Equivalence Determinations for Financial Services and Miscellaneous Provisions (Amendment etc) (EU Exit) Regulations 2019 — House of Lords, 2019-02-18
Topic: Macroeconomics
Michael Bates (Conservative, Centre-right): Perhaps the noble Lord was not aware that he and I served in the same Government 25 years ago. He was a personal hero of mine because he abolished the hated Cleveland County Council and returned it to the North Riding of Yorkshire, which was greeted with absolute acclamation. However, it was still not enough to get me past the 1997 general election, so I find myself here in your Lordships’ House. Indeed, the noble Lord, Lord Young, was there 40 years ago—so there is form My point is that the Treasury is accountable to Parliament. It is possible to question a Treasury Minister here in the House of Lords in the way that noble Lords could not question a Commissioner in the House of Lords, so I do not want us to run down that particular track. Nor do I want to overegg the situation and say that it is perfect. We are having to prudently prepare for a set of circumstances that nobody in this House wants but for which we need to prepare because the industry requires that assurance Let me try to deal with some of the specific points in this debate. The noble Baroness, Lady Kramer, asked what third countries will do to declare the UK equivalent. The Treasury and the regulators have been in close contact with third-country authorities, including the United States regulators. We expect to replicate all arrangements with third countries which are based on equivalence. The UK will have grandfathered all existing Commission decisions through the EU withdrawal Act, and there will be retained EU law—the point I referred to The noble Lord, Lord Tunnicliffe, asked about a no-deal scenario, and I have dealt with that The noble Baroness, Lady Kramer, asked why the negative resolution procedure is considered appropriate for equivalence. We went through this whole area. I will not repeat it, but, if the House will bear with me, it is good that the usual channels are here. As part of the EU withdrawal Act, there was intense discussion and debate about the correct process for considering the large body of regulation that would be coming onshore. A comprehensive system of scrutiny—involving sifting committees, the Joint Committee on Statutory Instruments and the Secondary Legislation Scrutiny Committee—was set out for your Lordships, and it has been working. I am sure that the noble Lord, Lord Adonis, will come back at a later stage to some of the debate we had, which was probably as interesting to me as it was to him as we listened to Sub-Committees A and B. But the reality is that that scrutiny work is going on through your Lordships’ House and is following exactly the process set out in the Act and agreed through the usual channels The noble Baroness, Lady Bowles, said that the legislation is hard to follow. The Government are committed to ensuring that the law is transparent and accessible. That is why the National Archives will publish online a collection of documents capturing the full body of EU law as it stands on exit day. It will also gradually incorporate retained direct EU legislation into the Government’s official legislation website, legislation.gov.uk. She also asked whether decisions will be reviewed every three years because of the forthcoming SI. The future Treasury SI deals with making sure that equivalence directions fit into part of the existing FSMA framework. It does not mean decisions will be reviewed every three years Further, the noble Baroness asked why the SIs are being undertaken in such a piecemeal way and wondered why changes cannot be assessed holistically. A number of legislative changes will be necessary to ensure that there is a functioning statute book on exit day. HM Treasury has been as open as possible about this legislation and the potential impact, particularly by publishing draft legislation in advance of laying, alongside explanatory policy decisions The noble Lord, Lord Sharkey, asked whether we could provide examples of consultation on proposed rule changes. The regulators have undertaken extensive consultations on the proposed changes to their rules and technical standards. However, the powers in the EU withdrawal Act allow them to proceed without consultation, where necessary, to ensure that the necessary regulations are in place for exit day Does relying heavily on secondary legislation leave room for departments to push through unpopular or controversial legislation? These are powers granted under scrutiny by the EU withdrawal Act, as I have already explained Let me turn to another point raised by the noble Lord, Lord Sharkey, and my noble friend Lord Deben. They asked why we have chosen a 10-year appraisal period. This is not about when we review the legislation; this is a technical issue about the period over which the costs are allocated. We have committed to further analysis and, if the SIs come into effect, we will need to consider what an appropriate time is, but it will be much less than 10 years The noble Lord, Lord Sharkey, asked about consulting and whether we would allow more than is quantified in the impact assessment. The limitations set out in the impact assessment would not be overcome by consultation at this stage. Firms need to consider all the changes made by these SIs, alongside the broader changes that occur at the point of exit, which cannot be known in advance The noble Baroness, Lady Bowles, asked why we have not mentioned the public in the commentary. Consumers benefit from both competition and financial stability. This instrument will allow the Government to have due regard to both The noble Lord, Lord Sharkey, asked why no one has come forward to provide transparency around the costs of Brexit. The impact assessments for these SIs focus solely on their direct impacts; the wider costs of Brexit were covered in the cross-government analysis When we talk about the costs of these SIs, which just bring onshore regulations that already exist, has anybody thought for a moment to consider what the costs would be if we did not have them ready by exit day? What would that mean for the financial services industry? It would be cataclysmic. It is absolutely the reason that the noble Lords, Lord Sharkey and Lord Tunnicliffe, were right to say that, while they recognise the need for scrutiny, they also recognise how important it is for the industry that we get these measures through. I will come back to some of the other issues in later debates on this evening’s SIs.