Financial Services Bill

Debate between Baroness Noakes and Lord Naseby

Committee stage
Monday 1st March 2021 Grand Committee

[Baroness Noakes (Con)]

My Lords, various amendments in this group address different aspects of small and medium-sized banks and other financial institutions, and I am not opposed to having more and different banks in the financial system. Indeed, anyone who has had a bad customer experience with one of the major banks, as I have in the past year, supports more competition and choice. However, I sound a note of caution: we have to be very careful not to send the regulators down a path that could lead to poorer outcomes for consumers.

I am always reminded of the history of building societies, the number of which has shrunk dramatically over the past 100 years or so. These were often small and regionally based, and the numbers have reduced for two main reasons. One reason for this was obviously the liberalisation measures which allowed a number of them to demutualise—one of the more recent trends—but, over time, the other reason was that these were small organisations which were often not managed particularly well and had insufficient financial resilience, and they often had to effectively sell themselves to other building societies in order to protect members when things went wrong.

Against that background, regional banks, as suggested in Amendment 126 in the name of my noble friend Lord Holmes of Richmond, are, in my view, unlikely to be a panacea. It is less than clear that the failure of a regional bank could easily be prevented in the current regulatory environment. I do not oppose the report that he suggests but I am a bit of a cynic when it comes to seeing that as a useful way forward.

I particularly want to speak to Amendment 91 in this group, in which the noble Baroness, Lady Kramer, has suggested restricting access to the term funding scheme if it is not then available for onlending to other banks and providers of finance. I accept that there may be an element of protectionism in the large banks that have access to the term funding scheme not wanting to share that advantage source of finance with other lending institutions. But the scheme suggested by the noble Baroness, Lady Kramer, would require the major banks to accept the credit risk of dealing with these smaller organisations without any ability to price for that risk. These organisations often struggle to raise equity capital, for good reason: they carry higher risk, they are often not profitable, and they do not all survive.

It seems to me that if the Government think it is a good idea to fund more lenders at preferential rates in order to fund the various lending schemes that have been introduced, they should instruct the Bank of England to vary its lending criteria for the term funding scheme. At the moment, it is restricted to those with access to the discount window facility. It would not take too much to get that changed, without trying to distort the lending decisions of the major banks. If the Bank of England were unwilling to assume that risk itself, it would be open to the Treasury to underwrite it for the Bank, without distorting the decisions made by the banks that do take term funding scheme finance.

[Lord Naseby (Con) [V]]

My Lords, I will speak to Amendments 29 and 126. Amendment 29 adds a hugely important new clause, clearly positioned by the mover, the noble Baroness, Lady Bowles, to whom I pay tribute.

By way of background, I have been involved in the mutual movement nearly all my life. My parents were active members of a co-operative. I bank with the Co-operative Bank. I have been politically involved since the days when I was leader of the London Borough of Islington, for some three years from 1968. I entered the Commons in 1974 and took an interest in debates from then onwards, becoming a non-executive director of the Tunbridge Wells Equitable Friendly Society in the 1980s. When I left the Commons in 1997, I became chairman of this society, the trading name of which was the Children’s Mutual. We built up a leading position for the child trust fund; to my deep regret, the Government of the day decided to end that fund. Finally, I had a Private Member’s Bill in your Lordships’ House, which became the Mutuals’ Deferred Shares Act 2015. So, I reckon to know a little bit about the mutual movement.

United Kingdom Internal Market Bill

Debate between Baroness Noakes and Lord Naseby

Report stage & Report: 3rd sitting (Hansard) & Report: 3rd sitting (Hansard): House of Lords
Wednesday 25th November 2020 Lords Chamber

[Baroness Noakes (Con)]

My Lords, I support the government amendments in this group, but I put my name down to speak in order to address the other amendments tabled by the noble Baroness, Lady Bowles of Berkhamsted. Like her, I am concerned about the heavy-handed penalties that could apply in respect of the CMA’s information powers under the Bill.

The CMA has extensive information powers under the Enterprise Act 2002, as the noble Baroness, Lady Bowles, explained, which are needed so that it can carry out its competition functions effectively, in particular in the face of companies or sectors that are resistant to one of the CMA studies. However, there has to be a serious question about the information powers put into the Bill in respect of the office for the internal market. It should be remembered there was no clear consultation on this during the summer, so the proposals have not had a lot of serious attention.

The OIM will of course be focused on the effectiveness of the internal market rather than the behaviour of companies or sectors. I understand that the OIM needs to build up a picture of intra-UK trade flows in order to understand the scope of what it is looking at, and it should have the ability to request that information. However, to back up that kind of information gathering with extensive penalties is not right. It stands in stark contrast with the Trade Bill, which sets up the possibility of requesting information from businesses in respect of international trade—but it is very clearly a request, with no compulsion. My noble friend Lord Grimstone of Boscobel confirmed that in Committee on the Trade Bill.

The office for the internal market may well want to gather information from the devolved Administrations or regulatory bodies within the devolved territories. For example, it could be looking at whether particular provisions have a detrimental effect. That sort of information gathering is largely within the public sector, and the enforcement provisions in Clauses 39 and 40 do not make sense in that context.

Can the Minister say who the “persons” in Clause 39, whom the Government expect to be served with a penalty notice, are? Could one of them be, for example, the First Minister in Scotland, or one of her Ministers? If not, why not? I suspect that the serious information that may need to be extracted at some stage will come from the devolved Administrations. Why should businesses, which will be the victims of any abuses of the internal market, be treated in the way envisaged in the Bill?

So I support the noble Baroness, Lady Bowles, in particular in her Amendment 62A to try to shield small companies from these powers. I listened carefully to what the Minister said in his introductory remarks, which were very helpful, but I remain concerned that the CMA will use inappropriately the powers given to it by the Bill. There are no safeguards against that, so I hope that my noble friend will take this away for further discussions between Report and Third Reading.

[Lord Naseby (Con)]

My Lords, I should declare an interest in that I have a partnership with my wife to look after 40 acres of woodland in Bedfordshire. I thank my noble friend on the Front Bench. I have worked on a great number of Bills in this and the other place, and it is good that when we discuss things in depth, right across the Chamber, problems are raised and the Minister listens. I welcome enormously Amendments 62 and 63.

However, I share the concerns of some other noble Lords about the implications of Amendment 62A. It raises questions that ought to be considered—although I am not in a position to repeat what my noble friend Lady Noakes said. I hope that the Minister has listened to the concerns expressed from both sides of the Chamber and will find a means of ensuring that what might be very unusual cannot happen. I am sure that my noble friend on the Front Bench is listening. Some consideration should be given to including Amendment 62A, or something comparable, in the Bill.

United Kingdom Internal Market Bill

Debate between Baroness Noakes and Lord Naseby

Report stage & Report: 2nd sitting (Hansard) & Report: 2nd sitting (Hansard): House of Lords
Monday 23rd November 2020 Lords Chamber

[Baroness Noakes (Con)]

My Lords, I am glad that my noble friend Lady Neville-Rolfe’s Amendment 30 is only a probing amendment. I very strongly believe that the UK’s internal market will be more robust as a result of this Bill and that it needs to cover all aspects of trade and professional activity occurring between the four parts of the United Kingdom.

However, like my noble friend, I have been struggling to work out just how important Part 2 is to businesses throughout the UK at the moment, and I also understand that there is relatively little current data on trade in services across the four nations. Given the exemptions that will apply to Part 2, the Government presumably do not think that the Bill will have very much real-world impact, at least in the short to medium term. I can see that it may be necessary to protect service providers in the future, if one or more of the devolved nations chooses to make it difficult for out-of-nation services providers, and, to that extent, I can see why we may well need Part 2 of this Bill. It would be good to hear from the Minister what he sees as the biggest problems that this Bill is trying to tackle.

[Lord Naseby (Con)]

My Lords, I think the House should be very grateful to my noble friend for putting this probing amendment down. All of us who have worked in the services industry, as I did before going to the other place, understand it very well. However, despite this, it is very difficult to comply with this part of the Bill.

The underlying problems I have are that, first, the services industry is a real growth market for the UK and shows every sign of continuing to be so. We must be very careful not to undermine it. I note my noble friend’s mention of consultation, which I am a great believer in; I have probably spoken about it on more amendments than anybody else. At any rate, consultation of only one month is not acceptable in any industry, particularly not at this crucial point.

I have two technical questions, having read and thought about this. First, what happens to those service industries that have no regulator, which would be a fair number of them? Sometimes they are in a licensed area, and sometimes they are not in any particular area, so it is not clear to me what happens to them. Secondly, will the register, when it appears, automatically approve every existing business in the services industry and transfer them across? If not, is there to be an appeal mechanism? Again, I ask these questions on a probing basis and look forward to my noble friend giving us some guidance.