Financial Services and Markets Bill [HL]

Lord Massey of Hampstead Excerpts

Committee stage
Wednesday 8th July 2026 Grand Committee

[Lord Tunnicliffe (Lab)]

I rise to speak to the Motion that Clause 40 does not stand part. As I explained at Second Reading, I have no professional knowledge of the banking industry but, because of circumstances, for more than 14 years I have been in this Room talking about the finance industry and doing my best to pretend to understand at least bits of it.

The one thing that I think I bring to this Bill is my long experience of concern about problems of little likelihood, even small likelihood, but with catastrophic results if the risks mature. It is on that theme that I am concerned that we are creating risks. In 2008 we had the crisis. It is now 18 years ago, just long enough for most people to have forgotten it. We had the Vickers review, which we all felt was pretty good, and after that came ring-fencing, and we convinced ourselves that this would solve most of the problems. There were some other things as well. There was the splendid clause that vested criminal responsibility on the boss of a subordinate who committed some criminal offence. Clearly this was too uncomfortable for the City, so it was changed. I led the opposition to the change and failed with a 200-vote tie. Because we were the Opposition not the Government, we failed.

The preparation for my consideration of this ring-fencing issue caused me to read through a lot of stuff. I came to the conclusion that the ring-fencing was not nearly as effective as we had felt it would be at the time, but, in a sense, I was reluctant to be overly concerned about it because I felt that the resolution regime developed by the Bank of England, in which I had personally taken a great interest, would be good enough to pick up the holes in the Bill.

I was comfortable in this position—almost willing to ignore it—until, at Second Reading, the noble Baroness, Lady Kramer, for whom I have immense regard, rather woke me up. I quote her speech:

“Picking up on the point made by the noble Lord, Lord Tunnicliffe—I disagree with him completely—that in the case of resolution, we do not need ring-fencing because we have a resolution regime in place or we can weaken the one because the other exists. Will the Minister be able to look me in the eye and say that he would activate a bail-in bond scheme if a big bank failed? The consequence would be huge financial instability among those who held those bail-in bonds—I am talking about the insurance companies and pension funds. Many would be on the verge of collapse if we ever exercised bailing in those bonds. That is one of the reasons why, in the financial crises that have happened, no Government have ever taken that step”.—[Official Report, 8/6/26; col. 1206.]


I do not have the weight of knowledge to be able to disregard such a statement.

The Minister was kind enough to facilitate a visit to the Treasury and the Bank of England to take me through the bail-in regime. It took four people from the Treasury and four from the Bank of England to try to persuade me that it was in good hands. I came out of that uncomfortable. If one is uncomfortable about a potential catastrophe, one feels that one has to pursue it, I am afraid.

Then one comes up against the mechanisms of legislation; here, I have to give notice of my concerns. If we are going to remove or take away activity from the ring-fencing solution and replace it with the resolution regime, it is important that that is tested much more intrusively than is proposed. I hope to persuade the Minister that, between now and Report, some mechanisms that are convincing to like-minded, fair-minded people have to be put together so that that balance will be achieved.

I was responsible for all sorts of safety, but particularly in the railway industry. You would not be able to do this in the railway industry. If you make a change that is of critical importance, there is a set procedure that must be gone through, and it must be signed off at the highest level. We should recognise that Clause 40 is of that magnitude. It just so happens that, in yesterday’s Times, there was an article that said:

“The Bank of England is planning to loosen rules it brought in to make the financial system safer after the 2008 crisis despite worries about the proposed changes voiced by some of its own officials … The central bank’s financial policy committee announced on Tuesday that it intended to revamp some regulations on the loss-absorbing capital that lenders must hold because it wanted to tackle the ‘unintended consequences’ of its rules and make it easier for banks to lend to households and businesses … Andrew Bailey, the Bank’s governor, insisted the overhaul would ‘make our capital regime more effective, proportionate and better calibrated to the risks in today’s financial system without unduly compromising the safety and soundness of firms’”.


“Without unduly compromising” is not nearly a powerful enough test. The limited test is that the risk should be lowered—as low as reasonably practicable.

We have all sorts of problems in this world, and all sorts of unprecedented things are happening. We have cryptocurrency. Now, I do not understand cryptocurrency; it seems a series of charades to me, but I suppose the purist would also point out that the dollar is a series of charades, because that is the essence of paper money. Nevertheless, things that can go and down up like that are fundamentally dangerous, given how large they are becoming in the banking world.

We also have the unregulated banking area. Without knowing the detail, but from listening to people who know about it talk about it, that seems to be an increasing threat. We also have wars all over the place. If we are moving to a regime where we give up ring-fencing, depending on resolution, we will need to subject it to a stronger set of tests through the processes of this legislation.

[Lord Massey of Hampstead (Con)]

I support Amendment 160A. I want to start by briefly addressing a couple of issues raised by the noble Lord, Lord Pitt-Watson. Most importantly, I want briefly to quote the conclusions of the Skeoch report. The panel judges that the ring-fence

“is worth retaining at present”

but adds a number of considerations:

“The Panel recognises that the regime’s benefit will likely diminish with time, especially as the resolution regime—designed to ensure the continuation of all critical functions … —is embedded. This is because … UK authorities become comfortable with the viability of the large banking groups’ restructuring capabilities”.


I mention this only because the impression was given—

[Lord Pitt-Watson (Lab)]

I did indeed talk to senior members of the Skeoch commission before writing my speech, and what I said is completely consistent with the conclusions of the Skeoch commission, which was set up by the previous Conservative Government, as I said.

[Lord Massey of Hampstead (Con)]

I am just reading the conclusions from the report, my Lords. They make it very clear that the continuation of ring-fencing made sense at the time the report was written, but the commission clearly envisaged that it might not be needed over the passage of time. I also remind noble Lords that Glass-Steagall was abolished some 25 years ago with no detriment to the American banking system. I say this just to make the point that it is not so obvious.

[Lord Pitt-Watson (Lab)]

I find it difficult to believe that someone has told me that the withdrawal of Glass-Steagall, which took place 13 years before the global financial crisis, had no detriment to the American banking system. As I say, I have read the Skeoch report and discussed it with senior members of Skeoch, and I believe that what I said is entirely consistent with the recommendations that they made to the Government and this House, which is recognised in the Bill.

[Lord Massey of Hampstead (Con)]

I also draw attention to the abolition of FOS, which the noble Lord mentioned. I draw the Committee’s attention to Amendment 172A, which discusses the changes proposed to FOS. It is to be abolished and replaced with something called the financial adjudication service, which is a broadly similar methodology to give redress to consumers and private clients, in the event of problems with the firms that serve them. While it is a change, it is a reform to FOS with an organisation with a different name, but it is not a straightforward abolition of that very important process. This will be dealt with in that later amendment—not in my name, I might add.

Governments, like some businesses, are very good at locking the stable door after the horse has bolted. Our reaction to 2008 was an example of just that. But we are now 18 years on and the banking sector has been solid during that time. However, as we know, growth has flatlined, despite many years of ultra-low interest rates. I am not suggesting that we are an exception here; there has been a similar experience across most of Europe. But we now have a substantial cost of capital for business to bear, with interest rates stuck at 3.75% and sadly not much prospect of a reduction in the near term.

--- Later in debate ---

[Baroness Kramer (LD)]

I have one question for the noble Baroness, as my noble friend Lord Sharkey will speak for us on this. What will the cost be to the individual of going to the tribunal system? I am conscious that an individual needs to raise between £40,000 and £50,000 to get to preliminary hearing at the employment tribunal. Is that the kind of number that she has in mind?

[Lord Massey of Hampstead (Con)]

I support this amendment and just raise the point of the First-tier Tribunal. I have experience of dealing with the FOS as a firm. At the moment, if you want to appeal the decision of the FOS, you have to go to judicial review. Therefore, whatever the cost of this First-tier Tribunal, it would be very substantially less than going through a process of judicial review, which firms are reluctant to go through, as noble Lords can imagine, because of its cumbersome nature.

[Baroness Lawlor (Con)]

Can I ask the noble Lord to clarify? Judicial review can determine a matter only if there is a matter of law involved, not a matter of adjudication; is that right?

[Lord Massey of Hampstead (Con)]

That is right.

[Lord Sharkey (LD)]

My Lords, as the noble Baroness, Lady Neville-Rolfe, remarked earlier in our Committee discussions, we often agree about things, but not, I am afraid, about this amendment. There are three reasons for that: first, the amendment is not necessary; secondly, it probably would not work, although its lack of any real detail makes it quite hard to tell; and, thirdly, it would significantly bypass parliamentary scrutiny mechanisms. For example, proposed new subsection (1)(c) says that the determination of complaints will

“be determined by reference to such statutory requirements as may be specified”,

without actually specifying them. This does not make for proper scrutiny.

How complaints are determined is absolutely critical in how redress is obtained. The amendment tells us nothing about how that would be done, or on what criteria judgments would be made. Proposed new subsection (1)(g) contains what looks suspiciously like a Henry VIII power. None of these provisions is really necessary, and nor is the amendment as a whole. That is because there does not appear to be a convincing evidence base for the radical root-and-branch reform that abolishing the FOS would bring about. The nearest we have to evidence is in the assertion by the Minister that:

“The Government’s review found that, in a small but significant minority of cases, the FOS has acted as a quasi-regulator”.—[Official Report, 22/6/26; col. GC 260.]


That is all the government explanation there is for the proposed radical reform and, by extension, for the amendment before us.

I have repeatedly asked the Minister for more detail; I asked at Second Reading, and I asked again on the first day in Committee. I have had no response to what are essentially simple questions. How many cases are small? How was their significance assessed? How is the FOS, in this small number of cases, acting as a quasi-regulator? What we have currently is an assertion, but it certainly is not evidence. When he speaks, can the Minister tell the Committee what “small” means in this context? How many and what kind of cases were involved and how did they come to be characterised as significant? As for HMT’s rather bland consultation report, the frequent use of the phrase “broadly speaking” does not inspire a lot of confidence about the strength of its case.

The amendment before us is essentially skeletal and removes the complaints procedure to a wholly different legal arena. Given the grossly overstressed nature of our justice system, it is very hard to see any improvements being located there. The FOS is meant to be, and is, a quick, simple alternative to costly court processes for consumers. There is no hard evidence to support the proposals made in this amendment and, indeed, no clear sense of what kind of redress system and what criteria for determination are envisaged.

Last July, the FCA and the FOS signed a memorandum of understanding. Article 21(b) of the memorandum says that the two parties will

“seek to achieve a complementary and consistent approach, so far as that is consistent with their independent roles by consulting each other at an early stage (including on the interpretation of regulatory requirements where they are relevant to the resolution of disputes)”.

Article 24(c) says:

“For the Financial Ombudsman Service: seek a view from the FCA on the interpretation of its rules and how redress could potentially be assessed, as early as possible in advance of issuing a final determination, and provide the FCA with any relevant information and draft determinations it can share, to assist the FCA in formulating a view.”


The following article says that the FCA should try to respond to the FOS’ submission within 30 days.

Political Party Finance and the Electoral Commission

Lord Massey of Hampstead Excerpts

Thursday 2nd July 2026 Lords Chamber

[Lord Massey of Hampstead (Con)]

My Lords, I start by thanking the noble Earl, Lord Kinnoull, for introducing this debate on such an important subject for our country. I declare my interest as a former chief executive of the Conservative Party and indeed a donor to the party for over 25 years, although not on the scale of Mr Harborne.

[Noble Lords]

Shame.

[Lord Massey of Hampstead (Con)]

A great shame. I come to this debate from a slightly different angle, perhaps, from other noble Lords. I have always believed that assisting the work of a political party that shares one’s views and values is a form of public service. As a party, the Conservative Party has always been deeply committed to the principles of the Electoral Commission and we adhered very carefully to the rules and always carried out detailed due diligence on large donors. I agree with the idea of a cap on overseas donors and with the idea of increased fines for misconduct; however, I am concerned about some proposals in the Bill which would be unfair to companies wanting to support any of our parties.

I want to address another concern, which is the matter of electoral fraud, as I am concerned that some items in the Bill could have the unintended consequence of making this easier. Most political parties believe that companies should be able to donate to a political party. At the same time, we are all aware of the potential for foreign money to enter our politics, which of course can come through individuals as well as corporates. The question is: what is the test we ought to apply in practice to judge eligibility to donate? The Bill stipulates three tests—perhaps I am getting slightly ahead of myself, as it is not yet before us, but I am addressing an item that will be in the Bill. The three tests are UK-generated revenues, UK headquarters and majority UK control. I strongly agree with the last two: we need companies to be in the UK and majority controlled by UK shareholders. However, the idea that the revenue should be generated in the UK could create some unfairness for those who make some or all of their revenues outside the UK.

The revenue source condition will not stop a determined shell company, but it will penalise genuine UK-owned businesses. In addition, the information on the geographic source of revenue is simply not discoverable for private companies, in effect, making it impossible to apply this new test to any company. I ask the Government to look again at this revenue source requirement.

I now turn to voter fraud, which is another serious issue that should concern us all. The Bill may unwittingly open a door to fraud by allowing non-photo ID to be used as verification. It also provides for the acceptance, without proper checks, of digital ID and introduces the idea of vouching. For those who have not read about vouching, this means that voter A can tell polling station staff that voter B is eligible and has the necessary ID. These proposals amount to a significant loosening of our voter verification rules at a time when there are rising concerns at the growing number of election frauds that have been alleged over several years. If we are worried about interference in our politics, and we should be, we ought to be alive to the real risks posed by voter fraud in certain areas. In this context, it is not clear why any dilution in the stricter requirement introduced by the last Government should be introduced.

This fraud risk is reinforced by the proposal for automatic registration, which will provide further opportunities for wrongful voting, as we know the electoral roll is only 84% accurate. However, I commend the Government on one important change, which is that candidates for UK general and local elections will now have to prove their identity. It seems extraordinary, does it not, that until now we have allowed people to stand for Parliament without having them prove their identity? The whole system needs to be as rigorous as possible to reinforce public confidence in our electoral system and in democracy itself. It is all about trust, as mentioned by the noble Earl, Lord Kinnoull, right at the beginning of this debate.

A final concern I want to raise, and I will be very brief, is about votes for 16 year-olds. This change is manifestly inconsistent with almost all rules defining adulthood, including by this Government, and the eligibility rules of the overwhelming majority of OECD countries. In implementing the social media ban up to 16, the Government recognised the vulnerability of young people to malign influences, yet the Bill places an expectation of competency for them to vote as soon as they turn 16, which is a dangerous precedent and should be resisted when the Bill comes before us.