European Union (Withdrawal) Bill

Viscount Trenchard Excerpts

Tuesday 30th January 2018 Lords Chamber

[Viscount Trenchard (Con)]

My Lords, surely the single Act of Parliament which created the largest number of delegated powers was the European Communities Act 1972. I am therefore surprised that noble Lords do not welcome the fact that the Bill brings many powers back to this Parliament.

The Prime Minister has rightly recognised the need for an implementation period of about two years. The Government prefer the term “implementation period” but others refer to it as a transition period. What is vital is that we must make serious progress towards agreeing the end state before we agree the interim measures. How can we determine what needs to be agreed for the implementation or transition period without at least knowing the broad outline of the definitive free-trade agreement that we expect to have in force at the completion of that period? Can my noble friend the Minister encourage the Government to be bolder and more confident in talking about their vision for the future of the United Kingdom in resuming its place on the world stage as a strong advocate of free trade, which is an absolute necessity in bringing about greater prosperity and the alleviation of poverty, wherever it exists?

Could we not talk more about our markets? In manufacturing, many German and French companies, and subsidiaries of both British and third-country companies operating on the continent, are concerned that their Governments are not doing enough to encourage the EU to ensure open access to the UK’s markets. Services account for more than 80% of the UK economy. The largest part of this is financial services, centred on the City of London. The City has become the world’s leading financial centre, not because we are in the EU but because of many reasons that will continue to apply after we have left the EU. The EU’s negotiators know this; we should call their bluff. If they insist on introducing impediments to free access for Europe’s companies to our capital markets, their companies and their people will suffer.

As recognised by the European Union Committee in its report published last Friday, the UK and the EU negotiators should favour an end state which allows mutual market access. Fragmentation of London’s financial markets would lead to increased costs and a deterioration of financial stability. The EU seems intent on relocating the euro-clearing activity of central counterparties to the EU. But the United States is content for dollar-clearing activity—and Japan is happy for yen clearing—to take place here. Even China seems to take pride in the increasing volume of renminbi transactions taking place in the world’s most efficient financial marketplace. The EU alone is putting political objectives ahead of economic common sense in seeking to bring about the disintegration of London’s financial markets.

London’s markets do not belong to Europe; they do not even belong to the UK. They belong to the world. We host these markets here on behalf of the world. Our regulators, the FCA, the PRA and the Bank of England, will have a commensurately greater influence in the framing of financial regulation in international bodies such as IOSCO once they are restored to the level of independent national regulators. I believe that London’s future continued success as the world’s leading financial centre depends upon our recovering the freedom to adopt a somewhat less dirigiste style of regulation, which will make our markets more attractive to investors and borrowers located in the faster growing economies of the world.

It is of course necessary, as we are often and properly reminded by the City of London Corporation and the industry representative bodies of the City, to secure early agreement of transitional arrangements to reduce the risk of business unnecessarily and pre-emptively deciding to move people and businesses to Europe.

We also need to agree a bespoke deal delivering mutual market access. We have now a position of complete convergence, so it should not be so difficult, as is often claimed. We should make it clear that we will continue to allow EU financial institutions to operate in London on the basis that they do now, in the expectation that mutual regulatory recognition will continue. As advocated by the Legatum Institute, dual regulatory co-ordination mechanisms will in any event be necessary for our future FTA.

The City of London Corporation rightly points out other areas where continued mutual recognition of standards is clearly important for both the UK and the EU. These areas include legal services and the flow of food and feed products through London’s ports. The City also recognises its need to continue to have access to talent under the terms of the future immigration Bill. It needs the most talented individuals to work not only in financial services but across the sectors, including the creative sector.