My Lords, as the Minister noted, the first SI—dealing with OTC derivatives, CCPs and trade repositories—was published in draft on 22 October last year. The second, dealing with financial markets and insolvency, was published in draft on 31 October last year. The impact assessments for these SIs are contained in a consolidated batch of nine HMT impact assessments, which themselves rely occasionally on references to IAs for other SIs. That batch was published on 29 January, three months after the publication of the drafts and two working days before we were scheduled to debate them. Even one working day beforehand, last Friday morning, the IAs were not available in the Printed Paper Office. Can the Minister explain the very late appearance of the SIs and why the PPO did not have copies by Friday? Can he reconcile this late publication of IAs with giving Parliament proper time for scrutiny? Can he assure the Committee that future Treasury IAs will be published in good time and lodged with the PPO?
The consolidated IAs contain a headline assessment of cost and benefits. As to costs, there are three headings: “Total Transition”, “Average Annual” and “Total Cost”. In each case, the IA estimates the costs as “Unknown: likely significant”. This is unsatisfactory and raises the question of whether HMT understands the role that IAs play in parliamentary scrutiny. It is of no help that the consolidated IA reckons the benefits to be “significant” but declines to attempt to quantify them. In the remaining 52 pages of the impact assessment there is no real detailed examination or quantification of likely costs and benefits, apart from a reading time-based estimate and a passing reference to the trade repositories SI where costs are estimated, apparently, at £500,000 per TR. I say “apparently” because there is a typo in the cost reference for these TRs, so it is not clear whether the figure is meant to be £50,000 or £500,000. Perhaps the Minister can clear that up. I think that it would help the Committee in its scrutiny of future Treasury SIs if consolidation was avoided and we returned to individual impact assessments in proper form for each SI.
Turning to each SI, I found it quite hard in parts to follow the EM for the OTC derivatives, CCPs and TRs SI. I would be grateful for some clarification from the Minister. In paragraph 6.1, the EM notes that the SI revokes two pieces of delegated legislation. Will the Minister expand on what these are and why they are
being revoked? The EM does not say why—or if it does, I could not find it. In paragraph 7.7, the EM explains that:
“As a general principle, the UK would need to default to treating EU Member States largely as it does other third countries, although there are cases where a different approach would be needed including to provide for a smooth transition to the new circumstances”.
The EM does not explain what these cases may be or what the different approach might be. Will the Minister tell the Committee what these cases are, or may be, and what different approaches will be needed, and why?
Paragraph 7.12 of the EM states:
“Where the Commission has taken equivalence decisions for third countries before exit day, these will be incorporated into UK law and will continue to apply to the UK’s regulatory and supervisory relationship with those third countries—with the exception of those taken under Article 25 EMIR as set out in the CCP Regulations”.
Will the Minister explain what these exceptions are and why they exist?
In paragraph 7.16, the EM notes that the SI introduces a power that allows the FCA to suspend the reporting obligation for up to one year, with the agreement of HM Treasury, where there is no registered UK TR available. Surely the Treasury must know how likely this is and who it will affect. Again, the EM and the impact assessment do not help—or at least did not help me. Will the Minister say how likely this suspension is, who it will affect and what its consequences and impact might be?
I turn briefly to the second instrument, the financial markets and insolvency regulations, which is, by comparison, a model of clarity and straightforwardness. My only question relates to paragraph 1.76 of the impact assessment, which explains that the relevant EEA systems will be required to notify the Bank of England, before exit day, to enter the regime. What happens if they do not? What risks does this generate, and what procedures are in place to mitigate them?
I realise that I have asked quite a few quite detailed questions, and if the Minister prefers to respond in writing I would be happy, as long as we have the answers before the SIs reach the Chamber. I emphasise that I feel strongly that the consolidation of IAs makes proper parliamentary scrutiny significantly more difficult, and the very late production of IAs, as in this case, really does not help.