Financial Services Bill

Baroness Altmann Excerpts

2nd reading & 2nd reading (Hansard) & 2nd reading (Hansard): House of Lords
Thursday 28th January 2021 Lords Chamber

[Baroness Altmann (Con) [V]]

My Lords, first I congratulate my noble friend Lord Hammond of Runnymede on his brilliant maiden speech. I look forward very much to his future contributions to our debates. I am delighted that he has joined us and can bring us his tremendous expertise as a brilliant addition to your Lordships’ House—as indeed is the noble Baroness, Lady Shafik. I would also like to welcome her, particularly as a colleague from the London School of Economics, where I am currently visiting professor in practice and emeritus governor. We have been privileged to hear two such excellent maiden speeches this afternoon.

Like so many others, I warmly welcome the trade and co-operation agreement reached for goods a few weeks ago as we left the transition period. But this Bill is of significant importance for our economy, as no deal was agreed for financial services—which accounts for such a significant part of our economy. I appreciate the Government’s stated intention to secure a memorandum of understanding on financial services with the EU by, I believe, March 2021, and I ask my noble friend how this is progressing. Have any decisions been reached about areas in which it will be considered appropriate to retain regulatory alignment? What negotiations are ongoing with stakeholders in connection with this? I also believe that the Treasury has recently launched a review of Solvency II, so I ask my noble friend when this review and the wider review of financial services will publish findings and conclusions.

I am particularly interested in the potential for reforms of Solvency II rules, which could pose an attractive opportunity for UK firms which provide long-term savings, investment products and insurances to free them from the straitjacket imposed by Solvency II. It was always rather less appropriate for UK firms than for those on the continent, which has a much more bond-oriented traditional financial culture, rather than the UK approach, which has always more readily embraced and understood the benefits of equity investment, early stage in venture capital firms, and other diversified asset classes with higher expected return potential, and can have greater impact on supporting or boosting economic growth.

Freeing these financial firms to invest more in green assets, infrastructure and low-carbon housing projects will help, as we are aiming to move towards a net-zero economy. I support the words of the noble Baroness, Lady Cousins, and the noble Lord, Lord Reid, that financial services regulations and risk assessments should take account of environmental risks and means of mitigation.

Clearly, the Treasury would like to move towards a more principles-based approach from a rules-based approach. But, as other noble Lords have said, this opens many new challenges and risks. Could my noble friend, in support of the words of my noble friend Lord Sharpe, say what analysis has been done to assess whether our regulators are equipped to cope with the significant transfer of power this Bill’s measures would involve?

My noble friend, in his excellent introduction to this Bill, stated that the Government believe that regulators have the technical expertise and market understanding necessary to exercise the new powers and will be guided by the FSMA financial objectives. The noble Baroness, Lady Bowles, explained the serious shortcomings of the FSMA, and I share her concerns.

In addition, it has long seemed to me that the FCA has either insufficient powers or insufficient capacity to protect consumers against poor practice and products or services that have too often proved damaging to customers, who find themselves without protection and, in certain cases, without recourse to compensation. I urge the Government, for the future of financial services and consumer confidence in this industry, to require greater emphasis on proactive regulation, which anticipates problems, rather than try to clear up failures after the event.

Could my noble friend explain to the House whether he believes regulators will have enhanced accountability to Parliament, as called for by the noble Lord, Lord Sharkey, the noble Baroness, Lady Hayman, and others? To what extent does he believe they will have greater scrutiny to help legislators to assess whether financial services operate as safely as possible?

Of course, the aims of supporting financial providers, financial stability or firm competitiveness are important, as set out in this Bill. However, I have particular concerns about consumer protection, which is so directly important to ordinary individuals and families across the population. I echo the words of the noble Baroness, Lady Coussins, that we should take the opportunity to help those stuck with unmanageable debt, particularly in light of the Covid pandemic. I support the debt respite scheme rollout and continuation, as well as calls for this Bill to include measures that will impose far more effective controls on high-cost credit promotions. I was interested in the comments of the noble Lord, Lord Stevenson, about bills of sale. I also support the aims of the help to save initiative.

Finally, I add my voice to those calling for much greater emphasis on green issues in financial services regulation and for proper parliamentary scrutiny of this critical issue to protect our planet and mitigate the impacts of climate change.