Economic Update

Lord Stevenson of Balmacara Excerpts

Wednesday 19th October 2022 Lords Chamber

[Lord True (Con)]

Yes, I agree with that, and my noble friend Lord Howell of Guildford has been so wise on this point for such a very long time. Again, this may involve difficult decisions and reflections, and some people may have to lay aside some of their prejudices in the national interest. We will be giving very careful thought to seeking to move towards greater energy independence. I hope that that goal, which must be in the national interest, will allow all of us from different points of views to temper some of our ardour in the collective public interest.

[Lord Stevenson of Balmacara (Lab)]

My Lords, the Minister has been very generous with his time. He has made a number of comments about the integrity of the Government now in place and has stressed the need to go forward, working with the team he has. Can he comment on the fact that the Home Secretary has now resigned?

[Lord True (Con)]

My Lords, obviously, I cannot comment on information to which the noble Lord is privy. I am here as Leader of the House of Lords to serve your Lordships’ House. I give priority to serving your Lordships’ House and have not been looking at WhatsApp during this exchange of views.

Financial Services Bill

Lord Stevenson of Balmacara Excerpts

Consideration of Commons amendments
Wednesday 28th April 2021 Lords Chamber

[The Deputy Speaker (Baroness McIntosh of Hudnall) (Lab)]

The original question was that Motion B be agreed to, since when Motion B1 has been moved as an amendment to Motion B. Therefore, the question I now have to put is that Motion B1 be agreed to.

[Lord Stevenson of Balmacara (Lab) [V]]

My Lords, I am very grateful to the Deputy Leader, the noble Earl, Lord Howe, for introducing the debate today. I particularly thank the noble Lord, Lord Sharkey, and his all-party parliamentary group for their determined efforts to make sure that this issue is kept alive and at the forefront of our debates on the Bill. We discussed this issue at Committee, on Report and now at ping-pong. We have had the opportunity to meet Ministers and we have been extensively briefed by civil servants, and I am grateful to all of them for the time they have taken to make sure we are fully briefed about the issues.

It is not uncommon to come across issues in Bills containing matters of public policy which seem to pose difficulties to the Government, despite general support for a solution expressed in amendments such as those we have before us today. In my experience, these often turn out to be what are called wicked issues, ones that span departments and need more time, it turns out, to be resolved in Whitehall than is available in the Bill. In this Bill, we had debates on statutory regulation for bailiffs, which probably falls into that category, as it was primarily a matter for the Ministry of Justice. Sadly, we have to wait for a resolution of a problem that all concerned agreed is actually settleable, albeit we have a deadline imposed of some two years. With that, now, the mortgage prisoner issue, but this is not really a wicked issue: the question of how to deal with mortgage prisoners really boils down to how to provide a “get out of jail” card for the small but not inconsiderable number of people—we think it is about 15,000—who are not able to exercise the basic choices about mortgage borrowing that we would regard as fair and appropriate for comparable citizens not caught in this prison. The sad fact is that while this issue continues, injustice is occurring.

Yes, there are problems of who qualifies; yes, there is a moral hazard; and yes, there may be unforeseen consequences. As Her Majesty’s loyal Opposition, we do not normally recommend that any Government should intervene directly in the market—although providing support for those who are trapped in financial difficulties not of their own making has many precedents and, ironically, is presumably where we are likely to end up on this issue, as I very much doubt that the current voluntary solutions will take the trick. As the noble Lord, Lord Sharkey, says, only 40 have so far managed to make the transfer that is on offer through the changes the Government have already made.

I have to say that, since the powers to deal with this issue are already invested in the Treasury, it is hard to see why a possible solution based on the efforts to date to modify the normal affordability checks for existing borrowers, perhaps underwritten or guaranteed by the Government, cannot be devised so that it deals with the situation in what the Government say they need, a proportionate and appropriate way—well, we would all applaud that.

All of us involved in this issue in both Houses have been impressed by the commitment and understanding of the issue displayed by the Economic Secretary to the Treasury, John Glen. We are supportive of his efforts to resolve this issue and want him to carry on—but with pace. We would be happy to continue the dialogue with him if that would be helpful. He stressed in the other place that one of his main concerns was that any solutions proposed should

“not provide false hope to borrowers”.—[Official Report, Commons, 26/4/21; col. 85.]

He is right to say that, but I put it to him that our main concern, and the reason we have pursued this issue to this very late stage in proceedings, is that it is surely unconscionable for the Government to leave a group of their citizens with no hope of recovery from circumstances that, as the noble Lord, Lord Sharkey, pointed out, they did not create. We need to keep in mind the need for hope.

I trust that the positive words we heard earlier from the Deputy Leader, the noble Earl, Lord Howe, about the Government’s strong commitment to finding proportionate and appropriate solutions to this problem will be turned into action very early in the new Session, with strong leadership from the Treasury, giving hope to those suffering the injustice we have been discussing. If the noble Earl can give that assurance when he comes to respond to this debate, I can confirm that we will not seek to test the opinion of the House on Motion B1.

[The Deputy Speaker (Baroness McIntosh of Hudnall) (Lab)]

The noble Baroness, Lady Noakes, has indicated a wish to speak.

Financial Services Bill

Lord Stevenson of Balmacara Excerpts

Report stage
Wednesday 24th March 2021 Lords Chamber

Moved by

[Lord Stevenson of Balmacara]

1: Before Clause 1, insert the following new Clause—
“Duty of care for financial service providers
(1) The Financial Services and Markets Act 2000 is amended as follows.(2) In section 1C, after subsection (2)(e) insert—“(ea) the general principle that firms should not profit from exploiting a consumer’s vulnerability, behavioural biases or constrained choices;”.(3) After section 137C insert—“137CA FCA general rules: duty of care (1) The power of the FCA to make general rules includes power to introduce a duty of care owed by authorised persons to consumers in carrying out regulated activities under this Act.(2) The FCA must make rules in accordance with subsection (1) which come into force no later than 6 April 2022.””Member’s explanatory statement
This new Clause would strengthen the FCA’s consumer protection objective and introduce requirements for the FCA to make rules for financial services firms that amount to a statutory duty of care.

[Lord Stevenson of Balmacara (Lab) [V]]

My Lords, Amendment 1 is in my name and that of my noble friend Lord Eatwell. I thank the noble Lord, Lord Sharkey, and the noble Baroness, Lady Bennett of Manor Castle, for adding their cross-party support on this important issue and look forward to their contributions to the debate. I also thank the noble Baroness, Lady Penn, the Deputy Leader of the House, the noble Earl, Lord Howe, the noble Lord, Lord True, and their officials for making time to discuss this issue after Committee, which has helped us considerably and shed some light on the complex set of consultations that the FCA and the Treasury itself are conducting over the next few months, all of which are happening, of course, during the pandemic and at a time of significant change in duties and responsibilities in all quarters.

In his excellent speech in Committee, my noble friend Lord Eatwell set out the case for the introduction of a duty of consumer care to be placed on financial services providers, which he argued would strengthen the FCA’s consumer protection objective and introduce requirements to ensure that firms operating in the financial sector should not profit from exploiting a consumer’s vulnerability, behavioural biases or constrained choices. I can do little better than rehearse his main points again. Markets in financial products sold to individuals, households and small businesses are seriously inefficient, mainly because of asymmetric information, as the seller of the product typically knows much more about the risks involved in making a particular investment or other financial transaction than does the consumer.

Secondly, given that the FCA’s strategic objective is about promoting competition in the market, thereby improving consumer outcomes, it can either regulate each individual financial product to ensure that the consumer is probably informed, or it could adopt the principle enshrined in Amendment 1 and make general rules, including the power to introduce a duty of care owed by authorised persons to their consumers. The case for a duty of care for consumers was argued very strongly at the time the current regulatory structure was set up; indeed, I was present in many of those debates. But, absent primary legislation or changes to it, the FCA has, perforce, adopted the first option and attempted to deal with each consumer detriment issue as it arises. However, by its own admission, this has not gone very well. From its consultation entitled, Our Future Approach to Consumers in 2017, through to the feedback statement published in April 2019, the FCA has wrestled with the issue of duty of care and is still wrestling today, with a review scheduled to start, we understand, in May 2021.

My noble friend’s case was that the status quo is failing and a new approach is urgently required for two main reasons. First, new products are always coming on to the market, which means that the FCA is always playing catch-up to introduce new rules and has to take time for appropriate consultation and so on to deal with the new threats to consumers. The rush to get a handle on “buy now, pay later” products in this legislation speaks volumes about that approach. Secondly, financial products are now available with one click via the internet, with all that that implies about the failure of the conventional approaches of “know your customer” and the need for careful concern about going through the paperwork and understanding the terms and conditions of what you may be signing up to. In short, fintech, with all the benefits it can bring—well argued by the noble Lord, Lord Holmes— signals the end of the current FCA regulation as we know it. The case for a duty of care approach is unanswerable.

Amendment 1 provides the FCA with the means to end its failure to meet its consumer protection duty through dogged adherence to a failing competition objective. The enactment of the power to introduce a duty of care for consumers would rightly place responsibility for ensuring that markets function well firmly on the shoulders of those who have the information required to attain that goal. If the FCA has the power to introduce a duty of care for consumers, it could finally begin to live up to its strategic objective.

Far too many consumers are being treated inappropriately, whether by the mis-selling of products, by the denial of rights or by obstruction of responses to complaints and so on. If the Government wish to improve on the consumer protections previously enshrined in EU legislation, the introduction of a duty of care on consumers is a safe and sure way forward. It is a way to ensure that markets function well for the benefit of the consumer, as it should be.

I am sure that, in responding to this debate, the noble Baroness, Lady Penn, will try to persuade us that there is no need for this amendment, as future consultations to be carried out by the FCA and the Treasury will cover all these points in detail and so all will be well. Indeed, either or both of these exercises may require primary legislation—that is quite likely—and we will be back again in a few months’ time debating the same issues all over again, when the Treasury has decided on its responses to the consultations and brings forward legislation to implement another generation of regulatory frameworks. I put it to the Government that, while the wording of the amendment may not be perfect, the intent—particularly the wording of subsection (2),

“that firms should not be profiting from exploiting a consumer’s vulnerability, behavioural biases or constrained choices”—

is worth holding on to and action should be taken now. I give notice that, in the absence of a positive response today, I am minded to test the opinion of the House on the amendment. However, if the Minister is prepared to commit to bring this back at Third Reading, with an agreed wording, we could work with her to settle this issue. I beg to move.

[Lord Sharkey (LD) [V]]

It is a pleasure to follow the noble Lord, Lord Stevenson of Balmacara, and to support this amendment. The noble Lord has made a strong and compelling case for both parts of the amendment. The case for and against a duty of care was discussed extensively in Grand Committee and I do not propose to revisit the arguments in detail.

In his speech in Grand Committee, the noble Lord, Lord Davies of Brixton, made a simple but important point:

“The truth is that the industry has a systemic tendency to malfeasance.”—[Official Report, 22/2/21; col. GC 112.]


I listed in Committee some of the many serious instances of malfeasance over the last couple of decades—I am sure that they are familiar to us all—which amply demonstrate the truth of the observation made by the noble Lord, Lord Davies. There can be no doubt that the temptation to malfeasance and the opportunities for malfeasance grow, and are deeply rooted, in the huge inequality of arms. The noble Lord, Lord Eatwell, emphasised that in Committee, as the noble Lord, Lord Stevenson, has just noted. There can be no doubt either that the culture within parts of the financial services industry is, to say the least, not oriented to serving the best interests of consumers. John Lanchester has graphically described the industry as treating its customers as “an extractive resource”. All this is true in an industry that is highly regulated. This inevitably leads to the conclusion that the regulatory regime is obviously and severely deficient.

The FCA has consulted on the duty of care at least eight times in the last five years and is about to do so again, starting in May, apparently. It is not clear, given the Treasury’s current consultation on the FSFRF, why we need two consultations covering the same ground. I know that some respondents to the HMT consultation have already proposed a new duty of best interest or duty of care. There is no reason to suppose that this new, and much delayed, FCA consultation will come up with anything more than equivocation, fence-sitting or long grass, if its previous efforts are anything to go by. Last time round, the FCA found that most respondents considered levels of consumer harm to be high and that change was needed to protect consumers. None of the financial services respondents wanted a duty of care, but 92% of consumers did, in a popular survey commissioned by the FCA’s own consumer panel.

The industry resists a duty of care for obvious reasons of self-interest, sometimes presented as a concern that such a duty would increase costs ultimately to the consumer. This does not say much for our financial services’ belief in competition, nor does it acknowledge the fact that, for example, PPI was sold at a commission rate of 87% or that the industry has had to find the funds to pay over £50 billion in redress for PPI alone.

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The Government will continue to work closely with the FCA to ensure that the concerns raised by this House can be addressed. However, I am afraid that I cannot commit to returning to this issue at Third Reading, so if the noble Lord, Lord Stevenson, wishes to test the will of the House, the time to do so is now. None the less, I hope he may reconsider and instead withdraw his amendment.

[Lord Stevenson of Balmacara (Lab) [V]]

My Lords, thank you for a very good debate. It has been a fine example of the way in which Report brings together the arguments made in Committee and allows the House to come to a collective view about the issue in question.

In her customary way, the noble Baroness, Lady Penn, gave a full and considered response, and I thank her for that. She focused more on what she called the strength of feeling in the House and did not really engage with the strength of the argument. I hope that when she reflects on that, she may recognise that that is a bit of a weakness. The arguments are not to be ignored simply because they are expressed strongly. They are to be looked at seriously, because they are trying to attack a pernicious problem that is causing huge consumer detriment, as exemplified in the many speeches we have heard today, particularly from those who have worked in the industry for a number of years. The noble Baroness, Lady Altmann, and others gave examples that were redolent of the experience of trying to make the system work.

I think the Minister also accepted in her speech that the Government want regulatory structure to protect consumers and said that the level of harm was perhaps too high. In explaining how the FCA’s three objectives are expected to operate—which must be a logical mess, when you analyse them—she illustrated why my noble friend Lord Eatwell and others wish that we had a better, principle-based and less list-based structure for the way in which the regulators carry out their work. As the noble Lord, Lord Sharkey, put it—he could not have put it more simply—FiSMA does not protect consumers, malfeasance is flourishing and may even be encouraged by the current structure, and redress is patchy, lengthy and not really available to those who need it most.

The issue before the House, therefore, is whether the existing process and procedures, the existing wording which sets them out and the existing objectives, which are constraining what the FCA can and cannot do, are the best we can get to. The arguments that have been made, particularly the devastating figures from the ombudsman’s service, suggest that we are not in a good place on this. This was picked up by many speakers, including the noble Baronesses, Lady Tyler and Lady Kramer.

In the context of the need for better financial well-being as we recover from the pandemic and the chance to do things better, are we really saying that the best we can come up with is to wait for another consultation, which will probably just be another exercise in playing catch-up and result in a longer list of rules and requirements? Why do we not just set a very high tide mark for what we expect our regulators to do and, if the consultation proves the case, reduce the requirements where that is proportionate and appropriate?

I do not understand why the Minister felt unable to take the issue away, talk about it and come back at Third Reading. She challenged us to put our views to the House. I would therefore like to test the opinion of the House in this matter.

[The Deputy Speaker (Baroness Watkins of Tavistock) (CB)]

I shall now put the Question. We have heard a Member taking part remotely say that they wish to divide the House in support of this amendment, and I will take that into account. The Question is that Amendment 1 be agreed to.

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[The Deputy Speaker (Lord Lexden) (Con)]

The name of the noble Lord, Lord Stevenson of Balmacara, does not appear on the list, but he should have been included, so I call him next.

[Lord Stevenson of Balmacara (Lab) [V]]

I am grateful to the House for allowing me to speak at this point. I put in a request, but it got omitted. The Deputy Speaker has expressed the situation well.

The substance of the issues raised by the noble Earl in his introduction are incontestable. We respect the devolution settlement and we need to make sure that everything we do is in accordance with that. He slightly misspoke in the sense that the Sewel convention now has statutory force, rather than being just a convention. Indeed, it is often now called the Sewel principle. When we were dealing with matters arising from the internal market Bill, which came to your Lordships’ House about six months ago, that was certainly the way in which we addressed this issue.

I understand the logic behind the Government’s current position and their concern that they should not take steps which would in any sense mitigate the Sewel principle, as discussed. However, I was left a little confused by the noble Earl’s remarks, despite the usual clarity with which he expressed himself.

As I understood it, the debt respite scheme was being progressed under regulations made under the Financial Guidance and Claims Act 2018, to which he referred. It therefore seems a little odd that we are still concerned that that might not go ahead or that, if it did, it would do so under regulations made in Northern Ireland rather than those which will apply in England and Wales. From memory, this will be in place from May 2021, which is not very far away. I would be grateful if the noble Earl could be a little clearer about that when he comes to respond, or perhaps he could write to me and we could discuss this. The issue is where that authority will vest going forward. Will it relate to the UK financial guidance Act or to local legislation put through by the Northern Ireland Assembly? Matters may arise regarding how that is decided, but I would like to know the answer.

The other question is how we make progress in relation to the statutory debt repayment plans. The issue here is again whether the necessary legislative consent order would have come through, when it has not, in relation to that. If that is the case, perhaps the Minister will confirm whether that is happening. If it is not happening, is not the situation a little different this time? Because, as we are going to discuss in the next group, we are now being told that the timeframe for the delivery of the SDRP is going to be the end of 2024, which is, after all, three and a bit years away. It seems unlikely that there will still be a problem if we are waiting for the Northern Ireland Assembly to consider that: we should be able to get through that in three and a half years’ time.

I would be grateful if the Minister would let us know a bit more about the Government’s plans and again, it that is not in his notes, he can write to me and we can discuss it offline.

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Moved by

[Lord Stevenson of Balmacara]

11: Clause 34, page 40, line 30, at end insert—
“(4B) The regulations may also include the following as part of the scheme—(a) provision to ensure that debt advisers that are responsible for the delivery of debt advice in support of a plan for the repayment of some, or all, of an individual’s debts have been properly authorised by the FCA;(b) provision to ensure that when an individual is deemed suitable to enter into a plan for the repayment of some or all of their outstanding debts, the organisation holding funds on behalf of the individual and making the agreed repayments to creditors must be a charity or other not-for-profit organisation properly authorised by the FCA;(c) provision to ensure that the aggregate provision payable in respect of the costs of operating the repayment plan, other repayment plans, the debt respite scheme and the wider debt advice services being provided meets the reasonable annual costs of the organisations involved; (d) provision that the debts that are dealt with under a plan for repayment include those owed to Her Majesty’s Government and those owed to other UK public bodies and service providers;(e) provision that when an individual has entered into a plan for the repayment of some or all of their outstanding debts, they will receive protection from any warrant or action from bailiffs appointed by a UK court.”Member’s explanatory statement
This amendment allows further probing of the Government's plans to establish the Statutory Debt Management Scheme.

[Lord Stevenson of Balmacara (Lab) [V]]

My Lords, I declare an interest as a former chair of StepChange, the debt charity. Amendment 11 has exactly the same wording as the amendment to Clause 34 that I moved in Committee. The purpose is to give the Government a further opportunity to set out in more detail their plans for the introduction of the statutory debt management plans in England and Wales—not, sadly, in Northern Ireland, yet—to complement that which is already working as a very successful scheme in Scotland. We are getting there by patchwork, even if we are unable to do so from top down, as we might wish.

I am very grateful to the Minister and officials for facilitating discussions about the detailed SDMP proposals, and for his very full letter of yesterday, which sets out the Government’s position very clearly. It is a very good letter to have, and we got a lot of reassurance from it.

I also touch on Amendment 12 in the names of the noble Baroness, Lady Bennett of Manor Castle, and the right reverend Prelate the Bishop of St Albans, which introduces an interesting and important aspect of debt management plans—a bit of detail, in fact. It is about the concept of negotiated debt settlements on behalf of debtors, which are already part of the current debt management plan process in operation in Scotland, and in England in an informal way—not statutorily backed. A realistic quantum for the outstanding debt is clearly a key metric when plans have been drawn up for what should constitute an affordable repayment schedule, so it makes sense to both sides if the final figures reduce the outstanding debt in as short a time as possible. I look forward to hearing further from the noble Baroness and the right reverend Prelate, if he is able to join us, about how they see this working in practice. I think they are probably more suited to regulatory action than statutory action in the Bill, but we will wait to see how the case comes out when it is argued.

Yesterday’s letter from the noble Lord, Lord True, is extremely helpful, and I thank him for it. In it, he explains that secondary legislation will spell out matters of detailed policy and implementation for the SDRP and confirms that, as these will be introduced by the affirmative resolution procedure, Parliament will be given adequate opportunity to debate and scrutinise the regulations. I welcome that. In Committee, my main concern was timing, and the letter says that the Treasury intends to consult on the draft regulations as soon as possible after the Bill receives Royal Assent. We will keep an eye out for them and hope that it will not be too late after Royal Assent comes through.

On implementation, the letter makes it clear that, understandably, there needs to be time for IT changes and preparing the scheme guidance. It suggests that 18 months would give adequate time for stakeholders to prepare after regulations have been laid. I have no reason to question that timing but, given that the letter goes on to suggest that the SDRP may not actually be in use until the end of 2024, it seems to me that we are talking about a delay of perhaps three and a half years once work has started. I wonder whether the Government might want to look at that timetable again. We need to get this right, clearly, and time must be given for that, but Ministers are aware that the SDMP is complementary to the debt relief scheme, which we were just talking about in relation to Northern Ireland, which is due to operate on a much tighter timetable—to be introduced, I think the Minister said, in early May. To be honest, I do not think I would be alone if I said that the Minister’s hope, as expressed in his letter, that this timetable reassures noble Lords that the Government’s work will proceed at pace is not altogether convincing. Perhaps the Minister will respond at the end of the debate.

The letter also contains some very helpful reassurance on other policy matters. Debtors are to be protected from most creditor enforcement during an SDRP, including enforcement by bailiffs. That is a great relief to hear. We will come back to that in a later amendment. It might be helpful if the Government could clarify what creditor enforcement would not be protected under an SDRP. That would be useful to have on record. The letter confirms that the widest range of personal and business debt should be eligible for inclusion in an SDRP. It is good to have that confirmation and to know that, in particular, that includes local government as well as Crown debts. Again, it is useful to have that clarification on the record.

Only those with appropriate authorisations from the FCA will be able to offer SDRPs, unless they are a local authority that offers money advice and is therefore exempt from FCA authorisation. Again, that clarification is helpful and welcome. Debt advice providers will not be able to charge a fee to debtors for accessing an SDRP. Again, that clarification is extremely welcome.

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I understand the purpose behind the amendment of the noble Baroness, Lady Bennett, but we believe that the approach that I have set out today on the SDRP is the right approach. I must tell the noble Baroness that we will not be able to accept her amendment either now or at Third Reading. Her Majesty’s Government, however, will of course be open to conversations with all interested parties as work on the scheme goes forward. I hope that our openness in the course of this Bill is an earnest of that. So it is for these reasons that I ask that the amendment be withdrawn.

[Lord Stevenson of Balmacara (Lab) [V]]

My Lords, I thank all those who have participated in this short debate. It was unfortunate that, because of timing and other pressures, we have lost the contributions from the noble Baroness, Lady Morgan of Cotes, and indeed from the right reverend Prelate the Bishop of St Albans, both of whom had interesting points that they wanted to make. Despite that, we have touched just about every issue that needed to be looked at. Indeed, we have gone a bit further. I am very pleased that the debate has taken place, even though we have just passed our closing time.

I will take a few minutes to wind up by touching on a couple of points. Of course, I am deeply embarrassed by the idea that this initiative is all my responsibility and that I should get all the credit for it. That is certainly not the case. This has been a team effort by many groups and bodies, many of which were referred to by the Minister in his remarks. We should give credit to the not-for-profit and charitable bodies that have been working tirelessly over many years to get unmanageable debt sorted out in our society, for all the reasons that the noble Lord, Lord Davies of Brixton, said. It is a cost to the public good. We did a calculation when I was at StepChange which suggested it was probably costing about £9 billion a year. I was interested that the noble Baroness, Lady McIntosh, also came up with a figure very close to that.

It is important that we have a mature and sensible debate about debt: how it happens, how it arises, and how it gets resolved. The great thing about today, and what I take away from it, is that we are able to do that in your Lordships’ House in a way that reflects the very best of our ability to contribute to these debates, and also with a listening Government who are prepared to take it back and see if there is a way in which legislation and regulation can be adjusted. If we can understand a little bit more about why debt happens and what people want to do about it, I think we will all benefit.

My experience at StepChange was rather unexpected. When I first went there, I thought it would be largely a collection of feckless people who had got themselves into overspending and debt. In fact, the truth was that our median client was probably in their 50s, had led a blameless life and done everything to make sure that their outgoings and income matched and that there was not a debt problem for them. They had done the best for themselves and for their families, and it was always, as someone said in the debate, an unexpected issue: somebody had got ill, somebody had lost their job unexpectedly, or there was some other crisis that occurred that tipped them over into a situation for which—and this was a message that came over time and time again—they really did not have the tools in their own personal skillset to be able to deal with. They did not understand the financial system very well, they could not understand where they could get help from, there was a confusing number of people who were trying to make money out of the problems that they were in, and they struggled.

It was only because of StepChange, Money Advice Trust, Citizens Advice, Christians Against Poverty and others who have done fantastic work over the years that we have got ourselves to a point where we can see a way forward on this. This legislation will help tremendously. There is no doubt about that at all. I am very grateful to the Government for having listened, having thought through the issues, and come forward with sensible plans, even though like others I regret the timescale that we are on. Nevertheless, I am sure we can get it right.

The Minister echoed a lot of the good will and support around the House that I have been reaching out to. But if he thinks this is the end of the line, he has another thing coming. I have a long list of things that I would still like to get done, things that have got away so far but which I shall try to ensure I do before I stop. If we get people off unmanageable debt and back into society, they often have terrible problems getting a credit rating. We must attack that. Even getting a credit card after you have been through a debt process is very difficult. A whole series of issues could come under the process that we talked about on an earlier amendment regarding financial well-being. We could look at that, with advantage, to build on where we are today.

If we can, as the noble Baroness, Lady McIntosh, said, have a sensible discussion about who is affected, why it happens and how we can do best by them, we will all benefit. With that, I again thank noble Lords for their contributions and beg leave to withdraw this amendment.

Amendment 11 withdrawn.

Financial Services Bill

Lord Stevenson of Balmacara Excerpts

Committee stage
Wednesday 10th March 2021 Grand Committee

Moved by

[Lord Stevenson of Balmacara]

99: After Clause 40, insert the following new Clause—
“Standard Variable Rates: cap on charges for mortgage prisoners
In section 137A of the Financial Services and Markets Act 2000 (the FCA’s general rules), at end insert—“(7) The FCA must make rules by virtue of subsection (1) in relation to introducing a cap on the interest rates charged to mortgage prisoners in relation to regulated mortgage contracts, with a view to securing an appropriate degree of protection for consumers.(8) In subsection (7) “mortgage prisoner” means a consumer who cannot switch to a different lender because of their characteristics and has a regulated mortgage contract with one of the following type of firms—(a) inactive lenders, or firms authorised for mortgage lending that are no longer lending; and(b) unregulated entities, or firms not authorised for mortgage lending.(9) The rules made by the FCA under subsection (7) must set the level of the cap on the Standard Variable Rate at a level no more than 2 percentage points above the Bank of England base rate. (10) In subsection (9) “Standard Variable Rate” means the variable rate of interest charged under the regulated mortgage contract after the end of any initial introductory deal.(11) The FCA must ensure any rules that it is required to make as a result of the amendment made by subsection (7) are made not later than 31 July 2021.””Member’s explanatory statement
This new Clause would require the FCA to introduce a cap on the Standard Variable Rates charged to consumers who cannot switch to a different lender because of their characteristics and who have a regulated mortgage contract with either an inactive lender or an unregulated entity.

[Lord Stevenson of Balmacara (Lab) [V]]

My Lords, financial regulation has to ensure that consumers are well protected. It is with this principle in mind that I move the amendment in my name. I thank the noble Lords, Lord Sharkey and Lord Holmes of Richmond, for their support. We have also had an aperitif, in the sense that Amendment 127 in the name of the noble Lord has already been debated in an earlier group, although its main focus is aligned with the amendments in this group and I look forward to his comments.

The recent report of the UK Mortgage Prisoners group referred to by the noble Lord, Lord Holmes of Richmond, when he spoke on the earlier group of amendments, is graphic and shocking. It makes the case that the Government need to come forward promptly with a fair deal for the 250,000 or so mortgage prisoners who have been stuck for some 10 years paying higher interest rates than they needed to. The All-Party Parliamentary Group on Mortgage Prisoners has kept this issue alive, having been contacted by hundreds of mortgage prisoners who describe the worry and stress that comes from being trapped as they are. This is a shameful episode.

I am grateful to the Economic Secretary to the Treasury for meeting my noble friend Lord Tunnicliffe, myself and others last month. The Economic Secretary told us that he has a keen interest in settling this matter. He explained that there are difficulties including moral hazard, which means that it is not easy to sort. However, while the issue continues, considerable injustice is occurring. The Government may well be right to say that the SVRs currently paid by mortgage prisoners are only a little higher on average than the SVRs of other lenders but, particularly during the pandemic, small differences matter. In any case, the assertion that the Government make that the differences are rather minor does not ring true in the light of the report from the all-party group. Its case studies, which include nurses, teachers, members of the Armed Forces and small business people, suggest that, for all those who are trapped and struggling with the consequences of the Government’s decisions when money is tight and margins matter, these things need to be sorted.

Surely the true comparison is that if mortgage prisoners were with an active lender and of course up to date with their payments, they would have access to a range of products to transfer to, which would give them a lower fixed rate for their mortgages. In the other place when this issue was discussed, the savings available were said to be in the order of £5,000 a year. That is not an inconsiderable sum. Why are these people being singled out for this penalty?

The problem also seems to be the inability to access the best market-matching deals, compounded by the fact that the prison effect is reinforced by the inability to prevent mortgages being sold off to so-called vulture funds, which are often unregulated. This matter has been left unresolved for far too long. The inability to seek out new deals and to limit costs is causing stress, and in some cases has caused families to lose their homes. As the Government have been involved throughout this process, is it too much to ask them to explain what the plan is, and what the timetable for resolving the incarceration of these prisoners will be?

In its recent report, UK Mortgage Prisoners says that it has put the record straight on what it calls a “Government made scandal”. It is for the Government to defend themselves on that charge. UK Mortgage Prisoners complains that the Government have “effectively ignored the issue” and that, where the FCA has intervened, it has done so in a limited and ineffective manner. Its asks seem very simple: an immediate cap on SVRs for closed mortgages; introducing a tailored mortgage product for those affected; giving credit to prisoners who have for a decade or more made overpayments; stopping penalty charges for any excess arrears; and adjusting credit ratings going forward. Those are five simple steps for 250,000 people whose lives have quite simply been blighted.

[Lord Sharkey (LD) [V]]

My Lords, I declare an interest as co-chair of the APPG on Mortgage Prisoners. Mortgage prisoners exist almost entirely because the Treasury made a terrible mistake when it sold the first tranche of former Northern Rock and B&B mortgages to an unregulated American vulture fund called Cerberus. Cerberus is the name of the multi-headed dog that in Greek mythology sits at the entrance to the gates of hell. That is not an inappropriate name, in view of what happened next.

Three things are needed to rescue mortgage prisoners. The first is to reduce immediately to comparable market rates the SVRs that they pay. The second is to make sure that transfers to much less expensive fixed-rate deals are properly available to them. The third is to make sure that new classes of mortgage prisoners cannot be created in the future.

Amendment 99, moved by the noble Lord, Lord Stevenson, to which I have added my name, deals with the first of those things. My Amendments 116 and 117 deal with the second and third. Amendment 99, as he has so clearly and forcefully explained, would protect the thousands of mortgage prisoners stuck paying high standard variable rates. It would introduce a cap on the standard variable rates paid by customers of inactive lenders and unregulated entities. That would provide immediate relief for thousands of mortgage prisoners, and could give space for longer-term solutions to be found. It would help mortgage prisoners who took out loans with a fully FCA-regulated high-street bank which were then sold on to vulture funds.

Money-saving expert and consumer champion Martin Lewis supports this proposal, and on Monday he released a statement saying:

“While the government chose to bail out the banks in the financial crisis, it has never bailed out the banks’ customers who were victims of that collapse. Mortgage prisoners have been left paying obscene interest rates for over a decade through no fault of their own. They have been completely trapped in their mortgages and unable to escape the financial misery it causes … Coupled with the devastating impact of the pandemic on people’s finances, urgent action is needed to prevent the situation from becoming catastrophic. The independent LSE report I funded has a cogent argument as to why an SVR cap isn’t a balanced long-term solution. Yet in lieu of anything else, I believe for those on closed-book mortgages it is a good stopgap while other detailed solutions are worked up, and I’m very happy the All-Party Parliamentary Group on mortgage prisoners is pushing it. This would provide immediate emergency relief for those most at risk of financial ruin. No one should underestimate the threat to wellbeing and even lives if this doesn’t happen, and happen soon.”


The Government will no doubt say that some mortgage prisoners are already paying rates lower than 3.5%, so rates do not need to be capped. But those sold on by the Government to vulture funds like Cerberus are paying high rates. In the package sold by the Government containing more than 66,000 mortgage loans, 52% were paying rates between 4.5% and 5%, and 37% were paying rates of over 5%, when the mortgages were securitised.

The Government could have set strict conditions when selling the mortgages on the interest rates which could be charged. But when they sold £16 billion of mortgages to Tulip and Cerberus, they imposed only a 12-month restriction on increases to the standard variable rate. These have long since expired and the chief executive of Tulip Mortgages told the Treasury Select Committee that the firm now had

“complete discretion to set the interest rate policy.”

On the sale to Heliodor, the Government claimed that the organisation which bought the loans would be required to set their standard variable rates by reference to the SVR charged by a

“basket of 15 active lenders”.

But when you read the details of the securitisation agreements for the mortgage loans sold, you will find that, actually, the Government have required the SVR to be set only at the level of the third highest of the 15 active lenders. This is absolutely critical, as the third highest SVR is actually 4.49%. The lowest SVR among those 15 active lenders is 3.35%, and the average SVR weighted by market share is 3.72%.

The latest and final sale of the Treasury-held mortgages was announced in February. The book was sold to Davidson Kempner Partners and Citibank, with funding by PIMCO. The Government said that the SVR was going to be charged by reference, again, to a basket of 15 active lenders, but there are no details about how this will work in practice. If it reflects the practice in earlier sales, it will not actually provide any protection to customers. The Government will also say that the FCA has changed the affordability test to enable mortgage prisoners to switch to a different lender. But the progress has been very slow, with only a very small number of lenders willing to use these new flexibilities.

The cap on the SVR proposed by this amendment would provide immediate relief to mortgage prisoners who have been overpaying for the past 13 years. It would protect all mortgage prisoners, including those who are unable to switch. It would give time for other solutions to help mortgage prisoners to be developed. The SVR cap would apply only to mortgages owned by inactive lenders and unregulated entities. It would have no impact on active lenders competing to attract customers.

The cap is supported by the campaign group UK Mortgage Prisoners, as the noble Lord, Lord Stevenson, said. Members of the group have stated that this amendment is the difference between feeding their children and themselves or continuing to rely on food banks. The Government created the problem of mortgage prisoners and it is their moral responsibility to rescue them from the significant detriment that many still face. I urge the Government to accept the amendment in the name of the noble Lord, Lord Stevenson.

I now turn to Amendment 116, which would extend access to fixed interest rates to all mortgage prisoners, enabling them to gain control and certainty over their monthly mortgage payments. When the time came for the nationalised Northern Rock and B&B mortgages to be sold by the Government back to the private sector, they could have pursued an approach which ensured that these customers were in fact protected. They could have sold them to active lenders or secured a commitment from purchasers to offer these new customers new deals.

The risk to these customers was identified. In January 2016, the noble Lord, Lord McFall, wrote to the Treasury, UK Asset Resolution and the FCA to say that the customers affected by these sales should be protected, offered a fair deal and given access to fixed rates. UKAR responded that, by returning these mortgages to the private sector,

“the option to be offered new deals, extra lending and fixed rates should become available”.

But this requirement was not written into the contract when mortgages were sold to funds such as Cerberus, with the BBC reporting that UKAR is now claiming to have been “misled” by Cerberus.

A UKAR spokesman told BBC “Panorama” that Cerberus had the ability to lend to the former Northern Rock customers and that UKAR believed that it intended to do so. They said:

“The reply to Lord McFall sent on behalf of the UKAR board of directors was based on information presented to UKAR and the board had no reason to disbelieve this at that time.”


At the very best, this is evidence of catastrophic incompetence. At worst, it is evidence that UKAR heartlessly pursued profit over care for mortgage customers.

Consumer champion Martin Lewis lays responsibility for the treatment of mortgage prisoners squarely with the Government. He said that the Government

“have sold these loans to professional debt buyers who do not offer mortgages and left these people in these types of mortgages, which have been too expensive, crippled their finances and destroyed their wellbeing.”

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[The Minister of State, Cabinet Office (Lord True) (Con)]

My Lords, I acknowledge that the Government have a great deal of sympathy for borrowers who are unable to switch their mortgage, and we are committed to finding practical ways to help them. That is why we have been working closely with the FCA, and I will set out the action that it has taken.

In 2019, the FCA introduced a modified affordability assessment, which allows active mortgage lenders to waive the normal affordability checks for borrowers with inactive lenders who meet certain criteria—for example, not being in arrears and not wishing to borrow more. As a result of this, inactive lenders have been contacting borrowers who have had difficulty with switching, setting out new options that may be available for them on the active market. I am pleased that a number of lenders, including Halifax, NatWest and Santander, have already come forward with options specifically for these borrowers.

More widely, we have taken steps to support those unable to make mortgage payments during the pandemic. Payment holidays have provided vital support for consumers, including those with inactive lenders, with over 2.75 million mortgage holidays granted since March 2020.

However, policy should be based on clear evidence. The FCA’s analysis found that customers with inactive lenders paid, on average, just 0.4% more than customers in the active market with similar characteristics. There has been comment in Committee on that figure. The FCA’s analysis also found that, of the 250,000 borrowers with inactive lenders, half were in a position to switch to a new mortgage even before any action from the Government. That illustrates one aspect of the diversity of this group.

On the 0.4%, I am aware that there are other estimates out there, including in a recent report, which has been referred to, published by the UK Mortgage Prisoners action group on 8 March, just a few days ago. Treasury officials have reviewed this analysis and noted that these figures seem to be based on surveys with small sample sizes. The comparisons are often inappropriate—for example, contrasting rates that many borrowers with active lenders would not even be offered. I hope that noble Lords will appreciate that this is a complex topic. We are, as I have said, committed to finding practical ways to help.

Amendment 99 seeks to cap standard variable rate mortgages for some customers. Data from the FCA suggest that the majority of borrowers with inactive lenders pay less than 3.5% interest. As I have already said, compared to those with similar lending characteristics, consumers with inactive lenders pay on average only 0.4% more than those with an active lender. This was also backed by the London School of Economics recent report on mortgage prisoners, noting that it does not recommend capping standard variable rates at a low rate. Capping mortgages with inactive lenders could have an impact on their financial stability, as it would restrict lenders’ ability to vary rates in line with market conditions. That would also be unfair to borrowers in the active lending sector, particularly those in arrears, who are paying a higher standard variable rate.

Amendment 116 seeks to provide new fixed interest rate deals for certain mortgage customers with inactive lenders. I have already set out the FCA’s work in introducing a modified affordability assessment and that a number of active lenders—household names—have come forward with offers. The FCA estimates that up to 55,000 borrowers could be eligible to benefit from the new modified affordability assessments. The Government will continue to monitor the situation and hope to see even more options available over the coming months. Enabling people to switch into the active market is the best way to help consumers secure new deals, and that is what we have been doing.

Amendment 117 would require active lenders to seek a borrower’s permission before transferring their regulated mortgage contract to an inactive lender. There are already a number of protections in place for borrowers, meaning that their mortgage cannot be sold on to an unregulated servicer and their terms and conditions cannot change as a result of the sale, so the benefit of explicitly seeking permission from the borrower is unlikely to help them any further.

It is required that all loans within the UK must be administered by a regulated entity, meaning that all customers will be able to benefit from consumer protections —for example, access to the FOS. The terms and conditions of a loan do not change upon sale, meaning that consumers will be treated in line with their original agreement even if their loan was sold to an unregulated entity.

As my noble friend Lady Noakes pointed out, the amendment would also risk disrupting the residential mortgage-backed securities market as it may prevent the effective securitisation of mortgages, where beneficial ownership of a portfolio of mortgages is transferred to a special purpose vehicle. Securitisation is a common way for active lenders to fund themselves, and disrupting the securitisation market would likely have a negative impact on the availability and cost of mortgage credit in the United Kingdom. For those reasons, I ask that the amendment be withdrawn.

[Lord Stevenson of Balmacara (Lab) [V]]

My Lords, I thank those who have contributed to this debate for the various points they have raised. The noble Lord, Lord Griffiths, has it right: this is a complex and detailed issue and it delves down way beyond most people’s experience of how markets of this type operate. In those circumstances, we have a difficult choice as a Committee on how one might want to take this forward.

On the one hand, my noble friend Lord Griffiths is right that the end of the story is what is happening on the ground to people who have ended up in this situation through no fault of their own but as a result of government action. The Government therefore have to explain to the people of this country why, having created this problem, they do not feel that they have more than just a moral responsibility to see it resolved. On the other hand, I take absolutely the Minister’s point that, it being a complex issue and the Government having seen some action already happening, they remain committed to what he called finding a practical plan forward; I hold on to that. However, the complexity and the fact that this affects a relatively small number of people—although 250,000 people is not a small number in my terms—do not mean that we should simply allow the market to find the right balance between the commercial pressures of offering loans and the ability to service those loans and make a profit out of them from those who have limited resource. There is no doubt at all that, having said all that, there is obviously a pandemic issue as well.

Where does that leave us? I take hope from the fact that the Minister said that there is work on the way to try to take this forward. I recognise that it is a complex issue—indeed, I said so in my opening remarks. However, he must accept that the arguments made by myself but made in much more detail and with a much wider range of evidence by the noble Lord, Lord Sharkey, supported by the noble Lord, Lord Holmes of Richmond, suggest that this is more than just a complicated problem which needs to be bottomed out by working with the market. We need convincing that there is work going on that will result in a workable solution of benefit to those affected by this within a reasonable timescale, otherwise we will come back on Report with a better-drafted amendment—perhaps covering some of the points made by the noble Baroness, Lady Noakes, but not all of them—in a way that makes it clear that the Government cannot continue to let this settle itself. It has to be taken forward in policy terms otherwise too much damage will be caused. In the meantime, I beg leave to withdraw the amendment.

Amendment 99 withdrawn.

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[Viscount Trenchard (Con)]

My Lords, I declare again my interests as stated in the register in respect of financial services companies. I am delighted to support Amendments 103 and 104 in the name of my noble friend Lady Neville-Rolfe. My noble friend is a champion of impact assessments and she speaks from experience. The impact of many financial services regulations on smaller firms has been very damaging. I mention just two examples. The unbundling provisions contained within the MiFID II directive, requiring asset management companies to pay separately for research, have been disastrous in their effect on smaller companies with interesting strategies, which have either been forced out of business or forced into mergers where their innovative strategies have not been taken forward. The effects have been less choice for customers and less coverage as a result of the significant reduction in the number of securities analysts, particularly those covering smaller and growth companies.

The effects were predictable, but ESMA ploughed ahead and the FCA acquiesced. It is small comfort now that ESMA itself realises that the unbundling provisions were a mistake, and may move to make changes, but much damage has been done. An impact assessment, such as recommended by my noble friend, would have avoided this.

I also mention the alternative investment fund managers directive. When I worked in Brussels as director-general of the European Fund and Asset Management Association —EFAMA—my French and German colleagues said that they did not think that the EU should move to regulate alternative funds; that was London’s market, and largely London’s alone. Furthermore, it was of interest only to professional investors, who did not need protection from investment risks. They thought that it would be wrong for the EU to try to regulate it. However, three years later, Michel Barnier, as Commissioner for the Internal Market, moved to introduce the AIFMD. Again we were overruled and reluctantly went along with it. An impact assessment might have encouraged the FSA to fight harder against it than it did.

For the reasons so well explained by my noble friend, I support her amendments and look forward to hearing the Minister’s reply.

[Lord Stevenson of Balmacara (Lab) [V]]

My Lords, I am pleased to be part of this debate, which is narrow in some senses but has the capacity to reach quite widely. It is narrow in the sense that it has been framed through Amendments 103 and 104, which I broadly support, about the need to try and get more of an impact assessment model into the way in which we review the changes that may come through as a result of the return to the UK of powers previously exercised at EU level. It also raises much wider issues, which I will come to before I end my short contribution to this debate.

I am sure that the case made by the noble Baroness, Lady Neville-Rolfe, is about good government. Better regulation was always part of the argument she used when she was a Minister. I well remember the discussions we had across the Dispatch Box about intellectual property, in both primary and subsequently secondary legislation. The material on this was much enhanced by the good work done by her civil servants in bringing forward some of the issues raised and trying to give them a quantitative—not just qualitative—feel when the debates were organised. A lot of the work that they do on better regulation does not get properly recognised, and this is a good opportunity to pay tribute to it. As an example, I particularly enjoyed the annual work that I was often asked to do in relation to the setting of the national minimum wage, now the national living wage. It was always accompanied by a formidable document, created mainly I think by the Low Pay Commission but endorsed by civil servants. It went into every conceivable aspect of the way in which the setting of a minimum threshold for wages would, or could, affect the labour market, with particular reference to women and other low-paid groups in society. It was always a red-letter day in my diary when I saw that coming up; I knew that I was going to be given a very meaty topic to research, read up on and debate. I enjoyed the debates that we had on that.

While I say yes to the thrust of what is being said here, and recognise the benefits that will come from good impact assessments, properly debated, particularly in relation to the regulatory framework in the Bill, I wonder whether there is a slight irony here. The substance of what the noble Baroness is saying in her amendment is that better scrutiny of proposals brought forward for legislation—and, of course, for secondary legislation —would happen if there were better impact assessments. I say in passing, and in reverse order, that a secondary instrument is very much a creature of the primary legislation that has preceded it. It is not uncommon to find in SI impact assessments binary choices, usually not very helpful in detailed essence. The proposition set up in the impact assessment is often, “What would happen if this legislation did not go through?” and then “What will happen when it does go through?” In other words, if there is a change in regulations, you impact; no change and you impact the change. You do not get a range of options.

Financial Services Bill

Lord Stevenson of Balmacara Excerpts

Committee stage
Monday 8th March 2021 Grand Committee

[Lord Tunnicliffe (Lab) [V]]

My Lords, many colleagues will recognise Amendment 79 as a response to the recent publication of the Woolard Review into change and innovation in the unsecured credit market.

The Government have been on something of a journey on buy now, pay later products. In December 2020, the Economic Secretary resisted a similar amendment tabled by long-standing personal debt campaigner and MP for Walthamstow Stella Creasy. He said that while the Government were aware of potential risks resulting from a boom in the use of buy now, pay later products,

“we are yet to see substantive evidence of widespread consumer harm”,—[Official Report, Commons, Financial Services Bill Committee, 3/12/20; col. 398.]

and it would therefore be inappropriate to act.

To be fair to the Government, they did not want to pre-empt the findings of the Woolard Review, which was published a month ago and is a very strong piece of work. It warned of “significant potential customer harm” if there was not a role for the FCA. By bringing certain unregulated credit products under the FCA’s watchful eye, we could see requirements around affordability checks, as well as the introduction of proper protocols for individuals who find themselves struggling to repay the loans they have taken out.

The review also stressed the importance of ensuring a well-functioning debt advice sector, and the need for both government and regulators to take a more holistic approach to a range of issues around personal finance and debt. I know that this piqued the interest of my noble friend Lord Stevenson of Balmacara, who has already dealt with the concept of financial well-being and will turn his attention to Victorian log-book loans shortly. We support his endeavours and hope that at the very least the Government will commit to a review of the antiquated legislation whose repeal was recommended by the Law Commission several years ago.

We strongly welcome the Government’s acceptance of the Woolard Review’s recommendations, as well as their commitment to implement the necessary changes as soon as practicable. It is in some ways a curious change of position, as the review’s discussion of theoretical risks does not appear to meet the evidence test set by the Treasury just three months ago. However, this is a policy change that we can support and, luckily for the Minister, this legislation provides a means of delivering on the Government’s promises.

No doubt we will hear later that this is a very complicated matter and the Treasury needs time to think through the consequences—intended and unintended. Mr Glen hinted at this back in December, talking about the need for the Government to “assess the options” and to weigh up whether they “would be proportionate” in responding to potential harm.

One worry previously cited by the Government related to the potential restricting of flexible payment options for such things as gym memberships or sport season tickets. Nobody would wish to restrict access to such options, in part because they have shown themselves over many years to be low risk. We therefore welcome the distinction made in the review, which talks of “certain new credit products” being brought under the FCA. Our Amendment 79 is more wide-ranging but is, as so often in Committee, a vehicle for debate.

Another worry of those who oppose regulation relates to the potential stifling of innovation in the sector. Of course we welcome new entrants and new services, but on the basis that they operate in a responsible manner. These products are booming in part because of Covid-19 and changes to peoples’ shopping habits. Buy now, pay later grew exponentially during 2020, with an estimated 5 million people using products from firms such as Klarna and Clearpay. The value of these transactions is in the billions, and that figure is likely to grow.

We do not oppose Klarna, Clearpay or other providers of these services. They offer a product which many shoppers wish to avail themselves of, and I am confident that such companies will continue to grow once subject to FCA regulation. All we are asking is that these players, as with others across the financial services sector, are subject to the correct balance of rights and responsibilities, including duties to those who may have problems with debt.

I have no doubt that the brilliant minds at the Treasury and the FCA can come up with a solution, and do so while the Bill remains under consideration. Our amendment mentions the 2022-23 tax year, and if we are to learn lessons from the past, including the failure to properly regulate payday lenders, surely we must keep this target at the forefront of our minds.

I know from previous discussions with the Minister and officials that they are working very hard on this. Therefore, I am hopeful of seeing a government text on Report, if not establishing the detail then committing to the principle and providing the powers that will be needed to implement changes in the coming months.

Other noble Lords with amendments in this group will be very keen to make their speeches, so I will not detain the Committee for too much longer. However, I want to voice support for the other amendments, including that from my noble friend Lord Stevenson referred to earlier in my remarks. I also look forward to the Minister’s response to the amendment on access to bank accounts and cash. Sadly, we continue to see the withdrawal of bank branches and cash machines from towns and villages across the country, suggesting that previous initiatives have not had the desired effects. I beg to move.

[Lord Stevenson of Balmacara (Lab) [V]]

My Lords, I start by expressing support for Amendment 79, introduced by my noble friend Lord Tunnicliffe. As the Woolard Review pointed out, the buy now, pay later issue is a hotspot at the moment and in need of urgent action. My noble friend’s amendment would require that the non-interest-bearing elements of lending under that regime should be regulated by the FCA, and we support that. I thank the Economic Secretary for the time given to us recently on this issue and I appreciate that this is not easy to regulate for. However, as my noble friend pointed out, there is time to get this right by the next financial year.

At heart, this looks like a consumer-friendly initiative—something we could all support. Credit-financed purchases have been with us for a long time, and there are some examples of activity in this field that could be damaged if the regulations to be brought forward are too aggressive. My noble friend mentioned employees, advances of salary and season tickets, and similar arrangements. However, the real profit motive which drives these schemes lies in the small print. Like so many similar schemes, these buy now, pay later schemes put pressure on customers to make unnecessary purchases, do not make effective credit checks, and there is evidence that they can cause mental health difficulties for those who sign up. I am sure that it would be possible to get this side of things properly regulated. However, what is less easy to regulate—although in fact it is far more damaging to hard-pressed consumers—are the penalties that get applied to missed payments and the excess interest that is loaded when payments are missed. In addition, compulsory insurance is often levied against default, links to loyalty follow-up purchases are imposed, and no real comparator APRs are somewhere available for those who wish to shop around before purchasing.

The focus placed on the FCA’s duty to promote competition rather than on a duty of care is an issue in play here. When the FCA was asked to regulate payday lenders, this House made it clear that its concern was the usurious rates of interest being charged, often many thousands of percentage points measured by APR. The solution favoured by the House was banning the products, which was why many of us were mystified by the FCA’s proposed solution of reducing the number of players in this market to a smaller number of well-capitalised companies—which indeed got the interest rates down, but only to around 1,000% APR, so consumers were left facing usurious rates. I hope the Minister will be able to reassure us that the approach that the Government are thinking of taking to buy now, pay later will not fall into the same trap as the payday lender regulations. The aim is consumer care and stamping out egregious behaviour, and not just promoting competition by allowing companies to rip off vulnerable consumers.

My Amendment 101, which I am grateful to the noble Lord, Lord Holmes of Richmond, for signing, is also about high-cost credit. As I said at Second Reading, it is high time we repealed the Victorian bills of sale legislation, which permits an egregious area of high-cost credit to continue and flourish outwith current consumer protection rules. Harm is being done.

Bills of sale are an early form of mortgage, aimed at goods and chattels and not property, which allow individuals to use goods they already own as security for loans while retaining possession of them. The use of bills of sale grew from fewer than 3,000 cases in 2001 to more than 30,000 in 2016. The number has dropped recently, but it is probably still in the order of 15,000 a year and it is going up. Ironically, bills of sale were legislated for before cars were invented, but they are used today mainly for what are called log-book loans, where a borrower raises cash on the security of his or her vehicle. Borrowers may continue to use their vehicle while they keep up the repayments, but if they default, the vehicle can be repossessed, sometimes from outside their front door, without the protections that apply to hire-purchase transactions or other consumer credit. It is also difficult to discover, when a car is being sold, whether it has a log-book loan attached. The register is kept by the High Court and it is not easily searchable. The new owner has no protection against losing the car if that loan has been defaulted on by the previous owner. This is just not fair.

Bills of sale are currently governed by two Victorian statutes, the Bills of Sale Act 1878 and the amendment Act of 1882—the statute was apparently so obscure in 1878 that it had to be re-regulated for in 1882. The legislation is described by the Law Commission as “archaic” and “wholly unsuited” to the 21st century. The current law creates hardship for borrowers and for private purchasers. The Law Commission argues that it imposes unnecessary burdens on lenders, and the lack of a proper chattels mortgage system restricts access to finance for unincorporated businesses and high-net worth individuals.

The great majority of bills of sale are taken out by borrowers who have difficulty in accessing other forms of credit. The current APR in a recent advert that I saw was 450%. The Law Commission says that the statutory form of a bill of sale as set out in the 1882 Act, which has to be followed absolutely to the letter, confuses borrowers rather than helps them to understand the consequences. It is clearly an area that should be cleaned up. A simple way, which is what I propose in my amendment, would be to repeal the Acts. While I accept that some people currently using log-book loans would be adversely affected by such a radical change, the greater harm lies in continuing the status quo.

I currently have a Private Member’s Bill on this issue, drafted by the Law Commission, which includes provision also for a goods mortgages scheme. Perhaps a way forward on this would be for the Government to agree to take on all or part of this Bill in the next Session using the special scheme for approving uncontentious Law Commission Bills. I would be happy to meet the Minister on this issue, if he could find the time, to see whether this would turn out to be a way forward.

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

My Lords, it is a pleasure to speak to this group of amendments. In doing so, I declare my interests as set out in the register. It is also a pleasure to follow the noble Lord, Lord Stevenson. Before I speak to Amendments 127, 131 and 136C in my name, I shall speak to Amendment 101, so eloquently introduced by the noble Lord, Lord Stevenson of Balmacara; Amendment 135, in the name of my noble friend Lord Leigh of Hurley, who is speaking after me so I shall not eat too much of his afternoon tea; and, briefly, Amendment 136F.

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[Lord Stevenson of Balmacara (Lab) [V]]

My Lords, I believe the House owes a great debt of gratitude to the noble Lord, Lord Sharkey, for the work he has been doing on this issue over the last nine years. I have been involved in part of the process, which is why I put my name down to speak: like him, I feel rather confused and not a little embarrassed that no action has been taken in recent years.

Like the noble Lord, Lord Sharkey, I first got involved in this when policy changed in the early part of the coalition Government and new arrangements were introduced for interest-bearing loans and, eventually, maintenance loans. I recall that in about 2014 there was the consultation process described by the noble Lord, Lord Sharkey. As I was then the Labour spokesperson on higher education in your Lordships’ House, I got a lot of correspondence, exactly as he described, from potential students and some existing students. Potential students wanted to know whether at the time they applied and went to higher education there would be a real chance of there being loans that they could take out that would not be a problem in terms of sharia compliance. More worryingly, students who were already at university in the middle of their course found that they could not continue without a guarantee in some form that finance would be available to allow them to see out their course.

In a sense, we were all trying to do the same thing. Indeed, I sat in on meetings with the Higher Education Minister at the time, Jo Johnson, and other colleagues in the House. We had meetings with representatives of Muslim students and the community at which a lot of these issues were explored. When the Government took powers in the 2018 Act, as described by the noble Lord, Lord Sharkey, to ensure that they could facilitate the production of loans of this type, we thought the matter was over. Indeed, I wrote to a number of people I had been working with saying that we thought that the process had reached its natural conclusion and that it was just a matter of time before the Government brought forward the necessary proposals.

As we have discovered, that has not happened, and although there have been promises and suggestions that it was coming, it has not. The Government have got themselves into a very bad position here. I cannot believe that it is impossible to go forward—as the noble Lord, Lord Naseby, said, just to do it—and I am looking forward to hearing the Minister’s response. If there is anything we can do to help, he should be sure that there is, as the noble Lord, Lord Sharkey, said, no politics in this. We simply want a good job done to make sure that all people who contribute and wish to contribute to higher education in this country can do so and are not in any sense disadvantaged simply because of their religion.

[Baroness Kramer (LD)]

My Lords, any one of us can go on to our smartphone and find an app for halal financing for someone who wants to buy a car or a house—they are called “halal mortgages”—or who needs money to support a small business. It is incredible and quite incomprehensible that we do not have a sharia-compliant version of student loans. It is not as though we do not know how to do it or the institutions do not exist in the UK. I suspect that many noble Lords have been, like I have, at general meetings of the financial services industry where, as well as talking about being world leading in terms of green finance, we have talked about London as a very important centre for sharia-compliant finance as we attempt to expand and have a much greater global reach. Six years is an incredible time to wait. It has been four years since enabling legislation was put in place.

I was looking at a Metro article on the web about students who were interviewed in 2019. Some had managed to put together a way to pay their student fees. One said:

“I was constantly broke as a student and never, ever did anything remotely fun. I always felt too guilty if I spent any money on myself.”


Students who started out and found that they just could not keep going left and went to work, but then found that, as this lady said,

“to progress further I need that degree so the plan is to go back.”

However, this young woman has no idea how to finance it. Another youngster talked about the stress of

“having to live scrupulously and scrape up enough to pay each instalment in time.”

We really should not be putting any student into this situation. I do not understand the delay. There does not seem to be an obstacle in terms of designing the appropriate facility or the appropriate legislation. I hope that the Ministers who are here, all of whom are people of understanding and sympathy, will go and put pressure on the Government to take this from the bottom of the in-tray and put it at the top. It could be a minor amendment that we make on Report.

Financial Services Bill

Lord Stevenson of Balmacara Excerpts

Committee stage
Monday 1st March 2021 Grand Committee

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

My Lords, it is a pleasure to take part in this debate on the second group of amendments and I declare my interests as in the register. I will speak to Amendment 126 in my name and, before I do so, say it is a pleasure to follow the noble Baroness, Lady Bowles of Berkhamsted. I congratulate her on the way that she introduced the group.

My Amendment 126 offers a structure of regional mutual banks, which are successful in other nations but not so present in the UK. With the current situation apropos Covid and the current economic outlook, it seems timely to reconsider the whole concept of mutuality via the structure, as set out in this amendment, of regional mutual banks. If we get this right, it would seem to play very much to the levelling-up agenda, to the regional agenda and to a more collaborative, connected and closer relationship between lender and lendee—with both sharing a part of the journey in whatever endeavour, be that individual or SME.

Elsewhere in Committee I have raised, and will raise later, issues around financial inclusion which are a stain on so many of our institutions and lives. But this is not a question just for individuals shut out of our financial services system; it is a question for the underbanked as well as the unbanked. It is also a question for SMEs, unable to get the lines of credit they require to do what SMEs do best: grow the economy for the benefit of their employees and communities—for the benefit of them all. In Amendment 126, the consideration of regional mutual banks goes to all these points.

Similarly, it could be the basis for a rebirth in this country of true patient capital, which is much in existence in other nations but not, perhaps, so much in recent years in the UK. We may also wish to consider changes to the rules around pension fund investments, which could come through such vehicles as regional mutual banks. We are all aware of the names of some famous and successful international pension funds—Ontario Teachers, to give one example. Why do we know about it, when most people perhaps do not necessarily know about our large pension schemes? It is because of the current rules and approach when it comes to where all that potential investment can be deployed.

Again, the amendment suggests that the whole question of capital adequacy should be considered. If we have a structure with a different funding model, leaning more towards patient capital, should we consider whether the current capital adequacy rules are indeed adequate for such institutions? Are they in fact acting as a barrier, a blocker, to the development of regional mutual banks? With such structures, the amendment seeks to probe a reconsideration of risk and risk profiling when it comes to these kinds of banking operations. The amendment also seeks to look at other social, economic or political limiting factors which may be out there.

Finally, I hope my noble friend the Minister will agree that Amendment 126 offers a helpful suggestion in terms of the seeding of such regional mutual banks. Public finances have rarely been as tight as they are right now; everybody understands that. Perhaps dormant assets could be used to act as some seeding to see where we could take the whole concept of regional mutual banks.

As we come out of Covid, it seems an opportune moment to reconsider, reimagine and potentially reignite the whole concept of mutuality throughout our society, which was so successful and so beloved in previous generations. I hope my noble friend the Minister will agree that Amendment 126 offers a positive, creative structure worth considering for the future. Regional mutual banks could play a key part in the Covid rebuild and in future, as yet unwritten, success stories.

[Lord Stevenson of Balmacara (Lab) [V]]

My Lords, I declare my interest as a former chair of StepChange, the debt charity. I put my name down to speak in this group of amendments because they give me an opportunity to raise a wider concern about the access we need to low-cost credit. In fact, this fits in very closely with points already made by the noble Baroness, Lady Bowles, on Amendment 29 and the noble Lord, Lord Holmes of Richmond, on Amendment 126, and his important point about financial inclusion and the need to make sure that we do not forget that. I am looking forward to the comments to be made by the noble Baroness, Lady Kramer; she will also touch on these issues when she comes to speak.

When responding to a group in an earlier debate, my noble friend Lord Tunnicliffe mentioned that he grew up in a household where poverty was a constant worry. He mentioned the “jam jar economy”, which often characterised low-income households. It was cash-based: putting small amounts of coin away for future expenditure. Indeed, research a few years ago showed the surprising conclusion that the lowest paid in our society were often the heaviest savers on many measures, mainly because they had to be. It was done outwith traditional credit sources and topped up where necessary by house-to-house lenders, which were often a vital lifeline.

A key problem I want to highlight is the need to solve the problem of how to expand low-cost credit. My noble friend Lord McNicol, when he was speaking in an earlier group, mentioned the problems revealed by a very interesting report by the University of Edinburgh Business School on the financial health of NHS workers—people who were in employment but receiving low wages. It was based on real-time open banking figures. It showed across the 20,000 or so NHS workers who were surveyed that far too many were heavily reliant on a regular basis on persistent overdrafts and high-cost credit, often borrowing to meet the emergency needs they had from time to time, at APRs of well over 1,000%. The report makes for very interesting reading, and I hope that the Government will have access to it when they come to consider these issues further.

I know that the Government are concerned about this and that their financial inclusion work recognises, as previous Governments have, that the availability of low-cost credit is a major blockage to financial well-being. As the noble Lord, Lord Holmes of Richmond, said, it also affects the ability of SMEs and sole traders to operate successfully in a difficult economy.

I hope that the Minister can say a bit more about the plans the Government have when she comes to respond. I know that the Government will pray in aid the idea that credit unions will often be the solution; they have been mooted so often in the past but do not seem to grow. Other countries have other models—Germany has its particular banks focused on the local economy and America has the Community Reinvestment Act—which have solved the problems. Is there not time to consider things that might operate more successfully here in the UK?

None of the individual measures outlined in the amendments in this group, welcome though they are, will solve low-cost credit and the drought that we are suffering from. But they make the point well that the regulatory measures in the Bill should not restrict much-needed support from institutions, banks and other organisations such as credit unions to help those who need to borrow but who cannot do so at the rates or in the period of time which are often required by our major institutions. I look forward to the Minister’s response.

[The Deputy Chairman of Committees (Lord Russell of Liverpool) (CB)]

The noble Baroness, Lady Neville-Rolfe, has withdrawn from this group, so I call the next speaker, the noble Baroness, Lady Noakes.

Financial Services Bill

Lord Stevenson of Balmacara Excerpts

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

Moved by

[Lord Stevenson of Balmacara]

8: Before Clause 1, insert the following new Clause—
“Duty of the FCA to make rules promoting financial wellbeing
(1) The Financial Services and Markets Act 2000 is amended as follows.(2) After section 137C, insert—“137CA FCA general rules: financial wellbeing(1) The power of the FCA to make general rules includes the power to require authorised persons to promote financial wellbeing of consumers in carrying out regulated activities under this Act.(2) The FCA must make rules in accordance with this power which come into force no later than 6 April 2022.””Member’s explanatory statement
This new Clause would introduce a duty to promote financial wellbeing for the FCA which would strengthen the FCA’s consumer protection objective and empower the FCA to introduce rules for financial services firms informed by that duty.

[Lord Stevenson of Balmacara (Lab) [V]]

My Lords, with this amendment, we come to the end of the group of amendments that precede the Bill. This is another slightly detached issue that I hope will get a response from the Government. Amendment 8 is supported by the noble Lord, Lord Holmes of Richmond; I am very grateful to him for his support. His amendments on financial inclusion, which are also in this group, raise many similar issues. I look forward to hearing his comments and to the subsequent debate.

I declare my interest as a former chair of StepChange, the debt charity. Amendment 8 would place on the FCA

“a duty to promote financial wellbeing”—

a new term—

“which would strengthen the FCA’s consumer protection objective and empower the FCA to introduce rules for financial services firms informed by that duty.”

As I have already said, this is a probing amendment, seeking at this stage what I would describe as a high-level response from the Government. I am not looking for detail at this stage; it is really a question of whether there is merit in further work being done on this concept. If there is, I am looking for some pointers about how the Government would like it to go forward.

The background to this amendment is a suggestion from the Money and Pensions Service that there is a case for giving the FCA the power to nudge—its term, not mine—financial services firms to underpin their activities with regard to the financial well-being of their customers and to go beyond current considerations of consumer protection or vulnerability, which I think they have already adopted to some extent. The intention is to remove any asymmetry of knowledge, expertise and capacity between the service providers and their clients. It is a very ambitious goal and would take a lot of work across many sectors not normally involved in the consideration of financial competence.

During my time as the chair of StepChange, we used the term “financial inclusion” to cover the need to have a society where everyone felt that they were knowledgeable enough to be secure and in control of their financial affairs; indeed, we have used the term since then. However, if we change that to “financial well-being”, we go much further. We could say that the aim would be to have the knowledge, confidence and resilience for all in society to pay bills as they fall due, cope with unexpected shocks and plan across our assets and income over time for a healthy financial future right through to well after retirement.

It is a very ambitious and much wider term than “financial inclusion” or any amount of financial education. The importance of the term is that it better captures a life cycle approach to the modern needs for economic health, generating confidence and empowerment within the population at scale coupled with a financial services industry that goes well beyond just designing and delivering good products and excellent services—which we accept they do, of course. It all should be backed by a regulatory system with a holistic overview and the powers to match.

Is this just smoke and mirrors, or is it a realistic vision of the way that things might be? Whatever the case, it is a good time to ask the question. As we discussed earlier today, the FCA’s 2020 Financial Lives survey found that just over half of UK adults—24.1 million people, in its figures—display one or more of the characteristics of vulnerability to their financial situation: a health condition, negative life events, low financial capability or low resilience. Other surveys have already been mentioned. The Salad Projects’ report was mentioned by my noble friend Lord McNicol, and hopefully will be again when he comes to speak on this group. It shows the reality of coping with low incomes and why a shortage of low-cost credit is such a major issue for so many citizens who, even when in regular employment and often with blameless credit references, cannot find appropriate ways to cope with even the basic costs of living, let alone saving for a rainy day and retirement.

The Government are currently consulting on a phase 2 review that includes financial inclusion on the levelling-up agenda, but we also have some other material. As has been mentioned already, The Woolard Review: A Review of Change and Innovation in the Unsecured Credit Market is a major contribution to the understanding of this area; it will come up again in later amendments. There is a lot going on. With this probing amendment, I seek a sense from the Government of whether they accept the case for a broader approach to financial well-being being championed by the Money and Pensions Service and by some firms such as NatWest and Nationwide. In particular, do they accept that, whether or not a formal duty of care is placed on financial service firms—I would support this—the forms of regulation in this area need to be expanded to deliver what the FCA calls

“fairer outcomes for consumers, including support for customers with poor financial well-being that might extend well beyond simple commercial transactions”?

Thirdly, would they consider taking this one step further and seeing what would be required from other partners and agencies?

If we really want a system capable of helping consumers to develop the skills and confidence to interact with financial service providers, people must be secure in the expectation that, if they need help in managing their decisions on their finances, they will not be ripped off and that there will be quality support for them. We must also ensure that education, advice, debt counselling services and other things focus on helping all citizens to develop the skills and confidence to interact effectively with financial service providers—not only providing the products that they need over the life cycle but developing their skills and confidence about their financial well-being and empowering them to take control and plan what they want to maximise their resources.

This is a big agenda that probably also needs action on many other issues such as low-cost credit sources. However, at this stage, we need a clear signal from the Government about how far this issue can go and on what terms they would like to see further work done.

I beg to move.

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

My Lords, it is a pleasure to speak on this group of amendments. I congratulate the noble Lord, Lord Stevenson of Balmacara, on the excellent way in which he introduced the group. The concept of financial well-being is a growing area and there is a lot for us all to reflect on. I thank him for all that he has done in this whole area of financial well-being, not least during his excellent time at the helm of StepChange.

We should thank all the organisations involved in financial inclusion, not least Macmillan Cancer Support and the Money Advice Trust. They go to people who are at the sharpest end of financial exclusion, and their commitment and the briefings that they provide to parliamentarians are a credit to everybody involved in that space.

I turn to my Amendment 9 in this group, which would place a duty on the Financial Conduct Authority to work toward the objective of financial inclusion. In doing this, I seek to raise the whole level of financial inclusion across our regulators. The context has moved on significantly during the Covid crisis. People who, fortunately, have never had to think about financial inclusion or have never been at a loss as to where the next bill payment will come from find themselves very much at the sharp end of financial difficulty. Fortunately, in many of those instances, the Government have stepped in through the furlough scheme and the self-employed and business loan schemes.

The reality is that, in a broad sense, these are enablers of continued financial inclusion. I would argue that, in this new world, it is difficult to consider the concept of financial stability while we still have such issues around financial inclusion. Financial exclusion has dogged our society for decades. It ruins lives, paralyses potential and corrodes communities. This amendment would give the FCA the objective of considering the barriers, blockers and bias that continue to mean that people are shamefully excluded from mainstream financial products.

Similarly, in the second point in my amendment, I want to place a requirement on organisations

“to report on their use of financial technology to increase financial inclusion.”

Not for one minute do I believe that fintech is the silver bullet—I am well aware of the issues around financial and digital exclusion—but fintech must be part of the solution and must be turbocharged at all levels of financial services. It must be understood much better by HMT, as well as the role it can play in varying degrees across financial services. This was proven at the beginning of the Covid crisis when, in a matter of hours, various fintechs came up with innovative solutions to address some of the issues that then rolled out as the crisis developed.

Having a financially inclusive nation makes sense. Having a financial inclusion objective within the scope of the FCA makes complete sense. I hope that this amendment will add to all the extraordinarily good work that everybody involved in financial inclusion is currently undertaking.

--- Later in debate ---

[The Deputy Chairman of Committees (Lord Russell of Liverpool) (CB)]

I have received no requests to speak after the Minister, so I call the noble Lord, Lord Stevenson of Balmacara.

[Lord Stevenson of Balmacara (Lab) [V]]

My Lords, I thank all noble Lords who have contributed to this debate. I am deeply embarrassed by all the personal comments and blushed to my roots, which I hope was not too obvious on screen. The noble Lord, Lord Holmes, rightly pointed out the excellent work being carried out by many other agencies and bodies in this area as well as StepChange. I completely endorse his comments; there is a lot of good work going on.

I normally find myself aligned very closely with the noble Baroness, Lady Neville-Rolfe—sometimes rather embarrassingly, given our respective party positions—but this time I seem to have completely confused her, for which I apologise. The noble Lord, Lord Blackwell, was right that there are two quite separate tracks here, as my noble friend Lord McNicol picked up on. One is setting up a regulatory environment within which more good behaviour and activity by firms enhances the overall capacity of the system to work well in terms of financial capability and well-being. The other is hoping for the wider context that is necessary for all this to happen—particularly starting with education, which is always a hard nut to crack. As the noble Lord rightly said, this could be picked up by employers, trade unions, wider agencies, anybody with an interest in seeing a holistic society using the non-cash elements that my noble friend Lord Tunnicliffe was so scared of but yet so sprightly embraced in his unique style.

We all must learn how to operate with new technologies and new operations. My children do not use cash; they have not used cash for 10 years. They are all flashing out ridiculously brightly coloured cards and seem to have a much better track on what they are spending and how well they are doing than I ever did. I completely admit that. However, that is no excuse for me—I must get up there and be part of that process. But there is a role for Government, there is definitely a role for the FCA and the regulator; there is a role for companies that want to go down that track and have the capacity to do so, but there is no fixed agenda for that yet.

I wanted to hear a high-level endorsement by the Minister that this was something worth exploring and working for. She has given that, and I am very grateful. We can see this as a burgeoning programme of work which might well surprise us all in terms of where it might reach and what it might do. We are all rightly trying to support it in a way that will be most appropriate. With that, I beg leave to withdraw the amendment.

Amendment 8 withdrawn.

Business and Planning Bill

Lord Stevenson of Balmacara Excerpts

Report stage & Report stage (Hansard) & Report stage (Hansard): House of Lords
Monday 20th July 2020 Lords Chamber

Moved by

[Lord Stevenson of Balmacara]

19: Clause 5, page 5, line 7, at end insert—
“(6A) Any conditions published under subsection (6) are subject to annulment in pursuance of a resolution of either House of Parliament.”

[Lord Stevenson of Balmacara [V]]

My Lords, in moving Amendment 19, I will also speak to my other amendments in this group. Since there is much agreement, and also duplication, I will try to be brief.

These amendments are drafted pursuant to the 17th DPRRC report. I thank the committee for its hard work on this Bill, and on the emergency Bills on which it has had to work in recent weeks. The timescales are very difficult, and the pressure to deliver is also very high, but it has been able to do that with considerable skill, and we are very grateful.

The DPRRC recommendations set up, in essence, a dialogue between the Government and the committee. However, in a spirit of co-operation and because of the short timescales of the emergency legislation, we often put down the recommendations of the committee as amendments as a way of encouraging the Government to act. In Committee, we had a series of notifications that the Government were preparing to accept the DPRRC recommendations. However, on this occasion, it also produced an interesting outcome. For your Lordships’ information, the wording of our amendments has been strongly influenced by the helpful advice we received from the Public Bill Office, although they are our responsibility and tabled in my name. But it is interesting that on several occasions, recommendations made by the DPRRC in the report have resulted in different wordings in the amendments that have been tabled by the Government and by ourselves. When the noble Earl comes to reply, he may be able to shed light on the Government's thinking and explain some of the differences in approach, and I think that would be helpful. Amendment 78 in the name of the noble Earl says:

“If the Secretary of State considers it reasonable to do so to mitigate an effect of coronavirus.”


But our version in Amendment 79, which we hope will achieve the same result, says

“but regulations may only be made under this subsection where the Secretary of State considers it necessary or appropriate for a purpose linked to the coronavirus pandemic.”

I am not saying that we have a monopoly on the correct drafting, but I think it interesting that we have come to different conclusions about what might be considered the same issue.

I am left with a slight concern that we may have exposed a gap in our procedures that is exacerbated by the nature of these pieces of legislation. I hope that in calmer times, the DPRRC and the House might find an opportunity to reflect on this, and that our other committees, such as the Secondary Legislation Scrutiny Committee and the Constitution Committee, might do likewise.

When he comes to respond, it would be for the benefit of the House if the noble Earl highlighted any areas where the Government have decided not to follow the advice of the DPRRC, in whole or in part. I beg to move.

[Lord Balfe [V]]

I only really need to say one thing. I am concerned that some of these clauses might turn into permanent legislation—I am aware that there is a tendency for what is temporary to become permanent. Can I have the Minister’s assurance that it is not intended to extend any of these clauses beyond what is absolutely necessary to deal with this emergency?

--- Later in debate ---

[Earl Howe (Con)]

My Lords, I begin by speaking to the government amendments in my name—Amendments 26, 28, 47, 49, 58, 60, 65, 67, 73, 75, 78, 80, 81 and 83—which are grouped with Amendment 19 and the others in this group tabled by the noble Lord, Lord Stevenson.

I am grateful to the noble Lord, Lord Stevenson, for tabling his Amendments 19, 22, 57, 63 and 71, which would require any statutory guidance issued by the Secretary of State in relation to pavement licences, extended planning permissions, construction hours or electronic inspection of the Mayor of London’s spatial development strategy to be subject to negative parliamentary procedures. As he indicated, these amendments reflect recommendations made by the Delegated Powers and Regulatory Reform Committee of your Lordships’ House in its report on the Bill. I welcome the opportunity to discuss them.

The committee’s views are always important, and we have responded positively elsewhere in the Bill to its recommendations, as I shall explain in a moment. However, in relation to this matter, I am afraid we cannot accept its recommendations or, by extension, these amendments. This reflects partly a general principle but also the practical realities. First, the statutory guidance under Clauses 5, 8, 16, 17, 18 and 21 is planning guidance. Guidance by the Secretary of State to local planning authorities has been a key feature of the planning system ever since its creation over 70 years ago—whether that guidance has been through circulars, planning policy guidance or, more recently, the National Planning Policy Framework and its associated practical guidance.

The issuing of this guidance, as a general principle, has never required statutory instruments. For instance, there is no parliamentary procedure requirement in relation to guidance to local planning authorities about the preparation and content of local plans, a key planning function under Section 34 of the Planning and Compulsory Purchase Act 2004. Similarly, and to give an example directly relevant to this Bill, our construction working hours provisions and the extension of planning permission provisions modify the Town and Country Planning Act 1990. The various powers of the Secretary of State to issue guidance under that Act are not subject to parliamentary procedure. These documents will form part of the full suite of planning practice guidance and, in practice, it would be peculiar to have different parallel procedures for publication.

Our pavement licence clauses are linked to Part 7A of the Highways Act 1980. That Act contains four powers for the Secretary of State to issue guidance, none of which are subject to parliamentary procedure. Two of these powers were inserted by amending Acts in 2000 and 2015. The situation is similar for other statutory guidance required by this Bill. So, prescribing a parliamentary procedure for guidance in relation to the temporary planning measures in the Bill would be out of kilter with our well-established approach.

Furthermore, requiring guidance to be subject to parliamentary procedure does not reflect the practical realities of planning guidance. The draft guidance we have published is, like our other planning guidance, technical and practical and expressed in the form of questions and answers to help local planning authorities, and applicants, and has been formulated taking account of the view of sector specialists. For instance, the guidance on additional environmental approval for extending planning permissions has had input from the Environment Agency and Natural England. I hope that many noble Lords will have had the opportunity to review this guidance during the course of the Bill’s passage.

This guidance is designed to evolve over time in response to local planning authorities’ practical experience of these temporary measures. While we have obviously sought to ensure that guidance is as comprehensive as possible from the outset, we know that, in time, additional questions or clarifications may be required. We want to be able to make these updates in a flexible and timely way. We should not forget that local planning authorities are best placed to understand the specific needs, requirements and arrangements of their local areas. Providing helpful and up-to-date guidance is essential in allowing them to exercise their judgment on the ground. Requiring each change of guidance to be subject to the negative parliamentary procedure makes it more difficult in practice to make incremental changes to help them. I therefore regret that we cannot support these amendments, and I humbly beg the noble Lord, after reflecting on our arguments, to withdraw or not move them.

Turning to the other amendments in this group, I am pleased to say that the noble Lord, Lord Stevenson, and I find ourselves in broad agreement. The Government’s Amendments 26, 28, 47, 49, 58, 60, 65, 67, 73, 75, 78, 80, 81 and 83 implement another of the recommendations of the Delegated Powers and Regulatory Reform Committee, which the Government are pleased to accept. As noble Lords will be aware—I emphasise this to my noble friend Lord Balfe and the noble Lord, Lord Blunkett—the vast majority of the measures in the Bill are temporary. In several cases, clauses provide for expiry dates to be extended by regulations, subject to the affirmative or “made affirmative” procedure.

We thank the committee for its careful consideration of the Bill. Our amendments in this group would implement its recommendation to clarify that the provisions will only be extended for a purpose linked to the coronavirus pandemic. I was grateful to the noble Lord, Lord Beith, for his supportive comments on this issue. I join other noble Lords in extending my sympathy to him on the loss of his wife, the noble Baroness, Lady Maddock.

The Government’s intention has always been for the powers to extend the temporary provisions to be used, if necessary, in response to emerging information about the duration of the pandemic, the nature of social distancing requirements and the impact of coronavirus on relevant sectors. We want to provide absolute clarity that the powers to extend will be exercised only where this is necessary and appropriate, and only to mitigate an effect of coronavirus. Therefore, these amendments make this clear on the face of the Bill. The wording we have used is consistent with other legislation. I also remind noble Lords that the requirement for any extensions to be by regulations, subject to the affirmative or “made affirmative” procedure, will provide opportunity for further parliamentary scrutiny.

I am sure that noble Lords will welcome this clarity, and I hope that the noble Lord, Lord Stevenson, will agree to withdraw Amendment 19 and to not move Amendments 27, 48, 59, 66, 74, 79 and 82, which are intended to achieve the same purpose.

[Lord Stevenson of Balmacara [V]]

I thank noble Lords who have spoken in this short debate, not just for their widespread support but for their brevity. I particularly thank the noble Lord, Lord Naseby, for his kind words. I join other noble Lords in very much appreciating that the noble Lord, Lord Beith, has come in today to speak on this issue, and sympathise with him at this time of loss.

It was good to hear the noble Earl give a full response. He always couches his words to your Lordships’ House in such reasonable terms, packaged in a velvet of deepest hue, that it is sometimes easy to think that he is agreeing with you, when in fact he is not. In particular, I picked up his heavy points regarding the Government’s intention not to take up the recommendations from the DPRRC on statutory guidance to which regard must be had. The noble Earl gave very good examples, which had not occurred to me, but I have no reason to doubt that they are genuine. However, the DPRRC’s report is very firm on this issue:

“We have frequently taken the view that statutory guidance to which regard must be had … should be subject to a parliamentary procedure.”


It goes on to say that:

“This is not to say that the guidance should have to be drafted like a statutory instrument … The point is that guidance which has legal significance, and which may have—and may be expressly designed to have—a transformative effect on behaviour in important areas, requires a parliamentary procedure.”


There is clearly no chance that the House will resolve this important issue in this Bill, but I point out to the DPRRC that it has now been raised. It, and other committees, may wish to return to it in order that we resolve it going forward.

The House has given this issue a good kick about. I am grateful to the noble Lord, Lord Kirkhope of Harrogate, for picking up exactly point I was trying to make about the importance of the choice of terminology. He focused on a different set of amendments, but this issue runs like a golden thread through all the Government’s proposals when compared to ours. These are important differences, but they are not necessarily going to hold the House back tonight. I hope, again, that the DPRRC will look at them in due course. I beg leave to withdraw Amendment 19.

Amendment 19 withdrawn.

--- Later in debate ---

[Lord Clement-Jones]

My Lords, Amendment 52, which I have signed and strongly support, is similar but different, in a crucial respect, to the one which the noble Baroness and I tabled in Committee. I am delighted that we are joined by even heavier artillery on Report. In Committee, the noble Baroness, Lady Williams, said:

“At present it is not possible to use a digital ID as proof of age for the purchase of alcohol in the UK because there is no industry standard for digital ID… Until such a standard is agreed, the current restrictions should be upheld. I hope that my noble friend will not press her amendment. I shall finish there.”—[Official Report, 13/7/20, col. 1435.]


I am not going to repeat what I said in Committee—for which I am sure the Minister is grateful—but I know she is always open to sound argument. I want to show why her brief in Committee was not entirely accurate.

It is rather misleading to say baldly that there is no industry standard for digital ID. Back in 2016, the age verification group of the Digital Policy Alliance—which has some distinguished and knowledgeable present and former parliamentarians among its members—sponsored a publicly available specification, PAS, code of practice standard number 1296 on online age checking. This was adopted by the British Standards Institution and the independent regulator, the Age Check Certification Scheme. It is now PAS 1296:2018.

A publicly available specification is a voluntary standard intended to assist providers of age-restricted products and services online with a means to adopt and demonstrate best practice and compliance. There are easily available audit processes and services to check conformity with the PAS, involving policy, quality and technical evaluation, and an enormous number of reputable companies provide age-verification services through digital ID systems. As the noble Baroness said, in many ways the UK is leading the way in digital ID. It is active across the range of age-restricted products and services, such as DVDs, gambling, lottery tickets and scratchcards, knives, air weapons, fireworks, petrol, solvents and cigarettes, but not—perversely and uniquely—alcohol.

This is the digital ID marketplace that the Government said they wanted to build, in their call for evidence last year. Most of these companies are UK-based and many are global. Nearly all work to the standard set by PAS 1296:2018. Many of them have other forms of certification and security standards in place, such as ISO 27001. There is an active trade body, the Age Verification Providers Association, whose members—as the Minister probably knows—have just had good news from the High Court in an important judicial review case involving non-implementation of the age-verification provisions of the Digital Economy Act.

Another government department, BEIS, through its Office for Product Safety and Standards, together with the Chartered Trading Standards Institute, provides training that

“will enable participants to confidently apply the PAS 1296:2018”.

Not only is there a form of auditable standard in place, but reputable training in compliance with PAS 1296.

As we pointed out in Committee, this is a strongly deregulatory measure. Retailers have noted that almost 24% of supermarket baskets contain an age-restricted item. As a result of current rules, many customers are waiting longer than necessary. This would ease any congestion, mitigate the risks of queuing, reduce the need for continual sanitisation by staff—as the noble Baroness said—and be for the benefit of all in infection control. Rather than being the last ship in the convoy, can the Home Office not steam ahead on this? The noble Baroness, Lady Neville-Rolfe, explained that it is essentially a pilot period only. I urge the Government to accept our amendment.

[Lord Stevenson of Balmacara [V]]

My Lords, I speak in support of Amendment 52. I very much hope that the Government welcome the spirit of what was said by the noble Baroness, Lady Neville-Rolfe, even if they cannot accept the amendment today—although I hope they can. There are a number of areas in public life where we urgently need a proper age-verification system that deals directly with what an individual can and, on occasion, cannot do. Gambling and access to legal pornography are two that come to mind, but access to alcohol, whether consumed on or off the premises, is under direct consideration today.

The noble Baroness, Lady Neville-Rolfe, spoke convincingly in Committee and again this evening on the benefits that a digital ID system would bring. This was echoed by the noble Lord, Lord Clement-Jones, who also explained what is happening in the digital marketplace. If, as the noble Baroness says, this boils down simply to putting ID cards, passports or driving licences on mobile phones, it is hard to see why the Government do not grab this initiative. It is already widely used, particularly for verifying age for knife sales.

There may be other work going on in the Home Office on digital ID, but I would be satisfied if the Government today confirmed that they are aware of the benefits of digital ID, supportive of the technology in principle and prepared to work with the industry to resolve any outstanding issues in the near future.

[Baroness McIntosh of Pickering]

My Lords, I too will address Amendment 52. I thank my noble friend Lady Neville-Rolfe for the interest she has shown in digital ID. I again declare my interest as chairman of the board of PASS, the Proof of Age Standards Scheme. I welcome the opportunity to again put on record my support for digital age verification. I am proud of the work PASS does; it has stood the test of time well in providing assurance through a set of national standards and an independent audit of physical proof-of-age cards. However, we are determined that PASS will not stand still. In an age when so many young people own a smartphone—according to Ofcom data in 2018, 95% of 16 to 24 year-olds own a smart- phone—it is only pragmatic for proof-of-age schemes to adapt to the technology most widely used by young adults.

That is precisely why PASS launched a consultation to seek views on its proposals to develop a set of standards to underpin digital proof of age. The PASS proposals will offer a seamless transition from physical to digital verification, continuing to support the many thousands of physical proof-of-age cards currently in use while mirroring those high standards for a new generation of digital proof of age. It will create a universal solution that will work in any number of outlets that sell or provide age-restricted products, as well as for alcohol licence holders. It will avoid additional costs for retailers and pubs, which are, as we all recognise, experiencing unprecedented challenge and change—that is why this Bill, and its measures to help businesses as the economy starts to reopen, are so welcome. It will allow for a level playing field of competition and choice for the new market of digital-age providers, where retailers and licence holders will not be reliant on a single supplier.

I do not believe that we want to prejudge the findings of the consultation: it closes this week, on 24 July, and the responses so far run into hundreds. However, there is support for the direction of travel set out by PASS from retail trade bodies, including the Association of Conveniences Stores, the National Federation of Retail Newsagents, the Retail of Alcohol Standards Group, and the Wine and Spirit Trade Association, and high-street supermarket brands, some of which are members of the British Retail Consortium. There is support within the hospitality sector, including from some well-known pub companies, and from the majority of card issuers, including CitizenCard and Young Scot. There is also support from the Age Verification Providers Association, which includes many of the new generation of tech companies, specialist in digital solutions, and the Government’s very own commissioned expert panel on age restrictions.

I pay tribute to the hard work and responsibility of the retail and hospitality industries over recent years. That we talk less today than in the past of the scourge of underage drinking and the dangers of age-restricted products is a great tribute to their hard work and responsibility. But let us not lose sight of the importance of preventing the sale of such products to minors; the protection of children from harm is a vital licensing objective. Regulation is important in managing risk, and accreditation against agreed and independently audited national standards is vital.

--- Later in debate ---

[Baroness Kramer (LD) [V]]

My Lords, first, I thank the noble Baroness, Lady Penn, for her willingness to talk virtually to a number of us who have been focused on this issue; however, I came away from those discussions almost more confused than I went into them. This House will be aware that the financial regulators—certainly the FCA—do not regulate institutions but activities. One of the activities it cannot regulate is commercial lending, which is on the far side of what is generally called the regulatory perimeter. A slight sleight of hand is, to some extent, made available to sole traders, micro-companies and the very small end of small businesses so that they do merit some protection, that typically coming in the form of an appeal to the ombudsman. Although the ombudsman has very limited power to actually make sure that any remedy is effected, there is at least one to go to.

For companies that do not fall into this category—my noble friend Lady Bowles provided the detail, so I will not repeat it—there is no form of protection; the FCA has no standing. Therefore, when those companies are put into default and the banks come to collect on their debts, their only resort has been to the courts. Under this arrangement, that is now removed from those companies if they have taken out a bounce-back loan. I really do not understand why the ability to go to the courts to protest unfair treatment has been removed.

The Government have full knowledge that the FCA cannot act under these circumstances. I suppose that, occasionally, somebody in government will argue that the FCA can turn to the Senior Managers Regime, but, as we all know, having listened frequently to the testimony from Andrew Bailey, only in very rare instances would the regime apply. Indeed, the FCA has been very reluctant to use it, even in some very egregious cases; in fact, I would be interested to hear from the Minister the number of times the FCA has actually used it. It is not a workable mechanism for trying to force the banks to provide fair treatment to the larger end of SMEs if they go into default under their bounce- back loans.

The Bounce Back Loan Scheme is brilliant, but I am very concerned that it will end up with a stain on its character when, in 18 months’ or two years’ time, we have a chain of companies that are clearly being treated unfairly by the banks and both the Government and the regulators stand back and say, “There is nothing we can do. This was an unregulated activity, only contract law applied, and we have disallowed these companies’ ability to go to the courts to seek any form of redress”. Frankly, it is a tragedy and a scandal in the making.

I am not sure it has been made clear to companies that when they apply for bounce-back loans, it is caveat emptor and they will be without even the normal range of protections should they go into default. If I understand correctly, the Government have decided to disapply the right to turn to the courts as part of an enticement to the banks to participate in the Bounce Back Loan Scheme. I cannot believe that that concession should be given; and if it was asked for by the banks, I am even more worried because, as we know, the banks seek opportunities to make profit—that is the business they are in.

Perhaps the Minister is not that familiar with the RBS and GRG scandals. The GRG was a profit centre. The RBS staff who were part of the GRG were looking not only to get loans and interest repaid but to make an additional profit, particularly by seizing assets. Under the various contract terms, they could identify firms that would value those assets. The owners or borrowers could argue that the assets were being valued at well below market value, but had no means of enforcing that, and of course we know from the various reports that followed that it was not infrequently the reality that assets were valued very low, triggering the default, and months later, having been seized by the bank, were resold for multiples of the valuation.

The mechanisms that the banks use when they have the opportunity to put a company into default are frequently outside the boundaries of what any of us would consider fair and appropriate. I do not understand stripping away from companies any possible route to a remedy under those circumstances.

[Lord Stevenson of Balmacara [V]]

My Lords, my name is on this amendment, and I am in general support of the points powerfully made by the noble Baroness, Lady Bowles, in Committee and today, and by others who have spoken. They have made the main arguments, which I will not repeat.

The Government argue that the key driver for this initiative is to get the bounce-bank loans out to as many small businesses as want them and can use them, and to reduce barriers to that effect. I sympathise—it is very hard to be against that aim—but there are clearly risks here, as we have heard. While my concerns are not identical to those of the noble Baroness, Lady Bowles, they are very similar, and I would like to make three points on the issue.

First, there is general agreement that the Consumer Credit Act 1974 urgently needs bringing up to date, to be fit for purpose regarding the changed regulatory landscape of different lending practices and the tighter financial circumstances of the 2020s, now and post Covid-19. The current lender/borrower relationship envisaged under the Act does not work but, as others have said, it is very risky to remove all the court protections, and I sympathise with that.

Secondly, the Government have put on record the very tight constraints that they are putting on lenders who wish to engage with bounce-back loans, including banning fees, banning punitive interest and forbidding reach-through sanctions to personal assets such as houses and vehicles, but is that enough? There is a powerful tool in the Government’s armoury.

Thirdly, the 100% guarantee that we have been talking about is on the lender, not the borrower, but that gives the Government considerable powers which they say they will use to drive good behaviour. For me, the key question is whether, in removing access to the courts under the unfair trading clauses of the 1974 Act, the Government have put the bounce-back loan borrowers in a worse position than if they had left it all in place, or—as suggested in the amendment—just the affordability issue. It is a close call.

I would be very grateful if the Minister, when responding, could deal fully with the following points. First, will she confirm that the Government will undertake to overhaul the Consumer Credit Act 1974 in the near future, taking full account of the issues raised in this debate? Secondly, can she list concisely the limits on lenders’ ability under the bounce-back loan to penalise borrowers who are in default or otherwise transgress, irrespective of the amount of money borrowed, and the statutory and non-statutory opportunities for borrowers to protect themselves and their possessions if lenders attempt to penalise them absent the core protection of the 1974 Act?

Thirdly, can the Minister set out what she called “the steely determination” of the Government to use their power to reduce or cancel the 100% underwriting of loans made under the BBL scheme, if lenders transgress? This could be a very powerful weapon. It would be useful to know who will have the power to trigger certain sanctions, and how borrowers will be informed about the process. The noble Lord, Lord Carlile, suggested that an arbitration structure was needed, and he may well be right. If the Minister can confirm that these points are in play and give assurances on them, then I suggest that the noble Baroness, Lady Bowles, does not press her amendment to a vote this evening, as we will not support her.

Business and Planning Bill

Lord Stevenson of Balmacara Excerpts

2nd reading & 2nd reading (Hansard) & 2nd reading (Hansard): House of Lords
Monday 6th July 2020 Lords Chamber

[Lord Stevenson of Balmacara (Lab) [V]]

My Lords, I thank the Minister for his comprehensive introduction to the Bill. A large number of Members of your Lordships’ House wish to speak in this debate, and we look forward to their contributions.

When a crisis hits, effective Governments do two things: first, they deal with the immediate challenge and, secondly, they anticipate the fallout and begin working out how to tackle the consequences in the months and years ahead. It is anticipated that the UK has spent over £200 billion on a first-stage economic rescue operation but there is, as yet, no plan for economic recovery. Millions of jobs are now at risk and even a VAT cut, which is widely anticipated and would be welcome, will not of itself return our economy to pre-crisis levels of activity. The reannouncement of major infrastructure projects remains just that; most are nowhere near shovel-ready and will take many years to come on stream.

The £29 billion in Covid-19 loans to 640,000 businesses has been a significant boost to liquidity but as loans, these are not earned income. They will leave even fundamentally sound companies with huge debts, which will restrict their ability to reinvest for the future while opening them up to predatory takeovers. The current trickle of bankruptcies may turn into a flood.

I say all this because I want to make the point that while the Government have acted to protect us from the supply shock caused by the pandemic, the resolve that delivered the furlough schemes, which currently maintain 9 million people who might otherwise be out of work, needs to be shown again as we start the recovery to stimulate demand and save jobs. It will be a long haul. The Government urgently need to come forward with a comprehensive, flexible and imaginative plan for the support and recapitalisation of viable British businesses, and the prevention of mass unemployment. But this Bill, welcome though it is, is not that plan.

I thank the Deputy Leader of the House, the noble Earl, Lord Howe, for the constructive conversations that he and my colleagues have had on the Bill. It is a short Bill and there is a large degree of agreement on it. The headline provisions, as has been said, are to enable the hospitality industry to reopen quickly and serve a greater number of customers in a safe environment. My noble friends Lord Kennedy and Lady Wilcox will be leading for us on these sections.

We welcome the temporary loosening of licensing and planning regulations to enable bars, restaurants and cafés to serve customers outside their premises. Having said that, we will question why the opportunity has not also been taken to include street-food vendors and small breweries in this legislation. In these essentially local issues, it is important that local authorities continue to have discretion in these matters because they are best placed to make the judgments about local impacts. However, we have received requests to amend Clause 11 so as to prevent increases in anti-social behaviour in town centres late at night and in the early mornings. It is also right that we raise the concerns of USDAW about the safety of staff. The government guidance is clear about the mitigation and reduction of risk that is needed if one metre-plus social distancing is in place. It is also very important that the Health and Safety Executive has the resources and powers to enforce the safety of those extended workplaces. Can the Minister confirm that that will be the case?

The introduction of more flexible planning appeals is also welcome in speeding up the processes, but we want reassurances that no legitimate voice will be excluded from being heard. Local government is worried about the cost implications of these new rules, so we urge the Government to publish a report detailing the extra costs that councils will face in processing increased volumes of planning applications at the new, reduced fee levels.

We also welcome the measures in enabling construction sites to get back to work more easily, through extended working hours. It is important, however, that communities do not feel that their interests are being ignored in this. We would like to see councils being given the discretion they need to restrict hours of operation, where there is a compelling and overriding local reason to do so. But as well as discretion, local authorities need certainty about resourcing. As was said in the other place, £10 billion-worth of costs have been loaded on to local authorities during this crisis but only £3.2 billion has so far been provided by the Government. When he comes to respond to this debate can the noble Earl, Lord Howe, explain how and when the Government are going to honour their commitment to stand behind councils and give them the funding they need, now and in the future? It is important that the Government also offer cast-iron guarantees that none of the measures in the Bill will place additional costs on councils that have to be financed by further cuts in their services elsewhere. I challenge the Minister to put this on the record.

We also welcome the changes to transport and vehicle licensing, an issue which will be handled by my noble friend Lord Tunnicliffe. I will be in the lead on the proposal to remove the “unfair relationship” provision from the Consumer Credit Act 1974. There have been many calls over the years for reform of the CCA 1974, as the safeguards are cumbersome and often inconsistent with bona fide attempts to provide flexible solutions to customers who experience temporary financial problems. That pressure has clearly been increased by the pandemic and it is right to take action now on this issue, even though it is to be hoped that the wider issues are also under review.

Bounce-back loans have been very successful in getting money out to small firms which can use them. This compares with the CBILS, where only half of the applications have been approved. We still do not know why, or how many have been rejected and how many are still in the queue. One thing that we will be asking for is that in the interests of transparency, the Government should publish data on the number of rejections and applications, and list the banks concerned. After all, if moneysavingexpert.com can do it, why cannot the Government?

I press the Government to think again about the way in which they are restarting the economy. In particular, I call for a more nuanced approach to the ending of the current support schemes. Many sections of our economy, employing hundreds of thousands of people, have opened this weekend with important social distancing restrictions in place. The hospitality industry has restarted, which is good, but at much reduced levels of revenue; these are not sustainable and may translate into a risk to hundreds and thousands of jobs. Live performances, including concerts and the theatre sector, are still forbidden and many of our most important arts organisations are on the point of closure. The announcement today of additional funding for our arts and cultural bodies is very welcome, but we urgently need the long-promised road map to the reopening of live music and theatre venues. While the buildings may be saved, what will be performed? Many directors of small limited companies—often freelancers in the creative industries—have been denied support and are really struggling as a result. The Government are taking a one-size-fits-all approach to the furlough, when it is increasingly clear that we need a differential approach. Some sectors, such as tourism and the creative industries, are more affected by the public health measures than others, so surely the economic support measures have to match that.

The Government have been talking up a new deal in recent days, and we will presumably know more after the Budget later this week. From recent debates in this House and from polling data, it is clear that the idea of a green recovery is shared widely across the nation. People want jobs to be secured and new quality jobs to be created, but they do not want the economy to return to where it was. They want tangible action on retrofitting insulation in our housing stock, manufacturing low-carbon engines, adapting our towns and cities to walking and cycling, creating green spaces, and reforesting and rewilding.

To conclude, we welcome the Bill, but its measures are modest. The Government have shown that they are willing to take action to relieve the worst impacts of the pandemic, but we face the deepest and sharpest recession, possibly for hundreds of years, and government power has to continue to be used. The decisions taken by the Government in the coming weeks will determine how many jobs are saved and how many businesses survive. The commitment to do “whatever it takes” cannot be a hollow promise. In short, we need this Bill, but we also need an extension to the furlough scheme for specific sectors, an urgent job-creation programme with a green recovery at its heart, and real action on infrastructure, not just words. I urge the Government not to step back when our economy, businesses and workers desperately need their support.