Question to the HM Treasury:

To ask His Majesty's Government which of the Chancellor’s proposed reforms to financial services regulation, announced in Edinburgh on 8 December, will (1) require primary legislation, (2) require secondary legislation, (3) be achievable using existing powers; and for each of the proposed reforms that can be made using existing powers, what power they intend to use in each case.

The Edinburgh Reforms, launched by the Chancellor on 9 December, take forward the government’s ambition for the UK to be the world’s most innovative and competitive global financial centre. We are committed to an open, sustainable, and technologically advanced financial services sector that is globally competitive and acts in the interests of communities and citizens across all four nations of the UK.

As part of the Edinburgh Reforms package, several consultations were either launched or trailed. It would not be appropriate to pre-judge the outcome of these consultations, nor how any measures may be implemented when final government policy has yet to be agreed. The outcomes of these consultations will be taken forward in the usual manner and peers will be able to engage in the normal ways depending on the precise form of implementation.

As set out in the Chancellor's written statement, a number of reforms will require secondary legislation. These are:

• Secondary legislation in Q1 2023 to remove burdens for firms trading commodities derivatives as an ancillary activity. The powers to implement this can be found in: Article 3 of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001, Article 3 of the Financial Service and Markets Act 2000 (Markets in Financial Instruments) Regulations 2017, and Article 4 of the Financial Regulators’ Powers (Technical Standards etc.) (Amendment etc.) (EU Exit) Regulations 2018.
• Secondary legislation in 2023 to improve the functionality of the ring-fencing regime. The powers to implement these proposed reforms, which will be subject to consultation in mid-2023, can be found in Part 9B of the Financial Services and Markets Act 2000.
• Secondary legislation, when parliamentary time allows, to amend the Building Societies Act 1986. The powers to implement this can be found in Section 7 of the Building Societies Act 1986, and Section 104 (1) of the Building Societies Act 1986.

Additionally, the government will add transactions in certain cryptoassets to the Investment Management Exemption list for tax purposes. The existing list of investment transactions is set out in the Investment Manager (Investment Transactions) Regulations 2014. HMRC is able to make this change using existing powers contained in sections 827(2) and 835S(4) ITA07 and section 1150 CTA10.

Several of the Edinburgh Reforms are also being taken forward as primary legislation through the Financial Services and Markets Bill (FSM). These are the implementation of a Financial Market Infrastructure Sandbox in 2023, the establishment of a safe regulatory environment for stablecoins and the repeal of retained EU law in financial services. The FSM Bill contains provisions that will enable the government to commence the repeal of retained EU law in financial services and implement its replacement, a smarter regulatory framework specifically tailored to the UK, using secondary legislation following the passage of the Bill. The government will also legislate in the Finance Bill to amend the tax rules for Real Estate Investment Trusts.