Financial Services Bill

Christine Jardine Excerpts

Report stage & 3rd reading & 3rd reading: House of Commons & Report stage: House of Commons
Wednesday 13th January 2021 Commons Chamber

[Bim Afolami (Hitchin and Harpenden) (Con)]

I rise to support the Bill and to focus my brief remarks on the wholesale market, rather than the retail market, which most Members have addressed so far. In particular, Government amendments 22 and 23, which the Minister mentioned in his opening speech, clarify beyond any doubt that non-UK firms—all firms that do not have the UK as their principal place of business—are not within the scope of the rules on the parent undertaking. That is particularly relevant to me. I brought the subject up in my Second Reading speech and it is something on which I have corresponded with the Minister and his team. I am very glad that he and the Treasury have engaged on the Bill in this way. It is a telling example of how good Ministers behave, and the Minister has been exemplary in taking on board comments on the Bill from a range of Members. I commend him for that.

I have a couple of short comments on what others have said. On new clause 16, tabled by the SNP, in my speech on Second Reading I gave my view that there is a need for increased scrutiny by this House of the regulators, but the Minister is right to say that we need to consider that in its entirety in the consultation on the future of the regulatory framework. That is the right way to do it. It is very important to get it right, and I look forward to sending in my remarks if I have not already, and seeing the Government’s response to those points.

I shall finish by addressing certain amendments that were introduced in Committee or that have been mentioned today, on the European Union—new clause 12, new clause 20 and many others—whereby, effectively, Opposition Members have tried to impose requirements on the FCA or the PRA to assess the impact of the differences between the EU and UK regulatory frameworks. The conceptual problem with that is—as I think that all hon. Members, and indeed the Government, need to see—that over the next five to 10 years we are going to be in a very different regulatory world. We need to think of attracting companies and investment on a global basis, not with a purely European focus as was the case in the past.

The Minister has already mentioned our success in relation to FinTech. The Chancellor has mentioned his focus on making sure that the London stock exchange is more attractive and effective for others coming from abroad. The European Union’s drivers and incentives are not the same as ours in this country, so it would be wrong for us to necessarily seek to follow the rules blindly. It is not a race to the bottom; it is a race for us in this country to win the global competition for safe, beneficial, productive capital and business. That is what the Bill helps set us up for.

[Christine Jardine (Edinburgh West) (LD) [V]]

It is an honour to follow the hon. Member for Hitchin and Harpenden (Bim Afolami) in this Report stage debate and to speak on a Bill that is of so much importance at this juncture for our economy and the circumstances that we face. The sector that it deals with is so important, and it cannot be overstated. The financial services sector is vital to our recovery, not just because of the jobs it provides and the tax that it contributes to the Exchequer, but because of the number of people, families and communities in this country whose future wellbeing depends on a well-regulated and successful financial services sector.

The Liberal Democrats, my own party, have tabled two amendments—new clauses 22 and 23, both of which address the issue of debt repayment and recovery, but at this stage we shall not be pressing them to a Division, so I prefer not to discuss them. Instead I shall discuss the amendments that we will be supporting, specifically new clause 7, tabled by the hon. Member for Walthamstow (Stella Creasy), of which I am one of the signatories. As I alluded to, our support is recognition of the need to act now to create an environment that enables our economy and the people at the heart of it to recover as quickly and as financially painlessly as possible. The scale of the potential problem that awaits us as we emerge from the current crisis is frightening for businesses and for households. The most recent research from StepChange estimates that more than 3 million people are in arrears and priority debts, and potentially 6 million people—more than the population of Scotland—are behind on household bills. For those people, that creates stress, financial hardship and sleepless nights worrying about how to feed their children.

We should have no truck with any company or organisation that in any way exploits the difficulties that covid has created. That is why I put my name forward as a co-sponsor of new clause 7, which would bring the non-interest-bearing elements of buy now, pay later lending and similar services under the regulatory ambit of the FCA. We need to act now, before we have another scandal. Such companies facilitate overspending online and costs appear lower than they actually are. One in four shoppers used such companies in the run-up to Christmas. More people are being furloughed and made redundant, so even if something seems affordable now, it might not be in future, either for the country or for individuals.

In the past year, we have heard much about the crossroads at which our economy, and indeed the country, stands. Our financial services sector was worth £132 billion to the UK economy in 2018 and had more than 1 million jobs. It has suffered. It is worth 7% of our economy. In my city of Edinburgh, we have the second-largest financial services sector in the UK and the global financial centres index ranks it as 13th in the world. The scale of what we are facing cannot be underestimated, which is why the Bill should be amended as I suggest.

[Kevin Hollinrake]

I very much appreciate the efforts that the Minister is making to try to tighten up in many areas. We are on the same page about many different aspects of the measures that we are talking about. Looking at the Bill from afar and taking a helicopter view, for decades, we have been willing to preside over a system that I would describe as financial feudalism. Some people live by a completely different set of rules and are not held to account properly by the rules that are in place. Unless we start to put measures in place that hold individuals to account for some of that egregious behaviour, we will not stamp it out.

That behaviour undermines the faith in the very system that we believe in—the free market system. We cannot simply hold our hands up and say, “It’s the bankers again,” or, “It’s the money launderers again.” We have to tackle those issues and put measures in place to do that. We did with the Bribery Act 2010, which was effective in giving individuals a corporate responsibility to stamp out bribery. Again, the Government acted on tax evasion in 2017.

There are still other areas, however, where we allow people to steal, defraud, launder and lie. That is not to say that there are not some good people in our financial institutions, and there are some very good bankers, but we need to hold individuals to account for things such as LIBOR, foreign exchange rigging, and the disgraceful scandal at HBOS and the Royal Bank of Scotland, where only one individual has been held to account with a directorial ban. As I have said before, over a similar period of time, between 2008 and 2018, there were £9 billion of criminal and corporate fines in the US, but £260 million in the UK.

I am glad that the Government support the principles behind new clause 4 and will bring their own measures forward. It is absolutely vital that that is not just kicking things into the long grass and that those measures are brought forward quickly so that we can hold individuals to account for failing to prevent corporate fraud and money laundering.

The key thing that I will talk about in my last 54 seconds is mortgage prisoners. Again, the fact that we let people’s mortgages be sold to vulture funds in the first place is because we do not have proper regulatory oversight and we do not lean on them as the FCA can on regulated firms. The promises that were made to Lord McFall and others were simply not carried through.

New clause 25 in particular is a nuclear option. I am not a person who would like to cap anything—the market should deliver those solutions—but we do not have a proper solution for the many people who are trapped on very expensive rates. The evidence that we have says that it would not affect the marketplace of residential mortgage-backed securities, about which the Minister is concerned; that it would be highly effective; that we could define it for a certain cohort; and that it would relieve hundreds of thousands of people from dire financial straits overnight. I ask him to look at that again.

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[Christine Jardine [V]]

Like other Members, I would like to reiterate my and my party’s support for the financial services sector and its importance to our economy, making up about 7% of GDP. There has been a lot of cross-party agreement on this in Parliament. I hope the Government recognise that it is incumbent on them to take on board the comments from the Liberal Democrats, the Labour party and the Scottish National party. There is a great deal of work still to be done to protect consumers from unscrupulous operators, and this will be vital to not only our economic recovery but the future shape of the United Kingdom’s economy once we recover from covid-19.