Social Housing

Lord Young of Cookham Excerpts

Thursday 31st January 2019 Lords Chamber

[Lord Young of Cookham (Con)]

My Lords, I am grateful to all noble Lords who have taken part in what has been a very constructive debate, as the noble Lord, Lord Kennedy, has just said. In particular I am grateful to the noble Lord, Lord Whitty, for choosing it and for introducing it with a very eloquent non rant.

It is almost 40 years since my first speech as a housing Minister in 1981. The noble Lord, Lord Whitty, was then working for the General, Municipal, Boilermakers and Allied Trades Union prior to running the Labour Party. The noble Lord, Lord Shipley, was a Newcastle city councillor keeping tabs on the noble Lord, Lord Beecham, who was entering his middle period as the leader, and a youthful noble Lord, Lord Kennedy, was waiting to be able to vote in his first general election. Affordable housing was a priority for the Government then and it remains a priority for the Government today.

It was during my time as a housing Minister in the 1980s that I met the noble Baroness, Lady Osamor. She was campaigning for the renovation of the Broadwater Farm estate and, as important, for the empowerment of the local community and an improvement in its relations with the local authority and with central government. I remember meeting community leaders, of whom she was one, and the charismatic Dolly Kiffin. It is good to renew her acquaintance after all those years. I commend her on her speech and look forward to her future contributions.

An occasional partisan note has crept into our debate. As noble Lords know, I am the least partisan of Ministers. Perhaps I may just put one or two statistics before your Lordships to redress the balance; this debate is about social housing. Between 1997 and 2010, the stock of social housing fell by 420,000. Since 2010, the overall stock of social housing has increased by 79,000. Some 12,440 local authority dwellings were built between 2010-11 and 2017-18, up from 2,920 over the previous 13 years. The briefing we all got from the Home Builders Federation said that housing output was up by 78% in the last five years and that the supply has risen to its fourth highest level since 1971. For the year ending March 2018, the planning system granted permission for 359,000 new homes. There is more in my brief which I will not deploy because I want to answer the debate and because we are in no way complacent about the task ahead.

I would like to make two general points about social housing. First, there has been much emphasis on the need for more housing at social rents, a point made by the noble Lords, Lord Kennedy and Lord Shipley, as opposed to affordable rents. I understand the case, but there is a trade-off between rent levels on the one hand and the number of homes that can be built on the other. For the sake of argument, let us assume that an extra £1 billion became available. On average across England, we would expect either to build 12,500 homes at social rents or twice that number—25,000—at affordable rents: double the number of homes to house those in housing need. Moreover, approximately two-thirds of social housing tenants receive housing benefit to support the payment of their rent. So I understand why housing Ministers want to maximise supply, and I plead guilty to this. More recently, the Government have recognised the case for social rents in areas of high demand, a point made in this debate, and we have turned the dial back to provide a minimum of 12,500 new social rent homes. But those who call for a major reversion to traditional social rents must recognise the cost in lost output, and that is true whatever the level of investment available.

The second general point is one that has not been made at all in this debate: if you are in housing need, of course the number of new social homes built is relevant and the more the better. But someone in housing need is eight times more likely to be rehoused through a re-let of an existing social home, than through a new home. So increasing the number of re-lets is a key ingredient in helping those in need. Without changing the rules on security of tenure, I am all in favour of a dialogue between social landlords and their tenants where the tenants’ circumstances have improved substantially, partly as a result of having a decent home, so that they are now in a position to consider home ownership and explore Help to Buy, shared ownership, which was mentioned by the noble Lord, Lord Thurlow, and other home ownership options.

That is also why I have always been a keen supporter of portable discounts—basically, turning the discount that a social tenant is entitled to under right to buy into cash so that the tenant can buy a home. It has a number of benefits. It widens the choice of home that the tenant can buy beyond just the one he is in. It secures a re-let at a fraction of the cost of new build, and of course it does so more quickly. Moreover, it does not erode the stock of social houses, a point made by many noble Lords. The concept is being tested through the current voluntary right-to-buy pilot for housing association tenants in the Midlands; the discounts are funded by central government. I hope housing associations consider whether this has a greater role to play in tackling waiting lists.

On this, and in response to points made by the noble Lord, Lord Whitty, I was interested to read in last week’s Inside Housing an article by Mark Henderson, the chief executive of Home Group, supporting voluntary right to buy. He said that 87% of his tenants wanted to own their own homes. He went on to say:

“At Home Group, for example, we want to go a step further”,


than the national federation’s offer of replacing one for one.

“We will be able to build two homes for every home sold, including at least one for social or affordable rent. This means that”,


voluntary right to buy,

“will lead to a net increase in the amount of affordable homes in an area, alongside helping customers achieve their aspirations of homeownership”.

I hope other housing associations might consider following his lead.

This brings me to right to buy and the points made by many of those who have spoken, including the noble Lord, Lord Whitty, and the noble Baroness, Lady Blackstone, about the use of right-to-buy receipts. Since the reform of the housing revenue account and the introduction of self-financing in April 2012, a proportion of receipts is paid to the Treasury to reflect the reduction in the amount owed to the Treasury and as part of the self-financing settlement, but also to tackle the budget deficit. However, noble Lords will know that we have just undertaken a consultation on the use of right-to-buy receipts. We are considering the responses and how to take these forward. I will ensure that all the points made by noble Lords about more flexibility and the use of capital receipts are taken on board before we come to a final decision on that. Capital receipts could be used for the purposes the noble Baroness, Lady Watkins, suggested, namely, regenerating existing local housing stock. The noble Lord, Lord Kennedy, asked whether local authorities that have transferred their stock can borrow. Yes, they can. They can borrow through their general fund in line with the prudential code. If they want to, they can then on-loan to a third party for housing development.

I turn to rough sleeping, a topic covered by many noble Lords, including my noble friend Lord Garel-Jones, the noble Lord, Lord Pendry, the noble Baronesses, Lady Lawrence and Lady Warwick, and others. Many referred to the tragic death of a rough sleeper on our own doorstep a few weeks ago. Under the first rough sleepers initiative, which was launched in 1990 and which my noble friend Lord Garel-Jones mentioned, the number of people sleeping rough in central London fell by more than half—from an estimated more than 1,000 before the initiative began to around 420 in November 1992. The model was taken forward by the incoming Labour Government and extended to other parts of the country, but the challenge today is as acute as ever.

In response to my noble friend, there are four ingredients to a successful strategy. The first is prevention. The Homelessness Reduction Act, backed by £1.2 billion and piloted through this House by the noble Lord, Lord Best, should give people the help they need earlier and reduce homelessness. Secondly, we need outreach workers with the skills to build up confidence and trust with the rough sleepers and persuade them to abandon that lifestyle. Thirdly, we need direct access hostels with all the necessary support services such as health—mentioned by the noble Baroness, Lady Lister—and the resources to deal with the underlying problems. Fourthly, we need move-on accommodation so that people can put their lives back together and re-enter the mainstream.

I join the right reverend Prelate the Bishop of Chelmsford in praising those who do heroic work: Centrepoint, The Passage, St Mungo’s and Change Grow Live. Initiatives such as No Second Night Out are particularly important and worthy of support. I pay tribute and wish every success to my ministerial colleague in the department, Heather Wheeler, committing to halve rough sleeping by 2022 and—in response to the question asked by the noble Lord, Lord Sawyer—end it completely by 2027. It is an ambitious agenda, backed up by £100 million in funding for the first two years, and in December we published a delivery plan showing how we intend to deliver on the 61 commitments made.

I am grateful to the noble Lord, Lord Bird, for his contribution outlining the consequences of ending rent control. When I bought my copy of the Big Issue today from Phil in Great Peter Street, he asked to be remembered to the noble Lord. Phil suggested that those in the Victoria area who are recruiting staff could do well to call in on the nearby hostel where Phil stays, where they would find some motivated and hard-working employees who deserve a break, like him.

Many noble Lords spoke about encouraging local authorities to build, and we want to see councils deliver a new generation of homes. We have abolished the housing revenue account cap, and my noble friend Lord Porter deserves credit for the role he has played in securing that freedom. We hope that will enable them to double delivery to around 10,000 homes per year by 2021-22.

The noble Lord, Lord Whitty, criticised stock transfer, when a local authority transfers its stock to a housing association. This can happen only where the tenants have voted for it. In many cases, after they voted for it, the regeneration of a stock took place at a faster rate than would have taken place under the local authority— so I do not think that is a fair criticism of housing policy.

Removing the borrowing cap will help to diversify the housebuilding market, with councils better able to take on projects and sites that private developers might consider too small. To further help councils build, we are providing a longer-term rent deal for five years from 2020 that provides local authorities with a stable investment environment to deliver the new homes.

I was struck by the phrase “long-term” in the noble Lord’s Motion—a challenge to all Administrations accused of short-termism. I agree with him that if we are to make faster progress we need to give those who supply social housing greater certainty. That is why in September the Prime Minister announced a £2 billion long-term funding pilot, starting in 2022, which will boost affordable housing by giving housing associations the long-term certainty they need and will move away from the stop/start delivery that has characterised previous approaches to funding. This funding certainty makes it more viable for the larger housing associations—many noble Lords have key roles to play in housing associations—to take risks and invest in more ambitious projects and larger sites, with the funding guaranteed beyond the current spending review.

We recognise that our commitment to increase the supply of homes requires a modern construction industry—a point raised by my noble friend Lady Bloomfield, who talked about off-site construction. The strategic partnerships we are developing with housing associations are being used to promote modern methods of construction. This is supported by our £4.5 billion home building fund providing support to builders using modern methods of construction, which will, we hope, help to address the shortage of skilled on-site construction workers in addition to encouraging custom builders and new entrants to the market.

My noble friend Lord Garel-Jones suggested that we should build up rather than along and pointed to the difference between our cities and many in Europe. It so happens that yesterday the Secretary of State for Housing announced that, as part of a fresh initiative, 78 homes will be built on London’s rooftops by the summer after Homes England agreed a £9 million funding deal with Apex Airspace Development. This follows our revised NPPF supporting opportunities to use the airspace above existing buildings. These will be built off-site then winched into position to minimise disruption to existing residents.

Many noble Lords referred to poor standards in the private rented sector. The noble Baroness, Lady Donaghy, asked about selective licensing, which is basically a scheme to drive up standards and safety in the private rented sector, where they are known to be poor. Last year, at the invitation of the noble Lord, Lord Kennedy, I got up very early one morning and went to Newham with the noble Lord, the Mayor of Newham, Rokhsana Fiaz, and the police to see how selective licensing was enforced—basically, by going into premises that are as yet unlicensed but suspected of being tenanted. What struck me—and, I am sure, the noble Lord—was the appalling conditions many tenants were living in, paying extortionate rents, but also the sensitivity of the team from Newham in explaining to frightened tenants exactly what was going on and what their rights were. I was deeply impressed that morning.

Since 2015, eight schemes have been approved by the Secretary of State for Housing: one was rejected but it then successfully reapplied. In response to the noble Baroness, a review is under way: we are due to publish it in the spring and I will make sure that the chartered institute report to which she referred is fed into it before we come to any conclusions.

My noble friend Lady Bloomfield raised a number of important points on planning, investment and construction. Last year we updated the NPPF to tackle unaffordable house prices in many areas across the country. The framework sets out a new way for councils to calculate the housing needs of their local communities. We are working closely with other government departments and local authorities to identify and free up public sector land to maximise the amount of affordable housing built on it. The community trust partnership mentioned by my noble friend is one model that can help bring private sector investment alongside local authorities and provide experience to increase affordable housing.

One of the key points that has arisen during the debate—which I will certainly raise with the Secretary of State—was the cost of land and the Land Compensation Act 1961. At the moment we have the CIL, the infrastructure levy, and Section 106, both of which seek to capture the value of land. Many noble Lords, including the noble Baroness, Lady Blackstone, and the noble Lords, Lord Shipley, Lord Best and Lord Judd, said that we ought to go further and do more. We are committed to capturing increases in land values to reinvest in local infrastructure, central services and further housing. That is why we are at the moment making important changes to ensure that the existing mechanisms for securing funding for infrastructure and affordable housing work as effectively as possible. I take seriously the comments and suggestions made during the debate.

I am conscious that I will not be able to get through everything in the time available but, quickly, on public sector land, an issue raised by the noble Baroness, Lady Warwick, the aim of the programme is to release land with a capacity for at least 160,000 homes in England from the central government estate by 1 March 2020. The noble Baroness asked what the percentage of affordable might be. The answer is, as I think she knows, that local authorities set their own percentages in their local plan. It is a matter for them, having assessed local need, to judge what should happen on new developments.

On supported housing, I was interested in the speech of the noble Baroness, Lady Healy. There is a need for specialist and other supportable, affordable housing for older and vulnerable members of society. We have delivered 34,000 new supported homes in England since 2011 and, together with the Department for Health and Social Care, we continue to make funding available for investment in new supported housing. Our announcement last summer that the housing costs for supported housing would continue to be made by housing benefit has been greatly reassuring to those active in the market. I hope it will be welcomed by the sector and unlock fresh investment.

I apologise for not dealing with all the questions. I have many good replies in front of me which, sadly, I do not have time to read out but which I will answer.

The Government support the case for delivering more affordable housing and are committed to doing so. We want to support the delivery of the right homes, be they for rent, ownership or supported housing in the right places. We have listened to the sector and to today’s debate. We have introduced a number of measures to create a more stable investment environment. We have abolished the HRA borrowing caps; announced longer-term funding; increased our affordable homes programme to £9 billion; announced social rent funding; and set long-term rent certainty. We are not complacent but now is the time for councils and housing associations to step up and deliver the affordable housing that communities need. I thank all noble Lords again for their contributions to this debate.

Domestic Infrastructure: Chinese Ownership

Lord Young of Cookham Excerpts

Wednesday 23rd January 2019 Lords Chamber

[Baroness Anelay of St Johns]

To ask Her Majesty’s Government what assessment they have made of the risks arising from Chinese ownership of technologies and platforms critical to the domestic infrastructure of the United Kingdom.

[Lord Young of Cookham (Con)]

My Lords, the Government take seriously any national security risks arising from the ownership of infrastructure assets and systems, and assess those risks on a case-by-case basis, irrespective of their origin. On 24 July 2018, the Government published the National Security and Investment White Paper, which consulted on reforms to powers to scrutinise investment for the purposes of protecting national security. The Government are now considering carefully the response to that consultation and will respond in due course.

[Baroness Anelay of St Johns (Con)]

My Lords, while thanking my noble friend for his considered Answer, I point out that superfast 5G has great potential for our economy. It could be worth £200 billion over the next decade. The world leader in 5G is Huawei, but our closest security allies—Australia, New Zealand and the US—have already taken steps to restrict access to Huawei technology on the grounds of national security. Will we follow suit speedily? If not, why not?

[Lord Young of Cookham]

I am grateful to my noble friend, who has drawn attention to the need to get the balance right. America has banned Huawei from federal networks. We do not plan to go as far as that. I think America has a different approach from this country to international trade and inward investment, particularly under its “America first” policy. Of course, it has particular difficulties with China at the moment. We want to get the balance right and to have the best digital infrastructure we can, with up-to-date equipment to promote growth and inward investment, but we do not want to compromise national security. Huawei is precluded from taking part in certain sensitive parts of our infrastructure—lawful intercept, for example—and in other cases its equipment is interposed between equipment from other firms to mitigate risks. We keep the balance under review, but I think we have it about right.

[Lord Cunningham of Felling (Lab)]

My Lords, the Government have the laudable objective of procuring for the United Kingdom the latest 5G high-speed technology communications system. We should all support that. We should also all support the idea that we need adequate protection against some people’s technologies. Since, in this case, the most advanced optical fibre technology is from either Huawei or ZTE—both Chinese-owned and controlled—how will the Government achieve their objective if we are not to deal with them? There is no other way to do it at that level of technology. As I said some time ago in this House, if we are not willing to trust the Chinese with our communications system, is it not a bit perverse to suggest that we trust them with our civil nuclear power?

[Lord Young of Cookham]

In the case of Huawei, we have set up unparalleled arrangements in this country. As the noble Lord will know, we have set up at Banbury a centre to evaluate Huawei’s strategy and the equipment it is developing. That board is overseen by the chief executive of the National Cyber Security Centre, so we have a deep insight into what Huawei is up to and can take mitigating action in certain circumstances. As I have said, in certain circumstances we can ban it from taking part. But we want to make use of the latest technology and, as my noble friend said, Huawei is a world beater and it would not be in the national interest to ban it totally. We are looking at whether we have the legal structure right for the future in protecting national security, but I think we have the balance about right.

[Lord Broers (CB)]

My Lords, a word of caution on nuclear power—the noble Lord, Lord Cunningham, mentioned it. Does the Minister agree with me that we need to collaborate with the Chinese in building our nuclear plants? The Chinese are now world leaders. They have been the first to build an EPR, such as we are building at Hinkley Point, and they have also been the first to build the American AP1000. Specifically, collaboration with China General Nuclear, CGN, will be key to our success at Hinkley Point, Sizewell and Bradwell and in qualifying CGN’s own HPR1000, especially in the light of the withdrawal of the Japanese. I declare my interest as a member of the parliamentary group led by Ian Liddell-Grainger MP that visited the EPR reactor in Taishan in November. I would like to say—

--- Later in debate ---

[Lord Broers]

CGN has a remarkable safety record in nuclear power. We should run our plants ourselves but let it help us build them.

[Lord Young of Cookham]

My Lords, we welcome Chinese inward investment into the civil nuclear projects in the UK, as the noble Lord mentions, subject to our robust legal, regulatory and national security requirements. We have the most robust and stringent requirements. My advice is that the project at Hinkley so far meets all the necessary requirements that the noble Lord referred to.

[Lord Wallace of Saltaire (LD)]

My Lords, are we working on our own in responding to the Chinese threat, or are we working with others? Would it not be sensible not only to work with our other Five Eyes colleagues but also to work with our European partners? If we have to find and develop alternative technology for some of these critical projects, clearly it might be much more sensible to work closely with other friendly governments.

[Lord Young of Cookham]

Of course we should work closely with our allies, but it is just worth pointing out that some of our allies have a different legal framework. Australia, for example, has a law saying that telecom operators cannot procure equipment from a company that has extraterritorial jurisdiction. That rules out Chinese companies and many others. We do not have quite that same approach, but, of course, we learn from experience, from Australia, New Zealand, the United States and our other allies.

[Lord Livingston of Parkhead (Con)]

My Lords, does the Minister agree that the UK has had a much more sophisticated approach to Chinese companies for many years, both in setting up the cyber centre that looks at Huawei source code to understand it, and in recognising that in certain parts of UK networks, such as BT’s core network, it was not appropriate to put it in? It also recognises that much equipment from other countries actually has Chinese components in it, so the position is actually far more sophisticated and nuanced than perhaps were some of the headline statements made in many other countries.

[Lord Young of Cookham]

My noble friend is absolutely right.

Money Laundering and Transfer of Funds (Information) (Amendment) (EU Exit) Regulations 2018

Lord Young of Cookham Excerpts

Wednesday 23rd January 2019 Grand Committee

Moved by

[Lord Young of Cookham]

That the Grand Committee do consider the Money Laundering and Transfer of Funds (Information) (Amendment) (EU Exit) Regulations 2018.

[Lord Young of Cookham (Con)]

My Lords, this statutory instrument, laid under the EU withdrawal Act 2018, is part of the legislative programme that the Treasury is undertaking to ensure that there continues to be a functioning legislative and regulatory regime for financial services in the EU. The statutory instrument has been debated and approved by the House of Commons. The SI will fix deficiencies in UK anti-money laundering law to ensure it continues to operate effectively post exit. The approach taken in this legislation aligns with that of other SIs being laid under the Act, providing continuity by maintaining existing legislation at the point of exit.

Turning to the substance of the SI, many noble Lords will be familiar with existing anti-money laundering legislation. The money laundering regulations set out the requirements on regulated firms to combat money laundering and terrorist financing. Further, the EU Funds Transfer Regulation specifies what information must accompany electronic transfers of funds. Finally, the Oversight of Professional Body Anti-Money Laundering and Counter Terrorist Financing Supervision Regulations established the Office of Professional Body Anti-Money Laundering Supervision within the Financial Conduct Authority in early 2018. Anti-money laundering legislation is designed to combat illicit finance, while minimising the burden on legitimate businesses.

In a no-deal scenario, the UK would be outside the EEA, and outside the EU’s legal, supervisory and financial regulatory framework. Therefore, these three pieces of anti-money laundering legislation would need to be updated to reflect the new position of the UK, and to ensure that the provisions work properly in a no-deal scenario. The changes primarily affect the financial services sector, but the impact will be minimal and we have engaged with industry extensively to ensure that affected firms are aware of the changes that we are making. These draft regulations will make the following changes to the UK’s anti-money laundering regime.

First, this SI will equalise the regulatory treatment of European Economic Area member states and “third countries” for correspondent banking relationships—that is, when one bank provides banking services on behalf of another bank. Currently, UK financial institutions apply enhanced due diligence measures to correspondent banking relationships with financial institutions outside the EEA. However, these measures are not required for intra-EEA relationships.

This SI will equalise the regulatory treatment, meaning that enhanced due diligence will be required for all correspondent banking relationships. This change better aligns with the Financial Action Task Force standards on the issue, and the existing practice of many UK institutions, which already apply enhanced due diligence because of the risks associated with correspondent banking relationships. The SI will also equalise regulatory requirements on the information about the payer and payee accompanying electronic transfers of funds. Therefore, UK payment service providers will be required to provide higher volumes of information accompanying transfers into EEA member states and other countries. These changes are being made to reflect the UK’s new position outside of the EU’s regulatory framework.

Secondly, this SI will transfer from the Commission the responsibility to make technical standards, which specify the additional measures required to be taken by credit and financial institutions with branches or subsidiaries abroad, to the Financial Conduct Authority. These standards are of a type similar to those currently made by the FCA, in an area where they have technical expertise. Therefore, the FCA is the appropriate body to take on this responsibility. The transfer of this power is necessary because the relevant standards are currently made by the European Commission.

Thirdly, this SI removes the obligation for certain UK persons to have regard to guidelines published by the European supervisory authorities. The UK will be outside the EU’s regulatory framework, so it would be inappropriate for UK persons to be legally required to have regard to these guidelines. Firms will continue to be required to have regard to guidance developed by UK supervisory authorities and industry bodies, thereby maintaining the same strong standards to counter money laundering and terrorist financing.

Finally, the current money laundering regulations require certain information to be communicated to EU institutions. These provisions will be removed, as they would no longer be appropriate once the UK is no longer a member of the EU. The House of Lords Secondary Legislation Scrutiny Committee queried the change in requirements to transmit information to EU institutions, and whether the FCA would be co-operating with its counterparts in other countries to combat illicit finance. However, the changes to information-submission requirements made by this SI relate to specific duties to provide information directly to EU institutions, such as the national risk assessment of money laundering and terrorist financing.

Legal obligations to submit this information would be inappropriate once the UK leaves the EU. It is important to emphasise that UK supervisory authorities, including the FCA, will continue to co-operate extensively and make information available to overseas anti-money laundering authorities in relation to firms which have offices within the UK. Therefore, UK authorities will continue to make use of international co-operation to detect, prevent and investigate money laundering.

The Treasury has been working very closely with the FCA in the drafting of this instrument. It has also engaged extensively with the financial services industry on this SI, including UK Finance and relevant trade associations, and will continue to do so in relation to other SIs within the onshoring programme. Last November, the Treasury published the instrument in draft, along with an explanatory policy note to maximise transparency to Parliament and industry. The Treasury considers the net impact of business to be less than £5 million, so a full impact assessment has not been carried out.

In summary, this Government believe that the proposed legislation is necessary to ensure that the UK’s anti-money laundering and counterterrorist financing regime operates effectively, and that the legislation will continue to function appropriately if the UK leaves the EU without a deal or an implementation period. I hope noble Lords will join me in supporting these regulations.

[Lord Kirkhope of Harrogate (Con)]

My Lords, I hope it will be all right for me to intervene in this matter. As a former Member of the European Parliament, I had something to do with the fourth anti-money laundering directive and the high standards required by it and I would like to ask my noble friend one or two questions.

First, we have been obliged to operate enhanced due diligence only to countries outside the EEA, and post-Brexit we will find ourselves required to deal with all countries equally—in other words, with enhanced due diligence in all cases. I know my noble friend has just referred to the fact that many UK institutions apply this enhanced approach already and that the Financial Action Task Force recommends those standards but I would like to inquire of him as to the position regarding others. He said “most institutions” but I believe quite a considerable number do not wish to apply enhanced due diligence in countries where we are satisfied that the standards are common in the EEA and, of course, in the EU. I am rather worried about this and the obligations that it will now put on institutions which they did not have before. I think it is quite a significant change.

Secondly, I am interested in the issue of information. When payment service providers transfer funds outside the EU, there is a need for higher levels of information. I am concerned that, once again, post-Brexit we will require of UK PSPs a much greater volume of information accompanying the transfer of funds into all the EU states as well as those outside. Again, I wonder about the extent of those obligations and the amount of information. Is my noble friend aware of how that extra information should be obtained and what it would consist of? Can he advise me now or write to me if he cannot?

Thirdly, although it is not mentioned in this measure at all, I am quite curious as to whether any of these things will affect the status of so-called politically exposed persons. Currently, as noble Lords know, the term covers quite a large number of people, particularly those who have had a connection overseas—as they put it from this country—with receipts of moneys or involvement in business affairs. I wonder whether by bringing this back into this country and no longer being obliged to apply the rules that applied before, this will then recategorise or decategorise large numbers of people currently designated as PEPs and therefore subject to a very much higher level of scrutiny by our financial institutions.

I know that this is not a policy change as such but clearly this measure is a big change to obligations and procedures. There must be some costs attached and quite a lot of organisations may not be ready to carry out these new responsibilities in terms of the due diligence or, indeed, provision of information. Is my noble friend satisfied that, in the consultations and discussions that have taken place so far, our institutions are satisfied that they will be able to cope with this in the timescale we have?

--- Later in debate ---

[Lord Tunnicliffe (Lab)]

My Lords, perhaps I should say a couple of words about where we find ourselves with these SIs. As Her Majesty’s loyal Opposition, I do not want our participation in this process to be misinterpreted in any way as an endorsement of a no-deal exit from the EU; I cannot think of a worse outcome than no deal to the chaos that we find ourselves in. However, we have to accept that, given this chaos, which has to be laid at the Government’s door, there is a real possibility that we will stumble out of the EU without a deal. While the Government seek to make contingency plans for this, by bringing in front of us what one might call no-deal instruments, we will do our duty of scrutinising them as best we can.

So far, the Government seem to have played by the rules. In my view, the rules are set out first in the European Union (Withdrawal) Act 2018, but also in paragraphs 7.1 through to 7.9—which are identical in all Explanatory Memoranda that come from the Treasury. I believe they say that there will be no new policy introduced except where necessary to achieve the transition.

I diligently read through the Explanatory Memoranda. I fear that I did not read the instruments with as much care, because, frankly, I would not know how to start. A lot of them relate to other documents and getting up-to-date, amended copies of them is difficult, so I have to judge an instrument on the basis of the Explanatory Memorandum. All it basically does is say that EEA countries become third countries. It then goes on to make the consequential changes, which involve transferring various responsibilities. In relation to this instrument in particular, it also defines high-risk countries, which I can see is important.

I have only two questions. The problem with these memoranda is that the authors know what they are talking about, whereas the reader does not know what they are reading about. Having staggered through the document, when I got to paragraph 2.12, I became exhausted. I shall read what I think is the offending passage:

“The standards are to specify what additional measures are required to be taken by credit institutions and financial institutions with branches or subsidiaries abroad, when national law outside the UK does not permit group-wide policies and procedures to be implemented that are at least as strong as those that are required by the MLRs”.


I hope that the noble Lord can make some sense of that.

My only other comment is on the tone of the memorandum—this is true of other memoranda, but I shall centre on this one for the moment. The obligation to report to EU institutions is removed, and one can see why that is perfectly logical. However, money laundering is an international crime with an enormous impact on ordinary citizens, relating particularly to terrorism and to their wealth, because of the crimes committed and their impact on the economy. It is crucial that, even if we are daft enough to leave the EU without a deal, international co-operation continues. It is not just about taking the law where it is now; it is about the law needing to develop as criminals become cleverer and do different things, and we understand more about what they are doing and what action and international co-operation are necessary.

These regulations are brought before us as no-deal SIs and will be commenced on exit day. It is clear what role they will have if it is a no-deal exit, but if a deal is done and we enter a transition period and then come to the end of it, what will happen to this statutory instrument? Will it be repealed or will it be paused? The answer to that makes a big difference to its impact. If the instrument is merely paused, we are making law for the future. If it is repealed and we essentially start from scratch as part of the negotiation in the transition period, and if sanity then reigns and we complete a deal, this SI will not matter; we will be looking at longer-term ways of managing the problems to which it relates.

[Lord Young of Cookham]

My Lords, I am grateful to all noble Lords who have taken part in this debate, particularly my noble friend, with his background as a Member of the European Parliament.

I agree with the noble Lord, Lord Tunnicliffe; in so far as the Government do not want no deal, we do not expect no deal, and we accept entirely that it will be much better to make progress. He also asked what would happen to this SI if, as I hope, there is a deal. The answer is that the withdrawal Act would switch it off, and it could subsequently be either reintroduced or possibly amended in the light of whatever agreement we came to during the transitional period.

[Lord Tunnicliffe]

Could the noble Lord define “switching off” slightly better? Is the law taken out or repealed? The term I have used is “paused”, which is rather different from “deleted”.

[Lord Young of Cookham]

I will read out the exact words in my brief: “Are these SIs for a no-deal scenario only? This legislation would not come into effect in March 2019 in the event of an implementation period, which will be delivered through a separate piece of legislation”—as I think I said—“through the EU (Withdrawal) Bill. It could be amended to reflect an eventual deal on the future relationship or to deal with a no-deal scenario at the end of the implementation period”. I hope that that is not too far from what I initially said. Alternatively, it could be delayed until the end of the implementation period with the possibility of repeal or amendment, depending what happens. The answer to the noble Lord’s direct question is that if there was a deal, it would be, in my words, switched off, or, in the words that I have just read out, it would not come into effect, and the withdrawal Act would be the vehicle through which that happened.

My noble friend Lord Kirkhope mentioned the burdens on banks. It is important to focus on the fact that we are talking about relationships with correspondent banks with regard to the standards he referred to. As I understand it, at the moment there are two standards: one for inter-EEA banks and the higher one for outside. In future, there will be one standard, so to some extent it will be slightly easier for the banks. As I said at the outset, in many cases, the banks already provide the higher standards—the enhanced due diligence—even where they do not have to.

In response to the points my noble friend made, which were also made by the noble Baroness, Lady Bowles, we plan to have some transitional arrangements. I hope that they will help both my noble friend and the noble Baroness. We have announced plans to grant the regulators a temporary power to phase in these new requirements that would apply to firms in a no-deal exit. This power must be exercised by the regulators in accordance with their statutory objectives, as set by FiSMA. This is a sensible measure to ensure that the firms have the time they need to adjust in an orderly way to the changes brought about by Brexit. The regulators will be seeking industry views on where it would be appropriate to phase in new requirements. However, the short answer to my noble friend is that it is no longer appropriate to treat the EEA differently, so we must either reduce all the standards or enhance them. We have chosen to enhance the standards, which, as I said, meets the higher standards that I think we would expect in any case.

So far as politically exposed persons are concerned, this statutory instrument will not affect the regime for them following exit. My noble friend was rightly concerned about the effect on business and the financial services sector. We believe that the SI will have a minimal effect on businesses across the sector. As I said when I spoke at the beginning of the debate, we consider that the net impact on businesses will be less than £5 million a year. Picking up again on the point made by my noble friend, we understand from the FCA and industry that in practice this already takes place because of the risk that firms associate with correspondent banking relationships. As such, this will lead to minimal increased costs to businesses beyond the status quo.

I turn now to payment services providers which again were mentioned by my noble friend. They will also be legally required to provide a greater volume of information to their EEA counterparts in connection with the cross-border transfer of funds than is currently the case, thus equalising the requirement across third countries. We understand from the industry that this takes place already and any changes will require firms to expand their existing IT systems to firms with which they transact.

On the information requirements concerning the electronic transfer of funds, which was a point I made earlier, HM Treasury has communicated that it will bring forward measures to give the FCA some flexibility to phase in changes to the regulatory requirements on firms under the EU withdrawal Act. They will use the powers to waive or modify some requirements to allow for a smooth transition to the post-exit regulatory regime.

[Baroness Bowles of Berkhamsted]

When there is a change, will there be any kind of notification for businesses and others? One of the biggest problems that, if you like, completely innocent people can experience when they are transferring money is that it gets suspended somewhere while further checks are made. That is more likely once we have gone into a third-country regime than being in the EEA. If you are transferring money for the purchase of a property or something significant for your business with a contract attached, to suddenly find that your money has been delayed by several days or a week can mean that you are in breach of the contract. Because of the particular way in which the money laundering rules operate, we are not allowed to warn people because of the risk of warning the potential money launderer. People should at least be aware that the rules are switching because that would be useful to know in order to build in some certainty. I am thinking in particular of businesses. They will have to realise that they must send money with time to spare.

[Lord Young of Cookham]

I am grateful to the noble Baroness. The last thing we want is to have any turbulence at the point of transition or to have legitimate transactions held up. The FCA will be consulting with the banks and payment services providers concerned, particularly in the light of the transitional arrangements that I mentioned earlier. Of course they have known for some time that these changes are on the way so that they have been able to prepare for them. However, one of the consequences of what I have just said is that there does not have to be a sudden switchover on 30 March or 1 April because the Treasury and the FCA will be introducing transitional arrangements. There will be due warning before any change takes place.

[Lord Kirkhope of Harrogate]

The concern of those of us who have been involved over the years with these anti-money laundering directives is the way they have been implemented in different member states. This country has always been more than diligent about making sure that any directive we have prepared in Brussels has been implemented to the nth degree over here. In doing so, the FCA has been used in a way that I believe has meant that a lot of financial institutions have gone further than was necessary not only for their own economic convenience as much as anything else but also because we in Britain have been more draconian in terms of implementation as the anti-money laundering directives have been developed, in particular this fourth one. The whole point is proportionality; in other words, it is important that we have now introduced more balance to the way in which we hope that the fourth directive will be implemented in member states. However, yet again in this country the FCA and our own financial institutions have been more than zealous in their activities.

My noble friend suggests that we should always look for higher standards, but standards should not always be equated with obligations. The obligations we have placed upon our consumers and others in this country are very strong indeed. I hope that the FCA will not use the proposed flexibility and more room to manoeuvre to go in the wrong direction because that would put us at a massive disadvantage economically.

[Lord Young of Cookham]

My noble friend will know that when we leave the EU, the obligation that we already have will be transferred. Thereafter, looking to the future, we will no longer be bound by EU regulation, so the opportunity for gold-plating them will not exist; we will be in control of our destiny. I am sure that my noble friend would not want in any way to water down the robust regime we have in this country to deal with money laundering, terrorist financing and the rest. We must get the balance right, which is what I think my noble friend was saying.

[Lord Tunnicliffe]

I intervene on that point because there is surely a contradiction. Surely when we leave the EU, the opportunity for the state to gold-plate—take present regulations and make them progressively more difficult—will be unfettered. The Minister has to convince us that, given that freedom, it will not be misused.

[Lord Young of Cookham]

The noble Lord has repeated what I meant to say: at the point of transfer, the existing EU regime is on our statute book. We will no longer be bound by future directives so there will not be the opportunity to gold-plate: we will be master of our own house. Having said that, I am sure that the noble Lord and my noble friend would not want in any way to water down the tough regime we have against money laundering and terrorist finance, but we will be in control of our destiny rather than having to implement directives.

Reverting to the point that the noble Baroness made, the FCA does not expect firms or regulated entities providing services within the UK’s regulatory remit and other stakeholders to prepare now to implement the changes from exit day. The FCA is engaging with the industry extensively to ensure smooth and effective implementation of the changes.

The noble Lord, Lord Tunnicliffe, asked me about paragraph 2.12 of the Explanatory Memorandum. The SI confers power on the FCA to make certain technical standards in an area in which it has technical expertise. The transfer of power is necessary because the relevant standards are currently made by the European Commission. The technical standards specify what additional anti-money laundering measures are required to be taken by banks with branches or subsidiaries abroad. These measures include policies and procedures to counter money laundering and terrorist financing, and must be at least as strong as those required by the UK money-laundering regulations.

For example, if a UK bank has a branch abroad in a country that does not have anti-money laundering and terrorist financial requirements as strict as ours, the parent bank must ensure that the branch applies measures equivalent to the UK regulations. If the law of the country in question does not permit such measures, the UK parent bank must take additional measures to handle the risk of money laundering and terrorist financing effectively. The FCA will be able to make technical standards specifying what additional measures such a parent bank may take and the minimum action needed to handle those risks.

The noble Lord also asked about high-risk third countries and how the list will be updated. On exit day, the EU high-risk country list will be onshored and form part of retained EU law. Subsequently, references to the list will be static rather than dynamic, meaning that updates that the EU makes to the list will not flow through into UK law. The list will evolve only as amended by UK law. The Sanctions and Anti-Money Laundering Act 2018 gives the UK power to maintain a list of high-risk jurisdictions in connection with which enhanced due diligence needs to be performed. Updates to the list will be made through the affirmative procedure. Therefore, they can come into force before parliamentary approval but will then cease to have effect if both Houses do not approve them within 28 days of their being made. Parliament will have scrutiny on updates, while allowing updates to be made quickly to reflect changing circumstances in third countries. There will be a significant increase on current levels of scrutiny as Parliament has no direct influence over updates to the list at the moment.

Finally, the noble Lord asked how we would co-operate with the EU on anti-money laundering efforts once the UK leaves. National anti-money laundering authorities will continue to make use of international co-operation to detect, prevent and investigate money laundering. There is a legal gateway in the regulations that provides that UK supervisory authorities must take such steps as they consider appropriate to co-operate with overseas AML authorities. Moreover, the political declaration agreed with the European Union contains a statement of mutual intent that the future relationship should cover money laundering and terrorist financing. This includes commitments to put in place arrangements for effective and swift data sharing, allowances to support law enforcement, measures for practical co-operation between law enforcement authorities and agreements to support international efforts to prevent, and fight against, money laundering and terrorist financing.

I hope that I have answered the points that noble Lords have made.

Motion agreed.

Market Abuse (Amendment) (EU Exit) Regulations 2018

Lord Young of Cookham Excerpts

Wednesday 23rd January 2019 Grand Committee

Moved by

[Lord Young of Cookham]

That the Grand Committee do consider the Market Abuse (Amendment) (EU Exit) Regulations 2018.

[Lord Young of Cookham (Con)]

My Lords, as this instrument has been grouped I will speak also to the Credit Rating Agencies (Amendment) (EU Exit) Regulations 2019.

The Treasury has been undertaking a programme of legislation to ensure that if the UK leaves the EU without a deal or an implementation period, there continues to be a functioning legislative and regulatory regime for financial services in the UK. The Treasury is laying SIs under the EU withdrawal Act to deliver this and a number of debates on these SIs have already been undertaken in both Houses. The SIs being debated today are part of this programme.

These SIs will fix deficiencies in UK law relating to market abuse and credit rating agencies to ensure that they continue to operate effectively post exit. Both SIs will be critical to ensure good market conduct practices to protect market integrity. The approach taken in this legislation aligns with that of other SIs being laid under the EU withdrawal Act, providing continuity by maintaining existing legislation at the point of exit, but amending where necessary to ensure that it works effectively in a no-deal context.

Market abuse involves numerous illegal practices in relation to financial markets. Such practices include insider dealing, market manipulation and the unlawful disclosure of inside information. In 2016, the EU implemented the Market Abuse Regulation which empowered EU regulators and the Financial Conduct Authority in the UK, to prevent and detect market abuse. MAR aims to increase investor protection and market integrity, thereby enhancing the attractiveness of EU securities markets for capital raising.

The regulation applies to financial instruments traded on EU trading venues and worldwide market abuse that concerns these instruments. In a no-deal scenario, the UK would be outside the EEA and outside the EU’s legal, supervisory and financial regulatory framework. The MAR therefore needs to be updated to reflect this and to ensure that the provisions work properly in a no-deal scenario. These draft regulations will amend the MAR to ensure that the UK sustains an ability to prohibit market abuse and to enforce against it effectively post exit.

Firstly, the EU-wide scope of MAR will be retained by this SI, so it will continue to capture financial instruments traded on both UK and EU trading venues and global conduct that impacts these instruments. A UK and EU scope accounts for the deeply integrated relationship between the financial markets in each jurisdiction due to current arrangements in the EU. This is necessary so that the FCA can continue to investigate, prohibit and pursue cases of market abuse that relate to financial instruments in EU markets that impact on UK markets if EU regulators are unable or unwilling to do so. If this provision were not in place, the FCA would not be able to enforce against market abuse on EU trading venues, and would subsequently not be able to protect the integrity and reputation of UK markets.

--- Later in debate ---

[Lord Deben (Con)]

When my noble friend says that the FCA has the necessary resource capacity, does that mean that it could do it if it had the money and resources to do it—in other words, if it were intellectually able to do it—or does he mean that it already has the financial and staffing capacity to do it?

[Lord Young of Cookham]

The FCA has been consulted about these regulations. If there were a no-deal scenario, I am advised that it has the necessary resource capacity to effectively carry out its new function. Perhaps I can deal in more detail with my noble friend’s question now.

As I hope I said, the FCA has dedicated the necessary resources to account for the additional work through its 2018-19 business plan, and it will ensure that its considerable experience and technical expertise in regulating the financial services sector is reflected in its new supervisory role in relation to the CRAs.

[Lord Deben]

I am sorry to trouble my noble friend again but who will pay for this? The resources of the FCA are, to a large extent, raised through various kinds of costings. I declare an interest, as set out in the register, as the chairman of PIMFA. Who will pay this bit of its budget?

[Lord Young of Cookham]

My Lords, the chief executive of the FCA, Andrew Bailey, has said that he expects to hold FCA fees steady for a year or so, assuming that there is an implementation period. However, the FCA is able to increase its fees should it need to increase its income in the event of no deal.

[Baroness Bowles of Berkhamsted (LD)]

As we have got on to the subject of fees, when the credit rating agencies want to get approval from ESMA, they have to pay a fee. Therefore, will we not have a comparable fee or is it just all part of the steady-state budget?

[Lord Young of Cookham]

They will continue to have to pay a fee, so to that extent there will be no change, but instead of it going to ESMA, it will go to the FCA.

Furthermore, the SI will require firms to establish a legal entity in the UK to register with the FCA, in accordance with the current policy under CRAR. The SI provides the FCA with pre-exit powers so that it is able to begin registering firms, and the instrument will also establish three regimes to allow for FCA registration to smooth the transition from ESMA supervision to FCA supervision. First, UK-established CRAs will be able to convert their ESMA registration into one with the FCA through the conversion regime. Secondly, newly UK-established legal entities that are part of a group of CRAs that have a registration with ESMA will enter a temporary registration regime if they have submitted an advance application to the FCA which has not yet been processed. Thirdly, certified CRAs established outside the EU will, through the automatic certification process, be able to notify the FCA of their intention to extend certification to the UK.

The SI will also enable credit ratings issued by a CRA established in the UK, with an FCA registration, to be used for regulatory purposes in the UK. The instrument will also enable credit ratings issued before exit day by EU firms that register, or apply for registration, with the FCA to be eligible for regulatory purposes in the UK for up to a year.

In addition, in relation to appeal rights, given the new enforcement rules provided to the FCA, references to EU institutions will be replaced with the appropriate UK bodies. The Upper Tribunal will now be responsible for appeal requests that have been made as a result of an FCA decision, and the FCA’s warning and decision notice will apply to this SI also.

The Treasury has been working closely with the FCA in the drafting of these instruments. Both bodies have continuously engaged with CRAs and taken on board their views where possible when deciding on the direction of the instrument to ensure that the market is informed of its policy intention. The Treasury published the instruments in draft, along with an Explanatory Note for each, to maximise transparency to Parliament, industry and the public ahead of laying.

In summary, we believe that the proposed legislation is necessary to ensure that market abuse is effectively prohibited and credit rating agencies are appropriately supervised, and that the relevant legislation will continue to function appropriately if the UK leaves the EU without a deal or implementation period. I hope that noble Lords will join me in supporting these regulations.

[Baroness Bowles of Berkhamsted]

My Lords, the first thing that I noticed on page one of the draft instrument is that it says this is done not just under the EU (Withdrawal) Act but under the European Communities Act, but it does not tell us which bits are which. If you are trying to go through and ask whether this corresponds to the rules laid down in the EU (Withdrawal) Act, you do not know, because the rules under the European Communities Act are not exactly the same. I do not find any difficulty in what has been done here, and I have come across this before in other statutory instruments. But I think it would be good practice when you are doing it with powers in lots of different places if the relevant bit of the instrument were to say which the enabling power was instead of putting it in an anonymous way. But then, I am still learning about how these things are done in the UK.

I accept the points made by the Minister about what I call the symmetry point: that some bits here need to be retained, extending into EU territory, if I can put it that way, so that we know what is going on. Emissions trading is one example of that. Perhaps I should declare an interest on the register—the usual London Stock Exchange Group plc issue. How will we get information back into the UK from, for instance, the trading of UK instruments on exchanges in the EU? This is the other side of the trading obligation. If the EU says that you can trade only on recognised exchanges—there are exchanges that, for example, trade UK-listed shares—that means that, unless there is some kind of deal done, people will theoretically want to trade in the EU rather than the UK, or they will want to cut off trading in the EU so that they own the trade in the UK. We have concentrated on that when talking about trading obligations; we have not talked about what happens to the information from the trading venues that remain in the EU.

I am sorry that I had not thought this out previously; it just occurred to me while the Minister was speaking. This is something for the regulators and, probably, the Government to look at as we move forward and work out what the EU is going to do in respect of exchanging information with us. The exchanges provide data to the FCA so you can see whether there is any funny business going on; it is one of the methods of detection, as you can see spikes and so forth that might indicate something strange.

Another question on symmetry is that I wonder why we have bothered, in new paragraphs 5 and 5A on page 11 of the regulation, to list all the European organisations that still have exemptions. One of the things I did from time to time in the EU, perhaps a little mischievously, was to take out the list of all the bodies that did not have to come under market abuse regulations. As I have said more than once, central banks can do things that, if anybody else did them, would be called market abuse. Generally speaking, we allow central banks to do that.

There is a general provision for certain public bodies and central banks of third countries. If the EU is now a third country, why bother to state that the Treasury can make particular exemptions for member states, the ESCB, members of a federal state, the Commission, the European Investment Bank, the European Financial Stability Facility and the European Stability Mechanism? Why not just treat them as generic public bodies? This gives the EU special treatment. Yes, one might want to prepare a list, but was this just a short cut? If we were going to compact these things down for the long term and if we were going to treat the EU as a third country, why list all EU bodies but not other third-country bodies? I am not sure that I would have put them on the face of the regulations, just for the sake of it. Those are all the issues that I wish to raise at this point.

--- Later in debate ---

[Lord Young of Cookham]

My Lords, I am grateful to all noble Lords who have taken part in this debate and I notice that neither the noble Baroness, Lady Bowles, nor the noble Lord, Lord Tunnicliffe, have any fundamental objections to the detail of the SIs before us. I shall try to deal with the points they have made, along with those made by my noble friend. I was asked why the European Communities Act is mentioned. The answer is that the ECA powers are used to make consequential amendments to the Criminal Justice Act 1993 and the UK Market Abuse Regulation 2016. The European Communities Act is mentioned because it is the parent rather than the withdrawal Act.

My noble friend raised a number of points that go slightly wider of the mark. I would just say to him that it is a consequence of leaving the EU—like him, I campaigned to remain—that we can no longer influence what he described as “over there”. I used the word “equivalence” because what we are trying to do is make sure that if and when we do leave, the regime in this country is as equivalent as it can be to the regime when we were in the EU. Likewise, he talked about discretion. Indeed, we will not have the discretion that we have at the moment to influence what happens in the EU as a direct consequence of us having left.

Both my noble friend and the noble Baroness, Lady Bowles, raised the question of how we get information from the EU. In terms of ESMA and EU regulators co-operating and sharing information with the FCA, it will look to make use of the existing arrangements in the Financial Services and Markets Act 2000 to co-operate and share information which should be in the interests of both parties. We hope that that will continue. I was asked why we have bothered to keep paragraph 5 in the MAR SI, which is the list of EU institutions. We have omitted these exemptions from the UK MAR to achieve symmetry with the EU, but we recognise that after exit we may achieve or negotiate closer links, in which case it would be desirable to reinstate the current position if it was reciprocated or desired. I was also asked why we have exempted EU bodies under MAR. The UK and the EU markets are highly integrated, a point made by the noble Lord, Lord Tunnicliffe, and the relationship between them means that the exemptions may also be necessary for EU institutions interacting in the UK market.

My noble friend raised the issue of FCA fees. He will understand that those are not within the scope of the EU withdrawal Act powers or indeed within this statutory instrument. However, I hope that he was reassured by what I quoted from the chief executive, Andrew Bailey. He expects FCA fees to remain steady for a year or two, assuming that there is an implementation period.

The noble Lord, Lord Tunnicliffe, asked why the scope of this SI covers financial instruments in both UK and EU trading venues. I think the answer is that there is a very close relationship between the UK and EU markets and the scope provided by this SI ensures that the FCA will continue to have the ability to investigate and pursue cases of market abuse related to financial instruments which affect UK markets. UK companies may have instruments that are quoted not in London, but in Europe. If there were abuse there, it could affect the integrity of the UK market. This means that the FCA could take action where activity in a financial instrument, which was traded on an EU venue, impacted on UK markets. We want to maintain the current levels of integrity and confidence that UK markets currently hold. The impact assessment—

[Lord Tunnicliffe]

There seems to be an extraterritorial competence here, which is pretty unusual in English law.

[Lord Young of Cookham]

We would expect the EU regulators to intervene and investigate market abuse in an EU trading venue of a UK-related instrument. We would expect it to take the lead. The provision in the SI is for what I hope is the unlikely event that they decide for whatever reason not to intervene, but that we feel there is a need to investigate market abuse because it is having an impact on UK markets. That is why that particular power is as I have said.

To return to the lack of an impact assessment, we did ship a bit of water yesterday. We recognise the importance of having impact assessments available to inform these debates. Treasury Ministers are doing everything they can to make these available as soon as possible. They are in discussions with the Regulatory Policy Committee to improve the impact assessments and enable them to complete their review of them. We hope to publish the relevant impact assessment next week.

[Lord Tunnicliffe]

I omitted to congratulate the noble Lord on getting out an impact assessment on the final SI—the credit rating business. Because it came out, I was foolish enough to read it; it is interesting that the numbers showed a cost to the industry of £11.4 million. I did not really understand what that meant—whether the figure was big or little. It is obviously £11.4 million, but do these people make hundreds and thousands of millions of pounds such that it is nothing or will it be a significant cost to them?

[Lord Young of Cookham]

It is a very good question, and the answer is that we do not have the exact information as to the exact turnover or number of people employed in the CRAs. I will make further inquiries and see if I can shed some light on that. I might get some in-flight refuelling.

[Lord Deben]

When my noble friend sheds some light on that, would he be kind enough to explain something which is often hidden in this? I do not quite understand why there is an additional cost if we are to do the same thing, only locally, because they must have been paying somewhere else. Could my noble friend make sure that we have an answer that shows which bits are, if you like, real additions and which are a replacement for somewhere else? That is all I want to know.

[Lord Young of Cookham]

Seeing whether one can net it off is a very good question, and I will see whether we can do that—I probably cannot do it on my feet.

To revert to the point made by the noble Lord, Lord Tunnicliffe, about how the £11.4 million cost to the credit rating agencies relates to the size of the industry, we expect credit rating agencies to incur an estimated £10,000 per firm for changes to IT systems and £60,000 per firm for reporting requirements. This is for the five firms that the FCA expects to enter the regime. On top of that, there are familiarisation costs. Perhaps I could write to the noble Lord with more information, seeing whether we can net it off, as my noble friend has just said, by looking at what they have to pay at the moment.

The answer to the noble Lord, Lord Tunnicliffe, about the status of this SI, if there is an agreement, is the same as in the last debate. The SIs would be delayed and may then be repealed or amended as appropriate, depending on what deal we actually do.

The noble Lord asked for an explanation of the third option of paragraph 7.12 of the Explanatory Memorandum. This relates to credit rating agencies’ pre-exit applications to the FCA. All credit rating agencies will need to register with the FCA in order to establish legal entities in the UK following exit. Firms can complete this registration through the automatic certification process. Basically, if you have a credit rating agency which is located outside the EU but which has registered with an EU credit rating agency, it can apply to have that certification extended to the UK in a sort of passporting arrangement.

The noble Lord, Lord Tunnicliffe, asked about the senior management structure of credit rating agencies and whether individuals could be held responsible. It is a good question. The senior managers and certification regime does not currently apply to credit rating agencies; I think that one of the reasons is that they do not actually handle customers’ money, which of course banks and other agencies do. Regulation 22 of the SI applies Section 400 of the FiSMA, which provides that if an offence committed was with the consent or connivance of an officer of the body corporate, or due to neglect on its part, the individual as well as the corporate is guilty of an offence.

Finally, on international co-operation, the MAR SI amends Part 8 of the FiSMA to facilitate international co-operation between EU and non-EU regulators and the FCA. There are existing co-operation provisions for cases of market abuse that we will seek to rely on. Related to that, both the Treasury and the FCA will continue to co-operate internationally with the EU to facilitate identification and enforcement of market abuse, and we are confident that the FCA and HMT can continue this co-operation despite no longer being part of the EU.

Motion agreed.

Credit Rating Agencies (Amendment, etc.) (EU Exit) Regulations 2019

Lord Young of Cookham Excerpts

Wednesday 23rd January 2019 Grand Committee

Moved by

[Lord Young of Cookham]

That the Grand Committee do consider the Credit Rating Agencies (Amendment, etc.) (EU Exit) Regulations 2019.

Relevant document: 11th Report from the Secondary Legislation Scrutiny Committee (Sub-Committee A)

Motion agreed.

Brexit: Stability of the Union

Lord Young of Cookham Excerpts

Thursday 17th January 2019 Lords Chamber

[Lord Young of Cookham (Con)]

My Lords, if that was the speech of a novice, we look forward to hearing from the noble Lord when he finds his length. I am grateful to all noble Lords who have taken part in this timely and exceptionally well-informed debate. In particular, I am grateful to the noble Lord, Lord Lisvane, who chose and introduced it, this time without the colourful reference to his maiden aunts.

The noble Lord has listened to more hours of debate in Parliament on the union—many of them I expect involuntarily—than any of us. He has unrivalled insight into the constitutional and legislative implications of what has happened in the past and what is happening now. I am therefore pleased that at this time of constitutional change, with our eyes turned outwards to the EU, he has provided us with the opportunity to look inwards—as the noble Lord, Lord Griffiths, has just told us—to the far older, far stronger bonds between our nations, which have enabled us to overcome past challenges, as the noble Lord, Lord Armstrong, told us. This is an opportunity to see how those bonds might be strengthened in the future. My noble friend the Duke of Montrose managed to put the relationships in a historical context by drawing on recollections of his ancestors.

I will say straight away that the Government take the warnings from the noble Lord, Lord Lisvane, and others who have spoken in this debate extremely seriously. I pay tribute to the work that the noble Lords, Lord Lisvane and Lord Hain, and others have done with the Constitution Reform Group to bring stability to the union, an objective which we all share. The Minister for the Constitution looks forward to meeting that group soon, and I will return to the Bill in a moment.

Speaking on “The Andrew Marr Show” earlier this month, the Prime Minister said that, if the vote was lost on Tuesday, we would be in uncharted waters, and that of course has consequences for the union. In our debate, we have had some professional political cartographers steering us away from the jagged rocks below the cliff edge to which some siren Brexiteers entice us, and indicating where calmer waters and more favourable winds may prevail. No deal would be bad for all of us but it would create particular political tensions in Scotland and Northern Ireland, as we have heard today from my noble friends Lord McInnes and Lord Dunlop, and from the noble Lords, Lord Thurlow, Lord Hannay and Lord Hay, who spoke about the backstop. I think we were all moved by the speech from the noble Lord, Lord Wigley, about Wales and the late Steffan Lewis, to whom he paid tribute.

It is worth rewinding briefly to see how we got here. Of course, the centrifugal forces within the UK predate the Brexit referendum, as the noble Lord, Lord Lisvane, said in his opening remarks. This was repeated by the noble Lord, Lord Judd, and the noble and right reverend Lord, Lord Chartres. We saw the growth in political support for Scottish independence when the SNP unexpectedly won overall control at Holyrood, and in Northern Ireland we have seen growing support for the party that believes in a united Ireland. The Brexit referendum crystallised and added momentum to these forces.

During our debate, there has been criticism of the decision to hold referendums, a point made by the noble Lord, Lord Empey. The noble Lord, Lord McCrea, reminded us of how we got here. I am personally cautious about referendums as they can cause tension with our parliamentary democracy, but there are some issues which it cannot satisfactorily resolve. For example, the SNP, mentioned by the noble Lord, Lord Thurlow, was never going to win a majority in Westminster to deliver Scottish independence, yet there was clearly significant support for it in Scotland. The referendum was the right way to resolve that issue. Likewise, UKIP was never going to win a Westminster election, but in 2014 it topped the poll in the EU elections on an unequivocal manifesto of withdrawal. Again, the referendum was the right way to resolve this question and lance the boil.

Likewise, there is provision for a referendum in Northern Ireland should the conditions in the Belfast agreement ever be fulfilled, a point referred to by the noble Lord, Lord Bruce. I was impressed by what the noble Lord, Lord Rogan, said: that in Northern Ireland, more important than Brexit is the wish of the population to see the restoration of the Northern Ireland Executive. They see that as their top priority.

In passing, I understand all the arguments against a second referendum, which is not government policy, but I do not accept that our democratic tradition is so fragile that it could not withstand one, were it to be held.

The criticism that can be made of the Brexit referendum is not so much of the decision to hold it, as of the subsequent and unsuccessful campaign to remain, recently revealed on our screens as having been outwitted by a slick if, at times, irresponsible operation acting below the radar of conventional politics and masterminded by an arch political disruptor. That referendum crystallised, but did not cause, the different views in the UK on whether we should remain part of the EU. Two countries voted to leave and two to remain. The consequences of that have been the focus of today’s debate.

I turn to the constructive proposals from the noble Lord, Lord Lisvane, in his Bill to help bind the UK together. I commend him for identifying the broadly undisputed purposes of the United Kingdom in Clause 2. I also applaud the heroic endeavour to distinguish between what are called “central policy areas” and matters that are devolved to the four national Parliaments. Here, I particularly welcome the requirement that the Governments of each nation co-operate on matters of national importance, such as aspects of defence and security. Co-operation is one of the key principles of our current memorandum of understanding between the UK Government and the devolved Governments, and its operation over recent years has been positive. Such an approach should continue. I propose to say a word or two in a moment about one of the themes running through the debate on the relationship between government and the devolved Assemblies.

Reading the press release put out by the steering committee on 9 October, I was struck by the following sentence:

“the Bill asserts that Scotland, Wales, Northern Ireland and (if it so chooses) England is each entitled to its own internal sovereignty”.

The noble Lord might find this an unfair comment, but I found it perverse that a Bill that seeks to bring us closer together should have as its starting point the total separation of the four parts of the union. Even if they subsequently agreed to pool sovereignty, that initial step and taste of sovereignty might make subsequent independence easier to achieve, a point made by my noble friend Lord Dunlop.

My first question on reading the Bill relates to the asymmetrical nature of current devolution settlements, which I think correctly reflects the different histories and cultures of our four nations. Scotland, Wales and Northern Ireland are all treated differently. The Bill does not appear to make provision for this, and has a one-size-fits-all approach that does not reflect the findings of the Silk and Smith commissions, nor the views of the people of the UK, as mentioned by my noble friend Lord McInnes.

My second question relates to one raised by the noble Lord, Lord Armstrong, about adjusting the settlement over time to reflect changing circumstances. We can do that at the moment and we do so relatively easily. English votes for English laws is a case in point. It has embedded fairness and balance into Parliament’s law-making process, ensuring that MPs representing English constituencies can consent to legislation that affects only England while maintaining the key principle that all MPs from across the UK can debate, amend and vote on every piece of legislation.

We have also continued to move forward at pace to decentralise governance in England, bringing powers closer to the people so that services can be delivered that are attuned to their local needs. I challenge the assertion of the noble Lord, Lord Adonis, who I think said that little had changed since Redcliffe-Maud. Through the Cities and Local Government Devolution Act 2016, we have taken major steps to decentralise governance in England through devolution deals. Seven city regions are now headed up by their own elected mayors, with their own devolved powers and budgets.

I welcome the comments of the noble Lord, Lord Wallace. An enthusiastic debate over devolution is continuing across Yorkshire and a number of further suggestions have already been discussed locally. We are of course willing to discuss proposals that have support behind them, cover a sensible economic area and do not break up areas that already have long-standing integrated services. We are currently considering the information recently submitted by the 18 Yorkshire leaders, but we have always been clear that the first step to any devolution deal across Yorkshire is the full implementation of the 2015 Sheffield City Region devolution deal. We want Sheffield to enjoy the full benefits of its 2015 deal, including £900 million of investment.

Turning back to the Bill for a moment, the future changes set out in Part 2 of the Schedule seem infinitely more complicated and cumbersome, and risk locking us into a settlement that becomes outdated—a point made by the noble Lord, Lord Armstrong. Constitutional development in the UK needs to evolve to reflect circumstances of the day and be flexible enough to meet new challenges.

The noble Lord, Lord Lisvane, will understand that his Bill is unlikely to have an easy passage. My attention was caught by Clause 28(1), which says:

“On commencement of this Section, the House of Lords shall cease to form part of Parliament”.


Well, we may need to spend a little time on that one. The noble Lord will understand better than anyone that a Bill heralding the most significant constitutional change in our history will take a Session or two to make progress.

What are the Government doing to strengthen the union during Brexit? We recognise the importance of working closely with the devolved Administrations throughout the negotiation process and welcome the regular engagement that has taken place through forums such as the Joint Ministerial Committee on EU Negotiations and the Ministerial Forum on EU Negotiations.

Here I might depart from my text—always a risk—and say that one of the themes running through the debate has been what the noble Lord, Lord Lisvane, called “imperial condescension”, the noble Lord, Lord Wigley, referred to as a “power grab”, and the noble Lord, Lord Adonis, referred to in more derogatory terms. But it was clear from what the noble Lord, Lord Griffiths, said, that the Chancellor of the Duchy of Lancaster, my right honourable friend David Lidington, wants his approach to have that element of respect and to promote good relationships.

I take on board the points made by the noble Earl, Lord Kinnoull, the noble Lords, Lord Lisvane and Lord McConnell, my noble friend Lord McInnes and a number of others that this relationship should be rebooted. Comments were made about the regularity of the meetings and Ministers’ attendance. It is quite clear from this debate that the institutions and the quality of the dialogue need to be improved. As a result of the exchanges on that subject, I propose to talk to the Chancellor of the Duchy of Lancaster whenever I can and feed through to him the theme that has consistently run through some of the speeches on both sides. I know that officials are working closely with counterparts in the devolved Administrations to take forward this review of intergovernmental relationships. On 19 December, the Prime Minister, together with the First Ministers of Scotland and Wales, reviewed the progress made so far of the review at the JMC. It is important for us to look, in the light of our debate, at the principles and machinery that underpin the relationships and how we can best ensure—

[Lord Dykes]

Since the Prime Minister is so overworked and busy, would it not be a good idea for David Lidington to be in charge of those detailed discussions?

--- Later in debate ---

[Lord Young of Cookham]

My right honourable friend David Lidington has a key role to play in building up a relationship with the devolved assemblies. He has attended a large number of these meetings. If the noble Lord looks at the allocation of ministerial responsibility, the Chancellor of the Duchy of Lancaster has this as part of his portfolio.

To revert to what I was saying, an interim report was presented and agreed on 19 December. All the Administrations have tasked officials to make a further report to the JMC(P) in due course. I will ensure that the views expressed during this debate are taken on board as that review takes place.

The noble and learned Lord, Lord Morris, asked about legislative consent Motions. We are fully committed to the Sewel convention and its associated practices for seeking consent set out in the devolution guidance notes. We are continuing to seek legislative consent, taking on board the devolved Administrations’ views and work on the EU exit Bills according to established practices, just as we have always done.

I may need to write to the noble Baroness, Lady O’Neill, about the letter from Mr Tusk that she referred to but, in principle, the Government are committed to the Belfast agreement, as they always have been, and remain steadfast.

We have been working with the devolved Administrations on what a deal might look like in practice domestically. We are committed to preserving and strengthening the decision-making abilities of the devolved Administrations and, as we have made clear, the devolved institutions will continue to be able to make any decision that they can make now after exit. As set out in the EU withdrawal Act, as new powers are returned to the UK and where they are within areas of devolved competence, they will flow directly to Belfast, Cardiff and Edinburgh.

We are also working collaboratively with the devolved Administrations to agree where we should continue to take UK-wide approaches and what they will look like. These common frameworks referred to by the noble Lord, Lord Griffiths, will be established in specific policy areas and help preserve the UK internal market, preventing four different sets of rules in different parts of the UK making it more difficult for a cheesemaker in Monmouthshire to sell to customers in Bristol, or for a farmer in Aberdeenshire to sell their beef in Berwick-upon-Tweed.

On funding, which a number of noble Lords mentioned, we are committed to the Barnett formula. We believe it is a fair and transparent way of funding the devolved Administrations. The noble Lord, Lord Empey, raised a good point on accountability. I suppose the answer is that the Scottish Executive are accountable to the Scottish Parliament, and ultimately to the Scottish electorate, for the way in which they spend the money—including the money that they get from Westminster.

In the turbulence of the current political situation, it is easy to lose sight of the background to this debate. The bonds between our nations exist not only because we share values and histories but because, time and again, we have shown that we can achieve more when we operate together. That is why we believe in the union and will continue to govern in the interests of every part of it. That commitment is reflected in the way that we work across the entirety of the UK: from high-profile, job-creating investments such as the aircraft carrier being built at Rosyth to the no less important work behind the scenes, such as officials working hard to ensure that Welsh beef and lamb can be sold across the globe. Initiatives such as the industrial strategy drive growth across the whole of the UK, while sector deals and investment in research and development will support the industries of the future, whether in Scotland, Wales, Northern Ireland or England.

I will try to answer one or two specific questions. My noble friend the Duke of Montrose asked about the Supreme Court. We challenged the Scottish Bill on the basis that it was not within the competence of the Scottish Parliament. We are grateful to the Supreme Court for providing greater clarity. This is not simply a question of where constitutional powers lie, important as such questions are. Greater clarity was needed to ensure that our statute book functions properly and the law is clear.

I say to the noble Lord, Lord Hastings, on Gibraltar: let no one be in any doubt that on the future partnership the UK will negotiate for the whole UK family including Gibraltar, as the Prime Minister said on 25 November. As the Chief Minister said, this is a deal which works for Gibraltar.

Where do we go from here to prevent the centrifugal forces I referred to earlier driving apart the component parts of the UK? We need a deal with the EU that those in Northern Ireland and Scotland in particular feel comfortable with, even though a majority voted to remain, and we need to avoid no deal.

In 2010, my party was the largest one but it had no majority. The country was looking over a cliff edge after the collapse of global markets, with concerns about our currency and our financial and political instability. Then, in the interests of the country, we reached out to those sitting on the Opposition Benches—our opponents in the recently concluded general election. An offer to talk was rightly accepted, without any preconditions. We then had to abandon some manifesto commitments; there were tensions within my party that had to be managed as we formed the then coalition. But it was the right thing to do and I remind my former colleagues in another place, understandably worried about their future, that our party came together then and, when the country passed its verdict, we went on to win a general election for the first time in nearly 25 years.

Now, we do not need another five-year coalition but, picking up a point that I think was made by the noble Lord, Lord McCrea, we need to work together again in the interests of the country. The current deal is dead but I hope that a reformed one can be found, acceptable to those who want to leave, so that the referendum box can be ticked, but also acceptable to those who, like me, voted remain so that we can do so with minimum turbulence, because on leaving we move into the transition period where there is stability. Your Lordships’ House has debated these issues today calmly and constructively, in contrast to the excitable atmosphere in another place, and we have put aside partisan points. That is the spirit in which the debate should now continue in both Houses of Parliament, with a view to arriving at an acceptable conclusion in the national interest.

Government Policy: Plain English

Lord Young of Cookham Excerpts

Wednesday 19th December 2018 Lords Chamber

[Lord Sherbourne of Didsbury]

To ask Her Majesty’s Government what steps they are taking to ensure that all government papers and publications which set out government policy are written in plain English.

[Lord Young of Cookham (Con)]

My Lords, the Consultation Principles published in 2012 by the Cabinet Office state that consultation should be clear and precise, using plain English and avoiding acronyms. These principles are actively promoted by the Civil Service Policy Profession but Ministers are ultimately responsible for the clarity of government publications.

[Lord Sherbourne of Didsbury (Con)]

My Lords, I am very pleased that my noble friend is answering this Question. He was first a Minister in 1979—and I am delighted that he is still a Minister today—so he will remember that in the past Governments used to set out government policy in plain English in short and succinct White Papers, whereas now you go into the Printed Paper Office and your heart sinks when you see a heavy and thick document because you know that, the thicker it is, the more impenetrable it will be. Therefore, I ask my noble friend to urge his ministerial colleagues to revert to the practice of publishing government policy in short White Papers written in clear and simple English.

[Lord Young of Cookham]

I am grateful to my noble friend. There have been a number of discontinuities in my service as a Minister over the years. I share his alarm when one goes into the Printed Paper Office and picks up a huge tome, particularly if a Minister will have to answer a debate on it. When I was a civil servant, I was guided by Sir Ernest Gowers, whom many will remember. He wrote The Complete Plain Words and he had three principles: first, use no more words than are necessary; secondly, use words that are familiar; and, thirdly, avoid vague and abstract words and use words that are precise and concrete. I commend Sir Ernest Gowers to all Ministers and all civil servants when they produce White Papers, and I heartily endorse the exhortation from my noble friend.

[Baroness Garden of Frognal (LD)]

My Lords, I congratulate the noble Lord on the clarity of his response. The Plain English Campaign advises, as he has mentioned, “Keep your sentences short”, “Prefer active verbs” and “Avoid nominalisations”. I am sure we would all aspire to that. What training is given to civil servants and Ministers to ensure that they avoid gobbledegook in government documents?

[Lord Young of Cookham]

Like the noble Baroness, I too follow the progress of the Plain English Campaign. A winner this year was an NHS trust, the George Eliot Hospital, which was commended for its publications. So far as advice to government Ministers is concerned, the Government Digital Service runs workshops to help Ministers and civil servants to write clearly. It has had workshops with the DWP and Public Health England, and its content team maintains the content of the most trafficked content. It encourages everybody to avoid jargon but my brief tells me that content on websites should “be updated to improve the end-to-end user journey”.

[Lord Browne of Ladyton (Lab)]

My Lords, on any reasonable measure, all three services of the UK’s Armed Forces are smaller now than when the Government took responsibility for them. The Navy has fewer vessels than it had in 2003 and the Government have no intention of building more than there were in 2003. However, yesterday, in an otherwise pretty vacuous Statement, the Secretary of State for Defence said to the other place:

“The Royal Navy has increased its mass and points of presence around the world”.—[Official Report, Commons, 18/12/18; col. 657.]


Talking about clarity, what does that mean?

[Lord Young of Cookham]

Like the noble Lord, I read Patrick Kidd’s article in the Times today that took my right honourable friend to task for some of the verbs and phrases he used in the Statement. My right honourable friend may well be a contender next year for the Plain English Campaign’s Golden Bull Award, which this year was won by a sports commentator who said:

“He’s given the referee no choice but to consider his options”.

[Lord Dobbs (Con)]

I am so glad it is my noble friend answering this Question. As part of the Government’s relentless pursuit of comprehensibility, is he able to explain what is meant by the phrase “Brexit means Brexit”? Given that this is a season of good will, which infuses everything we do, is he able to give us some more understanding of what we are meant to understand by:

“No deal is better than a bad deal”?

[Lord Young of Cookham]

I think my noble friend will understand if I do not venture too deeply into matters that are the responsibility of another government department. It would be helpful, however, if the Labour Party could explain its policy on Brexit in plain English.

[Lord Singh of Wimbledon (CB)]

My Lords, will the Minister agree that we also need to look at the down side of the use of plain English? It would seriously harm the fine art of obfuscation and the career prospects of many civil servants. Impenetrable briefs given to Ministers might be replaced by help towards straight answers. That could be the end of government as we know it.

[Lord Young of Cookham]

The noble Lord may have read the Manchester Guardian in 1794, when the same issue arose. I quote:

“The nonsensical jargon of the old Ministries must be replaced by a simple style, clear and yet concise, free from expressions of servility, from obsequious formulae, stand-offishness, pedantry, or any suggestion that there is an authority superior to that of reason, or of the order established by law”.

[Baroness Smith of Basildon (Lab)]

My Lords, one of the reasons this House always welcomes the Minister to the Dispatch Box is that he fulfils his obligations, is always clear and concise and, as we have seen today, answers questions with some wit and humour. That is not always the case with answers to your Lordships’ House. In the spirit of Christmas I will not name names, but may I suggest that a new year’s resolution for the Minister might be to hold training classes for his ministerial colleagues so that we may have the delights of similar answers from all Ministers?

[Lord Young of Cookham]

In her intervention, I think the noble Baroness has made me even more unpopular than before with my ministerial colleagues.

Constitutional Convention

Lord Young of Cookham Excerpts

Thursday 13th December 2018 Lords Chamber

[Lord Young of Cookham (Con)]

My Lords, I commend the noble Lord, Lord Foulkes, on his choice of subject and its timing, this debate coming as it does in a month when a number of important constitutional issues have captured the headlines. I join all noble Lords in paying tribute to my noble friend Lord Higgins. I first heard him speak from my party’s Front Bench in 1974, when he was part of Ted Heath’s opposition team, and have followed his career ever since. I remember him in particular chairing the Treasury Select Committee in the 1990s. The debates here will be the poorer without him. I hope that he does not entirely absent himself from political discourse, but uses other platforms. I was touched by his genuine tribute to his successors, the fact that he has done 54 years in public service and the way that he stuck up for his beliefs at a time when they were unpopular. The children of this country are for ever grateful to him for the rebate of VAT on children’s shoes.

It has been a real pleasure for me to listen to this debate, well informed and topical as it has been, as I have a long-standing interest in constitutional issues. I was my party’s spokesman in another place on the subject at the turn of the century, when we debated what became the Political Parties, Elections and Referendums Act, along with Lords reform. I served on a democracy taskforce, chaired by Ken Clarke, with fellow members including the noble Lords, Lord Butler and Lord Tyrie, which promoted the policy of English votes for English laws. I shall come back to that in a moment. As the leader of the House in another place, I promoted some reforms in the coalition Government to give back to Parliament some of the powers the Executive had taken away. I have also done some time on the council of the Hansard Society and worked with my noble friend Lord Norton, when he was commissioned by the then leader of my party, now my noble friend Lord Hague, to work up his report on strengthening Parliament.

However, the pleasure of listening to and learning from this debate has been moderated by the knowledge that I am expected to wind it up. Noble Lords have given me a long frontier to patrol and while I will try to address some of the key issues raised, my remarks will mostly be a contribution to the debate rather than a summation. The wide-ranging nature of this debate highlights one of the problems with a constitutional convention—a point raised by the noble Lord, Lord Howarth. Noble Lords have raised so many issues that any convention looking into them would take years to do them justice. When I got the brief from the Cabinet Office for this debate, it was over 100 pages long and covered over 25 topics that could come under such a convention. Noble Lords have raised many others.

I am not averse to independent conventions looking at certain constitutional issues. Indeed, there have been many successful examples which we have heard of during this debate. We have had the report of the noble Lord, Lord Burns, on reforms to this House; there were the Silk and Smith commissions on devolved powers; recent commissions, such as that of the UCL Constitution Unit on referendums, have added greatly to the debate and knowledge in this area. The noble Lords, Lord Foulkes and Lord McConnell, reminded us that they were both part of the Scottish Constitutional Convention and I applaud the success of that convention in producing two reports prior to the devolution changes in 1997. I also applaud the work of the noble Lords, Lord Lisvane and Lord Hain, on the Act of Union Bill, which I understand we will now be debating early next year. But the point about all these conventions is that they were narrowly focused, rather than the wide-ranging agenda proposed by the noble Lord. The noble Lord, Lord Howarth, reminded us of the fate of the Kilbrandon commission.

The helpful Library briefing note for this debate referenced the work undertaken by Professor Robert Hazell and Dr Alan Renwick, referred to by the noble Lord, Lord Kennedy, on their Blueprint for A UK Constitutional Convention. However, the quote that he used was not this one. The summary to the report said:

“While some activists would like to see an overarching constitutional review, there is good reason to think this would be too complex and controversial to yield useful results. Limiting the convention to one aspect of the constitution is likely to be better”.


As this suggests, it would be worth considering how such a large topic could be disaggregated and prioritised, with the key issues being more clearly defined.

The Motion of the noble Lord, Lord Foulkes, helpfully does not stipulate that the Government should initiate such a convention; indeed, he implied in his opening remarks that this was something the Opposition should do. Anticipating a government response the noble Lord, Lord Owen, said that there was no way that the Government would agree to this. What struck me during the discussion about the nature of such a convention was what the noble Lord, Lord McConnell, said when he spoke of the convention on which he served: that it was successful because it reflected the settled will of the people of Scotland. That convention had a purpose and that was why it succeeded. The whole argument behind this convention is, because there is no settled will or purpose, there is clear disagreement. Some noble Lords want a written constitution, including the noble Lords, Lord Bruce and Lord Dykes; others who have taken part in this debate would be firmly against a written constitution. The suggestion by the noble Baroness, Lady Bryan, that we should do this quickly and urgently is not an optimistic prognosis, given the difficulties it would have to cover.

While our debate has been wide-ranging, it has not covered everything that affects democratic accountability. For example, I regret the recent erosion of collective responsibility in government and the selective briefing of exchanges in Cabinet, both of which I believe hinder good government. Another issue central to democratic accountability in this country is the role of our political parties, hardly mentioned in this debate. Half of all voters think that British politics is broken. Only one in seven thinks that the Tories and Labour represent the views of the public—I will come to the Liberal Democrats in a moment. The noble Earl, Lord Listowel, rightly spoke of those who feel disfranchised and dispossessed. The noble Lords, Lord Bruce and Lord Adonis, and the noble Baroness, Lady Jones, spoke of alienation.

Half of those who spoke in this debate served in the other place. As the noble Lord, Lord Lipsey, pointed out, as party membership declines, as has happened in my party, with its centre of gravity shifting to the right, or is swollen by supporters with a particular ideology, as has happened to the Labour Party in its shifts to the left, it may become more difficult for candidates in the centre of the political spectrum to get selected. Putting aside our age, how many of us who have spoken in this debate—predominantly remainers or Blairites—would be selected today?

Meanwhile, what has happened to the Liberal Democrats? For all my political life, when a Conservative Government have faced difficulties, whether that be under Macmillan in the 1960s, Heath in the 1970s, Thatcher in the early 1980s or Major in the 1990s, the third party has been a safety valve and has won by-elections, particularly when the Opposition party have also been unpopular. There was Orpington, Berwick, Crosby, Hillhead, Newbury and Christchurch among a long list, which brings back painful memories. Today, with a Government who are facing unprecedented difficulties and visibly divided, and a Labour Party led by its most left-wing leader in history—without Michael Foot’s gift of oratory and Cabinet experience—where is our third party? It is languishing in single figures. I make this point not to provoke but to underline the central importance of our parties to democratic accountability and the risk of their being seen as not relevant to voters. I reinforce the point made during this debate about the broad terms of reference of any convention on democratic accountability.

No one, except I think the noble Lord, Lord Howarth, mentioned the role of social media in our democracy. Last Saturday a former head of GCHQ said that Facebook poses a threat to democracy without tougher regulation. As I have said before, usually in response to the noble Lord, Lord Kennedy, we have an analogue regulatory system for our elections in a digital age. During the last three decades, the internet has revolutionised not only the way we interact with each other but the way we do politics. The digital landscape poses challenges for our democratic accountability that we cannot afford to shy away from addressing, so it is incumbent on this Government to keep pace with the changes to technology. We are determined to have a system that is fit for purpose, and we will be introducing reforms once relevant court cases have been disposed of and the relevant Select Committee and Electoral Commission reports are available to achieve that objective.

As others have outlined during this debate, constitutional conventions can work in some circumstances, but it depends on the situation. Other countries which have tried have found the process challenging. The recommendations of the conventions in British Columbia and Ontario were rejected when they were put to the public in referendums. In Ireland, of the 18 recommendations made by the Irish constitutional convention, only two were put to referendum and only one passed. In Iceland, where a more wide-ranging constitutional convention was undertaken, all six of the proposals of the constitutional council were passed following a referendum. However, they have not been taken forward by subsequent Governments. That highlights one of our key concerns with proposals for a constitutional convention: that they often fail to deliver the intended result.

I shall try to touch on some of the points that were raised during the debate. The noble Lord, Lord Lipsey, and the noble Baroness, Lady Jones, touched on AV and criticised first past the post. I say to the noble Lord, Lord Lipsey, that he has seen the hurdles facing those who want a second vote on the referendum where the result was 52% to 48%. What hurdles will confront those who want a second referendum on the result of the referendum we had on AV, when the vote was 67.9% to 32.1%, particularly against a background of the comment made by the noble Lord, Lord Grocott, that we should not repeat referendums too often?

A number of noble Lords made a valid point about the potential tension between government by referendum and government by representative democracy. What would have happened 40 years ago if any of us had stood for Parliament and been elected making it quite clear that we were opposed to capital punishment but there had been a referendum and the people decided that they wanted it? Would MPs have had to respect the result of the referendum and go against what they had said in their election address? There is a potential tension there which was rightly brought out in a number of comments.

English votes for English laws came in for a little bit of criticism from one or two noble Lords. I remember sitting in another place on a Standing Committee considering the Labour Government’s proposal to ban smoking in public places. In Standing Committee, there was an amendment to extend the ban to pubs, which was opposed by the Minister in the Standing Committee. There were enough people on the Standing Committee to demand a vote and the Government were saved by a Member of Parliament from Scotland, where smoking had already been banned in pubs, voting not to ban smoking in pubs in England. From that moment I became a strong advocate of English votes for English laws. Contrary to what a number of noble Lords have said, I think it has embedded fairness and balance into Parliament’s law-making process. I think it has strengthened England’s voice, just as devolution strengthened the voices of Scotland, Wales and Northern Ireland within our union. I think it is right that elected Members of the House of Commons who represent constituencies in England have the opportunity to give their consent on domestic legislation that affects only them, simply mirroring the position in Scotland.

On the case for an English Parliament, the noble and learned Lord, Lord Morris, cast some doubts as to whether it would work, and the noble Lord, Lord Owen, pointed out the asymmetry in the United Kingdom with such a large component of it being accounted for by one unit. If one looks at Andrew Blick’s pamphlet Federalism: The UK’s Future?, he makes the point that an English Parliament would not deliver the benefits of decentralisation associated with devolution. I think there is no consensus that an English Parliament is the way forward. I believe that English votes for English laws delivers a coherent constitutional response without the upheaval of an English Parliament.

Rather than work up the case for an English Parliament, we prefer to strengthen communities and regions within England through, in particular, the northern powerhouse and the Midlands engine and by developing a devolution framework for England, providing clarity for all English authorities about the future of English devolution. I was interested in what the noble Lord, Lord Owen, said about the German Länder, but it seems to me that we do not have the building blocks that they have in Germany to create the structure that they have there.

A number of noble Lords mentioned regional assemblies. This was piloted in the north-west by the noble Lord, Lord Prescott, and did not find favour, so since the Cities and Local Government Devolution Act 2016 came into force we have taken major steps to decentralise governance in England through devolution deals and combined authorities headed by elected mayors in seven city regions, with an eighth mayor in North of Tyne to be elected in May. A number of noble Lords said that this is asymmetrical and a muddle—I think that was the expression used—but it has happened only when it was what local authorities asked the Government to do. Combined authorities are created when that is what local authorities have decided to do. Likewise, if they want elected mayors rather than the traditional local authority settlement, that is what they can have.

I was interested in what the noble Lord, Lord Adonis, said about building on the success of elected mayors. Looking not just at London but at Manchester, we have arranged for particular combined authorities to assume the delivery of central government programmes such as the work and health programme and the life chances fund, and to help to develop new and innovative ways of working with local public services such as health and justice. I agree that this is a model we should build on. I think my noble friend Lord Heseltine can claim to be the champion of mayors in advance of anyone else who may make that claim.

I think elected mayors have been one of the successes in the British constitution. They chair their combined authorities and ensure strong and strategic leadership across a clear economic geography as a recognised leader who is accountable to voters in their region. They can act nationally and internationally as an ambassador for their region, boosting the area’s profile and helping to attract inward investment. Mayors also have soft powers, such as the ability to convene a range of stakeholders to tackle complex issues such as homelessness, and I applaud what Andy Burnham is doing on Manchester on that point. I think the introduction of strong mayors has been one of the most important constitutional changes in past years.

With two minutes left, I am not going to be able to do justice to the issues that were raised about Brexit and the impact on devolution, but I was struck by what two noble Lords said about having a single constitutional member in the Cabinet or, as I think was suggested by the noble Lord, Lord McConnell, getting rid of the Secretaries of State for Scotland and Wales altogether. As an English MP, I would have been worried about the potential impact on sentiment in Scotland if it no longer had a voice in a UK Cabinet but if he—

[Lord McConnell of Glenscorrodale]

My Lords—

[Lord Young of Cookham]

It comes out of injury time.

[Lord McConnell of Glenscorrodale]

I said to your Lordships’ House that I would support the proposal that was put by my noble friend because of course you would have to replace the Secretaries of State with another post in Cabinet that could reflect those national interests throughout the UK.

[Lord Young of Cookham]

Right.

Perhaps I may say in conclusion that I was struck by what the noble Lord, Lord Howarth, said towards the end of his remarks, that rather than go for this all-singing, all-dancing convention we should stand back. I was also struck by what my noble friend Lord Norton said about, instead of having this convention, starting off by having a good look at exactly where we are. I conclude conscious that I have not responded to the debate, but I thank all noble Lords who have taken part—and leave the noble Lord, Lord Foulkes, a second or two in which to sum up.

Wheeled Goods Vehicles

Lord Young of Cookham Excerpts

Thursday 13th December 2018 Lords Chamber

[Baroness Gardner of Parkes]

To ask Her Majesty’s Government what plans they have to repeal the exemptions from the requirement for wheeled goods vehicles to be fitted with sideguards.

[Lord Young of Cookham (Con)]

My Lords, under regulations made in 1986, most new heavy goods vehicles—HGVs—are required to be fitted with sideguards. There are limited historical exemptions—for example, a motor vehicle that does not exceed 15 mph, and fire engines—which were put in place for good reasons. Work is focused on amending regulations to ensure that where sideguards are required on new HGVs, these are retained and maintained. I anticipate that these proposals will be published in 2019.

[Baroness Gardner of Parkes (Con)]

The Minister may be aware that the typical cases at the moment are the mixers and tippers—heavy goods lorries that are exempt. It is the front wheel that hits you if you are on a bicycle and too near, but when you get dragged under the vehicle, the back wheel is the one that kills you. It is better to abolish this exemption, particularly as companies such as CEMEX, the Mexican cement-mixing firm, have deliberately and carefully put these barriers on, although they are not required; CEMEX is trying to persuade other cement people to do it. But would it not be simpler and better for the Government to just change the regulations? Is the Minister able to tell us figures for fatalities and casualties?

[Lord Young of Cookham]

I am grateful to my noble friend. Cement mixers are not exempt under the regulations, and since 2012 all tippers have had to be fitted with sideguards. On the figures, in London over the past three years, 70% of cyclist fatalities involved HGVs, so my noble friend is quite right to draw attention to this. I speak as someone who came in on a cycle. My noble friend asks about injuries. Of the 29 cycle fatalities and life-changing injuries in two years, 25 were caused by the cyclist being knocked over by the front or side of the cab; in other words, ahead of the sideguard. Once the cyclist is knocked over, the sideguards are of no value because they are two feet above the ground. So the Government have been focusing on other measures to improve vision and cyclists’ safety, as well as making sure that the existing regulations on sideguards are honoured.

[Lord Teverson (LD)]

My Lords, we have an increasing number of foreign vehicles—some of them not EU ones—on our city streets these days, with drivers driving on what is to them a strange side of the road. How confident are the Government that those foreign vehicles meet the standards and regulations that we require on sideguards?

[Lord Young of Cookham]

The standards that we follow on sideguards are international standards imposed under one of the United Nations sub-committees. So a vehicle, wherever it has been constructed, will have to meet those international standards, which cover sideguards. We are now taking extra steps to make sure that, in addition to the vehicles being fitted with sideguards when they are manufactured, the sideguards are maintained—for example, if they become damaged, quite often they are not replaced—and those are the regulations that we are looking at bringing in next year.

[Lord Berkeley (Lab)]

My Lords, will the Minister explain to the House how much enforcement of these regulations takes place? I was kindly invited to a demonstration of enforcement down by the Tate Gallery a couple of years ago, where the police and VOSA were combining to enforce the regulations on tachographs and all other rules relating to trucks. They must have spent a lot of money on this around the country but they said that the main achievement was to put a board on the back of scaffold lorries to stop the poles falling off. If that is all they can do, surely we need much more enforcement of these regulations?

[Lord Young of Cookham]

As the noble Lord will know, there are regular spot checks on roads in this country where heavy goods and other vehicles are stopped and checked to make sure that they comply. I will supply the noble Lord with more information on the effectiveness of these spot checks and how often they are carried out.

[Lord Kirkhope of Harrogate (Con)]

My Lords, I had direct experience when I was a Member of the European Parliament of a constituent whose daughter was killed by a lorry because the visibility from that lorry was not adequate. I think that changes have been made in relation to the requirements for extra mirrors for observation around a vehicle of that kind. But sometimes the outside mirrors are obstructed with debris or become, frankly, useless during the vehicle’s use. Are we sufficiently able to move on and do things quickly when we find new ways in which we can help to protect those who are in contact with or close to heavy goods vehicles?

[Lord Young of Cookham]

My noble friend is quite right that the UK played a leading role in changing international standards. In July 2016, measures for large HGVs with improved mirrors came into effect, largely as a result of our intervention. More work is going on in what is called detection technology, which detects vulnerable road users, and measures using cameras. There will be new requirements for buses and lorries, which could come into effect in 2021 under the direct vision standards initiative.

[Baroness Jones of Moulsecoomb (GP)]

My Lords, I do not really understand the Minister’s reply to the noble Baroness, Lady Gardner. He said that the Government are focusing on other measures. What other measures? I do not find it acceptable if he says it is either/or, when it is in fact a simple change that the Government could make which could save lives or prevent life-changing injuries.

[Lord Young of Cookham]

I am sorry if the noble Baroness did not understand my reply. What I hope I said was that cement mixers are not exempt; in other words, they have to comply with the sideguard regulations. Since 2012, all new tippers have be fitted with sideguards and we are taking other measures. On 22 November, we published proposals to increase road safety for cyclists, pedestrians and horse riders. The Government are taking a wide range of initiatives to promote road safety. Our roads are among the safest in the world but one casualty is one too many.

[Lord Tunnicliffe (Lab)]

My Lords, the death of cyclists in this scenario is a tragedy. The problem, which I think the Minister has alluded to, is that the vehicles are very heavy and the cyclists are very light. Sideguards are relatively ineffective when turning left over a prone cyclist. The modern technology available that powers alerts with radar or sensing systems and so on, including on modestly priced cars, is here and available today. It is actually on the car that I own. Is the department taking direct action to accelerate the trialling of this sort of equipment on lorries and contemplating regulations to require it to be fitted?

[Lord Young of Cookham]

We are playing our role, in this case along with the European Commission. In May 2018, direct vision for trucks was one of the safety measures included in the European Commission’s review of general safety regulations. We are also supporting measures under the European Commission’s third mobility package further to improve the protection of pedestrians and cyclists. The European Commission is also doing work, which we support, to reduce what it calls the “aggressiveness” of HGV fronts in the context of vulnerable road users. The noble Lord is quite right that there is a lot of work going on supported by the UK which we hope will improve safety for pedestrians and cyclists.

HS2

Lord Young of Cookham Excerpts

Thursday 13th December 2018 Lords Chamber

[Lord West of Spithead]

To ask Her Majesty’s Government whether they have revised their estimates of (1) the cost of, and (2) the timetable for completing, HS2 following delays and increased costs in relation to Crossrail.

[Lord Young of Cookham (Con)]

My Lords, HS2 Ltd regularly reviews project plans and is currently working with its contracted suppliers to update and agree its latest cost and schedule confidence assessments for phase 1. HS2 Ltd is always examining lessons learned from major infrastructure projects, including Crossrail, to improve its understanding of the risks to delivering on time and to budget. We will publish updated cost and schedule estimates for phase 1 as part of the full business case in 2019.

[Lord West of Spithead (Lab)]

I thank the Minister for his Answer. A huge amount of money is involved. There is not much money around and things have changed. Does the Minister think that increasing capacity on the west coast main line is more important than, for example, sorting out the shambles in the civil nuclear industry and thereby safeguarding our future energy supplies for the nation? Does he think that it is more important than getting a secure GPS system to replace Galileo, from which we were so disgracefully excluded by the EU? Does he think that it is more important than resolving the funding crisis in our Armed Forces, when Russia is confronting and destabilising our nation? If so, does he not think that this is the time to pause and reconsider where this money should be spent?

[Lord Young of Cookham]

The noble Lord will know that the question of allocation of resources between a range of government departments is one taken collectively by the Cabinet and announced by the Chancellor of the Exchequer at the appropriate time. It is not for a junior Minister to comment on the allocation of public expenditure between the Ministry of Defence and a whole range of departments, including those for transport and energy. On the last part of the noble Lord’s question, I think that it is right to go ahead with this project. It is expensive, but the phase 1 funding has not increased since the spending review settlement in 2015. Phase 1 is scheduled to cost £27.18 billion in 2015 prices and we are determined to keep it within that cost estimate.

[Lord Alton of Liverpool (CB)]

My Lords, will the noble Lord—a much-respected and much-liked former Secretary of State, as well as a junior Minister in your Lordships’ House—comment at least on the prioritisation of railway needs and demands? He will have noted, following the resignation of Sir Terry Morgan, that the Mayor of Liverpool resigned last week from the board of the Northern Powerhouse Partnership citing as his reason for doing so the lack of rail investment to service the £1 billion renaissance of Liverpool dockside. Can he say where HS3 and the proposed linkage of northern cities now stands? Should not the revitalisation of the north be a much higher priority than HS2, which by comparison will contribute far less to northern regeneration?

[Lord Young of Cookham]

The noble Lord makes a powerful case for more resources for transport in addition to the money that we have already committed to HS2, in both phase 1 and phase 2. He wants additional resources to improve connectivity with Liverpool. A spending review is just starting in which I am sure the Department for Transport and those departments that have an interest in the northern powerhouse will make bids. I note his strong representations that improved connectivity for Liverpool should be a high priority.

[Lord Forsyth of Drumlean (Con)]

Has the Minister had the opportunity to read the reports from the Economic Affairs Committee of this House on HS2, and can he confirm how many billions could be saved by a marginal reduction in the speed of this train?

--- Later in debate ---

[Lord Young of Cookham]

Can I write to my noble friend with the answer to that question? At the moment, as I indicated in my first reply, there is a dialogue between HS2 and the suppliers to ensure that the bids come in within the overall envelope that the Government have allocated. This may involve looking at some of the specifications that my noble friend has referred to. We are determined to stick within that envelope and all options will be looked at to make sure that we maintain the costs of this project.

[Baroness Randerson (LD)]

My Lords, Sir John Armitt from the National Infrastructure Commission thinks that HS2 could cost an additional £43 billion. Is it not time that the Government gave us an up-to-date estimate of the true cost of this plan? Do the Government accept that the north of England needs better east-west rail connections as much as it needs HS2 going all the way to the north and not stopping at Birmingham?

[Lord Young of Cookham]

To answer the first part of the noble Baroness’s question: as I said in my original reply, we will publish updated cost estimates as part of the full business case in 2019. In the second part, she reinforced the bid for more resources to go into public transport in the north; that has been noted and will be taken up in the spending review.

[Lord Adonis (Lab)]

My Lords, on behalf of the whole House, I am sure, I say that we would welcome the Minister’s appointment as Secretary of State for Transport so that he can take some responsibility for these issues. He might be a great improvement on the current regime. In respect of HS2 and HS3, it is vital that we improve intercity connectivity between London, the Midlands and the north. It is also vital that we improve connectivity between the northern cities. We should not have to choose between them. Does the Minister agree that the right thing to do is to proceed with HS2 and HS3, and that if we were not having to spend £39 billion on Brexit we could do both very comfortably?

[Lord Young of Cookham]

My Lords, you do not see one Transport Secretary for a long time and then two come along at once. The noble Lord is right: HS2 will directly connect eight of the 10 largest cities in the country; it is about connectivity and capacity as much as about speed. He has reinforced the strong bid I have already heard for more resources to HS3 and other connectivity within the cities of the north. That bid will be taken forward as part of the spending review. The added weight that he has just given to it will, I am sure, cut a lot of ice in the Treasury.