Financial Services and Markets Bill [HL]

Baroness Kramer Excerpts

Report stage
Wednesday 9th September 2026 Lords Chamber

[Baroness Young of Old Scone (Lab)]

My Lords, I welcome the Minister’s statement that he was committed to bringing forward amendments at Third Reading. I think it is relevant to this group of amendments. I simply want to draw the House’s attention to two sessions we have had in the last three or four days with the FCA. The Minister very kindly organised a session with the FCA about its role in climate and environment. To be honest, the kindest thing I can say is that I was underwhelmed. I think that it is doing a lot more than it displayed that day. The defensiveness that it demonstrated in front of a bunch of really friendly, helpful and not at all terrifying Baronesses, was a bit of worry to me, to be honest, because I felt there was real defensiveness and push-back against a responsibility. I thought perhaps we had just given it a hard time and it was having a bad day—but we had another session with it yesterday, organised by Peers for the Planet, and I was horrified.

I have the quote here because I wrote it down and then went home and wept. A fairly senior representative of the FCA said, in terms: “The FCA does not have a mandate to tell businesses what they should do on climate and the environment”. I would like the House to know that and the Minister to bear that in mind when he comes forward with his Third Reading amendments, because there is a real need for a stronger line in guidance than we might otherwise imagine.

[Baroness Kramer (LD)]

My Lords, fairly early on in Committee I said to the noble Lord, Lord Stockwood, who was then in charge of bringing the Bill through, that, when a common opinion was held by the noble Baroness, Lady Noakes, the noble Lord, Lord Vaux, and my noble friend Lady Bowles, he ought to listen. Those are the three real experts that we have in the House on markets, regulation and the financial services industry, and all of them set aside political ideology when they come forward with recommendations. They look to the common good and to good functioning, both for markets and for consumers. So I am very glad that on proportionality—which of all the issues was the most serious in the downgrading of principles, quite frankly—that the Minister is now amending that.

I am also appreciative that there is going to be movement on climate change because, as colleagues have said, this is a crisis that is on our doorstep. We have no choice but to act, and it means we need to focus all our strengths on dealing with that crisis. I am very conscious of the impact of financial stability and how it crept up on us, because we only looked at it through a very narrow lens instead of looking across the piece and recognising how holistic and interconnected so many issues are.

I have Amendment 67 in this group. I have to confess that it is an odd place for this amendment, and I shall deal with it briefly. Amendment 67 arose because a number of banks have been refusing to take small businesses and SMEs generally in the defence industry as their customers, usually because they are concerned about reputational risk. That has made it very difficult for those SMEs to raise credit, and it is seriously undermining the UK’s plans to build up its defence forces, which I think we all agree is not acceptable. Some Members may not be aware that the most innovative defence firms are SMEs. It is not just about the big players—the SMEs are critical, particularly at a time when so much is changing in the strategic and defence sector. These small SMEs already face high regulatory hurdles, and they often face slow procurement processes when they work with the Ministry of Defence. The absolutely killer blow is then not to be able to finance the projects, no matter the quality of the contract that they have.

The FCA has said its rules present no obstacle to lending to SMEs and considers that to be a green light, but that is not having very much impact. My amendment essentially attempts to put some welly behind the FCA in dealing with these issues. It would require it to conduct and publish a review at least once every three years, including identifying any barriers. I would have thought that a report like that might get the Government going as well. I know that the Government are aware of the problem, but I emphasise that knowing about it is not enough; they actually need to act and change minds.

[Baroness Neville-Rolfe (Con)]

My Lords, we welcome the Government’s decision to retain proportionality as an express statutory consideration for both the FCA and the PRA when they exercise their general functions. This responds to productive discussions in and outside Committee, for which I thank the Minister and indeed the noble Lord, Lord Stockwood, who I am delighted to welcome back to the discussion of the Bill, and I thank him for his efforts to improve it. I also thank my noble friend Lady Noakes, the noble Baroness, Lady Bowles, and the noble Lord, Lord Vaux, for their constructive and flexible approach to the substantial problems on these clauses.

Time and again, one of the concerns we hear from business is that regulation can be disproportionate to the risk it is intended to address. That is particularly true for the small and medium-sized firms that we rely on so heavily for competition, innovation and economic growth, right across this country. The proportionality changes help to address this and we will not therefore be pressing our Amendment 62 on SMEs to a vote—even though it is my favourite amendment and I have the support of the noble Lord, Lord Vaux. The noble Baroness, Lady Kramer, is right to focus on lending to small defence companies as well.

The requirement for the FCA and PRA to explain in their annual reports how they have taken these proportionality principles into account, alongside the requirements relating to consultation and parliamentary committees, creates an important mechanism through which Parliament can examine whether the principle is actually being applied in practice, with concrete examples, as the noble Baroness, Lady Bowles, suggested. This is important because the ultimate test of these amendments will not simply be whether “proportionality” appears in statute. It will be whether firms see a genuine difference in the way regulation is developed and applied, particularly by the regulators. We hope that the Government’s amendments will prove to be a meaningful mechanism through which regulation can become easier to comply with, less costly and ultimately more successful in achieving the objectives that Parliament has set for the regulators—of course, the proof will be in their implementation.

The Government have listened to concerns raised during the passage of the Bill and we support the amendments that the Minister has tabled in response. This is good House of Lords practice. Like my noble friend Lady Noakes, I do not intend to pursue the other amendments today.

--- Later in debate ---

Moved by

[Baroness Kramer]

60: After Clause 22, insert the following new Clause—
“FCA rules: access to certain savings accounts for persons lacking capacity(1) The FCA must make rules requiring a relevant provider, where the conditions in subsection (3) are met, to enter into an agreement under which payments from a relevant account held by a person who lacks capacity to manage their own financial affairs (“the account holder”) are made to a person acting on the account holder’s behalf (“the recipient”) instead of to the account holder.(2) A “relevant account” means—(a) a Child Trust Fund within the meaning of the Child Trust Funds Act 2004;(b) a junior individual savings account within the meaning of regulations made under Chapter 3 (income from individual investment plans) of Part 6 (exempt income) of the Income Tax (Trading and Other Income) Act 2005;(c) an account of any other description specified by the FCA in rules made under this section.(3) The conditions are that—(a) there has been provided to the relevant provider either—(i) a document signed by a registered medical practitioner stating that the account holder lacks capacity to manage their own financial affairs, or(ii) a statement in writing by the recipient that they understand their duty to apply any money received in the best interests of the account holder, that they are aware that they may incur civil or criminal liability if they misapply the money, and that, so far as they are aware, no other person has authority to receive the money by virtue of a power of attorney or an order or appointment made by a court, and(b) the account holder has not informed the relevant provider that they do not wish such an agreement to be made.(4) Rules made under this section must—(a) secure that a relevant provider which makes a payment in accordance with such an agreement does not, by making it, incur any liability to the account holder, unless the provider has reasonable cause to believe that the recipient is likely to apply the money otherwise than in the account holder’s best interests, (b) require the recipient to apply any money received under the agreement in the best interests of the account holder, and(c) provide that the aggregate of the payments made under an agreement may not exceed £5,000 in any period of 12 months.(5) The purpose of rules made under this section is to enable access to be obtained to money held in a relevant account on behalf of an account holder who lacks capacity without the need for an order or appointment of the Court of Protection or any equivalent order of a court.(6) In this section “relevant provider” means an authorised person (within the meaning of the Financial Services and Markets Act 2000) who provides a relevant account.”Member’s explanatory statement
This new clause seeks to require the FCA to make rules enabling money in a Child Trust Fund or Junior ISA belonging to a person who lacks capacity to be paid to someone acting in that person’s best interests, subject to safeguards, without an application to the Court of Protection.

[Baroness Kramer (LD)]

I wish to test the opinion of the House.