Financial Services and Markets Bill

Emma Hardy Excerpts

2nd reading
Wednesday 7th September 2022 Commons Chamber

[Richard Fuller]

Not surprisingly, the hon. Lady has put her finger on one of the most fundamental elements of the debate that we need to have on the Bill, which is the accountability of regulators, as expressed through the House and, if I may say so, through the Government. I can assure the hon. Lady that that will be a fundamental part of our debate throughout the Bill’s progress, and, indeed, I will say more about it later in my speech.

[Emma Hardy (Kingston upon Hull West and Hessle) (Lab)]

Will the Minister give way? This is further to that point.

[Richard Fuller]

If it is further to that point, of course I will.

--- Later in debate ---

[Emma Hardy]

I think that one of the points made by my hon. Friend the Member for Wallasey (Dame Angela Eagle) was not just about regulation post-Brexit, but about the power grab in the Treasury. Clause 3 deals with the Treasury’s powers during the transition, and it states that the primary legislation in schedule 1 will be bypassed, with powers given directly to the Treasury because of the need to move EU regulations speedily into domestic law. That, I think, is where one of the problems lies. It is a question of how much power is going directly to the Treasury and bypassing Parliament entirely.

[Richard Fuller]

The hon. Lady has made a useful point. She has identified the fact that there is an extensive amount of change in this Bill. As we repeal EU legislation, there will clearly be some measures on which there is a common view that they can easily be repealed and are unnecessary. It is right that the Treasury, and the Government, should be able to take those actions directly. Equally, there will be measures that will require full consultation by the House through secondary legislation, and I can give a commitment that that will be done apace, but with the ability for parliamentary colleagues to debate those measures fully. It is important that we achieve the primary objective of the Bill, which is to make the United Kingdom a solid global financial service centre.

In fact, the Bill has five objectives. They are to implement the outcomes of the future regulatory framework review, which involves reshaping our regulatory and legislative regime as an independent state outside the EU; to bolster the competitiveness of UK markets and promote the effective use of capital; to promote the UK’s leadership in the trading of global financial services; to harness the opportunities of innovative technologies in financial services; and to promote financial inclusion and consumer protection. I will take each of those in turn.

Let me deal first with the implementation of the outcomes of the FRF review. Clause 1 and schedule 1 repeal retained EU law for financial services so that it can be replaced with a coherent, agile and internationally respected approach to regulation that has been designed specifically for the UK. This will build on the existing model established by the Financial Services and Markets Act 2000, which empowers our independent regulators to set the detailed rules that apply to firms. They do this while operating within the framework and guard rails set by the Government and by Parliament.

Schedule 1 contains more than 200 instruments that will be repealed directly by the Bill. While in some cases these rules can simply be deleted, in many areas it is necessary to replace them with the appropriate rules for the UK, in our own domestic regulation. These instruments will therefore cease to have effect when the necessary secondary legislation and regulator rules to replace them have been put in place.

As we have already heard from Members today, giving these measures effect will require a significant programme of secondary legislation to modify and restate retained EU law. I can confirm that in most cases, this will be subject to the affirmative procedure in the House.

--- Later in debate ---

[Richard Fuller]

When I say “access to cash” I mean access to cash. My hon. Friend raises the question of whether that access should be free; that is a matter to which we will return in Committee, but I cannot give him that assurance at this stage.

As the country faces cost of living pressures, we must ensure that the door to affordable credit is open to all. The credit union sector plays a crucial role in this respect by delivering for its members and providing an alternative to high-cost credit. Clause 63 allows credit unions in Great Britain to offer a wider range of products and services to their members. To improve consumer protection, the Bill will strengthen the rules around financial promotions. Clause 62 enables the Payment Systems Regulator to mandate the reimbursement of victims of authorised push payment scams by payment providers, for all PSR-regulated payment systems, and places an additional duty on the regulator to mandate reimbursement in relation to the faster payments service specifically.

Clause 48 and schedule 9 give the Bank of England new powers to oversee wholesale cash infrastructure, to ensure its ongoing effectiveness, resilience and sustainability. Clause 47 and schedule 8, on cash access, will ensure that the FCA has regard to local access issues and a Government policy statement on access more generally. The Treasury will designate banks, building societies and cash co-ordination arrangements to be subject to FCA oversight on this matter.

[Emma Hardy]

rose—

[Richard Fuller]

I am afraid I am going to conclude.

This is a significant Bill and I look forward to the House considering each measure in detail as it makes its passage through Parliament. The Bill has a single vision: to tailor financial services regulation to the UK’s needs, to promote global competitiveness and innovation, and to contribute growth in our economy. I commend it to the House.

--- Later in debate ---

[Emma Hardy (Kingston upon Hull West and Hessle) (Lab)]

I want to start with a general point about the Bill, which puts an awful lot of faith in our regulators to be able to carry out the functions written in it. I have been approached by members of staff working for the FCA—in fact, staff representatives at the FCA—who have talked to me about the current climate there. There are issues around recruitment and, specifically, around the retention of skilled individuals, and how relations are breaking down to a rather concerning degree. If we want the FCA to do everything that the Government are saying they want it to, especially post-Brexit when we are moving regulation across, then we need a competent and effective FCA. I hope the Minister will take that point away. I am happy to have further conversations with him on the matter, so we can resolve the issue.

It seems particularly concerning that the FCA does not recognise any trade union. When comparable bodies such as the Bank of England recognise trade unions and the FCA does not, that seems to be indicative of the problematic workings of the FCA. I do not want to comment further on that, but I hope that the Minister takes that away as a serious point, because we cannot have effective regulation if we have ineffective working practice.

I was going to intervene on the Minister but I was pipped to it, because he sat down before I could. However, I wanted to mention clause 64, which is about providing insurance after terrorism incidents, so if insurance becomes too expensive, someone can continue to have insurance and the Government will step in. I thought that that was interesting because I have repeatedly raised in the House flood insurance, Flood Re, what happens if buildings are continually flooded and how we make sure that we have affordable flood insurance. It is very good that the Government want to introduce that provision for acts of terrorism, but I hope that the Minister will look more deeply into flooding and businesses’ concerns about that.

Let me turn to my main gripe with the Bill, and I am sure that the hon. Member for Salisbury (John Glen) will know exactly what I am going to say. As I mentioned to him in passing the other day, he is welcome to support any of my amendments, because he has heard all this before. I was disappointed that there was no provision on having regard to financial inclusion. It is great that there is a provision on having regard to the Climate Change Act 2008—the Labour party legislation—but there is nothing on financial inclusion. I will table amendments to give the FCA a cross-cutting “must have regard to financial inclusion” provision, and I genuinely call on Treasury Committee members to support them, as this was a recommendation from one of our reports. The proposals would include a statutory duty to report to Parliament annually on: the state of financial inclusion in the UK; the measures that the FCA has taken, and is planning to take, to advance financial inclusion; and recommended additional measures that could be taken by the Government and other public bodies to promote financial inclusion.

This is a bit of a no-brainer. We have a cost of living crisis, with people suffering from severe levels of debt and hardship. We have a Government who are potentially—though we are not quite sure—bringing forward massive amounts of borrowing to be heaped on taxpayers for years to come, and what I am proposing is free. When do we ever get to do that? I am proposing a small solution to the cost of living crisis that is absolutely free; it would address the poverty premium and ensure that the FCA “has regard” to financial inclusion.

I assume that the Minister will refer to the FCA consumer duty as an example of action that the Government are taking. However, that is not enforceable until July 2023—unless the new Prime Minister decides not to move it at all—and it does not address the fundamental problem of what happens to the clients that the market do not want. I am talking about those who are locked out and excluded from financial services. The previous FCA principles were about treating customers fairly, but that still does not address what happens if the market does not want someone.

What is the poverty premium, and what does that mean? In real life, that means people paying more for credit due to their credit rating, paying more for insurance because of where they live or past health issues and paying more for services, because they cannot benefit from direct debits or—as we have heard mentioned a few times—they need to use cash. I find it ludicrous that we have a situation where it costs more to pay in cash than it does in direct debit. We know exactly the kind of people that harms. Of course, the poverty premium is not limited to areas under the FCA’s remit. We have had previous debates about gas and electric and pre-payment meters, which I will not go into now, but the costs are very real.

Let me give an example from my Kingston upon Hull West and Hessle constituency, where nearly a fifth of constituents are affected. The poverty premium means that it costs them nearly £6 million more a year to access the same services and goods. If any Members who are listening are interested—especially those on their phones—they can look at the Fair By Design website, where they can look up their constituency and find out exactly how much the poverty premium is costing each and every one of them. This can be addressed by ensuring that the FCA “has regard to” financial inclusion.

Financial inclusion has been mentioned briefly, and I pay credit to the Government for what they are doing on credit unions. That is a good step forward, but this is always passed between the FCA, the Treasury, other regulators and Departments. Everyone nods very seriously and says how important it is. Someone says, “We must seriously do something about this but it is not actually our Department’s problem. It is someone else’s problem.” And the next person says, “Oh, this is really important. We must do something about it, but is not for our Department. It is their problem”—so the issue goes round and round with nobody actually taking responsibility. That is why having regard to financial inclusion is so important in terms of the FCA having a remit to actually look at this.

I am thinking particularly about insurance. A specific example is car insurance: people cannot drive without it, yet for so many it is simply unaffordable. That leads either to people driving without insurance or to their being unable to take on specific jobs because they simply cannot afford it. We need to do something about that.

My proposals, for which I will call for support across the House, will try to address it. They would end the current damaging situation by giving the regulator a clear remit and saying, “The buck stops here—you have regard to financial inclusion, so you need to look at this.” Sometimes that will mean the FCA taking a main role, and sometimes it will be others, but it will mean that the buck stops somewhere, so somebody has to take the issue seriously and look at the extra costs facing the most financially vulnerable in our society.

I also call on the Minister to introduce measures for groups facing digital exclusion and give them technological support with banking. Specifically, we need measures to ensure that blind and partially sighted people can access their finances and manage them independently.

I am very excited, because I keep asking to be on the Bill Committee and I think I have finally been given the nod. I look forward to discussing the Bill in more detail at every opportunity and through every clause as it goes through Parliament.