Financial Services and Markets Bill [HL]

Debate between Lord Davies of Brixton and Lord Holmes of Richmond

Committee stage
Wednesday 8th July 2026 Grand Committee

[Lord Davies of Brixton (Lab)]

I cannot but support the desire for greater public understanding of financial matters. The noble Baroness, Lady Neville-Rolfe, and the noble Lord, Lord Holmes of Richmond, have made a powerful case for better understanding, but I am not convinced that they have made the case for it to be focused in the way that they have set out in their amendments, so I look forward to the response from my noble friend the Minister. I want to make two points about these amendments.

The first is that better understanding is not a magic trick. We can be in favour of it but we must never overstate what it can achieve. It certainly does not weaken the case for effective regulation or remove the need for it at all. We need to be clear about that because, sometimes, when the issue is discussed there is a slight—or sometimes more than a slight, perhaps an overt—suggestion that that is what it would achieve.

It is worth my quoting a bit from the interim report from the Second Pensions Commission, which is obviously about pensions but gets to the heart of the matter. It says in its report:

“As with the principles underlying automatic enrolment, the pensions system needs to work in the interests of savers as they enter retirement and protect those who do not, or cannot, engage”.


That is the bottom line: whether people choose to take education or are capable of taking it, they are still entitled to first-class financial services. I am sure everyone here would agree with that, but sometimes it is not front and centre to the way that people think about it.

[Lord Holmes of Richmond (Con)]

Just to be clear, is the noble Lord suggesting that in anything that I have set out—I will not speak for my colleagues—financial education and financial capability would then be used to weaken and have lesser regulation? I do not believe that that is what I said.

[Lord Davies of Brixton (Lab)]

No, I am not for one moment suggesting that. I am saying that, in other discussions, I have heard it said explicitly or by implication. It is a danger and, given what we are trying to achieve, it is one that we should recognise and take account of.

My second point is that both amendments refer to the FCA. The first amendment, from the noble Baroness, Lady Neville-Rolfe, specifically refers to pensions. Let us be clear: the FCA knows little or nothing about pensions. It is the wrong body to undertake any form of public information about pensions. I have heard the discussion on the regulation of pensions and people asking, “Why do we have two regulators?” Well, we do have two: one is the Pensions Regulator and the other is the FCA, but the FCA’s involvement is narrow and we should understand that it is dying. It is going because personal pensions are dead, and the FCA will have little or nothing to do with pensions in the future. The life companies have not quite realised this yet—they are fighting against it—but history will remove them from this market.

Clearly, pensions do not fall within the ambit of the FCA for these purposes. It can provide information about life insurance products and annuities, but those are not pensions. The word “pensions” is wrong in Amendment 167.

Financial Services and Markets Bill [HL]

Debate between Lord Davies of Brixton and Lord Holmes of Richmond

Committee stage
Monday 29th June 2026 Grand Committee

[Lord Holmes of Richmond (Con)]

My Lords, it is a pleasure to follow the noble Baroness, Lady Tyler. I had the equal pleasure of serving alongside her during her excellent chairing of the Financial Exclusion Committee.

As the noble Baroness rightly identified, since we published our report, financial exclusion—or a lack of financial inclusion—has persisted. She rightly identified the Government’s financial inclusion strategy. There are a number of good things in it, but I ask the Minister: why was it so light on the potential role that fintech, as well as broader technologies, could play in addressing some of the elements of financial exclusion? It was largely silent on those issues.

I shall speak to Amendment 104 and all the other amendments in my name in this group. Similarly, I suggest having a financial inclusion objective and detailed reporting requirements therein. We have the Financial Inclusion Commission, which has some excellent members, but financial exclusion persists.

It is right to have our financial services regulator further empowered to be the lightning rod and the focus for this whole question of financial inclusion. To talk about the principles again, the Government are keen on growth, but financial inclusion does not run counter to that growth or the international competitiveness objective. Financial inclusion is essential to it: enabling people to have financial services and be financially included is likely to increase digital inclusion and social inclusion, as employees become self-employed and the employed become economically active. I ask the Minister: are these things—enabling and empowering financial inclusion—not what any Government should be about?

I suggest a financial inclusion unit for the FCA, so that it can be a powerhouse for innovation and research and a real regulator and driving force for financial inclusion. When the Minister comes to respond, can he identify how financial inclusion has changed in the almost two years of the current Government? Is it not time for greater focus and effort on this most significant of issues?

In many ways, the most significant issue when it comes to financial services is enabling and, in reality, empowering everybody to have a fair go, and to become active and enabled in our economy and our society. Amendment 161 builds on this, but in the specific context of broadening data-sharing requirements—always on a consenting and empowering basis—to look again at what we can do with new technologies. Let us look at other sources of data such as rental history, which can be so helpful in enabling financial inclusion—but currently are far from happening, never mind becoming the norm—to support those millions of individuals. Where is innovation when it comes to financial inclusion? Does the Minister not agree that these amendments would enable the Government to have a human lead on these technologies, with a far greater chance of much greater financial inclusion for all citizens?

My final amendment goes to KYC, or what passes for it. In many ways, you can see this within financial inclusion, where all too often, in whichever context one considers it, “know your customer” means almost completely the reverse or nothing of the sort. Does the Minister not agree that it is time to look again to innovation and the technologies that can be deployed to give us effective KYC and AML? Or does he believe that, because one is able to put a gas bill in paper form in front of a financial services business, it shows just what an upstanding citizen you must be and gives all that is required on KYC and AML? It is so gravely in need of transformation. We have the tools and technologies to achieve this, which would also add to significant financial inclusion. I look forward to the Minister’s response.

[Lord Davies of Brixton (Lab)]

This is an important and interesting debate. I want to draw attention to and base my remarks on Amendment 95, which refers specifically to the poverty premium in insurance. This is a theme that runs across financial services. It perhaps does not get the attention it deserves, because one of the main reasons for financial exclusion is of course poverty, and poverty is clearly an issue where the Government have a clear and central responsibility.

In practice, the approach taken by the FCA has been to use the obligation for the consumer duty as the primary vehicle for dealing with the poverty premium. The FCA has directly linked the consumer duty to the poverty premium, with the argument that firms are required to deliver good outcomes for retail customers and ensure that products and services offer fair value. The FCA has not itself specifically tackled the poverty premium head on; in effect it has passed the responsibility to providers.

The most obvious manifestation of the poverty premium arises with premium finance, whereby people have to pay premiums by instalments over the year instead of paying a lump sum at the beginning of the year. The terms on which they are financed have been open to significant criticism. People think they are paying the contributions monthly but, in practice, someone lends them the money to pay the initial contribution and they repay that loan over the year. There is a widespread lack of understanding that, in fact, they have two contracts: the insurance contract and the loan contract. The terms of that loan contract have been called into question. Figures from the FCA suggest that about four-fifths of customers in financial difficulty use premium finance and that, in 2024, 60% of motor insurance customers and 41% of home insurance customers paid by instalments because they could not afford to pay annually. There is probably a series of people who fail to do the sums and just pay monthly because that looks easier.

The FCA has found that the cost of premium finance has fallen since 2022, and made it clear to firms that they are under a clear requirement to ensure that fair value is offered. There is a technical problem here in that, as well as the financial issues, with some forms of insurance there is an underwriting issue. It is possible to argue that someone who pays monthly is not in the same underwriting position as someone who pays yearly. It is very difficult to pin down that aspect of the issue. The FCA accepts that this poverty premium exists and believes that some of the premium finance provides a poor product. It has accepted that

“financial regulation cannot tackle financial exclusion or the related ‘poverty premium’ alone. We must work together across government, regulators, industry and consumer groups”

to deal with it.

The Financial Inclusion Strategy published in November refers to the issue, and we now have the FCA’s 2026 insurance priorities, which include expanding access to insurance as a central priority and emphasise the importance of helping vulnerable groups. However, the campaigning group Fair by Design has argued that the FCA is not doing enough to deal with these issues. It points out that the FCA has said that it has the tools to deal with this but, in practice, is just leaving it to the individual companies to act responsibly.

Financial Services and Markets Bill

Debate between Lord Davies of Brixton and Lord Holmes of Richmond

Report stage
Thursday 8th June 2023 Lords Chamber

[Lord Holmes of Richmond (Con)]

My Lords, there are currently quite a few difficulties with the UK economy, but one that seldom gets the focus, attention and commentary that it requires is the lack of financial inclusion for so many people right across the United Kingdom. At its extreme, it is best summed up as: those who have the least are often forced to pay the most for financial services and products. However, it is a question not just for individuals but for micro and small businesses, which can find themselves effectively financially excluded.

Amendment 13 simply seeks to introduce a secondary objective for the FCA on financial inclusion. It would not in any sense fetter any of the other objectives, not least the primary objectives. It could operate effectively and efficiently within that current stream of objectives for the regulator.

Without in any sense seeking to pre-empt my noble friend when she comes to wind up, I think that she may well say that it is not the right approach to introduce a new objective for the financial service regulators without first undertaking a significant and serious consultation. That is a fair point. If she is unable to accept my Amendment 13, would she agree to take away the opportunity and possibility to launch the consultation into a secondary objective for our financial service regulators on financial inclusion? I beg to move.

[Lord Davies of Brixton (Lab)]

My Lords, my Amendment 14 proposes a new clause to the objectives, adding the principle of protecting the mental health of consumers. I set this out at some length in Committee, and I think it is worth repeating the point. I should perhaps say at the beginning that I support the other two amendments, although I prefer the one from my Front Bench. I would like to see an explicit statement that the concept of financial inclusion extends to people who have problems dealing with financial services because of problems with their mental health.

Financial services have to understand and recognise the nature and scale of the mental health problems faced by some people. They need to be placed under an explicit duty of care to their customers who suffer from these problems, and they should be required to take explicit additional steps to minimise the potential difficulties faced by those who have or are at risk of having mental health problems associated with their finances.

I am sure that all noble Lords accept the principle that financial regulation should pay regard to the problems faced by people who have problems with mental health. It goes almost without saying. The issue is not about the principle but about whether it should be referred to explicitly in this bit of the legislation. I think that it should, but I am willing to take small mercies if the Minister can make clear the explicit and implicit responsibilities on the regulators to undertake to provide this sort of support and explanation for people who have mental health problems.

The experience works both ways: financial problems lead to mental health problems, and people with mental health problems have difficulty in handling their finances. That is an established fact. I ask for general support for the principle and an indication that, one way or another, the legislation will provide these people with the support they require.