Financial Services Bill

Lord Leigh of Hurley Excerpts

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

[Lord Leigh of Hurley (Con) [V]]

My Lords, I refer your Lordships to my registered interests and extend a very warm welcome to my noble friend Lord Hammond of Runnymede. I have sat through many of his speeches, including the famous one in which he described why “Spreadsheet Phil” is inappropriate, but this was exemplary. His maiden speech and that of the noble Baroness, Lady Shafik, were excellent.

The final EU withdrawal agreement was a success, but, as has been discussed in this House and elsewhere, it was light on financial services. Mark Carney, the former Governor of the Bank of England, said this time last year that the City of London must not be a “rule-taker” after Brexit, effectively outsourcing the regulation and supervision of our global financial centre. Therefore, while adopting the EU rulebook in the first instance has delivered much-needed continuity and stability, we must now think about what comes next. That must surely be an approach that sees the UK continue to set global standards in prudential regulation and consumer protection, without losing sight of our broader objectives of innovation and competition.

There are three initiatives worthy of mention that can reinforce the initial steps taken in the Bill. The first is the future regulatory framework review. The Government’s response to this will give us the clearest indication yet of the vision for financial services post Brexit. I note the stress placed on equivalence of outcome. This should give us more room for interpretation, and indeed the opportunity to revisit many areas of law which were effectively gold-plated into UK law when we were EU members.

The second is the productive finance review. This concerns the means to unlock more capital to increase productive capacity in the real economy. I mention it here because it should also look at the impact of regulation on institutional capital flows into key areas such as infrastructure and technology. EU directives IORP and Solvency II limit such capital flows with prohibitive capital charges and should be looked at immediately. There is £6 trillion in UK private pensions alone that could be unlocked for more productive purposes.

The third is the Kalifa review into UK fintech. The Chancellor and my noble friend Lord Gadhia recently spoke of the need to see a second big bang in the City. Fintech is a key part of that. I hope the review proposes reforms as transformational as the first big bang was for the City.

Turning to the specifics of the Bill, there are commendable measures that will advance the competitiveness of financial services within our current regulatory envelope. Asset management remains our most globally significant subsector. Therefore, the measures to update the regime for third-country investment firms is to be commended. Similarly, introducing a more proportionate prudential approach to regulating investment firms will lower their costs of doing business, and better reflect underlying risk. On the other side of the coin, there are important measures on supervision and consumer protection. In particular, I commend the review that former FCA director Chris Woolard is leading on “buy now, pay later” lenders, where there is mounting evidence of bad debt, mis-selling and very bad practice. However, on FCA enforcement, there is a balance to be struck, and this Bill is, I am afraid, another opportunity missed to strike that balance. I am referring to the FSCS levy, FCA enforcement and the endless ex-post powers of the Financial Ombudsman Service.

The FSCS levy is due to soar by a third, to over £1 billion, with one of the reasons given being the cost of compensating SIPP consumers. However, there is mounting evidence that the FOS has been overreaching itself in its decisions against those very same SIPP providers. For example, many SIPP providers provide execution-only services on behalf of a client—the clue in the phrase “self-invested”—and yet claims of mis-selling are upheld, even where no financial advice is proffered and no advisory permissions are even held.

Frankly, this has the appearance of a racket. Blessed by the FCA, the FOS adjudicates, the FSCS is jacked up accordingly, the FS industry is forced to pay, driving some literally to bankruptcy, and the money flows seamlessly back to the FCA. It is a system with no accountability before the law, and no right of appeal. In short, it is unjust, and at a time when the broader powers of the FCA are being debated. Will the Minister consent to revisiting this important issue? It is a shame that the Bill does not seek to rebalance the relationship between the FCA and FOS and bring some common sense into how FOS operates.

Members of this House might recall that I have been banging on about FOS for some time, and I have had the pleasure of meeting the City Minister to discuss it. Well, something fell into my lap this summer. I received an unsolicited credit card from a company called NewDay. I had not asked for a credit card. A day or so later, a neighbour spotted someone rummaging in my outdoor letter box. It was a scam. Someone had ordered a card in my name and was seeking to retrieve the PIN subsequently sent in the post. A simple remedy would be to require credit card recipients to confirm that they had ordered one before it is sent to them. I suggested that to the company; it refused, so I complained to the FOS and it took six months for the FOS to tell me it could not fix the issue as the FCA handbook, which, as we know, governs FOS, states that as I was not yet a customer, I was not an eligible complainant under the FCA dispute resolution—rule 2.7.2, if you are interested—so it would take it no further and, as a result, others will now get scammed in this way.

That shows a dramatic shortage of common sense. Does the Minister agree that it is not clear that FOS is fit for purpose, and that the Bill provides us with an opportunity to ensure that FOS and the FCA do the job Parliament had envisaged, or to let us change the way FOS and the FCA operate?

European Union (Future Relationship) Bill

Lord Leigh of Hurley Excerpts

3rd reading & 2nd reading & Committee negatived & 2nd reading (Hansard) & 2nd reading (Hansard): House of Lords & 3rd reading (Hansard) & 3rd reading (Hansard): House of Lords & Committee negatived (Hansard) & Committee negatived (Hansard): House of Lords
Wednesday 30th December 2020 Lords Chamber

[Lord Leigh of Hurley (Con) [V]]

My Lords, I start by complimenting my noble friend Lord Cavendish of Furness on his valedictory speech, which was typically eloquent and clear. I know the whole House will join me in thanking him for over 30 years of service to this House. His warm and friendly camaraderie will be missed by all of us. He has not sought to be safe through caution, but if anything he has been more than forthright in his illustrious time here, and he can retire safe in the knowledge that the Government have achieved in the Bill all and maybe more than he and I could have expected. He knows why I get a particular thrill every time I refer to him and that he will be greatly missed by all the House. I am also delighted to see that the noble Lord, Lord Austin of Dudley, is giving his maiden speech here. His proud stand against historic and current anti-Semitism makes him a particular hero of mine.

I have supported the Government at every step of their negotiations and it is true that I would have settled for a lesser deal, so I can only thank and praise our negotiating team, led by my noble friend Lord Frost, for its achievement. Mark my words: this will go down in history as a masterclass of negotiating success.

In this huge Bill I will pick out one area: namely, technical barriers to trade. Perhaps the Minister can answer this question in his summing up later. The Bill very helpfully allows for conformity of product legislation, codes, clarification and status. For example, the Soil Association needs to change and co-ordinate with the EU to enable trade to continue. The plea I hear from manufacturers now is to allow a grace period for the new systems to kick in and for guarantees that their customers in the EU will not remove the products from their shelves, as they are currently threatening to do, because after tomorrow, those products may not be EU compliant. Accordingly, there needs to be a grace period.

Finally, on financial services, as a practitioner in that field, I disagree strongly with the noble Baroness, Lady Kramer. Those threats and worries were raised at the time of the referendum and they proved not to be true. I am convinced that the EU will look carefully at our negotiation through this agreement and will see that there can be a win-win between us on financial services. I have spoken about equivalence a number of times in this House, and I look forward to the Government achieving a more than satisfactory solution in this vital area soon.

Covid-19: Public Wealth Investment Fund

Lord Leigh of Hurley Excerpts

Tuesday 9th June 2020 Lords Chamber

[Lord Agnew of Oulton [V]]

I agree with the noble Lord on the role of the British Business Bank, which has played an extremely important part in the economy over the last few years. It has given some £7 billion of finance to almost 95,000 SMEs and has been part of the distribution for much of the support over the last few months. We will continue to review the greater part that it can play.

[Lord Leigh of Hurley (Con) [V]]

My Lords, I refer to my register of interests. There is no question that we need some sort of public wealth investment bank to replace CBILS—perhaps using the old model that 3i had. However, the BBB is not the answer. It does not have the mechanics, the experience or the expertise to make the direct investments in SMEs that are badly needed. Would my noble friend meet me and other practitioners to discuss the mechanics of how we can get relatively small equity investments into SMEs in the very near future?

[Lord Agnew of Oulton [V]]

I am very happy to meet my noble friend to discuss that, but I stress that we expect the private sector to step up to the mark in investing in these small businesses in future. We have the EIS and the SEIS, and we will continue to review them.

Budget Statement

Lord Leigh of Hurley Excerpts

Wednesday 18th March 2020 Lords Chamber

[Lord Leigh of Hurley (Con)]

My Lords, I welcome my noble friend to his new role. I was one of those who called out in private discussions with previous Chancellors and in public for this House to have a Treasury Minister, and it is appropriate that the Treasury has a direct line to the wealth of experience and expertise in this House, as this debate shows.

This Budget and subsequent statements needed to be about two things. First and foremost, it was about survival. Our economy, our businesses and our people were threatened as they have not been since the Second World War. Fear stalks the market even as it does the supermarket aisles, so now is not the time to talk about missed fiscal targets. This was a moment for the Chancellor to do whatever it takes to get us through this crisis. He could do so because our economy is in so much better shape than it was in 2010, given the mistakes made before then.

It is true that this crisis is unlike financial crashes that I have witnessed from 1972 to 2008, in that it is not driven by an endemic and systemic failure of our economic system. This could mean that the recovery is rapid. However, that depends on what is left once Covid-19 has passed. I am talking in particular about small businesses. We are confident that this will run for months, not years, but those will be long months for many businesses short on working capital, supplies and customers. Whole swathes of our economic and social life are being shut down in the name of prevention and control. In every one of those businesses, jobs are under threat, and many will not survive. On all sides of the House, we hope that the measures announced will be successful, and we are so grateful to see such a competent person in the role at this time.

Access to working capital is vital. I am, however, concerned about the ability of the British Business Bank and commercial lenders to combine quickly enough to provide the needed liquidity. It will take time—time we do not have. Each loan still has to be assessed by a bank official. Make no mistake: these loans will not be given and will not save the people who work in businesses which are just not able, in the opinion of the bank’s loan officers, to pay them back. Even if 80% of these loans are underwritten by government, the bank is not going to want to lose its 20%. Therefore, cruise businesses and those in travel, leisure and gaming and all their suppliers, and many others in a similar climate, will be deemed non-viable and will not get the loans.

I further suggest that the Chancellor considers more direct measures, as has been discussed here: emergency loans but delivered through the tax system via PAYE or VAT. This would be so much more direct for businesses which need it. If the directors of a business determine that it can survive, we need to help that business keep as many people as possible, so a PAYE holiday this month, to be recouped over the next six months, would save a lot of redundancies. We must also be aware that the £10,000 given as a grant to businesses which are eligible for small business rate relief, subject to the important point the Minister made, could be a rogues’ charter, but it is a price we will have to pay.

It is true that we have a significant package of measures designed to get us through the next year intact. However, our current insolvency laws are not helpful for this unique crisis. Currently, directors of limited companies, who must be mindful of their responsibilities to creditors and to avoid personal liability, are almost pushed to call in the administrators. This is a disaster when in fact a business has just a short-term liquidity crunch. Indeed, it may be that the Chancellor produces more rescue help in the next day or so, but that may be a day too late. A director does not know what is going on but he or she knows that administration will protect them. We urgently need a relaxation of the insolvency laws, which I gather Germany is doing right now, for some sort of Chapter 11 or other interim moratorium. It is needed immediately and it should last for the next few months. I cannot emphasise enough how urgent this is. I have been in touch directly with Ministers in BEIS but perhaps my noble friend and his colleagues can address this issue later today.

On the Budget itself, I am very glad that the Government will not pay for extra borrowing with changes to either business property relief or IHT, or by the mooted mansion tax, but I am very disappointed that they have chosen to reduce the lifetime limit for entrepreneurs’ relief from £10 million to £1 million. This flies in the face of what is otherwise a commendable Budget for innovation. The idea is that entrepreneurs who are not salaried but risk their own capital should keep more of the proceeds if they succeed. HM Treasury claims that this will net an extra £2 billion or so a year, but that assumes that entrepreneurs will not change their behaviour at all—of course they will. In my line of work—I disclose to your Lordships’ House my registered interests—I already know of entrepreneurs who are planning to start up their next business in Singapore or to emigrate to avoid, legally, capital gains tax. It was a short-sighted and counterproductive move. If we want entrepreneurs to take big risks, as we do, we have to allow them big returns. I know that people in the Treasury and the Resolution Foundation do not like it but I say to them: get over it. I hope in future Budgets the £1 million figure will be raised.

I ask my noble friend whether his officials will provide clarity on the extra funds to be provided to SMEs for apprenticeships to support an increase in the number of high-quality apprenticeships in the 16 to 18 range. Given the 47% drop in those apprenticeship starts, what plans are in place to recruit and fund 16 to 18 year-olds into apprenticeships? One start might be to ban MBAs from being covered by the levy.

I also repeat the plea made regularly by myself and my noble friend Lord Lucas for online marketplaces to be liable for the collection and remittance of VAT—Amazon being the prime example. This is taking place in most of the USA and many other countries. The UK’s competitors are cracking down on this evasion but we have not, thus making the UK increasingly attractive to VAT fraudsters. All we seem to have done is to pursue with a vengeance the one whistleblower who has revealed the scope of the problem: a Mr Richard Allen. This matter is costing our country substantially in lost VAT and really does need action from the Government.

All that I have said and asked for should not take away from a Budget from a Chancellor who has risen to the occasion. British businesses and citizens were crying out for an almighty show of fiscal force and that is exactly what they got.