Financial Services and Markets Bill [Lords]

Catherine West Excerpts

Tuesday 10th November 2026 Commons Chamber

[Dame Meg Hillier (Hackney South and Shoreditch) (Lab/Co-op)]

I agree with both the Chancellor and the shadow Economic Secretary, the hon. Member for Wyre Forest (Mark Garnier) that the financial services sector has an important part to play in our economy. As the shadow Economic Secretary said, the sector represents 3% of jobs in the UK, and it is important for growth and investment. It is therefore important that we understand its role and that we get things right. This Bill, in the Government’s terms,

“will modernise how the sector is regulated, and enable it to grow and lend more to businesses. It will also make consumer protections fit for the digital age”.

I do not think any of us would disagree with those intentions.

The Government have also set out clearly that they want to maintain high standards of regulation and oversight at the same time. There is a balance to be struck in leaning in to support a sector, while also protecting the many consumers—millions of our constituents—who are borrowing, investing and using the services of financial institutions. Having a strong and competitive financial services sector is important for driving growth, but the protection of consumers is important, too. The Treasury Committee has looked at that balance between the growth objective that the previous Chancellor set the Financial Conduct Authority and its role in regulation.

As a side point, I mention remit letters. The new Chancellor has not had a chance to write too many yet, but the number of remit letters that go to our regulators runs into quite high numbers. Those bodies then have to consider the “have regard to” comments in those letters in their work, and it makes for a very long list of things to do, some of which just cannot all be done at the same time. The Treasury could look to prune some of these requirements, or to decide what the key areas are at any point, so that those organisations know what they should be focusing on.

This Bill could be seen as moving the pendulum more towards the financial services sector and further from regulation to support consumers, and we should be careful about that. The Committee has made some comments on it, but for me, consumers should be front and centre. My question to the Government—the Economic Secretary may expand on this in her closing remarks—is: how far should that pendulum swing? How far is too far? Who is the arbiter of what level of protection constituents and consumers should expect? We have a number of bodies, and I will speak about the Financial Ombudsman Service a little later.

It is not just me or the Treasury Committee who have been raising these issues. Nikhil Rathi, the chief executive of the Financial Conduct Authority, said to us in July that the FCA needs a clear indication of the Government’s risk tolerance when it comes to markets. He is up for the challenge, but he needs to know as a regulator where to draw the line between promoting growth and consumer protection. We know that even a small increase in the percentage of customers harmed is a lot of people. One of the pleasures of our role as MPs is that we get to see people face to face at our surgeries. We see people in the raw. Whitehall is a long way from that direct contact, and it is us who will be picking up the problems if they arise. As this Bill proceeds through Committee, we need to be cautious and make sure that we are stress-testing that point about consumer protection at each stage.

The Government are encouraging more investment. In fact, the Economic Secretary, during her previous time as Economic Secretary, made a number of public statements encouraging people to invest more. I can understand the Government’s position. People can make a lot more money from savings if they invest them carefully and well, but it is about changing the language. There has been concern about investment, particularly since the financial crash of 2008—it is a bit like the “Smoking kills” signs on cigarette packets—so the Government are changing the language, but I need to ask what level of risk they are willing to take. As they change the language and encourage people to take not risky, but less safe approaches to managing their money, where will the Government draw the line?

My main concern is the changes to the Financial Ombudsman Service, which has been a vital consumer protection. It is popular with consumers, and the source of much complaint from the City. The shadow Economic Secretary highlighted some of those concerns, as did the Chancellor. We know that the Financial Ombudsman Service is not perfect. It has had a bit of a rocky ride in the past few years, but it is already undergoing some changes without the need for legislation. It is having to adapt to the modern world, and AI is no doubt causing it even more challenges, but it was dealing with a high volume and not always reacting quickly enough.

I have a couple of particular concerns to raise. One is the time limit on complaints. While 10 years sounds like a long time, some of the financial products that our constituents take out have a very long life, with pensions being the obvious example. When something goes wrong in that area, it can have a long reach back into the past. I understand the challenges for banks, such as we have seen with the motor finance issues. When the issue was payment protection insurance, I spoke to one bank that employed 10 people just to go through the complaints coming in from people who were not even customers of the bank. There is a lot to be done in that area. This partly relates to those online promising the earth to people if they take up a complaint, even if they do not have legitimate grounds. I do not believe setting the time limit at 10 years is the answer. The Economic Secretary might not be able to discuss it now, but perhaps she will meet the Committee or me—whoever—to talk about how the Government will protect people taking out long-term financial products, including pensions.

The Treasury Committee has heard evidence on the Financial Ombudsman Service from the Citizens Advice, which noted that although it believes that consumer protection and growth do not have to be competing objectives—I agree with that—this Bill reduces protections and access to redress for consumers. Which? wrote to the Committee and noted that the proposed referral mechanism in clause 6 risks making redress slower and more complex, creating additional barriers to redress for consumers. I know that the Chancellor answered that point to a degree in response to my question earlier.

Clause 7 constrains the fair and reasonable test that the FOS has worked under for such a long time, which will make it harder for consumers to receive redress, even when they have been treated unfairly. I can see clearly what the Chancellor and the Government are trying to do here. We have heard the noise from the financial institutions, saying, “We adhere to the rules of the FCA. We take into account the consumer duty, as the FCA requires us to do. Then something goes to the ombudsman and suddenly it seems to be judged by a whole different set of rules.” Most financial institutions do a reasonably good job most of the time and treat their customers fairly, and the consumer duty weighs heavily on them. When something goes to the ombudsman and is not considered to meet the fair and reasonable test, it should be something that is egregiously outside that consumer duty. It is important to have that backstop for our constituents. The Financial Ombudsman Service is already, as I said, undergoing non-legislative reforms. We should focus first on improving the system, rather than adding more layers of legal reform. Perhaps giving it that chance to reform itself would be the best first step.

In March this year, the Committee wrote to the Government outlining the importance of the Financial Ombudsman Service’s independence. The perception of that independence is vital. I propose—I would like to talk to the Economic Secretary further about this—that we introduce a statutory lock for the Treasury Committee on the appointment and dismissal of the chair of the Financial Ombudsman Service. There is precedent; the Chancellor of the Exchequer may not know it, but he cannot appoint or sack a chair of the Office for Budget Responsibility without the agreement of the Treasury Committee. That is a lock on a mad, bad or dangerous Chancellor taking away the independence of that important body. We think that there should also be a lock on a mad, bad or dangerous Chancellor doing the same for the chair of the FOS.

[Catherine West (Hornsey and Friern Barnet) (Lab)]

Does my hon. Friend, who chairs the Treasury Committee, agree that in other jurisdictions it is quite common to have more parliamentary oversight of these sorts of appointments?

[Dame Meg Hillier]

I agree with my hon. Friend, who is also a member of the Treasury Committee and a constituency neighbour of mine in London. We are not suggesting for a moment that the Treasury Committee starts rolling up its sleeves, conducting job interviews or getting in CVs. That is not our role. Our role is to be a check and a balance on the Government.

As I said to the Opposition Front Bench spokesman, the hon. Member for Wyre Forest, we are not legislating for the people here in this Chamber, who I believe are good and honourable Members with all good intent. We have to legislate for the worst possible set of legislators and the worst possible Government, and we need to make sure that we have that commitment to the independence of the Financial Ombudsman Service. This would be one small step that would take nothing away from the rest of the Bill. It would not damage any of the Government’s set-out intentions. I know that the Chancellor is a strong advocate for a strong Parliament, and he should be praised and recognised for that, so I hope he will consider this option. I am happy to share my thoughts with the Economic Secretary on how an amendment could be tabled; it may be that it can come up in Committee—I would hope that it would not have to wait until a later stage, on Report.

It is essential that the Chair of the Financial Ombudsman Service, which is a key public role, has the necessary independence and professional skills to maintain the balance between consumers and the financial services industry. The Treasury Committee has a number of pre-appointment hearings—more than a number of Committees do—and our measure is professional competence and independence. I would hope—and so far, Members will be glad to know, this has proved to be the case—that when the Treasury goes through a proper recruitment process, it recruits people with professional competence. We measure against that. Again, if there were a mad, bad or dangerous Government in future, that might not always be the case, but so far it has been. The independence point is important too, and that is what is often tested in the room when we have someone before us for a pre-appointment hearing. We do not have a power to sack, but in this case, we think we should have an extra power of a lock on that appointment.

The Financial Ombudsman Service is accountable to Parliament. The Treasury Committee was compelled, due to the actions of a previous chair of the Financial Ombudsman Service, to underline that point in our ninth report of the session 2024-25, which was entitled— I say this for Hansard’s purposes and I am sure that colleagues will avidly look this up in a moment—“Financial Ombudsman Service: Accountability to the House of Commons”. Providing the Treasury Committee with a statutory lock on the appointment of the FOS chair would help to guard against a repeat of that incident. I was saddened at the time to receive a letter from a public appointee to say that they did not have to appear in front of the Treasury Committee because they were a Member of the other place. That is another issue that I will take up in due course. The Second Reading debate is obviously about arguments in principle, but I am happy to have a further conversation with the Economic Secretary on the detail.

I want to raise a couple of other quick points while I have the floor. On financial inclusion, I know the Economic Secretary has played her part—I think four Economic Secretaries have dealt with the financial inclusion strategy. Now that it has been published, the Committee will keep an eye on how it is going. We published a report on the matter, and the Government told the Committee that the Bill would include a reserve power on access to face-to-face banking services, recognising the limitations of voluntary action. The power was removed in the other place following concerns about its breadth. In their response to our report, the Government said they intended to restore that power during the passage of the Bill in the Commons, and that they would use evidence from the access to banking services review to do so. I would be interested, if the Economic Secretary could cover that in her closing remarks.