Economic Crime and Corporate Transparency Bill

Debate between Baroness Bennett of Manor Castle and Baroness Altmann

Committee stage
Tuesday 25th April 2023 Grand Committee

[Baroness Bennett of Manor Castle (GP)]

My Lords, it is a pleasure to rise to take part in this debate, which has been rich, full and powerful. I will seek not to repeat anything that has been said but simply to make a couple of points.

First, I offer the Green group’s support, showing that we have the broadest possible political support in your Lordships’ House for this approach. I also want to address the use by the noble and learned Lord, Lord Garnier, of “ingenious”. These amendments are not ingenious—they are obvious, reflecting an obvious step. It is interesting that a number of Members of your Lordships’ House, operating so far as I am aware entirely independently, have collectively brought together a group of amendments that forms a quite complete package. I am happy to accept that we can work on the detail, and I very much join others in wishing that the Government will work on the detail, but the package is there, approaching this issue from different angles.

I bring up a point made by the noble Lord, Lord Agnew, in the previous group, which reflected on the failures of HMRC to deal with money laundering. That is just one element of the way in which our institutions that are supposed to be taking on economic crime are simply not up to the task or resourced for it. I join the media crew here as a former newspaper editor, which is the perspective I come from. In many of the worst cases, as the noble Baroness, Lady Wheatcroft, outlined earlier, it is not law enforcement or HMRC that uncover situations that bring gross abuses and crimes to public notice but journalists and NGOs bravely stepping out to expose what is happening. The Government are not capable of doing that, and we desperately need the fourth estate to take those actions. It fills a gaping hole which otherwise will not be filled, and crimes will not be exposed if the media and NGOs are not in a position to do this.

I think the noble Lord, Lord Cromwell, referred to an important report from the Foreign Policy Centre and Article 19. Last night an event in the Houses of Parliament looked at an updated report that they had prepared called London Calling—a very timely event. To look at some of the contents of the report, it says that the UK is

“a leading jurisdiction for domestic and trans-national SLAPP cases”.

A 2020 study by the Foreign Policy Centre found that 63 journalists working on financial crime and corruption in 41 countries identified the UK as the leading international jurisdiction for legal threats. I also make the point—it was made by others, but it needs to be driven home—that this report notes that the use or threat of SLAPPs “rarely make the public record”. So, although the noble and learned Lord, Lord Garnier, says this is just a handful, it is the tip of an iceberg of people using the UK legal system for criminal purposes. It is not exposed, but we know that it is there.

I will make two final points. The world knows that that issue is there. If we think about the geopolitical state of the world now, this is broader even than the financial impacts. I note one estimate of the cost of worldwide economic crime: $274 billion. There is the financial cost, but also the impact in a world where the rule of law is under consistent attack, where we see not just individual oligarchs or kleptocrats but entire nation states attacking the rule of law. The UK is putting itself in a far weaker position by being the home where the kleptocrats, oligarchs and those states are able to use the law as a weapon.

Finally, we have mostly referred to the traditional mainstream media. Looking at the range of organisations involved in the initial launch of the Foreign Policy Centre and Article 19 report, on the panel were Tortoise Media, Open Democracy and English Pen. This concerns some very small, brave organisations with very few financial resources; it is not just the old legacy media, which still have some financial resources left. We have people stepping up to the plate. We think about London, but we have also seen a real rise of quality regional media in places such as Manchester, Liverpool and Sheffield, where local media is stepping up and doing investigative journalism. They have almost no resources to be able to take on the threats; they need legal protection, so this needs to happen at all levels. Your Lordships’ House has come up with a package that takes us a long way towards where we need to be. We must get there now. As many others have said, we cannot wait.

[Baroness Altmann (Con)]

My Lords, I add my support to my noble friend Lady Stowell’s Amendments 87, 88 and 89 and congratulate her and her committee on their work. I also support Amendment 80 from the noble Lord, Lord Thomas, and Amendments 105 and 106 from the noble Lord, Lord Cromwell. As I said at Second Reading, this is a vital issue that must be covered in this Bill. In this group, we are discussing threats and lawsuits whose intention is to silence, intimidate or censor critics such as investigative journalists. So often, as the noble Baroness, Lady Wheatcroft, explained so well, they stem from economic crime.

This issue is not just about actual lawsuits. As others have said, often the matter will start with a threatening letter or even a phone call, which is enough to stop journalists or investigators from pursuing inquiries. That is why so few SLAPPs have come to court. I respectfully disagree with my noble and learned friend Lord Garnier on whether the few cases are any indication of whether this legislation and these amendments are required. These threats and vexatious potential lawsuits threaten not just journalists, campaigners, authors or academics but everyone’s rights in this country. They limit the rights of the public to have matters exposed, such as bribe-taking, poisoning water supplies with toxic chemicals, or general economic wrongdoing, which falls squarely within the remit of this Bill. Our courts are supposed to be there to protect ordinary people and small companies without large resources against those with more power, money and influence. Without these amendments, that protection will be fundamentally weakened when we have an opportunity to strengthen it.

I am not a lawyer, but Amendment 80 seems sensible to me. I believe that the Law Society supports judiciary-led gatekeeping. Amendments 87, 88 and 89 from my noble friend Lady Stowell seek to remove the incentives to issue these kinds of threats by introducing properly meaningful fines and intend that payments should not be able to come from the proceeds of economic crime. Again, that seems eminently sensible. I will listen carefully to my noble and learned friend but, equally, I urge him to listen carefully to the powerful arguments across all sides of this Committee and either accept these amendments or introduce his own.

Retained EU Law (Revocation and Reform) Bill

Debate between Baroness Bennett of Manor Castle and Baroness Altmann

Committee stage
Tuesday 28th February 2023 Lords Chamber

[Baroness Altmann (Con)]

I join the tributes to my noble friend the Minister—an excellent Minister who is passionate and knowledgeable about his brief. I also thank him for the briefing yesterday. I have no doubt that he was sincere in his reassuring words that the default position will be to retain, and I have no doubt that that is his intention, but this is not the reality of the Bill. As my noble friend said yesterday on REACH, the water framework directive and habitats, the Environment Act set up a clear process for change, and yet now we find that the Bill overrides all that, as the noble Baroness, Lady Parminter, stated.

If a carve-out is possible for financial services, surely this is one of the other areas that must be excluded from the Bill. I am sure that there has been an extensive effort to find all the various regulations involved in protecting the environment and involved in REACH and so on, but the only reassurance we had yesterday was that the department is confident that it has found the vast majority. This is about protecting the public.

We are also told that, if Ministers see fit, or decide that it is in citizens’ best interests, they will make the relevant and necessary changes as they decide. But what if Parliament disagrees? It will have no power. Indeed, as the noble Lord, Lord Kerr, indicated, were the public to be asked themselves, they would disagree. They are not consulted and they have no say; this will be happening by default.

In my view, it is not possible to improve environmental protections without tightening regulations in some way, yet the Bill works against all that. If you want cleaner water in our rivers, as the noble Duke, the Duke of Wellington, so rightly focused on, will you have to have more dirty water in the sea? How will you offset that? Who will decide where regulations must be relaxed to be able to tighten in other areas as we move forward with the intention we clearly have—and rightly so—to improve environmental protections and protections for the public? If it is discovered that a whole family of chemicals or pesticides are more harmful than previously recognised and need to be banned, will other harmful substances have to be allowed into public circulation because we must not tighten regulation?

The Bill seems to be driven by ideology and politics. I have concerns that the sunset is clearly politically driven, and that it cannot be in the national interest. Surely the ideology that regulations can only be weakened cannot apply to something as precious as the environment and all the issues covered by Amendments 10, 11, 12 and 37.

[Baroness Bennett of Manor Castle (GP)]

My Lords, it is a pleasure to follow the noble Baroness, Lady Altmann, and to join in this debate, which is obviously about an absolutely core area for the Green group.

I offer a reassurance to the noble Baroness, Lady Lawlor, who, in this very wide and broad debate round the Committee, was the only one who offered some kind of support for the Government’s position. On protecting wild animals, she said that she wanted to see divergence for the better. Of course, if we threw out the Bill and it disappeared—everyone from the noble Viscount, Lord Stansgate, to many noble Lords opposite, including the noble Lord, Lord Cormack, and the 12 Cross-Bench colleagues I counted who have spoken, indicated either implicitly or explicitly that that was their desire—Defra would have vastly more time to work on improving and strengthening existing regulations. That is what the noble Baroness is wishing for, and the best way to do that would be to get rid of the Bill.

Many noble Lords have talked about this, but I shall just pick up on what the noble Duke, the Duke of Wellington, said about the reassurances that we heard yesterday and the ones that we are expecting today from the noble Lord, Lord Benyon, from the Front Bench. Reassurances are fine, but they must be in the Bill. That in effect in this area is what is done by Amendment 37, in the name of the noble Baroness, Lady Hayman, the noble Lord, Lord Krebs, and the noble Baroness, Lady Bakewell, and to which I have added my name to make it cross-party and non-party. This is an authoritative—if not comprehensive—list of the main areas of Green and animal welfare concern. I associate the Green group with almost everything said by the noble Baronesses, Lady Hayman, Lady Bakewell and Lady Parminter, and the noble Lord, Lord Krebs, but I shall disagree on one point. The noble Baroness, Lady Hayman, said that we have high standards in the UK, and the noble Baroness, Lady Parminter, said that we have stringent targets. I would say that we have a basic inadequate minimum of standards.

To pick up on the point made by the noble Baroness, Lady Altmann, and to expand on it a little, there was much discussion in the last debate that we had to wait until we got to debate Clause 15. But let us look at that letter—I am afraid that I am going back to the famous letter. I have hand-transcribed a paragraph from it, because it is so important. The letter says that the Minister would like to

“clarify that it is possible for additional regulations and higher standards to be introduced through the powers to revoke or replace, so long as the package of reforms contained within each statutory instrument does not increase the overall regulatory burden for that particular subject area”.

The noble Baroness, Lady Altmann, said, “What about new scientific discoveries—say about water?” To be concrete about that, let us think about new scientific discoveries that we have experienced just in the last year or two, such as PFASs, or “forever chemicals”, as they known in shorthand. We are coming to understand just how utterly pervasive and dangerous they are. Does that mean that we are going to give up and let a bit more sewage in, so long as we can do something to block some PFASs? That is what that paragraph in the letter means.

Antimicrobial resistance is something else that I am doing a great deal of work on. I must have a discussion about it with the Minister at some stage. We now increasingly understand that pesticides are having impacts in causing antimicrobial resistance. That is something that the Minister may not yet quite grasp, but it is a really important technical area. We are also starting to understand what the impact of microplastics in our water and soils might be on human health, to pick up on the point that the noble Lord, Lord Krebs, made: we are not just talking about looking after the environment. We are talking about looking after what we actually live in.

I am not sure that even the Benches around me really grasp that our economy and our lives are entirely dependent on the environment. In the UK, we are using our share of the resources of three planets every year—and we have only one planet. So, as the noble Baroness, Lady Parminter, pointed out, we squeezed into the Environment Act—and my recollection is that we had to fight very hard to do this—some non-regression clauses. We absolutely have to strengthen so many things to head us in that one-planet-living direction.

To continue with that focus on biology and thinking of us as human animals in a world on which we are entirely dependent, we have an ecosystem that has developed over decades. We have talked about the importance of case law and how EU and UK approaches have been blended together in regulations. I am still trying to understand what the interpretive effects are, and whether they are or are not reflecting case law. But the model of an ecosystem is perfect for this.

It might surprise the Committee, but I am going to cite a recent article from Current Biology, a peer-reviewed journal, about the Permian-Triassic boundary, a period known as the “Great Dying”. One thing that was found in this period was that one apparently quite insignificant little species had a key role in the ecosystem, and when that died a whole ecosystem fell apart. That works as a metaphor for the risk that we are running with this Bill—however good the list is from the noble Baroness, Lady Hayman. What is missing, what is the keystone, what is the vital bit that makes everything else fall apart? The Government cannot tell us; they can tell us only that they do not know. That is where we are.

Financial Services and Markets Bill

Debate between Baroness Bennett of Manor Castle and Baroness Altmann

Committee stage
Monday 30th January 2023 Grand Committee

[Baroness Bennett of Manor Castle (GP)]

My Lords, it is a pleasure to take part in this debate on the second day of Committee. I have to say that it has been an extraordinarily powerful debate thus far and an absolute indictment of the UK financial sector. I begin by apologising for not taking part in the first day of Committee, despite having signed a number of amendments. I am afraid I was taking part in the debate on the so-called Genetic Technology (Precision Breeding) Bill, and it is impossible to spread oneself across too many places.

The case for these amendments, in particular Amendment 40 in the name of the noble Lord, Lord Sharkey, to which I am pleased to attach my name, has already been powerfully made, by the noble Lord himself and by the noble Baroness, Lady Bowles of Berkhamsted, in the debate on the previous group of amendments. I will make a couple of additional points. In particular, I draw on a survey by the Federation of Small Businesses, published in December, which found that 30% of small and medium-sized enterprises thought that they had signed financial contracts that contained unfair clauses and provisions.

The survey also found that successful applications for loans and other financing for SMEs had fallen precipitously. Less than half were successful in the third quarter of 2022; before Covid, two-thirds had been successful. One of the things we are always hearing from the Government is, “Rely on the market! People can shop around and choose”. We have already heard the reality of the inequality of arms—as the lawyers would put it—between a small business and a giant financial-sector company. But there is also no opportunity: small and medium-sized enterprises have to take money from wherever they can get it, if they are lucky enough to get it at all.

What we have here is a practical reality, as the noble Lord, Lord Holmes of Richmond, just set out. The financial sector is not meeting the needs of the real economy, and that issue underlies all our debates on the Bill. Is the financial sector there as a high-stakes casino in which a few people can make a lot of money and the rest of us have to pick up the pieces when it all goes wrong, or is it there to meet the needs of the real economy and give us a genuinely sustainable—in all senses of the word—society?

Although we have perhaps not needed him, it is a pity that the noble Lord, Lord Sikka, is not currently in his place, as he could also have contributed very powerfully to this debate. What we have is a litany of disaster. The FCA has a terrible track record. Your Lordships’ Committee is trying to do something to fix that, and, boy, does it need fixing.

[Baroness Altmann (Con)]

My Lords, I too support both amendments in this group. I congratulate my noble friend Lord Holmes on his Amendment 219, and the noble Lord, Lord Sharkey, on Amendment 40 and the way in which he explained it. I urge my noble friend the Minister to take seriously the comments that have been made and the reference to the Treasury Select Committee, which recommended just this kind of change.

I would like to understand from my noble friend: if the Government do not agree with the Treasury Select Committee, why? How do they believe that SMEs are protected against the kinds of scandals and bad behaviour that have clearly been rife within the sector over a number of years? Does my noble friend seriously believe that small and medium-sized enterprises are equipped enough to stand up against the information and resources available to the financial services industry to avoid the kind of problems that we have seen in the past?

--- Later in debate ---

[Baroness Altmann (Con)]

My Lords, I support both amendments in this group. I think my noble friend Lady Noakes’ Amendment 43, which she so eloquently explained, is very much needed within our financial services system. I agree that it is possible that we should consider introducing into the wording greater parliamentary scrutiny rather than the discretion that may otherwise be given wholly to the Treasury, but I think the explanation by the noble Lord, Lord Tunnicliffe, of the situation with buy now, pay later is a good example of the kind of amendment that my noble friend wants to put in which would have facilitated some faster action had it been put in. I am not sure, but with the Bill we are going back time and again to the asymmetry of information and power between those transacting with financial services in general and the financial services industry that is putting products out to those customers. I think these amendments would be very useful additions, and I look forward to hearing from my noble friend.

[Baroness Bennett of Manor Castle (GP)]

My Lords, I rise to express support for Amendment 212 and to make a couple of points about it. I noticed that a couple of days ago the New York Times reported that buy now, pay later is an industry facing “an existential crisis”. I also note that various market analysists are reporting that this is a huge area of growth for the UK economy and the UK financial sector. Putting those two things together is a cause for concern not just for individual consumers, as the noble Lord, Lord Tunnicliffe, set out so clearly, but for the structural impact on the UK economy.

A survey was done for a household debt report by a company called NerdWallet. I cannot attest to the value of the survey, but it confirms what I have observed: 20% of women and 11% of men have used buy now, pay later in what amount to loans. So there is a gender aspect to the use of buy now, pay later. We look at many other areas of our system where women are financially disadvantaged but there is real cause of concern here.

My final point concerns something that really puzzles me—I understand that we may not be able to get an answer on it now. It was reported recently that a company called Zilch, which has 3 million buy now, pay later customers, is planning to report to all the major credit agencies the amount of debt that is being held by its customers. I think customers’ understanding is that it does not show up on their credit records—this is usually a soft search—so they are able to keep borrowing money through this mechanism and it does not show up. I do not quite understand how, if something was taken out on that basis, it can suddenly become declarable to credit rating agencies. This is an area where it is clear that regulation is necessary.

Health and Care Bill

Debate between Baroness Bennett of Manor Castle and Baroness Altmann

Consideration of Commons amendments
Tuesday 26th April 2022 Lords Chamber

[Baroness Altmann (Con)]

My Lords, I follow the noble Baronesses, Lady Brinton and Lady Campbell, and will confine my brief remarks to social care, which I have long worked on. Sadly, the measures in the Bill will not rise to the challenge as required to sort out the social care system in our country.

I accept and congratulate the Government on the concessions that they have made. I am delighted to see Motion C on modern slavery. However, as far as social care is concerned, I would like to understand from my noble friend, on workforce planning, whether private care homes and non-state care home staff will be assessed as to adequacy. At the moment, there are horrendous staff shortages, and the current immigration policy does not seem to include carers—an essential element of the workforce—because of the pay structures. If he could explain what the social care workforce elements of the Government’s proposals are for the non-state social care sector, I would be most grateful.

I am not planning to vote against the Government on Motion D1, but I am afraid that I cannot support them. I put on record that I agree with everything that has been said about the Government’s changes to the social care cap. I believe that the measures are regressive; they will damage the least well off—or the lower end of the middle range of people, shall we say. They may be better than the current system, but they are not a solution and are not satisfactory. We will end up having to revisit the support for social care. Having said that, and in view of the fact that this is financial privilege, I will not vote against the Government on Motion D1.

[Baroness Bennett of Manor Castle (GP)]

My Lords, I rise very briefly to offer Green support for both Motions A1 and D1. Motion D1 has already been very amply covered, most notably by the noble Baroness, Lady Campbell of Surbiton, so I will just address my remarks to Motion A1.

I know that many Members of your Lordships’ House feel as though we do not want to be political about things—I might have thoughts about that—but this is not a political amendment at all. As the noble Baroness, Lady Merron, said, more than 100 of our major healthcare organisations have expressed support for this workforce planning approach. Just a couple of hours ago, and this addresses your Lordships’ House directly, the British Heart Foundation put out a press release saying that, without this amendment, it is

“unclear how ambitious targets laid out in the Elective Recovery Plan and other NHS delivery plans can be met.”

The chief executive said that

“the Government has missed an open goal by failing … to address the workforce shortage”.

In addition, just yesterday the King’s Fund put out a report saying that the Government—they can welcome this—are “on track” to meet their target of “50,000 extra nurses” by 2024. However, the King’s Fund points out that the level of vacancies is still the same as it was when that promise was made. Just plucking figures out of the air and going, “Hey, we’ve got this great figure”, is not enough; we need to plan for the future. That is why this amendment is absolutely crucial for our NHS.

Subsidy Control Bill

Debate between Baroness Bennett of Manor Castle and Baroness Altmann

Committee stage
Monday 7th February 2022 Grand Committee

[Baroness Bennett of Manor Castle (GP)]

My Lords, I rise briefly to offer Green group support for all these amendments, to which we might well have attached our names were we not caught in this massive legislative pile-up. I should declare my interests as a vice-chair of the LGA and of the NALC. With the amendments having been so comprehensively and effectively introduced by the noble Baronesses, Lady Blake and Lady Humphreys, I shall make just a few additional points.

One of the most popular hashtags in my rather busy Twitter feed is #LandofCronies. There is grave public concern about corruption, cronyism and the nature of decision-making on government spending. Indeed, I put it to the Minister that these amendments collectively could be a great protection for Ministers in future, enabling them to say, “Here’s the transparency. What we’re doing is very clear and very obvious.” I note that in the other place such diverse and broadly respected organisations as the Centre for Policy Studies, the Adam Smith Institute and Transparency International backed similar amendments and that the Financial Times has warned that the new planned flexible regime could pose a “significant risk” and

“On the altar of speed, it has sacrificed scrutiny”—


it being the Government.

We are in a very interesting situation whereby the subsidy regime, having been under the control of EU rules and the UK having traditionally provided much less public funding than most other countries—around £8 billion a year—is now about to increase dramatically just as the controls utterly fall away. This is about showing people what is done; it is democracy and transparency in action. There is broad support for these amendments, so I would be delighted to hear the Minister express that the Government are moving in this direction.

[Baroness Altmann (Con)]

My Lords, I support these amendments. I support the aim of a more flexible scheme than the EU has, and I welcome the Government’s commitment to introduce transparency to their new subsidy scheme, but, as others have explained, this Bill potentially reduces transparency.

The amendments in this group had strong support in the other place, not least from our honourable friends John Penrose and Kevin Hollinrake. I also thank the Centre for Public Data, which has worked with them to provide information to help the Government achieve what they want to achieve perhaps in a better way, which is what these amendments may enable to be done.

I support the use of subsidies to achieve the levelling-up agenda and the net-zero agenda. I think that we all realise that regional growth and infrastructure need an extra boost now. However, can the aim of reducing central control of subsidies and relying on transparency, so that interested parties can challenge subsidies that they believe are unlawful, be achieved by a process whereby those interested parties will not know that there is a subsidy unless it is more than £0.5 million and there could be a series of subsidies just below that which could amount to quite substantial sums? It would help me understand how this aim could be realised if the transparency that I think we could rely on cannot be achieved because the database does not include a record of those very subsidies that are meant to be challenged. I suggest that this seems somewhat illogical, and I urge my noble friend either to bring back his own amendments on Report or to consider accepting these amendments.

Financial Services Bill

Debate between Baroness Bennett of Manor Castle and Baroness Altmann

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.

Financial Services Bill

Debate between Baroness Bennett of Manor Castle and Baroness Altmann

Committee stage
Monday 1st March 2021 Grand Committee

[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.