Financial Services and Markets Bill [HL]

Debate between Lord Vaux of Harrowden and Baroness Bowles of Berkhamsted

Committee stage
Monday 6th July 2026 Grand Committee

[Baroness Bowles of Berkhamsted (LD)]

My Lords, I support these amendments. They almost follow naturally from the debate that we had earlier about the need for a structurally competent wholesale function within the FCA. It is clear that you cannot produce a credible cost-benefit analysis without a credible evaluation capability. The PRA has understood that and already has the beginnings of an evaluation function, as the noble Baroness, Lady Noakes, said.

I can understand that in part, because prudential regulation requires modelling, capital assessment and an understanding of how rules transmit through markets. The PRA’s world is balance-sheet solvency, capital modelling and risk transmission, so it already employs actuaries, quants and economists, and the evaluation office therefore fits more naturally into that culture. The FCA is different; its culture, as we have discussed, is overwhelmingly consumer focused. That is appropriate for retail regulation but it means that the FCA has never developed the technical machinery for the evaluation of wholesale market impacts. Consumer protection does not require the modelling of liquidity, pricing dynamics or market structure, but wholesale regulation does.

It occurred to me only when I was thinking about this in the context of this amendment that the need for an evaluation office points again to the different sides of the FCA and why somehow upgrading, or separating the wholesale side, becomes more relevant because functions are missing due to the consumer focus. We have heard that the FCA tends to do the minimum of cost-benefit analysis required by statute and then largely ignores it—again, probably because it thinks that it is not relevant to consumer protection, but I would say it is to the particular detriment of the wholesale side. That is an additional reason for supporting these amendments.

[Lord Vaux of Harrowden (CB)]

My Lords, I am sorry that I was not able to be here last Wednesday for the debates on the amendments tabled by the noble Lord, Lord Bridges, and others that proposed the creation of an office for financial regulatory accountability. I have read the debates in Hansard and there is a remarkable similarity to three years ago when we debated similar amendments. This was a significant error in 2023 during the passage of the last Financial Services and Markets Act. It would have been a significant improvement to the ability of Parliament to hold the regulators to account—a complement rather than a replacement.

I shall touch briefly on the ability to scrutinise the proportionality of specific rules. I shall look closely in Hansard at the Minister’s comments during the second group, when he seemed to agree that the specific scrutiny of the rules is in fact important, contrary to the approach that the Bill now takes. This holding of the regulators to account by Parliament has become only more important and more difficult, I think, as we give yet more responsibilities to the regulators under the Bill with, as we have heard, the move of the PRS, the Consumer Credit Act and so on.

Amendment 142 would provide an alternative way of achieving something similar to the amendments that were discussed on Wednesday that might perhaps be easier for the regulators and the Government to accept. It proposes the creation of offices of regulatory evaluation within both the FCA and the Bank but, unlike the office for financial regulatory accountability proposed by the noble Lord, Lord Bridges, it would lie within the regulator, although it would probably have much the same role. Whichever way we do it, I am sure the Minister will have heard loud and clear the concerns that are shared across the Committee about the accountability of the regulators to Parliament, another of the main themes that are emerging as we load ever greater responsibilities upon them.

Financial Services and Markets Bill [HL]

Debate between Lord Vaux of Harrowden and Baroness Bowles of Berkhamsted

Committee stage
Wednesday 24th June 2026 Grand Committee

[Baroness Bowles of Berkhamsted (LD)]

My Lords, I will speak to Amendments 72 and 75 and to my opposition to Clause 16 standing part of the Bill. I also support the other amendments in this group and their intentions: I think we could talk quite a lot longer about them all.

My Amendments 72 and 75 would require the regulators’ long-term strategies to include a review of their rulebooks, with the aim of identifying outdated or unnecessary requirements. That is a sensible and uncontroversial idea. No one disputes that the regulatory rulebook should be kept under review or that unnecessary or duplicative requirements should not be removed. Indeed, the FCA’s own handbook review consultation acknowledges that parts of the rulebook are outdated, unclear or internally inconsistent. I hope that this review idea can be taken up.

However, these amendments presently sit within Clause 16, which is where the problem lies. Clause 16 creates a statutory duty for the FCA and the PRA to produce long-term strategies. In principle, that is not objectionable; regulators have produced strategy documents before, and it is entirely proper that Ministers should be able to input as long as it is transparent, but there are other problems that have been elaborated on by the noble Baroness, Lady Noakes, which I do not need to repeat. In practice, however, Clause 16 is the delegation engine for Clause 17. It is part of a process of downgrading the day-to-day requirements, the regulatory principles on rule-making, into a commentary in a five-year strategy document. This is a profound change in the constitutional architecture of financial regulation. What were once operational regulatory principles, enforceable by judicial review—even if that route is rarely pursued—become strategic aspirations, influenced by Ministers, unchallengeable by others and reviewed only every five years. The long-term strategy is being used as a vehicle to downgrade regulatory principles and apply them in a minimalist, non-operational way—just talk, no walk. If Clause 16 is to remain, it must be made significantly better and not simply operate as a Trojan horse.

The key thing about regulatory principles is how to make them sensibly relate to operational matters— I say sensibly because that has not happened. That is the problem. It may work for some of them to be dealt with more thematically and rather more regularly than five-year intervals, but others need consideration at the rule-making and supervisory level. While Ministers are meant to stay clear of day-to-day operational interference, like the noble Baroness, Lady Noakes, I query whether Clause 16 overly restricts ministerial input. FSMA 2000 has always had a difficult settlement to keep government away from day-to-day decisions, but—as the financial crisis showed—it is inescapable that the buck stops with government. Clause 16 does not strike the right balance there.

My Amendments 72 and 75 point to rulebook review. As I said in a previous group, and as noted by the Lords Financial Services Regulation Committee, it is effectively the regulators’ system that is cluttered, fragmented and difficult to navigate. It is a lot harder to navigate than a few regulatory principles that the regulators complain about, but which are the only way to challenge that regulatory clutter. In the Lords committee report, a central finding was that culture change, not structural tinkering, is what is needed. Regulators must be clearer, more predictable and more proportionate in how they exercise their powers. The Clause 16 regulatory strategy does not deliver that; it substitutes what were enforceable operational requirements about proportionality with unenforceable talk.

It rather looks as though the regulators will avoid having to step up to the mark. They did not much like the committee’s report or its suggestions of culture change, and, as we will discuss when we get to Clause 17, in the words of one City commentator, it looks like the regulators have done a job on Parliament. Clause 16 is not about transparency, nor is it new in suggesting a strategy document. It is just a vehicle to diminish the accountability and effectiveness of the regulatory principles, and I oppose it.

[Lord Vaux of Harrowden (CB)]

I have added my name to three of the amendments tabled by the noble Baroness, Lady Noakes, in this group. To be honest, I am not quite sure why I did not add my name to her other two; I should have done, so I apologise. The noble Baroness has already explained those with her usual clarity, so I will try hard not to repeat what she said.

Briefly, on Amendment 70, I was going to say that I assumed that the omission from the FCA’s strategic priorities of its secondary objective was an oversight. The noble Baroness, Lady Noakes, has kindly shared with me an email she has received from the Minister that effectively confirms that, and that it will be sorted out at a later stage. Can I very gently say to the Minister that when he writes to noble Lords, it should be copied to all who have signed an amendment? On Amendments 73 and 76, I will listen with interest as to why the Treasury should be able to make recommendations to the FCA and the PRA only in relation to the long-term strategies—that is, every five years. I suspect that the Treasury will come to regret that restriction.

I have also added my support to Amendments 72 and 75 in the name of the noble Baroness, Lady Bowles, both of which would require the FCA and PRA to carry out a review of their regulations as part of the five-year strategy process, with a view to eliminating any unnecessary regulations. Rulebooks have a habit of growing—being added to—and scope has a tendency to creep, so a five-year spring clean must be a good thing and would be a good discipline that I would wholeheartedly support. I finish by saying that I share the reservations that have already been raised about the whole of Clause 16.

Financial Services and Markets Bill [HL]

Debate between Lord Vaux of Harrowden and Baroness Bowles of Berkhamsted

Committee stage
Monday 22nd June 2026 Grand Committee

[Lord Vaux of Harrowden (CB)]

It is very nice to be back to do another Financial Services and Markets Bill. As it is the first time I have spoken, I should declare a registered interest in Fidelity National Information Services, Inc., which is a large American company that provides services and software to a wide range of financial services companies around the world.

I have tabled Amendment 26 and given notice of my intention to oppose that Clause 3 stand part of the Bill. I have also added my name to a number of amendments in the name of the noble Baroness, Lady Noakes.

I have another interest to declare. I lost my local bank branch in my village some years ago, and I have just been informed that the last remaining bank in my nearest town is also about to close. To visit a bank branch for me will now involve a 100-mile round trip, so I am sympathetic to the idea that we need to do something to ensure continuation of access to banking services, especially in rural areas such as mine. At the same time, I am conscious that I probably visit a bank branch less than a couple of times a year, so I understand why banks feel it necessary to close them. They are not economic. We need to find a sensible balance to this. I accept that we may need to do something, but what?

There is the old joke: “We need to do something; this is something, so let’s do it”, but Clause 3 is not even something. It is just a vague—I was going to say promise, but it is not even that—intention to do something completely unspecified at an unspecified time, or indeed times, in the future. This Government have an unfortunate track record of putting sweeping powers into legislation before deciding what they actually intend to do with them, and this is yet another example. As the Delegated Powers and Regulatory Reform Committee pointed out really strongly, this is a very sweeping power with no meaningful limitations at all other than, as we have heard, the need to have regard, and only to have regard, to the independent review currently being undertaken by Richard Lloyd.

Clause 3(3), which has only examples rather than limitations, is one of the widest I have seen. It includes the express ability to make changes to any Act of Parliament, a really strong Henry VIII power. It starts by saying:

“Regulations under subsection (1) may (among other things)”


do the things listed below that. Will the Minister explain what these other things might be? Am I being old-fashioned to suggest that this is not the right way to create law? It would surely be better to wait until after the review has been undertaken, decide what is needed and then legislate—if legislation is actually necessary, since, as the noble Baroness, Lady Noakes, says, we got these banking hubs without legislation—and have the legislation subject to proper scrutiny by Parliament, which it will not be if we go down this route.

The Minister will no doubt try to reassure us about how this power will be used. Of course I—and, I am sure, everybody else in this Room—will have complete faith that the Minister would not try to misuse the power, but he will not always be the Minister. That may be a comment that has particular resonance today. Who knows? It is even possible that this Government may not always be the Government, but this power is unlimited and will be the law for the foreseeable future. Who knows what a future Government might wish to do with such an unlimited power? Indeed, as written, they could even use it to reduce the rights of access to banking.

I have a few specific questions for the Minister. First, will he explain in more detail how the Government currently expect, subject of course to the review, to use this power? What do they expect to do with it and when? Secondly, will he explain which Acts of Parliament he has in mind that might be changed under Clause 3(3)(b) and what changes he would expect to make to them? I put on record now that if I do not get a very convincing answer as to why this wide Henry VIII power is required, I will push Amendment 26, which would remove the power to amend primary legislation, to a Division on Report.

Finally, the Explanatory Memorandum recognises that this is a broad power. It says it is “necessarily broad”. At the same time, and in contrast to that, it also seems to recognise that it is broader than really needed, as it goes on to say,

“the Government would expect to narrow it once the review has concluded”.

I am somewhat baffled by that. We are in Grand Committee now, and the timetable for the Bill seems pretty tight. Will the Minister explain how it would be possible to narrow it, given that the Bill is likely to have completed all its stages before the review is completed and they have worked out what they want to do with it? Once the Bill has become law, the power cannot be narrowed.

This is another example of the Government trying to show they are doing something before they have decided what they want to do, and therefore giving themselves inappropriately broad powers that avoid proper scrutiny when they do finally decide. It is not the right way to make laws that will outlast this Government, and I do not believe this clause should stand part of the Bill without at least very significant narrowing and safeguards.

[Baroness Bowles of Berkhamsted (LD)]

My Lords, I will speak briefly to Amendments 24 and 27 in my name. I support what has just been said by the noble Lord, Lord Vaux. To some extent, we are again fishing in the same constitutional pond that regulators are not Parliament. Parliament should not give away powers it cannot get back, and it should not make decisions before we know what we are deciding about.

Amendment 24 would ensure that any regulations made under this clause can only make provision that arises directly from the statutory review. A review is not a blank cheque. If Parliament asks for a review of access to banking services, the regulation-making power should be, if not confined to, at least in some way related to what the review identifies and not what a future Minister or regulator might wish to do. That is my real target. It may be that I have drafted he amendment a little too tightly but, as has been explained, this is a very open-ended power to do anything. Looked at constitutionally, the fact that the consultation has not yet been completed and assessed more than stretches proper procedure.

Amendment 27 addresses a different but related concern. As drafted, the Bill creates machinery in which FCA rules effectively drive changes to legislation, including primary legislation. The FCA pulls the lever, the Treasury presses the button and the law moves to reflect the regulator’s rulebook. The Government will no doubt say that Parliament can always reject the regulations, but we all know how that plays out: Parliament is presented with take-it-or-leave-it unamendable statutory instruments, and if it dares to reject them, we are told we are precipitating a constitutional crisis. That is not meaningful parliamentary control.

I am not opposed to the FCA modernising rules or streamlining processes—far from it—but where those rules have the effect of altering rights or obligations that were created by Parliament, the change must meaningfully come back to Parliament. Otherwise, we risk creating a system where the regulator can, in substance, rewrite Acts of Parliament by changing its rulebook. That is not proportionate regulation; it is law-making without accountability. Again, this seems not to be the sort of thing expected under the Legislative and Regulatory Reform Act. These amendments do not prevent modernisation; they simply ensure that modernisation happens within a statutory framework, with Parliament retaining oversight of the rights it has created. It does not mean going into the detail, but it does mean monitoring the rights. I hope the Minister will recognise that these are modest but important constitutional guardrails.

Bank Resolution (Recapitalisation) Bill [HL]

Debate between Lord Vaux of Harrowden and Baroness Bowles of Berkhamsted

Committee stage
Tuesday 10th September 2024 Grand Committee

[Baroness Bowles of Berkhamsted (LD)]

I have mixed feelings about this amendment. I am grateful for the comments of the noble Baroness on why it was an objective; I understand that. Very definitely, the costs should not be disproportionately larger, but, if it was a relatively small amount larger than an insolvency and there was a good public interest case, I would not want to bar it. I am not quite sure whether the words used and having it as an objective necessarily convey that; if we were to proceed further with it, we could somehow make it a little more explicit in that regard. It needs to be in the same order of magnitude, not hugely more. With that caveat, I am probably in the same position as the noble Baroness, Lady Noakes.

[Lord Vaux of Harrowden (CB)]

I was not going to speak on this amendment, but I am also slightly in two minds. One hesitation is that it is very hard to know on the day you do the recapitalisation payment what the cost of an insolvency situation would be. However, I understand where the noble Baroness is heading with this, and there is a lot of sense in the sentiment behind it. This gives more ammunition to the question around reporting—we need the Bank of England to give a very clear explanation as to why it has chosen recapitalisation over insolvency. That might be my preferred way of going about it, but I understand absolutely what the noble Baroness said and support the sentiment behind it.

--- Later in debate ---

[Lord Vaux of Harrowden (CB)]

My Lords, on this amendment I agree with every word that the noble Baroness has just said. Like most noble Lords, I have an inherent preference that things should appear in a Bill, rather than relying on slightly woolly statements of Ministers that this is what they intend to do. There are circumstances when that is appropriate but in a case like this, where the code will be so important, there should be an obligation that the code is updated to take account of the recapitalisation process.

To repeat what I said on Thursday, and what the noble Baroness has said, it is deeply unsatisfactory that the Minister seems to be relying on the existence of the code and its updating to avoid detailed amendments being put down on Report and pushed through. If that is the case, it is surely important that we get a chance to look at the revised code before then, or at least a draft of it—or, at the very least, clear details of what Ministers are expecting to include in it. I urge the noble Lord to see what we can do to achieve that. Otherwise, he will face detailed amendments to deal with the issues that we have discussed, because we have nothing else on which to base our position.

[Baroness Bowles of Berkhamsted (LD)]

I agree with what both previous noble Lords have said. We cannot rely just on the fact that something is going to be revised. It is the same old problem that we have with primary legislation a lot of the time: it lays out something that could be good or bad, but it says, “Trust me, we will get it right when we come to secondary legislation or something else down the track”. That is not satisfactory and, in the absence of some more detail, we have to see something about the code of practice or similar—whatever one calls it—in the Bill, just to make sure that there is an understanding of the direction of travel for the sort of detail that we are asking about.

Bank Resolution (Recapitalisation) Bill [HL]

Debate between Lord Vaux of Harrowden and Baroness Bowles of Berkhamsted

Committee stage
Thursday 5th September 2024 Grand Committee

[Baroness Bowles of Berkhamsted (LD)]

I only need to say briefly that I am in agreement with the noble Baroness. This is drafted too widely. Part of me thinks that some of this should be covered by the ordinary banking levy, and that the PRA and the Bank of England have to manage their budget, as anybody else would have to, in expectation of sometimes having adverse effects, rather than there being some bottomless pit, or pool, of money into which they always have access. The truth of the matter might need to be somewhere half way in between, but it is too open at the moment.

[Lord Vaux of Harrowden (CB)]

My Lords, I briefly add my support to what the noble Baronesses have said. This is drafted extraordinarily widely. The words

“another person has incurred or might incur in connection with the recapitalisation”

could theoretically include the legal costs of the shareholders of the bank that is going bust, for example. We have to find some way of reducing that scope. I had attempted to deal with this in Amendment 12 on reporting, but having heard what the noble Baroness said I do not think that does it. We need to find some way of narrowing it.

--- Later in debate ---

[Lord Vaux of Harrowden (CB)]

My Lords, I rise again briefly. The noble Baroness has made some really important points. Once again, I have attempted to deal with this as a reporting question in Amendment 12, which states that a report would be required each time a recapitalisation payment was made; that should stand anyway.

This can become quite significant if, for example, there is a situation where the Bank of England expects to be able to sell a bank immediately but that falls over and then goes into a bridge bank for two years—or, indeed, more—and picks up all those costs along the way. One can see a situation where you could have, for example, an annual payment covering the costs of the bank until the Bank eventually decides to put it into insolvency. The critical factor must be that, any time a recapitalisation payment is being considered, whether it is the first one or a subsequent one, the insolvency route is reconsidered at each point and this does not become an open-ended default drag on costs—but the reporting point, which we will come on to later, stands as well.

[Baroness Bowles of Berkhamsted (LD)]

The noble Baroness, Lady Noakes, made a good point. I agree entirely with what the noble Lord, Lord Vaux, said.

I raised double-dipping at Second Reading and got the answer, “Well, yes, you could double-dip”. Of course, if you go from thinking that you are going to do the bridge bank or whatever to having to move into insolvency, there will be another dip if there are deposits to cover; I have a later amendment on that but it is all part of the same conversation. I am sure that the noble Lord, Lord Vaux, knows a lot more about this than I do because he is an accountant, but things always get worse than you expect. How is the Bank going to deal with that? Initially, it is probably going to have to ask for more than it thinks it could possibly ever need.

Some kind of structure around this, with points at which it is revisited and good reporting, appears to be the only solution. I initially thought, “Yes, maybe HMT intervention is the solution”, but I take the point that the Minister made earlier on about HMT intervention and independence. The fact is that, really, they are all in it as a club taking the decisions together already, so I am not sure that that would necessarily be the decisive factor one would want. It is about what the procedures are; the way things are being done and being understood; and how the reviews and reporting happen so that, when the worst happens and another dip comes along, one is not totally taken by surprise.

Financial Services and Markets Bill

Debate between Lord Vaux of Harrowden and Baroness Bowles of Berkhamsted

Report stage
Tuesday 13th June 2023 Lords Chamber

[Lord Vaux of Harrowden (CB)]

My Lords, I introduced a number of amendments on the subject of authorised push payments fraud in Committee. At the time I said I was broadly happy with the Minister’s responses but would look to return to the reporting question again, which is what Amendment 94 does. I should say at the outset that I support what the Bill is trying to do in respect of APP fraud to make it easier, and in particular fairer, for victims of APP fraud to get their money back. Before I go any further, I remind the House of my interest as a shareholder of Fidelity National Information Services, Inc., which owns Worldpay.

My new Amendment 94 has two elements to it. First, it would introduce requirements on the PSR to report annually on the impact that the reimbursement requirement had had on consumer protection and on the behaviour of payment service providers. Secondly, it would effectively create a league table to enable consumers to see how each bank is actually performing both in preventing fraud and in reimbursing victims.

On the first point, the annual impact report is necessary because the mandatory reimbursement requirement could have unintended consequences that might damage consumer protection. I shall give a couple of possible examples of that. First, there is the possibility of moral hazard. If the mandatory requirement means that consumers start to take less care about protecting themselves because they will be repaid anyway, that could have the undesirable consequence of actually making it easier for the fraudsters to commit fraud and so actually increase levels of fraud. While, as we discussed in Committee, we must not put the blame on the victims, there is a balance to find in this area to avoid making it easier for the fraudsters while improving consumer protection and outcomes. We will know whether we have found the right balance only when we start to see the results.

A second example might be that the banks change their behaviour in an undesirable way. Rather than improving their fraud detection and prevention processes, they might simply decide that the easiest thing to do would be to stop providing services to people whom they see as being at the highest risks of fraud in order to reduce their potential reimbursement liability. I think many Members of this House have seen similar behaviour in respect of PEPs—politically exposed persons—where, rather than undertaking sensible risk-based steps, banks have on occasion just decided that it is too difficult or expensive to deal with PEPs and have refused to open accounts or have even closed accounts. We will come to that later today, but it is a good example of a well- intentioned risk measure having undesirable consequences. In the case of APP fraud, if the banks see it as too great a financial risk to provide banking services to those deemed to be at a higher risk of fraud, then we might see a whole swathe of more vulnerable people unable to obtain banking services.

These are just two examples, but I hope that they demonstrate the importance of the PSR keeping the impact of the requirement for mandatory reimbursement under regular review and amending it if it turns out to have unintended negative consequences. Reporting on this regularly and publicly will ensure that the impact assessment is robust.

Turning now to the second element of the amendment, the requirement to report annually on the performance of the banks, a major criticism of the current voluntary reimbursement code is that it is completely non-transparent. While numbers are published, they are anonymous. Consumers cannot see which banks are behaving best, and which are behaving worst, unless, as TSB does, they tell us voluntarily. The TSB example is encouraging—it is using its 100% reimbursement policy as a selling point. Introducing competitive good behaviour is highly desirable, and this amendment would help achieve that.

The amendment would effectively create an annual league table that would enable consumers to see which banks have the lowest levels of fraud—which will give an indication of how good they are at detecting and preventing fraud—which banks are better and quicker at reimbursing victims when fraud occurs, and, by including the appeal information, which banks make it more difficult for victims. That would allow consumers to take this information into consideration when deciding whether to stay with their existing bank or when considering opening a new account—something that would otherwise not be possible. That would, I hope, provide a real competitive incentive for banks to change their behaviour both in detecting and preventing fraud and in treating victims promptly and fairly.

This would not introduce a significant additional burden; the PSR will have all this information anyway, so reporting it is not a significant job. However, the benefits to consumers of making this information public are potentially significant.

When we discussed this in Committee on 13 March, the Minister stated in relation to the impact assessment that the PSR

“has committed … to a post-implementation review”

and that the Government would also

“monitor the impacts of the PSR’s action and consider the case for further action where necessary”.

That does not go far enough. Fraudsters keep changing their business models in reaction to actions by industry and the authorities, so it is essential that this is kept under continual review rather than only a one-off, post-implementation review. It is also important that the impact assessments are published. Can the noble Baroness provide any greater comfort in those respects?

On the league table, the noble Baroness said on 13 March that the PSR

“is currently consulting on a measure to require payment service providers to report and publish fraud and reimbursement data”.—[Official Report, 13/3/23; col. GC 166.]

It is now nearly three months later, so can the noble Baroness provide an update on whether this consultation has progressed and whether the data will in fact be published? It would be better if such data was published by a single source such as the PSR rather than piecemeal by payment service providers. I beg to move.

[Baroness Bowles of Berkhamsted (LD)]

My Lords, I support this amendment and I can be relatively brief. It is important not only to collect the statistics but also at times to dig underneath to see how they might be being gamed. From personal experience, I know of instances where banks are treating microbusinesses more strictly than they are treating consumers, saying that a business should know and therefore rejecting them out of hand at the first time of asking, if I can put it that way. I have heard, in a similar case, stories of someone making contact by telephone repeatedly, their inquiry getting lost and the person having to go through the whole story with a case handler multiple times, the strategy obviously being, “Let’s try and make them give up”. That was with a very large bank; I will not name it because I do not have absolutely all the detail. Therefore it is quite important that different criteria are not being used between sole traders and individuals when it has already been determined via the ombudsman that both have a route.

Economic Crime and Corporate Transparency Bill

Debate between Lord Vaux of Harrowden and Baroness Bowles of Berkhamsted

Committee stage
Tuesday 18th April 2023 Grand Committee

[Lord Vaux of Harrowden (CB)]

My Lords, I rise to move Amendment 53; I hope to be fairly brief. It is related, in a way, to Amendment 48A in the name of the noble Lord, Lord Coaker, which we spoke about earlier. In effect, it attacks the issue of unique identifiers from the opposite direction.

Clause 67(3) ensures that the unique identifiers allocated to companies and others, including ACSPs, are not available on the public register. I was rather surprised to find this. My amendment is really a probing amendment to find out the rationale for hiding unique identifiers and discuss whether that is the right thing to do. It seems to me that the unique identifier would be a helpful tool to assist civil society organisations, journalists, analysts and, indeed, AML regulators to discover trends and connections in the information held on companies on the register.

One person can easily have a number of versions of their name—A Jones, Andrew Jones, AJ Jones and so on. It is not necessarily dishonest. I have two names myself: my title and my real name. I hope that that is not dishonest. My amendment would make it much easier to search using the unique identifier and would avoid the problems of potentially having multiple names or versions of names and people being missed off. It would allow an AML regulator quickly to search for all situations where a particular ACSP has acted, or a journalist to identify ACSPs that act regularly for companies in particular industries, and to be sure that they have caught all the instances.

When I met the Minister previously, for which I thank him again, he explained that the unique identifier is used as the login for the relevant entity. If that is the case, I understand why it should not be public, but I strongly question whether that is sensible. Very few organisations would use a number such as a unique identifier for login purposes; it would go against commonly accepted security practices. The Government do not do it in other systems, as far as I am aware. Would it not make more sense for the unique identifier to be public, and therefore useful, to allow the greatest transparency that I have described and to have a more secure method of logging into Companies House accounts? I beg to move.

[Baroness Bowles of Berkhamsted (LD)]

I will speak briefly on this amendment because key to it is: what is the purpose of the unique identifier? Perhaps like the noble Lord, Lord Vaux, I thought that it was like the resource identifier that you use for searching. I know that if you search on my name, you do not find all my directorships. I keep amending my name to try to make sure that they are all the same, but you still cannot find them in Companies House, so I was thinking that it was a better way than names of finding out all the companies that people were involved in, and so on.

I can see that, if it is more of a login approach, that might be different, but that then begs the question: is there not a better way of identifying companies and individuals that works on the searches? If you are searching to see whether somebody is doing something in a different company, or how many directorships they have, simply going by name means that too often there are minor variations, and it will not flag up what you are looking for. Like the noble Lord, Lord Vaux, I am curious about what the purpose of this identifier is, and therefore why it is confidential.

Pension Schemes Bill [HL]

Debate between Lord Vaux of Harrowden and Baroness Bowles of Berkhamsted

Report stage & Report stage (Hansard) & Report stage (Hansard): House of Lords
Tuesday 30th June 2020 Lords Chamber

[Baroness Bowles of Berkhamsted [V]]

My Lords, I have signed my name to both these amendments, which follow on from significant debate in Committee. I agree with what the noble Baroness, Lady Drake, said about how Amendment 8 bolsters the importance of ensuring adequate finance for the administration of a scheme in all circumstances. It is necessary to have certain requirements specified and agreed in advance rather than to rely on negotiation at what might be a difficult time or, indeed, where it might be impossible. I therefore wholeheartedly support Amendment 8.

Amendment 32 is important and reflects the matter of general fairness and, in particular—although it is not specified—intergenerational fairness, which was discussed in Committee. My noble friend Lord Sharkey will explain further, but I wish to make the point that we should remember that CDCs have shared risk, that their strength is that returns can be more predictable, and that there is intergenerational solidarity so that good times and bad are to some extent smoothed. That solidarity cannot be undermined by allowing market highs to be carried away by those who may chose to leave the scheme. It surely must be possible to devise mechanisms, whether by way of buffers, conservative valuations, a delayed retained part or something else, to prevent the problem that those wishing to transfer their pensions out essentially ruin what is left for everybody else. The point is that fairness has to extend over more than a snapshot in time. That is the only way that you will have fairness in the sense of shared risk to all the members.

[Lord Vaux of Harrowden (CB) [V]]

My Lords, I wish to support Amendment 32, tabled by the noble Lord, Lord Sharkey, to which I have added my name. I should add that I also wholeheartedly support Amendment 8, but I will restrict my comments to Amendment 32.

While there seems to be general support for the introduction of this new type of pension—collective money purchase schemes, or CMPs; I am going to try very hard not to call them CDCs as we go through this—they are not without risk. As we discussed at some length in Committee, one of the greatest risks that is often raised in respect of CMPs relates to intergenerational fairness. Indeed, at the extreme, in a situation where no returns are being earned but pension levels are maintained for existing pensioners, the pensions being paid would be dependent on the funds being put by new joiners, as in a Ponzi scheme. That is very extreme, as I say, but it demonstrates that there is the possibility of one cohort being disadvantaged by the treatment of another cohort. If existing pensioners are paid too much, those currently paying in will suffer, and if the scheme is overcautious in what it pays out to pensioners, pensioners will suffer and current workers will gain.

This is not theoretical. We only need to look at what is happening in the Netherlands to see that the question of whether to cut benefits when returns are not as good as expected is a real and current issue. In a standard defined contribution scheme, the risk is not pooled, so the issue does not arise. In a defined benefit scheme, the matter is dealt with by the employer making up the difference. However, in a CMP, there is no possibility of that happening. If you want to maintain the level of pensions when returns are low, the future pensions of those still contributing will be impacted and vice versa, so the issue of intergenerational fairness is specific to CMP schemes.

It is also worth pointing out that CMPs have implications for not only intergenerational fairness but fairness more generally. For example, as the noble Baroness, Lady Bowles, pointed out, if someone wants to transfer their fund out of a scheme, how do you value their share? The benefits that arise from the scheme are uncertain, being targets only, so if you value a transfer based on the target benefits, which seems to be what is proposed, that will not take account of the risk that those benefits may not be achieved. In that situation, the person transferring out is getting a better deal than those staying, unless that risk is taken into account in the transfer valuation. The issue is complicated further because of the pooling of longevity risk in a CMP. For example, if someone has just a couple of years to live, there would be a strong incentive for them to take their money out to the detriment of those staying in.

Given that fairness is the single most commonly raised risk that relates to CMPs, it is curious that there is no explicit mechanism in the Bill to deal with it. In our previous discussions, we were pointed in the direction of Clause 18 to see how the matter is dealt with, but in fact that clause sets out only how benefits and so on will be calculated and says that regulations will be made in that respect; nowhere does it mention the critical question of fairness. I imagine that that is because it has been based on other pension legislation, which, as I said, does not suffer from this risk.

Amendment 32 introduces as very simple means by which to ensure that intergenerational fairness and fairness more generally must be assessed by the trustees. Given the importance of this issue, I urge the Minister to consider it really seriously.

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[Baroness Bowles of Berkhamsted [V]]

My Lords, I shall speak briefly to each amendment in this group. The noble Baroness, Lady Altmann, has a series of amendments on data accuracy—there was also one in the first group—which I have signed. It is important to have accuracy, especially when there are matters of significant value and security. Ensuring that records are accurate and are kept up to date should be in-built from the start of operations, and as the dashboard is starting out there is no reason not to take that precaution.

I have expended time and energy tracing and correcting inaccurate records on pensions and with banks. Key causes of corruption and inaccuracy have been that information was not transferred accurately, or sometimes was not entered accurately in the first place but particularly when legacy systems did not join up with a new system. It is immensely important that pensions information is not lost or inaccurate, as that can also open the door to potential scams or other sales pressures built around tracking pensions or correcting pension data.

With regard to the pensions dashboard, I agree with what has already been laid out by the noble Baroness, Lady Drake, so I will not repeat it. Transactions are the dangerous point. They are certainly not where the focus should be as dashboards are set up and their operations tested, but it is going to be very tempting for commercial dashboards. Commercial companies may find a way to get around that, but this information would give the FCA as the regulator a direct guide to what is to be expected so that it could take action against any circumvention of the intentions of the amendment. I therefore support all the amendments in this group.

[Lord Vaux of Harrowden [V]]

My Lords, I support all three amendments. The grouping is slightly odd, mixing the question of transactions with that of data accuracy; there is a relationship but it is only tangential. The noble Baronesses, Lady Drake, Lady Altmann and Lady Bowles, have already explained the reasoning for the amendments so I shall try to be brief.

Amendment 52 would prevent a dashboard service from engaging in financial transactions. The matter has been well explained by the noble Baroness, Lady Drake, so I will just say that the risks around pension-related transactions happening without proper advice are very well known. Dashboards are being created primarily for the purpose of allowing people to obtain better information about their situation. That information will be helpful when deciding whether to carry out some transactions but it does not in any way negate the need for proper advice, so allowing dashboards to become transaction platforms would make ensuring that proper advice had been taken much more difficult. At least until they have been fully established and the implications well understood, it really must make sense to prohibit dashboards from becoming transactional platforms.

The other two amendments along with Amendment 13, which was discussed in the first group, are about establishing appropriate processes to ensure the accuracy of the data on the dashboard. It almost goes without saying that a dashboard containing inaccurate information may actually be more damaging than no dashboard at all; I apologise for the echo of something else there. These dashboards are intended to help people and their advisers to make decisions about their future pensions. Inaccurate data will lead to wrong decisions being made. It is therefore critical that data must be fully and regularly checked and audited, so I urge the Minister to accept these amendments.