Dissolution and Calling of Parliament Bill

Lord Butler of Brockwell Excerpts

Committee stage
Tuesday 25th January 2022 Lords Chamber

[Lord Sherbourne of Didsbury (Con)]

I just think that if you gave the House of Commons the opportunity to veto it, and the Government of the day simply could not get on with their business, which is what would probably happen, then we would have a problem. I come back to the point I made with my noble friend Lord Lansley: if you have a Government with a minority, or without a working majority, that Prime Minister may not be able to get the support of Parliament; but he or she needs it to be able to have an effective working Government.

[Lord Butler of Brockwell (CB)]

My Lords, the noble Lord asked for an example of where a Prime Minister might illegitimately ask for a general election. I will give an example not a million miles away from our present circumstances. Let us suppose that 54 Conservative Members of Parliament expressed no confidence in the present Prime Minister, and there was then an election in the Conservative Party for an alternative leader, and that leader emerged. At that moment, the present Prime Minister decided that, rather than give up power, he would ask the Queen to dissolve Parliament so that there could be a general election. I put it to the noble Lord, Lord Sherbourne, that, in those circumstances, a majority in Parliament, which the Conservatives would have, would reject the proposal for a general election. That might be an imaginable circumstance. I am not in favour of this amendment—I would rather not have it at all—but that is a situation where I would rather that the majority in Parliament rejected the idea of an election than the Queen having to do it.

[Lord Mackay of Clashfern (Con)]

My Lords, I have a very vivid recollection of Harold Wilson’s problem when he was elected with less than a parliamentary majority. As noble Lords will know, he had a second election in that year. At that time, I was the Sheriff Principal of Renfrew and Argyll, and therefore I was a returning officer for the constituencies in Renfrew and in Argyll, so I was rather familiar with what was going on.

Harold Wilson, when he was elected first, had not got a majority. The opinion polls were not quite so prominent in those days as they are now, but there was quite a lot of speculation as to whether, if he took a second election, he would be better off or worse off. That was a decision that he had to make which would not necessarily have been the same as the balance of people in Parliament, because, if the theory of the noble Lord, Lord Grocott, were right, they would be anxious to be the Government. But I fear that they had the rather suspicious feeling that they might not be the Government, and that in fact what might happen would be that Mr Wilson would get a better majority than he had up to that point. As the Committee knows, it was not quite like that either. To forecast what the vote in Parliament will be in the event of a Prime Minister wanting to call an election is by no means easy. It was very difficult in 1974, and I have no doubt that that sort of circumstance might occur again.

I have tried to look at this from the point of view of the construction of our constitution. We have three parts of the constitution: the Executive, the judiciary and the legislature. The business of the House of Commons—and this House, for that matter—is to legislate primarily and to hold the Government to account. The executive power is not in the House of Commons or in this House, and it should not be; something has gone wrong when that happens. The executive power is in the Executive.

The noble Lord, Lord Newby, asked what the authority of the Prime Minister is if he or she has changed since the Parliament was elected. The authority is that he or she is the Prime Minister, and the Prime Minister’s responsibility, subject to Her Majesty, is to be the head of the Executive. Therefore, the responsibility for taking executive decisions is, and should be, with the Prime Minister.

As I said, the idea that you can forecast the result of a vote in Parliament on this subject is extremely difficult if you take account of all the possible circumstances. I know that if you have an Opposition doing very well and the Government are looking a bit shaky, they will both want the same thing—but there are many other circumstances in which they will not want that.

I submit to your Lordships that we had in existence for many years a system under which there was no vote in the House of Commons at all. As far as I remember, apart from the Wilson year there was really no difficulty about the responsibility of calling an election. You just have to think what a responsibility the person who calls an election has. We had a slight example of that not long ago, when an election was called and the result was that the Prime Minister had a smaller majority—indeed, no majority at all—having started off with a majority. I do not think for a minute that the Prime Minister thought that was going to happen—it would be extraordinary if she did—but it did happen, and that is the responsibility of the Prime Minister.

I find it very difficult to see how that can be properly shared with anybody else. He or she has to take the responsibility to consult the public—the people. It is an executive call to start a general election, and surely the responsibility for doing that should be on the Prime Minister and not on the House of Commons. All Members of the House of Commons will have some kind of interest in what is going to happen. It does not necessarily follow that they want the good of the general population, although it might be disguised in that way. For example, I could see that as people age—as I certainly am—they may feel that they do not want to continue, whereas others are very anxious to keep their position. One has to have that kind of consideration in mind.

I have great difficulty in disagreeing with the noble and learned Lord, Lord Judge, with whom I have agreed many times in the past, but this is a fundamental point. My principal reason for thinking that this is not an appropriate amendment is that the responsibility of the Houses of Parliament is primarily to legislate and to keep account of the Government, but not to control an executive act except by legislating. This is not in any way a legislation; it is just a decision in the House of Commons that has no effect except as an executive decision.

--- Later in debate ---

This Bill will provide a welcome degree of clarity. It will restore, or rather confirm, the status quo and, with this ouster clause, keep the judges out of politics. I pause to point out that, in a sense, as we said in the IRAL, this is not truly an ouster clause, since the Bill is not creating a new power and then ousting the jurisdiction of the courts. Rather, it is confirming the status quo as acknowledged so long ago by Lord Roskill in the GCHQ case. It is doing this in the interests of legal certainty, a point made by the Constitution Committee, of which I have the privilege of being a member. Our current Prime Minister is perceived by many in your Lordships’ House and outside as having rather little regard for the law. But personal antipathy to this Prime Minister should not result in our making unnecessary and undesirable amendments to this Bill.

[Lord Butler of Brockwell (CB)]

My Lords, I shall disagree with the noble Lord who has just spoken by opposing the inclusion of Clause 3 in the Bill, but first I thank the noble Lords, Lord True and Lord Wolfson, for extending to me the courtesy of a virtual discussion on this. They failed to persuade me, but I appreciated the courtesy.

Last week, the Minister circulated a letter to your Lordships addressing the issues arising from the Bill. In it, he said:

“Clause 3: Restates the long standing position that the exercise of prerogative power”


in relation to the Dissolution and calling of Parliament “is non-justiciable”, and the noble Lord, Lord Faulks, has just said something similar. I have been around a long time, but I am not aware of any such long-standing position. There is the statement of Lord Roskill, but it did not bear directly on this. It is not surprising that this position has not been conclusively established, because no challenge to the use of the prerogative power has ever been made. Nor do I think it likely that it ever would be. If it was, I find it hard to imagine the circumstances in which a court would uphold such a challenge. So, in practice, I regard this clause as unnecessary, and dangerous.

Let us suppose, for the sake of argument, that a Government misused this prerogative power by asking the sovereign to dissolve Parliament in order to prevent Parliament causing the Government some inconvenience or in an attempt to overturn the result of a recent election. What safeguard would there be against such a misuse of power in the absence of the courts? The noble Baroness the Leader of the Opposition was absolutely right. She said that there were three possibilities. There is Parliament—the House of Commons—which we debated in the last group of amendments, there are the courts or there is the sovereign. Those are the only three possibilities. Again, I quote the Minister’s letter:

“The sovereign retains the power to refuse an improper dissolution and, in doing so, acts as a constitutional backstop in this context.”


Is this a position in which we would wish to place the sovereign? It would do precisely what we are all agreed we should not do: namely, to require the sovereign to intervene in what are likely to be, as the noble Lord, Lord Grocott, said, the most highly charged political circumstances. Therefore, if anyone is to prevent the Government misusing the power, and the Government are determined to oppose the House of Commons being given a vote, I submit that it should be the courts rather than the sovereign.

Of course, if the high court of Parliament—the House of Commons—has authorised the use of the power, that would put it out of the reach of the courts. That is the virtue of the amendment moved by my noble and learned friend Lord Judge and the noble Lord, Lord Wallace of Saltaire, but the Government are opposed to that. There are dangers in leaving it to the House of Commons, which were described at length in the last debate, so it is either the courts or the sovereign. I submit that in those circumstances, it has to be the courts.

There is a more fundamental objection to Clause 3. These are the words of the clause:

“A court or tribunal may not question—


(a) the exercise or purported exercise of the powers referred to in section 2,


(b) any decision or purported decision relating to those powers, or


(c) the limits or extent of those powers.”


I find those words chilling. They amount to saying, “We will take these powers, but we will not allow any interference by the judicial system in the way we exercise them.” That is the language of an authoritarian —some might even say totalitarian—Government.

It is because the present Government have shown signs of seeking to override any challenge to the use of their powers that this ouster clause is such a dangerous precedent, as my noble and learned friend Lord Hope has said. I suggest that this House should stand against that precedent. I shall not seek the opinion of the Committee today on excluding Clause 3 from the Bill, but I reserve the right to move an amendment on Report to remove it.

--- Later in debate ---

[Baroness Noakes (Con)]

My Lords, I will speak only on Clause 3 stand part and not on the more detailed amendments, because I am sure that my noble friend the Minister will reply in his careful way about how the wording was arrived at and what it is intended to do, as he did very carefully at Second Reading.

One does not have to be an expert on the constitution, which I am not, to know that judges should not interfere in politics, and decisions on calling elections are about as political as decisions ever get. I believe the Government are right to try to draft this Bill in such a way that the courts cannot interfere in that very political decision, and that is why I support Clause 3 standing part of the Bill.

The fact that the Government feel it necessary to include Clause 3 and draft it in such a complex way speaks volumes about how the judiciary has found many ways of getting involved in areas that would have seemed unthinkable only a few years ago, ones of which we would have assumed the courts would steer clear. The clause is necessary only because of the direction of travel taken by the courts in the way they have interpreted the areas they get involved in. I, for one, believe that we need no more surprises like the Miller judgments.

Clause 3 is confined to the specific and narrow issue of whether the prerogative power to dissolve Parliament is justiciable. I cannot conceive of any circumstances in which the involvement of the courts could ever be justified, and those who oppose Clause 3 have said that they cannot think of any either. Even the noble Lord, Lord Butler of Brockwell, who demonstrated the fertility of his imagination in the debate on an earlier group of amendments, could not come up with an example. We are legislating against shadows, against figments of the imagination.

The issue is about only the steps taken to allow a general election to be called. It is a very political decision. We cannot conceive of the courts ever getting involved in delaying an election, halting an election or even, as my noble friend Lord Faulks suggested, nullifying the result of a general election. It just seems too ludicrous a concept even to contemplate. However, we need it to be clear beyond peradventure in the law, and without this clause it may not be.

We need to get this into perspective. Clause 3 does not diminish the role of the courts in the constitution; it is about this one narrow area that before, when we simply rested on the prerogative, no one thought the courts could ever get involved in, but because of other developments in the law we now feel it necessary to be quite explicit about it.

[Lord Butler of Brockwell (CB)]

The noble Baroness and I agree that the circumstances in which this situation arises are unthinkable, so why should we have the dangerous precedent of this ouster clause in the Bill?

[Baroness Noakes (Con)]

We have it because it is just possible that the courts could find a way in. We have seen them getting involved in areas that we never thought they would get involved in before. That is a fact of the way the judiciary has moved in recent years, and it is why the clause is there.

I do not accept that the clause sets a dangerous precedent. It is about this one very narrow issue. It is not about an ouster clause that would be put in every statute that came before Parliament. Of course, Parliament must decide at the end of the day how it wants to frame its laws. It has the right to do that, and the courts can then interpret those laws, but I do not believe that this will be seen as a precedent for a more general use of ouster clauses. If it is, I am fairly sure that Parliament would not accept them. We should see this clause in the narrow concept in which it is drafted and not try to extend it beyond that.

Downing Street Parties: Police Investigation

Lord Butler of Brockwell Excerpts

Tuesday 25th January 2022 Lords Chamber

[Lord True (Con)]

No, my Lord.

[Lord Butler of Brockwell (CB)]

My Lords, could the Minister give us a little more precise guidance about the effect of these developments today on the timing of Sue Gray’s report? Can that report still be expected within the next few days?

[Lord True (Con)]

Most noble Lords will understand why I am not going to speculate on the timing of the progress of either investigation. I have told the House that aspects of the Cabinet Office investigation will continue. Obviously, there is an independent police investigation. I am sure the noble Lord, with his great experience and great service to the country, will understand that those two inquiries must be allowed to run their course.

Dissolution and Calling of Parliament Bill

Lord Butler of Brockwell Excerpts

2nd reading
Tuesday 30th November 2021 Lords Chamber

[Lord Butler of Brockwell (CB)]

My Lords, I regret that I am going to share the self-satisfaction of the noble Lord, Lord Grocott. I believed from the outset that the 2011 Bill was misconceived. Partly through the not inconsiderable intervention of my noble friend Lord Pannick, who regrets that he cannot be here today, your Lordships’ House was twice persuaded to send the Bill back to the House of Commons for reconsideration. The concession eventually obtained was that the operation of the Act should be reviewed in 2020 by a Joint Committee. That was conducted under the chairmanship of the noble Lord, Lord McLoughlin, who I think I am right in saying should be congratulated on his birthday today.

The stated intention of the Fixed-term Parliaments Act was, as the noble Lord, Lord Newby, said, to ensure that the 2010 coalition lasted a full five years. But, with respect to the noble Lord, the Bill was not even sufficiently effective to do that. If either of the coalition parties had wanted to end the Parliament early, it is highly likely that, with the support of the Official Opposition, the necessary two-thirds majority in the Commons to bring the Parliament to an end would have been available.

A second aim of the Act was to remove from the Prime Minister the alleged advantage of being able to choose the timing of a general election. In my experience, the flexibility that Prime Ministers have is very limited in practice. No Prime Minister is likely to choose to put their Commons majority at risk before the last year of a Parliament unless they judge it essential in order to get their Government’s programme through. Experience also shows that, if the electorate sense that the Government are putting them to the trouble of a general election for opportunist reasons, they punish the party severely through the ballot box, as the intervention by the noble Lord, Lord Cormack, made clear. That is what Mrs May found in 2017.

I believe that the traditional arrangement by which the Prime Minister can ask the Queen to dissolve Parliament so that the Executive can seek a new mandate, in circumstances where they cannot rely on getting their programme through Parliament, is in the national interest. I therefore support this Bill. However, I greatly regret the inclusion of Clause 3. The noble Lord has argued that the Dissolution of Parliament is a matter properly dealt with by the electorate rather than the judiciary, but in my submission, this is a false argument. By the time the electorate have any say, Parliament will have been dissolved, the power will have been used and the Queen will have had to assent to it.

If the Bill gave a role to Parliament in the Prime Minister’s request for Dissolution, it would, as others have said, be a different matter. But the Bill does not allow any involvement by Parliament. Under the Bill, Dissolution is not something done by Parliament; like Prorogation, it is something done by the Executive to Parliament. Parliament does not authorise it or have any role in it. If the Executive misuse their power, in my view the exercise of that power should be subject to review by the courts.

But in this case, as has already been pointed out, there is an even more fundamental objection. Let us suppose that the Government do misuse the prerogative power in some way. All commentators agree that, at least in theory, such a situation could happen. What protection would exist if the courts cannot intervene? There is only one source of protection in that circumstance: the sovereign. The sovereign would have to refuse the Prime Minister’s request for Dissolution. That would require the sovereign to do what everyone agrees she should be protected from doing: intervening in party politics, and in the most contentious of circumstances. If it is necessary to have protection against the Prime Minister’s abuse of the power in this Bill, in my view it should be provided either by Parliament or the courts, not by the sovereign.

I end with a more general point. A recent article in the New Statesman, under the heading “Democracy’s Last Stand”, discussed how ex-President Trump’s attempt to subvert the result of a democratic election was thwarted by the courts. The article also pointed out how rapidly Hungary, Turkey and Brazil have seen their democracies strong-armed by repressive Governments. The article asked whether the United Kingdom’s constitutional safeguards are sufficient to prevent a slide in a similar direction. It reminded readers of the politically motivated Prorogation, the demonising of the courts and the BBC, and the attempts to override the findings of independent standards and appointments bodies. One could add the use of the Henry VIII powers to bypass Parliament’s scrutiny, highlighted by two Committees in your Lordships’ House last week, and now, the ouster clause in this Bill.

I suggest that those of us who value our democratic traditions must stand up against the Government’s attempts to remove oversight of their actions by Parliament and the courts. If Clause 3 is not amended, I shall vote against its inclusion in the Bill.

Security of Ministers’ Offices and Communications

Lord Butler of Brockwell Excerpts

Tuesday 29th June 2021 Lords Chamber

[Lord True (Con)]

My Lords, I cannot comment on the circumstances. The Department of Health inquiry, I would imagine, would look into all these matters, including who was and should be responsible for making the Secretary of State aware, if he was not aware, of this device.

[Lord Butler of Brockwell (CB)]

My Lords, the use by Ministers of private means of communication is dangerous on all sorts of grounds, and Ministers need good advice about that. Following on from the question of the noble Lord, Lord Wallace, is there a review of ministerial private use of the internet, so that departments can identify which parts of such correspondence are subject to FOI so that they can deal with FOI requests?

[Lord True (Con)]

My Lords, there is guidance. Obviously, guidance, as the noble Lord with his great experience will know, is reviewed from time to time. That is also the case in relation to FOI, on which I have already commented. The Cabinet Office responded to 92% of FOI requests within 20 working days. As to the boundaries, Ministers are also parliamentarians—MPs and Peers. There are distinctions between official classified information and the day-to-day management of a Minister’s life. One needs to be aware in office of those barriers and those responsibilities. I take note of what the noble Lord has said.

Finance Bill

Lord Butler of Brockwell Excerpts

2nd reading & Committee negatived & 3rd reading
Tuesday 8th June 2021 Lords Chamber

[Lord Butler of Brockwell (CB)]

It is a pleasure to follow the noble Lord, Lord Bridges, who chaired our sub-committee with great competence, and I shall have a word to say about that later. I start in the general area about which he was speaking. As we debate the Finance Bill today, I warmly welcome last week’s agreement by G7 Finance Ministers to work together, to ensure that all countries get their fair share of revenue from multinational corporations. I congratulate the Chancellor of the Exchequer on presiding over this achievement. However, while I do not want to rain on his parade, I cannot agree with him that this shows what the UK can do post Brexit, as he claimed.

To my mind, it shows two different things. The first, somewhat contrary to what the Chancellor claimed, is that international problems, such as the taxation of multinational corporations, can be addressed only by countries working together and by pooling part of their sovereignty. They cannot be solved by individual countries acting independently. The second lesson of the G7 Ministers’ agreement is that nothing happens until the United States decides that it should. This first step could not have been achieved without the United States giving a lead.

I turn now to the report of the Finance Bill Sub-Committee on the new powers of HMRC in the Finance Bill that we are debating today. I comment first on a quirk of our curious constitutional procedures. I joined this sub-committee at a late stage of its work. It seems to me that the report is a useful commentary on the powers in the Finance Bill, but our constitutional procedures prevent your Lordships’ House turning the committee’s conclusion into amendments to the Bill. There really is no reason of Commons financial privilege why the Lords should not be able to pass amendments relating to the fairness and proportionality of HMRC’s administration of the tax system. The only reason is that they happen to be contained in the Finance Bill. As a result, this sub-committee’s report turns into a mere commentary, which may influence the House of Commons if anyone there bothers to read it, but otherwise it is simply the basis of a conversation between the committee and the Government. That can be quite a useful conversation, since the main means by which your Lordships’ House can influence events is by persuading the Government. The committee has persuaded the Government on some of the issues in the report, but it is frustrating that, having debated this report, your Lordships’ House has no option other than to nod the Finance Bill through in the form in which it has reached us.

It was a privilege to serve on this sub-committee, which was superbly chaired by the noble Lord, Lord Bridges, and benefited from the participation of the chairman of the main Economic Affairs Committee, the noble Lord, Lord Forsyth. As the noble Lord, Lord Bridges, has said, the committee was very well served by the excellence of its clerks. We also had good co-operation from the Financial Secretary to the Treasury, Jesse Norman MP, senior members of HMRC, and representatives of professional associations affected by the Bill’s provisions.

On rereading the report, I feel that it perhaps comes across entirely as an indictment of HMRC. That may be inevitable, because the report concentrates on those powers in the Finance Bill that seem to the sub-committee excessive or not fully thought through. Speaking for myself—I speak with a Treasury background—I have considerable sympathy with HMRC, particularly in its task of dealing with schemes of tax avoidance and evasion, which are like a many-headed Hydra—as soon as HMRC hits one of the heads another pops up. Yet it is not difficult to feel that HMRC has been more zealous and effective in pursuing often innocent taxpayers, rather than those who have made a fortune from promoting avoidance schemes.

There have also been ongoing deficiencies in HMRC’s dealings with taxpayers, some of which HMRC acknowledges. The sub-committee received distressing evidence from victims of the loan charge to which the noble Lord, Lord Bridges, referred, not least about delays or failures in getting a response from HMRC when taxpayers have sought to achieve a settlement of their affairs.

A compelling account of the distress caused by HMRC’s handling of the loan charge was given in the BBC Radio 4 programme “File on 4”, to which the noble Lord, Lord Bridges, referred, and which I commend on its investigations into these issues. A recent edition of the programme dealt with a further scheme with some similarities to the loan charge, to which the noble Lord, Lord Bridges, also referred: the recruitment of staff through umbrella companies, which offer to save employers overheads in the form of national insurance contributions, holiday pay and employment regulations by offering recruitment in penny numbers, each too small to incur those overheads.

I know that IR35 has recently come into effect as a means of distinguishing between general and useful recruitment agencies and those set up for avoidance, but I echo the noble Lord, Lord Bridges, in asking the Minister whether there are signs that it is preventing the offering of services for avoidance purposes by umbrella companies with overseas directors who are difficult to pursue. It would be a tragedy if another version of the loan charge were to become established, which could cause distress for its victims for many years to come.

I end by commending HMRC and the Government on the detailed response the sub-committee received to the report we are debating. The Government’s response is that out of 24 main recommendations in the report, nine were accepted, six were partially accepted and nine were rejected—you might call it a score draw. A sceptic might say that it was the recommendations of general principle that tended to be accepted by the Government and the specific recommendations that were rejected. Nevertheless, there is evidence that the report served a useful purpose in challenging HMRC, and it was an honour to take part in preparing it.

Budget Statement

Lord Butler of Brockwell Excerpts

Friday 12th March 2021 Lords Chamber

[Lord Butler of Brockwell (CB) [V]]

My Lords, I congratulate the noble Lords, Lord Benyon, Lord Khan and Lord Cruddas, on their maiden speeches.

I make a single point on the proposed 1% pay increase for the National Health Service. I accept that to decelerate borrowing, the Government need to restrain their own wage costs. On the other hand, the public want to express their gratitude to the NHS. My conclusion is that the pay review body should determine ongoing NHS pay levels on what is necessary to recruit and retain staff, but there should be a one-off bonus to recognise the extraordinary demands of the last year on the NHS.

I have a specific suggestion. A one-off, tax-free bonus of £1,000 to all in the NHS would cost £1.3 billion. How should that be paid for? While many in the economy have suffered in the last year, the income of others has been maintained or even enhanced. A temporary 1% increase in the 40% higher rate of income tax would raise something over £1 billion, which would go a long way towards covering the bonus I have suggested.

Of course, I am well aware that the Government’s manifesto ruled out increases in income tax rates. However, in this exceptional situation, a one-off surcharge for this fiscal year to reward NHS employees would be acceptable to those in the higher tax ranges. If I may speak personally, it would certainly be acceptable to me. I hope that this suggestion might be considered.

Financial Services Bill

Lord Butler of Brockwell Excerpts

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

[Lord Butler of Brockwell (CB) [V]]

My Lords, it is a privilege to be the first to congratulate the noble Baroness, Lady Shafik, on her charming and hugely impressive maiden speech. This debate shows the House is fortunate to have the addition of not one but two real heavyweights to our number. I am sure I speak for the whole House when I welcome the noble Baroness and say that we look forward to her continuing to contribute her extensive expertise and experience—national and international—to the work of our House.

This is a large Bill and, in view of the significance of the financial services sector in the UK, a very important one. I declare my interests as set out in the register and as a former member of your Lordships’ EU Financial Affairs Sub-Committee—one who worked under the splendid leadership of the noble Baroness, Lady Falkner of Margravine.

Like the noble Lord, Lord Sharpe of Epsom, I want to direct my remarks to the part of the Bill relating to the regulation of investment firms, in particular, the EU markets in financial instruments directive, popularly known as MiFID. The current directive, MiFID II, came into force in the United Kingdom on 3 January 2018. Its provisions have been widely criticised, not only in the UK but throughout the EU, as excessively burdensome and not sufficiently distinguishing between market operators on grounds of size or function. Now the UK is responsible for its own regulation, which is welcome, but using the powers to be conferred by this Bill the Financial Conduct Authority will be able to introduce a more tailored approach under the title of an “investment firms prudential regime”. It is also welcome that the FCA has already circulated a discussion paper inviting comments on its approach.

One area in which MiFID II produced unforeseen adverse consequences—at least, unforeseen by its proponents, for it was foreseen by others—was the treatment of investment houses’ research costs. It was an aim of MiFID II to prevent the financing of research services from trading commissions, because it was believed that this would remove an incentive to unnecessary churning of investments as a means of providing funds for research. This was a laudable objective, but it was predicted during consultation on the directive that a complete ban on the commission-sharing regime would cause fund managers to cut their spending on research and benefit competitors outside the EU, who were not subject to similar restriction. It would also discourage new businesses seeking to establish themselves in the market. This has, indeed, been the result.

An alternative suggestion was that the aim of greater transparency could be achieved by disclosing to clients in advance fixed, budgeted amounts for research. This was adopted in MiFID but not considered sufficient in itself; further onerous reporting was required. This is but one example of the competitive burdens imposed by MiFID II. It is to be hoped that they will be mitigated in the UK’s new investment firms prudential regime, so as to combine transparency about costs with removing disadvantages suffered by UK firms in comparison with competitors in the United States and the Far East.

The FCA’s consultation on the new regime coincides with two other developments that are currently under way. One is the discussions being conducted with the EU, and due to be completed by April, about a new framework for equivalence between the UK and EU following Brexit. The second is that, like the UK, the EU is itself reviewing and preparing modifications to its regulatory regimes, covering not only MiFID but other matters covered by the Bill, such as the capital requirements directive implementing Basel III and the anti-money laundering directive. The UK’s discussions with the EU about equivalence are taking place on ground that is shifting beneath our feet. Such developments in regulation in the UK and the EU will, and inevitably should, continue as financial markets continue to develop.

If anything were needed to persuade both sides in the present UK-EU negotiations that it is in our mutual interest to work in close consultation with each other, it is a report last week that in the absence of UK trading platforms for derivatives being given EU market access, business in euro-denominated interest rate swaps fell sharply in London during the first fortnight in January. At the same time, it has doubled not in the EU financial hubs, where it also fell, but in New York. It is to be hoped that the EU can be persuaded that a restrictive approach to the UK is contrary to not only the UK’s interests but its own.

The United Kingdom has long been a leader in international financial regulation, as shown by our pivotal role in the 2007 financial crisis and its aftermath. We must see to it that this Bill and its implementation continues to allow that leadership, not only in the UK’s interests but, as the noble Baroness, Lady Shafik, said, in the world’s.

EU-UK Trade and Cooperation Agreement

Lord Butler of Brockwell Excerpts

Friday 8th January 2021 Lords Chamber

[Lord Butler of Brockwell (CB) [V]]

My Lords, I address my two minutes to prospects for the financial services sector, drawing attention to my interests in the register. Many have criticised the thinness of the agreement in respect of financial services, but the surprising thing is that so few cries of alarm have been heard from practitioners themselves. In the next three months, there are to be negotiations about access. Of course, we should not expect the EU to make thing easy. Paris and, particularly, Frankfurt have long aspired to challenge London’s supremacy, and this week the Governor of the Bank of England warned that becoming a rule-taker would be too high a price to pay for equivalence. Nevertheless, I am even more confident than my old friend the noble Lord, Lord Griffiths of Fforestfach, about the prospects for this sector.

First, the UK financial services sector is innovative. It offers a complex of services, an ecosystem that, combined with the asset of the English language, is difficult to replace. Secondly, the EU would find it difficult to discriminate against the UK in this field without also cutting itself off from other markets such as the United States. Thirdly, financial services are not like goods; they are not material items that can be identified and controlled as they cross borders. In the lead-up to Brexit, fewer jobs have been moved to Europe than pessimists predicted. It may be that a greater number of financial transactions will be conducted and taxed on the continent, to the cost of the UK Exchequer, but I believe that they will still be conducted by UK-based companies. In this area, as in others, the market is likely to decide. The test will be the quality of services that our financial services sector provides, and in this I believe that we can be confident.

European Union (Future Relationship) Bill

Lord Butler of Brockwell 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 Butler of Brockwell (CB) [V]]

My Lords, I have never made a secret of my regret that the 2016 referendum went the way it did. I hoped for some time that, when the implications became known, the British people would be given a second chance to vote and the result would go the other way. But I accepted long ago that the train had left the station and that we had to turn our attention and energies to negotiating a new relationship with our former partners. We now have the results of that negotiation.

I cannot agree with those who say, as some have, that this is a bad deal, on the grounds of the increase in bureaucratic controls on trade in goods, extra checks on exports of food and farmed products, and loss of access to development funding. They are not the results of the agreement; they are the inevitable results of the original decision to leave the European Union.

Like the noble Lord, Lord Leigh, I take a more favourable view of these negotiations than some previous speakers. They seem to me to have been skilful, firmly based on principle and with a surprisingly satisfactory outcome. We approached them not as a mendicant, but as an independent country with a great deal to offer, as indeed is the case. The United Kingdom is the fifth largest economy in the world. We are one of the world’s two leading financial centres. We have pioneering universities and research centres, as our leading role on the coronavirus vaccine has shown. We have a structure of law that is admired and relied on by businesses around the world. We have the great asset of the English language. These things are not going away and are not affected by Brexit.

My view is that we can greet this agreement not just with profound relief that it is much better than no deal, but with positivity about the opportunities that it presents for continued trade and co-operation with Europe. We can be justifiably proud of the civil servant negotiators, who worked so hard and with evident skill to achieve this outcome. I believe that they have shown themselves to be at least equal in resolution and ability to their EU counterparts.

This is of course not the end of the story, as the President of the European Union said in her moving words when the agreement was announced. There are important areas where there is need for further agreements and co-operation in our mutual interest but, when we vote on the Bill, I will support it, and not just with relief but with optimism.

Ministerial Code

Lord Butler of Brockwell Excerpts

Tuesday 24th November 2020 Lords Chamber

[Lord True (Con)]

Well, my Lords, my noble friend always asks his questions in a direct manner. I will not comment on any individual case, but it is certainly true that being at the top of a major department is a challenging role for Ministers and senior civil servants alike—and, frankly, I have not known many snowflakes in either of those capacities.

[Lord Butler of Brockwell (CB)]

My Lords, it would have been good if the Minister had condemned the terms of the question asked by the noble Lord, Lord Howard. Under this Prime Minister, the conduct of the Government and their Ministers has been criticised by the Supreme Court, the National Audit Office in relation to their conduct of procurement, the Commissioner for Public Appointments, the chair of the Committee on Standards in Public Life and the Prime Minister’s independent adviser on ministerial conduct. Do the Government take these criticisms seriously? If so, what proposals do they have to restore confidence in the probity of public life?

[Lord True (Con)]

My Lords, I do not agree that confidence in the probity of public life, as the noble Lord puts it, is destroyed. The Government take all criticism and comment seriously and reflect on all comment, positive and negative. That is the wise thing to do, and I am sure the Government will continue to do it.