Financial Services and Markets Bill

Anthony Browne Excerpts

Report stage
Wednesday 7th December 2022 Commons Chamber

[Andrew Griffith]

I will repeat my previous point, and the hon. Lady will have her chance to speak later. It is the objective of the Government, in the course of the transition that my right hon. Friend the Member for North West Hampshire (Kit Malthouse) talked about, to protect the vulnerable and ensure that protection of access to cash. The hon. Lady’s statistic is right, but I reiterate that more than 95% of people today live within 2,000 metres of a free cashpoint, and I hope she recognises that.

[Anthony Browne (South Cambridgeshire) (Con)]

I want to follow up on some of the comments from my right hon. Friend the Member for North West Hampshire (Kit Malthouse). Cash is being used far less than it was previously. That is good and convenient for many people. I fully support the Government’s moves and the ambition across this House to ensure that we have access to free cash, but there is no point in people having access to free cash if they cannot spend it on essential items. I just flag that many retail outlets no longer accept cash. It is not just parking; there are cashless bars and so on. That is fine, but there is a scenario where outlets that sell essential items such as food shops and chemists might at some point be required to accept cash, because if they do not accept cash, lots of people will be excluded.

[Andrew Griffith]

My hon. Friend makes another important point, and I fear we are in danger of previewing the debate that we shall have this afternoon. When we talk about access to cash, we are not just talking about withdrawals; we are also talking about the deposits that are so vital. If our small businesses in particular are to continue to take cash, they need to be able to deposit that securely, safely and conveniently.

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[Chris Grayling (Epsom and Ewell) (Con)]

I rise to focus on new clause 24, tabled in my name and with the support of a number of Members on both sides of the House. It focuses on one of the great challenges of the moment, which is how we reverse the loss of habitats and forests around the world. Deforestation in South America, Asia and, to an increasing degree, in the northern parts of the world is a real crisis for our planet. It is appropriate that we are having this debate today, the day on which the biodiversity summit begins in Montreal. It is my hope that that summit will lead to a new international agreement on tackling habitat and biodiversity loss around the world.

New clause 24 focuses on taking the battle against illegal deforestation to the next step. This Government and this House took the first important step last year in the passage of the Environment Act 2021, which introduces a requirement for those dealing in potential forest risk products in the United Kingdom to have a due diligence process in place to ensure that they are not sourcing their products from areas of illegally deforested land. That was a substantial and very positive step, and I am pleased to see that the European Union has taken a similar step this week and is perhaps going slightly further in tackling the issue of forest risk products.

But a substantial area that remains untouched both here and in many countries around the world is the question of financial services investing, whether through equities, loans or bonds, in companies that source forest-risk products. We know from the work of organisations such as Global Witness that, over the years, there have been far too many examples of banks knowingly, or sometimes unknowingly, financing the activities of companies that purchase directly from those who are illegally deforesting areas of the Amazon, for example, for beef production or soya production.

We need to extend the work we have already done on forest-risk products, and those who directly deal in them, to the financial services sector and the banks that fund companies that have the potential to participate directly or indirectly, knowingly or unknowingly, in illegal deforestation.

I hope the Government will take this on board, and I am grateful to the shadow Minister, the hon. Member for Hampstead and Kilburn (Tulip Siddiq), for her words of support. New clause 24 would replicate almost exactly what this House has already approved in the Environment Act 2021, translating it into a duty on the financial services sector to carry out similar due diligence to ensure that its work does not support illegal deforestation.

The reality is that these financial services businesses already do due diligence. No major institution simply lends or invests in a business without doing very careful due diligence on where it is putting its money, on the likely return on that investment and on the likely risks of that investment. New clause 24 would not ask them to do something wholly different from what they are already doing; it would simply require them to extend their due diligence into this area, which most institutions, at a senior level, would say is vital to all of us.

[Anthony Browne]

My right hon. Friend is making an incredibly important point about an issue I also massively care about, and I totally support the ambition to get some form of regulation in this space. When I was environment editor of The Observer and The Times, I often wrote about deforestation. There is a real problem with doing due diligence on supply chains, as the loggers in Brazil log illegally but tell their intermediaries that they log legally, so the intermediaries say they are logging legally, and so on. That is all quite difficult to trace. If there is not a robust due diligence system, and many people have struggled on that, my fear is that financial services companies will end up not backing any wood product companies at all, as even the legitimate ones would be seen as a risk.

[Chris Grayling]

My hon. Friend makes an important point. What makes it possible for big organisations to track their supply chains is the presence of Earth observation data, which many supermarkets now use to understand where they are sourcing from. Interestingly, it is a central part of this week’s proposal by the European Union. The data is available, but it is complicated. I recently had a meeting with a major institution that financially supports companies in Brazil, and it said it is incredibly difficult to track, all the way down the supply chain, where products are coming from. Well, it may be incredibly difficult, but it still has to be done.

New clause 24 would place a duty on financial institutions, as we did with retailers, to carry out proper due diligence on their investments, to understand and to be absolutely certain that the companies they deal with have due diligence processes in place themselves, so they know from where they are buying beef, soya or palm oil and so they work properly to ensure they deliver products from sustainable sources in a responsible way.

We hear warm words coming from the executive suites of our major financial institutions all the time about their commitment to sustainability, to net zero and to being responsible citizens. Sometimes they do it, sometimes they do not. There might be the will in head office, but sometimes a local branch does not deliver. New clause 24 would make it a clear duty on those institutions to do due diligence to make sure they know where products are coming from and so they know where investments are being made. This country has been a leader, and new clause 24 would be one further step in dealing with the blight of deforestation, which affects everyone’s future.

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I understand that the Government are considering advising free access in the policy statement, concerned that requiring free access will result in the loss of paid machines. That simply does not make sense.

[Anthony Browne]

rose—

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I conclude by reminding the Minister—not that he needs any reminding—that the Financial Conduct Authority’s first objective is to promote effective competition in the interest of consumers, and that it is specifically charged with identifying where firms may exploit the difficulties that customers face in making choices. I welcome this Bill and look forward to seeing the FCA step up to its greater responsibilities. Everybody who lives in Southend West deserves a fair rate of return on their hard-earned savings and to have fair access to banking facilities. I urge the FCA and the Treasury to use their groundbreaking new powers to make sure that happens.

[Anthony Browne]

As I have made clear in previous iterations of this legislation, I am very broadly supportive of the aims of this Bill and on the Treasury Committee we have scrutinised it in detail, so I will limit my comments to just some of the huge number of amendments. I love this exercise in democracy where different MPs with different interests come forward with their amendments; I have actually worked with many of them in my life and have direct experience with them.

I absolutely support new clause 27 on freedom of expression, which my hon. Friend the Member for Penistone and Stocksbridge (Miriam Cates) mentioned. UsforThem, which was founded by someone in my constituency, has done some great work campaigning on schools, but was utterly traumatised by the sudden loss of access to PayPal, and we need due process around that.

On new clause 28 relating to buy now, pay later, which the hon. Member for Walthamstow (Stella Creasy) mentioned, I was involved with the regulation of payday loans, something else that fell between the gaps and needed to be sorted—it was outrageous. I am convinced by her arguments that buy now, pay later is another gap that is not addressed. I am sure the FCA has powers to deal with that already, but I hear her frustration that the Government keep saying that they will deal with it but have not done so, so I urge the Minister to put that on his list of things to take up and deal with.

The same applies to new clause 11, which the Chair of the Treasury Committee, my hon. Friend the Member for West Worcestershire (Harriett Baldwin), talked about convincingly. It is an absolute scandal that huge swathes of the population cannot get access to financial advice and are impoverished as a result because of a failure of regulation, or excessive regulation—we can blame the EU. I was on an FCA taskforce some time ago to try to sort out this problem—I was trying to remember where it went, but it clearly ran into the sand. We absolutely need to deal with this urgently. Again, I take reassurance from the Minister’s comments that he will deal with it as a matter of urgency. I will hold him to that, as, I am sure, will the Chair of the Treasury Committee.

Access to in-person banking is really important. In fact, I negotiated the deal with the Post Office on behalf of the banks to open up post offices to offering banking services. There are actually more post office branches than all the bank branches in the country combined. A lot of people complained to me about the lack of access to certain banking facilities, and I would always point out that they can do those things at their local post office, which they did not know—we need to raise the profile of that.

Opposition Members need to define clearly what they mean by “in-person banking”. There are lots of different things. Do they mean going to ask for a mortgage or just paying a bill, for example? We do lots of different things in different places. The deal with the Post Office is being renegotiated, and I think the main thing there will be to ensure that whatever services we want are put into the negotiations.

Finally, I want to talk about access to free cash. I said in an intervention earlier that I massively support access to cash. Cash use is dwindling—clearly, more people are using cards and other payment types—but we need to make sure that people who do not want to use other means have access to cash and, indeed, access to free cash. I should say—I do not think anyone has remarked on it—that paid ATMs have been dying a death over the last 15 years. There is about half the number now than there was 15 years ago. People pay for only 5% of ATM withdrawals—I never do because I find it offensive to pay to take out my own money. I fully support the sentiment.

However, on new clause 7, there is already a power in the Bill for the FCA to ensure access to cash, and that could include pricing so that the FCA can ensure access to free cash. I have two things to say about the drafting of the new clause. First, it does not stipulate whether it applies to personal or business customers. Traditionally and historically, a lot of business customers have paid for cash-handling services. Is the new clause saying that they should no longer pay for them? It is not quite clear. If they are no longer required to pay, are non-cash businesses cross-subsidising them? Secondly, the new clause does not stipulate whether it applies just to sterling cash and not to foreign exchange. If I was a bureau de change dealer, I would be rather worried about having to offer my services for free.

With those comments, I basically urge the Minister to stand by the various commitments he has made this afternoon. I support the Bill.

[Mr Baron]

I very much welcome the Bill and congratulate my hon. Friend the Minister on listening to and engaging with the points raised by many of us on the Back Benches.

I support new clause 11 in particular—I was heartened to hear what the Minister had to say about it—but may I perhaps reinforce a very simple message about the urgency required on financial advice? We in this country have been blessed with the City of London and many other world-leading financial institutions around the UK. I think I can say with some confidence that London is the financial capital of Europe, if not the world. The world comes here to do business on a variety of fronts. Yet we have very little good access to advice. In fact, if anything, we have a widening advice gap.

On the one hand, we have wealth managers raising their minimums, banks withdrawing from the high street and withdrawing fully from providing investment advice; we also have the retail distribution review, which I supported because it was ending the backhand commission for unit trusts—that was bad for the consumer—but it has resulted in independent financial advisers having to charge more and few of them being used. On the other hand, with all that advice in retreat, we have the Government and all parties saying that we must take greater control of our finances, there are greater pension freedoms and there is a great demand for good advice.

A lot of people of modest means who have no access to good advice fall into that void. They may be tempted, for example, to leave cash in the bank earning a pitiful rate of interest while inflation erodes its value. This is where the law of unintended consequences comes in, because all that regulation that had to be met before one could offer full-blown advice is fine when we are talking about full-blown advice, but there is a middle ground that needs to be covered. I offer a basic statistic that might interest or help those willing to take a particularly long-term view to their financial planning: instead of leaving money in cash, if they invest in equities over the long term—25 years, for example—they stand a very small chance of losing money. There will be volatility, but because they are investing, hopefully, in growing businesses, they will do well, and 97 times out of 100, that will beat cash deposits. That is the sort of advice that banks, building societies and many others could give, without getting too complex about financial planning. It would offer consumers a choice, rather than just letting their cash sit in banks and get eroded. Will the Minister therefore give impetus to the assurance he has given on new clause 11 and really get the Treasury looking at this issue, because there is a halfway house, and we must not stop regulation being the enemy of the good? That is what we are asking for.

I will add one other thing quickly in the minute I have left. Please make sure that our regulators listen to the various trade bodies when it comes to regulation, because we are inheriting—I very much welcome this Bill—a lot of powers from the EU. We are in control of our own destiny, but I take issue with the FCA on a number of points. One of them is that when it comes to investment trusts, there are such things as key information documents. They are an invention of the EU and are misleading about risk and putting consumers at risk of losing money—it is as simple as that. The Association of Investment Companies has said that. By the way, it has also said, in relation to those key information documents, “burn before reading”. Despite that, there has been no meaningful action from the FCA on that issue, and that is wrong. I ask the Minister to make sure that our regulators do not rest on their laurels, realise the greater freedoms they have got and rise to the occasion.