Financial Services Bill

Lord Hodgson of Astley Abbotts Excerpts

2nd reading & 2nd reading (Hansard) & 2nd reading (Hansard): House of Lords
Thursday 28th January 2021 Lords Chamber

[Lord Hodgson of Astley Abbotts (Con) [V]]

My Lords, I am afraid the wonders of modern technology are such that I am confined to a landline today, but that has not prevented me hearing two distinguished maiden speeches from my noble friend Lord Hammond of Runnymede and the noble Baroness, Lady Shafik, and I congratulate both of them. I also add my congratulations to the Minister on his explanation that this Bill was the first step in creating a regulatory framework designed to reinforce the UK’s position as a leading world financial centre and enable the UK to take advantage of our post-Brexit freedom of action.

In addition, as the Association of British Insurers pointed out in its briefing on the Bill, it also provides a good foundation for positive future co-operation with our European neighbours. As such, it has my enthusiastic support, but as the noble Lord, Lord Reid of Cardowan, pointed out in his speech, it is a Christmas tree Bill, and there are, inevitably, some decorations about which I am less enthusiastic, and there is at least one decoration that seems to be missing from the tree altogether.

Before I go any further, I draw the House’s attention to my entry in the register of interests, in particular that I chair a company that is regulated by the FCA. My foremost point concerns the culture we are trying to create with this Bill. What do I mean by culture? When the regulators, the FCA and others come to see you in the firm, they are very interested in what the culture of the firm is and what the prevailing attitudes of the senior management are; for example, the balance being struck between innovation and conservatism, the level of acceptance of financial and operational risk, the treatment of staff and so on. Up to now, a large measure of this culture has been dictated by the institutions of the EU. This, of course, will no longer be the case. I ask my noble friend: who is going to be responsible for establishing this future culture? How do the Government plan to assess the culture? How, if at all, would they plan to achieve changes to that culture? Last, but by no means least, as many other noble Lords have remarked, what role will Parliament have in that process? At first glance, there seems to be a considerable democratic deficit, as many noble Lords have said.

A good part of the Bill is devoted to improvements in the tightening up of the regulatory regime. Having participated in the proceedings on the Sanctions and Anti-Money Laundering Act 2018, I understand and support such changes, particularly where they reflect changes in business practice and business behaviour. However, all these measures come with a cost. That cost is borne not by the Government or by financial institutions but by the consumers, clients and investors. There is a need, as we introduce new regulations to deal with new circumstances, to step back and see what old regulations can be amended, or be dispensed with completely as being no longer effective.

As we sail into this brave new world, an important issue will be the extent to which the Government are able to obtain reciprocity or equivalence from the EU. It will be a matter of great interest to Parliament, this House, and indeed the country as a whole. I chair the Secondary Legislation Scrutiny Committee. When the committee considered the various interim regulations for the financial services sector, it was far from clear what, if any, reciprocity had been achieved. I was asked by the committee to write to the Minister John Glen about this, and I am afraid that his response, dated 7 January, which I invite my noble friend to read, was hardly a model of clarity. The Government declined to accept new Clause 8 in the other place, which required the Government to report on equivalence. If this is still the Government’s considered position, they will need to do better than Mr Glen’s letter.

I turn finally to a decoration that I think is missing from the tree altogether. I served as a member of the post-legislative scrutiny committee on the Bribery Act. Our investigation revealed a number of concerns. The first was the difference in treatment of smaller companies as opposed to larger companies as a consequence of the application of the directing mind principle—this was referred to by the noble Lord, Lord Hendy, and my noble and learned friend Lord Garnier. The second concern was the often inordinate time taken over investigations, and, finally, the strange position that the failure to prevent offences applied only to bribery and tax cases and not to corporate crime generally.

I am aware that, in the other place, the Government declined to accept a widening amendment, but I think that the noble Lord, Lord Rooker, the noble Baroness, Lady Bowles, my noble and learned friend Lord Garnier and I will wish to explore this anomaly and return to this question in Committee.

To conclude, this is an exciting time for this country and for our financial services sector. Getting the right foundations in place quickly will be of critical importance, which is why this Bill has my support in principle.