Financial Services Reforms

Debate between John Baron and Andrew Griffith

Tuesday 11th July 2023 Commons Chamber

[Andrew Griffith]

I thank the right hon. Gentleman for his contributions on how we can deliver the best pensions for long-term savers. There are no estimates for the share of the UK. We are mobilising an additional £50 billion of assets over time. That is evolution, not revolution. We would expect—and it is the job of this Government—to present that investment capital with a wave of attractive options across some of the fastest-growing sectors, as the Prime Minister and Chancellor have laid out, and to remove frictions and obstacles as people seek to invest in the UK, creating a conducive environment for that investment but falling short of mandating it, in the knowledge that the allocation to international investments for some of our actively managed schemes already exceeds that of other comparable companies. On the charge cap, we are this morning publishing a consultation on the new value for money framework. Clearly, we want to continue ensuring that pensioners benefit from fair charges, but also that that does not come at the expense of the underlying performance that they receive.

[Mr John Baron (Basildon and Billericay) (Con)]

I welcome this set of measures, particularly the ending of the packaged retail and insurance-based investment products regime and the introduction of the Mansion House compact, on which some of us have lobbied the Government. I will share two key concerns with the Minister. On fintech and early-stage businesses, we have a problem in this country because the pension fund industry has divested itself of UK equities, to the detriment of the London stock exchange and, ultimately, of financial services generally. It troubles me that that 5% is not focused on early-stage start-ups in the UK, unlike many other domestic pension funds, which do support their own. More generally, a bigger piece of the jigsaw is missing in my view. Pension funds have generally divested themselves of UK equities to such a great extent—some estimates suggest a 90% reduction since 2000—that we need to see more encouragement by Government to get the pension funds to use their wealth by putting it into UK equities for the betterment of the UK economy. After all, they do benefit from tax breaks.

[Andrew Griffith]

I thank my hon. Friend for his, as ever, apposite points. That encouragement is exactly what the proposals are all about: working voluntarily with the sector and encouraging it to lean in. I want people to see 5% as a potential floor, not a ceiling. Many will seek to go much further forward. The broad objective of the Government is to provide good access to capital at every stage of a Government’s life, whether it is our support for the seed enterprise investment scheme, the enterprise investment scheme or the venture capital trust; the expansion of the pool of individual investors who are able to invest directly in the stock market; and some of the opportunities that he talked about, all the way through to ensuring that our listed and private capital markets work extremely well. That is the objective of the reforms.

Financial Services and Markets Bill

Debate between John Baron and Andrew Griffith

Report stage
Wednesday 7th December 2022 Commons Chamber

[Mr John Baron (Basildon and Billericay) (Con)]

On the FCA and financial inclusion, it is very wise that we ensure that good financial advice is imparted by the powers-to-be. In referring Members to my entry in the Register of Members’ Financial Interests, may I say that when it comes to things such as investment trusts, we are still trying to throw off the yoke of well-intentioned but misguided EU regulation when it comes to information that could lead to a misunderstanding about risk? The FCA seems somewhat reluctant to carry that forward. Will the Government ensure that the regulators, including the FCA, are doing their job?

[Andrew Griffith]

My hon. Friend makes a very fair point. To be clear, the purpose of good financial regulation cannot be to extinguish risk, but is to give people choice and indeed allow them to reap the rewards of taking risk in an appropriate and informed fashion, so I completely agree with him.

On the theme of reporting, I assure the hon. Member for Blaenau Gwent (Nick Smith) and my hon. Friend the Member for The Cotswolds (Sir Geoffrey Clifton-Brown) that the consumer panel, like all other statutory panels, already produces an annual report with the panel’s opinion on matters that it has engaged with the FCA on; however, following new clause 10 being tabled, I recognise the need to ensure that reports are brought to the attention of the House. I have engaged with the FCA, which has agreed with me that in future it will notify the Treasury Committee, as the relevant Committee of this House, on publication of the consumer panel’s report, to ensure that Members of this House are aware of and can fully engage with it. I hope that that goes some way to giving the hon. Members the satisfaction that they seek.

Before I speak about the financial advice guidance boundary, raised in new clause 11 in the name of my hon. Friend the Member for West Worcestershire (Harriett Baldwin), the Chair of the Treasury Committee, let me congratulate her on her relatively recent election to that role—although I hope that we have worked well together even during her short time in it.

--- Later in debate ---

[Mr Baron]

I very much welcome the Bill and congratulate my hon. Friend the Minister on listening to and engaging with the points raised by many of us on the Back Benches.

I support new clause 11 in particular—I was heartened to hear what the Minister had to say about it—but may I perhaps reinforce a very simple message about the urgency required on financial advice? We in this country have been blessed with the City of London and many other world-leading financial institutions around the UK. I think I can say with some confidence that London is the financial capital of Europe, if not the world. The world comes here to do business on a variety of fronts. Yet we have very little good access to advice. In fact, if anything, we have a widening advice gap.

On the one hand, we have wealth managers raising their minimums, banks withdrawing from the high street and withdrawing fully from providing investment advice; we also have the retail distribution review, which I supported because it was ending the backhand commission for unit trusts—that was bad for the consumer—but it has resulted in independent financial advisers having to charge more and few of them being used. On the other hand, with all that advice in retreat, we have the Government and all parties saying that we must take greater control of our finances, there are greater pension freedoms and there is a great demand for good advice.

A lot of people of modest means who have no access to good advice fall into that void. They may be tempted, for example, to leave cash in the bank earning a pitiful rate of interest while inflation erodes its value. This is where the law of unintended consequences comes in, because all that regulation that had to be met before one could offer full-blown advice is fine when we are talking about full-blown advice, but there is a middle ground that needs to be covered. I offer a basic statistic that might interest or help those willing to take a particularly long-term view to their financial planning: instead of leaving money in cash, if they invest in equities over the long term—25 years, for example—they stand a very small chance of losing money. There will be volatility, but because they are investing, hopefully, in growing businesses, they will do well, and 97 times out of 100, that will beat cash deposits. That is the sort of advice that banks, building societies and many others could give, without getting too complex about financial planning. It would offer consumers a choice, rather than just letting their cash sit in banks and get eroded. Will the Minister therefore give impetus to the assurance he has given on new clause 11 and really get the Treasury looking at this issue, because there is a halfway house, and we must not stop regulation being the enemy of the good? That is what we are asking for.

I will add one other thing quickly in the minute I have left. Please make sure that our regulators listen to the various trade bodies when it comes to regulation, because we are inheriting—I very much welcome this Bill—a lot of powers from the EU. We are in control of our own destiny, but I take issue with the FCA on a number of points. One of them is that when it comes to investment trusts, there are such things as key information documents. They are an invention of the EU and are misleading about risk and putting consumers at risk of losing money—it is as simple as that. The Association of Investment Companies has said that. By the way, it has also said, in relation to those key information documents, “burn before reading”. Despite that, there has been no meaningful action from the FCA on that issue, and that is wrong. I ask the Minister to make sure that our regulators do not rest on their laurels, realise the greater freedoms they have got and rise to the occasion.

[Andrew Griffith]

I thank Members from all parts of the House who have spoken today for their valued and often very informative and sometimes passionate contributions. I sense a tone of disappointment in the hon. Member for Hampstead and Kilburn (Tulip Siddiq), my shadow on the Opposition Front Bench. I will try to endeavour not to disappoint her in return for her party’s support for this important and landmark Bill. I spoke at length in my opening remarks. I hope I was generous in taking interventions, and perhaps colleagues will indulge me if I try to get through this as quickly as possible.

We heard from my right hon. Friend the Member for Chelmsford (Vicky Ford), my predecessor, who contributed so much to this Bill. We also heard from my hon. Friend the Member for North East Bedfordshire (Richard Fuller) and from my hon. Friend the Member for North Warwickshire (Craig Tracey), who served on the Bill Committee. They all spoke to a greater or lesser degree in support of new clause 17 and about how we can make that better and better hold the regulators to account.

We heard about the specific metrics suggested in new clauses 12, 13, 14 and 15—my hon. and right hon. Friends are very productive. I can say that I will consider things very carefully. In those amendments, they gave specific examples of how we could potentially deploy the powers in new clause 17, and I undertake to consider carefully whether those are the right way forward. We heard from my right hon. Friend the Member for Chelmsford about that sense of urgency, and we got that again in new clause 11. Again, it is potentially a good way forward that I would like to consider.

We all understand that it comes down to financial inclusion, for which the hon. Member for Kingston upon Hull West and Hessle (Emma Hardy) rightly never fails to agitate. If, however, the consequences of our financial regulation exclude, as I think we heard, 92% of people from getting basic guidance on the sorts of products that are right for them, that is a problem for inclusion and for the industry. It is something that I was asked to take away with due urgency, and I commit that once we have the Bill on the statute book that is absolutely what I will do. Technology can be our friend there as well. We heard that from my hon. Friend the Member for West Worcestershire (Harriett Baldwin), the Chair of the Treasury Committee.