant”.

The real issue is how the word “major” will be interpreted in practice by the Treasury, and probing that is the purpose of Amendment 2. What will it mean when applied in this context? In particular, what tests will the Treasury apply to the differences contemplated in proposed new Section (1A)(b) of the Government’s amendment to determine whether they are major? I would be very grateful if the Minister could set out explicitly what those tests will be.