Grand Committee
(3 years, 5 months ago)
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Arrangement of Business
(3 years, 5 months ago)
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The Deputy Chairman of Committees (Baroness Healy of Primrose Hill) (Lab)
My Lords, the hybrid Grand Committee will now begin. Some Members are here in person, respecting social distancing, and others are participating remotely, but all Members will be treated equally. I must ask Members in the Room to wear a face covering except when seated at their desk, to speak sitting down, and to wipe down their desk, chair and any other touch points before and after use. If the capacity of the Committee Room is exceeded, or other safety requirements are breached, I will immediately adjourn the Committee. If there is a Division in the House, the Committee will adjourn for five minutes.
The time limit for the following debate is one hour.
Antique Firearms Regulations 2020
(3 years, 5 months ago)
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Baroness Williams of Trafford
That the Grand Committee do consider the Antique Firearms Regulations 2020.
The Minister of State, Home Office (Baroness Williams of Trafford) (Con)
My Lords, the regulations were laid before this House on 9 November. This country has some of the toughest gun controls in the world and we keep them under review to safeguard against abuse by criminals and terrorists. The Offensive Weapons Act 2019 banned certain rapid-firing rifles and devices known as bump stocks and, in December, we began a three-month surrender and compensation scheme to take these and a range of offensive weapons out of civilian possession. In November, we launched a public consultation on a range of firearms safety issues, including security requirements for high-powered rifles.
The regulations will prevent criminals exploiting a lack of clarity in the current law to gain possession of antique firearms for use in crime. Under the Firearms Act 1968, antique firearms that are possessed, purchased, sold or acquired as “a curiosity or ornament” are exempt from most of our firearms laws, including licensing control. Unfortunately, the Act does not define “antique firearm”. The Home Office has published guidance on which firearms can safely be regarded as antique, but criminals have been taking advantage of the lack of a legal definition to obtain old but functioning firearms for use in crime.
The number of antique firearms recovered per year in criminal circumstances increased from four in 2007 to 96 in 2016. The number of recoveries has since decreased but remains at an unacceptably high level. In more than half these recoveries, ammunition capable of being used with a firearm was also present. Sadly, there have been six fatalities since 2007 linked to the use of antique firearms. The problem was highlighted by the Law Commission in 2015. It recommended that there be a statutory definition of “antique firearm”. The Government accepted this recommendation and included a power in the Policing and Crime Act 2017 to define “antique firearm” in regulations. The Home Office held a public consultation to seek views on the detail of the definition. After careful consideration of the feedback, and following discussions with expert stakeholders on the technical aspects, I am pleased that we are now able to bring forward these important regulations.
The regulations will define in law which firearms can safely be regarded as antique and therefore exempt from control, and which should be subject to licensing. They are based closely on the existing Home Office guidance, so will be familiar to law enforcement, collectors and dealers alike. They specify a cut-off date of manufacture, after which a firearm cannot qualify as an antique. They also specify a range of propulsion systems and obsolete cartridges which are safe to be regarded as antique.
When read with the relevant provisions in the Firearms Act 1968, the regulations will mean that, to be regarded as an antique, a firearm must be held as a curiosity or ornament, have been manufactured before 1 September 1939, and either have a propulsion system specified in the regulations or be chambered for one of the obsolete cartridges specified in the regulations. Following concerns raised by law enforcement, the list of obsolete cartridges does not include seven types that, together with their associated firearms, feature most often in crimes involving antique firearms. This means that those firearms will no longer be regarded as antique.
I realise that omitting these seven cartridges will be disappointing for collectors, who will see a drop in the value of their associated firearms. However, public safety is paramount, and it is the Government’s duty to protect communities from gun crime. We are being balanced in our response to this problem. Existing owners of firearms will be able to retain them on a firearms certificate and we will make commencement regulations to allow a transition period of three months for them to do so.
We have also added 23 obsolete cartridges to the list following advice from law enforcement that they will not present a threat to public safety. This brings additional firearms into the definition of “antique”.
The Government want to ensure that these regulations remain relevant and effective. There will be annual reviews to consider the latest developments in criminal use of antique firearms. We will also carry out a full review of the regulations every three years. Law enforcement and representatives of collectors and dealers will be involved in these reviews.
Public safety is the Government’s top priority and these draft regulations will help to prevent criminal use of antique firearms. I commend them to the Committee.
Lord Blunkett (Lab)
My Lords, I appear to be stalking the Minister, as I turn up on all occasions when she presents, as she did yesterday on the important domestic abuse legislation. On every occasion I find myself reflecting on the past and wishing that I had done more in the areas she addresses. That is true today.
We are iterating as we go, because the changes the Minister described this afternoon build on what has been done over many years since 1968. I remember the terrible events at Dunblane and the actions we had to take under the then Conservative Government, and the changes we made when I was Home Secretary. On each occasion there appeared to be a loophole and something else that needed to be done. As I said yesterday in the Chamber, I appreciate that this is inevitable because we are learning as we go along, and so are criminals and perpetrators. They learn how to adapt and to adopt new methodologies as we close a loophole.
I am strongly in favour of the regulations. It may appear to be a very small measure but I am clear, as the Minister said, that we are attempting to close loopholes on risk. If anything puts people at risk—and use of these historical weapons has grown—we should try to close the loophole.
My only comment is that there is absolutely no real inconvenience to collectors, whether in the public sphere such as museums, or individuals who have developed a collection over the years. There is no real harm in asking them to register what they have because criminals will redeploy their skills on those historical weapons and in some cases make them operable, although it is more difficult with the ammunition. We sometimes create a bureaucratic barrier that does not really exist and would not be a problem for people registering. I put that on the table.
Lord Addington (LD)
Like the noble Lord, Lord Blunkett, I really do not have much objection to these regulations in principle. My gut reaction, however, is about the cut-off date of 1939, and the stability of the technology—creating a bullet and firing it down a metal tube, which is spun to give it accuracy. It is very established and goes back a long way, certainly to the mid-part of the 19th century. I wonder if we should not have pushed it back a bit further; I would have thought that the end of the First World War had a nice ring about it, as opposed to the start of the second. At just over 100 years, it would also make it antique even in the most pedantic of senses.
The main question here is: what criteria and threshold are we going to have for introducing the calibres of weapons that will be regarded as antique, which are not to be used but banned in future? It may be established that it is comparatively easy to repurpose, if you get the right technology and list of chemicals together. If you have the propellant and the chamber for it, you can fire it. What criteria will be used to make sure things are added to this list, or indeed taken off it? I do not think that will happen often but it could be there. If we could get an idea about this, I would be slightly happier about these provisions because of some small steps.
For instance, I live near Hungerford and catch a train there. There was a handgun used in part of the Hungerford attack; we waited until Dunblane to ban it. When are we going to get something slightly more proactive to deal with this? Handguns, in particular, are small and very short-range weapons designed for killing people. Historically, to put it in context, they replaced a sword. They are for killing people up close. They are not weapons for accuracy or sporting weapons. Can we have a better idea about how we will judge when something is deemed to be dangerous?
The Earl of Shrewsbury (Con)
My Lords, I refer the Committee to my entry on the register. I broadly welcome these regulations, which bring changes to the law on antique firearms. Section 58(2) of the Firearms Act 1968 provides that an antique firearm possessed, acquired, et cetera
“as a curiosity or ornament”
is no longer subject to the provisions of the Act. However, Parliament has consistently refused to give a definition of an antique firearm. I well recall during my term as chairman of the Firearms Consultative Committee—I was appointed two weeks before Dunblane—that we regularly struggled to define antique firearms and continually deferred discussion on the issue to the next meeting. I am not sure whether that next meeting ever arrived.
This statutory instrument is therefore to be welcomed, but with a word of caution. It provides that an antique firearm can only be one which conforms to the criteria that it was manufactured before 1 September 1939 and is of a defined propulsion system. Any other firearm, irrespective of age, type and more, cannot be considered antique in law if it does not meet these criteria. The chief officer of police no longer has any discretion, as was formerly the case. I welcome the clarity being imported into what has for many years been a very uncertain area.
What is less welcome is the modification of the so-called obsolete calibres list. Some revolver cartridges will be removed from the list, including the .44 Smith & Wesson, the 11 mm French and the 10.6 mm German. I would go further, but my time is restricted. Many people have acquired antique firearms chambered for these calibres since the guidance changed in 2002. Values range from the low hundreds to many thousands of pounds; they were bought as investments in many cases. It will be possible to apply for a firearms certificate to continue to possess such firearms, and the good reason test will not be applied, as I understand it. However, not all applicants will match the suitability criteria currently required for FACs. Those people affected will have to dispose of their lawfully acquired property for whatever value the market will give them, so the value of those firearms is likely to plummet and there will be no compensation.
The amendment of the obsolete cartridge list has been based on imperfect data supplied by NABIS, which alleges that there has been a steady rise in the number of antique revolvers used in armed crime. In truth, there have been seven fatalities, six of which were encounters between violent criminals who would have used any type of firearm available to them to settle their scores. The small proportion of antiques used in crime therefore surely makes the measure wholly disproportionate. Some 23 cartridges will be added to the obsolete cartridge list. Can my noble friend give me an assurance that the regulations, and the list, will be reviewed every three years and that the review group will include both collector and trade representatives?
Lord Robathan (Con)
My Lords, my interest in this matter is sparked by the fact that, before the first lockdown in March, I was in discussions with the British Shooting Sports Council to become an officer of that organisation. It is not declared in the register because I think I have been proposed but not yet nominated; I am not quite clear what has happened in the past nine months but I will find out.
Having read the documents, this does not seem a huge issue. The Government’s response is fairly balanced. What always concerns me is using a sledgehammer to crack a very small nut; I hope that that is not the case here. I note the Law Commission recommendation. I heard the comments made by the noble Lord, Lord Blunkett. As a former Home Secretary, he knows a lot about this and his comments seemed sensible.
I note the cut-off date of 1939. When I was at school, I was in the CCF. In the school armoury, I think we had pre-1939 Lee-Enfield mark 4s. Times have changed but, as far as I am aware, none of the Merchant Taylors’ schools—
The Deputy Chairman of Committees (Baroness Healy of Primrose Hill) (Lab)
My Lords, I must adjourn the Committee for the next five minutes, as a Division has been called. Oh, my apologies; it is in the Commons. Let us begin again.
Lord Robathan (Con)
I was just going to say that all the rifles—about 100 of them—in the school armoury were pre 1939, were not used in crime as far as I am aware and were extremely accurate. They have now all been dispersed, of course. There was an occasion when the IRA tried to steal rifles from, I think, Felsted School around 1968; they were dangerous and it is obviously much better that we do not have dangerous weapons hanging around.
I support my noble friend the Minister.
The Duke of Montrose (Con) [V]
My Lords, I am grateful for the Minister’s introduction. I was anxious to find out what policy the Government were pursuing. I have been through the 1968 Act, which is probably one of the most amended Acts we could see.
From what my noble friend the Minister has told us, it appears that we are following the Law Commission’s recommendation in defining more closely what constitutes an antique rifle. There certainly has been a problem with uncertainty over what exactly was covered in the previous legislation.
Section 58 seems to lay down weapons that are not subject to the firearms legislation and to which licensing does not apply. Does that suggest that any gun manufactured before 1939 could be argued to qualify for not requiring a firearms certificate? I am sure that there are guns in estate gun-rooms from well before that time. I declare my interest, in that I have used quite a few guns from before 1939—some of which the police have persuaded me to hand in and a couple of which I retain.
I understand that any breach-loading gun desired to be kept as an antique in Scotland has to be disabled and the breach sliced open before it can be kept as unlisted. Have the unscrupulous people that my noble friend the Minister mentioned been able to restore such guns so that they can sell them illegally to individuals?
What will be the situation once the measures are in place? I have some ammunition that features in the schedule. My noble friend the Minister gave some information on the criteria used to draw up the list of ammunition, but it would be useful to know whether it is merely a question of what is no longer commercially manufactured.
Lord Bhatia (Non-Afl) [V]
My Lords, the use of antique firearms in criminal activity has risen in recent years. Antique firearms kept as ornaments are currently exempt from several provisions in firearms legislation. At present, there is no statutory definition of an antique firearm. For that reason, this instrument will better regulate the sale of such firearms and responds to concerns raised with the Government by law enforcement agencies about the increase in their use in criminal activities in recent years.
Section 58(2) of the 1968 Act exempts from most controls under that Act antique firearms
“sold, transferred, purchased … as a curiosity or ornament”.
This includes being able to possess them as a “curiosity or ornament” without needing a firearms certificate and trade in them without being registered with the police as a firearms dealer.
Recently, an increasing number of antique firearms have been recovered in criminal circumstances. There is obviously a need to regulate the sale and purchase of antique firearms; I welcome this initiative. There are also antique knives, swords, et cetera. Do the Government intend to regulate their sale and purchase?
Lord Lucas (Con) [V]
My Lords, I congratulate the Government on the evidence base and proportionate response to the problems addressed in these regulations. I note that it implies a confidence in the police’s ability to cope with a technically complex list of obsolete calibres and models of pre-1939 air guns, as well as being able to tell the difference between, for example, an antique Brown Bess musket and a modern one for use by re-enactors that will require licensing. That is most welcome. The police will not be able to do that, of course; they will turn to experts, who are readily available, but between them they will get these distinctions right.
If these regulations are passed today, a number of obsolete calibres can be freely gifted, loaned or sold because the Government have agreed with experts that these items pose an extremely low risk to society. I am delighted that the Home Office is considering things at this level of detail and very much hope that this will lead to a reconsideration of the concerns expressed during the passage of what is now the Offensive Weapons Act, in particular the assertion that the police could not tell the difference between a pre-1945 item and a modern one—a task that is much easier than the one that this regulation places on them. This had led to wording that threatens the destruction of some fascinating parts of our heritage and profitable parts of our film industry. I hope that, in future, we will see the spirit in which this regulation has been brought forward applied to our Second World War heritage.
Lord Garnier (Con) [V]
My Lords, I recommend the article by Rupert Jones, “Firearms and Fury: The Rise of Gun Crime in the UK”, published in Counsel magazine for June 2018 and helpfully drawn to the Committee’s attention by the Library in advance of this debate. Together with the clear explanation by my noble friend the Minister, it makes the case for these regulations unanswerable. Were it permissible to do so, it should be annexed to the Official Report for this debate.
The penalties for gun crime are almost invariably severe. Mr Jones wrote about a registered firearms dealer who was sentenced to 30 years in prison for transferring illegal firearms and ammunition. He had Home Office authority not only to possess prohibited handguns but also to sell them. His criminal sideline involved making ammunition to fit antique guns. Despite being in prison since 2015, this man’s ammunition was being discharged by criminals on our streets and recovered by the police long afterwards. It very probably still is. It seems that one can lawfully buy a working handgun without any record of the transaction.
Despite the post-Dunblane restrictions, for some reason it was not thought that antique firearms, for which ammunition was no longer commercially manufactured, would be seen other than as items to be admired in collections. The non-commercial manufacture of ammunition is as old as gun-making itself. I have known people like me, who are legitimate and licensed owners of pre-1939 shotguns used only for game shooting, who used to make their own shotgun cartridges either to save money or as a hobby. That skill is well beyond me. However, my great-great uncle, the sixth Lord Walsingham—a trustee of the Natural History Museum until his death in 1919, perhaps one of the greatest game shots of his generation and a world-renowned ornithologist and lepidopterist—used to make paper cartridges filled with dust for a gun with a barrel no bigger than a pencil. He used them carefully to stun hummingbirds in the tropics so that he could study them close up.
Unfortunately, the private manufacture of modern ammunition specifically designed to be fired from otherwise lawful antique weapons in the course of crime is all too common. When I was Solicitor-General a decade ago, I learned that remarkably few handguns were used in a great many criminal shootings. A small number of illegally held handguns are available for hire to criminals and passed around from gang to gang. What I had not realised until I prepared for this debate is that the market is not limited to modern handguns and longer-barrelled weapons. Antique weapons are also used to commit crimes. If they are—I am sure that they are—we must do all that we can to prevent it. If these regulations help with that, so much the better.
Before concluding, I will say one more thing. At the time of the Dunblane reforms, ill-considered damage was done to the legitimate, competitive, Olympic sport of target shooting and its innocent participants. I join my noble friends Lord Shrewsbury and Lord Lucas in hoping that these otherwise commendable regulations cause nothing similar to law-abiding collectors of antique guns.
Lord German (LD) [V]
My Lords, I welcome the policy intent of these regulations and the Minister’s introduction to them. They seek to remove a category of firearms from harmful and malevolent use.
However, the Minister must explain the delay in bringing forward this new law. It is now over three years since the consultation on these regulations ended. The Government’s response to this consultation was published only last November, and that took just under three years. If the obligation to protect the public from harm is the prime objective, keeping the country waiting for this length of time is certainly not the way to go about it. I am bound to draw a parallel with the Surrender of Offensive Weapons (Compensation) Regulations 2020, which had a very similar consultation period, from October to December 2017. It took two and a half years to bring forward that legislation as well. Can the Minister reassure the Committee that there is no endemic failure in her department that prevents public safety measures of this sort being dealt with at pace?
One piece of information that was not clear from the documentation supporting the regulations is the source of the antique firearms recovered during criminal circumstances. The Explanatory Memorandum states that the current situation
“is being exploited by criminals to obtain old but still functioning firearms.”
Can the Minister explain how criminals are obtaining these weapons? Are they being purchased on the open market or are they being stolen from collectors, dealers or museums? If they are being purchased on the open market, that obviously adds considerable strength to the case the Minister made for these regulations.
However, on their own, these regulations will be insufficient because licensing alone does not completely stop malevolent use, particularly from theft of weapons of this sort. Supplementary to that issue, is it safe to assume that collectors and museums would not wish to render these weapons useless as firearms by altering or damaging them in any way because they would then lose market value or, in the case of museums, their importance as genuine artefacts?
As a result of the delay in implementation, these regulations are being introduced in the midst of a lockdown. This is particularly important for the impact on museums. At present, all museums are closed, certainly for the next few months and possibly for longer. That is right across the UK, not just in England. Many museum staff are furloughed, particularly for museums run by charities and private sector bodies. Zero income is being achieved through visitor entries and other footfall and their financial future is challenging to say the least.
The impact assessment demonstrates that these regulations will have cost implications for museums. For those affected by the regulations—some 200 museums in all—the costs fall unevenly on smaller institutions. The figures given in the impact assessment are £200 for a licence and £3,000 for appropriate storage facilities. These set-up costs can be crippling when museums are struggling with the effect of the pandemic and when there is zero visitor income. So much of their revenue comes from entry charges, where there is no free entry support from Governments across the UK, and from sales in catering and shopping outlets—as any visitor to the Imperial War Museum will see, these are very important—as well as any income they get from corporate and sponsored function hire. All of these options are closed. Will the Government, having delayed the introduction of these regulations since the consultation period ended more than three years ago, provide an appropriate period of grace, not just a fixed three-month period, for museums—at least to coincide with museums’ ability to bring staff out of furlough and recommence income generation so that they are not hit with a financial burden when their income is zero?
Finally, I welcome the regular review indicated in the regulations and the review body proposal. The challenge for the Government is to achieve an appropriate balance on the review body between the interests of collectors and dealers, law enforcement and museums. Can the Minister tell us the arrangements the Government are making for that balance to be achieved? With satisfactory answers to these points, it will be appropriate to welcome these regulations.
Lord Rosser (Lab) [V]
We are certainly not opposed to these regulations, but there appears to be some doubt on the Government’s part as to whether they will have any impact on the serious issue they are intended to address.
As the Minister said, the regulations seek to resolve concerns about the increased use of antique firearms in crime by providing a statutory definition of antique firearms. In so doing, the regulations set out to provide certainty on which firearms can be possessed or traded as an antique and thus be exempt from the need for a firearm certificate and the provisions of the Firearms Act 1968, as amended by the Policing and Crime Act 2017. The Minister gave the figures. The number of antique firearms recovered in criminal circumstances was four in 2007, reached a peak of 96 in 2016 but was still at a figure of 68 in 2019. Since 2007, six fatalities have been linked to antique firearms.
The lack of a statutory definition of an antique firearm, as opposed to Home Office non-statutory guidance, has enabled criminals to obtain old but still functioning firearms without the control provisions and licensing requirements under the 1968 Act being applicable. As has already been commented on, in 2015 the Law Commission recommended defining “antique firearm” in legislation to remove ambiguity over what was meant and provide greater clarity for the police and other criminal justice agencies in enforcing the law and prosecuting offenders. That recommendation was accepted by the Government and the Policing and Crime Act 2017 provided for a statutory definition, which led to a public consultation that year on the detailed aspects of the statutory definition.
Like the noble Lord, Lord German, I ask the Government to say in their response why it has taken more than five years to implement a Law Commission recommendation on a matter impacting on serious violent criminal offending at a time when violent crime has risen, and why it has taken three years from the conclusion of the public consultation on the detail of the statutory definition to bring these regulations forward. This might suggest a somewhat laid-back attitude to the incidence of violent crime, unless the Government say that the reason for the delay is that they still do not think that the regulations will actually have any impact on violent crime involving antique firearms.
If that is the case, such a stance would appear to be in line with the statement in the impact assessment—if I have understood it—that
“there is no robust evidence to indicate that re-classifying antique firearms in this way will reduce criminality involving antique firearms, serious violence, wounding or homicides.”
Does that statement represent the Government’s view of the effect, or rather non-effect, on public safety of these regulations, which have taken more than five years to appear following the Law Commission recommendation and have a net cost to business of £500,000 a year on top of set-up costs of £6 million? In their response, a clear statement is needed from the Government on not only the reason for the time it has taken to bring these regulations forward, but, in the light of the statement in the impact assessment, which I accept I may have misinterpreted, whether and why the Government think that these regulations will address two specific government issues.
The first issue is the concern mentioned in paragraph 7.1 of the Explanatory Memorandum:
“Law enforcement has raised concerns with the Government about the increased use of antique firearms in crime.”
In the light of the statement in the impact assessment, do the Government think that the regulations will address that concern?
The second specific issue arises, once again, in the light of the statement in the impact assessment that
“there is no robust evidence to indicate that re-classifying antique firearms in this way will reduce criminality involving antique firearms”.
The issue is whether, and why, the Government believe that these regulations will deliver on their stated primary objective, as set out in the impact assessment:
“The primary objective is to preserve public safety by strengthening firearms legislation to prevent the criminal misuse of antique firearms.”
Again, in the light of the statement in the impact assessment, do the Government believe that these regulations will deliver on that primary objective?
Baroness Williams of Trafford (Con)
I thank all noble Lords who have spoken in this debate.
Turning first to the noble Lord, Lord Blunkett, he nobly assists me in so much these days. Yesterday, he and the noble Lord, Lord Young, gave an absolutely fantastic lesson in how, by not doing things, we will come to regret them years later. Far from feeling as if I have been stalked, I have been greatly assisted by him, particularly when we can improve on what went before. The noble Lord stated his support for the regulations and I agree with his words: there is no real inconvenience in registering what people have and, if it helps to improve safety, all the better.
The noble Lord, Lord Addington, asked about the cut-off date of 1939 and thought that 1914—or maybe 1918—would be a rather lovely date. Law enforcement and some other respondents to the Home Office’s consultation preferred a 1900 cut-off date. Although moving the date from 1939 to 1900 would reduce the risk from firearms of that period by requiring them all to be licensed, the majority of firearms manufactured during that period do not in fact feature in crime. They are held safely and responsibly by museums and collectors, with no danger to the public. Licensing them all would therefore add extra burdens on the museums referred to by the noble Lord, Lord German—along with collectors, dealers and the police—without significantly increasing public safety.
The noble Lord, Lord Addington, asked me about the criteria, as did my noble friend the Duke of Montrose. I will go through those criteria again: to be antique, a firearm must be held as a curiosity or ornament, have been manufactured before 1 September 1939 and either have a propulsion system specified in the regulations or be chambered for one of the obsolete cartridges specified in them. He also asked a sensible question: how do we define “deemed to be dangerous”? There is no actual legal definition but the judgment on what is deemed dangerous is, I guess, the evidence of criminal use.
My noble friend Lord Shrewsbury questioned the reliability of NABIS data. I will take his points back. I concur that there were some inconsistencies in the NABIS data in its 2017 and 2018 annual reports in respect of recoveries of antique firearms. The head of NABIS subsequently had the data examined and found administrative errors in the figures used in the 2017 report. She has removed that inaccurate data from the NABIS website and put in place measures to ensure that there is no recurrence. The review of the list will be done every three years.
Moving on to my noble friend Lord Robathan, I just love listening to the stories from him and my noble and learned friend Lord Garnier. Honestly, what went on in their schooldays? We did not have such fun at all, but I thank my noble friend for his support for these regulations.
My noble friend the Duke of Montrose asked about disabling guns in Scotland before they can be antiques. That is not part of the current arrangement or the new regulations, so it will not be required.
I know that the noble Lord, Lord Bhatia, is pleased with the regulations but he asked about knives and swords. They are subject to different controls.
My noble friend Lord Lucas asked—no, he was delighted with the regulations. He was pleased about the clarity of it being pre-1939 firearms, as opposed to post-1939 ones.
The noble Lord, Lord German, asked how firearms were obtained. The answer is: through a variety of methods. There is evidence that criminals are taking advantage of the lack of legal clarity to obtain old but still-functioning firearms for use in crime. In recent years, there have been several notable convictions involving antique firearms, with substantial sentences handed down by the courts. For example, in 2017, a former firearms dealer was convicted and sentenced to 30 years’ imprisonment for firearms offences including supplying antique firearms to criminal gangs. In 2018, a firearms certificate holder was convicted and sentenced to 23 years’ imprisonment for firearms offences including making ammunition for antique firearms and supplying it to organised crime groups.
The noble Lord, Lord Rosser, asked how the regulations would help. Basically, as I said, the problems of the current law on antique firearms were highlighted by the Law Commission in its 2015 report Firearms Law: Reforms to Address Pressing Problems. It recommended defining “antique firearm” in law, essentially following the model used in Home Office guidance.
The noble Lords, Lord German and Lord Rosser, lamented the delay in laying the regulations. As I understand it, it was necessary to take some time to consult widely on the detail of the regulations, some aspects of which are quite technical, and consider them carefully with expert stakeholders. However, I am pleased that we can now bring the regulations forward, which will strengthen the controls on antique firearms to prevent them falling into criminal hands.
Finally, I understand and empathise with the point made by the noble Lord, Lord German, about museums. I will take it back and see whether I can get a response for him.
The Deputy Chairman of Committees (Baroness Healy of Primrose Hill) (Lab)
The Grand Committee stands adjourned until 3.45 pm. I remind Members to sanitise their desks and chairs before leaving the Room.
Arrangement of Business
(3 years, 5 months ago)
Grand CommitteeRead Full debate Read Hansard Text
The Deputy Chairman of Committees (Baroness Healy of Primrose Hill) (Lab)
My Lords, the hybrid Grand Committee will now resume. Some Members are here in person, respecting social distancing, others are participating remotely, but all Members will be treated equally. I must ask Members in the Room to wear a face covering except when seated at their desk, to speak sitting down, and to wipe down their desk, chair and any other touch points before and after use. If the capacity of the Committee Room is exceeded or other safety requirements are breached, I will immediately adjourn the Committee. If there is a Division in the House, the Committee will adjourn for five minutes.
The following Members have withdrawn from the next item of business: the noble Lords, Lord Liddle, Lord Bilimoria and Lord Bhatia, and the noble Baronesses, Lady Jones of Moulsecoomb and Lady Wheatcroft. The time limit for it is one hour.
Financial Services and Markets Act 2000 (Regulated Activities) (Amendment) Order 2020
(3 years, 5 months ago)
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Baroness Penn
That the Grand Committee do consider the Financial Services and Markets Act 2000 (Regulated Activities) (Amendment) Order 2020.
Relevant document: 37th Report from the Secondary Legislation Scrutiny Committee
Baroness Penn (Con)
My Lords, this order, which we are here to discuss, brings prepaid funeral plan providers within the Financial Conduct Authority’s regulatory perimeter, subjecting them to compulsory, proportionate and robust regulation. This will ensure that consumers—often elderly and vulnerable—are adequately protected by proportionate but sufficiently robust regulation.
A funeral plan is a contract under which a policyholder makes one or more payments to a funeral plan provider, which subsequently provides or pays for a funeral on the policyholder’s death. Funeral plans allow consumers to “lock in” the price of their future funeral when they purchase a plan. Around 1.5 million plans are held by individuals across the country. Funeral costs have risen at almost twice the rate of inflation for the past decade, with the average funeral now costing between £4,000 and £6,000.
In recent years there have been reports from Fairer Finance and Citizens Advice Scotland of consumer detriment. In 2018 the Government launched a call for evidence, which confirmed that consumer harm exists in the funeral plan market. In particular, there is a lack of clarity for customers over what is covered by their plan; high-pressure and misleading sales tactics; and a lack of access to redress schemes if things go wrong. Some 84% of respondents to the call for evidence expressed support for a compulsory regulatory regime. Following further consultation, the Government decided to bring the prepaid funeral plan market within the remit of the FCA.
The funeral plan market has outgrown its 20 year-old legislative framework. Although a funeral plan contract is a regulated activity under the regulated activities order, the existing exclusions for plans covered by a trust arrangement or insurance contract mean that no prepaid funeral plan provider has ever been authorised and regulated by the FCA. The order removes those exclusions, requiring providers to be authorised by the FCA in relation to “entering into” funeral plans. The order also introduces a new regulated activity requiring providers to be FCA-authorised in relation to the administration of funeral plans, including existing plans. These changes will enable the FCA to introduce new rules to protect consumers at the point of sale; ensure that providers administer funeral plans properly; and ensure that providers have sufficient reserves to pay for funerals as they fall due.
Many funeral plans are sold by smaller intermediaries and third parties. Regulating this large part of the market is essential to protect individuals from the risk of unfair selling practices by companies that would take advantage of vulnerable customers. The order therefore amends the regulated activities order to make dealing in funeral plan contracts as an agent a regulated activity. This means that intermediaries or third-party distributors that promote or sell funeral plans will also be brought within the scope of the regulatory regime.
However, the Government are alive to the fact that many plans are sold by funeral directors, which are generally small to medium-sized family businesses and would not otherwise engage in financial services activity. To ensure a proportionate approach to these firms, the order amends the relevant regulations to allow them to become appointed representatives of principal firms. This means that funeral plan providers, acting as the principal firm, must ensure that the representatives they appoint to sell or promote their funeral plans comply with the relevant regulatory requirements, without these firms necessarily needing to pursue full FCA authorisation.
The order makes consequential amendments to the financial promotion order. It also brings the funeral plan market within the scope of the Financial Ombudsman Service and extends the ombudsman’s jurisdiction to complaints relating to matters that occurred when the relevant funeral plan provider was registered with the existing voluntary regulator, the Funeral Planning Authority.
I would like to acknowledge the work done by the Funeral Planning Authority. I hope that the FPA will continue its activities until the new FCA regime comes into force. The Government urge providers to remain registered with the FPA and continue abiding by its code of conduct during the transitional period. Having consulted widely with industry, the Treasury has concluded that most reports of poor activities can be attributed to those providers that have chosen not to register with the FPA. This demonstrates that a voluntary system of regulation cannot be fully effective because providers can choose not to comply.
It is a regrettable fact that bringing a previously unregulated sector into regulation—whatever form that may take—creates a possibility that some providers are unable to meet the threshold for authorisation. I therefore cannot rule out that, in authorising these firms under the new regime, it is revealed that some providers are unable to deliver on the promises they have made to their customers. I can assure the Committee that the Treasury and the FCA will monitor the situation closely and, subject to the facts at the time, stand ready—
Baroness Penn (Con)
My Lords, I will repeat my last sentence in case it could not be heard due to the Division Bell. I can assure the Committee that the Treasury and the FCA will monitor the situation very closely and, subject to the facts at the time, stand ready to take any appropriate action.
Once this order has been made, there will be an 18-month implementation period before the new regulatory framework comes into force. This will allow time for the FCA to consult on and implement the new regulatory framework, and for firms to familiarise themselves with those new requirements. The Government understand that the FCA will also consult on whether to extend coverage of the Financial Services Compensation Scheme to the sector. The Government are committed to working closely with the FCA on any legislative requirements to ensure that such an arrangement would work efficiently for consumers.
Compulsory regulation in this area is long overdue. Consumers should be able to make arrangements for this difficult time in life without fear of exploitation by disreputable firms. I beg to move.
Lord Empey (UUP) [V]
My Lords, I warmly welcome this order. It is perfectly fair to say that, in recent times, consumers have been bombarded by advertisements for these plans on television and radio and through other channels. As my noble friend said, people can be in a very vulnerable position in their lives when they are subjected to this pressure.
I would like to ask several things, in case I did not pick up some of the Minister’s comments. She made the point that some of the current operators may not be able to manage the new regulatory environment. What is the position for their policyholders, as it will be another 18 months before things are fully in place? What triggered the decision to push for this particular order? Was it the evidence of wrongdoing? Did the Government just decide to do so or did they receive a recommendation from the FCA in this regard?
While the Minister said that there were in the region of 1.5 million policyholders, can she give the Committee some sense of the amounts of money involved in this sector? It has grown exponentially in recent years. Also, what will the position be during the 18-month implementation period when people are still selling these policies, including perhaps a number of companies that will not be able to meet the requirements in the long term?
Clearly, markets change and evolve over time. We know this, but I am interested to know who is actually looking at it. When markets open up, perfectly good companies put forward policies. That is a great thing but, as the Minister has admitted, there are a certain number of people who are prepared to exploit. What is the position for companies that may not be in the United Kingdom but sell policies to it? In which regulatory environment will they operate, and what sanctions and security can be provided to consumers if they are not registered in the United Kingdom?
However, in broad terms, I welcome this order. It is overdue, as the Minister said. I hope that it will provide reassurance to a lot of people who perhaps currently find themselves holding policies that could still be vulnerable. It would be helpful if we could alleviate any further worry among those policyholders, particularly at a critical time in their lives.
Lord Davies of Brixton (Lab) [V]
My Lords, this is a no-brainer. Funeral plans are clearly a form of life insurance and, just like mainstream life insurance, they should be subject to full regulation. Promises are made to policyholders and we, as legislators, have an obligation to ensure that those promises are met.
We also have a duty of care. Funeral plans are mainly used by people on low incomes and with limited savings. Gold-standard independent financial advice will never be available to these prospective policyholders. They are inevitably on their own in an area that is potentially costly to them and where they have little knowledge, so regulations are required. I support what is proposed here today.
Provisions are required to provide protection for those who worry about being given a pauper’s funeral or concerned about it being a burden on their family after their death. However, the Committee needs assurance on some issues. I assume that there will be a time limit—maybe not now—but, given the time, I will limit myself to just two points.
First, we need assurance that the involvement of the FCA will not result in an inappropriate regime of supervision that would work against policyholders’ interests by unnecessarily increasing costs and limiting choice. The Minister was right to mention the work of the Funeral Planning Authority. It is a shame, therefore, that the Treasury does not appear to have made full use of its experience and expertise in this area. No doubt the Minister is aware of the detailed criticisms it has made of these proposals. I understand that a meeting with the authority is proposed but will the Minister assure us that the Treasury, and in due course the FCA itself, will take appropriate advantage of its undoubted expertise?
Secondly, it is important to mention the special needs of those religious communities—Jewish, Muslim and evangelical Christian—that provide funeral support for members of their own congregations. Such arrangements generally include a type of funeral plan that could fall under the order. I do not suggest that these plans should be disregarded for the purposes of the order. However, these arrangements are culturally significant, so will the Minister assure these communities that appropriate consideration will be given during the consultation to their special nature, both by the Treasury and by the FCA?
Lord Foulkes of Cumnock (Lab Co-op) [V]
My Lords, I thank the Minister most sincerely for a very helpful introduction. I must declare a couple of relevant interests as a former Labour and Co-op MP and as a former chair of Age Scotland. Both are, and indeed were, non-pecuniary interests. I know that that is an unusual thing in our House these days.
The Co-op Group and Age UK are major providers of funeral plans and are both members of the Funeral Planning Authority, but they do not support the FPA’s objections to the order. Indeed, the Co-op welcomed the announcement made in I think the Budget last spring that the Financial Conduct Authority would be given responsibility for the regulation of funeral plans, which the Minister outlined in her introduction.
I and the Co-op appreciate the FPA’s concern for the future of smaller providers. I think that the Minister dealt with that in her introduction. The Co-op also said, and I agree, that the primary concern is the protection of consumers. As has been said, FCA regulation is the only way to achieve that successfully. Similarly, my former colleague at Age Scotland, Mike Douglas, pointed out when I spoke to him that the FCA is particularly well versed in the important principle of treating customers fairly, which should be applied to these products.
I also pay tribute to the work of Citizens Advice Scotland. Someone asked who had raised the issue; it was Citizens Advice Scotland in the first instance in a report way back in February 2016. It has taken us more than four years to get to this stage.
I also understand that the Treasury consulted widely on these plans and that the Financial Conduct Authority will also do so in its implementation, as the Minister said.
I was going to ask the Minister only one question on when she expects the order’s provisions to be put into practice, but she dealt with that in her introduction and said that it would take 18 months. My question now is: why will it take that length of time? Can that not be sped up? The sooner we get this protection to people purchasing funeral plans the better. Otherwise I am very pleased to say that, for once, I support the Government’s order without reservation.
Lord Mann (Non-Afl)
My Lords, I also congratulate the Minister on the eloquence of her introduction and the Government on bringing forward this timely statutory instrument. I suppose I should declare an interest of sorts in that I am almost certainly the only qualified gravestone topple tester in Parliament. I have taken quite a significant interest in all matters relating to funerals, particularly burials. The need to regulate on this was raised under previous Governments with less success.
The kinds of people who plan for funerals in this way are very identifiable. Over the years, I have met and discussed the issue with many of them. They are easily recognisable: they are the kind of people who live in tidy houses, with tidy gardens. They volunteer; they will be volunteering to assist with Covid and matters relating to vaccinations. They are the bedrock of everything decent about the country. These people care about everything around them and, therefore, care about leaving everything in order when their time has gone. That motivation means that people tend to utilise such a service. The danger is that they perhaps place too high a value on it, and the mis-selling of the wrong or wrongly priced product has long been a concern. The beauty of the order is that any complaint about that, whenever it comes—by definition it could sometimes be made by someone from another generation rather than from the person who contracted the service—will shift the market towards good provision.
I have seen too many cases of trauma, usually when a husband dies leaving a wife or vice versa, when a funeral plan does not meet expectation. They had no idea that was going to happen. A lifetime of careful budgeting, of caution and living in a proper, very British way, as they would see it, blows up in their face. That is the importance of this, well beyond the appropriate, standard regulation of a financial product in a market. This is important in terms of the ethics of the country. The change it makes in cases where things go wrong, and the ability to do something about it, is disproportionately significant for the people impacted. I therefore thank the Government and the Minister for bringing this forward.
Baroness Bowles of Berkhamsted (LD) [V]
My Lords, as other noble Lords have mentioned, around 2016 and 2017 there began to be reports about the mis-selling of funeral plans. The concern mainly focused on the plans not covering the cost of a funeral, the magnitude of fees taken by introducers and plan providers, and the inflexibility of plans and cancellation costs. The concerns have also come to light during a period when funeral costs have escalated, with elderly individuals being sold plans based on spiralling costs. Those costs are not inevitable—indeed new, cheaper funeral arrangements are now coming to market.
At times, the hard sell takes place door to door, but the pressure to make funeral provision is all around in advertisements. Even when this is from good providers, it adds to pressure for people to “do something” and spare their hard-pressed family from financial concern at a time of distress, making them easy targets.
Like other noble Lords, I have received the brief from the Funeral Planning Authority, and I thank it for the work it has done. I recognise that the new authorisation arrangements are an existential threat to it. That seems to be acknowledged in paragraph 12.2 of the Explanatory Memorandum, which says that the regulatory cost will be partially offset by the fees that the majority of providers currently pay to the existing voluntary regulator.
The current terms for the FPA are to give 180 days’ notice, which means that the FPA may well cease before the FCA becomes responsible; it might not hang out for the 18 months if it has people resigning. What effect does the Minister think that will have? Will it make for some kind of lacuna?
The FCA will establish an authorisation procedure to commence in summer 2022 and will consult in spring this year. There’s the rub: we really do not know what it will do. It will all depend on that consultation. The only information at present on the FCA’s website is that it will look at outcomes, ensuring that consumers get the product paid for, and that
“funds are looked after and used responsibly.”
I await with interest how that will roll out. For example if funeral costs become more competitive, would funds being used responsibly prevent paying over the going rate at the time and even result in a cash payment, or is that merely a statement about the prudential soundness of the provider? Does it extend to blocking excessive fees? The problem is that we do not yet know any significant detail.
At present, all providers have to use a trust or an insurance policy, otherwise they would already come under FCA regulation, so what other kind of prudential supervision does the Minister envisage and where has it gone wrong such that it is not sufficient? Or do all the problems lie with the selling side, such as the pressures, commissions and descriptions? If that is the case, it is a little disappointing that the FCA site does not say something about sales conduct, other than getting the product paid for.
The SI removes the regulatory exemption for having funds in trust or an insurance policy so that everyone becomes regulated. At the same time, that seems to open up other forms of prudential security. I wonder what the effect of that will be. In the light of the FCA website comments, does it mean an expectation that funds will be invested and secured differently?
Of course we will let the SI proceed and I broadly welcome it, but I share some of the reported concerns. Like so much of the delegated powers we give to our regulators, the fact is that we really do not know what will happen, where the improvements will be or what we can do if they are insufficient. We of course have confidence in the FCA, but it is built entirely on that. We have no assurance in the SI or in any direction to the FCA that aggressive door-to-door sales must cease. The Treasury has made some provision, with the financial ombudsman taking over the role of dispute resolution, which would have been done by the FPA, but it is not really a satisfactory vision of the future. I would be far happier if there had been more specific guidance to the FCA about those things that have to stop, such as unreasonable fees, profiteering and door-to-door selling.
I heard what the Minister said in introducing the SI about regulation at the point of sale. That is good, but will it really stamp out bad practice? As the Minister said, it is only the 5% who have not taken up the voluntary authorisation. How easy will it be to find that and reduce it to zero?
Lord Tunnicliffe (Lab) [V]
My Lords, I am grateful to the Minister for introducing the order. As she outlined, it amends the regulatory framework for providers of prepaid funeral plan contracts, generally requiring them to be authorised by the Financial Conduct Authority. Intermediaries need not be directly authorised but will be expected to become appointed representatives, who are essentially overseen by an FCA-registered provider.
The provisions appear to offer a sensible conclusion to the consultation exercise launched back in 2018. We will certainly not oppose the order, though I would like clarity on a number of points.
The majority of providers act responsibly and sympathetically, and, for many, a prepaid funeral plan offers peace of mind. It is no surprise that the market has grown in recent years; it is perhaps more surprising that it has taken so long for the 2001 regulatory framework to be revisited. As the supporting documentation notes, the current voluntary regulatory system has not delivered the desired level of consumer confidence. We hope that the order sends a message to any unscrupulous actors that their behaviour must change. The ability to refer cases to the Financial Ombudsman Service is a particularly important inclusion. I hope the Minister can assure noble Lords that the department will follow early cases to ensure that the new regulatory regime has the desired effect.
Can the Minister offer any insight into how problem cases may be resolved under the new regime? If a provider or intermediary is judged to have fallen short of the FCA’s requirements, for example, will the funeral package remain valid with another player assuming responsibility for delivery? Those who have taken the time to spell out their wishes will want them honoured. If their plan were to be cancelled and a refund issued, it would be not only inconvenient but a potentially traumatic experience.
The Explanatory Memorandum and the information paragraphs in the 37th report of the Secondary Legislation Scrutiny Committee note that the new regime will not be fully in force until 18 months after the order is made. It clearly makes sense to give both the FCA and providers time to flesh out the detail and adjust to the new reality. However, can the Minister confirm what steps, other than those outlined in paragraph 2.3 of the Explanatory Memorandum, will be taken to prevent vulnerable customers being targeted or pressured into signing agreements in the interim period? Can she also confirm whether the Government plan to formally make this order shortly after the Commons has considered the draft on 13 January, or is there likely to be a delay to allow the FCA more time to begin its consultation?
Finally, could the Minister please outline the rationale for explicitly excluding local authorities from the regulated activities? I am not aware of local authorities clamouring to offer such services, but what if a specific need were to arise in a particular locality?
Once again, I thank the Minister and her department for introducing the order. I look forward to her response and, all being well, the FCA launching its consultation in due course.
Baroness Penn (Con)
My Lords, I am grateful to all noble Lords who contributed to the debate and for their support for this measure. The noble Lord, Lord Empey, asked what triggered the Government’s decision to act in this area. As other noble Lords noted, there had been reports on issues with this sector by Citizens Advice Scotland and Fairer Finance. The Government conducted their own call for evidence, which also found evidence of consumer detriment and triggered government action.
The noble Lord also asked about the amount of money involved in the sector. There are 1.5 million undrawn plans, equating to approximately £4.3 billion in assets under management.
The noble Lords, Lord Foulkes and Lord Tunnicliffe, asked about implementation. I fully expect the Government to make this order shortly after the Commons has considered the draft. The 18 months for implementation include time for the FCA to consult on the requirements that it will put in place. I assure the noble Lord, Lord Tunnicliffe, and the noble Baroness, Lady Bowles, that, once a new regime is in place, the Treasury and the FCA will work closely to ensure that it is having the desired effect.
The noble Lord, Lord Empey, asked about firms outside the UK selling to UK consumers. I assure him that the relevant regulated activity refers to plans for the provision of a funeral in the UK. The fact that a provider is based outside the UK does not necessarily mean that the regulated activity will not be deemed to be carried out in the UK, and therefore subject to UK regulation.
The noble Lord also asked for reassurance about the impact of these regulations on specific religious requirements for burials and their provision by religious groups. The regulated activities order clearly defines what is meant by a funeral plan contract. This definition may not capture the arrangements of religious bodies. Further, the regulation applies only to persons carrying out regulated activities by way of a business.
As regards the potential for disreputable conduct by firms before the FCA’s compulsory regime comes into force, I again strongly encourage all funeral plan providers to remain registered with the FPA during the transition period and to continue following its code of conduct. I also urge consumers purchasing funeral plans to choose providers that have registered with the FPA. This will provide some level of protection and, in future, the benefit of access to the Financial Ombudsman if something were to go wrong.
The noble Lords, Lord Empey and Lord Tunnicliffe, asked whether I could provide any insight into how problem cases may be resolved under the new regime—for example, where the provider of an existing plan does not get authorisation under the new regime. The noble Lord, Lord Tunnicliffe, is absolutely right that the preferred solution in this situation, where a funeral plan provider is unable to meet the threshold for authorisation or chooses not to continue in the market, will be for the transfer of its business to another provider that has successfully obtained FCA authorisation. Legislation does not prescribe the terms of any such transfers that may be undertaken in a way that preserves the consumers’ underlying benefits, such as their choice of funeral director or services provided.
The noble Lord, Lord Tunnicliffe, also asked for clarity on the exclusion for local authorities. During its consultation exercise, the Treasury found no evidence of harm from prepaid funerals sold by local authorities. The Government therefore consider that it is not necessary to bring them within the scope of the FCA regulation. However, they can continue to provide this service should they wish to. The order simply excludes them from the regulatory remit of the FCA.
The noble Lord, Lord Davies, asked for reassurance on the role of the FCA, as did the noble Baroness, Lady Bowles. The FCA has a reputation for being an effective regulator and its experience of conduct and prudential regulation, alongside its extensive rule-making powers, will provide a solid basis for strengthening the regulatory framework for funeral plans. The Financial Ombudsman Service has experience of dealing with a wide range of types of complaints and was supported by a majority of respondents to the Government’s consultation. Taken together, the FCA and the Financial Ombudsman Service will provide consumers with an effective and enforceable regulatory regime, and an effective dispute resolution mechanism. I thank the noble Lord, Lord Foulkes, for his support of the FCA’s role in regulating this sector and provide reassurance to the noble Lord, Lord Davies, that the Treasury and the FCA have consulted, and will continue to consult, on the details of these regulations and the rules made under them. They will, of course, draw on the important advice of the FPA.
The noble Baroness, Lady Bowles, asked about the ongoing role of the FPA. As I said, it is my hope that the FPA will continue until the new regulatory regime comes into force and that providers will remain registered with the FPA, enabling it to continue functioning. I believe that these regulations are a welcome move to regulate a sector that is overdue for them.
The Deputy Chairman of Committees (Baroness Henig) (Lab)
That completes the business before the Grand Committee this afternoon. I remind Members to sanitise their desks and chairs before leaving the Room. The Committee is adjourned.