Financial Services and Markets Bill [Lords]

John Glen Excerpts

Tuesday 10th November 2026 Commons Chamber

[John Healey]

Two questions in one intervention—that really will be the last time I give way to the right hon. Gentleman. The answer to his first question is that, as I have said already, this is time limited. It will end in March 2028. If he looks at clause 7 of the Finance Bill, he will see that set out.

On the question of hitting investment, I have to tell the right hon. Gentleman that none of the discussions I have had with banking and financial sector leaders before or subsequent to the Budget suggests they want to do anything other than raise their levels of investment into British firms. I understand the reaction to and view of the temporary 3% additional surcharge that I put on banks to help pay for household energy help this winter. I certainly would not describe it as welcomed by the banks. I do believe it is manageable. I do not believe, and I have seen no evidence, that it is going to hit the levels of investment or the commitment they make to this country. As I said earlier, I will miss no opportunity to talk up the importance of the financial services sector to the UK.

[John Glen (Salisbury) (Con)]

Will the Chancellor give way?

[John Healey]

Given that the right hon. Gentleman has served with such distinction in the Cabinet Office and the Treasury, I will give way one last time.

[John Glen]

I am extremely grateful. Of course, one way of mitigating the anxieties of the banking sector is to ensure that the capital requirements directed by the PRA are significantly reformed. I understand from what the Chancellor has said that there is provision for that possibility, but what instinct does he have about the space that exists for the PRA to move decisively to signal to the banks that there is room for more capital to be lent by British banks in London, as a way of countering the concerns about the tax?

[John Healey]

I think I can do better than answer about my instinct on the scope for that. I would point the right hon. Gentleman to the measures in the Bill. I would also point him to my exchange of letters with the Governor of the Bank of England about capital requirements and the expectation to see material change, bearing in mind the importance of the internationally competitive position of UK banks. He will know that the Bank is undertaking its own review of this area at the moment, and I hope we will get the results and any consequent changes before too long.

Finally, I have spoken about the importance of maintaining the UK’s pre-eminent position as a global financial centre. That requires maintaining the very highest standards in tackling illicit finance. We have in the UK a strong set of anti-money laundering rules, but the supervision of compliance with those rules is currently fragmented and inconsistent. Last year, the Government announced that the Financial Conduct Authority will take on responsibility for the anti-money laundering supervision of legal and accounting service providers, as well as trust and company service providers.

The Bill enables the FCA to take on those new responsibilities, meaning that we can reduce the number of bodies that have a role in anti-money laundering supervision from 25 to three. Additionally, as financial crime increasingly involves cryptoassets held outside the UK, the Bill will enable the Government to update existing cryptoasset recovery powers through secondary legislation. [Interruption.] Madam Deputy Speaker, you are encouraging me to conclude, so I will, but I hope you appreciate that I have taken a large number of interventions.

I believe there is a shared determination in this House to ensure that the UK remains the global location of choice for financial services firms to invest, innovate and grow. This Bill is a necessary step to strengthen that leading UK position on financial services: streamlining regulation and reducing the burden on businesses, supporting financial resilience through our credit unions, reforming consumer protection so that it is fit for this digital age, and raising levels of investment in our high-growth firms, all while maintaining our high standards of regulation and oversight. It is a Bill to generate good growth in every postcode and provide fresh hope for the future. I commend this Bill to the House.

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[Bobby Dean (Carshalton and Wallington) (LD)]

The UK financial services industry is vital to our economy. It enables us all to buy houses and cars, to save and invest safely and to insure against bad outcomes; it provides millions of jobs, not only in London but right across the UK; and it contributes hundreds of billions of pounds to GDP. It is one of the UK’s only world-leading industries. We have 160 foreign banks in the City and twice as many US dollars are traded on the UK foreign exchange in the UK than in the US. We have the largest source of pension funds in Europe—and if I mention Europe, as a Liberal Democrat I must also mention Brexit.

It is true that the UK financial services industry has remained strong after Brexit. Of course it has: it is a world-leading industry that has many advantages beyond its access to European markets. We have, for instance, the advantages of location, language and law, and there is enormous talent here in the capital. However, we should not mistake that resilience for evidence that Brexit did not harm financial services. Exports of financial services have declined by 5.9%, and, according to TheCityUK, that is at least partly due to Brexit frictions. The loss of passporting rights, for example, makes it harder to acquire clients across the continent. Compliance and administrative costs have risen, and we are now less attractive in relation to becoming a pan-European headquarters. Whatever the dispute may be when it comes to the precise numerical impact of Brexit on financial services, this negative track has to be acknowledged.

[John Glen]

I recognise the case that the hon. Gentleman is quite predictably making on Brexit, but given that we are where we are, what does he think would be the view of the financial services sector and the City of London on changes to where we are now?

[Bobby Dean]

Uncertainty is always unwelcome in the financial services industry, but Governments must make decisions for the very long run, and I think that in the very long run it would be in our best interests to be part of the single market again.

The industry has remained resilient, not only in the face of Brexit but in the face of other challenges, but that should not be taken for granted. It is due, at least in part, to hard work and the reforms that were introduced after the 2008 financial crash. Prior to that, a reckless, deregulatory and ignorantly optimistic environment led to a complete and utter disaster, and not only for the industry but for society as a whole. The debts that stacked up in response to that crash are still squeezing the present Government’s potential to deliver better public services or lower taxes to this day, and the reputation of the industry among the public still suffers because of that event.

However, it is worth stressing that the reforms made in the aftermath have broadly worked. The sector has remained financially stable. Repossessions are low, pension funds are healthy and stable, and bank failure is rarely speculated about—and if it were to happen, I trust that it would happen in an orderly way. This has remained the case despite some serious stress tests in recent years, not least the global pandemic and the global energy shocks, and it shows that measures such as the bank capital requirements, the liquidity rules and the ringfencing have created a system that can hold. I think that the Government should be mindful of that as they set out on a path to—in their own words—deregulate again. They should resist the Conservative party’s calls to abolish ringfencing entirely. I think that savers across the country will be shocked to hear that there is a party advocating for that money once again to become available to the investment banking industry. In a wider context, the Government should tread cautiously. They should not fall for the same old cycle of deregulation, crisis, and then regulation again. Instead, they should try to plot a more stable path through this moment.

Nevertheless, there of course remains a case for reform. We are decades on from the financial crisis, and there will be plenty to do to modernise, to move with the times, to learn lessons, to tidy, to simplify, to clarify and to adjust, to make our financial services system work for the 21st-century economy. There is much to be supported in the Bill. I support, for instance, the move to make the Payment Systems Regulator part of the Financial Conduct Authority, and I hope that will mean we can continue some of the good work on open finance. I broadly support what I think is the intention in relation to improvements in access to banking, although we have yet to see some of the detail because we are waiting for the review to be published. I support the move to expand credit unions, and of course I support the intention to table amendments on child trust funds, for which I credit my hon. Friend the Member for Horsham (John Milne) and my right hon. Friend the Member for Kingston and Surbiton (Ed Davey).

More broadly, the Liberal Democrats support the thrust of the Bill, but there are some key areas where we want to work with the Government to get this rare opportunity for reform right. In particular, on consumer protection I fear that the Bill is in danger of overcorrecting. It starts from a false premise, which is that consumer rights and economic growth are somehow in contention. They are not; they are two sides of the same coin. There can be no booming economy without consumer confidence, and poorer protection and more difficult redress are in the interests of neither consumers nor firms.

I am struck by the volume of lobbying material that I receive from industry, and by how little I receive from the voice of the consumer. It is because of that inequality of arms that we in this place should be so mindful of the decisions we make in respect of this legislation. Some of it looks like a shopping list of demands from industry, and that should give the Government pause for thought. We should remember that the same inequality of arms in the lobby industry is repeated when it comes to legal disputes, and indeed at the point of purchase of financial products. Information asymmetry is a known economics concept, and in the development of financial products there is a huge information asymmetry. Experts are developing complex products that are inherently difficult for consumers to understand, and we should legislate accordingly with that in mind.

I therefore ask the Government to listen carefully to the 15 organisations—including Martin Lewis’s MoneySavingExpert, Citizens Advice and Which?—that have got together and warned that the reforms of the Financial Ombudsman Service could lock consumers out of independent redress, removing that vital safety net of free dispute resolution. Indeed, the former Member of Parliament for Makerfield, Yvonne Fovargue, has concerns that these reforms do not meet the Prime Minister’s “Makerfield test”. That should be a strong warning to the Chancellor.

The Financial Ombudsman Service stands accused of being a quasi-regulator, making precedent-setting decisions that firms cannot anticipate. I admit that there has been dysfunction in the service in recent years and that there is a case for better co-ordination and clarity, but the reforms, as they stand, will tip the balance too far in favour of firms, and I think we are in danger of making the FCA a quasi-ombudsman. The rules set by the FCA are necessarily high-level, especially if they are principle-based, and they cannot account for every situation in detail. The ombudsman must retain the power to make a judgment on what is fair and reasonable in the round, or we will descend into a dispute over strict legal compliance that will always favour firms in the way that I have described.

The chief executive of the FCA has repeatedly expressed concerns to the Treasury Committee about the possibility that the referral mechanism may create a back-door appeals mechanism for firms, gum up the system, and lead to the regulator doing the job that the ombudsman should rightly be doing. We will go into all the details in Committee, but I urge the Government to find a way through this that suits consumers too.

There are further issues that we will want to pursue in Committee. The Consumer Credit Act protections that are being rolled into the FCA are important provisions that need to remain in primary legislation. I recognise the need for regulatory power to respond to developments dynamically, but we must also ensure that such important provisions are protected in law, and I do not think that the FCA’s strategies will afford sufficient protection. Other Members have mentioned access to affordable credit, and this is a huge opportunity for us to take meaningful action in that regard, looking at some of the provisions proposed for the fair banking Act, and ensuring that when the washing machine breaks down or the car fails, people can access the credit they need to get through those crisis moments.

I have some simple asks in relation to the Bill, involving transparency and the current status of the access to affordable credit that banks are providing, and their links with credit unions and other community organisations to improve that access. I note that we now have a Co-operative Prime Minister. The Co-operative party backs such amendments, so I look forward to seeing whether they make it into the Bill. We would also like to see tougher action on the big tech companies in relation to fraud and scams. At present, the UK financial industry is on the hook for scams that nearly always originate on big tech platforms. Just last week I heard in the Chamber that Ofcom’s regulations would probably be sufficient, but we now have an opportunity to write into legislation liability for those tech firms, and I do not think we should miss it.

There is more that I could talk about, but in the interests of time I will move on. I support the Conservatives’ point about the digital asset strategy, and I think it would be a missed opportunity not to include something about that in the Bill. I would also like to speak up on the injustice facing mortgage prisoners, and I will say more about that in Committee.

Let me end by saying that we welcome the thrust of the Bill. It reinforces the position of the financial services sector as a great contributor to the UK economy, and its status as a global leader and a beacon of stability. However, there is a real danger of overcorrection and damage to consumer rights, as well as the potential to miss some big opportunities for long-running problems to be solved. I look forward to working with the Government in Committee to further the Bill’s progress.

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[John Glen (Salisbury) (Con)]

I refer the House to my entry in the Register of Members’ Financial Interests, and to my ministerial experience as the Economic Secretary between January 2018 and July 2022. Listening to the opening speeches gave me pause to reflect on some of my decisions. I hope that I am the sort of politician who is ready to concede where I did not go far enough or where mistakes were made, but after I have gone through some of the measures in this Bill, I want to offer some broader observations about the interaction between the Treasury, this place and our regulators, because it goes to the heart of how we move forward effectively as a country.

as the shadow Economic Secretary said, the Bill contains some very welcome measures. Although the detail will be worked through in Committee, I think we can be positive about the reforms to credit unions. I made some changes to expand the common bond, and I wish the Government well with their extension of it. I ask the Economic Secretary to examine the issue of the interaction of credit unions and Help to Save. For many of the people who use credit unions, the opportunity, on an automated basis, to sign up to Help to Save—it gives everyone on universal credit the opportunity to save up to £600 a year, and after two years receive a 50% bonus from the Government—in these times would be very welcome. I am not sure exactly how that would be achieved, and I realise it is complicated, but it just stands to reason that it should be more readily accessible.

I also welcome the reform of consumer credit. These matters were discussed in my office four or five years ago, and I welcome the Government bringing it forward. I certainly did not seek to slow it down, but it is an incredibly complicated piece of work to update our consumer credit framework and how we protect consumers in a world where financial products and the interactions of consumers when taking out products have transformed considerably over the last 52 years. However, as we look at the changes—I note the comments of the Chair of the Treasury Committee, the hon. Member for Hackney South and Shoreditch (Dame Meg Hillier), on the Financial Ombudsman Service changes—we have got ourselves into a bit of a mess in this country.

In the Treasury Committee, I found myself talking about motor finance, and reflecting on being told that harms have been done to me when, from my perspective, I had made a decision about the amount of the deposit and the monthly payment in a financial agreement. However, I fully accept that the consumer credit legislation as it is at the moment means there was an obligation of proactive disclosure on behalf of whoever provided me with that product, rather than some reasonable test of what I should reasonably ask of the person providing the product. To me, that goes to the heart of the dilemma we face in financial services: to what extent can we in this place legislate against risk or put some reasonable responsibility on an individual consumer to take ownership of the decisions they make?

[Bobby Dean]

Will the right hon. Gentleman give way?

[John Glen]

I am very happy to give way to hon. Gentleman, as he did to me.

[Bobby Dean]

I am sure the right hon. Gentleman was anticipating my intervention, as we have had this conversation in the Select Committee. I made a point earlier about information asymmetry. Does he not accept that when financial products can be so complex, if providers are not utterly up front about the conditions, it is quite impossible for the consumer to take the responsibility he implies they should take?

[John Glen]

I absolutely take on the challenge, but I think we need to level with the British public about this and have a better conversation about it, rather than say there is an ultimate backstop provision apparently for absolutely everything. We have to reset that dynamic.

I have mixed feelings about the proposed reforms of the Financial Ombudsman Service. I feel it has become an unreliable pathway to resolution, but I am also concerned that by wrapping it into the FCA, as with the decision to apparently streamline regulations by putting the Payment Systems Regulator into the FCA, we will just create a bigger FCA, with different functions under one banner.

[Dame Meg Hillier]

It is worth noting that, in the end, there were two redundancies as a result of the merger, all the backroom costs were the same and the only thing that will change, when the legislation finally goes through, is that the board will go, which is a saving of about £100,000.

[John Glen]

I am very grateful for the hon. Lady’s characteristic grasp of the detail of this subject, and she absolutely makes the point. Just removing a banner from a front office does not streamline, so I urge the Economic Secretary to retain a forensic view, as I know she will, of what processes faced by businesses and consumers are actually streamlined.

I note the streamlining of the senior managers and certification regime by abolishing mandatory annual employee certification below senior manager level. I note the comment of the hon. Member for Great Yarmouth (Rupert Lowe), who is no longer in his place, on that regime, which was, “Abolish everything.” I understand the frustration that leads to many people saying that, but I think we have some new challenges, which have not been properly addressed, when it comes to AI in financial services.

The Chair of the Select Committee mentioned this in passing, but AI, in automating the evaluation of which products would suit individuals, is transforming most consumers’ interactions with financial services. Following the Mills review, there does seem to be a bit of a gap in what will happen with appropriate regulation. It seems that the essence of the position of the FCA is that it does not want to slow down the pace of innovation and growth in financial services, so it will be very reticent to put in any regulation. That is not an unreasonable sentiment, but we must discuss where we as a society feel responsibility should lie. If a financial services firm essentially allows an AI regime to produce offers of products that are sold, somebody has to be responsible for the terms and the basis for such a product going to market.

I welcome the changes to the PRA to streamline the bank rules on ringfencing, but I was the Minister who commissioned the Keith Skeoch review, which essentially came to the conclusion that it was not really necessary, but because of the legacy of the global financial crisis, we had better keep it in place. I urge the Economic Secretary to ask this question: what does that ringfencing actually give us? Many senior people at the PRA told me that we do not really need it, and we have a resolution regime that would actually satisfy all our requirements. However, it has a totemic significance, because it is associated with that season of under-regulation that led to the global financial crisis. We must have an honest conversation, not one based on received wisdom about what happened 18 years ago. We should not be reckless, but we do not need to carry unnecessary burdens when they do not really add anything.

Time goes quickly in this place, and I respect the need for everyone to speak, but I would like to make two or three broader points. One is about the imbalance of power and expertise. When I became the Economic Secretary, I hardly slept for the first few weeks because it was just so complicated, after I had been the arts, heritage and tourism Minister. From museums to MiFID in one step was a big move, but I did my best to master it. Every six weeks or so, I met the head of the FCA and the head of the PRA. These are some of the most brilliant people in public service, who have at their disposal some of the most intelligent, numerate individuals who are aware of all the nuances of different conditions, the capital requirements of banks of different sizes and the different mitigations for them. I was trying to mediate all the representations I had had from TheCityUK, UK Finance, the Association of British Insurers, the London Market Group and all the consumer organisations, essentially to try to challenge them on the right way of liberalising the regime or having a strong and simple regime to, for example, make it easier for smaller banks.

I probably got that right sometimes and on other occasions did not press hard enough, while at times there was a reasonable expectation that I would be moved on. Indeed, since July 2022 there have been eight Economic Secretaries—I am glad the sixth one is now back again as the eighth one. I just do not feel that that is a grown-up way to deal with our financial services Minister—the person responsible for this industry that we have all said is so important in terms of the jobs it creates and the GDP it accounts for. There is well-meaning intent, when we come to this place, to mediate consumer groups’ concerns and the concerns of our constituents, but we need to think about how we can do this better. Perhaps there should be a joint committee of the Commons and the Lords, properly staffed with the sort of expertise and advice that would really allow us to take on our friends at the PRA and the FCA, but it is something that does need scrutiny.

The legacy of the global financial crisis is important. It obviously had an enormous impact on our country and our public finances. “Too big to fail” must never happen again, but we must recognise that financial services in this country compete on an international basis. Too often, when legislation is passed in this place, there is another “have regard to”. I have been in Select Committees where colleagues have asked about some piece of legislation—some provision or “have regard to” that I probably allowed to pass through the House of Lords because I wanted to be collegiate—that led the regulator to make assessments that were not going to go anywhere, but added significant compliance costs to our financial services industry with no material outcome. I urge the Minister to really think about what is a necessary legacy of the global financial crisis and what is a sort of received wisdom of defensiveness that does not serve us well any more.

My final point, which I alluded to earlier, is about the consumer reset. The Chair of the Select Committee rightly pointed to Nikhil Rathi’s challenge to us at the Select Committee that we, as politicians, need to be clear about what level of risk we are prepared to tolerate. That is a difficult question for us as Members of Parliament. We are never going to want to say to our constituents, “We are happy to allow lots of risk,” but we have to put it in context. The measures we put in place on risk mitigation, the mandate and responsibilities we give the FCA and the PRA, make quite a big difference to the way the industry functions and how competitive it is.

I welcome what the Government have done on financial education. The Economic Secretary and I were at the launch of a report by UK Finance this morning. I welcome the progress that has been made and needs to be made in that area, but we must get to a better place in terms of enabling people, when so much more information is available, to own the choices that they make. Of course the responsibility to look after consumer interest exists, but let us calibrate that appropriately for the age we live in.

Thank you for the opportunity to contribute.

[Madam Deputy Speaker (Judith Cummins)]

With an eight-minute time limit, I call Lauren Edwards.