Financial Services and Markets Bill

Gareth Davies Excerpts

2nd reading
Wednesday 7th September 2022 Commons Chamber

[Gareth Davies (Grantham and Stamford) (Con)]

It is a great pleasure to speak in this debate on a Bill that is, frankly, the biggest reform of financial regulation in a generation. First, I pay tribute to the longest-serving Economic Secretary that we have known, my hon. Friend the Member for Salisbury (John Glen), who committed his work with great diligence and who is greatly respected in the industry to this day.

I care a lot about the financial services industry. I worked in it for many years, it taught me a lot about the world, and my wife works in it, so I personally want it to thrive, but given its significance to our economy and people, we all should. The Prime Minister was right when she said that it is the “jewel in the crown” of our economy. It is a direct benefit to businesses, savers and investors, and an indirect benefit to us all through jobs, growth and tax revenue. That is why it is important that we do everything we can to unleash its potential, as this Bill does.

I welcome the fact that the Bill takes advantage of our regulatory freedoms now that we are not in the European single market, gives more control to our domestic regulators and ensures that they are more focused on international competitiveness. All those who worry about that resulting in a decline in regulation should be assured that the primary objective remains intact, and that that mirrors established conventions in markets with highly regulated systems, such as Australia and Japan.

I welcome the moves to tighten the regulations on promotions by creating a new regulatory gateway for approvals. I also welcome the provisions to improve the co-ordination between the FCA and the PRA. As a member of the Treasury Committee, I welcome its enhanced role, but join others in saying that it is important that it has the resources and expertise to carry out that role effectively.

This is an excellent Bill that will help to drive the industry and our country forward. I have been struck that we all agree on one aspect, which I will talk about: the need to further democratise our capital markets. Despite the remarkable success in the finance industry, it genuinely bothers me that not enough of our people are directly participating in or benefiting from our capital markets. Although we are all stakeholders in UK plc, not enough of us are shareholders with a stake in our economic success.

We can do three things to address that. First, I am a huge advocate of extending auto-enrolment to those aged 18 to 22, so that they can get on the savings ladder earlier. That would create 900,000 new savers and £1 billion extra in savings for our economy, and it would do a great deal to encourage a better savings culture. Secondly, we should look at removing regulatory obstacles to people receiving investment advice, so that people do not just save, but invest. Thirdly, I want us to get on with reforming Solvency II, so that more pensioners can expand their investment universe into illiquids such as infrastructure. If we do those things, we can build on this excellent Bill and ensure that everyone shares in the success of our world-leading financial services sector.

Financial Services and Markets Bill (First sitting)

Gareth Davies Excerpts

Committee stage
Wednesday 19th October 2022 Public Bill Committees

[Martin Docherty-Hughes (West Dunbartonshire) (SNP)]

I am chair of the all-party parliamentary group on blockchain.

[Gareth Davies (Grantham and Stamford) (Con)]

I am a vice-chair of the APPGs on environmental, social, and governance and on financial markets and services. I also spent 14 years in financial services and my wife works in financial services.

[Shaun Bailey (West Bromwich West) (Con)]

I am chair of the all-party parliamentary group on financial resilience.

--- Later in debate ---

[Emma Hardy]

Did you want to add anything, Victoria?

Victoria Saporta: No, I think Sheldon has covered it.

[Gareth Davies]

Q Good to see you again, Sheldon. Can you confirm whether you know of any country in the world that has a competitive objective for its regulators?

Sheldon Mills: I’m not aware of one. Vicky?

Victoria Saporta: Singapore has one. Its financial stability, however, is primary; it overrides the competitive objective, which is secondary. There is the Hong Kong Insurance Authority. Otherwise, it is not common, particularly for prudential authorities, which is what I know about.

[Gareth Davies]

Q Australia and Japan also have regulators with a competitive objective. Would you regard Singapore, Hong Kong, Japan and Australia as being robust regulatory financial centres?

Sheldon Mills: We do not like to comment on other financial centres, but, yes, I would consider them to be robust financial centres.

[Gareth Davies]

Q You consider them to be robust financial centres. Would you consider those financial centres of Japan, Australia, Singapore and Hong Kong to be competitive financial centres to the United Kingdom?

Sheldon Mills: Yes, in certain respects.

[Gareth Davies]

Which respects?

Sheldon Mills: I think they are competitors to the financial services system. The UK is extremely strong, varied, and has a multiplicity of financial services. Some of the competition that comes from some of those regions is quite specific in terms of what it seeks to compete with. We have a very broad-based financial services system.

[Gareth Davies]

Q Thank you. Sarah, how do you believe the secondary competitiveness objective might change your behaviour and your policy making?

Sarah Pritchard: From an FCA perspective, it is very much as Sheldon has said. It is important to say we support the Bill as it is currently framed. We think a secondary competitiveness objective can work alongside our primary statutory objectives. It will give us another lens through which to look at the policy work and the development of the regulatory agenda that we are taking forward. Back to the points raised previously on transparency and accountability, it will give us another method by which we will be reporting and considering our outcomes against. We will take that into account. We think it can work as a secondary objective.

On the various elements that make up competitiveness that have been touched on earlier, I think that innovation and ensuring that we can stay ahead of the game with the pace of development across the financial services markets is really important. You can see the financial markets infrastructure sandbox proposals contained within the Bill. There are proposals there on critical third parties as well, so you can already see on the face of the Bill in those particular areas a real desire to make sure that the UK can stay in lockstep or stay competitive as a country enabled through the way in which the financial services regulatory framework is developed going forward.

I think the agility is important. We often hear that regulators are too slow. Sometimes we hear that regulators are too fast in terms of putting out too many consultations. Clearly there is a balance there. We have shown ourselves able to act at speed through the Russia-Ukraine conflict and introduced new rules on side pockets to enable support in that context of war. We will need to maintain that flexibility to be agile when we need to, while retaining the checks and balances that are really important in terms of transparency and accountability.

[Siobhain McDonagh (Mitcham and Morden) (Lab)]

Q The FCA announced in June that you would be strengthening the protection of access to banking services. Some might say that this was closing the stable door after the horse has bolted, given that 50% of branches in town centres have now closed. What powers does the FCA currently have to protect banking services, and why were you not doing that before?

Sheldon Mills: Thank you very much for the question. The first framing point to this question is to understand that banking services have and are changing, and there are many, many benefits of those changes. The move towards digitalisation of banking services provides a huge amount of support to many people who are vulnerable. My mother is deaf and the change to a digital means of banking services has transformed her life completely.

The starting point must be that we have to consider the variety of ways in which people can provide banking services. That said, we know that, locally, branches can be important for communities. It is not just branches. It is a point at which people can deposit money and take out money. You can have a variety of those. They can be branches or post offices. They can be what we are trying to encourage the industry to develop when they close branches.

--- Later in debate ---

[Emma Hardy]

Q Okay. So, in general, would you welcome anything that we can do to strengthen provisions against fraud?

David Postings: Yes.

[Gareth Davies]

Q I just want to pick up on one thing you said, David. Can you confirm that the removal of the share trading obligation will make the UK a more competitive and open market?

David Postings: Yes, it will.

[Gareth Davies]

Q Thank you. More broadly, concern has been expressed about the Bill in some quarters that a freer derivatives market will push up commodity prices. Do you have a view on that?

David Postings: I do not have a view on that, I am afraid.

[Gareth Davies]

Q Do you believe that derivatives in general and competitive trading markets push up commodity prices?

David Postings: They can change the volatility in the market. They do not necessarily push the price up, but they can change the volatility.

[Gareth Davies]

Q Thank you. Do you have a view on that, Emma?

Emma Reynolds: I defer to David.

[Peter Grant]

Q Clause 1 proposes to repeal around 250 pieces of European legislation, pretty much at the stoke of a pen. The rest of the Bill then expects the Treasury to replace all those bits of legislation by a process that will allow for very minimal parliamentary oversight. Do you have concerns either that there may be a period where parts of the market are inadequately regulated or, alternatively, that there is uncertainty as to what the regulations are, because of the process of repealing something before you know what is going to replace it?

Emma Reynolds: From what is in the Bill, I do not think that is the Government’s intention. As I understand it, the Bill gives the power to the Treasury to transfer—restate—EU legislation, and we have encouraged the Treasury to think of this as a sequence, because we do not want big regulatory change in one go, as the compliance costs are quite high. We absolutely see that there is an opportunity to tailor EU legislation to our markets, so I do not think it is the case that this legislation would not apply; I think this is going to be done in a phased way.

Financial Services and Markets Bill (Second sitting)

Gareth Davies Excerpts

Committee stage
Wednesday 19th October 2022 Public Bill Committees

[Stephen Hammond]

Okay.

[Gareth Davies (Grantham and Stamford) (Con)]

Q Martin, I want to ask you very quickly about all the data that you have been listing in the evidence. I take this evidence session very seriously. I think that it would be really helpful if you could share the constituency data, but also, importantly, the workings. Can you just confirm that the way in which you are working out the poverty premium is not based on a best-case counterfactual?

Martin Coppack: What do you mean by “best case”?

[Gareth Davies]

Q Well, it is based on either a best-case counterfactual or average consumers’ costs. Which is it?

Martin Coppack: We have a whole list. We deal with Bristol University. We do a range. We work out an average. And then we have figures that go much higher. If it is one in 10 of people who are in poverty, we would have a higher one. We have a whole range that we can present to you.

[Gareth Davies]

Q But is the data that you have been rattling off today to all of us specifically on the best-case counterfactual or on an average cost per consumer?

Martin Coppack: I am not quite sure what you mean by “best case”.

[Gareth Davies]

Q Okay. Maybe write to me with your workings and we will go from there. If you rattle off data in an evidence session such as this, it is important for you to know how that data was calculated.

[Emma Hardy]

How they have worked it out is on the website.

Martin Coppack: It is published by the Bristol University Personal Finance Research Centre.

[Gareth Davies]

That still does not answer my question. If you are going to come to a Committee such as this, please provide your data.

[The Chair]

Order. I am afraid that brings us to the end of our allotted time for this panel. On behalf of the Committee, I thank our witnesses.

Examination of Witness

William Wright gave evidence.

Financial Services and Markets Bill (Seventh sitting)

Gareth Davies Excerpts

Committee stage
Tuesday 1st November 2022 Public Bill Committees

[Siobhain McDonagh]

My amendments 16, 17 and 18, together with new clauses 10, 11 and 12, address access to free cash, which is indisputably important in our society. Ten per cent. of UK adults—5.4 million people—continue to rely on cash to a great or very great or extent in their daily lives. One in five people says that they would struggle to cope in a cashless society, and that struggle would disproportionately affect those on lower incomes, the elderly and people with physical or mental health difficulties.

Without Government intervention, we are losing free access to cash in our society. In my constituency, the number of free-to-use ATMs has declined by 36% in the last five years, while the number of pay-to-use ATMs has increased by an extraordinary 22%—there is money to be made somewhere. The problem is not confined to Mitcham and Morden: since 2015, the UK has lost more than half its branch network—5,003 branches—at a terrifying rate of 54 branches each and every month.

Through my amendments, I wish to draw the Committee’s attention to the notable decline in the provision of free-to-use ATMs. Since August 2018, the UK has lost 12,599 free-to-use ATMs—a decrease of nearly 24%. Meanwhile, almost a quarter of ATMs now charge people for access to their own cash. It is no wonder that more than half of consumers experienced one or more issues accessing cash at a bank branch in the past year.

Who are the losers in this cashless society? The access to cash review unsurprisingly revealed that those earning less than £10,000 per year were 14 times more likely to be dependent on cash than those earning more than £30,000 per year, and yet they are the residents of the areas where free access to cash is hard to come by.

Take Pollards Hill in my constituency, where a ridiculous clause in the lease prevents the new Co-op from opening a free-to-use ATM because of two paid-for cash machines further down the row of shops. Residents are taking out small sums of money in order to control their budgets, some of them at just £10 a time, but they are charged £2 to take that out—a 20% charge for every single payment. They literally have to pay for access to their cash. Surely the legislation must be tightened to avoid imposing additional costs such as that on the most hard-pressed.

I believe that the need for access to cash is growing. Age UK highlights that one in five older people still relies on cash for everyday spending. The cost of living crisis has seen households reliant on cash counting out the pennies to ensure that they can make ends meet—it is no wonder that in August, the Post Office handled its highest total of cash ever. The evidence is overwhelming and I believe that there should be a societal duty on the Government to ensure that the most vulnerable people in our society have free access to cash and are not left behind.

It is not just me who has such concerns. The hon. Member for Vale of Clwyd (Dr Davies), now the Under-Secretary of State for Wales, stated on Second Reading that he hoped the Government would commit to protecting free cash withdrawals and deposits, presumably in light of Prestatyn losing TSB, Barclays, HSBC, NatWest and Royal Bank of Scotland in recent years, initially leaving the town’s high street without a single bank or cash machine despite being a major regional shopping centre.

On 19 April, the hon. Member for Beaconsfield tweeted after the announcement of bank branch closures in her constituency that she would take up the issue in Westminster, describing crisis talks with the banks on access to cash on high streets everywhere as essential. I am sure she agrees that this is the moment to vote where her voice was.

The hon. Member for Havant has seen at first hand how damaging the removal of access-to-cash provision has been for his most vulnerable constituents, having launched campaigns against TSB, NatWest, Barclays and HSBC in recent years, and having raised his concerns with HSBC about the potential impact on the elderly, who might not be able to access online banking and are reliant on face-to-face services. The hon. Member for Orpington has seen Nationwide, Santander and Barclays close in Petts Wood. He pledged to hold the latter to account in support of those residents who do not use mobile or online banking. Well done to that Member!

The hon. Member for Grantham and Stamford, in advance of the closure of the HSBC branch in Bourne, shared concerns with his constituents about the impact on his elderly constituents whom he said relied on the bank as a vital service in the town centre.

[Gareth Davies (Grantham and Stamford) (Con)]

The hon. Lady is making a fantastic speech—let me say that straight out of the gate—but may I clarify that her proposed access-to-cash solution is for the Treasury to make an intervention on the regulator?

[Siobhain McDonagh]

I do not believe that the regulator, the FCA, will force through free access to cash unless we legislate for that. As Members, we are responsible for that. I suppose I am trying to say that hon. Members are doing their job excellently by highlighting concerns in their constituencies. Even though we have been through a very rough time in politics and a lot of our constituents are unhappy about the turbulent times we have entered, many of them still have faith in democracy, party politics and our system because Members do that sort of work. I believe that we need to follow through when we are given the power to do so.

I have more. The point was even more strongly expressed by the hon. Member for West Bromwich West, who made a powerful speech. Following HSBC’s decision to close its branch in Wednesbury, he gave this message to his constituents:

“The argument of go to West Brom is not good enough! I am determined to fight this”—

good on him!

The hon. Member for North Warwickshire described the impact on local residents as “obvious” when the Lloyds Bank branch closed, leaving Coleshill High Street without a bank branch. As an MP for a rural constituency, the hon. Member for Hastings and Rye detailed her concerns to our witnesses last week about her constituency being able to access cash free, and about the distance her residents would have to travel otherwise.

I do not doubt that my constituency neighbour, the hon. Member for Wimbledon, shares my concern about the loss of cash machines and bank branches in Morden town centre, which we share. One of the only remaining free-to-use ATMs is hidden in a Cashino—an arcade. That is extraordinary.

Government Members need not worry: the new Chancellor shares their view. He was pictured in the Alton Herald just last November celebrating the arrival of a new free-to-use cash machine in his constituency. I say to the Minister: do not worry. If these amendments pass, the Chancellor is right behind you.

Given what appears to be an overwhelming consensus on the issue, I hope Members on both sides of the Committee acknowledge that the Bill needs to be amended to ensure not only that there is access to cash but that there is free access to cash. They will be lauded in articles in their local newspapers and posts on Twitter and their social media for passing these amendments.