UK and EU Relations — House of Lords, 2017-09-12
Topic: Domestic Commerce
Susan Kramer (Liberal Democrats, Centre to centre-left): My Lords, as I listen to the noble Lord, Lord Blencathra, I begin to understand why so little progress is being made. From the perspective of the Brexiteers, this is a war scenario, whereas I thought that we were trying to negotiate a long-term partnership. Indeed, I thought we were the people who had decided to leave the EU and so initiated and required this whole process of negotiation, and therefore it was us who were going to establish how we thought the relationship should be structured in the future. But clearly that is not the Brexiteer view, and I thank the noble Lord, Lord Blencathra, for making clear why David Davis is, frankly, proceeding so slowly and inadequately in this negotiation I want to focus on financial services, an industry which underpins this country. It contributes 7% of GDP, £76 billion in annual taxes and 2 million jobs across the UK, a third of it or so arising from clients or activity in the 27. To quote Catherine McGuinness, policy chairman of the City of London Corporation, this week, "the sector is approaching a precipice … The sector needs clarity on immigration policies, agreement now on transitional arrangements and a clearer idea of how it can continue to trade post-Brexit" That lack of clarity in this crucial arena is becoming a critical problem Your Lordships will have read today that Chubb, the US insurer, has just announced that it will move its European headquarters from London to Paris; it has been in London since 1930. That is the 16th major insurer to announce its move to one of the 27—including Lloyd’s of London I have great concerns about the small and medium-sized players in the industry. The big companies are making provision; they have adopted a "save ourselves" policy, because they are tired of lack of clarity from the Government. The small companies, however, lack the resources to make such contingency plans, but they are critical to the ecosystem of financial services in our country, and for their sake alone the Government need much clearer communication There is something that the Government could help us with, and I hope we shall get some response from the Minister on the subject. The only one of the papers that seems to have any application to the financial services industry—even that is only a slight application—is the interesting paper on enforcement and dispute resolution. I hope the Minister will produce more papers focusing on that critical area. In February the Government were enchanted by the idea of an enhanced equivalence arrangement with the EU for financial services. It would be unique: long-term equivalence agreements would be underpinned by a dispute resolution mechanism The word on the street is that the idea has now been abandoned. Perhaps the Minister could tell us more about the status of enhanced equivalence as a potential strategy. It was supposed to replace the parts of MiFID, including passporting, that currently permit cross-EU business in financial services. We understand that the industry has expressed fears that such a framework would be a recipe for almost permanent dispute, and that it is very dissatisfied with the proposals for dispute resolution that the Government have trialled in trial balloons. Is that accurate? Can the Government confirm today that some key firms have been telling them that in any equivalence arrangement they need to be free to opt to select the European regulator as the regulator for their non-domestic UK activity, as the only way to keep the current pattern of business that underpins so much of the industry Is it also accurate to say that various regulators across the globe have now entered the fray, and that to retain London’s regional and global roles, the Government are now considering the creation of a sort of international college of regulators—European, US and Asian—which, together with the UK regulator, would have joint supervision and monitoring roles as well as providing dispute resolution across a wide range of financial services? Is that the interpretation that the industry should put on the paragraph in the paper that I described a moment ago, which discusses a joint committee structure as a mechanism for monitoring, supervision and dispute resolution? In such a case what would be the role of the UK regulator, when sterling is such a small part of the market, and how would such a college of regulators relate to British institutions—for example, Parliament? I should make it clear that I do not oppose the idea; I just want to understand how it would work, as would the industry There are also critical issues involving clearing. Can the Government update us, as the European Central Bank has now taken powers from the European Parliament to remove euro-denominated clearing from third-party countries—essentially at will, and salami slice by salami slice—which is creating a great deal of uncertainty and difficulty, particularly for client securing here in the UK On immigration, I want to make a couple of very quick comments. In the leaked paper there was no discussion of entrepreneurs, who are critical to the development of the financial services industry in this country. Critical, too, are not just high skills and low skills, but mid-level skills such as coding. Among all those players, almost nobody is interested in coming to this country unless their spouses and partners can also be given work permits—an issue that is never addressed. I am afraid that workers in this industry, so much in demand across Europe, even with the kind of reasonable provisions that the Government may be considering, will often hesitate to bring their skills to the UK because here they face restrictions, whereas they will have great opportunities in 27 other countries with no restrictions whatever.