Financial Services and Markets Bill

Baroness Laing of Elderslie Excerpts

Consideration of Lords message
Monday 26th June 2023 Commons Chamber

Consideration of Lords amendments.

[Madam Deputy Speaker (Dame Eleanor Laing)]

I must draw the House’s attention to the fact that financial privilege is engaged by Lords amendment 35. If Lords amendment 35 is agreed to, I will cause the customary entry waiving Commons financial privilege to be entered in the Journal.

Clause 25

Regulatory principles: Net Zero emissions target

[The Economic Secretary to the Treasury (Andrew Griffith)]

I beg to move, That this House disagrees with Lords amendment 7.

[Madam Deputy Speaker (Dame Eleanor Laing)]

With this it will be convenient to discuss:

Government amendments (a) to (c) in lieu of Lords amendment 7.

Lords amendment 10, and Government motion to disagree.

Lords amendment 36, Government motion to disagree, and Government amendment (a) in lieu of Lords amendment 36.

Lords amendments 1 to 6, 8, 9, 11 to 35 and 37 to 86.

[Andrew Griffith]

I am delighted to speak again to the Bill, following its passage through the other place. I thank my colleagues, Baroness Penn and Lord Harlech, for their expert stewardship of the Bill, as well as the Opposition spokespeople for their generally constructive tone.

Hon. and right hon. Members will be aware that the Bill is a crucial next step in delivering the Government’s vision of an open, sustainable and technologically advanced financial services sector. Members will also recall that this sector is one of the crown jewels of our economy, generating 12% of the UK’s economic activity and employing 2.5 million people in financial and related professional services. Few constituencies will be untouched by those jobs and economic benefits. For example, Scotland benefits from £13.9 billion of gross value added and an estimated 136,000 jobs.

The Bill seizes the opportunities of Brexit, tailoring financial services regulation to UK markets to bolster the competitiveness of the UK as a global financial centre and deliver better outcomes for consumers and businesses.

The Bill repeals hundreds of pieces of retained EU law relating to financial services and gives the regulators significant new rule-making responsibilities. These increased responsibilities must be balanced with clear accountability, appropriate democratic input, and transparent oversight. There has been much debate in this House and in the other place about how to get that balance right. As a result of the considered scrutiny, the Government introduced a number of amendments in the Lords that improved the Bill in this regard.

Lords amendments 32 to 34 require the regulators to set out how they have considered representations from Parliament when publishing their final rules. Lords amendments introduced by the Government require the regulators to report annually on their recruitment to the statutory panels, including the new cost-benefit analysis panels created by the Bill. The amendments also require the Financial Conduct Authority and the Prudential Regulation Authority to appoint at least two members of authorised firms to their CBA panels. This will ensure that their work is informed by practical experience of how regulatory requirements impact on firms. My hon. Friends the Members for North East Bedfordshire (Richard Fuller), for North Warwickshire (Craig Tracey) and for Wimbledon (Stephen Hammond) may recognise that amendment and I thank them for their efforts to ensure that the Bill delivers proper accountability.

Amendments from the Government also provide a power from the Treasury to require statutory panels to produce annual reports. The Treasury intends to use this power in the first instance to direct the publication of annual reports by the CBA panels and the FCA consumer panel. I hope the hon. Member for Blaenau Gwent (Nick Smith) will welcome this as he tabled a similar amendment on Report.

Lords amendment 37 will enhance the role of the Financial Regulators Complaints Commission, which is an important mechanism for raising concerns about how the FCA, the PRA and the Bank of England carry out their functions. The amendment requires the Treasury, rather than the regulators themselves, to appoint the complaints commissioner, significantly strengthening the independence of the role.

In response to a debate in this House, the Government amended the Bill to introduce a power in clause 37 for the Treasury to direct the regulators to report on various performance metrics. On 9 May, I published a call for proposals, seeking views on what additional metrics the regulators should publish to support scrutiny of their work, focused on embedding their new secondary growth and competitiveness objectives. We have already had a number of helpful responses and we will come forward with proposals at pace following the expiry of the deadline next week. To further support that, Lords amendment 6 requires the FCA and the PRA to publish two reports on how they have embedded those new objectives within 12 and 24 months of the objectives coming into force. Taken together, these are a significant package of improvements to hold the regulators to account.

I know that access to cash is an issue of huge importance to many Members on both sides of the House. Representing the rural constituency of Arundel and South Downs, where the constituents are older than the UK average, this has always been at the forefront of my mind during the passage of the Bill. I also pay tribute to the campaigning work done by the Daily Mail and the Daily Telegraph on behalf of their readers as well as by groups such as Age UK and the Royal National Institute of Blind People.

Let me be clear: the Government’s position is that cash is here to stay for the long term. It provides a reliable back-up to digital payments, can be more convenient in some circumstances, and many, particularly the vulnerable, rely on cash as a means to manage their finances. The Bill already takes significant steps forward in protecting the ability of people and businesses across the UK to access cash deposit and withdrawal facilities for the first time in UK law. I am pleased to report that we have gone even further and introduced Lords amendments 72 to 77, which will protect people’s ability to withdraw and deposit cash for free. The amendments will require the FCA to seek to ensure reasonable provision of free cash access services for current accounts of personal customers. This will be informed by regard to a Government policy statement, which I expect to publish no later than the end of September.

Many Members are concerned about the separate issue of face-to-face banking. The FCA already has guidance to firms around the closure of bank branches and I hope that they and the industry will listen to the concerns of Members on behalf of their constituents on that issue.

Many Members across the House will have experienced the disproportionate application of rules requiring enhanced due diligence for politically exposed persons— PEPs. They and their families should not face some of the challenges and behaviours by banks that I have heard about. The Government are taking action to ensure that PEPs are treated in a proportionate manner. Lords amendment 38 requires the Treasury to amend the money laundering regulations to explicitly distinguish between domestic and foreign PEPs in law.

--- Later in debate ---

Finally, I want to raise the issue of politically exposed persons, which I am glad the Bill is addressing. There are enough drawbacks to taking on a life of public service without them being added to by finding that our adult children—as is the case with my kids—struggle to open a bank account on the grounds of having a mother who is in politics. That really is not fair. The Government need to do everything possible to ensure that the very real need to protect politically exposed persons does not extend to their offspring, who have got absolutely nothing to do with it. Overall, I think this is an excellent Bill, and I look forward to supporting the Government.

[Madam Deputy Speaker (Dame Eleanor Laing)]

I call the SNP spokesman.

[Peter Grant]

As has been said throughout the passage of the Bill, our chief concern has always been that too many provisions in it do not go far enough. I am pleased to say that the other place has tightened up some aspects of the Bill. It is disappointing that this evening the Government seem determined to oppose some amendments that could have addressed more of our concerns and, in at least one case, seem determined to make an amendment that makes things even worse.

In the interests of brevity, I will not go through all the Lords amendments that the Government are happy to accept; I ask Members to take those as read. The first Government proposal that I have some concern about is their motion to disagree with Lords amendment 7. I appreciate that they have tabled alternative amendments, which they might think say pretty much the same thing or better, but Lords amendment 7 explicitly refers to targets set by any of the UK’s national Parliaments. They are not mentioned anywhere in the Government’s amendment (a) in lieu. I hope the Minister can explain why the Government are opposed to giving targets set by the devolved nations of this Union of equals the same status as those set in this place, because some of those targets and activities will relate to responsibilities that are explicitly devolved to one or more of the other nations of the United Kingdom. It does not seem very equal that some Parliaments can have their targets effectively regulated and others cannot.

I do not have any issue with Government amendments (b) and (c) in lieu of Lords amendment 7, although it seems strange that they have been tabled as alternatives, because they are entirely compatible with it. In fact, the Government could quite easily have tabled them in the Lords at the time.

As was said by the Opposition spokesperson, the hon. Member for Hampstead and Kilburn (Tulip Siddiq), Lords amendment 10 is a good amendment. I do not understand why the Government want to take it out. Are they against financial inclusion? If they think that financial inclusion is a good idea but that this amendment is not best way to pursue it, I would remind them that they have had months to come up with a better amendment. “Take it back, don’t agree it just now, and we promise to bring something back in the near future.” However, we have been promised effective measures on financial inclusion since before I was a Member of this place, but it has not happened yet, and the problem is getting worse all the time.

To answer the right hon. Member for South Northamptonshire (Dame Andrea Leadsom), it is all very well for the Government to find ways to make post offices the last bank in town, but they are being shut left, right and centre as well, so there is no long-term protection for access to cash, especially in our poorest and most deprived communities, of which I represent more than my fair share. It is no comfort to them to be told, “The bank has closed, but you can use the post office,” if, as I have seen happen literally at the same time, the Post Office is saying, “We’re going shut the post office, but you can still use the bank.” That does not give any protection or comfort whatsoever.

Lords Amendment 36, on illegal deforestation and so on, is also a good amendment that we would have supported. We are willing to accept the Government alternative as an improvement in some regards. The biggest concern we have—it is one on which we would very much want the opportunity to give the House the chance to express its will this evening—is about one of the crazy ways in which this place deals with things, especially once legislation has been back and forth between here and the Lords. If this House wanted to disagree with Lords amendment 38, as I think quite a few of us will, we will not be allowed to do that unless the debate finishes within three hours. The ability of the democratically elected House of Commons to scrutinise and perhaps overturn a decision taken by the undemocratic, unelected House of Lords along the corridor therefore depends on how many people want to speak, how long they want to speak for, and how fast they want to talk.

Lords amendment 38 is about politically exposed persons and the way they are risk-assessed in relation to money laundering. It makes a very broad assumption about the amount of due diligence that needs to be exercised to prevent money laundering in the case of a politically exposed person from the UK—someone who, in the words of the amendment, is

“entrusted with prominent public functions by the United Kingdom”.

The assumption is that they are always less of a potential money laundering risk, as are their family and “close associates”, whatever that means. That is far too broad and sweeping an assumption.

I do not have an issue with any regulation being worded in a way that is proportionate to the risk, and I can understand the attraction of being able to designate some individuals as less of a risk than others, but this exemption is far too sweeping. What do we mean by “entrusted with prominent public functions”? As we all know, we have had very recent examples of people who were entrusted with the most prominent public function of all—the office of Prime Minister—turning out to be totally untrustworthy. How do we define a “close associate”? Would, for example, Evgeny Lebedev have been regarded as low risk simply because he could accurately have been described as a close associate of the then Prime Minister, who himself has turned out, as the House now agrees, to have been untrustworthy? When is a close associate not a close associate?