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

Motion to Approve

That the draft Regulations laid before the House on 21 January be approved.

My Lords, I beg to move that the House considers the draft Official Listing of Securities, Prospectus and Transparency (Amendment etc.) (EU Exit) Regulations 2019—

For once, it would be nice to get it right. The Minister is moving that they be approved.

I am always very happy to take correction from the noble Lord. If he would like, I am happy to ask that the House approve these regulations.

Let me try again. The Treasury has been undertaking a programme of legislation to ensure that, if the UK leaves the EU without a deal or an implementation period, there continues to be a functioning legislative and regulatory regime for financial services in the UK. The Treasury is laying SIs under the European Union (Withdrawal) Act to deliver this, and a number of debates on these SIs have already taken place here and in the House of Commons. The SI being debated today is part of this programme.

The SI will fix deficiencies in UK law relating to the UK’s listing regime, prospectus regime and transparency framework to ensure they continue to operate effectively post exit. The approach taken in this legislation aligns with that of other SIs laid under the EU withdrawal Act, providing continuity by maintaining existing legislation at the point of exit but amending where necessary to ensure that it works effectively in a no-deal context.

Turning to the substance of the SI, many noble Lords will be familiar with the prospectus directive, the transparency directive and the consolidated admissions and reporting directive, or CARD, and with related legislation that is implemented into UK law to set the listing regime, prospectus regime and transparency framework that regulate capital markets activity in the UK.

The transparency directive harmonises transparency requirements across the EU by requiring issuers with securities, such as shares and bonds, admitted to trading on a regulated market to disclose a minimum level of ongoing information to the public. It built on and amended CARD, which co-ordinates the conditions for the admission of securities to official Stock Exchange listing.

A prospectus contains information on an issuer that is seeking to offer securities to the public or is seeking admission to trading on a regulated market. The information they provide is used by investors to make investment decisions. The prospectus directive contains the harmonised rules governing the content, approval, format and distribution of the prospectuses that issuers must produce when securities are offered to the public or admitted to trading on a regulated market in a member state of the European Economic Area.

My Lords, for the avoidance of doubt, I say that the Motion before the House is that these draft regulations, laid before the House on 21 January, be approved. The Question is that this Motion be agreed to.

Amendment to the Motion

Moved by

At the end insert “but this House regrets that no consultation was undertaken on this instrument despite the impact on businesses, particularly those involved in capital markets.”

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 consultation has not been undertaken 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,