Financial Guidance and Claims Bill [HL]

Baroness Drake Excerpts

Report: 1st sitting: House of Lords
Tuesday 24th October 2017 Lords Chamber

[Baroness Buscombe]

My Lords, before turning to Amendment 3, it may be helpful to the House if I were to say now that, in the light of earlier Divisions, the Government will accept Amendment 7 as it is consequential on Amendment 1.

Amendments 3, 5 and 6 address concerns raised by the noble Baroness, Lady Drake, and referred to by other noble Baronesses, including the noble Baroness, Lady Coussins. They provide certainty that the information, guidance and advice services provided by the single financial guidance body and its delivery partners will be impartial and free to members of the public.

As we stated in the Government’s response to the consultation on the single financial guidance body—and as I confirmed in Committee—it has always been the Government’s firm intention that the body’s information, guidance and advice services should be provided free to members of the public. We recognise the concerns that often the people most in need of financial guidance or debt advice are already in financial difficulty. The existing organisations already provide free services and we are clear that this should not be any different when those services transfer to the new body.

In Committee, the noble Baroness, Lady Drake, made a number of very pertinent points about the importance of the new body being wholly customer-focused and not influenced by commercial interests. She highlighted that, in the case of guidance, the body needed to be trusted to take the customer up to, but not into, the “decide and buy” or “decide and act” moment. She stressed that a commercial comparison website that takes commission is very different from a factual comparison table that provides information based on customer needs.

We agree that guidance from a provider with a vested interest in the decision a customer makes carries a greater risk of being partial. Impartiality—ensuring that the person or organisation giving the information, guidance and advice has no vested interest, whether that be the single financial guidance body itself or its delivery partners—should be central to the new body’s ethos. This amendment provides certainty on these two important matters. It places impartiality at the heart of the body’s culture and ensures that its services will be free to members of the public. For these reasons, I beg to move.

[Baroness Drake (Lab)]

My Lords, I support and very much welcome these government amendments. I thank the Minister for the consideration she has given to the arguments put forward in Committee. These amendments would make the guidance and advice free to the user and impartial. It is very important that it should be free to the user and not vulnerable to ministerial discretion to decide to charge a fee at some later point for three important reasons.

I do not want to prolong the debate, having got the amendments but, just in case there were ever to be reconsideration of the point, I say that if the new body is to be effective in meeting its objectives it needs to be trusted and universally recognised for supporting members of the public and those most in need. To charge for information and guidance would make the relationship transactional, which risks undermining trust and public perception of the purpose and ethos of the service. It also needs to be free to the user if it is to reach the people who need it most. Charging a fee could deter many people on low and moderate incomes. In many instances, getting customers even to seek guidance often needs a pull, and charging just makes that problem more difficult. If the service is not free to the user but subject to a fee, the new body’s priorities and impartiality could be compromised because of potential conflicts over where to put resource from the organisation—towards those most in need or to the services with the greatest potential to raise revenues.

The requirement in the Bill that guidance and advice given must be impartial is very important. The Minister referenced arguments used in Committee that there are so many providers of information and guidance that they nudge or encourage the consumer in directions that are not driven solely by their needs. It will be the fact that the new body is impartial in the advice and guidance it gives that will distinguish it and allow it to build trust and to deliver its statutory objectives. I thank the Minister for bringing these amendments forward.

[Baroness Kramer]

My Lords, I join in thanking the Minister for bringing these amendments forward. I think she recognises that the three existing bodies to be merged all have a reputation for impartiality. Their services are free and she is making it absolutely clear that those vital elements which she respects and appreciates so much in the existing bodies will carry through into the new body. It seems to me that stating it clearly, rather than leaving it to be read and potentially misconstrued, is exceptionally helpful.

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Moved by

[Baroness Drake]

4: Clause 2, page 2, line 21, at end insert “including by means of provision to the public of a pensions dashboard.”

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[Baroness Drake]

My Lords, the intent of Amendment 4 is to require that the introduction of a pensions dashboard shall be as a single, public service dashboard overseen and hosted by the single financial guidance body, a safe viewing space where an individual can see all the information on their state and other pensions savings. I welcome the Government’s recent statement that the Department for Work and Pensions is to take ownership of the dashboard project and take it forward to the next phase. Releasing data on individuals’ state pension entitlement to the dashboard is a key criterion for its success. The DWP being now responsible for the database of state pension entitlements and taking ownership of the project is in itself reassuring, because the department could never allow release of this personal state data through the dashboard unless it was completely satisfied with the governance, standards and protection of individuals.

The industry has done a good job in driving the dashboard project forward and the recent report on the project from the ABI asserts,

“that it is possible to build the ‘plumbing’ to connect multiple pension schemes to dashboards and for people to see their pensions in one place … infrastructure can be delivered, and a data standard for sharing information can be agreed … industry can work successfully with FinTech providers to make this happen”.

That is good and it has done good work, but the project now needs to move into a new phase, owned and driven forward by the Government, engaging a wide body of stakeholders, including, importantly, consumer groups. The public need to see clear proof of concept from the perspective of the consumer’s interest and the public good.

Within the dashboard there will be a pension finder service: the engine that sends out messages to search the records of all providers and schemes records to see if there is a match to the customer details. The engine then collects that data to populate the consumer’s front-end viewing space. If introduced, the data of millions of people will be accessible through the dashboard—high standards, tough regulation and sound governance will be required. To be successful, a dashboard requires all providers to release their data, but there are some big and significant questions still to be answered on governance, implementation and consumer protection before the Government can move to compel all providers to provide their data, which the industry is calling for.

There is a major governance challenge to be addressed: the consumer protection of millions of people in both the provision of the dashboard and the infrastructure that supports it. Issues such as identify validation and security, data matching and pension-finding consent need to be overseen and policed.

The ABI report acknowledges,

“the need for strong governance to make clear what obligations, liabilities and controls are in place … to oversee the setup and maintenance”,

of the dashboard. Under what circumstances should individuals’ data be shared with third parties? What will be the requirements around consent and protection? What happens if those parties are not regulated? Certainly, any unregulated party must be excluded from using dashboard data. After all, the consumer will be giving permission for the use of their personal data to search for pension savings, and for the provider or scheme to share that data with the dashboard.

The dashboard, in requiring near-universal coverage, raises the governance bar on protecting consumers from bad behaviour by both regulated and unregulated providers, scammers and consumers’ own vulnerability when all their pensions and savings data can be identified and viewed in one place, accessible through a digital identity. Oversight of that governance must rest with a public body with the right powers to work with regulators and industry to deliver what is required.

The potential scale of the dashboard raises the importance of public control over its implementation and rollout. There will be the constraint of the minimum viable product, but a staged implementation approach to full coverage will reduce the risk to the consumer. I recognise the dashboard is only as useful as the data that populates it, so a pathway to full coverage is needed for its success, but that needs public control.

The Government need to give clarity on the consumer benefits and public policy outcomes that a pension dash- board is expected to deliver. Any decisions on the project must be benchmarked against these desired benefits and outcomes. The dashboard may provide people with the information they need to consider their options but, of itself, it will not enable them to make informed decisions. It is important that support structures exist around the dashboard to avoid people making poor decisions with the information they have accessed.

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I am grateful to all noble Lords who have taken part in this debate. I am very pleased that I could say what I have already said this evening—so on that basis, given that I was able to set out the proposals to which the Government are committed for taking this work forward, I hope that the noble Baroness will be willing to withdraw her amendment.

[Baroness Drake]

My Lords, I am grateful to the Minister for her reply. I tabled my amendment for two reasons: the first from conviction, and the second to ensure that I could secure the fullest possible statement from the Government on Report. I recognise that ownership is being transferred to the DWP. I consider that to be very positive, first, because of its remit and experience; and secondly, because it has an alignment of interest over its own database, which is the state database. The Minister has already confirmed that the Bill would not preclude having a public governor of the dashboard in the single financial guidance body if that was the policy decision. In her statement, she has quite clearly said that the Government accept that the dashboard must be of use to individuals; that consumers must be at the heart of the design; that it has to be viable, and that the framework of governance must hold public confidence. The Minister referred to a report being produced in spring next year, and I recognise that there is a lot of work to be done, but I think she can assume that there will certainly be several Members of this House who will be looking to scrutinise what the Government say in the report. On that basis, I beg leave to withdraw the amendment.

Amendment 4 withdrawn.

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[Viscount Brookeborough]

My Lords, could I just look at one other aspect of vulnerability? It is looked on as being a disability of some kind, but vulnerability is also down to isolation, where one might live and being on the periphery. Look at banking in particular—the most basic place that somebody goes or would like to go for financial advice or help at first if they live out in the country. Look at the number of banks that are closing branches left, right and centre. Of course it is business, but we have to realise what is really going on there. They say that they have consulted and we had various banks, without naming them, which came in front of our committee and said, “We consulted before we closed”. But we did not find one instance where a bank had changed its mind because it had consulted. It is as simple as that. We have to look at it on those terms.

Actually, we had Nationwide. I must forgive it for a minute, because I rather liked it. Nationwide said, “We are opening some branches”—and it is being novel about it. It could be opening a branch with one man, who will sit in what could be an office or a caravan. He could be visiting a village or whatever. When the customer says to somebody he probably knows, “Bill, listen. What can you do? I need a loan or a mortgage”, he says, “Hold on”, and presses a button. Up comes Peter from the loans office who says, “Just sit down and we’ll have a chat about this”. He says, “Would you like some coffee?” and the guy says, “Yes please”—because he likes getting anything free that he can. He presses a button and the coffee arrives from next door. The whole thing is very homely. He says, “When I have this loan, what about a mortgage?”. He says, “I’ll bring in Charles on that and the three of us can talk about how it will work”.

Ultimately that is no different from what always used to happen—you went into your bank to the man you knew and he then took you into an office to see somebody else—but this is novel thinking. Banks will always worry about their business, but they should not necessarily be closing branches and we have to encourage them to be novel. The internet is there and the banks must watch out. I heard a comment the other day or saw it in the Financial Times. It was something about banks becoming vulnerable, because people might not keep their money there. The sooner the banks catch on to what is going on and come up with novel ideas, the sooner the vulnerable will not be as vulnerable as they appear at the moment.

I live on the border with the Republic, and we will talk about Brexit another time. The banks have literally all come back from the border. Societies in those villages are increasingly vulnerable. They are beginning to be scared. They have to drive 20 miles, so they had better have something good to talk to the bank about. They had better know exactly what they are doing before they go. A lot of them may be older people without the internet. Something like the Nationwide’s idea is the way we should be going. We must treat vulnerability not only as those who may be medically vulnerable but as vulnerable members of our society.

[Baroness Drake]

I will carry on the spirit of the contribution of the noble Lord, Lord Kirkwood. In Committee, several Peers ran several amendments trying to capture this issue of vulnerability—whether it was vulnerability because of a health shock or because of some standing reason. As the noble Baroness, Lady Finlay, explained in moving her amendment, the attraction of Amendment 11 is that it does not seek to list or define. It just tries to capture the principle that there is a category of people who become or who are vulnerable for a series of reasons, and they need to be addressed.

The purpose of the single financial guidance body is to achieve a series of improved public and individual outcomes by improving a person’s financial capability, but a person’s capability cannot be improved—it just cannot happen—if they are excluded from the market for financial services or denied the access or the means to make good decisions. As my noble friend Lord McKenzie and I frequently say, the fundamental, immutable requirement of financial capability is that you are included and have access. You cannot begin to become capable without it. One feels the sense around the Chamber, which I hope the Minister is able to find a way of recognising, of a wide concern and a very constructive amendment. It is not overprescriptive but allows the financial guidance body to recognise that it needs to address this problem.

[Lord McKenzie of Luton]

My Lords, this has been a good debate. I emphasise that we support the amendment, which is no surprise given that I put my name to it. I am sorry that we pre-empted someone: I am happy to step back.

This is a very elegant formulation, which stops a whole list being produced. It instinctively recognises that people might be vulnerable for reasons to do with their circumstances but that this is not necessarily something endemic to them. There are fluctuating circumstances which particularly fit that description: in our short debate we have had discussion of learning disabilities, mental capacity and addictions. A broader issue, but still within the key definition of vulnerability, is isolation. The noble Viscount, Lord Brookeborough, made a very telling point on that. The noble Lord, Lord Kirkwood—I keep calling him my noble friend; we have debated too often over the years—spoke about the impact of vulnerability because of destitution. We should recognise that people may be perfectly fit and able-bodied and have all their mental capacity but if they are broke and have no money then they are potentially vulnerable or in vulnerable circumstances.

The formulation is powerful and succinct and we support it. I hope the Minister will find some way of incorporating it into the Bill—even if not in the precise wording, although it seems excellent to me—so that we can support it.