House of Lords: Governance

Baroness Bennett of Manor Castle Excerpts

Wednesday 8th December 2021 Grand Committee

[Baroness Bennett of Manor Castle (GP)]

My Lords, it is a pleasure to follow the noble Lord, Lord Wei. I very much agree with his desire to get greater public involvement in, understanding of and engagement with the operation of your Lordships’ House.

Today, we have the rare luxury of a seven-minute speaking slot, despite the subject, the operation of your Lordships’ House, being what some might dismiss uncharitably as navel-gazing—this being, as we are always told, the unelected House, limited in power and so unable to block the Government doing things, even when we know they are wrong. That is, of course, two minutes longer than we had yesterday to speak on the enormous changes to our NHS proposed in the Health and Care Bill.

I begin by apologising to the noble Lord, Lord Davies of Brixton, and doing some violence to his division of governance, management and administration, by simply classifying three things into those groups. First, if we look at administration as being about the fabric of this place, we see that there are clearly issues. I am not terribly interested in them, because I think this place should be turned into what it clearly is—a museum—and we could get a new, modern, functional institution; Birmingham would be the obvious place.

On management, if we think about staff, I agree with the noble Lord, Lord Strathclyde, and say how wonderful I have found the staff in the Bill Office, the Table Office, the Library—I do not want to miss anyone out here—and the canteen, and the doorkeepers. So many staff are absolutely brilliant. Like the noble Lord, Lord Davies, I want to think about the unions, and I worry about how some of the staff are treated sometimes; I hope that the unions stand up for them.

That brings me to the third category, which is governance. I will focus on what are generally referred to as the usual channels, on which there was a short paragraph or two in the Library briefing. Given that we have quite some time, I thought I would step back and take a very long view that reflects my current reading: David Graeber and David Wengrow’s The Dawn of Everything: A New History of Humanity. It focuses particularly on the Palaeolithic and the Neolithic, with a reminder that people tens of thousands of years ago were just as intelligent and creative as we are today—they were biologically identical—and arguably more so, given that they did not have the foundation of the centuries of development on which we build. I do not fully have time to explore this fascinating issue—I definitely recommend a read—but the point I want to draw from it for our subject is that humans have created many different ways of getting together and making decisions. The authors, and many modern archaeologists, posit that we do not require hierarchical, rigid structures, or monarchs or aristocrats, to operate societies, just people gathering together and deciding new ways of doing things.

It is interesting that many have referred to your Lordships’ House being self-governing. That might, at least in theory, be what you would describe as an anarchist collective. In that frame, I will explore some possibilities for governance of your Lordships’ House, particularly regarding what is done by the usual channels. It struck me that we have structures very like those with which many nations and groups are now successfully experimenting: citizen’s or people’s assemblies—representative groups that seek to arrive at consensus decision-making, as has been done in the UK and France with the climate assemblies, in Ireland on the difficult issues of abortion and equal marriage, and in some local contexts in the UK, some organised by the Government. These are forms of deliberative democracy. They sound a little like the townhall meetings that the Senior Deputy Speaker proposed. I suggest that these are structures rather like our Select Committees: groups that hear expert evidence, carefully weigh and examine it, and arrive at conclusions.

The way that the usual channels make decisions is utterly opaque and utterly unknown, as many noble Lords pointed out. What if it was replaced with a representative committee that operated openly and made decisions based on evidence and testimony expressed as the will of the House? I have previously raised issues about Select Committees, notably the fact that membership is decided on the basis of allocation by four groups, effectively excluding a large and increasing part of the House’s membership. But they are broadly representative —far more so than the usual channels—and from everything I hear, not having had the opportunity to participate myself, they operate in a broadly collegiate and constructive way. My suggestion is that that is how we reorganise the decisions made by the usual channels.

I started by saying that some might view all this as navel-gazing, but the fact is that what happens in your Lordships’ House is astonishingly important in our current circumstances; we are far more representative of the country than the elected other place, where 44% of the votes in 2019 got Boris Johnson 100% of the power. Looking at the fact that our Cross Benches have the balance of power in your Lordships’ House, they are quite a representative group, a little like a citizen’s assembly or perhaps the kind of structures the noble Lord, Lord Wei, suggested.

I have looked at the big scale, but I want to pick up on a couple of small and immediate points. The first is the disappointment that I know is shared by many Peers about our return to a free-for-all at Oral Questions; here I disagree with the noble Lord, Lord Taylor of Holbeach. We know that there is a gender discrimination aspect to that, although that is not the only discrimination. It benefits the loud, the pushy and the experienced—and yes, I know which of those categories I might belong in.

The second point I wish to raise specifically is about the current deeply uncertain situation concerning Covid-19—indeed, I believe announcements are being made as I speak. Media reports suggest that the Government are about to announce a work from home directive. I do not expect the Senior Deputy Speaker to comment on that, or indeed on the procedures of the House right at this moment, but I very strongly propose that we should hear tomorrow about what will happen in your Lordships’ House in light of the Covid situation. I expect that we will see significant changes. On this point, I will finish by coming back to and reflecting on the unsuitability of the fabric of this place. I really hate to think what a carbon dioxide monitor would show in this Room at this moment because I do not think that it is anything resembling Covid-secure.

COP 26

Baroness Bennett of Manor Castle Excerpts

Tuesday 16th November 2021 Lords Chamber

[Baroness Evans of Bowes Park (Con)]

I thank my noble friend. The UK presidency marked Ocean Action Day at COP, championing a call for action to protect and restore ocean health and resilience. For instance, more than 100 countries have now signed up to protect at least 30% of the global ocean by 2030. My noble friend Lord Goldsmith is obviously very heavily involved in this work and will continue to lead international action in this area.

[Baroness Bennett of Manor Castle (GP)]

My Lords, like the noble Lord, Lord Newby, I was surprised that the Prime Minister rather bravely referred to Aristotelian virtue in the Statement. Four essential characteristics of virtue, according to Aristotle, are prudence, temperance, courage and justice. There is no provision in the Glasgow agreement for loss and damage payments—reparations for the fact that the global south is already suffering deadly horrendous damage because of the emissions of the global north. The Statement says that Alok Sharma will push countries to go further. Will the UK lead in putting in funds for loss and damage, as Scotland has already done, reflecting the fact that the most vulnerable nations made it very clear at COP that they expect this to be fully sorted out at Sharm el-Sheikh?

[Baroness Evans of Bowes Park (Con)]

I am surprised that the noble Baroness did not realise that this was, in fact, the first COP decision that included a position on loss and damage, which is a recognition of how seriously developed countries are taking their obligations. The Glasgow dialogue was launched better to co-ordinate financial support for extreme impacts, and it agreed that there would be a dialogue between parties, relevant organisations and stakeholders to discuss the arrangements for funding activities to avert, minimise and address loss and damage. We also established the functions of the Santiago network, which will provide technical assistance to developing countries to address loss and damage. So progress was most certainly made.

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[Baroness Evans of Bowes Park (Con)]

I completely agree with the noble Viscount. That is why we were so pleased, for instance, with the 140 leaders representing over 90% of the world’s forests pledging to halt and reverse forest loss by 2030. We also had 45 nations pledge action and investment to protect nature and to shift to more sustainable ways of farming and, as I mentioned earlier, there was action on the global ocean. The noble Viscount is absolutely right, and that is why we put this front and centre and included it in COP in a way that had not happened before. My colleague, my noble friend Lord Goldsmith, is leading this: he is passionate about it and will continue to talk to global colleagues in order to keep this agenda going forward.

[Baroness Bennett of Manor Castle (GP)]

My Lords, the Statement says that we have seen countries that really should know better dragging their heels on their Paris commitments. The Minister will be aware that the Beyond Oil & Gas Alliance has launched, led by Denmark and Costa Rica and also involving the states of California and Quebec. Given that we are committed to 1.5 and one of the commitments of the Beyond Oil & Gas Alliance is 1.5, meeting Paris commitments, are we not dragging our heels by not signing up to this alliance?

[Baroness Evans of Bowes Park (Con)]

No. We have been central to action in this area. For instance, we were central to setting up the Powering Past Coal Alliance which now has 165 members, including national and subnational Governments, businesses and organisations. We will obviously continue to look at this area but we are certainly leading the way. In fact, the transition is already under way. In OECD countries, the share of coal in power generation has fallen from a peak of 40% in 1990 to a low of 23% in 2019. As we have said, although perhaps we had watered-down language, as we have all accepted, the end of coal is in sight, and that is what we want to continue to work to.

Afghanistan

Baroness Bennett of Manor Castle Excerpts

Wednesday 18th August 2021 Lords Chamber

[Baroness Bennett of Manor Castle (GP) [V]]

My Lords, it is a great pleasure to follow—unexpectedly—the noble Baroness, Lady Sherlock. My noble friend Lady Jones of Moulsecoomb has already focused on our essential responsibility to provide refuge for the people who served us and to whom we promised safety. In the other place, Caroline Lucas highlighted how the Government’s planned Nationality and Borders Bill would criminalise

“a woman fleeing the Taliban with her children”—

an intention the Home Secretary has reportedly confirmed since my Green colleague spoke.

In my brief time, I will follow the noble Lord, Lord Newby, in looking at the bigger picture, given that we now have to make an urgent root-and-branch review of our nation’s place in the world. Of immediate import is to end exercises in US-inspired sabre rattling, as was said by the noble Lord, Lord Lamont. As the noble Baroness, Lady Helic, said, the integrated review of security, published just in April, is already hopelessly outdated.

The tragic events in Afghanistan are a powerful indicator of the post-hegemon world in which we live. We must never again see the UK blindly following the US, particularly into war, but also into other dangerous international policies. The UK should be working through international institutions, within the rule of international law, and with likeminded nations to strengthen and support these mechanisms. That can start by working to rally the international community to present a common front to the Taliban, demanding respect for human rights and democracy.

Next, the UK needs to stop pumping out weapons into a world awash with them. The Taliban is now extraordinarily well armed. Of the $83 billion the US spent on Afghanistan’s army and police, a very large percentage was on weapons, now largely in Taliban hands. In the past decade, the UK has licensed the sale of £16.8 billion-worth of arms to countries classified as “not free”. The standout, obvious disaster is Saudi Arabia. Since the war in Yemen started, the UK has licensed the sale of £20 billion-worth of arms to it. The uses to which our weapons are now being put by Saudi Arabia are indefensible, but, when regimes such as this fall, as such regimes always fall, where will those weapons end up? They will likely be in hands such as the Taliban’s. We must stop being arms pushers.

Finally, there are our nuclear weapons, which were acquired in the Cold War, now a long-gone era. I can only assume that, when the noble and gallant Lord, Lord Houghton of Richmond, referred to

“totemic platforms of a bygone age”,

he had those weapons in mind. They are of course irrelevant in the Afghan crisis. They keep us in the club of nations that have hideous weapons of mass destruction, while their use is unthinkable. We could take a major positive step towards a new geopolitical order by joining the majority of the world’s nations in backing a ban on nuclear weapons. More modestly, we could join the pushers for no first use, and to end the sole authority for use, which left so many terrified in the last days of the Trump presidency.

On a final note, coming back home, what extra help are the Government going to provide to veterans who served in Afghanistan, and those still serving, to deal with the shock of this month’s events? This is a huge issue, as the noble Baroness, Lady Taylor of Bolton, highlighted.

Official Development Assistance

Baroness Bennett of Manor Castle Excerpts

Thursday 24th June 2021 Grand Committee

[Baroness Bennett of Manor Castle (GP) [V]]

My Lords, it is a pleasure to follow the noble Baroness, Lady Hayman, and I thank the noble Lord, Lord Campbell, for securing this debate. I commend particularly the contribution of the noble Baroness, Lady Sugg, who has shown her absolute commitment to those in need of our aid.

Let us run through where some of these cuts are falling and how we have found out about them. It is thanks to the UN Population Fund—UNFPA—that we know the UK Government are cutting their funding for its programmes by 85%, down from $211 million to $32 million. The UK Government are that organisation’s largest donor, a major supplier of contraceptives, other sexual and reproductive health products and some maternal and newborn health supplies. We provide contraceptives to about a third of users in some of the poorest countries.

We have learned about another cut from the World Health Organization. We will see millions of people at risk of dying from neglected tropical diseases—to which the noble Baroness, Lady Hayman, just referred. These diseases mostly affect people in the poorest countries. This is a particularly disgraceful, disgusting waste: some 280 million tablets are likely to expire and have to be incinerated because of the withdrawal of this money.

From the World Food Programme, we learn that in Yemen, considered to be the world’s worst humanitarian crisis, will see a cut of nearly 60% in UK aid. Nearly half the population—13.5 million people—is already struggling to get enough food, and that is expected to rise by 3 million by the end of this month.

So what gender assessment have the Government carried out of their decisions? Will they publish a gender assessment? Will it publish a poverty assessment? How is it that this seems to be hitting what is perhaps the 1% of the world’s poorest people? Has it actually been targeted at women and the poorest?

House of Lords: Remote Participation and Hybrid Sittings

Baroness Bennett of Manor Castle Excerpts

Thursday 20th May 2021 Lords Chamber

[Baroness Bennett of Manor Castle (GP) [V]]

My Lords, it is a pleasure to follow the richly evidenced contribution of the noble Earl, Lord Kinnoull. I thank the noble Baroness the Leader of the House for this debate, and the noble Lord, Lord Cormack, for his contribution to it, which has given me something to react against.

I do agree with the noble Lord, Lord Cormack, however, that perspectives on the issues of the functioning of the House may be influenced by our personal experience. To declare mine, I spent about five months in what the noble Lord calls “normal” and have subsequently been a very regular—I know the Government sometimes think too regular—contributor remotely. I admit that I have found it easier than many; I am not quite a digital native, but I did learn to programme in BASIC in 1987. That gives me a particular perspective on the tremendous innovation and patience of all the staff who have transformed this House; I thank them all. This House has done brilliantly in adapting to circumstances, to general acclaim—and to the envy of MPs; we have done considerably better than the other place, as the noble Lord, Lord Kirkhope of Harrogate, noted.

The noble Lord, Lord Cormack, suggested that there was a risk of the continuation of the current arrangements making the House increasingly irrelevant. My conclusion is the opposite. If we continue to vote more efficiently and allow more open participation for Members than the other place, it highlights the fact that this House is, under our undemocratic electoral system, more representative of the views of voters than the other place. My five months of so-called normal is, I believe, sufficient experience to make a critical judgment on the perspective of the noble Earl, Lord Howe, and the noble Lord, Lord Cormack, regarding the suggestion that repetition in speeches and reading out contributions that make no reference to what came before them is more common now. I strongly disagree with any suggestion that Ministers more often provided effective answers to questions in 2019 than they do now. Like the noble Lord, Lord Sikka, I do not believe in some past golden age.

My noble friend Lady Jones of Moulsecoomb has already addressed the issue of equality, particularly for our disabled Members and those with caring responsibilities, to which the noble Baroness, Lady Humphreys, and the noble Lord, Lord Bradshaw, provided personal testimony. To exclude those Members from contributing to the full as we go back to a “normal” that forces them to experience extraordinary practical difficulties getting into and around the House would be unconscionable. In an age of the expectation of equality, it would be damaging to the reputation of the House, as would be not considering the environmental impacts of our decision, as the noble Earl, Lord Devon, said.

It is the same with voting. To insist that Members be in the House is to exclude the views of many—and not just those affected by personal circumstances. Those who seek to maintain the union might like to consider how excluding Members based in nations other than England from exercising their vote appears.

The noble Lord, Lord Cormack, spoke slightingly of the “ease of contributing remotely”. I call that “efficiency”. I nipped out of this debate for a meeting on animal sentience with the noble Lord, Lord Goldsmith, joining a Teams meeting in seconds. That might not be great for my step count, but it was a lot more efficient than a forced speed-walk through the winding corridors of Westminster. Of course, that is of considerable importance to our small Green group—the two of us trying to represent the 1.25 million people who have just voted for our party in the local elections alone—but it is surely of great relevance too to the many in your Lordships’ House who combine membership with continuing professional or voluntary activities to, sometimes at least, the benefit of the nation.

There is efficiency too in being able to fully share the work of your Lordships’ House through social media. The right reverend Prelate the Bishop of Birmingham commented that, for many:

“If you’re not on Instagram, you don’t exist.”


That is something that Members of your Lordships’ House might want to contemplate in considering their social media presence and how the rest of the nation views us.

Which brings me to the word “normal”. There was little in the procedures of your Lordships’ House of October 2019 that looked normal to the outside world—and I am not talking just about mink and maces. Standing up and seeing who can shout loudest, muscling out others in Oral Questions, is behaviour that is not regarded as normal in preschool, and is clearly discriminatory. Having opaque procedures controlled by the usual channels meets no definition of a democratic normal. That those usual channels exclude several hundred Members of the Chamber is clearly not normal. The phrase “usual channels” is so normalised as to be part of the furniture but, I suggest that, in thinking about further changes, that furniture should go.

Finally, the noble Earl, Lord Howe, spoke about

“a temporary solution to a temporary problem”.

But we are in an age of shocks. We have had massive pandemic threats once every 10 years over the past few decades and, as many Peers have noted, SARS-CoV-2 is far from under control. We have a climate emergency, a dangerously unstable financial system, and a building in the same condition, as the noble Baroness, Lady Scott of Needham Market, said.

In the always useful Cross-Bench meeting, our new Clerk of the Parliaments spoke of the need, whatever decisions we arrive at after this debate, to maintain the ability to return in an emergency to arrangements such as those we have now. How much easier it will be to do that if the systems are kept functioning rather than being mothballed. We have to think about resilience in everything that we do in the future, in this House and in this country.

Covid-19 Update

Baroness Bennett of Manor Castle Excerpts

Thursday 13th May 2021 Lords Chamber

[Baroness Evans of Bowes Park (Con)]

I thank my noble friend. We are obviously aware of the concerns raised about the challenge of securing indemnity for live events. Reopening when we are confident it is safe to do so will reduce the chance of cancellations and interruption, which is why the rollout of the vaccination programme is so critical. We also want to be sure that any investment or intervention would lead to an increase in activity. At the moment, for instance, we understand that social distancing remains one of the key barriers to activity. I can certainly reassure my noble friend that DCMS officials are working across government and with the affected sectors to understand the challenges and are keeping the situation under review to determine the most appropriate and effective response.

[Baroness Bennett of Manor Castle (GP) [V]]

My Lords, in light of the difficulties Australia and New Zealand, with their excellent Covid control track records, have had in preventing breakouts of infection from quarantine facilities, can the Leader of the House tell me how many cases of infection have been traced to English quarantine facilities, an issue of particular importance given concern about the B16172 variant? If she is unable to answer this now, could she perhaps write to me later?

[Baroness Evans of Bowes Park (Con)]

I will write to the noble Baroness.

Financial Services Bill

Baroness Bennett of Manor Castle Excerpts

3rd reading & Report stage
Monday 19th April 2021 Lords Chamber

If the Government accept the principle of transparency, they can improve the wording of this amendment and make it part of this or future legislation. The outcome can only be better regulation and government accountability, as well as higher public confidence in the finance industry—something we all seek. I beg to move.

[Baroness Bennett of Manor Castle (GP) [V]]

My Lords, it is a great pleasure to follow the noble Lord, Lord Sikka, who has just delivered what I can describe only as a bombshell of a speech—one that makes the case for the extraordinary importance of this amendment and for a far broader cleanout of the Augean stables of our financial sector and its so-called regulation and, indeed, of our entire UK system of government.

I remind noble Lords that Amendment 33 in the name of the noble Lord, Lord Sikka—also signed by the right reverend Prelate the Bishop of St Albans, and to which I am pleased to attach my name—creates for the FCA a

“duty to make a statement about ministerial directions on investigations”.

I also remind noble Lords of a key part of the speech that we have just heard. On 30 May 2017, possibly in response to previous invitations, the Thames Valley police and crime commissioner wrote to Prime Minister saying:

“There is a serious problem with bank governance, which appears to be corrupt at the highest level in a number of our major banks. The governance system itself is being run by those most involved in cover ups and corrupt practices.”


That came from the Thames Valley police and crime commissioner, yet it appears that nothing has been done in response to that letter. I note also, as the noble Lord, Lord Sikka, said, that despite an initial offer of a meeting, the late Sir Jeremy Heywood subsequently declined to meet the police and crime commissioner.

Who should be paying attention to this? I would say everyone in the UK, and indeed the world, for while it might be more than a decade since the threat presented by the financial sector to the security of us all was made so starkly evident, the threat remains and is undoubtedly even greater now than in 2008. Among those who should be paying particular attention, I strongly suggest, are all those who have been assuring us in this House and elsewhere that everything is fine: “Nothing to see here, just a few bad apples being cleared out”. People have been saying that there is no problem with regulation or transparency, or the risks that the financial sector presents. They should pay attention to the noble Lord’s speech.

The House has heard my views before on the deep-rooted, decades-old—indeed, centuries-old—issues with our financial sector. I am not going to repeat those, which I explored at some length in Committee. Instead, I focus in this stage on the financial sector as a huge global crime issue, as a major United Nations initiative has recognised. I refer to the High-Level Panel on International Financial Accountability, Transparency and Integrity for Achieving the 2030 Agenda—the so-called FACTI panel. It is calling on Governments to agree to a global pact for financial integrity for sustainable development. This reminds us that while we often think of white-collar crimes and fraud as victimless, in fact they are crimes that damage the whole world, but particularly the poorest and most vulnerable in the UK and globally.

The FACTI panel, consisting of former world leaders and central bank governors, business and civil society heads and academics, says that as much as 2.7% of global GDP is laundered annually, while corporations shopping around for tax-free jurisdictions cost Governments up to $600 billion a year. We have heard often in debating the Bill, and elsewhere from the Government in particular, about how prominent the UK financial sector is on the global stage and about its world-leading role. There can be no conclusion from the FACTI report except that it is directed clearly at the UK and at your Lordships’ House.

The FACTI panel says that stronger laws and institutions are needed to prevent corruption and money laundering, and that the bankers, lawyers and accountants who enable financial crime must also face punitive sanctions. The report also calls for greater transparency on company ownership and public spending, stronger international co-operation on the prosecution of bribery, to which this amendment is particularly relevant, on minimum corporate tax, which I asked a question about last week, and on the global governance of tax abuse and money laundering. In Committee, I also referred to the Center for American Progress, not necessarily an organisation with which I often ideologically agree. However, it was making similar arguments to those of the FACTI panel. I invite any noble Lords with an FT subscription—which is all of us, through the Library—to look at stories tagged “financial fraud”. They make for a sober set of reading.

Action is needed. We hear often about the need for the UK to be world leading. I want to reflect on a meeting—which I know was before the pandemic because it was in person, conducted upstairs in one of the Committee Rooms of your Lordships’ House—when I had a discussion with a group of University of Michigan master’s students. They were visiting with their professor while in Europe to study fraud; their entire master’s degree was in fraud and corruption, examining the scale of it around the world. Pointing down the road from your Lordships’ House, I said to them that the City of London was one of the global centres of corruption. I was perhaps not surprised but still interested to discover that there was no expression of shock or surprise from those students. They simply nodded in agreement, as if I had made a statement that to them was blindingly obvious.

The City of London has been trading on its global reputation with centuries of propaganda, backed for much of that time by the muscle of colonial power. The world has moved on and is less and less likely to believe the propaganda. Amendment 33 is a simple, modest and far from sufficient step, though an important one, to ensure transparency in the governance of our financial sector—indeed, transparency of our governance. I commend it to your Lordships’ House.

--- Later in debate ---

Moved by

[Baroness Bennett of Manor Castle]

36: After Clause 40, insert the following new Clause—
“UK Finance Watch
(1) A body corporate called UK Finance Watch is established.(2) The purpose of UK Finance Watch is to provide oversight of—(a) the United Kingdom’s financial services industry,(b) its impacts on the real economy, and(c) all associated regulations.(3) The PRA and FCA must fund the activities of UK Finance Watch.(4) UK Finance Watch must produce reports on the following matters—(a) proposed changes in financial legislation and regulations;(b) deficiencies identified in retained EU law relating to financial regulation;(c) any other issue relating to financial markets and the financial services sector which, in the opinion of UK Finance Watch, threatens the stability and prosperity of the economy of the United Kingdom.(5) The Treasury, PRA and FCA must have regard to any publication produced by UK Finance Watch.(6) The Chancellor of the Exchequer must appoint members to UK Finance Watch.(7) When appointing members to UK Finance Watch, the Chancellor of the Exchequer must have regard to the desirability of appointing members who, between them, have expertise in— (a) academia;(b) accounting;(c) law;(d) climate, biodiversity and the environment;(e) trade unions.(8) UK Finance Watch may appoint officers and staff to assist their functions.”

[Baroness Bennett of Manor Castle (GP) [V]]

My Lords, before moving the amendment, I join the noble Earl, Lord Howe, the noble Lord, Lord Sikka, and the noble Baroness, Lady Kramer, in expressing my sadness at the death of the noble Lord, Lord Judd. I send my condolences to his family. The noble Lord, Lord Judd, was the first person to ask me a question while I was in the middle of delivering a speech in your Lordships’ House and did so in his characteristically kind and generous manner. It was a good lesson—perhaps intentionally so—for a newbie.

In light of our time-truncated debate in Committee, Amendment 36 in my name, also backed, kindly, by the noble Lord, Lord Sikka, is a somewhat adapted version of the amendment that I presented there. It would create a UK equivalent of the EU’s Finance Watch. I have chosen at this time to use this name for clarity as well as pronounceability.

I really must thank the noble Lord, Lord Eatwell, who made the case for this amendment—intentionally or not, I am not sure—in our previous session on Report. He suggested that there were flaws in my Amendment 37, criticisms with which I would not necessarily disagree. He said the amendment

“asks the FCA and the PRA to—to use a phrase that has become popular today—mark their own homework. They are not really the right people to assess themselves; there are plenty of research institutes around this country that do a first-class job of assessing exactly these issues. However, we have not brought them together very well.”—[Official Report, 14/4/21; cols. 1425-26.]

I highlight the last sentence in particular because bringing together expertise, knowledge and analysis is exactly what “UK Finance Watch” would be designed to achieve—to bring together the undoubtedly wide range of expertise around the country to provide independent technical advice to enable Members of your Lordships’ House and the other place to contribute to public debate.

I set out in Committee and in briefings circulated before the Committee debate a detailed explanation of what the comparable EU body has achieved, and I will not repeat that here; nor will I repeat comments I made then about the thinness of the scrutiny of this Bill by your Lordships’ House, except to repeat that that is not a criticism of those here but rather a call for many more Peers to be engaged. The financial sector impacts on every aspect of modern life. We live in a financialised society, whether it is hedge fund ownership of care homes, water supplies or the PFI contracts and their successors doing such damage to our schools and hospitals. Peers who are experts in these areas have interests in these areas and many other Peers from all aspects of society need to be engaged in debates on financial Bills. But that is clearly not customary and could easily be daunting.

However, there is a need for a co-ordinated independent source of information, expertise and detailed knowledge that can, in some way, match the lobbying firepower and influence. I have in mind here the position of remembrancer, to empower Peers concerned with every aspect of society in overseeing the impact of the financial services laws and regulations that are so crucial. This would help the House obtain the complete picture that I was calling for in the amendment last week.

I thank the noble Baroness, Lady Kramer, for her comments in that debate. She said that

“one of the big questions that has never been answered is: how does our financial services industry impact on the real economy, in contrast to something much more circular within the financial services economy?”—[Official Report, 14/4/21; col. 1425.]

She has entirely identified what I was seeking to do with that amendment. This amendment would not, as drafted, achieve that aim, being focused on ensuring the quality and effectiveness of legislation and regulation. However, when I put the words of noble Baroness, Lady Kramer, and the noble Lord, Lord Eatwell, together, if UK Finance Watch proved to be a network, a clearing house—as the noble Baroness, Lady Kramer, suggested it could be in our debate in Committee on a similar amendment—of the information that the noble Lord, Lord Eatwell, referred to, then we would have made real progress in the oversight and public legislative understanding of what is currently a far too opaque and little-understood area. As the right reverend Prelate the Bishop of St Albans said earlier, we need far more people asking questions about the financial sector from the outside, but they need help to be able to do that effectively.

I feel that the noble Baroness, Lady Kramer, made the arguments for me but I note that Greensill is just the latest brand name for which the UK financial sector will be famous—or infamous. I hope this model being based on one in the EU does not prejudice noble Lords or, indeed, the Government against it. Being world leading surely means looking around the world, seeing best practice and copying it.

It is not my intention to divide the House on this amendment. The oversight and scrutiny of regulation and laws for our financial sector is clearly an ongoing debate of considerable concern to a wide range of Members of your Lordships’ House. I beg to move.

[Baroness Noakes (Con)]

My Lords, we simply do not need another body set up to look at the financial services industry. It is already in effect a core function of the Treasury and if the Treasury thought that it needed some help in identifying the issues that the proposer of this amendment identifies, it does not need the cover of primary legislation to set one up. In addition, Parliament itself has always taken a keen interest in the financial services industry. The long-standing Treasury Select Committee of the other place examines regulators as well as key emerging themes in relation to financial services and your Lordships’ House has recently created an Industry and Regulators Committee, which is having its first meeting as we speak. Indeed, the noble Lord, Lord Eatwell, the noble Baroness, Lady Bowles of Berkhamsted, my noble friend Lord Blackwell and I are members of the new committee. Therefore, it should not surprise the House if in due course there is a focus on matters relating to the financial services sector.

I suspect that the subtext of this amendment is a belief that the financial services sector is wicked and has a negative impact on the UK economy. I do not believe that belief is widely shared in your Lordships’ House. On the other hand, there are few—if any—Members of your Lordships’ House who think that the financial services sector is perfect, and that includes me. The important point is that we already have the scrutiny mechanisms that I have described to give a proper focus to the activities and the impact of the financial services sector. I agree with the noble Baroness, Lady Bennett of Manor Castle, that this amendment should not be pressed to a vote.

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[Earl Howe (Con)]

My Lords, as I set out in our earlier debate, the Government agree that effective oversight of the regulation of our financial services sector and consultation with a diverse range of stakeholders are crucial to the sector’s ongoing success. As we have discussed previously, Parliament has a unique role to play in that oversight function.

In that context, I will set out the existing mechanisms that ensure effective independent oversight of the sector and its regulation by a diverse range of stakeholders. I will not repeat my previous remarks on the regulators’ arrangements for publishing consultations and the manifold ways in which they are already held to account by various panels and Select Committees.

I understand that this amendment is partly inspired by Finance Watch in the EU, an organisation which conducts research, monitors financial services legislation inside the EU and advocates on financial services issues. As the noble Baroness indicates in her amendment, we do not have a body in this country that performs an equivalent role; were we to have one, I imagine it would be made up of industry stakeholders of various kinds. As noble Lords will know, parliamentary committees can and do seek input from a wide variety of experts. In doing so, they can bring together the existing expertise of academics, think tanks and industry stakeholders.

Nothing prevents the creation of such a body in this country without a legislative basis; indeed, the EU organisation was not created by EU law but was simply set up as a non-profit organisation under Belgian law. It is funded by a combination of contributions from its members and philanthropic foundations and grant funding from the EU, for which the group has to bid.

The Government and the regulators regularly consult on their plans and proposals, and interested parties, including those from the backgrounds set out in this amendment, are free to respond. The Government and regulators consider all responses to such consultations carefully and consider how the views expressed should influence final policies and rules. I am concerned that this amendment would therefore duplicate existing practices in a very real sense.

In addition, it would appear to duplicate the work carried out by the Financial Policy Committee of the Bank of England. The FPC acts as the UK’s macroprudential authority; it identifies, monitors and acts to remove or reduce systemic risks to the UK financial system. It may make recommendations to the Treasury, the FCA and the PRA, and is required to publish a financial stability report twice a year setting out its view of the outlook for UK financial stability, including its assessment of the resilience of the UK financial system and the main risks to UK financial stability.

Given this, and the existing processes that I have set out in previous debates today that offer ample means for achieving the outcomes sought by this amendment, I hope the noble Baroness will feel able to withdraw it.

[Baroness Bennett of Manor Castle (GP) [V]]

My Lords, I thank the Minister for his response and all noble Lords who have taken part in this debate.

The noble Baroness, Lady Noakes, suggested that what this amendment covers is actually a core function of the Treasury. That is very much not the case. The Treasury is the definition of the establishment, part of the Government; this is an outside, independent oversight body. She also said that Parliament takes a keen interest in financial regulation. That conclusion can be questioned by looking down the lists of speakers through the progress of this Bill and contrasting them to the lists of speakers for, for example, the Domestic Abuse Bill.

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[Baroness Bennett of Manor Castle (GP) [V]]

My Lords, it is a pleasure to follow the reflections of the noble Viscount, Lord Trenchard, on how oversight of this Bill has been truncated, despite all the hard work put in, and the fact that we still do not have a clear picture of what the Government propose, as the noble Baroness, Lady Kramer, said in introducing Amendment 37F.

As this is the last amendment, and we have already covered this ground extensively, I will be brief. I wanted to speak on this group to offer my support for the amendment in the names of the noble Baronesses, Lady Kramer and Lady Bowles of Berkhamsted, both of whom have done extraordinary, sterling work on this Bill.

We have a real problem of oversight, which has been seen and expressed on many sides of your Lordships’ House. Looking at the real-world situation, the circumstances now and the headlines coming out, we have huge problems with our financial sector, and any independent outside observer would see that clearly. Although we know that this amendment will not be put to a vote, it would ensure that there is a chance to properly question and scrutinise the work of the regulators, which has to be at the heart of the system, and of trying to fix our broken system.

It has been a long debate, if often cut up into different stages and occurring at odd intervals, and we have a long way to go. The Government tell us we are to expect many more financial Bills coming down the track. We will have to keep coming back to these issues again and again, until we finally see progress.

[The Deputy Speaker (Baroness Garden of Frognal) (LD)]

The noble Baroness, Lady Bowles of Berkhamsted, has withdrawn, so I now call the noble Lord, Lord Tunnicliffe.

Financial Services Bill

Baroness Bennett of Manor Castle Excerpts

Report stage
Wednesday 24th March 2021 Lords Chamber

[Baroness Altmann (Con) [V]]

My Lords, I am pleased to speak to this amendment. I have worked in this industry for many years. The numerous scams, frauds and scandals that have plagued consumers are ongoing. It seems clear, as the noble Lord, Lord Sharkey, said, that the Financial Services and Markets Acts 2000 does not protect consumers. I thank the noble Lord, Lord Stevenson, for his clear explanation of why the amendment, in all its parts, is required.

A duty of care on providers to make sure that they are considering the interests of their customers would certainly help to address the asymmetry of information between the providers and the consumers. It might also assist customers in the manner that the products that are developed are offered. Too often, providers develop new products with new complexities that are clearly not user-friendly. The FCA requirements are that the risks and details of the products must be disclosed, but the disclosure documents are impenetrable to the ordinary person. Those working at the FCA and those working for the providers understand the language used—it is natural to them—but the vast majority of the public do not understand the specific product literature which the FCA has been relying on to offer this kind of protection. It is clearly not helping consumers to be faced with bamboozling jargon and many pages of legalese in the product descriptions and the terms and conditions.

The FCA consulted on this in 2017 and it released a statement in 2019, and other consultations have covered this as well. I congratulate the Government for having engaged on this issue, and my noble friends Lord True, Lady Penn and Lord Howe; I know they have all worked on this issue. But, from a practical perspective, and as someone who has worked in this industry, developed product for consumers and worked with consumers on the other side who have suffered detriment, I believe that the fears about competition are somewhat overdone. All firms, if they have a duty of care, will then have to look after customers, so the issue of competition should not really pose so much of an impediment. Markets currently function in the interests of providers rather than consumers, and regulators are reactive to problems rather than trying to pre-empt problems that have been highlighted and pointed out for two or three years before anything is actually done—by which time so many consumers have lost out.

Of course I believe that firms should not profit from exploiting the public’s lack of understanding and education when it comes to retail financial services. Successive Governments have talked about improving financial literacy, but they have not managed to achieve this. In practice, providers do not know their customers, the customers do not understand the product literature and, indeed, it seems that there is very often no requirement for the provider to even ask basic questions of the consumer before the consumer buys a particular product. There are countless examples of areas where just a basic question could have prevented a consumer buying an inappropriate product.

So I urge my noble friend on the Front Bench to take up the offer of the noble Lord, Lord Stevenson, and work with him and other interested Peers to come up with a form of words for Third Reading that can prevent a vote on this issue and can also help accelerate the important duty of care that is required. Waiting for a consultation later this year is simply not good enough when it comes to the kinds of scandals and scams that we know are going on day in and day out.

[Baroness Bennett of Manor Castle (GP) [V]]

My Lords, it is a great pleasure to follow the noble Baroness, Lady Altmann, and her powerful plea, which I hope the Government will listen to. I also speak to Amendment 1 in the names of the noble Lords, Lord Stevenson of Balmacara, Lord Sharkey and Lord Eatwell, to which I was pleased to attach my name, as I did to a very similar amendment in Committee.

Any noble Lords who have read the Second Reading debate will note that I majored on a “duty of care” in my speech. I used what you might call an expanded definition of “duty of care” to suggest that it might not be too much to put on the face of the Bill a demand that the financial sector should not engage in reckless, fraudulent, corrupt, obviously damaging systemic behaviour, including shipping off tranches of cash into tax havens, deploying complex financial instruments that they clearly do not understand and handing over control of markets to automated systems without adequate controls—things that threaten the security of all of us. But while I believe that principle remains sound, the lawyers convinced me that, in narrow legal terms, “duty of care” could not be stretched that far.

What the amendment here clearly introduces is a duty of care to individual customers. As proposed new subsection (2)(ea) says, their

“vulnerability, behavioural biases or constrained choices”

should not be exploited. Once, perhaps, such a clause was not necessary. There was a not ideal, but certainly useful, constraining paternalism: your local bank manager would look after you, both in limiting borrowing and in making allowances for unexpected disasters, personal and business. That has long gone—as of course has, almost universally, the local bank manager and, all too often, the local bank branch—so we need the law to step in to protect people to constrain the behaviour of financial institutions. As noble Lord, Lord Sharkey, said, we are in a situation where malfeasance has just continued to grow, with technical developments being one cause of that and, as noble Baroness, Lady Altmann, said, scandals and fraud have plagued consumers.

So that is the institutional side of where we are, but we also have to think about the state that people and our society are in today and make the law fit for our modern times, for these are times of massive insecurity. The idea of saving, or of even making the incoming funds match the essential outgoings each month, was an impossible dream for millions of people even before the arrival of the SARS-CoV-2 virus.

No one can know when sudden illness might strike—this Bill has been championed by Macmillan Cancer Support, to whose work I give credit—or it could be a redundancy or a pandemic that strikes people unexpectedly. That is one side of vulnerability and care that financial institutions should acknowledge. As Macmillan highlights, almost one in three of those severely financially impacted by their cancer diagnosis had to take out a loan or credit card debt. That is a public health issue. What we have are institutions that have been making profit from customers, sometimes for decades, and they have a duty to act compassionately and fairly in such circumstances.

But I think we also need to pay a bit of attention to the elements of the proposed new clause referring to “behavioural biases” and “constrained choices”. The noble Lord, Lord Holmes of Richmond, has been a rather isolated champion in this Bill on issues around the use of artificial intelligence algorithms and issues such as their potential bias, but he has also highlighted the way in which financial companies now have a historically uniquely detailed understanding of customer behaviour and the chance to exploit that through complex, opaque mechanisms.

As the noble Lord, Lord Stevenson of Balmacara, said in introducing an amendment, there has always been asymmetrical access to information between financial sector companies and their clients, but this has been massively magnified by technology—something that is only likely to grow. To create an assumption that this inequality of arms should not be misused should, we hope, constrain the behaviour of the financial sector—or at least, if it does not do that, provide a potential route for redress should it occur. There are already many who have need to seek redress for the behaviour of financial sector companies. I spent time with some of them this morning at a meeting of the Transparency Task Force.

As noble Lord, Lord Stevenson, said, the Government are likely now to say “Wait”—but why? We know that there is already an existing massive problem and a huge risk. If the Government do not acknowledge the need to act now, I offer the Green group’s strong support for the intention of the noble Lord, Lord Stevenson, to test the view of the House.

[The Deputy Speaker (Baroness McIntosh of Hudnall) (Lab)]

The noble Lord, Lord McNicol of West Kilbride, has withdrawn from the debate, so I call the next speaker, the noble Baroness, Lady Tyler of Enfield.

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Throughout the passage of the Bill and in many other fora, the Government have made it clear in their rhetoric that they understand the overwhelming importance of climate risk. These amendments would lay the foundation of turning those words into action, and I hope that the Minister will be able to respond positively to them.

[Baroness Bennett of Manor Castle (GP) [V]]

My Lords, it is a great pleasure to follow the noble Baroness, Lady Hayman, who is taking such a brilliant lead on these issues in your Lordships’ House. I thank her for her concentration on the biodiversity crisis as well as the climate emergency. Reflecting on her comments, I too hope that this is the last time it will be up to this House to add the missing element of climate to a financial Bill. Maybe for biodiversity we can proceed even faster. I too welcome the news about the FCA appointments—although putting that into the Bill, as Amendment 23 would do, would be better, because it would provide a statutory guarantee that such an appointment would continue.

I shall speak to Amendments 3, 22, 23 and 44. Amendment 44 is in my name, and Amendment 3 is in the name of the noble Lord, Lord Oates, and others. Amendments 22 and 23, to which I have attached my name, are in the name of the noble Baroness, Lady Hayman. I shall speak to Amendments 3, 22 and 23 together.

I had cause this morning to reflect back on the work of your Lordships’ house, by a similarly small and dedicated band, on the Medicines and Medical Devices Bill. At that team’s heart was the noble Baroness, Lady Cumberlege, author of the recent review often referred to by her name, but actually entitled First Do No Harm. Would that we could see the financial sector adopting that principle. Instead, it continues to pump funds into destroying the planet at breakneck speed.

An independent report by a coalition of NGOs, out this morning, shows that the world’s biggest 60 banks have provided $3.8 trillion-worth of financing for fossil fuel companies since the Paris climate deal in 2015. In our home sector, UK bank Barclays provides the most fossil fuel financing of all European banks—and the finance provided in 2020 was more than in 2016 or 2017.

The report notes that a commitment to be net zero by 2050 has been made by 17 of the 60 banks, but the report describes the pledges as “dangerously weak, half-baked, or vague”. It is clear that self-regulation—however much the Government may be wedded ideologically to the idea—has not worked. And we are in an emergency: we cannot wait.

Johan Frijns, at BankTrack, part of the coalition behind the report, says:

“there exists no pathway towards this laudable goal”—

net zero—

“that does not require dealing with bank finance for the fossil fuel industry right here and now.”

These amendments do not go that far, but they least set us on the right track—a track to transparency that does not require little-funded NGOs to dig well-buried data out of dark corners.

None the less, as others have noted, we have made some progress since Committee stage, and I welcome the government amendments in this group, which reverse the Government’s claim, made to me in Committee, that we did not need a reference to the climate emergency in the Bill. This will be, I believe, after the Pension Schemes Act, the second financial Bill to start to acknowledge the truth of doughnut economics—that the economy, and all human life, has to live within planetary limits.

That brings me to my Amendment 44, which addresses biodiversity. It is an addition to the government amendment requiring the FCA to “have regard to” the carbon target for 2050 when making Part 9C rules. My amendment simply adds another “with regard to”—in this case to the UK commitments under the UN Convention on Biological Diversity.

I referred to planetary limits. We are not yet focused nearly enough on the fact that the atmospheric carbon dioxide levels, at 417 parts per million today, is only one way in which we are outside the doughnut of sustainability. There is also the collapse of the natural world, as the globe’s Governments have acknowledged with the Convention on Biological Diversity, to which the UK is of course a signatory.

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I thank noble Lords for their indulgence. On behalf of the right reverend Prelate the Bishop of St Albans, I beg to move.

[Baroness Bennett of Manor Castle (GP) [V]]

My Lords, it is a great pleasure to follow the noble Lord, Lord Sikka, who has presented the amendment so clearly and effectively, while I also regret the absence of the right reverend Prelate the Bishop of St Albans, who has been doing such sterling work in focusing on the practical real-world impacts of the Bill on people’s lives and welfare, to which, as we have discussed in other groups, a lack of effective regulation in the financial sector has done such damage.

In Committee, during a debate on a similar amendment, the noble Lord, Lord Rooker, referred to brass-plate economies and the damage that they do to societies if they become dominant. Indeed, much of our debate in Committee focused on the well-being of the people of Gibraltar. I have no objection to that; indeed, I welcome it. I wish them well in their difficult post-Brexit position, which they were put into despite 96% of them voting in 2016 to remain in the EU. However, we have to ask why 20% of the UK insurance sector and a large amount of our out-of-control, seriously damaging gambling sector is going through Gibraltar’s servers, with very little benefit to the people of the UK. I doubt whether ending it will make any great difference to the people of Gibraltar either; as the noble Lord, Lord Sikka, has just outlined—and he is one of your Lordships’ House’s experts in this area—very little of that money is likely to be seen in Gibraltar in any meaningful sense.

I note that the Minister said in Committee:

“This proposal cannot be supported by the Government because it does not reflect Gibraltar’s autonomy”,


but I am not sure that I understand that. If we are talking about regulating activities in the UK, which is what the amendment is explicitly about, surely that is a matter of sovereignty—the issue to which the Government are so attached. Perhaps the Minister can explain that further in his answer.

In Committee, the noble Lord, Lord True, said:

“The Government were satisfied that the Gibraltar authorisation regime is rigorous”,—[Official Report, 1/3/21; col. GC 308.]


but we have to ask why so much business is whizzing through Gibraltar, at least in electronic form, for no obvious reason.

The noble Lord, Lord Sikka, pointed out in Committee that Gibraltar has a population of around 33,000 but more than 60,000 registered companies, nearly two for every person living on the Rock. We know that Gibraltar as a society must need people to fulfil many roles, from childcare to garbage collection, food preparation and, probably now much more than before, customs officials. The regulators of those 60,000 companies must be kept very busy keeping a tight and careful eye on their activities. Perhaps the reason is simply the comparative corporation tax rates. As the right reverend Prelate intended to say, our corporation tax rate is 19% whereas Gibraltar’s is 10%. Of course, the Government promise that our corporation tax rates will rise to become somewhat closer to international norms—if not just yet—so the disparity and the potential attraction are likely only to increase.

I referred in Committee to the Tax Justice Network estimate that the Gibraltarian arrangements inflict costs of $4 billion on other nations, predominantly the UK. That figure could grow significantly with tax rises, so I would argue that the case for this amendment has become even stronger, and I remain, with many others, doubtful about the level of transparency and scrutiny.

Ultimately, this amendment is about activities in the UK. It is not about Gibraltar at all. It is about transparency, honesty and ensuring that profits made in the UK are properly taxed in the UK.

[Baroness Kramer (LD)]

My Lords, I am cautious about any further disruption for Gibraltar post Brexit. The challenge that Gibraltarians face is going to be an exceedingly difficult one and, since the UK put Gibraltar into that situation, we ought to be sympathetic and supportive.

I understand the motives of the right reverend Prelate the Bishop of St Albans and others to increase transparency, but we are talking about what is best described as legal tax avoidance, not tax evasion. I hear nothing but widespread respect for the Gibraltarian tax authorities and the way they manage the business that falls under their supervision.

This is a dangerous time to deny another party equivalence when we ourselves are seeking equivalence from the European Union. I would point out, as others have done, that we have rather a low corporate tax rate at the moment. It is due to rise in the future, but we will still be at the low end of the G7. At the moment, we are exceedingly low compared to most of our EU competitors. We have also granted equivalence to the EU, and that includes locations such as Luxembourg and Ireland, which have low corporate taxes much more akin to those of Gibraltar.

So I do not think we have a major problem here. I am always glad to see an opportunity for transparency but, in this case, we are not looking at shutting down criminal activities, which is the area where I would like to see us work very hard on transparency. I think we need to be responsible to the people of Gibraltar, who sit in a position that is not of their choosing.

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[The Deputy Speaker (Lord McNicol of West Kilbride) (Lab)]

My Lords, the next speaker is the noble Baroness, Lady Bennett. The speaker after her, the noble Baroness, Lady Morgan, has withdrawn, so the speaker after the noble Baroness, Lady Bennett, will be the noble Lord, Lord Davies.

[Baroness Bennett of Manor Castle (GP) [V]]

My Lords, it is a pleasure to follow the noble Lord, Lord Stevenson of Balmacara, and I offer my thanks for his support for the concept of Amendment 12, to which I shall speak. It appears in my name and is kindly supported by the noble Lord, Lord Sikka, and the right reverend Prelate the Bishop of St Albans.

Amendment 12 seeks to secure a discounting of debt for people entering proposed statutory debt repayment plans—something that the noble Lord, Lord Stevenson, noted has already occurred in Scotland. I set out in Committee that that is a large group of people with incomes above those eligible for debt relief orders, but with assets and income generally below those covered by voluntary agreements on bankruptcy. All those other agreements operate in ways that can result in debt being cleared in a relatively short period, much shorter than those to be covered by statutory debt repayment plans. I will not repeat all that detail again.

However, this amendment represents a development of an amendment presented in Committee to secure a fair debt write-down in respect of debts sold on the secondary market. For that initial amendment and this amended one, I pay tribute to the large amount of work done by the Centre for Responsible Credit, from which noble Lords will have received a briefing. While a strong argument exists to support this proposal, entirely legitimate concerns were raised in the debate that the impact of such a move on the operation of the secondary market would need to be properly considered. The noble Lord, Lord True, also raised a concern about the need for equitable treatment of debtors in the scheme. Taking those concerns on board, this new amendment, rather than being prescriptive, is permissive in nature and seeks to ensure that discounts on debt are secured, where appropriate, with the full agreement of creditors.

Amendment 12 recognises that many creditors listed on debt repayment plans, regardless of whether the debt originated with them or they bought it on the secondary market, will often prefer to receive a lump sum as full and final payment as opposed to low levels of instalments spread out over many years. As a result, many creditors already offer a significant discount on the total level of debt if a lump-sum settlement can be made. While the StepChange debt charity has a dedicated team to provide advice to debtors concerning possible full and final settlements, not all debt management plan providers do so. There arises a potential conflict of interest, as SDRP providers are likely to be reimbursed on a percentage basis of the total debt collected. Securing discounts for big debtors would reduce their revenues.

This amendment would therefore ensure that the Government are provided with a power to instruct SDRP providers, where appropriate, to enter into debt settlement negotiations on behalf of debtors entering the scheme. Hopefully this is not needed, but it is important that such a power exists.

In addition, it ought to be possible for SDRP providers to go further. With appropriate funding and regulation, business models could be encouraged that would allow SDRP providers to themselves buy out, and therefore discount, debts registered on their plans. For example, in recent months we have seen instances of debt of £10,000 being discounted by as much as 40% in return for full and final settlement. Enabling such debts to be bought out and subsequently collected by SDRP providers would mean the debtor would have to repay only £6,900, even after taking into account a 15% fee for the provider. It should be possible to achieve a result that is beneficial to creditor and debtor alike. I stress that building this negotiated settlement approach into the SDRP is likely to be welcomed by creditors, who in many cases are already prepared to discount heavily for lump sums in full and final settlement.

It is not my intention to push this amendment to a vote at this stage, but I seek a commitment from the Minister to continue to explore and work on this issue. I hope he can commit to a meeting between the department and interested noble Lords to see how we can take this forward, possibly in regulation.

[Lord Davies of Brixton (Lab) [V]]

My Lords, I speak in support of Amendments 11 and 12. I do not intend to delay us particularly long at this time of night, but I want to take the opportunity to pursue an issue.

My involvement in the Financial Services Bill has been a learning experience for me, as a new Member, in the way in which we are able to progress issues through the course of a Bill and the opportunities arising at different stages to make points and develop what it is possible to achieve, as opposed to what we would like in a perfect world. I have made plain my support for a more fundamental debt jubilee, but that is clearly a discussion—a fight—for another day. The amendments before us today clearly provide a useful step forward—a small step, but one that is still worth while.

I want to say a word on behalf of the debtors, those people who have taken on debts for all sorts of reasons—some good, some bad. You cannot just look at the debtors in this situation and say, “That is where the problem arose.” Quite clearly, bad debts are part of the business plan of people who lend money. We have learnt to an extent during these debates that there are issues in how you develop a plan so that, when debts are discounted, it is not just commercial organisations that benefit and there is also the opportunity for those who have unwisely or mistakenly taken on debts to gain some advantage from the discounting of debts. That is really what we are trying to work towards here.

I support these amendments and hope the Government will be able to take on board the issues raised. The underlying issue—this is the point I have pursued before—is that there is a public interest in dealing with debt and relieving people of the debts they have taken on; it does not help just the individuals concerned. Lowering the level of debt and removing onerous debts help us all generally, and particularly at the moment when we are looking for an economic revival. I hope the Government take on board the ideas behind these amendments and work towards a scheme that helps not just the debtors but all of us.

Financial Services Bill

Baroness Bennett of Manor Castle Excerpts

Committee stage
Wednesday 10th March 2021 Grand Committee

[Baroness Bowles of Berkhamsted (LD) [V]]

My Lords, as the amendment suggests, I think it is necessary to know when there have been interventions and why. I do not say that from a wish to create political opportunity to complain—in fact, rather the opposite. When matters are transparent, there is generally less to complain about and more understanding. If there is a wish to keep everything private, that in itself is a problem. The amendment does not ask for chapter and verse on everything, just the nature of the intervention.

I recall the instances of HSBC and Standard Chartered. I was aware of them at the time, not from any information from the Government but because the size of US fines and the impact that it had on European banks were spoken about in Brussels. It is fair to say that there were concerns from other European countries. I do not think that the UK was the first to write. The financial stability point on fines for things that we also thought were pretty shocking was openly discussed in Brussels, including in my committee. Indeed, I recall having conversations around financial stability implications with the president of the ECB and with the Fed and US Treasury, although I do not think that one needs to advise people like Ben Bernanke about the relative sizes of UK banks and the UK economy and the problems that that will create; you would get pretty short shrift in return.

It is actually quite humiliating either to make or know about such interventions or to sit there while people say to you, “I’ve had a letter from your Minister.” I certainly felt humiliated about the need for such information by my country and humiliated by the behaviour of important financial institutions from my country. A normal response would be to try to make sure that it does not happen again, and I fear that progress has not been as good as it should have been. Maybe one reason for that, I now realise, was that there was no such discussion about these occurrences in the UK in the same way as there was in Brussels, which I find quite shocking. But too big to fail should not mean too big to jail. We have been around that debate already, in the sense of needing fairly to prevent offences, the construction of large companies, which create organised irresponsibility, and the FCA failing us at a critical moment in the SMCR, so it has been undermined.

To get back to the point about disclosure—yes, it should be shared, and any humiliation should be shared, so that those responsible at the time get more heat and there is greater resolve to make corrections. Everything is all so much more diluted and dismissible when it is looked at only as history.

[Baroness Bennett of Manor Castle (GP) [V]]

My Lords, I thank the noble Lord, Lord Sikka, for tabling the amendment, to which I was delighted to attach my name. It is a great pleasure to follow the noble Baroness, Lady Bowles of Berkhamsted, and I welcome her support.

I do not think I need to add to the noble Lord’s detailed, forensic presentation of the clear, obvious and systemic problem: that Ministers intervene to end or direct investigations into fraud, corruption and malpractice. As he clearly documented, they do that on what appears to be a semi-regular basis. This amendment seeks to stop that, or at least make it illegal. Noble Lords might argue that it should not be; I certainly look forward to examining any contributions that seek to do that.

We have an institutional culture of cover-up, as the noble Lord said. We cannot be sure that every case has been exposed—indeed, it would be very surprising if they had been—despite the often extraordinary efforts of investigative journalists and academics such as the noble Lord. We are most likely seeing the tip of an iceberg. That what has been done emerges only later, dragged into the light of day despite considerable resistance, is of considerable detriment to public and international trust in both the financial sector and the British Government, as the noble Baroness, Lady Bowles, just highlighted.

The most useful contribution that I can make to this debate is to the politics and the sociology—and I mean politics with a small “p” for, as the noble Lord demonstrated, this behaviour is not contained to Governments of any particular political hue. He said that ministerial cover­ups had emboldened banks. Behaviour that tolerates, supports and enables dishonest and corrupt practices encourages the spread of those practices. If there are indeed only a few rotten apples, which I am sure many from the financial sector will claim, the rot will spread if they remain in the barrel. Those people will still be in place in institutions—in many cases, in very senior places within those institutions —and be sharing, passing down and directing others to continue their practices, approaches and morals. I have an agricultural sciences degree; I can promise you that the rot will spread through the barrel.

We are now without the protective umbrella of EU regulation and what was once seen as a force independent of one particular financial centre that enforced some degree of cleanliness among all of them—albeit that the UK had an inordinate, often baleful influence on attempts to tighten regulation and prevent fraud and corruption. With the UK making its own rules, the behaviour of both the UK Government and the UK financial sector will come under greater scrutiny.

The EU is—not coincidentally after the UK’s departure—looking in the coming years to significantly tighten regulations on tackling fraud and corruption, on stopping tax dodging, on preventing greenwashing and on reining in the inordinate economic power of the internet giants. What happens in the UK will be weighed against that, which is why tightening up this Bill with this measure and others is crucial. What we need is not a more “competitive” financial sector but an upgraded one, one that is honest, straightforward and trustworthy.

There is also the politics in the broadest sense: the issue of how the Government are regarded, which is a long-running, serious issue for the UK. The place of politicians at the bottom of trustworthiness rankings is a source of jokes and bitterness but a serious and significant problem for our body politic. It has to be tackled. This amendment, a legal commitment to honesty and transparency, would be a significant step.

We are seen, from many sides of politics, to have a Government of the few, a Government for the money, a Government for the City of London, to the detriment of the country. This has to change if we are as a country to go forward.

I shall finish with a quote. The

“trend toward globalized corruption has been enabled in crucial part by regulatory asymmetries among key international economic actors and a lack of resources and political will in law enforcement.”

That comes not from the Tax Justice Network or Transparency International. It comes from a foreword to a report from the Center for American Progress entitled Turning the Tide on Dirty Money, signed by Senator Robert Menendez, chairman of the US Senate Foreign Relations Committee, Tom Tugendhat MP, chairman of the UK Foreign Affairs Committee and David McAllister MEP, chairman of the EU Parliamentary Committee on Foreign Affairs. The authors say that corruption

“threatens the resilience and cohesion of democratic governments around the globe and undermines the relationship between the state and its citizens.”

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[Baroness Bowles of Berkhamsted (LD) [V]]

My Lords, I have signed these amendments from the noble Lord, Lord Hodgson, and I agree with what he and the noble Lord, Lord Knight, have said. I am aware that the noble Lord, Lord Hodgson, has a long record of engagement in these matters, because from time to time I discover that I am following in his footsteps. The “good work” amendments recognise that we need structural changes in how companies operate to ensure that they provide good work in the face of technological and societal changes. With the financial services sector both supporting all businesses and being our largest industry, it has a special, strategic leadership role to play, and ways that this can be brought about are contained in Amendments 108, 109 and 110. This would be in line with the principles of Section 3B(1)(c) of FSMA, which states that there is role for ensuring

“the desirability of sustainable growth in the economy of the United Kingdom in the medium or long term”.

In my book, sustainable growth must encompass technological and societal changes as well as the environment, but I fear there is a long way to go to live up to that.

In the interests of time, I shall concentrate on Amendment 122. There has been all-party support for employee share ownership in all its forms for a long time. Such schemes provide rewards and motivations in ways that wages cannot. At its best, an employee share plan will also give employees a say in how a business is run and can help to achieve many of the aims of the Good Work Charter, such as dignity, fair rewards, participation and learning.

Employee share ownership and employee ownership have many positive effects, and I want to highlight research on how well employee-owned companies deal with financial adversity.

Research published by the Cass Business School after the 2008 financial crisis established that employee-owned companies create jobs faster than non-employee-owned counterparts and withstood the recession better as it deepened. They recruited when non-employee-owned companies were laying off staff, and had motivation where others found it hard to motivate staff.

More recently, I chaired an inquiry into the effects of employee ownership and the report, entitled Ownership Dividend, found evidence that showed that employee-owned businesses performed better, were more resilient and more rooted in local economies—hence why the term “ownership dividend” was coined. Therefore, as has been said, such companies have a strong part to play in the UK’s plans to build back better and restart the economy.

Amendment 122 suggests an emphasis on analysing impact of sustainable growth provided by employees share schemes. As I mentioned previously, it should already be covered in the principles, but the urgency around “sustainable” in all its forms does not seem to be present. Therefore, I commend Amendment 122, as well as the good work amendment.

[Baroness Bennett of Manor Castle (GP) [V]]

My Lords, I will speak briefly to Amendments 108, 109 and 110 in the names of the noble Lords, Lord Hodgson Ashley Abbotts and Lord Knight of Weymouth. I broadly agree with everything they said.

The noble Lord, Lord Hodgson, in his introduction, referred to the level of dissatisfaction in our society: the threats from poverty, inequality and insecurity. I would say that these amendments are digging here into some of the depth of the problems that I referred to in my speech on a previous group and seek to provide some remedies. As he was speaking, I thought of meeting an USDAW representative in Sheffield referring to one of her members who had just come to her to seek a voucher for a food bank. The member was not, as you would expect as an USDAW member, unemployed; in fact, that member had seven jobs, but they were all zero-hours contract jobs and that particular week they had not delivered enough money for that person to feed themselves and their family.

However, it is important that we do not just focus—the noble Lord, Lord Hodgson, did not—on those who are in desperate poverty and inequality, as awful as that is. As he was speaking, I could not help but think of what the late, great David Graeber called—here I may be about to use what is unparliamentary language here, but it is a direct quote—“bullshit jobs”. The noble Lord referred to people’s desire to get meaning, to feel that what they are doing, how they are using their time and talents, is worthwhile and contributing to society. Indeed, a failure to acknowledge and understand that—a focus purely on the pounds, shillings and pence—is at the root of a lot of our problems: the financialisation, to which the noble Lord, Lord Knight, referred, of our entire economy—not just the financial parts but the real economy, the care economy, the public service economy.

The noble Lord, Lord Knight, referred to managing things in a different way. I point again to New Zealand’s living standards framework, that guides its Treasury—based on a system not that dissimilar to our own—where they judge the quality of work, people’s security, the quality of the environment and the economy all together and seek to manage them to a stable, secure, decent whole.

These are important amendments and crucial principles, so I wanted to speak briefly in favour of them.

[Lord Holmes of Richmond (Con) [V]]

My Lords, it is a pleasure to speak to this group of amendments. In doing so, I declare my interests as set out in the register. I shall speak particularly to Amendment 122. It is evident that employee share ownership is a positive force within our economy, and speaks so much to the current Covid environment and what kind of economic sector, work and business basis we can have to our economy as we built out of Covid.

It is no surprise that Sir Nicholas Goodisson, after taking the London Stock Exchange through the big bang and seeing some of the early privatisations, then moved on to a role heading up the Wider Share Ownership Council. He saw the benefits and the positive impact that it had for people to have a stake in something, and there could be no better example of that than employees having a stake—a share—in the company for which they work on a daily basis.

I believe we will see more innovative models of employee ownership coming through. The EOT, for example, is still very much in its embryonic phase but it is a very positive concept and construct. There will be further developments in this area and I believe Amendment 122 sets out the case very well that when employees have a share, a stake and a say in the business for which they work, it benefits all concerned.

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I have spoken at length; I hope I have brought a picture of how these individual amendments add up to a potential transformation that we could have if we truly embraced the opportunity that fintech presents. We have the talent; we have the technology. Does the Minister agree that the time is now, and that we must act? I beg to move Amendment 112.

[Baroness Bennett of Manor Castle (GP) [V]]

My Lords, it is a pleasure to follow the noble Lord, Lord Holmes of Richmond. He is, without a doubt, the House’s expert, and indeed enthusiast, on all these issues. In this large group of amendments, he has covered a broad range of issues of what is a huge area of the future of finance. He and I might differ somewhat in our balance between enthusiasm and concern about the risks, but it is really important that we are able to debate this. It is disappointing, however, to see the very small number of participants on this group, which brings up an issue that I will raise later, about the capacity of this Committee of your Lordships’ House to fulfil the role laid on us to scrutinise such large, complex, new and fast-moving areas.

Given the pressure of time, I will restrict myself to commenting on three amendments in this group. I start with Amendment 112, to which the noble Baroness, Lady McIntosh of Pickering, has also added her name. It calls for an artificial intelligence officer in companies—someone such as, I should imagine, a chief financial officer. I did a master’s thesis partly on artificial intelligence 20 years ago; I was then and remain an AI sceptic. After 20 years, we seem to be at the same point that we were then, which is “We are about to get to AI really soon, now, yes, it’s going to work”. In those 20 years, however, there has been massive progress in what is known in shorthand as “big data”, or the ability to crunch truly astonishing quantities of data and to manipulate and use it. So I suggest to the noble Lord, Lord Holmes, that perhaps what is needed is some kind of title or combination of roles that takes in both data and AI together.

On Amendment 118, the ethical use of artificial intelligence, the noble Lord has already covered this quite well, but it is important to stress that, in recent years, we have seen huge exposure of the difficulties of a sector that is profoundly unrepresentative of people whose lives it increasingly impacts. The noble Lord gave the example of soap dispensers which, in these days of Covid-19, is a potential matter of life and death; but we also need to think about access to your finances and being able to manage your finances, and even simply being able to manage them without having to take vastly more time and effort than some other person just because the AI mechanisms are discriminatory. These are all issues that need to be engaged with. I note, for example, that some of the events that have been happening recently at Google do not fill one with confidence about the ways in which the culture of the entire artificial intelligence community is moving—certainly in some areas.

I will comment finally on Amendment 119, about digital resilience. This is one of the most important factors of all. We increasingly hear talk of the internet of things, and of tying together the internet of things and fintech. I think particularly of the recent opening of a store in which there are no checkout people and no scanning and where lots of cameras watch and monitor everything that happens in that store and then a bill appears in your email later. This relates to an earlier group and our discussion on the nature of work and good work, but it also relates very much to the issues of discrimination and resilience.

I was in Lancaster a few years ago, after it had suffered an enormous flood. For several days, the city was without power and it was clear that things very nearly fell apart, due in large part to our reliance already on technology and fintech—that was how people paid for things. We need to think hard about issues of resilience in our age of shocks and how we build systems that will not be at risk of profoundly falling apart—not just the cash machines falling apart, but an inability to even obtain food.

I also need to mention the issues around bitcoin and other digital currencies. There are huge and growing concerns about their environmental impacts and indeed the sustainability of those impacts. Bitcoin and other such currencies are extremely energy-hungry by design. A single bitcoin transaction uses 707 kilowatt hours of electricity, which is the equivalent of 24 days of use by a single average US household. On an annual basis, were bitcoin alone to be a country, it would be 39th in the world in its energy consumption. These are massive changes that need to be considered in the round—the kind of triple accounting that the noble Baroness, Lady Kramer, talked about before. They are issues that deserve far more time and focus than we can give them today, but they really do need to be tackled.

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[Baroness Bowles of Berkhamsted (LD) [V]]

My Lords, this amendment was not intended newly to introduce country-by-country reporting but to maintain the country-by-country reporting requirements that exist through CRD IV and retained EU law. In retrospect, looking at my amendment now, perhaps that is not quite clear.

Once again, as the statutory instrument layer is removed, it is within the purview of our financial regulators to decide that some things are inconvenient or not part of their main remit and to dispense with them. Article 89 of CRD IV requires institutions to report annually, specifying by country in which they have an establishment, information on a consolidated basis including: name, nature of activity and geographical location; turnover; number of employees on a full-time basis; profit or loss before tax; tax on profit or loss; and public subsidies received. Since then, there has been a little more general progress in country-by-country reporting, but I wanted to ensure there were no backward steps as the PRA and FCA start to write the rules.

There was much coverage at the time about the late insertion by the European Parliament of country-by-country reporting that nobody expected, but I can tell the story—which can actually be seen if we look at whole article in the directive. As was the way in trialogues that I chaired in the European Parliament, we shared out speaking. I am sure that the noble Baroness, Lady Bennett, will be pleased to hear that the Greens were leading on country-by-country reporting, but all that had been conceded to the Parliament in the trialogue was an assessment, maybe followed by legislation if appropriate.

I got a note from the Greens’ adviser saying that they were out of arguments and asking whether I could help. Maybe I should have framed that, because a Green being out of arguments is quite an astonishing thing. They knew that at that stage we had nothing to trade in return to get country-by-country reporting in. So I asked the Council and Commission to confirm that the only reason why they objected was that industry was saying that economic damage would be caused by country-by-country reporting. They both swore that that was the only reason why they were objecting to the insertion of such a clause: that they were afraid of what might happen if these really rather mild provisions were introduced.

I then proposed that the information be submitted in confidence to the Commission and that, in consultation with the regulators, there be then a general assessment of potential negative economic consequences of public disclosure, including the impact on competitiveness, investment, credit availability and the stability of the financial system. It sounds incredible, but those were the scare stories that the other institutions had bought into.

In the event that the report, including analysis based on actual data, identified significant effects, then the provision of public disclosures could be deferred or removed, but otherwise the provision would come into force in 2015. Having sworn that the only nervousness was about all these effects, they then had to concede that proposal. All that explains the content that you can clearly see in article 89 and the report in its paragraph 3. Of course, no damage was found, and the article is in force and transposed into UK law. I quote from a 2014 PWC document on compliance:

“HMT sought to adopt a pragmatic approach to provide rules that are practical and which provide some options designed to ease the compliance burden faced by businesses. This optionality has allowed HMT to implement rules that comply with CRD IV, but which, in line with broader Government policy, do not mandate reporting beyond the requirements of CRD IV.”


There are some activities that would trigger investment firms falling within scope, so it therefore seems relevant to raise this matter in the Bill, as the investment firm provisions are about to be rewritten. Of course, small and UK-only investment firms may not fall within the definitions, because I am proposing carry-over of the existing ones, but where they are larger organisations then they should continue to comply. Against that background, I hope that the Government will not say that they want to allow closing down of transparency and that the Minister will understand why I do not believe any of the scare stories about damage. I beg to move.

[Baroness Bennett of Manor Castle (GP) [V]]

My Lords, it is a great pleasure to follow the noble Baroness, Lady Bowles, not just because she highlighted the role of the Greens in pushing country-by-country reporting at the European level, and the value of having a Green in the room. A great way of bringing people on board and into the debate is to ask them for help. I will briefly quote the chair of European Parliament’s sub-committee on taxation, MEP Paul Tang:

“I think transparency is a powerful tool for change because many of the current tax policies can’t stand the light of day. Just shine the light on it.”


That was from an interview with Forbes, showing how so many of the defenders of the status quo are increasingly isolated and clearly out of touch, not just with the public but with much of the establishment who realise that things cannot go on as they are.

I have been asked at public meetings over many years how we get multinationals, rich individuals and the financial sector to pay their taxes. My first answer is simple: you need a Government who want to make them pay their taxes. My second, more detailed and technical, answer is, simply, country-by-country reporting. This is something that the UK can impose without needing international agreements. I back the noble Baroness’s amendment to the hilt.

[Baroness Kramer (LD)]

My Lords, I am going to be very brief again on this issue, because I cannot pretend that it is my area of expertise. I remember the period when George Osborne was very proud of saying that not only would he make country-by-country a requirement but that it would be published. My understanding is that that was reversed in 2016. Perhaps the Minister will correct me, but that information is no longer published at a national level and the UK has been fairly instrumental in blocking the OECD from publishing the data at an international level. I apologise if I have got that wrong: I am reading from a Tax Justice Network report. Its calculation is that, as a consequence of not publishing, and therefore not having the cleansing impact of transparency, the UK misses out on collecting something in the range of £2.5 billion in corporate taxes a year.

Again, this is not my area of expertise, but I shall wish to hear from the Minister. We as a country have always said the answer is transparency. We have insisted that publication is the mechanism for cleaning up abuse. I would be extremely troubled if the regulators felt they were now in a position to weaken in any way country-by-country reporting requirements.

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Moved by

[Baroness Bennett of Manor Castle]

123: After Clause 40, insert the following new Clause—
“Regular impact assessments on the UK financial services sector
(1) Within 12 months of the passing of this Act, and every subsequent five years, the responsible Treasury Minister, Chairs and Chief Executive Officers of the Prudential Regulation Authority and Financial Conduct Authority must each separately provide reports to relevant Committees of the House of Commons and House of Lords.(2) The reports under subsection (1) must include an assessment and critical analysis of the following—(a) the costs and benefits of the financial services sector in the United Kingdom;(b) the impact of the financial services sector on inequality and economic development;(c) the impact of capital allocation decisions on real economic activity;(d) net gains or losses to the real economy caused by mergers and acquisitions;(e) risks to the real economy of write downs in the value of financial assets;(f) risks inherent in “shadow banking”;(g) the impacts of money and financial activities being moved to offshore jurisdictions.(3) In preparing the reports under subsection (1), the responsible person must consult with, and publish any submissions from, the Financial Scrutiny and Oversight Network.(4) In this section—“shadow banking” means financial services which are not subject to regulatory oversight, including but not limited to unregulated activities by regulated entities;“real economy” means the production, distribution and consumption of goods and services.”

[Baroness Bennett of Manor Castle (GP) [V]]

My Lords, I beg to move my Amendment 123 and speak also to Amendment 124. They are quite large amendments, and I would say significant proposals, and I have cut down what I shall say given the time. This is based in large part on the work of the Sheffield Political Economy Research Institute, known as SPERI, and particularly Professor Andrew Baker there, and the Tax Justice Network, particularly Nicholas Shaxson.

I begin with Amendment 123, as it flows on from an earlier exchange between the noble Earl and me, which he kindly continued by letter, confirming my assumption that the source of his claim for the annual tax revenue for the financial sector of £76 billion came from a PricewaterhouseCoopers report. That is, of course, a gross figure, one that reflects income but not costs. It is in no way an impact assessment. It is a pity that the noble Baroness, Lady Noakes, is not with us now.

This amendment proposes that within 12 months of the passing of this Bill and every subsequent five years the responsible bodies must separately provide reports to the relevant committee of the Commons and Lords and consult the financial scrutiny and oversight network, which I shall get to shortly. Behind this is the fact that there is now a large body of academic literature, known as the “too much finance” literature, which supports the idea that some countries, including most certainly the United Kingdom, suffer from the finance curse: too much finance makes us poorer. It seems that the City of London passed the point of optimal finance sometime in the 1980s and has grown massively since then, harming the UK economy. The only study of which I am aware that has attempted to quantify the damage, from SPERI, estimated in 2019 that excess finance reduced economic growth by a cumulative £4.5 trillion from 1995 to 2015. That is the finance curse.

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[Baroness Bennett of Manor Castle (GP) [V]]

My Lords, I thank the Minister for his answer. He focused on the positive impacts of the financial sector and, when he came to addressing negative impacts, he talked a lot about risk. There is of course a lot of focus on risk at the moment with what is happening with Greensill and the shadow banking sector, but I do not believe that he really addressed the other negative impacts such as the diversion of human resources and capital. Indeed, when he was talking about the tax revenue, I thought that my PhD graduate from Newcastle would surely be working in some sector contributing in different ways.

The Minister perhaps misunderstood the issue of equality, so maybe I need to look at redrafting that. I referred to regional inequality and looked at socioeconomic and other areas of inequality.

I will speak briefly on the responses from others. The noble Baroness, Lady Kramer, pretty well said that she thought we should have exactly what I was proposing. She said that there were a great deal of resources in think tanks, academics and NGOs and that we needed to bring them together. That is exactly what is proposed in FSON—a network, not reinventing the wheel, not creating a whole new institution, but just making sure that those things are joined up and have a structure to work together to identify the crucial points.

The noble Lord, Lord Tunnicliffe, said that there were consultations on the way so we would have to wait but, with the risks—as the Minister acknowledged—and the costs of the financial sector, we really cannot wait. We have to act now. I have cited some very traditional, mainstream sources expressing great concern about the problems that the financial sector presents. We cannot have business as usual. As the noble Lord, Lord Sikka, said earlier, the cost of doing nothing is enormous. However, given where we are and the time of the evening—I have cut short my planned remarks significantly—I beg leave to withdraw my amendment, though I suspect I will bring this back on Report.

Amendment 123 withdrawn.

Financial Services Bill

Baroness Bennett of Manor Castle Excerpts

Committee stage
Monday 1st March 2021 Grand Committee

[Baroness Sheehan (LD) [V]]

My Lords, it is a pleasure to follow the noble Baroness, Lady Ritchie of Downpatrick. I found myself nodding at her every point. I pay wholesome tribute to my noble friend Lord Oates for the manner in which he introduced this series of amendments and the comprehensive nature of his speech. These amendments get to the nub of the issue.

In 1989, I left a comfortable job in advertising and went back to university, to bolster my chemistry degree and get a better understanding of the scientific evidence and facts behind the litany of dreadful things that seemed to be happening to the planet. The main issues of concern in those days were acid rain, the ozone hole, species loss and radiation in the environment, especially following the Chernobyl disaster in 1986. Another issue causing grave concern was what was then referred to as global warming. I wanted the facts. Specifically, I wanted to know to what extent climate change was anthropogenic.

When I left Imperial, I was in no doubt that the warming planet was due to the accumulation in the upper atmosphere of greenhouse gases, caused by the burning of fossil fuels since the start of the industrial age. The science was incontrovertible then, 30 years ago, and the ball was firmly in the political court. Over three decades later, to my utter frustration, when push comes to shove—and actions not words are needed—the political will appears lacking. I therefore welcome these amendments, especially Amendments 31 and 32, for their clarity of purpose.

I will say a few words about Amendment 28 in the names of my noble friends Lord Oates and Lady Kramer, and the noble Baroness, Lady Bennett of Manor Castle, the purpose of which is to place a requirement on the PRA, when setting the capital adequacy requirements of a credit institution, to have regard to its exposure to climate-related financial risk. It invokes the Task Force on Climate-Related Financial Disclosure and our domestic commitments through the Climate Change Act 2008, as amended in 2019. In my view, the amendment is pretty uncontroversial if you think that we are facing a climate emergency and I hope that the Minister will sympathise with its aims.

In Committee last Wednesday, the noble Lord, Lord Sharpe of Epsom, took me to task when I welcomed Amendment 48’s aim to bring forward the TCFD’s implementation by two years. He rightly said that the methodology to quantify the metrics was complicated and not yet in place. However, a huge amount of work is being done on the issue by UN agencies, EU agencies and the OECD, to name but a few.

I am heartened by the way that we met the challenge of developing and deploying not one but myriad vaccines in the space of a year. It is not much short of a miracle. That was made possible by global collaboration and working at speed, putting aside some artificial barriers to manufacturing by paying upfront to cover the risk of failure. In short, huge challenges were overcome because we faced a global crisis of mammoth proportions. Of course, the issue of scaling up manufacturing capacity to meet global demand remains, not least in developing countries, but that is now an issue of political will. With climate change, we are dealing with a global emergency that has the potential to dwarf the pandemic, so I say to the noble Lord, Lord Sharpe of Epsom, that necessity is the mother of invention. We can do this if there is a will.

I welcome the intentions of Amendment 136A, but it is a little broad and detracts from the central theme of tackling the climate crisis. ESGs are now pretty well established and cover a range of factors that move companies in the right direction, which is to be welcomed. But it is a slow process—it is not compulsory—and they do not explicitly signal climate-related financial risk, which I would like to see.

In conclusion I will say a few words about Amendments 31 and 32. The question to which I would like an answer is: who will pay the cost to society of climate change? The answer is that we as society will pay these costs. But such social costs are not built into the price of oil, gas, coal, gas fires, electricity, natural gas heating, petrol or diesel. As a result, the corporations most responsible do not pay directly for their pollution. That also leaves few incentives to limit greenhouse gas emissions, so problems such as climate change go unabated. I support these amendments as they not only are a shorthand way of building the massive social cost of carbon into investment decisions but also recognise climate-related investment risk.

[Baroness Bennett of Manor Castle (GP) [V]]

My Lords, it is a great pleasure to follow the noble Baroness, Lady Sheehan, who has made powerful points. A little more than a year ago, we faced the Covid emergency and the Government moved very fast with multiple rules and regulations. The world has moved very fast and science has moved very fast. That is a demonstration of how fast the world can change in an emergency—and we are all in agreement that we are in a climate emergency.

Given that I agree with many of the comments already made on this group of amendments, I aim not to repeat them all but perhaps to take us a little bit forward. To briefly outline, I am speaking on Amendments 28 and 42 in the names of the noble Lord, Lord Oates, and the noble Baroness, Lady Kramer, as well as my name. I also express my support for the principles and direction of Amendments 31 and 32 in the name of the noble Lord, Lord Oates. In his expansive and effective introduction, the noble Lord presented a strong case for the detail contained in these amendments.

With Amendment 136A, the noble Lord, Lord Holmes of Richmond, is heading in the direction of an amendment of mine discussed last week. I spoke about introducing acknowledgment of our international obligations on biodiversity. This amendment heads in the direction of thinking in terms of the sustainable development goals, and that kind of system thinking is very much what we need. It goes a lot further than simply looking at the climate emergency. I would like to see us go further than where we are at. The full SDGs are a big step that we need to take at some point very soon.

The noble Lord, Lord Sharpe of Epsom, noted that there are other uses for fossil fuels than energy generation or transport. Many of those uses are, of course, the production of plastics, which are creating a whole different set of crises in our plastic-choked world: a pollution crisis and a crisis in the impact on animal life and quite possibly on human health.

It is pretty clear that we are already in a carbon bubble. We know from an organisation as radical as the International Energy Agency that we have to leave at least three-quarters of our known fossil fuel reserves in the ground to avoid catastrophic runaway climate change. Yet we still see money being lent, sometimes by the UK Government—the chair of COP 26—to develop and even explore new reserves. This clearly is not the way forward.

To build on what others have said, rather than simply repeat it, I refer noble Lords to an article by Semieniuk et al in volume 12, issue 1 of the journal WIREs Climate Change, published in January/February 2021, entitled “Low-carbon Transition Risks for Finance”. In the conclusion of that article, the authors say:

“Asset stranding combines with other transition costs, notably unemployment, losses in profits, and reductions in real incomes from price changes that generate significant risks for portfolio losses and debt default. Financial actors might become unable to service their own debt and obligations, creating loss propagation within the financial network. The adverse impacts of credit tightening and lack of confidence as well as the direct impact of transition costs to the macroeconomy, could lead to a general economic crisis with further risks for finance.”


They continue:

“Targeted financial policies, however, can dampen some transition risks by direct regulation of the financial sector.”


This element of the conclusion relates in some ways very closely to the debate we will be having tomorrow on the National Security and Investment Bill, but it is worth noting that, with a different cause at its base, it could be taken as a pretty fair description of what happened in the 2007-08 global financial crash.

I referred to that article, at least initially, not primarily for its conclusion but for the detailed calculations and models in its body. I suspect that one answer that we might hear from the Minister in responding to this group is that something needs to be done, but not quite yet—the Augustinian approach mentioned by the noble Baroness, Lady Hayman, in our debates last week. However, the article demonstrates that thorough work has been done and is available to the department to act now. As the noble Lord, Lord Oates, and the noble Baronesses, Lady Hayman and Lady Sheehan, all referenced, we are in a state of extreme urgency—a climate emergency.

However, the noble Baroness, Lady Noakes, gave me a further reason to draw on that conclusion. She said that she relies on the banks in calculating and pricing risk. She said, “Banks do not lend in situations where default is likely.” Well, we all know how that worked out in 2007 and 2008. The noble Baroness also said, “Carbon debt financing could be driven out of the City of London.” If we look at the costs we bore from risky lending and risky actions by the financial sector in 2007 and 2008, we see that that could indeed be a very good thing for our financial security. I do not believe that we would see a direct migration of financing shifting out of the City of London and going to other places. If the British Government were to take this action and become world-leading, as they so often tell us they want to be, that would have an impact on other financial markets around the world. Other people would say, “Well, if London is doing that, perhaps we should have a look at it, too.”

Let us look at the best possible outcome: we entirely prevent a carbon bubble financial crash. One problem, of course, is that you do not get credit for stopping things that never happened, but perhaps we would know that we had done the right thing. Even if we managed only to significantly reduce the size of that carbon bubble crash, we would indeed be world-leading. We are ready to take action: this is an emergency and so we have to take action. I commend these amendments to the Committee.

[Baroness Altmann (Con) [V]]

My Lords, I thank the noble Lord, Lord Oates, for his excellent introduction to this group of amendments and his work to try to ensure that the Bill rises to the challenge of ensuring that our financial services institutions, regulations and activities are properly concerned with the dangers of climate change. I am happy to add my support to Amendments 28 and 42 in the names of the noble Lord, Lord Oates, and the noble Baronesses, Lady Kramer and Lady Bennett—who it is a pleasure to follow—which seek to ensure that capital adequacy and credit rating agencies take account of climate risk.

I also have sympathy with Amendment 136A, in the name of my noble friend Lord Holmes, which seeks to require that fund management firms should report on their ESG compliance. My only thought on that is that it may not go far enough. Such a requirement could become just a tick-box exercise and I believe we need to go much further than that if we are to meet our obligations to today’s younger people.

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[Lord Rooker (Lab) [V]]

My Lords, unlike the noble Baroness, I consider both the amendments to be probing in nature. As I said at Second Reading, I have no expertise or knowledge. I visited Gibraltar privately on holiday in 1977 and 1979, both times quite deliberately to give support because at that time the border with Spain was closed. As I had talked to the Foreign Office beforehand, I had the opportunity to speak with the Governor and members of the Government and the then trade union leader who later became First Minister. The dockyards were winding down, but one thing those people told me they did not want was Gibraltar to be dependent on being a brass-plate economy, and in effect that is what we are talking about. The right reverend Prelate gave some good examples. Transparency is crucial. It is a global issue. Identification of what is going on is required. The gambling figures the right reverend Prelate gave are a concern. My noble friend Lord Eatwell gave the figure of 20% of UK motoring. It is not for no reason that the biggest single donor to the Brexit campaign for exiting the EU has his insurance companies working out of Gibraltar, so there must be some reason that you can make a lot of extra money working through Gibraltar than you can in the UK.

The danger is that if we leave it as it is and build on it, Gibraltar will become the UK’s state of Delaware, the backstreet way to money laundering and other issues. Frankly, the EU will not stand for it. The financial structures of the services of the EU will be working closely and looking in detail at what is happening following Brexit. They are not going to stand for, effectively, a state of Delaware that has been inserted into Europe by the UK. Therefore we have to find a better way of doing this. One way of dealing with it is by openness and transparency. As the right reverend Prelate said, this is in no way an attack on the people of Gibraltar or, indeed, on the structures of Gibraltar. I have always been a strong supporter of Gibraltar having the right to choose, and 96% of Gibraltarians voted not to leave the EU. It was right at the time we did it that we incorporated Gibraltar into one of European UK constituencies. It is different from the other overseas territories of the UK, and because it is different, we must not allow the undermining of the financial system, so we have to find a better way of dealing with it. I look forward to the Minister giving some assurance on this and perhaps explaining, in answer to my noble friend’s question, why such a large proportion of the UK motor insurance system is worked out of Gibraltar. What is the reason for that? It cannot be the sunshine. The only reason can be money and profit—profit where less tax is paid. That is the basic reason that we have these probing amendments today. I look forward to the Minister’s answer.

[Baroness Bennett of Manor Castle (GP) [V]]

My Lords, it is a pleasure to follow the noble Lord, Lord Rooker. What we might label in shorthand “the Delaware danger” is very real. It was my pleasure to attach my name, as has the noble Lord, Lord Sikka, to Amendment 46 in the name of the right reverend Prelate the Bishop of St Albans. I also welcome Amendment 47 in the names of the noble Lords, Lord Tunnicliffe and Lord Eatwell. We heard from the noble Lord, Lord Eatwell, a clear and welcome outline of the peculiarities of the Gibraltar authorisation regime and the reason why we need to hear a lot more from the Minister about the justification for it and an explanation for some of the peculiarities that the noble Lord, Lord Rooker, just outlined.

I do not regard Amendment 46 as a probing amendment; I suggest that it is a modest amendment for improvement. It builds on an amendment from the noble Baroness, Lady Bowles of Berkhamsted, debated last week, which made broader country-by-country reporting proposals. Given that we have just seen the Government’s welcome incorporation into the Domestic Abuse Bill of a significant number of amendments proposed by noble Lords in that debate, we might hopefully see the same thing here before we get to the next stage of this Bill.

The noble Baroness, Lady Neville-Rolfe, suggested that this might be extraordinary, or be targeting Gibraltar in some way. As the noble Lord, Lord Eatwell, outlined, we are incorporating it in a truly extraordinary way within our system, so it is surely important that we have full transparency about what is happening. The noble Baroness, Lady Neville-Rolfe, said that we should not make it more difficult for Gibraltarian businesses. Whether it is motor insurance or the gambling industry, we are not talking here about the issue for Gibraltarian businesses; we are talking about businesses operating and making their profits in the UK, which should be paying their tax in the UK. On the Tax Justice Network corporate tax haven index—what might be called the ranking of infamy—I note that Gibraltar is ranked 28 on a scale where number 1 is the worst. While it is not the worst, given that there are scores of tax havens around the world, it is pretty well right up there.

It is estimated by the Tax Justice Network that the tax loss that Gibraltarian arrangements inflict on other nations is about US$4 billion. I do not have a breakdown of figures of where those losses are inflicted but, given what we have heard about both the motor insurance and the gambling industries, it is clear that a very significant portion of them will be in the UK. We also have to think about the nature of those industries; the gambling industry, in particular, inflicts significant major damage on individuals and communities in the UK and I believe that even the Government are looking to tighten controls on it.

Certainly, Amendment 46 offers a modest measure towards transparency, honesty and openness. If that should mean that certain industries pay tax on their profits in the UK, I do not see how that could be opposed. I ask the Government to comment on that.

[The Deputy Chairman of Committees (Baroness Fookes) (Con)]

My Lords, I understand that the noble Baroness, Lady McIntosh of Pickering, has withdrawn, so I now call the noble Lord, Lord Sikka.