Financial Services (Implementation of Legislation) Bill [HL] Debate
Full Debate: Read Full DebateLord Bates
Main Page: Lord Bates (Conservative - Life peer)Department Debates - View all Lord Bates's debates with the Department for International Development
(5 years, 9 months ago)
Lords ChamberMy Lords, I thank all noble Lords for their engagement in this Bill not just in Committee on 8 January, when we had an excellent session looking at the Bill to see how it could be strengthened, but also when we followed that up in various interactions with Peers in the gap after that. There was a meeting on 22 January in which we shared some of the ideas at that point, and that conversation has continued. I place on record our gratitude particularly to the noble Lords, Lord Davies and Lord Tunnicliffe, but also to the noble Lord, Lord Sharkey, the noble Baronesses, Lady Bowles and Lady Kramer, and to my noble friends Lord Hodgson and Lord Leigh for their interaction. I also thank the noble and learned Lord, Lord Judge, for his impromptu legal advice in Committee.
Amendment 1 has been grouped with an amendment in the name of the noble Lord, Lord Davies, and the convention is that I cannot pre-empt what he will say. I will listen to him very carefully, and will simply move my amendment at this stage and address the concerns and issues raised in the noble Lord’s amendment at the end.
Amendment 1 is designed to perform two functions. The first change, as set out in the proposed new subsection (1A)(a), is in response to a recommendation by the Delegated Powers and Regulatory Reform Committee—I again place on record my thanks and appreciation to it for its scrutiny, published in the 42nd report of that committee, under the chairmanship of my noble friend Lord Blencathra. In its report, the committee noted that, for those files listed in the Schedule which are still in negotiation, the justification for the power to adjust is that it is not now possible to know what the final form of that legislation will be. However, the DPRRC noted that the same justification could not be used for files already agreed, and it recommended that the power to adjust be limited only to the files in the Schedule to the Bill. I can now say that the Government are able to implement the DPRRC’s recommendation. These files have been settled while the UK has been an EU member and has been around the negotiating table at all stages with a full voice. We accept the principle that this is settled law that has received UK sign-off and that, as such, an ability to fix deficiencies is more appropriate than one to make policy adjustments.
The proposed new subsection (1A)(a) therefore ensures that, for the first category, the Treasury will have no ability to make policy adjustments when these files are domesticated. These files are: the prospectus regulation; articles 6 and 7 of the central securities depositories regulation; article 4(1) of the securities financing transactions regulation; and articles 37 and 38(2) of the markets in financial instruments regulation. Instead, the Treasury will only be able to fix deficiencies in the manner of the current onshoring process under the established terms set out in the EU withdrawal Act.
My Lords, I am very grateful not to be the Minister, who has to respond to my noble friend Lady Bowles and the noble Lord, Lord Leigh. I can see that it is a challenge and I hope that if I talk for a few minutes, it will give the Box a little more time to get notes to him.
I think that the House knows that my underlying question has always been how we draw the line so that we know when it is appropriate for change to be carried through by an SI and when it should come to this House as primary legislation, particularly in this field. What happened in the weeks and months immediately following a no-deal exit would shape whether we were in a position to maintain access to the EU market for our most significant industry—the services sector—and indeed for the economy as a whole. I think that in the changes he has made the Minister has got us to a better place and to a much clearer understanding of the Government’s intent. If he wanted to split the difference, he could say “major or significant” and deal with the problems all in one go.
I want to say how much I appreciate the listening that the Minister did and how much we appreciate the listening, thought and effort that his officials put into responding to the queries and issues that we raised. It gives me the feeling that we in this House, including the Government, are all essentially on the same page in understanding the significance of the period that would follow no deal and how carefully and sensibly we would have to approach regulation in the financial services area because of the potential knock-on impacts and unintended consequences, which could be extraordinarily severe.
With that sense that the Minister understands when an issue should be brought to the House because it is a fundamental change of policy and critical to an underlying key sector of the economy, and when it is an issue that can rightly be dealt with under a statutory instrument, I can say that I am very happy with the changes that have been offered and, again, I thank the Minister for them.
I thank noble Lords for their contributions. I particularly thank the noble Lord, Lord Davies, for moving his amendment and giving us the opportunity to comment. I very much concur with the noble Baroness, Lady Kramer, about how the officials have engaged in this process. I do not know whether it is appropriate to refer to them on the Floor of the House but I will do so anyway. I think that they too found it a very useful interaction. This Bill is beginning its journey through the legislative process in your Lordships’ House, and the ability to shape and craft it so that it will have been improved by the time it leaves this House will make the job of the other place, which has quite a lot on its plate at the moment, a little easier.
I also agree with the tribute paid by the noble Lord, Lord Davies, for the work being done by officials and, indeed, by UK Members of the European Parliament and the industry on shaping EU financial regulation over the years to make it effective and proportionate.
I believe that the intent behind the noble Lord’s amendment and behind the noble Lord, Lord Sharkey, putting his name to it was to give the Government an opportunity to put further flesh on the bones of what is meant by “major” and “significant”. They will become the new version of “corresponding” and “similar”, which we discussed in Committee. I do not want to hark back to that debate; instead, I shall focus on these key words. I will put some remarks on the record and then turn to the point made by my noble friend Lord Leigh.
It is clearly important that we find a way of limiting this power appropriately, and I am very grateful for the proposal in Amendment 2, moved by the noble Lord, Lord Davies. However, the noble Lord’s amendment could have the unfortunate and unintentional effect of rendering the power and therefore much of the Bill almost unworkable. The reason the Government settled on the term “major” rather than “significant” in drafting this amendment was the greater clarity provided by the term “major”.
My Lords, I again thank noble Lords for their contributions and in particular my noble friend Lord Hodgson. Our debate on the previous grouping focused on what limitations would apply to the power under this Bill. This grouping looks at the complementary subject of reporting to ensure that the Government are as transparent as possible in the exercise of the power. The Bill, as introduced, placed a duty on the Government to publish a report annually on their exercise of the power. It was clear in Committee, however, that there was some room for improvement. I am again grateful and indebted to noble Lords from across the House for their work in Committee and in the period between Committee and Report.
I turn to Amendments 3, 4 and 5. The noble Baroness, Lady Bowles, proposed that, where adjustments or omissions are needed when implementing the files, the Government should publish a report beforehand setting this out in detail to make sure that Parliament has sight of this, and can consider the merits of the proposals. Given the exceptional nature of the Bill and the powers being sought, it can only be right that the Government are clear with Parliament and the industry about how they intend to implement these files. The Government therefore propose introducing a new requirement, as set out in Amendments 3 and 4. These would ensure that, before laying any statutory instruments before Parliament under the affirmative procedure, the Government must first publish a document detailing the proposed text of the regulation with an accompanying report. The report would have to outline what, if anything, has been omitted from the original EU legislation, where there had been any adjustments to the original EU legislation, and provide justification for these adjustments.
As I noted in Committee, the three-month requirement could risk being too long. The essence of this Bill is the speed with which it will allow the UK to keep its regulation up to date and responsive to the uncertainty of a no-deal scenario. The amendment therefore proposes a one-month deadline. However, the Government will of course commit to publishing these documents earlier where possible.
On Amendment 5, in Committee my noble friend Lord Hodgson suggested a more regular reporting cycle than the yearly proposal in the Bill as introduced, and that these reports should set out the Government’s reasoning for why any adjustments might have been necessary. I again reassure noble Lords that it was always the Government’s intention to set out such a justification. This underpins the spirit behind the proposed new subsections (8) and (9) in Amendment 5. This requires the introduction of a more regular requirement for the Treasury to report—now every six months. It requires the Government to specify both how the power has been exercised over the previous six-month period and how they intend to exercise it over the coming six-month period.
This change has the further benefit of clearing up an inconsistency helpfully highlighted by the Delegated Powers and Regulatory Reform Committee in its 42nd report. Previously, the reporting deadlines were set out on calendar dates, whereas the power was to be commenced with reference to “exit day” as defined in the European Union (Withdrawal) Act. This amendment now tidies up the drafting to ensure that the reporting periods are set with reference to the commencement of the power itself. I again convey my thanks to the Delegated Powers and Regulatory Reform Committee.
Finally, proposed new subsection (9A) in Amendment 5 responds to the suggestion from the noble Lord, Lord Adonis, and the noble Baroness, Lady Bowles, in Committee. Here we propose to introduce the same requirement for the financial regulators—the Bank of England and the Financial Conduct Authority—to report on their exercise of any powers sub-delegated to them through the Bill. This follows the model established in the EU withdrawal Act. We agree that it is right that, as they will be implementing much of the legislation contained in this Bill, Parliament and the public should be kept informed of how their functions are being discharged.
I hope these amendments demonstrate the extent to which we believe it is vital that Parliament can properly assess and consider legislation taken forward under the Bill. These amendments on reporting, alongside clearer limitations of the power itself, substantially improve the safeguards that apply to the Bill. I hope these will provide the reassurances that I know the Committee sought.
My Lords, I thank the Minister for listening to everything said in Committee. There really is little else to say other than that he has taken on board three of my amendments. I am very pleased to see them there. I accept that he has cut down the timescale in the pre-legislative report, if I can call it that, to one month from three months because it might be necessary to do things more rapidly.
If I can pick out a theme from the several speeches I made before, it is that Parliament should not be surprised by what the Government intend to do and do. This suite of amendments, including the more frequent reporting suggested by the noble Lord, Lord Hodgson, makes it very clear: we are told before and afterwards. In fact, we might be told before twice by the two reports—the generic one, if I might put it that way, and the precise one. We will also know where things are so that the diligent individual, possibly when dealing with things in the Moses Room in Grand Committee, will not have to search around wondering where things have or have not gone.
I thank the Minister. He has served me and us very well in this.
My Lords, I support Amendments 3, 4 and 5. They are the product of ideas from all parts of the House: from the noble Lord, Lord Hodgson, and particularly from Lib Dem Members. Amendment 4 strikes me as a very important innovation. Other parts of the Administration may want to ponder what should be done here, because while it will all be down to the Government how they use it, it creates a mechanism by which we get will close to being able to amend an SI. Clearly, no great measures are going to fall because we have no great power to influence them and we all know that we are not going to vote on such SIs.
However, to be able to discuss an SI with the Government—obviously not on the Floor of the House but perhaps by approaching Ministers on particular issues—before it is laid would be an important step forward. Proposed new paragraph (b)(ii) and (iii), inserted by Amendment 4, is also important for making how such an SI is generated much more structured. I hope this will give real transparency to SIs, which can at times be very complex. I end by thanking the Minister for his efforts on the Bill and almost by celebrating, for want of a better term, the extent to which we have been able to come to consensus.
I thank the noble Lord, Lord Tunnicliffe, for his last intervention. In effect, I think he was saying that in the way we have been working together we have perhaps somehow pioneered a new way of approaching financial secondary legislation. I am pleased that he feels that.
I am grateful to my noble friend Lord Hodgson for his support for the amendments. He was tempting the noble Baroness, Lady Kramer, to rehearse the vigorous and full debate which took place in Committee on these provisions. Perhaps I may step out of the middle simply to reiterate that the Bill is not the Government’s proposed long-term solution for all financial services legislation. The Government will take forward their proposals for a sustainable, long-term model in due course, when there will be lots of opportunities to discuss the important issues which have been raised.
My Lords, I again thank noble Lords for their contributions. The noble Lord, Lord Sharkey, made a contribution in Committee in which he expressed concern about the omission of some files from the Schedule and Clause 1. At Second Reading and in Committee the omission of two sustainable finance files, which complete the EU’s sustainable finance package, was raised. I am pleased to confirm to the noble Lord and the House in general, and to the sustainable finance industry, that the Government are happy to add these two files to the Schedule via this amendment. I thank him for pointing that out and I beg to move.