Secondary International Competitiveness and Growth Objective (FSR Committee Report)

Lord Johnson of Lainston Excerpts

Wednesday 11th March 2026 Grand Committee

[Lord Johnson of Lainston (Con)]

My Lords, I shall first declare my interests. I am on the board of a crypto data business and have investments in companies regulated by the FCA and the PRA. More usefully for this debate, I ran a regulated asset management firm for 15 years, a job that I enjoyed greatly at the beginning, when I was able to offer my investors from all over the world a fabulous and, for us, very profitable service, but, by the end of my time, I became dominated by compliance with absurd rules designed by people with limited to no knowledge of the financial services sector who have caused untold damage to the lives of our citizens, all under the guise of a misunderstood notion of risk reduction and consumer safety.

That is why the debate today is so important, and I congratulate the members of the committee for writing one of the best reports from the House of Lords that I have ever read. I am delighted that, as the noble Lord, Lord Altrincham, suggested, some effect has been achieved, something has been done. The growth mandate, which is the main focus of the report, which I supported, by the way, as a Minister for Investment, was fought by everyone in the system who I met. I think even the noble Lord, Lord Hill, was cautious about the opportunity, sadly. It was felt that it would create untold risks, that it would distract the regulators from their task of ensuring that the consumer is treated properly and that it was not appropriate—that dreaded word. However, the people in charge should be focusing on the growth requirement every waking minute; that is their purpose. Finance is only about growth.

Of course, we need regulations and registrations for the market to function. The noble Lord, Lord Eatwell, gave some exceptionally good explanations around that. The rest is the hard bit, and it is the bit that the leadership of the FCA, the PRA, the Bank of England and, to some extent, the Government, are dodging, as the report clearly demonstrates.

Imagine an FCA that was judged by how many new firms came here from abroad to set up. The noble Baroness, Lady Moyo, gave examples of banks that have withdrawn from this market. I ask noble Lords to consider, if I may call on their imaginations, a regulator that acts as a service to business rather than a hindrance. When I set up my office in Singapore, how did the MAS, the Monetary Authority of Singapore, treat us? Did it ask for endless forms to be completed or say that it could not say how long our application would take to process but maybe six months, or a year? No. It sent two delightful people to our office in London. They helped us to navigate the documentation. They even suggested schools for the children of the staff moving out there and offered, unbelievably, some funds to manage from the Singapore Government. Can anyone here seriously think that the FCA or the PRA would do anything like that? It is a shame that they would not.

This report also shows something extremely worrying, which is that they have created a culture of fear. Firms, like some poor downtrodden citizen of a dictatorship, asked to be anonymous when discussing issues with the committee. They are frightened that if they criticise these people, they will be given some type of regulatory punishment beating. I cannot remember whether it was the noble Lord, Lord Vaux, who made that astonishing comment—today, in this country. In my view, this is unacceptable and shameful. From this House, I demand an answer to this awful culture that these people have created. I ask them to note that we are not frightened of them, and that they work for us.

Let me turn to some of the specifics of their failures. By the way, we in this House must share the blame, as should my own party, which presided over so much of this damaging nonsense. The idea that no one can die and no one can lose money is what destroys civilisations. My first point is MiFID, which was a UK, not a European, idea. We tried to blame the Europeans, but it came from this country; it came from the FCA or its predecessor. It was thought of by people with no knowledge of how research is generated or paid for or its vital importance to the market. They felt that companies were charging too much, as if that is something that a Government should question. We want companies to make money so long as the market is competitive, since the market sets the price. I know that it is a bizarre and outdated idea. Adam Smith’s 250-year anniversary seems to have been forgotten—but not, I am pleased to say, by the noble Lord, Lord Lilley; I am not sure that his dinner will be cooked by anyone at this rate. MiFID destroyed the small cap market. For those listening from the regulators—I bet no one is, by the way—that means that small companies cannot get coverage from brokers, so they cannot raise money. So we cannot grow our businesses, and they have to go abroad for capital. Does that sound familiar?

RDR is the next atrocity. This onerous regime governing advice that can be given to individuals is now so complicated and expensive that millions cannot afford to receive proper advice. The effect is that many people have no idea what to do, so either do not save or drift into non-regulated areas such as cryptocurrencies.

Not separating retail investors from institutional investors was covered well by the report. By our not properly separating these two regimes, specialist firms—which through their number and size reduce, not increase, risks to the system—cannot make their products easily available to other institutions and face the same burdens as a multinational bank.

The senior managers regime is a sclerotic absurdity designed to make us feel good about ourselves but merely discourages companies from managing their staff in a flexible and timely fashion. It thus increases risks for the system, because they cannot get the right people in the right places.

Banking regulation has been well covered in the debate. Through the fear of mis-lending, we have now prevented banks lending to businesses, especially domestic banks. This lack of capital has severely hurt our economy, stopped people getting mortgages and created a far larger unregulated credit market that could blow up at any time. I am sure that the officials who run the PRA and FCA say, like Captain Smith of the “Titanic”, “But no one ever thanked us for the icebergs we missed”, but they are creating an ever-bigger berg into which we will crash unless something is done. All Labour needs to do is tweak these requirements for capital, as we have heard, to make them sensible. It would create untold economic growth—that is my gift to the Minister, if he wishes to receive it.

Another terrible act, which I am afraid was probably thought of by some of my colleagues in the Conservative Party, is the concept of consumer duty. That too was well covered in the report, but I do not believe it has been discussed today. It is truly the worst of all—a tortuous process where a company has to work out how a user many parts down a chain may be advantaged or disadvantaged by a product or service. Every firm I know already has such a duty embedded in its mandate; it is how business works. But these days we love holding everyone to account so that blame can be apportioned if something goes wrong.

The problem is that things change—or, in another phrase, go wrong. Capital needs to be reallocated to the highest point of return for humans to progress—that is the beauty of life—and trying to prevent that is truly selfish and foolhardy. After all, that is what diversification is for: it is what risk and return are, which seems to elude the regulatory environment and the people creating these rules.

People, by the way—this is the kicker as I come to a conclusion—are also, and should be, responsible for making their own decisions. Things such as the consumer duty will remove further from the citizen good savings products and advice. The compliance costs will increase, reducing profitability for the sector and capital for growing companies. Documentation will increase in size and complexity, yet again befuddling us all, who now just click “yes” to everything. Dangerously, people will think they are protected from losing money or their house simply because of the size of the disclaimer that they have clicked, so they will act with less caution and rationality, spelling worse crises than before.

I am afraid to say that the fact is we have unsuitable people running these organisations. I have been specific in not naming anyone because I do not think that is fair. Ultimately they are civil servants—for whom I have the greatest respect. But they have no real experience —or any experience at all, actually—of running financial services firms, and their priorities are not growth but, in my mind, their own convenience and self-justification. We have seen examples of that in their responses to this report.

We in the UK are in an emergency. Unless the Government, we in this House and most especially the regulators take note of the importance of the growth mandate, we will drift further from being a middle power to becoming an emerging one, poor and defenceless. It is an unkind thing to do to us. So I ask the regulators responsible to wake up today. I am afraid I ask them to replace their leadership; I know that is a strong expectation and unlikely to happen, but it is essential that the responsibility borne by these individuals for the acts that they have committed is made clear. I ask them to correct their course of action and focus on growth and, importantly, how to serve the businesses in the same way the MAS serves the financial sector in Singapore. We forget the amazing people who work in these organisations. We need to regulate to make the financial services industry in the UK not contained, small or limited but the greatest in the world. That is why I commend this excellent report to the House.

Product Regulation and Metrology Bill [HL]

Lord Johnson of Lainston Excerpts

2nd reading
Tuesday 8th October 2024 Lords Chamber

[Lord Johnson of Lainston (Con)]

My Lords, it is a great privilege to follow the noble Lord, Lord Fox. He was highly eloquent—although I feel he got slightly stuck on the Peterborough ring road towards the end of his speech when talking about Europe.

There were phenomenal contributions from across the House, including, obviously, from my noble friend Lord Sandhurst. I also pay tribute to the noble Baroness, Lady Winterton, who gave a phenomenal maiden speech, but I was confused as it was filled with compassion, humility and personability. I do not see those as qualities at all relevant to being Chief Whip from my recollection, so I assume she filled her other roles with excellence. I welcome her to this House and look forward to working with her over the coming years.

The Bill is a very important evolution of our product safety processes. It continues much of the work undertaken by the previous Government to ensure that consumers can be safe in the knowledge that what they buy conforms to high standards and that shops on our high street do not have to compete unfairly with online providers through a derogation of standards. I congratulate the Minister, the noble Lord, Lord Leong, for continuing the excellent work, if I may say so, of previous Ministers in the DBT. To follow on from that, the metrology part of this Bill has its roots in a sensible need, quite rightly, to update the legislation to ensure that we can have control over our measurements and standards following our departure from the European Union.

However, as we heard from a number of noble Lords, we have some significant concerns about how these measures will be implemented, as well as the risks contained within the Bill, which could easily lead to less protection for consumers, less choice and higher costs to businesses, and have the exact opposite effect from our desire to have greater freedoms to be an independent trading nation.

I have a few points. This has been a fascinating debate on what could have appeared to be a Bill with a rather anodyne title. I will add to the list of questions, some of which are overlapping and some of which follow on from the excellent speech given by my noble friend. I have not received very clear responses back on questions following the last few debates I have spoken in, so I would be grateful if we can get those, because these are technical points. We want to create good legislation and I think the whole House is agreed that this is an important Bill, but we have to do it correctly.

It is relevant that we are having a philosophical debate. I think the noble Lord, Lord Fox, mentioned the principles around the philosophy of this legislation. It is important; we are changing significantly the principle of responsibility and where it lies for online marketplaces. That is complicated. At the same time, we do not want to distort the new gig economy. Millions of people trade online. I should declare an interest that my sons spend a great deal of their time trading football shirts on various websites. We have to be very careful to ensure that we are not affecting or limiting the prospective future of the online economy because we are concerned about product standards in some respects. Having said that, we have to ensure that the responsibility is properly delineated and that there is a high degree of product safety. I would like to hear the Minister’s thoughts on the philosophy relating to some of the more intellectual concepts around the changes to where responsibility lies, and for him to give us some security that this is about product responsibility rather than necessarily trying to overregulate people’s activities when it comes to online marketplaces.

I would also like some clarity, if the Government can provide more to this House, on the costs of enforcement and how they will ensure that the fees levied will be incidental, or indeed affordable. I have a fear that we will see a whole raft of new regulators. It is clearly important that we have enforcement, but this has to be paid for. This could create an entire new web of regulatory activity, which can often be misguided and expensive.

I am very concerned, as I think are many Members of this House, both noble friends and noble Lords, about the range of criminal offences that will be created, with different tariffs. For some reason we love locking people up in this country and then seemingly releasing them soon after. It would probably be sensible to outline here and now what the real constraints are in this area. I do not think it is good enough, as we have repeated many times in this debate, simply to have that be defined at a later date.

I would like to see the consultation outcomes on product safety. My noble friend Lord Sandhurst mentioned this. It seems absolutely bizarre that we have not seen the outcomes of the consultation that was done a year ago. I am very aware that there was an election, but that should not have stopped officials doing the work to understand the responses. It is impossible for us to legitimately say that we can have a proper debate in this House if we have not seen the feedback from the consultation around product safety and how we need to go forward. I believe, from an informal discussion we had earlier this week, that there is a commitment to produce at least a summary of the findings before Committee, so I call on the Government to do that.

I also press the Government further for more work on battery safety. A number of noble Peers with great expertise have contributed to that part of the debate. It is essential that we deal with this urgently. In response to the noble Lord, Lord Foster, I would not like to confuse some of the comments about battery safety—not that he was confused in any way—with the importance of having proper legislation on consumer safety in general in this Bill.

I want to follow up on the points, well made, by the noble Baroness, Lady Lawlor, about the effect of this legislation on the Windsor Framework. Other noble Lords have raised this issue too, and it is very relevant; we are dealing with complex, sensitive webs of legislative activity and it is essential that we really consider what the impact will be. It is not good enough to say—I fear that I predict this response from the Minister—that there will not be an effect. There clearly will be, because this is a complicated issue. It is very important that we have an open debate about that.

The noble Lord, Lord Browne, and other noble Lords rightly raised the issue of the devolved nations. Have they consented? Where are we in the process of gaining legislative consent? How will this affect the internal market of the United Kingdom? Again, this is not straightforward. It is simply not good enough to say that we hope to get it at a later date, or that if we come back in a few months’ time, it will all be fine.

Then, there is disquiet about how these measures may be used—when they are eventually defined—to align our standards ever further with those of the EU. This is especially relevant in areas such as environmental protection. We know well that, in many instances, blindly following the EU will have negative impacts on our economy. Can the Minister please respond to these important questions? I am concerned that this has somehow been negated in the discussions we have had. It is very important to get the philosophical elements of this correct. An element of openness and transparency will be welcome; it will solve problems in the future if we have an open discussion now.

It is true that this is relatively technical legislation designed to play catch-up with a new modern digital economy. Unfortunately, however, the phrasing is very broad and the powers are ill-defined. Trying to ensure that the Government can evolve their regulatory frameworks as technology evolves is fair, but, at the same time, we need more detail. There is also a growing body of opinion that these plans do not go far enough in genuinely ensuring that consumers are protected, and that trust can be properly vested in the online marketplace industry.

Giving such broad powers to a Government who, by their own admission, do not have a clue as to what tomorrow holds is extremely dangerous and goes against the principles of good lawmaking. It is crucial that we have a proper debate now to ensure that we understand what we are doing and have thought clearly enough about how these marketplaces will operate and how consumer product safety can be properly engaged.

I am also extremely concerned that, if we rush this and simply use secondary legislation to bring in criminal offences, fines, costs and other regulatory structures, we will end up with a clunky, heavy-handed set of regulations that do not protect the consumer. They will end up checking boxes and denigrating out business base, reducing consumer choice.

Finally, it is clear that this House, and, indeed, the nation at large, need to be properly reassured that this Bill is not a simple attempt to realign us with every aspect of EU regulation, but that we have thought clearly about the ramifications of how the world has changed and how properly to police that to ensure consumer safety in a growing economy. I very much look forward to a far higher level of detail as we enter Committee, and I look forward to Minister’s response.