Financial Services and Markets Bill

Debate between Geoffrey Clifton-Brown and Stella Creasy

Report stage
Wednesday 7th December 2022 Commons Chamber

[Sir Geoffrey Clifton-Brown (The Cotswolds) (Con)]

I am grateful to catch your eye, Madam Deputy Speaker.

I congratulate the hon. Member for Blaenau Gwent (Nick Smith) on tabling new clause 10, for which he should receive much of the credit. This amendment has an extremely simple intent in laying a duty on the FCA to report to Parliament on

“(a) the adequacy and appropriateness of the FCA’s use of its regulatory powers; (b) the measures the FCA has taken to protect vulnerable consumers, including pensioners, people with disabilities, and people receiving forms of income support; and”—

finally and most importantly—

“(c) the FCA’s receptiveness to the recommendations of the Consumer Panel.”

I will now say why paragraph (c), in particular, is so important. The hon. Member has explained clearly why the FCA should regularly report to Parliament, and in my role as deputy Chairman of the Public Accounts Committee, I have constantly urged openness and transparency, wherever possible, so that our constituents can make full and proper judgments on the actions, or lack of them, of regulators such as the FCA.

Like the hon. Member for Blaenau Gwent, I will give the House an example. The PAC inquiry that we held in April and June this year highlighted the plight of some 2,000 of the 7,700 British Steel pensioners who in 2019 suffered significant financial shortfalls because of the wrong advice given by a significant number of independent financial advisers who advised pensioners to opt out of their valuable defined-benefit pension schemes. To add further insult to injury, the actions by the regulator caused a number of independent financial adviser companies to go out of business or merge with others, and therefore the compensation that pensioners received rightly was capped. I know this is a complicated subject but both the hon. Member and I are using it as an egregious example of why the FCA needs to be more accountable to Parliament and our constituents. This amendment stems from recommendations 5a and 5b in the PAC report “Investigation into the British Steel Pension Scheme”, published on 21 July:

“The FCA should be more proactive and consumer-focused in its engagement with stakeholders. It should have a better mechanism for responding to consumer harms and collect more evidence on a regular basis to pick up on issues that are being raised, especially from emerging risks in financial markets…The FCA must also review how effective the Financial Services Consumer Panel is at consumer protection and how it influences policy debates within the FCA from a consumer angle.”

The hon. Member and I have had discussions with the Economic Secretary, who is on the Front Bench today, and I believe he is sympathetic to the principle that the FCA needs to be much more accountable. If that is the case, I very much hope that he will concede the principle of this amendment and incorporate it as a Government amendment in the other place. Neither the hon. Member nor I wish to be prescriptive about how or when this reporting should take place to Parliament; that is a matter for the Government.

No financial institution will ultimately exist without its consumers. The whole point of the FCA as a regulatory authority is to protect their interests. Rather than having to work through long and complicated reports, there needs to be clear, easily available information on what regulators are doing, or not doing, on their behalf. All of this requires a fundamental shift in the regulator’s—the FCA’s—attitude to the consumer and a commitment to engage more when things go wrong.

Finally, I want to comment on the fraud aspects of the Bill. The PAC recently conducted an inquiry on fraud and discovered that 41% of all reported crime in June was accounted for by fraud, up from 30% in 2017, yet just 1% of police resources is being devoted to fraud crimes. So we urgently need to see the Government’s new comprehensive fraud strategy.

[Stella Creasy]

I rise to add my wholehearted support to the comments of my hon. Friend the Member for Kingston upon Hull West and Hessle (Emma Hardy), to new clause 7, to my Front Bench, and indeed to the points made by the hon. Member for The Cotswolds (Sir Geoffrey Clifton-Brown): many of us have had concerns about the FCA and its ability to represent consumers for many years, and it is good to see that work being done.

I shall focus on new clause 28. The bridge of the Titanic received seven warnings about icebergs. It was told exactly where the iceberg was, but on hearing those warnings it varied the direction of travel by one or two degrees yet kept going full steam ahead. The visible iceberg was 50 to 100 feet high and 200 to 400 feet long, yet still they ploughed into it. It does not take a rocket scientist to recognise that we have a personal debt crisis in this country with a cost of living crisis, that our constituents are struggling because there is too much month at the end of their money, and that those who make their money from those who are struggling are licking their lips.

This Bill is about financial regulation yet one of the most pernicious legal loan sharks is the buy now, pay later industry. The pool in which they fish is wide. This country has £205 billion-worth of consumer credit lending to account for, up £482 million on the previous month. People are borrowing not just to pay Peter and Paul, but to pay for their mortgages, to put food on their table, petrol in their car and clothes on their children’s backs. Let me be clear: I do not stand here with a hair shirt on saying nobody should borrow, but in that environment, when our constituents are being exploited by these companies, it is absolutely right to regulate them and protect our constituents, yet that is not what is happening here.

For nearly three years we have been warning the Government on the need to act on legal loans harks and the buy now, pay later companies—those warnings that came to the bridge of the Titanic. The Klarnas, the Laybuys and the Clearpays are the companies whose names we see when we go to check out online. They account for 6% of all online spending in the UK, and that is expected to double in the next two years. High thousands of reputable retailers have them on their websites. They have them not to help people to spread their payments as the companies claim, but because people spend on average 30% to 40% more if they use buy now, pay later.

But what people are telling us very clearly is that they are spending money they do not have. A quarter of all buy now, pay later users have been unable to pay for at least one essential because they are having to make repayments on buy now, pay later products. Some 25% of users have also missed a payment or made a late payment on a buy now, pay later loan in the last 12 months.