Financial Services and Markets Bill

Debate between Baroness Kramer and Baroness Bennett of Manor Castle

Committee stage
Monday 30th January 2023 Grand Committee

[Baroness Bennett of Manor Castle (GP)]

My Lords, I will briefly express support for this amendment, which has already been so powerfully argued for. I would have signed it had I caught up with the legislative deluge.

I want to make two additional points. First, the Pensions Regulator’s most recent survey of defined contribution schemes found that more than 80% did not allocate any time or resources to managing climate risk. It would be interesting if we were to see the way in which fund managers were voting, not only to have that recorded, but I would assume that they would have to have some kind of thought behind it to explain what was recorded. The transparency might force some more thinking to happen, which would clearly be a good idea.

I also want to ask a question of the proposers of this amendment because I was slightly puzzled by the information on request element of the amendment. The noble Baroness, Lady Sheehan, noted that US regulators forced this to be published openly as a matter of course. It seems that that would be the logical thing, that this should be available not only to clients but to anyone who might like to make an assessment of how companies and asset fund managers are behaving and why they are behaving in that way. Perhaps in my classic Green position, I wonder whether we should not go further, and, rather than saying “to clients on request”, say that this should be freely published and available to all.

[Baroness Kramer (LD)]

My Lords, with three outstanding speeches, I have very little to add other than to say that I very much support this. However, I have a question for the Minister. I was just looking up the definition of a fiduciary duty, which is when someone

“has undertaken to act for or on behalf of another in a particular matter in circumstances which give rise to a relationship of trust and confidence.”

We know that many people feel that there is an implied and inherent fiduciary duty between the person who puts their money into a pension fund and those who act to invest it—I see that the noble Baroness, Lady Noakes, is shaking her head. I know that in various pieces of legislation there has been an attempt to clarify that. However, surely at the very least there is a responsibility to transparency. This seems to me a very mild but important principle to establish. I suspect the Minister would be very concerned if she were to put her money into an entity and did not know, within reasonable boundaries, how it was being invested and used and what impact it had. Surely, these amendments are minor and mild but important.

UK Infrastructure Bank Bill [HL]

Debate between Baroness Kramer and Baroness Bennett of Manor Castle

Report stage
Monday 4th July 2022 Lords Chamber

[Baroness Bennett of Manor Castle (GP)]

My Lords, it is a pleasure to follow the noble Lord, Lord Ravensdale. It was particularly useful that he spoke before me because I have taken some of the words that he and his supporters put down in their amendment but made an additional change, taking out the words “economic growth”. But I agree entirely with everything the noble Lord just said about the need to focus on reducing disparities and tackling economic and social disadvantages. As he said, that takes the wording from the Government’s own approach in another place and it would be very hard for the Government to argue against that.

I argued extensively in Committee about why economic growth as a target in its own right has failed and, indeed, is undeliverable, because you cannot have infinite growth on a finite planet. I will not go over those arguments again now, but I think it is very clear from the fact that we are back here again, after an extensive debate in Committee from all sides of your Lordships’ House, simply saying that the bank will work for regional and local growth. As was said in Committee, that could be regional and local growth in Chelsea and the wealthiest 10 wards in the whole country, which is surely not the purpose, and it therefore needs to be clarified in the Bill. As was said in our earlier debate when we were talking about the environment, we have seen acknowledgement of the need to change the Bill already. This is surely another crucial change.

I was pleased to attach my name to Amendment 12 in the name of the noble Lord, Lord Tunnicliffe, and backed by the noble Lord, Lord Ravensdale, and the noble Baroness, Lady Kramer. This is again putting levelling up in the Bill. It is what the Government say the Bill is for. Surely, it has to be specified in it.

[Baroness Kramer (LD)]

My Lords, I am going to be exceedingly brief because so much has been said which I support. I want to make a couple of comments on Amendment 12 in the name of the noble Lord, Lord Tunnicliffe, and others, that I have been pleased to sign. I want to make a point that I think has not been hit on. It is really important because it signals to those who put together projects and then turn to the investment bank and look for resources and funding that they are going to have to meet tests such as improving productivity and making sure that they are delivering well-paid jobs.

Putting that in the Bill would take it away from being a passive measure by which the bank looks at and decides whether to support projects and moves it into the active category. Those who are going out and investing will look closely at whether they are delivering against those various tests. There is so much that is good in the various amendments within this group—I very much support my colleague on Amendment 2—but I particularly wanted to underscore the message-signalling that is deeply inherent in Amendment 12.

--- Later in debate ---

[Baroness Bennett of Manor Castle (GP)]

My Lords, it was not my intention to speak on this group but, given that all the non-government speakers have been from the other side of the House, I felt I should offer an argument from this side of the House that is perhaps 180 degrees opposite to that presented by the noble Baroness, Lady Noakes, but, none the less, makes an argument for either Amendment 6 or Amendment 24.

The noble Baroness, Lady Noakes, suggested that she preferred private bankers to public bankers. Private bankers have been left to provide the direction for our economy and society over the past few decades and look where that has got us: we are having to talk from all sides of the House about the urgent need to level up and to tackle poverty, inequality, our climate emergency and the nature crisis. Therefore, we need to make sure that the bank is not crowding out private finance. If it is, it is spending money in the wrong places. It needs to be doing things that are innovative and different from what we have been doing up to now. That is why I encourage either the mover of Amendment 6 or those speaking to Amendment 24 to consider testing the opinion of House, and I offer them Green support.

[Baroness Kramer (LD)]

My Lords, my motivation here is somewhat different: I want to see the bank move along the risk spectrum. There is a temptation, due to the structure of the bank, for it to stay within the range of fairly safe investments. It has to produce a return and it has a very small risk capital base, but I would like it to maximise that to move along the risk spectrum. I see no other way to accelerate the innovative technologies that we need, or development in disadvantaged areas where people have typically turned their backs, unless the bank is willing to take on that much higher risk profile. The various additionality amendments seem to create that kind of pressure to move UKIB much further down the risk spectrum than it might otherwise feel comfortable in doing, meaning that it therefore does not maximise the opportunities in front of it.

Dormant Assets Bill [HL]

Debate between Baroness Kramer and Baroness Bennett of Manor Castle

Report stage
Tuesday 16th November 2021 Lords Chamber

[Baroness Kramer (LD)]

My Lords, this amendment was triggered by remarks made in Committee by the noble Baroness, Lady Barran, who was the very capable Minister then who was replaced by another very capable Minister. She was very open in response to a question that had been asked quite innocently. We wanted to put in an amendment in Committee a requirement to confirm that the dormant asset money would flow to charities or recognised and formalised social enterprises.

In her response, the noble Baroness said no, that the Government wanted to make sure that the money was also available to mission-focused for-profit companies. There was general shock around the Committee, as everyone talked about the Dormant Assets Bill as providing money to charity and social enterprises, and it sent me away to Google. Perhaps others in your Lordships’ House were far less naive than I, but there is a massive business growing in the social impact arena these days, which has become very attractive to the private sector.

To give your Lordships an idea of who is coming to play in this particular arena, I will refer to one of endless websites that contain copies of similar discussions: “Mainstream venture capital … funds”—we are talking about VC funds—

“are beginning to look for a new kind of unicorn—companies that will not only provide huge financial returns”—

we are talking here about 12% returns for modest venture capital, perhaps with earlier-stage money 20% returns—

“but also create huge social impact.”

It notes London and San Francisco as two of the leading hubs for these kinds of investments.

I have no argument with a venture capitalist who puts money into social good. That is absolutely fine as far as I am concerned. But I am very concerned if that entity is seeking grants from the dormant asset fund and turning that around to enhance the returns to its investor, who is expecting a return around the 12% to 20% mark. I can see why it is extremely attractive to the for-profit company; after all, it is very hard in most circumstances for social impact to generate returns of that extraordinary size. But if there is a very significant grant coming from the dormant asset fund, one can achieve those kinds of benchmarks easily. I do not think that is the purpose that was embedded in the original Bill or the purpose which most of us who are associated with this have in mind.

The amendment is not an attempt to exclude all for-profit companies, because I understand that there are some areas where they have been very useful, for example in teaching financial literacy. It is to make sure that they are not plucking extraordinary returns as a consequence of grants from the dormant assets fund. Charities and social enterprises seeking funds and grant money may indeed find that they have some excess over the particular project that they have been working with, but their whole constitutional structure requires them to make sure that money flows back into good causes. I do not want this to turn into an opportunity for that money to flow back to large-scale investors.

As we all know, the oversight process in the Dormant Assets Bill—we will talk about this on the very last amendment—is very weak, because in the original concept the end users were going to be charities and social enterprises that were under constraint and governance of various different kinds. Therefore, an additional level of scrutiny was not a matter of significant concern. With this big expansion, and with the purposes to which the fund can be applied being essentially in the gift of the Secretary of State, this becomes a major concern.

We are all concerned about money being spent inappropriately. Nothing would be more damning to this whole process than a major scandal in which we suddenly have a newspaper describing circumstances in which money from the dormant assets fund has gone to an investor seeking very large returns. This could compromise not just that particular project but the whole programme. Frankly, I do not think that is a principle that should be allowed to proceed in this Bill, which is why I have moved this amendment.

[Baroness Bennett of Manor Castle (GP)]

My Lords, I rise briefly to commend the noble Baroness, Lady Kramer, on her alertness in uncovering this issue, and to make a very simple comparison with something that has occupied a great deal of time in your Lordships’ House lately: the water companies, and what we have seen happen with them, with, very often, hedge fund owners involved, massive profits being taken out and massive loads of debt. This is a terribly important amendment. I regret not attaching my name to it. I certainly would have done had I been alerted to it earlier. This is terribly important, and I encourage the noble Baroness to keep pushing.

Financial Services Bill

Debate between Baroness Kramer and Baroness Bennett of Manor Castle

Report stage
Wednesday 24th March 2021 Lords Chamber

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

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

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

I note that the Minister said in Committee:

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


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

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

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


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

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

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

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

[Baroness Kramer (LD)]

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

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

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

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

Financial Services Bill

Debate between Baroness Kramer and Baroness Bennett of Manor Castle

Committee stage
Wednesday 10th March 2021 Grand Committee

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

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

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


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

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

[Baroness Kramer (LD)]

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

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

Financial Services Bill

Debate between Baroness Kramer and Baroness Bennett of Manor Castle

Committee stage & Committee: 1st sitting (Hansard) & Committee: 1st sitting (Hansard): House of Lords
Monday 22nd February 2021 Grand Committee

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

Apologies, my Lords, but I have sorted the problem out now. I speak briefly in support of Amendments 5, 73 and 95, in the names of the noble Baronesses, Lady Bowles, Lady Altmann and Lady Kramer. Although not a generalisation that is 100% true, the gender division of the people on various sides speaking on the Bill is interesting. It made me reflect back to the financial crash of 2007-08 and the role that the extreme gender imbalance in the financial sector was seen to have played within it.

When I thought to look at these issues about exploitation, unconscionable conduct, and legal protection against mis-selling, I went to the website moneysavingexpert.com. In a previous contribution, I referred to the role of such commentators who, using the power of public opinion, often seem to be a stronger check on the behaviour of the financial sector than the Government. But, of course, they are able to work only after the fact. Just looking down the list, we are talking about payment protection insurance, mis-sold ID fraud insurance, the mis-selling of package bank accounts and excessive charges on bank accounts—and that is just talking about individual consumers. A similar list would come up for small business. It is a long tale of woe that has caused a great deal of suffering and harm to individuals and small businesses, the operators of which have often put their whole heart and soul into the business.

What we seem to have now is a strategy of shutting the stable door sometime after the horse has bolted, and after a long delay for debate and inquiry. All three of these amendments are a very strong bolt that we should be sliding home now to protect consumers and small businesses from the overweening, immense power of the financial sector.

[Baroness Kramer (LD) [V]]

My goodness, this has moved fast. My Lords, let me start by addressing Amendment 95, because it is in my name. It would give SMEs the right to sue in respect of all regulated financial services, not just banking. It would—and this is an important example—entitle them to sue for breaches of the rules relating to insurance, otherwise known as COBS, in respect of business interruption insurance policies.

Another big practical implication relates to the cross-selling of regulated products or services as part of the add-ons to a loan. In the swaps mis-selling scandal—I believe my noble friend Lord Sharkey mentioned this in his earlier list, when talking about a duty of care—over 40,000 swaps were sold to SMEs. The banks had broken the regulatory requirements in over 90% of cases. It is almost impossible to imagine that having happened if the banks’ legal departments knew that the banks would be sued by their customers as a result.

None of the SMEs that have taken swaps cases all the way to court have won. Judges have repeatedly said that, had the customer been able to sue for breach of the COBS rules, that would have made all the difference. The evidence is there in Green & Rowley v RBS, Crestsign Ltd v NatWest, London Executive Aviation Ltd v RBS, and Fine Care Homes Ltd v NatWest. Those cases and the other swap cases that failed at trial show that—even where a judge is convinced that the customer did not understand the product they were buying and even where the bank salesperson knew that the customer was relying on them to explain the product—the common law fails to provide the customer with a remedy. I realise that the swaps scandal is, hopefully, in the past but, without the amendment proposed, there is nothing to stop banks from perpetrating similar behaviour in future.

My amendment addresses only part of the issue of the limitations of the regulatory perimeter, which both my noble friend Lady Bowles and the noble Baroness, Lady Bennett, have discussed, and it is why I support Amendments 5 and 73 in the name of my noble friend. I find it ridiculous that the regulatory perimeter treats small businesses as, in effect, akin to multinationals in their capacity to understand financial products and fight on an equal footing with big institutions.

My noble friend Lady Bowles has cited the case of RBS GRG. For those not familiar with this case, GRG was the turnaround unit of RBS. A number of firms were persuaded to allow themselves to go into the turnaround unit even though they were both viable and paying their loans on time; but RBS believed that under the terms of their loan agreement they were at risk because the value of their assets had declined, which created a covenant default. In a remarkable number of cases, those companies that were viable and paying on time were made bankrupt, their assets were stripped after having been assessed at very low market values and—surprise, surprise—the bank was able some time later to sell those assets for a much higher value, thereby generating profits. It was indeed not just a turnaround unit but a profit centre.

After great pressure from Vince Cable, the FCA initiated an investigation. It asked a group called Promontory to produce a two-stage report: one to look at the case and the other to make recommendations. However, after the first phase of the report was complete, the FCA explained that it could not publish it as it contained commercially sensitive information, and it therefore produced a summary. Miraculously, the original report made its way into the hands of the Treasury Select Committee. This, to me, is almost the worst part of the story: the summary that had been provided by the FCA and the report itself did not match. There was essentially a whitewash of the conclusions of Promontory. The FCA may have disagreed with the report that it received, but that would have been a very different declaration.

We have talked before about the senior management and certification regime; the FCA could have used that regime to try to deal with senior management who had been involved in this entire process, but it chose not to. That, I am afraid, is the history of the use of the senior management and certification regime. However, my noble friend Lady Bowles could equally well have cited the HBOS Reading fraud perpetrated between 2003 and 2007, which I mentioned earlier. Six bankers ended up in jail for that fraud, but we are now in 2021 and fair compensation has not yet been paid to the victims. This is now a Lloyds problem and has been for some time.

We have been through multiple reviews and are now awaiting the work of yet another review of compensation, the Foskett panel, which hopefully will make sure the compensation is appropriate—but, as I said, it is 2021. There have been issues; for example, a whistleblower who examined who knew what and when has been compensated twice by Lloyds for retaliation against her. There is currently a review by Dame Linda Dobbs into who in senior management knew or ought to have known what was going on.