Financial Services and Markets Bill

Baroness Lawlor Excerpts

Committee stage
Monday 30th January 2023 Grand Committee

I have a saying that Greens lead and other follow, and I invite the Committee to think back about to when your Lordships’ House started talking about climate and nature. It was those radical Greens with their radical ideas. Now, this has come into the mainstream. I put to the Committee that the issues that I am putting on the table today will very quickly be mainstream, and if the UK wants to be world-leading, as we so often hear, bringing the planetary limits within the framework of our financial sector would truly be extraordinarily world-leading.

[Baroness Lawlor (Con)]

My Lords, I thank the noble Baroness, Lady Bennett, who I am very pleased to follow, and the noble Baronesses, Lady Hayman and Lady Sheehan, for their lucid and eloquent statements, but I oppose Amendments 44, 53, 56, 62, 69 and 69A. I see no grounds for increasing or extending the obligation as the amendments in this group propose. The Bill already includes a new regulatory principle for the FCA and the PRA, requiring them when discharging their role to have regard to the need to contribute towards achieving compliance with Section 1 of the Climate Change Act 2008. Were we to go along with this group of amendments, we would see as a consequence the further erosion of the competitiveness of the sector. Adding a climate and nature objective, as Amendments 53, 56 and 62 would, or adding, as Amendment 69 proposes, a further regulatory principle on the natural environment to that in Clause 25, would do likewise.

To my mind, such a way of thinking is vague and aspirational. “Climate and nature” or “the natural environment” are vague, whereas the tangible aims of clean water or clean air, or of mitigating against pollution, are serious and important aims of policy. There, the policy is clear and has been pointed out in the legal context; the law is clear. The “polluter pays” principle of tort law establishes the obligation to compensate those injured by these kinds of harm. Indeed, there is scope for strengthening the prohibition on dumping industrial chemicals in rivers or disincentivising the use of petrol engines in crowded cities.

The amendments in this group would undermine competition. The UK is competing in a world in which it is already legally bound by net-zero emissions law, although many of its rivals are not. In the Global Financial Centres Index table of the various global financial centres, New York and London stand at the top and are followed—in this order—by Hong Kong, Shanghai, Los Angeles, Mumbai, Singapore, Beijing and Tokyo. Tokyo is under a net-zero target regime, and Los Angeles has recently introduced a law. Of the top greenhouse gas emitters, only Japan, Canada and the EU have legally binding net-zero commitments. The bulk of Asian markets and those rising in China do not. As matters stand, these are the competitors.

There is also a danger that such amendments are parochial, whereas the sector is—and must continue to be—global, not retreating into a little UK or little EU syndrome. The result of putting the extra demands on the UK’s financial services and market would be to handicap the sector and make it less competitive—a less attractive place to do business, with global competitors edging their way up the league tables. The world has changed since London overtook Amsterdam in the 17th century and Paris at the end of the 18th. Since the 20th century, it is rivalled only by New York.

If we are to take the competitiveness object seriously, the law must facilitate and encourage competition, not handicap it. Each successful demand for an extra law in pursuit of one or the other’s picture of an ideal world will handicap our financial sector and make this country a less attractive place to do business. At the moment, London and New York, static at the peak of the pyramid, face stiff competition.

This is a very controversial question—too controversial and political to be slipped into the Financial Services and Markets Bill. The measure will have an impact on our whole economy, as noble Lords have quite rightly pointed out throughout. Constitutionally, we have not the mandate to change the policy and, politically, I doubt whether there is an appetite for extending the law beyond what there now is. If anything, there may be an appetite to suspend it during these periods of shock.

[Lord Naseby (Con)]

My Lords, I declare an interest: I am a trustee of the parliamentary pension fund. I am also a former chairman of a financial services organisation, Invesco. I have tried to put myself in the shoes of when I did that, some 15 years ago.

It comes down to what my noble friend has been talking about: the practical side of financial services. There have been major changes in the time since I last chaired an organisation, but the trustees of the parliamentary pension fund have a meeting this Thursday and we always have to balance the objectives of that fund, which is primarily to ensure that there are adequate funds to pay the pensions of our membership—that is the primary purpose of that organisation. Secondly, we have to respond to the laws of the land; indeed, because we are a parliamentary group, we are adamant that we should keep track of what is happening on the green dimensions as they affect financial services.

In her speech, which we have just listened to and which I was certainly listening to, my noble friend Lady Lawlor made it clear that, in her view, the amendments before us—with one exception, which I will come to in a minute—are, frankly, not practical. On Thursday, I will have to be practical. If anything, as matters stand at the moment, the amendments will handicap the financial services world. This worries me even more because it undermines competition. We must remember the primary new dimension that we are talking about in financial services: the requirement for growth. We look for the key kernel of that growth to come from the City of London and financial services in general. For my money, this is a stage too far. Having previously been an RAF jet pilot, I must say that, when I read about planetary limits et cetera in Amendment 69A, I think that that is going too far.

However, although I am not sure that it is ideally written, I think that there is merit in Amendment 240 —particularly proposed new subsection (1), which would require a reporting system on green material—in broad terms. Whether that is the right phraseology, I am not able to judge, but, from a practical point of view, I do not think that the amendments we have before us are appropriate at this point in time.