Financial Services Bill

Chris Leslie Excerpts

Monday 6th February 2012 Commons Chamber

[Chris Leslie (Nottingham East) (Lab/Co-op)]

First, I congratulate hon. Members who have taken part in the debate this evening, particularly those who served so diligently on the pre-legislative scrutiny Committee and on the Treasury Select Committee, many of whom are in warmer foreign climes at present. I thank in particular the right hon. Member for Hitchin and Harpenden (Mr Lilley) for chairing the pre-legislative scrutiny Committee and my right hon. Friend the Member for Newcastle upon Tyne East (Mr Brown) and my hon. Friend the Member for Leeds East (Mr Mudie), who contributed to the debates, for their work.

My hon. Friends have spoken on a number of topics this evening, but it would be invidious in the short time left for Front Benchers—only 10 minutes each—to try to discuss them in more detail. But do not worry Mr Speaker, because we will have about 10 hours in every one of the four weeks when we consider this Bill in Committee, so we can elaborate on each other’s comments then. Let me just note that my hon. Friend the Member for Walthamstow (Stella Creasy) rightly spoke about the need for reforms to high-cost credit and that my hon. Friend the Member for Rutherglen and Hamilton West (Tom Greatrex) spoke about the collapse of Arch Cru and the need for lessons to be learned, and made a reasonable call for a Treasury inquiry into those matters. My hon. Friend the Member for Islwyn (Chris Evans) emphasised the need for more action on financial education and my hon. Friends the Members for Glasgow North East (Mr Bain) and for Foyle (Mark Durkan) talked about the current difficulties in the banking sector, particularly with high executive pay. Also, my hon. Friend the Member for Edinburgh East (Sheila Gilmore) spoke about the importance of addressing financial exclusion and access to basic bank account services.

The Bill is a significant piece of legislation and we support the moves to a prudential regulatory approach with improved systemic oversight, but there are serious misgivings about the proliferation of agencies and the confused responsibilities in the Bill, which are far from ideal. As we have heard, we are moving from a tripartite system to a quartet system, and the acronyms abound. That might work, but we need clear lines of accountability. That was the point that my right hon. Friend the shadow Chancellor was making. There are issues with complexity, and risks associated with putting all our hopes on placing regulation in the hands of the Bank of England. The formation of the Financial Policy Committee is sensible, but we need to ensure that it has the right composition, with fewer Bank of England officials in its membership, and that appointments reflect the balance across the economy.

We have touched on a number of issues relating to the economy, such as responsibility and long-termism, and we have heard about consumers of financial services, many of whom are, after all, constituents of ours, for whom we have an obligation to speak. There will undoubtedly be a debate about the objectives of the Financial Conduct Authority and whether they are sufficiently focused on the fairness, transparency and efficiency we need in the system. There is some confusion in the Bill regarding the FCA’s powers when it issues a warning notice, and the extent to which such notices will be published. Will it be known to consumers or will there be a nod and a wink, with notices going privately to the companies concerned? Is that the right balance? I am not entirely sure that that works.

We have to do a lot more to emphasise other consumer protection matters. We must surely grasp the nettle and take this opportunity to do what we can to improve financial education in all our schools up and down the country. We must also make sure that the information available to customers more generally is accessible, intelligible, clear and understandable so that we can try to do something about the asymmetry of information that hon. Members have discussed.

My hon. Friends the Members for Islwyn and for Foyle suggested that a fiduciary duty of care should be placed on providers of financial services, and we think that there are compelling arguments in favour of such a change, particularly as some important points about pensions and charges need to be brought out in the debate, as the hon. Member for Warrington South (David Mowat) mentioned.

My hon. Friend the Member for Walthamstow continued her campaign to introduce a time limit and a limit on high charges for credit, particularly for the vulnerable in our constituencies. I agree that it is time to ensure that the FCA has powers to take action in that regard and on fee charging, debt management plans and further safeguards for depositors.

When it comes to responsibility and the long-term changes that are needed to ensure that financial services address the real economy as well as the needs of consumers and constituents, it is important that we learn the lessons of the past. Therefore, we must look at the FSA’s report on RBS and take action in the Bill to end the bias in advisory fee structures in takeovers. We must take the opportunity to reform acquisition and merger rules, as the FSA has recommended. To what extent can we use the opportunity presented by the Bill to enhance the role of the Financial Reporting Council, and possibly the FCA, to support sound stewardship and shareholder accountability and to improve the corporate governance that many hon. Members have talked about, never mind the reforms that are so overdue to executive pay, the bonus culture and the remuneration committees that have been so much in the news in recent days? It is also important to take the opportunity to do more to support a diverse financial services sector, supporting mutuals and building societies, many of which do not fit into the neat capital requirements and plc structures imposed on them by current regulatory arrangements. Those are some of the changes that we will want to introduce in Committee.

It would be wrong not to take this opportunity to talk about one of the fundamental vacuums in the Bill: the insufficient attention to jobs, growth and finding ways to support our economy. The action taken by the Financial Policy Committee and the Bank of England will undoubtedly have a big impact on the availability of credit, not least because the Government have signally failed to do anything to encourage bank lending: Project Merlin has already fallen by the wayside and credit easing has still not commenced. The FPC has the objective of protecting and enhancing stability, but we believe that it should also be guided by the objective of promoting employment and the long-term growth prospects of the economy. That is something that the CBI has argued for, and it happens in similar situations elsewhere around the world.

Perhaps the Government’s difficulties stem from their partisan design of these structures when the Chancellor was in opposition. As we heard in his speech, the Government have tried to tell a domestic political narrative that pins the failures of the credit crunch solely on the previous Administration, and suggest that it is something that happened only in this country. In his revisionist attempt to re-write history, not even once did he mention the problems in other countries, or the fact that there was a global financial crisis. He suggested that what happened, happened only here in Britain—as if the then Prime Minister got on a plane and caused all the problems in America, Spain, Germany and elsewhere, as well as in the UK. The Chancellor’s analysis of the history of the credit crunch is lacking, to say the least. It would have been better if he had redesigned regulation in a way that recognised the casino culture of the global banking sector at the time of the financial crisis.

We are faced with a Bill that contains a number of problems, but ones that we hope can be amended and improved. The regulatory structure fails to sit adequately with the international and European regulatory environments. The EU’s supervisory bodies are split thematically to deal with banking, pensions and insurance, rather than mirroring the conduct and prudential arrangements set out in the Bill. Given that the EU drives the vast bulk of the regulatory agenda that will be able to overrule the domestic regulators that we are debating, it is important that the Government state clearly how they will ensure that our voice is not marginalised in those regulatory environments—if, indeed, it is possible to be even more out in the cold than the Chancellor is at present.

[Mark Field]

Will the hon. Gentleman give way?

--- Later in debate ---

[Chris Leslie]

I am afraid that I have only one minute before the Minister has to speak, in which time I shall also emphasise the points that my right hon. Friend made about the lack of Bank of England accountability in the proposals before us.

The hon. Member for Bury St Edmunds (Mr Ruffley) correctly pointed out the problems of a lack of a proper supervisory function in the court of the Bank of England, and they absolutely have to be addressed. There are problems also with the regulatory structure, which on the one hand describes itself as twin peaks, but looks as though it has at least four elements to it—the quartet model, which we have heard about today. Will we hear the voices of those four institutions in their own right, or will they be subjugated to the voice of the Governor of the Bank of England?

One of the most important issues for us in the House of Commons is accountability to Parliament. We are investing an enormous amount in the Bank of England, with quasi-legislative powers being placed in its hands, and my hon. Friend the Member for Leeds East was absolutely right about the need for us tread carefully in relation to those accountability questions.

We will not object to the Bill this evening, and we hope that it gets a Second Reading, but it is right that we shall spend time debating its contents in detail. Some serious amendments are needed, and we want stronger regulation that is fit for purpose, has sufficient checks and balances, delivers financial stability, promotes employment and growth, protects consumers and safeguards the interest of the taxpayer. The whole country wants to see banks that serve the best interests of the wider economy and society, and we hope that Ministers will listen and amend their Bill accordingly.