Financial Services (Implementation of Legislation) Bill [HL] - Committee (1st Day)

Part of the debate – in the House of Lords at 3:34 pm on 8th January 2019.

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Photo of Lord Sharkey Lord Sharkey Liberal Democrat 3:34 pm, 8th January 2019

My Lords, I shall speak to Amendment 3. At Second Reading, there was much discussion of the wide powers that the Bill gives to the Treasury via secondary legislation. All the amendments in this group deal with that issue.

Clause 1 contains clear Henry VIII powers. It allows the Treasury to make policy and new laws entirely by means of statutory instrument. It even allows such new laws to be wholly unrelated to the UK’s exit from the EU. Unusually, it allows these new laws on to the statute book without any parent primary legislation. There will be no parent Acts for these new laws: no context, no detailed parliamentary discussion and no effective parliamentary scrutiny.

We should be clear that the affirmative SI procedure does not provide proper, full parliamentary scrutiny. SIs are not amendable; they offer only the choice of acceptance or rejection, and rejection by this House is very rare. It has rejected six affirmative SIs in the last 68 years. The prospect of future rejection stands at zero as long as the Labour Party maintains its current reluctance to reject. Amendment 3 seeks to address and limit the use of SIs in the Bill.

As the Bill stands, Clause 1(1) gives the Treasury absolutely unrestrained discretion over the creation of new laws and new policies by SI. The words “adjustment” and “appropriate” do not restrict the Treasury’s room to act. Both these words are capable of very wide interpretation, and, in any case, the Treasury is to be their interpreter. My probing amendment sets limits on how these words may be interpreted in this context. It sets limits to prevent the creation in law of entirely new policies by SI. It does this by requiring that the exercise of the Treasury’s regulation-making power does not extend to significantly altering, expanding or running contrary to the primary purposes of the specified EU legislation. I am advised by the Legislation Office that inserting this restriction in page 1, line 8 after “legislation” means it will also apply to the words “adjustment” and “appropriate” in lines 9 and 10 on page 1. That is certainly its intent.

There is no justification for giving the Treasury unfettered power to make new financial services policy and law by delegated legislation. That is especially true when these SIs would be orphans. They would have no relevant parent Act and no meaningful scrutiny. Amendment 3 moves the powers closer to those of Section 8 of the EU withdrawal Act, which allows only changes necessary to remedy defects of the incorporation of EU law into UK law after the UK leaves the EU.

This is also in line with the recommendation made in paragraph 16 of the report of the DPRR Committee published on December 18. This said that:

“The power to make adjustments is a very broad one with no restrictions on what the modifications may relate to or the circumstances in which they may be made. In the absence of any explanation, we consider the power to be inappropriate in so far as it relates to EU legislation that has already been adopted. We recommend that the power should in that case be limited (by analogy with section 8 of the EUWA) to a power to remedy deficiencies arising from the UK’s withdrawal from the EU”.

I have also added my name to Amendment 5, in the names of the noble Lords, Lord Davies of Oldham and Lord Tunnicliffe. That amendment also sets out to limit to withdrawal matters the exercise of the regulation-making powers, although it may prove a little too restrictive in dealing with the in-flight files, as may Amendment 7.

The Government are looking to give themselves quite unnecessarily wide powers in this Bill. It is surely unnecessary, as well as unwise, to allow HMT to create new policies and laws for our critical financial services industry without full, proper parliamentary scrutiny. The promised consultations are no substitute for primary legislation. Nor, emphatically, is our affirmative SI procedure. We should restrict this Bill’s delegation of powers in the light of departure from the EU to do two things: to rectify any defects in retained EU law, and to incorporate into UK law elements of the specified in-flight legislation. Amendment 3 is aimed at imposing those restrictions.