Official Listing of Securities, Prospectus and Transparency (Amendment etc.) (EU Exit) Regulations 2019 - Motion to Approve

Part of the debate – in the House of Lords at 7:47 pm on 18th February 2019.

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Photo of Lord Adonis Lord Adonis Labour 7:47 pm, 18th February 2019

My Lords, perhaps also for the avoidance of doubt I should make it clear to the noble Lord, Lord Sharkey, that this is not a fatal amendment; it is a regret amendment. I have laid other amendments to the later statutory instruments.

The noble Lord, Lord Lilley, who made a fleeting appearance in our proceedings earlier, said that I have a reputation in the corridors of the House for being obsessive about these statutory instruments. I take that as an extreme compliment because, in my experience of politics, it is only the obsessive people who tend to get things done. Indeed, it is because of the Brexit and Eurosceptic obsessives, whose work goes back now 30 years, that we are in this mess to begin with. If it was not for obsessive anti-Europeans and Brexiters we would not be here. It is time for obsessive moderates like myself to start asserting ourselves. Unless the obsessive moderates assert themselves, the obsessive extremists, who seem to have taken charge of both our major political parties at the moment, will triumph. That is not in the national interest. I plead guilty to being an obsessive. I shall be obsessive about many more of these instruments, both this evening and for many days to come, because it is in the public interest that we are.

When the Minister, for whom I have great respect—I never cease to be astonished that he and the noble Lord, Lord Young, are still members of this Government as they are one of the most extremist Governments I have ever observed in my political lifetime—says that these regulations are necessary in order that we do not crash out with no deal, it is the Government of which he is a member that have a unilateral power to end no deal. This evening the Government could end the prospect of no deal by either making clear that they will apply for an extension of Article 50 or by using the power that they have to unilaterally revoke Article 50. For the noble Lord to try to cast on us the responsibility for a no-deal Brexit, which is entirely the creation of Her Majesty’s Government, is a true Alice in Wonderland situation.

Part of the reason I tabled this amendment is to encourage a wider debate. When it comes to the handling of financial services, we see the immense harm that will be done by Brexit at large and by any form of hard Brexit to Britain’s international position and trade. I can see many noble Lords around the House who are much more expert in this area than I am; we heard earlier from the noble Earl, Lord Kinnoull. I am not an expert; I come at this as a lay man. I read the debates to understand what has been happening in the financial services sector, which is one of the most important sectors of our economy. It made a £119 billion contribution to the UK’s economy last year; is 6.5% of our total economic output, with half of that being generated in London; and contains about 5,500 UK firms which use existing EU passporting rights to do business. We are talking not about small matters here but about the fundamental economic interests of the country and of a huge number of people whose livelihoods depend upon this sector, so I make no apology for detaining the House on this matter and becoming obsessive. I think we need more people to be obsessive about the economic good health of this country before it goes down the plughole in coming months and years if Brexit proceeds.

Looking at the history of the policy in relation to financial services alone, although there are much wider issues at stake, it is striking how far removed the current situation is from the aspirations even of the Government after the referendum three years ago. They then talked about keeping very close to the single market, the importance of having mutual recognition and maintaining passporting. The current Chancellor of the Exchequer said it was the fundamental objective of British policy to seek to negotiate that at the beginning. We have now moved in a steady retreat from that to an equivalence regime which the Chancellor himself condemned as inadequate in repeated speeches last year, so not only the negotiating position of the Government but what they actually negotiated in the political declaration was criticised as grossly inadequate by the Chancellor only months before. Now we have the obscenity of debating a no-deal situation which the Government had said was never their policy and which they now regard as being little short of calamitous for the country, to judge by the no-deal policy statements and technical papers that they published last year. We are in an extremely difficult situation. Although the argument for having the statute book in good order is there, there is a much bigger argument for us not proceeding with no-deal Brexit in the first place, taking it off the table entirely and having a more fundamental assessment of whether Brexit in any form is the right thing for us to do.

When it comes to the regulations we are talking about now, the issue about consultation is important. Unusually, for this instrument we have an economic impact assessment. It is not quite clear to me why it was decided that we would have one on this set of regulations but not on others and I await with interest the letter that the Minister will send to the noble Lord, Lord Trefgarne, and my noble friend Lord Cunningham about the handling of impact assessments and consultation in future. However, we have an impact assessment for these regulations and it is extremely concerning. It states that there will be significant costs as a result of the duplication and the other requirements which are brought about by these regulations. The annexe to the impact assessment states that the monetised familiarisation cost per firm will be £700, and that the total familiarisation cost to all impacted firms of this instrument alone—and we will debate three others this evening, let alone the cascade to come—will be £1.5 million.

As somebody who has occupied a position similar to that occupied by the noble Lord, Lord Bates, I know that the first thing one does when looking at reports of this kind is to go to the footnotes, which contain many of the most revealing statements. The whole basis of the calculation of the costs involved in these regulations depends on the validity of the figure of 2,113 business being affected. That is a suspiciously precise number, but the figure of 2,113 has a footnote, footnote No. 10, which is a masterly piece of construction by civil servants. It states:

“This figure is the number of issuers currently listed (as of 16 November 2018). This figure should be considered the minimum number of issuers that will be impacted by this SI, as other firms such as advisors will also be impacted, though this is difficult to quantify”.

That means that the Treasury does not have clue how many people are actually going to be affected by this. It will include a plethora of other organisations, such as advisers, consultants and boutique firms. Noble Lords who know far more about this sector than I do will be able to tell us that. All these organisations will be affected by these regulations and, if this economic impact assessment amounts to anything, they will be hit by the £700 per firm familiarisation cost. I suspect that is a conservative cost; when I wade through what the changes to listing requirements will be when they are duplicated as we leave the EU with no deal, I suspect the figure could end up significantly higher.

That refers directly to consultation, which is so important to this. What consultation has there been? I am now used to quoting the section on consultation to the House, and for some reason it always appears as paragraph 10 of the Explanatory Memorandum to these instruments. I am not sure how these instruments are packaged so that consultation is always paragraph 10; there is clearly a template. However technical and detailed the material before it, consultation is always in paragraph 10. In this case it does not say that it has not undertaken a consultation on this instrument because the costs are negligible. It cannot say that because in this case there is an impact assessment which shows that the costs are far from negligible, so we have a complete non sequitur this time between paragraphs 10 and 11 of the Explanatory Memorandum. Paragraph 10 states:

HM Treasury has not undertaken a consultation on the instrument”,

and then we have the usual blather,

“but has engaged with relevant stakeholders on its approach”,

without defining who the stakeholders are, what the engagement has been or what the response has been and then, after a nothing paragraph 11, paragraph 12.1 on impact states:

“There is an impact on businesses, particularly those involved in capital markets”,

which is set out in the impact assessment. It seems to me fundamentally wrong. In a case of this kind where there is a significant impact which could become greater over time, as our rules diverge, where there has been an attempt to quantify that impact and where we have so many people affected—2,113 is the minimum number of companies directly affected, but the real number will be significantly higher—not to have undertaken any consultation is simply and straightforwardly unacceptable. I repeat the point I make obsessively on these regulations: in no other context would this House regard it as acceptable not to have a consultation on changes of this kind. In any other context, the normal rules would apply. They require a Cabinet Office 12-week consultation with a proper opportunity for people to respond, and then the Government respond to the consultation and publish the consultation responses and their own response.