Financial Services and Markets Bill

Baroness Penn Excerpts

Committee stage
Tuesday 7th March 2023 Grand Committee

[Baroness Meacher (CB)]

Amendment 168 is the lead amendment; that is absolutely right. I think we had got on to Amendment 199. Is that correct, Minister? Are you happy with that?

[The Parliamentary Secretary, HM Treasury (Baroness Penn) (Con)]

Noble Lords can speak to any amendment in the group once the lead amendment has been put, I believe.

[Baroness Meacher (CB)]

One or two people had talked to Amendment 199 and I was just about to do the same. Is that okay?

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[Lord Tunnicliffe (Lab)]

My Lords, this is a cross-party group on the environment. It has no amendments led by Labour, but I have signed Amendment 199 in the name of the noble Lord, Lord Randall, on outlawing someone carrying out a regulated commercial activity that directly or indirectly supports deforestation risk commodities, unless relevant local laws are complied with.

I pay tribute to the noble Lord, Lord Randall, and thank Global Witness for its support on this amendment. My party is committed to securing the highest sustained growth in the G7. That means modernising our economy and financial regulation. We cannot deforest our way to sustainable growth nor a robust financial system.

Leaders across the City of London, along with BNP Paribas, Legal & General, Unilever and Tesco, are supportive of the measure proposed by the noble Lord, Lord Randall. Sir Ian Cheshire, former chair of Barclays and head of the Global Resource Initiative task force, has written to the Minister to remind the Government that the task force concluded its work in May 2022 by reiterating the need for new legislation to provide due diligence obligations for financial institutions equivalent to those that will be in place on supply chain companies under the Environment Act 2021. The Minister has previously argued that enhanced risk reporting eliminates the need for this amendment but the GRI task force has already rejected that argument. Sir Ian’s letter put this issue to bed when he wrote that risk reporting mechanisms, such as the task force on nature-related financial disclosure and voluntary net-zero pledges, are insufficient to prevent deforestation financing.

This expert backing and the desire of the British public to eliminate the scourge of deforestation are key reasons why this amendment has such considerable cross-party support. It would allow us to be global rule-makers, not rule-takers, when it comes to our financial system; I urge the Minister to take it seriously. Beyond Amendment 199, this group contains a lot of common-sense amendments that highlight the expertise of this Committee.

[Baroness Penn (Con)]

My Lords, I welcome this chance to continue this Committee’s important debate on amendments concerning green finance. As I stated in a previous Committee session, the Government are committed to fostering sustainable finance in the UK and will shortly publish an updated green finance strategy to that effect.

I will speak first to Amendment 168 from the noble Baroness, Lady Worthington. It is of course correct that all models have their limitations in depicting the real world but the Bank of England’s models have considered the views of experts in the field; they therefore do not need to be directed to do so. The scenarios used in the climate biennial exploratory scenario, or CBES, were formed by the Network for Greening the Financial System, an international network of central banks in which the Bank of England plays a prominent role. The scenarios have been produced in partnership with leading climate scientists, leveraging climate-economy models that have been widely used to inform policymakers—not to mention being used by and continuing to be used by the Intergovernmental Panel on Climate Change. These scenarios are updated continually by the Network for Greening the Financial System, which also ran a public survey welcoming feedback on its most recent iteration of climate scenarios.

It is also not the case that CBES is the PRA’s only tool to manage climate risk. It is actively using its position as a supervisor to ensure that firms are not materially undercapitalised for climate risks, setting out its expectations in its supervisory statement published in 2019. Furthermore, the PRA is an active member of two of the leading international standard setters: the Basel Committee on Banking Supervision and the International Association of Insurance Supervisors. The Bank is actively participating in both forums to ensure that the regulatory frameworks for the banking and insurance sectors address potential gaps in the management of climate-related financial risks. This work will flow through to our domestic framework and at the same time ensure international co-operation on what is fundamentally a global issue.

I now turn to Amendment 199 in the name of my noble friend Lord Randall of Uxbridge, which is supported by other noble Lords in this Committee. The Government agree that the financing of illegal deforestation is a serious global issue that must be tackled. However, this amendment would involve implementing a new and untested regulation that would impose a broad supply chain rule on all regulated financial services firms. It would currently be very difficult, time-consuming and expensive for UK financial services firms to ascertain whether firms or products that they invest in are exposed to forest risk commodities in compliance with local laws.

In introducing this amendment, the noble Baroness, Lady Boycott, referred to the provisions in the Environment Act 2021. These provisions will apply to the supply chains of large UK corporates. However, UK-based banks and fund managers engage in lending and investment activities with companies in jurisdictions across the globe, not just commercial activity in the UK. There are currently no consistent, equivalent disclosure requirements to those that will be set out under the Environment Act 2021 in jurisdictions across the globe. Given that, capturing the activity of all of their customers and supply chains would not be as simple as adding an extra stage of disclosure to the regime set out in the Environment Act 2021, as had been suggested. However, I assure noble Lords that the Government are committed to addressing this issue and will work with the financial services sector and those with expertise in tackling deforestation to consider how we can make further progress.

[Baroness Sheehan (LD)]

Before the Minister moves on to another amendment, I put a question to her on Amendment 199 on deforestation. I hope she is coming to answer it.

[Baroness Penn (Con)]

Not just yet. Was it about the letter?

[Baroness Sheehan (LD)]

The question was about the regulations under Section 17 of the Environment Act 2021 that are supposed to be forthcoming. I asked the Minister when she thought they might be ready.

[Baroness Penn (Con)]

I will have to get back to the Committee on that point. I had picked up the noble Baroness’s other point, which was also referenced by the noble Lord, Lord Tunnicliffe, on the letter from Sir Ian Cheshire on this issue. I looked closely at his report and the recommendations in it. I am happy to place a copy of that letter and my response to it in the Library so that all noble Lords have access to them.

I was going to add something about the importance, in seeking to address this issue, of co-ordinating action internationally. This is necessary to reduce the financing of illegal deforestation and not simply drive it into other jurisdictions.

The noble Lord, Lord Tunnicliffe, referenced the work by Sir Ian Cheshire’s task force and its references to the Taskforce on Nature-related Financial Disclosures, the TNFD. The Government accept that that will not solve this problem on its own but it is important to recognise it as an important building block in creating an international solution. As I have pointed out, other jurisdictions do not have disclosure regimes. The TNFD is an attempt to create a global standard on nature-related disclosures that could be an ingredient in making progress in this area. The UK is the largest financial backer of the TNFD. We support its work to develop a global framework for reporting on nature-related impacts, dependencies and risks, within which deforestation is being considered. Once the task force launches its final recommendations in September 2023, the Government will consider bringing these standards into the UK disclosure framework.

Finally, on deforestation, in response to Sir Ian and the noble Lords who raised it today, as I set out, we are looking at what we can do further in this area. If noble Lords would like to meet to take those discussions forward, I would be very happy to do that.

[Baroness Sheehan (LD)]

Before the Minister moves on, could I reiterate the strength of feeling across the Committee on deforestation? It is not just about the 12% of global carbon dioxide that is released by burning and cutting down forests; it is also about the destruction of the carbon sink. It is a double whammy. This is an issue that we can and must solve. We have a report by the Government’s own appointed head of the GRI, Sir Ian Cheshire, who clearly lays out how we move forward on this. I wonder why the Government will not accept the findings of their own reports.

[Baroness Penn (Con)]

I say to the noble Baroness that I absolutely agree. I appreciate the point that the issues concerning deforestation are about not just nature and biodiversity but our ability to tackle climate change. That is why we are such strong supporters of the TNFD’s work, for example. She mentioned Sir Ian Cheshire’s report. I said to the Committee that I have read that report and looked at it very carefully. I do not think that we are in disagreement in wanting to find solutions to this problem. Sir Ian’s report also sets out that work needs to be done to ensure that the solutions that we identify are effective. For example, he refers to ongoing work in other jurisdictions such as the EU and the US on disclosures that would be building blocks towards making the progress that we all want to make. The Government do want to make further progress on this issue and I understand the strength of feeling, so I commit to this Committee to take those discussions further and see where we can build consensus on it.

[Baroness Sheehan (LD)]

I thank the Minister. On behalf of the noble Lord, Lord Randall, I accept the meeting. I know that he cannot be with us today, sadly. The final point that I leave with the Minister is that Sir Ian Cheshire was very clear in his letter about why he thought the UK should be acting. It is because, as a financial sector, we really matter. We may have 1% of the global emissions footprint but, in terms of the deforestation footprint and the money that passes through London, it is substantial.

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[Baroness Penn (Con)]

The Government understand and agree with those points. That is why we are also seeking to find a way forward on this work and have driven considerable work at a global level to try to tackle deforestation. I hope noble Lords can take some heart from our commitment on that.

On Amendment 232, also from the noble Baroness, Lady Sheehan, my noble friend Lord Naseby will be pleased to hear that NS&I’s retail green savings bonds, which I think have been available for a couple of years, are integral to the continued successful delivery of our green finance programme. We clearly have more work to do in promoting them, so the NS&I will continue to promote them and encourage retail investors to help finance the fight against climate change and other environmental challenges.

The Government committed to publishing a biennial impact report by September 2023, which will detail the environmental impacts and social co-benefits of the green financing programme’s spending. This will include available reporting on greenhouse gas emission reductions of projects financed by the green savings bonds and green gilts. The upcoming impact report will complement the programme’s first allocation report, published in September 2022. These annual allocation reports detail how funds raised from sales of green gilts and green savings bonds contribute to different green priorities such as clean transport and renewable energy.

Amendment 232 proposes publishing an assessment of the scope for future green financing. Decisions on future green financing ambitions are based on eligible green spending commitments and will be taken each financial year as part of wider decisions for the Treasury’s budget. Financing decisions are also influenced by gilt and retail savings market conditions and consultations with investors. Reporting on the future scope of green financing in advance, rather than at the beginning of each financial year, could create the risk that future spending requirements and conditions in the gilt and retail savings market are disregarded. That would make the successful delivery of the green financing programme more challenging.

I turn to Amendments 233, 235 and 236 from the noble Baronesses, Lady Wheatcroft and Lady Hayman, which concern sustainability disclosure requirements, green taxonomy and transition plans. Sustainability disclosure requirements—SDR—are designed to provide an effective and co-ordinated reporting framework for sustainability information. This is already being taken forward at pace. The FCA recently consulted on new sustainability-related disclosure requirements for all regulated firms and more detailed rules for asset managers and asset owners.

The Government’s 2021 road map made it clear that disclosure of transition plans will be a part of SDR. The Government launched the independent Transition Plan Taskforce in April 2022 to develop a gold standard for transition plans. The task force has since made huge progress, having just consulted on its recommendations, framework and guidance, with the final framework and guidance to be published later this year, alongside additional sectoral guidance.

The FCA has already implemented the guidance from the Taskforce on Climate-Related Financial Disclosures for transition plans for asset managers and asset owners, on a “comply or explain” basis. It is continuing to work closely with the Transition Plan Taskforce to develop and implement its recommendations.

As I reaffirmed to noble Lords in a previous debate, the Government are committed to implementing a green taxonomy as part of their sustainable finance agenda and, as I set out in my Written Ministerial Statement to the House on 14 December 2022, the Government will provide an update as part of the green finance strategy. We are clear that the value of a taxonomy rests on its credibility as a practical and useful tool for investors, companies, consumers and regulators in supporting access to sustainable finance.

Noble Lords have only to look at the implementation challenges the EU is facing, including on data availability and reporting, coherence with regulatory frameworks, and international interoperability, to see that this is a complex exercise. We have been clear in the UK that, with the support of our Green Technical Advisory Group and with public consultation, we will take the time to get the taxonomy right to ensure that it is usable and effective.

On Amendments 201 and 237, the Government and regulators are taking steps to improve the UK’s regulatory framework to support more effective stewardship. We have already discussed in Committee the Financial Reporting Council’s world-leading Stewardship Code 2020. This asks trustees and managers to disclose how they have considered environmental and social factors, including climate change, in their investments. The Department for Work and Pensions’ recent stewardship guidance for pension scheme trustees came into effect last October.

In addition to these existing initiatives, the DWP, along with the FCA, the Pensions Regulator and the Financial Reporting Council, has already committed to a review later this year of the regulatory framework for effective investment stewardship, to ensure that it is consistent across market participants and financial products. I recognise that this is a complex issue and recognise the concerns raised by the noble Lord, Lord Davies of Brixton, about the specific framing of the amendments. This is an issue that would warrant further discussion before Report.

On Amendment 241A, tabled by my noble friend Lady Altmann, UK pensions have been at the forefront of tackling climate risk and will undoubtedly continue to play a crucial role. The Government are working hard to drive consolidation among pension schemes so that they deliver increased scale, better value for money and improved access to investments such as green infrastructure. As part of this drive, the DWP recently published a consultation on a value for money framework for defined contribution pension schemes. Furthermore, the pooling of Local Government Pension Scheme assets, from the 86 funds into eight asset pools, has already led to £380 million in net savings to March 2022; these are projected to exceed £1 billion by March 2025.

We are also working hard to lower the barriers for individual pension schemes to invest in green. The DWP is reforming the treatment of performance-based management fees to enable individual pension schemes to invest more easily in assets such as green infrastructure.

Finally, when it comes to the noble Baroness’s amendment, we are aligned in wanting to see more of this pool of capital able to be directed in the way we have discussed in this Committee. It is important that we lower barriers to such projects and solutions. We do not see the benefit in creating a distinct, lighter-touch regulatory regime to support pooled investments in green projects. There may be risks in reducing regulatory oversight in this way.

The UK’s world-leading regulatory standards are important in providing market participants with the confidence to invest and we should be cautious about changes that could undermine that confidence. I say to my noble friend Lady Altmann and the noble Baronesses, Lady Hayman and Lady Drake, that we want to think about how we can make progress in this area. While the specific amendments suggested might not be the right way, we should continue to put our thinking caps on when it comes to how we can guide progress in this area.

With that, I hope that, for now, the noble Baroness, Lady Worthington, is able to withdraw her amendment and that other noble Lords will not press their amendments when they are reached.

[Baroness Worthington (CB)]

My Lords, I am grateful for the Minister’s reply to this varied group of amendments covering a range of issues that fundamentally speak to the need for the financial sector to take a more serious look at how it can help prevent the exacerbation of environmental challenges, including climate change, and invest in solutions at scale.

I was encouraged to hear that the Government are about to produce their green finance strategy. I wonder whether it might have been a good idea to have done that before the Bill, as then we might have had—

[Baroness Penn (Con)]

We produced our green finance strategy in 2019 and we provided a green financing road map in 2021. I very much hope that before we reach the end of the Bill noble Lords will have sight of the refreshed green finance strategy.

[Baroness Worthington (CB)]

That is great, but my point still stands. It would have been good to have had the refresh before the legislation so that we could have incorporated any findings into the Bill.

On my amendment on the assessment of risk in relation to capital requirements, it is not the case that everything is fine in the world of climate modelling. It really is not. If you spend time with climate scientists who are empirical scientists out in the field witnessing the impact of climate on the natural world, they will tell you that the models are not in line with what they are witnessing. That tells you that we have not got a handle on the speed and pace of change in the physical world thanks to decades of unmitigated emissions of greenhouse gases and the never-ceasing increase in concentrations of greenhouse gases in the atmosphere.

The noble Lords, Lord Lilley and Lord Naseby, may well say that it is fine and that we are just going to look at demand. We have been doing that for about 30 years. It has not made a jot of difference. The reason for that is that we have an economic system based on an incumbent power that is very adept at keeping demand for its product healthy and at finding new sources of demand for its product, so we absolutely need to cut with both sides of the scissors. We need constraints on demand and constraints on supply; otherwise, we will carry on with this merry dance and the emissions in the atmosphere, which are what matters, will continue to rise.

I believe that the finance sector is not the place to solve this. We need political will across all member states to pass the legislation necessary to drive capital into solutions and to stave off the continued licensing of extraction. That will take time, but it needs to be done.

In the meantime, if we walk into believing that the finance sector has got this—“Don’t worry; the models are all fine”—we will be making a grave error. These models are not sufficient; they do not take a whole host of measures into account. The noble Lord, Lord Stern, is not here, but he is an expert in these matters and he will tell you how flawed these models are. How can they be sufficient when many of them conclude that a global increase of around 3 degrees will take roughly 5%, 10% or 15% from GDP? That is ludicrous. Do not forget that an average global increase of 3 degrees means warming at the poles at three times that rate and hugely different regional impacts. That is not a safe place to be.

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[Lord Tunnicliffe (Lab)]

My Lords, this is a key group for the Labour Party politically; it contains four of our amendments. Amendment 180 would require His Majesty’s Treasury and the FCA to publish a review of the need for

“access to essential in-person banking services”

and to ensure

“a minimum level of access”

to them.

Amendment 181 would require HMT to

“publish a policy statement setting out its policies in relation to the provision of essential in-person banking services, including … support for online banking, and maximum distances people can expect to travel to access services.”

I would be interested to know the Minister’s view on the reasonable distance for an elderly or disabled customer to have to travel to speak to someone from their bank.

Amendment 182 is perhaps the most important. It would compel HMT to

“guarantee a minimum level of access to free of charge cash access”.

Amendment 184 would require the FCA to

“monitor and report on levels of cash acceptance across the UK.”

I set out the crucial importance of free access to cash at Second Reading so I will not do so at length a second time; well, that is what it says here. Nobody has more interest in being speedy than me, or perhaps the Minister, because we have to be here for every minute of this Committee. We are almost in our 27th hour but this group is different from anything else that we have discussed. The rest of it—I cannot think of a polite way of putting it—is about activity that takes place for people like us. Quite a number of people work in the finance industry; we are looking at the nuances of it and how politicians should be involved.

However, the issue of cash is about our society. It is about the poorest and least competent people in our society. Technology has been a substantial disruptor. It is a disruptor that particularly applies to finance. It has allowed financial transactions to become extraordinarily efficient and has created a whole new customer base of people who are comfortable with technology. They have access to a whole new marketplace. We know that the dynamics of that have probably been benign for society.

However, the other problem is that it has created a divide in our society. I ran an organisation that used to have a lot of cash; I am all too familiar with the tremendous impact of approaching a cashless society. In all the knowledge in the world, the last bits are the most expensive bits. Yes, the cost of transactions goes up and so on and so forth, but we cannot afford to create the divide in our society that is emerging. We must support all parts of our society seriously. We must recognise that, in their lives, people sometimes need all banking services. We must recognise that some people simply cannot envisage how to budget without physically seeing it in separate pots. It is clearly a natural reaction if you are running out of money. You can see it there and have confidence because you know that, if you go into the grey world of accounts, banks, overdrafts, loans and things like that, all sorts of horrible things happen. For that group in society—it is probably 10% of our society so it is a substantial number of people—we must find a way of maintaining the public service. We must achieve a minimum service.

The noble Lord, Lord Blackwell, said what all providers of service say: if you are not ultra-efficient, you load the inefficiency costs on to other customers. It so happens that being ultra-efficient does not do much harm to your profit line either. Big businesses such as banks pursue the maximisation of shareholder value. It is in the law. They are supposed to do it, for Christ’s sake. We should not be surprised when they do but I rarely see them turning into charities. We have got to find ways. We do not have to keep all the branches open; even I can work that out. We have to be much more inventive in how we service this need, which is still large, but the way we must do that is by creating duties on the purveyors of financial services as well as rights and constraints.

It is proper for the law to create duties to look after the poorer members of our society. That is why so many people have said that it is important for a variety of needs—resilience and so on—that we maintain it. The banks must play their part. They have enjoyed massive exploitation—I do not use that in a pejorative sense—of information technology, probably more so than any other section of our society. They must recognise that there has to be a cross-subsidy in this situation because we must restore financial equity to all our society.

[Baroness Penn (Con)]

My Lords, as we have heard in this debate, the nature of banking is changing. In 2021, 72% of people banked online, and 57% on their mobile phones. Meanwhile, 85% of payments were made without cash, up from 45% a decade earlier, and 86% of UK adults used contactless payments.

[Lord Tunnicliffe (Lab)]

Were 85% of the number of payments made without cash, or was it 85% of the value of payments?

[Baroness Penn (Con)]

I will check for the noble Lord because I do not have that level of detail in my notes. They say that “85% of payments” were made without cash, not “the value of payments”, but I should double-check to clarify for him.

In the light of these innovations in the way that we bank, the Government recognise that it is incredibly important that people are not left behind—we have heard that in today’s debate. Many people still rely on physical services: in particular, millions of people still rely on cash and need access to withdrawal and deposit services.

Working with industry, the Government are already undertaking positive action to support cash access in this context. For example, existing initiatives subsidise free-to-use ATMs in remote and deprived areas. Following changes in the Financial Services Act 2021, there is a new ability to have cashback without purchase services, enabling withdrawals to the penny that people request. Communities can ask LINK to assess whether additional cash services are needed, with several major banks and building societies funding new shared services. As a result of that initiative, over 70 communities are due to get new cash deposit facilities.

In that context, it is important not to underestimate the significance of the provisions contained in the Bill. It is the first time, in UK law, that we are protecting people’s ability to access cash. The Bill provides the FCA, as the independent regulator, with the responsibility and necessary powers to ensure reasonable provision of withdrawal and deposit services.

In evidence to Parliament, the regulator said that it anticipates taking account of reasonable access to free cash services for personal customers—subject to due process, which includes a requirement to consult on its rules. In using its powers, the FCA will utilise the wealth of data that it has collected, including on access at the regional level, and it must have regard to local deficiencies in cash access services and the Government’s policy statement.

The noble Baroness, Lady Tyler, asked about the policy statement. It is currently being developed, and we expect it to be published after the Bill completes its passage. It is important that it takes into account the latest available data and evidence ahead of its publication.

I have clarification for the noble Lord, Lord Tunnicliffe, on the statistic that I used, so I shall not need to write. I can confirm that 85% of the number, not the value, of payments were made without cash.

[Lord Holmes of Richmond (Con)]

While we are getting clarifications in flight, may I ask my noble friend the Minister about the 86% of people using contactless? Are 86% of people using contactless all the time or are they making one payment a year? If someone from the Box is able to answer that in flight, that would be helpful.

[Baroness Penn (Con)]

That request has been noted. Reading the statistic in my notes, I would say that 86% of adults have used contactless payments, rather than it being a comment on how much they use them as part of their payment mix. If I am wrong, I hope that the people supporting me will tell me.

I talked about the policy statement and the significance of the measure that we are taking in the Bill. We have heard from the Committee that not everyone agrees with that approach. In legislating to protect access to cash, the Government have sought to provide that reassurance for those who rely on cash for a number of different reasons.

We have heard why it can be important for accessibility and for people to manage their finances. We have also heard about privacy concerns. However, we have not sought for the legislation to be prescriptive on the cost, type of facility or range of services offered at facilities. We are seeking to ensure that this primary legislation allows for innovation and flexibility, as the needs of people and our communities evolve over time. I think those advocating for greater access to services also recognised the need for that flexibility and change in needs over time. It is for those reasons that the Government do not support Amendments 176, 178, 182 and 185 from the noble Baronesses, Lady Tyler and Lady Twycross, and the noble Lord, Lord Tunnicliffe.

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[Baroness Penn (Con)]

My Lords, we were addressing the question of when alternative service provision is put in place and the accessibility of that service provision.

I have addressed the point made by the right reverend Prelate the Bishop of St Albans about connectivity. He also made a point about customers needing, for example, a smartphone to make payments or access online banking. The FCA has stated that it expects payment service providers to offer solutions that work for all groups of people. It encourages all firms to consider the impact of their solutions for customers. The regulators’ guidance recognises that not all customers will have mobile phones or a reliable signal and that viable alternatives should be provided in these situations.

All service providers, including banks and building societies, are bound under the Equality Act to make reasonable adjustments where necessary. Many of them support access to digital services through initiatives to distribute devices, teach skills, or facilitate support networks.

As my noble friend Lord Holmes highlighted, moving towards digital can create opportunities for accessibility but it can also create barriers. It is important that we embrace these technological changes in ways that reduce those barriers, so his point about ensuring that interfaces, including ATMs and point-of-sale terminals, are accessible is really important.

[Lord Eatwell (Lab)]

Would the Minister indulge me for a moment? I have been intrigued by her discussion of the role of digitisation. I refer to Amendment 184, tabled by my noble friend Lord Tunnicliffe, on the duty to collect data on cash acceptance.

When teaching monetary economics, the first thing that you ask students to understand is, “What is money?” Money is something that is generally accepted in discharge of a debt. That is the definition of money. The issue of cash acceptance is therefore vital as society develops in the way that the noble Baroness, Lady Noakes, outlined so clearly. What will happen is that, for the section of society who rely on cash—several million people—their cash will no longer be money. It will no longer be generally acceptable in payment of a debt. In those circumstances, the digital instrument will be crucial. However, if the digital instrument is issued only by companies, namely banks, to those who are customers of the banks, who have some basic criterion, it is surely the responsibility of the state to issue a digital instrument that is available to all citizens.

That being the case, to get to that stage, we need to know how cash is generally accepted. Therefore, the amendment, which contains a duty to collect data on cash acceptance, is vital for the development of future policy with respect to cash and digital instruments. The Minister rejected the amendment by saying that it is not the FCA’s responsibility. Can she tell me which department of government has this responsibility to collect data on cash acceptance?

[Baroness Penn (Con)]

My Lords, there are a number of ways to tackle the issues that the noble Lord referred to. There are various statistics around payment methods used by consumers in the UK; I quoted some at the start of my speech. The Government have not mandated service providers to accept certain forms of payment; that is not the approach we intend to take to ensure that people continue to have access to cash or money. I have said that, in supporting businesses’ access to deposit services, that will support people’s ability to use their cash as a form of payment.

The noble Lord also raised the question of a digital form of money. That is a question that the Government have looked at very carefully. We launched what I think was a joint consultation between the Government and the regulators, looking in more detail at the question of a central government digital currency and how to take forward that work, as well as considering questions such as those from the noble Baroness, Lady Fox, about privacy issues in a world of having a digital form of money versus having cash as a form of money.

I understand the importance of having a picture and the data that allows us to understand what is going on. I do not think that the data is necessarily the gap here; it is about how you provide for the ongoing use of cash in a society where rapid changes are being made. Our approach to that has been through legislating in this Bill on access to cash withdrawal and deposit facilities.

I was just talking about the importance of the accessibility of payment interfaces, including ATMs and point-of-sale terminals. I am pleased that UK Finance and the RNIB have developed accessibility guidelines for touch screen chip and PIN devices, as well as an approved list of accessible card terminals. The Government’s disability and access ambassador for banking, Kathryn Townsend, also encourages a consistent consumer experience and engagement with deaf advocacy groups.

[Lord Hunt of Kings Heath (Lab)]

My Lords, I do not want to delay the Committee or the Minister but, on ATMs, I referred rather incoherently to the interchange fee paid by LINK. Will the Minister take back the issue that this is having a big impact on the viability of providing free cash by the companies that do so? This partly seems to be down to the ownership of LINK and the influence of banks in relation to it, but does she accept that there can be very profound effects when you lose free access to cash and have to pay for it? I was told this morning at a meeting with NoteMachine —one of the companies that provide cash—that six out of 10 withdrawals are for £10 because people are using it to budget. The problem is, if you no longer have access to free cash, you then have to pay £1.50 for it. That is a huge rate. These are some of the practical issues that I hope the Minister will be prepared to take away between now and Report.

Even accepting that the Minister may not be prepared to accept any of these amendments, it seems that at the moment we do not, despite FCA guidance, have a guarantee that the financial sector as a whole is going to change the way it operates. This is the problem that we face. If anything, its policies are driving cash out without recognising the impact on some very vulnerable people.

[Baroness Penn (Con)]

On interchange fees, decisions regarding the operation and funding arrangements for an ATM network are taken by the parties involved. The noble Lord will know that LINK has commitments to protect the broad geographic spread of free-to-use ATMs and is held to account against those obligations and commitments by the Payment Systems Regulator. It has specifically committed to protect free-to-use ATMs more than one kilometre away from the next nearest free ATM or Post Office and free access to cash on high streets, and it supports free-to-use ATMs in deprived areas through its financial inclusion programme.

I recognise the point that the noble Lord has made. Coming back to the provision in the Bill, while I understand that different amendments have been tabled to look at how it could be enhanced or altered, it is important to acknowledge that legislating to protect access to cash is the Government recognising the point that the Committee made and taking action to address it. We want to have flexibility in how that is delivered, but we are providing for it in primary legislation and I hope that principle is welcomed, even though there are different opinions about how it could best be delivered.

Drawing towards the end of my remarks, I was going to note specifically on accessibility that that question was considered by the most recent Financial Inclusion Policy Forum. As I was saying to the noble Lord, Lord Hunt, while the Government do not support these amendments, I hope that noble Lords recognise the action that is being taken through the Bill and elsewhere, because the Government take these issues seriously. It is right to consider the outcome that we are all trying to deliver in a changing world: accessible financial services. That can mean a range of things, such as for people on low incomes being able to budget their money or for accessibility when it comes to disability, age or other factors. The way we have tried to approach access to cash in the Bill is by looking at delivering those outcomes in a flexible way, so I hope that at the moment the noble Baroness, Lady Tyler, is able to withdraw her amendment and that other noble Lords do not press their amendments.

[Baroness Tyler of Enfield (LD)]

My Lords, it feels some time now since we started this group of amendments. I thank the Minister for her measured response in which she tried hard to reflect quite a wide range of views on the issues we have been talking about. I also thank all other noble Lords who have contributed. This has been a fascinating debate. There has been a reasonable degree on consensus in places, but by no means full consensus, and I certainly understand that.

I want to refer to a very important comment made by the noble Lord, Lord Tunnicliffe. He said that this group is different and is about whether we want a divided society. Another noble Lord said—I am sorry but I cannot remember who it was—that banks are not charities. I think we all understand that but it is for us as legislators, a point I made in my opening speech, to decide on the sort of society that we want. That is actually what this group of amendments is about.

I listened to the noble Baroness, Lady Noakes, and others, and I assure your Lordships that I am not stuck in the past. I make most of my payments by holding out my phone. However, a very helpful point was made by the noble Baroness, Lady Fox, which was that there are times when I do not want to pay like that. I still want to use cash sometimes, even though I can hold my phone out, and it is rather important that I have that choice.

--- Later in debate ---

Moved by

[Baroness Penn]

191: Schedule 11, page 213, line 3, leave out “financial”
Member’s explanatory statement
This amendment would enable the Bank to direct a central counterparty’s parent company to establish a separate holding company as a parent of the subsidiary, rather than requiring that holding company to be a separate financial holding company.