Financial Services and Markets Bill

Debate between Lord Holmes of Richmond and Baroness Kramer

Report stage
Thursday 8th June 2023 Lords Chamber

[Lord Holmes of Richmond (Con)]

My Lords, it is a pleasure to take part in this debate and I will speak to Amendments 82 to 85 and 110 and 111 in my name. I start by thanking the Minister and Treasury officials for all the work they have done around access to cash and, indeed, the moves they have taken. It is great testament to all those organisations which have campaigned on cash for so many years, and will make a real difference to people up and down the country.

Without in any sense pre-empting the work that the regulator and others will do on this, I ask my noble friend the Minister to set out some thoughts on what reasonable access might look like. What are the Government expecting? Allied to that, while I join her in welcoming the increase in the number of shared banking hubs that are coming online, what do the Government see as a reasonable number of hubs to be open by the end of this year?

My Amendment 82 seeks to go further and is really predicated on a very simple belief: what point is access to cash if there are no places to spend it? What currency does cash have in those circumstances? The start point would be really to have all businesses with a physical presence mandated to accept cash. Stepping back from that, as my amendment does, does my noble friend the Minister not agree that any government service, be it central or local, and any public service, particularly that which involves a payment, must accept cash? Similarly, any third party acting on behalf of national or local government in performing a public service should be mandated to accept cash. Does my noble friend see it as reasonable for any business, private though it may be, with a turnover of £100,000—as set out in my Amendment 82—to have to continue to accept cash while we move and transition towards a more digital financial services system?

Amendment 83 seeks to make our cash network part of the critical national infrastructure. There are two key reasons for this. First, it would enable cash usage, enable the economy to work and enable financial inclusion. Secondly, does my noble friend the Minister not agree that, when one looks at the current geopolitical state of the world, making the cash network part of the critical national infrastructure would provide a good second and third line of resilience if the digital systems should go down or suffer an attack? As things stand, that is not beyond the realms of possibility.

Amendment 84 addresses banking services specifically and would enable the Treasury to determine that such services must be available on a high street with a certain number of shops and premises. Banking services would include withdrawals and deposits and must cover both individuals and businesses. Indeed, as the amendment sets out, if there is a last branch standing, that branch should not be allowed to close unless alternative provisions are already in place, such as a banking hub.

Amendment 85 addresses the accessibility of financial services and products. This is differentiated from access to financial services, although there are some obvious overlaps. The amendment points out the difficulties with the accessibility of certain financial services and products. The obvious and most easy example to understand is card payment machines where the buttons are removed and there is merely a flat screen. They are completely inaccessible for me and thousands of people.

In Committee, my noble friend the Minister talked about discussions between the Government, the RNIB and other organisations. Can she update the House on where those discussions have got to? How will the Government ensure that, whether one is paying for a meal or a bicycle, the means of payment is accessible for all those seeking to use it?

Amendment 110 addresses the need for a review of access to digital financial services and products. I raised this in Committee and do so again because it seems highly necessary and a logical next step from the Access to Cash Review, which was completed in 2019. Although I am a staunch supporter of cash and people’s access to and acceptance of it, the future is digital. However, we must ensure not only that that future is accessible but, equally crucially, that the transition to it is accessible. Does my noble friend the Minister agree that further work by HMT in this area would not only make sense following the Access to Cash Review but do a great service in addressing issues which will be felt sharply if we do not address them at this stage?

I will give just one brief example. I could have on my handheld device the best mobile banking app ever created, but if I do not have the digital skills and the confidence to use that app, no payment will be made. Similarly, if, in those same circumstances, I have those digital skills but no mobile connectivity or broadband, that payment will not be made. We need this review of access to digital financial services, before these problems become acute and they affect not only people’s finances but all elements of their lives.

Finally, Amendment 111 addresses the issue of the last branch standing in any particular location but seeks to push a bit further. If there is a remaining branch on a town high street, that is a good thing. However, if that branch does not offer a full banking service, particularly to small and medium-sized businesses and micro-businesses, and if it does not serve more than 20% of the local community, does my noble friend the Minister not agree that we should change the regulations to enable a shared banking hub to be opened in that area?

I look forward to my noble friend the Minister’s response. I hope she will respond fully to all my amendments, but particularly to Amendment 111. A very simple change between Report and Third Reading would make such a potential difference for many of the areas in those circumstances.

[Baroness Kramer (LD)]

My Lords, I will be exceedingly brief because we took, as we should have, a lot of time on this issue during Committee. We have also discussed financial exclusion already. Once again, I am channelling my noble friend Lady Tyler of Enfield, who wishes that she were not ill and could be here today. I will focus my remarks on Amendment 80 in the name of my noble friend Lady Tyler, and which is signed by me.

The numbers that have been provided to any parliamentarian of interest by LINK on the rate of bank branch closures are frankly scary. The number of bank branches is now below 5,000 across the country and is expected to fall to around 1,000 in the next few years. Amendment 80 gives the FCA power, where certain conditions are met, to direct the establishment of a banking hub. Banking hubs are the solution proposed by the banking industry, in association with LINK, to provide a physical banking facility which is essentially a collective of the relevant banks and the Post Office, in locations where bank branches have disappeared. I am very sympathetic to the idea that the noble Lord, Lord Holmes, proposed, where a branch in name but not in practice because its services are so limited would qualify as well.

LINK has recommended 100 of these shared hubs, but so far only six have opened. Quite often, that is because of the resistance of the banking institutions, which, in effect under the current scheme, have a veto on whether these hubs happen. The gap is yawning and the FCA needs to step in. Because this was raised in Committee, I say that anyone who thinks that online banking is a substitute for face-to-face banking can live only a very vanilla life. I found out the hard way that the systems online and the telephone constantly get it wrong. Often, the only way to resolve a complex issue is face to face. As others have said, including the noble Lord, Lord Holmes, the 5 million people who find digital difficult are even more disadvantaged.

I seriously hope that the Government will accept Amendment 80 because it is the missing mechanism to deliver the project—the Government themselves back the project—of banking hubs and shared banking. To get it delivered we need Amendment 80 to put powers into the hands of the FCA to make sure that it happens. This is a project, I repeat, that the Government themselves have sponsored, in a sense. We need the enablement and delivery to take place rapidly.

UK Infrastructure Bank Bill [HL]

Debate between Lord Holmes of Richmond and Baroness Kramer

Committee stage & Lords Hansard - Part 1
Tuesday 14th June 2022 Lords Chamber

[Lord Holmes of Richmond (Con)]

My Lords, it is pleasure to take part in this first group of amendments on the UK Infrastructure Bank. I support Amendment 1 tabled by my noble friend Lady Noakes. When my noble friend the Minister responds, will she fully explain why the bank would not wish to come under the auspices of the financial regulators—the FCA and the PRA—and why HM Treasury would not want it to do so?

My Amendments 38 and 42 have the same purpose: to underscore in the Bill the bank’s operational independence from HM Treasury. Amendment 38 would put on the face of the Bill that the bank will be able to lend to whatever level and by whatever means it chooses without having to have recourse to HM Treasury. Does the Minister agree that this is implicit in the Bill and that to have this statement in the Bill would make absolute sense?

On Amendment 42, I agree entirely with the point alluded to by my noble friend Lady Noakes. The reason I bring Amendment 42 forward again is to further assert in the Bill that the bank should have the ability to avail itself of the capital markets. Does my noble friend the Minister agree that, again, having this provision in the Bill would clearly underscore the operational independence of the bank, which is espoused in all the briefing notes on the Bill?

[Baroness Kramer (LD)]

My Lords, this group of amendments addresses two entirely different issues, as the noble Baroness, Lady Noakes, identified. I rather fear that in the minds of the Treasury they are the same issue, which is slightly unfortunate but will probably explain a great deal of our debate today.

I will first address Amendment 42 in the name of the noble Lord, Lord Holmes of Richmond, which I very much support. This would allow the Bank to

“borrow on the international capital markets”,

putting that on the face of the Bill. We have a very small bank set-up here with only £4.2 billion in risk capital, which means that, for years, it will be able to do relatively little and will have to do it in such a way as to get substantial commercial returns to build up its equity base. That will allow it to grow and do rather larger things—but, since this is an important instrument for the whole goal of levelling up, you would think that impact and the need to act rapidly would be at the forefront of the Government’s thinking.

Obviously, being able to go to the international capital markets to access capital in the way that the European Investment Bank and KfW in Germany do—that is very well established—would be important. Also, given that there will be a green purpose to much that the bank does, it is important to note that one of the biggest movers in providing green financing has been the decision of the European Investment Bank as it goes to the capital markets to raise climate and sustainability awareness bonds to jet-propel finance into those markets. It is utterly beyond me to understand why those powers have not been given to the UK Infrastructure Bank; perhaps the Minister will explain.

Almost more importantly, perhaps, I want to address the issues raised by the noble Baroness, Lady Noakes, and the noble Lord, Lord Teverson. I very much support his notion that we must find a way to incorporate the senior managers and certification regime. Frankly, it has been quite a weak straw in the hands of the FCA. I do not want to entertain folks here for too long by going through the instances in which the FCA should have used it but has declined to do so, or has used it very weakly; but at least it is something to make sure we have real responsibility sited where it should be in senior management.

I want to pick up a rather different issue, which was mentioned by the noble Baroness, Lady Noakes, only in passing: whistleblowing. I will talk about this in more depth in the group of amendments beginning with my Amendment 30 about the operational independence of this bank, but when we get later into the Bill we will find that a framework has been established allowing the shareholder—in other words, the Treasury and the Government—to give directions, both specific and general, to the bank. The framework elaborates on that but recognises that the board of directors of the bank may well look at these specific directions and wish to reject them. The grounds that may be given, not in a rejection but a “reservation notice” to the shareholders, include infringement of

“the requirements of propriety or regularity”

or various other things including on “value for money” or “strategic objectives” and so on; we can go into that later. In the two sections that I want to address, a reservation notice can be sent on grounds of infringement of “propriety or regularity”, or of being

“of questionable feasibility or … unethical”.

In that case, the shareholder—the Treasury, or the Government, in effect—can send a notice to the bank overriding its letter of reservation, forcing it to go ahead with the activity, even if it is considered by the bank to be unethical. The bank is supposed to provide a written direction, which, when you first read this, looks as though it will be published. However, very carefully written into the framework is the phrase

“published (unless the Shareholder has directed in writing to the Company that the matter must be kept confidential).”

I think we can guarantee that any direction that is unethical or infringes on propriety will come with an instruction to keep it confidential. At that point, for the public and Parliament to know, we rely on whistle- blowers.

That brings me to the point raised by the noble Baroness, Lady Noakes. First, directors are not covered by the Public Interest Disclosure Act anyway. Senior employees would be, but to have any protection to be able to blow the whistle they would have to go to a regulator to make a protected disclosure. There is no regulator, therefore there is no mechanism for protected disclosure.

I want noble Lords to understand the jeopardy in which those directors or senior executives might find themselves. I suspect they will have been asked to sign some version of a non-disclosure agreement—it has many different names; I always tussle with the Government, because it turns out they have done it under a different name, such as a confidentiality agreement, but it is the same thing. There is even some talk of extending the scope of the Official Secrets Act, which could creep into this as well. I also noticed that the directors—I am sure those who have been appointed are excellent people—really would be taking steps of jeopardy if they blew the whistle, because most are making their careers as advisers to government or as chairs or directors of government-related entities, so they have a great deal of jeopardy at hand.

If this is unregulated, there is no mechanism for disclosure, even where actions within the view of the directors or senior employees of the bank infringe on propriety or are unethical. I would like the Minister to explain why the Government decided that that framework should be in place. I should also like her confirmation of whether there are non-disclosure agreements or their equivalent. If she cannot at this moment, by the time we get to the group beginning with Amendment 30 she will have had the opportunity to consult the Box. It will be a yes or no answer. I am certain we must get an answer either way.

Financial Services Bill

Debate between Lord Holmes of Richmond and Baroness Kramer

Report stage
Wednesday 24th March 2021 Lords Chamber

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

My Lords, it is a pleasure to take part in this debate on the first group of amendments on the first day of Report on the Financial Services Bill. I declare my interests as set out in the register.

I congratulate the noble Lord, Lord Stevenson of Balmacara, on tabling this amendment and on the way in which he introduced it. These arguments have been put since at least 2017, when we debated the Financial Guidance and Claims Bill. What has happened in the interim has merely strengthened those arguments on the need for a duty of care. During the last year, as in so many other areas of life, we have seen exactly why something in this space would assist. Now that we have the excellent vaccine rollout and inoculation programme, such a duty would put a capital “B” into the “build back better” approach. It would be a real example of “better”.

I will not rehearse the arguments that I made at Second Reading and in Committee. I want to take this opportunity again to thank Macmillan Cancer Support and congratulate it for everything that it continues to do in this area. According to the testimony of a cancer patient,

“I felt I was battling my bank as well as cancer.”


Will the Minister consider what can be done between Report and Third Reading? With the Easter break in between, there is time, so this is more than timely. Can she reassure noble Lords of the potential for movement on this specific point of a duty of care?

[Baroness Kramer (LD)]

My Lords, I shall be very brief. I spoke on this issue at length in Committee. The Government may take note that every single speaker today from across the House has supported the concept of a duty of care and non-exploitation and has urged the Government to act.

In all the speeches, both before today and referenced again today, we have heard about this chain of malfeasance, whether it has been described as scandal or fraud or an abuse of customers. Clearly, the existing legislation does not work, or we would not have this kind of history with new scandals cropping up, sadly, on a regular basis. Like it or not, treating customers fairly is interpreted by both the industry and the regulator as exceedingly light touch, to be offset by the “caveat emptor” principle—the taking of personal responsibility—to which the noble Baroness, Lady Tyler, referred. This is unacceptable. This Government often say that they focus on outcomes. The outcomes have been unacceptable. Look at the outcomes and the chain of scandals. Here is the opportunity to act.

In response, the Minister might say that there are effective tools, such as the senior managers and certification regime. Anyone who has followed the progress of this Bill and the amendments through Committee will have heard how that has broken down. It has, in effect, become something of a busted flush. The Minister might say that scandals have been picked up very early because we have working whistleblowing channels. Again, from listening to the discussion throughout Committee stage, it is clear that this scheme is not working. The analysis in the Gloster report reinforces that.

We do not need a ninth consultation. Every time there is another major scandal, the FCA’s response is to have another consultation. In the end, there is something like a freckle of movement. This issue needs to be seized by the scruff of the neck and resolved before more people suffer injury. The regulator needs to be put on the front foot. By supporting this concept and this amendment or something equivalent to it, the regulator will finally be put on the front foot and the industry will recognise that it has been duly warned and must reconsider the way in which it behaves.

I hope that we shall hear from the Minister that we shall see an equivalent proposal at Third Reading because, if not, I will not hesitate to ask all my colleagues and every Member of your Lordships’ House to support any decision by the noble Lord, Lord Stevenson, to move this to a Division.

Financial Services Bill

Debate between Lord Holmes of Richmond and Baroness Kramer

Committee stage
Wednesday 10th March 2021 Grand Committee

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

My Lords, it is a pleasure to speak to this group of amendments. In doing so, I declare my interests as set out in the register. I shall speak particularly to Amendment 122. It is evident that employee share ownership is a positive force within our economy, and speaks so much to the current Covid environment and what kind of economic sector, work and business basis we can have to our economy as we built out of Covid.

It is no surprise that Sir Nicholas Goodisson, after taking the London Stock Exchange through the big bang and seeing some of the early privatisations, then moved on to a role heading up the Wider Share Ownership Council. He saw the benefits and the positive impact that it had for people to have a stake in something, and there could be no better example of that than employees having a stake—a share—in the company for which they work on a daily basis.

I believe we will see more innovative models of employee ownership coming through. The EOT, for example, is still very much in its embryonic phase but it is a very positive concept and construct. There will be further developments in this area and I believe Amendment 122 sets out the case very well that when employees have a share, a stake and a say in the business for which they work, it benefits all concerned.

[Baroness Kramer (LD)]

My Lords, first, I have to correct an error I made in the last group of amendments. I referred to the HBOS Reading scandal when I was talking about the Promontory report, and of course I should have been talking about the RBS GRG scandal; I am afraid I got my scandals wrong. My apologies for that—there really are too many to choose from. I hope that one day I find there are no choices; that would be a very good situation to be in.

I find this group of amendments wonderfully refreshing and a very important change of direction. Amendments 108, 109 and 110 in the name of the noble Lord, Lord Hodgson, build on the concepts that we already have in the UK Stewardship Code but take that further. In many ways, one can see a relationship with the duty of care amendments that we talked about earlier in this debate. That duty of care was focused on customers but in many ways that is now extending that perspective to employees. I find that exciting and worthwhile.

I and my colleagues in the Liberal Democrats have long talked about the need for a very different social contract between employers and the workforce. Very often that workforce may not be an official workforce in the formal sense; it may be people who are self-employed and working freelance but who in effect are working very closely with an organisation. The whole of that workforce needs a very different social contract as we go forward into a different era.

I think we both have different standards about how we treat each other and different expectations. However, we are also about to go into a period of transition to the digital age. That will be disruptive. It creates real issues for a large swathe of people and we cannot passively step back and look at a group of people just as collateral damage as we make that transition. The obligations to the workforce have become far more significant than they might have been in a fairly steady and static era when everything was expected and was not changing very significantly.

I have long been a fan of what is loosely called triple bottom line accounting—and have probably talked about it too often in this House—whereby issues such as the environment and the social impact along with the financial impact are measured when we look at both individual accounts and when we look globally at a nation’s accounts. We had earlier amendments around the issue of well-being, which are well related to all that.

I was excited to hear the example of New Zealand that the noble Lord, Lord Knight, detailed to a fairly significant degree. Nearly 20 years ago I spoke to a conference in Auckland around these issues as New Zealand was making its decision to revisit the way in which it managed its national accounts and looked at corporate accounts. I notice that very often, when we look at an English-speaking country with close ties to the UK, we find it much easier to absorb the examples and to treat them in a sense as a pilot from which we can learn. I therefore hope very much that the principles in these amendments will be enhanced.

Like the noble Lord, Lord Hodgson, and my noble friend Lady Bowles, I am a great believer in employee share schemes. There is always a downside to be aware of. If something goes wrong in a company, you want to make sure that employees have also built other pension resources, have diversification and all those kinds of opportunities. A principle that is held as very important for senior management ought to be extended down throughout the employee base. Where you have ownership, you have a voice, and having a voice is important both in empowering people in their everyday life as a workforce and in making sure that they drive the direction of the company they are working for. We all know that the old-fashioned view that all that matters is the shareholder is essentially part of the past, and I very much welcome all these amendments as part of the future.