Financial Services Bill

Baroness Laing of Elderslie Excerpts

2nd reading & 2nd reading: House of Commons & Programme motion & Programme motion: House of Commons & Ways and Means resolution & Ways and Means resolution: House of Commons
Monday 9th November 2020 Commons Chamber

[Stephen Flynn (Aberdeen South) (SNP)]

It is a pleasure to follow the hon. Member for Thirsk and Malton (Kevin Hollinrake). It is safe to say, as others have done, that this is not a debate that will have folk at home sitting on the edge of their seat awfully excited, that is for sure. None the less, it is an incredibly important debate. It is an incredibly important matter for the UK economy, but also for the Scottish economy, as my hon. Friend the Member for Glasgow Central (Alison Thewliss) outlined. The financial services sector in Scotland is incredibly important, and it is linked to tens of thousands of jobs across our nation. It is in that broader context that we are obviously quite content to let this Bill pass on Second Reading, bearing in mind the fact that a regulatory framework is needed at this stage. I hope the Government will be amenable to some of the amendments we will put forward. Those amendments will broadly—how shall I put it?—be borne out of frustration that perhaps the Bill does not necessarily go as far as it could or should go. I will seek to touch on a couple of those matters during my speech today.

The first one I would like to touch on is about clause 31, which is on money laundering. Clause 31 in itself appears to be one that is quite self-congratulatory in its nature. To quote, as I feel is appropriate to do on this occasion, the Government say that the Bill

“will further support the public and private sectors to efficiently and effectively target their resources towards potential criminal activity using trusts, maintaining the resilience of the UK’s defences against economic crime.”

On the face of it, that looks like a fantastic thing, but when we look a little bit more at what we on the SNP Benches have been saying for a number of years now about Scottish limited partnerships, it appears that the warm words of the Government do not actually bear fruit given the reality of the picture on the ground. It should not need to be said to Members on the Government Benches, but when we are talking about Scottish limited partnerships, we are talking about organisations through which people can access financial products without having to name who they are. If that is not an open invitation to money laundering, I do not know what is. When we look at money laundering in the context of Scottish limited partnerships and also of tax avoidance and £35 billion tax gap that exists in the UK at this moment in time, it is probably safe to say that the public are a little bit sceptical about whether the Government take this as seriously as they should.

Our frustrations do not stop there. They also relate to clause 32, on the debt respite scheme. The Government say that clause 32 will

“empower the Government to make regulations which will compel creditors to accept amended repayment terms”.

Again, on the face of it, that seems like a perfectly legitimate and correct thing to do, but does it necessarily address the situation at this moment in time, when businesses across Scotland and the UK have taken out bounce back loans and coronavirus business interruption loans that they will not be able to pay back? Does it meet the reality of the situation? I am very sceptical as to whether it does.

The Government have two options on that front. They could simply write off that debt for small to medium-sized enterprises, which are the lifeblood of our economy, or they could take strategic moves to turn some of that debt into equity stakes, where it would be appropriate to do so, to boost economic activity and perhaps gain some money back for the public purse. Unfortunately, again I am sceptical as to whether the Government will seek to do either of those things. That is not in any way a positive outcome.

Thirdly, I want to touch briefly on clauses 24 to 26, on the overseas funds regime. As my hon. Friend the Member for Glasgow Central said, the ABI has expressed concerns about the potential for equivalence to be used as a political football. I think all of us have that concern. We heard warm words from the Chancellor earlier today about the fact that he would not seek to use it as a political football, but being a bit of a sceptic about this Government, I think that warm words from the Chancellor at the Dispatch Box are not quite good enough. The record of this Government when it comes to saying one thing and doing the complete opposite is all too clear for everyone to see, so I have grave concerns in that regard.

The issue of equivalence takes me on to the final point that I wish to make, which is about the ongoing shambles in relation to Brexit. The UK Government website states that the Bill will “promote financial stability”. We do not have a trade deal with the European Union, and the transition period is a matter of weeks away. We do not know whether it will be possible for our financial services to access markets in Europe uninhibited. The scale of that issue is immense, particularly when we consider the fact that the City of London alone accounts for just under a third of all capital market activity across Europe. The market that we are seeking to leave is enormous, and this Government appear to have no plan and no desire to act prudently.

We heard from the Chancellor earlier, and we will probably hear it again from Government Members, that the blame for this lies at the EU’s feet, because it is refusing to partake in discussions in a proper and appropriate way. Who can blame the EU when, as the hon. Member for Edinburgh West (Christine Jardine) said, this UK Government are actively seeking to break international law? Who can blame the EU for being a little bit sceptical about the intentions of this Conservative Government? The sabre rattling needs to end, and the Government need to realise that the financial services industry must have the access it needs to support the tens of thousands of jobs that are reliant upon it, not only in England but in Scotland.

To conclude, I want to once again clarify that this Bill is very much born out of necessity, and we broadly support the regulatory framework around it. However, what is clear from this Bill, from the Brexit shambles and from the fact that the UK’s credit rating once again got downgraded just three days before the Bill was published, is that this Tory Government are no longer a Government of financial stability. I long for the day when Scotland no longer has to take its decisions in this place but can take its own decisions as an independent European nation.

[Madam Deputy Speaker (Dame Eleanor Laing)]

I call Gareth Davies. I will give him a moment in case he is here—I should have gone to Specsavers. I call Jim Shannon.

[Jim Shannon (Strangford) (DUP)]

You almost caught me unawares, Madam Deputy Speaker—I thought that the hon. Member for Grantham and Stamford (Gareth Davies) would be about.

I broadly support what is in the Bill, but I have a couple of requests, as others have had. I want to make three specific points on the LIBOR transition, debt respite and the inadequate FCA regulatory framework for SME lending. I say, first, that it is a pleasure to see the Minister in his place. He is always very responsive to us all on the questions we ask him, and he always keeps a smile on his face—it is always something you do extremely well, even though the questions that we may put to you are hard and perhaps not always put in the way that they should be.

LIBOR, the London interbank offered rate, is an interest rate benchmark used to indicate banks’ costs of funding their activities: for example, the cost of obtaining money for a loan they will make. It has been used and continues to be used as a reference in hundreds of trillions of pounds-worth of financial contracts, so this is a very important issue. The former FCA chief executive officer and now Bank of England Governor, Andrew Bailey, said that after 2021 the FCA will no longer persuade or compel banks to submit the underlying data that goes to calculating LIBOR, causing concern that it could cease to exist. Minister, it is a really big issue for us all, and certainly one that people have contacted me about. There have been many loans in the past and that are still in force where banks have used LIBOR.

I understand that the existing powers on benchmarks granted to the FCA, passed under EU law and to form part of UK law from 2021, are seen as insufficient to ensure a smooth transition away from the use of LIBOR, so again, Minister, perhaps you can give me an answer on that. I welcome, among other things, clauses 8 to 19, which appear to grant the FCA greater powers to compel the continued publication of the benchmarks, to prohibit the use of benchmarks and to oversee the orderly wind-down of benchmarks. I hope that the new FCA chief executive officer will now deploy these powers at the earliest opportunity. Again, Minister, perhaps we will be able to get some indication of a timescale for that, if possible, to assure us on where we are.

I welcome the fact that the Government have made a commitment to Gibraltar. Others have referred to it and others will—it is certainly one of the issues that I am concerned about. This gives peace of mind to that sector and we thank you for that.

Can I, Minister, perhaps underline another issue—

[Madam Deputy Speaker (Dame Eleanor Laing)]

Order. The hon. Gentleman cannot say, “Can I, Minister—”. How many millions of times have I said this to the hon. Member for Strangford (Jim Shannon)—only usually, I do not, because there is no time and there is a lot going on? Here I have my opportunity: he has heard my request to him a hundred times to please address the Chair. He cannot say, “Minister, will you do this?” And even worse, when he is addressing the Prime Minister, he must not say, “Prime Minister, will you do this?” He has to say, “Will the Prime Minister do this?” and “Will the Minister do this?”—in the third person, not the second person, please.

[Jim Shannon]

I stand corrected, Madam Deputy Speaker, and I will use my best endeavours to do that. Sometimes I get carried away in the emotion of the debate—it is a very emotional debate, of course—and I find that maybe I do not use the correct words.

Will the Minister look at the issue of money laundering in Northern Ireland? I make that comment because in all the countries across the globe, and particularly in this United Kingdom of Great Britain and Northern Ireland, money laundering is one of the issues that concerns me greatly. We have had many cases of money laundering over the last while, and we have many cases in Northern Ireland where paramilitary groups are involved in clear money laundering activities, which are against the law. With the Bill coming forward, will the Minister be able to give an assurance on money laundering, particularly in Northern Ireland? What discussions have taken place with the regional Assembly and the Minister in the Northern Ireland Assembly with responsibility for policing and justice, and what has been the feedback from that? I think that if we are going to do this well, we have to ensure that contact is made with the regional devolved Administration and that there are discussions outside that, particularly with the Republic of Ireland. Many illegal things are taking place in respect of transport across the border in all places, but we must tackle the ability of paramilitary groups to actively use the border with this purpose in mind.

Secondly, on the debt respite scheme, will the Minister confirm that clause 32 will amend the Financial Guidance and Claims Act 2018 to empower the Government to make regulations that compel creditors to accept amended repayment terms; provide for a charging mechanism through which creditors will contribute to the costs of running the scheme and repayment plans; and include debts owed to a Government Department at any level, including the devolved Administrations, in the statutory debt repayment plan? Again, I make a plea for the Northern Ireland Assembly: what will be the position in relation to any debts that are due? When do the Government expect to bring forward the relevant regulations? What discussions have taken place with the devolved Administrations on the statutory debt repayment plan?

The Treasury will be aware that the Business Banking Resolution Service has to be part of an effective solution under this process. The Democratic Unionist party remains concerned that we are not on track to do that. While the income from financial services is notable, so is the responsibility not only to shareholders but to the Government. We must ensure that that obligation is understood completely by enforcing the BBRS within legislation.

Thirdly and lastly, I refer to the bank lending regulatory framework. I finish with this because I believe it is the most important point. I know that the Minister is fully aware of it from discussions with the DUP and others who have contacted him. I have been in contact with him regularly about this issue since he first spoke about it at the Dispatch Box in January 2019. Of course, I have also been in touch with the Chancellor over the past month. The Minister must agree that it is crucial for SMEs to have the opportunity to export their products and services to the global economy, and the support to do so. I believe that our financial services industry, and banks in particular, must be regulated by the FCA in a much more legally effective way under this Government. Minister, it is very important that we have the bite, so to speak. It is all very well having words, but we need the strength of legislation to govern the banks’ small business lending post-Brexit.

The Government must get this right. I know that they can and I know that there is a will to do so. It is important that the future legal and regulatory framework allows our SMEs to have confidence in the 21st century global economy. I believe we have an opportunity to get it right this time, and it is time to do just that.

Madam Deputy Speaker, I hope that is to your satisfaction. Thank you very much.