Workers (Economic Affairs Committee Report)

Baroness Kramer Excerpts

Thursday 8th February 2024 Lords Chamber

[Baroness Kramer (LD)]

My Lords, I was privileged to be part of the committee that delivered this report, serving under the noble Lord, Lord Bridges, who has so effectively presented the conclusions in our report and given an update based on the additional data that has become available. I am probably rather redundant in this debate, but that has never stopped me before and I am afraid it will not do so today.

Economic activity matters to economic growth—the noble Lord, Lord Griffiths, rehearsed this issue well—so it was not great news when on Monday the ONS revised its figures for the three months to November 2023, showing economic inactivity at 21.9% rather than 20.8%. I accept, as the noble Lords, Lord Bridges and Lord Willetts, the noble Baroness, Lady Noakes, and others have pointed out, that the ONS is finding it extremely difficult to get sound survey statistics in this changing labour market. On its behalf, I point out that it is not alone; the FT ran an article last week entitled “Guess the US job numbers”. This is really difficult, and we must accept that we will never get pure statistics, but our goal must be to get enough to drive us in the right direction.

It is clear from all the numbers we have that Covid left a different impact in the UK from other developed countries, as the noble Lords, Lord Skidelsky, Lord Turnbull and Lord Bilimoria, pointed out. Other countries found that economic inactivity during the Covid period recovered post Covid, but we have found the reverse. If anything, it has intensified. It is important to say that, when we began our report, we honestly did not expect to find that early retirement among the 50 to 64 year-old cohort would be such a powerful factor in economic inactivity. If anything, we assumed when we began that a post-Covid rise in sickness and long NHS waiting lists would be the cause. They are important parts of the problem, but our report clearly demonstrates that increased ill health, as others have said, typically came after retirement rather than causing it.

The noble Lord, Lord Skidelsky, caught this rather well. The scale of the significant lifestyle change that we identified, which caught me unawares, is still in many ways a mystery. We have heard a number of potential answers to that question today. The noble Lord, Lord Hendy, talked about terms and conditions and the noble Lord, Lord Skidelsky, about people just not finding their work enjoyable. The noble Viscount, Lord Chandos, and others also addressed this and the noble Lord, Lord de Clifford, gave us an example from veterinary services of why it is so hard to retain people in work, which must be part of their choosing early retirement. We almost have a vicious circle; as people fall out of the workforce, the stress that falls on those who remain is higher than ever. I very much hope the Minister will explore this and that the Government will do significantly more work in this area. I know that the OBR is treating this cohort of 50 to 64 year-olds retiring early as a temporary change; I am less sure, but that is another reason why we need to explore this.

However, I do not think that recognising early retirement negates the urgency of dealing with the NHS backlog. Virtually every speaker made the point that this is a critical area on which we must focus. If people in the 50 to 64 retired cohort become and remain ill, any chance that they will rejoin the workforce is pretty much lost, no matter what support and incentives are on offer. Yesterday’s ONS figures suggesting that some 2 million people in work are underperforming because of sickness underscore the issue. There was a further warning in more recent evidence given to the Economic Affairs Committee, on a different issue, by Richard Hughes, chair of the OBR:

“People used to be getting healthier as they aged, but the data has been more disappointing recently, in the sense that you are getting more years of unhealthy life rather than more years of healthy life”.


We have to find a way to change that, for many reasons, including the workforce. I see no way other than a significant investment in reform to increase services and deal with both prevention and treatment. The noble Lord, Lord Layard, underscored the importance of ensuring that mental health is not neglected in that focus on reforming health and investing in improved health.

In undertaking this report, we were beginning to focus on a much more fundamental problem which may not have been as fully discussed in this debate: the changing ratio between our working-age population in the UK and our dependant population. Richard Hughes said:

“The underlying demographics remain pretty stark, in the sense that, in the 1970s, we had about two people in work for every one person in retirement. At the moment, we have about one and a half people in work for every one person in retirement. By the time we get out to 2070, we have only one person in work for every one person in retirement”.


This is despite expected future increases in the state pension age. The noble Lord, Lord Davies, has a point: for some jobs it is easy to think of asking people to work longer, but for many it would not be appropriate.

There was a time, perhaps until 2018 or 2019—and the noble Baroness, Lady Noakes, made this point—that bringing women into the workforce and raising the state pension age and free movement sustained our working-age population. The first two have largely run their course, and, as we know, free movement has ended. This is not a debate on immigration or Brexit, but I am quite taken with the fact that, according to the OBR, historic data showed EU migrants as having higher employment rates and making fewer demands on public services than the general population, while migrants under the current system are now forecast to mirror the population. This highlights that we need a proper immigration debate in which workforce issues are properly included, and the noble Lord, Lord Bilimoria, underscored that point.

This is also not a debate on productivity, but obviously increases in productivity can substitute for workforce. The noble Lord, Lord Willetts, talked about technical and educational qualifications, and indeed childcare, as playing an important part in releasing people into the workforce. Better training, better use of the apprenticeship levy and return to work schemes are all important, but we should not fool ourselves that these will provide us with a sufficient number of people to make up the workforce shortfall in the demographics we are looking at.

Like a lot of people, I very much hope that Al will give us a productivity revolution and, essentially, resolve our demographic shortfall. One hears this spoken of widely. The right reverend Prelate the Bishop of Bristol made the point that AI comes with many issues, complications and moral questions. I would add another word of caution around the simple assumption that AI will drive forward this kind of change in productivity. The House will remember that, many years ago, we discussed the notion that first came the agricultural revolution, which drove up productivity, and then the Industrial Revolution drove it up, and then in the 1990s we expected that the digital revolution would follow the same pattern. But in the UK at least—quite a number of noble Lords have talked about our weak productivity performance—the digital revolution changed the way we work but led to no rise in our productivity.

I am desperately concerned that, in looking at this issue—the noble Lord, Lord Londesborough, gave us the statistics on how productivity has been scraping along, barely above zero—we recognise that, if we are going to use AI as the offset, we need a proper strategy in place to be able to do so. It has got to be comprehensive and challenging, and not the bitty and scattered arrangements or pieces of policy that we have today.

I close by picking up the point made by the noble Baroness, Lady Noakes, and the noble Lord, Lord Davies. Frankly, the Government’s reply to the report is pretty complacent and largely misses the point. It does not recognise the scale of the issue that we are dealing with. Yes, we need better data, but we also need the Government to understand that there are real and fundamental issues around the size of the workforce and our demographic profile. These issues have to be thought through and encompassed in every plan that we have for the economy, or else we will not see the economic growth that we want to see to sustain our population and our quality of life.

Cost of Living Support

Baroness Kramer Excerpts

Thursday 22nd June 2023 Lords Chamber

[Viscount Younger of Leckie (Con)]

I hope I can help the noble Lord. As I have already mentioned, inflation really is one of the Prime Minister’s key priorities. He has made it clear, as we have, that reducing inflation is absolutely key. He also speaks about growth, while making it clear that growth comes as a secondary item to inflation. However, it is also important that the economy grows. In previous answers, I have made it clear that we are doing as much as we possibly can to look at what more banks can do to be helpful. One thing which I have not said is that we are working closely with the Bank of England, while making it clear that the Bank is independent in also working as hard as it is in the fight to bring down inflation. It is not just us in the UK; as others have said, there are similar issues in other countries, particularly in Europe. However, I realise that in the UK we still have a lot of work to do.

[Baroness Kramer (LD)]

My Lords, the Minister looks to a negotiation with the banks to provide better terms to mortgage holders who are under pressure. He must surely accept that the banks will offer those terms to those they deem their most attractive customers, not to low-income house owners, who cannot take the required flexibility of interest-only or a long extension to their mortgage’s life. That is the group, surely, which needs to be served by an emergency mortgage fund to rescue this situation. Surely he could find the money to support those who will see their mortgages rise by more than 10% of their disposable income and take the money back from the banks, which are seeing bumper profits off the back of rising interest rates.

[Viscount Younger of Leckie (Con)]

I certainly note what the noble Baroness has said. I have mentioned already that the Chancellor is meeting the banks. I do not want to pre-empt the outcome of those discussions. What is important are the initiatives we have taken already to help people. There is support for people who have mortgages. We have increased the generosity and availability of the support for mortgage interest scheme, meaning that those on universal credit can apply for a loan to help cover interest repayments after three months rather than nine and can now receive support while working.

A new Financial Conduct Authority customer duty, coming into effect next month, will ensure that firms put customers first, delivering fair value and ensuring good outcomes for those in financial difficulty. The noble Baroness raises a very important point and I hope that further measures can be produced. We await the outcome of discussions.

Pensions: Online Dashboard

Baroness Kramer Excerpts

Tuesday 24th July 2018 Lords Chamber

[Baroness Buscombe]

My Lords, let me first say that the figure of 50 million referred to is an estimate made in 2012 of the number of dormant, not lost, pension pots by 2050. To suggest that 50 million pension pots will be lost unless a pensions dashboard is introduced is wholly inaccurate: I want to make that very clear. We are looking through the whole process and at experience overseas in order to understand more about pensions dashboards. The noble Lord knows that the whole process is very complex. We are working through the options around scheme participation in any potential pensions dashboard. The decision whether to compel participation depends on a number of issues, such as the functionality, delivery model and governance of the dashboard. We will set out the Government’s view in due course.

[Baroness Kramer (LD)]

My Lords, can the Minister address this feet-dragging? George Osborne announced that this project would go ahead in 2016, it was meant to be up and running next year, and Guy Opperman, in his role, constantly says that he is actively supporting it. The industry is—to put it mildly—cross, having done all the work it needs to contribute towards creating a pensions dashboard. It is vital so that savers can make the best investments of their pension money, and it is key to fraud prevention. Both of those are crucial issues. Can the Minister confirm that the rumours that the scheme is in jeopardy are false, and can she please finally give us a timetable?

Financial Guidance and Claims Bill [HL]

Baroness Kramer Excerpts

3rd reading (Minutes of Proceedings): House of Lords
Tuesday 21st November 2017 Lords Chamber

[Baroness Finlay of Llandaff (CB)]

My Lords, I add my most sincere thanks to those of my noble friend Lady Coussins. This new clause is incredibly important. Yesterday, this was unanimously welcomed at the National Mental Capacity Forum leadership group, including by all those from the financial sector represented in the group, as being a very important way forward to make sure that our society is increasingly integrated and recognises the needs of those with permanent and transient impairments and incapacity, and those who may temporarily have been put in extremely vulnerable circumstances.

I also thank the Minister for the way she has listened and stayed in communication with us as the wording has been developed. It really was a very positive and constructive dialogue.

[Baroness Kramer (LD)]

My Lords, as well as congratulating the Minister on bringing the language of “vulnerable circumstances” to the Bill, I want to congratulate the others who have made this issue so clear during our very positive and engaged debates; namely, the noble Baronesses, Lady Coussins, Lady Finlay and Lady Hollins. When the Minister first put down a slightly earlier draft of the amendment, which reordered some of the opening sections of Clause 2, because I am a naturally suspicious person, I tried to see whether there was some bear trap in there or something that I should be afraid of. I could find no such bear trap—and nor could my colleague, my noble friend Lord Sharkey, who I think now has a reputation for the most incisive examination of language in a Bill. I fully understand the desire of the Government to be clear and transparent—they seem very positive. I shall have more to say about the Bill in later stages—but, with this first grouping, we start off on a rather good note for the opening of Third Reading.

[Baroness Altmann (Con)]

My Lords, I congratulate my noble friend on the hard work done by her and the Bill team to include the changes called for in our earlier debates on the Bill. I fully support the reworking of the sections to improve the clarity of the Bill; the adjustments are sensible and pragmatic. I also add my congratulations to the noble Baronesses, Lady Finlay, Lady Hollins and Lady Coussins, on the important provision relating to vulnerable individuals. It is important that we have achieved that increased protection for them in the Bill. I again thank my noble friend and offer support for the amendment.

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The noble Baroness, Lady Buscombe, was kind enough to thank all sections of your Lordships’ House for their contributions to the earlier debates and for their support for this amendment. I endorse everything she said. I am delighted to have played a small part in the process of creating this legal framework and delivering the powers needed. What we want now is for the scheme to be designed and delivered quickly and effectively. Having listened to the Minister today, I place my trust in the Government to see this through as soon as reasonably practicable.

[Baroness Kramer]

My Lords, my noble friend Lord Sharkey is unable to be with us at the moment because he is at the Economic Affairs Committee. I suspect that, by the time that committee finishes and he can come down and join us, we will have moved to the conclusion of Third Reading, so I am privileged to speak on his behalf, as it were.

I will talk for a moment about the debt respite scheme and then just say a few words about Amendment 33, which stands in my noble friend’s name and now has the added support of the noble Baroness, Lady Buscombe. The debt respite scheme is absolutely crucial and I congratulate all parties, including the Opposition Front Bench and the Government Front Bench, and the Bill team for working through all of this. This is my opportunity to say that the Bill team has been very open to discussion.

Like others, I recognise that this Bill is very different from the fairly narrow, technical Bill that was originally conceived. This House took on board the argument that many of the issues raised, particularly those around financial inclusion, cold calling and debt respite, were not party-political controversies. All signed up to those issues, and the only question was whether there would be other vehicles in the very near future to carry through those policies. We can all see that the works are getting more and more gummed up on a daily basis, and I suspect there is real relief on all sides now that important issues such as cold calling, debt respite and financial inclusion have found their way into this Bill so that action can be taken despite whatever may be happening at a national level on the broader policies, particularly with Brexit. That is a real win for everybody in the House, including the Government and also the Minister, who has turned a technical Bill into an opportunity to make a real impact on people’s lives.

On Amendment 33, which amends the Long Title, I will pick up the point that the Minister made when she introduced Amendment 1 and talked about the importance of clarity and transparency. To the general public, this Bill will not be noted because it brought together three very important bodies into a single body, although all of that matters and will itself breed quite a significant number of good outcomes; it will be remembered most because it gave the Government the power to deal with cold calling and the abuse from which much of the population suffer on a daily basis. As many noble Lords, including colleagues on the Cross Benches and the noble Viscount, Lord Trenchard, have said, the most vulnerable have been impacted most by cold-calling abuse.

The Bill will also be remembered because of the debt respite clauses. To have a Bill in which neither of those two issues appears anywhere in the Long Title would seem most peculiar to anybody trying to find the appropriate legislation tackling these issues. You would have to guess that they might be in a Bill with the more limited Title. The words “and for connected purposes” might mean a great deal to people in this House, but do not mean a great deal to people elsewhere. Making sure that the Long Title fully reflects the strengths of the Bill and that those strengths can be easily recognised is a real improvement. It will rebound very much to the Government’s advantage.

Most of our exchanges have been extremely gracious, so I hope that the Minister will feel able to overcome her irritation around this one last clause. We have worked well together as a House, which has been crucially important. As I say, our thanks go very much to the Bill team, which has been a crucial part of this. I pay particular tribute to my noble friend Lord Sharkey since he is not here and able to speak for himself. He, among a number of others in the House, has contributed to a very worthwhile piece of legislation.

[Viscount Brookeborough (CB)]

My Lords, I add my praise to the two Front Benches. I should not think they could sustain much more joint praise, but on this occasion they have moved mountains in the length of time that this has taken. I emphasise how important the respite is from the point of view that every single case is a personal case of one family. It is not a matter of statistics, of speaking only of “30% of the families”; every single case that is allowed to go through this debt is a tragedy.

I say on behalf of Northern Ireland, if not the devolved parts of the UK, that it is good to see that it may be extended there, especially, from my point of view, to Northern Ireland. There are many individuals who, although they may not be listening to this, will unknowingly benefit from this to a tremendous extent. I thank all parties involved.

--- Later in debate ---

[Baroness Buscombe]

My Lords, I announced on Report in response to amendments tabled by the noble Baroness, Lady Meacher, the Government would bring forward amendments to introduce an interim fee cap in respect of PPI claims management services. Amendments 25, 26, 27, 29 and 30 honour that commitment—and I am sorry to see that the noble Baroness is not in her place.

As noble Lords are aware, this Bill already puts a duty on the FCA to cap fees charged in respect of financial services claims. This will ensure fair and proportionate prices for consumers using these services. However, as we have previously discussed, the implementation of the new regulatory regime and an effective, robust cap will necessarily take some time. This is a particular concern, given that the FCA’s PPI claims deadline may have passed by the time the FCA’s fee cap is in place. That is why the Government are introducing an amendment to set a fee cap at 20%, excluding VAT, of the claim value. The interim fee cap will apply to both CMCs and legal services providers that carry out claims management services in relation to PPI claims, to be enforced by the relevant regulators. It will be enforced by relevant regulators from two months after the Bill receives Royal Assent, until the FCA is in a position to implement its own cap. This cap will complement the range of measures in relation to PPI and other financial claims that the claims management regulation unit has announced. These include banning upfront fees and banning charges, where it is identified that the consumer does not have a relationship or relevant policy with the lender, as well as ensuring that all cancellation charges are reasonable and that consumers are provided with an itemised bill setting out details of what they relate to. This package of measures will support the Government’s aim to ensure that the claims management sector works in the interests of consumers by protecting them from excessive fees.

On Report, I also committed to tabling a government amendment to extend the FCA regulation of claims management to Scotland, should the UK and Scottish Governments agree that position. I am pleased to be able to confirm that the Scottish Government have now written to the UK Government to confirm agreement to extending regulation there. It highlighted that the situation in Scotland has changed since this issue was first discussed earlier this year. Legislation is currently progressing through the Scottish Parliament that will allow Scottish solicitors to offer increased funding options to clients on a no-win no-fee basis. As a result of these changes, Scottish solicitors will no longer need to set up CMCs to offer damages-based agreements to clients, and the CMC landscape is expected to change significantly.

To ensure that CMCs are not able to take advantage of this potential gap in regulation by targeting Scottish consumers, the UK and Scottish Governments have now agreed that FCA claims management regulation should extend to Scotland. This will ensure that there are appropriate regulatory standards in place to deal with CMC practices across Great Britain. These amendments follow up on my commitment on Report and do just that, extending FCA regulation of CMCs to Scotland, which will ensure that Scottish consumers are protected in the same way as those in England and Wales.

I note that the constitutional position of this issue has not been entirely straightforward as CMC regulation clearly concerns a mix of reserved and devolved matters. The regulation of the legal profession in Scotland is of course devolved, whereas matters of competition and aspects of consumer protection are reserved. It is the UK Government’s view that CMC regulation concerns reserved matters of competition and consumer protection. The Scottish Government have confirmed that they will seek the legislative consent of the Scottish Parliament for the CMC provisions as part of the wider legislative consent Motion for this Bill.

For the purposes of record, I should note that the UK Government’s view is that only Clause 20(4) relating to consumer advocacy is relevant to the legislative consent process, although I am aware that the Scottish Government might take a broader interpretation of how much of this is covered by the LCM. Nevertheless, the crucial issue here is that we have agreement that FCA regulation of CMCs should cover Scotland. I believe that this represents a sensible outcome which will benefit and protect consumers across Great Britain.

I am sure your Lordships will agree that the introduction of an interim restriction on charges in respect of CMCs is a positive step forward in ensuring that the claims management sector works in the interests of consumers. I am sure you will also agree that it is desirable to extend FCA regulation of CMCs to Scotland, given the change in circumstances there. I beg to move.

[Baroness Kramer]

My Lords, I apologise, as when I last spoke, I attributed to the noble Viscount, Lord Trenchard, a very eloquent speech that was made on cold calling and the way it targets vulnerable people, when it was the noble Viscount, Lord Brookeborough, who made that speech. I apologise to both parties. If I have any excuse, it is that I confuse my own children, and one of them is male and the other is female, so it is even more embarrassing.

As regards this group of amendments, my only regret is that the cap on fees is set at 20%. It would have been better to have a lower cap. However, we congratulate the Government on the underlying principle of taking temporary action because it is very likely that by the time the FCA gets its grip on this issue we will be beyond the reach of future PPI claims. However, other than that, I once again thank the Minister for being responsive to the issues that have been raised all around the House, including this one and those of cold calling, debt respite and financial inclusion. This is a very important move by the Minister and her name will be attached to these issues well into the future.

[Baroness Altmann]

My Lords, I too once again thank the Minister and all parties who have worked so hard on this Bill. I thank the noble Earl, Lord Kinnoull, who initially raised the issue of Scotland. It is excellent that the whole of Great Britain is included in the Bill. I thank the department for all the hard work that it has done to achieve this.

I too am delighted to see a cap on the PPI claims management fee. Like the noble Baroness, Lady Kramer, I would very much have liked the Government to agree that the parties responsible for the mis-selling would pay the fee rather than taking it out of the compensation that is paid to the customer. I understand that there may be an issue over the profitability of the claims management company itself but perhaps a compromise would be to split the 20% so that the customer gets 90% of what is due and the financial firm that has done the mis-selling perhaps pays 10% as well to the claims management firm. Having said that, I certainly welcome a 20% cap. I once again thank the noble Lords, Lord Stevenson, Lord Sharkey and Lord McKenzie, and the noble Baronesses, Lady Kramer and Lady Drake, the noble Earl, Lord Kinnoull, and all other noble Lords who have made such great improvements to the Bill.

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Moved by

[Baroness Kramer]

33: Line 1, after “body” insert “(including provision about cold-calling and a debt respite scheme)”

Financial Guidance and Claims Bill [HL]

Baroness Kramer Excerpts

Report: 2nd sitting (Hansard): House of Lords
Tuesday 31st October 2017 Lords Chamber

[Lord Holmes of Richmond (Con)]

My Lords, being a member of the my noble friend Lord Hunt’s flock in your Lordships’ House, I am a bit concerned that if I overly push on Amendment 41, which comes hot on the heels of Amendment 39A, I, too, may be the victim of whiplash. We discussed many of the issues in Committee. I have brought back the amendment on Report so that I might push my noble friends who understand the timeline for bringing in a duty of care. My initial intention was to table an amendment placing a general duty of care on financial institutions; as a result of the scope of the Bill, a specific duty as set out in my amendment pertaining to CMCs is what we are discussing today.

I am grateful to all the organisations that helped with briefing for the amendment, not least Macmillan Cancer Support, which really demonstrates what a modern charity can do, not just focusing on the specific issue at the centre of its organisation but going wider to all the elements that directly affect people when they receive a cancer diagnosis. That is partly why I chose to focus on Macmillan and cancer in putting down this amendment. It goes to the heart of bringing to life why there is a need for a general duty of care to be exercised by financial services institutions, when one in two of us will receive a cancer diagnosis in our lifetime. This is not a marginal matter; it demonstrates that financial institutions not only have their current responsibilities and obligations but need that general duty of care.

The amendment deals specifically with CMCs. I push my noble friend the Minister to accept it and to give some further description building on comments that he made in Committee on the timeline for considering bringing forward and implementing a general duty of care, with the good offices of the FCA obviously involved—I am grateful to the FCA for meeting me to discuss this, not least Mr Christopher Woolard. I shall say no more; the arguments were put in Committee. I urge my noble friend to accept the amendment and beg to move.

[Baroness Kramer (LD)]

My Lords, I congratulate the noble Lord, Lord Holmes of Richmond, on sticking with this issue, because it is fundamental. I say to the Government that a duty of care is so important and should be so central to every piece of our financial services industry that we should not let the perfect—having a general duty of care—be the enemy of the good, which is the opportunity to put a specific duty of care in this Bill. I hope the Government will consider that.

I have the privilege to be on the Parliamentary Commission on Banking Standards. As we sought to strengthen the framework of regulation and to expose a lot of misdirection within the financial services industry, I think everybody, not only on the committee but far more broadly, agreed that the key problem lay in culture. We have turned to the banking and financial services industries and asked them through various bodies to improve their culture, but surely we also have a responsibility to drive that with every piece of legislation that comes our way. Duty of care reflects that whole-culture approach: the underlying, underpinning approach that we expect our financial services to take, where the interests of the customer are at the centre. It is not that the financial services should not be able to make profits—of course, that is the business they are in—but it should never be at the expense of that central interest of the client or customer.

I urge the Government to take seriously this opportunity in an area where there has been extraordinary abuse. I listened to the noble Lord, Lord Hunt of Wirral, for example; others talked about whiplash and issues around holiday sickness. In issue after issue, we have seen a complete failure in the culture of the bodies that provide such services. We should tackle that issue head on and not be afraid to use language that is clearly around that duty of care—not considering it too soft or too difficult—so that it becomes a general habit. I hope we will not rely just on general duties of care, because those can sometimes be imperfect, but will make sure that in every piece of financial services legislation this issue is underscored. In that, this legislation could be a leader.

[Lord McKenzie of Luton]

My Lords, like the noble Baroness, Lady Kramer, we have added our name to the amendment of the noble Lord, Lord Holmes of Richmond, which takes us back to regulatory principles and the duty of care.

The noble Lord is right to have removed the “where appropriate” qualification from his earlier amendment. The amendment deals with the regulation of claims management, although this is seen as an opportunity to debate the wider calls for a duty of care across the financial services piece.

On the narrower point, we acknowledge that in Committee the Minister gave assurances about the FCA consulting on the design of new rules for claims management companies and taking account of its statutory operational objectives, including an appropriate degree of protection for consumers. However, we note that there is no current alignment of the objectives of the CMRU and the FCA, and there seems to be no certainty about where this process will end up.

Financial Guidance and Claims Bill [HL]

Baroness Kramer Excerpts

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

[Viscount Trenchard (Con)]

My Lords, I understand the motives of the noble Lord, Lord Sharkey, and other noble Lords in seeking to introduce a consumer protection function to the Bill. However, I believe that it places too broad and onerous a responsibility on the single financial guidance body. If noble Lords look at the functions already included in the Bill, the first three are specific. The fourth, the strategic function, seeks to improve the financial capability of members of the public by supporting the provision of financial education to children and young people—although I think that should perhaps be widened. I believe that the strategic function enables consumers to protect themselves better than they would be able to do without it.

Proposed new subsection (3E) would define cold calling as,

“unsolicited real-time direct approaches to members of the public carried out by whatever means, digital or otherwise”.

This is too all-encompassing. I would be delighted if cold calling by direct telephone and text were banned, but I am not sure that banning all unsolicited approaches is a good idea. If all unsolicited approaches were made illegal, including those by letter or email, how would a business market its services to new potential customers? Would such a draconian measure not result in severe restriction of choice for consumers? How would they know what products and services were available in the marketplace?

I suspect that the 2.6 million nuisance calls made every week—or 9 million a month; I am not sure what the figure referred to in the debate was—is a serious underestimation. What do the Government intend to do to protect the consumer from unsolicited telephone and text approaches?

[Baroness Kramer (LD)]

My Lords, perhaps I can be helpful on a couple of the points just raised by the noble Viscount, Lord Trenchard. These amendments ban solicitations in real time, as he will have noticed. That obviously excludes letters. It means that you can send information through the post; no one would wish to prohibit proper kinds of marketing. It is the nuisance and intrusion and the element of pressure that comes from that real-time activity that is the pernicious side of solicitation. That, essentially, is cold calling and is exactly what this is intended to deal with.

The noble Viscount suggested that financial education and capability are the way to go; indeed, many in the Government feel that that is the route to deal with cold calling, so that people know to hang up. However, the noble Viscount, Lord Brookeborough, was very clear in illustrating that, while we all get cold calls, we are merely the tip of an iceberg. For those who pursue this, the real focus is on people who are absolutely the most vulnerable. Being realistic, financial education and capability, even on the most extraordinary scale, would be very unlikely to provide adequate protection to that group of people who are now constantly being abused.

On the point made by the noble Lord, Lord Faulks, if this body is not associated with consumer protection, quite frankly I wonder what this body is for. That is the underlying premise that sits behind both the predecessor groups that are now being put into the single financial guidance and advice body. It is essential to bring this on to the face of the Bill in a very clear way, as it is the underlying motivation and characterisation of this body, and certainly it is a responsibility.

The noble Lord, Lord Faulks, also suggested that the Government do intend to move in this area. We have been hearing that for an incredibly long period of time and, with constant pressure, perhaps one day the Government will move. The problem is that we need protection now. We need protection in the near term because, as my noble friend Lord Sharkey, the noble Earl, Lord Kinnoull, and others have illustrated, this has grown in such scale and momentum that there are daily victims. Every day that we wait there are more victims. Since it is completely unnecessary to wait because the language in this Bill serves the purpose, then in a sense it would be extraordinary to say we will sit back and wait 18 months or two years or whatever else, allowing people to be abused. We can bring a stop to it now in a very simple and straightforward way.

If I understand the Government correctly, they are willing to look at certain targeted areas in which to stop cold calling but not to provide a stop to cold calling in each area where there is clear detriment, which is what the amendment allows through use of this new single body to identify and communicate that detriment. These organisations are so slick and quick they can move from one topic to another very rapidly—you close one door and another door gets opened. For example, we stopped cold calling on mortgages. That is an excellent example that tells you we can do it. It is straightforward. The dimensions are understood. The complexities are well-considered and we have plenty of track record to look back at to make sure that it is done well. We have all of that in place. However when cold calling on mortgages was banned, it shifted on to the next issue—currently, it is pensions, claims management and holiday sickness. Everybody can be absolutely sure there will be something new, provided loopholes are left, by simply attacking one issue here and one issue there. That is the beauty of this particular amendment: it gives us the power to deal with this whole industry, the same people and the same players.

I shall make one last remark and then sit down. I want particularly to congratulate the four noble Lords whose names are on this amendment, all of whom have been working so hard in this area. Three of them are here today, able to speak for themselves, but one of them cannot. The noble Baroness, Lady Altmann, as we know, has been a real mover and shaker on these issues, not just over cold calling for pensions—pensions are her area of real expertise and we have heard her on that—but we have also heard her in this House speaking around the much broader issue as well, which is why she has put her name to the amendment. She had a speaking engagement at lunchtime in the Midlands which she felt she could not cancel. She has not eaten lunch but run to the train station. She is on the train which pulls in to the station at 4.30 and had been greatly hoping there would be a Statement today that would delay this long enough that she could be here to join in with this particular section of the debate. I am sure she will speak in later parts of this Report.

The noble Baroness should not be left out when we recognise that the movers and shakers on this are from every side of the House. This is not a partisan or party-political set of amendments. This is a set of amendments by Members of this House who recognise their responsibility to protect those who are most vulnerable now, before more damage is done, and I hope the Government will see it that way.

[Lord Faulks]

Before the noble Baroness sits down, will she clarify one thing? She was critical of my suggestion that the insertion of the consumer protection function is in some way an attempt to expand the scope of the SFGB. She said, quite correctly, that it is part of the SFGB’s function to protect consumers, but surely the purpose of this amendment is to expand the scope of its activity beyond that which is already in the Bill so that it can deal with matters that are beyond what is apparently in other parts of the Bill.

[Baroness Kramer]

I thought that we could only speak once on Report, but I hope that the House will excuse me if I get to my feet again. Fundamentally, I disagree with the noble Lord. Consumer objectives are merely bringing to the face the underlying discussion and the ethos which sits entirely behind this body and every one of its instructions. If the noble Lord reads all the roles and responsibilities and the debates about those roles and responsibilities, he will understand that this meshes perfectly with these activities. It strengthens its hand in an obvious way, rather than leaving it in a slightly awkward, ambiguous situation.

[Lord Elystan-Morgan (CB)]

My Lords, I am full of respect for and sympathy with the amendments and the spirit in which they have been moved. We are facing massive social abuse that is complicated and extremely extensive. I doubt very much whether in the complicated and convoluted society in which we live it is humanly possible to rid us of all of it. I am sure that is beyond us.

The remarks made by the noble Lord, Lord Faulks, triggered two thoughts in my mind. The first relates to the Offences Against the Person Act 1861 and how well that Act has served society. We are still dealing with it day in and day out in the courts, and with the help of judicial interpretation it is as fresh in many respects as it was the day it was passed. In so far as the offence of assault occasioning actually bodily harm—Section 47—is concerned, the noble Lord is absolutely right. There should be a parallel offence that is not confined to an assault and does not concentrate upon a physical consequence. There have been attempts in the past to widen that offence, but they have been rather vague and less than totally successful. It has to be revamped completely so that the concept of assault is not basic to it and it is not confined to bodily harm.

My other point relates to the higher end of the scale with regard to cold calling. At the very bottom of the scale there is the fishing exercise, the hopeful prospect that something might come of what is not of itself a criminal act. At the other end of the scale, there is a very serious criminal act where A says to B “Let us pretend that an accident occurred—we know nothing like that ever took place—and you are the claimant in regard to that matter and that you are prepared to put forward a statement of facts about a fact that you know to be totally false. I will support you, and we will split the profits between us. You should be prepared, of course, to commence an action in the courts”. The moment you do that, you have probably committed a very serious offence. You have attempted to pervert the course of justice. I believe that as a proposition of law, exceptional to the usual law of attempts, every attempt to bring about a perversion of the course of justice is of itself a perversion of the course of justice. It is at that end that we should start concentrating. Very few of these cases are brought to court, and very few of them are successful, but it would be marvellous to be able to make an example of some of the very worst cases, and by such example a very considerable social lesson would be taught.

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[Baroness Buscombe]

My Lords, I beg to differ. Despite the noble Lord’s extensive experience in another place, it is entirely possible for us to bring forward an amendment in the Commons to introduce such a ban.

As I was saying, we want to ban pensions cold calling because a private pension plan is often an individual’s most valuable asset. A ban will send a powerful message to consumers to put the phone down. My officials recently met a range of stakeholders to explore the details of the ban and are currently working on developing the details of the policy arrangements.

Pensions cold calling is also a complex area which we want to get right. Indeed, the recent discussion with stakeholders uncovered interesting questions around how to define existing relationships and express requests for information. The Government will continue to finalise these complex policy details and we intend to publish draft legislation for scrutiny in early 2018. Following this, we will legislate at the earliest opportunity. This gives us the opportunity to develop legislation which is more carefully targeted and allows us to make proper provision for enforcement which this current draft does not allow.

The Government have listened and want to work at pace to introduce a targeted response which will strengthen the arrangements already in place. However, the proposed approach in this amendment could delay implementation of any such ban. If this amendment were passed, the Government would first have to wait for the body to be set up. It is not expected to be set up and operational until October 2018. Then, recommendations would have to be made to the Secretary of State. No doubt, this would not be immediate because this body will have a huge amount of work to undertake when it is first set up. So it could be at least another year or two before any consideration could be made, prior to a recommendation being put to the Secretary of State to introduce such a ban. Then the Secretary of State would have to make and lay affirmative regulations.

The noble Baroness, Lady Kramer, said that we need protection now. If Amendment 2 were passed, there would be much more delay than if the Government were to wait.

[Baroness Kramer]

I think the Minister distinctly said that she was considering a ban being introduced in the Commons on cold calling for claims management but not for pensions. So the timetable she has described becomes rather complicated compared with the alternative for which she has not given a timetable.

[Baroness Buscombe]

I have already made it clear, as we did in Committee, that we intend to bring forward a ban on pension scams. We cannot be entirely accurate on timing because, as the noble Lord, Lord Kirkwood, made clear, we have to find a legislative opportunity. As I have just said, we will introduce draft legislation early next year and that will go through a process of pre-legislative scrutiny. I hope noble Lords will accept that this is very sensible in order to get it right. Indeed, some years ago, this House introduced the possibility of draft legislative scrutiny in important situations such as this. We do not want to get it wrong.

I also say to the noble Lord, Lord Kirkwood, that it is not without this planet to expect and hope that there will be opportunities—gaps in the timetable—for legislation to come forward. Given the timetable for setting up the body and for the many things it will have to undertake in its early months, I suspect that passing this amendment would mean a protracted delay in introducing a ban on CMCs. The noble Baroness knows perfectly well that we cannot introduce the ban on pensions cold calling in this Bill because it is out of scope. CMCs are actually in scope.

[Baroness Kramer]

This amendment is in scope. It allows the banning not only of cold calling, but of a broader range of issues. The point made from the Labour Benches was that the Government always said they would have done it in this Bill had there been any mechanism for it to be in scope. It is now in scope, which is why we are debating it on the Floor today. We are not debating an out-of-scope amendment.

[Baroness Buscombe]

That is why I am making it clear that banning pensions cold calling is out of scope of this Bill, but the CMCs are in scope. I am sorry; this is very confusing for noble Lords. I shall focus on what really matters—namely, whether this amendment would bring forward a ban on cold calling. I must stress that that is not the case; there would be a protracted delay.

To reiterate, the Government agree with the spirit of these amendments and will bring forward legislation in this Bill, in the other place, in relation to cold calling for claims management activities. Along with our pre-stated commitment to ban pensions cold calling, I hope that reassures the House.

My noble friend Lord Faulks asked whether the SFGB is the right body to handle cold calling. I stress that I do not believe this is the right duty to place upon this body. It should be the subject of primary legislation. However, the Government intend to bring forward the appropriate legislation that will work in practice. That is the important thing here. My noble friend Lord Trenchard questioned whether this amendment was right and said that we needed to take care to avoid unintended consequences with a complete outright ban that could possibly work to the detriment of the consumer.

I shall detain noble Lords no longer. I hope that the amendment will be withdrawn.

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[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.

[Lord Stevenson of Balmacara (Lab)]

My Lords, I thank the noble Baroness for making the statement she did at the Dispatch Box at the start of this debate. We are very appreciative of the acceptance of Amendment 7, which goes with the spirit of the way we have conducted the discussions over the Dispatch Box and in meetings over the period of the Bill. It has been one of the happiest Bills I have been involved in and I have been involved in some very happy Bills. I extend the thanks to the Bill team for their good supportive work. It has been a very good experience all round. This amendment is another example of that, because Members will recall that in Committee the Government’s line was that—although they absolutely agreed that advice, guidance or information given by the new body or by its contracted other bodies must be free at the point of use—they did not think it necessary to amend the Bill. However, over the time we have been talking about it, it has grown on them that there might be an advantage in doing so, for all the reasons my noble friend Lady Drake gave. Having those words at the heart of its mission statement and affecting all the work it does will make it a much better body, so we are very grateful and we support the amendment.

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In Committee, the Minister confirmed that such a public service role, if agreed by the Government, falls within the objectives set for the single financial guidance body in the Bill. The public governing entity would work alongside the regulators, government and industry to ensure that all the necessary controls and protections were in place. I beg to move.

[Baroness Kramer]

My Lords, I congratulate the noble Baroness, Lady Drake, on such an extraordinarily comprehensive but succinct speech framing the future structure of the kind of pensions dashboard that I think everybody in this House feels consumers deserve. I also congratulate the Government on their willingness now to step forward and take ownership of this process. As the noble Baroness, Lady Drake, said, the two key underlying issues that will be crucial to the public are protection of data—the whole issue of access to data—and quality guidance to enable them to make use of the information that comes to them through that dashboard as they try and structure their future financial circumstances.

I assure the House that although very often we on this side will try to write an amendment that we think is comprehensive and will basically create the legal framework we want the Government to follow, there are times—this is one of them—when we recognise that the need for development and the underlying complexity of the issue mean that the far better route is government ownership of the policy and the project to take it forward. The Minister will know from having listened to the noble Baroness, Lady Drake, and others in the House that we will always be here with scrutiny and with recommendations to the Government, but it will be exciting to see the process that they now put in place to make sure that this goes from merely a possibility enabled by technology to a very real service for consumers in this country.

[Baroness Altmann (Con)]

My Lords, I too congratulate the Government on their decision to host the pensions dashboard and to put in place the necessary measures for the dashboard to be held in one place. I congratulate the noble Baroness, Lady Drake, on her persistence and her excellent description of why it is so important that this measure is implemented in the manner she set out.

The public need a single dashboard. If individual private sector organisations each released their own dashboard, it would be too confusing for the public. One thing that will certainly assist in any dashboard is standardised statements, required perhaps by the FCA and the Pensions Regulator, whereby anyone who receives a statement about what pension they have—what terms it has and so on—has to be given a piece of paper. Sometimes called a pensions passport—although it does not matter what it is called—this will be a standardised, simple statement that tells people in one place what they have and clearly explains the kind of terms that the pension has, its value and any special features. Sadly, too often, the private sector has not been able to achieve that. Very often the statements that people get are almost unintelligible. They are sometimes far too long and use different language for the same type of pension, so that people struggle. I support this amendment and congratulate the Government and the noble Baroness.

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[Lord McKenzie of Luton]

My Lords, I will also speak to Amendment 17. Together, these amendments revisit the issue that we raised in Committee concerning the SFGB’s role in financial inclusion and add as a specific objective of the body contributing,

“to the reduction and elimination of financial exclusion”,

particularly for vulnerable people. Our amendments spring in particular, as will be recognised, from the House of Lords Select Committee report on financial exclusion, which regrettably has still to receive the Government’s response. I would press the Minister on when this might be forthcoming, but can anticipate that the answer will be some variation of “soon”, “in the near future”, “imminently”, or perhaps even “before Christmas”.

The amendments raise two particular issues: where are we as a country on financial inclusion and financial exclusion; and what, if any, should be the role of the SFGB in addressing these challenges? Dealing with the latter first, we argue that it should be included in the strategic function of the new body and that it should have as one of its objectives contributing to the reduction—or elimination, although we accept that that is perhaps overly ambitious at the moment—of financial exclusion, especially for vulnerable persons. We should stress that this does not seek to have the SFGB usurp the role of the FCA or the Treasury in these matters—a point made by the Minister on our original amendments—but to support financial inclusion and help reduce financial exclusion.

As defined by the Minister, the noble Lord, Lord Young, financial inclusion is about individuals and businesses having access to useful and affordable financial products and services that meet their needs. If the single financial guidance body does not have a role in addressing these matters through its money guidance function or improving the financial capability of members of the public, then what is its purpose? Will the Government be clear on this issue and say precisely what role they believe the single body should play in promoting financial inclusion and combatting financial exclusion? What is the Government’s view on that?

The need for a strategy to improve financial inclusion in the UK was a key recommendation of the Select Committee. We have already acknowledged the importance of appointing a Minister for financial inclusion and the need to engage across government to lead, co-ordinate and monitor a strategy. We accept that leadership on this might reside primarily outside the SFGB, but to suggest that it does not have a role seems perverse. If financial inclusion is about access to financial services, capacity to manage financial transactions and avoiding problem debt, then financial exclusion would clearly cover circumstances when this is not the case. That more should be done to advance financial inclusion can hardly be in doubt. Promoting financial inclusion was a key recommendation of the Financial Inclusion Taskforce, whose mission was to increase access to banking, improve access to affordable credit, savings and insurance, and improve access to appropriate money advice. It undertook monitoring of financial inclusion initiatives as well as regular research. Unfortunately, the taskforce fell by the wayside when abolished under the coalition Government and thus left a gap. We hope that that gap can be filled with the help of the single financial guidance body.

There are a raft of statistics that identify the levels of financial exclusion in the UK, those at risk of being financially excluded and those at risk of facing significant barriers to engagement in modern society. Some 13.5 million people live in low-income households or in poverty, and 1.7 million adults do not have a bank account. One-third of people over the age of 80 have never used a cash machine or prefer to avoid them; 3.8 million UK households do not have any internet; and 40% of the working-age population have less than £100 in savings. The vulnerable or potentially vulnerable are not a fixed or homogeneous group, but a common characteristic is often poverty—simply not having enough money—and having to transact on the most expensive terms.

The Select Committee outlined some of the particular circumstances that made various groups vulnerable: those with identity verification issues, such as ex-offenders; those with mental health challenges, where financial exclusion can have a variety of negative consequences; and the disabled, where often reasonable adjustments are inadequate. We have very serious issues to confront.

We could debate these important issues all day, but I am aware that we have a further amendment coming up in the name of the noble Baroness, Lady Finlay, which might be a formulation on which the Government can offer a measure of support. It certainly has our support. In the meantime, I beg to move.

[Baroness Kramer]

My Lords, I was glad to add my name to Amendment 8, moved by the noble Lord, Lord McKenzie of Luton. Amendment 17 is almost the other side of the coin.

I think that most Members of this House, including those in the Government, feel that financial inclusion is sufficiently important that it should be expressed through most of the financial bodies that we create. The noble Lord laid out very well the depth of the problem; others on the committee may speak to that in a moment.

It would be helpful to have clarification under the Bill, in part because we have genuine confusion. I am pretty sure that Ministers have all been under the impression that this matter is wrapped up and dealt with in the context of the powers, responsibilities and objectives of the FCA but, having talked to the FCA, they will now be aware that it has a very constrained role in this area and does not provide capacity to deal with the problem—for example, filling in gaps—that most people assume that it has.

Part of our problem, of course, is that we never consolidate financial legislation, so there is genuine confusion over who does what and assumptions that particular issues are taken care of when they are not. Financial inclusion is one of those that has fallen right through the holes, due to the mismatch of a whole variety of different pieces of legislation. This is an opportunity to provide for a body to consider these issues centrally to everything that it does. What it does is very relevant to that process. That is obviously not a complete answer to the problem of financial inclusion—that involves many others—but we have to make a start somewhere. It should now become a regular habit for financial inclusion to be addressed in each piece of financial legislation.

[Viscount Trenchard]

My Lords, nobody in this House would disagree with the idea that we must do as much as possible to reduce financial exclusion and promote financial inclusion, but, again, I am not sure that the amendments are practical. Normally, anything proposed by the noble Lord, Lord McKenzie, and the noble Baroness, Lady Kramer, is of the very greatest sense; I know that from experience going back many years.

However, I worry that to amend the strategic function as proposed to strengthen further the obligation on the new body may be just a bit too much of a burden, too onerous, too open-ended and not properly defined. It is very hard to define exactly what is financial inclusion and what is financial exclusion. Obviously, the former is a good thing and the latter a bad thing, but if the strategic function is already there to support improvement in financial capability, the ability of the public to manage debt and the provision of financial education to children and young people—although I think that should probably be to everybody—the amendment duplicates that, makes it too vague, too hard to define and, potentially, too onerous.

Furthermore, I also worry about enshrining in statute the terms,

“vulnerable individuals, families and communities”,

because there is nobody in your Lordships’ House who does not recognise that vulnerable individuals need more help and support than those who are not so vulnerable. Nevertheless, it is very hard to define, and to create a different obligation for an ill-defined set of individuals and communities from the general obligation to all members of the public may be confusing and make the legislation less clear and less effective. For those reasons, although I understand the noble Lords’ objectives, I cannot support their amendments.

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[Baroness Kramer]

Obviously, we support these amendments. The Government’s argument has always been that this issue will act as a constraint. However, we think it draws attention to the problem and empowers people. One of our great dissatisfactions historically with the provision of financial education and financial capability is that it does not seem to create people who are more financially capable when they need to be. Amendment 10 raises once again the issue of timing and relevance. We are all human beings and we can go through various forms of training but if we then never use those skills or that information but require it 10, 15 or 20 years later, that is the point at which it needs to be recalled rather than having a tick-box exercise to show that at the age of 16 we took a class on those issues. We want this education to be relevant and to underscore the direction that I hope very much the single financial guidance body will want to take, but is by no means required to take, of looking for relevance and at situations where there is critical need, care leavers being one of the most obvious examples of that. We have known for years that care leavers get themselves into enormous trouble because of their lack of awareness of these issues but no body has felt it necessary to step into the breach. Here we have the perfect body to step into the breach. That would be entirely consistent with what it is doing. That is the mood and spirit of these amendments. I hope very much that the Government take the issues on board because were we not to see results that responded to the spirit and meaning behind these amendments, we would have a body that was very suboptimal. I think the House would agree with that.

[Baroness Finlay of Llandaff (CB)]

My Lords, I thank the noble Lord, Lord Stevenson, for his very important comments in introducing these amendments. He has covered some issues that I was going to cover in relation to my amendment, which is next. I wonder whether he feels my amendment covers some of the things he is concerned about, because care leavers are just one group in vulnerable circumstances—we all know that—but there are other groups as well. I have a slight concern that once we start to put lots of different lists in the Bill, somebody will be left out. I will explain why our amendment is worded as it is and I am very grateful for the support from his Benches, but I raise that as a question.

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[Baroness Hollins (CB)]

My Lords, I am pleased to add my support for this amendment. My own particular interest relates to people with learning disabilities, who can be presented with significant challenges when it comes to managing money on a daily basis, even where local financial services are readily available to them.

The move to digital banking and even past innovations such as chip and pin present a real risk for people with limited capacity—a risk of exploitation. When bank branches close, the financial services available at the Post Office are often held up as an answer. However, for people with limited mental capacity—not just people with learning disabilities—they are not the answer. For instance, the Post Office no longer provides a paying-in book, and the only way of obtaining cash is through chip and pin. There are hundreds of similar examples, relating not just to people with learning disabilities but to those who are in vulnerable circumstances at different times, as we have heard from my noble friends.

This welcome Bill is creating a single financial guidance body that could make a significant difference in improving financial capability, reducing debt problems and helping more people to engage with their pensions. Perhaps providing easier-to-read or pictorial guides to finances would be a useful starting point for the new organisation to consider—for example, covering banking and managing personal budgets—with the aim of helping people with learning difficulties take more control of their finances. It could consider appropriate training so that people with a learning disability and their families can be better supported, as online guides are unlikely to be adequate for these groups.

I must declare my interest here as the chair of Beyond Words, a community interest company which works to empower people with learning disabilities by developing pictorial narratives to help them when circumstances are too challenging.

I hope that the Minister will support the amendment to ensure that the new body keeps in mind the needs of people in more financially vulnerable situations.

[Baroness Kramer]

My Lords, we on these Benches would gladly have added our names to this amendment but the list was full, which is always good news, particularly when the inspiration and leadership come from the Cross Benches. I just want to make it clear that we are very supportive of the amendment.

I also want to add one comment. I know that sometimes the use of the term “vulnerable” is challenged but, as I know from dealing with legislation in the other place, although that was quite some time ago, there is a long and very established history of using the term “vulnerable”, certainly at least—although, I am sure, not limited to—among the utilities, which obviously have to recognise and identify all kinds of vulnerable customers for a whole range of purposes. It allows what I would call reasonable common sense to apply in identifying the full scope of people who are vulnerable. Some of the examples that we have had today have been around mental capacity issues and learning difficulties, but it seems to me that nothing in the many historical ways in which this term has been used in legislation previously would limit it or prevent it, for example, applying to care leavers or, in terms of financial education, to younger children and to the broader group that we are discussing.

Therefore, I hope that the Minister will accept that there is a well-tried, true and well-trodden path setting out how we identify vulnerable people. The term is frequently used to tackle a variety of needs and there is plenty of legislative precedent that makes this a very effective amendment.

[Baroness Altmann]

My Lords, I add my support for the amendment and congratulate the Cross Benches and the noble Lord, Lord McKenzie, on tabling it. In a way, it is very sad that the financial services industry is not making more effort to look after vulnerable customers or indeed to present materials in the ways that the noble Baroness described. I think that doing so pictorially could help everybody. So far, financial services are all about dense words and jargon that people struggle to understand.

This body is due to be financed by the industry and the industry has perhaps not always taken enough care. One hears stories from cancer charities where somebody would call up their bank and say, “Look, I am going through some treatment. Is there any chance I could either have a loan or some respite from repayments?”. It simply is not on their agenda to help people in that way, even when people approach them and explain their vulnerability and their circumstances. So it is right that this body should introduce some measures that are designed particularly for vulnerable customers and, indeed, change the narrative and the language used to explain finance, educate people and inform them about finance, in ways that the industry seems not yet to have been able to do.

Financial Guidance and Claims Bill [HL]

Baroness Kramer Excerpts

Committee: 3rd sitting (Hansard): House of Lords
Monday 11th September 2017 Lords Chamber

[Baroness Drake (Lab)]

My Lords, Amendment 62 seeks to make it a criminal offence for a person to mimic, impersonate or behave in a way which indicates that they are giving advice and guidance on behalf of the single financial guidance body when they not in fact giving guidance on its behalf and are not authorised to do so. This is not a novel proposal. Under existing legislation, it is a criminal offence to impersonate Pension Wise. This provision would not stop every organisation seeking to use or mimic government initiative statements to give credibility to their approach to attract members of the public, but it would be a powerful deterrent. A deterrent is definitely needed because the human cost of receiving fraudulent, wrong, conflicted or partial guidance from organisations or persons who win people’s trust by misleading them into believing they are acting under an authorised government initiative can be just dreadful, leading to irreversible financial losses, life-changing losses, debt and more.

Those vulnerable to the activities of the misleading, mimicking guidance operators are not only the struggling, the stretched and those with more basic levels of numeracy and literacy, although their needs are very important; in the context of finances, those individuals who are vulnerable and at risk go up the income chain as consumers deal with products and services that can be diverse, complex and rapidly changing. Those with retirement savings, for example, are usually people who have typically had good and sustained periods of employment over their working life and have usually compulsorily or voluntarily set aside money aside for their later life. These impersonators can be ingenious in their hunt to claim fresh victims, as a recent press release from the Pensions Regulator demonstrated when it warned that,

“rogue pension websites that are carrying anti-scam messages to try to trick consumers into believing that they are legitimate businesses”.

Some even imply they are regulated by carrying warning messages designed to prevent people falling victim to scams. These imitators are using material owned by the regulators or other government initiatives to impersonate and mislead the public. Therefore, in this instance, a mechanism designed to protect consumers is now used to dupe them.

The deterrent of criminal proceedings is needed not only to protect the public and the integrity of the services of the new financial guidance body but to protect the legacy names of its predecessor bodies, such as Pension Wise and the Pensions Advisory Service, names which the public will continue to recollect for some time before they recognise and internalise the name of the new body. It must be a criminal act to mimic not only the new brand but any of the existing brands that will move into the new single financial guidance body.

The Government thought it necessary to make an explicit criminal offence to imitate Pension Wise but no provision is contained in the Bill for it to be an offence to mimic the new financial guidance body. At Second Reading the Minister commented that there was no need for such a criminal offence provision in the Bill, as:

“The brand and service offer of the new body will be protected by existing stringent criminal offences under fraud and copyright laws”.—[Official Report, 5/7/17; col. 946.]


However, that view was not considered sufficient to protect the public from operators imitating Pension Wise—such imitation was made a specific criminal offence. I remain concerned that the absence of a specific provision to make it a criminal offence to mimic the new financial guidance body is a weakness in the Bill. Why was it considered appropriate to create a specific criminal offence of imitating Pension Wise rather than relying on existing fraud and copyright laws? Which existing legislation would ensure that any form of imitation of the new financial guidance body was a criminal offence, and why is that not referenced in the Bill? How will the Government ensure that imitating any of the existing brands that will move into the new single financial guidance body, including Pension Wise, will continue to be a criminal offence? I beg to move.

[Baroness Kramer (LD)]

My Lords, I strongly support the amendment moved by the noble Baroness, Lady Drake. This is an area where we need belt and braces—every mechanism that we can to make the new body and the services that it will deliver resistant to the scammers, who are ingenious beyond the capacity that most of us find credible, until we experience or hear about a scam ourselves.

In many cases, when people seek advice or guidance over an important matter in their lives, they turn to an organisation in which they have built trust over many years, where they have a whole series of experience and where they have neighbours and friends who share that experience. From that, they can be quite informed in choosing to whom they turn. However, that tends not to be true in the kind of issues that this body will deal with. People who are under debt pressure often panic when they finally reach the moment when they feel they must turn to somebody. It makes them particularly open to scammers, who will do things such as charging them, taking commission and exploiting their vulnerability at that moment. In the area of pensions people are exceedingly confused and, again, are hesitant to turn to names that they might know or which are well established for fear that they will meet a sales opportunity. Therefore, someone who sets themselves up as providing impartial advice suddenly becomes productive. Again, they have no testing mechanism due to previous experience of that body.

Therefore, in supporting the noble Baroness, Lady Drake, on this amendment, we very much seek belt-and-braces protection for consumers, recognising that people are increasingly vulnerable to scamming, particularly with modern instruments such as the internet. The Government need to be motivated to make sure that real and significant protection is in place.

--- Later in debate ---

[Baroness Drake]

My Lords, Clause 6 requires the single financial guidance body to set and publish the standards that it will meet in the provision of information, guidance and debt advice. It is specifically required to obtain the approval of the FCA to those standards. Clause 7 requires that every three years the FCA must review whether those standards are appropriate, review how they are being monitored and enforced, and make recommendations. Amendment 68 would place a requirement on the FCA that, when discharging its duty to approve these standards, it will act in the interests of consumers and promote financial inclusion. The intention of the amendment is to strengthen the remit of the FCA, in this instance, to act in the consumer’s interests.

The single financial guidance body is an organisation whose function is expressly to support individual members of the public. Its objectives are to improve individuals’ financial capability and their ability to make informed decisions and to manage debt. Problems of access undermine the general principle that consumers should take responsibility for their own decisions. People cannot reasonably exercise that responsibility if they struggle to understand the nature, processes, terms and conditions of products and services.

The financial guidance body standards have to be approved by the FCA, whose remit is different—its remit is to ensure well-functioning competitive markets. If there is a gap in the market, the FCA often does not have the power to fill it, and if there is a market failure it seeks to address it by improving competition, even though in many instances the weakness of the consumer buy-side market forces cannot exert the necessary force to achieve a well-functioning market in parts of the financial services industry. The FCA acknowledged in its Retirement Outcomes Review Interim Report that competition is not working well for consumers who do not seek advice; it has concerns about whether a competitive market can develop in future; and consumers can struggle with the complexity of decisions. This echoes the view of the OFT, in its 2013 report on workplace pensions, that the buy side there was one of the weakest that it had ever encountered.

Competition will not always be an effective way to overcome access problems; the very creation of the financial body is a recognition of that fact. As for the wider market, in its paper on Access to Financial Services in the UK, the FCA observed that,

“left to the market, some consumers will be unable to access the products or services they want or at a price they are willing or able to pay”.

The market can go only so far in addressing the various financial needs of people.

The FCA is an economic regulator with a statutory objective to secure an appropriate degree of protection for consumers of financial services, which is largely focused on the provision of information and disclosure, given the general principle that consumers should take responsibility for their decisions and providers should give consumers a level of care that is appropriate, having regard to the capabilities of the consumer. However, the FCA does not have a specific objective or duty relating to consumers’ access to financial services or financial inclusion. The extent of the FCA toolkit in assisting vulnerable customers can appear uncertain.

The single financial guidance body, by comparison, is created to focus expressly on the needs of the public and the consumer, to improve their financial capability to make informed decisions. It is given the power in Clause 2(3) to do anything that is conducive to the exercise of its function.

So there is clearly a potential for tension between the remit of the FCA, when it considers whether to authorise the guidance body standards, and the aspirations of the guidance body on how to support the public when setting those standards. The objectives of the FCA and the financial guidance body need to be aligned when the standards for the provision of service by the new body are set and approved. That is the purpose of my amendment, which would give the FCA the duty to act in the consumer’s interest when authorising those standards.

The standards are a matter for the new body when it is set up. I do not seek to debate what the standards should be, but as a way of illustrating my point I could speculate on matters where tensions could arise: the qualitative standards for the guidance and how far guiders can go in their role in enhancing individuals’ ability to manage their financial affairs and make informed decisions; the guidance output given to the customer; standards for determining when the provision of guidance and debt advice are considered lacking such that the new body has a locus; the consumer’s journey, including how they get the guidance; the ability of vulnerable customers to access financial guidance; and the extent of active promotion of the financial guidance service by relevant organisations.

The answers to the questions of what the standards should be on these and other matters may be different depending on whether they are looked at wholly through the lens of the individual—the consumer’s interest—or from the perspective of a competitive, well-functioning market. The FCA and the new financial guidance body should look at these standards through the same lens, that of the consumer’s interest. That is what my amendment seeks to do. I beg to move.

[Baroness Kramer]

My Lords, I will speak in support of this very important amendment moved by the noble Baroness, Lady Drake. Much of the difficulty in the conversations we have had around this Bill has come over the role and obligations of the FCA. If the Minister or her officials care to look at the FCA website, they will understand that consumer protection is very much interpreted in the realm of preventing mis-selling and preventing scams; it is not a broader protection of the consumer in the way that some might interpret that language—for example, to make sure that the consumer has successful routes to navigate financial services.

I can give the Minister one simple example of which she will be aware. Many of us around this Committee—and, indeed, probably the Minister herself—believe that a breathing space scheme would be very advantageous in helping people to move through debt management to restore their finances. However, the FCA cannot mandate such a thing. It cannot act, as it were, to protect the consumer even though one might consider, if using just the English language, that such an action would be captured by the words “consumer protection”.

In the same way, on the issue of access the FCA can try and act so that a banking institution, for example, does not put up barriers that would discriminate or set itself up in such a way that people could not get on to the relevant website to access the service, but that is not access as in, “What financial services do members of the public require, and are those kinds of services being provided by the financial service sector and industry?”. So it cannot gap-fill. Actually, it is quite unusual to have an arrangement where such gap-filling is not possible. For example, in the United States, that may be done indirectly through things such as the Community Reinvestment Act, so there are paths by which that kind of back-filling can be pursued by the regulator.

I hope very much that the Government will understand that, in terms of providing advice and guidance, the FCA in looking at the standards that have been set cannot operate within the usual realm of an economic regulator of essentially promoting market efficiency or market fairness, which is its fundamental and underlying approach and responsibility. That is why the inclusion of language that talks about acting in the interests of consumers and about promoting financial inclusion is very appropriate when the FCA is now engaged in something that steps outside its traditional, typical overarching role.

[Baroness Altmann]

My Lords, I too support the amendment moved by the noble Baroness, Lady Drake. It is an important amendment, and it would be most welcome if my noble friend would seriously consider extending the protection for consumers that this Bill is rightly aiming to achieve. I echo the comments of the noble Baronesses, Lady Drake and Lady Kramer, in terms of focusing on the FCA promoting the interests of consumer protection, perhaps in new ways from what has happened in the past.

--- Later in debate ---

[Baroness Altmann]

My Lords, Amendment 69 seeks to remove Clause 33, which proposes to cancel legislation, passed by Parliament only last year, which ensures that the pensions guidance body can help members of the public who have bought annuities they neither want nor need, perhaps having been forced to in the environment which existed before the pension freedoms were introduced. Section 2 of the Bank of England and Financial Services Act 2016 amends Section 333A of the Financial Services and Markets Act 2000 and extends the definition of pensions guidance, expanding the scope of Pension Wise so that pensioners who are able to sell their annuity income can access free, impartial guidance before they make this irreversible decision. Since May last year, when the Act was passed, the Government have unexpectedly announced that they have changed their mind and no longer intended to allow people—who had been assured that they would be able to sell unwanted annuities from April 2017—to do so. This decision will obviously have disappointed many of those people, but I accept that Ministers believed it was right.

However, there are two important reasons why it is unwise and unnecessary to revoke the legislation that was enacted just last year. If we retain authorisation for Pension Wise or the new single financial guidance body and the FCA to facilitate mandatory guidance for people who may, in future, be allowed to sell their unwanted annuities, we will not need to take up precious primary legislative time to introduce the measure once more—that has already been done. We do not need to explicitly remove this measure; it can either be considered redundant or, in so far as it relates to something that already exists but is little known, it could be of use to many members of the public.

No further regulations have yet been laid in this connection. However, it is important that the single financial guidance body and the FCA should still have a remit to inform or guide the public on selling an unwanted annuity. The particular reason is that it is already possible for people to sell their existing annuities if they are under £10,000. Although the Government changed their mind on anyone’s overall ability to sell an unwanted annuity, there is the ability—which is not widely known—for people to sell one valued at under £10,000. It is surely important for the single financial guidance body or Pension Wise still to be involved in this area and ensure that there is public information and guidance about the risks of such a sale. I beg to move.

[Baroness Kramer]

My Lords, I support the noble Baroness, Lady Altmann, on this. Given that we have loosened up pension provision very widely, and recognised people’s ability to make decisions about their future, I have never understood the Government’s decision on taking away the right to sell an unwanted annuity. There are many reasons why this might be the right and appropriate decision for people in some circumstances. People may be facing large mortgages on which, for historic reasons, they are paying very high interest rates and which could be wiped out, to their overall financial benefit, if they could access their annuity. I could understand it if the Government thought that necessary safeguards should be added. In that case, the answer is to add those safeguards. For example, people could be required to access guidance at the very least, or there could be a much stronger recommendation that they access advice under these circumstances. To choose this vehicle, when this issue has been paid very little attention and focus, seems like an under-the-radar change to something absolutely fundamental. I support the amendment.

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[Baroness Buscombe]

My Lords, first, I thank the noble Lord, Lord McKenzie, for tabling this amendment.

The purpose of Clause 14 is to provide for the single financial guidance body to be dissolved and for its functions, property, rights or liabilities to be transferred to the Secretary of State or another body. It provides for wind-up to be effected through affirmative regulations that must be debated and approved by both Houses of Parliament.

We believe that this provision is a pragmatic measure. It seeks to ensure—should it ever be necessary—that there is a smooth transition of the delivery of government-sponsored debt advice, pensions and money guidance from the single financial guidance body to another body or the Secretary of State. I appreciate that as we are here today debating the establishment of the single financial guidance body, it may be difficult to envisage that at some point in the future we may need to revisit again how we deliver government-sponsored financial guidance. Yet, just as we are now looking to meet the needs of members of the public by bringing together three separate services into this body, we may find there is a case to join up financial guidance with other services in the future. This clause would facilitate a smoother transition should we need to transfer the functions, assets and employees of the body to another.

The ambition behind this clause—should it ever need to be used—is to facilitate a more flexible approach to transition that would deliver the best outcomes for members of the public who need financial guidance. There would be no need to find a primary vehicle to transfer functions and to wind up the body. It would provide the opportunity for Parliament to respond more quickly should it be more appropriate for public financial guidance to be delivered by another body. It will be important, should this clause need to take effect, that the service to consumers is not compromised.

Where a Bill does not provide a fixed lifetime for a public body, Cabinet Office guidance states that departments should consider whether legislation should contain powers to permit winding up at a later date and for finalising and auditing the closing accounts. However, I assure noble Lords that this power does not take away Parliament’s ability to scrutinise or reject any proposals. Regulations would be required to dissolve the body, following the affirmative procedure, giving both Houses the opportunity to debate the proposals and—if they see fit—to reject them.

Before taking the decision to repeal the legislation for the Money Advice Service and Pension Wise and establish the new body, the Government consulted three times over a period of two years. We have chosen not to go down the same route as the Public Bodies Act or the Enterprise Act, which were referred to by noble Lords, but I assure noble Lords that in taking this power to wind up the new body by affirmative regulations we were not suggesting that consultation would not happen or that it would not be necessary. We would, of course, want to involve stakeholders and the public in the decision to dissolve the body in the same way that we have involved them in the development of these provisions.

[Baroness Kramer]

So often in this House I have heard Ministers argue that it is totally inappropriate for Members of this House to support a fatal Motion to a statutory instrument, yet the Minister is here arguing the rights and appropriateness of this House to do just that. I find it somewhat confusing that there is one message on these issues when it appears to suit the Government’s purpose and a completely different message on an occasion such as this.

[Baroness Buscombe]

I reject what the noble Baroness says. For example, with regard to banning cold calling in pension scams we are finding it extraordinarily difficult to find a primary opportunity to introduce that legislation. Here, there is no question of hubris, recklessness or carelessness on the part of government. We are trying to enable a smoother transition if, following consultation some time in the future, it is felt necessary to have a fundamental change to the current body, for whatever reason. At the moment I cannot foresee it, but it could happen.

[Baroness Buscombe]

Far from it; we are not ignoring Parliament—indeed, we have listened to the committee that the noble Lord sits on—but we do not always have to accept what the committee proposes. It is important that we listen, but no—we do not always have to accept what the committee proposes. We propose instead that there should be affirmative regulations, with consultation, that would allow a smooth transition if in future we found ourselves in a situation where it was decided that there should be a fundamental change to the make-up of this body. For example, Pension Wise was set up only a few years ago. However, since then it has been decided that it would be far more effective, efficient and supportive of the consumer if we were to have one single body, following considerable consultation both with the public and with stakeholders to ensure that the Government are reflecting the wish of the consumer.

[Baroness Kramer]

I must question the Minister on this. Is she saying that she wishes that she was in a position to be able to introduce the Bill, in effect, as a regulation rather than as a Bill, and that the Government are frustrated that at present they have three bodies, consider that one body would be better, and that in future they wish such decisions to be made through not primary but secondary legislation?

[Baroness Buscombe]

The noble Lord’s amendment seeks to add safeguards to the winding-up provision by mandating the Secretary of State to undertake procedures set out in Section 11 of the Public Bodies Act before the wind-up can take effect. The power in the clause would mean that the draft regulations would be subject to the affirmative procedure where both Houses of Parliament would have to approve a Motion before the regulations could take effect.

Further, as I have indicated, I can see no reason why—should it ever be necessary—the Government would not consult prior to taking any action to dissolve the body. This would be contrary to the open and transparent culture that we are all committed to. However, as I noted earlier, I have some sympathy with the noble Lord’s intentions on consultation and, in the light of the committee’s comments on this clause, as well as the debate, I will consider further whether there is anything more that we can do to meet any concerns that have been raised. I therefore urge the noble Lord, Lord McKenzie, to withdraw his amendment.

Financial Guidance and Claims Bill [HL]

Baroness Kramer Excerpts

Committee: 2nd sitting (Hansard): House of Lords
Wednesday 6th September 2017 Lords Chamber

[Baroness Finlay of Llandaff (CB)]

My Lords, first, I declare my interest as chair of the National Mental Capacity Forum. I join in the comments of my noble friends Lady Coussins and Lord Listowel in welcoming the spirit of these amendments. Perhaps I may flag up, as I would be glad to have it on the record, that these amendments may not go far enough for those who have difficulty with financial issues.

Capacity impairments are related not only to mental ill-health. They may be related to frailty and there may be fluctuating mental capacity. For a group of people with communication difficulties, since banks are closing and local branches are no longer there, there is no one with whom they can communicate. If they have speech difficulties, they certainly cannot communicate well over the phone. They may have a mobility tremor, for example, which makes it difficult for them to use the internet without assistance, yet they may want to manage their affairs with a degree of privacy, which they can do in a face-to-face consultation with somebody in a bank.

In addition to impaired capacity and disability issues, there is another difficulty we increasingly see, particularly among the older population: coercion, which may be from other family members and a form of elder abuse. It can be very subtle indeed. I had a meeting this morning with Building Societies Association representatives, who are certainly detecting coercion in face-to-face encounters. But I also asked them whether there is any evidence of detecting coercion in the online systems that are in place. There is none, which becomes worrying. Although this group is right on the borderline of impaired capacity, they are inhibited from exercising their capacity because they are frightened of being intimidated by others.

Another group of concern is those with addictive behaviours such as the hypomania the noble Lord, Lord McKenzie, referred to in his opening remarks. For example, people may have a gambling addiction—a very defined addiction—and be increasingly enticed into spending more or doing a great deal of shopping during the night, when they are hypomanic. The control options on accounts should really be strengthened, so that someone can put them on but not have the ability to take them off themselves without a consultative delay period. The problem is that when they are hypomanic, they think it very reasonable to spend or gamble massively, but later they realise they did not have the capacity to do so. I hope the Government will look very favourably on these amendments and that when we come back on Report, they might even consider extending them a bit further.

[Baroness Kramer (LD)]

My Lords, if I may join in the general chorus, the concern that these amendments express—that the single financial guidance body is not directed to look at the issue of financial exclusion—is a serious lost opportunity. This body primarily directs channels of communication to all kinds of people about how to manage their money, whether that is in time of crisis or to maximise the opportunity for a good pension in old age, for example. As a result, it is in contact with people and is therefore aware of them in a way that, for example, a formal regulator such as the FCA can never be. Not to try to tackle the very individual and human complexities of financial exclusion seems a lost opportunity, given the palette of opportunity being created by the structure of the body. Financial exclusion matters greatly. We all know about growing inequality within our society and how it undermines the progress we wish to make. The contribution this body could make in this arena could help tip the balance in the direction in which we all hope to go.

[Baroness Hollins (CB)]

I add my support, but I wish to take this a little further. Older people are not the only members of the public who rely on easy access to cash in order to manage their daily budgets. People are now being required to use chip and pin instead of a cheque to obtain cash in a bank, which is not possible in a post office. The risk of chip and pin for many vulnerable people who have limited capacity is that it opens them to exploitation. They are more at risk of scams and other kinds of financial exploitation. It is just putting some more vulnerable people at risk. This is a wonderful opportunity to address the risk that many people now being encouraged and empowered to live more independently in the community could lose some of that independence.

--- Later in debate ---

[Lord Young of Cookham (Con)]

My Lords, the co-pilot is in charge of this leg of the legislative journey, and I apologise in advance for any turbulence. I thank the noble Lord, Lord McKenzie, for tabling these amendments and for the way he argued in support of them. As I listened to some of the contributions, it struck me that during this debate we have identified gaps in existing provision. One of the things we want the new body to do is to identify those gaps and then fill them. I will come back to this issue later on in dealing with some of the specific points that have been raised. I am grateful for the contributions that have been made and I will try so far as I can to address them.

Clause 2 sets out the functions and objectives of the new body, including the role of the strategic function. In designing these functions, we have set the parameters so that the body has a clear remit to focus its efforts while at the same time ensuring that the scope is sufficiently wide so that it can respond to changing needs and circumstances in meeting that remit.

I begin with Amendments 19 and 39, which seek to integrate financial inclusion within the new body’s strategic function and to set out in statute a definition of financial inclusion and exclusion, the case made by the noble Lord, Lord McKenzie. As my noble friend mentioned at Second Reading, we take the issue of financial exclusion seriously. The Government are grateful for the work of the ad hoc Select Committee on Financial Exclusion in highlighting this important issue. I am all too aware of the appetite of noble Lords to read the Government’s response, and I recognise that the general election held this year and subsequent ministerial changes have, unfortunately, pushed back that response, which will be published shortly. None the less I am grateful for the comments from the noble Lord, Lord Kirkwood, and the noble Baroness, Lady Coussins, about the appointment of my honourable friend Guy Opperman as a Minister with responsibilities in his department.

I cannot anticipate the Government’s final response, but in the meantime I want to be as helpful as I can to the noble Lord, Lord McKenzie, and others by outlining our understanding of the term “financial inclusion”. I begin by picking up the point identified by my noble friend Lord Trenchard in looking at issues of definition. To quote the World Bank:

“Financial inclusion means that individuals and businesses have access to useful and affordable financial products and services that meet their needs—transactions, payments, savings, credit and insurance—delivered in a responsible and sustainable way”.


That is an internationally accepted definition of financial inclusion. When we consider that definition, it follows that the Government’s policy regarding financial inclusion must be focused on ensuring that there is an adequate and appropriate supply of useful and affordable financial services and products. The Government therefore work closely with the industry regulator, the Financial Conduct Authority, to ensure that appropriate action is taken when the market fails to supply services and products. The noble Baroness, Lady Coussins, mentioned bank closures, which is an example of where the market has failed to supply what particular customers want. In passing, I note that in many parts of the country the Post Office is stepping up to the plate, and one should not underestimate its contribution.

On the matter of “financial capability”, the term refers to the ability of the public to manage their money well, including the ability of members of the public to engage with services and products made available by the financial services sector. So there are two different concepts—capability and, as I shall refer to in a moment, the supply of services. Of course there is little value in ensuring an appropriate supply of useful and affordable financial services and products if people do not have the ability to actually use them. That is where financial capability comes in. It is the role of the single financial guidance body to improve the ability of the public to manage their money so that they have the skills, knowledge, motivation and confidence to fully use the financial products and services on offer.

Against the background of those definitions, the concern that we have about these amendments is that the reference to “financial inclusion” would fundamentally change the nature of the new body from an information and guidance body to more of a regulator with specific powers to intervene in the financial services market. At the moment the Treasury and the FCA have responsibility and the relevant powers to intervene when the financial services market fails to supply affordable products and services. Against that background, the attempt in the amendments to give the body a remit over financial inclusion risks duplication and confusion.

I think noble Lords will be aware of the FCA’s work in the area of financial inclusion. It is of the utmost importance that this progress is not impeded by unnecessary confusion over the role of different public bodies. Indeed, the FCA’s competition objective states that it may have regard to,

“the ease with which consumers who may wish to use”,

financial,

“services, including consumers in areas affected by social or economic deprivation, can access them”.

The FCA takes those objectives very seriously and has undertaken a number of pieces of work in recent years—

[Baroness Kramer]

Perhaps there is a slight misunderstanding here. The FCA certainly sees its role as regulating appropriately those financial services that exist, but where a gap exists, it takes no responsibility for filling it. Many in this House have had a long dispute with both the Treasury and the FCA about that, because the gap never gets closed. I draw that to the Minister’s attention, because often those who are not close to this matter assume that it has that role.

[Lord Young of Cookham]

My initial response is that if the gap is indeed not closed, it is one of the objectives of the FCA to address that. I was just quoting that it has to have regard to,

“the ease with which consumers who may wish to use”,

financial,

“services, including consumers in areas affected by social or economic deprivation, can access them”.

If it is not responding and ensuring access, that is a case not for giving that responsibility to another body but for holding the FCA to account to get it to discharge the responsibilities that we have given it.

The FCA takes its objectives very seriously, and has undertaken several pieces of work in recent years to increase access and protect consumers, including a report on consumer vulnerability in February 2015. To give one example, in June this year, the FCA published a call for input on access to insurance, following a broader report on access to financial services that it published in May last year. The call for input seeks views on the challenges that firms face in providing travel insurance for consumers who have or have had cancer and the reason for pricing differentiations in quoted premiums.

I look forward to seeing that work develop, and I encourage all relevant stakeholders to provide responses to the call for input. It is important work and, in response to the noble Baroness, is an example of the sort of project to promote financial inclusion that the FCA can conduct in its role as industry regulator.

Against that background, I urge the noble Lord, Lord McKenzie, to withdraw Amendment 19 and not to press Amendment 39. I am grateful for the opportunity to address the important topic of financial inclusion, to which I am sure we shall return, but, as I said a moment ago, the Government are concerned that the amendment could create confusion between the roles of the FCA, on the one hand, and of the SFGB, on the other.

I turn to Amendment 25, which makes provision for the new body to advise the Secretary of State on the role of Ofsted and the primary school curriculum. I am aware that the Lords’ Select Committee on Financial Exclusion made a similar recommendation on the role of Ofsted and the primary school curriculum in its recent report. We will of course respond to each recommendation in due course and give them the close attention that they deserve but, for the time being, I just comment that the Government believe that this amendment could cause confusion about the remit of the new body with regard to the school curriculum.

As was stated earlier, the new body will have a role to help co-ordinate and support initiatives delivered by charities and other parties which are designed to improve the financial education of children and young people. It will be able to identify gaps in provision, identify best practice, and work with schools to understand how they are delivering financial education, in which lessons that is taking place, and explore further the barriers to school involvement. The Government are clear, however, that the school curriculum and monitoring of school performance is a matter for the Department for Education in England and those of the devolved nations.

In practice, this means that the body will be able to undertake activities to help schools to provide financial education. For example, the body will be able to undertake activities such as funding the project undertaken by the Money Advice Service and the Education Endowment Foundation to run a trial of Young Enterprise’s Maths in Context programme. Some 12,000 pupils in 130 English schools will take part in the trial, testing whether teaching maths in real-world contexts improves young people’s financial capability and attainment in GCSE maths exams.

--- Later in debate ---

[Baroness Kramer]

I will say just a sentence or two, because the noble Baroness, Lady Altmann, has put the case so well. I hope that the Government will take it away to consider it. One of the underlying flaws in the Bill is that it takes a Victorian view that there are people who have debts, who are struggling to deal with them, and others who have investments and need to work out how to maximise them. In this day and age, they are the same people dealing with, from their perspective, a single pot of money which they have in various places or have various issues with. If this is not cleared up in the Bill, the noble Baroness is exactly right to say that we undermine the benefits that the service can bring. It needs to be brought into the modern era. It is good to have a nice legal definition— I should like the MiFID definition, which is in the letter; that makes a great deal of sense—but, as the noble Baroness, Lady Altmann, put so clearly, that does not deal with the perspective of the consumer: where do they stand, what do they need and what on earth is this service providing?

[Lord Kirkwood of Kirkhope]

I did not intend to contribute to this debate, but it is a very important issue. The note, which I also received at 3.46 pm this afternoon via the Whips Office despatch, misses the important point about auto-enrolment. That is causing the most concern. The noble Baroness, Lady Altmann, clearly explained how that changes the circumstances. The Government need to continue to work on this. I am not an expert, but, speaking for myself, I would want to test this in the Division Lobby if they cannot come up with a more rational response to the amendment of the noble Lord, Lord McKenzie, and the arguments of the noble Baroness, Lady Altmann.

Financial Guidance and Claims Bill [HL]

Baroness Kramer Excerpts

Committee: 1st sitting (Hansard): House of Lords
Wednesday 19th July 2017 Lords Chamber

[The Earl of Listowel (CB)]

My Lords, I hope the noble Baroness, Lady Altmann, will not mind my taking this opportunity, which was probably taken at Second Reading, to pay tribute to the work of organisations in this area, particularly to Toynbee Hall and the late Earl Attlee, who was a trustee of Toynbee Hall. When my father left university at Oxbridge, he went and lived in Toynbee Hall in the 1930s and learned a bit about what it was like living in that area at that time. It shaped Clement Attlee’s view of the world, of course, so perhaps the welfare state that we have now is partly due to the work of Toynbee Hall. It gives advice to care leaders, and the noble Lord, Lord Northbrook, has spoken of the evidence that it gave him. It is organisations like that which have been providing support and advice to vulnerable families and individuals over many years that we really need to celebrate and give credit to.

[Baroness Kramer (LD)]

My Lords, the amendments moved by the noble Baroness, Lady Altmann, are significant. They go to the heart of whether or not this new body is going to be structured in such a way, with a set of responsibilities and clear communication with the public, that will allow it to become properly effective. I think that is what everyone in the Committee both hopes and wants.

It is clear from listening to every Member across the Committee that we have a situation at the moment where the confusion between advice, counselling and guidance is intense. We need clarification around the use of language. The noble Baroness put it well in saying that this new body should be shaped, and therefore the legislation has to be shaped, from the perspective of the potential user, not from the perspective of the legal gurus whose primary objective is to bring three pre-existing bodies together—bodies that were set up in a different financial era with rather different purposes. I have no objection to them being brought together, but the primary purpose of the Bill is surely not to bring three bodies together but to end up with a body that meets the public need in handling the complexity of modern finance, ranging all the way through from debt at one extreme to savings and investments at the other, and recognising that most people in today’s world are engaged right across that spectrum, sometimes at different phases of their life but often all at the same time. There are complications now when people get into debt, but obviously some of that debt is considered desirable in terms of mortgages. We have ISAs of many different kinds, all with somewhat different purposes.

Pension funds used to provide defined benefits but now we have defined contribution schemes. The Committee will be well aware that many people now with defined contribution schemes have pots that they are beginning to draw down and remove from their pension schemes. At this point in time, that may not be that significant, because for many people that will be a relatively small amount of money because the change in the structure of pensions has been recent, but with every year the group of people newly coming through to this opportunity to draw down is looking at a pension that represents a bigger and bigger piece of the financing that has to support them through the rest of their lives.

The general confusion has to be tackled urgently. I point the Committee to the Financial Conduct Authority report, Retirement Outcomes Review, a very recent document—within the last couple of weeks—which speaks almost with some despair about the percentage of pensions that are being drawn down without any advice being taken at all. The Committee may not be aware that,

“Accessing pots early has become ‘the new norm’. 72% of pots … have been accessed by consumers under 65, most of whom have taken lump sums”.


That is a huge change. The report says:

“Most consumers choose the ‘path of least resistance’”—


in other words, they do not review the various options and instead go with their current provider when they do the draw-down. However,

“Many consumers buy drawdown without advice but may need further protection to manage their drawdown effectively”.


The report talks about the risks of people,

“paying more in charges and/or tax”,

than they should,

“choosing unsuitable investment strategies … losing valuable benefits”,

and,

“running out of pension savings sooner than expected”.

To get that group to take advice, we need a body that is fit for purpose. It seems to me that the amendments proposed by the noble Baroness, Lady Altmann, are exactly designed to create a body that is fit for purpose in its use of language, presentation of its programme and shaping of its objectives, because it will have worked through these issues of advice, counselling and guidance and eliminated the endless confusion, which is, I would suggest, one reason why many people have not taken advice—they are, frankly, so confused about the offer that is out there that they have no idea which way to turn. It is interesting that the FCA report at no point talks about people seeking guidance and therefore getting appropriate outcomes; it recognises that advice is the direction that will be essential for most people. This body surely has to play a role in that, so language clarity is required.

In reference to the title or naming of this new organisation, we note that the Government have kept to themselves the powers to name the organisation. They have not shared with us what the title will be but, as we talk about this language confusion, it is rather important. The Committee will also note that the Delegated Powers and Regulatory Reform Committee recommended that it should, in fact, be Parliament that sets the name, recognising the importance of that name both in shaping strategy and in making sure that communication with the public is as clear as possible and that the body does not continue to struggle with the existing difficulties that have set by terminology.

I hope that the Government will take this whole issue away, recognise its significance, work through it and come back with something that will let this new body be as effective as it could possibly be in meeting the public need.

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[Baroness Buscombe]

I thank all noble Lords who have taken part in this helpful debate, and in particular my noble friend Lady Altmann for raising these issues through her amendments. It is important to be straight about it: let us not get hung up on legal terms that we need to use in the Bill to ensure that the body can deliver the crucial support on problem debt need. How the sector and others promote the services is another matter. It needs careful consideration based on evidence and insight.

I thank my noble friend Lady Altmann for bringing forward Amendments 4, 12, 44 and 67, which replace references to “debt advice” with “debt counselling” or “guidance and counselling”. My noble friend has tabled a further amendment in this group, 21, which would add to the body strategic functions to improve public understanding of the distinction between certain personal finance terms and improve their knowledge of how to access relevant information and guidance. I also thank the noble Lords, Lord McKenzie of Luton and Lord Stevenson of Balmacara, whose Amendment 38 would establish a definition for the terms “advice” and “guidance” used in the Bill.

Regarding Amendment 38, I reassure noble Lords that the Financial Conduct Authority provides thorough definitions of guidance and advice in the relevant section of its handbook. The handbook includes examples which clarify how the distinction between guidance and advice works in practice, and the Government believe that such detail is best articulated by the regulator rather than through primary legislation. I also observe that through the specifications in Clauses 6 and 7, the FCA will have a formal role in ensuring that all the activities conducted on behalf of the new body are in line with its regulatory standards and guidelines.

The FCA has conducted a significant body of work in this area, providing clear definitions of the terms “guidance” and “advice”. The Government are grateful to it for these efforts and believe that any ambiguity over the use of these terms has been appropriately addressed. It is therefore not appropriate to insert definitions of these terms in the Bill.

As she did on Second Reading, my noble friend Lady Altmann raised the important point about language and its consequences, as have other noble Lords. I agree that it is important to ensure that the Bill’s wording accurately reflects the activities the new body will be undertaking, and that members of the public fully understand the nature of the support available to them. I have reflected on this point, take it seriously, and have therefore given it careful consideration. However, I have concluded that it would not be right to include these amendments.

The first reason for not including the amendments is that “debt advice” is the term that most appropriately reflects the provision that the new body will deliver in relation to its debt function, so it should be used instead of alternatives. There are two key reasons for this. First, “debt advice” reflects a broader set of activities than “debt counselling”, and this broader set of activities is precisely what the new body will have a duty to deliver. For instance, while “debt advice” can be said to cover providing recommendations for individuals about which debt solution they should pursue, as well as adjusting individuals’ debts through a debt management plan, “debt counselling” can be said to cover only the first of those activities.

Secondly, I should note that, like financial advice, debt advice is an activity regulated by the FCA. It involves advisers offering a personal recommendation to an individual which steers them towards a particular course of action. Under FCA rules, in giving this recommendation the adviser is required to make it clear that they are giving a consumer regulated advice. Only those providers who have been authorised by the FCA to deliver this service or who are exempt from authorisation can provide this advice. As such, this makes it different from the other functions delivered by the body and means that other previously been suggested terms—for instance, “debt guidance”—would not be an appropriate description. “Guidance” in this context refers to the provision of generic information about money matters without the inclusion of a personal recommendation. Authorisation is not required for guidance, so using a term such as “debt guidance” would, we believe, be equally misleading.

The second reason why I do not believe that we should amend the term “debt advice” brings me back to the underlying purpose of ensuring that the language we use is clear, accurate and consistent. We must ensure that the way we structure and label the services on offer to individuals reflects the way they use and understand these services. There is no compelling evidence that use of the term “debt advice” is an issue for consumers or that it affects their ability to access appropriate provision. Indeed, the term is almost ubiquitously used among leading debt charities. We also need to bear in mind that we have carried out three consultations covering this issue, among many others, and have found that to be the case.

[Baroness Kramer]

Perhaps I may ask the Minister for some clarification. My question relates to a point raised by the noble Baroness, Lady Altmann, the reply to which I did not clearly understand. If an adviser provides debt advice to an individual who has a debt issue but also belongs to an auto-enrolment scheme for a pension, is the adviser permitted to propose that the individual opt out of that pension or would they be violating their authority as an adviser if they did so? From looking slightly to the Minister’s side, I gather that they would, and therefore they would be unable to provide that advice, even if it was the correct and best solution for the individual. That is part of the complication that is coming out of this language.

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[Lord Stevenson of Balmacara (Lab)]

I understand that a note has come at pace with its best advice. It might be sensible to ask for a letter on this point because it is at the heart of not so much the naming game but functions. If advisers of the body will not be able to move seamlessly, however many hot keys they are able to employ, from pensions to general expenditure and back again, it is a different body to the one we are trying to set up. As I understand the situation—this is what I would like to be checked back—it is possible for an individual to be authorised to give advice on both debt and pensions, but the debt advice community has broadly not chosen to go down that route, regarding pensions as needing expertise that would be difficult and expensive to acquire. What the noble Baroness has said is not entirely wrong, but it is not entirely right either.

[Baroness Kramer]

Perhaps I may add to that. Partly this is problematic because individuals receiving the debt advice may not understand that there is no discussion of their pension pot, because the adviser is unable to raise the issue and, therefore, they may not recognise that they are being offered a series of potential solutions within a limited framework that does not make use of the full financial resource that describes essentially who they are and what they have available to them. We use advice only in the regulated sense, but the person listening thinks that it is advice in common terminology, and that is why we end up with the problems that the noble Baroness, Lady Altmann, is trying to address.

[Baroness Buscombe]

This turns on the question of what we mean by seamless. The point is that this body will be able to signpost people. The most important thing about the use of language, in a sense, is the ability of the advisers to clearly signpost and explain who can advise on what. It is a question of who has the advice, the skills and permissions to give debt advice and who can only give guidance.

I am not sure why there is an issue about this. It is more about the ability to signpost people in the right direction. Certainly, all the analysis has shown that changing the terminology makes no difference at all. What makes a difference is the ability of people to understand what it is they are able to receive and from whom.

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[Baroness Coussins]

My Lords, I support Amendment 6, which I rather hope might prove uncontroversial. This is because, as I understand it, it is the Government’s firm policy intention that the services that the SFGB will commission will be free at the point of use to members of the public—as is the case with current arrangements. Given that what we are debating here are the arrangements for advice and guidance for individuals who are often in financial difficulty, certainly in the case of debt advice but also in other situations, this free-to-client principle is of such fundamental importance that it should be in the Bill.

On a separate point, the amendment uses the phrase “members of the public”—as does the Bill in relation to the SFGB’s functions and objectives. I would like clarification from the Minister that this phrase will include those members of the public who are self-employed. At Second Reading she referred to the body’s remit excluding micro-businesses, so clarification on the position of self-employed people would be welcome, in particular as they now account for 14% of the UK’s workforce. Indeed, the growth of self-employment has led to a significant increase in debt; self-employed people are increasingly taking out personal loans to finance their business needs, so the dividing line between personal debt and business debt is becoming increasingly blurred. Current arrangements for debt advice provision through the Money Advice Service do cover debt advice for people who are self-employed, and I would be grateful if the Minister could give us an assurance that this will continue.

[Baroness Kramer]

My Lords, we support the amendments in this group. I start from the assumption that they are remedying a momentary lapse in the energy of the team that was drafting the Bill, because I cannot believe that the Government are not fully signed up to the principles that advice should be free at the point of use, and also both independent and impartial. So I, too, suggest that these amendments are surely uncontroversial and are useful to the Bill to make sure that the point is not lost, as they remedy those moments when long hours of work and not enough coffee made it difficult to remember every single issue that had to be grasped in the general drafting of a Bill of this complexity.

[Lord McKenzie of Luton]

My Lords, it may come as no surprise that we on the Front Bench support my noble friend Lady Drake, for all the reasons that she and others mentioned this evening. Certainly, if advice was not free at the point of use, it would undermine the function and could create conflicts of interest, as my noble friend said. Issues around independence and impartiality are absolutely crucial. I am delighted to hear that HMRC had to cough up for a fridge—it is not a usual occurrence and I congratulate my noble friend on engineering that.

I say to the noble Baroness, Lady Coussins, that we entirely agree with the point about the self-employed. We have tabled an amendment on that later in the Bill and I hope that we will be able to make common cause on that as well.

--- Later in debate ---

The question of the self-employed was raised in particular by the noble Baroness, Lady Coussins, and also by the noble Lord, Lord McKenzie. Members of the public who are self-employed will be included. The body is focused on individuals. In the case of businesses, even a micro-business—which might be just one or two individuals running a business, either incorporated or however it is formed—is not covered. All individuals, including the self-employed, will be counted as members of the public.

[Baroness Kramer]

Will the Minister take away and think through this issue? Their Lordships have been perfectly correct in saying that many people who are self-employed raise a personal loan that then finances their business activity. Historically, there would have been relatively little overlap between these categories. When people went to a bank, the category would have been specifically personal or business. In today’s world, particularly with people borrowing from peer-to-peer platforms and through various other internet mechanisms, that clarity has disappeared. I would not want to see—as I am sure this House and the Government would not—an adviser caught in a particularly awkward trap, trying to work out whether they are talking about an individual or have tripped over into a prohibited category because the funds are used for a business. Therefore, clarity around this will be crucial.

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[Baroness Buscombe]

Noble Lords may laugh, but I have the advantage of having been at the other Dispatch Box in opposition when noble Lords opposite were in government. We suffered continually from the inability to get that Government to introduce and think about really important measures like this. That is why the situation has become so much worse over the past 19 years that I have been in your Lordships’ House. But we want to get this right.

[Baroness Kramer]

I think the Minister may have misread noble Lords’ tone and intent. As everyone has said, there is common ground on this issue across all the Benches. Everyone is attempting to put in a breathing space and everyone wants to stop cold calling. The Minister’s argument is that the amendments have been twisted to come into the scope of this Bill. They are not the ideal amendments and everybody has said so. But in response to the discussion that has taken place across this House—a discussion that these amendments enabled—would the Government look at making a small amendment to the Long Title to enable the introduction of powers through statutory instrument? This could introduce both the breathing space and the stop on cold calling, without describing exactly how that is done, so the Government would have the opportunity to think through those complexities.

This measure is being proposed because the legislative timetable means that no vehicle other than this Bill is available for at least 24 months to make those changes. The Government may be ready to make the changes three months from now, but will find themselves without any legislative vehicle to enable them to do so. A small change here could enable the Government to act on the timetable they have identified, but which they now have no mechanism for because of the way the legislative timetable is playing out. Perhaps I am being confusing, but I am trying to make the point clear.

[Baroness Buscombe]

My Lords, I understand entirely and accept what the noble Baroness is saying. Indeed I understand that that is the purpose of all noble Lords who have spoken this evening. However, I take issue with the idea that there is no legislative opportunity over the next two years. The Government have made it very clear that we will not be confining ourselves to Bills relating to our departure from the European Union. There will be other opportunities to legislate in these important areas, but we want to make sure that when we do it, we get it right. It is important that I address—

[Baroness Buscombe]

No, I cannot do that at the moment and I think it is unfair to ask me to set out the Bills that could be used at this time. What I am saying, though, is that noble Lords should not presume that there are no other opportunities to bring forward legislation over the next two-year period, other than those relating to the departure from the European Union—

[Baroness Kramer]

I am sorry, but other than a Private Member’s Bill—I think even all the Private Member’s Bills have been allocated over the next two years—I am not sure it is possible to identify such a vehicle. If it is, we would all feel much comforted. A reassurance that such a vehicle is coming within a reasonable timeframe would be very helpful, but we cannot see one.

[Baroness Buscombe]

I hear what the noble Baroness is saying, but I stick to what I said before: there may be opportunities in the coming few sessions or so. The important thing is that we want to take this forward with care, and we are very committed to it in principle.

I should also refer to cold calling and the question the noble Lord, Lord Sharkey, raised. We are consulting on pensions cold calling, but the situation is different from mortgages cold calling. We have consulted on banning pensions cold calling through legislation, while a ban on mortgages cold calling has been put in place through FCA rules. Legislating to ban cold calling makes the activity illegal and therefore sends a stronger message to members of the public to put down the phone.

There are already measures in place to tackle unsolicited calls more broadly. The Information Commissioner’s Office enforces restrictions on unsolicited direct marketing, and the Digital Economy Act, passed earlier this year, required it to issue a statutory code of practice on direct marketing activities. The code will include guidance for direct marketing organisations on complying with the law, including the Privacy and Electronic Communications Regulations (EC Directive) 2003, and the upcoming data protection Bill. Unsolicited direct marketing calls to a person who has not agreed to be contacted are illegal.

Financial Guidance and Claims Bill [HL]

Baroness Kramer Excerpts

Committee: 1st sitting (Hansard - continued): House of Lords
Wednesday 19th July 2017 Lords Chamber

[Lord Stevenson of Balmacara (Lab)]

My Lords, this is a brief amendment and stands on its own, I think primarily to ensure that the next group gets enough focus. We are back to the definition of words, which is obviously going to bedevil us as we go through the Bill. This one is slightly more generic than the others, in the sense that the description we have been given of the task of this new body is that of creating a mixture of direct provision and commissioning. However, sometimes the wording does not seem to match up to that, so the amendment suggests a better form of wording that would leave out “provide” and insert “ensure provision of”. When we look up the dictionary definition of “provide”, we see that it is basically an active verb whose primary meaning is to make available for use or to supply.

As I read it, it is there as an active verb, which means that the body to which it is applied will be doing things—implementing in an active way. Substituting “ensuring provision of” would mean a much greater accent on working with others to make sure that these things happened. The amendment applies to the pensions arrangements referred to in line 19 of page 2. In many cases, the pensions guidance function would be carried out mainly in house, or others would be commissioned to do the work, so it may not be the most appropriate place for the amendment, but we pick up the same idea as we move through the Bill and look at the other aspects of the work of the organisation.

It is a probing amendment at this stage to invite the Minister better to articulate what “provide” means here. We want to know in particular whether commissioning work is envisaged in this limb, whether it involves any direct provision and, if so, what that would be. Can the Minister give some broad breakdown of the balance between those two aspects? I beg to move.

[Baroness Kramer (LD)]

My Lords, I agree with the noble Lord, Lord Stevenson, that the amendment is possibly sitting in the wrong spot, because the various pension bodies being absorbed into this single body have provided guidance directly. It is advice provided through a commissioning, contractual arrangement, which I am sure everyone intends should remain in place. However, the underlying spirit of the point the noble Lord makes and the request for clarification are important.

I rise to speak merely because the Minister may answer that such issues are covered somewhat in Clause 4. I simply wanted to point out that that clause regularly uses “may”, whereas I think the Government’s intention —and that, I suspect, of many others in this Committee —is that this be a “must”. So, the argument that Clause 4 is the answer to the question raised may not exactly work.

[The Parliamentary Under-Secretary of State, Department for Work and Pensions (Baroness Buscombe) (Con)]

My Lords, I thank the noble Lord, Lord Stevenson, for the amendment and for the opportunity to clarify. Amendment 8 would change the wording of the pensions guidance function by replacing “provide” with “ensure provision of”.

I am of the view that the amendment would make little difference to the outcomes that the body will deliver. Pensions guidance will be provided by the body itself or on behalf of the body by its delivery partner organisations, whether or not the requirement is that the body “provide” or “ensure provision of” pensions guidance. It is important that the body be able to design its services in a way that best meets the needs of the public.

It is better to establish clearly the body’s functions in Clause 2 and then set out in another clause which of those functions may be carried out by others. The amendment rather brings the two concepts together in Clause 2 in a way which is less clear.

Taken with Clause 4, as referenced by the noble Baroness, Lady Kramer, the wording of the pensions guidance function allows the body either to deliver information and guidance itself or to make arrangements with partners to deliver some, or all, of it. The mix of in-house and delivery partner provision will be for the body to decide. It would be wrong for me or indeed any of us to try to judge at this stage how much of the body’s work will be done via commissioning and how much in house. That may to some extent depend on how much certain advice is sought and what direction and guidance—

[Baroness Kramer]

I am sorry to interrupt the Minister but am not clear on what she just said. The provision in Clause 4 says that,

“The single financial guidance body may arrange for another person”.

That applies not just to the pensions guidance but to debt advice. My understanding was that the structure of debt advice currently underpinning MAS would be carried over into the Bill. Is this raising the option that the new body would provide debt advice directly? I am slightly unclear on that point. Could she help us with that?

[Baroness Buscombe]

I thank the noble Baroness for her intervention but I read it myself and I do not think it does—as she suggests—create that opportunity for the single financial guidance body to deliver the debt advice function. It says that it,

“may arrange for another person … to carry out any of the following functions on its behalf”.

The SFGB is the delivery partner. On the reference to “may” rather than “must”, from a legal standpoint it is already in the Bill that the guidance body can arrange for another person to carry out any of those functions. Indeed, it is implicit that it will.

I apologise but I have just been corrected in relation to the debt advice function. It is an option but not the plan—if that makes sense. I hope this explains what the wording of the pensions guidance function means in practice. I urge the noble Lord to withdraw his amendment.

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My view is not novel. Sweden and Australia both provide their population with access to a clean version of a public dashboard. I urge the Minister to seriously consider the merits of this amendment, which addresses a real and growing need for the Government to give a clear signal on the direction of travel for strong and robust governance in the provision of a dashboard and the infrastructure that supports it. I beg to move.

[Baroness Kramer]

My Lords, I very much support the amendments moved and spoken to by the noble Baroness, Lady Drake, and the pressure they create on the Government to come up with some coherent answers to the very significant questions which have been posed. We are great supporters of the dashboard, as is, I suspect, almost everybody in this House who is engaged in pensions, savings and investment issues. However, I also spend quite a bit of time now trying to understand where artificial intelligence is taking us. The first question that is always asked is: who controls the data? Secondly, who controls the best analytics to be able to turn the data into a marketing opportunity?

The data will clearly become dominated very quickly by a limited number of companies. That in itself will become a mechanism that limits options for individuals and makes it extremely difficult for them to compare the options that they could source from a variety of providers. It tends to tie them back to a single, dominant provider. The Government surely have an interest in preventing the development of either those quasi- cartel or monopolistic structures, but early intervention is needed to make that possible. Who controls the dashboard will be an issue of real significance and there is a strong argument that it cannot be one of the commercial players, in whose interests it would always be to manage that dashboard to the advantage of their own proprietary products. I hope that the Minister will engage with this opportunity, because events are taking over in this area and government has a relatively limited scope in which to intervene to shape the framework.

[Lord McKenzie of Luton]

My Lords, briefly, I support my noble friend Lady Drake and the powerful case she has made for the public service dashboard. I will also speak to the proposal that pension guidance functions should include the state pension.

Decisions around receipt of the state pension are not necessarily a straightforward matter. As we know only too well, there has been some confusion over the age at which some—particularly women—reach state pension age and are entitled to access their pension. Reaching state pension age does not of course necessitate giving up employment. Deferring the state pension can generate a higher rate of pension and therefore possibly tax, albeit no longer with a lump sum. But deferral will not earn an income uplift in weeks where certain benefits might be in payment, for example for carer’s allowance. The deferral increase is not inheritable. There are transitional rules for those reaching state pension age before 6 April 2016. As entitlement depends on a person’s national insurance record, paid or credited, there may be decisions about the appropriateness of buying extra years. These are just some of the intricacies surrounding the state pension.

It is accepted that the Pension Service will provide details, including forecasts of entitlement, but should these matters not be considered in the round, particularly with the person’s broader retirement planning? After all, for many people the state pension will constitute their biggest single risk-free income source for the rest of their lives. In their response to the final SFGB consultation, on page 10, the Government stated:

“the government believes people would benefit from access to joined up information and guidance to help them develop the financial capability they need”.

Surely an understanding of what might flow from the state pension system is as important as an understanding of choices around pension pots. Indeed, given the recognition that the service should be directed at those most in need, are they not likely to be those for whom the state pension represents a significant part of their income?

My noble friend Lady Drake made, as ever, a powerful case for the pensions dashboard, and in collecting together details of all of a person’s pension pots it is important that it should include the state pension. To be clear, we do not argue for SFGB to replace the Pension Service but for it to be able to feed its choices into how it might fit together with other pension opportunities.