Financial Services and Markets Bill
Thursday 8th June 2023
(1 year, 6 months ago)
Lords ChamberFinancial Services and Markets Act 2023 View all Financial Services and Markets Act 2023 Debates Read Hansard Text Watch Debate Read Debate Ministerial Extracts Amendment Paper: HL Bill 124-II Second marshalled list for Report - (6 Jun 2023)
Baroness Penn
“(ic) how it has complied with the statement of policy on panel appointments prepared under section 1RA in relation to the process for making appointments and the matters considered in determining who is appointed, and”Member’s explanatory statement
This amendment would ensure that the FCA includes in its annual report under paragraph 11 of Schedule 1ZA to the Financial Services and Markets Act 2000 a summary of how it has complied with the statement of policy on panel appointments in section 1RA as inserted into FSMA 2000 by Clause 43.
The Parliamentary Secretary, HM Treasury (Baroness Penn) (Con)
My Lords, I will speak to all the government amendments in this group, which are part of a package of changes that the Government have brought forward to support scrutiny and accountability of the financial services regulators.
This group of amendments focuses on supporting that work through independent analysis and scrutiny. The Government have listened to the view expressed by noble Lords that, for there to be effective scrutiny, it is critical that Parliament and others have access to accurate and impartial information to assist in assessing the performance of the regulators. The Government have carefully considered the proposal, put forward by my noble friend Lord Bridges in Grand Committee, to establish an office for financial regulatory accountability, or OFRA.
While the Government cannot accept the proposal to establish an OFRA, we have considered what more can be done to support the provision of independent analysis and scrutiny. FSMA already requires the regulators to consult on rule proposals and establish independent panels to act as a “critical friend” in the rule-making process. The regulators seek to engage the panels at an early stage of policy development and the panels voluntarily produce reports annually on their work.
Through the Bill, the Government are already enhancing the role of the statutory panels to support scrutiny and accountability. This includes Clause 43, which requires the regulators to publish a statement of policy on how they recruit members of their statutory panels. In addition, following the debate in Commons Committee the Government introduced Clause 44, which requires panel members to be external to the regulators and the Treasury.
However, the Government have heard the calls from across the House for further reassurance that the regulators’ approach to panel recruitment will ensure that panel members are drawn from a diverse range of stakeholders and are sufficiently independent of the regulators. The Government have therefore introduced Amendments 23, 24, and 57, which will require the FCA, the PRA and the PSR, as part of their annual reports, to set out how recruitment to their panels has been consistent with their statements of policy.
The Bill also already introduces measures to strengthen the quality of the regulators’ cost-benefit analysis, including the introduction of new, independent panels to support the production and development of CBA. It is important that CBA reflect as accurately as possible the costs and benefits to firms and consumers of implementing and following regulation. In assessing this, the experience of regulated firms themselves is vital.
The Government are grateful to my noble friend Lord Holmes for raising this issue in Grand Committee, and again through Amendments 44 and 47 today. The Government have reflected on that earlier debate and introduced Amendments 43 and 46, which will require both the FCA and the PRA to appoint at least two members to their CBA panels from authorised firms.
To ensure that Parliament has access to the important work of the panels, the Government have introduced Amendment 50, which provides a power for the Treasury to require the panels to produce annual reports. The Treasury will then be required to lay these reports before Parliament. I can confirm that, in the first instance, the Government will bring forward the necessary secondary legislation to require the CBA panels and the FCA Consumer Panel to publish an annual report to be laid before Parliament, reflecting the fact that the work of the Consumer Panel and the new CBA panels has been of keen interest to noble Lords in earlier debates. The Government will keep this under review, and the legislation will allow the Government to require other panels to publish annual reports and lay these before Parliament if they consider that appropriate in future.
Finally, Amendment 95 seeks to strengthen the independence of the complaints scheme through which anyone directly affected by how the regulators have arrived at their decisions can raise concerns. The scheme is overseen by the independent complaints commissioner, and Amendment 95 seeks to strengthen that independence further by making the Treasury responsible for the appointment of the commissioner, rather than the regulators.
Existing legislation requires the complaints commissioner to publish an annual report, including trends in complaints and recommendations for how the regulators can improve, which is to be laid before Parliament. Amendment 95 also enables the Treasury to direct the commissioner to include additional matters in the annual report. This will ensure that, where appropriate, the Government can make sure that the report covers issues which the Government consider are important to support scrutiny of. Amendment 95 also requires the regulators to include a summary of where they have disagreed with the commissioner’s recommendations, and their reasons for doing so, in their response to the commissioner’s annual report.
The Government have been clear that the regulators’ increased responsibilities as a result of the Bill must be balanced with clear accountability, appropriate democratic input and transparent oversight. The package of amendments we are debating in this group contribute to that and support Parliament through additional independent analysis and scrutiny.
Lord Holmes of Richmond (Con)
My Lords, it is a pleasure to take part in the debate on this group of amendments. I will speak to Amendments 42, 44, 45 and 47 in my name, and offer my support for all the amendments in the name of my noble friend Lord Bridges, to which I have added my name. I will leave him to set them out.
I again thank my noble friend the Minister, and the Treasury officials and team, for all the meetings and work done during Committee, and between Committee and Report, on the question of regulator scrutiny and accountability. I thank her particularly for adopting my Amendments 44 and 47 on the membership of the panels. On my Amendments 42 and 45, could she say a little more about the evidence base the panel will use to come to its recommendations? Would it be valuable to publish any dissenting opinions on the matters to be published? This would be extremely helpful for Parliament to scrutinise the panel’s decisions.
Finally, I ask a broader question around cost-benefit analysis. How will HMT and the regulator seek to ensure that the whole CBA process is meaningful, balanced, considers all majority and minority views, and does not fall into the potential trap of being a utilitarianist pursuit, which cost-benefit analysis can sometimes fall foul of?
That said, I thank again the Minister and the Treasury officials for their support for the amendments and for the discussions we had to come to this point, particularly on Amendments 44 and 47. I look forward to hearing in detail, particularly from my noble friend Lord Bridges and the Minister, the suggestion around the office for regulator accountability.
Baroness Hayter of Kentish Town (Lab)
My Lords, I will briefly speak to Amendment 39, to which I have added my name, and government Amendment 50. I declare that I am on the board of the ABI. More relevantly, as the amendments are about the Consumer Panel, I speak as a former vice-chair of one of the statutory panels, the Financial Services Consumer Panel. It was some time ago and our focus then was on the FSA rather than the present FCA, but our role was essentially the same.
I was on the panel before the events of 2007 and 2008. As a panel, we were warning about the risk to consumers of interest-only mortgages, high loan to value mortgages—which were really unacceptable to us—and high mortgages relevant to income. It was just before the crash, but I am not pretending that we foresaw what would happen, even though we were worried about those things. We did not anticipate what was happening in the financial sector, starting with Fannie Mae and Freddie Mac and Northern Rock. Our concern was about how consumers would fare should house prices tumble and their incomes not rise—or, indeed, if interest rates should increase. We saw them as a very vulnerable group of consumers.
What is interesting and relevant to Amendments 39 and 50 is that our role was only to advise the then FSA. Sadly, it did not pay enough attention to what we were saying. It might have given it a little bit more on its dashboard had it done so. Had our report been to Parliament and the Treasury perhaps someone might have noticed and taken an interest. That lives in the “What if?” category of history, but it explains my support of any report made by people who represent consumers being brought to public attention.
Amendment 39, to which I have added my name, was so brilliantly written and argued for in the Commons by my honourable friend Nick Smith. I should say that a long time ago we worked together when he was the Labour Party agent in Holborn and St Pancras and I was the CLP chair. Quite a bit seems to have happened since then to both of us. I knew at the time that he was able to take an issue with which he was dealing and see the broader context, which is how we come to the amendment he has essentially developed and which is in front of the House today.
My honourable friend’s interest was sparked when he was campaigning on behalf of members of the British Steel pension scheme—a scandal which led the NAO and the PAC to conclude that the FCA fell drastically short of its proper role in protecting consumers of financial services. His interest in that brings me to where we are today.
In my time, we have witnessed nearly £40 billion being paid in compensation to consumers who were mis-sold PPI, although the full costs were paid much later. Again, as consumer reps, we flagged up that this was not an appropriate product for most of those it was being sold to. Just occasionally, listening to consumers is good not just for them but for the industry and the whole economy. The voice of consumers is worth listening to.
The Government’s Amendment 50 is very welcome. It requires the statutory panels—I am particularly interested in the Consumer Panel—to report to the Treasury and for their reports to be laid before Parliament. This will bring consumer interest to the heart of our public discourse, which will be good for all concerned. I thank the Government for their amendment on this. I am happy that this trumps, or at least meets, Amendment 39.
Baroness Bowles of Berkhamsted (LD)
My Lords, in general I support all the amendments in this group. I am particularly pleased to see government Amendment 50 on the panel reports, assuming that they are implemented, and government Amendment 63 and its companions in the next group to require the regulators to state how they have taken account of parliamentary committee reports in rulemaking. I thank the Minister and the Bill team for covering some of the amendments that I tabled in Committee and similar ones from other noble Lords.
In this group, I have added my name to the amendments tabled by the noble Lord, Lord Bridges, which concern the setting up of an office for financial regulatory accountability, as I did in Committee. The noble Lord is unable to be here today and has asked me to give his apologies and to introduce his amendments.
There is no need to go through the debate that we had in Committee, except to say that since FSMA 2022 there has been a growth in voices calling for an independent oversight body, including the main industry bodies. Those bodies were somewhat disappointed by the Minister’s suggestion in Committee that there was no industry support or suggestion along those lines, because they have made their views clear. I have received emails assuring me that they put points in the consultation responses as well as in published industry papers, although I acknowledge that those were early days and they may not have got as far as formulating ideas in the same way that I had in my consultation response.
There has also been a growth in support in this House. As has been said, if we had campaigned during the Brexit referendum that there would be this massive amount of power going to government, which would then be pressed onwards to unelected regulators, maybe some people would have had different thoughts, but that is water under the bridge. Going back to the amendments tabled by the noble Lord, Lord Bridges, the suite of amendments that cover the office for financial regulatory accountability—Amendments 64 to 72—includes some useful amendments from the noble Lord, Lord Eatwell, with which the noble Lord, Lord Bridges, agrees.
Viscount Trenchard (Con)
My Lords, I too thank my noble friend the Minister for again responding to the strong views expressed within your Lordships’ House and for introducing the amendments that she has. I also agree with what my noble friend Lord Holmes said.
I also thank the noble Baroness, Lady Bowles of Berkhamsted, for the introduction of my noble friend Lord Bridges’ Amendment 64 and the others in that group. I supported his amendments in Grand Committee and am pleased to do so again today. My noble friend set out with his usual clarity, as did the noble Baroness, why we should support these amendments, and I will not waste your Lordships’ time in repeating them.
As my noble friend Lord Forsyth of Drumlean said in Committee, in order for Parliament to be able to hold the Treasury and the regulators to account, it is necessary to have an independent source of information. The proposed office would provide that. It is also welcome that the main duties of the office will include a duty to prioritise the analysis of regulations that restrict competition, negatively affect competitiveness and add compliance costs.
I do not believe that the new office would be a regulator of the regulators. Rather, it would be a means to ensure that the regulators really do get on with the job on which they are behind schedule—the promise made in 2016, in the general election manifesto and many times since that we will take advantage of our regulatory freedoms to eliminate or simplify those regulations which do not suit our markets and which place a disproportionate burden on market participants. We should not do this at the expense of standards, but to recast the rulebook in common law style will make it much easier for firms to maintain the high standards on which the regulators, the Treasury and noble Lords will all insist. The proposed office would greatly assist in ensuring that this will happen.
I also note—although we will discuss this in the next group—that, ideally, the office would deal principally with a Joint Committee of both Houses rather than two separate committees which might compete with each other. That would double the work and the costs that the office and the regulators would have to bear in carrying out their duties.
I believe the creation of an independent office such as the one proposed would be more helpful than the creation of a multiplicity of panels, which may be set up by statute but remain panels of the entities of which they form part. These are also duplicated between the two regulators, which doubles the cost and time taken by the regulators, and by the relevant committees of your Lordships’ House, in discussing with them.
I hope my noble friend the Minister is prepared to consider further the creation of something which is truly independent of the regulators. I think we have too much legislation by statute to require entities to negotiate with panels of which they are a part, which conceptually I find rather odd in any case.
Lord Vaux of Harrowden (CB)
My Lords, this is the first of two groups that seek to improve the level of parliamentary scrutiny and accountability. Arguably, I think the groups are the wrong way around from a logical point of view, but we are where we are. We had long debates on this in Committee, and it was clear that accountability and parliamentary scrutiny was probably the single biggest issue on which Members from across the House felt that the Bill fell woefully short, particularly given the huge amount that is being transferred to the responsibility of the regulators by the Bill.
We heard in Committee of the need for three legs to the whole process of scrutiny and accountability: reporting, independent analysis and the parliamentary accountability elements. This group is about the second leg—the independent analysis that will support the parliamentary scrutiny and accountability. The Government have listened, and that is welcome, but I am sure I am not alone in finding what they have proposed to be rather thin gruel.
The Government have introduced a number of amendments which enhance the role of the various policy panels, in particular the cost-benefit analysis panel. These are welcome, but I am afraid they really do not go far enough. Other noble Lords, especially the noble Lord, Lord Holmes of Richmond, have tabled further amendments to enhance and support the role of the panels. Again, that is very welcome but not, I think, sufficient. Despite these improvements, the panels remain appointed by the regulators and are not genuinely independent.
I remain strongly drawn to the amendments in the name of the noble Lord, Lord Bridges of Headley, introduced by the noble Baroness, Lady Bowles, to which I have added my name, to create a genuinely independent office for financial regulatory accountability. As I said, so much responsibility is being handed to the regulators that it must make sense to have a genuinely robust system of oversight over the regulators, not just responding to consultations about proposed changes to regulations that the Government have put into the Bill but a much more holistic oversight of the whole regulatory direction—something that deals with what the noble Viscount, Lord Trenchard, referred to as the multiplicity of panels. We need to draw this all together, and we need to be much more forward-looking about the direction of regulation, rather than backward-looking as to what is proposed.
This is such an important matter and such a huge volume of work that, if we are to scrutinise it effectively, we need to have something such as the proposed office for financial accountability to enable parliamentary committees and others to carry out the meaningful scrutiny. The noble Baroness, Lady Bowles, talked about the need for resources; we will come on to that in the next group, but she is quite right. This would really help because, if the independent information were available to the committees, it would save them the job of doing all the sifting and all the rest of it, and they would be able to concentrate on the bits that really matter.
Even with the amendments proposed by the Government, I do not think that we get anywhere near that real scrutiny. I am sorry to hear that the noble Lord, Lord Bridges, does not intend to push these amendments; I would have liked him to do so and would have supported him if he had. I hope that he will continue to use his influence as the chair of the Economic Affairs Committee to push for a similar approach.
Lord Eatwell (Lab)
My Lords, I totally agree with what the noble Lord has just said and therefore I will not repeat his words. The office for financial regulatory accountability proposed by the noble Lord, Lord Bridges, would become an important part of the whole regulatory architecture in this country. The reason why I have proposed a couple of amendments—I am delighted to hear that the noble Lord, Lord Bridges, actually likes my amendments to his amendments—is to enhance the position of the office within that architecture.
We have to recognise that there will be virulent opposition to this in the Treasury. The Treasury’s darkest day in recent years was the day that the Office for Budget Responsibility was established as an independent entity evaluating the performance of the economy. In the same way, having gone through that dark day, I can imagine the horror with which the Treasury observes the possibility of an independent entity evaluating the performance of regulators and the performance of the Treasury in its activity in guiding regulation. It is no surprise at all that we have what the noble Lord has quite appropriately called “thin gruel”, instead of something that would be truly effective and would create both an independent assessor and a sounding board for the industry, consumers and others who have an interest to express in regulation to get their views on to the front line.
With my Amendments 67 and 72 I am again in slight opposition to the noble Viscount, Lord Trenchard, in the sense that I want to remove the lines in the amendment from the noble Lord, Lord Bridges, that specifically focus on the competition objective, because I do not want to second-guess what the office might do. The office could choose to travel over any part of the regulatory countryside. I regard my Amendment 72 as much more important because, as part of the architecture, the office should be funded through the levy in the same way as other parts of the regulatory system; the FCA, the Financial Services Compensation Scheme and so on are all financed via the standard levy on the industry. After all, this would be a trivial amount of money because—as has been pointed out—it would be only a relatively small entity. I am delighted that the noble Lord, Lord Bridges, liked my amendment to his amendment. I hope that he will be able to carry forward these proposals in the way that the noble Lord, Lord Vaux, suggested.
I will comment on Amendments 44 and 47 from the noble Lord, Lord Holmes, on the membership of panels at the FCA and the PRA. I support his view that placing practitioners on panels can have a very positive effect. I say this because I was an independent member of the board of the old Securities and Futures Authority, which was a practitioner-run regulatory authority with independent members, of which I was one. I was very impressed by the way that practitioners, when required to be regulators and placed in a regulatory role, assumed the role of regulators—they were not just representatives of their special interests. In fact, their special interests were left at the door; what came in with them was their specialist knowledge. I was sceptical when I first joined the board of the SFA but was won over by the performance of practitioners there. The proposal from the noble Lord, Lord Holmes, for practitioners will add to the regulatory effectiveness and knowledge of these panels.
Lord Forsyth of Drumlean (Con)
My Lords, I agree with everything that has been said by everyone in the debate so far and support all these amendments. I know that my noble friend Lord Bridges is mortified that he cannot be here today. We discussed the arguments and I supported them in Committee. The noble Lord, Lord Eatwell, is absolutely right about how this would have gone down in the Treasury. But I do not want to be grudging, given the amount of movement that the Minister has been able to achieve as a result of the debate, and the government amendments in this group will make a difference. We are dealing with the old “Quis custodiet ipsos custodes?” problem here. This group of amendments would have taken it a lot further forward, although the government amendments are helpful.
I do not want to anticipate the next debate, but the key question will be, as a number of noble Lords have pointed out, the resource that is made available. If it is not to be through a body such as the OBR, as my noble friend Lord Bridges was suggesting, it will have to be provided by the parliamentary authorities. Whether that will work, and how effective it will be, will depend on the extent to which the Government give a clear indication that they would welcome it, although it would be a matter for the House. I suspect that would be helpful.
I thank the Minister for having listened to the debate in Committee, which we are in danger of repeating, and having taken some measures, if not going perhaps as far as my noble friend Lord Bridges’s Amendment 64 would require. I also thank the noble Baroness, Lady Bowles, for so ably making the case for it.
Baroness Kramer (LD)
My Lords, I will speak very briefly. It will be evident to the House by now that, as was true in Committee, essentially every speaker takes one position, other than the Government. Maybe one or two support the Government’s position, but overwhelmingly there has been a common feeling across political ideologies and views. People from different perspectives, including those who are independent in this House, all share the same set of concerns.
We all particularly welcomed the amendment from the noble Lord, Lord Bridges, because it was a piece of completely new thinking—a way to break the conundrum very effectively by making sure that an office of financial regulatory accountability would change the game by providing Parliament and anyone else responsible for scrutiny and accountability with the analysis, information and data they need to do that effectively. I very much hope that the Government will take it away and consider it.
I join all other noble Lords in finding not only the amendments from the noble Lord, Lord Bridges, but those from the noble Lord, Lord Eatwell, and the others in this group extremely constructive. I vary slightly from the noble Lord, Lord Forsyth; I understand that the Government have moved a little in the amendments they have brought forward in this group but, my goodness, it is a baby step. This issue is far too big to be dealt with only by baby steps.
Baroness Chapman of Darlington (Lab)
My Lords, I start by acknowledging the government amendments in this group, which make a number of changes that we think are sensible to ensure that the cost/benefit analysis panels have representatives from industry, to allow the Treasury to direct statutory panels to make annual reports and to make it the Treasury’s job to appoint the complaints commissioner. These all represent steps in the right direction—even if, as the noble Baroness, Lady Kramer, has just said, they are not necessarily the giant leaps that some would hope to see.
We tabled Amendment 39 in this group, which would require the FCA consumer panel to produce annual reports on the regulator’s fulfilment of its statutory consumer protection duties, and my noble friend Lady Hayter explained why we were backing this so firmly and spoke about the work with the British Steel pensioners, led by Nick Smith. She saved my blushes because Nick is my husband. I know that is not a declarable interest, but in the interests of transparency, I should probably let people know. We are pleased to see Amendment 50 and will not be pressing our Amendment 39 to a vote because of it. We believe that the government amendments go a significant way to addressing our concerns, so will not press our amendment, but that does not mean that we are convinced that consumer issues are by any means resolved, and we may have to revisit this topic in future.
The noble Baroness, Lady Bowles, helpfully introduced the amendments tabled by the noble Lord, Lord Bridges, and presented his proposal for an independent office for financial regulatory accountability. This is an interesting proposal but, when considering the Government’s numerous concessions on scrutiny and accountability, at this point we would not be minded to support it at a Division, because the creation of such a body needs significant work and amounts to a fundamental change in how we regulate the sector. We do not want to pre-empt what the Minister has to say, but it was not a core focus of the future regulatory framework review, the outcomes of which the Bill seeks to implement.
The amendments from the noble Lord, Lord Bridges, raise important questions about the capacity of parliamentary committees to scrutinise the regulators’ output, and this is something we have consistently raised with the Minister during our private discussions. When I say “we”, that is very much the royal “we”—I obviously mean my noble friend Lord Tunnicliffe. I am sure that he is grateful to the Minister for the time she has given to him, to my noble friend Lord Livermore and to me in recent weeks. While we understand that it is for Parliament to make its own arrangements, both now and in future, we hope that the Government will acknowledge the substantial workload that committees will have and remain open-minded about whether and how the regulators can better facilitate Parliament’s work.
I am especially grateful to my noble friend Lord Eatwell for his amendments to the OFRA texts, but I suppose this highlights in part the difficulties with supporting the detail of the proposal at a Division at this point. We see that many people agree with the principle, but there is probably a great deal more work to be done on the detail.
Baroness Penn (Con)
My Lords, let me respond briefly to the points raised in the debate. I take first the amendments from my noble friend Lord Bridges, well introduced by the noble Baroness, Lady Bowles: Amendments 64 to 66 and 68 to 71, which would establish an office for financial regulatory accountability. As I said in my opening remarks, the Government agree that the provision of accurate and impartial information is extremely important for assisting Parliament in its important scrutiny role—and, indeed, others.
However, as the noble Baroness opposite acknowledged, creating a new body raises questions about how it would interact with the existing accountability structures and the balance of responsibilities between government, Parliament and independent regulators. As I noted in Grand Committee, the provisions for the establishment of the Office for Budget Responsibility referred to in this debate, on which OFRA is, at least in part, modelled, were brought forward in a stand-alone Bill after public consultation, where there was sufficient time to consider carefully its role and remit in advance. The Government therefore do not think that establishing such a body through amendment to this Bill is the right way forward at this time. We acknowledge the strength of feeling and degree of consensus from different parts of the House on this idea, and noble Lords can rest assured that my noble friend Lord Bridges has made it very clear to me that this is not the last that the Government will be hearing from him on this subject.
I turn to the series of amendments from my noble friend Lord Holmes. Amendments 42 and 45 seek to make specific provision for the regulators’ new CBA panels to be provided with the information required to perform their functions. The Government support the intention of these amendments but consider that the requirement in legislation to establish and maintain the panel already requires the regulator to ensure that the panel has the appropriate information and data to perform its functions.
My noble friend Lord Holmes asked how we could ensure high-quality cost-benefit analysis work. As he and the noble Lord, Lord Eatwell, noted, key to this is the composition of the panels. Panels with members who have diverse backgrounds, expertise and thought will be better placed to ensure that the FCA, the PRA and the PSR receive the most comprehensive appraisal of their policy. That is part of the reason why we have Clause 43, which requires the FCA and the PRA to set out a clear and transparent process for appointing members.
The FCA has also recognised the importance of improving diversity in the membership of its statutory panels and is undertaking a review to identify ways in which it can boost diversity so that the composition of panels appropriately reflects the range of practitioners and stakeholders in financial services. The Government welcome the work that is being done to move recruitment to the panels in this direction.
Amendments 41 and 45 seek to require the new CBA panels to make public their meeting materials and recommendations. The Government are not able to support this as it could undermine the confidentiality of the panels’ contributions, which is crucial to their role as a critical friend to the regulators. The panels and the regulator will already be able to make public their deliberations and materials when they consider it appropriate, without undermining that confidentiality. Through an amendment in this group, the Government are taking a power to oblige the panels to publish their annual reports on their work and lay them before Parliament; we think that this will deliver sufficiently.
If a panel feels that its work or conclusions are being ignored by the regulator, or where there are issues on which the regulator and the panel differ, the Government expect that these will generally be resolved in the course of regular engagement between the regulator and the panel. However, as I have said, panels are able to express their views publicly, including through their annual reports or by publishing responses to consultations. For example, as it currently operates, the FCA’s consumer panel regularly publishes its responses to the regulator’s consultations.
I turn to Amendment 39 in the name of the noble Baroness, Lady Chapman. I am glad that she and the noble Baroness, Lady Hayter, feel that government Amendment 50 seeks the same outcome and should help to deliver that, although I note that, as the noble Baroness said, this is not the last word on consumer issues. However, at least when it comes to this particular focus, we have, I hope, delivered on that.
I know that not all noble Lords are satisfied with all of what the Government have put forward, but this is a step forward in the right direction. I expect to hear more from noble Lords in future on how the new system that we are establishing through this Bill is operating. For now, I commend the amendment.
Baroness Penn
“(za) after paragraph (ba) insert—“(bb) how it has complied with the statement of policy on panel appointments prepared under section 2NA in relation to the process for making appointments and the matters considered in determining who is appointed,”Member’s explanatory statement
This amendment would ensure that the PRA includes in its annual report under paragraph 19 of Schedule 1ZB to the Financial Services and Markets Act 2000 a summary of how it has complied with the statement of policy on panel appointments in section 2NA as inserted into FSMA 2000 by Clause 43.
Lord Forsyth of Drumlean
Lord Forsyth of Drumlean (Con)
My Lords, I fear that the Minister has stolen my clothes. In speaking to Amendments 25, 29, 31, 36 and 38, which are in my name, and in looking at the government amendments, including Amendment 30, I find myself saying that the government amendments are far more effective and do a better job. They achieve the same purpose, so I say a big thank you to the Minister for having taken this on board. But, just reflecting on the debate we have had, I say that this will work only if very substantial resources are made available to any committee, whether that is a committee of this House or a Joint Committee.
I entirely understand the autonomy of this House, and the Government are to be commended in respecting it. It is up to this House and the other place to decide what committees they will establish, but here we have a statutory opportunity for us to set up a Joint Committee of both Houses, which my noble friend Lord Trenchard has made strong representations for, or indeed another committee of this House. But be in no doubt that any committee, whether joint or single, is going to have to look at the entire financial regulatory structure that has been taken from the European Union and given to the regulators. That is an enormous task. Although in this House we have many able people with expertise in this area, they have a finite amount of time and will absolutely need to be supported by people with technical expertise and knowledge, of the kind which the noble Baroness, Lady Bowles, would have been quite used to when she was in the European Parliament, so ably chairing a committee with similar responsibilities.
I very much support the government amendments and certainly do not feel the need to press any of mine to the vote in this House. I thank the Minister for having listened so carefully, and for the time that she and her officials have given to considering the arguments and points, which have been made pretty well with a degree of consensus across the Committee and the House. I beg to move.
The Deputy Speaker (Lord Faulkner of Worcester) (Lab)
I must advise the House—this will not surprise the noble Lord, Lord Forsyth—that, if this amendment is agreed to, I will be unable to call Amendment 26.
Lord Eatwell (Lab)
My Lords, I will comment briefly on the proposal which has emerged and is contained in Amendment 30 in the name of the noble Baroness, Lady Penn. It refers to the possibility of parliamentary committees being
“the Treasury Committee of the House of Commons … the Committee of the House of Lords”
or a Joint Committee. It says “and” but I presume that they would be mutually exclusive.
What is extraordinary about this amendment is that it contains a seriously bad idea which might lead to an extremely good outcome. The seriously bad idea is that the two committees, one in the other place and one here in the Lords, would be sitting at the same time and looking at the same material, requiring the same levels of expertise to advise them and the same commitment of time by the regulators—and, perhaps, producing divergent opinions which would lead to regulatory uncertainty. That is a very bad outcome. Why I fully support these amendments, however, is that the seriously bad idea will lead to an extremely good outcome, because people will see that the possibility of having a committee in the other place and a committee here doing the same thing, with all the negative connotations that I have just discussed, will lead to the rational outcome of a Joint Committee of both Houses.
Lord Vaux of Harrowden (CB)
My Lords, I added my name to the amendments by the noble Lord, Lord Forsyth, so I thought I would stand and associate myself completely with his comments. I am delighted that the noble Baroness has effectively accepted the proposal. I will add my voice to say this: the subject of financial services is so huge, complex and important that it really requires a dedicated committee, whether a Joint Committee or committee of this House, not just to be part of, say, the Industry and Regulators Committee or the Economic Affairs Committee. It is much too big a subject to be covered by a committee that is not dedicated to the subject—and, if you have a dedicated committee, it must be properly resourced.
The Government rightly say that this is a matter for Parliament, but let us be realistic: they have huge influence on what happens there. I really hope that the Government and whoever the powers-that-be in this House who make these decisions are—even as the chair of the Finance Committee, this is still slightly opaque to me—are listening. This is so important. We must go ahead and must resource it properly.
Viscount Trenchard (Con)
My Lords, I strongly agree with what my noble friend Lord Forsyth has said. I also put my name to his Amendment 25 and other amendments, and I think that he is entirely right.
I also thank the Minister for responding to the concerns expressed on all sides of the House and for recognising that the parliamentary oversight of the regulators may need to be done by a Joint Committee of both Houses. Like the noble Lord, Lord Eatwell, I had also noticed that the amendment says not “or” but “and”, so there is a danger that there might be three committees doing the same thing, which would treble the work required by the regulator and, presumably, by the witnesses and experts who would be called to assist.
Also like the noble Lord, Lord Eatwell, I had the experience of serving on the 1999 Joint Committee of both Houses. This was established by resolution of your Lordships’ House and another place separately but was effectively driven, or at least strongly encouraged, by the Government at the time. The noble Lord, Lord Burns, was a most effective chairman of the Joint Committee, and it was a pleasure to serve on it under his leadership. An added benefit of that Joint Committee was that it enabled noble Lords with an interest in financial services to work much more closely with Members of the other place and concentrated the expertise of both Houses in one committee. I agree with the noble Lord, Lord Eatwell, that it would be a seriously bad outcome were there to be two committees tasked with this huge job.
I also refer to what the noble Baroness, Lady Bowles, said. I was in Brussels at the same time that she was chairman of the ECON, the economic affairs committee of the European Parliament. I often visited the European Parliament at that time. I was struck by the large number of staff and the great facilities available to the committees to carry out their role of scrutinising the legislative proposals brought by the Commission. We have not experienced that burdensome type of work: in the past, under the European model, all our financial services regulation was in primary legislation. It will now be given to the regulators. We therefore need more resources than have been available to us to scrutinise and supervise them properly. This is really important.
Noble Lords should also be grateful to the Minister for restoring equality of involvement between another place and your Lordships’ House. I thought that this was an unfortunate precedent for this type of legislation, particularly as many noble Lords have recent and continuing involvement with financial services firms. I look forward to the Minister’s winding up.
Lord Carrington of Fulham (Con)
My Lords, I will add my two cents’ worth to encourage the establishment of a Joint Committee. I cannot believe that having a committee in each House of this Parliament would work effectively, for all the reasons that the noble Lord, Lord Eatwell, has suggested. The committees of this House and the other place are grossly underresourced in any case. We need a committee looking at something as detailed and complex as this which operates in the way that the Public Accounts Committee in the other place is set up, is dedicated to look at regulation and has the resourcing to double-guess not only the regulators but the advisers who advise them, so that it can stand up and come to its own opinion. In the small time that the members of those committees are able to dedicate to the committee, with all the other duties they have as parliamentarians, it should be able to analyse the evidence and come up with sensible, and inevitably highly technical, solutions.
I have some experience of the committees of both Houses. I chaired the Treasury Select Committee, donkey’s years ago, and I served on the Economic Affairs Committee here for some time. Neither of those committees has the resources to be able to undertake this kind of task. It needs a completely new structure. Possibly the only model we can look at is the PAC, which has the National Audit Office advising it very closely. I am not suggesting we should set up a national audit office for regulation, although I know my noble friend Lord Bridges has suggested such a thing. We need to make sure that whatever is set up is properly resourced. I recognise that it is a matter for both Houses to decide how they do that, but we have to be absolutely clear that both Houses can do that only if the financial resources are made available by His Majesty’s Treasury and the Government to enable them to do so. It will be a decision to be taken by His Majesty’s Government and my noble friend the Minister to ensure that the resourcing is available.
It is a necessary step. However, it is a step and almost certainly not the conclusion. Once we have experience of regulating the regulators, we will be able to judge what other changes are needed to make sure that the regulation is effective and that financial markets in London are regulated in a way that is effective and convincing for participants in those markets on a global basis.
Baroness Kramer (LD)
I congratulate the noble Lord, Lord Forsyth, on being so persuasive. The Government have listened carefully to his advice and have come forward with amendments that are identical in their outcome, even if perhaps they have found a more effective or legally acceptable way to set out the wording. I am sure that that is a step forward, but I want to join the chorus.
I had the privilege of being on the Parliamentary Commission on Banking Standards, which in effect was a Joint Committee of both Houses. It was very much driven by the Government, who set it up in the first place, and it was properly resourced. From the work we did over the two years, there are two lessons to be drawn. One is that, with that resource, you can genuinely produce the evidence and go into the detailed questioning that is necessary to expose what may not have been obvious from a superficial or limited inspection; in-depth was possible because of the resource that was made available. The second lesson is that as a Joint Committee—I am very attracted to Joint Committees, as they avoid the duplication that others have talked of—that commission received a degree of respect and significance that is probably not available to a committee that is the creature of one House but not the other. The joining together of the forces of both Houses was meaningful.
Lord Livermore (Lab)
My Lords, I join the noble Baroness, Lady Kramer, in congratulating the noble Lord, Lord Forsyth, on persuading the Government to adopt his amendments, albeit in a slightly different form. Given the amount of regulation coming forward in the months and years ahead, and with the expertise that your Lordships’ House can offer, it was crucial that the Government extended the Commons-only provisions to include a relevant Lords committee, and we very much welcome these government amendments.
We are also pleased that the Minister included the option of a Joint Committee, as this future-proofs the legislation in the event that colleagues in both Houses feel—as does my noble friend Lord Eatwell—that such a body would provide a better form of scrutiny of the regulator’s work. As my noble friend Lady Chapman mentioned in a previous group, and as the noble Lord, Lord Forsyth, stressed further, there are still significant outstanding questions about the level of staff resource and expertise that relevant parliamentary committees will be able to draw on. Although these questions cannot be adequately addressed through the Bill, these concessions will at least safeguard the role of your Lordships’ House and enable conversations on resourcing to now proceed.
Baroness Penn (Con)
My Lords, the amendments in this group focus on further formalising the role of parliamentary scrutiny of the regulators. The Government agree with noble Lords that effective parliamentary scrutiny, in particular through parliamentary committees, has a critical role to play in improving the quality of regulation, as the noble Baroness, Lady Kramer, said, and the performance of the regulators overall.
The Bill, through Clauses 36 and 47 and Schedule 7, seeks to ensure that the Treasury Select Committee has the information it needs to fulfil its role, by requiring the regulator to notify the TSC when publishing any relevant consultations. However, the Government have listened to the case made by noble Lords that the important role of this House was not adequately reflected by that approach. We have therefore tabled a series of amendments which will require the regulators to also notify the relevant Lords committee when they publish a consultation. These amendments will ensure parity between arrangements for the Commons and the Lords. They also provide that, if a Joint Committee is set up in future, the regulators will be required to notify it in the same way.
I am glad that my noble friend Lord Forsyth feels that these amendments fulfil the aims of his own; that is just as well, as his amendments in Committee and on Report formed the basis for the Government’s approach—that is no coincidence. I am grateful to him for the work that he has put in on this issue and for the time that he has taken to discuss these matters with the Government.
I am also grateful to my noble friend Lord Bridges and the noble Lord, Lord Hollick, for their engagement as the chairs of the current committees in this House that look at the work of the financial services regulators. When I spoke with them, they explained how the EAC and the IRC currently split some responsibility for financial services policy, an example of which was their recent work on LDI, where the EAC focused on the work of the Bank of England and the PRA and the IRC focused on that of the FCA. The Government’s amendments would allow for the two committees to continue with that approach if they wished to do so and for a different Lords committee to receive notifications of consultations from the FCA and the PRA. That structure would be for Parliament to decide.
I shall now pick up on the concern from noble Lords about having multiple committees looking at the same issues or the work of the same regulators. As I have said, the structure is a matter for Parliament, but currently we have the TSC in the Commons, and the Economic Affairs and the Industry and Regulators Committees in the Lords, which at the moment look at various aspects of the regulators’ work without duplicating each other or creating unnecessary burdens. Given the scale of powers for the regulators being established in this Bill, there will be more than sufficient work to go round different committees, and they have already proven themselves able to co-ordinate their work so that it is not duplicative.
We have heard, given the scale of the task before us, that there is concern about the resource made available to those committees. Committee structures and their resourcing will remain a matter for Parliament to decide and I have noted that noble Lords agree that that is the right approach. However, the Government recognise that the new model for financial services regulation will require a step change in this House’s scrutiny of the regulators and agree there must be suitable resource in place to support this. The Government will work with the usual channels and the House authorities in the appropriate way.
The Government have also heard concerns about the feedback loop when Parliament engages with regulatory proposals. There can often be a significant period of time between an initial consultation and the Bill’s existing provisions regarding the regulators’ engagement with parliamentary committees, and final rules being published. In particular, the Government recognise amendments tabled by the noble Baroness, Lady Bowles, in Grand Committee, seeking to require the regulators to explain how parliamentary recommendations have been considered. The Government have therefore tabled Amendments 61 to 63, which require the regulators, when publishing their final rules, to explain how they have considered representations from parliamentary committees. This will ensure that the regulators provide a public explanation of how the views of parliamentary committees have been considered at the point when rules are made. This complements the existing requirement in Clauses 36 and 47, and Schedule 7, for the regulators to respond in writing to the chairs of committees that have made representations. This will ensure not only that regulators appropriately consider Parliament’s representations but that they set out publicly how they have done so.
The debates so far have shown that there is no single silver bullet to solve the problem of accountability. However, the Government are committed to creating an effective, overarching ecosystem in which the various different actors all play their roles in holding the independent regulators to account, ensuring high-quality financial services regulation in the UK. I am therefore grateful that my noble friend Lord Forsyth has said that he will withdraw his amendments, and I intend to move the Government’s amendments, based on those amendments, when they are reached.
Lord Forsyth of Drumlean (Con)
My Lords, I am most grateful to my noble friend the Minister for the way in which she has responded to this. I entirely agree with her point, as a former chairman of the Economic Affairs Committee, on the way in which we have worked with the Treasury Select Committee. I agree also with the noble Lord, Lord Eatwell, that it is carefully drafted and—who knows?—it may very well lead to both Houses deciding to have a Joint Committee, which would certainly be the best possible option. But that is obviously not a matter for me and I beg leave to withdraw my amendment.
Baroness Penn
Member’s explanatory statement
This amendment, together with the amendment at page 50, line 43, would extend the duties of the FCA to notify the Treasury Committee of the House of Commons so as to include a relevant Committee of the House of Lords and a Joint Committee.
“(4A) The reference in sub-paragraph (4)(a) to the FCA’s operational objectives includes, in its application as a secondary objective, the competitiveness and growth objective (see section 1EB).” Member’s explanatory statement
This amendment would ensure that the references to the FCA’s operational objectives in new paragraph 28 of Schedule 1ZA to the Financial Services and Markets Act 2000, as inserted by Clause 36 of the Bill, includes a reference to the competitiveness and growth objective, as inserted by Clause 24 of the Bill.
Member’s explanatory statement
See the explanatory statement for the amendment at page 50, line 30.
Baroness Penn
“(5A) References in this paragraph to the relevant Parliamentary Committees are references to—(a) the Treasury Committee of the House of Commons,(b) the Committee of the House of Lords which—(i) is charged with responsibility by that House for the purposes of this paragraph, and(ii) has notified the FCA that it is a relevant Parliamentary Committee for those purposes, and(c) the Joint Committee of both Houses which—(i) is charged with responsibility by those Houses for the purposes of this paragraph, and(ii) has notified the FCA that it is a relevant Parliamentary Committee for those purposes.”Member’s explanatory statement
See the explanatory statement for the amendment at page 50, line 30.
Baroness Penn
Member’s explanatory statement
This amendment, together with the amendment at page 52, line 11, would extend the duties of the PRA to notify the Treasury Committee of the House of Commons so as to include a relevant Committee of the House of Lords and a Joint Committee.
“(4A) The reference in sub-paragraph (4)(a) to the PRA’s objectives includes, in their application as secondary objectives, the competition objective and the competitiveness and growth objective (see section 2H).”Member’s explanatory statement
This amendment would ensure that the references to the PRA’s objectives in new paragraph 36 of Schedule 1ZB to the Financial Services and Markets Act 2000, as inserted by Clause 36 of the Bill, includes a reference to the competition objective and the competitiveness and growth objective, as inserted by Clause 24 of the Bill.
Member’s explanatory statement
See the explanatory statement for the amendment at page 51, line 42.
Baroness Penn
“(5A) References in this paragraph to the relevant Parliamentary Committees are references to—(a) the Treasury Committee of the House of Commons,(b) the Committee of the House of Lords which—(i) is charged with responsibility by that House for the purposes of this paragraph, and(ii) has notified the PRA that it is a relevant Parliamentary Committee for those purposes, and(c) the Joint Committee of both Houses which—(i) is charged with responsibility by those Houses for the purposes of this paragraph, and(ii) has notified the PRA that it is a relevant Parliamentary Committee for those purposes.”Member’s explanatory statement
See the explanatory statement for the amendment at page 51, line 42.
Baroness Penn
“(7A) The FCA must appoint to the FCA Cost Benefit Analysis Panel at least two individuals who are employed by persons authorised for the purposes of this Act by the FCA, with each one being employed by a different person.”Member’s explanatory statement
This amendment would impose a duty on the FCA to ensure that the FCA Cost Benefit Analysis Panel includes at least two members who are employed by persons authorised by the FCA under the Financial Services and Markets Act 2000.
Baroness Penn
“(7A) The PRA must appoint to the PRA Cost Benefit Analysis Panel at least two individuals who are employed by PRA-authorised persons, with each one being employed by a different person.” Member’s explanatory statement
This amendment would impose a duty on the PRA to ensure that the PRA Cost Benefit Analysis Panel includes at least two members who are employed by PRA-authorised persons.
Baroness Penn
Member’s explanatory statement
This amendment ensures that the PRA Cost Benefit Analysis Panel (established under Clause 41) will be required to provide advice in relation to cost benefit analyses prepared for the purposes of consultation under the new paragraph 10A of Schedule 17A to FSMA 2000 (inserted by Clause 19).
Baroness Penn
“Panel reports
(1) The Treasury may by regulations require specified statutory panels of the regulator to produce an annual report on their work and provide that report to the Treasury.(2) Regulations under subsection (1) may make provision about the content of the annual report.(3) The Treasury must lay a copy of each report prepared by virtue of this section before Parliament.(4) Each specified statutory panel of the regulator must publish its reports prepared by virtue of this section in such manner as it thinks fit.(5) In this section—(a) “statutory panels of the regulator” means—(i) in relation to the FCA, the panels mentioned in section 1RA(8) of FSMA 2000,(ii) in relation to the PRA, the panels mentioned in section 2NA(8) of FSMA 2000, and(iii) in relation to the Payment Systems Regulator, a panel established under section 103(3) of the Financial Services (Banking Reform) Act 2013;(b) “specified” means specified in regulations under this section.(6) Regulations under this section are subject to the negative procedure.”Member’s explanatory statement
This new Clause would provide the Treasury with a power to make regulations to require annual reports to be produced by the statutory panels established under the Financial Services and Markets Act 2000 and the Financial Services (Banking Reform) Act 2013.
Baroness Penn
“(1A) The statement must provide information about— (a) how representations (including by a statutory panel) can be made to the Bank with respect to its review of rules under section 300I, and(b) the arrangements to ensure that those representations are considered.(1B) In this section “statutory panel” has the meaning given by section 1RB(5).”Member’s explanatory statement
This amendment would impose a duty on the Bank of England to ensure that the Bank includes in its statement of policy about the review of rules (required by section 300J of the Financial Services and Markets Act 2000, as inserted by Clause 46) information about how representations (including by statutory panels) can be made and considered.
(ii) the Bank’s secondary innovation objective (see section 30D(2) of the Bank of England Act 1998);”Member’s explanatory statement
This amendment would ensure that new section 300L of the Financial Services and Markets Act 2000, as inserted by Clause 46 of the Bill, includes, for the purposes of the Bank’s report, a reference to the Bank’s secondary innovation objective, as inserted by Clause 45 of the Bill.(The words after “advance” in section 300L(2)(a) would become sub- paragraph (i)).
Baroness Penn
Member’s explanatory statement
This amendment would ensure that new paragraph 33B of Schedule 17A to the Financial Services and Markets Act 2000, as inserted by Clause 47(14) of the Bill, includes a reference to the Bank’s secondary innovation objective, as inserted into the Bank of England Act 1998 by Clause 45 of the Bill.
“(g) in sub-paragraph (5A)(b)(ii) and (c)(ii), the references to the PRA being notified were references to the Bank being notified.”Member’s explanatory statement
This amendment would extend the duties of the Bank of England to notify the Treasury Committee of the House of Commons so as to include a relevant Committee of the House of Lords and a Joint Committee.
Baroness Penn
“(1A) The statement must provide information about—(a) how representations (including by a relevant panel) can be made to the Regulator with respect to its review of requirements under section 104B, and(b) the arrangements to ensure that those representations are considered.(1B) In this section “relevant panel” means—(a) a panel of the Payment Systems Regulator established under section 103(3), (b) a panel of the FCA mentioned in section 1RA(8) of FSMA 2000, and(c) a panel of the PRA mentioned in section 2NA(8) of FSMA 2000.”Member’s explanatory statement
This amendment would impose a duty on the Payment Systems Regulator to ensure that the Regulator includes in its statement of policy about the review of requirements (required by section 104B of the Financial Services (Banking Reform) Act 2013, as inserted by paragraph 7 of Schedule 7 to the Bill) information about how representations (including by statutory panels) can be made and considered.
“(bb) set out how the Regulator has complied with the statement of policy on panel appointments prepared under section 104I in relation to the process for making appointments and the matters considered in determining who is appointed,”Member’s explanatory statement
This amendment would ensure that the Payment Systems Regulator includes in its annual report under paragraph 7 of Schedule 4 to the Financial Services (Banking Reform) Act 2013 a summary of how it has complied with the statement of policy on panel appointments in section 104I as inserted into the 2013 Act by paragraph 7 of Schedule 7.
Member’s explanatory statement
This amendment, together with the amendment at page 159, line 5, would extend the duties of the Payment Systems Regulator to notify the Treasury Committee of the House of Commons so as to include a relevant Committee of the House of Lords and a Joint Committee.
Member’s explanatory statement
See the explanatory statement for the amendment at page 158, line 36.
“(5A) References in this paragraph to the relevant Parliamentary Committees are references to—(a) the Treasury Committee of the House of Commons,(b) the Committee of the House of Lords which—(i) is charged with responsibility by that House for the purposes of this paragraph, and(ii) has notified the Regulator that it is a relevant Parliamentary Committee for those purposes, and(c) the Joint Committee of both Houses which—(i) is charged with responsibility by those Houses for the purposes of this paragraph, and(ii) has notified the Regulator that it is a relevant Parliamentary Committee for those purposes.”Member’s explanatory statement
See the explanatory statement for the amendment at page 158, line 36.
Baroness Penn
“(4D) Where representations are made to the FCA by a Committee of the House of Commons or the House of Lords or a Joint Committee of both Houses in accordance with subsection (2)(e), the FCA’s account mentioned in subsection (4) must also describe how the FCA has considered the representations made by that Committee in making the proposed rules.””Member’s explanatory statement
This amendment would impose a duty on the FCA to include in the account that the FCA must publish under section 138I(4) of the Financial Services and Markets Act 2000 details about representations made by Parliamentary Committees.
“(4D) Where representations are made to the PRA by a Committee of the House of Commons or the House of Lords or a Joint Committee of both Houses in accordance with subsection (2)(e), the PRA’s account mentioned in subsection (4) must also describe how the PRA has considered the representations made by that Committee in making the proposed rules.””Member’s explanatory statement
This amendment would impose a duty on the PRA to include in the account that the PRA must publish under section 138J(4) of the Financial Services and Markets Act 2000 details about representations made by Parliamentary Committees.
“(5D) Where representations are made to the Payment Systems Regulator by a Committee of the House of Commons or the House of Lords or a Joint Committee of both Houses in accordance with subsection (3)(d), the Payment Systems Regulator’s account mentioned in subsection (5) must also describe how the Payment Systems Regulator has considered the representations made by that Committee in making the proposed requirement.”Member’s explanatory statement
This amendment would impose a duty on the Payment Systems Regulator to include in the account that the Payment Systems Regulator must publish under section 104(5) of the Financial Services (Banking Reform) Act 2013 details about representations made by Parliamentary Committees.
Baroness Penn
Member’s explanatory statement
This amendment is consequential on the amendment at page 160, line 29.
Baroness Penn (Con)
My Lords, the Government recognises that, while digital payments are increasingly present in our society, cash continues to play a vital role in many people’s everyday lives. That is why this Bill puts in place a framework to protect the ability of people and businesses across the UK to access cash withdrawal and deposit facilities for the first time in UK law and introduces new powers for the FCA.
It is important to recognise that, on the whole, cash access in the UK remains comprehensive. Industry is already funding a range of new and innovative services to support communities and ensure that they have easy access to cash. To date, LINK has recommended new shared cash access services in over 100 communities across the UK. This includes the introduction of over 50 shared banking hubs. While the opening of these facilities is taking time to get right, I welcome the recent openings of new hubs in Troon in Ayrshire and Acton in west London. I also understand that the pace of delivery is due to accelerate over the coming months.
Lord Holmes of Richmond (Con)
My Lords, it is a pleasure to take part in this debate and I will speak to Amendments 82 to 85 and 110 and 111 in my name. I start by thanking the Minister and Treasury officials for all the work they have done around access to cash and, indeed, the moves they have taken. It is great testament to all those organisations which have campaigned on cash for so many years, and will make a real difference to people up and down the country.
Without in any sense pre-empting the work that the regulator and others will do on this, I ask my noble friend the Minister to set out some thoughts on what reasonable access might look like. What are the Government expecting? Allied to that, while I join her in welcoming the increase in the number of shared banking hubs that are coming online, what do the Government see as a reasonable number of hubs to be open by the end of this year?
My Amendment 82 seeks to go further and is really predicated on a very simple belief: what point is access to cash if there are no places to spend it? What currency does cash have in those circumstances? The start point would be really to have all businesses with a physical presence mandated to accept cash. Stepping back from that, as my amendment does, does my noble friend the Minister not agree that any government service, be it central or local, and any public service, particularly that which involves a payment, must accept cash? Similarly, any third party acting on behalf of national or local government in performing a public service should be mandated to accept cash. Does my noble friend see it as reasonable for any business, private though it may be, with a turnover of £100,000—as set out in my Amendment 82—to have to continue to accept cash while we move and transition towards a more digital financial services system?
Amendment 83 seeks to make our cash network part of the critical national infrastructure. There are two key reasons for this. First, it would enable cash usage, enable the economy to work and enable financial inclusion. Secondly, does my noble friend the Minister not agree that, when one looks at the current geopolitical state of the world, making the cash network part of the critical national infrastructure would provide a good second and third line of resilience if the digital systems should go down or suffer an attack? As things stand, that is not beyond the realms of possibility.
Amendment 84 addresses banking services specifically and would enable the Treasury to determine that such services must be available on a high street with a certain number of shops and premises. Banking services would include withdrawals and deposits and must cover both individuals and businesses. Indeed, as the amendment sets out, if there is a last branch standing, that branch should not be allowed to close unless alternative provisions are already in place, such as a banking hub.
Amendment 85 addresses the accessibility of financial services and products. This is differentiated from access to financial services, although there are some obvious overlaps. The amendment points out the difficulties with the accessibility of certain financial services and products. The obvious and most easy example to understand is card payment machines where the buttons are removed and there is merely a flat screen. They are completely inaccessible for me and thousands of people.
In Committee, my noble friend the Minister talked about discussions between the Government, the RNIB and other organisations. Can she update the House on where those discussions have got to? How will the Government ensure that, whether one is paying for a meal or a bicycle, the means of payment is accessible for all those seeking to use it?
Amendment 110 addresses the need for a review of access to digital financial services and products. I raised this in Committee and do so again because it seems highly necessary and a logical next step from the Access to Cash Review, which was completed in 2019. Although I am a staunch supporter of cash and people’s access to and acceptance of it, the future is digital. However, we must ensure not only that that future is accessible but, equally crucially, that the transition to it is accessible. Does my noble friend the Minister agree that further work by HMT in this area would not only make sense following the Access to Cash Review but do a great service in addressing issues which will be felt sharply if we do not address them at this stage?
I will give just one brief example. I could have on my handheld device the best mobile banking app ever created, but if I do not have the digital skills and the confidence to use that app, no payment will be made. Similarly, if, in those same circumstances, I have those digital skills but no mobile connectivity or broadband, that payment will not be made. We need this review of access to digital financial services, before these problems become acute and they affect not only people’s finances but all elements of their lives.
Finally, Amendment 111 addresses the issue of the last branch standing in any particular location but seeks to push a bit further. If there is a remaining branch on a town high street, that is a good thing. However, if that branch does not offer a full banking service, particularly to small and medium-sized businesses and micro-businesses, and if it does not serve more than 20% of the local community, does my noble friend the Minister not agree that we should change the regulations to enable a shared banking hub to be opened in that area?
I look forward to my noble friend the Minister’s response. I hope she will respond fully to all my amendments, but particularly to Amendment 111. A very simple change between Report and Third Reading would make such a potential difference for many of the areas in those circumstances.
Baroness Kramer (LD)
My Lords, I will be exceedingly brief because we took, as we should have, a lot of time on this issue during Committee. We have also discussed financial exclusion already. Once again, I am channelling my noble friend Lady Tyler of Enfield, who wishes that she were not ill and could be here today. I will focus my remarks on Amendment 80 in the name of my noble friend Lady Tyler, and which is signed by me.
The numbers that have been provided to any parliamentarian of interest by LINK on the rate of bank branch closures are frankly scary. The number of bank branches is now below 5,000 across the country and is expected to fall to around 1,000 in the next few years. Amendment 80 gives the FCA power, where certain conditions are met, to direct the establishment of a banking hub. Banking hubs are the solution proposed by the banking industry, in association with LINK, to provide a physical banking facility which is essentially a collective of the relevant banks and the Post Office, in locations where bank branches have disappeared. I am very sympathetic to the idea that the noble Lord, Lord Holmes, proposed, where a branch in name but not in practice because its services are so limited would qualify as well.
LINK has recommended 100 of these shared hubs, but so far only six have opened. Quite often, that is because of the resistance of the banking institutions, which, in effect under the current scheme, have a veto on whether these hubs happen. The gap is yawning and the FCA needs to step in. Because this was raised in Committee, I say that anyone who thinks that online banking is a substitute for face-to-face banking can live only a very vanilla life. I found out the hard way that the systems online and the telephone constantly get it wrong. Often, the only way to resolve a complex issue is face to face. As others have said, including the noble Lord, Lord Holmes, the 5 million people who find digital difficult are even more disadvantaged.
I seriously hope that the Government will accept Amendment 80 because it is the missing mechanism to deliver the project—the Government themselves back the project—of banking hubs and shared banking. To get it delivered we need Amendment 80 to put powers into the hands of the FCA to make sure that it happens. This is a project, I repeat, that the Government themselves have sponsored, in a sense. We need the enablement and delivery to take place rapidly.
Baroness Chapman of Darlington (Lab)
My Lords, I congratulate the noble Lord, Lord Holmes, on tabling his amendments and his tenacity in raising these issues on a very regular basis. He is absolutely right to do so. We were pleased to table Amendment 81 in Committee, and we re-signed it when retabled by the noble Baroness, Lady Altmann, on Report.
We strongly welcome the Government finally bringing forward meaningful protections for cash access. Just in case the noble Lord, Lord Tunnicliffe, starts to doubt his powers of persuasion, we wonder if the Minister could explain why the noble Lord did not seem to have the magic touch when it came to getting him to accept it. The position seems to have changed somewhat now.
It is good that organisations such as Which? have welcomed this concession, noting that cash continues to be hugely important for many households, particularly those which need to keep track of their spending during the cost of living crisis. People should not have to pay fees to access their own money. While we welcomed the Government’s previous move to offer cashback at some retailers without a purchase, cashback services are not available anywhere near widely enough for that to be a substitute.
We welcome the progress made, but there is obviously a lot more to be done. An increasing number of people are finding themselves with little or no access to face-to-face banking services. While the banking hub initiative has promise, its coverage is too limited for it to be anything like a viable solution at this point. We welcome the fact that the noble Lord, Lord Holmes, has tabled several amendments on this. We hope that the Minister is able to go beyond previous assurances, and we look forward to her reply.
Baroness Penn (Con)
My Lords, I will first address the point made by the noble Baroness, Lady Chapman, on the change between Committee and Report. On a whole host of areas, we have reflected on the discussions we had in Committee. The Government have taken the time to do that work and were able to bring forward amendments at this stage, whereas we simply were not able to bring forward amendments on a whole host of topics in Committee. I do not think it is anything to do with differing powers of persuasion between the different stages.
My noble friend Lord Holmes has many of the amendments in this group. I am glad that he also welcomes the Government’s amendments in this area. He asked what reasonable access would look like; that further detail will be for the policy statement. It is important to recognise that currently, on the whole, cash access remains extensive. According to FCA analysis, over 96% of the population are within 2 kilometres of a free-to-use cash access point.
Turning to my noble friend’s amendments, I too acknowledge his persistent campaigning on the provision of access to cash across successive financial services Bills. However, the Government are not able to support the approach in Amendment 82. We do not consider it necessary or appropriate to place additional requirements on organisations to accept cash across the public and private sectors. This should be a decision for individual organisations as they decide how best to operate. What I can say to my noble friend is that the provisions in the Bill do not reflect access just to withdrawal facilities but to deposit facilities, which will support organisations to continue to accept cash.
On Amendment 83, again, this is an issue that my noble friend has raised previously. The designation of critical national infrastructure is sensitive and is not made public. I reassure my noble friend and all noble Lords that appropriate arrangements are in place to ensure the resilience of the UK’s financial system, including cash provision.
I turn to Amendment 80 from the noble Baroness, Lady Tyler, spoken to by the noble Baroness, Lady Kramer, and Amendments 84 and 111 from my noble friend Lord Holmes, which all relate to access to banking services. I acknowledge the strength of feeling on this topic and the perspectives that have been raised. As people acknowledge, it is clear that the nature of banking is changing, and the long-term trend is moving towards greater use of digital and telephone banking services over traditional branches. Of course, it is vital that those customers who rely on physical services are not left behind, which is why the FCA is taking an assertive approach to its guidance for firms on this issue.
Where firms are closing branches, the regulator expects them to put in place appropriate alternatives where reasonable. If firms fall short, the FCA can and will ask for closures to be paused or for other options to be put in place. Beyond digital access, several banks are rolling out community outreach initiatives when they close branches, maintaining key physical services in local libraries, shopping centres and roaming vans. Over 99% of personal and 95% of business customers can, and do, do their everyday banking at 11,500 Post Office branches.
On banking hubs, determining their location and the range of services provided is a commercial decision. My noble friend asked what would be a reasonable number of hubs to have open by the end of the year. As I said earlier, over 50 have been announced. We expect delivery on that commitment to pick up as this year progresses. Furthermore, since the last debate, several firms have made the commitment that, where a banking hub has been announced as a result of their branch closure, they will not close that branch until the hub is open, so we have a double lock of improving the speed of delivery but not losing services until we see improvement in the pace of delivery. That is welcome and shows that the industry is taking this issue seriously.
Regarding accessibility in my noble friend Lord Holmes’s Amendments 85 and 110, I absolutely share his ambition for financial services to be accessible to all. He spoke about some of the work that we discussed in Committee and asked for an update. Perhaps I can write to him after today’s debate with an update on that work.
I turn to the amendment on a review of digital inclusivity. Many financial services firms also support access to digital services through initiatives to distribute devices, teach skills, or facilitate support networks. The Government recognise that we need to be proactive in this space, and there is a range of work under way to ensure that financial services adapt to the needs of consumers in the digital age and to address the issues that my noble friend rightly raised. These include driving further progress on access to digital infrastructure, connectivity and skills to fully benefit from this transition.
I am grateful to my noble friend for his constructive challenge of the Government’s approach to this important issue. I assure him and all noble Lords that the Treasury will continue to consider where there may be gaps in the Government’s approach and ensure that no one is left behind as we evolve into new ways of managing our money. An example of this is that the Government recently held a call for evidence on the Payment Services Regulations, which invited views on this policy. We are currently considering responses, including where these are linked to financial inclusion.
I hope that, although the Government are not able to support the other amendments in this group, I have reassured noble Lords that the Government consider these issues very seriously through this work. I hope that noble Lords do not move their amendments when they are reached.
Baroness Penn
“(3A) A “free cash access service” is a cash access service that is—(a) a free of charge service which enables cash to be placed on a relevant personal current account, or(b) a free of charge service which enables cash to be withdrawn from a relevant personal current account.”Member’s explanatory statement
This amendment would provide a definition of “free cash access service” in new Part 8B of the Financial Services and Markets Act 2000, as inserted by paragraph 1 of Schedule 8 to the Bill.
Member’s explanatory statement
This amendment is consequential on the amendment at page 161, line 15.
“(3A) A “relevant personal current account” means a relevant current account held by one or more individuals for purposes outside any business, trade, craft or profession of that individual or those individuals.”Member’s explanatory statement
This amendment would provide a definition of “relevant personal current account” in new Part 8B of the Financial Services and Markets Act 2000, as inserted by paragraph 1 of Schedule 8 to the Bill.
“(2A) The reference to cash access services in subsection (2) includes free cash access services.”Member’s explanatory statement
This amendment would clarify that the cash access policy statement that the Treasury must prepare under new Part 8B of the Financial Services and Markets Act 2000, as inserted by paragraph 1 of Schedule 8 to the Bill, includes policies concerning free cash access services.
Baroness Penn
“(1A) In this section references to cash access services include references to free cash access services.”Member’s explanatory statement
This amendment would ensure that the FCA’s duty, in new section 131U of the Financial Services and Markets Act 2000, as inserted by paragraph 1 of Schedule 8 to the Bill, of seeking to ensure reasonable provision of cash access services includes seeking to ensure reasonable provision of free cash access services.
Baroness Penn
“(2A) Regulations under this paragraph may apply to partial property transfers generally or only to partial property transfers—(a) of a specified kind, or(b) made or applying in specified circumstances.”Member’s explanatory statement
This amendment would provide consistency with other parts of Schedule 11 on Central counterparties by clarifying that regulations made under paragraph 75 (restriction of partial transfers) may apply to transfers generally or only to transfers of a particular kind or in particular circumstances, as specified in the regulations.
Baroness Penn
“(5A) A liability, to the extent of its reduction by a write-down order under this section, is to be treated as extinguished unless and until revived by section 377H or 377I.”Member’s explanatory statement
This amendment would clarify the effect of a write-down order under section 377A (to be inserted into FSMA 2000 by paragraph 1 of Schedule 12 to the Bill) on the treatment of liabilities reduced by the order.
Member’s explanatory statement
This amendment would correct a reference in the table of termination events in the context of describing when a write-down order regarding the value of an insurer’s liabilities ceases to have effect.
Member’s explanatory statement
This amendment would provide a drafting clarification to ensure that the effect of a write- down order is more clearly reflected in this provision concerning compensation to policyholders where insurers are in financial difficulties.
Lord Harlech
“The Ombudsman scheme
(1) FSMA 2000 is amended as follows.(2) In section 429 (Parliamentary control of statutory instruments), in subsection (2B) after paragraph (c) insert—“(d) provision made under paragraph 15(3) of Schedule 17.”(3) Paragraph 15 of Schedule 17 (the Ombudsman scheme: power of scheme operator to charge fees) is amended as set out in subsections (4) and (5).(4) In sub-paragraph (1) after “respondent” insert “or other persons of a specified description”.(5) After sub-paragraph (2) insert—“(3) The reference in sub-paragraph (1) to persons of a specified description is a reference to such descriptions of persons as may be specified in regulations made by the Treasury.(4) The power conferred by sub-paragraph (3) to specify descriptions of persons may not be exercised so as to provide for eligible complainants to fall within a specified description of persons.(5) The reference in sub-paragraph (4) to “eligible complainants” is a reference to complainants who are eligible in relation to the compulsory or voluntary jurisdiction of the ombudsman scheme (see section 226(6) and 227(7)).(6) Before making regulations under sub-paragraph (3) the Treasury must consult the scheme operator.””Member’s explanatory statement
This new Clause would enable the scheme operator of the Financial Ombudsman Scheme to make rules requiring persons of a description specified in regulations, other than eligible complainants, to pay fees in connection with the investigation of complaints (in addition to the existing power to impose fees on persons who are the subject of complaints).
Lord Harlech (Con)
My Lords, the Financial Ombudsman Service was established through the Financial Services and Markets Act 2000 to provide for the proportionate, prompt and informal resolution of disputes between consumers and financial services firms. The FOS offers a cost-free service for consumers, which is fundamental to its purpose.
The FOS is funded by a combination of an annual levy on regulated firms and case fees. Under the current framework, it is responsible for setting its case fee rules and can charge case fees only to firms that are subject to complaints. This means that claims management companies—or CMCs—and other professional representatives cannot be charged for bringing cases to the FOS. The Government heard the concerns raised by noble Lords, particularly by my noble friend Lady Noakes during Grand Committee, about CMCs bringing large numbers of vexatious claims against firms to the FOS.
Amendment 90 therefore addresses those concerns by amending FSMA 2000 to give the Treasury the power to make regulations specifying categories of persons to whom the FOS can charge case fees. The Treasury intends to add CMCs and other professional representatives such as law firms to this list. This will enable the FOS to amend its rules to charge case fees to CMCs and other professional representatives for bringing complaints, subject to its usual consultation processes. By specifying who can be charged by the FOS in regulations, the Government can ensure that the full range of claims management models can be effectively captured. It also allows flexibility to amend this list in future if different models emerge.
The Government are clear that all consumers should be able to access the FOS free of charge and without the need for any CMC support. The FOS remaining a cost-free service for consumers is fundamental to its purpose. The amendment therefore expressly prevents the Treasury adding consumers to the categories of persons who can be included in the regulations.
In summary, Amendment 90 will ensure that the Treasury is able to empower the FOS to charge case fees to CMCs while ensuring that the FOS remains cost-free for consumers. I beg to move.
Baroness Kramer (LD)
From these Benches, the amendment makes sense to us.
Baroness Chapman of Darlington (Lab)
Happily, it makes sense to us as well. Without wishing to delay anybody—remembering the exchanges we had before this debate started today—I wonder whether the Minister could indicate the level of fees. He said that consumers would be excluded, which is very important. Are the Government confident that this will not in any way suppress the use of this service? Do they have anything in mind to improve awareness of the service among consumers?
Lord Harlech (Con)
My Lords, I am grateful for the contributions in this short debate and thank both noble Baronesses for them.
On case fees, the amendment follows the existing approach under FSMA to allow the FOS to charge fees to respondents. Under this approach, the Government set out through legislation who the FOS is able to charge fees to and it will be for the FOS to set the detail of those case fee rules. This may include when firms should be charged; for example, from the first case or after a certain number of cases. Similarly, the amendment will not prescribe the specific approach the FOS will have to take in charging CMCs—it will be for the FOS to look at those fees. The FOS highlighted concerns from industry about this issue in its feedback statement following its recent consultation on its funding framework, and it acknowledged examples of poor behaviour by CMCs.
The Government agree that there are wider implications and it is critical that the bodies in the financial services regulatory framework, including the FCA and the FOS, co-operate effectively. That is why Clause 38 introduces a statutory duty for the FCA, the FOS and the Financial Services Compensation Scheme to co-operate on issues that have significant implications for each other or for the wider financial services market. Clause 38 also ensures that the FCA, the FOS and the FSCS put appropriate arrangements in place for stakeholders to provide representations on their compliance with this new duty to co-operate on matters with wider implications. These organisations already co-operate on a voluntary basis through the existing wider implications framework. Clause 38 will enhance that co-operation and ensure that these arrangements endure over time while retaining the operational independence of the bodies involved.
As I have set out, the Government are clear that all consumers should be able to access the FOS free of charge, without the need of any CMC support. Amendment 90 will enable this.