Financial Services Bill

Baroness Kramer Excerpts

Report stage
Wednesday 24th March 2021 Lords Chamber

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

My Lords, it is a pleasure to take part in this debate on the first group of amendments on the first day of Report on the Financial Services Bill. I declare my interests as set out in the register.

I congratulate the noble Lord, Lord Stevenson of Balmacara, on tabling this amendment and on the way in which he introduced it. These arguments have been put since at least 2017, when we debated the Financial Guidance and Claims Bill. What has happened in the interim has merely strengthened those arguments on the need for a duty of care. During the last year, as in so many other areas of life, we have seen exactly why something in this space would assist. Now that we have the excellent vaccine rollout and inoculation programme, such a duty would put a capital “B” into the “build back better” approach. It would be a real example of “better”.

I will not rehearse the arguments that I made at Second Reading and in Committee. I want to take this opportunity again to thank Macmillan Cancer Support and congratulate it for everything that it continues to do in this area. According to the testimony of a cancer patient,

“I felt I was battling my bank as well as cancer.”


Will the Minister consider what can be done between Report and Third Reading? With the Easter break in between, there is time, so this is more than timely. Can she reassure noble Lords of the potential for movement on this specific point of a duty of care?

[Baroness Kramer (LD)]

My Lords, I shall be very brief. I spoke on this issue at length in Committee. The Government may take note that every single speaker today from across the House has supported the concept of a duty of care and non-exploitation and has urged the Government to act.

In all the speeches, both before today and referenced again today, we have heard about this chain of malfeasance, whether it has been described as scandal or fraud or an abuse of customers. Clearly, the existing legislation does not work, or we would not have this kind of history with new scandals cropping up, sadly, on a regular basis. Like it or not, treating customers fairly is interpreted by both the industry and the regulator as exceedingly light touch, to be offset by the “caveat emptor” principle—the taking of personal responsibility—to which the noble Baroness, Lady Tyler, referred. This is unacceptable. This Government often say that they focus on outcomes. The outcomes have been unacceptable. Look at the outcomes and the chain of scandals. Here is the opportunity to act.

In response, the Minister might say that there are effective tools, such as the senior managers and certification regime. Anyone who has followed the progress of this Bill and the amendments through Committee will have heard how that has broken down. It has, in effect, become something of a busted flush. The Minister might say that scandals have been picked up very early because we have working whistleblowing channels. Again, from listening to the discussion throughout Committee stage, it is clear that this scheme is not working. The analysis in the Gloster report reinforces that.

We do not need a ninth consultation. Every time there is another major scandal, the FCA’s response is to have another consultation. In the end, there is something like a freckle of movement. This issue needs to be seized by the scruff of the neck and resolved before more people suffer injury. The regulator needs to be put on the front foot. By supporting this concept and this amendment or something equivalent to it, the regulator will finally be put on the front foot and the industry will recognise that it has been duly warned and must reconsider the way in which it behaves.

I hope that we shall hear from the Minister that we shall see an equivalent proposal at Third Reading because, if not, I will not hesitate to ask all my colleagues and every Member of your Lordships’ House to support any decision by the noble Lord, Lord Stevenson, to move this to a Division.

[Lord Eatwell (Lab)]

My Lords, during our debates on this Bill, we have referred several times to the success of principles-based regulation in this country. We have contrasted it with the more prescriptive regulatory structures introduced within the European Union. The idea of a duty of care is a prime example of principles-based regulation because it presents a principle from which particular actions can be derived. It is now very important, given the financial stresses created by the pandemic to which several noble Lords have referred in their contributions to this debate. This is but one example of the unexpected pressures in the financial system that arise on a regular basis, not least because of the fintech innovations referred to earlier which require a flexible, principles-based approach. The strength of this approach is that is encompasses financial innovation—the changes to which many noble Lords have referred.

I understand that later in the consideration of this Bill the Government will bring forward measures to regulate the “buy now, pay later” market. This would already have been encompassed in a duty of care. It would not have slipped through the gap. If there had been a general duty of care in place, consumers would have received some degree of protection already.

One of the striking things about the issue of a duty of care and the FCA rulebook is that a number of measures that amount to a duty of care exist in the rulebook already. There are “know your customer”, “treating customers fairly” and the consumer credit rules, which require assessment of creditworthiness. What is striking is that this specific list has gaps in it.

Many noble Lords referred to the examples of malfeasance; it is this structure that creates the environment for and encourages malfeasance. It encourages testing of boundaries and of gaps. If there were instead a broad principle it would significantly discourage that persistent, competitive drive to test the gaps that exist in the current list of consumer protection measures in the FCA rulebook.

It is not simply that the lack of a duty of care creates the inability to deal with malfeasance; it actually creates it by the structure it presents for a very competitive market. We all know that this particular structure—having a specific list of something in a legal document—always raises the question of what has been left out. That is exactly the case in the FCA rulebook. It lacks the firm foundation of principle.

In Grand Committee, the noble Baroness, Lady Penn, was quite right to argue in summing up that

“the FCA is already taking steps to ensure that financial services firms exercise due care and regard when offering products, services and advice to consumers.”

She was right that there is a list, but she was quite wrong to then argue that a statutory duty of care

“does not add to the FCA’s existing powers in this area.”—[Official Report, 22/2/21; col. GC 116.]

Of course it does. It must do, in one of the most dynamic industries in the United Kingdom, associated with innovation, change and competition. It is the very nature of successful principles-based regulation that actions should derive from general principles.

The FCA lacks this statutory declaration of general principle. This is why Macmillan Cancer Support’s campaign Banking on Change was necessary, and why it is so important to place a general principle of duty of care on the statute book. My noble friend Lord Stevenson has made a very specific offer to the Minister with respect to Third Reading. I strongly urge her to accept it.

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Almost every week there is another financial scandal; I have just mentioned two or three in passing. They are man-made and the outcome of failed institutional structures and the absence of effective democratic oversight. Scandals can be checked and require a new approach to regulation, as was ably argued by the noble Baroness, Lady Bowles of Berkhamsted. This amendment seeks to guide the FCA, the PRA and other regulators through external reviews. The focus is on their conduct and whether they are fit for the purpose of meeting their statutory duties, or whether those duties are adequate for protecting the people. The review would focus upon all kinds of resources which the regulators need. It would be laid before Parliament and become a key mechanism for building trust in regulatory bodies to ensure that they carry out their main mission, which, above all, should be to protect people from malpractice.

[Baroness Kramer (LD)]

My Lords, my noble friend Lady Bowles has already indicated that she does not intend to call a Division on this amendment, which I think is right. However, this is probably one of the most important amendments that we have discussed under the umbrella of the Bill. It opens up a new area to consider: how we make our regulators accountable and whether the committee system and traditional structures of Parliament can do the whole job or whether support is needed from some additional bodies. What the noble Lord, Lord Davies, called an outside pair of eyes on this issue could be extremely useful to Parliament by bringing a particular expertise. There could be periodic reviews, looking, for example, not at the decisions made by the regulator but at its capacity and mode of operation—those core issues which determine whether a regulator is effective. The noble Lord compared it to a visit from Ofsted, which is probably a little light-touch and simple but it takes the conversation in the right direction.

I have a strong suspicion that three or four years from now, we will be back to this discussion and looking much at an independent arrangement to look at our various regulators in order to provide information when appropriate to Parliament, so that it can get on with the areas of scrutiny in which it has most capacity, which is to ensure that the rules fit with the mandate that Parliament has given it in primary legislation. This is an extremely important area with some very interesting thinking.

I hope that the Treasury takes note. It would be lovely if it was picked up in the financial framework review, but that might be hoping for too much. That review has gone on a very limited and very traditional route. It would be good to challenge it with some new thinking, and to open its process to break through and work out how effective accountability can be put in place. This affects our fundamental economy and the capacity of a Government to deliver on public services, so the consequences are significant. Real attention paid to this area would be exceedingly welcome.

I will not pick up the other scrutiny issues because we will deal with those on the second day on Report. I will discuss some of the letters we have had from the regulators then. However, I want to put down a marker that this is an area and a thought process that must be taken seriously. I hope that the Government see that as an opportunity.

[Lord Eatwell (Lab)]

My Lords, I was tempted to start my speech with the famous quotation from Juvenal, “Who guards the guardians?”. But, given the strictures by the Leader of another place against speaking in foreign languages—although he was referring to Welsh—I will instead begin with a different quotation, from the late Lord Keynes. In the introduction to The General Theory of Employment, Interest and Money, he says:

“It is astonishing what foolish things one can temporarily believe if one thinks too long alone, particularly in economics.”


Well, we have certainly had many examples of regulators believing foolish things. The sorry history of the regulatory response to the role of credit derivatives in the expansion of credit in the run-up to the financial crisis of 2007 to 2009 is a clear example of the folly of thinking alone. Hence, a periodic review of the thinking of regulators—whether the prudential regulator or the conduct of business regulator—would certainly be worthwhile; it would be a useful challenge to groupthink.

However, this particular aspect is not best achieved by three independent persons, because there would be a grave temptation to appoint three expert regulators—just the sort of people who would think in the same way. However, they would, no doubt, come up with recommendations that deal with the operational objectives in this amendment, so I see the review activity as falling into two parts: the operational assessment; and the core policy issues, about which I would have less confidence in the approach of the three independent persons. Peer reviews are all very well, but I assure you that any academic economist will tell you that they not only tend to embody the status quo but often stifle innovation and can perpetuate error.

That is why I and others in the House have argued that the intention of the amendment with respect to policy would be best met by a parliamentary scrutiny committee. It is the nature of parliamentarians to be sceptical, to pose without embarrassment the naive question, to entertain the views of mavericks and free-thinkers, and to relate the performance of any organisation to its statutory objectives—after all, they are responsible for the statutes. So we have two tasks before us: a review, as proposed in the amendment, which would be a valuable check and assessment of operational matters; and the review of policy and thinking, which could be the regular component of the work programme of a scrutiny committee.

But first, of course, we need the acknowledgement from Her Majesty’s Government that they would support the foundation of such a scrutiny committee, giving it appropriate powers to work with the regulators in an effective and constructive manner and to commission regular reviews of policy issues of the sort sought by the noble Baroness, Lady Bowles. We will discuss this matter later; so much hangs on the issue of the general scrutiny of the activities of regulators, voiced by Members on all sides of the House, that we will certainly return to this matter later in consideration of the Bill.

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

My Lords, we have not as yet been able to restore contact with the noble Lord, Lord Holmes of Richmond. Should he reappear before the Minister speaks, I will try to call him, but for the time being he is not with us, so I call the noble Baroness, Lady Kramer.

[Baroness Kramer (LD)]

My Lords, I will follow my practice of trying to be brief and selective on Report. We have had absolutely brilliant speeches and I do not intend to repeat them.

Perhaps I can start by being helpful to the noble Baroness, Lady Noakes, and I speak as a fairly weather-worn commercial banker who dealt extensively with loans and risk. She will understand, therefore, that the PRA, as the regulator, in dealing with capital adequacy issues, looks at the loans that sit as assets on the bank’s books, but of course it does not stop there. It looks through that to the operational activities—to the activities and investment of the company to which the loan is made. That is why the terminology “investment” pins exactly what this amendment is intended to do, which is to make sure that the PRA does that look-through to investment. I do not think that any member of the PRA would have the slightest difficulty in understanding what this amendment is guiding them to carry out. They would see that it has genuine precision in it. I do not have a problem with the wording; the wording says what it should, it says what it means and it says what the PRA would understand and follow through.

Very briefly, I thank the Minister for the two “have regard” amendments that he has embedded in this group. To “have regard” to the climate change target of 2050 is a step forward, but we have to recognise that it is very light-touch and will not scare the horses. The noble Baroness, Lady Noakes, captured that rather well when she said that the two “have regard” amendments will do no harm. I do not think they change the landscape, but they give a little hint of a change in direction and I welcome that change in direction.

Like others, I am very frustrated that we have a PRA that is going to do stress tests to test the sufficiency of banks’ capital buffers to deal with the financial instability caused by climate change, but then seems to have taken almost the equivalent of a vow of passivity and will not then follow through and implement the consequential adjustments to capital adequacy ratios that would come from that exploration and examination of the buffers. I really do not understand going through the process and then saying, “But we will not learn from or implement the consequences of that work”.

I sometimes think, as I listen to the speeches, that there is a sense that this requirement to look at capital adequacy ratios is somehow novel or revolutionary. I sit on the Economic Affairs Committee and last week, we were privileged to hear from the noble Lord, Lord Turner of Ecchinswell. I hope I have pronounced that correctly. We were looking at quantitative easing issues and therefore it was a discussion of central banks, but the issue of climate change came up. I thought what he said was quite helpful in understanding how normalised the approach of challenging this issue through capital adequacy ratios is now becoming. He said that any role of central banks in relation to climate change is very much secondary to the fiscal and regulatory authorities—the same issue that I think was raised with reference to quotes from the noble Lord, Lord King—but that is an important statement. It is secondary to the fiscal and regulatory authorities because, of course, the relevant regulatory authority is the PRA. He went on to give an illustration by referring to coal:

“If banks go on lending to coal companies, they may end up with stranded assets on which they will make a loss. That will be bad for their capital ratio. I think that it is reasonable for the PRA to set higher capital ratios for anybody who is still lending to coal.”


I do not want to suggest that he was willing to go further than coal, but he was using it as an illustration. I think most of this House would very happily accept that that language needs to be extended across the full range of fossil fuels, certainly in requiring the PRA to do a review. So, I wanted to underscore that this is a normalised approach; this is where we will go, and where we will end up. Given that we have described climate change, absolutely correctly, as an emergency, a delay in getting to that appropriate application of capital adequacy is really serious.

I wanted to pick up the point made by the noble Baroness, Lady Noakes—that most loans are short or medium term. They are, but they are supporting longer-term projects. Of course, the duration of financing the project itself—the project they enable, the project they empower, the project they drive—has a much longer-term application. So, the fact that the loan itself is short term does not mean that it can be set aside as though it had no longer-term implications. It is merely the first step in an ongoing process, and once the process is started it is almost impossible to stop. Loans might be short term because people think they might get better terms and conditions or pricing in the future. The short-term issue is not applicable here; the urgency issue is.

We know that we face an emergency and that how we act in the future will have to be more draconian and dramatic, and have far greater collateral damage, than if we act early. It is crucial that the issues raised in Amendment 3—getting in place the plan, pattern and process for using capital adequacy ratios to tackle the financial instability that will come from allowing climate change-related activities to continue and grow—be dealt with now, and rapidly. If the Government do not recognise what we have been describing here and commit to this review of the whole issue of capital adequacy and climate change, I very much hope that my noble friend Lord Oates will press his amendment. The message is absolutely critical.

[Baroness Jones of Whitchurch (Lab) [V]]

My Lords, I am grateful to the noble Lord, Lord Oates, for leading this debate this afternoon, and to all noble Lords who have spoken. We had a detailed debate in Committee on the need for the regulators to take a more systematic and urgent approach to their climate change obligations. I do not intend to repeat the general arguments, not least because the Minister accepted the need to embed our climate change goals in the financial services sector. The point of difference remained, how deep and how fast. Since that time, we have had a useful meeting with the Minister and we were pleased to hear that he had accepted our arguments concerning the need for the regulators to have regard to the Climate Change Act. The Government’s amendments, tabled today, reflect that concession and we consider this to be a considerable step forward. I thank him for his work in making that happen.

Since then, the Minister has also facilitated the sending of two letters from the PRA and FCA setting out their work on sustainable finance, to which a number of noble Lords have referred. It is useful to have their current commitments restated in this way and we are pleased that they have engaged with us on the subject. It is also helpful that they have set their work in an international context, as we know that we cannot solve this issue alone. However, I would say to the regulators, and indeed to the Treasury, that what is lacking in these letters is the urgency and reprioritisation that the climate change emergency demands. As we discussed in Committee, many individual financial institutions are already ahead of the game and are implementing dynamic green initiatives. We have heard great speeches from the Chancellor and others on the importance of the issue, but why are the regulators not being more ambitious, to ensure that everybody meets the standard of the best? As a result, today we have tabled further amendments to spell out in more detail how systemic finance-related climate risks should be embedded in the policy agenda going forward.

I have added my name to Amendment 3 in the name of the noble Lord, Lord Oates. It addresses the need for the PRA to review the risk weighting applied to investments in existing and new fossil fuel exploitation and production. The noble Lord has explained the case for that amendment extremely well today. We agree that the current regime does not adequately reflect the high-risk exposure of such investments. Clearly, institutions with over-exposure to carbon-intensive investments are not acting prudentially and their capital requirements should reflect this. As we discussed before, as the policy agenda moves rapidly away from fossil fuels and towards renewables, there is a considerable risk of the assets being stranded. The capital adequacy requirements need to reflect this risk more accurately.

The Minister will know that the Basel Committee conducted a survey of regulators in April of last year to stocktake their supervisory initiatives on climate change financial risk. This seems to run counter to the point that the noble Baroness, Lady Noakes, was making—I listened carefully to what she was saying about the comparative responsibilities of regulators and banks—because the Bank of England and the PRA were both respondents to the survey. In fact, only six out of the 27 replies factored the mitigation of climate-related risk in to their prudential capital requirements so far, but there was some criticism in the conclusions of the survey as a result of that. So, were the UK regulators in the good minority or the bad majority in the outcome of that survey, and are their responses to it in the public domain? Does he also accept that, without the necessary adjustments made in Amendment 3, investments will continue to focus disproportionately on outdated oil and gas activities that run counter not only to investments but to the interests of the UK economy as a whole? This point was well illustrated by the noble Baroness, Lady Sheehan. This is why we would particularly welcome the involvement of the Climate Change Committee, in order to provide the wider perspective of the longer-term UK interests, rather than the narrow short-term interests on which investment decisions are too often made. I therefore hope that the Minister will be able to give us the assurances we seek in this regard.

I have also added my name to Amendment 22, in the name of the noble Baroness, Lady Hayman, for which she made a very powerful case. We believe it essential that the Government set out how they will actively ensure that climate change considerations are reflected in the regulators’ statutory objectives. This amendment would provide a framework for systematically assessing and reporting on climate change financial risk. It would ensure that all government guidance is linked in order to provide a coherent and entire picture on managing climate change—an improvement on the current piecemeal reporting structure. I therefore hope that the Minister will be able to give us the assurances we seek on this issue. It would also be helpful if he could spell out what future formal reporting mechanisms would be put in place to achieve this.

Moving on to Amendment 23, at Committee and again today, the noble Baroness, Lady Hayman, has made a compelling case that the FCA needs a senior executive to oversee and deliver the climate change agenda. Like her, we were pleased to see in the FCA’s letter that a dedicated director of environmental and social governance standards is being recruited to lead on this work. We welcome this appointment and believe it represents a real step forward.

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[Lord Blackwell (Con) [V]]

My Lords, I declare my interests as set out in the register. I support these amendments, which have been so well explained by my noble friend Lady Noakes. In Grand Committee, the Minister accepted that there were concerns that a residual risk of disruption and potential litigation would remain even once the FCA had exercised its powers under the Bill. This is really important, given the amount of money and the number of contracts at stake, and the timescale of the changes in the benchmark at the end of 2021.

My noble friend the Minister said that the Government would prefer to wait for the results of the consultation, but these are not new issues. The Treasury and regulators have been aware of them for many months. The argument was made that the reason for waiting for the consultation is that there might be areas where there was legitimate reason for civil litigation and that those legitimate legal claims might be blocked. I am not persuaded that there are legitimate legal claims where the benchmark is being replaced with a synthetic benchmark at the direction of the regulator. There has to be a change and I cannot think of situations where those claims might be appropriate and fair. I would welcome it if the Minister can explain where those concerns come from and what situations might be blocked unfairly by these amendments.

Other than that, we should move to deal with these concerns now, as noble Lords have said. If the Minister does not like the specificity of Amendments 4 and 5, I would certainly be prepared to accept Amendment 6. I hope my noble friend the Minister will come back at Third Reading with government amendments to address these issues. If she does not feel able to do that and my noble friend Lady Noakes were to bring back her amendments at Third Reading, I would be compelled to support her.

[Baroness Kramer (LD)]

My Lords, I am grateful to the noble Baroness, Lady Noakes, for bringing forward these amendments. I have to confess that I am not keen on Amendment 5 because it seems that it would create an opportunity for various institutions to use the change in the benchmark in a way that would be abusive to a customer, who would then have no redress.

Amendment 5 goes too far, but Amendment 6 makes perfect sense to me. Frankly, I find it extraordinary to think that the Government have not seized it and put “government” in front of it. We will face tough legacy contracts and there needs to be a sensible and appropriate way to deal with them. Amendment 6 captures that exactly as it should. I hope very much that the noble Baroness, Lady Noakes, will get a positive reply on Amendment 6 from the Government, otherwise there will be litigation and a mess, and I am not sure that that helps anybody.

[Lord Eatwell (Lab)]

My Lords, we should all be grateful to the noble Baroness, Lady Noakes, for her persistence in this vital area. She is quite right that the clock is ticking: with nine months to go, we really need to do something about this issue; to do otherwise would be irresponsible.

Amendment 4 is valuable in defining continuity of contract, but there remains a problem that it does not and cannot solve: if the foundation of a contract is changed, its value can change. That leads on to Amendment 5. Here, I regret to say that I differ with the noble Baroness, Lady Noakes, and with the noble Baroness, Lady Bowles. It is surely the responsibility of Parliament in this case primarily to protect the retail investor, as it is the retail investor who is not the professional, who typically does not have the same information as the professional and who is likely to be more financially vulnerable, not least because retail investment is dominated by pension savings. I therefore conclude that the provision of a safe harbour is inappropriate in this case and would be looking instead for some mechanism of reconciliation rather than prevention of claim.

However, I am delighted to express my support for Amendment 6—which is not surprising as my name is on it. Here the noble Baroness, Lady Noakes, has actually saved the Government from considerable embarrassment by presenting an amendment which succinctly encapsulates, without being prescriptive, the issues the FCA must address in facing the difficulties created by the replacement of Libor: continuity of contract and reconciling the damages. Unlike Amendments 4 and 5, Amendment 6 incorporates those. I express strong support for Amendment 6 and recommend it wholeheartedly to the Government. In terms of the buffet approach, it is the healthy option.

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[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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[Baroness Kramer (LD)]

My Lords, the minute I saw this group of amendments, I knew they were above my pay grade. I am in awe of the understanding of the noble Lords, Lord True and Lord Stevenson of Balmacara. I forwarded all the amendments to those of my colleagues who deal specifically with Northern Ireland, and I think they travelled over to Northern Ireland, as well, for review there. The message I got back was that the timing—I will not repeat the word that followed—problem, let us say, was not a problem.

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[Baroness Coussins (CB) [V]]

My Lords, I support Amendment 11 in the name of the noble Lord, Lord Stevenson of Balmacara, and I remind the House of my interest as an ambassador and former president of the Money Advice Trust.

Although Clause 34 may be seen as a relatively small part of the Bill, we have had a great deal of discussion on it during the passage of the Bill—a sign of how important SDRPs are. Throughout the process, I and other noble Lords have been keen to secure clarity over the timetable for introducing SDRPs.

I thank the Minister for his positive and constructive engagement on this issue and for meeting me and the noble Baroness, Lady Morgan, to discuss the timings for the introduction of SDRPs. Like the noble Lord, Lord Stevenson, I am also grateful to the Minister for his letter yesterday, which provided further clarity on this timetable.

In Committee, the Government did not accept my amendment to include a specific date by which SDRPs should be implemented. I was pleased nevertheless to hear the Minister confirm that the complex and detailed process to prepare for implementation seemed to be entirely compatible with the end date I was proposing—albeit pretty tightly.

So I hope the Minister will be able to confirm that on the record this evening, by specifying the various stages of the Treasury’s intended timetable for laying the regulations and reassuring the House that SDRPs are genuinely intended to have a commencement date before May 2024. I look forward to the Minister’s reply.

[Baroness Kramer (LD)]

My Lords, I join in congratulating the noble Lord, Lord Stevenson of Balmacara, on his amendments in Committee and again here on Report. He has clearly found a mechanism for engaging very fruitfully with the Government, and therefore we all have the benefit of a letter that lays out some of the important and significant elements of statutory debt repayment plans; for that, I am grateful.

I join with the noble Baroness, Lady McIntosh, in being rather perturbed—I think the noble Lord, Lord Stevenson, was as well—that the implementation date is 2024. I think that the noble Lord, Lord Stevenson, said that it was towards the end of 2024. I advise the Government not then to use terms such as “at pace”, which they use extensively in the Financial Services Bill—usually to argue that there is no time for a statutory instrument to be approved by Parliament, which takes a matter of weeks.

I am rather troubled and it suggests that the Government might want to think of some kind of stopgap to deal with the very significant number of people who will find themselves with debt problems as we come to the end of furlough. People will find that they have been moved into permanent redundancy and that other jobs are hard to obtain, and a lot of young people coming out of university courses will not find the usual opportunities.

We are going to go through a very rough period where quite a number of people will find themselves loaded down with private debt, not because they have behaved inappropriately in any way but because the way events have hit them. They will need some additional support and rescue, rather than just the schemes that are in place. The SDRPs would almost certainly have been ideal for many of them. So I hope the Government will look at the events that are going to force a lot of people into a very difficult position.

Amendment 12, tabled by the noble Baroness, Lady Bennett, would do what I think Amendment 55 in Committee was intended to do. This time I think it would do it. It is designed to enhance opportunities for people who have signed up to SDRPs to pay off their debts early at a discount. It will need some structure and engagement from social enterprise groups and perhaps even the Government providing some measure of support, because seed funding will be needed to get a scheme such as this off the ground. I hope that the Government will think some of that through. It seems the kind of scheme that would enable people to get back into the financial mainstream more quickly, which is surely something we want to achieve. Again, the need for that will be more acute because of the extraordinary number of people who will find themselves in debt as a consequence of Covid. I do not think it actually requires legislation, so I am glad that the noble Baroness, Lady Bennett, will choose not to move it.

These two amendments highlight the need for some serious thinking on how the Government can best support people who will come out of Covid and find themselves in fairly difficult circumstances. When we work with people who have debt problems, a fundamental issue usually has to be dealt with that has led them into that corner. Sometimes it is to do with lifestyle choices, but very often it might be mental health issues or family breakdown. The group who will find themselves in problems because of the impact of Covid do not fall into that category. Therefore, with a proper helping hand at the right time, they could quickly and easily be returned to a position where they are no longer financially excluded or in financial difficulties. That is absolutely necessary if we are to see the recovery that we all hope for. I hope the Government will look at these amendments and continue to build on them, rather than consider them concluded because Report has passed.

[Lord Tunnicliffe (Lab) [V]]

My Lords, we welcome the re-tabling of Amendment 11 by my noble friend Lord Stevenson, which provides the Minister with an opportunity to give more detail on the intention behind the Government’s introduction of the statutory debt management scheme. We are grateful to the Minister and his officials for the various meetings that have taken place in recent weeks. We hope that, even once the Bill has passed, there will be opportunities for further cross-party dialogue on issues relating to personal debt, financial resilience and so on.

There was a lively debate on this issue in Grand Committee, and various amendments were tabled by colleagues from across the Committee. Despite the number of amendments, almost all noble Lords were united in saying that the Government must get on with introducing the scheme. Amendment 12 from the noble Baroness, Lady Bennett, co-signed by the right reverend Prelate the Bishop of St Albans, deals with some slightly broader issues relating to problem debt. We hope that the Minister can provide a full response to those points, either now or in writing.

Looking at these amendments and the next group on BNPL and financial exclusion, I am struck by just how important it is to adopt a more holistic approach to personal finance, as proposed by my noble friend Lord Stevenson in his previous amendment on the concept of financial well-being. Helping people with debt has to be important. I have trouble understanding how people cope with that situation. It is the role of the state to provide structures to allow people to take on their debt problems in a managed way. I look forward to the Minister’s response to my noble friend’s amendment.