All 13 Debates between Lord Vaux of Harrowden and Baroness Penn

Tue 13th Jun 2023
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UK Infrastructure Bank Bill [HL]
Lords Chamber

Report stage & Report stage
Tue 14th Jun 2022
UK Infrastructure Bank Bill [HL]
Lords Chamber

Committee stage: Part 2 & Lords Hansard - Part 2
Tue 14th Jun 2022
UK Infrastructure Bank Bill [HL]
Lords Chamber

Committee stage: Part 1 & Lords Hansard - Part 1

Authorised Push Payment Fraud Performance Report

Debate between Lord Vaux of Harrowden and Baroness Penn
Tuesday 14th November 2023

(1 year, 1 month ago)

Lords Chamber
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Lord Vaux of Harrowden Portrait Lord Vaux of Harrowden
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To ask His Majesty’s Government what assessment they have made of the authorised push payment (APP) fraud performance report published by the Payment Systems Regulator in October 2023.

Baroness Penn Portrait The Parliamentary Secretary, HM Treasury (Baroness Penn) (Con)
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My Lords, the Government are committed to tackling authorised push payment fraud and stopping customers falling victim to scams. The Government welcome the publication on 31 October by the Payment Systems Regulator of data on the levels of APP fraud and of reimbursement among payment service providers. This will ensure that firms are properly incentivised to combat fraud and explore all avenues to do so.

Lord Vaux of Harrowden Portrait Lord Vaux of Harrowden (CB)
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My Lords, this excellent report allows us at long last to see which banks are behaving best and worst in preventing and reimbursing fraud. One of the best ways to reduce fraud would be to stop fraudsters using UK bank accounts to receive the stolen money. We can now see from this report that Metro Bank, TSB, Starling and Monzo are the banks that receive and process the most stolen money. Smaller payment providers are even worse. For every £1 million received by Clear Junction, for example, more than £10,000 was stolen money, and almost 20% of Dzing Finance’s receipts by number were fraudulent. Now that we have this information, what are the Government doing to ensure that banks take real action to stop their accounts being used by fraudsters? Secondly, I congratulate Anthony Browne on his promotion yesterday, but what does that mean for his essential role as the Prime Minister’s Anti-Fraud Champion?

Baroness Penn Portrait Baroness Penn (Con)
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I congratulate the noble Lord, because he was a strong advocate for the publication of this data. As he says, it has indeed been revealing, and I assure noble Lords that action has already been taken on the back of it. On 27 October, the Financial Conduct Authority imposed restrictions on Dzing Finance Ltd, which was the worst-performing payment service provider for fraud volumes received. It now cannot on-board any new retail customers or allow any new incoming funds from retail customers for the purposes of issuances of electronic money or providing payment services without the written agreement of the FCA. In March this year, the FCA wrote to all payment firms, highlighting fraud risks and instructing them to take action to address this. Where issues are identified, the FCA will continue to take action. I also congratulate my friend in the other place on his appointment, but I assure noble Lords that his excellent work will continue under the work of the Home Office.

Money Laundering and Terrorist Financing (High-Risk Countries) (Amendment) Regulations 2023

Debate between Lord Vaux of Harrowden and Baroness Penn
Wednesday 19th July 2023

(1 year, 5 months ago)

Grand Committee
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Baroness Penn Portrait The Parliamentary Secretary, HM Treasury (Baroness Penn) (Con)
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My Lords, this Government recognise the threat that economic crime poses to the UK and our international partners, and are committed to combating money laundering and terrorist financing. To help respond to these threats, and building on the recently enacted Economic Crime (Transparency and Enforcement) Act, the Government are currently taking through a second Bill, the Economic Crime and Corporate Transparency Bill, which will bear down on kleptocrats, criminals and terrorists who abuse the UK’s financial and services sectors.

The money laundering regulations provide the legislative framework for tackling money laundering and terrorist financing, and set out various measures that businesses must take to protect the UK from illicit financial flows. Under these regulations, businesses are required to conduct enhanced checks on business relationships and transactions with high-risk third countries. These are countries identified as having strategic deficiencies in their anti-money laundering and counterterrorist financing regimes that could pose a significant threat to the UK’s financial system.

This statutory instrument amends the money laundering regulations to update the UK’s list of high-risk third countries. It removes Cambodia and Morocco from the list to reflect changes agreed by the Financial Action Task Force, the global standard setter for anti-money laundering and counterterrorist financing. The FATF found that both Cambodia and Morocco have made the necessary domestic reforms to improve their compliance with FATF standards, which have been confirmed through on-site visits to both countries.

The Government will pass further changes in due course to add to the UK’s list of high-risk third countries those that the FATF added to its own list in February and June 2023. The reason for passing these changes separately is to give time to complete a full impact assessment for these additions.

This is the seventh SI amending the UK’s list of high-risk third countries to respond to the evolving risks from third countries. This update ensures that the UK remains at the forefront of global standards on anti-money laundering and counterterrorist financing. In 2018, the Financial Action Task Force assessed that the UK has one of the toughest anti-money laundering regimes in the world. The UK was a founding member of this international body, and we continue to work closely and align with international partners, such as the G7, to drive improvements in anti-money laundering and counterterrorist financing systems globally.

Lastly, this list of high-risk third countries is one of many mechanisms that the Government have to clamp down on illicit financial flows from overseas threats. We will continue to use other available mechanisms to respond to wider threats from other jurisdictions, including applying financial sanctions as necessary. This amendment will enable the money laundering regulations to continue to work as effectively as possible to protect the integrity of the UK financial system. It is crucial for protecting UK businesses and the financial system from money launderers and terrorist financiers. I therefore beg to move.

Lord Vaux of Harrowden Portrait Lord Vaux of Harrowden (CB)
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My Lords, I thank the Minister for introducing and explaining the regulations. I realise that all they do is follow the recommendations of the Financial Action Task Force, FATF, to change the list of countries designated as high risk and therefore subject to enhanced due diligence requirements in relation to anti-money laundering, counterterrorism financing and counterproliferation financing. In that respect, so far so uncontroversial.

It has to be said, however, that the list is somewhat surprising—both for those on it and, in particular, those not on it. The changes made by these regulations are also somewhat surprising: they remove Morocco and Cambodia from the high-risk list. It seems rather odd that Cambodia, which is generally regarded as among the most corrupt countries in Asia, is no longer treated as high risk. I am very fond of Cambodia and have spent a lot of time in that country, but that does not change the fact that it is extremely corrupt.

According to Transparency International’s Corruption Perceptions Index, Cambodia is ranked 150 out of 180 countries on the index. This is a slight improvement on previous years, but still considerably lower than many countries that remain on the high-risk list, such as Albania at 101, Panama at 101, the Philippines at 116, Barbados at 65, Burkina Faso at 77, Iran—which is on the blacklist—at 147, Jamaica at 69, Jordan at 61 and Mali at 137. I could go on. In fact, Cambodia has a worse corruption score than all but seven of the 27 countries that remain on the FATF high-risk list. It is not only Transparency International that ranks Cambodia badly. With perhaps more relevance to this regulation, the Basel AML Index ranks Cambodia as having globally the seventh worst money laundering and terrorism financing score. Despite that, we are reducing the level of due diligence that the regulated sector will have to apply to it. Seriously, is there anybody in this Room who believes that Cambodia should be treated better than, say, Gibraltar, Barbados or even the Philippines? I should like the Minister to look me in the eye and state that she really believes Cambodia is not a high-risk country for corruption.

This starts to beg the question about the value and legitimacy of the FATF high-risk assessment process, known as the mutual evaluation assessment. That value is called into even greater question when we look at the countries not included in the high-risk designation. I will give a high-profile example: until February of this year, Russia was a member of the FATF. In February, the FATF suspended its membership because of the war against Ukraine—somewhat belatedly, one could say. I emphasise “suspended”; Russia has not been expelled. It is evidently a paragon of virtue when it comes to money laundering and terrorism financing because, unlike the British territory of Gibraltar, Russia is not designated as high risk and therefore not subject to enhanced due diligence. It is odd, then, that we have spent so much time passing Bills in this House specifically to deal with the stolen laundered money coming from Russia. Almost unbelievably, in its last review of Russia in 2019, the FATF praised Russia’s efforts to prosecute terrorist financiers and suggested that AML/CFT is afforded the highest priority by the Russian Government. This is a country that finances and supports organisations such as the Wagner Group, while Putin’s Government is generally regarded as a kleptocracy. Other countries not on the list, and therefore not subject to enhanced due diligence, include such famously uncorrupt ones such as Somalia, Venezuela, Libya, Turkmenistan, Nicaragua and Zimbabwe, to name but a few. All score worse than Cambodia in the corruption index; all are apparently low risk, according to the FATF. The Explanatory Memorandum refers to the FATF’s “robust assessment processes”; frankly, those do not stand up terribly well to scrutiny, if this list is anything to go by.

It is worth quoting the recently departed FATF CEO, David Lewis, who was very highly regarded. He said the agency structure of “mid-level bureaucrats” means that it does not have the scale to take on the big global financial crime issues. He said that they are

“very comfortable dealing with the finest minutiae of technical detail, but aren’t comfortable or able to have big picture discussions and are often only in their jobs for one of two years”.

He stated that genuine reform of the FATF is difficult to achieve, with typically two to four countries blocking consensus, meaning it is rare that you can get any meaningful change, which probably explains the list we are looking at.

Concerns are often raised about the FATF’s lack of transparency. The minutes of plenary sessions that make these risk designations are not published and it is clear that political horse-trading plays a significant role in the decision-making process. To be fair, there is no doubt that the FATF has had a positive impact on global financial crime since its inception in 1989, but there are growing doubts about its ability to cope with the challenging global situation we currently face. In an article for RUSI, Tom Keatinge of the Centre for Financial Crime and Security Studies makes some helpful suggestions about how the FATF could be improved. He suggests, first, greater transparency: it should provide greater assurance of independence and oversight. Its activities should be overseen by an independent board and its evaluation should be independently reviewed, not subject to the evidently politicised horse-trading that occurs currently. The minutes of the plenaries should be published, or the plenaries themselves could be livestreamed. Secondly, it needs to create a dedicated technical-assistance capability to ensure that unintended negative consequences, such as financial exclusion and the use of the FATF recommendations by autocratic regimes against civil society organisations, are addressed.

Thirdly, he suggests that the FATF needs to show greater ambition. Ultimately, the question is whether it is addressing financial crime effectively. It currently evaluates how effectively its recommendations are implemented, but not the extent to which financial crime is addressed as a result. He suggests an independent review of the FATF’s effectiveness, which seems a simple and sensible suggestion 45 years after it was founded.

Fatima Alsancak, also of the Centre for Financial Crime and Security Studies, suggests that Russia is a good

“case study in the deficiencies of the … FATF mutual evaluation process, which allows countries with high levels of institutionalised corruption to complete their evaluations despite the lack of integrity in their AML systems”.

She goes on to say:

“It is essential for the watchdog to revisit its standards”,


and again highlights the need for greater transparency in the decision-making and listing process.

I was going to ask why South Africa, Nigeria, Croatia, Cameroon and Vietnam are not the list, but the Minister answered that in her opening statement. I mentioned earlier that Gibraltar, a British Overseas Territory, is on the high-risk list. Will she please comment on that, too?

There are important questions to answer about the value of the FATF evaluation process. We should not rely passively on what are, frankly, flawed recommendations. Do the Government agree that FATF’s procedures and the high-risk list itself appear to have important deficiencies and, if so, what are they doing about it? Do they agree with the recommendations that I referred to earlier?

Financial Services and Markets Bill

Debate between Lord Vaux of Harrowden and Baroness Penn
Baroness Penn Portrait The Parliamentary Secretary, HM Treasury (Baroness Penn) (Con)
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My Lords, the Government and the Payment Systems Regulator recognise the importance of regular, robust data collection. This is crucial for monitoring the effectiveness of the reimbursement requirement and ensuring that firms are held accountable. I am grateful to the noble Lord, Lord Vaux of Harrowden, for his considered engagement on this issue. I reassure noble Lords that the PSR has committed to half-yearly publication of data on authorised push payment scam rates and on the proportion of victims who are not fully reimbursed.

I can tell my noble friend Lord Naseby that a voluntary system is already in place and the PSR has already begun collecting data from the 14 largest banking and payment groups. The first round of transparency data is due for publication in October this year. The data that the PSR will publish includes the proportion of scam victims who are left out of pocket, fraud rates where the bank has sent customers’ money to a scammer, and fraud rates where the bank has hosted a scammer’s account. That means that, from October this year, the PSR will publish data for total fraud rates, both for sending money and receiving fraudulent funds, and reimbursement rates, on a twice-yearly basis for the 14 largest banking groups. This so-called league table will provide customers with the information they need to consider the relative performance of different banking groups on these metrics, and to factor that into their banking decisions.

Further to this data, once the reimbursement requirement is in place the PSR will use a range of metrics to monitor its effectiveness on an ongoing basis. These include the length of reimbursement investigations, the speed of reimbursements, the value of repatriated funds, the treatment of and reimbursement levels among vulnerable customers, and the number and value of APP scams. Data on appeals will be captured and reported by the Financial Ombudsman Service separately.

More broadly, the PSR will publish a full post-implementation review of the reimbursement requirement introduced by this Bill within two years of implementation. The review will assess the overall impact of the PSR’s measures for improving consumer outcomes. That does not mean it will not also consider the effectiveness of this measure on an ongoing basis. Indeed, more widely, the PSR will consider risks across different payment systems and, where necessary, address them with future action. This includes a commitment to work with the Bank of England to introduce similar reimbursement protections for CHAPS payments, and with the FCA in relation to on-us payments.

The PSR has been working closely with industry to develop effective data collection and reporting processes for its work on fraud. While the Government recognise the intention behind the noble Lord’s amendment, they do not consider it necessary or appropriate to prescribe specific metrics to be collected in primary legislation. I hope that, given the reassurance I have been able to provide today, he would agree with that point.

The noble Lord, Lord Livermore, spoke about the wider impacts of fraud and the duties that go beyond financial services companies or payment system providers in addressing those risks of fraud. That is being looked at through both the Government’s counter-fraud strategy and other Bills. He mentioned the Online Safety Bill. I disagree with his assessment of the measures in there. The measures that we have to tackle fraud in that Bill are a significant step-change in what we expect of companies in this space, and I think they will make a real difference. We are committed to working across all sectors to look at what more we could do in this space once we have implemented those measures and see how effective they are. I hope noble Lords are reassured by our commitments more broadly on this issue, and specifically by the fact that the PSR will be publishing data in this space once we have implemented the measures in the Bill.

Lord Vaux of Harrowden Portrait Lord Vaux of Harrowden (CB)
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My Lords, I thank all those who have taken part in this debate, particularly the Minister for her constructive engagement on this and the reassurance she has just given. In fact, in one area, she has actually gone further than my amendment suggested, as the noble Lord, Lord Naseby, pointed out: the annual report is now to be six-monthly, which is hugely welcome. It is only for the top 14 payment service providers, which will cover the bulk of the market, but that is something that the Government and the PSR might want to keep under review, particularly as different players come in and out of the market. I thank her very much for her reassurances.

I will make one comment more generally, echoing some of the comments made by the noble Lord, Lord Livermore. It is not only the banks that are players within the fraud chain, it is all those other parties that enable or facilitate fraud, from the tech companies to social media companies, the web-hosting companies, the telecom companies, et cetera. This measure puts all of the liability on to the banks. While it is a simple solution for victims—and that is to be commended—we need to find some way of incentivising all those other players in the fraud chain to behave properly and to stamp down on their services being used by fraudsters. I am hoping that we will see progress on that in the Online Safety Bill, and also in the failure to prevent fraud clauses in the economic crime Bill that is coming forward. With that, I beg leave to withdraw my amendment.

Financial Services and Markets Bill

Debate between Lord Vaux of Harrowden and Baroness Penn
Baroness Penn Portrait Baroness Penn (Con)
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As I said, the approach we take will be determined alongside the consideration of any design of a central bank digital currency. The decision to move ahead with a CBDC has not yet been taken; however, we do believe that it is likely to be needed in future. Although it is too early to commit to build the infrastructure for one, we are convinced that further preparatory work is justified. Therefore, that definition will become clearer as the design of the approach also becomes clearer—but the commitment at the outset to parliamentary engagement is there.

Lord Vaux of Harrowden Portrait Lord Vaux of Harrowden (CB)
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The Minister just made a statement that it is likely to be needed in future. Can I ask a very simple question: why? Why is a CBDC likely to be needed in future? That seems a fairly bald statement.

Baroness Penn Portrait Baroness Penn (Con)
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My Lords, we may not wish to repeat the debate that we had in the Chamber earlier this year, but I was going to address my noble friend’s question about retail versus wholesale and the point from the noble Lord, Lord Vaux, about the use case for a CBDC.

The noble Lord, Lord Eatwell, made one of the points in relation to a CBDC. We want to ensure that central bank money, which is currently available to the public only as cash, remains useful and accessible to the public in an ever more digitalised economy. We have heard about access to cash in our debates earlier in Committee.

Financial Services and Markets Bill

Debate between Lord Vaux of Harrowden and Baroness Penn
Baroness Penn Portrait Baroness Penn (Con)
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My Lords, I recognise the keen interest across this Committee in the provisions in the Bill to tackle financial crime and fraud more generally, and, in this group of amendments, on tackling APP scams specifically and the related work of the Payment Systems Regulator to introduce mandatory reimbursement. The noble Baroness, Lady Bowles, said that she hoped that the sense of the amendments could be taken forward, or that the Government could provide reassurance to noble Lords that it will. I hope to be able to do so.

Measures in the Bill not only enable the Payment Systems Regulator to act on APP reimbursement regardless of the method of payment used, but also have a specific requirement mandating, within a specific timeframe, that they are taken forward under Faster Payments. We have sought within the Bill both to provide further powers for the regulator and to specify that it needs to act within a certain timeframe on the form of payments, which currently represents the largest form of fraud, not only by volume—97% of payments by volume—but by value. The figures I have are that Faster Payments account for approximately 85% of the value. The noble Lord and noble Baroness also mentioned CHAPS. That is the next highest in value, but it is about 4%, so it is right that we prioritise action on Faster Payments first. That does not rule out further action on other forms of payment further down the line.

I appreciate that we often have a debate on what needs to be in a Bill versus powers that, in this case, we are giving to the regulators to make rules. We have also heard during this debate about fraud how dynamic that situation can be, so enabling the regulator to update its response to approaching these questions through its rules is the right approach in this situation.

None the less, a lot of detail of the Payments Systems Regulator’s approach is in the public domain, and I hope it would reassure the noble Lord, Lord Vaux, on a number of his amendments that the approach being taken is consistent with many of the recommendations made by his committee. Indeed, having its proposals out for consultation on how mandatory reimbursement should work has provided an opportunity for all interested parties to comment.

Turning to the specifics in the amendments and hopefully updating the Committee on work that the PSR is taking in relation to each, I begin with Amendments 202 and 207, tabled by the noble Lord, Lord Vaux, on the scope of the requirement on the PSR to mandate reimbursement. As I have noted, under this legislation the PSR could act in relation to any designated payment system, but with a specify duty on Faster Payments which, as I said, accounts for 97% of scams by volume today. We expect the PSR to keep under review the case for action across other designated payment systems, in collaboration with the Bank of England and the FCA.

In relation to Amendment 204, on issues that the PSR should consider as part of its approach, I assure the Committee that the PSR has set out how it has considered these issues in its consultation. For example, as discussed, the PSR is proposing that the cost of liability is split equally between the sending and receiving banks, recognising that both parties have a responsibility in preventing fraud.

On Amendment 205 on the publication of data, the PSR is currently consulting on a measure to require payment service providers to report and publish fraud and reimbursement data. I was surprised to hear Green support for league tables. I did not know that they were supportive of them on schools, but in this case that data is important and the transparency we are talking about helps noble Lords keep track of how effective these provisions are once they are implemented.

Amendment 206 is on a duty to review. The PSR regularly reports on the discharge of its functions through its annual report and has committed in its consultation to a post-implementation review of its action on APP scams, to assess the overall impact of its measures for improving consumer outcomes. The Government will also monitor the impacts of the PSR’s action and consider the case for further action where necessary. While the Government recognise the intention behind the noble Lord’s amendments, we do not think it necessary or appropriate to further circumscribe the actions of the regulator in primary legislation at this stage, given the extensive consultation the PSR has undertaken on this matter and its responsibilities and expertise in this area as the independent regulator.

On Amendment 203, tabled by the noble Baroness, Lady Kramer, and spoken to by the noble Lord, Lord Sharkey, the Government’s intention, as already expressed in the legislation, is to ensure that more victims of APP scams across the Faster Payments system specifically, and wider payments systems in general, are reimbursed, and to enable the PSR to act in this area. The Government recognise that no one sets out to be defrauded and that APP scams are, by their very nature, convincing and sophisticated.

None the less, we also recognise that many banks take action to engage with their customers ahead of making a payment, and that questions of liability can be complex. As the noble Lord, Lord Vaux, set out, a blanket approach to mandatory reimbursement raises questions of moral hazard and the potential for APP reimbursement fraud itself to become an area of difficulty. This is a difficult balance to strike. While this amendment is well meaning, it will not help achieve effective resolution in these cases. We are confident that the PSR has the appropriate objectives, expertise and powers to develop proposals for APP scam reimbursement that both ensure strong protections for victims and incentivise banks to engage effectively with their customers to prevent fraud. In its consultation on its reimbursement approach, the PSR stated its intention to require firms sending payments over the Faster Payments system to fully reimburse all consumers who are victims of APP scams, with very limited exceptions. The PSR considers that this will ensure that victims are reimbursed in the vast majority of cases. In that regard, the PSR has already signalled its intention to set a high bar for customer liability—higher than currently applies within the existing code of voluntary reimbursement.

We do not believe that this amendment will improve outcomes for customers beyond the provisions already set out in the Bill, and it could impede the work of the regulator, which has already consulted on the proposals. I hope that noble Lords genuinely feel reassured by the level of detail in which the PSR and the Government have thought through these proposals, and acknowledge the ability to have a dynamic response in this area. I therefore hope the noble Lord can withdraw his amendment.

Lord Vaux of Harrowden Portrait Lord Vaux of Harrowden (CB)
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Can the Minister comment on the Treasury Select Committee’s recommendation on the PSR, effectively subcontracting its responsibilities to Pay.UK?

Baroness Penn Portrait Baroness Penn (Con)
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I apologise to the noble Lord; I did have an answer for him on that. The Bill is clear that the Payment Systems Regulator has the duty to act on mandatory reimbursement. The PSR has the relevant powers and expertise, as well as the appropriate discretion, to determine the most effective approach in that area.

Financial Services and Markets Bill

Debate between Lord Vaux of Harrowden and Baroness Penn
Baroness Penn Portrait Baroness Penn (Con)
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My Lords, I believe that I have already made the offer to noble Lords to meet to discuss the issue of accountability, both parliamentary accountability and the proposals such as those put forward in the amendments today. That still stands. I am afraid that I cannot—

Lord Vaux of Harrowden Portrait Lord Vaux of Harrowden (CB)
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I apologise for interrupting. The Minister is quite right that she has made that offer. We were grateful for it, but it is of fairly limited use if there is no recognition on the part of the Government that there is a gap here in terms of parliamentary accountability and scrutiny. She has not actually said yet that she recognises that there is a gap. I have to say that she should look around her: it is pretty clear that it is there.

Baroness Penn Portrait Baroness Penn (Con)
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What I have tried to say to noble Lords is that, in bringing forward the proposals in this Bill, we absolutely recognise that, with the increased responsibilities that go to the regulator, we need to ensure that there is proper accountability and scrutiny. We have put forward the proposals in the Bill to attempt to do that.

Financial Services and Markets Bill

Debate between Lord Vaux of Harrowden and Baroness Penn
Baroness Penn Portrait Baroness Penn (Con)
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In the legislation, the Government are seeking to formalise and make explicit some of the ways in which committees can have their work facilitated. I recognise that this Bill refers to the Treasury Select Committee. That is the case in existing financial services legislation; for example, Schedule 1ZA to FSMA requires that the person appointed as the CEO of the FCA must appear before the TSC before their term can begin. Also, when appointing independent reviews of ring-fencing and proprietary trading, as required by Sections 8 and 10 of the Financial Services (Banking Reform) Act 2013, the Treasury was required to consult the TSC.

Lord Vaux of Harrowden Portrait Lord Vaux of Harrowden (CB)
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I am struggling with the logic here. If it is the case that scrutiny by the Treasury Select Committee is in previous legislation, why is it wrong to change that and enhance the scrutiny in this way? Logically, the two seem to be the same thing.

Baroness Penn Portrait Baroness Penn (Con)
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Perhaps I could finish my point; we will also come to this issue in the next group. In seeking to ensure that the relevant committees of Parliament have the information that they need to do their jobs, the Bill references the TSC, but I acknowledge that other committees in Parliament have done this role in the past or may wish to do it in future. That is something we will want to reflect on in our discussions of both this group of amendments and the next one. I recognise the point that has been made to me and will, I think, be made to me again in our debate on the next group. Although there is precedent for the TSC—indeed, it has set up its own sub-committee on this matter—I completely see the value of contributions of committees from this House or, if Parliament determined it, Joint Committees. We want to reflect carefully on how we can ensure that we are able to facilitate that also.

The noble Lord, Lord Vaux, invited me to reflect on this discussion and discuss with noble Lords between Committee and Report if and how we can take the thoughts and ideas further. That is something that I would be very happy to do. We will reflect on the points raised during this debate and consider them carefully before Report.

I wanted to make two points regarding this group. First, it is for Parliament to determine its committee structure and it has the ability to determine that, including the establishment of a Joint Committee, through existing procedure. Establishing a Joint Committee through statute is the exception rather than the rule and reflects the specific circumstances of the Intelligence and Security Committee. It is, I think, the only committee that has been established by statute in the last 100 years or so.

The other point, which we will discuss further, is that although we do not want to determine the correct committee structure, we do want to ensure that committees have the information they need to do their work. We have put clauses in the Bill to reflect that but, as I believe we will come on to, we will want to consider whether they fully reflect the work done in both Houses to scrutinise the regulators.

--- Later in debate ---
Baroness Penn Portrait Baroness Penn (Con)
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My Lords, as the Chancellor has set out previously, it is vital that lessons are learned from both the recent disruption in the gilt market and the vulnerabilities in leveraged funds that this exposed. Pensions and, more specifically, liability-driven investment—LDI—funds are regulated by a number of different bodies. In the UK, the Pensions Regulator oversees pension schemes and the FCA supervises fund managers that manage LDI funds. Many LDI funds are based overseas; authorities in these jurisdictions are responsible for supervising the funds themselves.

In accountancy, the Financial Reporting Council is responsible for regulating auditors, accountants and actuaries, whereas the UK Endorsement Board works internationally to agree accounting standards and adopts these for use by UK companies. More broadly, considering the financial system as a whole, the Bank of England’s Financial Policy Committee—the FPC—is responsible for monitoring and addressing systemic risks to promote financial stability in the UK.

It is therefore right that the FPC has played and will continue to play an important role in ensuring that vulnerabilities in LDI funds are monitored and tackled. The Government welcome the FPC’s Financial Stability Report from December as an important milestone in the “lessons learned” process. The Government and the Bank of England agree that the FPC’s existing powers and duties remain appropriate and are sufficient to monitor and address the systemic risks associated with pension funds and their investment strategies.

Regarding Amendments 149 and 149A, the FPC already has broad powers of recommendation, as set out in the Bank of England Act 1998. It can make recommendations to the PRA and the FCA on a “comply or explain” basis and can make recommendations to any other persons it deems necessary to fulfil its objectives, including the Pensions Regulator, the Financial Reporting Council or the UK Endorsement Board. The FPC is also able to make recommendations to the Treasury, including in relation to the regulatory perimeter. These powers are used by the FPC to ensure that it can effectively monitor and/or address systemic risks, including those that may arise from pension funds and their investment strategies or accounting standards.

Additionally, the FPC must keep its recommendations under review and publish an assessment of the effectiveness of the committee’s actions in its financial stability reports. These must be published twice per year and laid in Parliament, allowing for further public scrutiny with regard to the impact of any recommendation made by the FPC, including whether it was complied with.

The FPC’s proactive approach to reviewing and addressing systemic risks was demonstrated in December when the FPC recommended that regulatory action be taken as an interim measure by the Pensions Regulator in co-ordination with the FCA and overseas regulators to ensure that LDI funds remain resilient to the higher level of interest rates that they can now withstand, and defined benefit pension scheme trustees and advisers ensure these levels are met in their LDI arrangements. The FPC has welcomed, as a first step, the recent guidance published by the Pensions Regulator in this regard. The FPC can also make recommendations in relation to reporting and monitoring requirements for LDI funds and pension schemes. The FPC’s financial stability reports then provide a public assessment of risks to UK financial stability.

With respect to Amendment 159, the Government agree it is essential that appropriate risk oversight and mitigation systems are in place, including for non-bank financial institutions. Sections 9C and 9G of the Bank of England Act 1998 stipulate that the FPC is responsible for identifying, monitoring and taking action to remove or reduce systemic risks, with a view to protecting and enhancing the resilience of the UK financial system. This responsibility includes risks emanating from all parts of the financial system, including the broader system of non-bank finance such as defined benefit schemes. It is right that this responsibility sits with the FPC which is able to prioritise its work as necessary to improve financial stability. The FPC has well-established processes for achieving this task, working closely with the FCA and the PRA.

Lord Vaux of Harrowden Portrait Lord Vaux of Harrowden (CB)
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The Minister seems to be telling us that it has all the powers it needs and that everything is fine, and yet it happened. What went wrong and how do we fix it, if not this way?

Baroness Penn Portrait Baroness Penn (Con)
- Hansard - - - Excerpts

There is ongoing work to look at that question. There has been an interim finding, as it were, setting out a number of recommendations. At the moment what they do not do, in my understanding, is set out the need for increased or different powers. But the noble Lord makes the correct point that we then need to understand whether those powers were used in the most effective way to prevent something like this from happening in the first place. The point I was seeking to make was that, so far in its work in reviewing what went wrong and why, it was not a question of a lack of powers or the inability in its remit to make certain recommendations. That is not to say that that work has concluded or that all the action that we need to take after reflecting on what happened has concluded either.

I was talking about the FPC’s powers and responsibilities to look at risks emanating from all parts of the financial system, including non-bank finance. It has the powers to recommend and, under Section 9H of the 1998 Act, also to direct the FCA and PRA to implement certain measures as specified by Parliament in order to further its objectives. Furthermore, as the IMF noted last year, UK authorities have often taken the lead in international efforts to improve the surveillance of risks beyond the banking sector.

In dealing with Amendment 159, looking at the risk from the non-banking sector in terms of financial stability and echoing my words to the noble Lord, Lord Vaux, the Government’s position is not that those risks are all fine, managed and under control. It is that the FPC has the powers it needs to deal with those risks where it can at a domestic level. In the Chancellor’s annual remit letter to the FPC, he reiterated the importance of prioritising work with international partners to address the vulnerabilities associated with non-banks. The FPC welcomed this recommendation. I say to the Committee that we agree that this area has been identified for more work at an international level but, alongside this co-ordinated international work, the Bank will continue to take unilateral action to reduce domestic vulnerabilities where it is effective and practical to do so.

Financial Services and Markets Bill

Debate between Lord Vaux of Harrowden and Baroness Penn
Baroness Penn Portrait Baroness Penn (Con)
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Yes—I am sorry.

Lord Vaux of Harrowden Portrait Lord Vaux of Harrowden (CB)
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It is easily done.

Baroness Penn Portrait Baroness Penn (Con)
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When the noble Baronesses sign up to each other’s amendments, it can be confusing.

Financial Services and Markets Bill

Debate between Lord Vaux of Harrowden and Baroness Penn
Baroness Penn Portrait Baroness Penn (Con)
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I opened my remarks by acknowledging that fraud needs a co-ordinated response from government, law enforcement and the private sector. That is at the heart of our approach, and it is why the Government established the Joint Fraud Taskforce to bring all those actors together. I attended it towards the end of last year, and it meets regularly. There are many different actors that need to take action in this space, including the regulators but also law enforcement, industry and companies—not just the financial services sector. Measures in the Online Safety Bill look at online platforms, for example.

Lord Vaux of Harrowden Portrait Lord Vaux of Harrowden (CB)
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I apologise for interrupting, but all this would be a lot easier if we had the national fraud strategy. When can we expect it?

Baroness Penn Portrait Baroness Penn (Con)
- Hansard - - - Excerpts

I agree with the noble Lord. We can expect it soon—or imminently; I could use a variety of different descriptors, but it will be sooner than “in due course”.

UK Infrastructure Bank Bill [HL]

Debate between Lord Vaux of Harrowden and Baroness Penn
Baroness Penn Portrait Baroness Penn (Con)
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My Lords, I turn to Clause 9 of the Bill, on the statutory review. We had an extensive debate on this in Committee and, reflecting on that debate, the Government have tabled several amendments to this clause.

On the timing of the review, in Committee I set out the rationale for the first statutory review of the bank taking place after 10 years. This was for two reasons: first, to ensure that we could accurately measure the effect of the bank’s long-term investments and, secondly, to ensure that we do not overburden the bank with constant reviews. As I have previously noted, the Treasury is currently undertaking a review of the bank’s framework document and will undertake a review by spring 2024 of the bank’s capitalisation. The bank will also be subject to frequent Cabinet Office-sponsored arm’s-length body reviews, which should be conducted by an independent person.

However, I understand the strength of feeling in the House and, for this reason, I tabled an amendment to shorten the timescale for the first statutory review. Bringing forward the initial review to take place no later than seven years after Royal Assent will mean that the first statutory review will be conducted in 2029. This fits neatly with the timing of the levelling-up missions, which the bank’s work will support, that are due to be achieved by 2030.

I turn to my other amendments to Clause 9. I heard concerns in Committee that the Treasury would, in these reviews, be marking its own homework. That was not the intention, and so I have brought forward an amendment to clarify that the Treasury will appoint an independent reviewer to conduct the review. Noble Lords will, I hope, be further reassured that the Cabinet Office-sponsored reviews, as I have just noted, will have a recommendation that they be conducted by an independent reviewer too. I hope noble Lords are content with these amendments. I beg to move.

Lord Vaux of Harrowden Portrait Lord Vaux of Harrowden (CB)
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My Lords, I rise to speak to my Amendments 30 and 32. I am grateful to the noble Baronesses, Lady Noakes, Lady Kramer and Lady Bennett of Manor Castle, for their support. In fact, I think I may have achieved a world first in getting the noble Baronesses, Lady Noakes and Lady Bennett, to sign the same amendments. I hope, therefore that the Minister might take note of this extraordinary event and take the amendments seriously.

First, I thank the Minister for her amendments in this group, and for listening to and acting on the concerns that were raised by noble Lords as the Bill has proceeded. Her amendments are very welcome, especially those that deal with the issue that was previously raised about the Treasury marking its own homework. Having an independent person carry out the review is an important step. I also welcome the reduction of the period before the first review from 10 years to seven years. I think everyone agreed that 10 years was way too long, but even after that change, there will still be a review only every seven years, which I still think is too long. Amendments 30 and 32 would reduce this to every five years.

The argument in favour of the longer period seems to be that infrastructure investment is long-term, which it is, and therefore it will take a longer period before the success of the bank can be evaluated. I think this rather misses the point. Although it is true that the success of a particular investment may take more than seven years—indeed, it might be 20 or 30—to become clear, the review should be covering how effectively the bank has performed in making investments. Is it making enough investments, are they appropriate, are they in the appropriate parts of the country and, importantly, do they meet the additionality principle and, as we discussed earlier, the crowding-out problem? We do not need to wait until the investments themselves reach maturity to be able to see how well or badly the bank is performing in making investments.

UK Infrastructure Bank Bill [HL]

Debate between Lord Vaux of Harrowden and Baroness Penn
Baroness Penn Portrait Baroness Penn (Con)
- Hansard - - - Excerpts

I think the Bill sets out that the Treasury does have the power to issue direction, and it will be published if it is ever used. We have heard about the precedents. Although I know Members of the Committee have different views on the value of that, I thought my noble friend expressed that very well.

To return to the purpose of the Bill, the Government are not simply able to change the objectives or sell the institution without further legislation. The Bill also makes provision for transparency to Parliament and the public around any circumstances in which the Treasury issues directions or statements of strategic priorities to the bank.

Section 172 of the Companies Act also confirms the bank’s independence: it states that the duty of the directors of the bank is to act in the way that is

“most likely to promote the success of the company”

and it requires them to have regard to factors such as the desirability of maintaining a good reputation for the bank, the bank’s impact on the community, the environment, and the need to foster business relationships. A clause setting out that the bank is operationally independent would therefore be unnecessary as that is already the legal default position and has been reflected in the bank’s independence over the first year of its existence, and the process by which it has entered into its initial investments.

Amendment 30 would require the Government to give an operational independence undertaking for the bank. It is, as the noble Baroness noted, a copy of the provision in the Enterprise and Regulatory Reform Act 2013 for the Green Investment Bank. As I have noted, we do not think this is necessary since it is a matter of company law that the bank is already operationally independent, and the Government have been consistent in their statements on this matter.

To respond to the noble Baroness’s point, we believe that the bank’s operational independence is substantive, not a kind of declaratory position, however—

Lord Vaux of Harrowden Portrait Lord Vaux of Harrowden (CB)
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I am just trying to understand more about why the statutory basis of the bank gives it this level of operational independence. I do not think there is anything in the articles which provides that, so where does this come from—I think these were the words the Minister used—as a matter of law?

Baroness Penn Portrait Baroness Penn (Con)
- Hansard - - - Excerpts

I think there are two elements to it: the bank is established under the Companies Act 2006, and as a matter of company law is operationally independent, and then, in terms of what this Bill does, the bank—

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Lord Vaux of Harrowden Portrait Lord Vaux of Harrowden (CB)
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Given that this consultation has been happening with the devolved nations, can the Minister give us some flavour of how that has gone and what the reaction from the devolved nations has been?

Baroness Penn Portrait Baroness Penn (Con)
- Hansard - - - Excerpts

My understanding is that it has been very constructive, but perhaps I can write to noble Lords setting out further detail on that.

Amendment 49 in the name of the noble Baroness, Lady Kramer, would ensure that the bank’s chair must keep the board under review to ensure that it continues to perform adequately. I think it goes without saying that I agree with the policy of this, but again believe that it is set out sufficiently within the framework document which largely reflects the requirements of the corporate governance code, against which the bank, as I said before, will publicly report compliance each year. It covers most of these points adequately, particularly in paragraphs 5.5.2 and 5.9.5.

I have committed to write on a number of aspects and know that noble Lords have given notice that they may wish to return to this at Report. With that, I hope that the noble Baroness will be able to withdraw her amendment for now.

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Baroness Penn Portrait Baroness Penn (Con)
- Hansard - - - Excerpts

My notes say that it will be a Cabinet Office-led review, but as part of that process we—which I would take to mean the Treasury—will conduct the review. If that is incorrect, I will clarify that.

Taken together, this means that the bank will have been subject to four reviews by the time of our first statutory review. The review in statute is designed to encompass all the elements of the previous reviews and has been chosen to be 10 years after Royal Assent because it allows for a fuller analysis—

Lord Vaux of Harrowden Portrait Lord Vaux of Harrowden (CB)
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Will these Treasury reviews be published?

Baroness Penn Portrait Baroness Penn (Con)
- Hansard - - - Excerpts

I will be happy to go away and check on that point. I think that the intention is that they would be, but I will double-check.

The period of 10 years has been chosen to allow for a fuller analysis of the infrastructure funding that the bank has undertaken and to see the real impact of its investment in the context of delivering against the missions set out in the levelling-up White Paper and the progress towards the Government’s net-zero target.

I will note one further point. As I confirmed at Second Reading to my noble friend Lady Noakes, UKIB will be subject to external audit by the National Audit Office, including on an annual basis as part of the statutory powers of the Comptroller and Auditor-General.

Amendment 63, in the name of the noble Lord, Lord Teverson, seeks to mirror the arrangements of the Green Investment Bank by having a company shadow the bank to ensure that it is meeting its objectives. He is clearly knowledgeable on this subject as he sits on the board of the Green Purposes Company. However, he will note that the Green Investment Bank did not need this function when it was part of government because there were already other routes of accountability, including directly to Parliament in relation to the bank’s use of public money.

This legislation sets out quite clearly the objectives of the bank so, if there is any deviation from that, the Government can compel it to change its course or there will be a challenge in the courts. Further to this, Ministers are accountable to Parliament on the performance of the bank, so I dare say the noble Lord would provide adequate challenge should he think that the bank was not performing against its objectives.

To tidy things up, my noble friend Lady Noakes asked a question on the bank appearing before Lords committees. There is no barrier to that. Indeed, the CEO and the chair of the bank were before the Economic Affairs Committee on 17 May as part of an energy supply session.

I hope that, in laying out those reasonings from the Government at this stage, my noble friend will feel able to withdraw her amendment and that other noble Lords will not move theirs when they are reached.

UK Infrastructure Bank Bill [HL]

Debate between Lord Vaux of Harrowden and Baroness Penn
Baroness Penn Portrait Baroness Penn (Con)
- Hansard - - - Excerpts

My Lords, this first group of amendments all cover the financial aspects of the bank. Amendment 1 in the name of my noble friend Lady Noakes and Amendment 53 in the name of the noble Lord, Lord Teverson—I shall not quibble about the wording of the amendments; I understand their purpose —would subject the UK Infrastructure Bank to all financial services regulation and the senior managers and certification regime in turn. This goes against the exemption that Parliament approved for the bank last year.

The Government’s view is that adopting this position at this stage would create a disproportionate regulatory approach that would unnecessarily add to the cost, complexity and burden of a relatively small and new organisation. Financial services regulation was not intended for public sector institutions with a policy objective. UKIB does not require regulation in the same way as commercial banks. The practice of regulatory exemptions in this way follows precedent for similar institutions operating in the public sector—for example, the European Investment Bank.

It may be helpful to note that even though UKIB has a general exemption from financial services regulation, UKIB’s framework document is clear that, as far as reasonably practicable and as appropriate, UKIB will abide by the principles of the senior managers and certification regime and relevant elements of the FCA’s Principles for Businesses. As part of its compliance framework, UKIB will adopt and implement policies to safeguard itself against fraud, theft, corruption, bribery, insider dealing, market abuse and money laundering. It is therefore important to emphasise that the general FSMA exemption UKIB has been granted already does not mean that UKIB is absolved of all compliance obligations. Rather, the exemption means that UKIB has flexibility to adopt a bespoke approach to its governance that is proportionate to its activities.

Amendments 42 and 38 in the name of my noble friend Lord Holmes of Richmond would increase UKIB’s powers to borrow from international capital markets and give UKIB an unfettered ability to determine its own investment levels without Treasury authorisation respectively. With regards to Amendment 42, I assure my noble friend that UKIB already has these powers under company law.

Further, UKIB has a maximum financial capacity of £22 billion, including an overall borrowing limit of £7 billion. Within this limit, UKIB can borrow up to £1.5 billion a year from either the Debt Management Office or private markets, including international markets, depending on the best value for money and subject to standard approval processes.

Similarly, the spirit of Amendment 38 mirrors the Government’s ambition for the UK Infrastructure Bank: that it should have operational independence in its day-to-day operations and investment activities. The framework document outlines that UKIB has the freedom to set the pricing of its transactions. It is already using this power.

Lord Vaux of Harrowden Portrait Lord Vaux of Harrowden (CB)
- Hansard - -

I am sorry to interrupt, and I thank the Minister for giving way. She has referred to the framework document a few times. Can she clarify exactly what its legal status is?

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Baroness Penn Portrait Baroness Penn (Con)
- Hansard - - - Excerpts

My Lords, the Committee’s debate on this group has helped to ensure that we have properly considered the purpose of the bank, particularly around its levelling-up and climate change objectives. I will first address Amendments 3, 4, 5, 15 and 20, which seek, in various forms, to provide additional scope for the bank to pursue natural capital improvement, biodiversity or to deliver environmental improvement plans, by either splitting the climate change objective or adding a third environmental objective.

The bank has a broad mandate, which includes the flexibility to support a wide range of projects to help tackle climate change and support regional and local economic growth—two of the defining missions of this Government. As noble Lords will know, the Government conducted a review, which reported in March following wide engagement with environmental stakeholders and market participants, to consider a potential broadening of the bank’s objectives to include other areas such as improving the UK’s natural capital. Most stakeholders observed that there is already significant scope for intervention in nature-based solutions within UKIB’s existing mandate, particularly through its climate mitigation and adaptation objective, and scope to invest in flood defences, water and wastewater infrastructure.

Therefore, following this review, the Chancellor confirmed in his first non-statutory strategic steer to the bank that natural capital opportunities are in scope of its existing remit and that it should explore early opportunities to support the development of markets for ecosystem services and nature-based solutions within its existing climate and levelling-up objectives. The bank will reflect the contents of this strategic steer in its first strategic plan, which will be published later this month.

Adding a third objective for the bank could dilute its focus. Although projects to deliver nature-based solutions and enhance the UK’s natural capital are within scope for the bank, these projects must link back to its core purpose, which is to deliver economic infrastructure projects. It is an infrastructure bank, and that is why the environmental review landed sensibly on nature-based solutions as a means of delivering the ends of economic infrastructure through natural technology.

The review recognised the significant potential for increased use of nature-based and hybrid infrastructure solutions, including for the water sector and greenhouse gas removals. These opportunities will be important to meet our objective to leverage at least £500 million per annum in private finance for nature’s recovery by 2027 and more than £1 billion per annum by 2030.

However, other steps must be taken to ensure that a successful market is created to finance nature. The review found that the market for nature-based solutions is constrained by multiple barriers, including insufficient scale of projects, lack of proven revenue streams and a lack of data. The bank can help to overcome some of these barriers, but work is also under way by Defra to improve standards and accreditation and to improve early grant funding through the £10 million natural environment investment readiness fund launched in February 2021 and the big nature impact fund, a blended finance vehicle that will help to create a commercial portfolio of projects.

I turn now to the bank’s “do no significant harm” commitment. Amendment 2 from the noble Lord, Lord Tunnicliffe, seeks to raise and firm up the environmental floor for UKIB projects, and Amendment 16 from the noble Baroness, Lady Bennett, seeks to remove fossil fuels from the scope of the bank, as she explained.

With respect to Amendment 2, while there is naturally some risk of the bank’s growth objective coming into conflict with its climate change objective, we believe that this has already been robustly and appropriately covered in the bank’s framework document, which states:

“Where an investment is primarily to support economic growth, the Company will ensure that it does not do significant harm against its climate objective.”


It will be for the bank to decide exactly how to administer this “do no significant harm” clause and how to interpret it when considering individual transactions, and it is already doing this.

On Amendment 16, I say that the “do no significant harm” clause is accompanied by a sensible exclusions list, prohibiting the bank from entering into fossil fuel investments, with a small number of exemptions—for example, for carbon capture, usage and storage, which will significantly reduce emissions over its lifetime. I hope the noble Baroness, Lady Bennett, can see why we need these exemptions and why it would not be appropriate to exclude fossil fuels entirely from the bank’s scope. As a package, it is sensible to keep all these conditions together in the framework document so that they may be kept under review and ensure that the environmental baseline for the organisation is sufficiently high.

Amendments 6, 8 and 9 all seek in some way to add more specificity to the existing objectives. For reasons that I will set out, the Government believe that the current drafting of the Bill is a more appropriate way to deliver against these, although they recognise the policy aims that the amendments seek to deliver. At statutory level, the correct approach is to set out the overarching policy goal and, in this context, phrasing the bank’s objective as one of supporting regional and local growth provides a clear direction for the bank without being overly prescriptive.

We would not want to use language or terms in statute that could result in unintended consequences. For instance, if we adopted the drafting of the noble Lord, Lord Ravensdale, in Amendment 6, terms such as “geographical inequality” and “areas of economic disadvantage” would require detailed and complicated definitions that could change over time or be context dependent. We would not necessarily want to preclude the bank from providing funding in disadvantaged areas of the south-east but, if we adopted the proposed amendment, the bank might be put in difficulty as the south-east as a whole might not qualify as an area of economic disadvantage.

However, all three amendments are addressed in the Chancellor’s first strategic steer to the bank, which states:

“Addressing the deep spatial disparities across and within UK regions is a central ambition of this government. Economic infrastructure connects people, both physically and digitally, to opportunities and the Bank has a key role to play in providing infrastructure finance across the UK and targeting investment to support faster growth in regions with lower levels of productivity … The government’s recently published Levelling Up White Paper (LUWP) outlines the need to end the geographical inequality which is such a striking feature of the UK”,


as noble Lords have noted,

“and it is important that UKIB supports this ambition. Therefore, I would encourage the Bank to target its portfolio of investments towards projects across the UK that deliver against the missions set out in the LUWP”.

Further, the steer is also clear that the economic growth objective should provide “opportunities for new jobs”. I will happily confirm to the noble Lord, Lord Tunnicliffe, that it is the Government’s ambition across the economy to have more high-skilled, better paid and securer jobs. The bank’s investments to date, consistent with its strategic steer, already meet the aims of these amendments. Investments in the Midlands, Northern Ireland and Wales are already helping to boost productivity across the UK and support the creation of good new jobs.

Finally, I turn to Amendments 7 and 10, in the name of the noble Baroness, Lady Bennett, which focus on improving the life outcomes of people in disadvantaged areas, reducing the use of natural resources and emissions and securing the interests of future generations. I would argue that these are consistent with the existing objectives for the bank. In the long run, productivity gains and economic growth are the fundamental source of improvements in prosperity. Productivity is closely linked to incomes and living standards and supports employment. Improvements in productivity also free up money to invest in jobs and support the Government’s ability to spend on public services. The climate change objective will help to secure the interests of future generations by reducing emissions and, as discussed, investing in nature-based solutions.

The Government recognise that protecting and enhancing the natural environment and the biodiversity that underpins it is crucial to supporting sustainable, resilient economies, livelihoods and well-being. We are therefore determined to support the development of private markets that drive investment in projects that restore or enhance our natural environment.

I thought it might be worth touching again on the question from the noble Lord, Lord Vaux, about the framework document, in order to aid our discussion. The framework document is a non-legally binding agreement between the Treasury and UKIB that sets out details of how the bank works that it would not be appropriate to have in statute. Notwithstanding that, it does create some legal force, as UKIB is expected to abide by it and can be judged against it in normal public law ways. It is a public document and there are reputational reasons for UKIB to follow it, and the Treasury can enforce it both as a shareholder in the bank and through the issuing of a direction. Of course, there will be parliamentary scrutiny, given that it is a published document. It can be changed and updated by agreement of both parties, the Treasury and the bank. UKIB’s articles of association are binding in company law and have been filed with Companies House.

Lord Vaux of Harrowden Portrait Lord Vaux of Harrowden (CB)
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The Minister mentioned that it will be subject to parliamentary scrutiny. What will be the mechanism for that?

Baroness Penn Portrait Baroness Penn (Con)
- Hansard - - - Excerpts

There are many mechanisms of parliamentary scrutiny that we are subject to every day. There are committee hearings, Questions in the House and many other different routes of parliamentary scrutiny.

To pick up on one final question, from my noble friend Lord Holmes of Richmond, about the bank’s ability to invest in overseas territories, the intention is for UKIB to invest in UK projects; it is not expected that it would invest in UK overseas territories.

I therefore hope, given those explanations, that the noble Lord, Lord Tunnicliffe, will withdraw his amendment and that other noble Lords will not move theirs when they are reached.

Banks: Authorised Push Payment Fraud

Debate between Lord Vaux of Harrowden and Baroness Penn
Thursday 11th June 2020

(4 years, 6 months ago)

Lords Chamber
Read Full debate Read Hansard Text
Baroness Penn Portrait Baroness Penn
- Hansard - - - Excerpts

My noble friend is right that it is essential that banks take proper steps to ensure that bank accounts are not opened fraudulently. The Financial Conduct Authority requires banks to maintain effective systems and controls to prevent the risk that they may be used to further financial crime. However, the code that specifies who pays compensation was drawn up with both industry and consumer groups and is getting reimbursements and compensation to those innocent victims. We should support a model that is supported by industry and consumer groups.

Lord Vaux of Harrowden Portrait Lord Vaux of Harrowden (CB) [V]
- Hansard - -

I thank the noble Lord, Lord Young of Cookham, for asking the previous question, which I was going to ask. Does the Minister agree that, if we made the fraudster’s bank liable—it receives and handles the stolen money —it would greatly incentivise banks to vet customers and monitor suspicious activities much more rigorously, and that it would be more effective than the current situation of the victim’s bank deciding whether the victim has been acting reasonably?

Baroness Penn Portrait Baroness Penn
- Hansard - - - Excerpts

As I said to my noble friend Lord Young, there are requirements on banks to ensure that, when bank accounts are set up, the firms identify and verify the customer’s identity. Under the voluntary code which was drawn up with industry, it is currently with the victim’s bank to pay reimbursements if the victim is at no fault in the fraud. Those arrangements expire at the end of this year, and the points that my noble friend and the noble Lord made may be raised with industry when looking at a long-term solution to the issue of reimbursing consumers.