European Union (Withdrawal) Bill

Lord Callanan Excerpts

Committee: 6th sitting (Hansard - continued): House of Lords
Monday 12th March 2018 Lords Chamber

[Lord Wigley]

My Lords—

[The Minister of State, Department for Exiting the European Union (Lord Callanan) (Con)]

My Lords—

[Lord Wigley]

My Lords, I am sorry but I intend to speak.

[Lord Callanan]

We have spent 45 minutes discussing the issues.

[Lord Wigley]

I have not intervened at any stage in this debate.

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[Lord Rooker (Lab)]

Before the Minister responds, I want to spend a couple of minutes on a highly relevant issue that has not been raised on this Bill at all.

Following the BSE crisis, which was very damaging to the economy, an all-island animal feed arrangement was created in Ireland. It is not generally appreciated that there are a disproportionate number of animals for food production on the island of Ireland, hence its exports to the rest of the world: 15% of the world’s infant formula market is controlled by the dairy industry on the island of Ireland. The animal feed situation, which is crucial, is controlled by the ports around the island of Ireland. After Brexit, the EU will be ultra-sensitive—do not forget that we are the country that gave the world BSE—about the imports of animal feed. Given that there already exists an all-Ireland animal feed arrangement, and all-Ireland control mechanisms at the ports and the mills, how will this work after Brexit for the transport between the north and the south from the feed mills and ports? It simply will not be possible to drive a lorry full of feed across the border into Europe without it being checked. I cannot understand why this issue never gets raised. A third of what we grow feeds animals—it is a huge amount of business. We are what we eat, of course, and the animals are produced that way. What will happen in the island of Ireland to the existing animal feed arrangements? It is highly relevant to this debate.

[Lord Callanan]

I thank the noble Lord, Lord Berkeley, for this debate on Amendments 104 and 231, which raise the important matter of frontier control procedures and freight transport in relation to the Clause 7(1) power. I am particularly grateful to the noble Lord for his helpful technical and operational suggestions. I would have passed them on to my colleagues in the Department for Transport but my noble friend Lady Sugg has already taken careful note of them and I am sure she would like to take them forward with him personally.

I am pleased to reassure the noble Lord that discussions in this field continue with all those involved in the running of our roads and railways and the freight services that use them. How these services and the procedures involved continue to operate after our exit is, however, a matter to be negotiated with the EU. In the event that there is no negotiated outcome, Her Majesty’s Revenue and Customs will treat EU trade as it currently treats third country trade, which means that businesses trading with the EU will need to comply with additional customs requirements. The Government recognise that this represents a change to how UK businesses currently trade with EU firms and so we will model new customs processes and procedures on the existing Union customs code.

The noble Lord’s amendment would prevent the making of regulations in certain scenarios but it does not, and cannot, do anything to prevent those scenarios arising. This will be determined purely by what happens in the negotiations. All it would do in the unhappy situation that we did not secure a satisfactory agreement with the EU is to leave us unable to reflect that situation in domestic law, which of course would only make the position worse. Furthermore, any report that was carried out before the outcome of the negotiations would necessarily be speculative and so would lack a certain utility.

Happily, I can tell the noble Lord that the transport of goods is incredibly important to both the UK and the EU, as many noble Lords have pointed out, and there is a strong mutual interest in reaching an ambitious agreement which maximises the benefits for all businesses and individuals. As such, the Government aim to negotiate for the most tariff and barrier-free trade with our European neighbours, as the Prime Minister said in her speech last week. The Government will ensure that appropriate measures are taken when implementing whatever may be agreed. It will be done in a phased process, thereby providing businesses with enough time to plan and prepare for the new arrangements, minimising disruption.

Whatever the outcome of the negotiations, the Government believe that it is in the interests of both the UK and the EU to have efficient and effective frontier control procedures to achieve one of the strategic objectives of ensuring that UK-EU trade is as frictionless as possible. We will continue to meet our commitment to keeping Parliament fully informed on these negotiations and allow for proper scrutiny, including through regular statements and in our support for the work of committees in this House and the other place. I hope I have reassured the noble Lord that the Government will work hard on securing an agreement with the EU that works well for all in the road and rail freight sectors and I therefore ask that he will withdraw his amendment.

[Lord Campbell-Savours]

I asked four questions on trusted trader status. When will I get my answers?

[Lord Callanan]

I will read Hansard and respond to the noble Lord in writing.

[Lord Liddle]

The Minister did not answer any of the points that I made about what level of contact the Government have had in Brussels discussing these issues, and why in the interval between the September agreement and March, when the Commission produced its own proposals, Britain appears to have done nothing. Will he please tell us what is going on?

[Lord Callanan]

We are having extensive discussions with our partners in Europe. We are also having extensive discussions with representatives of the rail freight industry and other players in the sector, but as the noble Lord well knows, the arrangements are a matter for negotiation.

[Lord Liddle]

If Brussels can produce a proposal, why cannot the British Government produce an alternative proposal?

[Lord Callanan]

As the noble Lord pointed out, we did produce a customs paper last year. In her speech last week, the Prime Minister referred to two alternative customs arrangements and those matters are being taken forward in the discussions. If the noble Lord reads the Prime Minister’s speech of last Friday, he will see that she referred to them specifically.

[Lord Liddle]

Of course I have read the Prime Minister’s speech. What do you take me for? I follow these things very closely, but the Minister still has not explained how it is that the Prime Minister simply referred to the principles that were put out last summer. This is a situation of real urgency for the economic actors, so why are the Government not producing proposals? Would the Minister be willing to write to me on this point?

[Lord Callanan]

I would be delighted to write to the noble Lord.

[Lord Berkeley]

My Lords, I am grateful to all noble Lords who have spoken in this interesting debate. It has been really well informed and I am amazed that the Government have nothing better to respond with other than answers that I think I heard six months ago. As my noble friend has said, time is running out. This is a probing amendment and I am grateful to the noble Viscount, Lord Hailsham, for suggesting that we should have gone harder, and indeed the noble Baroness, Lady Altmann, said the same thing. We have time to have discussions before Report, but it is a sad reflection for all of industry, not only the transport sector. The noble Baroness referred to the manufacturing sector and said that we are no further on. The Commission has produced papers but we just get motherhood and apple pie. I do not think I can take this any further tonight, so I beg leave to withdraw the amendment.

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If we try to replicate these EU laws, the variations might result in UK-specific standards. We hear that we will adhere to international and European standards in this area, but it will not be as easy as the current arrangement. There is an assumption that the UK will maintain existing standards. What about the implications for infrastructure and services? There are doubts as to whether the UK’s continued involvement will work at all. The main point I want to make is that in a global industry such as rail, many benefits of international or supranational standards development will be lost if the UK ceases to participate. If UK standards were different there would be a loss of economies of scale. Costs might increase and some manufacturers might choose not to compete or supply the UK market at all.

[Lord Callanan]

My Lords, I am again grateful to the noble Lord, Lord Berkeley, for bringing this important matter before the Committee. The Government are considering carefully all the potential implications arising from the UK’s exit from the EU, including the implications for the UK’s future relationship with the European Union Agency for Railways. The UK’s continued participation in the agency as a third country and its continued co-operation in the fields of rail safety and standards, as well as the implications for the UK’s technical standards regime, is, of course, a matter for the negotiations.

Our domestic railway and the cross-border services that link us with the EU serve an incredibly important function in the transport of goods and people across the UK and between the UK and the EU. In 2016, there were some 1.7 billion passenger journeys facilitated by rail in the UK, while the rail freight industry transports goods that would otherwise require 7.6 million more lorry journeys each year. Equally, the Channel Tunnel was responsible for 25% by value of all trade in goods between the UK and continental Europe in 2014, facilitating an estimated £91.4 billion of trade in total. Passenger services through the tunnel, including Eurostar and Le Shuttle, and international rail freight services, transported an estimated 20.8 million passengers and 22.5 million tonnes of goods in 2016.

As the Prime Minister made clear in her Mansion House speech last week, we want to maintain the continuity of rail services that link us with the EU, which provide important economic benefits to both the UK and the EU. However, our participation in the European Union Agency for Railways is not something that the Bill can legislate for. For decades, we have worked closely with our European partners to develop a regime in the field of rail safety and standards that reflects UK practice. We strongly believe it is in both our and the EU’s interests to ensure continued productive co-operation on safety and standards in the future, regardless of the outcome of negotiations. As I have said, this will be a matter for negotiations. In considering all relevant factors relating to the future rail safety and standards framework, the Government remain committed to our railways continuing to have the highest standards and remaining steadfastly amongst the safest in the EU.

We will continue to take on board the views of industry. The Government have a number of established mechanisms for engaging regularly with the rail sector. These include, for example, the Rail Delivery Group and the Rail Supply Group, whose members include the supply chain, passenger and freight operators, and Network Rail. As we prepare for the UK’s withdrawal from the EU, the Government will continue this engagement with a wide range of stakeholders from across the UK’s rail industry to seek views, which the UK has taken, and will continue to take, into consideration.

In the light of that, I hope I have satisfied the noble Lord that we understand the importance of maintaining the continuity of our important EU rail links, as well as maintaining a safe and effective railway. This will continue to be an important factor as we approach the negotiations. I therefore hope he feels able to withdraw his amendment.

[Lord Berkeley]

I am grateful to the Minister for that reply. It is not news to me, because, obviously, I am aware of what is going on. Could he possibly write to me quite soon about some information that I have which states that the Department for Transport is looking at which regulations from Europe could be torn up as soon as we leave? It is apparently highly confidential, which probably means that we will end up retaining a mishmash of half European and half British regulations, with a divergence which will be incredibly bad for both our manufacturing industry and operators.

[Lord Callanan]

My noble friend Lady Sugg will be happy to discuss that with the noble Lord.

[Lord Berkeley]

I am grateful to the Minister. I beg leave to withdraw the amendment.

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[Baroness Altmann]

I rise briefly to explain why I have added my name to these important amendments. One thing that has not been mentioned in Committee so far is the idea that the arrangements we have with Europe also protect the safety, maintenance and repair facilities around our country for our aviation and aerospace industries. We must maintain alignment of regulation. We have 100 airports and 172 maintenance and repair facilities, and if we jeopardise the standards of safety, if we are not in the open skies agreement and not in EASA, then the US apparently is already planning to send its own inspectors to make sure that our standards are up to scratch. If we cannot reassure people that we will maintain those standards, we will not have a functioning aerospace and aviation industry.

Another important element that must not be forgotten is that if we do not maintain our membership of the open skies agreement and EASA, the flights taken by ordinary citizens will increase in price. One estimate from the consultancy Oxera is that if all flights operated by third country airlines were removed, air fares for UK passengers would rise by between 15% and 30%—a Brexit surcharge which people were never told to expect to pay when they voted to leave the EU. These restrictions cannot be overcome simply by airlines setting up subsidiaries in Europe, because ownership restrictions do not allow non-EU investors to own a controlling interest in EU airlines.

I urge my noble friend the Minister to make a commitment to the Committee that we intend to maintain membership of EASA and the open skies agreement, notwithstanding the jurisdiction of the European Court of Justice.

[Lord Callanan]

My Lords, to start with, I apologise to the noble Lord, Lord Tunnicliffe, as we are more than happy engage in discussions with interested parties. Before I had this job, I was Aviation Minister and had regular meetings with all the concerned parties in the industry, and my noble friend Lady Sugg has told me she is very happy to continue those discussions. I am sorry if I did not make that clear to him earlier. We are of course carefully considering all the potential implications arising from the UK’s exit from the EU, including the implications for the UK’s future relationship with the European Aviation Safety Agency and the Single European Sky agreement. I thank the noble Lords, Lord Berkeley and Lord Adonis—surprisingly, I see that the latter is not in his place—for their amendment.

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[Lord Callanan]

I will repeat the words that I used, for the noble Lord’s benefit:

“The Prime Minister … acknowledged that an appropriate financial contribution would be necessary and that there will be a role for the Court of Justice of the European Union”.


As I was saying, the precise form and nature of the UK’s future relationship with EASA, as well as continued co-operation with the EU in the field of aviation safety more generally, will of course be a matter for the negotiations. The UK’s geographical position means that, with Ireland, the UK services over 80% of traffic entering or leaving EU airspace from the North Atlantic. Given that, the level of interaction between the UK and the EU demands close co-operation. The Government recognise the need for UK air traffic management arrangements to remain interoperable with the rest of Europe once the UK has left the EU. Safe and efficient air traffic management is a priority for us. The UK’s air traffic management system will remain closely bound to that of our European partners. We seek a close and collaborative relationship in this area, just as in many others. However, NATS will continue to provide the same high-quality service to airspace users that it does today.

The Government also want to avoid disadvantaging industry by imposing additional regulatory burdens. The Bill is part of that: it allows the Government to be clear that we are committed to maintaining a harmonised safety system that benefits both the UK and EU aviation networks and maintains the high safety standards that we all wish to see. I hope what I have said has been reassuring for noble Lords and that they feel able to withdraw the amendment.

[Lord Liddle]

My Lords, what about the point about the affirmative procedure?

[Lord Callanan]

I took on board the noble Lord’s question but I am unable to give him those reassurances at the moment.

[Lord Berkeley]

I am grateful to the Minister for his reply and to all noble Lords who have spoken in this excellent debate. The Prime Minister has made more progress here than in the logistics, customs and railway sectors. My final question to the Minister is: has the European Union agreed this? Until it is agreed, it is not a lot of good. We need to revisit this and, we hope, have regular updates. I hope the Government will push very hard for it to be a priority—as my noble friend Lord Whitty said, to have this signed, sealed and delivered at as early a stage as possible. On that basis, I beg leave to withdraw the amendment.

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[Baroness Hayter of Kentish Town (Lab)]

My Lords, I have little to add but I have tabled Amendments 350 and 351 in this group. I should like to mention the importance of ensuring parliamentary scrutiny, in particular of tertiary legislation which was mentioned by the noble Lord, Lord Lisvane. We will deal with that issue later in a different group. The issue he raises is covered in paragraph 15 of the report of the Delegated Powers Committee. There is to be no time limit on the ability to pass tertiary legislation.

As has been made clear both last Wednesday and today, in seeking to bring into UK law the provisions that are currently effected in the UK by virtue of the 1972 Act and our EU membership, the Government have simply slipped into a belief that they should take control of all of this and have drafted for themselves powers and possibilities that rightly belong in Parliament, not with the Executive. As has been said, these amendments are to ensure that use of the powers will be properly scrutinised, and that they will be used by Parliament, rather than Ministers. I hope that the Minister has heard this often and strongly enough to be able to indicate, even at this late hour of the night, that it should be the Government who bring forward amendments on this on Report, because the arguments have been so well made. We should expect them to take the next step.

[Lord Callanan]

My Lords, I know that concerns regarding the delegation of legislative power, particularly where that delegation permits sub-delegation or allows for tertiary legislation, are shared by many in the Committee. I know that this debate has been brief because the hour is late, but I am aware of the concerns. I say up front in response to the noble Baroness, Lady Hayter, that the Government understand these concerns. We have listened carefully to this debate and to other representations that we have received, so for Report we will look to see how we can provide additional reassurances and transparency around sub-delegation and additional scrutiny of any fees and charges made under Schedule 4.

I will go into this in a little more detail, if noble Lords will forgive me. I know that it is late, but these are serious amendments on an aspect of the Bill that is of legitimate concern, unlike some of the amendments we discussed earlier. I hope I can do something to put some concerns to rest. I shall first take a moment to clarify that, where a legislative function is being sub-delegated under Clause 7 or any of the other powers in the Bill, that power will also be constrained by the policy restrictions that apply to the delegating power. In the case of Clause 7(1), that includes all the restrictions in Clause 7(7).

Although, beyond Ministers, there are indeed a great number of public authorities in the UK, there are only a very small number to which it would be appropriate for Ministers to sub-delegate legislative functions as an appropriate correction for a deficiency in retained EU law. Again, these will all be subject to the affirmative procedure.

I also restate that any SI providing for legislative sub-delegation will be subject to the affirmative scrutiny procedure and will have to set out what conditions apply to the exercise of that power. Whether scrutinising the sub-delegation of any of the powers in this Bill, the creation of a new, specific and targeted legislative function, or the transfer of any legislative power from the EU, I would expect this House in particular to take a keen interest in these instruments and to have vigorous debates on the appropriateness of the conditions proposed for the exercise of the power before voting on the instrument.

While the Government are listening to the Committee’s concerns about the form that this sub-delegation will take, they believe that conferring powers on public authorities, including Ministers, to allow them to make provisions of a legislative character or other legislation can be an appropriate course of action, either to make corrections to retained EU law or to maintain a regime in the future. This is particularly true where there is a need for specialised, technical rules to be developed, introduced and maintained by a body that has the necessary dedicated resource and expertise.

I will give noble Lords an example. The EU binding technical standards—the detailed technical rules developed by EU regulators for financial services—demonstrate where it might be appropriate to sub-delegate the responsibility for correcting. These standards, which run to almost 10,000 pages, fill out the detail of how firms need to comply with requirements of policy set in higher legislation. The PRA and FCA have already been given the responsibility by Parliament of developing and making the domestic detailed rules needed to ensure that financial services firms are stable, well managed and meet the needs of consumers. These UK public bodies have played a leading role in the EU to develop these standards, so they already have the necessary resources and expertise to review and correct them to operate effectively in the UK from day one of exit.

[Baroness Kramer (LD)]

Perhaps the Minister could help me with a clarification. As I understand it, the FCA and others have the powers he just described as a consequence of a cascade that comes, as he said, from higher levels of legislation that originated in a democratic process. They therefore have safeguards, frameworks, constraints, mitigations and appeals processes—all kinds of characteristics sitting around them. How do the powers of sub-delegation which the Minister described relate to any of those structures of cascade or framework, since we are supposedly leaving the EU?

[Lord Callanan]

I am not sure that the powers originated in a democratic framework; a lot of them came from EU legislation introduced by regulation which takes automatic effect through the European Communities Act. We could have an argument about whether that is a democratic framework, but perhaps now is not the time.

[Baroness Kramer]

My Lords—

[Lord Callanan]

Let me make some further progress and see whether it responds to the noble Baroness’s questions.

Some of the powers to make legislation that will be transferred under the powers in the Bill are integral parts of regimes currently managed at the EU level; for example, where the European Commission currently legislates to add to or remove active compounds from lists of biocidal products. Where sub-delegated or transferred legislative powers are crucial to the functioning of a regime, it would not be appropriate for those powers to be subject to a sunset. That would only postpone rather than remove the requirement in the limited time available before exit for either a regular flow of primary legislation to keep regimes up to date or a suite of primary legislation to design equivalent powers to those which the Government intend to transfer under this Bill.

Perhaps I may address the three elements of Amendments 350 and 351 tabled by the noble Baroness, Lady Hayter. First, I turn to the scrutiny of the exercise of the powers by Ministers of the Crown in Schedule 4. We have laid out in Schedule 7, which I know we will debate at length another day, provisions for the scrutiny of those powers. Our position is that the powers should indeed be subject to the affirmative procedure where Ministers are creating new fees and charges regimes, or where we seek to grant an authority the power to set its own fees and charges. It is the sort of framework being established in which this House rightly takes a great interest. All this is of course possible under Schedule 4 only in relation to new functions that we are transferring from the EU or setting up on exit under the powers in the Bill. We have not provided for the adjustment of these, or for existing fees or charges, to be subject to the affirmative procedure. In years to come, there will be many such adjustments as technology cuts costs and inflation raises them. This ebb and flow can make a real difference to businesses, but does not normally represent a matter requiring debate and division within this House.

Nevertheless, I accept the point made by the Delegated Powers and Regulatory Reform Committee that the raising of a fee not by 1% or 2% but by, let us say, 13,000% would be a substantial matter. I trust, however, in the expertise of the Secondary Legislation Scrutiny Committee and the Joint Committee on Statutory Instruments to draw this House’s attention to such matters. I remind noble Lords that the negative procedure for statutory instruments does not mean no scrutiny at all, nor does it prevent debate. Nevertheless, if I have not addressed sufficiently the noble Baroness’s concerns on this point, I would be more than happy to discuss further how we might do so. As I said at the start, we are looking closely at this issue and expect to come back to it on Report.

Secondly, these powers are vested also in the devolved Ministers—we do not have the noble Lord, Lord Wigley, with us to make his regular point about devolved matters. While the scrutiny of the powers is important and, as I have just set out, the Government have tried to ensure that the most important of the regulations made under them will be affirmative, it is not for this House to dictate scrutiny to the devolved legislatures. The Bill contains a starting base of procedures for the devolved exercise of powers. While the devolved Administrations are competent to change these following Royal Assent, discussions continue with them about any alterations they may think it appropriate to make in the Bill. It would also not be appropriate for us to require the devolved Ministers to seek our approval for their statutory instruments—I am sure the noble Baroness did not intend this to happen.

My third point regards the sub-delegation of the power to provide for fees and charges. It bears repeating that any instrument providing for this will have to be affirmative, can delegate this power only to a body being given a new function under this Bill, and will have to set out the conditions for the exercise of that power.

[Baroness Hayter of Kentish Town]

It sounds as though what the Minster is reading out dates from before today’s debate on fees and charges. I had hoped that, in light of that, this continued idea of setting these by secondary legislation had gone from his mind.

[Lord Callanan]

We said that we would return to this matter on Report, but we are now talking about the sub-delegation of those fees and charges.

Moving on to Amendment 352 in the name of my noble friend Lord Hailsham, I am in total agreement with the principle that the Government should not raise fees or charges from the public, whether businesses or individuals, without considering the impact on those who will pay or the impact on both the payers and the wider economy. I may be wrong but I doubt that many in this Committee, other than the noble Lord, Lord Macpherson, who is sadly not in his place and is of course intimately familiar with it, will have read Managing Public Money. This weighty tome is easily available online and serves as the sacred text of Her Majesty’s Treasury regarding many things, including the setting of new fees and charges. It sets out that charges on the public must be subject to the general practices on consultation and economic and financial analysis. Without this, the consent of Her Majesty’s Treasury to establishing a new fee or charge, required by paragraph 3 of Schedule 4 for all new fees or charges under the Bill, cannot be obtained.

I hope that this long explanation, for which I apologise at this late hour, and my other points have gone some way to reassuring noble Lords. I am happy to continue discussing these important issues, but in the meantime I hope noble Lords will not press their amendments today.

[Lord Lisvane]

My Lords, I am extremely grateful to the Minister for the detail he went into in his reply, particularly at this late hour. I also pay tribute to him for his customary generosity in being prepared to discuss these matters outside the Chamber. He recommended one weighty tome with which, as a former accounting officer, I am moderately familiar. Perhaps I may recommend to him another weighty tome, Craies On Legislation, edited in masterly fashion by Daniel Greenberg, former parliamentary counsel. I think it is at chapter 3.5.1 that he will find a very good treatment of the dos and don’ts of sub-delegation. That might be something we discuss before we come back to these matters on Report.

Of course, he is absolutely right to say that the consigning of these powers to a body or a person will require the affirmative procedure, and that is fine up to a point, but the exercise of the powers, once sub-delegated, will be free of the trammels of the accepted processes, so it becomes even more important that, in the consigning of the powers, the constraints on how they can be used by the consignee, if I can use that rather unlegislative term, are made absolutely clear. That is something, perhaps, on which we can have further conversations between now and Report. On that basis, I beg leave to withdraw Amendment 110.

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[Baroness Hayter of Kentish Town]

My Lords, I do not think that anyone who has read the excellent December 2016 report Brexit: Financial Services from our EU Committee chaired by the noble Baroness, Lady Falkner, will be under any illusion about the challenge that Brexit poses to this economically crucial sector of our economy. This evening we have heard of the needs both of those in the financial sector and of those who depend on it, and we have heard of one possible way forward, but the most important point is that something is needed urgently.

The British Insurance Brokers’ Association, to which we have just heard reference, the Alternative Investment Management Association, the ABI and TheCityUK have all come to me, and I am sure to other Members of this House, to raise their concerns about Brexit and particularly the wider implications for the legal sector and the insolvency sector and what that means for investors as well as for the more traditional City firms. Along the lines outlined by the noble Lord, Lord Carrington, TheCityUK has called for a bespoke market access agreement based on mutual recognition, regulatory supervision and co-operation, with, as we have heard, particular emphasis on mutual recognition and the enforcement of judgments.

In long-term contracts, legal continuity and certainty are vital for business, as we have heard, but also for consumers, as the ABI has stressed. Retired British citizens in nice warm areas such as the south of Spain need to know whether their annuities and pensions from London-based providers will continue after March next year, and indeed after December 2020.

The AIMA wants to see regulatory frameworks that enable managers to deal with any type of fund vehicle or account, as they now do, as they manage the savings and investments of pension funds and insurance companies. The British Insurance Brokers’ Association—100,000 people are employed in that industry, and they arrange 70% of all general insurance—says that it is “critical” to reach a transition agreement quickly and, following that, a mutual free-trade agreement.

The one word that I want to leave the Minister with is “urgency”, because insurance renewals are already being issued for annual policies renewable on 30 March next year, a date that I know is uppermost in his mind. Any policies running after 30 March next year would result in uncertainty over the legitimacy of that part of the policy that is effective after we leave. So we need these brokers to be able to ensure that there are no interruptions in customers’ cover, and that extends to whether we can be insured when we travel and when we drive our cars abroad, and to travel insurance if the EHIC ends—these are real things that people rely on day by day.

As we know, the UK is the world’s largest exporter of financial services to the EU, which is where I have to disagree with the noble Viscount, Lord Trenchard. He thinks that there is great hope somewhere else, but actually, for us to earn money in the EU and maintain all the customers we serve there, we must first prioritise establishing that we can continue with what we do so well there. Shoring up that business certainty through a formal agreement on regulatory equivalence or something similar is becoming ever more urgent.

We first started debating this report in the House in December 2016. We are now in March 2018, and I fear we are no clearer in knowing what the Government are doing. I hope that at this late hour, not just of the clock but of the calendar in moving towards when we leave, the Government will be able to provide a little more assurance than they have done thus far.

[Lord Callanan]

My Lords, I first thank my noble friend Lord Carrington for his amendment, which has enabled us to have this excellent short discussion. I also thank the noble Baroness, Lady Falkner, for her contribution. Of course, I know the report of her committee extremely well, as I was a member of the committee when it was produced and I participated in many of the discussions to which she referred, and which she very ably chaired. I thank my noble friend Lord Trenchard for his comments. He made some excellent points and pointed out the global nature of many of the financial services regulations that we are talking about.

The noble Lord, Lord Hunt, made some good points about the insurance industry. I can assure him that we will continue the work that we are doing in consultation and discussions with the industry as we take the negotiations forward.

However, although I thanked the noble Lord, Lord Carrington, for his amendment, I am afraid that we cannot accept it for reasons that I will explain. It would not be practical given that the negotiations on the UK’s future relationship and the eventual arrangements for market access in financial services post Brexit have yet to begin. It will be important that in entering negotiations the UK retains a degree of flexibility as to what the precise arrangements for market access for financial services firms may be. It is imperative that both sides come to the negotiating table with a constructive mind set. That was the essence of the Chancellor’s contribution last week. Agreeing now to set out a report according to the specific and detailed criteria set out in the proposed new clause would prejudge a great deal of the substance that has yet to be discussed by both ourselves and the EU.

I emphasise that the Government share the aims of the noble Lord’s amendment. We are seeking an ambitious relationship that takes account of the fact that the UK and the EU start from a position of total alignment, with unprecedented experience in working with one another’s regulators and institutions. As the Chancellor outlined last week, the UK is a global financial services hub—an engine that powers the real economy and the UK—and it is a real asset for Europe too.

In his speech—this refers to the point made by the noble Baroness, Lady Kramer—the Chancellor set out three key elements for a possible approach to a future partnership: a binding dialogue for establishing regulatory requirements for cross-border trade; supervisory co-operation arrangements that are reciprocal, reliable and prioritise financial stability; and an independent arbitration mechanism that has the confidence of both parties to provide durable dispute resolution. We hope that we would agree that the UK cannot be a rule taker in financial services but, by working together as the Government have proposed, the UK and the EU can preserve market access and strengthen stability and prosperity in the UK as well as the rest of Europe.

Underpinning this is our commitment to upholding the robust standards which are, as the noble Viscount, Lord Trenchard, pointed out, often based on international standards that we have developed since the financial crisis. These aims have consistently been emphasised in government messaging—more recently by the Secretary of State for Exiting the European Union and by the Chancellor. These align with what we have been hearing from the financial services sector in terms of a desirable end state deal. However, the details have to be worked through via the negotiations and the process will require imagination on both sides. This proposed new clause would set out a prescriptive template for the Government to follow. Negotiations are by their nature fluid and we cannot agree to provide a report based on a set of potential end state arrangements, which are predefined and outlined specifically here, that prejudges the outcome of negotiations before those talks have even started.

These issues are extremely important and I hope that the Government’s conduct in negotiations, as well as the clear public stance of Ministers on the significance of financial services to our future relationship, will help to provide reassurance over our commitment to securing agreement on these issues. Once the negotiations conclude, the Government will need to make clear the substance of what has been agreed. This is particularly so in order to enable the industry to understand the provisions for market access and how they sit within the UK’s agreed relationship with the EU on financial services going forward. We will of course, as always, be happy to update Parliament when the appropriate time comes. However, in light of the need to preserve UK flexibility in the negotiations, I hope that the noble Lord will feel able to withdraw his amendment.

--- Later in debate ---

[Baroness Falkner of Margravine]

Before we dispense with the amendment I have a brief question for the Minister. If I have understood him correctly, he has just said that when the negotiations are complete, the Government would set out and clarify their position. Can he tell me what he means by “when the negotiations are complete”? Is he talking about the negotiations on the withdrawal agreement—in other words, by the end of this year—or the agreement on the FTA, in which case we will not know the parameters of the Government’s thinking until very much later when we are into the transition agreement itself? There I would have to agree with my noble friend Lady Kramer that essentially, businesses will have made up their mind and taken the necessary actions, not least because the regulators require them to carry out their contingency planning.

[Lord Callanan]

I think I mean both. We will update the House on the position at the end of the negotiations on the withdrawal agreement, on the agreement on the future FTA, and if I can add a third criterion to that, of course on the negotiations for the implementation period, for which we hope to be able to provide an update in the very near future. All those factors are important in the provision of financial services. If we get the implementation period agreed in the near future, which we hope and expect, that will provide a slightly longer period for businesses to establish the appropriate stability, but it is hoped that as we get to the end of the year we will have the withdrawal agreement. We expect that to provide the details of the framework for future co-operation. I will be very happy to update noble Lords at all of these stages.

[Lord Carrington of Fulham]

My Lords, I beg leave to withdraw the amendment.