Financial Services Bill

Baroness Noakes Excerpts

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

[Baroness Noakes (Con)]

My Lords, I congratulate my noble friend Lord Hammond of Runnymede and the noble Baroness, Lady Shafik, on their excellent maiden speeches. I look forward to their future contributions in your Lordships’ House.

For the last nine years, I have largely sat on the sidelines on financial services legislation, as I was on the board of a major bank. Now liberated from that, I am enjoying putting my financial services legislation anorak back on. I remind the House of my financial interests, as declared in the register.

The Government have described this Bill as a portfolio Bill, which is a fancy name for what is not much more than a motley collection of topics that have little in common apart from fitting under a financial services umbrella. This Bill certainly gives us no strategic insights into the future of financial services. That said, I broadly welcome this Bill, as it deals with a number of items in a sensible, pragmatic way.

Financial services legislation is very complex. Since FiSMA was enacted over 20 years ago, there have been numerous revisions, some of which, such as the Financial Services Act 2012, were significant. Huge amounts of EU law have been imported and we can expect more changes as we embark upon our post-Brexit life. We are getting close to consolidation being essential if our financial services legislation is to be accessible. Can the Minister say whether the Government accept the need for consolidation?

My principal reservation about this Bill concerns the considerable new rule-making powers that are being conferred on the PRA and the FCA, and I agree with much of what other noble Lords have already said on this. I find it a bit odd that the Government have chosen to go down this route ahead of the outcome of the consultation on the future regulatory framework review, which is still open. This looks like another example of the Treasury mind being closed to challenge through consultation. We are somewhat used to this, but familiarity does not make it acceptable.

More substantively, the Government have made a good case for the rules to be set by the people with the best technical knowledge, but they have not, I am afraid, made a case for the quality or quantity of accountability alongside that. In particular, I am unpersuaded that adding a list of “have regards” against which the PRA or FCA must report when they consult on rules amounts to a significant addition to the accountability framework. The House will know that I have been steadfast in my commitment to our exit from the EU, but it was never my understanding that taking back control of our laws would mean less parliamentary control and oversight than before. The Bill proposes to hand significant rule-making powers to the PRA and the FCA without any noticeable Parliamentary oversight. Ad hoc scrutiny through the existing committees in both Houses is no substitute for regular and structured parliamentary involvement. I hope that the Government will engage with those of us who want to find a practical solution to this accountability deficit.

Before leaving this topic, I would say that we need to look carefully at the new “have regards” when we get to Committee. I share the exciting vision of the future prospects for financial services that my right honourable friend the Chancellor of the Exchequer outlined in his November statement, but I do not see that fully reflected in the Bill. Like many noble Lords who have spoken today, I believe that international competitiveness needs to be firmly embedded into our regulatory arrangements and the statutes that govern that. I particularly welcome my noble friend Lord Hammond’s enthusiasm for this, which goes a long way, I have to say, towards offsetting his lack of enthusiasm for Brexit in his former life.

Finally, on tough legacy contracts that use Libor, I completely support the powers in Clauses 14 and 15 that allow the FCA to make arrangements for legacy contracts. It is good that the Government have accepted the very real practical issues involved in dealing with a relatively small number of debt instruments. There are, however, two outstanding issues relating to continuity of contract and safe harbour. I know the Treasury is well aware of these issues. I will save arguing the detail of them until we get to Committee, but I expect to table amendments aimed at giving the UK equivalent protections to those being drafted for the US market.

Financial services are a major part of our economy and we must allow this sector to flourish now that we are unshackled from the EU. Strong regulation will remain essential but we need all players, regulators and industry alike, to build the UK as the undisputed leading global financial centre. I hope that the House will remember that as we scrutinise the Bill through its remaining stages.