Financial Services and Markets Bill [Lords]

John McDonnell Excerpts

Tuesday 10th November 2026 Commons Chamber

[John McDonnell (Hayes and Harlington) (Lab)]

I declare an interest as the chair of the all-party parliamentary group on investment fraud and fairer financial services. It was admirably chaired by the hon. Member for Harrow East (Bob Blackman) for a number of years, and I took over 18 months ago. The all-party group grew organically: a number of Members were coming to Parliament with concerns about individual instances of fraud, and as a result, people came together and set up the all-party group. We work on the principle that we all support the idea that we need an effective and vibrant finance sector, but that the foundation of that sector is trust. “My word is my bond”—that is exactly what the whole element of trust is about.

There is a real concern at the moment that there is a lack of trust. If we look at the FCA’s polling, 36% of people said they did not feel that they had been treated fairly or honestly by a financial firm, and I can understand why. Let me run through just a few examples from my experience here: payment protection insurance; endowment mortgages; pension transfer mis-selling; London Capital, which I believe my hon. Friend the Member for Bishop Auckland (Dr Rushworth) mentioned; Connaught; Woodford; and hidden credit lines. I warn the House that the issue of micro-bonds is coming down the track as well, and that will be enormous.

We can see why people have lost confidence to a certain extent and why, as the hon. Member for Carshalton and Wallington (Bobby Dean) mentioned, we should listen to the 16 organisations that represent consumers, which have come to explain to us their concerns about the Bill. Concerns have also been set out by my hon. Friend the Member for Dartford (Jim Dickson). On clause 7, the concern is the interference with the fair and reasonable test. Way back in the year 2000, when that Financial Services and Markets Bill was going through the House, there was a long discussion that came to a fair proposal to establish the fair and reasonable test in the legislation. If I remember rightly, it was agreed on a cross-party basis. To now introduce conditionality, in terms of compliance with FCA rules, does not necessarily result in a fair outcome; certainly, in many instances, we have found that compliance with FCA rules is just not good enough to secure justice for people.

To reassure us, the Chancellor of the Exchequer said, “Don’t worry—the consumer duty will still apply.” It is not in the Bill, as far as I can see. I think that is a real issue. If we are to reassure people out there, we need to ensure that elements of that reassurance are in the legislation. As my hon. Friend the Member for Dartford also said, on clause 6, the issue of having to refer ambiguities from the FOS to the FCA draws the FCA into an adjudication role. I have to say that a number of the cases that we have dealt with have concerned omissions and failures on the part of the FCA. Again, there is an element of conflict of interests there. I know that an element of discretion can be involved, but it is a question of the elements of discretion to which the FCA is subject. The Bill states that the ombudsman must take into account

significant implications in relation to the functioning of relevant markets”.

I think that the FCA will be under pressure to ignore some of those elements if they fly in the face of issues relating to market success.

Clauses 42 and 43 undermine the ringfence between investment and retail banking. I was here in 2008. Others claim it, but it was I who first raised the subject of Northern Rock in this Chamber. We are seeing the same cycle: there is a financial crisis, regulation is introduced, memories fade, there is pressure to reduce that regulation, and we go into another crisis. That is what was happening from the 1980s onwards. Curiously, there were two books that people reached for when the crisis happened in 2008. One was J. K. Galbraith’s analysis of the 1929 crash. The other, funnily enough, was Marx’s “Capital”, but that is another discussion. J. K. Galbraith said that the best protection against another crash was memory. What is happening now is exactly what Andrew Bailey, the Governor of the Bank of England, has described: memories are beginning to fade, which is why people become so susceptible to the pressure for deregulation.

I want to make a couple of points before I quieten down. A number of issues have not been addressed in the Bill, and I should like them to be addressed. The first is the FCA’s treatment of whistleblowers. One of our advisers, Simon Andriesz, recently committed suicide. He was a whistleblower, and it was, I believe, as a result of the lack of support from the FCA that he took his own life. We have referred it to the FCA, and what has it done? It has launched an investigation, but it is not an independent investigation; it is an investigation by an incoming member of the FCA’s own board. That is unacceptable. We need to ensure that we protect whistleblowers.

The other issue is the Hillsborough legislation that we are introducing. I would like to see that legislation applied to the FCA, because I think that a duty of candour for the FCA would give reassurance to consumers outside.

Finally, this is not a choice between regulation and growth; both are essential for a successful finance sector.

--- Later in debate ---

[The Economic Secretary to the Treasury (Lucy Rigby)]

It is a pleasure to close this debate on the Financial Services and Markets Bill. I am grateful to hon. Members from across the House for their contributions, including those on the Conservative Benches who have joined us on a one-line Whip. I am grateful, as has been highlighted, for the spirit of collaboration in the other place, and for the constructive criticism—I think—that has been offered here. I know that Madam Deputy Speaker is being strict in the time limits applied to the wind-ups, so I will do my level best to cover as much as I can and spend most of my time addressing the reform of the regulatory landscape, which is where hon. Members have put most focus. To the extent that I cannot cover things, I will follow up in writing. As was pointed out by the hon. Member for Aberdeen North (Kirsty Blackman), I think the breadth of today’s debate reflects the importance of these reforms and, indeed, the importance of financial services to this country.

I will start by going back a step, if I might, because this party came into office with a really clear purpose: to bring stability back to the British economy, give working people greater security and get Britain back on the path to prosperity. At Budget, the Chancellor took the responsible decisions needed to protect the public finances and provide breathing space for firms and families across the country. However, stability and fiscal responsibility are the foundations, not the destination. If we want to see more good jobs, opportunities for our young people and people feeling more secure in their finances, we know that we need a thriving, dynamic economy that delivers for the British people.

Few sectors are more important to that task than financial services. From providing SMEs with finance to expand, innovate and hire to helping a family to buy their first home, getting capital to some of our most exciting start-ups and supporting people saving for retirement, financial services provide the ecosystem that underpins our economy and each of our daily lives. In Leeds, Bristol, Bournemouth, Manchester, London, Edinburgh, Belfast and Cardiff, financial services right across the United Kingdom provide the services we rely on every day, supporting more than a million good, highly skilled jobs and the ambitions and the aspirations of the country.

As hon. Members have pointed out, we are recognised as a world leader in financial services—something that all of us in this place should be very, very proud of, and something we must protect as a critical strategic asset. Members have also pointed out that global competition for capital is intensifying, and it is therefore vital that we strengthen the sector’s ability to deliver for the country, which is exactly what this Bill does.

Members have spoken to the key reforms in this Bill. Let me start with child trust funds, an issue raised by my hon. Friends the Members for Hyndburn (Sarah Smith), for Southend West and Leigh (David Burton-Sampson) and for Dartford (Jim Dickson), where we are righting injustice that has existed for far too long. Child trust funds were a product of the previous Labour Government, and they were based on a simple promise: every single child in this country, no matter their background, would start adult life with a financial asset of their own.

However, for far too many families of children with disabilities, that reality has been very different. Parents have been forced to go to court in a lengthy and complex process to access their children’s funds on their behalf. That is why we announced last week that we will use this Bill to make it simpler, easier and fairer for parents and carers to access child trust funds on behalf of young people who lack mental capacity. That means that up to 126,000 young people will be able to more easily access funds currently worth an average of £2,600. This money was always theirs, and with this Bill, it will reach them.

Many hon. Members—far too many to mention—have rightly highlighted the vital role that mutuals, co-ops and credit unions play in our financial services ecosystem. Member-led and rooted in their communities, mutuals and co-ops are central to this Government’s commitment to seeing good growth in every corner of the country, which is why we are committed to ensuring that the mutuals economy can flourish.

My hon. Friend the Member for Harrow West (Gareth Thomas) highlighted the importance of CDFIs, which, as he knows, we have backed in the Budget. I know that he wants us to go further, and I am more than happy to meet him to talk about exactly how we can do that. I can confirm that we intend to further extend the reforms to the common bond in Committee, bringing forward an amendment to enable credit union members who do not themselves directly meet the common bond to introduce family or household members on the same basis as other members. We have a lot more to do when it comes to the scale of our ambition on mutuals and co-ops, and I look forward to working with hon. Members across the House, and especially my hon. Friend the Member for Peterborough (Andrew Pakes) as the first ever co-operatives and mutuals champion in Government.

In addition to allowing our mutual and co-op sector to expand and best support growth, the Bill backs greater investment across our economy as a whole. It will give banks greater flexibility within the ringfencing regime to provide more capital to businesses, encouraging and supporting growth. The right hon. Member for Salisbury (John Glen) has urged us to be thoughtful when considering these reforms, and I can reassure him that we will be.

The shadow Economic Secretary, the hon. Member for Wyre Forest (Mark Garnier), spoke about capital requirements, as did the right hon. Member for Salisbury. The Chancellor and I acknowledge the importance of the Bank’s review of capital requirements. As the Chancellor said, that is made clear in his remit letter. I acknowledge the shadow Economic Secretary’s intention to table amendments in this regard, and I look forward to discussing those with him.

At the heart of the Bill is the protection of our global reputation for financial regulation. As has been said today, we have a reputation for sophisticated regulators, high standards and regulatory stability. We are very clear that we will protect each of those things. We are equally clear that where regulation can be made better, more up to date with the modern world, more effective in achieving its aims and more proportionate, we will do that.

The hon. Member for Tunbridge Wells (Mike Martin) raised an important point about how regulation affects defence SMEs. We are very clear that no legitimate company should be denied access to financial services solely because they are involved in the defence sector. The forthcoming defence finance and investment strategy will review how we can ensure that barriers to investment of the kind that he described are removed.

I thank my hon. Friend the Member for Buckingham and Bletchley (Callum Anderson) for his supportive comments on the regulatory aspects of the Bill. I know that he has tremendous experience in this area.

As I expected, plenty of hon. Members raised access to banking, including my hon. Friend the Member for Hackney South and Shoreditch (Dame Meg Hillier). I am happy to confirm, as did the Chancellor, that we are going to insert back into the Bill our ability to act on the conclusion of Richard Lloyd’s access to banking review. We will publish the review and our response very soon.

The Chancellor noted earlier that the Consumer Credit Act was enacted more than 50 years ago. That was before the iPhone and the laptop, and probably before the shadow Economic Secretary was even born—[Interruption.] I know that it was. It was the same year that this nation was introduced both to Ceefax and, I found out, to Bagpuss. The Act needs to be updated to ensure that the regulator can develop new rules around the information that consumers will receive, including via digital means, based on rigorous consumer testing.

Let me come to the FOS. It is clearly critical that when things go wrong, redress is accessible, consistent and predictable. Some hon. Members have questioned the respective roles of the FCA and the FOS. Under the proposed reforms, it will be the FCA as the independent regulator that sets the standards that firms must meet, including in relation to the consumer duty, and it will be the financial ombudsman that applies them.

I thank my hon. Friend the Member for Hackney South and Shoreditch for her input on this matter, including in today’s debate. She raises really important considerations about protections. Even if I cannot fully endorse her likening of risk warnings on retail investment to those on smoking, I can say that we will consider her input further in Committee. She raised concerns about the referral mechanism, as did other hon. Members. We have had constructive engagement with the FCA and interested groups on the referral mechanism and intend to bring forward a number of amendments at Committee stage to ensure that the mechanism functions well.

Madam Deputy Speaker, I fear that you are running out of patience with me, so I will do my best to conclude. I want to acknowledge the 10-year rule, as that was raised by hon. Members including my hon. Friend the Member for Feltham and Heston (Seema Malhotra). It is entirely right that some products will not be suitable for the operation of the 10-year rule, and the FCA will set out exactly which products those are.

I will skip over my comments on anti-money laundering and fraud, although that is an important part of the Bill. I will skip over my comments on digital assets, save to say please do not doubt the ambition of the Government. We will carefully consider the Lords reforms in that regard.

Financial services, as hon. Members across the Chamber have said, touch every part of our lives, from the mortgage that turns a family into homeowners to the small loan that turns a good idea into a growing business, and indeed the savings that turn a lifetime of hard work into security. The Bill backs the sector and it backs our economy to succeed.

[John McDonnell]

May I put on record again my concern that, as we may be facing a significant global crisis as a result of AI debt problems, now is not the time to undermine the protections we brought forward after 2008 and, in particular, the separation between retail and investment banking?

[Lucy Rigby]

I am grateful to my right hon. Friend for his comments. We are approaching our reforms of the ringfence very carefully. A detailed review has been conducted. We have to ensure that where regulation exists, it is fit for purpose and fit for the circumstances of the modern age. I am more than happy to meet him and talk about the new growth allowance, for example, which will ensure that we can get more capital into the real economy, more homeowners on the ladder and more investment to businesses.

The Bill will deliver a stronger economy to deliver opportunity, hope and prosperity in every corner of the country. I commend the Bill to the House.

Question put and agreed to.

Bill accordingly read a Second time.

Financial Services and Markets Bill [Lords] (Programme)

Motion made, and Question put forthwith (Standing Order No. 83A(7)),

That the following provisions shall apply to the Financial Services and Markets Bill [Lords]:

Committal

(1) The Bill shall be committed to a Public Bill Committee.

Proceedings in Public Bill Committee

(2) Proceedings in the Public Bill Committee shall (so far as not previously concluded) be brought to a conclusion on Tuesday 15 December 2026.

(3) The Public Bill Committee shall have leave to sit twice on the first day on which it meets.

Consideration and Third Reading

(4) Proceedings on Consideration shall (so far as not previously concluded) be brought to a conclusion one hour before the moment of interruption on the day on which those proceedings are commenced.

(5) Proceedings on Third Reading shall (so far as not previously concluded) be brought to a conclusion at the moment of interruption on that day.

(6) Standing Order No. 83B (Programming committees) shall not apply to proceedings on Consideration and Third Reading.

Other proceedings

(7) Any other proceedings on the Bill may be programmed.—(Gregor Poynton.)

Question agreed to.

Financial Services and Markets Bill [Lords] (Money)

King’s recommendation signified.

Motion made, and Question put forthwith (Standing Order No. 52(1)(a)),

That, for the purposes of any Act resulting from the Financial Services and Markets Bill [Lords], it is expedient to authorise the payment out of money provided by Parliament of:

(a) any expenditure incurred under or by virtue of the Act by the Treasury, and

(b) any increase attributable to the Act in the sums payable under any other Act out of money so provided.—(Gregor Poynton.)

Question agreed to.

Financial Services and Markets Bill [Lords] (Ways and Means)

Motion made, and Question put forthwith (Standing Order No. 52(1)(a)),

That, for the purposes of any Act resulting from the Financial Services and Markets Bill [Lords], it is expedient to authorise the charging of fees and charges under or by virtue of the Act.—(Gregor Poynton.)

Question agreed to.