Tenant Fees Bill

Debate between Lord Deben and Lord Palmer of Childs Hill

Monday 5th November 2018 Grand Committee

[Lord Palmer of Childs Hill (LD)]

My Lords, I pay tribute to the noble Baroness, Lady Hayter, for her imaginative use of Clause 21 in the Bill. She explained the story behind the amendment; I know that the Minister, who was so involved and helpful in getting client money protection on to the statute book, will understand it.

I will not repeat the wonderful arguments made by the noble Baroness but the principle behind this has always been that client money protection was operated voluntarily by 60% of the market. It was the 40% who did not cover themselves voluntarily that we had to deal with. Against the background of what has happened in the department in putting this situation into practice, it seems that we are covering the 40% but are in grave danger of losing the 60%, who will not want the situation outlined by the noble Baroness.

There is a problem because large firms and organisations deal with large sums of money going through their books, in their bank accounts and in their clients’ accounts. Therefore, such firms are exposed. That is how the department has come to the figure of £200 million for cover; it feels that the firms need to be insured to cover that exposure. With respect, the department has not looked at the real world, where the large firms and organisations described by the noble Baroness reduce their exposure by placing funds in custodial TDP schemes, thus reducing the amount that they hold. So, you do not need insurance to such levels because, to use an analogy, the firms will do what the betting industry does in laying off bets and what the reinsurance industry does in laying off their insurance risks on others in the industry.

Therefore, in very simple terms, without repeating anything she said, I support the noble Baroness, Lady Hayter. I hope the department will look into not having a vast £200 million cover because it is not needed. It will frighten off the 60% who already cover themselves voluntarily under client money protection. There is no need for this large sum. Everything else in the Bill is right; we have made great strides in client money protection. The noble Baroness mentioned the status quo; we should let sleeping dogs lie so that we can get CMP operating properly and not frighten off large firms. They may be unduly frightened but they can take action by putting money in custodial funds. I support the amendment.

[Lord Deben]

I wonder if I can help the noble Lord. I know he always worries when I get up and say that I am going to be helpful, but on this occasion I might be. I remind the Committee that I am chairman of the organisation that represents independent financial advisers and those who deal with wealth management. Therefore, I understand a lot about the parallel circumstances referred to by the noble Baroness, Lady Hayter, when she pointed out the protection accorded to bank accounts and the different sorts of protection in the financial services industry. What I really want to say is that I hope my noble friend will think very carefully about this because we have seen the huge difficulty that people now have—even the most excellent of firms—in getting proper protection from the insurance industry.

The noble Baroness made an important point about being proportionate as to what the real risks are. I want to make a point about the dangers of not being proportionate. This is an industry of great importance and I am absolutely excited by the Bill because it does a whole lot of things that need to be done. However, we have to be very careful about importing into it those things that will result in unexpected and unwanted additional results.

I am not sure that civil servants are always as expert in these detailed aspects of insurance as those who deal with them daily. All the advice is that there really is no need to protect any more than the kind of protection that ARLA and RICS already provide. You do not really need that advice: the fact is that they have run the system very effectively up to now. I remind my noble friend that the party he represents is always very much in favour of free enterprise and people getting together to organise things on their own. Would it therefore not be a good idea for us to be very careful about not taking that advice?

We know that the 40% that do not belong to these organisations are, by nature, either not very careful or painfully close to the edge of the law. There is a real range. But I remind the Committee of the last speaker, who rightly said that we do not want to enfranchise the 40% by disfranchising the 60%. That does not seem a sensible answer. I hope my noble friend will take the advice of those who have had to deal with these things in other areas: that it is extremely dangerous if you get yourself into a position in which you lay too heavy a weight of insurance when it is not necessary. I have a long history of defending the consumer, but I do not see how consumers are better protected by excluding from the market the two organisations that have so far dominated it—if that is the right word.

The last thing I want to say is this: I have often spent time trying to encourage ARLA to become a more professional body. One of the successes of recent years has been precisely that, and we ought to be encouraged by what ARLA has done. It would therefore be a great pity if, on this occasion, we ignored its experience, which has come about through its own change from its history to today, or indeed the 150 years’ experience of RICS.