Financial Services Bill

Andrea Leadsom Excerpts

Monday 10th December 2012 Commons Chamber

[Damian Hinds]

The hon. Lady is entirely right, and I alluded to that point when I talked about behavioural charges. It is wrong to think we can legislate perfectly for all eventualities in advance, however. This market has an amazing ability to shapeshift and find its way around any regulation we might put in place, as has been seen in the United States.

I would like to hear an assurance from the Minister that under the new regime it will be possible to have a flexible capping regime that allows for all parts of the market to operate while also insisting that they do so in a responsible way. I also seek an assurance that we will not just address “payday” loans, which are a relatively new phenomenon in this country. Home credit is massive, and it has been with us since Victorian times, and has been a problem for quite a long time. There is also pawnbroking, which my hon. Friend the Member for Chatham and Aylesford (Tracey Crouch) mentioned. Logbook loans are a big market in the United States; they have not appeared in a major way here, but we can bet our bottom dollar that they would get a big boost if other parts of the market were capped. Rent-to-own is another area.

On the basis of the Minister’s conversations across Government, can he assure us that the Government will continue with an integrated approach that addresses not just regulation but boosting financial capability, starting with children’s capability with mathematics in school? Will they also continue to support operators that provide responsible credit, in particular credit unions? I pay tribute to the work the Government are doing in supporting that sector, and would like them to go further in modernising it and making credit union services more widely available, such as through the post office network.

[Andrea Leadsom (South Northamptonshire) (Con)]

I want to speak briefly on Lords amendments 25 and 36, both of which deal with the issue of competition in respect of the new regulators: the Prudential Regulation Authority that will supervise the banking sector and the Financial Conduct Authority that will supervise business conduct in the banking sector. I seek reassurance from the Minister that having regard to the quality and level of competition in the marketplace will be sufficient to drive a radical improvement in respect of the new challenger banks.

As the Minister knows, the five oligopoly banks in the UK currently have over 80% of all small and medium-sized enterprise bank accounts and personal current accounts. That means access to finance is very limited in respect of choice and types of finance, and as bank balance sheets are currently in a difficult position, it is extraordinarily hard for small businesses to get hold of the financing they need to grow, which in turn will help our economy to recover. So the Bill gives us a once-in-a-lifetime opportunity to ensure that the regulators are, in future, incentivised to ensure not only that banks do not fail, but that we encourage new entrants to the market. At the moment, many would-be bankers find that they are set enormous hurdles, such as having to set up a dealing room just to provide evidence of their ability to do so, yet at the end of an enormous obstacle course the FSA tells them that they cannot have a banking licence. What we cannot have in the future is the PRA and the FCA combining to make it as difficult or more difficult to encourage new entrants into the market. So I hope that the Minister will set out how the regulators of the future will not only tolerate, but encourage new competition.

[Greg Clark]

This excellent debate has covered a number of issues that colleagues from all parts of the House feel passionately about, and correctly so because they are of huge importance to all our constituents, especially the most vulnerable in our society.

In the short time available, I wish to address some of the points that have been made directly by hon. Members. The shadow spokesman, the hon. Member for Nottingham East (Chris Leslie), asked how the powers would be exercised by the Financial Conduct Authority. The powers come directly from the FCA’s remit, and he will be aware that the Bill establishes a far-reaching consumer protection objective. The overall objective is

“securing an appropriate degree of protection for consumers.”

The Bill goes into detail to require the FCA to consider the following: the different degree of risk to be tolerated by different types of consumers; the different needs of different types of consumers for the provision of information; and the general principle that those providing financial services should be expected to provide consumers with a level of care appropriate to their needs. I think that colleagues would recognise that this is a far-reaching objective which gives quite general powers to protect consumers, and it is right that that should be so.

The hon. Gentleman mentioned basic bank accounts, on which some progress continues to be made. There is no universal legal right to a basic bank account, but the industry guidance still stands. It states that if a consumer asks to open a basic bank account and meets the qualifying criteria, the firm should offer them an account and that banks can refuse to open an account for a customer only where the customer has a history of fraud or is an undischarged bankrupt. Those provisions continue.