Brexit: Financial Services (European Union Committee Report) — House of Lords, 2017-02-09
Topic: International Affairs
Charles Hay (Crossbench, Unknown): My Lords, it is a pleasure to follow the noble Lord, Lord Dykes, with his lovely clarity of expression and thinking all round. I declare my interests as set out in the register, particularly in respect of Hiscox insurance group and Schroders plc. I warmly join in the many congratulations for the noble Baroness, Lady Falkner of Margravine, and her committee and staff on producing in double-quick time a carefully thought through and thought-provoking report I will confine my remarks to three high-level areas and not descend into the detail. The first is people. There has been a lot of debate and comment from all parts of the House about the 3 million people from the EU 27 who are here in Britain. A strong moral case has been made, saying that the uncertainty they are living with should be made certain There are probably two other things relevant to this debate to think about, the first being the need to engender a good atmosphere as we begin the negotiations. I should also have said that I am a Member of the European Union Select Committee, and in that capacity visited Strasbourg a couple of weeks ago for three days. We met 17 MEPs from more than 10 countries and were able to talk about a lot of issues, both on and off the record. What was interesting was how many of these people had friends and relatives living in the UK and how they too felt the uncertainty, in a slightly vicarious way. It would be good to address that, which would help to engender the very positive atmosphere we will need at the start of what will be complex and long-lasting negotiations The second and possibly harder-hitting point is the old City adage that capital follows talent. In my commercial career, I have seen that adage acted out time and again. The Minister has a tremendous commercial career behind her too, and a wonderful, sharp and seasoned brain. I am sure many here are thinking what I am thinking: that it is jolly good news that she has appeared at this time for our country in this role. She will be a great help. I have managed financial services businesses, including in continental Europe, for a number of years, using passports of course, and in Bermuda using the equivalence regime. Everything that one did was about trying to manage the talent and keep them attracted to and retained in the business, and when new talent was needed, to attract it. Anything that damages the ability of businesses to attract and retain talent is definitely not in our national interest, and I worry enormously that the uncertainty that people from the EU 27 in the financial services sector are living under at the moment is doing just that. That therefore needs to be coped with, and I would very much welcome the Minister’s comments on that line of thinking The second line of thinking, again born out of my business experience, concerns the mindset we should have going into the negotiations. Our mindset should be very much about having regard to the interests of the 500 million in the EU 28—including the United Kingdom—rather than to the narrow interests of the 65 million in the UK. In my experience with repeat order customers—the EU 27 are most certainly repeat-order customers of UK plc—at the end of every transaction one needs to achieve equity in the consideration that has passed between the parties. Everything is about communication, and again, it would be extremely helpful to make sure that our own people who are engaged in the negotiation at every level have that mindset I saw as well during our three days in Strasbourg that a number of what one might call macho statements by political commentators and politicians were being reported through the British press and other media. The lingua franca in Strasbourg and Brussels is of course English, so everyone reads the British press and watches the BBC and CNN, for example. Those statements were being faithfully reported, and it is not helpful to the sentiment there if it is seen that we are not having regard to the 500 million but solely to the 65 million. Again, I would appreciate some comments on that When we come to the negotiation, there are certain sectors where we have an incredibly strong hand, and we should not play that hand ungenerously. One is the reinsurance sector, which I am very familiar with, where we have the strongest hand. So we should act generously and be seen to be doing that, because that will help us in sectors where possibly we have a weaker hand The third area I want to talk about is the cliff edge and the very helpful paragraphs in the report about that, beginning at paragraph 100, and the transitional arrangements. Again, I am happy to report from Strasbourg—where the cliff edge came up—that there was a generally warm feeling towards the transitional arrangements on the part of MEPs. They are just MEPs, but I do feel that their warmth is probably reflected in their countries. I am going to mix metaphors in an appalling way now, but there was certainly a feeling that the cliff edge cuts both ways. They too felt that this was important I want to sound a warning bell, again born out of business experience. As the noble Lord, Lord Butler, said, businesses hate uncertainty. Using just an interim arrangement, with the ability to push a horrible negotiation down the road for two or three years, is possibly damaging to business as well. We should try to sort out everything we possibly can in these two years, putting into a transitional arrangement only those things that have to be put there. If we do not, we will cause damage to business. I cannot resist talking about optimism, because others have. Regarding the bits that I know—the insurance sector and to a lesser extent the fund management sector—I am in the Butler camp. For those sectors, good and sensible deals can and probably will be done, and I feel reasonably optimistic. I do not at all underestimate the very many hard yards ahead. I commend again the noble Baroness, Lady Falkner of Margravine, for her tremendous report.