Financial Services and Markets Bill

Lord Naseby Excerpts

Committee stage
Monday 13th March 2023 Grand Committee

[Lord Naseby (Con)]

My Lords, I take issue with my noble friend, as I have spent most of my political life involved in housing. We have a situation in the country, which is relevant to this amendment, of huge pressure on local authorities to help families who are homeless. The numbers are going up every month at the moment, and this amendment would at least ensure provision for a small section of society—possibly younger people or single-parent families—who find themselves in a situation that is nothing to do with their own original arrangement with the mortgage lender. It is entirely appropriate for our society to say that there is a means of helping them in a transitory manner to get them settled.

The most worrying aspect is in proposed new paragraph (b), which the noble Lord highlighted. This is not a new problem but a growing one, with unregulated entities on the fringe of the mortgage market. Any of us who has done any work in this area knows that it is quite a difficult area to control, but the FCA has not got a handle on it yet and it needs to.

I am not going to say any more, but I very much hope that my noble friend on the Front Bench will take this issue away, think about it and recognise that, if we do not take action, the local authorities where these people live will have even more pressure on them to find a home for the relevant family.

[Baroness Bowles of Berkhamsted (LD)]

My Lords, I rise to say a word in support of my noble friend Lord Sharkey. There are some more generalised and wider issues around this problem. We have the situation quite often—in fact, it is perhaps the norm nowadays—that whoever extends credit, whether for a mortgage or another thing, is not necessarily the same organisation that ends up holding it later on. It may be securitised, sliced, diced and sold on, or it may be sold on to a vulture fund because they are in trouble. The same sort of thing has happened with student loans, which have essentially been sold to vulture companies.

This raises the issue of what the Government’s terms are when they are doing the selling. I fully understand that they say they have to get the best value for the taxpayer, or whatever it is, but you cannot have value for the taxpayer at the cost of usury on a minority, and that is the situation that has arisen. It could impact on some with student loans, if the pressure to pay is different from how it was when the loans were elsewhere.

I have two questions. First, what are the Government going to do along the lines outlined by my noble friend to assist mortgage prisoners? More generally, what are they going to do when looking at mortgage terms that allow it to be sold on to anybody without any safeguards and other types of selling on, whether in distress or otherwise, that likewise essentially dispense with any kind of consumer credit or similar kinds of protections?

I am sure the Minister will recall that when we were talking about bounce-back loans and we had to dispense with some consumer credit protections, I warned that we might get bad behaviour as a consequence. This is part of the same picture and why we have such protections there in the first place, yet nowadays they are being seriously circumvented.

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[Lord Sharkey (LD)]

My Lords, I will speak briefly to Amendment 203 in the name of my noble friend Lady Kramer, who cannot be with us today. She is making good progress but is still recovering from surgery. On her behalf, I gently disagree with the noble Lord, Lord Vaux. The amendment is straightforward: it would simply prevent financial services from using the “You should have known it was fraud” excuse to deny restitution. In effect, in many sectors this allows the banks to decide whether to refund.

It seems to me that it is impossible to design a fair test for “You should have known” when talking of retail customers, especially vulnerable ones. How on earth do we devise a fair test under those circumstances? It is true that most consumers will not have the ability to challenge a bank’s classification of an event as “You should have known”, because they do not have the resource or the means to do so. Effectively, without Amendment 203, banks can decide for themselves which cases to allow, and that does not seem to be a good idea.

[Lord Naseby (Con)]

My Lords, I will speak broadly in support of these amendments, starting with Amendment 202. The incidence of fraud is growing almost daily. It is a huge worry and, unfortunately, it rests on His Majesty’s Government to try to find an answer to it. I accept that it is not an easy problem, but we cannot shy away from it. Over lunch today I was having some discussions with Transparency Task Force, a certified social enterprise. Certainly, some of the evidence it has is quite extraordinary and deeply worrying. I do not know whether there are other types of scams not covered in the Bill. I have not given any notice to my noble friend on that, but we would certainly like an answer.

On Amendment 203 on qualifying cases, I have spoken to only about half a dozen people who have had scams, but none of them knew anything about who was behind it. It is not very likely, is it? Having watched “The Gold” on television on Sunday, I can see how creative some people can be. It does not seem realistic, which is why Amendment 203 is important.

I have had a chat with members of the All-Party Group on Personal Banking and Fairer Financial Services. The only way to get a grip of these problems is to know what is happening on the ground. The noble Lord, Lord Vaux, asked for a six-monthly report, which is quite right. A quarterly report would probably be better, though it might be too tedious. At this point in time, His Majesty’s Government do not have a handle on the rate of growth, which is deeply worrying. I do not know whether these amendments are exactly right, but the problem is there, and it is the responsibility of His Majesty’s Government to get a grip on them.

[Baroness Bennett of Manor Castle (GP)]

My Lords, like the noble Lord, Lord Naseby, I broadly support this group of amendments. I particularly want to address Amendment 205 in the names of the noble Lord, Lord Vaux, and the noble Baroness, Lady Bowles.

As the noble Lord, Lord Vaux, said, it is worth highlighting uncertainty and trauma. We have a society in which every time people pick up their phones or emails to look at a message, many of them think, “I’m worried. Is this right or wrong? Is this official-looking email something I should click or not?” That is where we are. These amendments seek to address some of this, although even with them we would not get far enough. In the other place, the Treasury Select Committee last month expressed concerns about the Payment Systems Regulator dealing with push payment scams regarding the banks handing out the money and controlling the Pay.UK body that would be doing that. There is a concern that this needs to be seen as fair and rapid; to take away some of that fear is the key issue.

Amendment 205 is particularly interesting because we are talking here about a league table for how fairly banks treat victims of fraud. I could not help thinking of the comparison with schools. We have intensely scrutinised and detailed league tables for schools; surely we can manage similar league tables for banks. We had a lot of debate on earlier days in Committee on whether we wish to encourage competitiveness. But however much we might debate competitiveness, surely we all agree that competition between banks to see who is fairest towards victims of crime would be good.

This may not go far enough, but there are amendments here that the Government should certainly consider, particularly Amendment 205 concerning the league table.

Financial Services and Markets Bill

Lord Naseby Excerpts

Committee stage
Tuesday 7th March 2023 Grand Committee

[Baroness Bennett of Manor Castle (GP)]

My Lords, it is a pleasure to follow the noble Lord, Lord Davies of Brixton. Since the noble Lord, Lord Lilley, appeared to be directing a question at me about whether I oppose fossil fuels, I will take a moment to answer that. Do I think that pulling up carbon which has been stored in the ground over hundreds of millions of years, which was a crucial part of delivering the Holocene that gave us 10,000 years of incredibly stable climate in historic terms, and then pumping it into the atmosphere needs to be stopped with great speed? Yes, I oppose pumping out that stored carbon.

More than that, the fact is that extracting, transporting, burning and getting rid of the waste products from that fossil fuel causes huge damage to the health of people on this planet. One in five premature deaths that occur on this planet is as a result of burning fossil fuels—that is based on a study in environmental health in 2021. So do I want to do something urgently to make this a healthier planet for people? Yes, I do. However, that is not what any of these amendments are about. These amendments are to the Financial Services and Markets Bill, and all of them are about trying to stop the crashing of the financial markets, which are also crucial to our security and health in different kinds of ways. That is what all these amendments address.

It is really interesting that we have here a set of amendments which we might, collectively, for the purposes of Committee look at how we can hone and shape—I take the point made by the noble Lord, Lord Davies. But what we have in Amendment 168 are directions to the PRA to review capital adequacy requirements. That is about the security of firms. In Amendment 201, we have directions to the FCA to direct personal pension providers. Picking up on that point, I note the figures from the Pensions Regulator’s most recent survey of defined contribution schemes, which found that more than 80% did not allocate any time or resources to managing climate risk.

Then in Amendment 233, we have sustainable disclosure requirements, so that companies would report to investors what risks they are taking with their money by not dealing with all the sustainability risks which relate to the fact that we are exceeding planetary boundaries—not just on climate but on biodiversity, the loss of ecosystems and novel entities, and on phosphate geochemical flows. All these things are taking risks with people’s money, which is what we are talking about. Amendment 233 might indeed guide us in the direction of each major company having to have a chief environmental officer, who should be of equal status and importance to a chief financial officer because it is about ensuring the sustainability of the company, as well as the sustainability of this earth. Going on to Amendment 235, we are directing the Treasury to provide government guidance on how we achieve all of this.

That is an overview but I want to pick up one specific point. I would have signed Amendment 119, in the name of the noble Lord, Lord Randall of Uxbridge, and others in a full cross-party group, had there been space. When people think about forest risk commodities, they often start by thinking, naturally enough, about timber but, if we look at some statistics, palm, beef and soya production collectively amount to 36% of global deforestation. When Orbitas, an investment body, surveyed 24 capital providers in 2020, all of which had high levels of tropical commodity exposure, not one had screened their loan books and/or investments for agricultural transition risks. I want to major on that point while we debate this today, because if we look at Indonesia, 76% of unplanted forest concessions and 15% of existing palm oil assets could be at risk—that is, financial risk—should Indonesia adopt what is seen as its essential plans to meet its Paris climate commitments.

I said that we need to look at all aspects of planetary boundaries being exceeded. We also must include water risk. Fresh water supplies rely heavy on fossil water aquifers—in the American high plains, in Mexico, in eastern Europe, in Egypt, in Arabia, Iran and China. All agricultural production of food—the big sectors globally and financially—is utterly dependent on fresh water supplies, which are not being replenished. That is a huge financial risk as well as a risk to when any of us can eat in the future, at a basic level.

Finally, I focus on Amendment 168, tabled by the noble Baronesses, Lady Worthington, Lady Drake and Lady Sheehan. I would like to work with them ahead of Report because, as others have highlighted, this focuses particularly, though not exclusively, as the noble Baroness, Lady Worthington, said, on fossil fuel exploration, exploitation and production. We must broaden this out to look at the agricultural sector, because it is an area of enormous financial risk. I draw on the work of the investment group FAIRR, which looks at the extremely high financial risks. The majority of the largest protein producer companies are at high risk for greenhouse gas emissions, deforestation, water and waste. Over 60% of them saw soya feed from areas at high risk of deforestation and have still not set deforestation targets. Fewer than one in five meat, egg and dairy firms is adequately managing the pollution of waterways from manure. Just ask the people of Herefordshire about that if you want to know more.

FAIRR finds that the volume of waste produced by the 70 billion animals processed each year is equivalent to the volume of waste produced by twice the entire human population on this planet. Only 18% of global meat and dairy producers track even partial methane emissions, even though annual methane emissions from global capital and livestock make up 44% of anthropogenic methane emissions.

We are talking about the future of our life on this planet. We are talking about a liveable planet. That is inescapable. However, today we are talking about ensuring that we do not see the next financial crash. Let us remember the last financial crash, when the cash machines were within hours of stopping working. We must do something to stop the next financial crash from being at the point where the size of the carbon bubble, the level of stranded assets across a range of sectors—fossil fuels, animal agriculture and other areas—is such that it suddenly hits the markets. The markets are not counting this now. They must count this in if we are to have a sustainable financial sector.

[Lord Naseby (Con)]

My Lords, I will not repeat what my noble friend Lord Lilley said earlier, other than to say, speaking for myself and, I suspect, for my colleagues, that we do believe in net zero. That is a target. It is not an immediate diktat, but it is a target that I guess almost everybody in Parliament has accepted.

My noble friend is right that key in the judgment of those of us who have worked in the commercial sector, as I did before I came to Parliament nearly 50 years ago, is that we live in a free society. The answer to this problem is to phase out demand. It is easier to phase out demand than to phase out supply. If they both have the same effect in the end, you might as well take the easier and cheaper route, which does not involve subsidy to remove activity. We live in a free society and unless it is absolutely vital, it should be based not on government diktat, but on competition.

I will also comment on Amendment 199 on forestry. I had better declare an interest; it is hardly a forest, but there are 40 acres of woodland adjacent to my property. It is a wonderful hobby for me to have become someone who now understands woodland, at least; I could not claim that it is a forest.

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[Viscount Trenchard (Con)]

My Lords, I recognise the good intentions of the noble Baroness, Lady Tyler of Enfield, in introducing her Amendment 176. However, the tide is running out for cash. We are not the most advanced country in this area. It is now almost impossible to use cash in Sweden. What does my noble friend the Minister know about how the authorities in countries such as Sweden, which have largely dispensed with cash in daily life and where retailers are not prohibited from refusing to accept cash, support those who have no bank account, debit card or credit card?

I sympathise with the aim of this amendment. I regret the disappearance of the bank manager, but I doubt that this is an area where the Government should be too prescriptive. Where there really is demand to meet a bank manager, surely the market will respond and one or more banks will locate a manager where he or she is needed.

I support Amendments 179 and 190, to which my noble friend Lady Noakes has already spoken so ably. Her amendments recognise the reality of the disappearing role of cash.

I have sympathy for the aims of Amendments 180 and 181 in the name of the noble Lord, Lord Tunnicliffe, as I think it important that banks continue to provide in- person banking services where there is demand for them.

I sympathise with Amendments 238 and 239 in the name of my noble friend Lord Holmes of Richmond. The way the KYC rules are interpreted by banks and credit card providers is completely absurd and disproportionate. It really is ridiculous to have to prove one’s existence to an institution with which one has had an active business relationship for many decades. Can my noble friend the Minister tell the Committee whether she agrees that a review of the KYC rules is absolutely necessary?

[Lord Naseby (Con)]

My Lords, I shall be brief. I have put my name to Amendments 180, 182 and 189.

I have a couple of points to make on Amendment 180. First, proposed new subsection (2) is on essential in-person banking services. My wife and I were just in a position in which we needed a face-to-face meeting with our joint-stock bank. The nearest one is eight miles away, which is not exactly around the corner. It was extremely difficult to find the right person in that particular bank, despite the requirement being created by that bank. I am sure that others have had that experience. There is a need to have the ability to have reasonably convenient face-to-face meetings with knowledgeable people who are prepared to work on Fridays, when the rest of us are working. In our case, we work only four days a week—they are just long days—but that is by the by.

Secondly, proposed new subsection (4), to be inserted by the amendment, refers to “applicable local authority areas”. We must never forget that we now have a combination of district and single-tier authorities. The difference is that it can be many miles from one town to another in single-tier authorities.

Apart from that, I hope that my noble friend the Minister takes very seriously the points made in the amendments of my noble friend Lord Holmes. They are well worth listening to and analysing.

Financial Services and Markets Bill

Lord Naseby Excerpts

Committee stage
Wednesday 1st March 2023 Grand Committee

[Lord Hunt of Kings Heath (Lab)]

My Lords, I have added my name to Amendment 160, the principal amendment in the name of the noble Lord, Lord Bridges, to show that there is support for him all round the Committee and to show the Government, too, that at some point the House of Lords is going to make its views known when it comes to voting on the Bill. It would be good to see the Government acknowledge that they are going to have to do something to strengthen the accountability of these arrangements.

My principal concern is about the integrity of Parliament and the more general issue of the accountability of so many of the regulators, public bodies and quangos that we have established, because I see them as an extension of the Executive, in many ways. They do functions which traditionally the Executive may themselves have done. We are talking about financial markets but a recent example of extraordinary behaviour is that of the Arts Council, in its perverse decision to try to destroy opera in this country by the abolition of English National Opera and the withdrawal of a huge grant from Welsh National Opera for touring, when the Arts Council’s mission is ostensibly that it is supposed to be encouraging the touring of such companies.

The Arts Council apparently did that because the then Culture Secretary, Nadine Dorries, said that she wanted more money to go out into the regions for levelling up. That was translated into the destruction of a centre of excellence which had been very committed to inclusivity. At that point, she denied that she had ever wanted ENO to do that, but the Arts Council remains unaccountable to Parliament for that action and Ministers say, “It is nothing to do with us”. We are left in a quagmire as to how to know, in the end, who was accountable for what seems, on the face of it, a crass decision.

My main experience is not in financial services but in the health service, which is awash with regulators, public bodies and quangos. I will name just three: NICE, NHS England and the Care Quality Commission. They have huge influence and power over the affairs of the National Health Service but it is very difficult to say that they are accountable to Parliament at all. If we seek to ask questions about their performance in questions or debates, or meetings with Ministers, we will be told, “That’s nothing to do with Ministers”.

When it comes to financial services, I am therefore at one with the noble Lord, Lord Bridges. It is surely in the interests of the United Kingdom, in any case, that our regulatory arrangements be seen to be of the first order. I agree with him when he talked about the balance. We want the regulators to be seen to be independent, and robustly so, because that adds to their credibility. We clearly want to avoid politicisation, because that would undermine the esteem in which they would be held nationally and internationally. However, we want them to be subject to not just proper scrutiny but accountability. So far, we have heard nothing from the Government to suggest that they understand that, or why the current arrangements will not be sufficient.

As the noble Lord said, this proposal will not duplicate the Treasury Select Committee. His point about the OBR was important, because the OBR has fulfilled an important function, but I do not think anyone has suggested that it has undermined the working of Parliament or any of its Select Committees; indeed, it has enhanced what they can do. I think he was making that point when he said that his amendments will not undermine the regulators’ independence. In many ways, I think they would enhance them. This is not going to cost much money compared to the benefit it would bring and, as he also said, it will not duplicate the work of the FCA and PRA.

There is an overwhelming case for supporting this measure, alongside the previous debate about the need for a much strengthened Select Committee to carry out work inside Parliament, as the noble Lord suggested. I very much hope that the Government will listen to what he has said.

[Lord Naseby (Con)]

My Lords, I have added my name to this amendment, which in my judgment is absolutely vital. On 8 February, I listened to the chairman of the City of London Corporation’s policy and resources committee; I will quote a couple of points that he made on that evening. He said:

“Faced with increasing global competition”


the UK needs

“a long-term sense of direction, a programme for government, regulators, and industry to act and sustain our global powerhouse status. As a country we need a renewed focus, to adjust our compass, to be the destination that incentivises investment, thrives with talent, and commands the competition. And we need ambition and focus to achieve these goals.”

He finished by saying that we need “the courage to change” in three areas. I will quote two, which are relevant to this amendment:

“Firstly, we need to reduce frictions. That means strengthening UK policy and regulation with an effective and coherent sustainable finance framework. Secondly, we need to nurture innovation. More creativity in the market will inspire better products, which will help attract capital, firms, and customers.”


The City wants confidence in scrutiny and the supervision of the regulator. I hope that my noble friend on the Front Bench will take note of the feelings of the City. I am sure that it would be more than happy to communicate directly with my noble friend and put some flesh on the summary that I have given.

[Lord Vaux of Harrowden (CB)]

My Lords, I, too, have added my name to the amendments in the name of the noble Lord, Lord Bridges. The noble Lord explained in detail the need for the amendments far better than I can, so I will be brief. I support the noble Lord’s every word but, rather than repeating what has been said, I will comment specifically on how this would complement rather than replace the parliamentary scrutiny that is also required.

We have had a lot of discussion so far in Committee about the need for strengthened parliamentary scrutiny and accountability of the performance of the regulators, with an extraordinary level of agreement on all sides— I hope that the Minister listened to that. I strongly supported the idea of creating a bicameral committee specifically for that purpose, as proposed by the noble Baroness, Lady Noakes. Having an independent office for financial regulatory accountability would greatly assist such a committee in carrying out its work. We heard on a previous day in Committee from the noble Baroness, Lady Bowles, who is probably the expert in such matters, and from others about the enormous volume of work that scrutiny of the financial regulators will involve. That is one reason why we need a parliamentary committee focused solely on this subject. Having available independently prepared and, importantly, non-political analysis of both the performance of the regulators and the regulations themselves would make the work of the parliamentary scrutiny committee, or committees, that much more effective, enabling the focus to be on areas where shortcomings were identified, rather than wading through unmanageable volumes of information trying to find those areas.

I therefore make the point that the Minister should not be tempted to see these amendments as an alternative to the enhancements to parliamentary scrutiny that we have already discussed. Rather, she should understand that they are an important element within the three legs required for effective scrutiny and accountability, which the noble Lord, Lord Bridges, has previously explained as being reporting, independent analysis and parliamentary accountability. All three aspects should be embraced. These amendments cover the second, but please do not think that they would replace the others.

Financial Services and Markets Bill

Lord Naseby Excerpts

Committee stage
Monday 20th February 2023 Grand Committee

[Lord Naseby (Con)]

My Lords, I have a couple of quick comments. I have had the privilege of being across the two Houses for coming up to half a century. In my judgment, this Bill, which has a clear objective of growth—a brand-new element that has not been laid on financial services before—means that Parliament needs to show leadership. We are not often asked to show particular leadership but, with this substantial change, we in Parliament need to show leadership. That is what this amendment is all about.

[Baroness Bowles of Berkhamsted (LD)]

My Lords, I have two rather modest amendments in this group. They are again part of my drawing attention to the fact that there needs to be accountability to Parliament. All they would do is insert that, when a regulator does its consultation and is giving the notification to Parliament, it should mention and draw attention to the fact that issues have been covered by a parliamentary report. I know that the regulator will already have responded to a parliamentary report but it might have been some time sooner.

This is a relevant issue. Any sensible regulator would probably make the comment anyway but that does not mean you cannot put little pieces into legislation here and there that just remind people of the status of parliamentary reports. That is what these two amendments would do, with one for the FCA and one for the PRA. When those notifications come to Parliament, they would have to indicate when they have been covered by a parliamentary report. They would not have to say that they agree with it; one presumes that they would comment on it.

I will not say anything more about the scrutiny—I have said a lot already—other than that I basically agree with everything that everybody has said. We are all agreeing with one another. When the Minister has meetings to work out what concessions can perhaps be made, they will have to be substantial, not a little tweak. They will have to recognise the importance and magnitude of financial services—including the great power that they have, as has been said—and move towards what must be great accountability to measure up to that great power.

Financial Services and Markets Bill

Lord Naseby Excerpts

Committee stage
Monday 6th February 2023 Grand Committee

[Lord Naseby (Con)]

My Lords, I thank my noble friend Lord Moylan for tabling these amendments and digging fairly deep in this area. There is a lot happening in the City of London and in the whole financial world. There are opportunities for people who want to stay but, at this point in time, the windscreen is pretty misty as to what exactly is out there and whether or not it is regulated. What my noble friend has done is draw attention to this important area.

I talked to my two granddaughters, who take an interest in financial affairs, about what they think about their savings. What is interesting to me is that, for sixth-formers today, maths is absolutely key to their progress. Secondly, somebody is making them take an interest in their futures. That says a lot.

I support Amendment 55; I am very much behind it. I should mention—I think the Committee already knows this—that I have been deeply involved in the mutual movement, which wants to go into new waters to look at what is available and sensible within its clienteles. The same applies to the credit unions.

Noble Lords have spoken about financial inclusion. It is very important. However, I am not sure that there needs to be a report every 12 months. I can see that it should be so initially, but it seems like quite a burden on the authority to produce what I assume would be a long and detailed report.

As regards Amendments 228 and 241, I will wait to hear what my noble friend the Minister says but, in my experience, the joint-stock banks and anything with the Royal Bank of Scotland are in a pretty disastrous state at the moment. Branch after branch is being closed. People are not answering the phone. Emails are not being responded to. The banks do not even tell us when a branch will be closed; they forget then apologise afterwards. It is an absolute, unmitigated disaster; I hope that my noble friend on the Front Bench will try to get a grip on it.

I make no comment on Amendment 241 other than to say that I am really interested to hear the answer on it from my noble friend on the Front Bench.

[Lord Holmes of Richmond (Con)]

My Lords, it is a pleasure to take part in day 4 of the Committee’s deliberations on the Bill. I declare my financial services interests as set out in the register.

I agree with all the amendments in this group. My noble friend Lord Moylan’s amendments are clear, and I ask my noble friend the Minister to answer him in the affirmative when she comes to respond and to say that legislating in this area would be helpful on whatever agenda it was measured against. He also reminded us of Sid, who was the poster child for British Gas. It seems only appropriate, in that I find myself sitting next to a former prima ballerina, for me to say that I seem to remember BT using the music from “Swan Lake” for its initial public offerings—all to the good. It must be right that people have an opportunity to take part, with all the correct safeguards and rails around it, in these activities. I very much support Amendments 55 and 241.

Similarly, I support the amendments around the “have regard” duty for the FCA. My noble friend the Minister will be familiar with these arguments; we talked about them very much in our debates on the 2021 Bill, now an Act. We have had Oral Questions and Written Questions on the subject, so she will be well rehearsed in her answer on a “have regard” duty.

For this reason, I tabled Amendment 67A. It is time for the FCA to have a financial inclusion objective. That is in no sense to fetter the regulator’s independence or existing objectives. The financial inclusion objective could only be additive and assistive to its existing objectives on consumer protection, market integrity and competition, and to any potential future objectives as set out in the Bill.

Following the intervening two years since we last discussed financial inclusion in detail on the 2021 Bill, are there now more or fewer bank branches and ATMs? Is there more or less cash acceptance and financial inclusion? Whatever government agenda we consider—growth, levelling up, or increased connectivity and creativity for our citizens, communities, cities and country—a financial inclusion objective for the FCA makes sense. Will my noble friend agree that it is now time to enable the FCA to play a spearheading role in financial inclusion, and to accept Amendment 67A?

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[Lord Thomas of Cwmgiedd (CB)]

My Lords, I want to make just four points on fraud, which damages the markets so greatly and damages individuals. The amendments reflect the four points. First, we need a strategy. I do not see how we can go forward any longer without one. I have two comments on strategy. First, the bodies to be consulted should include lawyers and accountants, not because there might be a bent lawyer or bent accountant in the fraud but because often it is their failure to see a flaw in the system that has caused the fraud. Therefore, they need to be part of those consulted. Secondly, five years is a long time for a new strategy. We need some form of accountability for the performance of the strategy in the meantime.

My second point is the object, the principle or the duty—however you put it—of the regulators looking into fraud. This seems critical, and there are two primary reasons for this. First, there is the prevention of fraud. I have too often been told after a fraud has come to knowledge and things are being done about it by those in the market, “Oh, the return was too good to be true. Him? We would not have touched him with a bargepole.” Regulators ought to be able to pick that up, and the duty on them ought to emphasise that responsibility.

Secondly, if fraud occurs—and it is bound to—the expertise of the regulators is needed to guide the way in which prosecutions take place. These days, because virtually everything is documented, you cannot move money. In the old days you could take a suitcase of cash somewhere, but you cannot do that any more. You need someone who can interpret what is usually the defence, “Yes, I did this but I wasn’t dishonest”. The skill and expertise of those in the market who can point to and make clear why it was so obviously dishonest are critical.

Thirdly, dealing with fraud is expensive. If you are accused of fraud, you have nothing to lose by spending all you have in defending yourself. If you fail, that was the end anyway, so you might as well have tried to save your money. If you are successful, you generally get most of it back. In a sense, there is an imbalance. Therefore, I warmly support the amendment saying that the Treasury should hand over the cash. There is no conflict of interest there, because the decision on the level of fine is made by the court. That is a good idea.

Fourthly and finally, the idea of criminalisation is essential. It is often nice to be able to pay tribute to the wisdom of His Majesty’s Treasury. One of the most effective tools in its armoury in relation to sanctions has been criminalisation, because that is what frightens people. Therefore, criminalising the failure to act would be a welcome step, and is something that I hope His Majesty’s Treasury, with all its wisdom, will see the force of.

[Lord Naseby (Con)]

My Lords, I support Amendments 67 and 75—obviously, as I added my name. I will speak only to Amendment 67. I have spent nearly 50 years in Parliament, legislating on issues that needed urgent attention. I cannot think of any issue more important in monetary affairs, now or in previous years, than the one before us in this group of amendments.

In particular, I am very grateful to the UK Finance Annual Fraud Report, which highlights in some detail what is happening. Indeed, one of the paragraphs at the end says that the Bill before us, which the Government proposed, will legislate to deal with it. Look at the figures and the sheer scale of it:

“Most notable is the rise in impersonation scams and in authorised push payment (APP) fraud overall. In 2021 communications regulator Ofcom found that eight out of ten people that were surveyed had been targeted with scam texts or phone calls, intended to convince them that they were from trusted organisations such as banks, the NHS or government departments.”


The report goes on to say:

“The majority of APP fraud starts with some type of social engineering. As well as scam texts, phone calls and emails, more and more of us are paying for goods and services remotely”,


which opens the door to the fraudsters.

I will say no more other than this. My friend the noble Baroness, Lady Bowles—I greatly respect the work she does in this area—has produced a very simple amendment, but it is very powerful and clear and I highly recommend it to His Majesty’s Government.

[Lord Sikka (Lab)]

My Lords, I find all the amendments and all the arguments made by various speakers very persuasive, and I hope the Government take note of that.

I have some concerns that I do not think have yet been aired. Do we have the regulatory architecture to deal with fraud? There are at least 41 financial regulators. Just think about the duplication and buck-passing. Is it not time for us to have a British version of the Securities and Exchange Commission, or something equivalent, to deal with that? It may help not only to save resources but to have a co-ordinated approach.

The people perpetrating banking fraud do not live in one particular district of the UK; they are spread all over. The police in Bristol cannot go and raid somebody in Reading or Glasgow; they need permission from and to co-ordinate with somebody there. We do not have a national police squad to look for or investigate fraud. They are utterly fragmented. That itself encourages buck-passing.

Financial Services and Markets Bill

Lord Naseby Excerpts

Committee stage
Wednesday 1st February 2023 Grand Committee

[The Earl of Kinnoull (CB)]

My Lords, in moving Amendment 45 in my name, I will speak also to Amendment 63. I apologise for being unable to contribute at Second Reading; the opening speeches were at the same time as a major evidence session for the European Affairs Committee. However, I sat through much of the debate and have my well-thumbed copy of Hansard here. I declare my relevant interests, as set out the register, as a shareholder of Hiscox Ltd and Schroders plc and a director of Alpha Insurance Analysts.

In my commercial career, I was a director, chief executive or chair of regulated financial services businesses in eight different major jurisdictions. I dealt with the regulators in those jurisdictions and regulators in other EU jurisdictions because of the passporting regimes, and with regulators in places where we decided not to set things up.

However, this amendment has nothing to do with that. Its genesis was in the report of the European Affairs Committee from June last year, The UK-EU Relationship in Financial Services. That report was a major piece of work; we took evidence from a galaxy of stars, including two of the four deputy governors of the Bank of England. The report was settled in the usual House of Lords way, on a unanimous basis.

Paragraph 145 of our report begins a section titled “A competitiveness objective”. In considering this, the committee was trying to form a better view on four real issues: first, the wisdom or otherwise of a competitiveness objective; secondly, what it actually meant; thirdly, how a regulator might implement such a thing; fourthly, how Parliament might scrutinise it. We will come to the fourth issue when we discuss later amendments, particularly those to Clause 36.

We put the problem of the competitiveness objective to our galaxy of star witnesses, including both of the deputy governors of the Bank of England. It was quite difficult for us to form a view on the wisdom of it because, throughout our evidence generally, there were considerable differences among all the witnesses as to what a competitiveness objective amounted to. That difference in the set of views, which were honestly held, was quite difficult for us to reconcile. While the committee generally felt that it was a good idea, it was a bit like how I took the mood of the Second Reading debate to be. There was an interesting set of differences in what it meant; if you do not know what it really means, it is jolly difficult to implement it consistently across a regulator. How will you do that not only between regulators but within a regulator when the FCA has several thousand employees? We were a bit dubious about that. In terms of scrutiny, if it is all unclear above you, scrutinising it is jolly difficult.

The committee tried to assist in this. We wrote various descriptive paragraphs; in paragraph 151, the first of our two conclusive paragraphs on this—not on actual scrutiny—we said:

“The Committee notes that, as a result of the Future Regulatory Framework Review, the Government is considering introducing an additional, secondary ‘competitiveness’ objective for the Financial Conduct Authority and the Prudential Regulation Authority. However, it is equally important for the UK’s overall economic competitiveness for the Government and regulators to work together to develop a broader regulatory culture that is responsive, consistent, and proportionate”—


I emphasise those words.

Noble Lords will have noted that the words “responsiveness”, “consistency” and “proportionality” appear in Amendments 45 and 63. These amendments are designed to give effect to what we as a committee wanted to do, which was to give some directional help to regulators as to how they would be able to implement a competitiveness thing and to have measurable things before them. I must say that I have played the refrain of “responsiveness, consistency and proportionality” to various market associations since the report and I have heard nothing but a feeling that that is at least a start in finding a way of being able to help to define this elusive thing of the competitiveness objective.

It is worth quoting our second paragraph of conclusions:

“We ask the Government, in its response to this report, to explain in further detail how a secondary ‘competitiveness’ objective would be applied by the regulators in practice and how success will be measured.”


The Government’s response to our report was, in general, a very good one. I worked out that I have been in receipt —either as a committee chair or member—of well over 50 government responses, and I can promise noble Lords that this one was pretty good. On this particular bit, however, it was very weak. The response on this area had a quite a lot of paragraphs, but most simply repeated the question. The operative sentence is:

“The regulators will be responsible for operationalising their new objectives.”


I must say that my spellcheck is not modern enough for “operationalising”, so I am not quite sure what that means. But I am sure that the Government are washing their hands of that, which I feel is a mistake.

I submit that the European Affairs Committee’s view on this—remembering, of course, that the committee is cross-party and this was, as usual, an entirely unanimous report—is that there are three benefits to having clarity in this area. First, as a client—either an existing client or a prospective new client who wants to come in to be regulated in the United Kingdom—it provides some clarity. It is jolly good, let me say, if you are thinking of moving capital or business to a jurisdiction, to feel that the regulator will be responsive and consistent and will take a proportionate view of things. Those are all things that are directly relevant to any decision to set up in that jurisdiction or to maintain yourself in that jurisdiction.

Secondly, it is good for the regulators, because they will then know what they are meant to be doing. As I said, we asked regulators about that in our evidence sessions and we heard different answers as to what the thing meant. Thirdly, it is good for scrutineers. We, as scrutineers—I have jumped over the fence now; I am a solid scrutineer and do not do any business at all—will be able to ask the right questions and to have metrics given to us to see whether the regulators are doing a good job. That, I would submit, is a win-win-win scenario.

These two amendments build faithfully on the work of a major committee of this House and should, I feel, properly be part of this Bill. I beg to move Amendment 45.

[Lord Naseby (Con)]

My Lords, I will not repeat what the noble Earl has said, but I thank him for the depth of his proposal and the work that he has done in tabling these amendments.

I remind the Committee that I have chaired two quoted companies. I have been chairman of one friendly society and seen through both Houses the Mutuals’ Deferred Shares Act, so I think that I have some heritage, in particular in the mutual movement, which I think is really important to our society and our economy. I take a deep interest in that mutual movement and, indeed, I know that my noble friend on the Front Bench and the Government are particularly concerned about helping the mutual movement move forward. This group of amendments is there to help that.

For me, these two amendments are central to the Bill. I have said this before and will say it again: growth in financial services is dependent on, and an extension of, what is happening in the financial world. There are some really exciting new developments happening, but they need help and occasionally a little persuasion. The FCA has a major challenge on its hands. I welcome that, as I am sure it does, but there is an understandable danger that having an increased spectrum of activities is new to the FCA. It should be reminded to look around the corner, do a little investigation and find out what is happening underneath and therefore what is coming forward. I am sure it will do that, but it needs prompting and these amendments do that.

I say finally to my noble friend on the Front Bench that the mutual movement, both the friendly societies and the credit unions, is looking for new ways to raise capital. That is fundamental to both those mutuals. I therefore hope the Government will look at the noble Earl’s amendment with an open mind and accept it.

[Lord Holmes of Richmond (Con)]

My Lords, it is a pleasure to take part in day 3 of Committee. In doing so, I declare my financial services interests as set out in the register. I will speak to Amendments 66, 115, 116, 196 and 222 in my name. Before doing so, I give more than a nod to the amendment in this area that has already been so eloquently and eruditely set out.

Amendment 66 is on reporting on competitiveness, which is essential. As drafted, Clause 26 in effect enables the regulators to mark their own homework—“in its opinion”. Does the Minister agree that it would be far better for accountability to government and Parliament for there to be a criterion for measurement of adherence to the competitiveness objective? Amendment 66 sets this out. I would be grateful for her thoughts on each of the paragraphs proposed in Amendment 66.

Amendments 115 and 116 look at reporting the regulators’ activities in making authorisations for new and existing firms. There are many elements set out in these amendments and I would be grateful for the Minister’s response on all of them because we are really talking about the time and cost to firms and prospective firms. We need a lot more transparency and clarity, and Amendments 115 and 116 are focused in that direction.

Amendment 196 looks to reporting on determinations. Significant concerns have been raised on this issue across the industry. I point the Minister to the joint report of the City of London Corporation and HMT on the state of the sector. Does she agree with its conclusions on declining levels of responsiveness and the need for the regulator to up its game in this respect?

Similarly, when this Bill was in Public Bill Committee in the Commons, we heard of it taking nine months for an overseas CEO to receive authorisation and that it has been 15 years since a new insurance firm was established in the UK—a sector in which we have such heritage and past success. That evidence to the Public Bill Committee is a clear indication that heritage and past success are no guarantee of future performance. The regulator has played a key role in that being the current state of affairs.

I think we need to revisit the timelines for determinations and have a greater level of specificity and streamlining. A number of concerns have been expressed about the appropriateness of questions that people have found themselves on the end of. Rather than just seeing the 90-day statutory time set out, would it not be better to revisit this whole process and see how we could have a far more effective and efficient means of determination related to the type of determination that was being sought?

--- Later in debate ---

[Viscount Trenchard (Con)]

My Lords, I support my noble friend Lord Lilley’s Amendment 46, to which my noble friend Lord Moylan and I have added our names. It adds a further objective to ensure that the regulators discharge their duties in a manner which maintains high standards of predictability and consistency. Noble Lords might ask why this is necessary, given that the competitiveness and growth objective obviously requires them to act in a predictable and consistent manner. As I have already remarked, it is hard to be confident that this secondary objective will have enough effect on how the regulators exercise their functions.

I agree with what the noble Baroness, Lady Kramer, said on the previous group: it is necessary to find the right balance between different objectives. However, I fear that defining an objective as secondary and placing it lower in the hierarchy will in reality lead the regulators to apply an anti-competitive balance. These amendments provide a necessary safeguard against the lack of certainty currently worrying many market participants due to the very great transfer of powers to the regulators. As my noble friend has explained so well, this additional objective should make our financial market rules more predictable, increasing the attractiveness of our markets as the best place to introduce new and innovative products.

I also support Amendment 70 from the noble Baroness, Lady Bowles, and my noble friend Lady Noakes and its intention to introduce a principle to require the regulators to exercise their functions in an efficient manner. I also support Amendment 72 from my noble friend to promote proportionality as something that the regulators must apply in exercising their general duties. I am not advocating a race to the bottom, but it is widely believed that much of our current regulatory regime is applied in a less than efficient manner; it is often disproportionate in that the benefit, if any, is often smaller than the cost of achieving it.

Amendment 74 from my noble friend Lord Holmes of Richmond also seeks to strengthen the existing regulatory principle when the regulators are considering a new restriction but, on balance, I prefer the amendment from my noble friend Lady Noakes, which has wider application. In considering all these amendments, we should not lose sight of the need to question what the regulation is for. Amendment 77A in the name of my noble friend Lady Noakes ensures that we constantly ask ourselves this question. If there is no evidence that a regulation is needed or brings any benefit, we should not introduce it, or if it exists, we should abolish it. I hope my noble friend the Minister will accept these amendments and look forward to hearing her response.

[Lord Naseby (Con)]

My Lords, I will speak briefly to Amendments 54 and 64. They are vital to the future planning of existing companies, but they seem even more important to people entering a financial market, whatever it may be. When they are doing their planning, they must recognise—it must be self-evident to them—that there is consistency and objectivity. Most of my commercial life has been in the creative world and bringing it into the ordinary world—for want of a better description.

It may be that there is a difference between what is required for growth, which is the primary objective behind the Bill, and the competitive nature. They are two distinct objectives.

[Lord Sandhurst (Con)]

My Lords, I first apologise for not having spoken at Second Reading. I speak in support of Amendments 46, 54, 57, 64, 82 and 85 tabled by my noble friends Lord Lilley, Lord Moylan and Lord Trenchard. When effected, they will provide a much-improved basis for regulation. These amendments introduce an additional statutory objective, consistent with the existing objectives—namely, predictability and consistency.

Amendment 85, as we can see, obliges the FCA and PRA to apply common-law techniques of interpretation to regulations. These are to be interpreted in the same way as a court would look at them. That is critical for the promotion of predictability and consistency. Here I speak, as noble Lords know, as a lawyer, not a financier. By Amendment 85, rules of high-level generality will be used by the FCA only to assist in interpreting specific rules, not as stand-alones, as a general principle.

The context of these amendments is important. First, the ombudsman can award as much as £375,000—that is a lot of money—in an individual case and there might be 50 claims. Secondly, its determination is in respect of a vast body of technical rules with which the financial companies have to comply. Thirdly, as we have heard, the ombudsman decides a dispute on the basis of what is “fair and reasonable”, but is under no obligation to be predictable or consistent, nor to explain its reasoning. Indeed, the ombudsman is

“free to make an award different from that which a court applying the law would make”

when applying a rule. Lack of consistency results in unpredictability. We need legal accountability and predictability. We are dealing here with complaints about potentially large sums of money.

Lack of predictability means that firms must build compliance programmes based, in part, on guesswork about how the regulator might react when applying its rulebook. This is particularly so when considering the vaguely drafted rules known as “principles”. To take one example, it will be a principle for there to be a new vague duty to

“act to deliver good outcomes for retail customers”.

That is a rule with a high level of generality, which our amendment will address. It should not stand alone.

To apply such concepts to specific fact situations, without case law precedent, can be contentious. It is hard to challenge the assertions of the regulators as to how their rules are to be applied. Lack of definition in the rules cannot be good for entrepreneurs or for the competitiveness of the United Kingdom. Compliance activity becomes materially inefficient where there is lack of clarity and certainty in drafting and where there is lack of predictability and consistency in application. Costs are driven up; ultimately, the consumer pays.

We seek to introduce a new approach which produces predictability. Having established the principles set out in the amendments in this group, there will follow in later groups the means to give them practical effect through properly conducted adjudications. The gain for all concerned will be consistency and predictability, flowing from having to apply the regulations consistently and in accordance with ordinary legal principles of interpretation. Everyone concerned will know where they stand.

It will be simple, therefore, for the regulator to see whether a regulation is being applied—by adjudication or on appeal by the courts—as it would wish. It can then make changes based on hard evidence. Consumers and financial companies, meanwhile, will know where they stand. We invite my noble friend the Minister to acknowledge the need to incorporate these new objectives and the need for consistent, predictable application of the rules.

IMF Economic Outlook

Lord Naseby Excerpts

Tuesday 31st January 2023 Lords Chamber

[Baroness Penn (Con)]

I made it clear that the number one problem facing the UK is our high level of inflation, and that is why the Government have put it at the heart of our economic plans. We are determined to get inflation down. That is why we remain steadfast in our support for the independent MPC of the Bank of England, why we have made difficult but responsible decisions on tax and spending so that we are not adding fuel to the fire, and why we are tackling high energy prices by holding down energy bills for households and businesses this year and next and investing in long-term energy security. I fully acknowledge the challenges the UK is facing, and that is why we have a plan to deal with them.

[Lord Naseby (Con)]

Does my noble friend recall that the IMF has a little bit of a history of making forecasts where the UK is downgraded one way or another, and, lo and behold, a year later, we discover that we have not been as bad as it suggested? Is it not a fact that we now have before the House probably the most crucial financial services Bill that it has had to handle for a decade or more? My noble friend is taking through that Bill. At its core, there is just one word, which affects almost every clause, to help the City, businesses, trade, et cetera: “growth”, which is absolutely crucial to the future of this country.

[Baroness Penn (Con)]

I completely agree with my noble friend on the importance of the financial services Bill to unleashing further growth in our economy. It is also a really important example of how we will take the opportunity of the freedoms of Brexit to design regulation in a way that works best for the United Kingdom. Growth forecasts are inherently uncertain, but they still play a valuable role for government, economists, industry and others. Their uncertainty is a fact of life, but we should still look carefully at what they say.

Financial Services and Markets Bill

Lord Naseby Excerpts

Committee stage
Monday 30th January 2023 Grand Committee

[Baroness Lawlor (Con)]

My Lords, I thank the noble Baroness, Lady Bennett, who I am very pleased to follow, and the noble Baronesses, Lady Hayman and Lady Sheehan, for their lucid and eloquent statements, but I oppose Amendments 44, 53, 56, 62, 69 and 69A. I see no grounds for increasing or extending the obligation as the amendments in this group propose. The Bill already includes a new regulatory principle for the FCA and the PRA, requiring them when discharging their role to have regard to the need to contribute towards achieving compliance with Section 1 of the Climate Change Act 2008. Were we to go along with this group of amendments, we would see as a consequence the further erosion of the competitiveness of the sector. Adding a climate and nature objective, as Amendments 53, 56 and 62 would, or adding, as Amendment 69 proposes, a further regulatory principle on the natural environment to that in Clause 25, would do likewise.

To my mind, such a way of thinking is vague and aspirational. “Climate and nature” or “the natural environment” are vague, whereas the tangible aims of clean water or clean air, or of mitigating against pollution, are serious and important aims of policy. There, the policy is clear and has been pointed out in the legal context; the law is clear. The “polluter pays” principle of tort law establishes the obligation to compensate those injured by these kinds of harm. Indeed, there is scope for strengthening the prohibition on dumping industrial chemicals in rivers or disincentivising the use of petrol engines in crowded cities.

The amendments in this group would undermine competition. The UK is competing in a world in which it is already legally bound by net-zero emissions law, although many of its rivals are not. In the Global Financial Centres Index table of the various global financial centres, New York and London stand at the top and are followed—in this order—by Hong Kong, Shanghai, Los Angeles, Mumbai, Singapore, Beijing and Tokyo. Tokyo is under a net-zero target regime, and Los Angeles has recently introduced a law. Of the top greenhouse gas emitters, only Japan, Canada and the EU have legally binding net-zero commitments. The bulk of Asian markets and those rising in China do not. As matters stand, these are the competitors.

There is also a danger that such amendments are parochial, whereas the sector is—and must continue to be—global, not retreating into a little UK or little EU syndrome. The result of putting the extra demands on the UK’s financial services and market would be to handicap the sector and make it less competitive—a less attractive place to do business, with global competitors edging their way up the league tables. The world has changed since London overtook Amsterdam in the 17th century and Paris at the end of the 18th. Since the 20th century, it is rivalled only by New York.

If we are to take the competitiveness object seriously, the law must facilitate and encourage competition, not handicap it. Each successful demand for an extra law in pursuit of one or the other’s picture of an ideal world will handicap our financial sector and make this country a less attractive place to do business. At the moment, London and New York, static at the peak of the pyramid, face stiff competition.

This is a very controversial question—too controversial and political to be slipped into the Financial Services and Markets Bill. The measure will have an impact on our whole economy, as noble Lords have quite rightly pointed out throughout. Constitutionally, we have not the mandate to change the policy and, politically, I doubt whether there is an appetite for extending the law beyond what there now is. If anything, there may be an appetite to suspend it during these periods of shock.

[Lord Naseby (Con)]

My Lords, I declare an interest: I am a trustee of the parliamentary pension fund. I am also a former chairman of a financial services organisation, Invesco. I have tried to put myself in the shoes of when I did that, some 15 years ago.

It comes down to what my noble friend has been talking about: the practical side of financial services. There have been major changes in the time since I last chaired an organisation, but the trustees of the parliamentary pension fund have a meeting this Thursday and we always have to balance the objectives of that fund, which is primarily to ensure that there are adequate funds to pay the pensions of our membership—that is the primary purpose of that organisation. Secondly, we have to respond to the laws of the land; indeed, because we are a parliamentary group, we are adamant that we should keep track of what is happening on the green dimensions as they affect financial services.

In her speech, which we have just listened to and which I was certainly listening to, my noble friend Lady Lawlor made it clear that, in her view, the amendments before us—with one exception, which I will come to in a minute—are, frankly, not practical. On Thursday, I will have to be practical. If anything, as matters stand at the moment, the amendments will handicap the financial services world. This worries me even more because it undermines competition. We must remember the primary new dimension that we are talking about in financial services: the requirement for growth. We look for the key kernel of that growth to come from the City of London and financial services in general. For my money, this is a stage too far. Having previously been an RAF jet pilot, I must say that, when I read about planetary limits et cetera in Amendment 69A, I think that that is going too far.

However, although I am not sure that it is ideally written, I think that there is merit in Amendment 240 —particularly proposed new subsection (1), which would require a reporting system on green material—in broad terms. Whether that is the right phraseology, I am not able to judge, but, from a practical point of view, I do not think that the amendments we have before us are appropriate at this point in time.

[Lord Vaux of Harrowden (CB)]

My Lords, as this is the first time I have spoken in Committee, I should start by declaring my interest in Fidelity National Information Services, which, among other things, owns Worldpay.

I support the amendments in this group—particularly those in the name of the noble Baroness, Lady Hayman, to which I have added my name. She and other noble Lords have already explained the reasoning for them, so I will try not to be repetitive. I have added my name to them because I think that the climate and nature objective is so important that it deserves at least equal billing with the other secondary objectives of growth and competitiveness. For the record, I wholeheartedly support those growth and competitiveness objectives.

As we heard from the noble Baroness, Lady Lawlor, a few moments ago, some have argued that the climate and nature objectives conflict with the growth and competitiveness objectives. Frankly, I do not believe that that is the case. There are always trade-offs, of course, but, if done well, encouraging and facilitating the financing of the technologies and businesses that will enable the path to net zero will be a substantial driver for growth. I want to see the UK financial market become the global leader in financing and facilitating these exciting technologies. I believe that there is an enormous opportunity for the UK here.

The noble Baroness talked about this being a somewhat parochial objective. I could not disagree more. This is a global opportunity. Just the other day, I was talking to the ambassador from Vietnam, a country that is looking to expand its offshore wind arrangements massively; it has the most perfect coastline for it. That is something that this country could be hugely involved in from both a technology point of view and a financial services point of view—that is, financing this stuff.

Another argument that I hear against the climate and nature objective is that it is a negative objective focused on banning and stopping activities. In my view—this is where I suspect I disagree with the noble Baroness, Lady Bennett of Manor Castle—a climate and nature objective should not be about, for example, preventing investment in companies that are involved in fossil fuels or other activities.

Financial Services and Markets Bill

Lord Naseby Excerpts

Committee stage
Wednesday 25th January 2023 Grand Committee

[Baroness Altmann (Con)]

My Lords, I too congratulate the noble Lord, Lord Sharkey, on his amendment. I agree with his explanation of why parliamentary scrutiny is so important and his interesting explanation of the choice of words he has used in his amendment. I accept that later on, as my noble friend Lady Noakes said, we will debate parliamentary scrutiny once again, but in my view it is absolutely vital that we in this House recognise the dangers coming at us from various legislation that is taking away Parliament’s future ability to oversee and scrutinise important legislation.

I also understand what my noble friend Lord Trenchard said about the importance of allowing competition. However, we must not lose sight of the fact that what is sometimes called regulation may of course be inconvenient for the financial services providers and hamper the ability for innovation and free-for-alls to try different things, but it is also relevant to think of regulation as consumer protection. These are rules that will stop financial services companies taking advantage of consumers.

Asymmetry of information in financial matters is obviously something we are all too aware of, but just doing away with regulation, rushing to get rid of all the EU regulations without proper scrutiny and saying that the Financial Conduct Authority must work to a deadline, otherwise it will drag its heels, misses the point. If there is a forced deadline that precludes scrutiny and consideration of what these regulatory changes will mean for the general public or even more informed investors, without considering those risks, one has to ask whether it is resourced enough to do that. If not, which most of us would probably suggest is the case, what other elements of its duties will not be attended to while it is rushing to perform this job to an artificial deadline? It is a massive task—I respect that.

We need to take seriously the thrust of the remarks by the noble Lord, Lord Sharkey. I also look forward to hearing my noble friend’s remarks about the Government’s own amendments.

[Lord Naseby (Con)]

My Lords, I was one of the 34 who took part in the debate on secondary legislation, and I previously had the privilege of being on the Public Accounts Committee for some 12 years.

The debate on those two reports was an absolute watershed. Here is a golden opportunity to ensure that this Bill, which is so fundamental to the growth of our country, particularly the City of London, at a particular time can be pioneering. I am sorry to load that on to my noble friend; at any other time it might not be loaded on to her.

The key elements are there: secondary legislation basically means that those of us here in Parliament, in both Houses, have an opportunity to debate any changes made to a Bill. If I had to take issue with the noble Lord, Lord Sharkey, it is that he has in his amendment, at proposed new paragraph (b), the word “significant”. One company’s “significant” might be insignificant to another, and vice versa, so I do not think that is quite the right word to use.

We will go through this Bill in detail. Others have made their points, but for me—I did previous work with two quoted companies and a friendly society in the role of chairman—this is an opportunity. We must recognise that growth for our country is fundamental. That fundamentality is, to a fair degree, influenced by the Bill before us.

[Baroness Bowles of Berkhamsted (LD)]

My Lords, for the purposes of Committee I declare my interests in the register, in particular as a non-executive director of the London Stock Exchange.

I will comment only briefly in this debate because, as others have said, it touches on some issues that run throughout the Bill. This is a matter of great importance: how we transpose the legislation and get the benefits of that transposition into UK law. If we have the flexibility, we ought to be able to use it, but financial services are our largest-earning industry, and I believe it is right that Parliament has to be able to keep track of what is going on and why when there are changes, and, as has already been pointed out, to have its attention drawn to significant changes.

If this amendment comes round again on Report, I would also like to see in it a report on the resulting change to the regulatory perimeter. Quite a lot of change is already going on and it is not necessarily something that we have had our eye on. Some of this change will be entirely at the behest of the regulators rather than in the hands of government. We will come across this later. It was always clear with EU legislation—maybe irritatingly so, in some instances—that the regulator “shall” do something, which did not give it any room for manoeuvre if it thought something did not need to be done. It looks like we will give our regulators the bits of wriggle room and the flexibility that we want, but it is wholly right that there should a report back to draw to the attention of our House and those who scrutinise this the intended difference in the regulatory perimeter, among other things, so that we can watch it and see how it goes.

I will return to the regulatory perimeter in many ways, because one of the problems is that once something is inside that perimeter, a whole truckload of things that were not really necessary might come along. AIFMD might be a good example of that. It is a whole load of extra reporting: where has it gone, what has happened to it, and has it done anything?

At the same time, if bad things are going on, you want there to be some kind of powers of intervention. It should not be a whole caboodle, with lots of rules and regulations and reporting on one hand but nothing on the other. We need to be able to do the things that are in the middle and bridge that gap. Given the way the edges of what is or is not a financial service are getting more and more blurred, what with the big tech industries and so on as well as the more nimble fintechs, we need that ability to ensure that where there is harm there is a route for action, without it having to mean that the whole kitchen sink of reporting is thrown at it across the board.

--- Later in debate ---

[Lord Stevenson of Balmacara (Lab)]

As usual, I have forgotten where I was in my perorations, so the Committee might get a few words that it has heard already, which can be ignored. I think I was talking about the requirement in the 1882 legislation that all bills of sale have to be completed on a particularly complex standard form, and then registered with the High Court, which, of course, uses a paper-based record system. The sanctions for failing to comply with any of its documental requirements would be out of scope if current consumer protections applied, and lenders are understandably loath to amend them.

It costs about £45 to register a bill of sale with the High Court, and another £50 to search it. That does not happen very often, because you cannot search by vehicle registration number or any other useful form; it is just a simple list of all the registered cases.

I think most people would agree that the Law Commission makes the case very well for the repeal of the Victorian bills of sale legislation. What is so disappointing about all this is that, originally, the Treasury seemed to share that view. In a Ministerial Statement in February 2017, the Government accepted

“the overarching thrust of the recommendations”,—[Official Report, Commons, 7/2/17; col. 6WS.]

albeit warning that they would not proceed until they had further reflected on some of them. The reflection took the form of a limited consultation with stakeholders, which received 25 responses, after which the Treasury decided not to take forward the draft Law Commission Bill. The principal reason given was that several of the 25 respondents felt that some of the consumer protection proposals in the draft Bill prepared by the Law Commission did not go far enough. It is almost difficult to believe that.

That remains the position. I have tried to keep the pressure on: I took over the Law Commission Bill as a Private Member’s Bill. I got 10th place in the ballot one year, but then lost the Bill because of a snap election called by, I think, Mrs May—I forget now who was Prime Minister. However, I have had meetings; in 2019 I was kindly joined by the noble Lord, Lord Young of Cookham, and the then Economic Secretary to the Treasury, John Glen, but to no avail. In his last letter to me, he accepted that there was consumer detriment taking place but, as numbers of logbook loans were falling, he said he believed

“that the rationale of the Government’s decision not to proceed with legislative reform in this area still stands”.

John Glen is now promoted and in the Cabinet, and I am where I am. However, I respectfully disagreed with him then and still do today. Only a few months ago, I was written to out of the blue—they must have got my name from the news about the Bill when it was first introduced—by people who had been scammed, aided by logbook loan legislation. An elderly couple had put all their hard-earned savings into a motor home, which they wanted to use for their retirement. Just when they had completed the purchase and the renovations, spending almost as much again as they had on buying the vehicle, they discovered that it had mysteriously acquired an outstanding logbook loan, and they lost the vehicle and their capital. This is the sort of thing that happens.

I look forward to the Minister’s response today, and I remain willing to attend further meetings if she thinks that might help move this issue forward. I know from discussions with StepChange that consumer detriment is still happening in this area. I agree with the FCA, which I spoke to earlier in the week, that the credit squeeze, inflation and the energy cost crisis is going to make the return of logbook loans—and, indeed, many other forms of high-cost credit—as inevitable as it is undesirable. If accepted, my amendment would give the FCA the tools it needs to assist the many people affected by this egregious legislation—albeit I still believe that the right solution is for the Government to commit now to repeal the Victorian legislation as soon as reasonably practicable.

[Lord Naseby (Con)]

My Lords, I am not going to repeat what my noble friends Lady Noakes and Lord Trenchard have said, but I certainly think that His Majesty’s Government—I am a very loyal member of the governing party—need to recognise that this is a once-in-a-lifetime opportunity in this Bill. Therefore, for me, the driving force should be to ensure that in doing what we are doing—I accept that it is important to mention designated activities—we should be driven by the need for growth for our economy, good competition and innovation. Those things are so key to the future of this country, the City and the whole of the financial services area that we need to be a little bit careful. I think that my noble friend Lady Noakes’ proposal is a perfectly valid one. The Government can have another look at it, but I do not think that it is necessary.

[Baroness Bowles of Berkhamsted (LD)]

My Lords, I have some questions which arise from what the noble Baroness, Lady Noakes, said. If we want to go back to before the EU had the single market in financial services, we need to know how it worked with short selling. Unfortunately, I do not know how it all worked in the UK back then. When we started to do, or were forced into doing, the short selling regulation, I was told repeatedly from all sides in the UK that we did not need it but that naked short selling was banned. A lot of the concern was about short selling when you had not actually located where you would be able to get the share from for delivery. After the regulation was done, you had to know where you were going to get it, and it was a little firmer. However, I was assured that the wording was more or less the same as was applied, so how did we apply it? We did not have a designated activity regime.

There may be lots of little snippets around in financial services where you just need a simple rule like that—that you cannot do naked short selling but covered short selling is fine—without having lots of regulation, reporting and things around it. How are we going to do this? Would we do a designation just for a one-line piece of information? This is a genuine question, because absurdities begin when you have to invoke something that then requires complex rules. As soon as you go beyond the simple principle of no naked short selling, it will become a much bigger thing, as the European regulation did. There are other drivers for that, and it may be that more than just not doing naked short selling is necessary. My question is, within this designated activities regime, how do you do just one simple, little thing?

Financial Services and Markets Bill

Lord Naseby Excerpts

2nd reading
Tuesday 10th January 2023 Lords Chamber

[Lord Naseby (Con)]

My Lords, I too congratulate my noble friend Lord Remnant on his maiden speech and, in particular, on the depth of that speech in relation to the Bill we have before us this evening. I hope he will contribute in Committee.

My primary congratulations go to His Majesty’s Government. I have had the privilege of serving in the other place and here for 48 and a half years, and I do not think there has been a Bill as helpful to the City of London as this Bill has the ability to be. I say to my noble friend on the Front Bench, and to the whole of her team, well done on actually producing a Bill that is going to help the City of London. There have been a whole lot of positive reactions from the financial services market and from the City itself. I shall pick out just two that I received. First, “The City welcomes the creation of a more nimble, agile and proportionate regulatory regime for the implementation of the FCA’s and PRA’s growth and competitive secondary objective, alongside improving the speed of FCA authorisation turnaround times”. That is a bit mechanical, but it is very important. Equally, and even more important, probably—the noble Baroness, Lady Hayman referred to this—on the issue of the green area, “The world’s financial system through engaging internationally has to facilitate international standards and global alignment, ensuring that the ESG taxonomies are interoperable”. That seems to me absolutely vital. So much for the congratulations.

The other dimension that I noted the other day is the 30 Edinburgh reforms that the Chancellor has brought forward, almost—but not—on the sly. There is no doubt that they are important. One will drive investment into UK growth companies, in particular the new guidance for asset pooling of local government pension schemes—I declare an interest as a trustee of the parliamentary pension scheme. I can assure my noble friend that it is much needed and to be welcomed. I noticed that the leaders involved in this have got together and set up an organisation called the UK Capital Markets Industry Taskforce. That in itself is enormously welcome.

I want primarily to comment on an area that nobody has mentioned to date, thankfully. For some 25 years, I have been involved in the mutual movement. I had the privilege of being the chairman of the Tunbridge Wells Equitable Friendly Society for just over 10 years. As my noble friend on the Front Bench knows, at the moment a Private Member’s Bill from Sir Mark Hendrick, the Co-operatives, Mutuals and Friendly Societies Bill, is going through the Commons. It is there to deal with the scandal, frankly, of the demutualisation of mainly our building societies, which was not to the benefit of investors in the building societies but for somebody else to turn a penny—or several pounds. In its present form, that Bill will match the best legislation that exists in many other countries. It also introduces a voluntary power to enable a mutual to choose a constitutional change so that its legacy assets would be non-distributable, details precisely the destination of any capital surplus on a solvent winding up, and outlines the procedures in the mutual’s moves. That is a major step forward, and I very much hope His Majesty’s Government get it on the statute book. It will certainly have my support.

Secondly, there is the position of raising capital for the mutual movement. I had a Bill, which is on the statute book as the Mutuals’ Deferred Shares Act 2015. It was welcomed by all parties but unfortunately has been bogged down somewhere in the system and very little capital, if any, has been raised by the mutual movement. I understand that the Government are thinking of asking the Law Commission to look at that. I say to my noble friend that that is kicking it into the long grass a bit. I hope we can look at it again.

Finally, we come to the regulatory dimension. It seems to me, as one who sat on the Public Accounts Committee in the other place for some 12 years, that the reason that succeeds is that it is basically backed up by a government body providing the evidence. Maybe that framework is something we should look at. Something certainly needs to be done. We have listened enough this evening to know that movement in that area is absolutely vital.