Financial Services and Markets Bill

Lord Holmes of Richmond Excerpts

2nd reading
Tuesday 10th January 2023 Lords Chamber

[Lord Holmes of Richmond (Con)]

My Lords, it is a pleasure to take part in this Second Reading debate and to follow my noble friend Lady Noakes, about whose points I will say more in a moment. I congratulate the two maiden speakers from whom we have heard. I am very much looking forward to my noble friend Lady Lawlor’s maiden speech; I will not detain her much longer. I also congratulate my noble friend the Minister on the eloquence and erudition she showed in introducing the Bill. I declare my interests in the register, particularly those pertaining to fintech advisory work.

I will focus on two areas: financial inclusion and the regulator, mainly because nobody has mentioned the latter yet. Financial inclusion matters not just for those who find themselves on the wrong side of it. If we can drive financial inclusion, there are not just economic but social and national benefits for each and every one of us. That is why I am pleased to see the access to cash clauses in the Bill. It is important because cash still matters; it matters materially to millions. Looking at the reasonableness terms in the Bill, can my noble friend the Minister say what factors will be taken into account when we look at reasonable access to cash? It is a question of both distance—whether that distance is covered by public transport links— and cost. There are many factors to be considered, and I would welcome more detail on that in her wind-up speech.

As many other noble Lords have commented, access to cash is but one part of this. If there is no acceptance of cash, what currency does cash have if there is no place to spend it? In Committee, it is incredibly important that we look at the whole question of acceptance: which businesses are included; what size they are; what line of business they are in; and business clusters. There are so many issues to consider on how we nail the question of cash acceptance, because, without it, access does not go very far at all, as other noble Lords have commented.

The cashback amendment I tabled to the now Financial Services Act 2021, which my noble friend the Minister was kind enough to reference in her opening speech, demonstrates the enduring importance of cash. Evidence so far, since the introduction of cashback without the need for a purchase, clearly demonstrates that most of those transactions are for £20 or below, and therefore clearly serving individuals who were massively underserved or unserved before the passage of that legislative change.

Finally, on cash, does my noble friend the Minister believe it is time to consider cash as critical national infrastructure, and not just for financial inclusion? In the current uncertain world in which we exist, if there were to be a serious and sustained cyberattack on our financial systems, it seems that cash would provide a pretty robust first line of resilience.

Before noble Lords think that I am all about cash, I am interested in cash only while millions still rely on it and while we have not moved fully to the digital world. The future is inexorably digital, not least for payments. There is nothing necessarily problematic or negative about that, but that future has to be inclusive for all—and the transition to that future has to be similarly inclusive. Is it not high time to build on the work of the Access to Cash Review that the Government commissioned with, crucially, a review of access to digital payments?

On the regulator, as others have said, Parliament needs to consider seriously and urgently what we want our regulators in this space to do, without in any sense encroaching on their independence. What do we want them to do? How do we fit them out to do that? How do we put the structure and resource in place to set them up to succeed? How will we then hold them to account on all the principles which have been set out in that structure? It cannot be the case that it takes nine months for an overseas CEO to be able to come over to work in our financial services. It cannot be that it takes over a year for a start-up business to get a licence to operate in this country. It cannot be the case, as my noble friend Lord Ashcombe pointed out in his excellent maiden speech, that one size fits all. In insurance, how can it be that the same regulatory regime applies whether you are insuring a pet or a plane?

We know how to get this right with regulators. We saw that in the first part of the 2010s with our approach to fintech, and with the sandbox and with GFIN, which came as result of that. There was no better measure of success from the sandbox, and no better KPI, than the fact that it has been replicated in well over 50 jurisdictions around the world. That was all under Project Innovate; we need a second, third and fourth version of that project to drive forward all the opportunities which currently exist, combining common law, new technologies, and the potential geographic and historical benefits for London and the rest of the UK. As everybody in financial services knows, history is no guarantee of future success.

On the international competitiveness objective and the international perspective, what have the Government looked at in taking the best from around the world in this area—not least the MAS in Singapore, the Swiss regulator, and those in Bermuda and Australia, to name but a few?

In conclusion, this is the most important financial services Bill in a generation. It has extraordinary potential—but it is potential; it will not inevitably drive economic social good for citizens, cities, communities and our country. This is an extraordinary opportunity to make things better. In Committee and on Report, let us all work to make it even better.