Fiscal Outlook

Lord Pitt-Watson Excerpts

Thursday 10th September 2026 Lords Chamber

[The Parliamentary Secretary, HM Treasury (Lord Pitt-Watson) (Lab)]

My Lords, I thank the noble Lord, Lord Bridges, for securing this debate, and congratulate him on his opening speech. I also thank all noble Lords for their contributions today. It is a pleasure to respond to this debate. In doing so, I must say that I absolutely cannot do justice to the number of comments that have been made and the expertise that has been brought to the debate. But I will try to frame my response around some logic: first, the economic context; secondly, the fiscal rules and OBR; and, finally, the fiscal outlook and long-term challenges. I have to warn that, with the Budget coming up, there are things I cannot talk about because they could be in it, nor can I say anything that could lead to market speculation. But I hope that within the framework I have laid out, I can at least respond well.

I frame my remarks around the lead given to us by my noble friend Lady Alexander. I believe there is considerable consensus in this House. This is an Opposition day debate, and I heard a number of speeches that were a bit polemical, which is understandable, and a few Aunt Sallies about Britain being like the Soviet Union—I think that if you had ever visited the Soviet Union, you would not be saying that. There was also the odd speech that sounded a wee bit funereal about our wonderful, resilient country. But there were lots and lots of speeches which expressed a shared overall goal, which is to drive good growth in every postcode and to back investment, innovation and jobs across our economy. That is what the Chancellor set out in his speech earlier this week.

I believe the choices that have already been taken since this Government came to office put Britain in a stronger position today to deliver those plans and capitalise on the growth opportunities ahead. I know that one swallow does not make a summer, but in the first half of this year we had the highest growth in the G7 and government borrowing fell to its lowest level in six years. My noble friend Lord Chandos mentioned productivity. We need to be very careful about productivity figures, but last year we saw a greater than 2% increase in productivity, which was the best in 10 years when you adjust for the effect of Covid.

The Government are trying to build on our strengths—my noble friend Lord Chandos mentioned our world-class universities, and we have world-leading sectors such as life sciences, defence, technology, creative industries and, as the noble Baroness, Lady Kramer, mentioned, financial services. On the need for growth, which the noble Lord, Lord Londesborough, made absolutely clear, there are a whole set of things, including trade deals and planning reform, that we are trying to do.

Nevertheless, as was made clear in the debate, global instability, conflict and trade frictions are continuing, and they drive up inflation and interest rates around the world. Although these shocks are international in nature, their impact is particularly being felt here in the UK, from the cost of the weekly family shop to the cost of government borrowing. But Britain has shown a resilience in the face of these pressures, and I think the country is on the up. In the context of a more uncertain world, we must continue to make responsible choices, and fiscal discipline will underwrite every promise that this Government make.

I do not want to dwell on how we got to 100% borrowing or on the moment when Britain ended up having the highest borrowing costs among the G7. We are looking for a coherent policy going forward, which the noble Lord, Lord Hill of Oareford, was pushing us to look for. In the past, we have had so many different fiscal rules. Every time a Government were going to break the fiscal rules, they just changed what the fiscal rule was going to be—that point was made by the noble Lord, Lord Turnbull. Both the Prime Minister and the Chancellor have been unequivocal in committing to meet the fiscal rules in the Budget next month with a buffer for uncertainty.

The first fiscal rule, the stability rule, moves the current budget into balance so that day-to-day spending is met by revenues and ensures the Government will only borrow for investment. Previous fiscal rules discouraged investment. The second fiscal rule, the investment rule, ensures that net debt falls as a proportion of GDP, which is what the noble Lord, Lord Burns, was advocating. This keeps debt on a sustainable path while supporting over £120 billion of additional departmental capital spending in housing, energy, transport, and other growth-driving infrastructure—also in some pump-priming, which the noble Lord, Lord Howell, was encouraging us to think about. Taking this approach is responsible: it means the Government will balance the books with a buffer to protect against uncertainty, will control borrowing, and will reduce long-term pressures on our public finances. As the Chancellor said, there is nothing progressive about spending £1 in every £10 on debt interest.

I thought the speech by the noble Baroness, Lady Morrissey, was a classic speech from the House of Lords of such insight and expertise about how the bond market works. I will not try to respond to it in this talk. Beyond the fiscal rules, the Government have also taken a number of steps to strengthen the wider fiscal framework, including holding regular multi-year spending reviews so that departments have certainty on what their funding will be and protecting and respecting the independence of the OBR.

The Office for Budget Responsibility will produce an updated review of the economic and fiscal outlook alongside the Budget on 28 October. As I said at the outset, our economy is beginning to turn a corner; at least I hope it is. It is an uncertain world, and Britain has shown such resilience in the face of global pressures. We see this in the uptick of confidence among many businesspeople, including the successor to the noble Baroness, Lady Lane-Fox, at the British Chamber of Commerce. But clearly there remain challenges to the fiscal outlook. The war in Iran has pushed up energy costs and inflation, which in turn raised the cost of borrowing in all major economies, including in the UK. That is why the Chancellor has committed to reduce borrowing and get debt down, because that is the route to lower inflation, lower interest rates and higher economic growth.

The central point is to get debt under control, as the noble Lord, Lord Bridges of Headley, reminded us. As a result of the action the Government have already taken, borrowing fell last year from 5.2% to 4.2% of GDP. Okay, there is still borrowing, but the lowest in six years, and according to the IMF, for the first time since 2004 we are forecast to be borrowing less this year than the rest of the G7 on average. But this problem, which arose over half a generation ago, will take time to solve. It will take careful thought and clear discipline.

In the longer term, the OBR’s recent Fiscal Risks and Sustainability report confirms the need to boost growth and maintain sustainable public finances, and that is what the Government intend to do. People have raised questions about tax, particularly business tax. I spoke in the House about this only last week. It is true that businesses have been paying more tax, but it is also true that businesses have been responsible for that productivity increase and growth. The noble Baroness, Lady Neville-Rolfe, made a point about the Government stopping going on about inputs and starting to think about outputs. I agree that that is fundamental.

There were lots of questions about pensions and where pensions are invested. The Government are taking action on this by—let me acknowledge it—picking up a baton from the previous Government about the asset allocation of pension funds not being as good as it could be.

We had questions about employment and training. I say to the noble Lord, Lord Londesborough, that a 1% increase in productivity for every business would solve many problems. One statistic strikes me when we talk about people not in work: in the past 150 years there were only two peacetime years when the average annual employment rate was higher than in 2025.

Great things are there for us to do. The corporation tax rate for businesses is the lowest in the G7. The effective tax rate for a single individual with no children on average earnings is the lowest in the G7. The tax paid by a worker on a low or average income is at a historically low level. Lots of good stuff is going on.

For me, the standout speech of this debate was by the noble Baroness, Lady Lane-Fox, about productivity, creativity and imagination. They are in no way the exclusive preserve of Parliament or government. They belong to the British people and British businesses. Fiscal credibility is the bedrock for economic stability and national security, because without sound public finances we cannot give businesses and families the breathing space and stability that they need for the future. The ultimate goal, as the noble Baroness, Lady Kramer, reminded us—we have both congratulated the noble Baroness, Lady Lane-Fox—is growth: good growth in every postcode. It will be delivered not by the Government alone but by the people and businesses of Britain, the strong horse that pulls the whole cart. The foundation for that is a sensible, well-financed Government with real fiscal discipline, and that is what I think this Government are offering to the country.

Financial Services and Markets Bill [HL]

Lord Pitt-Watson Excerpts

Report stage
Monday 7th September 2026 Lords Chamber

[Baroness Kramer (LD)]

My Lords, I will be extremely brief because my Bench has just spoken very clearly on this issue. I share with the Conservative Front Bench concerns about accountability with a further removal of powers directly into the hands of the regulator, and had they pressed their Amendment 1, we would have supported it.

Very briefly, I will address the other amendments. I am still in a state of genuine concern that the Government will not accept an amendment that would confirm that the changes they are proposing to the Consumer Credit Act, which will be absorbed now into the role of the FCA, will not involve a diminution of consumer credit protection; this is the non-diminution of rights that the noble Baroness, Lady Bowles, described. Of course, the FCA could keep those rights in place, but there is nothing that compels it to do so. I find it extraordinary that we cannot be given this reassurance.

However, I am more exercised than anything else about the position of mortgage prisoners. The people who have been impacted, and many are now elderly, have dealt with a shocking situation over the past years. We could now give them relief for the remaining years in which they will be tangled with paying extraordinary levels of interest on mortgages that were taken out in good faith, for which they properly qualified and which were, at the time, market-standard mortgages. It has happened because, in essence, an arm of government has made mistakes when it has sold on those loans to vulture funds. It is shocking that we have not corrected this. The amendment before us today is new thinking. It is incredibly effective at making sure that, going forward, this incredible injustice is ended, and I hope very much that, even in these last few minutes, the Government will think again and provide support.

[The Parliamentary Secretary, HM Treasury (Lord Pitt-Watson) (Lab)]

My Lords, it is a privilege to be here today to debate the Financial Services and Markets Bill. I put on record my thanks to my noble friend Lord Stockwood for leading the earlier stages of this debate and thank all noble Lords who have contributed to this debate in Committee and beyond.

If noble Lords would allow me, I would like to say a few things about the Bill itself before moving on to address the amendments that have been put forward. The Bill has a purpose on which I think we are all agreed: to construct rules that help the financial services industry to serve its customers better and to prosper as a result of doing so. Noble Lords will therefore see that, in responding to the debate in Committee, the Government have been persuaded of some significant points made then and are proposing some significant amendments which I hope will be welcomed by the House. There are also amendments that will be suggested on Report where the Government disagree with the specific measure proposed but, in many cases, have great sympathy with the ultimate goals of the particular amendment.

However, there are many amendments which we do not believe belong as part of the Bill, in part because they are complex and require consultation, and/or go beyond the scope of the Bill, and in part also because the aims of the amendment are not best served by changing primary legislation but where the Government often would want to help promote the goals of the amendment—indeed sometimes, they already are—and can perhaps seek to encourage better practice. Central to all this is accountability, which I will come to at beginning and end of this group and then again later today.

To turn to these specific amendments, Amendments 1 and 6 would remove Clause 1 and Schedule 1 from the Bill and prevent the Government’s programme of Consumer Credit Act reform. Amendments 2 and 3 would ensure that the reforms do not diminish consumer protections, and Amendments 4 and 5 relate to the assignment of student loans and of mortgages. Similar amendments were debated in Committee, and the Government have carefully considered the concerns raised. However, we have concluded that we wish to press ahead with these much-needed reforms.

I think that we all in this House agree that the FCA is the right body to take on the role of consumer protection, and Parliament has already given it the right powers and objectives to do so, including a consumer protection objective. Since the 2014 transfer of consumer credit to the FCA, important protections, including creditworthiness and affordability assessments, have successfully operated through the FCA framework. I recognise the concern, raised both in Committee and again today, that Parliament is being asked to approve reform before replacement FCA rules have been finalised. However, I emphasise that the FCA must consult on proposed rules and engage with parliamentary committees as part of an established statutory framework. This includes the Financial Services Regulation Committee, ably chaired by the noble Baroness, Lady Noakes.

Both the FCA and the PRA are clearly aware of scrutiny. Last week, they sent me a letter, which I think has been circulated to all noble Lords, making a number of commitments further to enhance parliamentary scrutiny, and I have placed those letters in the Library. I expect to cover this information, including that in the letter, in detail in a later grouping today.

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[Baroness Neville-Rolfe (Con)]

My Lords, I thank the noble Baroness, Lady Hoey, and my noble friends Lord Holmes and Lord Mackinlay, for reminding us of the value of post offices and the importance of banking hubs, especially in this ever-expanding digital world. There are serious issues here across the country.

I will speak to my Amendment 10, which would do a very simple thing: remove Clause 3 from the Bill. My argument for it is equally simple: Clause 3 contains no detail about what the Government intend to do. Instead, as the noble Baroness, Lady Kramer, explained, it grants Ministers extraordinarily broad powers, including the power to amend primary legislation on access to banking.

Once the Richard Lloyd review has concluded, the Government may legislate for whatever they subsequently decide is necessary. That could include anything on banking services, with huge implications for consumers, banks, other financial services and the high street. As the noble Lord, Lord Vaux, said, the Government will have the power to amend any Act of Parliament. That is a huge power grab by the Treasury and a very significant delegation of power to ask Parliament to approve in advance. We do not know what problems these powers will ultimately be used to address, what regulations the Government envisage making, or which Acts of Parliament they wish to amend. Yet Parliament is nevertheless now being asked to hand over the power to do all these things.

We should be very cautious about giving any Government powers of this breadth on the basis that they will decide later, in good faith, how they wish to use them. Parliament should not be asked to give Ministers carte blanche, particularly where the powers include the ability to amend primary legislation with minimal parliamentary scrutiny. That would set a terrible precedent.

The right course is straightforward: Clause 3 should come out. Once the Government have completed the review of access to banking and know what they wish to do, they can return to Parliament with legislation setting out the policy, the powers required to deliver it and the appropriate safeguards.

I am very grateful to the noble Baronesses, Lady Kramer and Lady Altmann, the noble Lord, Lord Vaux, and my noble friends Lord Massey, Lord Mackinlay and Lady Lawlor for supporting this amendment. The Minister has a problem: we have a lot of concern across this House, not only among those engaged on the Bill. The amendment reflects the concerns of the Secondary Legislation Scrutiny Committee, with its very expert membership. The committee has also advised that Clause 3 be removed; I say to the Minister that that is usually a killer argument. For these reasons, I do not believe that Clause 3 can remain in the Bill. When Amendment 10 is called, I intend to test the opinion of the House.

[Lord Pitt-Watson (Lab)]

My Lords, I am hearing two arguments here: a strong consensus across the House for the need for access to banking and for the appropriate actions to be taken to make sure that that takes place; and a concern, also raised in Committee, about the breadth of the power, particularly its constitutional implications and the degree of scrutiny that Parliament would be able to exercise over any regulations made under it. These are serious points and the Government have considered them seriously, but they have concluded that Clause 3 is needed at this stage. Because the independent Lloyd review of access to banking has not yet concluded, we do not know whether it will recommend intervention, which consumers may be most affected, the nature of any detriment, and what form any intervention should take. Removing Clause 3 altogether, as Amendment 10 would do, would risk leaving the Government without a mechanism in the Bill to respond promptly if the review identifies a focused and time-sensitive need for intervention.

Amendment 9 would remove the ability to amend primary legislation through regulations made under Clause 3. If acting on the review’s findings required changes to an Act of Parliament, removing this ability would risk removing the mechanism to respond promptly to the review and could delay implementation. Amendment 7 would take a different approach by limiting the powers to matters arising directly from the review. I understand the intention behind that amendment and the review should clearly play the central role in shaping any future intervention. That is why the Bill already requires the Treasury to have regard to the review’s recommendations, but it would not be right to prevent Ministers from considering other relevant evidence alongside the review when deciding whether and how to act. The Government need to preserve the ability to respond proportionately to the full evidence that is available.

Amendment 8 is probably one on which we all agree. The noble Lord, Lord Holmes, and the noble Baroness, Lady Hoey, talked about the central part that post offices can play in making sure that banking access is available. I can confirm that the chair of the review into access to banking services has received representations from and has engaged with the Post Office and the National Federation of SubPostmasters and that officials will continue to engage as part of the development. As noble Lords know, the target is more than 350 full banking hubs, plus 10,500 post offices, involved in this, and I thoroughly commend the points that they have made.

I absolutely understand the concerns about the Henry VIII powers, which seem very broad. Clause 3 does not itself impose new obligations on firms, or any specific model of banking provision. Any regulations under the power would also be subject to the affirmative procedure. However, I assure noble Lords that the Government do not expect Clause 3 to remain in its current form. I forget how the noble Baroness, Lady Kramer, said her hopes would be fulfilled, but I think they would be fulfilled by amendments that were focused on the thing that we all agree on, which is the need for proper access to banking for older people, for younger people—for everyone.

The Government remain committed to keeping the scope of the power under review as the independent review completes its work. We expect to narrow this power after the review reports in October, when I expect the Bill will be in the Commons. Once the Lloyd review has concluded, the Government will be in a better position to consider the correct scope of this power. It would therefore be premature to narrow the power at this stage. For those reasons, I ask the noble Baroness to withdraw her amendment, though perhaps more in hope than expectation.

[Baroness Kramer (LD)]

My Lords, given that the Conservative Front Bench have expressed their interest in moving Amendment 10, I will withdraw Amendment 7.

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The prize is considerable: a population who are more financially resilient and better equipped to make decisions for themselves. That is good for consumers, investment, financial services and growth.

[Lord Pitt-Watson (Lab)]

I am grateful to noble Lords for raising these issues around financial inclusion. The Government fully recognise the importance of improving access to appropriate and affordable financial services—particularly those for people on low incomes and in vulnerable circumstances—and of improving the financial education of the nation. We support the intention behind many of the amendments, but we are not persuaded that putting this measure into primary legislation is necessarily the right way forward. I hope to describe what the Government are doing, including actions that we have taken as a result of some of the issues raised in Committee.

I start with Amendment 11, which would measure what banks and building societies are doing about affordable credit then set standards for them; for example, setting up something such as a CDFI would count against what they would be required to do. I would like to take a step back because quite a lot is already happening and there are important things that the Government are doing, as was articulately described by the noble Lord, Lord Holmes. Let me start with small businesses. In the Mansion House speech in July, the then Chancellor announced the expansion of the British Business Bank’s growth guarantee scheme, doubling SME lending to £3.5 billion.

I share the focus of the noble Baroness, Lady Kramer, on community development through financial institutions. Through the Community Finance Taskforce, we have brought together banks, community finance advisers and the Government. At Mansion House, more than £10 million of philanthropic funding from JPMorgan Chase and support from BNY was announced for the sector. The taskforce will publish a road map early next year to support the ambition of unlocking a further £1 billion of SME lending over five years. The British Business Bank’s Community ENABLE Funding Programme committed nearly £120 million of funding, with a second phase intending to grow that to £500 million. We are improving competition and supply through the enhancement of commercial credit data sharing in order to strengthen bank referral arrangements.

On personal lending, the Government’s financial inclusion strategy includes measures to strengthen community finance and partnerships between mainstream lenders and CDFIs. We are supporting practical interventions, including a small sum credit pilot in which Monzo has already announced it will be the first participant, as well as a transformation fund for credit unions alongside the common bond reforms—those are even part of this Bill—to make sure that credit unions can do their job better. I was quite taken by what the right reverend Prelate the Bishop of Manchester said about the centrality of being able to provide this sort of fund; I note that the only businessperson to receive a Nobel Peace Prize was someone who did that by finding a way to lend unsubsidised money to poor people in Bangladesh.

This is important, but a lot is already going on, and I wonder whether supporting that might be something that we would want to think about. The amendment would require the FCA to act against firms that do not meet minimum lending standards. However, do we not want customers and businesses to access appropriate credit and balance that with risks of overindebtedness? The noble Baroness, Lady Kramer, is right that what gets measured gets managed; equally, we need to be worried about creating a system where people are hitting the target and missing the point. For these reasons, the Government are not persuaded that these amendments are the right way of improving behaviour or pricing. I ask the noble Baroness to withdraw her amendment and, please, support the other actions that are being taken by the Government to address this critical question.

Amendments 57 and 61 concern how the regulators report on financial inclusion. Amendment 57 seeks to require the FCA and PRA to publish annual reports on how they have advanced financial inclusion. Amendment 61 seeks to require the FCA to publish an annual report on financial inclusion detailing how it has had regard to financial inclusion in exercising its functions and assess the impact of its activities on financial inclusion outcomes. These amendments would impose new statutory reporting duties that risk duplicating existing arrangements for how the FCA reports about the state of financial inclusion and its impact on it. Amendment 57 would also place reporting duties on the PRA, whose statutory duty is prudential regulation. This would create uncertainty about the PRA’s remit and what it would be expected to report against.

Financial inclusion is a shared responsibility across government, regulators and particularly the industry rather than a matter for regulators alone. We know that exclusion is driven by a broad range of complex and overlapping factors, including wider economic conditions, technological change and behavioural drivers. Accountability for improving financial inclusion should therefore remain a collective effort rather than being placed on one or two institutions whose powers extend to only part of the challenge.

The Government have set out this collective approach through our Financial Inclusion Strategy. We continue to work closely with regulators, firms and consumer groups to improve access to financial services and support those who are underserved. The strategy is subject to a public review, which will take place next year, to assess the progress that has been made through this collective effort and where further work is needed. I look forward to the input of Members of this House when that is published.

Amendment 60 concerns child trust funds, which have been spoken about passionately and very articulately by a number of noble Lords, including the noble Baroness, Lady Altmann, and the noble Lord, Lord Holmes. Decisions about who may act on behalf of persons lacking capacity are governed at bottom by the Mental Capacity Act 2005 and determined by the courts. The Act provides a well-established framework, including oversight by the Court of Protection, to ensure that access to and management of a vulnerable person’s account takes place where appropriate safeguards are in place and in that person’s best interest. This reflects the very real need to safeguard and protect vulnerable people.

This amendment seeks an alternative route of access outside that framework. However, it is difficult to ask the FCA to put that court protection aside—and the FCA does not even have the power to do that. Legislating to permit that would require giving the FCA the power to alter the effect of primary legislation through its rules via a Henry VIII power but without the same degree of oversight. That cannot be the right way forward.

As the noble Baroness, Lady Kramer, mentioned, on 8 July the Ministry of Justice convened a round table on mature child trust funds and young adults who lacked the mental capacity, not least because of debates in your Lordships’ House. That meeting was attended by the noble Baroness, Lady Kramer, other stakeholders and the previous Economic Secretary to the Treasury, Rachel Blake. My noble friend Lady Levitt spoke directly with the noble Baroness, Lady Kramer, and members of the public, and she made it clear that any solution to this issue would likely need to be delivered through primary legislation. Ultimately, this cannot be resolved through the FCA rules or changes to tax legislation. Primary legislation would be required.

However, we do take this matter very seriously, and I have raised it with the Ministry of Justice. I reassure the noble Baroness, Lady Kramer, that it is exploring how the Government can best facilitate access for parents and carers to child trust funds on behalf of their children. I do not have a solution, but we are trying. In the meantime, the FCA is conducting a review into provider practices under child trust fund accounts, including on whether there are barriers to vulnerable young adults accessing their money. We welcome this review. However, as I said, the underlying issue lies in the Mental Capacity Act, and it is not possible for the FCA to substitute or override the primary legislation in that Act.

Amendment 70 would require the FCA to ensure that financial institutions that are registered or regulated by the FCA facilitate the payment of inheritance tax by executors, before probate is obtained, through direct payment schemes. I thank the noble Lord, Lord Mackinlay, for raising this question. I am sorry to hear of the difficulties that he experienced. The duty of administering an estate often arises at one of the most difficult times in a person’s life, and I understand the noble Lord’s desire to ease that process for people who face similar circumstances.

The noble Lord has previously acknowledged that the direct payment scheme generally works well in its existing voluntary form and that it is rare to come across a case where an institution refuses a request to pay tax that is due. Following our debate on this amendment, we asked HMRC officials to contact the company where the money was lodged to understand more generally its policy on the direct payment scheme. The company confirmed that it does in fact facilitate direct payments to HMRC, normally through investment holdings, but there were some types of investment products that it did not consider suitable for release directly to HMRC before grant of probate. These included certain types of bond products. That is as far as we have got on this.

However, the noble Lord’s amendment proposes to mandate the use of the direct payment scheme by FCA-regulated institutions. Our experience—and, I think, his experience—is that most financial institutions facilitate direct payment schemes most of the time. There may be certain types of financial product where releasing funds to HMRC before the grant of probate presents a particular legal and technical complexity. Perhaps we can write to people who are not following the voluntary scheme well, but the advantage of a voluntary scheme is that institutions can assess the level of risk involved and make payment only if they are satisfied that they are releasing those funds correctly. The amendment as drafted would not allow for that to happen.

The noble Lord suggested that this change be made through FCA rules. However, changes to primary legislation may also be required to make this change. FCA rules do not generally displace the private law framework. Making this change through FCA rules could leave financial institutions on an uncertain legal footing. However, we have taken most seriously the points that the noble Lord has raised. They are good points and this area may still need to be addressed, but not by this amendment.

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Moved by

[Lord Pitt-Watson]

12: Clause 4, page 3, line 34, at end insert—
“(ga) in paragraph 14 (scheme rules), in sub-paragraph (2), omit paragraph (f);”Member's explanatory statement
This amendment would remove the power of the scheme operator to make rules providing for the delegation of functions from the Financial Ombudsman to staff, given the Financial Ombudsman’s general power to delegate under new paragraph 1B inserted by clause 4(8)(b).

[Lord Pitt-Watson (Lab)]

My Lords, I will speak to the amendments in my name in this group. Before turning to the detail, I should briefly note that almost all these amendments were previously tabled by the Government in Committee, where, in light of concerns expressed about the way in which they were tabled, the Government agreed to bring them back on Report. The group contains a modest number of minor and technical amendments, which are not unusual for a Bill of this size. They do not alter the underlying policy of the Bill. Their purpose is to ensure the Bill is relevant and that the relevant provisions in FSMA operate clearly and consistently. I will try to be quite quick, therefore, in going through them all, so as not to tire your Lordships.

First, turning to Amendments 18, 21 and 23 to 25. These are minor technical corrections to Schedule 2 to the Bill, which, taken with Clause 13, abolishes the Payment Systems Regulator and gives broadly equivalent functions to the FCA. Amendment 18 removes the duplicative provision from new Section 131Z19. Amendment 21 corrects a cross-reference so that the Bill refers to the correct FCA payment system. Amendments 23 to 25 ensure that references to the chair of the PSR, which should be obsolete after the PSR is abolished, are deleted in the correct places.

I hope this is all making sense, but if noble Lords have a particular thing they want to talk about, please do indicate. Amendments 73 to 75 are, once again, minor and technical amendments.

Amendment 12, which relates to Clause 4, makes a consequential amendment. New paragraph 1B of Schedule 17 to FSMA, inserted by Clause 4, permits any function of the Financial Ombudsman to be performed by any member of staff.

Amendments 76 to 79 relate to Clause 33. As noble Lords will be aware, the Bill introduces a more flexible senior management approvals framework, including the ability for firms to apply for conditional or time-limited approval in specified circumstances. These are technical amendments to ensure that the framework operates consistently and in line with the original policy intent.

As regards Amendment 81, finally, when the Bill before us gains Royal Assent, there will already exist a number of overseas recognition regimes created under existing powers in FSMA 2023 to restate regimes inherited from the EU. This amendment enables the Treasury to make consolidating provision, which would restate the existing regimes within the new overseas recognition regime framework. This is essentially a tidying-up exercise.

In summary, this group of government amendments makes technical corrections to ensure the Bill works as intended. I hope noble Lords will join me in supporting them.

[Lord Altrincham (Con)]

I thank the Minister for bringing forward these already tabled amendments, assembled this evening in group 4, and declare my interest as a director of South Molton Street Capital. These amendments, as the Minister explained, remove duplication, correct drafting, make the provisions of the Bill work better together, and make the Bill intelligible, internally consistent and ultimately more workable in practice. Therefore, we support them.

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[Lord Altrincham (Con)]

My Lords, we take a different view on the Financial Ombudsman Service. Our position is that the present FOS model now requires more fundamental reform. We propose that the Treasury should publish draft legislation to replace the FOS with a new financial adjudication service, alongside a dedicated financial services chamber within the First-tier Tribunal.

We accept the need for consumers and SMEs to have access to redress that is fast, expert and affordable. Our concern is that the FOS has evolved well beyond a simple dispute resolution function. Its decisions can shape market behaviour and influence how FCA rules are understood, without the same accountability as a regulator or the legal certainty created by binding precedent.

At the heart of that concern is the fair and reasonable test. A firm may comply with the law, FCA rules and its contractual obligations but still face uncertainty about whether the ombudsman will take a different view. We simply cannot have this situation if we want a regulatory landscape that is conducive to business confidence. We therefore understand the position taken by the noble Lord, Lord Sharkey, but we start from a different premise. Our position has not changed. We want a redress system that remains accessible to consumers but is also more predictable, legally certain and consistent.

[Lord Pitt-Watson (Lab)]

My Lords, I start with an apology to the noble Lord, Lord Sharkey, if I have failed to respond to him appropriately, but perhaps I can do so in the remarks that I will now make. In response to my noble friend Lord Davies, I am clear that treating customers fairly is one of the business principles of the FCA and is therefore one of the criteria by which a complaint will be able to be made to the FOS.

The FOS plays a vital role in the redress framework for financial services, ensuring that consumers have confidence that, if there is a complaint about a financial services provider, there is an independent, impartial service that can resolve that complaint and has the ability to put things right. That role will not be changing as a result of these reforms. However, the framework within which the FOS operates is not as consistent as it needs to be, and that is not good for consumers or financial services firms. That inconsistency is not surprising because the FOS’s fair and reasonable test was determined before the consumer duty came to the FCA.

The Government’s review of the FOS found that there is a small but possible minority of cases where that inconsistency in the framework could cause false determinations to have the effect of quasi-regulations by setting standards that may not be in line with FCA regulations. To be clear, these are all the FCA regulations. If noble Lords had been with me three months ago, they would have seen me writing letters to my predecessor confirming that that was indeed the case.

As far as the House of Lords is concerned, the Financial Services Regulation Committee stated in its report Growing Pains, that the FOS’s actions can,

“have regulatory impacts by creating precedents that the FCA requires firms to follow”—

again, a quasi-regulator. That is the background to why we are doing this.

[Baroness Kramer (LD)]

The key issue that I think the Minister has rather glossed over is the evidence base for making these changes. We have been told it would be coming; it has not come. Consistently, we have been told that letters are being developed, but letters have not arrived. I asked for a specific letter and was told that of course it could be provided. It is about the car finance scandal, which was basically exposed through the FOS while the FCA stood to the side, and what would be different now in the consequences of the complaints. What would happen to the complaints that would be different? This seems to be the issue that lies at the heart of this. The FOS exposed a major scandal. As the Minister will know, car finance is the second largest financial market in the UK. Nine out of 10 people who buy a car finance that car. The redress scheme that the FCA has been forced to put into place is currently £7 billion. If I understand correctly from listening to the Minister and his various advisers, in future the FCA approach to the problem would reign, this scandal would never be exposed and there would never be redress. I am waiting for the letter that is supposed to tell me whether that is exactly correct.

[Lord Pitt-Watson (Lab)]

Let me try to address that question. The FCA and the FOS are independent. It is not for the Government to decide what was a correct or a false decision. All that the Government are saying is that the criteria by which the FOS adjudicates should be similar to the rules that practitioners are trying to exercise in the way in which they are working. I think that is just good common sense. I believe there will be a publication coming out shortly from the industry with examples of where the industry may think that the FOS treated it in a way that was inconsistent with the FCA. It is not for me to judge whether that took place. It is for the FOS to judge whether that took place. That may be the reason that I am proving so frustrating in being able to write back properly to the noble Baroness.

Amendment 14 would remove Clause 8 from the Bill and add a list of factors that the FOS must take into account when determining what is fair and reasonable in all the circumstances. In Committee, the noble Lord and others raised concerns that Clause 8 might remove the ability of the FOS to consider fairness in the round. That is not the case. The FOS will still make its determination based on all the circumstances of the case.

The amendments made to FSMA by Clause 8 do not abolish the fair and reasonable test. That is the final adjudication that will be made by the FOS and, because of the principles of business, treating customers fairly is one of the criteria by which a complaint could be made.

Where the relevant FCA rules apply, the Government consider that FOS determinations should be consistent with those rules. Consumers and firms should be able to understand and rely on the FCA rules as providing the standards against which conduct is going to be assessed. I want to be clear: that extends to all the FCA’s rules—I think that addresses my noble friend Lord Davies’s question. That includes the principles for business, the consumer duty and the code of conduct. These are designed to secure high standards of conduct and consumer protection. If a firm fails to meet its obligations under these broad principles-based rules, the FOS may conclude that it should pay redress to the complainant, taking into account this failure and any other relevant information, such as the impact the failure had on the complainant. There is no requirement for a firm to have breached one of the more specific, detailed rules in the FCA’s rulebook.

The consumer duty was introduced by the FCA to improve consumer protection across all financial services, and the Government are confident that it sets a high standard of care that firms should provide to their customers. It includes a requirement to act to deliver good outcomes and an expectation that firms will act in good faith, avoid causing foreseeable harm and enable and support retail customers to pursue their financial objectives. The consumer duty, as I pointed out, did not exist when the FOS was established and the fair and reasonable test was introduced. It is right that the framework governing the FOS should be updated to reflect this landmark piece of consumer protection regulation. Without clarification, we are left with a situation where two different bodies are independently making assessments of what standards firms need to meet, and that does not seem like a sensible approach. The reforms to the fair and reasonable test strengthen consistency across the framework. They do not weaken consumer protection.

Amendment 13 would remove Clause 7. In Committee, the noble Lord suggested that the referral mechanism would in effect subordinate the FOS to the FCA. That is not the case. The FOS will remain completely independent and responsible for resolving complaints between consumers and financial services firms. The FCA will not determine individual complaints, it will not investigate disputes and it will not direct the outcome of cases. Those functions will remain entirely with the FOS.

The amendments to FSMA made by Clause 7 ensure that, where the FOS considers there to be an ambiguity within the FCA rules, the FCA must provide an opinion requested by the FOS. That is entirely consistent with its statutory role as a rule-maker. The FOS will then use that opinion, applying it to the individual circumstances of the case to make a determination.

Lastly, some noble Lords expressed concerns about the potential for referrals to lead to delays, including with reference to the FCA’s comment about the potential operational load. The Government recognise the importance of maintaining the FOS’s quick and informal model, but the Government anticipate that only a very small number of cases are going to be referred to the FCA. The vast majority will be resolved without the need for referral. To avoid delays, the timeline for the FCA to respond will be set out in secondary legislation.

The FCA and the FOS are already gaining practical experience of operating such a mechanism by trialling arrangements through their memorandum of understanding. The experience gained through this trial has provided valuable lessons for the implementation of the legislative mechanisms. The Government will continue to work closely with the FOS and the FCA ahead of those changes taking effect, preparing them to ensure that the new system works effectively. The memorandum of understanding, by the way, is creating a very small number of referrals from the FOS to the FCA.

Preparing for an Ageing Society (Economic Affairs Committee Report)

Lord Pitt-Watson Excerpts

Friday 4th September 2026 Lords Chamber

[The Parliamentary Secretary, HM Treasury (Lord Pitt-Watson) (Lab)]

My Lords, I begin by echoing the welcome of the noble Baroness, Lady Neville-Rolfe, and others for the report. I congratulate the noble Lords, Lord Liddle and Lord Wood of Anfield, on bringing it to the House today. I thank all noble Lords who have contributed to what has been a thoughtful and wide-ranging debate. As a new boy, I am struck by how coming to a debate in the House of Lords always opens up new issues around things you thought you had studied. I will aim to address the points that have been made—although I may not be able to namecheck everyone—and the excellent speeches made by noble Lords, such as that from the noble Baroness, Lady Prashar, which were very broad in terms of thinking about how to deal with this issue.

I begin where many noble Lords—in particular, the noble Lord, Lord Burns—began: with some optimism. The fact that we, as a society, are living longer is one of the great achievements of the modern age. I have two little twin granddaughters, Grace and Astrid. The noble Lord, Lord Liddle, explained to me that they can expect a lifespan of 90 years, which is an absolute triumph of public health, medical science and rising living standards. People having longer, healthier and more fulfilling lives has been an objective of everybody and of every party, I think—one that we want to promote. This Government remain committed to that goal.

However, that brings with it new and mounting pressures on public services and public finances not just here but, as the noble Baroness, Lady Bottomley, and the noble Lord, Lord Razzall, pointed out, in lots of countries across the developed world. The Government do not shy away from the reality, which is that addressing this challenge is not straightforward. It is not just about addressing the pension age, although that is an important part of what we have to do, or addressing fertility. I was interested in the speech from the noble Baroness, Lady Nargund. I had not thought about that issue before, so I would be more than pleased to talk to her about it or arrange for her to talk to somebody in the Government with greater expertise on it than me. The noble Baronesses, Lady Penn and Lady Meyer, also talked about this issue.

As I say, though, this is not just about the pension age or fertility. An ageing society touches on nearly every area of public policy. It would be wrong of me to suggest that there is one lever that can resolve it alone, however important it may be; that was, I think, the key point in the committee’s report. In order for this to work, we need to think also about how we can keep people, particularly older people, in work for longer and how we can deal with caring and social care. There is a circularity here, because the people who are not working are often looking after their parents. We need to think about how we can address discrimination and about life planning from education, which was mentioned by the noble Baroness, Lady Neville-Rolfe, as well as keeping people in employment.

I wish to talk about some of those points and the Government’s approach. I will not touch on housing, which I know is important and was raised by the noble Lord, Lord Best, or technology, which was raised by the noble Lord, Lord Willetts. I would like to talk about how we can look after people in old age. How can we support them to keep working? How can we provide adequate pensions? More broadly, how can we promote prosperity and keep the dependency ratio down by focusing on the denominator?

I shall start with social care, about which many noble Lords—including the noble Lords, Lord Burns, Lord Lamont and Lord Liddle—talked. There is a big gap in welfare provision. People are seeing everything they have worked for be wiped out by the costs of social care, which are increasing hugely. This issue was raised by the noble Baronesses, Lady Thornton and Lady McGregor-Smith, the noble Lord, Lord Willetts, and the right reverend Prelate the Bishop of Coventry. We must think about the technical solutions and not forget that old people, like all people, are of immeasurable worth.

Our Prime Minister has set out his personal commitments to making progress on fixing our broken social care system. He has agreed with the noble Baroness, Lady Casey, to bring the conclusion of the independent commission forward to 2027 in order to help with that. This will combine the work that was originally set out as two separate phases, so that a single set of recommendations will cover both the immediate improvements, which the system needs now, and the longer-term transformations that are required to meet demographic changes. The same pressures are bearing down on the National Health Service, and a series of actions is taking place there. That is all from me on social care.

What about keeping people working? I must start by addressing ill health. The noble Lord, Lord Kakkar, introduced fantastic expertise to this debate. Last year, the Government set out a 10-year health plan. They remain committed to supporting people to lead healthier lives. In the 2025 Budget, there was an increase of £29 billion in annual cash resources by 2028-29. The Department of Health and Social Care is bringing £13.4 billion of public health funding into the public health grant, and £800 million is being put into the treatment of mental health. I know that I am quoting inputs rather than outputs, because we do not know what the outputs will be, but I feel that there is a commitment to try to address these issues.

I turn to pensions. We have had a big debate about the triple lock, and I thank the noble Lords, Lord Redwood and Lord Turnbull, and the noble Baroness, Lady Coffey, for their input on that. As noble Lords know, the Government made a manifesto commitment that, until the end of this Parliament, the triple lock will remain. The noble Lord, Lord Tugendhat, made an interesting suggestion about a cost-benefit analysis, and the noble Lord, Lord Willetts, asked what the retirement age will be. That has been delayed because of the Pensions Commission.

Last summer, it was announced that the Government had launched a Pensions Commission to review the state pension age. The pension age review feeds into the Pensions Commission, which will advise the Government early next year on how the state pension age and wider pensions policy framework should adapt to trends to ensure that pensioners have adequate incomes in future, while ensuring fairness and fiscal sustainability.

The danger is that this feels like just another grand review. The noble Baroness, Lady Penn, and the noble Lord, Lord Macpherson, raised that. I have a long paragraph on all the things that are happening in pensions right now. Many foundation stones are being put in place: mandating value-for-money reporting; trustees giving people guidance on how to get a pension out of their pension savings; and CDC collective pensions that will give people an income for life rather than cash. Lots of stuff is already going on. There is also, as the noble Baroness, Lady Neville-Rolfe, said, financial education for the young so that they know what is going on as well.

I am running out of time. Noble Lords will be aware of many of the things that the Government are doing on the economy. It is growth in every postcode, which I hope addresses the point raised by my noble friend Lord Sikka. The noble Baroness, Lady Neville-Rolfe, is right to hold us to account. This is not procrustean. We are looking after everyone in every postcode.

Let me skip forward, if I may. A lot is going on with young people. We have talked about education. There is the youth guarantee, the growth skills levy and investing in training. More broadly, the Government recognise the importance of ensuring that every young person can make a successful transition to work. That is what Sir Alan Milburn’s review will be doing. Given that this is such a cross-cutting challenge, consideration of how we tackle the ageing population is embedded everywhere—in growth, pensions, health and social care and labour markets. It is also embedded in housing. We are not following one of the recommendations of the committee with a grand plan. My noble friend Lord Davies recognised this. However, the Government recognise that this is a big challenge.

An ageing society is a symptom of success. It is a matter for celebration. It is a result of the determination of a great nation to improve living standards for everyone. We have not solved all the problems—and I have not addressed them all in this speech. However, we have some strong foundations, not least in your Lordships’ report keeping an active debate going and in action by the Government. I trust that Grace and Astrid can not only expect longer lives than their granddad but healthier and more fulfilling ones. Thank you.

Financial Services and Markets Bill [HL]

Lord Pitt-Watson Excerpts

Committee stage
Wednesday 8th July 2026 Grand Committee

[Baroness Neville-Rolfe (Con)]

My Lords, our amendments in this group concern the future of the bank ring-fencing regime. I will start by setting out clearly the position that we have reached as the Official Opposition. Through our diagnostic work, we have found a consensus that the bank ring-fencing regime is no longer fit for purpose. It adds costs to banks and their customers and it has been superseded by other rules since its introduction. A regulatory regime should not be preserved simply because it exists. It must continue to justify itself against present-day risks, tools and costs. In our view, the ring-fencing regime no longer does so. The next Conservative Government would repeal the post-global financial crisis ring-fencing regime, bringing the United Kingdom more closely into line with other international jurisdictions. Amendment 160A reflects that policy.

It is worth reminding ourselves what ring-fencing is. The regime was created through the Financial Services (Banking Reform) Act 2013, which amended FSMA 2000. The implementing regulations and orders came into effect in 2019, more than 10 years after the onset of the global financial crisis. At its core, ring-fencing is the structural separation of certain retail banking activities from activities normally conducted by international wholesale investment banks. In practice, that means a separate legal entity, with restrictions on what it can do and how it can interact with the rest of the banking group. Retail and small business deposit-taking is placed inside the ring-fence, while certain other activities must be conducted outside it.

The regime was introduced for serious reasons. The Parliamentary Commission on Banking Standards, convened after the financial crisis, identified three broad objectives: to make it easier to deal with failing banks without taxpayer-funded solvency support; to insulate vital banking services used by households and SMEs from problems elsewhere in the financial system; and to curtail implicit government guarantees, thereby reducing risks to public finances and incentives for excessive risk-taking.

Since ring-fencing was designed, the wider regulatory landscape has changed profoundly. We now have a much more developed resolution regime. We have recovery and resolution planning. We have operational continuity arrangements in resolution. We have stronger capital and liquidity requirements. We have the leverage ratio, the liquidity coverage ratio and the net stable funding ratio. The Bank of England, the PRA and the FPC have a broad toolkit for reducing the risk of bank failure and dealing with failure if it occurs. Moreover, we have sounder management of banks as a result of the senior management regime.

That is precisely the point that we wish to highlight in our amendment. The risks that ring-fencing was designed to address are now addressed through other more modern, more targeted and more internationally coherent tools. The 2022 Independent Panel on Ring-fencing and Proprietary Trading, chaired by Sir Keith Skeoch, reported that the regime has an annual cost to the UK banking sector of around £1.5 billion, which comes from running multiple separate legal entities, duplicating governance systems and raising the cost of capital and lending conducted by non-ring-fenced bodies. This is because large retail deposits inside the ring-fence cannot be used as sources of finance elsewhere in a group to support lending and investment. That review also found that the reduction in the implicit government guarantee and progress in ending “too big to fail” were not attributable to ring-fencing but instead to the development of the UK resolution regime. Ring-fencing is therefore a good example of a broader problem in financial services regulation: rules that are introduced in response to a crisis which then remain in place long after the conditions that justified the change.

We are now left with two regimes that are not aligned in the way that they aim to address “too big to fail”. That adds complexity, cost and burden. It also risks making the United Kingdom less competitive than jurisdictions that rely on resolution, prudential supervision and capital frameworks, rather than structural separation of this kind. Clauses 39 and 40 show that the Government recognise that there is a problem. They seek to make changes to the ring-fencing regime and give the PRA more flexibility over ring-fencing arrangements, but in our view these reforms do not go far enough.

Amendment 160A would repeal Part 9B of FSMA and the core statutory ring-fencing provisions introduced after the financial crisis. It would require the Treasury, the PRA, the FCA and the Bank of England to take the necessary steps to unwind the related rules and guidance. It would require an orderly transition, with attention paid to financial stability, continuity of core banking services and the competitiveness of the United Kingdom. Consumer savings would continue to be protected. Banks would continue to be subject to prudential supervision. Resolution planning would remain in place.

This reform matters for competitiveness. Other major financial centres do not operate a UK-style ring-fencing regime. If UK banks are required to carry costs and structural constraints that their international competitors do not face, that affects the cost and availability of finance. It affects the ability of banks to deploy capital efficiently and it affects the attractiveness of the UK as a place to operate and invest in. It also matters for customers. Regulations that increase costs without delivering commensurate benefit feed through into pricing, service innovation and lending capacity.

If the Government believe that ring-fencing remains necessary, will the Minister explain precisely what financial stability objective it now achieves that is not already achieved through the resolution regime and other prudential rules? Ring-fencing was created in response to a particular crisis at a particular moment for reasons that were understandable at the time. But regulation must evolve. It must be reviewed against current conditions. It must be removed when it no longer serves its intended purpose.

Finally, I would add that whatever changes are made, it is right to have a proper process of consultation with business and stakeholders and a follow-up report to Parliament. That is the purpose of my Amendments 159 and 174.

[Lord Pitt-Watson (Lab)]

My Lords, if I may respond to that, I had thought until recently that what we were debating was a response to the Skeoch commission established by the last Government, but we have new amendments now, it seems—Amendment 160A and the abandonment of clauses—that are really throwing ring-fencing out. I guess that they are tabled in response to a speech by the leader of the Conservative Party, Kemi Badenoch—a speech underpinned by a policy document from her party. That speech, the policy document and this amendment are not asking to think things through further from the Skeoch report: they have made their minds up. Kemi Badenoch announced that a future Conservative Government will end ring-fencing—definitive end of discussion. That, I believe, would be a bad idea. So did the review by Keith Skeoch, who was commissioned by the Conservative Government to opine on this and whose recommendations we are now trying to take forward.

Worse still, the evidence for Mrs Badenoch’s statement is based on really questionable claims, numbers and Mickey Mouse logic. For example, the claim was that the Skeoch report reckoned that the cost of ring-fencing was £1.5 billion. In fact, the report notes that that figure was presented to the review and that

“it has not been possible to draw a strong conclusion based on aggregating these costs”.

The report recognises that there are some costs to ring-fencing, but notes that that was expected and acknowledged by the Independent Commission on Banking, which said that that would not be a cost to the economy, but rather

“a consequence of returning risk to where it should be—with bank investors, not taxpayers—and so would reflect the aim of removing government support and risk to public finances”.

The policy paper has a Mickey Mouse logic that costs should be placed on the taxpayer, when they should be paid by the banks and the investors in the banks.

We should of course be in favour of reviewing the ring-fencing regime to be sure that it is properly doing its job. This is what Skeoch did and, now, if this Bill follows that report, I ask the Minister to ensure that we are careful with definitions in the implementation. For example, we should ensure that, within the growth allowance, the definitions are very carefully drawn up. We do not in future want the taxpayer subsidising proprietary trading—what many refer to as “casino capitalism”.

Badenoch suggests that her reforms would release £450 billion in capital—another number from nowhere. I know that the noble Baroness, Lady Neville-Rolfe, will not have a lot of time to sum up, but I would be grateful if she might write afterwards on how these numbers have been derived and what reduction in bank equity capital they assume. If these numbers do not stack up, that pulls the rug from under the policy document and the speech that was made by the leader of the Conservative Party.

The policy paper suggests that we should abandon the Financial Ombudsman Service. In this industry, which represents 8% of GDP but attracts 42% of corporate fines, Mrs Badenoch has decided that the front-line institution that protects consumers should be abolished. We could say that this does not matter and that Kemi Badenoch is unlikely any time soon to be Prime Minister, but it should matter to us. As the noble Baroness, Lady Noakes, has pointed out, there is considerable expertise in financial services across all parties in the House. Although we have differences, we are united, I hope, in trying to set a framework for the industry that allows it better to serve its purpose: to serve the outside world; to help get money from point A, where it is, to point B, where it is needed; to keep our money safe; to help us transact; and to help us share risk.

If the Opposition Benches feel mandated to follow the policy documented last month, we have a problem. I could not find a single reference in that document to any input from any consumer group anywhere. It felt like a lobbyist document from the City, but I have talked to at least one lobbyist who said “No, it goes way further than we would ever suggest”.

[Baroness Noakes (Con)]

In Committee, it is normal to address the amendments and not opposition parties’ policy documents.

[Lord Pitt-Watson (Lab)]

The amendment has been put to us at the last minute. The points that it relates to have been there for weeks, indeed months, but I would argue that what has triggered the amendment is the speech by the leader of the Conservative Party and the policy document that underpins it. If the noble Baroness thinks, like me, that the policy document is lacking, I would be pleased to hear it because, as she knows, it would abolish the FOS and seek to mandate regulatory changes that come close to invading the independence of the regulator.

--- Later in debate ---

[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 Noakes (Con)]

My Lords, I have some experience of ring-fencing as, in my capacity as the chairman of the risk committee of a major bank, I oversaw the implementation of ring-fencing. At that time, it was a significant risk to the bank that we would not be in compliance with the ring-fencing legislation and therefore this required considerable oversight.

I am clear that ring-fencing has been a very expensive element of the post-financial crisis reforms. The Skeoch report, which has been referred to, put the upfront cost at £2.9 billion and the ongoing cost at £1.5 billion, which amounts to about £14 billion to date. The noble Lord, Lord Pitt-Watson, tried to undermine those numbers, but, from my experience, I do not doubt that order of magnitude. More importantly, the implementation, and, to a lesser extent, the ongoing element—

[Lord Pitt-Watson (Lab)]

There were two points, one of which is that the Skeoch report says that the numbers given are not its numbers. The report is clear that whatever the cost of ring-fencing, it is not a cost to the economy—this is what the Vickers report said earlier —and that, by removing ring-fencing, it suddenly becomes a cost to the taxpayer rather than to the bank’s investor. That is the key point that Skeoch is bringing to our attention.

[Baroness Noakes (Con)]

My Lords, I understand the point that the noble Lord is trying to make, but I argue that the risk of the taxpayer picking up the tab is now considerably lower, which means that it is reasonable to re-examine whether ring-fencing should be an ongoing part of the regime.

I was about to say that, in addition to the cash costs, there was during the implementation, and to some extent on an ongoing basis, considerable diversion of scarce management resource, which will have damaged the banks in a number of ways. My noble friend Lady Neville-Rolfe has registered her opposition to Clauses 39 and 40 standing part of the Bill. I support Clauses 39 and 40 on the grounds that any improvement in the ring-fencing regime is better than none. The flexibility that will come with letting the PRA handle some of the changes via rules is a constructive solution. The PRA is, however, heavily invested in ring-fencing and no one should be under any illusion that the power will be used by the PRA to make significant changes to the regime. That is why I believe that we need to make provision to go further and I support the other amendments in this group.

As we have heard, since the implementation of ring-fencing, the parallel and very expensive requirement to maintain and develop resolution plans has been implemented, and the Bank of England has confirmed that the major banks are resolvable. In addition, bank capital levels are significantly above the levels that they were immediately after the financial crisis and well above regulatory minima. Regulatory capital is expensive and can restrict the ability of banks to lend to support the economy. I am always extremely sceptical about claims that reducing capital requirements on banks will immediately lead to masses of extra lending by the banks—there is some element of truth in it, but the effect is not as great as might be claimed.

We are hugely proud of the robustness of our financial regulation and what we do in the UK is often copied abroad. No one anywhere else in the world has ever copied ring-fencing and that is for a very good reason: it is a very expensive solution to a problem that can be and has been addressed in other ways. That is why I support the amendments from my noble friend, which pave the way for eliminating ring-fencing. It cannot be done away with overnight, so I support the measured approach taken in my noble friend’s Amendment 160A.

[Baroness Lawlor (Con)]

My Lords, I am delighted to have the debate, and I am very grateful to the noble Lord, Lord Pitt-Watson, for raising questions which have encouraged debate, but I support my noble friend Lady Neville-Rolfe’s opposition to Clause 39 standing part of the Bill. I also support her Amendment 160A about ring-fencing.

Clause 39 gives the Treasury powers to loosen the ring-fencing scheme. It has been anticipated, as others have said in this debate, by a number of announcements and reports, not least the Skeoch report—I hope I have pronounced it rightly, in the Celtic way—and the announcements this year by the Treasury itself. All of these point to and address a real problem. The question before us today is whether the Government’s solution in their Clauses 39 and 40 is sufficient to deal with the problems raised by reviews and announcements going back to the 1 March 2022 independent review of the working of the scheme.

I have a concern. The clause may seem to be the answer to some of the serious questions raised in that review and other concerns, and allow for the mitigation of problems arising from the ring-fencing regime—to allow for “proportionate” changes, to use a word which continues to recur throughout the assessments of how the scheme is working. However, in essence, it protracts the dominance of the regime and the regulators in what should be business decisions under good law, which is the spirit of the common law. It is a law which is permissive of risk-taking rather than prohibitive of the spirit of enterprise, or looking over the shoulder to the precautionary principle.

Officials and regulators can be very intelligent, competent and talented people, but it is not part of their skill set to drive through an entrepreneurial idea from the drawing board to production, sale, expanding their markets, developing a business, taking risk, and hiring and training people—which is an additional cost—while all the time keeping on top of the services sector, one of the fastest growing sectors in the UK and a jewel in the crown. Enabling officials to decide which activities should or should not be prohibited, and under which circumstances, does not tackle the fundamental problem to which the ring-fenced regime has given rise: the artificial and contrived structure. We are dealing with a structural problem—an artificially separated structure.

This structure inhibits the financial services sector from functioning in the best possible way, as an enabling hub for the whole UK economy, to allow small businesses, in particular, to grow and credit to flow. It is unlikely to remedy what we are dealing with, the fundamental problem of risk aversion imposed by ring-fencing law on businesses and the endemic risk aversion in the operation of the law.

[Lord Pitt-Watson (Lab)]

I wonder whether there might be some confusion here. The thing about the ring-fence is that there are activities within it that the Government are promising to bail out. Those things are being insured. By the way, the move in the ring-fence proposed by the Government will extend these a little, but they include lending to the small businesses that the noble Baroness has talked about. The question is: are we going to be rid of that? Is it the case that the implicit guarantee that the Government are giving can go to any other activity that the bank decides that it wants to undertake? That could include, although Skeoch would say it is not a problem right now, the sort of proprietary trading that brought the American banks down in 2008—of course, they had been allowed to do that because Glass-Steagall had been removed 10 years earlier. What we are talking about here is: how much of bank activity will the Government stand behind? As Mervyn King said, we must make sure that it is just the very most important things.

[Baroness Lawlor (Con)]

I thank the noble Lord, but it is about where the line is drawn in law, so that businesses can be certain and have predictability, because activities change day by day.

[Lord Pitt-Watson (Lab)]

With respect, that is what Skeoch is recommending and what is being allowed in what we are being asked to accept here—there is an extension of the ring-fence. He is saying, “Look, there are other important activities that go beyond the ring-fence that are administratively complicated for the banks. Please can you move this? Also, can you move this in a way so that it doesn’t need to go to primary legislation any time it needs to change, because all these things are moving?” What we are trying to do here is recognise that the independent commission is run by a senior financial businessperson—he used to run Standard Life—whom we are going to back. He indeed said that, in the long term, you may want to think about how ring-fencing goes together with the resolution regime, but that is not for now. He certainly did not say that we should abandon it.

[Baroness Lawlor (Con)]

I thank the noble Lord, but he was speaking about 2022, which was light years away for the financial sector. Things have moved on and have changed. We have different regimes in place now. As my noble friend Lady Noakes has explained, the banks are now resolvable. There are other schemes that will avoid the problems for the taxpayer. That should be borne in mind.

I had better finish quickly. That is my objection. It is about who decides for businesses. If you have a ring-fence, ultimately, no matter how much you relax it, the Government are never going to have the knowledge of the sector, and the detailed tactical and strategic ability, to be ahead of the game and make businesses grow. They will always play slightly safe, but maybe they are over-safe.

I will finish on why we need to repeal the ring-fence, not just why Clause 39 is not good enough. In a sense, we are seeing the inhibition of risk-taking and a structure that inhibits it. As other noble Lords have pointed out, we do not have parallels in other economies. I know that there is the Volcker rule in the US, but Switzerland has solved its “too big to fail” problem without a ring-fence and it has a very instructive banking sector. France and Germany have it individually but not the EU, which rejected it. Australia reviewed it again in 2019 and rejected it on the grounds that noble Lords have mentioned. It is well worth going back to the famous Skeoch review, which contends that, in the longer term, we will not need the ring-fence and we will have resolution schemes in place. For those reasons, I support my noble friend’s opposition to the clause standing part of the Bill and her Amendment 160A.

--- Later in debate ---

The corporation is, however, unlike any other local authority in the UK, not least because the 8,500 residents of the City of London are dwarfed by the over 600,000 people who work there and whose interests also needs to be considered. There is no other municipality that contributes over £100 billion annually to the UK economy and is the centre of our world-leading financial and professional services sector. It is therefore right that the corporation should use its convening power to promote this sector, which is at the heart of its success, including through engaging with the FCA and the PRA. If noble Lords have specific concerns about a particular interaction between the corporation and the regulators, the right response is a specific question to the Treasury or to the regulators, or even to the corporation itself, rather than the statutory review panel with a long process that is being considered in this amendment. We do not legislate for a review every time a body engages constructively with a regulator, and we should not seek to do so here.

[Lord Pitt-Watson (Lab)]

My Lords, the noble Baroness, Lady Bennett, has suggested that we inquire into the City of London’s role with the regulators and regulation. My noble friend Lady Bi summed it up well: there is no direct role there. But I wonder whether we could send a message to the City of London, perhaps a little more collegiate and, as a result, more effective. We all recognise that the role and constitution of the City corporation is quite difficult to defend from 21st-century principles. Why does one square mile of the country have these unique privileges? It has billions of pounds worth of property and investment, and the Lord Mayor of London has the status of a Cabinet Minister, apparently, when he or she goes on trips abroad. Why is it charged with the powers of a local authority but also with promoting Britain’s financial services industry? I point out that your Lordships’ House bears witness to the fact that historic institutions can—and often do—do good and important work. I wonder whether, harking back to the traditions of the City of London, there is one that we could help revive, in the spirit of what the noble Baroness, Lady Bennett, may want to happen.

Historically, the City of London was responsible for the good conduct of the trades in the city, ensuring that the goods produced could be trusted to be of high quality. Indeed, I believe that Elizabeth I even had the goldsmiths of London check that the coinage that the Mint was producing was of a high enough standard, because the goldsmiths were more professional than the people at the Royal Mint.

Over time, that role of policing good conduct has passed to professional bodies and then to regulators, but we often forget that it is the professionalism that we need. Regulators cannot replace professionalism, for which so many people from Britain and around the world come to use Britain’s financial services industry. Professionals, whether individuals or institutions, are a disciplined group possessing special knowledge and skills in a widely recognised body of learning. They are prepared to apply this knowledge and exercise these skills in the interests of others. That professionalism, both for individuals and for institutions, harks back to that old role of the City of London: not regulation but professionalism. It is and should be the core and unique selling point of the UK financial services industry. I sense that that is what we in this Room would like to achieve.

The City of London promotes financial services, but surely, if it does that, it must be sure that the services it promotes—maybe not every financial service—serve a purpose in the world. There is still enormous room for the City to identify and help to encourage good practice, not just to promote financial services generally but to ensure that all the services it promotes deliver benefit to the customer and the world. That may, from time to time, involve talking to a regulator—I do not see that as a problem—but it should seek much more to ensure that professional good practice becomes a norm. The City already does some of this, but it could be so much clearer about its focus and role. There would be no better way to promote the success of financial services in Britain.

I have one last coda on this and a more immediate thought. Spokespeople from the City of London Corporation like to explain—correctly—that they represent the whole financial services industry of Britain, two-thirds of which works outside London. But those who work to promote the industry are exclusively employed in the square mile, and it is difficult to express the level of frustration that I have felt among some that the City talks the talk about employment around the country but maybe needs to walk the walk in its own practices on where people are employed. I hope that might be a constructive suggestion about how this venerable institution might serve its country better.

[Baroness Dacres of Lewisham (Lab)]

My Lords, I fear that Amendment 172C strays beyond the purpose of the Bill, which is concerned with improving the regulation of financial services and markets. It is not, in my view, the appropriate vehicle for reopening broader questions about the role and governance of the City of London Corporation. This amendment takes us into a rather different debate—it asks us to examine the role and function of the City of London Corporation—whereas the purpose of the Bill is to strengthen the UK’s financial regulatory framework, ensuring that it is effective, proportionate and capable of supporting growth, investment and innovation, while maintaining high standards. Our focus should remain on achieving those objectives.

It is important to be clear about the respective roles of the organisations involved. The City of London Corporation is not a financial regulator. It does not authorise firms, supervise markets or enforce regulatory rules. Those responsibilities rest with the Financial Conduct Authority, the Prudential Regulation Authority and the Bank of England, all of which are independently accountable to Parliament.

The City corporation performs a different, but none the less valuable, function. It acts as a convenor of expertise, an advocate for one of the United Kingdom’s most important industries and a champion of the UK as a global financial centre. Through its international engagement, it promotes inward investment, supports exports of financial and professional services, and works with industry to help maintain the UK’s reputation for high standards and innovation.

I question whether the amendment has demonstrated that there is a genuine accountability gap requiring statutory review. Before Parliament creates a new review mechanism, we should be satisfied that there is evidence of a problem that the existing arrangements have failed to address. I have not yet heard that case made. The City corporation is already subject to established governance and oversight arrangements, while the regulators are independently accountable to Parliament.

At a time when the Government are rightly seeking to promote economic growth and strengthen the United Kingdom’s competitiveness as a leading international financial centre, I am concerned that this amendment risks creating uncertainty without identifying a clear public benefit. Our efforts should be directed towards ensuring that regulators can carry out their duties effectively, while organisations such as the City of London Corporation continue to play their distinct role in supporting the wider success of the UK’s financial and professional services. For those reasons, I believe our attention should remain firmly on the purpose of the Bill: strengthening the United Kingdom’s financial regulatory framework. I cannot support Amendment 172C.

Secondary International Competitiveness and Growth Objective (FSR Committee Report)

Lord Pitt-Watson Excerpts

Wednesday 11th March 2026 Grand Committee

[Lord Pitt-Watson (Lab)]

My Lords, I should start by declaring an interest. By background, I am an investor, but I teach a course and run a centre at Cambridge that focuses on the purpose of finance, thinking about what are the aspects of the finance industry that allow it to perform its purpose well. Of course, regulation is one of them. I am particularly struck that this committee has not fallen into the trap of “either it is a market or it is regulation”. Regulations are there to try to make markets work well so that customers know what there are getting, suppliers know what they are committing to and the public are protected.

The interesting thing about the secondary legislation on the PRA and the FCA is that that is what it is trying to get to. It is trying to get to: “We want to measure the regulator by how well the finance industry is performing its function of being able to lend to and support the British economy”. That seems a step forward. Of course, it is tricky to do this because it is not just regulation and it is not just markets. There are also institutions, infrastructure, professionalism, good will, incentives, technology, information, branding and ethics. We do not all agree on that, as we saw in the debate between the noble Baroness, Lady Bennett, and the noble Lord, Lord Lilley, about how all those things work. Regulation tends to be rather rigid, whereas all the other factors—technology, for example—are changing quite quickly. Professionalism is something that changes depending on the circumstances to which it is addressing itself.

We used to have lots of self-regulation, which, of course, Adam Smith was very much against, and that has now changed to more and more government regulation. I think it was Andy Haldane who noted that in 1980 there was one regulator for every 11,000 people in the finance industry and, by 2011, that had changed to one for every 300. By the way, that is for every regulator—there are however many people in compliance. I rather like Robin Ellison. He is a senior pensions lawyer at Pinsent Mason who said that there were 3,000 pages of pensions regulation in 1990 and that, last year, there were 180,000 pages, which is three to 180.

We have been playing a sort of regulatory whack-a-mole. Whenever anything goes wrong, we put in another regulation. We built this Jenga tower of regulation. Sometimes you can take a block out of the tower when you play the game of Jenga, but sometimes, if you take too many blocks out, the whole tower collapses. I also worry that, if there is too much regulation, you leave the professionalism of the industry behind because people will say that, if it is not in the regulations, they can do it, and that is not a good way of thinking about how you run a finance industry. I think it was Laozi, the Chinese philosopher, who said more rules and regulations, more thieves and robbers.

That is why the secondary objectives are interesting: they are trying to focus back on what is the purpose of this industry, and the purpose of this industry is to serve the outside economy. It seems to me that this is not in the gift of the regulator, nor, to be honest, do we really understand the relationship between the finance industry and the growth in an economy or the role of the regulator in creating a successful finance industry. It is a great idea to have as many international comparators as we possibly can, but when you lack that sort of information it is awfully difficult to know where you are going.

It would be great to have someone who would tell you the risk appetite. I think it was twice in October 2008 that the move on the New York Stock Exchange was something that, according to the risk models, would have happened only once in the history of the world. Indeed, I think in one case it was once in the history of the universe. Unfortunately, there we were in October 2008. So, I think we need to be a little bit careful. I even wonder whether we should be cutting the Government a bit of slack so that they do not give us quick answers now, but give us proper answers long- term on how we are going to make this work.

On the points that have been made about primary investment, for example—the Eatwell criterion—I hate to have the regulators asking more questions, but surely we need to know where this money that is protected is going.

We need some definitions. I think there are definitions of the things we want the finance industry to do. Here are some basic ones: we need someone to keep our money safe; we need someone to help us transact; we need to be able to share risks; and, critically, we need to be able to take money from point A, where it is, and invest it in point B, where it is needed. If we look at the academic studies of how much the finance industry has improved in taking money from point A, where it is, to point B, where it is needed, over the past 80 years and how much the cost of doing that has gone down, the answer is very little indeed.

If the finance industry depends on trust, we have a huge problem. Ten years ago, the Bank of England— I think it was—did a study of British people to find one word that described their feelings about the direction of the finance industry. They chose “corrupt”. If we want companies to invest, they need to be convinced that the finance industry will not do to them what happened after the global financial crisis, where, as we all know, small and medium-sized companies were extremely badly treated.

What we have got is regulation on regulation. Some 42% of the fines issued to companies were to people in the finance industry, which is 9% of GDP. Yet, if we could get this right, the prize would be huge. In 2023, NatWest was involved in the issuance of £83 billion of green bonds. That outscales anything that the Government are doing. However, it needs to be the whole system. I am concerned that all our banks are targeting a return on equity above 15%. That surely is restricting the amount of money that will be available to the real economy.

As the noble Lord, Lord Kestenbaum, said, none of this will work if we have a standoff in trust between the regulator and the people who are trying to provide these services. I have one simple example. It is really difficult to open a bank account in Britain. I do not know whether noble Lords have tried it. If you ask the bank why this is, it will say, “Oh, we have all these regulations about knowing your customer, and we have those because we’re trying to stop money laundering”. That sounds fine, but in Bangladesh, if you have 10 taka—10 pence—you can open a bank account. I was talking to the governor of the Bank of Bangladesh and asked him how they manage to stop money launderers opening accounts. He said, “David, I don’t know too many successful money launderers who have only 10 pence in their account. Obviously, if somebody puts £10,000 through, we will do something about it”.

I note that there are folk within the finance industry who are trying to respond to all this. For example, Scottish Financial Enterprise under Sandy Begbie says that it will offer basic financial services to all those who want such services, and that this will include financial education and financial literacy materials. I wonder whether there is a regulator who is saying thank you, and a regulator who is keeping tabs on whether that happens.

I will finish optimistically, if I may. I talked about fines in the UK. One bank in America has been fined four times more than the entire British finance industry during the same period. Frankly, the regulation of finance in America is now felt by many to be very erratic indeed. In the European Union, the regulation feels suffocating, particularly on information. Surely this is an opportunity for the UK to do something to have an industry that fulfils its purpose well and is competitive as a result.

Let us not try to rush at this. I see that the Government have said that they want to embed these new secondary obligations and base them on independent evidence of how the financial services industry best serves the economy. That seems like a good thing that we should be pushing, not just as a destination but as a journey. Laozi’s most famous quote is:

“A journey of a thousand miles begins with a single step”.


We are already well along the journey, and the committee has done a wonderful job of taking us a few miles further. I look forward to this debate continuing, with reform appropriately administered by our regulators as we look to the future.

UK-EU Customs Union

Lord Pitt-Watson Excerpts

Thursday 29th January 2026 Lords Chamber

[Lord Pitt-Watson (Lab) (Maiden Speech)]

My Lords, it is with great pleasure that I rise in this debate to make my maiden speech. I should begin by giving thanks to all Members of the House for their warmth, their welcome and their generosity: to the Garter King of Arms, Black Rod, the Clerk of the Parliaments, the doorkeepers and all the others who work here; to my noble friends Lady Smith of Basildon and Lord Kennedy of Southwark; and to my noble friends Lord Wilson of Sedgefield and Lord McNicol of West Kilbride, who introduced me to the House.

I would also like to thank the noble Lord, Lord Stephen, for remembering my mother. She was a music teacher. My dad was a Church of Scotland minister, so I think that, like a few Members of this House, I am a child of the manse. But my career has been in business, particularly in finance, which is what I would like to talk about today.

For Britain, finance is the real jewel in the crown of our economy. It is 9% of our economy, but it earns for us a trade surplus of £70 billion, much of that through the European Union, so the finance industry is critical to any element when we think about our trade. But it is not just self-interest that makes the finance industry so important. Finance is central to the solution of the big problems of the world. It is almost impossible to imagine a prosperous economy without a successful finance industry. I led the finance initiative at the Paris climate talks; we will not solve the climate problem unless the finance industry is on board with that. If you look at poverty in the developing world—I was treasurer of Oxfam—and if we are to get people out of poverty, they need financial services. If you look at innovation—I chaired the endowment at Nesta—again we need the money and the stewardship to make sure that that innovation can take place.

The main part of my financial career was in another element: it was about the power of the finance industry and how that is exercised. Because the finance industry holds the shares in companies, that gives them the opportunity to approve or otherwise the boards of directors and therefore to have great influence. That influence needs to be seen through the eyes of the savers—the millions of people who save through their pensions into the finance industry. Of course, they want profitable companies, but they also want companies that pay regard to the society and the environment in which they trade.

The greatest part of my finance career was with an entrepreneurial pension fund called Hermes, and we worked very strongly on that. We encouraged people to get together on that as well. I consider myself one of the midwives of Principles for Responsible Investment, which now has over $100 trillion of investors signed up to it—and it is based in the UK. It was not just me—there were many people who were involved—but the UK is the centre in the world of responsible investment and of people trying to make sure that our money is used well for the people that it ought to be used for.

But there is another, less rosy side. We all remember the global financial crisis. There are many failures in the financial system. It is not highly regarded by the people of Britain. Most critically, when academics study the financial system, the cost of taking money from point A in the outside world and investing it where it is needed in point B has hardly fallen over 100 years. That is a real challenge.

But such challenges, I think, can also be big opportunities. I have a professional interest in working on thinking about pension structures. We believe it is possible that, with a better pension structure for the same cost, people who are saving for their pension could be enjoying a reliable income in retirement maybe 30% higher than they are currently getting through the UK system.

The other thing I do is teach. I teach finance at Cambridge on a course that is considered radical. It is called The Purpose of Finance, and it simply asks the students to debate what is the purpose of this industry at which Britain excels. It is not just about analysis, and it is not just about markets and regulation. It is also about institutions and innovation and cultures and governance and incentives and professionalism.

Finance is critical. It is critical to this debate about the trade relationship with Europe. It is a jewel in our economic crown. As we think about finance, we surely want that industry to grow and to prosper, because it is purposeful in delivering to the outside world—as all commerce should be. In the future, as part of my work here, I hope I can contribute to the House’s deliberations on these sorts of matters.