My Lords, I first thank my noble friend Lord Carrington for his amendment, which has enabled us to have this excellent short discussion. I also thank the noble Baroness, Lady Falkner, for her contribution. Of course, I know the report of her committee extremely well, as I was a member of the committee when it was produced and I participated in many of the discussions to which she referred, and which she very ably chaired. I thank my noble friend Lord Trenchard for his comments. He made some excellent points and pointed out the global nature of many of the financial services regulations that we are talking about.
The noble Lord, Lord Hunt, made some good points about the insurance industry. I can assure him that we will continue the work that we are doing in consultation and discussions with the industry as we take the negotiations forward.
However, although I thanked the noble Lord, Lord Carrington, for his amendment, I am afraid that we cannot accept it for reasons that I will explain. It would not be practical given that the negotiations on the UK’s future relationship and the eventual arrangements for market access in financial services post Brexit have yet to begin. It will be important that in entering negotiations the UK retains a degree of flexibility as to what the precise arrangements for market access for financial services firms may be. It is imperative that both sides come to the negotiating table with a constructive mind set. That was the essence of the Chancellor’s contribution last week. Agreeing now to set out a report according to the specific and detailed criteria set out in the proposed new clause would prejudge a great deal of the substance that has yet to be discussed by both ourselves and the EU.
I emphasise that the Government share the aims of the noble Lord’s amendment. We are seeking an ambitious relationship that takes account of the fact that the UK and the EU start from a position of total alignment, with unprecedented experience in working with one another’s regulators and institutions. As the Chancellor outlined last week, the UK is a global financial services hub—an engine that powers the real economy and the UK—and it is a real asset for Europe too.
In his speech—this refers to the point made by the noble Baroness, Lady Kramer—the Chancellor set out three key elements for a possible approach to a future partnership: a binding dialogue for establishing regulatory requirements for cross-border trade; supervisory co-operation arrangements that are reciprocal, reliable and prioritise financial stability; and an independent arbitration mechanism that has the confidence of both parties to provide durable dispute resolution. We hope that we would agree that the UK cannot be a rule taker in financial services but, by working together as the Government have proposed, the UK and the EU can preserve market access and strengthen stability and prosperity in the UK as well as the rest of Europe.
Underpinning this is our commitment to upholding the robust standards which are, as the noble Viscount, Lord Trenchard, pointed out, often based on international standards that we have developed since the financial crisis. These aims have consistently been emphasised in government messaging—more recently by the Secretary of State for Exiting the European Union and by the Chancellor. These align with what we have been hearing from the financial services sector in terms of a desirable end state deal. However, the details have to be worked through via the negotiations and the process will require imagination on both sides. This proposed new clause would set out a prescriptive template for the Government to follow. Negotiations are by their nature fluid and we cannot agree to provide a report based on a set of potential end state arrangements, which are predefined and outlined specifically here, that prejudges the outcome of negotiations before those talks have even started.
These issues are extremely important and I hope that the Government’s conduct in negotiations, as well as the clear public stance of Ministers on the significance of financial services to our future relationship will help to provide reassurance over our commitment to securing agreement on these issues. Once the negotiations conclude, the Government will need to make clear the substance of what has been agreed. This is particularly so in order to enable the industry to understand the provisions for market access and how they sit within the UK’s agreed relationship with the EU on financial services going forward. We will of course, as always, be happy to update Parliament when the appropriate time comes. However, in light of the need to preserve UK flexibility in the negotiations, I hope that the noble Lord will feel able to withdraw his amendment.
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