Financial Services and Markets Bill

Baroness Noakes Excerpts

2nd reading
Tuesday 10th January 2023 Lords Chamber

[Baroness Noakes (Con)]

My Lords, I draw attention to my interests in the register, in particular that I hold shares in a number of listed financial services companies. This Bill could certainly have been bolder, and it needs to be improved, but it also has my broad support. I would like to touch on just four aspects of the Bill in the short amount of time we have been allowed.

First, the competitiveness and growth secondary objective is welcome, if overdue. We must never forget that, without a strong economy—and in the context of the UK that inevitably means a strong financial services sector—there will be nothing worth regulating. The financial crisis led to a series of risk-averse reforms and a decade of regulatory gold-plating. It is no coincidence that the last decade has been disappointing in economic terms. We need a period of rebalancing.

However, whatever we do in the Bill will come to nought unless the regulators themselves change. I fear that they will find ways to marginalise the new secondary objective. We need them to put the interests of the UK ahead of the comfort blanket of precautionary regulation and, if necessary, to stand against the consensus in international regulatory fora, however comfortable that seems. The PRA’s public statements to date on what it will do with the new secondary objective and the FCA’s radio silence on the subject do not give me any comfort that they get what is needed.

The Government were right to bring forward amendments in the other place to strengthen the regulators’ reporting arrangements to reinforce the new objective. We will need to explore that in Committee to see how it will work in practice, and I suspect that we will conclude that it will need more teeth.

My second point relates to the role of Parliament. I am glad that the Government have finally accepted that there is an important role for Parliament in holding the regulators to account alongside the transfer of huge new rule-making powers. Most of us argued strongly for that in the passage of the Financial Services Act 2021. My noble friend the Minister will not be surprised that I am disappointed that the role of your Lordships’ House is something of an afterthought in Clause 36. I promise her that I will return in Committee not only to the role of your Lordships’ House but to the narrow construct of the remit for Parliament in that clause.

My third point concerns getting rid of retained EU law. Chapter 1 of Part 1 of the Bill is very welcome. I fully accept that replacing retained EU law with something tailored to the circumstances of the UK is a large task, but the Bill needs the discipline of a deadline. The approach of the Retained EU Law (Revocation and Reform) Bill is what we should be seeking to replicate in this Bill.

My final point relates to access to cash, and I fear that I shall disappoint my noble friend Lord Holmes of Richmond, who will speak after me. I fully accept that cash remains important to many people, but the fact is that the use of cash is in permanent secular decline. UK Finance expects only 6% of transactions to be in cash form by 2031, down from around 15% now. The Bill imposes costs on all consumers to maintain access to cash for a decreasing proportion of the population. The Access to Cash Review estimated the cost of providing cash at around £5 billion per annum—to put that in context, that is roughly equivalent to 1p on the basic rate of tax. Trying to preserve cash in our society, as if it is part of our national heritage, is just crazy. The Bill goes too far.

I end with a plea for the Government to bring forward a consolidation of financial services legislation. Most of the Bill comprises yet more alterations to FSMA 2000, which is itself already heavily amended. If now is not the right time for consolidation, will my noble friend the Minister say when that time will come?