Strathclyde Review — Motion to Take Note

Part of the debate – in the House of Lords at 5:05 pm on 13th January 2016.

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Photo of Baroness Bowles of Berkhamsted Baroness Bowles of Berkhamsted Liberal Democrat 5:05 pm, 13th January 2016

(Maiden Speech) My Lords, I rise for the first time, deeply conscious of the honour that it is to serve in your Lordships’ House. I am grateful for the kind way in which noble Lords have received me, for the friendliness of all staff and for the elegant and discreet way in which the attendants and doorkeepers have steered me from uncertain manoeuvres. I thank the noble Lords who introduced me, my noble friends Lord McNally and Lady Falkner of Margravine, and all those who have enriched my life and learning, without whom I would not be here.

I hope to contribute to various deliberations drawing upon my experience from both strands of my career. The first strand was that of scientist, engineer and patent attorney for over 25 years, running a professional business and immersed in leading-edge technology. The second strand was nine years in the European Parliament, culminating in five years as chair of the Economic and Monetary Affairs Committee, facing a vast and profound agenda due to the financial and eurozone crisis.

Many noble Lords have long-standing experience of the conventions of your Lordships’ House, so I speak now with great respect. None the less, secondary or delegated legislation exists in other legislatures and I have been deeply involved in the establishment and scrutiny of European secondary legislation, while keeping a watchful eye on that of the United States. My somewhat unoriginal observation is that secondary legislation works well until you hit a problem: then it works rather badly and does not fail-safe.

Financial services legislation is highly delegated in most countries and Europe now has delegated Acts and regulatory technical standards, the latter also involving the European supervisory authorities. Scrutiny is by the European Parliament and the Council of member states; each can veto independently, but not amend. From that well-populated setting, and with your Lordships’ indulgence, I will elaborate three experiences that resonate with the wider debate around delegated legislation.

The first is that of overarching constraint. Europe has the ECJ’s Meroni constraint, which limits delegation of discretionary power. Despite debate, constraint has had useful benefits. It reduces the likelihood of secondary legislation doing extraordinarily large or unexpected things. But perhaps even more importantly, it fosters vigilance on how to frame the delegated power with objective, legislation-specific guidance: an important aid for transparency, benefiting individuals and businesses as well. In the context of the review of the noble Lord, Lord Strathclyde, I venture that greater vigilance over the framing of delegated power is a natural response to other curtailments, even if the drafting of that guidance will rarely seem as exciting as other amendments or may even upset the odd Sir Humphrey.

The second experience is the inability to amend. On the technical standards for the European Markets Infrastructure Regulation, EMIR, a committee stage motion to reject was carried. Only a couple of parts in a complex, interconnected proposal were wrong, but they were important parts affecting small and medium-sized business, and it also went against the grain of prior understandings. A subsequent plenary rejection would have meant deadlines missed and various embarrassments to be felt all round, so a clarifying interpretation was obtained from the European Commission and, although it was not as good as proper correction, the fact is that without corrective opportunity, secondary legislation risks being, if not second-rate, at least second-best legislation. I also extracted a commitment to consultation for future proceedings—effectively, a correction in advance opportunity—but it is still thought that limited corrective amendment has a place.

The third experience is of a scrutinising Chamber feeling conflicted, which also came to light in our EMIR adventure. The Council privately agreed about the identified problems, but it emerged that various member states were embarrassed to vote against technical standards that had been signed off by their national regulatory authorities—which is a story in itself. However, they were glad that the European Parliament could take responsibility for the remedy. Of course, the constructs are different, but this shows the usefulness of independent veto powers for separate Chambers.

Europe has travelled in the direction of fuller framing of delegated power and, in contrast, I cannot disguise consternation about the extent and scope of some of our delegated legislation. What I have read and heard in your Lordships’ House on this subject, as in all things, is thoughtful and has raised similar remedies to those that I favour. I do not see a single silver bullet, but constraint, guidance and corrective amendments are tools for avoiding secondary legislation becoming second-best.