Financial Services Bill

Baroness Neville-Rolfe Excerpts

Committee stage & Committee: 1st sitting (Hansard) & Committee: 1st sitting (Hansard): House of Lords
Monday 22nd February 2021 Grand Committee

[Baroness Bowles of Berkhamsted (LD) [V]]

My Lords, Amendment 3 in my name and that of my noble friend Lord Sharkey is an amendment to Amendment 2 and probes what is meant by “high market standards”. Could these mean, “no lower than current standards”, and what are they measured by? Are they just rules, which we hear a lot about, or do they also include enforcement? Regrettably, we also hear about that when it has all gone wrong, with the Gloster and Connaught reports being the latest examples of that. Like a taster menu, our amendment then leads on to the connection between standards and oversight of regulatory performance with respect to both rule-making and enforcement, and suggests that there should be regular independent reviews every three years. For clarification, that would not be instead of whatever Parliament decides it wants to do; it would be additional.

I will put my cards on the table and say that I am nervous about any introduction of competitiveness as a general duty, even with the qualification, or as a bidding, to consider ranking. If one thing was learned from the FSA’s demise and the financial crisis it is that giving a financial services regulator a competition duty can lead to disaster through creating incentives to balance industry profit against safety and consumer protection. It can potentially lead the regulator astray from its essential objective of safety and soundness. If there is such a remit it will inevitably lead to calls from parts of industry that do not want fetters, or even from shareholders that want profits. If competition appears as a duty there will be pressures to go just a little bit lighter touch, then just a little bit more, with arguments that this is all okay because it is among experienced market participants.

Unfortunately, light touch in one part of a market that may seem remote from retail consumers does not prevent contagion. Let us not forget the investment bank “slice and dice” of subprime mortgages, which fuelled the financial crisis by stimulating yet more subprime lending—what gets made gets sold and invested in. Later amendments deal with what happens nowadays with regulated mortgages that are sold on to unregulated entities, so let us not kid ourselves that different parts of the market are in self-isolation or lockdown.

However phrased, a competition mandate is different from a proportionality mandate, which the regulators already have. I am all for regulators making it much clearer how they categorise activity as part of proportionality and transparency. I wish they would do more of it—it can aid competitiveness too—but put in an additional competitiveness mandate and what does that mean, other than to go lighter than proportionality requires?

On the other hand, it is necessary to recognise that regulation is a good way to end up with a closed shop, preventing new entrants and new products, and there can be incentives on regulators to seek the stability of the graveyard. I can think of areas where I would lay that charge, such as fixation on gilts and sluggishness around approving new banking models. However, I do not see a primary competitiveness mandate solving that, even alongside a “high market standards” statement.

This takes us back to what is meant by high market standards. Who sets those? Whatever they are, I am sure they will be lauded as “world beating” even before the rest of the world has been looked at. However, I think that a regular, expert independent assessment can check and report on all aspects—the standard of rules, whether they are gold plated, how good enforcement and operational systems are and, yes, what can be learned by comparison with elsewhere. However, I do not think it is for the regulators to advise on whether they are better at doing things than elsewhere. I already know their answer.

The final part of my amendment suggests that the regulators pay for the reviews—so it is rather like a Section 77 review. Then it says that the review must be published without modification, because there was a certain amount of photoshopping of the Promontory report about GRG and it was made public only via the Treasury Select Committee publishing a leaked copy.

However, there are other ways that regular independent reviews could be done—more like an independent person FiSMA Section 1S review that the Treasury can require—or through an oversight body led by a handful of skilled individuals, as the Australians are now doing. It seems to me that, if you want assurance on high standards, which I do, that is the way to do it, in line with what looks like becoming the new best practice, and that is where the UK should be.

[Baroness Neville-Rolfe (Con) [V]]

My Lords, I will speak to Amendments 6 and 7 in my name and that of my noble friend Lord Trenchard, who has a lifetime of experience in the financial services sector and understands the whole issue of competitiveness and UK influence from banking for many years in Japan. I am so sorry that because of procedural changes he is now unable to speak to these amendments.

I refer to my interests in the register, particularly as a non-executive director of Secure Trust Bank plc in Solihull and of Capita plc and as a member of this House’s EU Financial Affairs Sub-Committee. I was especially sorry to miss Second Reading of this very important Bill.

These amendments—like the one moved by my noble friend Lord Blackwell and those in the name of my noble friend Lord Bridges—introduce a competitiveness objective for the FCA and PRA. My Amendment 7 also applies to the Bank of England itself. My amendments differ because they spell out aspects of competitiveness that I know are important from a lifetime in business and from nearly three years as UK Minister attending the Competitiveness Council in Brussels.

Of course, consumer protection, stability and standards are important, but they are very well looked after in the structure of financial services regulation, even if the regulators do not always deliver or enforce properly, as we have heard from the noble Baroness, Lady Bowles. I come from a different perspective. Those of us with an understanding of economics know that needless red tape, inefficiency and lack of care for UK interests end up hurting UK consumers with prices that are higher than they need to be, delays that frustrate, and a failure to get things right first time. These also hamper innovation and productivity growth, two of the best ways to both benefit consumers—and I come from a consumer background—and stay ahead internationally.

This matters today even more than in the past. Financial services are the leading sector in the British economy, not only in London but in many other areas of the UK: Edinburgh, Cardiff, Newcastle and Birmingham, to name but a few. In the wake of coronavirus, Brexit and international competition, we need to treasure and enhance our leading position. France, the Netherlands, Germany, Ireland and Luxembourg are trying to steal our lead—but ineffectively, as this hurts their business and consumers and encourages investors and services to move to New York or Singapore. As Mr Barney Reynolds has argued, we must look again at the legacy of EU law, and I know my noble friend Lord Trenchard will have more to say on his ideas on another day.

We must not forget one point: small and entrepreneurial businesses are the backbone of this country. Everyone should remember that the big, powerful multinationals find it relatively easy to adapt to new regulations, rules and requirements, and to lobby for arrangements that suit their interests.

We must also create a benign climate for innovation, which is a vital part of improving efficiency. There is one great example: the Financial Conduct Authority’s so-called “sandbox”—clear, simple and easy regulation for fintech. Thanks for this are due to the current Governor of the Bank of England, but Mr Bailey and I were promoting this as good practice in India four years ago. It is dispiriting that there are not more such initiatives.

As my amendment states, we need “efficiency” and “competitiveness” in the interests of UK plc to feature in the purview of our regulators. A competition objective is not enough; indeed, it can sometimes harm smaller players, driving them bankrupt and causing problems for their customers, as bigger institutions mop up and take over their client base. Competitiveness is sometimes wrongly associated with bad aspects of globalisation. That is wrong: UK competitiveness is what this country now needs to strive for to support the UK base, rather than encouraging the sale of wonderful companies such as Arm to overseas interests. Alex Brummer has argued this forcefully in a series of books, and I agree with him.

While we come at the issue from different angles, I really do want my noble friend the Deputy Leader to listen to those of us who are seeking a change to the Bill to bring in considerations of “competitiveness”. So I will finish with the word’s dictionary definition:

“1. Possession of a strong desire to be more successful than others … 2. The quality of being as good as or better than others of a comparable nature.”


What could be better than that?

[Lord Sharkey (LD) [V]]

My Lords, Amendment 2, in the names of the noble Lords, Lord Bridges and Lord Blackwell, and the noble Viscount, Lord Trenchard, provides an opportunity to reopen an issue that was settled in 2012 by Parliament deciding against adopting a version of what their Lordships now propose.

Their amendment does not come as a surprise, not just because this Bill provides an obvious vehicle for its proposals but because it fits into the usual timescale of loss of institutional memory. Prior to 2012, we had a “have regard” on competitiveness built into FiSMA 2000; it required the FSA to have regard to

“the international character of financial services and markets and the desirability of maintaining the competitive position of the United Kingdom”.

This “have regard” was widely seen as contributing to the financial crash of 2007-08, which is why FiSMA was amended in 2012 to remove it.

During the discussion around and preceding its removal, there were some very forceful observations; three deserve particular attention. The first was from the Treasury, which, in its 2010 report, A New Approach to Financial Regulation: Judgement, Focus and Stability, said that there was strong evidence that

“one of the reasons for regulatory failure leading up to the crisis was excessive concern for competitiveness leading to a generalised acceptance of a ‘light-touch’ orthodoxy, and that lack of sufficient consideration or understanding of … complex new financial transactions and products was facilitated by the view that financial innovation should be supported at all costs.”

--- Later in debate ---

[Earl Howe (Con)]

My Lords, I am grateful to my noble friend Lord Trenchard, and sorry that he was not able to enter the main list of speakers for the reasons that he stated. I hope that we will hear more from him in later debates but I also hope that he will take some encouragement from the actions that the Government are already taking to promote the competitiveness of our financial services independently of any conclusions reached from the FRF review. Those are proof of the Government’s commitment and intent to put actions where our words have been. I very much look forward to debating his ideas further in the course of these Committee proceedings.

[Baroness Neville-Rolfe (Con)]

I thank my noble friend the Deputy Leader for his full and courteous responses, which I shall read very carefully before returning to the issue at Report, as I think that there may be something missing in the Bill and that it would not be wise to defer the whole matter of the next set of financial services reforms. What in my noble friend’s long and helpful list assists smaller financial services businesses, which do not necessarily want to list on the stock exchange yet suffer the full cost and burden of FCA and PRA regulation as they struggle to do a good job for consumers and their clients?

[Earl Howe (Con)]

My Lords, I can probably expand this answer to advantage in writing. The Government fully understand the disproportionate effect of some of our regulation on small firms, which is why we are looking critically at whether a more proportionate approach is available to us. It is probably best if I spell out our thoughts in a letter, which I would be happy to copy to all Peers in this debate.

--- Later in debate ---

[Lord Holmes of Richmond (Con) [V]]

My Lords, it is a pleasure to speak on this group of amendments. I congratulate the noble Lord, Lord Stevenson of Balmacara, on the excellent way in which he introduced the group. The concept of financial well-being is a growing area and there is a lot for us all to reflect on. I thank him for all that he has done in this whole area of financial well-being, not least during his excellent time at the helm of StepChange.

We should thank all the organisations involved in financial inclusion, not least Macmillan Cancer Support and the Money Advice Trust. They go to people who are at the sharpest end of financial exclusion, and their commitment and the briefings that they provide to parliamentarians are a credit to everybody involved in that space.

I turn to my Amendment 9 in this group, which would place a duty on the Financial Conduct Authority to work toward the objective of financial inclusion. In doing this, I seek to raise the whole level of financial inclusion across our regulators. The context has moved on significantly during the Covid crisis. People who, fortunately, have never had to think about financial inclusion or have never been at a loss as to where the next bill payment will come from find themselves very much at the sharp end of financial difficulty. Fortunately, in many of those instances, the Government have stepped in through the furlough scheme and the self-employed and business loan schemes.

The reality is that, in a broad sense, these are enablers of continued financial inclusion. I would argue that, in this new world, it is difficult to consider the concept of financial stability while we still have such issues around financial inclusion. Financial exclusion has dogged our society for decades. It ruins lives, paralyses potential and corrodes communities. This amendment would give the FCA the objective of considering the barriers, blockers and bias that continue to mean that people are shamefully excluded from mainstream financial products.

Similarly, in the second point in my amendment, I want to place a requirement on organisations

“to report on their use of financial technology to increase financial inclusion.”

Not for one minute do I believe that fintech is the silver bullet—I am well aware of the issues around financial and digital exclusion—but fintech must be part of the solution and must be turbocharged at all levels of financial services. It must be understood much better by HMT, as well as the role it can play in varying degrees across financial services. This was proven at the beginning of the Covid crisis when, in a matter of hours, various fintechs came up with innovative solutions to address some of the issues that then rolled out as the crisis developed.

Having a financially inclusive nation makes sense. Having a financial inclusion objective within the scope of the FCA makes complete sense. I hope that this amendment will add to all the extraordinarily good work that everybody involved in financial inclusion is currently undertaking.

[Baroness Neville-Rolfe (Con)]

My Lords, I thank the noble Lord, Lord Stevenson, and my noble friend Lord Holmes of Richmond for tabling these amendments and for the important debate that they have initiated this evening. Both have considerable expertise in the field; I am only sorry that we are not all here together physically and able to debate the issues in our Pugin corridors.

I accept that financial inclusion is important, given the difficulties that a failure to understand finances can cause anyone, and indeed everyone. However, to my mind, this ought not to be a matter for the FCA, which should focus its efforts on providing a good, strong, unbureaucratic regulatory regime that allows those providing financial services to flourish and serves consumers well. Rather, a basic understanding of financial matters should, in my view, be inculcated first in school. We all need to understand the basics of loans, interest, probability and risk, how to manage budgets and pay our bills, the risk of fraud, what to watch out for, the value of a pension and many other things.

Financial Services Bill

Baroness Neville-Rolfe Excerpts

Committee stage & Committee: 2nd sitting (Hansard) & Committee: 2nd sitting (Hansard): House of Lords
Wednesday 24th February 2021 Grand Committee

[Baroness Bennett of Manor Castle (GP) [V]]

My Lords, I thank the noble Lord, Lord Tunnicliffe, for his clear and incisive introduction to this group, and the identification of the problem of Clause 3, which I am proposing in a probing amendment should not stand part of the Bill. Amendments 24 and 25 seek to improve Clause 3 and appear to do so, but this group is crucial for debating the very issues that the noble Lord has raised. He reflected some of the concerns that I expressed in the first day of the debate: namely, that the language we are hearing from the Government and some Members of this Committee closely resembles that of 2006, most notably in the then Chancellor Gordon Brown’s infamous Mansion House speech.

Clause 3 transfers certain prudential regulation matters into PRA rules. The Treasury may by regulation revoke provisions of capital requirement regulations relating to the matters listed—a list that then amounts to a couple of pages. This Bill is often presented as primarily simply a matter of transferring and translating technical regulations from Basel and the EU into UK statute. Many of us have spent much of the last year in this Room working on just such statutory instruments. However, when considered more deeply, vesting such powers in the Treasury would seem to be a kind of discretionary deregulatory charter. It has been described to me as potentially a clause allowing Singapore-on-Thames to run riot.

I would not care to take an examination on the detail of what Clause 3 does, but I am being advised by someone who could set that exam, and I take great heart from the earlier expression of support from the noble Baroness, Lady Kramer, for this probing amendment—for Clause 3 potentially hands quite substantial discretionary powers to the Treasury to get more involved in PRA matters. It could be used to soften up or undermine the PRA. I can already predict some of the answer that I may hear from the Minister, that “Our intentions are good”. But, as we go around this merry-go-round again and again, what matters is what is written on the face of the Bill, not whatever the current Minister or Government’s intention might be.

My question, to which I would appreciate an answer now and perhaps in more detail later, is: does the Bill as currently written—perhaps improved by Amendments 24 and 25, but certainly without them—hand too much discretionary power to the Treasury and should the wording not be tightened to specify more precisely the circumstances in which the Treasury would involve itself in these matters of the PRA?

[Baroness Neville-Rolfe (Con)]

My Lords, as the noble Lord, Lord Tunnicliffe, intimated when he introduced his amendments, Clause 3 is very important to prudential regulation and the banks and financial institutions concerned. However, we must make progress with this Bill, so I will speak briefly. I look forward to the Minister’s explanation of what is intended here and why, and what the safeguards will be for those entities regulated by the PRA in terms of purpose, consultation, impact, cost benefit and so on. I do not read it in the same way as the noble Baroness, Lady Bennett of Manor Castle.

I would like to understand the competitive position. My son works in London for a French investment bank regulated primarily in Paris rather than London, under the equivalence arrangements that we have granted. I suspect that the local branch here may be part of a legal entity based in Paris. How would such an EU bank be affected by the proposed changes in Clause 3 and whatever replaces the revoked regulations? Is there a level playing field?

[Baroness Bowles of Berkhamsted (LD) [V]]

My Lords, the noble Lord, Lord Tunnicliffe, has reminded us that this is the clause where the legislation on the CRR gets waived away into rules without any legislative replacement. This follows the pattern that the Government proposed in their consultation: once there are rules from the regulators, the statutory instruments are revoked.

Paragraph 2.25 of the Financial Services Future Regulatory Framework Review states:

“The default approach would be for any retained EU law provision that is in scope of the regulators’ FSMA rule-making powers to be taken off the statute book to become the responsibility of the appropriate regulator.”


Therefore, although there may be consultations on replacement rules at the point of revoking the SIs, there are no checks further down the track, so at some time further on all the rules could be revoked too. As a practical matter, that will not happen, but it is possible that for some things big changes could happen. It is probably more of a worry when it is happening to the wider generality of financial services legislation than with standards that are underpinned by Basel provisions, but I make this point because the Minister said on Monday at the start of Committee that everything is being listened to in the context of the consultation, although I must say that his replies so far do not inspire too much confidence.

It may seem convenient to have a more flexible arrangement of having regulators doing everything and not bothering Parliament with statutory instruments, and the view being pushed by the Government seems to be that Parliament should not become too bothered by rules because they contain frightening Greek letters such as Σ that really just indicate some very simple sums that could easily be explained in a sentence. Underlying that is that there should not really be challenge, only fig leaves and what the noble Lord, Lord Holmes, called the rear-view mirror.

Even though I have no great love of statutory instruments as a measure for showing parliamentary consent, there is a qualitative difference compared with rules, and I want to flag up that this clause is where the notion that we will no longer have any firm policy against which to hold the regulator accountable is endorsed. From here on, the regulator makes the policy, and there is no policy guidance between the regulator’s rules and the simple objectives, have-regards clauses and perhaps a few generalised statements, such as supporting UK economic growth. I do not like this sparseness, and it is ridiculous to suggest that rules are constantly, rapidly needing change. That is not true and not internationally sustainable.

To some extent the Government acknowledge this, otherwise there would not be the statement in the consultation that some things may have to be put into SIs as a consequence of equivalence decisions. So other countries can measure our standards, but not Parliament. How embarrassing. I heard what the Minister said in reply to my equivalence information point in the first group today. He said that such things may have to stay out of the public domain—at least until they become a statutory instrument—but I never suggested that they be public, just that there should be some sharing with Parliament about the policy direction. I am pretty sure that the EU will take the view that regulator rules alone are not enough and are potentially too transient when it comes to such a large financial centre as London, not least when it comes to looking at the lavish use of “bespoke”, which was always one of Brussel’s most hated words because it thought, and I tend to agree, that it was tailoring cut to flatter and trick the eye. That is fine for clothes, but not so good for financial services rules.

As I want to mark resistance to this passing of all policy to the regulators so they end up held accountable only to their own rules, I support the noble Baroness, Lady Bennett, in the suggestion that Clause 3 does not stand part.

Financial Services Bill

Baroness Neville-Rolfe Excerpts

Committee stage
Monday 1st March 2021 Grand Committee

[Lord Eatwell (Lab)]

My Lords, the provisions in the Bill dealing with relations with Gibraltar raise a number of intriguing questions. The probing amendment in the names of my noble friend Lord Tunnicliffe and myself is really seeking some answers. The Bill in effect creates a single financial market with Gibraltar, even to the extent of offering customers of Gibraltarian entities access to the Financial Services Compensation Scheme. In doing so, it forges a single market with a different jurisdiction, a jurisdiction that includes a different regulatory authority and notably—as the wording of the amendment in the name of the right reverend Prelate the Bishop of St Albans suggests—a fiscal jurisdiction that diverges significantly from that of the UK. I welcome the right reverend Prelate’s amendment.

When this country was a member of the European single market, there was, in essence, a single regulatory regime in the UK and Gibraltar, although the implementation of EU directives was not entirely uniform. In the Bill, the provisions on Gibraltar have been presented as a continuity measure. However, the UK’s new-found ability and declared intention to deviate from EU rules signals a substantial shift in our regulatory framework and potentially in its interplay with that of Gibraltar. The first part of Amendment 47 asks the Treasury to present in detail its assessment of how compatible the regulatory systems in the UK and Gibraltar actually are. It is important that people have confidence in the firms that will be allowed to operate in the UK. The Gibraltar authorisation regime, as it is called, being introduced by the Bill seeks alignment of law and practice in the UK and Gibraltar, but it does not prohibit Gibraltarian divergence.

I turn to the impact assessment. It is pointed out that the Gibraltarian authorisation regime will be established by a mix of primary legislation, secondary legislation, regulators’ rules, MOUs, policy statements and guidance. Given the unique nature of the creation of the single financial market, it is important that Parliament has the opportunity to assess this plethora of measures; hence the need for a Treasury statement in 12 months’ time.

It is further noted in the impact assessment that about 20% of motor insurance policies in the UK are written with Gibraltar-based insurers. When replying to the debate, will the Minister tell the Committee why he thinks that might be? What are the peculiar advantages of Gibraltar that have attracted such an extraordinarily high proportion of this UK business, and will those peculiar advantages continue as a result of the Bill?

At a time when the entire regulatory framework is under review, the Government might consider this to be the time to reassess the financial services relationships with the Crown dependencies as well. I am aware of the very different legal status of the Crown dependencies from that of Gibraltar and the fact that, given that the Crown dependencies were never members of the European Union, the UK’s exit does not pose the same range of new problems. However, the Minister will be aware that the financial services provided in the Crown dependencies are a vital part of the financial infrastructure of the UK, in particular with respect to the flow of liquidity into the London markets. Will the regulatory framework review cover the issue of the financial market relationships between the UK and the Crown dependencies? The regulatory framework review could take note, for example, of the fact that many regulatory practices in some Crown dependencies, such as the registration of beneficial ownership, are significantly superior to current practice in the UK. Given that the UK Government happily promote financial relations with Gibraltar, even though the Gibraltarian fiscal regime is significantly different from that in the UK, are they considering some enhancement of financial relationships with the Crown dependencies by, say, extending access to the Financial Services Compensation Scheme?

[Baroness Neville-Rolfe (Con)]

My Lords, we have been making slow progress, so I will be brief. I rise to question the appropriateness of these amendments on Gibraltar and the Crown dependencies. I appreciate that the second amendment in the group, Amendment 47, tabled in the name of the noble Lord, Lord Tunnicliffe, is probing in nature and I look forward to the Minister’s reply.

Amendment 46 is extraordinary. It targets Gibraltar with new and additional requirements at a time when it is facing particular challenges following Brexit and with a new treaty with the European Union still under negotiation. It seems that there are three arguments against these proposals. First, Gibraltar is autonomous and has its own democratically elected Government, setting their own regulations and taxes. Secondly, reporting regimes on businesses and the individuals who run them are burdensome and costly, and divert management effort from serving customers and building for the future. Thirdly, in the case of Gibraltar we are talking about our good friends. Many British people love and support Gibraltar. Its Government is well led, as I know from taking evidence from the First Minister to the EU Committee of this House and visiting him and his Government with the committee. I know that they have demonstrated their commitment to meeting international standards on issues such as illicit finance, tax transparency and anti-money laundering. I do not believe that there is a case for making things more difficult for Gibraltar’s businesses or those involved with proposals of the kind in this group.

Financial Services Bill

Baroness Neville-Rolfe Excerpts

Committee stage & Lords Hansard
Wednesday 3rd March 2021 Grand Committee

[Baroness Neville-Rolfe (Con)]

My Lords, I have listened with great interest to some excellent contributions on this group of amendments. I refer to my own entry in the register of interests, although my comments stem from my experience over a lifetime of support for regulatory common sense as a witness of the perverse effects of well-intentioned but sometimes ill-judged regulation, sometimes added at the last minute to Bills such as this. I support proper standards and the use of whistleblowing, which is the subject of Amendments 96 and 97, in the names of the noble Baronesses, Lady Kramer and Lady Bowles. But my conclusion is that nearly all the harms articulated in the Committee today reflect a failure of enforcement by our regulators, and/or the failure of prosecuting authorities.

Financial Services Bill

Baroness Neville-Rolfe Excerpts

Committee stage
Monday 8th March 2021 Grand Committee

[Baroness Neville-Rolfe (Con)]

My Lords, it is always a great pleasure to follow my noble friend Lady McIntosh of Pickering, who is sitting today in front of a superb backdrop of the Houses of Parliament—in my opinion, one of the best views in Europe. I await my noble friend the Deputy Leader’s comments with great interest.

I have great respect for my noble friend Lord Blackwell and for all he has achieved. However, I have some doubts about this proposal, not least the amendment’s apparent focus on bigger operators. For me, the second-class treatment of small operators in the financial services sector as a result of regulation by two regulators is the bigger issue. It is there that the pressure on investment funds and on capital, the prioritisation of IT resources and the lack of management capacity—described so well by my noble friend Lord Blackwell—is at its most apparent. Smaller firms also suffer from the overlap and overload mentioned by my very experienced and expert noble friend Lady Noakes. I should say that I speak as a non-executive director of Secure Trust Bank, which is a smaller bank.

I was pleased to see the Chancellor focus on smaller businesses in last week’s Budget—for the first time, I felt—although I am not sure how much that will help in the financial services context.

In conclusion, is this amendment necessary, or can we tackle the issues rightly raised by my noble friend in another way?

[Viscount Trenchard (Con) [V]]

My Lords, my noble friend Lord Blackwell’s amendment is an interesting idea and deserves serious consideration. It requires the establishment of a new joint co-ordination committee, comprising delegates of both regulators under the chairmanship of the Governor of the Bank of England. As long as we retain a “twin peaks” regulatory structure, it is clearly right that both regulators carry out their duties in a co-ordinated manner, ensuring that their activities are consistent and proportionate in meeting their respective general duties and objectives.

At the time of the introduction of the “twin peaks” system, we were told that it was necessary because there was a conflict between the interests of the consumer and those of the Government in maintaining financial stability. However, the FCA is responsible for both consumer protection and the prudential regulation of all regulated companies except very large ones that are considered systemically important. Might not the best way to be sure that the regulators’ actions are consistent and proportionate be to merge them into a single regulator—the FSA—but leave the Bank responsible for macroprudential regulation?

As I failed to add my name to the speakers’ list for the group of amendments beginning with Amendment 2, debated on 22 February, I was able to speak only briefly after the Minister. My noble friend’s amendment deals with much the same ground, which gives me an opportunity, with the Committee’s leave, to make some of the points that I had wanted to make on the first day.

My noble friend’s amendment seeks to ensure consistent priorities between the two regulators. This is hard to do if the objectives confer conflicting priorities on the two regulators. Indeed, it can be argued that being dual regulated at all is time-consuming, expensive and unattractive. However, I strongly believe that we must move quickly to maximise the attractiveness of London’s markets in order to be assured that the City, including our wider financial services industry, will remain one of the two truly leading global financial centres, with all that that means for our prosperity as a nation.

In 1999, I was privileged to serve on the Joint Committee on Financial Services and Markets under the chairmanship of the noble Lord, Lord Burns, during my first incarnation in your Lordships’ House. At that time, we considered arguments that the FSA should be given a competition objective as a fifth objective. This was supported by the BBA and the ABI, but the Government argued, and the committee ultimately decided, to put competition and competitiveness among the principles rather than the statutory objectives. Two arguments that led us so to decide were that ensuring competition was the primary task of the OFT, not the FSA, and that making competitiveness of UK financial services an objective could damage the FSA’s relations with overseas regulators. Our report at that time noted that some members of the committee would have preferred competition and competitiveness to feature among the FSA’s statutory objectives.

Much water has flowed under the bridge since 1999. Following the financial crisis of 2008, the FSA was split into two regulators, and we adopted the “twin peaks” model that had first been introduced by Australia. On 22 February, my noble friend Lord Howe said that discussions about the balance of the regulator’s objectives

“are not arguments for today. The Government’s future regulatory framework review is considering how the UK’s financial services regulatory framework must adapt to reflect our future outside of the EU. That has to be the right place to consider issues such as the regulators’ objectives”.—[Official Report, 22/2/21; col. GC 142.]

The Minister’s response was disappointing. Does he not agree that our departure from the EU and freedom to adopt an entirely different, principles-based, outcomes-oriented regulatory model suggests that the Government should look seriously at this question as soon as possible?

Some encouraging proposals are included in the phase 2 framework consultation, such as the introduction of “activity-specific regulatory principles”, described in section 2.38. However, it seems that the Government do not plan wholesale changes. They conclude in section 2.46 that these regulatory principles could bring about

“enhanced regulator focus on … competitiveness, without needing to change the regulators’ overarching objectives”.

Such an approach is dangerously complacent. Can the Minister confirm that the Government agree with Andrew Bailey that it would be unrealistic and dangerous to stick to EU banking rules in the future? Surely, in financial services, where we enjoy the advantages of scale and can influence the emergence of global consensus around principles-based regulations that support innovation, we should move quickly to establish the right regulatory framework to do that.

Co-ordination between our two regulators has served us fairly well to date, but it is likely that the regulators will continue to face difficulties inherent in a multi-agency regulatory structure where the performance of one regulator is often dependent on that of the other. There is also a challenge in establishing the borders of financial regulation for allocating functions between the FCA and the PRA. In particular, the increased focus on systemic stability and macroprudential regulations has resulted in overlap between the two regulators. The FCA has responsibility for the prudential regulation of more than 24,000 firms in the UK, whereas the PRA is responsible only for the prudential regulation of some 1,500 systemically important banks and investment firms. Further, the “twin peaks” system is inherently anti-competitive for dual-regulated banks and investment companies, which have to report a large amount of monthly data in two different formats to two different regulators.

The PRA’s secondary competition objective is, by definition, subordinate to its other two objectives. In effect, it is simply a principle to which the PRA should have regard. Many countries have financial regulators that incorporate some kind of competition objective among their statutory objectives, and I do not think that there is any evidence that this has damaged their relationships with either the PRA or the FCA.

Furthermore, in his recent report on competition and markets, John Penrose found that

“our independent competition and consumer regulation regime currently has a good reputation, but not a great one. International rankings put our major competition institutions behind USA, France, Germany, EU and Australia. We have stopped making progress on cutting the costs of red tape and, in recent years, have gone backwards”.

This is largely as a result of a constantly increasing number of sectors, including many in financial services, being caught by the tentacles of the very cumbersome, expensive and complicated system of regulation that has been increasingly pushed by the Commission in the interests of harmonisation.

We have prospered and succeeded as a global financial centre not because of our EU regulatory framework but in spite of it. We may have devised much of the financial regulation ourselves and may even have gold-plated some of it, but we did not choose to work within the codified structures on which European law is based. Besides, our regulators are not that different from anyone else’s: they like to make rules, and gold-plating has been the only way that they could do that in recent years.

As Barnabas Reynolds explains well in his recent paper, published by Politeia and entitled Restoring UK Law: Freeing the UK’s Global Financial Market, common law is

“pivotal to the success of a global financial centre … A key element of London's attractiveness to investors is its legal framework, which underpins a flourishing commercial environment with the rule of law”.

I worry that the Government do not yet recognise that we have to replace the entire directives-based, cumbersome, EU-derived financial services rulebook and go back to something more like how we used to regulate: based on common law principles and outcomes. There is huge resistance to change among trade associations and larger financial services groups because the present system helps the strong incumbent against the innovator and the challenger—and is, in fact, a form of protectionism.

I look forward to hearing what my noble friend the Minister intends to do to move in the direction in which we need to go. I believe that my noble friend’s amendment may provide a first step on that journey.

--- Later in debate ---

[Baroness Noakes (Con)]

As I was saying, my Lords, of much greater importance are the plans that the Government have to support and promote the future growth of our financial services sector. The amendments on international competitiveness debated on our first day in Committee are far more important than EU equivalence.

[Baroness Neville-Rolfe (Con)]

My Lords, I am delighted to follow my noble friend Lady Noakes. Like her, I was struck by the comments of the Governor of the Bank of England, and I feel she has given us a welcome dose of reality this evening.

I speak as a member of the EU Committee and its Services Sub-Committee. We have wrestled long and hard on the vexed question of the granting of equivalence by the EU, including the important issue of reciprocity, highlighted by the noble Baroness, Lady Bowles. I want to make three points and ask one question.

First, once one has decided to leave the EU, it makes little sense to be tied to its rules and regulations—in effect, as the Governor of the Bank of England has said recently, thereby becoming a rule taker without being able to make any input to the new rules. So we will have to plough our own furrow on financial services. But that does not stop us agreeing equivalence arrangements in areas where there is strong mutual interest such as central counterparties, known as CCPs, already temporarily approved, and perhaps insurance. We have granted equivalence to European banks and other bodies, as has been said, and the prospect of maintaining that equivalence gives us some leverage.

Secondly, I do not see why we should necessarily refuse equivalence to third countries which do not have similar legal and supervisory standards. Flexibility is important if we are to welcome investors here, and they may have different yet adequate regimes, bringing in innovation and diversity of offer, which could be valuable in the UK. Trade in services is absolutely vital to the future of this country.

Thirdly, I can see the value of some form of reporting to Parliament, as proposed by the noble Lord, Lord Tunnicliffe, in Amendment 100 and my noble friend Lord Hodgson in Amendment 105—although in different ways. Even on the EU Committee, we have had the greatest difficulty extracting information on the progress of negotiations on financial services, partly because this is in the hands of the Treasury and its officials, while the main spokesman has been my noble friend Lord Frost, who has led our negotiations across the board with such tenacity.

My question is this. How does my noble friend the Deputy Leader feel about the balance between UK-owned banks and financial service operators and their EU competitors now that we have granted equivalence and the EU, in the main, has not? Am I right in thinking that a German bank such as Deutsche Bank, a Dutch bank such as Rabobank or a French asset management firm such as Amundi is regulated in its own country and less subject to UK regulator bureaucracy and aggressive enforcement of something like MiFID than its UK counterparts? Is there any sense in which it is privileged, and is this true also of smaller operators? Does this matter to UK plc?

[Baroness Kramer (LD)]

My Lords, I shall begin by addressing Amendments 100 and 105, which would require reports that would be both useful and interesting. However, I want to pick up the point that was made by the noble Baroness, Lady Noakes, who essentially took the position—I understand its logic—“Why bother to seek equivalence from the EU?” I think she said, “They wish us ill and see a competitive advantage in not offering equivalence.” However, I do not think she listened carefully to my noble friend Lady Bowles, who comes with a great deal of experience from the EU. The point my noble friend made is that in the EU, which is a rules-based organisation —that is its absolutely core fundamental structure—it is quite hard to offer equivalence to a financial centre where those who are regulating it make it very clear that they want great flexibility to be able to make change very easily and with very little process. That is what we are doing with this Bill.

Essentially, we are removing the normal parliamentary processes that would have been engaged in the process of changing regulation and leaving it in the hands of the regulator, with, as we have all discussed, virtually no accountability to Parliament. It seems from what we read that a 12-week consultation would be about all that is required for a regulator to change the rules, compared with the process in the EU, which people may regard as cumbersome but which has with it extensive consultation, engagement and oversight, and which flushes out exactly what is associated with, what is involved with and what the consequences are of that rule change. We will now have light-touch rule change—that would be an accurate way to describe it. In an atmosphere where there is very little trust—the language certainly has not been that which would develop and promote trust—I can certainly see why the EU would be uncomfortable with the idea of offering equivalence in those circumstances. Therefore, it is not a determination to do us ill but, to a significant degree, some shock that change will happen so often that it will have very little idea of the rule base that applies in the UK and certainly will not understand its various ramifications.

However, in a sense it really does not matter. I find it quite shattering that we have a Government—the noble Baroness, Lady Noakes, seems to be aligned with them—who say, “We are really not interested in being able to sell our services into the second-largest economy on the globe”—whether measured by population or in terms of GDP. That is a huge and significant market. We have never been successful at selling financial services into the United States, partly because it has its own, very stalwart financial services sector. I suggest that selling financial services into China will be exceedingly difficult over many years. China will wish to develop its own financial centre; it has Hong Kong. We begin then to look at countries across Asia and in South America. However, I think we will find very shortly that they intend to develop their own financial centres. When I have talked to people in India, they would be willing to do some work here with people in the UK but they want to develop Mumbai. We are seeing a regionalisation of economic blocs, which will lead to a rise of significant financial centres in other locations across the globe. There is a real danger in dismissing with a wave of the hand the customers who sit on our doorstep, who have traditionally been our core customers, and saying, in essence, “It really doesn’t matter whether we are able to sell them services. Let’s look elsewhere.” I am not sure that “elsewhere” looks quite so promising.

What I found most interesting in this whole debate was a very different set of questions raised by my noble friend Lady Bowles. To me they were, if you like, the financial services equivalent of the chlorinated chicken question. As we go out and seek to sell our financial services more broadly, presumably, many of those locations will turn to us and say, “You can sell to us provided we can sell to you. We’re developing our financial sector and we would like to have access to your markets.” My noble friend was asking: what standards will we be using to determine that reciprocity? As I say, it is the chlorinated chicken question. We have not heard much—or anything, frankly—from the Government about what standards we will apply under those circumstances.

It seems to me that, when we assert that we can find markets all over the globe that will take the place of the EU—and that this can be done rapidly and very easily—we have to answer that question. Are we going to have to pay the price of providing reciprocity to financial centres whose standards do not meet our own? What are the consequences of that if those entities are then freely able to enter the UK market? We have a long history of concern about money laundering and market abuse. There are very serious questions associated with that; I would like to begin to hear some answers.

Financial Services Bill

Baroness Neville-Rolfe Excerpts

Committee stage
Wednesday 10th March 2021 Grand Committee

Moved by

[Baroness Neville-Rolfe]

103: After Clause 40, insert the following new Clause—
“Impact assessments
(1) Regulations made under this Act, and under any regulation-making powers inserted by this Act into any other Act, may not come into force until the Secretary of State has laid an impact assessment of each regulation before each House of Parliament.(2) Rules made by the FCA or the PRA under rule-making powers given to the FCA or the PRA by this Act, and under any rule-making powers inserted by this Act into any other Act, must be published on the website of the FCA or PRA (as appropriate) at least 30 days before they are due to take effect, together with an impact assessment of the rules.(3) In this section, “impact assessment” means an analysis of the costs and benefits of the proposed change, compared to the existing position and other options considered, including the expected impact on UK businesses and the UK economy.”

[Baroness Neville-Rolfe (Con)]

My Lords, I rise to speak to my Amendments 103 on impact assessments and 104 on reporting. I have been like a long-playing record on the importance of cost-benefit analysis of legislation, regulations and new rules in the form of an impact assessment. I return to the charge today with renewed vigour, as we are transferring very substantial powers from Brussels to Britain. I know that the process of preparing a cost benefit and the sunlight of transparency help enormously in avoiding difficulties and disasters. By the way, I thank my noble friend the Minister for producing an impact assessment on this Bill—always one of the most useful Bill documents, even if in this case it is shortish on numbers.

Amendment 103 is in two parts. First, it requires the Secretary of State—in this case, usually Treasury Ministers—to lay an impact assessment of each SI or regulation that they make before it comes into force. I know from my time as a Minister that having to put my own name to such an impact assessment made me look much more effectively at any instrument I was signing and thus avoid cock-ups—which do unfortunately happen from time to time, even in the Treasury! Secondly, as so much of EU power is being transferred to the FCA and PRA, it requires them to publish their proposed new rules on their respective websites for public scrutiny and to add an impact assessment of the rules. By impact assessment I mean an analysis of the costs and benefits of the proposed change, compared with the existing position and other policy options, including the expected impact on UK businesses and the economy. All I seek is a simple way of ensuring that the authors of new rules always consider the economic impact of their proposals in the interests of good government.

So far, so good. But—and I accept it is a big but —in part these provisions seem to be required already by the Financial Services and Markets Act 2000, as subsequently amended. I have been through the relevant explanations and websites and am still not completely sure whether that is the case. Perhaps the Minister can kindly explain the position and give us some encouraging words as to the present and future position on this important matter. If my proposed provision is genuinely unnecessary, I am of course happy to withdraw it.

Amendment 104 follows on from Amendment 103. However, it is distinct and could be adopted alone. It requires the Secretary of State to publish an annual report on the impact of measures taken by the FCA, the PRA or the Government to regulate financial services with a particular focus on small business, innovation and competitiveness. While there has been a great deal of excellent discussion in this Committee on holding financial service operators to account and improving enforcement, we can lose sight of the value of smaller operators, including those based outside London. Moreover, innovation can bring huge value to consumers—online banking, easy money transfer overseas and share trading on mobile phones are good examples—and our strained economy will benefit from the competitiveness and attractiveness of the UK’s financial sector.

I know from my experience in the intellectual property area, which I hope that the noble Lord, Lord Stevenson of Balmacara, will remember as well, how valuable an annual report of this type can be in focusing staff attention. Writing the report is a complement to the usual in-tray—the focus on risk and the avoidance of banana skins that exercises public servants, sometimes to the detriment of more strategic thinking. I look forward to hearing from my noble friend the Minister on how we might best take some of these matters forward. I believe that they could encourage the intelligent scrutiny of new rules and their early dissemination and publication, and that a strategic look once a year will help the sector to stay ahead in the new world. I beg to move.

[Baroness Bowles of Berkhamsted (LD) [V]]

My Lords, for the purposes of today’s debates I again remind Grand Committee of my financial services interests as in the register.

I have signed Amendments 103 and 104 and agree with the noble Baroness, Lady Neville-Rolfe, so I will not repeat what has already been said. It is a subject that the noble Baroness pursues with diligence, and it is right to do so, even if at times—at least as far as I am concerned—the scope and content of impact assessments are a little disappointing. The amendment relates to the final impact assessments as rules are coming into effect, although, of course, to be useful, impact assessments are needed at each stage. Indeed, if proportionality is to be properly taken into account, that is surely a prerequisite for the regulator.

But returning again to the FiSMA theme, where much of the proportionality, flexibility—call it what you will—will be done on an institution-by-institution basis, so the rules will enable that but not demonstrate how it is to be carried out, I am not sure how that will be properly assessed in an impact assessment based only on the rules. Therefore, it will also be important to be able to capture what actually happens after the rules have come into operation. That might be by way of a retrospective impact assessment after a period of time, and would seem to be another matter that Parliament will need to investigate.

Included in that, it should be relevant to capture the effects of frequency of rule change, which is presently greatly emphasised by regulators and the Government as part of the reasoning behind the Bill, yet somehow I doubt that rule churning was what industry felt it was signing up for by supporting FiSMA. It will be important to understand the scale and nature of that rule tweaking. Amendment 104 gets in part to that with the Government producing a report, but perhaps it should be part of the annual report or an annual impact assessment from the regulators, so that it can be further queried and those regulated can be interviewed by the relevant parliamentary committee. So perhaps the Minister can confirm how this frequency of tweaking will be tracked, what is the Government’s planned part in it and would they support Amendment 104 in particular as part of the way to do that?

--- Later in debate ---

[Baroness Bowles of Berkhamsted (LD) [V]]

I am sorry to intervene again, but I feel I must correct what the noble Viscount, Lord Trenchard, said—or at least remind him that the unbundling of the analysts’ report was an invention of the FSA that the UK then sold to the EU, and now the EU is blamed for what the UK did through the EU. There are many other examples of that, although I can confirm that AIFMD was definitely not one of those. It would be nice if sometimes the Minister could intervene to at least have the record straight.

[Baroness Neville-Rolfe (Con)]

My Lords, I thank all noble Lords who have taken part in this debate, and I thank the noble Baroness, Lady Bowles of Berkhamsted, for her thoughts and for raising the ante to talk about a slightly more dynamic form of impact assessment.

I thank my noble friend Lord Trenchard for the very example that is now the subject of debate. I think the point that he was making, which I would support, is that impact assessments can reduce the perverse effects of such measures. We know—it is a matter of record, I think—that the number of analysts, especially small analysts, has gone down as a result of the MiFID legislation. An impact assessment on how it was enforced, whether its origin was in the brain of the UK or of the EU, could have been helpful. Of course, that is what my amendment is all about.

I was glad to have the support of the noble Lord, Lord Stevenson, for working up a decent impact assessment model. I share his tribute to public servants, having been one a long time ago, and the work of bodies that produce evidence for things, such as the Low Pay Commission and social trends, and the MPC in our own sector of financial services. Better scrutiny would take place with better impact assessment. It is why, regarding proposed new subsection (3) which Amendment 103 would insert, I talked about both the existing position and other options, because I agree with the noble Lord that it is much better if you can look at several options when developing difficult policies. I agree that pre-legislative scrutiny can sometimes be very useful.

My noble friend Lady Noakes reminded us, rightly, of the lack of impact assessment on the various Covid measures. I thank her particularly for the suggestion that the quality of consultation by the FCA, the PRA or the Government and of impact assessment should be added to any review.

I was glad to hear noble Lords build on what an impact assessment system should look like, including the noble Baroness, Lady Kramer—I echo her concerns about accountability—and the noble Lord, Lord Eatwell. There is a feeling that it is important to have a decent system.

My noble friend the Deputy Leader explained, as I had already anticipated in my own remarks, that a system does exist: both for government regulation and regulation by the two regulators, and for cost-benefit analysis to be produced. What I am not clear about is whether that is fit for purpose. It is very difficult to find out what the requirements are and to read all the various bits of paper. This is why I tabled the amendment, so that we could have an intelligent debate. Even if noble Lords do not want to go along with Amendment 103, we should make an effort, with the dissemination of the Bill, to ensure that the requirements are better understood.

That means that Amendment 104 is perhaps more important, because it asks that we review regularly what is being done in the way of cost-benefit and impact assessment, and how the objectives set out are achieved. I suggested some objectives in Amendment 104; others will no doubt be concerned about other objectives of the regulators. As we have said on earlier amendments, competition is not really the same as competitiveness. I was also keen to throw in small business—for reasons that my noble friend knows very well—and innovation, because of their value.

With this Bill, we need to satisfy ourselves that the new framework satisfactorily replaces, indeed, improves on, what went before. I take the point—the Chancellor is right—that we now have the chance to do the right thing in the UK, and to do it better than was done under the auspices of the EU. I may come back to this on Report, because a simple well-understood system of impact assessment, and of annual review in some form, would boost scrutiny and transparency, which has been a key theme of the Bill, as well as the governance of our largest and most important economic sector. I beg leave to withdraw the amendment.

Amendment 103 withdrawn.

--- Later in debate ---

[The Deputy Chairman of Committees (Lord Faulkner of Worcester) (Lab)]

My Lords, the noble Baroness, Lady Neville-Rolfe, was inadvertently left off the list of speakers, and I call her now.

[Baroness Neville-Rolfe (Con)]

My Lords, I thank my noble friends Lord Holmes of Richmond and Lady McIntosh of Pickering for tabling these amendments and I very much agree with my noble friend Lord Holmes on the scale of the transformation that will be driven by fintech. It is more important to the sector, in my view, than Brexit, and my noble friend Lady McIntosh’s question is therefore a good one.

I rise to speak on Amendment 115 on digital identification. I have taken a substantial interest in facilitating the provision of digital ID for several years. It is the sort of thing where the UK, with its early digital adoption and its skill in matters of security, should be ahead of the curve. Some good systems exist and have been rolled out in other European countries, but not here. This is probably because we have been waiting for the banking sector to make a decisive move.

I tabled amendments on digital identification during the passage of the Covid legislation, with support from some noble Lords here today. I did not press the matter because I was promised progress, and I had good meetings with my noble friend Lady Williams and the Digital Minister, Matt Warman MP, who published proposals for the UK digital identity and attributes trust framework on 11 February, with comments on it due from us all by tomorrow.

I thought that I would get another chance to press my case when our Covid laws were renewed but there is no sign of any such opportunity. I noted, however, that on 4 March my noble friend Lord Bethell, the Health Minister, told us that digital certificates, not physical ones, are being used for vaccines to avoid fraud, underlining the need to make progress in the financial area. The fraudulent attempt to trick my noble friend Lord Holmes in relation to his driving licence underlines exactly the scale of fraud in everyday life, an issue that is calling for digital ID.

I am disappointed about the pace of change on digital ID and although I support Amendment 115, it needs to be stronger. Waiting yet another six months for a plan is too slow. Why can we not get a grip of this important area, as we have done in the much greater challenge of vaccines? Give the job to Matt Warman with a remit to bring in digital ID for those who need it by 1 September. That would be novel provision but we need to accelerate this change.

[Baroness Kramer (LD)]

My Lords, after all those excellent speeches, I shall try to be brief but I need to declare my interests in the register because they apply to this group of amendments.

Fintech is an extraordinary success story in the UK. In 2011, shortly after having the privilege of being appointed to this House, I sought out and invited the chief executive of every fintech in the UK that I could find to come to a meeting. We needed only a small conference room over in Millbank House. Today, the QEII Centre would not be adequate. That alone speaks to the extraordinary success of the industry, much helped by an enlightened view from the Financial Conduct Authority, which had to be dragged kicking and screaming into looking benevolently upon the industry and understanding that it required appropriate regulation to grow. However, once it got there, the FCA has been incredibly positive and powerful.

I want to plead against complacency, which is a rather British weakness. In the days before Brexit, many of our fintechs chose to expand into continental Europe, using passporting and the e-commerce directive. They also attempted to go into the United States but few have been successful, partly because of the competition there and the difference in structure. The European market is incredibly important for expansion. We also know that it has been important for recruitment, which raises many issues around visas. A single person is perhaps not so hard to attract but someone whose wife or husband is unable to work may not be so cheered in taking up a visa to come to the UK. That is an underlying problem that we face for entrepreneurs and skills.

Many issues have been raised in this debate, including AI and fintech: the two merge over some significant territory. The issues raised by the noble Lord, Lord Holmes, are important and will, I hope, be a prod to make sure that we continue to deal with them at pace and to understand that there is no easy time. Berlin has, frankly, become a centre for tech within Europe and it would not be so very difficult to swivel that around and begin to absorb fintech. We do not want to put ourselves into that situation.

I wanted quickly to make two other points, picking up on points raised by the noble Lord, Lord Holmes. Digital fiat currency is now the issue of the moment. We have a relatively small window in which to decide whether we want to play in that area in such a way as to make us a significant player. One could say that sterling is not a natural global currency and we therefore need to be first mover. Picking up on the noble Lord’s point, I hope that we will look more at that area.

AI obviously brings with it extraordinary complexities and question marks but they are issues that can all be worked through if we focus on them. They will not become easier over time; they are just as difficult now as in the future, so one might as well deal with them as is. The issues raised by the noble Lord, Lord Holmes, deserve a proper debate on the Floor of the House and I am sure will draw in many more people than those who focus on financial services issues alone. I very much look forward to that opportunity as well as listening to the Minister’s response.

Financial Services Bill

Baroness Neville-Rolfe Excerpts

Report stage
Wednesday 14th April 2021 Lords Chamber

[Baroness Bennett of Manor Castle (GP) [V]]

My Lords, I welcome the government amendment in this group. We are seeing regulations catching up with financial innovation. As ever, it seems that the regulator is being forced to chase after advances that are screaming into the future with potentially very disturbing results.

However, I chiefly wish to speak to Amendment 35, in the name of the noble Lord, Lord Holmes of Richmond, and to offer my support for it, or at least for its principles. As the noble Lord said, we are talking about innovation, but innovation that is actually for the common good—innovation that works for people, and particularly, innovation that works for the most vulnerable in our society. The figures really are deeply shocking: estimates of 1 million unbanked people; 8 million people with debt problems; 9 million people with no access to mainstream credit. One thing that is not adequately recognised is the poverty premium: the fact that not having a bank account or access to mainstream credit means much higher costs for everything from utility bills to borrowing and very well documented impacts on health and wellbeing.

This seems like an apt time to ask the Government whether they have given further consideration to the recommendation from the Select Committee on Financial Exclusion, which reported in March 2017. It called for a Minister responsible for financial exclusion. Is this something that the Government are really going to focus on by means of this Bill? The noble Baroness, Lady Noakes, may have concerns about the structure of this, but the intentions of the noble Lord, Lord Holmes, are very clear. Are the Government going to take action?

[Baroness Neville-Rolfe (Con)]

My Lords, I offer a few words of caution on the subject matter of Amendment 35 in the name of my noble friend Lord Holmes of Richmond, who has done so much to promote financial and digital skills since we joined the House together in 2013. The amendment is concerned with the very real problem of the “financially excluded”, in today’s jargon. This problem is of long standing. Under the description of the poor, the New Testament informs us that “they will always be with us”, and similar quotations can be made from the Old Testament. More recently, as just mentioned by the noble Baroness, Lady Bennett, we have had good reports on the subject from our own committees.

Experience shows that another ancient saying is also relevant and helpful. I refer to the injunction on doctors when seeking to treat disease—“first do no harm”. Unfortunately, this latter injunction was not followed when the United States authorities sought to improve the lot of the financially excluded, which arguably led to the subprime crisis of 2008 in the United States, or at least made that crisis much worse than it would otherwise have been. Noble Lords will recall that, when it came to the attention of the federal authorities in the United States, some communities, called marginalised groups, received fewer house loans per head than others. The lenders concerned were threatened with prosecution under federal laws on discrimination. That was a major factor behind many subprime loans being made, which those receiving them had no real likelihood of being able to repay. Such loans were included in bundles sold to investors, which in many cases inevitably defaulted. The end result was a crisis in which some of the worst affected were those who had received the subprime loans in the first place—namely, the financially excluded, whom we are trying to help.

None of this argues against the amendment before us proposed by my noble friend Lord Holmes, although I note that my noble friend Lady Noakes has some reservations. We always need to listen to her because of her great expertise in this area. However, it shows that, in efforts to improve the lot of the financially excluded, we need to proceed with as much prudence and attention to the risks to them and more broadly, as we do in pursuing other wider objectives.

[Baroness McIntosh of Pickering (Con)]

My Lords, I am delighted to support government Amendment 14, and congratulate my noble friend and the ministerial team on listening to concerns expressed across the House, and in particular, in echoing my noble friend Lord Holmes, for introducing the follow-up provisions under the affirmative procedure. I will also address, perhaps more supportively than other noble Lords, my noble friend’s Amendment 35. I must say that I am increasingly envious of my noble friend Lady Noakes and, in particular, the rather splendid account that she had previously with the Bank of England. She must be torn, not wanting to destroy her rather splendid cheque book. For security purposes, she might err on the side of caution and do so.

My noble friend Lord Holmes of Richmond has done the House a great service by raising this issue. Yes, we can debate whether it should be a Bank of England account, which I understand no longer exists; perhaps this is not the right time to revisit that. I have become increasingly concerned—as, I know, have many in consumer circles with much greater knowledge than I about this—by the way in which one’s credit score can be disadvantaged. All sorts of extraordinary things seem to be happening at the moment, without us even knowing. We are apparently encouraged to do regular credit checks; I did, and was delighted to see that on one, the Experian account, my credit score was sound. But apparently the Government have discontinued Experian, so I do not know to whom to address that in future.

This raises the issue of those who have a poor credit score and are having trouble finding a bank account. My noble friend Lord Holmes has identified the difficulties in doing so. If it is not the wish of the Government to support the terms of Amendment 35, I hope that the Minister responding to this debate will nevertheless look carefully at the circumstances by which it is becoming increasingly difficult for those with poor credit scores to access even the most basic banking services.

I understand what my noble friend Lady Noakes said about how we are coming under increasing commercial pressure to make banks’ retail services financially viable. This is causing great concern for those of us in rural areas, because it is increasingly difficult to keep small rural branches open. To me, they perform a social function as much as anything, particularly for local shops, in banking their cash, allowing them to access bank accounts and, for example, banking their money when there has been a local mart. My noble friend has identified these very real concerns and I hope that the Government look on them sympathetically.

--- Later in debate ---

Moved by

[Baroness Neville-Rolfe]

24: After Clause 40, insert the following new Clause—
“Requirement to report to Parliament on impact on businesses
The Treasury must publish an annual report on the impact of measures taken by the FCA, PRA and the Government to regulate financial services, particularly on small business, innovation and competitiveness.”

[Baroness Neville-Rolfe (Con)]

My Lords, I shall speak to my Amendment 24 on reporting. I remind the House of my interests as a director of Secure Trust Bank and Capita plc.

The amendment would require the Treasury to publish an annual report on the impact of measures taken by the FCA, the PRA or the Government to regulate financial services, with a particular focus on small business, innovation and competitiveness. While there has been a great deal of excellent discussion during the passage of the Bill on holding financial services operators to account, we can lose sight of the value of smaller operators, including those based outside London. Moreover, innovation can bring huge value to consumers: just think, in our own lives, of online banking, money transfer overseas and customer share trading. Moreover, our strained economy will not recover without a proper focus on the competitiveness of the UK’s financial sector, which provides the veins and arteries of our economy.

I know from my experience in intellectual property how valuable an annual report to Parliament of this type can be in focusing ministerial and staff attention. Writing the report is a complement to the usual in-tray, the relentless focus on short-term risk and the avoidance of political banana skins; I am afraid these often exercise public servants to the detriment of more strategic thinking, and I speak as someone who used to be one. I believe that a strategic look once a year would raise thinking above the proverbial parapet and help the financial services sector to stay ahead in the new world, but can I persuade the Minister?

I will leave others to speak to their Amendments 25 and 37, but I will say that I took some comfort from the Minister’s reply to me on impact assessments in Committee, which is why I did not retable my amendment. He confirmed that both regulators, the FCA and the PRA, have a disciplined routine and a proper approach to impact assessment, and they understand that the sunlight of transparency must shine through. What is less clear is how easy it is to access those assessments, those nuggets of judgment and estimation. Could the Minister reassure us that there will be a decent system of signalling new proposals and that PRA and FCA impact assessments will be available to Parliament, perhaps through the public websites? We need to see and understand their proposals, and we need to do that routinely if we are to exercise our parliamentary scrutiny function properly, which has been an issue of great debate throughout the passage of the Bill. I beg to move.

Amendment 25 (to Amendment 24)

Moved by

--- Later in debate ---

Amendment 25 (to Amendment 24) withdrawn.

[Baroness Neville-Rolfe (Con)]

My Lords, I thank all noble Lords who have taken part in this debate. I also thank the Minister for reminding us of the contribution of the financial services sector to our economy, and for his summary of the remit letters. I particularly thank the noble Lord, Lord Sharkey, for Amendment 25, and am grateful for the support across the House for the idea of ex-post reporting—perhaps bringing things together a little bit better than the existing system of reporting, which has been outlined, currently does.

I emphasize, however, that I am very flexible and would be happy to have a report less often than once a year. As my noble friend Lady Noakes said, that could encourage more depth. We should also look at some of the difficulties; my noble friend Lord Trenchard reminded us of collateral damage, for example in the case of MiFID.

In any annual report that the Treasury might bring forward—if we were able to persuade it—I am also content to see consumer protection considered and assessed, although it might perhaps be better as a separate report. I know from my own experience in banking that, at present, this is not the main problem area. There is, rightly, a focus by the regulator—particularly the FCA—on protecting the consumer. However, especially in the medium to longer term, other things matter as well: the buoyancy and dynamism of smaller firms; innovation—whoever its parent—and innovation in fraud, as we have been reminded; and competitiveness. They all feature in my amendment. If we fail to think about these things properly, the consumer—and consumer protection—is the loser.

Amendment 37 in the name of the noble Baroness, Lady Bennett, is much broader in focus, but I think it has sparked some useful reflections about the benefits as well as the costs, about opportunity costs and indeed about how we cope with the great change in the financial services landscape brought upon us by the ups and downs of the internet.

We will come back to this in a future Bill. In that context, I would encourage the Treasury to listen to some of the things that noble Lords have said today, to be flexible and perhaps come forward with proposals that encourage these very important dynamics for the future. In the meantime, of course, I beg leave to withdraw my amendment.

Amendment 24 withdrawn.

Financial Services Bill

Baroness Neville-Rolfe Excerpts

3rd reading & Report stage
Monday 19th April 2021 Lords Chamber

Moved by

[Baroness Neville-Rolfe]

28: After Clause 40, insert the following new Clause—
“Digital identification in the UK financial system
(1) The Treasury may by regulations establish a scheme for the use of a distributed digital identification for individuals and corporate entities operating in the UK financial system.(2) Regulations under this section are subject to the affirmative procedure.(3) In this section, “the UK financial system” has the same meaning as in the Financial Services and Markets Act 2000 (see section 1I of that Act).”

[Baroness Neville-Rolfe (Con)]

My Lords, I shall speak to Amendments 28 and 29 in my name on digital identification, and I thank my noble friends Lady Mcintosh of Pickering and Lord Holmes of Richmond for their support. I take a substantial interest in facilitating the provision of digital ID and have done so for several years. It is the sort of thing where the UK, with its early adoption of digital and skills in matters of security, should be ahead of the curve. Perfectly good systems exist in a number of areas and have been rolled out in other European countries and Asia but, unfortunately, not here.

I tabled amendments in the same sense during the passage of Covid legislation last year. I did not press the matter because I was promised progress and I had good meetings with my noble friend Lady Williams and with the Digital Minister, Matt Warman MP, who published proposals for the UK digital identity and attributes trust framework on 11 February. Last week, my noble friend Lord Holmes and I had another constructive meeting, this time with my noble friend Lady Penn—currently on the Front Bench—and civil servants in DCMS and the Treasury.

I am perhaps a little too impatient for the Civil Service or, indeed, for the Front Bench, which is no doubt why I am better suited to these Benches, but I warn noble Lords that I will continue to press this matter until we introduce a reliable system of online ID—not a consultation and not a plan, but a government-approved system. But I am very reasonable, so let us start in financial services—the subject of today’s Bill. So much progress has been made already that it ought to be possible to capture this in regulation now. As we discussed in Committee, this could be helpful in reducing fraud, which has mushroomed in financial services.

Likewise, we should be able to introduce digital ID for sales of alcohol; the supermarkets already use such methods for preventing the sale of knives to those aged under 18. We should also allow a trial in a pub chain or two, and we could use digital ID in the property sector, where the ID checks for domestic house sales are needlessly bureaucratic and repetitive. We do not need to get into the question of domestic vaccine passports, of which I strongly disapprove, or of ID cards, but evolutionary progress on digital ID—starting in financial services and honed to appropriate use—is overdue.

I have tabled two alternative amendments. Amendment 28 is an enabling power allowing the Treasury to press ahead, subject to a parliamentary debate, as soon as it has sorted out a system of digital ID—whether on a trial basis or when it has a definitive solution for the sector, which should be soon. We do not want to wait for the online harms Bill or another legislative vehicle. Amendment 29 provides for a review by 1 September this year. My own experience as a Minister and a civil servant is that such reviews and a clear date can be effective where there is a political will to get something done, as I believe there is here. I beg to move.

[Lord Holmes of Richmond (Con)]

My Lords, it is a pleasure to follow my noble friend Lady Neville-Rolfe; in doing so, I declare my financial services interests as set out in the register.

My noble friend and I came into the House in the same autumn and, since 2013, we have both talked very much about distributed digital ID. It was pressing in 2013, so it certainly is in 2021. I will speak to all the amendments in this group briefly. I had pleasure in adding my name to my noble friend Lady Neville-Rolfe’s amendments; they are clear, succinct, short and to the point, and do the job. Does my noble friend the Minister agree?

My Amendment 30 merely seeks to flesh out some of the elements which must be considered if we are to have a successful distributed digital ID—the issues around scalability, flexibility and, crucially, inclusion. Does my noble friend the Minister agree that not only are these three issues vital to any distributed digital ID but that any ID should be predicated on the 12 principles set out in self-sovereign identity? Does she also agree that, because of the nature of this issue—as my noble friend Lady Neville-Rolfe pointed out—including issues around ID cards and Covid passports, there is a pressing need not only to move forward with this work but to have a public engagement to enable people to understand the issues and really get to grips with a system that can work for all?

My Amendment 31 seeks only to push the opportunity for the UK around open finance. We have seen the advantages open banking has brought; does my noble friend the Minister agree that open finance could be a boon for the UK, and could she set out the Government’s plans to enable this? I brought Amendment 32 forward in Committee so I will not dwell on it, except to seek a specific answer on subsection (2)(a) of the proposed new clause. Does my noble friend the Minister agree that we need to seriously consider the dematerialisation of UK securities at least at the same speed as that proposed in the EU? This is a competitive market; it is a race.

Finally, my Amendment 37E was brought forward simply to push the need for a review of access to digital payments. Digital payments are the future, accelerated by Covid, but, crucially, huge swathes of the population rightly rely—and must be allowed to rely—on cash. Does my noble friend agree that we urgently need a review of access to digital payments?

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I hope that I have demonstrated the Government’s commitment to this important area, and that noble Lords will therefore feel able to not press their amendments.

[Baroness Neville-Rolfe (Con)]

My Lords, I thank all who have spoken in this short but wide-ranging debate. Time is passing, and we live in a digital age, as my noble friend Lady McIntosh of Pickering said—a revolution indeed, in the words of the noble Baroness, Lady Kramer. My noble friend Lord Hunt of Wirral reminded us that the withdrawal of cash halved during the pandemic, with some cruel consequences. LINK does great work; I remember that from my time at Tesco. We need a network to endure as normality returns. I thank the Minister for updating us on the Chancellor’s statement on fintech and open finance today.

It may not surprise noble Lords that I remain disappointed at the pace of change on digital ID. The Minister is right to emphasise what has been done in recent months, and I strongly support this. However, years are passing, our leadership in digital is eroding, and we can no longer blame the EU. We must solve this problem for the industries, services and, above all, consumers involved. Of course there must be public engagement, but this must not be used as an excuse for undue delay. I will be back, but for today, I beg leave to withdraw my amendment.

Amendment 28 withdrawn.

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[Baroness Neville-Rolfe (Con)]

My Lords, I rise to speak on Amendment 33 in the name of the noble Lord, Lord Sikka, having studied the comments made in Committee and repeated today. I can understand his frustration with history in this area. In particular, I would highlight the long delay and prevarication by Lloyds and the then regulator in dealing with the HBOS scam, which led to the demise of a number of small businesses banking with HBOS’s corporate division in Reading. Maybe more transparency would have helped there but it was actually a failure by the bank itself and by the regulator, which I very much hope would not happen again today. I am still not entirely sure what eventually happened; I know that there were some high-profile convictions. Perhaps my noble friend the Minister could update us on that sorry tale. I share everyone’s wish to see a system where it could never happen again.

However, I always worry that bad cases make bad law. The cases being quoted are generally old, while the FCA’s powers have been strengthened over the years and the culture has changed so that it is now very pro-consumer. Moreover, as my noble friend the Deputy Leader of the House explained on 10 March, the FCA is an independent body and the power of Ministers to intervene is very circumscribed. I suspect we will come back to these issues in the next financial services Bill, so I would like to make two points today.

First, reports from the United States have to be treated with some care. It is a sad fact that, unlike our own regulatory authorities, the US ones are more than a little protectionist. They come down harder on foreign entities than their domestic ones and like to levy huge fines whenever they can. It is not a level playing field, unlike the UK, which is of course one of the reasons why investors like it here. Secondly, in the sort of cases we are talking about, Ministers—I speak from experience, first as a civil servant and secondly as a Minister at BEIS, DCMS and HM Treasury—act on advice, not as free-talking politicians. If they make a direction in an investigation, it will reflect a public policy need and that could be a confidential matter, such as security or a government interest. Once that is made public it might be difficult for those being investigated to get a fair hearing, which is unfortunate in itself and likely to lead to aborted prosecutions. Whichever party is in power, this would not be in the public interest. For all these reasons, I encourage those involved to withdraw their amendment today.

[The Lord Bishop of St Albans [V]]

My Lords, I will be brief in my support for this amendment. I am very grateful to the noble Lord, Lord Sikka, and the noble Baroness, Lady Bennett of Manor Castle, for speaking at great length. I therefore do not need to add a huge amount more, not least as I intend to go into a bit more detail on my concerns about transparency when speaking in support of Amendment 34, which touches on similar issues of accountability.

I am a little puzzled why the noble Baroness, Lady Neville-Rolfe, thinks that this is a case of bad cases making bad laws. It seems to me that there have been very considerable concerns in the past. Surely those ought to be investigated.

We are facing a real crisis of trust in public bodies at the moment, and I believe that this amendment will be a beneficial addition to this Financial Services Bill. In making provisions for an additional layer of transparency, it will act as an incentive against any possible interference; whether done formally or informally, it will still have that effect. The truth is that we do not know whether ministerial interference in FCA investigations has occurred, and positively stating either way is speculative.

Although I was not privy to the written response from the noble Earl, Lord Howe, which he promised to send to the noble Baroness, Lady Kramer, confirming whether there were provisions within the Ministerial Code to allow for interventions in FCA investigations, the assumption in Committee was that any attempt to steer an FCA investigation would constitute a breach of the Ministerial Code. That would require breaches of the Ministerial Code or other offences to be taken seriously, and not treated lightly or even dismissed. Last year, an inquiry found evidence that the Home Secretary had breached the Ministerial Code, yet the consequences extended little further than an apology. In February, it was revealed that the Health Secretary had acted unlawfully when his department failed to reveal details of contracts signed during the Covid-19 period. Just before Easter, we all started reading about allegations surrounding conflicts of interest in a former Prime Minister’s dealings with the financial services firm Greensill, and there have been concerns about the current Prime Minister’s dealings during his time at City Hall. It is vital that, if we are to rely on breaches of the Ministerial Code, they are given some teeth and have some effect.

I have no evidence, but it may be that no Minister has ever interfered in any FCA investigation, in any way. I sincerely hope that that is the case, but we cannot rule it out. If interferences have occurred, it would be doubtful to assume that investigations are always steered in the interests of consumers. Although provisions are in place to prevent misconduct, they should not discount the contribution that this important amendment can make in strengthening those rules and further disincentivising any possible ministerial interferences in FCA investigations. If Her Majesty’s Government have concerns about small parts of the wording here, I hope they come back with some improvements to ensure that the levels of transparency are clear to everybody, in every part of the system.

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Some may claim that the supervisory boards would increase the cost of regulation. That cost would be miniscule—certainly far less than the cost of the last banking crash, the possible shadow banking crisis or the pain suffered by stakeholders in LCF, Blackmore Bond, the Woodford fund and many other headline scandals. I do not intend to divide the House on this amendment, but I believe that we can find a solution together to the capture of the regulators, which is a most pressing issue facing us. I beg to move.

[Baroness Neville-Rolfe (Con)]

I start by sharing the powerful words of my noble friend the Deputy Leader on the sudden loss of the noble Lord, Lord Judd, who contributed so very recently to this Bill and whom I remember well as an effective Minister of State at the FCO when I was a young civil servant. His death is a great loss.

As I understand it, Amendment 34 is designed to improve the culture of the financial services sector—a sentiment that I empathise with—although it would do so by adding an extra layer of regulation through a stakeholder supervisory board. I am against this for the FCA, the PRA and other regulators. I have substantial experience of regulation from my Civil Service past, as an executive and a non-executive of non-financial companies, as a Minister and, currently, as a non-executive of a small bank. In my judgment, adding an extra layer of board members without practical experience could have a perverse and negative effect.

For good outcomes, one needs clear, simple and outcome-based regulation, and company directors who take their responsibilities seriously and promote a good culture, with a focus on customers and protection, on risk and the good use of capital, on fraud and cyber, on the people who operate the business—from the top right down to the bottom—and on innovation and cost control. Above all, one needs directors who will challenge, get into the detail and be listened to.

I have been a non-exec for over 20 years and, until recently, there has not been enough attention paid to, or appreciation of, the challenge function and directors who challenge. Cases such as the HBOS scam, which we have been concerned about today, are the result. This needs to change, in terms of the selection of non-executives and with strong internal challenge in the executive structure of companies. This applies to financial services companies and more broadly.

An extra layer in the form of a supervisory board will not solve the problems of culture that have been highlighted. It risks introducing a further confusion of responsibility. To my mind it is, I am afraid, a bad idea.

[Baroness Noakes (Con)]

My Lords, I am sure that the noble Lord, Lord Sikka, will not be surprised to find that I do not support his Amendment 34. In particular, as a former director of a supervised bank, I do not recognise the regulatory capture that he majored on in Committee and again today. In my experience, the relationships are always challenging and, sometimes, worse than that.

I have two main reasons for opposing the amendment. First, a supervisory board sitting over the top of the existing regulators undermines a fundamental characteristic of regulation in the UK—namely, that regulators are independent. That means that they are independent of government, certainly, and of Parliament and anyone else who thinks that they might have an interest in what they do. They are certainly accountable for delivering against their objectives and expect to be scrutinised by Parliament, but they are autonomous bodies. This amendment runs against that.

Secondly, the regulators already have governance structures that oversee the work that the executives undertake. In the FCA, it is the FCA’s own board, which has a chairman and a majority of non-executive directors. I believe that the only executive on the FCA board is, in fact, its chief executive. In the case of the PRA, there is a Prudential Regulation Committee, which has Bank of England executives and outside members, and is chaired by the Governor of the Bank of England. More importantly, in governance terms, as the PRA is part of the Bank of England it is overseen by the Court of the Bank of England, which, again, is a largely non-executive body chaired by a non-executive, although it does have the governor and the deputy governors, including the head of the PRA.

Governance of the regulators is carried out in the way in which governance in the UK is normally done. It covers the very things mentioned in proposed new subsection (8), which is therefore duplicative. If there are concerns, they should be dealt with within the organisations concerned, without writing reports to Parliament. I believe in transparency, but there is a point at which transparency becomes counterproductive, and I am sure that this amendment is way beyond that point.

Accountability to Parliament takes many forms, a key one being the annual reports that are laid before Parliament, setting out the regulators’ performance against their objectives, which is required by existing statute. It really is difficult to see what added value this amendment would create.

The amendment is also deficient in a number of respects. Perhaps the most glaring is the reference to the “Executive Board” of the PRA and of the FCA. As far as I am aware, there is no such thing specified in legislation or the governance arrangements of either body. I believe that each regulator has an executive committee or equivalent, but they do not have an “Executive Board”, with a capital “E” and a capital “B”.

The amendment would require the exclusion from the supervisory board of anyone who might actually understand what the PRA and the FCA actually do. Proposed new subsection (5) would disqualify “current and past employees” not just of the FCA and the PRA but of any organisation that they supervise. I have never thought that ignorance was a good qualification to be a member of a board.

Proposed new subsection (10) talks about “open meetings” but does not explain what that means in practice. Proposed new subsection (11) says that all the supervisory boards papers must “be made publicly available”, but it seems to pay no heed to the need for confidentiality or data protection. I could go on. These are unnecessary and ill-thought-out proposals, and I hope that my noble friend the Minister will not accept them.

Financial Services Bill

Baroness Neville-Rolfe Excerpts

Consideration of Commons amendments
Wednesday 28th April 2021 Lords Chamber

[The Deputy Speaker (Baroness McIntosh of Hudnall) (Lab)]

My Lords, we have a request to speak after the Minister from the noble Baroness, Lady Neville-Rolfe.

[Baroness Neville-Rolfe (Con)]

My Lords, I join others in congratulating my noble friend the Deputy Leader of the House and other Members of the Front Bench on the way they have dealt with the Bill and got us to this final stage. I just have a question about the consultation on the duty of care, and it stems from my experience in other areas of regulation—that is, health and safety and food safety. I have found that, where a duty of care is introduced, it is sometimes possible to change adjacent rules and regulations in a regulatory area and reduce the bureaucracy that can be a problem for both consumers and operators in the field. I would be interested to know whether that sort of work is likely to be envisaged by the Economic Secretary.

[Earl Howe (Con)]

My Lords, I do not have an answer for my noble friend, but her point is extremely helpful and I shall ensure that it is fed into the thinking that will be wrapped around the consultation process as it goes forward.