John Glen
MP for Salisbury · Conservative · United Kingdom
“I welcome the Chief Secretary to her new position, but what words of comfort could she give the residents of Salisbury in Wiltshire, a unitary authority? We are not part of a combined authority and we do not have a metro mayor.”
“Sam Moody is my constituent. He is the chief executive of Rockhopper. During my time in this House, he has been absolutely scrupulous in following the laws of this country and respecting the Falkland Islanders.”
“I listened carefully to what the Minister said about the process, and I respect that. But most people who take a pretty level-headed, pragmatic view of the need for a transition over time still cannot get their heads around the short-term reality: when we have so much turmoil in the middle east, why would we extend the time that we are no…”
“It is 55 days till the Budget. Given the market’s reaction to the Prime Minister’s statement on Tuesday, and given that our gilt rates are higher than those of our peers in the G7, could we have a debate on the implications of higher taxes for growth?”
“Before the hon. Lady makes her statement on Thursday, will she, when reflecting on the arrangement in Wiltshire that would embrace Wessex—although we have been told that that is not the Government’s view—address the prevailing concern that the people of rural Wiltshire will be considerably worse off without having the opportunity to embra…”
“I recognise that the Minister wants to come to what the Government are going to do, but does he not accept that the decisions already made in the last two years—with respect to the price of employment and the national living wage, the cost of employment with regard to legislation, and business rates—have depressed the appetite of many sma…”
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“There has, reasonably, been a degree of repetition in the asks made today, and three key points were raised. I have listened closely to those representations, and I would like to deal with some of them in turn. First, I have received suggestions that all policyholder records should be retained indefinitely, in case further payments are made. There has been correspondence between the Treasury and the APPG on that matter, and I can assure Members that relevant records are currently retained and will continue to be as long as it is legal. I can reassure the House that there are no plans to destroy any records. Secondly, I am aware that some are dissatisfied with the £1.5 billion and suggest that it is incompatible with the ombudsman’s report.”
“In 2010, we announced that up to £1.5 billion would be made available for payments. Those payments were tax-free, which increased their value even more. Out of that £1.5 billion, following representations from groups such as the Equitable Members Action Group, we decided to pay the group of with-profits annuitants in full. The total cost of those annual payments was estimated to be around £625 million. As several Members have mentioned, there is an additional £100 million contingency fund in place to provide for annuitants should they live longer than their actuarial forecast, and we expect the contingency to be drawn on from the middle of the next decade. The remaining funding was distributed pro rata to remaining eligible policyholders. The scheme operated successfully for around five years, and in 2016 the operation was wound down.”
“Sadly, he died of mesothelioma aged 69, just two years ago. I know that it was a matter of grave concern for him, and he took the money and invested it somewhere else. I am very familiar with the long history of this case. I want to take this opportunity to remind Members that, on this issue, this Government have taken more action than any previous one. Using the ombudsman’s findings, we determined the reduced returns that policyholders received to be £4.1 billion. That is significantly more than the £340 million arrived at by the previous Labour Government in the Chadwick review, which was then dismissed. That increase is because we generously assumed that every new investor consulted the incorrect regulatory returns and, on the sole basis of those returns, made an investment.”
“It is a privilege to respond to the debate. First, I congratulate my hon. Friend the Member for Harrow East (Bob Blackman) and the hon. Member for Leeds North East (Fabian Hamilton) on their tireless work on this issue, which has helped the Government to achieve so much. I attended a meeting of the all-party parliamentary group for justice for Equitable Life policyholders last September, and the respect of colleagues on both sides of the House for those Members’ work was clear. This well-documented topic has been explored once again in detail today, with 10 eloquent and measured speeches by Members on both sides of the House. I need to declare an interest. My father worked in a glasshouse nursery all his life and paid in modest sums each month to Equitable Life. He received the compensation of 22.4% to a bond that he was paying into.”
“I draw colleagues’ attention to Equitable Life’s own research from 2011, which suggested that their policyholders wanted the Government compensation to draw a line under this issue. I agree with them. The Government’s view is that this issue is now closed, and as a Minister I have never been in the business of offering false hope.”
“It is not about party politics; it is about saying that when we came into government, in the absence of a resolution to this matter, we increased the figure from £340 million, which the last Labour Government were proposing, to more than £1.5 billion. In the light of those facts, it is a bit unreasonable to criticise what I am saying. While I appreciate and empathise with the fact that some policyholders who have invested their funds have not received the funds that they hoped for, like my late father, and that this impacted on their plans and futures, we have taken the best action that we could have to resolve the Government’s part in these reduced returns. We have done more than any previous Government.”
“In summary, the Government believe that the proposed legislation is necessary to ensure that there is a functioning investment funds framework in the UK, which would provide continuity for UK investors and our asset management sector should we leave the EU without a deal or an implementation period. I hope colleagues from different parties will join me in supporting these regulations, which I commend to the Committee.”
“Finally, as long-term investment funds are a sub-category of alternative investment funds, EEA managers of European long-term investment funds will be able to make use of the temporary marketing permissions regime for alternative investment funds, as legislated for in the Alternative Investment Fund Managers (Amendment etc.) (EU Exit) Regulations 2018, debated earlier this month. The Treasury has been working extremely closely with the FCA in the drafting of the instrument and has engaged with the financial services industry and will continue to do so. In November and December 2018, the Treasury published the instruments in draft, along with explanatory policy notes, to maximise transparency to Parliament and industry.”
“However, in line with the Government’s approach to European legislation and powers granted under the withdrawal Act, the regulations ensure that there is a functioning framework for long-term investment funds in the UK. Like the collective investment schemes regulations, this SI maintains the existing investment rules for funds domiciled in the UK and addresses any deficiencies in legislation, including removing references to the EU and replacing them with references to the UK. It will also create a UK-only label of “long-term investment fund” to reflect that these funds will be in the UK and subject to UK rules.”
“The draft regulations also amend the Alternative Investment Fund Managers (Amendment etc.) (EU Exit) Regulations 2018, to bring forward the commencement date of the provisions relating to the temporary marketing permissions regime for alternative investment funds. That will allow the FCA notification window to operate as intended and at the same time as the regime outlined in the regulations. I move on to the draft long-term investment funds regulations. Long-term investment funds are a further sub-category of alternative investment funds, which was introduced in 2015. However, it has to be said that the take-up across the EEA has been extremely limited. The FCA states that, as of December 2018, there are currently no such funds set up in the UK and therefore we believe there will be no impact on businesses or consumers.”
“In order to ensure transparency in the process, the Treasury will make a written ministerial statement to both Houses in the event of the Treasury seeking to extend the temporary power, prior to any statutory instrument being laid. By the end of the temporary marketing permissions regime, the fund will need to gain recognition to continue to market to retail investors in the UK, as any other third-country fund is currently required to do. That will be under the current procedure outlined in section 272 of the Financial Services and Markets Act 2000. The Government are committed to reviewing the process and bringing forward legislation as necessary to ensure the UK can continue to efficiently recognise overseas funds.”
“That was part of the announcement by the Government in December 2017 to create a temporary permissions regime for EEA firms and funds. It will allow an EEA UCITS that currently markets into the UK under a passport, and subsequent new sub-funds of an existing umbrella fund, to continue to market to UK customers, as it could before exit day, for a period of up to three years. Following an assessment by the FCA on the effect of extending or not extending the period, the Treasury will have the power to extend the period for a maximum of 12 months at a time, in line with other transitional regimes that have been put forward.”
“Thirdly, the draft regulations will transfer the power to make binding technical standards from the European Securities and Markets Authority to the Financial Conduct Authority. As the UK’s national competent authority within the EEA, the FCA is already responsible for supervising investment funds and has extensive expertise and experience making rules relating to the sector. The draft regulations will give the FCA the power to specify the information that the operator of the fund must provide to the FCA for the operation of a UCITS fund. To offer continuity for EEA funds and the UK customers they service, the regulations create a temporary marketing permissions regime for EEA UCITS to continue to market into the UK.”
“To ensure proper regulatory oversight, however, the draft instrument will remove that provision and will instead ensure that all depositaries of UK UCITS are incorporated in the UK. Similarly, the instrument will ensure that management companies of UK UCITS are incorporated in the UK, whereas currently they may be incorporated in the UK or another EEA state. However, to align the changes with the temporary permissions given to EEA firms passporting into the UK by the EEA Passport Rights (Amendment, etc., and Transitional Provisions) (EU Exit) Regulations 2018, the draft regulations provide a transitional arrangement so that the requirements for managers and depositories of UK UCITS to be incorporated in the UK do not affect such depositories or managers if they have temporary permission to operate in the UK.”
“First, the draft regulations remove references to the Union and to EU legislation, which will no longer have legal effect, replacing them with references to the UK and UK legislation where appropriate. That includes removing references to the passporting system and binding requirements for information sharing. The instrument will also establish a distinction between the UCITS regimes in the UK and the EU. Funds authorised in the UK will be called UK UCITS. Secondly, all UK UCITS must have a depositary that is incorporated in the UK or another European economic area state. Currently, it is possible for an EEA firm to establish a branch in the UK and to carry out the functions of a depositary.”
“In a no-deal scenario, which is not the policy or aspiration of the Government, the UK would be outside the single market and outside the EU’s legal supervisory and financial regulatory framework. Therefore, retained EU and domestic law relating to the regulation of UCITS and long-term investment funds needs to be updated to reflect that, to ensure that the provisions work properly in a no-deal scenario. I will first outline the changes in the collective investment schemes regulations. Overall, this instrument will maintain the investment rules of UCITS, as set out in the EU directive. However, it will make changes to address deficiencies and to ensure a functioning regime.”
“Within the EU, the framework covering regulated funds predominantly sold through retail investors is provided by the directive on the undertakings for collective investment in transferable securities, commonly known as UCITS. Long-term investment funds are a sub-category of alternative investment funds that promote long-term investment such as in infrastructure, small and medium-sized enterprises and real assets. They are often sold to institutional investors, such as pension funds. Alongside the regulations on alternative investment fund managers, on venture capital funds and on social entrepreneurship funds that were approved by this House on 16 January and in the other House on 22 January, the draft instruments under discussion will ensure a functioning UK investment fund regime if we leave the EU without a deal.”
“The approach taken in this legislation aligns with that in other SIs laid under the 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. The subjects of the two sets of draft regulations being debated together today are collective investment schemes and long-term investment funds. The draft SIs relate to the management, administration and marketing of investment funds, which are investment products created to pool investors’ capital and invest it in financial instruments such as shares, bonds and other securities.”
“It is a pleasure to serve under your chairmanship, Mr Bailey. As the Committee is aware, the Treasury has been undertaking a programme of legislation to ensure that if the UK leaves the European Union without a deal or an implementation period, there will continue to be a functioning legislative and regulatory regime for financial services in the UK. To deliver that, the Treasury is laying statutory instruments under the European Union (Withdrawal) Act 2018, and a number of SI debates have taken place in this place and in the House of Lords. The draft SIs to be debated today are part of that programme.”
“I do recall. On that specific point, I checked with my officials, as I said I would. Their understanding was that that was not common practice. So I am doing all that is expected, based on the practice of Ministers in this position.”
“Member for Oxford East raised the issue of why the FCA was not required to keep a register of LTIFs and the issue of the power not the duty. The power to keep the register is being transferred to the FCA. As there are currently no LTIFs set up in the UK, there is no register of those funds online. The FCA keeps a register of small UK AIFMs that manage similar funds, European venture capital funds and European social entrepreneurship funds. The best thing is for me to obtain some assurance from the FCA about its plans, which are, in reality, at a relatively early stage because we are simply trying to transition over at this point. The detail of its ongoing regime and responsibilities will be a matter for it to convey in due course.”
“I refer to the comments of the chair of ESMA, who said on 3 October that in the case of a no-deal Brexit, EU regulators and ESMA “should have in place with our UK counterparts the type of MOUs that we have with a large number of third country regulators…ESMA has coordinated the preparations for such MOUs together with the EU27 NCAs.” More recently, the Luxembourg regulator stated that the “delegation of investment management, portfolio management and, or risk management to UK undertakings shall continue to be possible without any disruption post-Brexit”. I wish it could be more transparent and sooner, but I am convinced and assured that that work is going on and that it will be completed in time. The hon.”
“Therefore, including sub-funds in the temporary marketing permissions regime reduces the risk to the London Stock Exchange and ensures continued access for UK customers to new EEA funds in future. That was a direct change from laying this SI in November and December; we laid it again on 6 December in response to feedback from the markets. There is an iterative process, hence the time constraint that puts pressure on the impact assessment. The hon. Lady raised the issue of assurances on ESMA and on portfolio delegation.”
“Lady, she said that in a no-deal scenario, EU UCITS could not be marketed in a straightforward manner in the UK. The temporary marketing permissions regime is intended to prevent the market disruption that would result from a sudden end to passporting rights. The regime ensures that the business model of EEA fund operators marketing into the UK can continue for a temporary period while we transfer to the UK-only regime. That includes the new sub-funds, and reflects our intention to allow EEA firms and funds to continue their business operations for a temporary period. If we did not allow new sub-funds to enter the temporary permissions regime after exit day, there would be a significant risk to the role of the London Stock Exchange as a global hub for exchange-traded products.”
“We are acting within the terms of the withdrawal Act, and I have never sought to pretend that this process is optimal, but it is a practical measure to give business continuity and give the industry the answers they are concerned about. I also recognise that the degree of uncertainty is not helpful, but I draw the attention of the hon. Lady and the Committee to the remarks of Sam Woods, deputy governor of the Bank of England, who said in April last year that we would have 5,000 to 10,000 jobs moved by day one, which is between 0.5% and 1% of financial services jobs in the UK. There is an enormous resilience in the financial services sector, and this process is about ensuring that there is minimal disruption in the event of no deal. Moving on to the specific points made by the hon.”
“As I say, that is my responsibility, but I would point out that this is an unprecedented process, doing 53 SIs for financial services, 45 of which have now been laid, and working on each one individually. I hope the existence of the impact assessments up to 11 February—obviously there will be some more after that—will give her some comfort, but the points that she made have been heard. I will come on to the other points that the hon. Lady made, but I will now turn to the issues raised by the hon. Member for Oxford East. She made some initial observations with respect to the volume, flow and appropriateness of the SI mechanism that I may have heard before, but I acknowledge her sincerity and take them in the spirit in which they are intended.”
“Once again, I will begin by thanking the hon. Members for Oxford East and for Aberdeen North for their thorough examination of the statutory instruments; I will do my very best to answer in detail the points that they have made, and where I cannot, I shall write to them as soon as I possibly can. The hon. Member for Aberdeen North discussed impact assessments. We now have an impact assessment, which was circulated, as she acknowledged, at 10 past 10 this morning and covers all the statutory instruments that will be laid until 11 February. There has been a desire on my part and that of my officials to meet the necessarily exacting standards of the RPC.”
“From my point of view at this point, it seems reasonable not to suggest that there will be a register for something that does not yet exist, but the hon. Lady’s point is perfectly reasonable. I will write to the FCA following what she has said.”
“I am sympathetic to what the hon. Lady says, but she has to understand that the regulator is the regulator, and it will have reasons in terms of the market actors around that. My view is that it would be entirely appropriate for the regulator to have that register, and I would expect to see clear market-driven reasons for why it would not be necessary. Again, it would not be responsible for me to make a commitment without knowing all the background factors, but I will write to the regulator to express the Committee’s concerns and ask what its approach would be in the circumstances where those funds existed in the United Kingdom.”
“It is an interesting debating point. Had the hon. Lady seen the report of my appearance yesterday before the Treasury Committee with the chief executive of the FCA and the deputy governor of the Bank of England, she would know that we work collaboratively with the industry to do what is right. The intention of this process is not to deregulate in any way—there is no attempt by the Treasury to create some wriggle room to remove the obligation of the FCA. I understand the hon. Lady’s point, and I expect there to be continuity between the current and future regimes on the FCA’s reporting requirements. I will seek clarification on that point.”
“I have demonstrated why we need this SI to pass in the event of the UK leaving the EU without a deal, and I hope the Committee can now support the regulations. Question put and agreed to. Resolved, That the Committee has considered the draft Collective Investment Schemes (Amendment etc.) (EU Exit) Regulations 2019. Draft Long-term Investment Funds (Amendment) (EU Exit) Regulations 2019 Motion made and Question put, That the Committee has considered the draft Long-term Investment Funds (Amendment) (EU Exit) Regulations 2019.— (John Glen.)”
“Member for Oxford East made a point—I think it was also made by the hon. Member for Aberdeen North—about the Government’s general policy of reciprocity in the prioritisation of certain areas in a no-deal scenario. We want to continue to engage constructively with EU partners and be in a position to deliver on the political declaration in a negotiated deal, in which we would respect the autonomy of both sides but would be ambitious about the degree of collaboration on recognition. We think that that is realistic—there is a very strong relationship with our regulators across the EU, and we expect that to continue. I have answered most of the points that have been made. If there are any others, I shall write to both hon. Ladies on the Opposition Benches.”
“I think I have said all I can on that matter at this point. I will move on to the drafting point on territorial power for the FCA, which the hon. Member for Oxford East raised. I will consider that point carefully—there may be a drafting error. It is difficult for me to be certain about that now, but I will respond in due course. The hon. Member for Aberdeen North raised the issue of how many people engaged with the draft legislation. She will probably not be surprised to know that I do not have the numbers in front of me, but we have sought wide engagement with the industry and stakeholders as the legislation has developed, which can be seen in the fact that we relayed on 6 December following engagement on the sub-funds point. I am happy to examine any data on that and write to her on that matter. The hon.”
“On 28 November, the Bank of England published analysis on how the short-term impact of leaving the EU could affect the Bank’s ability to meet its objectives for monetary and financial stability. That analysis is published independently and reported to Parliament, but in line with normal practice, no comment will be made on discussions between Ministers.”
“I very much regret the hon. Gentleman’s tone. As he knows, the reality is that the best way of avoiding a no-deal scenario is to get behind the Prime Minister’s deal and vote for it.”
“I very much recognise the risks associated with no deal. That is why the Government are very clear, as the Prime Minister will set out shortly, about the imperative for the House to come behind the deal and vote for it.”
“A consultation was launched in October, and we intend it to be as wide as possible. The consultation closes today and the Government will respond shortly, but we are very sympathetic to where my right hon. Friend is coming from.”
“What I can tell the hon. Gentleman is that banks must make commercial decisions on the basis of what works for them. When I visited Scotland, I found they were also keen to work with post offices and the Government’s provision to make sure that services can be delivered through the Post Office.”
“It is a pleasure to serve under your chairmanship again, Mr Davies. The Treasury has been preparing extensively for a range of outcomes in the context of the UK’s withdrawal from the EU, including a no-deal scenario. The draft regulations form part of the necessary work to ensure that there will continue to be a functioning regulatory and legislative regime for financial services if the UK leaves the EU with no deal and no implementation period.”
“Finally, the SI will make further amendments to retained EU and UK legislation, including EU legislation that amends MAR, to ensure that it is operable in a UK-only scenario; to the Criminal Justice Act 1993 to remove references to directly applicable EU regulation; and to the Financial Services and Markets Act 2000 (Market Abuse) Regulations 2016 to ensure that the UK’s market abuse regime works effectively once the UK leaves the EU.”
“That will allow UK firms to continue to participate in secondary market trading under the emissions trading scheme, despite the UK leaving it, and will enable the FCA to continue to monitor and enforce against UK-registered emission allowance market participants. Additionally, the SI removes co-operation requirements between the UK and EU counterparts. The UK will no longer be obliged to share information related to market abuse with the EU, given that there would be no guarantee of reciprocity. However, the FCA will still be able to respond to information requests from third-country regulators; indeed the existing domestic framework for co-operation on information sharing with countries outside the UK already allows for that on a discretionary basis.”
“The scope has been limited to the UK and EU, and is not worldwide, given that markets in both jurisdictions are highly integrated due to the current arrangements. The SI also retains exemptions in MAR—and amends the scope of the exemptions to UK-only—that relate to certain trading activities that cannot be enforced against the regulation [Official Report, 5 February 2019, Vol. 654, c. 1MC.] They include exemptions on monetary and public debt management activities, buy-backs and stabilisation, and accepted market practices. Power will be conferred on the Treasury to extend the exemptions related to monetary and public debt management activities. That power is currently held by the Commission. In addition, the SI retains references to emission allowances.”
“That approach reflects the FCA’s extensive experience, expertise and capability to continue in that function post exit. I remind the Committee that it has 158 full-time employees working on Brexit—an increase from 28 in March 2018—and that in a few months it will publish its plans for the year 2019-20. Furthermore, the statutory instrument retains the existing scope of MAR, so that it continues to apply to financial instruments traded on both UK and EU trading venues, as well as to conduct anywhere in the world that concerns these instruments. That means that the FCA will continue to be able to investigate, prohibit and pursue cases of market abuse related to financial instruments that affect UK markets, as far as is possible in a no-deal scenario.”
“The 2018 draft regulations will make amendments to MAR and related legislation to ensure that the UK continues to have an effective regime to regulate market abuse once it leaves the EU. In line with our general approach of onshoring EU legislation by transferring powers and functions in the remit of EU authorities to the appropriate UK institutions, they will transfer powers from the European Commission to the Treasury, including the ability to make delegated Acts related to market abuse, and from the European Securities and Markets Authority to the FCA, enabling the FCA to make binding technical standards. The FCA has consulted on its proposed changes to its binding technical standards, and it will continue to enforce the market abuse regime in line with its current role as part of the EU framework.”
“Market abuse can involve a range of illegal practices relating to financial markets, including unlawful disclosure of inside information, insider dealing and market manipulation. MAR—the EU market abuse regulation, which came into effect in 2016—prohibits market abuse practices, thereby increasing market integrity and investor protection and enhancing the attractiveness of the EU securities markets for capital raising. It gives EU regulators powers and responsibilities to prevent and detect market abuse; the Financial Conduct Authority is the regulator that currently enforces it in the UK. MAR applies to financial instruments traded on EU trading venues, as well as market abuse that concerns such instruments anywhere in the world.”
“I am happy to confirm that point—I wondered what my right hon. Friend was going to come out with. As part of the programme that I have set out, the draft regulations will address legal deficiencies in retained EU legislation relating to market abuse and credit rating agencies. They are important for regulating market conduct practices and safeguarding market integrity. Their approach aligns with that of other legislation laid before Parliament under the European Union (Withdrawal) Act 2018, providing continuity by maintaining existing legislation at the point of exit, but amending deficiencies where necessary and introducing transitional provisions to ensure that they work as effectively as possible in a no-deal context. I shall first outline the 2018 draft regulations and then turn to the 2019 draft regulations.”
“They have both been published in draft form, accompanied by an explanatory policy note, to maximise transparency to Parliament, industry and the public before being laid before Parliament. In summary, the Government believe that these SIs are necessary to ensure that the regulatory regimes relating to market abuse and credit rating agencies work effectively if the UK leaves the EU without a deal or an implementation period. I hope colleagues will be able to join me in supporting the regulations, and I commend them to the Committee.”
“Additionally, references to EU institutions in relation to appeal rights will be replaced with appropriate UK bodies. Given the new enforcement powers given to the FCA, where its warning and decision notice will apply to CRAs, a right to appeal such actions has also been provided. The relevant UK body will be the upper tribunal. Finally, further amendments to UK legislation are made. The Financial Services and Markets Act 2000 is amended to enable the FCA to charge fees in relation to its new supervisory functions in respect of CRAs, as well as ensuring that the FCA is exempt from liability for damages relating to its new supervisory functions. The Treasury has been working closely with the FCA and the Bank of England and engaging with industry bodies on both instruments.”
“There are three types of registration regimes that will smooth the transition from ESMA registration to FCA registration: the conversion regime, which will enable UK-established CRAs to notify the FCA of their intention to convert their ESMA registration; a temporary registration regime, which will allow newly established legal entities in the UK to operate in the UK if they are part of a group of CRAs with ESMA registration; and an automatic certification process, which will allow certified CRAs established outside the EU to notify the FCA of their intention to extend certification to the UK. As part of the additional powers granted to it, the FCA will receive pre-exit powers to begin the preparatory work for registering CRAs before exit day.”
“That is consistent with the transfer of equivalence powers across other areas of retained EU law in SIs that have already been debated in this Committee. Thirdly, the SI will enable credit ratings to be used in the UK for regulatory purposes, should those ratings be issued by a CRA established in the UK with an FCA registration. The instrument will also allow for a transitional period of one year to enable credit ratings issued prior to exit day by EU firms that register or apply for registration with the FCA to be used for regulatory purposes in the UK. Furthermore, the SI sets out that firms are required to establish a legal entity in the UK to register with the FCA.”