Financial Services Bill

Alun Cairns Excerpts

Monday 26th April 2021 Commons Chamber

[Alun Cairns (Vale of Glamorgan) (Con)]

Thank you, Mr Deputy Speaker, for calling me to contribute to this debate on the amendments made in the other place. There is no doubt that the Bill represents a major step in our post-Brexit world, enabling us to take responsibility for our own financial services regulation. This is an area of the economy that is important to us all for several reasons, including the revenue the sector raises for public services, the jobs it creates and the impact it has on our financial stability and global presence. My right hon. Friend the Chancellor and my hon. Friend the Economic Secretary have rightly set ambitious targets and objectives to develop the sector for the United Kingdom.

We all know the impact the big bang had in the 1980s, elevating the UK to a leading global position in this field, but it is fair to say also that some challenges stem from such radical change, and that is why I am pleased that, at the heart of the Bill, is recognition of the need to enhance our prudential standards and commitments to maintain the highest regulatory standards. Lords amendments 16 to 19 are welcome in that they extend the reach of the Prudential Regulation Authority and the Financial Conduct Authority to take account of our climate change commitments. That shows how serious the Government are about contributing to our regulatory standards and expectations and enhancing our reputation globally in our attitude to both climate change and strong financial regulation. Lords amendment 7 and the string of amendments relating to the Proceeds of Crime Act 2002 are also welcome, updating legislation to ensure that it remains fit for purpose in the fight against market abuse and the fight against crime, and recognising the status of legislative consent, specifically in relation to Northern Ireland.

In the limited time available, I will focus on Lords amendment 8, which relates to people who are trapped with their current inactive mortgage providers—mortgage prisoners. We need to recognise the seriousness of the issue and the circumstances in which people find themselves. I, like many Members across the House, have constituents paying higher interest rates on their mortgages than would otherwise be necessary. Although I am optimistic about the economy, it is fair to say that there remains much uncertainty, and developing solutions for people in this situation, who could save thousands of pounds, deserves full and proper consideration.

It has been suggested that there are 250,000 people in this situation, although others challenge that by highlighting that many can already switch providers—that is absolutely true—and others are restricted because of arrears and myriad complex reasons. Whatever the data says, the reality is that an individual paying over the odds inevitably wants to gain a better deal or the best deal possible, and we, as Members of Parliament, have an obligation to give support in a range of ways. However, in doing so, we must also recognise the hardship and complexity of individual cases.

In spite of recognising that solutions need to be developed and worked through and recognising the positive motives of those who tabled Lords amendment 8, I do not think it would achieve what many believe or claim it would. It is simplistic in its drafting and it would be merely a short-term fix. I want to see long-term solutions to the challenges for these individuals and families. Even consumer commentators and London School of Economics research recognises that it would be only a short-term stopgap, not the longer-term answer we would like to see. Intervention in the market for some people would create issues and set precedents that may not have been fully thought through. Ultimately, we need to be working to gain market solutions that will be the long-term answer that people deserve. I welcome the comments made by the Minister in his introductory remarks from the Dispatch Box. He absolutely recognises the challenges that people face. The commitment to work with the Financial Conduct Authority is excellent news that offers the potential of a long-term solution. However, an effective market solution would not be the one-size-fits-all-approach that the amendment suggests.

We must also recognise the complexity that the Minister and the Financial Conduct Authority will have to deal with because of the unique circumstances in which each and every individual finds themselves. The reality is that answering those serious issues, with far-reaching effects on the families tied in such circumstances, requires a number of solutions that genuinely reflect the complexity of those individuals’ circumstances. The amendment has been presented as a simple answer, but, as I said, it requires much more work and study. I am grateful that the Minister responded to the calls from across the House that clearly build on the work he has been pursuing up to this stage. I ask the Minister to continue to respond to those Members supporting the amendment by asking them to recognise the complexity of the situation.

Although I am challenging the Minister—in, I hope, a positive way—I want to recognise the changes that he has introduced so far. The changes to mortgage affordability assessments have had a significant impact. They have made a major change, and there is the prospect of supporting a group of people with a more effective market-based answer than that offered by the amendment. That is the type of solution that we need as a long-term answer. I want to act to support mortgage prisoners, but I do not think that the amendment achieves that. There are many people in very many different circumstances, and I do not think that it recognises all the circumstances that exist. It will not deliver what many people believe it will achieve. There are myriad complex situations.

I would also say that it will take time for the amendment to become effective, even if it was passed today. I say to the Minister that we can use this time to come up with alternative long-term solutions. I had not expected the Minister’s response at the Dispatch Box, which commits to doubling his efforts with the Financial Conduct Authority and even setting a specific timescale. That recognises the urgency of this while managing expectations of the challenges and work that they are committed to doing. We are using the time, as I was planning to call for it to be used, to come up with long-term answers rather than the short-term fix that Lords amendment 8 claims to provide.

[Alison Thewliss (Glasgow Central) (SNP) [V]]

I very much support Lords amendment 1 on the duty of care. As the Minister will recall, we have raised this during the previous stages of the Bill, in Committee and on the Floor of the House. We think that a financial services duty of care has never been more needed than it is just now, given the difficulties that people have had in the past year with the impact of coronavirus and long covid. The Minister’s proposals are really for consultation, to kick the can down the road until August 2022, giving our constituents quite some time before they can get the duty of care that I think we would all agree they deserve.

In particular, the amendment would help those suffering not just from the effects of covid but from cancer, which is why it is supported by Macmillan Cancer Support. Four out of five people with cancer are affected financially, being on average £570 a month worse off as a result of their diagnosis. Without support to manage this financial impact, money worries can spiral out of control. Macmillan estimates that more than a third of people with cancer, 39%, are severely financially impacted by their diagnosis and of those almost one in three had to take a loan or go into credit card debt. Macmillan’s clear ambition is that every person affected by cancer can rely on their financial services provider to give the support they need to cope with the financial impact of a diagnosis.

At the moment, there is a clear gap in the service. Only 11% of people tell their bank about a diagnosis. Why is that? Is it because they do not think that they will get a fair hearing? Is it because they do not want to admit something like that to their bank because they fear some sort of negative consequence? That tells me that the rules as they stand are not working. It is a patchwork. Someone might have the good luck to have a financial services provider who is understanding, but that is not good guidance and it does not help everybody.

People support there being a duty of care. Research by the Financial Services Consumer Panel found that 92% of consumers, 99% of sole traders and 97% of small and micro businesses believe it is important that there is a duty of care in financial services. Health issues could have an impact on them, because they would affect their business and its viability going forward. The duty of care is also supported by Age UK, the Alzheimer’s Society, Fair by Design, the Money and Pensions Service, StepChange Debt Charity, Surviving Economic Abuse and The Money Charity. They believe in it because a duty of care can lead to the necessary change in culture and practice. Customers should be easily able to access forbearance from their provider, including flexibility on mortgage payments and interest freezes on credit cards or loans, without it damaging their credit files. If we put that in place, it would prevent long-term harm and financial exclusion.

There should be a clearer path to compensation when things go wrong because a provider has failed in its duty of care. That leads to a standard that people can expect and we can hold to account people who do not meet that standard. It would make a real difference were the Government to take this on, and it is hugely disappointing that they do not wish to do so today. I suppose there is still hope that the Government could change their mind right now and do this, but kicking the can around until 2022, when perhaps something will happen, does not help people here and now. I urge the Government to consider that and see whether there is any way they can bring it forward more quickly. Lots of the evidence on this issue already exists so we do not need to go into further consultation to prove the evidence that is clearly there.



In other areas the evidence is slightly more contentious and disputed, such as Lords amendment 8 on mortgage prisoners. The number of people affected seems to be part of the contention. The Minister said that he follows the facts and the evidence, but in reality he is disregarding some of the facts and evidence that do not suit his position. As the right hon. Member for Wolverhampton South East (Mr McFadden) said, the evidence is disputed. Although there may be up to 250,000 people stuck on that standard variable rate, many of them have also paid considerably over the odds in their mortgage payments.

There is also a degree of geographical impact. As a result of the location of Northern Rock, 14% of those affected are in the north-east, 16% in the north-west, 12% in Yorkshire and Humberside, and 11% in Scotland. That bears consideration, because this issue has a disproportionate impact on a large and significant group of people and their families, particularly in the context of covid and the challenges that many will be facing, which have deepened this year. It is incumbent on the Government to bring forward some kind of solution.