Financial Services and Markets Bill [HL]

Baroness Scott of Needham Market Excerpts

Committee stage
Monday 29th June 2026 Grand Committee

Debate on whether Clause 17 should stand part of the Bill.

[Baroness Scott of Needham Market (LD)]

I remind the Committee that when a group is led by a clause stand part debate, after the noble Baroness, Lady Bowles, has spoken, there is no second intervention from me at that point.

[Baroness Bowles of Berkhamsted (LD)]

My Lords, oppose Clause 17 standing part of the Bill. Before turning to the detail, I will explain how Clauses 16, 17 and 18 fit together. They are not independent clauses. They operate as a single, interlocking structural package—an unholy trinity. Clause 16, which we have already debated, starts the move of day-to-day statutory principles out of operational decision-making and into a five-year strategy document. Clause 17 is the moment where it cuts. It removes the operational duty to apply the principles and the duty to explain how they have been applied. The principles remain in the abstract, but the visibility of their application disappears. Clause 18 then seals the trio by removing the remaining statutory mechanisms through which Parliament once saw how those principles were applied.

I said in Committee last week that deregulation of regulators inherently increases the regulation of markets. A regulator’s default setting is caution, not proportionality. That is precisely why Nikhil Rathi asked Parliament for political cover to take on more risk, because he knows that the system will not shift itself.

However, removing the operational “have regards” does not reduce that institutional caution. It simply removes the focus that keeps it directed at the right things. It removes accountability and removes Parliament from the role or possibility of providing support or cover with its eyes open, a direction of travel that Clause 18 then completes. The result is that Parliament loses operational visibility at the very moment when regulators are being asked to take on more risk. This is the context in which Clause 17 must be understood.

By deleting the principles from their operational position, the Government remove the statutory reporting loop. That deletes the audit trail that allows us to test what the regulators have done and why. Crucially, it also removes the only lever of accountability we have. We do not possess direction powers or hold budgetary levers. We do not have judicial review that bites on the substance of expert rules. All Parliament has is the ability to see, to question and, ultimately, to embarrass. An embarrassment card is a fragile card, but it is the final line of democratic accountability in the UK’s financial regulatory system. Clause 17 strips even that card from our hands. This is not simplification. It is a cultural turnabout that systematically switches off operational accountability.

Parliament is not trying to run the regulators. Our role is that of a critical friend: the only body that can speak openly what industry dares not, and test whether the principles that Parliament set are being applied in practice. Under the current framework, regulators must have regard to statutory principles in consultations, rules and supervision. Have they done this perfectly? No. They adopted a tick-box matrix that has become tedious and uninformative, but nothing prevents them shifting to thematic reporting, highlighting where specific principles matter most. Where the system has fallen down most is on the supervisory side, with an explosion of excess communications, overbearing information requests and a proliferation of Section 166 investigations.

Explanations around the “have regards” are the audit trail of how Parliament understands how a regulator weighed proportionality, firm size and sustainability of growth, or where climate change held relevance. A thoughtful narrative is far more informative than a boilerplate matrix, yet Clause 17 removes all requirements to explain or to show the rationale. In its place, the principles are relocated to a five-year strategy document that cannot be specific or enforced by the courts, and cannot be used to test an individual rule or a heavy-handed supervisory decision. This is not simplification; it is opacity. I pose the question: is the role of Parliament wanted?

At the Treasury Committee on 24 March 2026, the FCA’s CEO, Mr Nikhil Rathi, was asked how the system would handle the blistering speed of financial innovation. His answer was striking. He said:

“That is why I asked for a risk appetite from the Government and Ministers and Parliament so that we all know … what guardrails we are operating within, with appropriate democratic input and oversight”.


He also told the committee during the Sexism in the City inquiry that if the FCA were to set thresholds below that which Parliament had established in employment law, it would need a degree of political cover and agreement through Parliament. This is two sides of the same coin. The FCA is actively asking Parliament for guardrails, oversight, democratic accountability and cover because it is being pushed to accept more risk, and with more risk comes more failure or challenge.

However, Parliament cannot share responsibility if we are blinded from seeing how the principles are applied, and we cannot endorse greater risk-taking if we are denied information on where those choices bite in practice. When scandals happen, what angers Parliament most is when the writing was on the wall for a long time. Woodford funds is a textbook example, and London Capital and Finance is another.

The Minister may point to strategies, outcomes reporting, cost-benefit panels and annual reports, but the FCA itself has conceded that these are visibility tools, not accountability tools. Reports describe outcomes after the event, long after the harm has occurred. A strategy document can say all the right, glossy things, while the actual rules produce disastrous outcomes. We have seen before how FCA high-level assurance, even on specific cases, can look immaculate, while operational reality goes badly wrong. We saw that with British Steel pensions, with motor finance and with Woodford. Clause 17 remains the only operational hook that Parliament has to test whether the principles guided the procedure.

Last week, the Minister indicated that perhaps proportionality would be restored. If so, that is welcome, but a verbal concession is not an amendment and patching one leak does not fix a broken hull. If proportionality cannot be functional in a five-year strategy document, how can other principles survive, exiled there? Clause 17 still deletes the operational requirement that regulators must consider the desirability of sustainable growth. Removing this is nonsensical. The Government cannot possibly want unsustainable growth—growth that does not last.

Let us not forget the legal hierarchy. The secondary objective of competitiveness and growth sits higher up the statutory ladder. Precisely because that objective sits higher, there is all the more need to keep the sustainable growth consideration anchored in the operational functions. Right now, we see a political dash to deploy capital productively. If we encourage a reckless sprint when the underlying assets are not yet created, we are building not prosperity but a bubble, creating systemic fragility. So, restoring proportionality but deleting sustainable growth from sight collapses the government logic. It says that an audit trail for a firm’s compliance cost matters but an audit trail for long-term stability of the economy does not.

The consultation spoke about rationalising the number of “have regards”. It did not propose removing them from rule-making. It did not propose isolating them in a five-year strategy. It did not propose weakening the basis on which the courts can test whether regulators have properly considered Parliament’s intent. It did not analyse the interaction with the secondary competitiveness objective. When the Government consult on one minor administrative tweak but legislate for a far-reaching structural overhaul, that raises serious questions of fairness and due process.

I can see what the Government thought they were doing here. They believed that, by removing the operational “have regards”, they would free the regulators from excessive caution and allow the system to move more quickly. But, in practice, this clause disturbs the balance in a way that the Government have not accounted for. It removes not the caution but the focus and visibility that allow Parliament to understand how risk is being taken, to understand where it is being borne and to play its part in the structural balance of the system, which includes giving cover to the regulators when appropriate. That is the constitutional gap at the heart of this clause and why it represents not a simplification but a weakening of the framework of accountability on which our financial regulatory system depends.

This clause, along with Clause 18, has a serious impact on parliamentary scrutiny, as has been raised by the noble Baroness, Lady Noakes—so I will not go further into that. But these things collectively are why I oppose that Clause 17 stands part.

Employment Rights Bill

Baroness Scott of Needham Market Excerpts

Committee stage
Thursday 5th June 2025 Lords Chamber

I apologise for taking so long, but I now beg to move.

[The Deputy Chairman of Committees (Baroness Scott of Needham Market) (LD)]

I must inform the Committee that, if Amendment 152 is agreed to, I will not be able to call Amendments 153 and 154 by reason of pre-emption.

[Baroness Jones of Moulsecoomb (GP)]

My Lords, it is a pleasure to support the noble Lord, Lord Hendy. I have put my name to only two of the amendments in this group, Amendments 154 and 164. Quite honestly, it took a lot of time and energy to read through all of his amendments; it must have taken an astonishing amount of time to write them all, so I am in awe of the work that the noble Lord has put into this Bill.

I was slightly nervous about the noble Lord’s mention of growth. I would like to know more about that later, perhaps, because growth obviously has to be of the right kind.

For me, collective bargaining is a way of making the world of work fairer. There are those who are vulnerable or not as talented who cannot argue for themselves, so they need support to do that. In a healthy economy, there is no place for poverty or for ultra-low wages, where people cannot pay their bills, feed their children or buy new shoes if they need them. It is incredibly important that people have a good wage.

My noble friend Lady Bennett of Manor Castle tabled an amendment to be discussed later in Committee for a 10:1 pay scale, such that you can pay your senior managers or CEO whatever you like, but you have to pay at least 1/10th of that amount to your cleaners, doormen or catering staff. The idea is that everybody needs a proper wage and, honestly, what would rich people do with even more money? They usually plough it not into the economy but into yachts and things like that.

I support almost every one of these amendments, and I am sorry that I have signed up to only two, but this is an incredibly important area. I hope the Government are able to shift a little on this and take advice from a very well-known lawyer who knows what he is talking about. We all want a fair world, and this is part of actually developing it.