Dunlop Review

Lord Bruce of Bennachie Excerpts

Monday 1st February 2021 Lords Chamber

[Lord True (Con)]

My Lords, my right honourable friend the Chancellor of the Duchy of Lancaster is second to none in his commitment to reinforce the United Kingdom and to carry that work forward. So, almost by definition, he is acting constantly every day in line with the aspirations of the Dunlop report.

[Lord Bruce of Bennachie (LD) [V]]

My Lords, sadly, the Prime Minister shows scant understanding of or respect for devolution. At the same time, the First Minister is obsessed with an independence referendum ahead of pandemic recovery but has no coherent or credible plan for how to achieve it. Is not this the moment to publish the Dunlop report and set out how the UK can move forward as four nations working together? How can we have confidence that the Government are implementing the report if they do not publish it?

[Lord True (Con)]

My Lords, I have asked for a little patience from your Lordships’ House, but it will have been noted that you are asking for an early publication. What I would underline is what I said before: that we are working positively with the devolved Administrations in many of the areas covered by Dunlop, particularly to establish new intergovernmental structures. The Prime Minister has established the union policy implementation committee—a Cabinet committee to ensure that the Government’s priorities in relation to the United Kingdom are delivered—and work is going on.

Financial Services Bill

Lord Bruce of Bennachie Excerpts

2nd reading & 2nd reading (Hansard) & 2nd reading (Hansard): House of Lords
Thursday 28th January 2021 Lords Chamber

[Lord Bruce of Bennachie (LD) [V]]

My Lords, I join other noble Lords in congratulating both the noble Lord, Lord Hammond, and the noble Baroness, Lady Shafik, on their maiden speeches. The noble Lord, Lord Hammond, showed the insight and intelligence that has characterised his approach to the challenges of the past few years. I particularly welcome the noble Baroness, Lady Shafik, to our House and fondly remember working with her when she was Permanent Secretary at DfID and deputy managing director of IMF and I was chair of the International Development Committee. I look forward to hearing more from her in the future. I am sure her contributions will always be well received.

There is no doubt that as a member of the EU the UK provided the leadership in financial services regulation because of the leading role of the City of London, which was the main capital and euro exchange market for the EU and beyond. But how UK financial services will fare from now is debated. It is argued, I suggest with justification, that the concentration of expertise, innovation and flexibility that characterises UK financial services will ensure that it continues to play a leading role. However, it will be challenging, for how will it maintain its pre-eminence if EU business ebbs away? That means servicing the EU financial services market from the UK and enabling firms and individuals located outside the UK to access its services through the UK.

Scale and expertise have been key factors in the UK’s pre-eminence but, as many people have observed, other centres will seek to pick up business from London, and the scale of New York may enable it to consolidate top spot. I have no doubt that the larger players in the sector will look after themselves, and that will not necessarily be to the benefit of UK plc. It has been said that the feared exit of jobs has not happened on any scale—to which the answer has to be, “Yet”. Without equivalence in key sectors, businesses and jobs will migrate—not that thousands of UK-based personnel will necessarily leave, but jobs that would have been created here will be created in other EU centres, such as Dublin, Amsterdam, Frankfurt, Paris and Malta. It will take time and the key question is, during that time, how will the UK develop to maintain its world-leading role and will the Bill help or hinder that process?

Having served in former times on the House of Commons Treasury Select Committee, and until recently on the House’s Financial Services Sub-Committee, I am well aware of the importance of effective financial regulation and scrutiny. The light-touch approach of the Labour Government contributed directly to the financial crash of 2008 and the blurred separation, or lack of it, between retail and investment banking brought the economy to its knees and threatened the savings of millions. Let us hope that the Bill does not open the door to too light a touch or to cavalier regulation to promote competition and attract business.

Financial regulation is a matter of balance. If it is too tight, it may stifle innovation, but if it is too loose, it may lead to financial disaster and reputational destruction. In the EU, we not only had the benefit of the scrutiny committee of the UK Parliament, but the substantial resources of the European Parliament, in which British MPs played a key role, not least my noble friend Lady Bowles of Berkhamsted. So what assurance can the Minister give that under this Bill regulation will be transparent and subject to effective scrutiny? Will the Government support the creation of a dedicated financial services committee with the resources to staff it effectively? If they do not, any financial failings in future will lie squarely at the Government’s door.

Speaking as I do on Scottish affairs for the Liberal Democrats, I remind the House of the importance of the financial services sector to the economy in Scotland. It is valued at £13 billion—or 9.4% of Scotland’s gross value added—employing between 150,000 and 160,000 people in more than 2,000 businesses. Particularly, it accounts for 24% of UK jobs in life assurance and 13% of all UK banking jobs. While Edinburgh has the greatest concentration, Glasgow, Aberdeen and Perth also record substantial employment in this sector.

Scottish Financial Enterprise, which represents the sector, is bullish about the future, claiming that Scotland is a sought-after location for delivering financial services. Without Brexit, there would certainly seem no reason why the sector should not continue to grow, as much of it delivers cost effectively and reputationally to the domestic market. However, Betsy Williamson, the chief executive specialist recruiter for the sector’s Core-Asset Consulting, says recruitment to the sector has dropped and that key jobs are being relocated or created outside of the UK. Aberdeen Standard has opened an office in Dublin and transferred £17 billion of assets there, and no doubt others are considering or doing the same. Today’s FT shows how many goods-based businesses are struggling with red tape and either deciding to abandon exporting to the EU as uneconomic or planning to transfer some of their activities to the EU.

Financial services are evaluating what is going to happen to them. Some have already moved, and others will. If we get this wrong, the trickle could become a flood. So even if you were bullish about the UK’s prospects, we are going to have to run harder to replace the revenue and jobs that are leaving and then try to grow new opportunities. Will there be enough scope for new businesses to replace these jobs and then add net growth? Will this Bill help or hinder? Will our regulation be lighter or tighter than the EU? Either way, will it be transparent enough and subject to adequate scrutiny to maintain resilience and confidence in the system? A lot is riding on this Bill. When people say it is technical, they mean that most people do not understand it, and that is exactly when things can go wrong.

European Union (Future Relationship) Bill

Lord Bruce of Bennachie Excerpts

3rd reading & 2nd reading & Committee negatived & 2nd reading (Hansard) & 2nd reading (Hansard): House of Lords & 3rd reading (Hansard) & 3rd reading (Hansard): House of Lords & Committee negatived (Hansard) & Committee negatived (Hansard): House of Lords
Wednesday 30th December 2020 Lords Chamber

[Lord Bruce of Bennachie (LD) [V]]

My Lords, it is no surprise to me that we are sitting today, at the last gasp of 2020, to consider legislation published just yesterday to deliver the most radical change of trading circumstances in our history. The Government never wanted Parliament to be involved in the process. We are being bounced into giving the Government sweeping and unspecified powers to do what they please without further reference to Parliament. Much of the detail was clearly agreed months ago, so it is total hypocrisy to suggest that legislators must simply buckle when it could and should have been perfectly possible for adequate time to be provided.

The compromises now reveal that all the braggadocio about sovereignty was just that. It is a pity that it was done with such ill grace and to such long-term damage. We will accept EU rules without having any role in shaping them and face endless argument and disruption should we seek to diverge.

With so little time, I wish to ask for clarification on two points and issue a warning on one. As a member of this House’s EU Services Sub-Committee, I was party to our long letter to the Secretary of State regarding Horizon and Erasmus+. We were concerned that, in participating as a third party to Horizon, we would move from being a net beneficiary of to a significant net contributor to a programme over which we would have limited control. Can the Minister tell me whether that has been addressed?

In the case of Erasmus, 53% of all students who studied abroad did so through Erasmus, which also funded EU students to study in the UK, bringing an academically enriching and economic benefit. Yet we have opted out completely. Why? Can the Minister say what that will mean to current students looking for a placement in the next academic year? Can he also explain how the proposed Turing scheme can possibly deliver comparable benefits to the multinational, multilayered Erasmus scheme? Will it just focus on the English-speaking world and further distance us from our European friends?

The warning relates to the impact of this deal on Scotland, and it is aimed both at the Government and people of the UK and at the Government and people of Scotland. It is becoming too glib and too easy to remark airily that Scotland is on course for independence and to assume that negotiating Scexit—Scotland’s exit from the UK—will be quick and easy compared with Brexit. We have heard that before. The institutions that we share are not peripheral; they are the arteries of our society. Similarly, the assumption that Scotland will achieve a rapid and seamless transition to membership of the EU, regardless of the lack of a central bank or currency and with debt several times the permitted threshold, is simply unreal. More to the point, erecting a border with the rest of the UK before any agreement can be reached with the EU should give anyone pause for thought.

Of course, the devolved Administrations should be treated with more respect, just as the reality of the benefits that we share across the UK should be valued more. The nightmare of the last few years, topped off with Covid, should surely teach us the value of togetherness, however strained relations become. If we do not learn from this, we face a future of endless debilitating division and argument as we decline in influence. If we can learn and find a more constructive way of engaging with each other, we might—just might—begin to see the glimmerings of a brighter future. I do hope so.

Taxation (Post-transition Period) Bill

Lord Bruce of Bennachie Excerpts

2nd reading & Committee negatived & 3rd reading & 2nd reading (Hansard) & 2nd reading (Hansard): House of Lords & 3rd reading (Hansard) & 3rd reading (Hansard): House of Lords & Committee negatived (Hansard) & Committee negatived (Hansard): House of Lords
Wednesday 16th December 2020 Lords Chamber

[Lord Bruce of Bennachie (LD) [V]]

My Lords, the Bill is welcome for the practical measures it contains, but more for the notwithstanding clauses that have been omitted and were previously threatened. In a way, it is another tortuous step along the way to deliver the easy Brexit that the Government, or their Brexit-controlling cabal, promised. I well remember the Prime Minister during the election, in a draughty-looking warehouse in or near Birmingham, promise that there would be no new paperwork or charges between Great Britain and Northern Ireland. In fact, the “oven-ready deal” proved anything but. The only oven-ready thing about it is that it was stuffed.

Having agreed the deal that Theresa May negotiated, we then got the United Kingdom Internal Market Bill, with its law-breaking clauses now dropped. Why? It was because the EU-UK joint committee met and agreed a way forward. This was always the way it should have been resolved, without the threat of breaking international law or resorting to the latest ploy of gunboat diplomacy. I just wonder how hard the Government are working to alienate everybody that we need to have on side for trade, co-operation, security and all the other things that a respecting nation needs.

Arch-Brexiteers in the Commons tried to reinstate this approach yesterday. It appears that they are still deluded in the belief that sovereignty is an absolute. It can be only if the country puts itself in solitary confinement—an uncomfortable place for a trading nation with a historically massive balance of payments deficit. Facing reality, the Government have now agreed, as they always had to, that at-risk goods will be properly monitored, that Northern Ireland will conform to EU rules on, as a case of detail, aviation fuel duty, and that the rest of the UK will follow suit for “consistency”. Is this a taste of things to come? I suspect it is. Similarly, there is agreement on aspects of VAT, but can the Minister explain the implications for online sales under £15 in Northern Ireland? Do Northern Ireland residents have to pay VAT on online purchases when GB residents do not?

Can we now hope for the dawn of pragmatic common sense and an acceptance of reality? The Prime Minister advocated cakeism, and it appears that Michael Gove believes that it is being delivered, but for Northern Ireland. He seems to be supported by the Foreign Secretary. We have been told that Northern Ireland is in a wonderful position, effectively being in the UK and the single market. This is an enviable position that the majority of businesses in Great Britain wish to be part of, but they cannot be.

The rest of us—the 99.8% of the economy that does not depend on catching fish—want to know where the dust will settle. Even in fishing, the catchers and processors have conflicting interests. If we want to continue trading profitably with the EU, which takes nearly 50% of our exports, we have to accept that there will be EU rules and we will need to accept those rules if we want to secure access. That has always been the case for third countries. We will no longer have a say in shaping those rules but, as the EU states have pooled their sovereignty to make the rules, we can reject them only at a price. We have the right to choose, but there is a price to pay.

Ironically, we are choosing to trade under WTO rules. We have far less influence over these than when we were members of the EU. Indeed, the WTO is a pretty dysfunctional organisation in dealing with disputes among its members. The Government are urging businesses to prepare to end transition in 15 days’ time. Ministers claim that they are trying to provide certainty, but the opposite is the case: how can people prepare for the unknown against a background of promises that it would all be quick and easy? This Bill is necessary, but more legislation is required. We still do not know under which terms, if any, we will leave the EU, and businesses are expected to adapt to unknown rules and regulations, which the Government cannot explain, which are complicated and for which they will probably have to pay for expert advice.

I was astonished, the day after the Prime Minister claimed that there would be no new rules, regulations or paperwork, to go on to the government website and see that its advice was to contact HMRC to get a registration, to take advice on customs requirements and to consider whether you need to employ customs staff or a customs agent. The contradiction was there for all to see on the very day that the Prime Minister made his absurd claim, which everybody knew was unsustainable.

The Bill is necessary. Thankfully, it is limited compared to what it would have been, but it is symptomatic of the bungling incompetence that characterises the Government in delivering an ideological ambition that is deeply damaging to the interests of this country and has left the world looking on in astonishment at how the UK took leave of its senses.

Union Capability: Dunlop Review

Lord Bruce of Bennachie Excerpts

Thursday 19th November 2020 Lords Chamber

[Lord True (Con)]

My Lords, the Government believe in devolution. The individual devolution settlements and their effectiveness have been appraised on a range of occasions, in the last 20 years. The Prime Minister, quite rightly, drew attention to the threat posed by the SNP to the unity of our kingdom.

[Lord Bruce of Bennachie (LD) [V]]

I have no doubt that the Dunlop review will be well informed and constructive, but I echo the comment of the noble Lord, Lord Foulkes, that the Government must address this issue urgently, given the Prime Minister’s recent remarks and the almost universal opposition expressed to almost all aspects of the UK Internal Market Bill. Does the Minister accept not only that we need clarity now to secure the devolution settlement, but that there is a case for a constitutional convention that respects devolution and achieves a collaborative approach to UK decision-making, rather than unilateral decisions by the UK Government?

[Lord True (Con)]

My Lords, good contacts exist between the UK Government and devolved Administrations. I recently reported to the House on the positive development in the review of intergovernmental relations. I assure the House that the Government take these matters seriously. The Prime Minister has set up a Cabinet committee for union policy implementation to support the delivery of policies that sustain our union.

Northern Ireland Protocol: Implementation Proposals

Lord Bruce of Bennachie Excerpts

Thursday 19th November 2020 Lords Chamber

[The Minister of State, Cabinet Office (Lord True) (Con)]

My Lords, the Government are committed to ensuring that businesses and communities are ready for the end of the transition period. I am sorry to hear of the remarks reported by the noble Lord, but our intensive programme of engagement with industry continues at pace. The Business Engagement Forum has now met 20 times since May, and this month the Chancellor of the Duchy formed a UK-wide business readiness task force. We have also made considerable progress on the provision of guidance, publishing over 25 pieces of sectoral guidance for businesses moving goods between Northern Ireland and GB in recent weeks.

[Lord Bruce of Bennachie (LD) [V]]

Yesterday’s Statement in in the House of Commons was a bravura performance, but completely out of touch with reality. Is it not the case that any small business in Northern Ireland planning for Brexit is faced with a nightmare of distraction, with few hard facts on which to base any decisions? The five essential steps on InterTradeIreland pose detailed questions on the supply chain, customs, people and data, to which answers are not available. If you ask your supply chain, they do not yet have the answers; if you ask customs, neither do they, and so on. When will the trader support service be in a position to deliver to businesses that register? Does the Minister accept that, given the continuing uncertainty, services in support of the trader support service will be needed for years to come?

Parliamentary Constituencies Bill

Lord Bruce of Bennachie Excerpts

Committee stage & Committee: 2nd sitting (Hansard) & Committee: 2nd sitting (Hansard): House of Lords
Thursday 10th September 2020 Grand Committee

[Lord Blencathra (Con)]

My Lords, I listened very carefully to the noble Lord, Lord Hain, expanding on his amendment. While he was talking about the unique difficulties of these extremely large Welsh constituencies and the difficulty of travel, I must confess I was quite sympathetic. When he concluded his remarks, I did a little Google search to find out the largest constituency in Wales. It seems to be Brecon and Radnorshire; the twelfth largest in the UK, it is 1,164 square miles. When I read that, I changed my mind and thought, “Lord Hain, so what? Big deal. Dry your eyes and get over it”. My constituency in the Lake District was 1,450 square miles and stretched from the Irish Sea on one side to the Pennines on the other where it was closer to the North Sea than to the other side of the country. If I wanted to travel from the Scottish border to its southern extremity, it was only an hour on the M6, even sticking to the legal speed limits. If I wanted to go from west to east, it was at least two and a half to three hours on minor and difficult roads. I am not quoting that as a sob story, merely to point out that Wales is not entirely unique in having large constituencies. I think the Richmond, Yorkshire constituency of the noble Lord, Lord Hague, was the second largest to mine, although he did not like to hear that.

In a spirit of being helpful, I did not want to be too provocative and stir up the noble Lord, Lord Foulkes of Cumnock. I cannot call him my noble friend but, in some ways, he is my noble pal because we worked together at the Council of Europe. I was tempted to put down an amendment reducing the number of Scottish constituencies to 30. However, I realised that if he was present physically, or even on the large screen, that could cause a bout of apoplexy, so I did not do it. I do not know if Scotland is unique, but the noble Lord, Lord Foulkes, certainly is and the House of Lords is a better place for it.

Scotland—and, to a certain extent Wales, but I do not know much about that—does not need all these excess MPs because the MSPs are doing the majority of the work. I remind the Committee of the matters devolved to Scotland which MSPs are in charge of, taken from the Scottish Government’s website: agriculture, forestry and fisheries; education and training; environment; health and social services; housing; land use; planning; law and order; local government; sport and the arts; some forms of taxation; and many aspects of transport. That is what MSPs do; United Kingdom MPs from Scotland do not have those matters to handle. The reserved matters, in which they can legitimately have an interest and on which they can claim to be working, are: benefits and social security, which I accept is quite a big one; broadcasting; constitution; defence; employment; equal opportunities; foreign policy; immigration; and trade and industry.

Those noble Lords who have been Members of Parliament in the Commons will realise that the former category of devolved matters involves the vast bulk of constituency work. Scottish MPs only have to do the reserved matters; English MPs have to do the whole shooting match—everything that is devolved to Scotland and all the reserved matters as well. I was interested to hear the noble Baroness, Lady Humphreys, say that in Wales most people now seem to accept that the Welsh Assembly Members are the real powerhouse. They are the ones who do all the work and people are increasingly looking to their Welsh Assembly Members to fix all their problems, not the United Kingdom MPs from Wales who come to Westminster.

It cannot be right that we have so many Members of Parliament from Scotland and Wales who are doing half the workload of English MPs. It is notable that all the advocates of these amendments have talked about constituency size in geographical terms, not about the number of constituents or the much-reduced workload for United Kingdom representatives from those countries. That is not right. Rather than halve their salaries, I would like to see their numbers cut to equate to their responsibilities. I am therefore happy to support the Bill in its present form.

[Lord Bruce of Bennachie (LD) [V]]

My Lords, I support Amendment 23, in the name of the noble Lord, Lord Foulkes. I apologise for not having signed it, because I agree with it wholeheartedly. I could not agree less with what the noble Lord, Lord Blencathra, has said. Not only is he being provocative, but he has knowingly missed an important point.

During my time as an MP and a candidate, I experienced four boundary reviews and I know how disruptive and traumatic they are. The first-past-the-post system sets great store by the connection between an MP and his or her constituents; boundary changes weaken, and can destroy, this, as the noble and learned Lord, Lord Morris, pointed out. This is why the commission should seek to minimise disruption and retain community and geographical links as far as possible. At a time of tension in relations across the UK, a reduction in the number of MPs representing its devolved parts will not be well received.

When I embarked on my parliamentary career, we had 72 MPs in Scotland. Following devolution, we now have 59— just over 9% of the total. The change was made for a particular reason: the effect of devolution. The rural constituencies in Scotland are now, on average, larger areas than their counterparts in the south, in spite of everything mentioned by the noble Lord, Lord Blencathra. They are further away from London and, in most cases, certainly when they are from the north of Scotland, MPs have to fly in order to attend the House of Commons. Travelling time to, from and within constituencies is often greater and it is not practical to nip back for a constituency event during the parliamentary week, other than in exceptional circumstances. It is true that, prior to devolution, details of Scottish policy that are now handled by Holyrood were decided by Westminster. Much of domestic policy is now devolved, but that is why we had the reduction in MPs previously, as the noble Lord, Lord Foulkes, pointed out.

The Government are embarking on a range of radical proposals which have far-reaching implications for Scotland and the future of the UK. I completely refute the case that Scottish Members of Parliament—or Welsh or Northern Irish ones for that matter—will have less work to do. On the contrary, this Government’s cavalier lack of interest in the continuation of the United Kingdom means that they will have far more to do than they have had since devolution began. Right now, apart from this Bill, there are the immigration, Trade, Agriculture and internal market Bills, which require detailed scrutiny by representatives from Scotland as well as Wales and Northern Ireland. I have been, and will be, involved in debates on these Bills, seeking to strengthen the devolution settlement and moving us towards a more federal union. Yet the Government are resistant to requiring consent to legislation from the devolved Administrations or considering a form of qualified majority voting to balance the fact that England can always outvote the devolved legislatures.

It is argued that numbers should prevail, but federal countries such as the USA, Canada, Germany and Australia all provide checks and balances between the centre and the parts that make up the whole. For example, California has two senators, as does Wyoming, which has the smallest population of all the United States. I understand the case for approximately equal numbers, but I believe that this can lead to unsatisfactory outcomes. Through the different boundary changes during my time in Parliament, my constituency started out in Aberdeenshire; then it was part of Aberdeenshire with part of Aberdeen; then part of Aberdeenshire with parts of Banffshire; then, finally, part of Aberdeenshire with part of Aberdeen, although not the same part. The Aberdeen part was the northern suburbs, which was confusing as the constituency of Aberdeen North did not include the northernmost wards of the city. All this makes a mockery of the special link between the MP and the constituency, although I was fortunate enough to get myself elected, in spite of these changes, on seven separate occasions.

When the Scottish Parliament was set up, the Westminster constituencies and those for the Scottish Parliament were the same. This was not sustainable when the number of Westminster constituencies reduced. At the foundation of the Scottish Parliament, the Gordon constituency had an MSP and an MP for the same territory. Once the boundaries were changed, the constituency then included parts of east Aberdeenshire, parts of west Aberdeenshire and parts of Donside, which caused further confusion for almost everybody. Even more frustrating, at the start of each boundary review, the electorate of Gordon was almost exactly on quota. The noble and learned Lord, Lord Morris, seemed to have had the same issue. Yet the Boundary Commission drew up the boundaries of the surrounding constituencies and took chunks out of Gordon to make up their numbers, which is why I had so many radical constituency changes. I did manage to persuade the Boundary Commission to keep Huntly in Gordon, given that it was the seat of the Dukes of Gordon and the recruiting base for the Gordon Highlanders. It would have been pretty ironic to keep the constituency name and remove the Gordon connection.

I hope the Boundary Commission will have learned from previous reviews and take seriously the need to minimise disruption between Westminster and Holyrood boundaries and anomalous breaches of community links. However, its task will be made harder if amendments such as these and other related ones are not accepted to change this rigid application of numbers, with a totally cavalier disregard for the implications for further tensions in the United Kingdom. The Government are not prepared to consider how the devolution settlement can be updated to allow the devolved Administrations to have a genuine say in UK decisions, rather than a situation where the United Kingdom can overrule them.

Equivalence Determinations for Financial Services (Amendment etc.) (EU Exit) Regulations 2020

Lord Bruce of Bennachie Excerpts

Wednesday 2nd September 2020 Grand Committee

[Lord Bruce of Bennachie (LD) [V]]

My Lords, this instrument raises many more questions than it answers, as is increasingly the case with government business.

First, what does paragraph 7.2 of the Explanatory Memorandum mean when it states:

“The UK has now left the EU with a deal”?


Is that not at best disingenuous, if not downright deceitful? We have an agreement to leave; we do not have a deal.

At the end of June, M Barnier said that the political declaration committed us to use best endeavours to finalise our respective assessments by the end of June. The Commission sent 28 questionnaires to the UK covering the areas where equivalence is possible. At that time, only four had been returned. Where are we now? Are we not empowering ourselves to set out our terms for equivalence to third parties? This is of course necessary to enable us to deal with the world and to negotiate with the EU, but when will the industry get any clarity as to what equivalence will be agreed with the EU? Is there any prospect—which always seemed unlikely, and is much less so given the current mood music—that the EU will agree to any longer time for ending equivalence unilaterally than its current 30-day rule?

I turn to the impact of the changes in Scotland, which is the UK’s largest financial centre outside London. It is estimated that financial and related professional services account for 9.4% of the Scottish economy, something the Scottish National Party sometimes seems unaware of. According to Scottish Enterprise, there are 28,865 companies in the sector in Scotland, employing 247,000 people directly or indirectly and generating around £16.7 billion. UK in a Changing Europe also highlights the importance of financial services to Scotland. In Edinburgh, a conservative estimate of employment in financial services stands at 10.7% of the workforce. Indeed, Edinburgh employs a larger proportion of people in financial services than anywhere in the UK outside the square mile and Tower Hamlets, and significant numbers also work in financial services in Glasgow and West Dunbartonshire. Edinburgh has now risen 12 places in the 2020 global financial centres index to be ranked as the 17th most important financial centre in the world. It is home to the global headquarters of the Royal Bank of Scotland and Scottish Widows, and CYBG, which owns the Clydesdale Bank, Virgin Money and Yorkshire Bank, has its European headquarters in Glasgow.

Financial services are Scotland’s largest service export, with the EU being a significant component of our exports. The EU single market is an important export market for Scotland’s financial services. Some 18% of Edinburgh’s total services exports are financial services to the EU, which is higher than the comparable figure for London, at 15%. This suggests that, proportionately, Scotland’s financial services are slightly more dependent on the EU. There are now signs that Scottish financial firms, as elsewhere in the UK, are planning a future outside the UK. For example, Scottish Widows transferred its European portfolio to a new legal entity in March 2019, Standard Life Aberdeen has opened a portfolio management and distribution service in Dublin to service the EU 27 and Royal Bank Of Scotland began operating a banking entity in the Netherlands in March 2019 to serve non-UK EEA customers.

In the financial crash, the impact of the changes was more severe outside London, so it is important to monitor how the changes we face impact on the Scottish economy in terms of jobs and access to finance, and on other areas of the UK outside London.

Big companies will do whatever it takes to develop their business, and that may not be in the interests of the UK. They will put their business before the UK national interest. There are a lot of small businesses in financial services. They might not find it so easy. Valid as this legislation is, what is lacking is any sense of political direction or certainty on which such businesses can be planned.

Finance Bill

Lord Bruce of Bennachie Excerpts

2nd reading & Committee negatived & 3rd reading & 2nd reading (Hansard) & 2nd reading (Hansard): House of Lords & 3rd reading (Hansard) & 3rd reading (Hansard): House of Lords & Committee negatived (Hansard) & Committee negatived (Hansard): House of Lords
Friday 17th July 2020 Lords Chamber

[Lord Bruce of Bennachie (LD) [V]]

Inevitably, my Lords, the March Budget has been overtaken by events and subsequent measures. I think we all recognise that, with the escalating crisis of Covid-19 and lockdown, the Government were faced with an unprecedented challenge which required drastic and radical action.

The measures taken have the benefit of providing cash quickly to individuals and businesses across the United Kingdom. I am sorry to record that the Scottish Government, unable to acknowledge the benefits of being part of the United Kingdom, have responded with churlish denial.

The massive increase in spending has been described as an end to austerity and, in terms of the scale of intervention and the escalation of the budget deficit, that is certainly how it looks. However, I contest that, had the coalition Government not tackled the hangover they inherited from the financial crash, the public finances would have been considerably more fragile than they are. Let us bear in mind that, before Covid-19, the economy was already slowing down and the OBR forecasts were pretty modest.

Now we know that the economy shrunk by 20% in April, and recovery is slow. Billions are being poured into helping people survive the lockdown and measures are trying to stimulate recovery. It is impossible to predict how the economy will recover and what the impact on public finances will be, but a day of reckoning will surely come.

Let me address some of the measures in the Bill. The Minister referred to the reversal of a proposed cut in corporation tax from 19% to 17%. This is projected to yield around £5 billion, but surely that now looks wide of the mark. Some companies may see a profit increase as a result of Covid-19, but surely most will struggle to make a profit or, as recent announcements have shown, even survive. Can the Minister indicate what adjustments have been made to the yield projections?

A couple of measures in the Budget are designed to claw back revenue to the HMRC, but the timing could not be worse. The loan charge proposals have hit many people hard. Some have been able to negotiate a deal with their employers, who effectively pick up the tax liability, but those who have not face real difficulty if they are forced to pay back earnings which they thought were legitimate and have probably spent. The issue of IR35 is one that we have been wrestling with for years. It convulsed the UK offshore oil and gas industry, as my constituency casework proved. Surely the case for further delaying implementation of these two measures is well made, and I hope that the Government will consider it.

The furlough scheme has been widely welcomed, but will all those furloughed have jobs to return to? Or will the Government have to fund increased unemployment, and will individuals be struggling because of the loss of their jobs?

Bounce-back loans totalling £30 billion have been rolled out, but normal due diligence has been suspended by government guarantees. What default estimate does the Government expect from those? Some people have already had access to finance in the form of grants and cheap loans, but many self-employed people have been given nothing. Such people are the backbone of the economy and provide essential, skilled services and they deserve better. Will the Government consider supporting them as they struggle to return to work and to cope with a total lack of income during lockdown?

For the hospitality industry, the VAT cut is of course welcome. However, not every hotel or restaurant can open cost-effectively this late in the season. There are considerable costs in social distancing in hotels and restaurants. For many, it can be justified only for a full season. Will the Government consider extending the VAT cut to boost bookings for what we hope will be a full season next year?

The digital services tax is a small start to what will need to be an international move to ensure that digital companies pay a fair share of tax on profits derived from their operations in individual countries. It is expected to deliver £275 million in the current tax year, rising to £440 million in 2023-24. The objective must be to ensure that digital companies are taxed fairly and equitably in the same way as other companies and pay proportionately.

The stamp duty Bill is projected to cost £3.8 billion, which is offered as a scattergun approach. Would it not have been better to target it towards first-time buyers rather than giving a kickback to many transactions that would have gone ahead anyway? Can the Minister comment on the different approaches taken by Scotland and Wales, which concentrate the benefit on the lower end of the market? Have the Government considered the effect on the lettings market? Will not landlords take advantage of this holiday to put currently let flats on the market? This would cause distress and expense to tenants forced to look for alternative accommodation, which was surely not the intention of the measure.

Finally—I declare an interest in that my wife is a local councillor—can I put in a demand that the Government recognise the crucial role played by local authorities in helping to cope with this crisis? This surely underlines the case for a fundamental review of local government finance so that it is not left at the mercy of short-term whims of the Government, happy to burden councils with responsibilities but not to provide the funding.

I hope that the mantra for moving out of this unprecedented shock is to build a fairer, more sustainable and more caring society. That is certainly what the Liberal Democrats are committed to.

Constitution, Democracy and Rights Commission

Lord Bruce of Bennachie Excerpts

Tuesday 16th June 2020 Lords Chamber

[Lord True]

My Lords, I have the privilege of coming to this Chamber to hear the views of Members from all sides of the House; I do that, of course. We will continue to promote the United Kingdom’s interests and values, including freedom of speech, human rights and the rule of law.

[Lord Bruce of Bennachie (LD) [V]]

Given the stress of the combined impact of Brexit and Covid-19 on the devolution settlements, may I urge the Government to consider how a federal constitution could share fairly the powers, resources and decision-making allocated to and shared between the devolved Administrations and local authorities?

[Lord True]

My Lords, I know that that is a long-time aspiration of the noble Lord’s party but I cannot add further to what I have said about composition, focus and scope.