My Lords, as a member of the committee, I too thank my noble friend Lady Falkner for the way that she chaired it and for her succinct opening speech, summarising both the report and its recommendations. I think we all acknowledge the staff who contributed to it in really quite difficult circumstances. I should say to the noble Lord, Lord Liddle, that I very much take many of his points but the committee took the view that we were taking evidence from the City on the proposition that we are leaving. How were we to explore how we leave and what we do? However, I also agree with the noble Baroness, Lady Liddell, that in the evidence we got month after month of no clarity, no sense of purpose or destination. We still do not have that and it is a matter of great concern.

In this House and the other place, but certainly across the wider community, there may not be much sympathy for a sector which many people thought brought the house down, took reckless risks with other people’s money and rewarded itself handsomely. It is therefore easy to say, “Who cares about the financial services sector?” But the answer is that we all have to care, and also to hope with some justification that lessons have been learned—although probably not all of them. To put it in a positive framework, we first need to recognise that financial services are a crucial part of our economy. At 7.2% of the economy, it has over 1 million jobs and a £60 billion trade surplus in a country that has the biggest balance of payments deficit in recorded history. It is the biggest contributor to minimising that and we are about to undermine it. It also delivers £24.4 billion in tax revenue each year. I do not suggest for a minute that, because of Brexit, all that will disappear but there is a lot of confusion and uncertainty. Much of the sector will migrate. The question is: how much?

The second important thing is that even if people are sceptical about the value of the industry in its own right, it is important. I echo the point about the dispersal of the jobs as I think there are 160,000 people employed in Scotland in financial services, which is more by a significant margin than are employed in the oil and gas industry. Much more importantly, it is also the lubricant of the entire economy and, when it works well, partly the lubricant of an international economy. Many people complain that the City or the financial services tend to think big, so it is much easier to raise £100 million than £100,000. The reality is that a lot of this business is for small businesses and individuals managing their savings and pensions, and creating the liquidity for investment at home and abroad. We know that domestic investment and inward investment have collapsed. The money has got to go somewhere, so it is going to leave the country. That is a matter of grave concern if we do not get it right.

We also heard consistent concerns about the future of contracts—insurance contracts and others—if there is no continuity agreement. The Bank of England Financial Policy Committee report stated that insurance contracts representing £55 billion of liabilities, involving 38 million policyholders across the EEA and with bilateral derivatives of £26 trillion and cleared derivatives of £70 trillion could all be affected. These are phenomenal numbers, even beyond telephone numbers, for which there is no clear contractual future as of the end of next March. I find it mindboggling that people calmly contemplate this and say, “It’ll be all right. It’ll be fine”, when we have absolutely no sense of progress. When people say we could be heading for a cliff edge we are told, as I have been told in a few cases, that we are fine. Nothing has happened. The economy is still functioning. We have to keep saying to people that we have not left and that we are still a member of the European Union until the end of March. That is when the cliff edge is approaching, not now. It is amazing how many people think we left the day after the referendum because they do not engage in the detail. Why would they? They have got lives to live, unlike us here who have to engage in the detail.

If we get to that situation, rule taker or rule maker becomes purely academic because we are either completely shut out of the European Union or we have to take its rules. There is nothing in between if we do not have an agreement, and there is no history of a financial services agreement. We know that mutual recognition is not going to be acceptable, and we know that all the alternatives fall far short of what is needed. The irony is that the financial regulatory arrangements of the EU have substantially been driven by the United Kingdom over the past 25 years to the benefit of both the European Union and the United Kingdom, yet in nine months’ time it will lose our expertise and we will lose its protection and access to its services if we do not get an agreement. That is the “if”, but many people will be forgiven for assuming that we may not get an agreement, given that two years down the road we have no inkling in any kind of detail of what kind of transitional arrangement we will get and when it will finish. Witness after witness said that they had no alternative but to do what the Bank of England has asked them to do, which is to assume that at the end of March next year we will be outside the European Union with no agreement, and that they were planning on that basis.

We know that jobs are going, investment is going, offices are being rented and people are being served notice. All this is happening. Companies will not put out press releases about this; they will just do it because they have businesses to run. They will get on and do it, as they are doing. That makes me concerned that it is worse than the maxim that people talk about—nothing is agreed until everything is agreed—because it is “nothing is agreed because nothing is agreed and nothing is going to be agreed”. I wonder when people will realise when we have fallen off the cliff. Will it be two-thirds of the way down—so far, so good—or will it be when we hit the rocks at the bottom?

The Government have not delivered the White Paper, but they have seen this report based on extensive evidence from all the senior players in this sector who have calmly and clearly told us of their concerns and their needs but who have heard nothing significant back from the Government in terms of outcomes. On a positive note, they all say that they believe the that civil servants and everybody engaged in the sector know what can be done and that it could be done, but they do not know whether the Government will do it or are capable of doing it. One very senior player in the sector said to us, “We believe there is a basis from which we can manage the future of our financial services sector and maintain a connection with the EU and our international pre-eminence. We could negotiate this. We think we know how we could do it. Our only problem is that we do not know whether the Government think we are more or less important than the fishing industry”. That is a pretty savage indictment of the relationship in practical terms between the Government and this crucial sector.

I found how the financial services sector is regulated through Parliament interesting. Our sub-committee is part of the process for the UK. Obviously the Treasury Committee and the European Affairs Committee in the House of Commons are part of the process. The role of the European Parliament is also interesting. It has far more resources, in terms of people, money and powers, to shape the regulations and the legislation, as it has done over many years. It is way beyond anything that the UK Parliament provides, needed to provide or needs to provide as long as we are a member of the European Union. We are, after all, participants in the European Parliament, although I am told that British MEPs are now regulated to the back row along with supplicants and are no longer treated as if they are Members of the European Parliament. Be that as it may, the UK is still a member of the European Parliament. Once we are not, we will not have the benefits of scrutiny by a European Parliament which has an obligation to us, as well as the other 27 members.

The Government should understand that the industry has given us quite detailed evidence, without being too prescriptive, that there are decisions that will need to be made by the regulators, there will be some decisions that might need to be made, particularly in the short term, directly by Ministers, but there are many other decisions, particularly in terms of legislative or regulatory changes, which will need to be made by a proper parliamentary process that will require resources far beyond anything that has been provided to our Parliament in the past. That is something the Government should take on board, not least because it is in the Minister’s interests, I would have thought, to have a parliamentary dimension to a sector which is so complicated and so wide reaching in its impact.

I plead with the Government to recognise that if we leave the EU—I notice that Gordon Brown said yesterday that he thought we probably will not and that if we did we would be applying to rejoin immediately afterwards—we not only need to negotiate a working agreement and to have a clear idea of how we manage regulation but we need to demonstrate and understand that Parliament has to have a much more substantial role in protecting our interests.