Financial Services and Markets Bill (Fourth sitting)

Debate between Tulip Siddiq and Peter Grant

Committee stage
Tuesday 25th October 2022 Public Bill Committees

[Peter Grant]

The amendment is quite simple. I understand the reason behind the concept of the authorised person. The Financial Conduct Authority will never have the resources or capacity to authorise every single financial promotion that somebody wants to publish, so that role needs to be outsourced. My concern is that, in some of the scams that my constituents have fallen victim to, the authorised person has sometimes been a key part of the web of deceit and concealment that has been laid for my constituents and others to fall into. Very often, when it all goes wrong, we find that the authorised person who approved the financial promotion has gone out of business themselves, so there is nobody left to take responsibility.

I am concerned that something that I have seen happen in a small number of cases might become more common. If someone takes a financial promotion that is clearly not compliant with legislation to an authorised person, the authorised person might well say, “No, I am not going to authorise it.” There is nothing to stop the person from then shopping around and finding someone who will agree to approve the promotion on their behalf. Because these promotions are so common, and because there are so many of them being authorised and then issued, it is very difficult for the regulator or anyone else to pick up on the ones that should not have got through. We are relying on the integrity of the authorised person.

The intention behind the amendment is to ensure that, regardless of which authorised person someone goes to, they get a consistent answer—either yes or no. If one authorised person refused to give approval for a promotion, it could then be approved only with the consent of the Financial Conduct Authority. I am not sure that I am minded to press the amendment to a vote, but I hope that the Minister will be sympathetic to the intention behind it. If he feels that the amendment is not necessary, or that its purpose could be achieved by a better route, I would be quite happy to hear his reasons.

[Tulip Siddiq]

We welcome clause 20, which we recognise would introduce tighter controls on those who approve financial promotions for others, to ensure that consumers are better protected. How does the Minister foresee the clause facilitating improved approver expertise, due diligence and challenges in exercising appropriate regulatory oversight?

Financial Services and Markets Bill (Third sitting)

Debate between Tulip Siddiq and Peter Grant

Committee stage
Tuesday 25th October 2022 Public Bill Committees

[Peter Grant]

If the sun moves much further, I will have to sit on the other side of the room to keep it out of my eyes, so my apologies for having to move seat during the debate, Dame Maria.

I thank the Minister for doing what I hoped he would have done in the debate on the revocations in clause 1: outlining in terms understandable to a lay person why some specific items of EU legislation are no longer appropriate for the United Kingdom—in fact, it is questionable whether they are appropriate elsewhere. I would have wanted to see that before the changes proposed in other parts of the Bill. On the basis of the Minister’s comments, and the fact that none of the regulators we heard from raised concerns, I am willing to accept that the changes suggested in the clause and the details in schedule 2 are appropriate.

I want to draw attention to a comment the Minister made earlier and to give him the chance to correct it. He suggested that this is EU legislation that Parliament never had the chance to scrutinise, but that is not the case. I spent several years, as other hon. Members did, on the European Scrutiny Committee. Every single piece of legislation the European Union intended to implement came before that Committee, which had the authority to call in Ministers and to put a stop on them approving things at EU Council meetings if the Committee was unsatisfied as to the impact. The House of Commons—the whole of Parliament—had the right to take action to prevent any of those directives from coming into force. The fact that Parliament seldom did that is a failing of this and previous Parliaments. The fact that Ministers had so much free rein to do what they liked, and could ignore Parliament if they wanted to, is not the fault of the European Union; it is because of the relationship between Parliament and Government. This Parliament is unfit for purpose, and Ministers from other members of the European Union would not have been allowed to agree to those directives without a vote in their respective Parliaments. I hope the Minister will be willing to correct the record. We can agree or disagree about legislation that the European Union put in place, but to suggest that this Parliament was somehow unable to have any impact on that legislation is simply not accurate.

[Tulip Siddiq]

Has the Minister picked up any feedback from the sector about the Government’s proposed reform to the position limits—a regulation under MiFID II—and the fact that they have not been adequately assessed for commodity market speculation risks? How does he plan to keep that issue under review? If he has heard of concerns, is he planning to address them?

Financial Services and Markets Bill (First sitting)

Debate between Tulip Siddiq and Peter Grant

Committee stage
Wednesday 19th October 2022 Public Bill Committees

[Tulip Siddiq (Hampstead and Kilburn) (Lab)]

Q I thank the panel for coming today. The Government announced on Second Reading that they intend to introduce an intervention power enabling the Treasury to direct a regulator to make, amend or revoke rules in matters of significant public interest. Do you think such a move would represent a significant departure from the UK’s model of regulatory independence, and would such a power affect your regulatory decision making process? Sheldon Mills, you touched briefly on that, so may I ask you first?

Sheldon Mills: Of course. It is a matter for Government as to what amendments they put to Parliament, and it is then a matter for Parliament as to what you do with them. You always have to be careful as a regulator not to tell Parliament what to do, but I will put some thoughts forward.

Independence needs to be at the heart of the regulatory system, so I think it will be important, if and when that amendment is put forward, to think about how the independence of the regulators is sustained. I understand from Government pronouncements that there is a commitment to the independence of the regulators, and that the proposed amendment, which I have not seen, is meant to ensure that where a public interest mechanism is needed—where the Government wish to think about the public interest—there is one to bring forward.

I have worked in regimes with public interest tests. I ran the mergers division at the Office of Fair Trading and the Competition and Markets Authority, and my learning from that is that, if put in place, such a test should be used exceptionally and with care, and that there should be specificity about the matters of public interest—in this case, financial services—on which it would be used.

We are working constructively with HMT in relation to this, and we would do so if such a power were introduced. The only point I would make—Vicky may come to this—is that the standing of the UK financial system is also built on its independence and its consistency of regulation, and it is important that we think through that as we design this regime.

Victoria Saporta: I very much agree with what Sheldon said. We have not yet seen the amendment, so we have to reserve judgment on it, but it will depend on the formulation.

A formulation whereby the Government can force or direct us to make or amend rules that we have already made, and that fall squarely within the statutory objectives that Parliament has given us, may be perceived as undermining operational independence and all the benefits that I talked about earlier. That could have adverse implications for our international standing and, ultimately, our competitiveness.

A formulation that is squarely outside our objectives—for matters of national security, for example—and does not have to do with safety and soundness, or the other objectives and “have regards”, could be a different matter if it is tightly done.

Finally, sometimes I have read in the press and in previous ministerial comments that it makes sense in a parliamentary democracy to ask the regulators to take another look. I just want to say that in clause 27 there is a review power that gives the Treasury powers to force us—to direct us—to take another look and, indeed, to appoint a third party to do so.

[Peter Grant]

Q Good morning to the witnesses. Mr Mills, you mentioned to Ms Siddiq that you had not seen the proposed amendment. Has the FCA been consulted at all about the text or the principle behind that amendment?

Sheldon Mills: Of course we have had discussions with HMT in relation to the proposed amendment. I personally have not seen it.

Financial Services and Markets Bill (Second sitting)

Debate between Tulip Siddiq and Peter Grant

Committee stage
Wednesday 19th October 2022 Public Bill Committees

[Tulip Siddiq]

Q The Bill does have provisions for access to cash, but not many provisions for free access to cash. Do you think that is a cause for concern?

Paddy Greene: Yes, it is a cause for concern. When we are talking about consumers, for the objective in the Bill on access to cash to be met, consumers must have free access to cash. Without that, I think the objective may be undermined. It is the case that we have paid-for provision—it is in theory available now—but it does not serve the market. We must ensure there is free access to cash. A huge raft of people rely on cash. It is massive numbers, but it is also the case that they tend to be vulnerable and on lower incomes. If it is the case that it is not free, when somebody goes to take out £10, they are paying £2 to get it. That is just an example, but that doesn’t seem right. The fact is, we need to have a minimum, base level of free access to cash. We are delighted that the provisions have been brought forward and that we will have this in legislation, but for it to work effectively, it has to be free access.

[Peter Grant (Glenrothes) (SNP)]

Q I do not know whether your responsibilities at Which? include consumer protection, particularly in relation to the financial services market, but from your perspective do the millions of small-scale retail consumers of financial services have confidence in the current regulatory framework of the United Kingdom?

Paddy Greene: I cannot speak for small and medium-sized enterprises—I am here to represent consumers—but fundamentally I do think that the regulatory framework in this country provides confidence. I think it has been robust, relatively speaking, over the years. If we compare it to some other international sectors, I think it is a framework that can provide people with confidence. We would be remiss to weaken that in any way.

--- Later in debate ---

[Tulip Siddiq]

Q On the catching up or lagging behind that you have mentioned, would you recommend any legislation? Is there a role that the Bill we are discussing could play to strengthen us and pull us forward?

William Wright: There is certainly a role for legislation; I am not sure that the right place for that role is this Bill in particular. It is important to step back and look at the huge amount of work that has already been done and is being done in and around green finance from a legislative perspective. The latest addition to that is the net zero review, and the green finance strategy is expected from BEIS early next year, maybe. There are sustainability disclosure requirements, the UK green taxonomy and the transition plan taskforce. That work, which is coming down the pipeline towards us, could contain a lot of the legislative impetus for the UK to close the gap.

More importantly, I think the industry is already beginning to fill the gap. Where the UK has a real opportunity in green finance in future is not so much in the level of capital raising by UK companies, but in the fact that it is in pole position to benefit from its existing expertise in markets such as risk management, derivatives and trading, as we see the emergence of a more sophisticated carbon market of green derivatives and green risk management, and in playing to its existing strengths, many of which have not been harmed or damaged in any significant way by Brexit.

[Peter Grant]

Q I know that your website describes one of your key aims as developing a larger capital market across Europe. There is a trick to be pulled off in encouraging all the right kinds of people to come and invest in your financial markets while keeping the wrong kinds of people out. How effective has the UK’s previous regulatory regime been at keeping Russian money out of our financial markets?

William Wright: On the substance of that question, I will have to put my hands up and say it is not an area that we have done a huge amount of work on, although we have recently hosted some events on that theme—for example with Edward Lucas, talking about Russia, Ukraine and links back to the City.

One point I will make is that back in 2007, in a previous life as a financial journalist, I was at the official launch of NYSE Euronext—this was the merger of the New York stock exchange and Euronext, the European-based stock exchange. The founding chief executive, John Thain, who was then chief executive officer of NYSE, said he thought that London would come to regret its campaign in the previous five or six years to attract Russian companies to list on the London stock exchange. If we look back on those comments with the benefit of 15 years of hindsight, he was probably correct.

--- Later in debate ---

[Tulip Siddiq]

Q Compared with the US or the rest of Europe, in the UK we lack mutually and co-operatively-owned regional banks. You have touched on this already, Robin, but I want to hear a bit more about why you think that is. What is the role of regulators when it comes to that lack of access?

Robin Fieth: The first thing is to look at the tradition—the tradition of the UK has been that our regional mutual financial institutions have either been insurers or building societies, traditionally, or, in the last 30 or 40 years, credit unions—compared with the United States or large parts of Europe, where there is a very long tradition of mutually-owned community banks, co-operative banks, lifelines and so forth. Our tradition is very different. Apart from the Co-operative bank, we have never had a large, mutual, fully general-purpose bank. Nationwide is a full retail bank, but it does not do business lending, for example. We have never had that tradition.

As some of you will know, there are a number of small community banks in the mobilisation phase or coming to mobilisation phase. On the second part of your question, the Bank of England’s new banks team has been very good at helping challenger banks to get through the process and start up, and we have seen so many start up. I am not sure that they have the same experience and expertise in respect of what the mutual model looks like and why it is different. If you talk to any challenger bank, they will say it was much more difficult to get through mobilisation than it should be. If you talk to the community banks, they say it is very difficult to get through mobilisation. There are at least three that we are working with on the side, if you like, that are going through that process.

The real challenge, where perhaps there is a role for Government, is in creating the forms of capital that mutual start-ups can follow, because they cannot be venture-capital backed, so you need some form of mutual capital. We have suggested to both the main parties, for example, that whichever version of the British Business Bank you want, it could have a mandate for part of its capital being mutual capital.

Robert Kelly: Robin has covered the vast majority of the salient points, and we would agree with his comments. In terms of taking it maybe a step further or down in respect of the community banking model, as Robin mentioned there is a development agenda in a few areas of the country. There is certainly space for innovation and competition in SME lending and around transactional activity and transactional accounts and making sure there is something different from a competition perspective —maybe where the bigger banks are not necessarily in those spaces or where there is perhaps an opportunity for some more partnership and co-operation. We have talked to some of the community banking models about what space they and the credit union sector could co-exist in. We acknowledge that credit unions are already able to do corporate lending and SME lending, and some have done so. I think around 20 or 21 credit unions across the country have taken advantage of that. The ongoing PRA consultation on the future supervision and regulation of the credit union sector has some reference to that, in terms of additional checks and balances.

We recognise that there is opportunity for the credit union sector to do more. A big part of the legislative reform package that will ultimately impact credit unions can be described as an enabling factor that allows product and service innovation and development. Alongside the community banking and mutual banking model, the development that we have seen, and all the background that Robin has already mentioned, it should be made clear that we in the credit union sector believe that we can also fill some of that space. If the overall objective is around competitiveness and enabling competition, we should be ready to act, and to respond to the needs of communities and small businesses across the country.

[Peter Grant]

Q Mr Fieth, let me first come to you and the comment that you made previously about the UK not really having a tradition of mutually owned lending banks. Was not the first trustee savings bank set up in Dumfriesshire in 1810? There has been a very long and proud tradition of locally and community-owned banks, which survived for a long time. They were basically wiped out in a series of corporate takeovers in the 1970s and ’80s. Is that not the case?

Robin Fieth: Whether the term is “corporate takeover” or “demutualisation”, which was very much encouraged by the Government of the day, is a moot point, but you are absolutely right: there is or was a very proud trustee savings bank tradition, and of course it started in the lowlands—well, the borders—of Scotland. Sadly, the last trustee savings bank went into run-off within the last five or six years. That was the Airdrie Savings Bank. It is a tradition that we no longer have. Again, those institutions were not a full service of the kind that the shadow Economic Secretary was talking about. They were not a full service model. They were very much a savings and loans model, largely for retail purposes. That is the tradition we had, yes, but it is now sadly part of our economic history.

Public Service Pensions and Judicial Offices Bill [ Lords ] (First sitting)

Debate between Tulip Siddiq and Peter Grant

Committee stage
Thursday 27th January 2022 Public Bill Committees

[Tulip Siddiq (Hampstead and Kilburn) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Sharma. I will start by talking about our public sector workforce and the service they give to this country. The pandemic has highlighted how much we depend on the NHS and on teachers, police and other frontline professionals who keep us and our loved ones safe. It is only right that the state ensures that our public servants are secure in retirement by providing a decent pension on a fair and equal basis.

Labour therefore welcomes the main provisions in clause 1, in particular the attempt to introduce a remedy for the discrimination of younger members in the new pension schemes established by the coalition Government between 2014 and 2016. I recognise that the remedy the Government have opted to include in the Bill—the deferred choice underpin, or DCU—was the preferred option of the overwhelming majority of respondents to the Government’s consultation, including Unison and GMB—my trade union. However, I want to draw the Minister’s attention to the fact that trade unions continue to have concerns about the lack of clarity on how the remedy, expected to cost around £17 billion, will impact the future value of members’ pension schemes.

On Second Reading on 5 January, the Under-Secretary of State for Justice, the hon. Member for South Suffolk (James Cartlidge) said

“liability…will fall on the Exchequer.”—[Official Report, 5 January 2022; Vol. 706, c. 112.]

That is an important commitment, but as Lord Davies of Brixton, a Member of the other place and one of the country’s foremost pension experts, has said, it does not address the question of whether the remedy will be included in the cost control mechanism at a later date. If this cost were to be included in a future cost control mechanism valuation, it would result in members receiving lower benefits and having to make higher contributions to their pension schemes. As the Public Accounts Committee has warned, this would, in effect, be unfairly penalising our public sector workforce for the Government’s economic incompetence by passing on some of the cost of the Treasury’s £17 billion mistake to members.

Can I ask the Minister to confirm, once and for all, whether the estimated £17 billion cost of the remedy will be included in future valuations of the pension schemes under the cost-control mechanism? If it is to be included, can he please set out how that will impact on the future value of members’ benefits and contribution rates? I think he will agree with me that our public servants deserve better than to be left in the dark, so I hope he will clarify this in detail.

Today, the Government have failed to address concerns about how pension scheme members will be protected from unscrupulous advisers. I know that Minsters have been reluctant to include pension scams in the draft Online Safety Bill, despite the spiralling costs of pension fraud and mis-selling. I would like the Minister to set out what steps he is taking to protect members from scammers, who may try to exploit the greater choice that this Bill provides by getting people to transfer out of the pension schemes in a way that is not in their best interest.

[Peter Grant (Glenrothes) (SNP)]

It is a great pleasure to serve under your chairmanship, Mr Sharma. Some of the comments that I will make today will repeat the assurances I asked for on Second Reading. Looking back over the Hansard record, I think I was the only Member who spoke in that debate who did not have their queries addressed in the Minister’s summing up—not that I was keeping track or feeling got at, at all.

I am grateful to the Minister for clarifying the query from my hon. Friend the Member for Glasgow South West; it should concern all of us that such a massive injustice almost slipped through the net. There have been dozens of chances for amendments to be made and for this Bill to be got right. I said on Second Reading that I was concerned that the number of very late amendments that the Government tabled in the Lords was an indication that there were still big gaps. Something as vital as not denying a public service worker their pension rights was missed because, as a result of a dreadful piece of legislation, their job was sold off to the private sector and then brought back in house again. For that potential injustice to have got this far, until the Government spotted it and brought them in, will leave us all at the end of today’s proceedings—and Tuesday’s if we sit then—still wondering what else is left that has not been picked up.

It is quite clear that, with some of the later amendments, the Government did not identify issues for teachers, whose length of service provision and their age sometimes will not fall into line with each other in a way that would be expected. Some of the later amendments suggest that the Government forgot that sometimes the Treasury does not decide things in Northern Ireland, but rather, it is the Northern Ireland Department of Finance that decides. How could such a crucially important piece of legislation have got to that stage without basic facts of the UK constitution having been picked up somewhere within Government?

I hope that when we come to those sections that the Minister will have the good grace to admit that sometimes there have been simple blunders by the Government, that mean we will have to consider these things as amendments rather than them being part of the substantive Bill.