Financial Services Bill

Lord Holmes of Richmond Excerpts

Report stage
Wednesday 14th April 2021 Lords Chamber

[The Minister of State, Cabinet Office (Lord True) (Con)]

My Lords, the Government have brought forward Amendment 14 to ensure that buy now, pay later products can be brought into scope of regulation in a way that is proportionate to the risks that they pose to consumers. As noble Lords will recall from previous debates, to which the Government listened carefully, on 2 February following the publication of the Woolard Review into the unsecured credit market, the Government announced their intention to regulate interest-free buy now, pay later products. Following that announcement, the Government have been working at pace to ensure that this can be done in a proportionate and timely manner. Amendment 14 is the next step in this process. Many noble Lords were keen to see progress on the issue, so I hope that they will welcome the amendment today.

The Government recognise the concerns that exist with these products as the market continues to grow in the United Kingdom. We are therefore acting decisively to address the risk of detriment to consumers. The Government intend to bring buy now, pay later products within the scope of the regulatory framework, which includes the application of the Consumer Credit Act 1974. However, as noble Lords have previously heard, it is important to note that those products are interest-free, and thus are inherently lower-risk than most other forms of borrowing. Used properly, they can provide a lower-cost alternative to mainstream or high-cost credit. The Government’s view is that they can therefore be a useful part of the toolkit for managing personal finances and tackling financial exclusion, a topic that I will return to later in the debate. It is therefore essential that when buy now, pay later products are brought into regulation, it is done in a way that provides robust consumer protection, while ensuring that it is viable for firms to continue to offer these products. Amendment 14 will ensure that that can be done.

Some of the provisions of the Consumer Credit Act could be disproportionate, given the short term, interest-free nature of buy now, pay later products. They could also materially impact the way in which consumers are able to access these products. As a result, this amendment seeks to provide the Government with the power to ensure that the provisions of the Consumer Credit Act 1974 that will apply to buy now, pay later products are proportionate to the risks that the products present. This will allow the Government to apply only the provisions of the Act that have been determined to be proportionate to the risks posed by buy now, pay later products.

The Government intend to publish a consultation later this spring where the views of consumers, buy now, pay later providers and the retailers that offer these products will be sought on this matter. We will carefully consider these views to inform our approach to creating a proportionate regime, including decisions on which provisions in the Consumer Credit Act should apply to buy now, pay later agreements. Following this, we will take forward the necessary secondary legislation to bring buy now, pay later agreements into regulation. That secondary legislation will be subject to the affirmative resolution procedure, meaning that noble Lords will have the opportunity to further scrutinise and comment on the Government’s proposals. I therefore ask that your Lordships support this amendment to ensure that the regulation of buy now, pay later can proceed both at pace and in a proportionate manner. I beg to move.

[Lord Holmes of Richmond (Con)]

My Lords, it is a pleasure to follow the Minister. In doing so, I declare my financial services interests as set out in the register. I would like to be the first to offer my support for Amendment 14 and what it seeks to achieve. I congratulate my noble friend on the decision to use the affirmative procedure to bring these powers into force.

I will now speak to Amendment 35 in my name. The thinking behind it is quite straightforward: financial exclusion has dogged our nation for decades, ruining individual lives and putting down potential. Solutions exist and thousands of people are working so hard in this area, but we need to do more and we need more innovation: hence the two elements in Amendment 35. It seeks to give the Bank of England—our central bank—a more significant role when it comes to financial exclusion. The Bank has an enviable brand, respected right across the UK and revered around the world. This brand could be well put towards solving the problem of financial exclusion.

The first part of Amendment 35 seeks to give the Financial Policy Committee of the Bank of England an objective to monitor financial exclusion. As noble Lords know, the FPC is responsible for financial stability in the UK. I believe there are 407 billion new reasons to take this opportunity to reconsider financial stability and include financial exclusion within the remit of the FPC.

The second limb of the amendment seeks to suggest the opportunity for the Bank to offer basic bank accounts to those who find themselves financially excluded. The take-up of bank accounts for those financially excluded is not just a measure of what is currently available from retail providers. The history of those individuals also plays a key part, so, again, the brand and the central place of the Bank could play a critical role here. If we considered some of those accounts potentially being digital accounts—perhaps central bank digital currency accounts or digital pound accounts—the Bank might play a critical role in addressing digital as well as financial exclusion.

The Old Lady of Threadneedle Street could be not just lender of last resort but potentially, through Amendment 35, provider of first support for those individuals en route to financial inclusion. Provider of first support is certainly worth a thought. Does the Minister agree?

[Baroness Noakes (Con)]

My Lords, I shall speak only in respect of Amendment 35. My noble friend’s amendment is very well intentioned, covering financial exclusion and basic bank accounts. Despite basic bank accounts having been in existence for nearly 20 years now, there remain problems with take-up. The know-your-customer rules, about which my noble friend Lord Holmes of Richmond raised concerns in Committee on this Bill, also make life difficult for individuals trying to access them. It is no secret that the banks regard basic bank accounts as a costly burden that they have to bear, which is probably at the heart of some of the issues.

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[Lord Sikka (Lab) [V]]

My Lords, it is a great pleasure to participate in this Bill. I strongly support Amendment 27. In view of the passionate speeches by the right reverend Prelate the Bishop of St Albans and the noble Lord, Lord Foster, my contribution will be relatively short, as they have said almost everything that I wanted to say.

In this technological age, it cannot be very difficult for any provider of bank accounts, credit cards, debit cards, store cards and other electronic payment systems to offer customers an opportunity to block payments to certain providers of services. As has already been said, the blockers actually increase consumer choice. The blockers would be of enormous help, as has been said, to those addicted to gambling or other ruinous addictions—of course, gambling is not the only one. It would certainly help their families too, because it would safeguard the family budget, which then cannot simply disappear by the swipe of a card or the click of a computer key.

I would urge that such blockers should be a necessary condition of the authorisation to trade in financial services in the UK. Other regulators, such as the Gambling Commission, should also insist that anybody who is licensed provides such facilities. The blockers obviously would not prevent people from indulging in gambling and other ruinous addictions. Nevertheless, they would really help vulnerable people in our society and I completely support this amendment.

[Lord Holmes of Richmond (Con)]

My Lords, it is a pleasure to take part in this group of amendments and I declare my interests as set out in the register. I will speak to a trio of amendments and I will endeavour to do it in a trice.

First, I very much support the intention behind Amendment 16. I ask my noble friend the Minister, over and above what is set out in the amendment, what reports the Government have received of bailiffs entering properties during the Covid period, both in breach of their guidance and the Covid regulations, and what action all relevant authorities will be taking in this respect.

Secondly, on Amendment 26, I very much support my noble friend Lord Leigh of Hurley, who set out the arguments perfectly and succinctly. Would my noble friend the Minister agree that there is clearly a loophole, and what will the Government do effectively to close said loophole?

Thirdly, and perhaps most importantly, I give full-throated support to Amendment 37C, so perfectly introduced by my noble friend Lord Young of Cookham. It seems one of those amendments where, for want of a small legislative change, a huge material difference could be made to so many people’s lives. It is a funds-releasing, anxiety-relieving amendment. I ask my noble friend the Minister: if not this amendment, will the Government bring forward one of their own at Third Reading? If not this Bill, what Bill?

[Lord Addington (LD)]

My Lords, while sitting here listening to this debate, I could not help but get the feeling that there had been a drawing of lots in the Government Whips’ Office when they were preparing to take on these amendments and the noble Lord, Lord True, lost. All of the issues here are good and real issues. If these amendments were accepted and brought forward, they would probably make our lives that little bit better.

Before I bring my full attention to the amendment brought forward by the noble Lord, Lord Young, I will say that we deserve to hear at least about a plan of action to deal with all these issues. If the Minister cannot provide that now, giving some idea of when they will be considered is very important. They are real issues; please deal with them. That is what we are here for. The only justification for us being in this Chamber is to deal with them, so can we hear about that?

When the noble Lord, Lord Young, first raised the issue in his amendment, I said that he had put his finger on an absurdity. I have not changed my mind. I think that the noble Lord, Lord Blunkett, basically said that the cock-up school of history is alive and functioning. The rest of us who were in Parliament at the time and involved in those Bills take our share of the blame because we did not spot it either. Can we change this?

The noble Lord, Lord Young, made about half a dozen arguments in his speech for why the amendment should be accepted or acted on. The most convincing one was that, for a comparatively modest sum of, say, £3,000, you have about four or five days-worth of paperwork. That is paperwork that you might not be very good at and which you might have to repeat, over and again, to get the money out—and usually the person doing the paperwork to get the money to support the child put that money in the bank in the first place. This is beyond belief; it is Kafkaesque. Will the Minister make sure that the people who put the money in to support a child can take it out to do so? What method are the Government taking? The law does not allow it at the moment, but we change the law all the time—we are doing it now. Please can he give us a plan of action on this?

The noble Lord, Lord Young, said that he did not expect to vote on this. The ball is of course firmly in his court on this one, but, dependent on what the Minister says, I hope the noble Lord will decide whether that is the correct approach here. I know it will annoy the Whips if we have a vote on this, but if the Minister cannot give him something that is at least in some way positive, I will certainly herd my colleagues through to support it.

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[Baroness McIntosh of Pickering (Con)]

It gives me great pleasure to follow the noble Lord, Lord Stevenson of Balmacara, and lend my support, with my co-signing, to an important follow-through from the Law Commission’s conclusions and recommendations. I echo the remarks I made in my support in Committee, and I believe the contribution from the noble Lord, Lord Stevenson, has been modest today. We are seeking reassurances, and I echo his concern about a definitive timescale.

It is interesting to note, as a non-practising Scottish advocate, that bills of sale do not apply in Scotland, so the Act does not extend to Scotland, and the provisions only really apply to England and Wales in this regard. Bills of sale, being mainly used for logbook loans, relate mostly to vehicles. But this is an opportunity, in supporting the amendment before us this afternoon, to probe my noble friend and the Government a bit further about what their plans are to review the recommendation.

Law Commission reports do not come along that often, and they come along often at the invitation of the Government. I would like to ask my noble friend about his intentions to give effect to the recommendations of the Law Commission report of 2017. In the consultation paper, it was proposed that the Bills of Sale Acts should be repealed in their entirety and replaced with new legislation to regulate how individuals may use their existing goods as security while retaining possession of them. Out of the 32 consultees who expressed their views, 24—75%—agreed to that.

I entirely endorse the Law Commission’s opinion that:

“The Bills of Sale Acts are written in obscure, archaic language, using words such as ‘witnesseth’ and ‘doth’.”


That sounds a bit like “the Leith police dismisseth us”. In the interests of modernising the legislation and making it more transparent, the purpose of Amendment 17 is entirely clear, and I take this opportunity simply to nudge and press my noble friend on what the Government’s intentions are now, four years on from the Law Commission’s recommendations.

[Lord Holmes of Richmond (Con)]

My Lords, it is a pleasure to follow my noble friend Lady McIntosh, and to congratulate the noble Lord, Lord Stevenson of Balmacara, on all his efforts in this respect. The Law Commission’s recommendations seemed pertinent and on point in 2017; four years on, they seem similarly pertinent and on point. Will my noble friend the Minister set out the pathway and the timetable for consideration of those arcane statutes, and tell us what issues and other legislation, which he alluded to, may also be under consideration along that pathway?

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[Lord Holmes of Richmond (Con)]

My Lords, it is a pleasure to take part on this group of amendments. I declare my financial services interests and say just this: the borrowers are not to blame, but they bear the burden. Does my noble friend the Minister agree?

In agreeing to a large extent with my noble friend Lady Noakes, with regret I am not convinced that these are necessarily the amendments to resolve the issue. Can the Minister set out what action he believes the Treasury and FCA are taking in this area? There clearly is an issue even if we accept that the numbers may be disputed, or that there are different categories and specific circumstances. These are all important points to be considered, but they still leave issues to be addressed. Will the Minister set out anything he can about what actions the Treasury will take and what the approach of the FCA will be to address these points?

[Baroness Bryan of Partick (Lab) [V]]

My Lords, it is a great honour to participate in this group of amendments, and particularly to support the noble Lord, Lord Sharkey, who has worked tirelessly to support mortgage prisoners. I feel I am in a similar place to my noble friend Lord Griffiths of Burry Port when he spoke in Committee. I will speak as someone inexperienced in high finance but who understands the importance of having a home—not as a financial asset or investment, but as somewhere safe and secure to live. To make this most basic need a pawn in the machinations of greed-driven financial transactions, as demonstrated by the financial crash of 2008, is an absolutely unacceptable face of capitalism.

Every Government since 1979 have encouraged people to see home ownership as a sign of virtue. When the noble Lord, Lord Heseltine, was Secretary of State for the Environment, he said:

“Home ownership stimulates the attitudes of independence and self-reliance that are the bedrock of a free society.”


But for many people, the period of their mortgage is a rollercoaster ride of anxiety, always dependent on matters far outside their control. The day the mortgage is paid off must rank among the best days of people’s lives. Many mortgage prisoners fear they will never see that day.

The FCA reported in July 2020 that around a quarter of a million people have their mortgages held by inactive firms. The majority of these people were up to date with their payments and, in any other circumstances, would have been able to adjust their mortgages and repayment patterns to suit their individual needs. No one would choose to remain on the SVR for years on end, so to compare their entrapment on that rate to those who may be on it temporarily, while they seek an alternative, is disingenuous. These people have been denied that opportunity, not through any decision they made or any fault on their part, but because of the way the Government chose to sell off mortgage loan books. It was not just people’s mortgages that changed hands, it was people’s lives—they were being bought and sold.

This Bill was viewed with real optimism among some mortgage prisoners. They thought amendments relating to SVR would help transform their lives, but how often have they been here before? Last year, there was hope that the FCA’s more lenient affordability checks would help some escape, but very few succeeded. For many more, their lives were made even more difficult by the impact of Covid-19. The report from the LSE in November 2020 makes the point that the FCA has now reached the limit of its powers. This means that only the Government can help to free mortgage prisoners. Instead, while Parliament was considering amendments aimed at protecting mortgage prisoners, the auctions continued. All the warm words and expressions of concern from Ministers meant nothing. The Treasury’s sole concern was that these people must deliver value for money for the Government.

These amendments are considered and cautious. Their implementation would not undermine capitalism or fundamentally damage the whole system of mortgage delivery, but would give some safeguards to a specific group of mortgage prisoners who have struggled for more than 10 years as victims of the failure of the very system the Government are defending. If it is not to be these amendments, what help will the Minister offer? Unless there is a clear alternative, I hope we will be given the opportunity to vote on at least one of them. I would be very pleased to give my support.

People with Disabilities Standing for Elected Office

Lord Holmes of Richmond Excerpts

Monday 22nd March 2021 Lords Chamber

[Lord True (Con)]

My noble friend makes an important point on which all parties would, I hope, unite. The reality is that the law regarding electoral expenses, permissible donors and grant-making is complex, and therefore the funding model has always been to contract with other organisations to deliver funding to political candidates. But I note what my noble friend says.

[Lord Holmes of Richmond (Con)]

My Lords, does my noble friend agree that the Government may be able to perform a useful convening role with political parties, to gain more traction on this issue? In 2018, I was commissioned to produce a report on increasing access to public appointments for disabled people. Unfortunately, many of its recommendations remain unaddressed. Could I gently ask my noble friend whether the Cabinet Office could help get some more traction on this and on working together to get more disabled people into public life and public appointments, which play such an important part in our society?

[Lord True (Con)]

I certainly agree with my noble friend about public appointments. I am sorry to hear what he said about his report. Certainly, it is the Government’s wish to encourage more disabled people into public appointments. We wrote twice to political parties in 2019; at that time, there were not responses.

Taskforce on Innovation, Growth and Regulatory Reform

Lord Holmes of Richmond Excerpts

Wednesday 17th March 2021 Lords Chamber

[Lord True (Con)]

My Lords, as to the employment Bill, I am not the Minister responsible but I will answer on the matter before the House. I draw the noble Lord’s attention to the third part of the terms of reference, which mentions

“maintaining the Government’s commitment to high environmental standards and worker protections”.

I hope that allays his fears.

[Lord Holmes of Richmond (Con)]

My Lords, the Covid pandemic has affected young people particularly hard in their education and when beginning their careers. To this end, and in terms of “Build back better” and this task force, will the Government put an end to the pernicious practice of unpaid internships? The Prime Minister and the public are in favour of a prohibition. Does my noble friend agree that this would be a clear illustration of levelling up and a labour market that works for everyone?

[Lord True (Con)]

Again, my noble friend asks me a question which goes well beyond my remit in the Cabinet Office. I note and respect what he says. The Government’s position is that, for some internships, early years in the labour market can help in securing work and gaining experience. However, he raises important issues. As for the task force issue, that is an independent matter for the task force.

Budget Statement

Lord Holmes of Richmond Excerpts

Friday 12th March 2021 Lords Chamber

[Lord Holmes of Richmond (Con)]

My Lords, I welcome and congratulate all noble Lords who have made their maiden speeches in today’s debate and declare my interests as set out in the register. The Chancellor delivered a good Budget in uniquely bad times. I believe it can be best summarised as “The Government’s economic strategy is their vaccine strategy; the Government’s vaccine strategy is their economic strategy”—and quite right too. Will the Minister join me in congratulating all those involved in the vaccine programme and all those in the NHS and our care services who have done so much through this pandemic? Will he review the current pay proposals for our nurses?

Turning to financial technology, I welcome its mention by the Chancellor in the Budget, particularly with the recent publication of the fintech strategic review. What does the Treasury intend to do to accelerate the implementation of the recommendations in Ron Kalifa’s FSR? Much of what is in the review does not require legislative change, so will the Government just crack on with that? For that in the review that does require legislative or regulatory change, what is the Government’s plan to enable that? Fintech is the future, and it is the future now. We have the talent, we have the technology; we need the legislation and the regulatory environment to further fuel that future. Does my noble friend agree?

Space Industry

Lord Holmes of Richmond Excerpts

Thursday 4th March 2021 Grand Committee

[Lord Holmes of Richmond (Con) [V]]

My Lords, the future is data and the future is now. Much of that data needs to, and can come from, space, not least EOD, as my noble friend Lord Willetts pointed out in his excellent introduction. We also have a phenomenal opportunity to bolster our cyber effort and I, like the noble Lord, Lord Parker, in his excellent maiden speech, pay tribute to all in our security services who work tirelessly and rightly in the shadows to keep us safe 24/7. We have a phenomenal opportunity with the new satellite industry. Does my noble friend the Minister agree that it is a great opportunity for Scotland as part of the United Kingdom? How does the space strategy fit within the overall industrial, digital and data strategies? Does he agree that space is not the final frontier but, if properly approached, is a universe of economic endeavour and possibility?

Financial Services Bill

Lord Holmes of Richmond Excerpts

Committee stage & Lords Hansard
Wednesday 3rd March 2021 Grand Committee

[Lord Holmes of Richmond (Con) [V]]

My Lords, it is a pleasure to speak on day four of proceedings in Committee on the Financial Services Bill. In doing so, I declare my interests as set out in the register.

I want to speak to Amendment 51, standing in my name. The purpose of this new clause can be simply stated: what is the purpose of the KYC—“know your customer”—requirements? It is one of the top TLAs—three-letter acronyms—in financial services, but is it fit for purpose? Does it achieve what we would want? Does it feel modern in outlook? Does it feel inclusive? It not only goes to the heart of a number of other amendments in this group; it really is a key underpin, and the adoption of this amendment would transform our KYC system and approach in this country. We have to ask those questions: what do want KYC for; what does it need to contain; when do we need it, and in what form?

Amendment 51 seeks, on passage of the Bill, a review of KYC requirements that considers a number of elements in order to seek to transform our approach to KYC. My first point concerns the question of inclusion, and I draw this broadly. Whom do we want to come within, in what form and through what means? For example, asking for paper documentation seems not only outmoded but somewhat exclusionary. Where is the level of efficiency in the current provisions? We have the ability to have “atomic settlement”. The current KYC feels a million miles away from a settlement in a millionth of a second. My final point addresses exactly that question of outdatedness. We have one of the greatest financial services sectors in the world. The big bang in the 1980s revolutionised the City of London, but it goes much beyond that when we consider our role in fintech, not just in London but across the UK, and the Kalifa review on that very subject, published only last week. We are leading-edge in so many ways when it comes to our financial services. KYC in no sense reflects, represents or leads that technological position.

If this amendment were to be seriously considered, if not adopted, we could look at different means of ensuring KYC. We could look at attributes and elements that would assist and give real-time assurance, giving elements to those who need them—things which operate absolutely in real time and are to be relied on, rather than bits of paper, bits of supposed identification, which hark not from a 20th-century but a 15th-century approach to identification. That brings me, finally, to the whole question of digital-distributed ID, which I will speak on later in Committee. That goes to the heart of so much of solving the KYC puzzle. If we could deliver an effective and efficient distributed ID system for individuals and corporate entities, we would transform the position regarding KYC.

I look forward to hearing the comments of my noble friend the Minister on Amendment 51.

[Lord Sikka (Lab) [V]]

My Lords, I speak to Amendment 51A, which invites the Government to reduce the number of anti-money laundering supervisors so that we can have consistent application of standards and effective regulators.

Dirty money is a huge danger to every country on this planet. The full extent of dirty money sloshing around in the UK is not known, although some authorities estimate that around £100 billion a year may be laundered through our banking and financial system. Transparency International’s report, Hiding in Plain Sight, examined 52 cases of global corruption and noted that despite a plethora of form-filling and regulators, some 766 UK-registered business entities were involved in laundering stolen money.

The threat of money laundering to national security is well documented in the Intelligence and Security Committee’s July 2020 report, Russia, which stated that

“the arrival of Russian money resulted in a growth industry of enablers—individuals and organisations who manage and lobby for the Russian elite in the UK. Lawyers, accountants, estate agents and PR professionals have played a role, wittingly or unwittingly, in the extension of Russian influence, which is often linked to promoting the nefarious interests of the Russian state.”

Large sums of dirty money cannot be moved or concealed without the active involvement of accountants, lawyers, and financial experts. These enablers must be tackled, and without effective regulation that is not possible.

However, the UK’s fragmented regulatory system for dealing with money laundering is highly deficient. There are 25 anti-money-laundering supervisors. These include the Financial Conduct Authority, HMRC, the Gambling Commission and 22 other bodies, mainly trade associations connected with accountancy, audit, bookkeeping and legal and notarial services. The list of 22 includes bodies such as the Association of Accounting Technicians, the Association of International Accountants, the Institute of Certified Bookkeepers, the Institute of Chartered Accountants in England and Wales, the Law Society and sundry other trade associations. Having twenty-five supervisors results in duplication, waste, inefficiency, poor co-ordination, inconsistency and obfuscation.

In September 2016, the Committee on Standards in Public Life, in its report, Striking the Balance: Upholding the Seven Principles of Public Life in Regulation, stated that the seven principles of public life apply to all regulatory bodies, and the Government agreed. These include independence and public accountability, but for some reason the Government do not apply these principles to anti-money laundering supervisors. Accountancy and law trade associations have no independence from their members. In any regulatory system, there is a concern that regulators would be captured by those who are to be regulated, but that is the starting point in AML supervision by trade associations.

In October 2011, the Government announced that they would make quangos more democratically accountable, but they have failed on that front too. Of the 25 AML supervisors, 22 are not subject to the freedom of information law, even though they are an explicit arm of the state. Perhaps the Minister will be able to explain this anomaly. Their exclusion from FOI means that the public have no opportunity to scrutinise their practices.

The Government’s faith in regulation by trade associations is routinely punctured by the Government’s own reports. In October 2017, a joint report by the Treasury and the Home Office, entitled National Risk Assessment of Money Laundering and Terrorist Financing 2017, summed up key risks around the accountancy sector:

“complicit accountancy professionals facilitating money laundering; collusion with other parts of the regulated sector; coerced professionals targeted by criminals; creation of structures and vehicles that enable money laundering; provision of false accounts; failure to identify suspicion and submit SARs; and mixed standards of regulatory compliance with relatively low barriers to entry for some parts of the sector.”

The report went on:

“Accountancy services have also been exploited to provide a veneer of legitimacy to falsified accounts or documents used to conceal the source of funds. For example, law enforcement agencies have observed accountants reviewing and signing off accounts for businesses engaged in criminality, thereby facilitating the laundering of the proceeds. In many cases accounts have been falsified by criminals and unwittingly signed off by accountants, while in others accountants have been assessed to be complicit”.


That is the state of money laundering and the world of accounting.

However, rather than consolidating the number of regulators and thereby securing consistent application of standards and law, in January 2018 the Government created a new body called the Office for Professional Body Anti-Money Laundering Supervision, better known by the acronym OPBAS. At considerable cost, it became a “supervisor of the supervisors” and oversees the 22 trade associations. The formation of OPBAS is an acknowledgement that all was not well with the regulatory role of trade associations.

A year later, on 12 March 2019, the OPBAS director of specialist supervision said:

“the accountancy sector and many smaller professional bodies focus more on representing their members rather than robustly supervising standards. Partly because they don’t believe – or don’t want to believe – that there is any money laundering in their sector. Partly because they believe that their memberships will walk if they come under scrutiny.”

The OPBAS Director went on:

“We found that some did not fully understand their role as an anti-money laundering supervisor. 23% had no form of supervision. 18% had not even identified who they needed to supervise. Over 90% hadn’t fully developed a risk based approach and had not collected all the data they needed to form a view about their riskiest members and their services. Supervision was often under resourced – and in some cases, there were no resources.


We found that for many supervision wasn’t important. It was only an add-on. This means it often wasn’t on the agenda and for around half, there was insufficient senior management focus. For 20%, it wasn’t overseen by the governing bodies. In some of the professional bodies, where supervision had been outsourced to another provider, there was minimal oversight of the work being done.”


The director also said:

“We also found that in all but 2 professional bodies, processes for handling whistleblowing were inadequate. We found that 56% of professional body supervisors had no whistleblowing policy in place at the time of our assessments.”


There you have it—a powerful indictment of the folly of relying upon trade associations for regulatory purposes. They do not want to be robust regulators because of the concern that “their memberships will walk”.

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I want to make a final argument in support of my amendment. As things stand, we expect the next general election to be held on 2 May 2024. Since joining your Lordships’ House some 14 years ago, I have witnessed a few times the playing out of the so-called wash-up procedure in the run-up to a general election, during which a certain amount of political horse-trading goes on to agree which bits of policy in the pipeline will be sacrificed to clear the parliamentary decks before the election recess. I do not want this to happen to statutory debt repayment plans. If the Minister undertook to persuade the Government to accept my amendments, this unintended pitfall would be avoided. I hope that he will give serious consideration to the whole case that I have made. I beg to move.

[Lord Holmes of Richmond (Con) [V]]

My Lords, it is a pleasure to take part in the debate on this second group of amendments. I declare my interests as set out in the register. It is also more than a pleasure to follow the noble Baroness, Lady Coussins, and the elegant way in which she introduced the amendments. I would certainly have added my name to her Amendment 67 had I had any ink left in my pen. I can only express regret that my name is not on it, as it elegantly and excellently expresses her intention, as she has done on her feet today.

In many ways, this is the most important group of amendments that we are considering in Committee. It takes me back to 2017, when we debated the Financial Guidance and Claims Bill, as it was then, and our discussions about duty of care and financial inclusion. It all rings true in these amendments and in our earlier discussions in Committee on financial inclusion objectives, not least for the Financial Conduct Authority.

I am grateful to the Money Advice Trust, Macmillan and StepChange not just for their briefing, advice and commentary for these amendments but for the work that they and all the organisations involved in the debt space do day in, day out—often unsung—dealing with people who find themselves in some of the starkest situations. Those organisations step in, and they deserve our thanks, praise and recognition.

I shall cover Amendments 53, 68, 69 and 111 in my name. I shall also touch briefly on Amendments 54 and 70 in the name of my friend, the noble Lord, Lord Stevenson, but I shall be mindful not to eat his tea. I feel somewhat nervous speaking before him, with all the expertise he has in this area and in view of his excellent chairmanship of StepChange. This Committee and our nation owe him a tremendous debt for the work that he has done in the area of debt.

Amendment 53 is relatively straightforward. It focuses on the provision of debt advice for those who would fall within the scheme. It hints at the wider point of financial education, not just in schools, as we have discussed in the past, but broadly, throughout life. It was not possible to craft an amendment to the Bill on financial education the way I would have intended. However, I believe that Amendment 53 speaks to that specific intention while having general applicability, broader than just those within the scheme.

Amendment 54, in the name of my friend the noble Lord, Lord Stevenson, is an excellent probing amendment, and I shall leave him to walk us through it. Amendment 68 has elements of Amendment 67, in the name of the noble Baroness, Lady Coussins. It sets out the provisions of the SD scheme and a timetable for its implementation. I am not entirely sure why I opted for December 2024 as the end date for when people would have to have been taken up into the scheme. I may have had the view that the Johnson Administration would go the full five-year distance. On balance, I am probably minded to go with the noble Baroness, Lady Coussins. May is probably a better date; it is certainly reasonable and achievable and gives the right amount of space, with the right amount of road, to enable this scheme to get up and running.

Amendment 69 seeks a consultation on how funding for advice will operate under the scheme and is relatively straightforward. Amendment 70 is, without question, one of the key amendments in this group. It was handsomely set out and I will not eat my friend’s lunch in doing so again. By setting out particular groups, not least SMEs, those with protected characteristics and charities, the noble Lord has done an excellent job in focusing on the key groups and on how such a review should be structured.

Amendment 111, my final one in this group, is concerned with so-called lead generators. In many ways, it goes to the essence of the human condition: the ebb and flow; the give and the take. What we witness with lead generators is, all too often, those taking from those who have the least. The aim of the amendment is straightforward: to end the misery and mental stress that the practice of lead generation, as currently conducted, causes to tens of thousands across the UK. What are lead generators? In essence, they use online tools to crawl the online world in search of those who have entered that environment to try and find solutions to their current debt difficulties. They then serve up the individuals they have captured, if you will, to organisations which seek to “advise” and “help” them. This area is riddled with misleading statements, misrepresentation—

[The Deputy Chairman of Committees (Lord Caine) (Con)]

The Committee will now adjourn for five minutes.

--- Later in debate ---

[The Deputy Chairman of Committees (Lord Caine) (Con)]

My Lords, before I invite the noble Lord, Lord Holmes, to complete his comments, I point out that I completely omitted to put the question when the noble Baroness, Lady Coussins, moved her amendment. For clarity, the question before the Committee is that Amendment 52 be agreed to. I call the noble Lord, Lord Holmes of Richmond.

[Lord Holmes of Richmond (Con) [V]]

As I was saying, lead generators are involved in misleading and misrepresentation by holding themselves out as organisations such as the Money Advice Trust or StepChange, or representing themselves as government to pull in for financial gain those who sought help for their debt difficulties. It is a pernicious practice, preying on those who are, without doubt, extremely vulnerable as a result of debt. It is unfortunate that the arena for their taking is the world wide web—one of the greatest gifts to humanity from one of the greatest of great Britons, Tim Berners-Lee. It is such a tragedy that his world is populated by these tawdry takers.

Amendment 111 would amend the FSMA to bring lead generators into the world of regulation to end this pernicious practice and to address the current asymmetry in FCA regulation: if you are introducing creditors that is a regulated activity; if you are introducing a debt advice service or the like, that is currently unregulated. The problem is large: StepChange and the Money Advice Trust estimate that at least 10% of those in need who seek their help and that of other debt advice services are caught up in and misdirected by such lead generating practice. That is an extraordinarily high figure.

We often see the world in a grain of sand when we consider personal testimony. One man said: “I am caught up in this world of these people. I am called, if not once, five times a day. Fortunately, I’ve managed to sort out my debt problems, but this harassment from these organisations is almost as bad as the debt itself. It’s having a detrimental effect on my life; it’s having a detrimental effect on my mental well-being.” That is the outcome of this mendacious practice, of this fakery and falsehood, from these tricksters and takers.

When my noble friend the Minister considers Amendment 111, would he agree that when individuals look for support in their hour of need as a result of a debt situation, they should find help, not harm? I am delighted that the amendment has the number 111; it is a single Nelson of an amendment. It is a single amendment with a single intention: for it to pass to make one single, simple change that will help hundreds of thousands. Will my noble friend the Minister channel his inner Nelson and give Amendment 111 its victory?

[Lord Stevenson of Balmacara (Lab) [V]]

My Lords, I declare my interest as a former chair of StepChange Debt Charity. I thank the noble Baroness, Lady Coussins, and the noble Lord, Lord Holmes, for their kind words about the work we have done with StepChange and all the other groups involved in supporting the repayment of debt and the management of unmanageable debt. It has been a pleasure to work with them and I have listened to their words very carefully, but it has also been wonderful, over the years I have been working on this issue in your Lordships’ House, to see the number of people who have become interested in it and who are prepared to join in and support it grow. It is now a very solid group with very firm views about how things should move forward, as we just heard.

I was very struck by what the noble Lord, Lord Holmes, said about the way people prey on those who have problems with debt. When I was working at StepChange we decided to change the name from the rather uncomfortable Foundation for Credit Counselling, which no one ever used. It was not a foundation, we did not deal with credit, and we did not counsel. It was a problem to get across what we did do, but we decided to be bold, as one is when coming to a new organisation and thinking about how you might change it. We decided to go for a name that took us away from any descriptive elements, and came up with StepChange.

One thing that we did not expect, which plays back to what the noble Lord, Lord Holmes, said, was that within 24 hours of our name being announced to the world there were between 15 and 20 groups preying on the same group of people we were trying to help, in exactly the way that the noble Lord described: they had changed their names to variations on StepChange. They also changed their colour coding, the whole look of their websites and the whole way that they approached potential customers. It was a wonderful example of the difficult area in which we operated. Here we were, trying to help people who were desperate to repay the debt that they had got themselves into. They were, by and large, decent, ordinary people for whom something had gone wrong with their lives and as a result they were spiralling into unmanageable debt. Yet here were these other companies trying to make money out of them, as the noble Lord explained. It was just awful, and to do so in a way that showed that they were watching how we operated in the market and were prepared to copy our techniques to get people to pay them money which they could not afford in order to get out of debt, was an extraordinary basis.

That leads into the amendments in this group, which are largely about trying to work with the Government in their good and well-thought-through plans, which are slowly coming to fruition. Perhaps they could go a little faster, but that is part of this discussion. My principal point is that I want us to support what the Government are doing because they are on the right track. We would like to do anything that we can to help them.

I have two amendments in this group and would have signed others, but I did not need to because they have a lot of support in other areas. Amendment 54 probes the nature and content of the regulations that will establish the statutory debt management scheme, which is complementary to and foreshadowed by the debt respite scheme mentioned by the noble Baroness, Lady Coussins, and the noble Lord, Lord Holmes of Richmond. Amendment 70 calls for a formal review of the debt respite and statutory debt management schemes within a two-year period after Royal Assent. It looks very straightforward on the surface but when the Minister responds I am sure that he will realise where the amendment is trying to take him. It has the same impact as the points made by the noble Baroness, Lady Coussins, and the noble Lord, Lord Holmes, which is that we are a bit worried about the time that it has taken to get this scheme going. The idea was—

Financial Services Bill

Lord Holmes of Richmond Excerpts

2nd reading & 2nd reading (Hansard) & 2nd reading (Hansard): House of Lords
Thursday 28th January 2021 Lords Chamber

[Lord Holmes of Richmond (Con) [V]]

My Lords, it is a pleasure to take part in this Second Reading. I declare my interests as set out in the register. It is greater pleasure to congratulate my noble friend Lord Hammond of Runnymede on his exquisite maiden speech. In it, I think the whole House heard that he is so much more than the misnomic “Spreadsheet Phil”. We have a real heavyweight in our midst, and I very much look forward to his future contributions on economic matters and so much more.

I would like to cover the areas of financial technology, or fintech, financial inclusion, or fininc, and the international perspective. Fintech is a great British success story, but we are slipping. The FCA sandbox was world-leading in its time and its great success demonstrated in how it has been copied around the world. Does the Minister agree that we need to update the sandbox to enable it to be available to all comers at all times rather than just those who are first in class? Does he agree that, in a sense, we need to industrialise the sandbox? Does he also agree that we need, for want of a better phrase, a growth box to address the scale-up challenge facing our fintechs? Does he have some early learnings from the City of London and FCA’s proof of concept around the digibox? It is early, I know, but there may be learnings that we can take into Committee and Report of this Bill.

Similarly, I would like to touch on crypto. The UK could be a world leader in crypto assets. Are we going to look to emulate MICA, do more than MICA or do something different? Similarly, we could be a world leader in setting the taxonomy for global crypto assets. Is that part of the plan? We have a fintech industry ripe for solving so many problems and driving so much economic growth. Does the Minister agree?

Another example is a central bank digital currency. If we looked at a hybrid model, we would be a world leader in rolling that out. If we do not, what about the challenge from Libra, now Diem, with the private sector potentially taking a huge influence over our macroeconomic policy? Look at what has happened with social media. If even a fraction of that happened with a digital currency, it would have not just an economic but a social impact—an impact on our very polity.

I turn to financial inclusion. Macmillan Cancer Support, which has done so much in this area, is pushing for a duty of care. I agree. Does the Minister? Similarly, with the SDRP regime, what is the timetable for bringing it into being? When we are looking at the breathing-space clauses, which are welcome, do they need further review against the backdrop of the Covid crisis? Similarly, can the Minister say whether bailiffs are being stopped from doorstepping people during this lockdown, as they were during the first one? It is not clear right now whether that is the case.

I turn to the international perspective, like other noble Lords I welcome the action in relation to Gibraltar. Will there be moves to enable Gibraltar to be part of a free-trade area with the UK?

When we look at the Basel framework, how does that work in terms of some of the international contexts? I would like to see a lot more British involvement in the continent of Africa, but African assets and investments are currently highly weighted from a risk perspective. Is that prudential or protectionist?

Does the Minister agree that when we look at technology and financial technology across the piece it would seem to make sense that we need a unit, a centre within government, maybe within the Treasury—for want of a better expression, a “fourth industrial revolution delivery unit”—to bring policy problems to private and public sector practical solutions?

In the Bill I believe we have the opportunity to reflect and consider what financial services are for. If they are for anything, they must be about enabling, empowering and unleashing individuals, institutions, innovations, neighbourhoods and nation states in a connected, interoperable and economic globe.

In the other place the Economic Secretary to the Treasury, the right honourable John Glen, called the Bill a “portfolio”—right enough. I hope noble Lords will be able to persuade the Minister during the passage of this Bill through your Lordships’ House that we can turn it into a portmanteau—a portmanteau to carry us, our economy and our society better through 2021 and well beyond.

SolarWinds Cyberattack

Lord Holmes of Richmond Excerpts

Monday 25th January 2021 Lords Chamber

[Lord True (Con)]

My Lords, perhaps the noble Baroness has better information than I do on the call between the President and the Prime Minister. The Government are certain that cybersecurity is absolutely at the heart of our overall defence need and defence capability. I repeat: we will work with all friendly allies in that area. The UK considers attribution on a case-by-case basis, but I do not have anything further for the House at this stage.

[Lord Holmes of Richmond (Con)]

My Lords, does my noble friend agree that one of the greatest lessons from SolarWinds is that the basics need to be right—password management, multifactor authentication and so on? Can he confirm that this is understood across the public sector and in all arm’s-length bodies, and that securing the supply chain is a constant and urgent need? Further, would he agree that in the UK we have an excellent cyber community, with private firms such as NCC and world-leading public institutions such as the NCSC? The Government should do everything to support this cyber industry so that it can do everything to protect us.

[Lord True (Con)]

My noble friend makes some important points. Obviously recognising the increasing importance of this area, the government security group is leading the development of a government cybersecurity strategy—which will sit underneath the national strategy —to deal with some of the issues my noble friend refers to. We also have a wide range of advice and support to help private sector organisations protect themselves.

Essential Services: Large-scale Technology

Lord Holmes of Richmond Excerpts

Tuesday 12th January 2021 Lords Chamber

[Lord True (Con)]

My Lords, the noble Lord makes some important points of which the Government are aware. I refer to lead government departments and their responsibilities. They are tasked to undertake a review of all the critical national infrastructure sectors to ensure that understanding of what is critical and of risk is up to date and relevant. The review is ongoing, with each lead government department identifying the assets and systems which are essential.

[Lord Holmes of Richmond (Con)]

My Lords, does my noble friend the Minister agree that there are huge advantages to be gained for system and state, and for local and national government, through the considered, ethical, purposeful deployment of digital and emerging technologies for the provision and transformation of essential and non-essential services?

[Lord True (Con)]

I agree with my noble friend. In a sense, his question balances with opportunity the question of risk, to which attention was rightly drawn in the previous question. Technology brings advantages for the delivery of critical services, as my noble friend said. The rapid development of the job retention scheme, with its online portal by HMRC, is a good example of how technology can bring advantages to all levels in a time of need. However, we are also aware that there are risks associated with reliance on technology.

EU-UK Trade and Cooperation Agreement

Lord Holmes of Richmond Excerpts

Friday 8th January 2021 Lords Chamber

[Lord Holmes of Richmond (Con)]

My Lords, there exists a need and an opportunity—a pressing need and a potentially transformational opportunity. The need is for a border fit for the 21st century. The opportunity is for a digitally enabled free-trade-flowing, free-trade-growing border, delivered by the best of our talent, deploying the best of our technologies. Artificial intelligence, distributed ledger technologies, cyber, the internet of things—we have world-leading proponents for all. All can be allied with a utility trade platform, which would benefit all concerned.

Does the Minister share my rational optimism for the border? Could he say what is happening with the 2025 border strategy? What can be done in 2021 to accelerate these plans? As we saw with Covid, it is possible to accelerate the innovation pathway dramatically. We need to do this urgently with the border. We have the technology: a 21st-century, digitally enabled, free-trade-flowing, free-trade-growing, friction-reducing border right around the UK. At Dover, to update Harold Wilson, we are atop the white cliffs of technology.