Financial Services Bill

Debate between Lord Holmes of Richmond and Lord McNicol of West Kilbride

Report stage
Wednesday 24th March 2021 Lords Chamber

[The Deputy Speaker (Lord McNicol of West Kilbride) (Lab)]

The next speaker after the noble Lord, Lord Holmes, will be the noble Baroness, Lady McIntosh of Pickering.

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

It is a pleasure to speak to this group of amendments, and I declare my interests as set out in the register. I congratulate the noble Lord, Lord Stevenson, on the way in which he introduced this group, and on all the work that he has done in this area, not least with StepChange. More than a step change, he has done more than many marathons around this subject. Not just your Lordships’ House, but the nation, is in his debt for the work he has done on debt.

I also thank the Minister for his engagement throughout the Bill. I know that he is completely committed to this area, and I congratulate him on the engagement and the time he has spent with me and other noble Lords. It is safe to say that this is an issue that will run longer than this Bill. As with so many other issues, Covid puts a new lens on debt, and enables more people to understand that it is not necessarily just for others. Potentially, with a slight twist of circumstance, we are but a heartbeat, or a breath, away from being in tough financial straits. I congratulate the noble Lord, Lord Stevenson, and I look forward to hearing the response from the Minister.

Financial Services Bill

Debate between Lord Holmes of Richmond and Lord McNicol of West Kilbride

Committee stage & Committee: 1st sitting (Hansard) & Committee: 1st sitting (Hansard): House of Lords
Monday 22nd February 2021 Grand Committee

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

My Lords, it is a pleasure to take part in this first group of amendments, and I congratulate the noble Lord, Lord Sharkey, on the way he introduced it. There could barely be a better amendment to start Committee.

In 2017, during the passage of the Financial Guidance and Claims Bill, now enacted, there was much discussion of, and amendments tabled around, a duty of care, with support from all sides of the House. The response then was that the time was not right: we had to get through Brexit and then look at financial rules and regulators in the round. Four years on, with Brexit done, I think the time is more than now to consider duty of care in all its manifestations, as the noble Baroness, Lady Bowles of Berkhamsted, set out.

In saying that, like other noble Lords I am extremely grateful for the briefings and unstinting hard work undertaken by many organisations in this area. It is invidious to single out two, but I will, not least the Money Advice Trust and Macmillan Cancer Support. Duty of care was an issue in 2017; it was an issue way before that. The Covid crisis has not brought about the need for a duty of care; it has merely shone the brightest and starkest of spotlights on the issues right across the financial services sector.

It is difficult to put it any clearer than this, from a client of Macmillan Cancer Support in one of her darkest moments: “It felt like I was fighting my bank as well as fighting cancer”. Fighting my bank as well as fighting cancer—that is a more than good enough reason to think extremely carefully about how to bring about a duty of care. That one individual speaks for hundreds of thousands.

My Amendment 129 in this group seeks to introduce rights of action for SMEs for breaches of the FCA handbook. I believe the amendment would bring clarity and consistency to how the handbook operates. These rights of action are currently available only to private persons but, when we consider this in the round, not least in the world of FS when we think of fintech founders, are the “Ss” of SMEs—micro-businesses—essentially that different from private persons? Of course I understand the concept of the corporate veil and limitation in all its forms but, in essence, when it comes to operating in a regulatory framework, as we currently have, are micro-businesses that different from private individuals, who currently have this right of action?

Imagine this: currently, a micro-business has only the letter of the contract to take action against the bank. This seems wholly unsatisfactory and more than a little asymmetric. The nature of the relationship between a small business and a bank should be much more effectively reflected in the rulebook. Need I suggest some of the ways this may have helped in the past, with Libor, forex, the GRG, and Lloyds/HBOS activities in Reading? In particular, RBS’s global restructuring group was one of the most shameful episodes in this country’s banking history.

Fundamentally, the amendment can be summed up in a simple line: in reality, how can an SME or micro-business take a bank to court? Amendment 129 offers the appropriate level of support and clarity to our SMEs, and consistency in the operation of the rulebook. Our SMEs are the beating heart of our economy. I suggest we use the amendment to put some head alongside that heart.

[Lord McNicol of West Kilbride (Lab) [V]]

My Lords, at this stage I have not put my name to any amendments, but I will speak in support of Amendment 4, tabled by my noble friend Lord Tunnicliffe, and make a few relevant points. Before I start, I make the Grand Committee aware of my financial interests as set out in the Lords’ register and echo the point from the noble Lord, Lord Sharkey, about the imbalance of power between the lender and the individual—a critical point that I am sure we will come back to in Committee.

Low financial resilience and overindebtedness are huge problems for individuals and the country. UK households have nearly £250 billion of outstanding consumer credit debt and more than 42.5 million people have used consumer credit. Those are the figures for 2019, pre Covid. In 2020 and into 2021 the problem has only worsened. The FCA recently found that the number of people suffering from low financial resilience increased by one-third to 14.2 million people in October 2021. That is nearly one-quarter of the UK adult population.

We know that low financial resilience is not just about overindebtedness. It can be caused by a combination of low savings and erratic family income. Erratic income and low levels of savings are not issues that the FCA can solve—government intervention and education are required to tackle those. However, overindebtedness is an issue that the FCA can help to address. Amendment 4 and a number of the other amendments in this group, as well as the later Amendment 8, would give the FCA some of the tools to do so.

As set out by the Government, the FCA has three key functions: protecting consumers, keeping the industry stable and promoting healthy competition between financial service providers. Of those three critical functions, I would like to concentrate on the first, of protecting consumers. Amendment 4 takes that current responsibility and would add to the Bill a clause which would give the Financial Conduct Authority a duty of care and, later, under Amendment 8,

“rules … to promote financial wellbeing”.

These would enhance the FCA’s powers to protect consumers—something which I am sure we all agree is necessary.

Christopher Woolard, chair of the recent Woolard review, said:

“Most of us will use credit at some point in our lives. So, it’s vital that we have a fair market that works for everyone. New ways of borrowing and the impact of the pandemic are changing the market, with billions of pounds now in unregulated transactions and millions of consumers at greater risk of financial difficulty”.


The Woolard report sets out 26 recommendations to the FCA, some on working with government and other bodies to make unsecured credit markets fit for the future. I hope that the Minister and Her Majesty’s Government will look at the amendments tabled and, where those issues and recommendations raised by Woolard align with them, we will see some government amendments or an acceptance of the amendments laid to the Bill.

This is specifically pertinent in relation to “buy now, pay later” products. On 13 January in the other place, Stella Creasy moved an amendment that would have required the BNPL industry to be regulated by the FCA. The proposal was defeated by the Government, by 355 votes to 265. The Woolard review makes the point, on the regulation of the unregulated “buy now, pay later” sector:

“BNPL products which are currently exempt from regulation should be brought within the regulatory perimeter as a matter of urgency. The use of BNPL products nearly quadrupled in 2020 and is now at £2.7 billion, with 5 million people using these products since the beginning of the coronavirus pandemic”.


The report continues by stating that

“more than one in ten customers of a major bank using BNPL were already in arrears. Regulation would protect people who use BNPL products and make the market sustainable.”

Seeing the light, the Minister, John Glen, agreed that Her Majesty’s Government need to act and bring BNPL into the scope of FCA regulation. I was hoping to see a government amendment to this effect, as the noble Lord, Lord Sharkey, said earlier, but I am sure it will be forthcoming at later stages of the Bill.

I also bring to the Committee’s attention an article in the Observer yesterday, Sunday 21 February, entitled “High-cost lenders ‘exploit NHS workers on pandemic frontline’”. The article highlighted a number of individual cases, as well as the alarming and eye-watering interest rates of over 1,300% being charged by some high-cost credit providers.

The article is based on a University of Edinburgh Business School research report, which makes it evident that the signs of financial vulnerability within the NHS workforce are being ignored by high-cost lenders on an industry-wide basis. Overindebted NHS workers are now struggling with unaffordable loans. They did not receive them from unlicensed backstreet lenders: more often than not, they got them through FCA-licensed and regulated high-cost lenders. This is why Amendment 4 is so important in stating

“the general principle that firms should not profit from exploiting a consumer’s vulnerability, behavioural biases or constrained choices”.

Tax: Church Action for Tax Justice Reports

Debate between Lord Holmes of Richmond and Lord McNicol of West Kilbride

Thursday 21st January 2021 Grand Committee

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

My Lords, tax, a temporary aberration, has proven more than somewhat sticky. Of itself, this is neither positive nor negative. I welcome the opportunity to take part in this debate, congratulate the right reverend Prelate on securing it, and welcome the two reports from Church Action for Tax Justice. Indeed, tax for the common good has to be what we are aiming at.

The Covid crisis has affected the relationship between citizen and state—taxpayer and tax collector—as with so much else in society and our economy, with HMRC being an effective means of financial support for many people. There is a real opportunity here to reimagine tax: real time, data-based, embedded far more in our daily experience, rather than something mysterious and distant, with the constant fear of the crown-embossed envelope landing on the doormat.

Many of us are used to dealing and interacting with our banks and grocers digitally, often via apps—why not similarly deal with the tax man? In saying this, I am in no sense undermining the significance of the pernicious forces of digital and financial exclusion, which need to be urgently addressed. But imagine a trader coming out of Covid. If HMRC reverses too quickly from financial support to debt collector, what should she do when faced with her VAT and other bills or paying the electric? As with any other debt, it should start with an effective relationship and connection, maybe via an app, with understanding and flexibility on both sides.

All the data already exists in our current banking and payment system to be able to operate a taxation system in real time for the benefit of all. It is encouraging that the Chancellor of Exchequer has nodded his support towards stablecoins and, indeed, central bank digital currency. Imagine central bank digital currency which could carry with it its taxation status, effortlessly operating an efficient, effective tax system for the whole UK. We could potentially have an effortless domestic and international, cross-border taxation system. When added to smart ledgers and DLT, the opportunity is extraordinary. Would my noble friend the Minister agree that, when it comes to tax transformation and tax for the common good, we not only have the technology but that tax in this new, transformed, technology-driven world does not need to be taxing?

[The Deputy Chairman of Committees (Lord McNicol of West Kilbride) (Lab)]

I will try the noble Lord, Lord McKenzie of Luton, again. Lord McKenzie?