Financial Guidance and Claims Bill [HL]

Lord McKenzie of Luton Excerpts

2nd reading (Hansard): House of Lords
Wednesday 5th July 2017 Lords Chamber

[Lord McKenzie of Luton (Lab)]

My Lords, I start by thanking the Minister for her introduction of this Bill and for the meetings that she and her colleagues have facilitated. We look forward to further engagement as we make progress.

As we have heard, this is a two-topic Bill, the first of which concerns the establishment of a new arm’s-length entity to replace three existing publicly funded consumer bodies, the Money Advice Service, TPAS and Pension Wise, which variously provide free-to-client and impartial information, guidance and advice. The SFGB will have responsibility for a strategic function also to support and co-ordinate the development of a national strategy. The Bill’s stated aim, which we can support, is to increase levels of financial capability, reduce levels of problem debt, and improve public understanding of occupational and personal pensions. We accept that having three existing organisations with overlapping remits but different brands, independent strategies and business plans, generates inefficiencies, although we should acknowledge the effectiveness of some of the work they currently do. In particular, we should recognise TPAS, which with a small budget and no marketing handles some 200,000 customer contacts each year. We can also see the challenges of fitting together three hitherto separate organisations.

The Bill also separately introduces a tougher and welcome regulation regime to tackle conduct issues in the claims management market, which we can also support. The Bill is a high-level framework Bill, with little detail of precisely what is to be delivered and how. It is understood that the Government consider that a mixed delivery model should apply to the SFGB, with some services delivered directly and others commissioned externally by specialist providers. Other than debt advice, there will be no support for regulated financial advice. I believe that the Minister made that point. There can be more than one tier of provider, with a third tier needing SFGB consent, and delivery partners will have to provide information for monitoring and enforcing standards. We have no problem with this, but what safeguards will be available to ensure that lower tier providers are not disadvantaged in this treatment, as happened sometimes under the Work Programme arrangements?

The Bill gives us no specifics on delivery channels, which will have to be designed by the new body, but the expectation is that these will include a customer-facing website, a telephone service and some face-to-face support—the components of the existing separate arrangements. How is it expected that arrangements will allow appropriate consumers who are not currently effectively reached to be catered for? Do we expect the SFGB to handle increased volumes?

The five areas that SFGB is expected to concentrate on are provision of debt advice, provision of information and guidance relating to occupational or personal pensions, accessing DC pots and retirement planning. I believe that the Minister suggested in her introduction that it would cover state pensions. We thought that that was not the case—but perhaps she could clarify that in her response. It is also to help consumers avoid financial fraud and scams, to give information on wider money matters and to co-ordinate and influence efforts to improve financial capability, along with co-ordinating non-governmental financial education programmes for children. The SFGB also has a strategic function to support and co-ordinate a national strategy but, especially given the appointment of a Minister for Financial Inclusion, this could be strengthened to a “develop and deliver” function, despite the SFGB perhaps having limited leverage in some areas.

We agree that these are important and relevant areas, but will test these against the existing remit of the separate bodies. It appears that a number of statutory functions of the MAS are not currently included, and we will need to know why. While we can support these areas of focus, we consider that there is scope to go wider and deeper if, as a country, we are to secure a step change in the financial capability of the nation.

Coincidentally, as has been referred to, with the introduction of this Bill, we have the benefit of the recent publication of the House of Lords Select Committee report, Tackling Financial Exclusion. I declare an interest as a member of that committee, which was ably chaired by the noble Baroness, Lady Tyler of Enfield. We will pursue a number of its recommendations in Committee, particularly on the importance of financial education, where we believe this Bill is too timid. There are also issues about the role of the FCA and whether its remit should be expanded to have a duty to promote financial inclusion. I know that my noble friend Lady Drake is on the case of consumer versus market issues on this matter.

More generally, as part of our work in Committee, we will seek to confirm that there is clarity on the boundaries between information, guidance and advice and that consumers are clear as to what is available and relevant to them. We also need to ensure that the SFGB can provide impartial information, notwithstanding that others may be operating in the same space. We welcome the focus on the provision of financial education for children and young people, although this appears to be restricted, as I have said, to non-governmental programmes. The Government should be bolder, as the Select Committee proposes.

The new body will have to cope with a changing economic environment. So far as debt is concerned, the latest data show that, against a backdrop of rising prices and stagnant wage growth, real incomes have fallen for three successive quarters and savings levels have crashed. Evidence provided to the Select Committee referred to fears expressed by debt agencies about the rise in queries covering rent arrears, energy and water bills, telephone bills and council tax. Consumer credit is on the rise again. Quite apart from the obvious question of what the Government are going to do about their austerity policies, which are driving much of this, how will they approach the capacity and resource issues of the new body? When will the Government recognise that their own policies on universal credit and council tax support are directly fuelling some of this debt? Can the Minister tell us what is happening to manifesto commitments on providing breathing spaces for debt?

The SFGB will also have to cope with an increasingly complex pensions sector. The growth of auto-enrolment brings more and more people within the scope of occupational pensions, with the 2017 review potentially—and hopefully—expanding its scope. The other major change has been the introduction of pension freedoms, giving much greater choice over when and how individuals access their entitlement. As the ABI points out, there is the prospect of a pensions dashboard being operational in 2019, with individuals being able to see all their pension pots, including the state pension, in one place online. Not having access to the dashboard as part of the guidance service would seem a missed opportunity. Have the Government given any thought to this? There is a strong argument also that retirement opportunities more generally should be within the remit of the SFGB. Of course, with pension flexibilities come financial fraud and pension scams, exacerbated by the precipitate manner in which the pension changes were introduced. A recent Citizens Advice report calculated that some 10.9 million consumers have received unsolicited contact about their pensions since 2015. These are alarming numbers and the SFGB will have a major task in promoting awareness of scams, not just those that are pension-related.

There is much more that we must explore in Committee, including the process for the setting of standards—on which we believe there should be consultation—the FCA review, reporting to the Secretary of State, and the arrangements for the various transfer schemes. Clause 12 of the Bill sets out arrangements for the disclosure of information between, variously, the SFGB, the Secretary of State, the devolved authorities and the FCA. We need reassurance that these are appropriate. As for the reach of the SFGB, noble Lords will be aware of the proposition that it should be extended to micro-businesses. Do the Government agree?

As for changes to claims management companies, we agree that the current arrangements regulating the industry, intended in 2007 as an interim measure, have not delivered a satisfactory situation despite a number of incremental reforms to the regulation powers in the interim. The current situation has been characterised by poor value for money, information imbalances, nuisance calls and texts and the progression of speculative and fraudulent claims. We accept the proposition that there is a public interest in having an effective claims management market operating in the interests of consumers, as this can provide access to justice for those who are unwilling or unable to themselves bring a claim for compensation. Further, as the Carol Brady review asserts, a well-functioning CMC market can act as a check and balance on the conduct and complaint-handling processes of individual businesses. We note that the Brady review rehearsed a number of options for taking regulatory responsibility, including bolstering the MoJ arrangements, but considered that a move to the FCA would represent a step change. This seems the right decision, especially as some 99% of turnover relates to financial services—PPI, packaged bank accounts or insurance.

We support the proposition that CMCs be subject to a rigorous reauthorisation process, and that there be a senior manager regime of personal accountability. How much of the detail of this will be available for our scrutiny before the Bill leaves this House?

The Bill enables the FCA to introduce a cap on charges, as we have heard. A consultation has already been carried out under the existing MoJ regulatory arrangements but we believe that no government response has yet been forthcoming. Can the Minister say when we might expect one, or is there to be a further consultation under the new arrangements?

In evaluating the Bill, especially the single financial guidance body, we need to determine whether what is on offer is essentially just a reordering of what we have at the moment, with some efficiencies built in, or a step change in our approach to enhancing financial capability. We should want it to be the latter and will seek to strengthen it to that effect where we can.

Financial Guidance and Claims Bill [HL]

Lord McKenzie of Luton Excerpts

Committee: 1st sitting (Hansard): House of Lords
Wednesday 19th July 2017 Lords Chamber

Moved by

[Lord McKenzie of Luton]

1: Clause 1, page 2, line 6, at end insert—
“( ) As soon as is practical after the completion of the transfer schemes referred to in subsection (7), the single financial guidance body must produce a business plan which must—(a) outline its business plans for a minimum of three years;(b) follow consultation;(c) be informed by a comprehensive assessment of consumer need; and(d) be updated annually.”

[Lord McKenzie of Luton (Lab)]

My Lords, I shall speak also to Amendments 2 and 3. Amendment 1 is a probing amendment designed to give the Government the opportunity both to expand on the process of creating the SFGB and, more importantly, to offer a greater understanding of the intended scale of the operation initially and going forward.

The amendment requires the production of a three-year business plan as soon as possible after the transfer schemes are completed. It requires that this be done following consultation, updated annually and informed by a comprehensive assessment of consumer need. At present, there appears to be no formal requirement in the Bill for there to be a business plan, although the response to the consultation of this month reminds us of the proposed publication of a framework document, which will provide further details of the governance arrangements under which the body will operate, including requirements for preparing, securing approval for and publishing its corporate and annual business plan. We know that SFGB will not be operational before autumn 2018, but perhaps the Minister might take the opportunity to expand on the timetable and say when the framework document is expected to be published.

As things stand—and we are grateful for a further meeting with officials on Monday—we have no information about the timing or sequencing of the transfer processes in Schedule 2, or certainty about what even the initial corporate and business plans might look like. Neither the response to the consultation, the impact assessment or the policy statement give any definitive information about the proposed initial scale of the operations of SFGB. Will SFGB have to commence within a funding envelope that reflects the existing arrangements? When will the SFGB levy components be set and how will they be consulted on? To what extent is it planned that efficiency savings arising from the amalgamation will be made available to the new body or applied to a reduction in the levies?

Is it envisaged that the Secretary of State will issue any initial directions or guidance to the SFGB in connection with the set-up arrangements? What parameters are to be given to the chair and chief executive on their appointment? At what stage in the process will they be in a position to influence the starting position of the new body?

There is a requirement in the Bill to make services available to those most in need. What initial assessment has been made of what this means in practice? Will the Minister outline for us how the transition is to be organised from the existing position to the introduction of the new body, and how smooth signposting can be secured?

Going forward, the NDPB will not be able to carry any reserves. So what will happen to the reserves and cash surpluses of MAS, which at March 2016 amounted to nearly £10 million—although they may have reduced since? Will these be available to the new body?

We know that MAS is to be dissolved, presumably at a point when a transfer scheme to the SFGB has been completed. Is it anticipated that any residual assets will be available at this point? If so, to whom will they accrue?

The landscape is changing for pensions and money advice. On pensions, we see the growth of auto-enrolment, provider signposting and pension freedoms; on money advice, the growth of those struggling with high levels of over-indebtedness and negligible savings. They amount to nearly 23% of the UK adult population— 11.6 million consumers. The Bill may have a technical framework to deal with all this, but we are seeking to understand how it is to be resourced to meet these challenges.

Amendments 2 and 3 are minor matters. Amendment 2 relates to the non-executive members of the NDPB. At present, the Secretary of State must be satisfied that a person does not have a conflict of interest before being appointed. The amendment would require the Secretary of State to be so satisfied also from time to time in future. I think this is a fairly routine approach to these matters that would not cut across any obligation on members to declare their interests in the usual way.

Amendment 3 deals with executive member appointments. Under paragraph 6 of Schedule 1, the chief executives and other executives must be appointed before the SFGB provides services to the public. The amendment requires that this also must be the case before any of the Schedule 2 transfers are put into effect.

We are seeking to understand the scale of this body and how it will look. At the moment, we are lacking a lot of information and we hope that the Minister can help us on this matter. I beg to move.

[Baroness Coussins (CB)]

My Lords, I support Amendment 1, and remind the Committee of the interest I declared at Second Reading as president of the Money Advice Trust, the national charity that provides free debt advice to individuals and small businesses through the National Debtline and the Business Debtline.

Amendment 1 corrects a notable omission in the Bill. Although the Bill requires the SFGB, as one would expect, to produce an annual report on its activities each year, there is no such provision for it to publish its business plan. Amendment 1 rectifies this quite effectively—and, perhaps more importantly, requires the body to consult on the preparation of this plan.

The Government have stated their intention that the SFGB should work in a consultative and collaborative way. Indeed, there are references to working with others elsewhere in the Bill. Amendment 1 would simply embed this consultative approach in the organisation, from the business plan down, and help set the appropriate culture in what will be, after all, a new organisation. I hope that the Minister will agree that this is a helpful amendment and give it serious consideration.

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[Baroness Buscombe]

I accept what the noble Lord says but I am also saying that what is necessary is already either in the Bill or, as I explained, in the requirements reflected in Her Majesty’s Treasury guidance which apply to all arm’s-length bodies across government. As for other DWP sponsor bodies, those requirements will be written into the framework document that will be developed in the run-up to launch and agreed with the CEO of the body. It will be reviewed regularly thereafter and published by the body.

[Lord McKenzie of Luton]

I thank the Minister for that reply and all other noble Lords who have participated in this debate. I thank the noble Baroness, Lady Coussins, for her support—in particular for the concept that this is a chance to embed in the culture of the new entity good practices around consultation and proper planning. I think that the noble Viscount, Lord Trenchard, also supported the broad thrust of what the amendment is trying to do. Ultimately, we are trying to get on to the record some clarity about the process. That was a key objective in tabling the amendment in this form.

The Minister said that the Bill is a high-level framework document and although I thank her for putting on to the record some comforting remarks about the things we were pursuing, I am still at a loss to understand the scale or scope of the new body and whether, on day one, it will look like an aggregation of the three existing operations. Will it be half that size or twice that size? We have no sense of that from this debate and it is a germane issue. As she says, this is a very high-level framework Bill and our one chance to address it in this House will come over the next few months, and then it will be gone. There are no parliamentary processes genuinely attached to the processes that the Minister outlined. I do not know whether any more could be said on that, but the other part of moving this amendment was to see what the concept was.

Again, is it expected that the new body will have to operate within the levy base at the moment, or will it be constrained in any way? Can the Minister give us some sense of what the new body will look like in terms of scale?

[Baroness Buscombe]

I again thank the noble Lord for these amendments. It is helpful to have on the record a little more detail about how the three bodies will transfer into one. It is important to emphasise that we cannot predict exactly what the new body will look like, and it would be wrong to try to do so. Initially we will bring the three bodies together but, over time, the three will evolve into one. It is important to protect current services during transition. We do not want to pin down, constrain or compromise the CEO and his board in their ability to produce the most effective single body out of these three bodies. Therefore, we must trust in them to some degree, although there has to be a lot of consultation during the process to produce something that will be much more efficient and, we hope, practical, particularly for the consumer, than what we have at the moment.

It is hoped that we will have sufficient finances to cover the transfer. The money currently held in reserves when MAS closes down, and the SFGB, could be used for some of the set-up costs if that is necessary. At the point of transfer, the reserves will be transferred to the new body and should be used up in year. The new body will be a non-departmental public body of central government and will not hold reserves. It is impossible to predict exactly how large the funds will be, but that is something that the board and the department will stay in touch with as the transition takes place.

[Lord McKenzie of Luton]

I thank the Minister for that further explanation—I think we are almost there. Only that big question remains unanswered.

Regarding the appointment of the chair and the chief executive, will they go before the Select Committee in the other place?

[Baroness Buscombe]

That is a good question. I do not have the answer, so I will write to the noble Lord.

[Lord McKenzie of Luton]

I am grateful for that. I think we have taken this as far as we can go this afternoon. I beg leave to withdraw the amendment.

Amendment 1 withdrawn.

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[Baroness Kramer]

My Lords, we support the amendments in this group. I start from the assumption that they are remedying a momentary lapse in the energy of the team that was drafting the Bill, because I cannot believe that the Government are not fully signed up to the principles that advice should be free at the point of use, and also both independent and impartial. So I, too, suggest that these amendments are surely uncontroversial and are useful to the Bill to make sure that the point is not lost, as they remedy those moments when long hours of work and not enough coffee made it difficult to remember every single issue that had to be grasped in the general drafting of a Bill of this complexity.

[Lord McKenzie of Luton]

My Lords, it may come as no surprise that we on the Front Bench support my noble friend Lady Drake, for all the reasons that she and others mentioned this evening. Certainly, if advice was not free at the point of use, it would undermine the function and could create conflicts of interest, as my noble friend said. Issues around independence and impartiality are absolutely crucial. I am delighted to hear that HMRC had to cough up for a fridge—it is not a usual occurrence and I congratulate my noble friend on engineering that.

I say to the noble Baroness, Lady Coussins, that we entirely agree with the point about the self-employed. We have tabled an amendment on that later in the Bill and I hope that we will be able to make common cause on that as well.

[Baroness Buscombe]

My Lords, I thank the noble Lords, Lord McKenzie and Lord Stevenson, and the noble Baroness, Lady Drake, for putting their names to the amendments in this group. They seek to amend the existing functions and objectives in the Bill to ensure that the body’s services are free at the point of use, that the guidance, information and advice provided is independent and impartial, and that the body provides its services broadly rather than focusing support in areas where provision is lacking.

Amendment 6, tabled by the noble Lords, Lord McKenzie and Lord Stevenson, specifies that any information, guidance or advice delivered by the new body or its delivery partners must be free. I note that this point was raised by the noble Baroness, Lady Coussins, as well. The Government absolutely agree that any help funded by the new body should be free at the point of use. The Government’s intention is to ensure that information and guidance are available to those who need it. We would not wish to prevent members of the public accessing help on the grounds of cost.

Pension Wise, the Pensions Advisory Service and the Money Advice Service currently offer free-to-client help and, as the Government noted in their consultation, the new body will do the same. Indeed, by bringing together pensions guidance, money guidance and debt advice in one organisation, the Government expect that savings will be made. As a result, we expect a greater proportion of levy funding to be made available for the delivery of front-line services to members of the public. I am grateful for the opportunity to address noble Lords’ concerns and will observe that Clause 5 confers on the Secretary of State powers of guidance and direction that may be used to prevent the new body entering into arrangements with fee-charging providers in the unlikely event that it should wish to do so.

Amendment 29, tabled by the noble Baroness, Lady Drake, would alter the wording of the Bill to remove the requirement for the body to focus its support for the provision of information, advice and guidance on areas where it is lacking. I understand the concerns that the noble Baroness raised, and it is right to make the point that the new body’s responsibilities and functions are not relinquished simply because provision of some kind is already delivered by a third party. That is a very important point to stress. However, with respect, I do not think that the amendment is required in this instance.

It is important that the new body uses the funds it receives in a cost-effective way, thereby achieving maximum impact for members of the public. The current wording of the Bill aims to achieve this by ensuring that the body targets its activities towards those areas where information, advice and guidance are lacking. It would be helpful to explain what we mean by “lacking”. For example, provision may said to be lacking where it is not of the right quality, lacks impartiality—or, indeed, where it is absent altogether. As such, the Bill’s current wording ensures that the body carries out its functions in the most effective way possible, delivering value for money from public funding and avoiding unnecessary duplication.

As noble Lords will be aware, duplication of services with other providers was a key criticism of the Money Advice Service, both from the Treasury Select Committee and from Christine Farnish’s independent review. The Government are keen to ensure that the new body avoids this issue and have drafted legislation to reflect this. However, the proposed amendment could increase the likelihood of the new body duplicating existing and already adequate provision rather than complementing it, thereby compromising its ability to deliver value for money. Not focusing its activities on areas where support is lacking would increase the risk of leaving gaps in provision, to the detriment of members of the public.

Amendments 28, 30 and 32, tabled by the noble Baroness, Lady Drake, would alter the wording of the Bill to include a requirement for the information, guidance and advice delivered by the body to be independent and impartial. The Government agree with the intent behind the amendments. Of course, it is important that information and guidance provided by the body is both impartial and independent from commercial interests. Members of the public must be confident that information and guidance provided by the body or on its behalf is trustworthy and accurate, and that it is not designed to sell particular financial services products—a point stressed by the noble Baroness.

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[Baroness Buscombe]

My Lords, I understand entirely and accept what the noble Baroness is saying. Indeed I understand that that is the purpose of all noble Lords who have spoken this evening. However, I take issue with the idea that there is no legislative opportunity over the next two years. The Government have made it very clear that we will not be confining ourselves to Bills relating to our departure from the European Union. There will be other opportunities to legislate in these important areas, but we want to make sure that when we do it, we get it right. It is important that I address—

[Lord McKenzie of Luton]

Can the noble Baroness particularise for us the Bills mentioned in the Queen’s Speech for the next two years that might be used to this effect?

[Baroness Buscombe]

No, I cannot do that at the moment and I think it is unfair to ask me to set out the Bills that could be used at this time. What I am saying, though, is that noble Lords should not presume that there are no other opportunities to bring forward legislation over the next two-year period, other than those relating to the departure from the European Union—

Financial Guidance and Claims Bill [HL]

Lord McKenzie of Luton Excerpts

Committee: 1st sitting (Hansard - continued): House of Lords
Wednesday 19th July 2017 Lords Chamber

Tabled by

[Lord McKenzie of Luton]

9: Clause 2, page 2, line 20, after “occupational” insert “, state”

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[Baroness Kramer]

My Lords, I very much support the amendments moved and spoken to by the noble Baroness, Lady Drake, and the pressure they create on the Government to come up with some coherent answers to the very significant questions which have been posed. We are great supporters of the dashboard, as is, I suspect, almost everybody in this House who is engaged in pensions, savings and investment issues. However, I also spend quite a bit of time now trying to understand where artificial intelligence is taking us. The first question that is always asked is: who controls the data? Secondly, who controls the best analytics to be able to turn the data into a marketing opportunity?

The data will clearly become dominated very quickly by a limited number of companies. That in itself will become a mechanism that limits options for individuals and makes it extremely difficult for them to compare the options that they could source from a variety of providers. It tends to tie them back to a single, dominant provider. The Government surely have an interest in preventing the development of either those quasi- cartel or monopolistic structures, but early intervention is needed to make that possible. Who controls the dashboard will be an issue of real significance and there is a strong argument that it cannot be one of the commercial players, in whose interests it would always be to manage that dashboard to the advantage of their own proprietary products. I hope that the Minister will engage with this opportunity, because events are taking over in this area and government has a relatively limited scope in which to intervene to shape the framework.

[Lord McKenzie of Luton]

My Lords, briefly, I support my noble friend Lady Drake and the powerful case she has made for the public service dashboard. I will also speak to the proposal that pension guidance functions should include the state pension.

Decisions around receipt of the state pension are not necessarily a straightforward matter. As we know only too well, there has been some confusion over the age at which some—particularly women—reach state pension age and are entitled to access their pension. Reaching state pension age does not of course necessitate giving up employment. Deferring the state pension can generate a higher rate of pension and therefore possibly tax, albeit no longer with a lump sum. But deferral will not earn an income uplift in weeks where certain benefits might be in payment, for example for carer’s allowance. The deferral increase is not inheritable. There are transitional rules for those reaching state pension age before 6 April 2016. As entitlement depends on a person’s national insurance record, paid or credited, there may be decisions about the appropriateness of buying extra years. These are just some of the intricacies surrounding the state pension.

It is accepted that the Pension Service will provide details, including forecasts of entitlement, but should these matters not be considered in the round, particularly with the person’s broader retirement planning? After all, for many people the state pension will constitute their biggest single risk-free income source for the rest of their lives. In their response to the final SFGB consultation, on page 10, the Government stated:

“the government believes people would benefit from access to joined up information and guidance to help them develop the financial capability they need”.

Surely an understanding of what might flow from the state pension system is as important as an understanding of choices around pension pots. Indeed, given the recognition that the service should be directed at those most in need, are they not likely to be those for whom the state pension represents a significant part of their income?

My noble friend Lady Drake made, as ever, a powerful case for the pensions dashboard, and in collecting together details of all of a person’s pension pots it is important that it should include the state pension. To be clear, we do not argue for SFGB to replace the Pension Service but for it to be able to feed its choices into how it might fit together with other pension opportunities.

[Baroness Buscombe]

I thank noble Lords for their contributions to this debate about the pensions guidance function. I shall begin by focusing my response on the questions around the state pension and shall then move on to the dashboard.

On Amendment 9, the noble Baroness, Lady Drake, and the noble Lord, Lord McKenzie, raised a question about information and guidance in relation to the state pension. It is, of course, vital that people have access to information about their state pension. Noble Lords will be aware that the Department for Work and Pensions is responsible for the policy and administration of the state pension. DWP offers a range of information and guidance through a variety of contact channels for people wanting to know about their state pension. The GOV.UK website is a key source of that information and guidance. It includes links which take people to the online services. For those who prefer to access information offline, DWP also provides leaflets, letters and other guidance on the state pension. All these forms of communication contain telephone numbers and the addresses of pension centres.

People seeking information about their state pension age or wanting a forecast of their state pension are able to contact DWP via telephone, textphone or email or, alternatively, they can write if they prefer. DWP also offers a digital service called “Check your State Pension” where customers can check a version of their state pension statement. Customers using this service can ask questions or raise queries by completing an online form. However, as with the current services, it is not appropriate for the body to become involved in specific issues relating to the detail or the handling by DWP of an individual’s state pension entitlement, for example, where a person has not received their state pension. These are matters that only DWP can properly respond to. As it has access to national insurance contribution records, DWP is the right organisation to deal with state pension-related questions, information and guidance. It would be inappropriate to expect pension schemes or the financial services sector to fund guidance on the state pension.

The single financial guidance body will be able to provide general guidance on the state pension in the same way as the existing services do now, for example, as general information on its website or as part of discussions with people. It will also direct people to the correct part of the GOV.UK website or provide the relevant telephone number or leaflet if a state pension query is raised during a face-to-face discussion, call or web chat or online inquiry. We expect the single financial guidance body to look for opportunities for a more seamless customer journey in the future as part of its programme of transformation across all its delivery functions.

I hope that I have clarified, in relation to state pensions, what the single financial guidance body can do and also the extensive service the DWP already provides to the public. Of course one of the key issues is the huge challenge which the noble Baroness, Lady Drake, referred to with reference to dashboards, and the same applies to the state pension in detail. The priority has to be around consumer protection safeguards, as she quite rightly said.

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Moved by

[Lord McKenzie of Luton]

14: Clause 2, page 2, line 24, leave out “provide” and insert “ensure provision of”

[Lord McKenzie of Luton (Lab)]

My Lords, I shall speak also to Amendments 15 and 20 in this group. Amendment 14 is straightforward and clarifies that the money advice function must ensure provision of advice as opposed to providing it—an issue over which we have already ranged. Amendment 15 spells out some of the aspects of the money guidance function. Amendment 20 adds to the strategic function,

“the awareness of scams and frauds relating to financial products”—

again, an issue we have touched upon already.

The Bill is drafted in somewhat general terms and states that the function is to provide information and guidance,

“to enhance people’s understanding and knowledge of financial matters and their ability to manage their own financial affairs”.

When exercising these functions, the SFGB must have regard to its objectives, which include improving,

“the ability of members of the public to make informed financial decisions”,

and focusing on where information, guidance and advice is lacking and is most needed, and where it can be provided in the most cost-effective way. This must be set in the context of the acknowledgment that financial capability—what this is all about—in the UK is low, and many people face challenges when it comes to managing money.

In July 2017, in the response to the consultation, the Government recognised the importance of providing information and guidance by delivering, or signposting to, information on all money matters, including budgeting and saving, insurance, financial advice, bank accounts, protection from fraud and scams, planning for retirement and debt solutions. Therefore, it seems that a broad remit is anticipated, and we would support this. However, there seems to be no good reason why these functions could not be spelled out in more detail in the Bill. Can the Minister say whether any of the matters set out in the amendment are considered outwith the Government’s intended scope of the money advice function and, if so, which?

Financial scams are, unfortunately, many and varied. We have already heard about that matter, so I will be brief. The people who perpetrate them are inventive and merciless. According to the Economic Crime Directorate of the City of London Police, financial crime has cost the UK a staggering £50-plus billion. Techniques encompass scams such as phishing, bogus investment opportunities—particularly for pensioners—intercepting home deposits, freebie scams, fake websites and many more. They can devastate people’s lives, and, as we have heard, can destroy a person’s retirement. Given the so-called pensions freedom, people around the age of 55 are being bombarded with investment opportunities. Citizens Advice calculates that nearly 11 million consumers have received calls about their provision since 2015. Given the hour, I do not propose to go further into that, because we have discussed it already. I beg to move.

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[Lord McKenzie of Luton]

My Lords, I thank the Minister for that reply. I think we are in agreement on where the Government are on this issue. However, I would like to clarify one point. Can she say whether any of the money guidance functions listed in the amendment are now off the table?

[Baroness Buscombe]

At this time of night I want to be absolutely clear that I give the right answer, in which case I will write to the noble Lord.

[Lord McKenzie of Luton]

My Lords, I beg leave to withdraw the amendment.

Amendment 14 withdrawn.

--- Later in debate ---

[Lord Sharkey (LD)]

My Lords, I shall speak to Amendment 18 in this group which is tabled in my name and that of my noble friend Lady Kramer. I agree with everything that has been said so far except perhaps for one thing. If the Government accept the amendment tabled by the noble Baroness, Lady Altmann, we will have a universal obligation as regards financial education. I can see the appeal of that in theory, but in practice I wonder how it would work out. Children and adults constitute the whole of the population, but I think that the intention of the Government in Clause 2(7)(c) is to identify groups where particular emphasis on the provision of financial education is needed. That is probably why they specifically mention “children and young people”. I agree with the approach of putting an emphasis on the groups that most need or will most benefit from financial education.

However, there are other critical target groups in need of special attention, and the noble Earl, Lord Listowel, has identified such a group. That is what our amendment is aimed at. It seeks to extend the group of special targets beyond a couple of age demographics to major financial events in the course of people’s lives. It would extend the group of special targets to those who are about to make major financial commitments. It specifies the obvious ones such as mortgages and pensions, and nowadays vehicle finance plans, but leaves it open to the SFGB to decide what other major financial commitments it may want to include in its overall strategy.

The Bill is drawn a little too narrowly on this issue and would benefit from our proposed changes and those proposed by the noble Earl, Lord Listowel. I hope that the Minister will feel able on this last amendment of the first day to break the habit of the day and accept a modest and uncontroversial amendment.

[Lord McKenzie of Luton]

My Lords, we would support a proposition which broadens as widely as possible the provision of financial education, but the issue that arises is how it will be delivered. I say to the noble Viscount, Lord Brookeborough, who was the leading voice on the committee in favour of financial education and led the charge on it, that if he is around September he will see that we have tabled a couple of amendments which deal specifically with two of the recommendations in the report about making it part of the curriculum in the primary sector, because we are behind the devolved Administrations in that regard. Latching on to the Ofsted framework is a means of getting some leverage, but, even with that, we know that it will be a challenging task. However, it is hugely important.

The data show that by getting to young people at school you can embed those ideas early, and they stick. Of course, a framework is there within which it can be delivered. Notwithstanding that it has been a requirement of the secondary sector for a number of years, as the noble Viscount said, we know of its patchy delivery—and there are clearly funding issues. I have pre-empted a little the amendment which we will come back to in September. We will perhaps pick up this important issue again then. Certainly, making sure that such education is available to the most vulnerable is important, and we support it.

[Baroness Buscombe]

My Lords, Amendments 16A, 17, and 18, tabled respectively by the noble Earl, Lord Listowel, my noble friend Lady Altmann, the noble Baroness, Lady Kramer, and the noble Lord, Lord Sharkey, would alter the strategic function on matters relating to financial education. However, I thank all of them for highlighting the important issue of financial education. While I appreciate the points that they make, the amendments as drafted simply do not work and are not appropriate.

Financial education is a specific area under the body’s strategic function targeted specifically at children and people of a young age to ensure that they are supported at an early stage on how to manage their finances—for example, by learning the benefits of budgeting and saving. I entirely agree with what the noble Viscount, Lord Brookeborough, said in this regard. It is crucial to “capture them young”, as I think the expression goes. Perhaps it would be more useful if I set out more fully what is covered by the body’s strategic function and the financial education element within that.

Through its strategic function, the single financial guidance body will bring together interested partners in the financial services industry, the public and voluntary sectors, and the devolved Administrations with the aim of improving the ability of members of the public to manage their finances. To deliver that, the body will support and co-ordinate a strategy. The premise of the strategy is that one organisation working independently will have little chance of greatly impacting financial capability, but many working together will—a point referenced by the noble Lord, Lord Sharkey. It is question of delivery. One body cannot deliver to all; it simply would not be practical for that one body to be in charge of every stage in life. The strategy should therefore be seen as a collective effort by multiple parties. The role of the new body will be to drive the process forward and oversee implementation.

More specifically, financial education is a subsection of that effort under Clause 2(7)(c). The SFGB will have a co-ordinating role to match funders and providers of financial education projects and initiatives aimed at children, and will ensure that they are targeted where evidence has shown them to be more effective. This falls within the wider strategic financial capability work of the body and should form part of a national strategy to enhance people’s financial capability. The Money Advice Service has been undertaking that role, which is one of the aspects that respondents to the Government’s consultations overwhelmingly agreed the new body should continue working on.

Amendment 16A would alter this function so that a strategy for the provision of financial education was extended to care leavers. I thank the noble Earl for raising this important issue. The Money Advice Service in its financial capability strategy recognises that more needs to be done to address care leavers’ financial needs and skills for independent living. The Government agree, and we expect the new body to consider further initiatives to support care leavers, but also other young people from marginalised backgrounds—for example, those leaving youth detention or with learning difficulties. The Government believe all these segments of the population are already covered in this section under the provision for young people. Specifying a provision for care leavers would create a specific requirement for the body and remove its discretion to target those most in need.

Amendment 17 would alter the wording of the Bill so that the strategy for the provision of financial education extended not to children and young people but to children and adults. Amendment 18 would make provision specifically for adults contemplating difficult financial decisions, such as mortgages, pensions and vehicle finance plans. As my noble friend Lady Altmann stressed, it is important that adults are informed and educated throughout their lives about how to manage their money well and avoid falling into problem debt. However, this is the role of the SFGB as a whole, as it delivers money and pensions guidance and debt advice. Also, the strategic function under Clause 2(7)(a) already gives the body a specific responsibility to work to improve the financial capability of adult members of the public, including in relation to the areas highlighted in the amendment tabled by the noble Baroness, Lady Kramer, and the noble Lord, Lord Sharkey.

We believe that it is unwise to give the new body a requirement to advise the Secretary of State on explicit issues, as worthy as those issues are. There are several topics that the body may wish to look into as part of its strategic function. Choosing a few could risk limiting the body’s ability to look widely at the sector and have regard to emerging issues in future.

I want to make further reference to what the noble Viscount, Lord Brookeborough, said this evening. I entirely support much of what he said on teaching basic skills in managing finances. I am aware that the Lords Select Committee on Financial Exclusion raised the primary school curriculum in its recent report on financial inclusion. The Government will address the committee’s recommendations on this issue when they publish their response in due course. I just add that the first recommendation made in that report proposed that we should have a Minister for financial exclusion. We preferred to refer to “inclusion”, and my honourable friend Guy Opperman MP is the first Minister for Pensions and Financial Inclusion. I have already been in discussions with him about how we can work with the Minister for Education in another place to take forward some of the recommendations in the report and discuss in further detail the concerns raised in it, particularly about primary school education. For those reasons, I hope noble Lords will accept that the amendments are not necessary. I urge the noble Earl to withdraw the amendment.

Financial Guidance and Claims Bill [HL]

Lord McKenzie of Luton Excerpts

Committee: 2nd sitting (Hansard): House of Lords
Wednesday 6th September 2017 Lords Chamber

Moved by

[Lord McKenzie of Luton]

19: Clause 2, page 2, line 32, at end insert—
“( ) financial inclusion,”

[Lord McKenzie of Luton (Lab)]

My Lords, I shall also speak to our other amendments in this group, namely Amendments 22, 25 and 39. Amendment 19 adds “financial inclusion” as one of the matters which the national strategy should specifically seek to improve. Amendment 22 sets out a range of factors which the SFGB must address as part of this national strategy. Amendment 39 offers definitions of financial inclusion and financial exclusion for this purpose. Amendment 25 takes us back to issues of financial education, which we discussed at the end of our previous Committee day.

As will be readily identified, these amendments draw heavily on the recommendations of the House of Lords Select Committee on Financial Exclusion. We acknowledge that the Government have already dealt with one of its recommendations—that there should be a clearly designated Minister for Financial Inclusion, and we support this. However, this opens the way for other recommendations of the Select Committee report to be taken forward, two in particular. These are that the Government should lead and set a clear strategy to improve financial inclusion in the UK as one aspect of a wider strategy to tackle exclusion, and that there should be an annual progress report submitted to Parliament. A Minister should have lead responsibility, but work is needed across government. The role of the SFGB in these circumstances would be to support the production of the annual report in conjunction with the devolved Administrations. This is exactly what Amendment 22 provides. However, if the Government were not minded to proceed with leading on a strategy and routine reporting, how will they take these matters forward? Can the Minister say more about when the Government will respond to the totality of the Select Committee’s report, and set out in particular what they see as their role in tackling financial exclusion and promoting financial inclusion?

As the report sets out, the precise use of the terms “financial exclusion” and “financial inclusion” has varied over the years, but we warmed to the approach adopted by the Select Committee, which we have set down in Amendment 39. This might be broadly characterised as financial exclusion representing the problem and financial inclusion the solution—that is, what we should seek to achieve.

One of the objectives of the SFGB is that it must have regard to improving the ability of members of the public to make informed financial decisions. Those who struggle to do so face the risks of financial exclusion, such as the inability to access what might be considered everyday financial products and services. As we know, such individuals can face significant barriers to engagement in modern society. Hence Amendment 22 requires the SFGB, as part of its role in developing a national strategy, to work widely with financial institutions and technology companies to support hard-to-reach groups in accessing financial support and products online.

At the same time as internet banking is growing, causing more financial services to move online, we are experiencing a programme of significant bank closures: 53% of UK bank branches closed between 1989 and 2016. It is suggested that this is a particular problem for older age groups who, we are told, place a high value on face-to-face contact, tend to be more reliant on cash and experience challenges in travelling, and one-third of people over 80 either have never used a cash machine or prefer to avoid them. Some of the high-street banks are responding to this by helping to develop the digital skills of their customers, and there is an obvious role for the SFGB in encouraging and promoting this.

Exclusion is not only a consequence of the digital challenge. The House of Lords committee heard about the difficulties for some, such as those without a passport or driving licence, in meeting rigorous requirements for bank accounts. These matters particularly affect the homeless, ex-offenders and migrants, to name but a few. Amendment 22 also highlights some of the financial exclusion issues which affect those suffering with mental health conditions. The report describes how certain behaviours, such as,

“disengaging … from contact with creditors and financial services providers”,

lead to the build-up of debt and problems with credit ratings, and that,

“excessive spending during manic episodes”,

can also lead to the build-up of debt. It is important, therefore, that arrangements include “control options” for customers.

However, as recent events demonstrate, the existence of control options does not guarantee provider compliance. One especially disturbing issue reported on by the Select Committee is the communication strategy pursued by some online retailers. This involves potentially “predatory behaviour” in the early hours of the morning, when lonely and isolated individuals are at their most vulnerable. This is a matter for the Government, the SFGB and others to be concerned about. Is the Minister satisfied with the current state of regulation and its implementation in this regard?

Finally, Amendment 22 calls for a review of the impact of the Welfare Reform Act 2012 on financial inclusion. While it calls for an annual review, we accept that it might better call for, as did the committee,

“a detailed, comprehensive cumulative impact study of how changes in social security policy resulting from the Welfare Reform Act 2012 might have adversely affected financial wellbeing and inclusion”.

Other organisations have tried, such as the IFS and the CPAG. A recent analysis by the latter showed that under universal credit and child benefit changes since 2013, families and children have lost more than any other group, with cuts far outweighing the increased support for childcare costs. Compared with the original design of universal credit, the average family with three children will be more than £2,500 a year worse off. The point is that the changes to universal credit will be heavily poverty-producing and lack of money is a feature of financial exclusion. While an annual review to monitor changes is helpful, the cumulative effect of all components of the changes to social security shows how mean-spirited and counterproductive they have been.

--- Later in debate ---

I apologise for a somewhat lengthy response but noble Lords have raised some really important issues. I hope that the explanation I have provided will explain why we are concerned about the relationship between financial inclusion and financial capability. These proposals would greatly expand the function of the SFGB and risk causing duplication and confusion over the role of other public institutions. On that basis, I ask the noble Lord to withdraw his amendment.

[Lord McKenzie of Luton]

My Lords, I thank all noble Lords who have spoken on these amendments. With the exception of the noble Viscount, Lord Trenchard, who had some equivocation about them, and the Minister himself, all were in support and I am grateful for that. The Minister has given a very long, very full reply and I will certainly need to take Hansard away and have a read of that, but I would like to pick up one or two points. He referred to the evaluation already in place for universal credit and the welfare reform. What evaluation specifically has focused on the impact of these welfare changes—or social security changes—on the build-up of debt and on the relationship with preponderance of debt? I ask this particularly because there are a number of instances identified in the report where there is clearly a correlation between the social security provisions and debt. The issues around the seven-day waiting period is a simple example. There are issues around the payment of rent—a monthly payment for some. There are also issues around council tax support. That support has changed and is delegated to local authorities at a time when their budgets are being slashed. We will discuss the nature of debt shortly. One of the issues flowing from that is the changing nature of debt. For example, utility bills and council tax bills are featuring more prominently in debt. I believe that at least part of that is a direct consequence of the system that the Government have put in place.

The Minister was concerned about the definition of financial inclusion or capability and said that the amendments could introduce confusion into the standard international definition. Leaving aside the precise semantics, what does he see as the Government’s role in all this? What are they going to do to improve financial capability—if that is the terminology he prefers—or financial inclusion to help people make better use of financial services and banking so that they can play a wider role in everyday life? That is what this is about at the end of the day. What will the Government do? What is on the Minister’s agenda? How will that be shared across Governments given that the report talks about needing to join up these services? I believe that a financial inclusion task force used to do some of this work but the coalition Government abolished it a few years back. This issue features as one of the strong recommendations in the report. Leaving aside terminology, these issues are not joined up at the moment and they need to be.

The noble Baroness, Lady Kramer, rightly pressed the Minister on the extent of the FCA’s role when there is a gap—namely, precisely what it should be doing in these circumstances. I need to read the record but there seemed to be a dispute over the extent to which the Minister’s assertions were correct in that regard.

A number of other points were made, including that of post offices filling the gap when banks close. However, I think there is some way to go before that happens. It is right to say that post offices are becoming more alert to these situations but I do not think that they are anything like clear substitutes for banks.

I thank the noble Baroness, Lady Coussins, for agreeing about the importance of financial inclusion—or whatever term we use—being an integral part of the strategy we adopt. That must be right. The noble Earl, Lord Listowel, mentioned the importance of this area to young people. The noble Baroness, Lady Finlay, rightly expanded the range of circumstances about which we should be concerned. I think the Minister said that nothing in the Bill prevents action being taken in relation to fluctuating mental health and disability issues and issues around coercion. Incidentally, the noble Viscount, Lord Trenchard, talked about people’s reluctance to seek advice. I would have thought a clear case of that would be where it is available but they might feel intimidated—actually intimidated or intimidated by the environment.

The noble Baroness, Lady Finlay, touched on the important issue of gambling. There is quite a chilling paragraph or two in that report about online providers deliberately targeting vulnerable people at two or three o’clock in the morning, when they are most susceptible to spending and making their commitments.

The noble Baroness, Lady Hollins, supported the amendment and referred to the challenges of chip and pin. A statistic in the report says that one-third of people aged 80 or over have never used a cash machine or would not want to. That is quite a frightening level of disconnect.

We have been at this for quite a long time but it is an important subject. I propose to take the Minister’s response away, and we may return to it on some basis at a later stage. In the meantime, however, I beg leave to withdraw the amendment.

Amendment 19 withdrawn.

--- Later in debate ---

[Lord Young of Cookham]

My Lords, I will try to reflect the German work/life balance referred to by the noble Earl, Lord Listowel, by sitting down well before six o’clock. I am grateful to the noble Baroness for introducing her amendment, and as I do so often, I found myself in agreement with nearly all of her analysis of some of the challenges out there: the fall in the savings ratio and the need for a holistic approach to these challenges. I also agree with what the noble Earl said about the problems faced by young families. Where I parted company with the noble Baroness was when she sought to place this extensive new duty on the single financial guidance body. Basically, what her amendment does is to require the new body to produce a report within its first year advising the Secretary of State on how government departments might best assess the impacts of any changes in public expenditure, administration or policy on financial inclusion, financial capability and household debt.

I have a lot of sympathy with the intent behind the amendment. I agree with much of what the noble Lord, Lord Stevenson, has just said about the need to stand back and take a holistic approach to the issue, and of course the Government do not want to do anything that would have an adverse impact on financial inclusion, financial capability or household debt through any of the policies that they pursue. However, I have real difficulty with the point that the noble Baroness is trying to make here, and I do not think that the amendment is either necessary or appropriate.

As I implied a moment ago, the scope of the report proposed in the amendment is very far reaching indeed. The definition of,

“public expenditure, administration or policy”,

is very broad. I have to ask the noble Baroness whether she will compel the body to produce a report for the Secretary of State which considers how to assess the impact if, for example, the Chancellor chooses to adjust expenditure on infrastructure, defence or healthcare. I am really worried that the amendment could overstretch this body’s resources in its first year and expand its remit far beyond that which was originally envisaged. In its first year the body is going to have to prioritise resources into bringing together three disparate bodies, identifying gaps in the market, as we heard earlier, and building on its primary task. If we start going down this road, I see a real risk of diverting resources away from the front line of providing services, bringing together and co-ordinating the functions of the three pre-existing bodies, and from front-line delivery.

The second point is one that has already been touched on. Ministers already review a range of issues when they assess new policies. The financial impacts on individuals and families are considered as a normal part of policy-making, and as noble Lords know, impact assessments are also produced to accompany legislation. I am not convinced that this broad requirement is in keeping with the body’s strategic function of working with others to support the co-ordination and development of strategies to improve people’s financial capability, their ability to manage debt, and the provision of financial education for children and young people. This function is about identifying the most important issues and possible interventions in financial capability, personal debt management and financial education for children and young people working through others.

In response to the point made by the noble Lord, Lord McKenzie, in winding up the last debate and in part response to the issues raised in this debate, a lot will become clearer as to where the Government are coming from on this when we publish our response to the ad hoc Select Committee. The noble Lord, Lord McKenzie, asked me where the Government are coming from, and given the number of recommendations made by the ad hoc Select Committee, I think that that is the right place to reply.

On government leadership, we take the issues of capability and inclusion very seriously, and perhaps I may reiterate my comments about government leadership. In addition, the Secretary of State can request guidance or advice from the new body under Clause 2(2), which will help co-ordination between the Government and the body. I am grateful to the noble Baroness for giving me the opportunity to put the Government’s view on this important issue on the record and to underline our concerns about the potential diversion of resources if we go down this particular route.

[Lord McKenzie of Luton]

May I receive a bit of clarification on the Government’s response to the House of Lords Select Committee? I think the Minister said that it would be soon, but can he give us an assurance that we will receive it before we get to Report? We are going to have a little gap after next week. I hope that that will be enough time for the Government to respond.

--- Later in debate ---

Moved by

[Lord McKenzie of Luton]

26: Clause 2, page 2, line 34, at end insert—
“( ) As part of undertaking its strategic function to improve the financial capability of members of the public, the single financial guidance body must carry out research on a periodic basis, in collaboration with other bodies with an interest in debt issues, to determine—(a) the level of unmanageable debt across England, Wales, Scotland and Northern Ireland,(b) the causes of unmanageable debt, and(c) ways to prevent unmanageable debt.”

[Lord McKenzie of Luton]

My Lords, in moving Amendment 26 I will speak also to Amendment 40. These amendments concern unmanageable debt, which we seek to define in Amendment 40—with some trepidation given my last attempt to define something. Amendment 26 would require the SFGB to carry out research from time to time relating to unmanageable debt and to do so in collaboration with other bodies with an interest in debt issues. The focus of the research should be to determine levels of such debt across the whole of the UK, the causes and the ways to prevent it.

Unmanageable debt is defined to recognise those situations where individuals are not routinely able to, or heading for circumstances where they will not routinely be able to, meet their financial commitments when they fall due. Research into such matters would not be new, but it is of particular relevance given the levels of unsecured personal debt in the UK. Citizens Advice reports that unsecured debt, after falling from its peak in 2008, is now growing faster than incomes and faster than secured debt. It cites an OBR forecast that levels of unsecured debt will return to pre-crisis levels by the end of the decade. These have implications for the individuals and families concerned, as well as the aggregate impact on the national economy. Citizens Advice research shows that unmanageable debt is unevenly distributed, taken as a measure of unsecured debt equivalent to six months or more of a person’s income but taking into account savings. Not surprisingly, those in the lowest income group are three and a half times more likely than the highest fifth to have unmanageable debt, those who are 20 to 29 years old are twice as likely as those who are 30 to 39 years old, and private renters are twice as likely as those with a mortgage.

Amendment 26 would require not only that the level of unmanageable debt be recognised but that the causes of the debt and ways to prevent it be determined. That is a more challenging requirement but would reflect changing circumstances over time. Evidence given by the Money Advice Trust to the House of Lords Select Committee was to the effect that, 10 years ago, the problems reported by 69% of callers to its National Debtline were to do with loans, overdrafts or credit cards, but that this percentage has fallen significantly to 42%. However, the service has seen a dramatic 140% rise in calls concerning household debts such as rent arrears, energy and water bills, telephone bills and, as we have discussed, council tax. This analysis was echoed by others, including StepChange.

We discussed in a previous amendment consequences of the abolition of council tax benefit and the detrimental effect that this has had on council tax debts. Another feature highlighted was the impact of the tax collection practices of different local authorities and how this could impact debts generally. We are, of course, coming on to discuss the importance of a breathing space. It has been suggested that the loss of debt advice and benefit advice services, particularly those funded by local authorities, has exacerbated the problem.

In seeking to bring research to bear on ways of preventing unmanageable debt we also need to focus on the wider consequences of individuals and families living with unmanageable debt, including family breakdown and poor physical and mental health, as well as on the fundamental issue underlying much of this—low and erratic pay. Research is not only about looking back. The Money Advice Service, together with CACI, published research on the design of a model to estimate the probability of an individual being overindebted. It concluded that the overindebted population is younger and more likely to rent and have children; feels the impact of macroeconomic changes more significantly; and is more exposed to changes in the welfare system. Unsurprisingly, they claim that, together with partners, this research will enable services for overindebted people to be provided earlier to help resolve crises and support them to stay out of debt in the longer term. We know that debt advice can be effective. Research can assist in channelling that advice in the most effective and efficient way. I beg to move.

--- Later in debate ---

[The Parliamentary Under-Secretary of State, Department for Work and Pensions (Baroness Buscombe) (Con)]

My Lords, I thank the noble Lord, Lord McKenzie, for tabling these amendments. Amendment 26 relates to the strategic function of the body and would add a requirement for the new body to conduct research on levels of unmanageable debt across England, Wales, Scotland and Northern Ireland, the causes of unmanageable debt and ways to prevent it. Amendment 40 then seeks to provide a definition of unmanageable debt. It is right that this House takes great interest in seeking to understand the causes of debt and how the Government can best help those who are struggling. I thank noble Lords again for their important contributions on this matter at Second Reading, in the meetings we have conducted since and in their amendments. I have given them a great deal of thought. I assure noble Lords that the Government take problem debt very seriously.

We understand, as the noble Lord, Lord McKenzie, has said, that the cost of living can sometimes become too great and that problem debt can be hard to escape and can compound family breakdown, worklessness, stress and mental health issues. The Government are committed to supporting those who are struggling with their finances and, as we have previously outlined, work is ongoing on this area. Indeed, during the Recess I paid a visit to the Money Advice Service to see for myself some of the work that it is doing in this regard, particularly the different areas of research it is carrying out. I also take this opportunity to acknowledge the work that Citizens Advice is doing in this area, and particularly the report they published last week, Stuck in Debt, which highlights the problems faced by many. The report highlights the risk of people taking on debt that they cannot repay and clearly shows the impact of unaffordable debt.

The strategic function of the single financial guidance body will be critical. It will give the new body the ability to work with others in the financial services industry, the devolved authorities and the public and voluntary sectors to identify the most pressing issues and possible interventions in financial capability, personal debt management and financial education for children and young people. I understand the very worthwhile aims of this amendment; however we do not believe that it is necessary to specifically reference one area of research in legislation. Clause 2(3) enables the body to conduct research on,

“anything that is conducive or incidental to the exercise of its functions”,

so it could conduct research into anything that noble Lords have raised this afternoon, for example. Furthermore, the body will, under its strategic function, be expected to work with stakeholders across the financial services industry, the devolved Administrations and the public and voluntary sectors to share and pool research evidence and knowledge among each other to inform the national strategy on financial capability.

Let us not forget that the whole purpose of this new body is to improve the financial capability of the public, through both its delivery and strategic functions. In order to deliver its objectives and functions effectively, this body, like any other delivery organisation, will need to conduct research to understand the issues it is addressing, test and learn new approaches to determine what works and continuously improve the services it is providing. I would find it hard to believe that this body would not conduct research on the very issues that the noble Lord has raised. The question here is not whether the body should conduct research on this and other matters—the Government are clear that, of course, it should. The question is, is it necessary to have it defined in primary legislation?

There are several topics that the body may wish to look into, but I am concerned that specifying just one could risk limiting its ability to look widely and strategically at issues across the whole sector. It must also have regard to emerging issues in the future. Amendment 40 seeks to provide a definition of the unmanageable debt levels that the body would be tasked with researching under Amendment 26. The noble Lord’s amendment undoubtedly highlights some of the key characteristics displayed by those who are struggling with their finances, such as being able to make only minimum repayments on outstanding credit commitments, difficulty in paying for essentials and a reliance on credit. The question here is not whether the Government agree with this definition; it is about whether this should be defined in legislation. As I have already explained, the Government believe that the new body should have the ability to choose the specific topics it researches in relation to its functions, and that these should not be specified in legislation.

Should the new body choose to research the causes and effect of unmanageable debt, it should also have the ability to define what it is researching. Although I understand the intention behind the definition suggested in the noble Lord’s amendment, defining unmanageable debt in legislation could unintentionally limit the scope of the body’s research. It is envisaged that the body will continue to support the aim of reducing problem debt, and this is clear in Clause 2(7)(b), which states that part of the strategic function is to improve,

“the ability of members of the public to manage debt”.

As I have said, the Money Advice Service and others already conduct significant amounts of research into the causes of overindebtedness. They are doing a great deal of work at the moment on how to support the aim of reducing problem debt in the first place. Indeed, I had an extensive discussion about how to do this in a much more strategic way; I think it was the chair of MAS who said that if someone falls off their horse, it is not just a case of looking at how they get back on it; it is how they learn to ride. It is about people’s whole approach, from an early age, to managing their finances. We envisage that the fantastic work the organisation is carrying out in research will be transferred and will extend and continue through to the new body, so I cannot quite accept the premise of the question asked by the noble Lord, Lord Sharkey, that if the money is not spent on research, how is the budget assessed. If that were the case, it would go to the core issue of whether the body is functioning: a crucial part of its function is to ensure that the body is looking at and thinking about how to improve people’s ability to manage their finances through life.

I know that a particular focus of research at the moment is to do with people’s attitudes; not just how they manage their debt in the short term, but their whole attitude to money and how they manage it going forward. I have various pamphlets here and I found it incredibly encouraging to learn about what we are doing for young children, going through to the elderly. Of course, as always there is lots more to do but the whole tenor of my response is that we should not restrain or constrain this body by tying it down, by listing or being too prescriptive in primary legislation. I hope that, after considering the points I have raised, the noble Lord will withdraw the amendment.

[Lord McKenzie of Luton]

My Lords, I thank the Minister for that sympathetic reply and for the detail contained in it. The thing I am struggling to understand is why, simply because the Government have particularised an approach in the Bill, that precludes any other approach to research or indeed any other type of debt to be the subject of that research. But this is probably not the time to pursue that in great detail. I simply do not see why the amendment cannot be accepted without impairing the argument the Minister has made for how she sees research and the importance of it. Unless she wants to say anything more, I beg leave to withdraw the amendment.

Amendment 26 withdrawn.

Financial Guidance and Claims Bill [HL]

Lord McKenzie of Luton Excerpts

Committee: 2nd sitting (Hansard - continued): House of Lords
Wednesday 6th September 2017 Lords Chamber

[Baroness Kramer (LD)]

My Lords, I am strongly in favour of this amendment, which picks up on an issue addressed earlier by the noble Baroness, Lady Altmann. It is that the world we live in is far more complex than the one that provided the framework when these original bodies, which are now being brought into one, were set in place. We need that revision for this single body to encompass the whole of the arena of life as it is today.

The noble Baroness, Lady Greengross, was very clear that for many people, the overwhelming majority of their wealth and assets is in their home, that using that as part of their support for their old age may well be a strategy they want to pursue, and that they cannot consider a pension without looking at that issue with the same kind of clarity and without looking at the situation as whole.

I have personal experience of this. I have an elderly family friend who is considering equity release or some similar way to use the wealth embedded in her home. I started to look at the various websites and at the products that are available. Noble Lords will be delighted to know that this is apparently the golden age of equity release, which is increasing at the rate of 28% per year. The websites are exceedingly seductive. The comparison sites compare one product to another, but none of them exposes the real issues of concern or the questions one should be asking about whether the product is appropriate. It is also easy to find a way to access that equity without being in a regulated environment. Recognising that, equity release is for some people entirely appropriate but for many it is entirely inappropriate, and advice is critical.

If people are not signposted and sent through a guidance mechanism to get that financial advice, it seems to me they are in very murky waters. It takes a very sophisticated financial expert to work their way through this. It makes pensions look simple, and I hope very much that the Government will take on board and make use of this excellent amendment.

[Lord McKenzie of Luton (Lab)]

My Lords, this is an interesting amendment. I believe that it is possible for the noble Baroness to achieve what she wants under the terms of the Bill as it stands, but that is not entirely clear and not quite for the reasons set down in the amendment. The amendment says:

“As part of its pensions guidance function, the single financial guidance body must provide”,


et cetera. Clause 2(4) says that the “pensions guidance function” under Clause 2(1)(a) is,

“to provide, to members of the public, information and guidance on matters relating to occupational and personal pensions”.

I do not think that equity release falls within that definition. There is a separate issue as to whether it would fall within Clause 3, which says:

“As part of its pensions guidance function, the single financial guidance body must provide information and guidance”,


et cetera, but that is to do with,

“flexible benefits that may be provided to the member or survivor”.

It seems to me, on a straightforward reading of the Bill, that it would not be possible to use the pensions guidance function strand of the new body, but there seems absolutely no reason why the money guidance function could not be used for that purpose. That would be a potential quarrel I would have. The Minister may say that interpretation is too restrictive and not right, but I do not think it would preclude the noble Baroness achieving what she wants. It seems to me the money guidance function should enable guidance to be provided on assets including on equity release.

The noble Baroness, Lady Kramer, raised the question of whether the FCA regulates all these schemes. I am advised that it probably does not, but obviously there is an issue there and perhaps the Minister would respond to that. We can support the thrust of this, because I think it achieves what the noble Baroness wants, but not quite, as I understand it, in the terms of the amendment, because of the other functions in the Bill.

[Lord Young of Cookham (Con)]

My Lords, I begin by thanking the noble Baroness, Lady Greengross, for her amendment, which seeks to add an additional requirement to Clause 3. She has a formidable reputation for campaigning on behalf of those of above average age. For as long as I have known her, she has taken a particular interest in housing, so there is a lot of force behind her amendment.

Clause 3 specifies that as part of its pensions guidance function, the single financial guidance body must provide information and guidance to help a member of a pension scheme make decisions about the options open to them as a result of the pension freedoms. This requirement replaces the current duty on the Secretary of State for the DWP to take steps to ensure that people have access to guidance on the pension freedoms. It ensures that the single financial guidance body will continue to meet the guidance guarantee made by the Government when they introduced the pension freedoms legislation back in 2015.

In its recently published interim report on the review of the retirement income market, the Financial Conduct Authority identified some emerging issues. For example, the review found that draw-down of defined contribution pots is becoming much more popular, and accessing pension pots has become the “new norm”. The FCA is now working with the Treasury, the DWP and other stakeholders to fully understand all the emerging themes and to develop ways in which any issues can be addressed. Without reopening some of the earlier debates, that shows the FCA is able to respond to concerns about consumer interests.

At Second Reading the noble Baroness raised questions about the adequacy of saving into a pension scheme at the levels required by automatic enrolment. The amendment she proposes would make it a statutory requirement for the body to provide guidance on other sources of retirement income, including housing wealth. While I agree with her that it is important that people plan for retirement, no matter what they age they are, and that they consider all their retirement income options, I hope to persuade her that her amendment is not necessary.

As part of its pensions guidance and money guidance functions, the body will provide general information and guidance to members of the public about the benefits of saving towards retirement, and the range of products available to provide income in retirement, including the products that the noble Baroness mentioned in her speech. I think the noble Lord, Lord McKenzie, came up with the answer before me: these services are already provided by the Money Advice Service and the Pensions Advisory Service. For example, the MAS website has information on what equity release is and on other products, such as home reversion plans. In establishing the single financial guidance body, the information and guidance about sources of retirement income that are currently spread across all three existing bodies will continue to be delivered but will be much more joined up—for example, there will be just one website instead of three—making it easier for people to access and consider in the round. That will also make it easier for the new body to assess any gaps in the provision, quality or impartiality of the information and guidance available.

Reverting to the debate that we had before the dinner break, the body will not provide advice on specific products. Its role is to provide general information and guidance on the options open to people so that they can make their own more informed financial decisions. It is not in the remit of the body to provide financial advice. In some instances, though—this was touched on during our debate—it may be that the body would need to refer an individual to an independent financial adviser, who would be able to advise them which products were the most suitable in their circumstances; I think that is what the noble Baroness, Lady Kramer, was implying. That in itself is a helpful service; we know that often, people are reluctant to seek financial advice or unsure of where to go. The body and its partners can play a role in breaking down those barriers, enabling people to understand when it will be beneficial or necessary for them to seek financial advice.

Housing wealth, as the noble Baroness knows better than anyone, is a complex area. Equity release schemes, as an example, may be a suitable option for some, but it is important that people are made aware of the associated risks. The FCA’s ageing population study, to be published later this year, will consider how lending in retirement can be made to work better for older consumers—again, evidence that the FCA is conscious of its responsibility to consumers. That study will consider product innovation and building upon existing industry initiatives to facilitate mortgage lending to older consumers. The Government are clear that anyone considering equity release should seek independent financial advice to ensure that the product is appropriate to their individual circumstances.

The noble Baroness, Lady Finlay, raised a number of issues. I may have to write to her about the transparency of exit charges. In a nutshell, though, so far as equity release is concerned, the FCA, as I think she said, has responsibility for the regulation of equity release products and advice on these. The Equity Release Council is the industry body for the sector and sets out rules and guidance that all members have to comply with. All customers must receive independent legal advice before taking out an equity release product. I hope that addresses some of the issues the noble Baroness raised about undue pressure being exercised by family members with an interest. The borrower has to provide a written suitability report, and the FCA requires the borrower to be provided with a “key facts” illustration for each product. Independent solicitors must also verify understanding before proceeding, and the customer must signal receipt and acceptance of the written suitability report. That report explains why they believe that equity release is suitable and why a particular product is being recommended to that customer. I think the noble Baroness raised the issue that people do not have to get regulated advice. I would like to reflect on that and perhaps drop her a line.

So while the body may provide general information on these schemes, that is an example where it would be best placed to make people aware that they should be speaking to regulated advisers, and signpost them to the appropriate place. As I explained, the body is required to provide guidance to replace the pension guidance guarantee. That is because we want to ensure that the move to a single body in no way reduces the guidance on offer for those who wish to consider exercising their pension flexibilities.

To conclude, the SFGB’s money guidance and pensions guidance functions already enable it to provide people with information and guidance on retirement planning, saving in a pension scheme, different sources of retirement income and, where appropriate, to signpost them to regulated advisers. These are all services which MAS and TPAS deliver now, and the body will continue to do that but in a more joined-up way for customers.

Against that background, I ask the noble Baroness to withdraw her amendment.

--- Later in debate ---

[Baroness Altmann]

My Lords, I support the amendment, to which I have added my name. It would make the take-up of guidance the default option or a mandatory option for anyone who does not have independent, regulated financial advice. We are taking time and spending so much effort setting up a body that is designed to help to guide and inform the public; this amendment would help to ensure that the public actually get the benefit of it.

Clause 5(1) gives the Secretary of State powers to issue,

“directions to the single financial guidance body”,

to do this. Therefore, before anyone could transfer or access their pension savings, they would have received this guidance, which will be set up specifically to make sure they understand the risks before they make any decisions about their pension. Someone would also explain the tax consequences and the potential long-term dangers of giving up a pension because, once they have given it up, they cannot get it back. As the noble Lord, Lord Sharkey, just remarked, the recent FCA research shows that there are some people who are transferring money out of their pension and just putting it into a cash account or a different investment because, clearly, they do not understand the benefits of keeping it in a pension. Having somebody explaining it to them first would be very much the aim of this particular body.

I wholly support the pension freedoms that the Government have introduced, but they are introducing them into a landscape where, for the past few decades, people were encouraged to believe that they did not really need to understand or engage with pensions, because all the decisions were taken for them. For most people, they were in a default fund on their savings journey and then, when they took the money later on, they were put into an annuity and that was it. They did not really need to understand what any options were because they did not really have many options. Unfortunately, people did not understand how annuities worked either. If we make this guidance a default or mandatory option then we make sure that we are protecting the public as well as giving them the freedoms. It is right that we give them the opportunity to make decisions that will suit them, but we have to make sure that we give them the opportunity of making properly informed decisions and as fair a chance as possible of making the freedoms work for them.

Providers too often want people to make a decision when they are too young, for example. It is not just in the freedoms landscape that people are taking their pensions early; the majority of people were buying annuities well before the age of 65 under the previous system, too. I hope that the Government will seriously consider that the 7% take-up rate for Pension Wise is woefully low—we need to find a way to increase that and we need to make sure that we protect the public and give them the fairest chance of making the freedoms work. Pension Wise or the new body could, for example, issue vouchers for everybody who is coming to the stage at which they might need to make a decision about their pension. They could be sent a voucher for a free guidance session. The financial guidance body, perhaps with the FCA and with providers, can work on ways of boosting take-up, but it is definitely something that would make the work that we are doing in this Committee so much more valuable around the country. I support this amendment.

[Lord McKenzie of Luton]

My Lords, we support this amendment. We think that it is a good, strong, robust amendment. It takes us back to the introduction of pension freedoms which, I am afraid, were done rather precipitately and without the groundwork being properly laid. This was a point that my noble friend made at the time but it fell on stony ground.

I was going to ask what the take-up of regulated advice or guidance was at the moment but the noble Baroness has given us the 7% figure for Pension Wise. If one is heading for a much higher percentage, it raises the question of what the resource implications of that would be. I do not know if any groundwork has been done—it is not a reason for not doing it. These are important situations. My noble friend has prompted me about the idea of an MoT at the age of 50 as part of the process to get people to focus on their upcoming pensions. We are certainly happy to support this. I am interested to hear what the Minister has to say on what the problems with it might be. Whatever they are, I would hope that we could overcome them, because this could make a very significant difference to the pensions landscape.

--- Later in debate ---

[Lord Sharkey]

My Lords, I was pleased to add my name to the amendments in the name of the noble Baroness, Lady Altmann. Both amendments address the problem of cold calling and pensions. I would, like the noble Baroness, have preferred an outright ban on cold calling, just as I would like an outright ban on cold calling for the benefit of debt management companies and for claims management companies. We can deal with banning cold calling for claims management companies later in the Bill, as the noble Baroness just pointed out, and she and I have both tabled amendments to do exactly that. Regrettably, banning for pensions and debt management companies is outside the scope of the Bill.

The amendments before us, therefore, cannot and do not go that far, but they do offer a pretty good work-around. They would do two things, as the noble Baroness has explained. They would require the SFGB to provide information and guidance on cold calling. They would also require people to have received this information and guidance before taking any action following a cold call.

Noble Lords have discussed cold calling on many occasions in this Chamber. On every occasion there has been universal dissatisfaction with the process and universal recognition that it is a menace, yet it still goes on. There has been a 180% increase in the past 10 months alone. There are now 2.6 million calls every month. This is an omnipresent menace. But there is no cold calling for mortgages. We banned that. Successive Governments have never got around to banning cold calling for pensions, for debt management or claims management and I know that the Government have promised, yet again, to ban cold calling for pensions. But, yet again, it is a promise without a delivery date. It is a promise that has no obvious legislative vehicle except this one.

I still do not understand why the Government are dragging their heels over this or over debt management and claims management cold calling either. I acknowledge that there will be complexities in devising the details of any ban, but it is surely not beyond the ability of the Government to deal with it speedily if they assign the right priority and the right resources to it. In any case, I remind the Minister that we have already held out in these debates the possibility of an enabling clause in the Bill with the details to follow later in secondary legislation. We have had no response to that—all rather disappointing and mystifying. In the absence of any willingness on the part of the Government to actually do anything in the Bill, these amendments show how progress can be made. I very much hope that the Minister will respond positively.

[Lord McKenzie of Luton]

My Lords, we support the thrust of the amendment, but there is just a query on its precise ramifications which perhaps I may raise now. The amendment states:

“As part of its pensions guidance function, the single financial guidance body must provide information and guidance regarding unsolicited communications and make provision to ensure that members of the public receive this information and guidance before taking any action following an unsolicited communication”.


I am not quite sure how that could be caused to happen; that is, where the knowledge of an unsolicited communication is and how that feeds through to encourage people not to take any action until they have considered these matters. When the Minister winds up, she might expand a little on that.

I certainly support what the amendment is trying to achieve. The idea of taking a power in the Bill to seek to move forward more quickly once it has left this House is certainly worth considering. But I guess that my key message is to the Government. Their response to the consultation document was robust and covered not only cold calling, but we have this equivocation as to when it is going to happen. I find it difficult to understand, given everything that is going on with Brexit, which is changing the world, why we cannot move swiftly to introduce provisions in a vital area where there is clear consumer detriment that is destroying many people’s lives. It would be helpful to have that clarification in the wind-up, and subject to that we support the amendment.

[The Parliamentary Under-Secretary of State, Department for Work and Pensions (Baroness Buscombe) (Con)]

Perhaps I may give an indication of my support in principle for banning cold calling of every type by saying that I have given up my landline because so many calls now are nuisance calls. They are about pensions and all sorts of other things. Apparently I have more accidents in my car than hot lunches. We have all had enough of it and this is an issue which is close to the hearts of many, if not all, noble Lords.

These amendments seek, under the pensions guidance function, to give the single financial guidance body a duty to provide information and guidance to members of the public about unsolicited communications. I should like to start by thanking my noble friend and all noble Lords for their contributions to this topic at Second Reading and during the first day of Committee. I really do understand that pension scams, and particularly unsolicited communications, have to be dealt with. As I have sought to reassure noble Lords, the Government also take the threat of pension scams extremely seriously and have committed to taking action to tackle the issue. Noble Lords have already made reference to the fact that last month the Government published their response to the consultation on pension scams, and in that document the Government underlined their commitment to bring forward a package of measures designed to tackle such scams.

As noble Lords will be aware, the Government intend to introduce legislation in a finance Bill later this year to tighten the rules in order to stop scammers opening fraudulent pension schemes. Tougher measures to prevent the transfer of money from an occupational pension scheme into a fraudulent one will be introduced following the rollout of the master trust authorisation regime in 2018-19. The Pensions Regulator will be given new supervisory measures to authorise and deauthorise master trusts according to strict governance standards, and the Government will consider how the legislation to limit transfers should align with these measures.

On pensions cold calling, which is the subject of my noble friend’s amendment, the Government’s consultation response committed to bringing forward legislation when parliamentary time allows. I really would like to reassure noble Lords that work is under way to ensure that the ban, which will include emails and text messages, is robust. We will continue to work with stakeholders and those with an interest in this space as work progresses. We hope to be able to outline more about our plans for engagement on Report. I say that, but I also ought to make it clear that, as the noble Lord, Lord Sharkey, has said, while we would love to do this overnight, the truth is that this is not in the scope of the Bill. I wish noble Lords could be flies on the wall at some of the meetings I have had with officials from the DWP and the Treasury, and also with ministerial colleagues including the Pensions Minister. We have been searching every which way to find an opportunity to introduce this legislation. We will not be overcome. We are determined to do it as soon as is practically possible. Indeed, it was not until I became a Minister that I realised how hard it is. It is easier for me now to understand, even after nearly 20 years in your Lordships’ House, how difficult it is to get some of these things done in practice.

I hope my strength of feeling is coming across: we are genuinely working on this as we speak. We are not dragging our heels. There is no lack of willingness. We are absolutely clear that we want to take this forward, but at the same time we need to be really careful about how the legislation is drafted—for example, by being careful not to exclude legitimate transactions and so on. I have the result of the consultation in front of me, which sets out in some detail the reasons why we have to be a little bit careful about how this is drafted, but I assure noble Lords that if it was in scope it would be in this Bill. Unfortunately, it is not in scope and we have been given clear instructions on that by all the powers that be who advise us on drafting of legislation in Parliament.

I turn to the amendment tabled by noble Lords on the pensions guidance function. This function allows for the body to provide information and guidance on matters relating to occupational and personal pensions. The noble Lords’ amendment would see the single financial guidance body given a duty to provide information and guidance on pensions cold calling and a duty to ensure that members of the public receive this information and guidance before taking any action following a cold call.

I will take each part of the amendment in turn and will first talk to the duty to provide information and guidance on pensions cold calling. As my noble friend and all noble Lords will be aware, information on spotting, avoiding and dealing with scams is currently provided by the Money Advice Service, TPAS and Pension Wise. Information on pensions scams is also available via the Financial Conduct Authority’s and the Pensions Regulator’s websites. This function allows for the body to provide information and guidance on matters relating to occupational and personal pensions, but the amendment would give the single financial guidance body a duty to provide information and guidance on pensions cold calling and a duty to ensure that members of the public receive this information and guidance before taking any action following a cold call.

Under the new body’s money guidance function, which will allow the body to provide information and guidance to enhance people’s financial capability, the Government would expect the body to continue to provide information of this sort. However, the Government believe that the new body will be best placed to determine exactly what information and guidance it provides. It will have the ability to assess the landscape and see what information and guidance is already out there. I agree that information on avoiding financial scams is vital, and, as I have already said, the Government expect that the body will continue the existing services’ good work in this area, but I do not agree that it is necessary to specify this in legislation.

On the second part of Amendment 42D, which states that the body should,

“make provision to ensure that members of the public receive this information and guidance”,

after receiving a cold call, I wholeheartedly agree that members of the public should know where they can go to seek information and guidance if they need it. Of course, the Government would expect that any information or guidance that the body provides is as accessible as possible. However, the amendment would not help to achieve this. In practice, it is not possible or reasonable for the body to be required to ensure—the noble Lord, Lord McKenzie, has said it is quite difficult—that people will come to it for help after receiving a cold call. Having said that, I heard an example of this when I was at TPAS. It was absolutely brilliant. It had all been recorded, of course, so one could hear this woman say, “I think I’ve just had a cold call”. Sure enough, this brilliant adviser—the person giving guidance—said, “I’m very sorry to say this sounds very much like a cold call that you should ignore. Well done for calling us, thank you so much”. This is happening daily, as I saw for myself. The body would not know who had received a cold call unless, of course, they went to the service. Even if the industry had access to this information, the body would not have the power to require the industry to ensure that members of the public received information before taking action.

I understand what noble Lords are seeking to achieve with this amendment. However, it would not be helpful to mandate the guidance that the body provides, particularly when there is already a clear expectation that the body should provide it, or to make the body responsible for ensuring that people seek out this guidance. I therefore ask my noble friend to withdraw the amendment.

Financial Guidance and Claims Bill [HL]

Lord McKenzie of Luton Excerpts

Committee: 3rd sitting (Hansard): House of Lords
Monday 11th September 2017 Lords Chamber

Moved by

[Lord McKenzie of Luton]

47A: Clause 5, page 4, line 16, at end insert—
“( ) Guidance issued by the Secretary of State under subsection (1) is to be made by statutory instrument subject to annulment in pursuance of a resolution of either House of Parliament.”

[Lord McKenzie of Luton (Lab)]

My Lords, I will also speak to Amendment 48. Clause 5 says:

“The Secretary of State may issue guidance and give directions to the single financial guidance body about the exercise of its functions … The Secretary of State must publish any directions that are given to the single financial guidance body … The single financial guidance body must have regard to guidance, and comply with directions, given to it by the Secretary of State”.


Amendment 48, which is where we started, requires the Secretary of State to publish any guidance issued as well as directions. This guidance is, as we have heard, not discretionary, and the SFGB must have regard to it. The Delegated Powers and Regulatory Reform Committee, however, in its first report of the 2017-19 Session, takes the view that a parliamentary scrutiny process should apply to these provisions. It considers the negative procedure an appropriate level of scrutiny, hence Amendment 47A; that is what the amendment requires. Obviously, such a procedure would appear to encompass the guidance being published in any event. I beg to move.

[The Parliamentary Under-Secretary of State, Department for Work and Pensions (Baroness Buscombe) (Con)]

My Lords, I thank the noble Lord, Lord McKenzie, for tabling these amendments to Clause 5, which provides for the Secretary of State to issue guidance and directions to the single financial guidance body about the exercise of its functions. It requires the body to comply with any directions and have regard to any guidance, and requires the Secretary of State to publish any directions.

Amendment 47A would require any guidance to be made by statutory instrument subject to annulment in pursuance of a resolution of either House of Parliament. Amendment 48 would place an obligation on the Secretary of State to publish any guidance.

Clause 5 facilitates a sensible working relationship between the body and the sponsoring Minister. It allows the body flexibility and independence in managing its business but balances this with a recognition of Ministers’ responsibilities to Parliament. Conferring functions on an arm’s-length body involves recognition that operational independence from Ministers in carrying out those functions is appropriate. Nevertheless, the sponsoring Minister remains answerable to Parliament for the activities of the body, including any failures.

I believe we are in agreement that creating the body is the right thing to do. I also agree with the comment of the noble Lord, Lord Stevenson, at Second Reading that it is important that we learn from the experiences with the Money Advice Service about what worked and what did not work successfully. One issue highlighted by the independent Farnish review of the MAS in 2015 was that the MAS’s formal accountability regime needed to be strengthened. The review concluded that it was not possible for any party, including the FCA and HM Treasury, to hold the MAS fully to account, either for the way it discharged its role or for the money it spent.

In setting up the single financial guidance body, it is therefore important that a balance is struck between enabling the sponsoring Minister to fulfil his responsibilities and giving the body the desired degree of independence. An arm’s-length body needs to have a degree of autonomy in order to deliver effectively but it also needs to have a good and constructive relationship with its sponsoring department. Arm’s-length bodies represent an extension of the department’s delivery, so it is important that we think about a department and its arm’s-length bodies as a total delivery system. Building trust between the department and the new body—this is critical to the point—will be essential in enabling the right balance to be struck between the body’s autonomy and the Government’s accountability.

In drafting Clause 5, and the Bill more widely, we have sought to provide a legislative framework that allows the body flexibility and independence to make the most of expertise and innovation in managing its business, and to balance that within the context of it being a public body. The single financial guidance body will be a non-departmental public body, responsible for supporting the delivery of government policy.

Clause 5 provides for the Secretary of State to give guidance to the body and requires it to have regard to that guidance in exercising its functions. Amendment 47A would require regulations to be made by statutory instrument, subject to annulment, in pursuance of a resolution of either House of Parliament. I consider that this would represent a degree of scrutiny unwarranted by the non-binding nature of the guidance in question.

Guidance provided by the Secretary of State to the arm’s-length body could cover myriad topics. Guidance could also be sought by the body; it is not necessarily just given. The relationship between an arm’s-length body and its sponsoring Minister and department is critical to the successful delivery of its functions. As in all professional relationships, whether between a sponsoring Minister and an arm’s-length body or a board and its executive team, being able to seek and give guidance in a straightforward and candid way will be important.

Having regard to guidance does not mean that the body must act on that guidance. For example, in commissioning or contracting services, the single financial guidance body may seek guidance concerning government procurement rules or the interpretation of those rules. Guidance may also be given or sought by the body to inform business planning. For example, where government develops a new policy that could affect the services it provides, the body will need guidance to enable it to prepare for potential change. Noble Lords will recall that the Pension Wise guidance service went live at the same time as the pension freedoms were introduced. This required considerable advance planning and service design.

In all those circumstances, it would be disproportionate to expect a statutory instrument to be drafted and for Parliament to scrutinise it. Also, the Secretary of State publishing guidance would not be consistent with the informal nature of much of the guidance that may be given. It would inhibit the critical relationship between the sponsoring Minister and the body supporting the delivery of government policy, and it could deter the body from seeking guidance, or the Minister giving guidance when it would be more sensible to do so. Further, a requirement to publish a guidance could lead to a position where the body feels obliged to respond publicly should it not act on the guidance, or feels under undue pressure to follow the guidance provided regardless whether it makes sense or is appropriate in the circumstances.

--- Later in debate ---

On the basis of that long, full explanation—for which I make no apology—I urge the noble Lord to withdraw his amendment.

[Lord McKenzie of Luton]

My Lords, I thank the Minister for that reply. I am a little surprised at the position the Government have taken on this. We all agree about the need for balance and flexibility in the arrangements—that is important—but the Government have written into the Bill provisions that give the Secretary of State the opportunity to issue directions and for there to be guidance. The Minister said the guidance is not binding. I accept that it is not technically binding but the provision is clear that a single financial guidance body must have regard to it. There is a strong imperative for the body to do that unless, presumably, there are exceptional circumstances.

Even if the Minister is not happy with the recommendation of the Delegated Powers and Regulatory Reform Committee that the negative procedure should be attached to this, the Government are setting their face against the guidance being published as well. That is an unduly restrictive approach. The report of the Delegated Powers and Regulatory Reform Committee is very clear. It states:

“There is a clear distinction between guidance that the recipient is free to disregard and guidance to which the recipient must have regard and must follow. People required by statute to have regard to guidance will normally be expected to follow the guidance unless they have cogent reasons for not doing so”.


The Government have not taken that into account in their very restrictive response.

There is no point in ranging over this point more extensively at the moment. However, I am surprised and we will return to this on Report. In the meantime, I beg leave to withdraw the amendment.

Amendment 47A withdrawn.

--- Later in debate ---

[Baroness Altmann]

My Lords, I too support the thrust of this amendment moved by the noble Baroness, Lady Drake, and the remarks of the noble Baroness, Lady Kramer. I hope my noble friends on the Front Bench will take seriously the efforts being made around the House to improve protection for consumers. I whole- heartedly support the aims of the Bill and I congratulate my noble friends on bringing it before the Committee, but adding to it measures such as this would very much strengthen protection for the public.

[Lord McKenzie of Luton]

My Lords, I support my noble friend, who has drawn a strong parallel with the experience of Pension Wise, with which she was heavily involved. She made the point that it is not only those who might be termed traditionally vulnerable people who are at risk from the ingenuity of impersonators but those who might be more sophisticated.

I should like to make a brief reference to paragraph 17 of the memorandum that the DWP sent to the Delegated Powers Committee. It says:

“Deferring the announcement of the name will also help protect the new body’s brand and reduce the likelihood of the setting up of ‘imposter’ websites as a means of deceiving and defrauding the public. Imposter websites could put members of the public at risk”,


and,

“were an issue when the Pension Wise brand was launched”.

If they were at risk before the naming of the body, what will give strong protection once the body is named? That seems to be the thrust of my noble friend’s amendment, which I support.

[Lord Young of Cookham (Con)]

My Lords, the co-pilot is back. I thank the noble Baroness, Lady Drake, for tabling this amendment, which would make it a criminal offence to falsely claim to be giving pensions guidance, money guidance or debt advice on behalf of the single financial guidance body. She set out very clearly the devastating impact that misleading or criminal advice can have on people’s lives. Both she and the noble Baroness, Lady Kramer, identified the ingenuity and adaptability employed by scammers and fraudsters to con people.

I was very interested in this amendment and made inquiries to see who would be caught by it. Clearly, people who claimed to give advice on behalf of the SFGB, or whatever it is called, would be caught but, as it stands, I understand that it would not cover someone pretending to give advice on behalf of a delivery partner. The noble Baroness may like to think about that.

Protecting people from financial fraud and scams is important, and I say to my noble friend Lady Altmann that the Government take it very seriously. Anyone who has served in another place will have seen at first hand the devastating impact that this can have on people’s lives. We will come on to cold calling when we reach Clauses 16 and 17.

Ensuring that people have confidence in the financial guidance and debt advice provided by, or on behalf of, the SFGB will be central to its success and to the success of other government policies to improve people’s financial well-being. This is a matter that we have explored in depth with the existing service providers—the MAS, TPAS and Pension Wise. As the noble Baroness said when she moved her amendment, of those three, only guidance provided under the Pension Wise banner is covered by a specific measure making it an offence to falsely claim to give such guidance. The MAS and TPAS rely on existing criminal offences.

In response to the speeches made, we have considered very carefully whether to go down the Pension Wise route and create a new, bespoke offence to cover all the single guidance body’s guidance and advice services. We have weighed up whether there is evidence to suggest that a bespoke offence would have any greater effect than existing criminal offences, taking into account that the Pension Wise offence has never been used in a prosecution.

There are already criminal offences that would cover imitation of the new body; again, the noble Baroness referred to these. For example, if an individual was misled by someone dishonestly claiming to give guidance or advice on behalf of the body with the intention of causing financial loss, this would amount to an offence. In England, Wales and Northern Ireland a person could be prosecuted under Sections 1 and 2 of the Fraud Act, and in Scotland such conduct would likely amount to the common-law offence of fraud.

In addition, under the Consumer Protection from Unfair Trading Regulations 2008, Regulation 9 makes it an offence to advertise or market a service in a manner that deceives or is likely to deceive the average member of the public. If that advertising or marketing causes or is likely to cause an average person to take a decision they would not have taken otherwise, again, this is an offence. This would make it a criminal act, for example, for scammers to use the logo of the new body.

Offences under the Fraud Act are subject to a maximum term of imprisonment of 10 years and offences under the Consumer Protection from Unfair Trading Regulations carry a maximum term of imprisonment of two years. As a deterrent, both maximum terms are significantly greater than the maximum 12 months envisaged by the amendment.

For these reasons, and having listened to the arguments, our assessment is that there are already existing offences which will provide for the single financial guidance body to take action against people claiming fraudulently to be delivering its services or using the body’s brand and reputation to mislead members of the public. Where people seek to scam and defraud by falsely claiming to be acting on behalf of the body, they will be liable to prosecution under existing offences, leading to the possibility of a custodial sentence. We believe that the protections in existing offences are sufficient and I therefore urge the noble Baroness to withdraw her amendment.

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[Baroness Altmann]

My Lords, I too support the amendment moved by the noble Baroness, Lady Drake. It is an important amendment, and it would be most welcome if my noble friend would seriously consider extending the protection for consumers that this Bill is rightly aiming to achieve. I echo the comments of the noble Baronesses, Lady Drake and Lady Kramer, in terms of focusing on the FCA promoting the interests of consumer protection, perhaps in new ways from what has happened in the past.

[Lord McKenzie of Luton]

My Lords, like other noble Lords who have spoken, I speak in support of my noble friend’s amendment. As ever, my noble friend has been very concise and focused on this key issue about how we can get the FCA in these arrangements to be seen to act in the interest of consumers and financial inclusion. There is a tension between the FCA as a regulator of the market and what we seek through this Bill—an improvement in financial capability and for guidance to be given to people so that they can make better-informed financial judgments.

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[Lord McKenzie of Luton]

We are less than happy with the amendment. The noble Baroness, Lady Altmann, will know that my noble friend Lady Drake and I looked at the issue of the secondary annuity market some while ago, and we paid her a visit in Caxton House when she had another role. At the time, our conclusion was that there is a lot of hassle, expense and complexity in the prospect of selling annuities into a secondary market and there simply have to be other priorities at the current time. If we were to proceed with it, there would need to be full legislation, properly debated. We understand that, in other respects, there is room for legislation in due course that could be applied to the secondary annuity market.

To illustrate some of the complexity, the players in the secondary market would need to include: individual annuity holders; beneficiaries and dependants; purchasers of rights of an annuity under a specific regulated activity; further regulated activities or providers buying back annuities; regulated intermediaries; EFAs providing mandatory, regulated advice; and authorised entities to check that annuity holders have received financial advice, to name but a few. This is a very complex area and we should let it rest where the Government have recently decided it should be. There are complexities and costs. The big risk is an asymmetry of understanding of how the market would work. Other complex issues are pension sharing on divorce and the impact of these arrangements on people in receipt of benefits and social care. It is a minefield: the Government have looked at it, we have looked at it, we are not happy and it should not be resurrected at this time. There have to be greater priorities in the pensions field.

[Baroness Buscombe]

My Lords, my noble friend Lady Altmann has moved Amendment 69, which intends to retain the section of the Bank of England and Financial Services Act 2016 which amended FiSMA to allow Pension Wise to offer guidance to consumers wishing to make changes to the payment of their annuity. Pension Wise was set up with the very specific remit of delivering guidance to help people make decisions on their options following the introduction of the pension freedoms. The Pension Wise remit was subsequently extended to include guidance to people who needed help in considering selling their annuity. This would have supported the Government’s proposals at the time to extend the pension freedoms to those who have already purchased an annuity. The Government decided in October 2016 not to proceed with this proposal because of concerns around consumer detriment.

The new body the Government propose to create in this Bill will inherit the guidance guarantee that Pension Wise provided but will also be able to help with guidance on any pension matters. Therefore, this amendment is not needed. I am particularly grateful to the noble Lord, Lord McKenzie; we entirely agree with the Opposition’s view of these proposals, which would allow those who have already purchased an annuity to sell the income they receive for a lump sum. Following extensive engagement with industry, consumer groups and financial regulators, the Government decided they would not continue with these proposals. Indeed, through discussions with stakeholders it had become clear that, while many annuity providers were willing to allow customers to sell their annuities, it is likely that there would be insufficient buyers to create a competitive market.

In September 2016, Money Observer reported a survey of 10 annuity providers, in which only one firm said it would purchase annuities issued by others and six ruled themselves out. This corresponded with government findings of a lack of interest from potential purchasers of annuities. This could have led to consumers receiving poor value for their annuity income streams and suffering higher costs in the sales process. The Government estimated that only 5% of annuity holders would have opted to sell their annuity and, although some people have been disappointed, consumer protection is a top priority for the Government. As the noble Lord, Lord McKenzie, said, priorities have to be thought through and this was not considered a key priority. Although some people have been disappointed, it would not be acceptable to allow a market to develop that could produce poor outcomes for consumers. I therefore encourage my noble friend Lady Altmann to withdraw her amendment.

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Moved by

[Lord McKenzie of Luton]

69ZA: Clause 14, page 11, line 1, leave out subsection 6 and insert—
“( ) When exercising the powers granted by subsection (1), the Secretary of State must adhere to the procedures set out in section 11 (procedure) of the Public Bodies Act 2011.”

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[Lord McKenzie of Luton]

Clause 14 enables the Secretary of State by affirmative resolution to dissolve the SFGB. The background to this, including the Henry VIII power that it includes, is set out in the Government’s memorandum to the Delegated Powers and Regulatory Reform Committee. That memorandum points out:

“This power will allow the Secretary of State to dissolve the single financial guidance body. The Bill does not provide for a fixed lifetime for the new single financial guidance body. This clause is therefore in line with the Cabinet Office guidance relating to setting up new arm’s-length bodies, which states that:


‘The legislation setting up a new Public Body should contain powers to permit winding up at a later date and for finalising and auditing the closing accounts, if a fixed lifetime is not established at the outset. Departmental legal advisers would need to be involved in this process. Difficulties have occurred in past cases where sponsor Departments have not been able to wind up statutory bodies when their work has been completed due to problems in securing a Parliamentary slot to amend the primary founding legislation. The bodies therefore continue to exist as legal entities even though there is no longer a requirement for them’.


If there is ever a need to dissolve this body, it will be essential to have a range of options and sufficient flexibility to be able to transfer functions, property rights and assets without recourse to primary legislation. This is the point made by the Cabinet Office’s guidance”.


That is all well and good but, as the Delegated Powers and Regulatory Reform Committee points out:

“Although the new single financial guidance body will be created by Parliament, clause 14 allows Ministers by affirmative-procedure regulations to abolish the body and transfer its functions to any other person. The normal principle is that what Parliament has created, Parliament alone should dissolve. In this case, the Minister: does not have to be satisfied as to anything before deciding to abolish the body, does not have to consult, does not have to conduct a formal review, and does not have to wait a certain time before seeing whether the new body works well.


Where Parliament has previously legislated to abolish public bodies it has provided procedural safeguards. Under the Public Bodies Act 2011, a Minister proposing to abolish a public body must consult the body concerned and others affected by the proposal; he then has to allow 12 weeks for responses. The Minister has to lay before Parliament a detailed explanatory document. A committee of either House of Parliament may require an enhanced affirmative procedure and the power to abolish is time-limited. None of these procedural safeguards is included in the current Bill.


The power to abolish the body and transfer its functions to any other person is a very broad power. For example, it is important that the guidance is independent of any commercial interests. However the power to transfer functions to another body is, on its face, unlimited.


The Committee raised similar concerns in its report on the Enterprise Bill, 9th Report of Session 2015-16, where the power was to abolish the Small Business Commissioner by statutory instrument. In response, the Government acknowledged the Committee’s concerns and tabled amendments that made the abolition of the Commissioner dependent on a 12-week consultation, the laying before Parliament of an explanatory document in addition to draft regulations”.


We support the recommendations of the Delegated Powers and Regulatory Reform Committee, which is what this amendment does. We take the view that it is inappropriate for the Bill to confer on Ministers a power to abolish the single financial guidance body. It is all the more unsatisfactory because the power is unaccompanied by the sorts of procedural safeguards found in the Public Bodies Act 2011 and the Enterprise Act 2016. This is exactly what this amendment is about and it seems to me pretty straightforward. Should the Government set their face against this, the noble Lord, Lord Sharkey, has an alternative proposition that the clause do not stand part of the Bill. We would be minded to support that as an alternative. I beg to move.

[Lord Sharkey]

My Lords, Clause 14 is pretty surprising. It runs entirely counter to normal practice and to the provisions of other Acts of Parliament and is careless of the need for proper scrutiny by Parliament. I entirely support the amendment of the noble Lord, Lord McKenzie. Your Lordships’ Delegated Powers and Regulatory Reform Committee commented on Clause 14 in some detail in its first report of the current Session.

As Clause 14 stands and as the DPRR Committee and the noble Lord, Lord McKenzie, have explained, the Minister does not have to be satisfied as to anything at all before abolishing it, consult anyone at all, have to conduct a formal review or have to wait a certain time to see if the new body is working well or at all. This is all at odds with the provisions of the Public Bodies Act 2011, as well as smacking of hubris and a cavalier disregard for parliamentary authority.

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[Baroness Buscombe]

The noble Lord’s amendment seeks to add safeguards to the winding-up provision by mandating the Secretary of State to undertake procedures set out in Section 11 of the Public Bodies Act before the wind-up can take effect. The power in the clause would mean that the draft regulations would be subject to the affirmative procedure where both Houses of Parliament would have to approve a Motion before the regulations could take effect.

Further, as I have indicated, I can see no reason why—should it ever be necessary—the Government would not consult prior to taking any action to dissolve the body. This would be contrary to the open and transparent culture that we are all committed to. However, as I noted earlier, I have some sympathy with the noble Lord’s intentions on consultation and, in the light of the committee’s comments on this clause, as well as the debate, I will consider further whether there is anything more that we can do to meet any concerns that have been raised. I therefore urge the noble Lord, Lord McKenzie, to withdraw his amendment.

[Lord McKenzie of Luton]

My Lords, I am grateful to the Minister for that. It was a long time coming but we must be grateful for small mercies.

This is an important point and very valid matters were pressed on the Minister, which I hope will help the Government to take this issue back and think again. It seems to me that a proper process is necessary here. As we have argued and as has been argued today, the affirmative process is not sufficient. We know that we cannot vote against it or vote to amend it. The noble Baroness said that it would be accompanied by a consultation. That is fine and we can put that on the record but, as I understand it, it is not mandatory under the processes. There are very important issues here, which the Delegated Powers Committee focused on, concerning a complete lack of knowledge about to whom transfers might be made. Also, important issues of conflict of interest lie at the heart of what the Bill is trying to achieve.

However, I shall quit while I am ahead. I am grateful to the Minister for taking this matter back and I hope that we will revisit it in a positive frame in due course.

Amendment 69ZA withdrawn.

Financial Guidance and Claims Bill [HL]

Lord McKenzie of Luton Excerpts

Committee: 4th sitting (Hansard): House of Lords
Wednesday 13th September 2017 Lords Chamber

[Viscount Trenchard (Con)]

My Lords, I, too, offer my support to my noble friend Lord Hunt. I agree with his two amendments, which seek to attack one of the major menaces of the spurious claims activity in our society at present. Does my noble friend the Minister think that the FCA is qualified and able to take on all these extra tasks? Will there be a new category of authorised person within the FCA? The skills required to regulate CMCs of various kinds may not be exactly the same as, for example, those required to give financial advice. It is also worth checking that there are not any other areas of spurious activity or the encouragement of spurious claims which are already being practised by unscrupulous people.

[Lord McKenzie of Luton (Lab)]

My Lords, as we have heard, these amendments would add two types of services to be brought within the definition of claims management services and hence within the regulatory provisions provided for in the Bill. The amendments were introduced with some passion. We support both of them.

We heard from the noble Lord some of the unacceptable behaviours of those delivering these services which warrant such inclusion. As part of the rampant compensation culture, we have heard about holiday sickness claims, which we will come on to debate, and artificial claims being stirred up by advertisements. Of course, medical reporting organisations and credit hire companies are involved in the claims process for road traffic accidents, providing medical reports and temporary replacement vehicles—an important service, perhaps, but it should be undertaken and conducted properly.

By way of background, we make it clear that we support the provisions in the Bill which enable the regulation of CMCs to transfer to the FCA but need to be reassured that it will be properly resourced to meet the totality of its new tasks—a point touched on by the noble Viscount, Lord Trenchard. The FCA currently regulates around 56,000 authorised financial services firms.

At present there is an exemption, which the noble Lord, Lord Hunt, touched on, from the regulation for claims management companies which employ solicitors on the grounds that such entities are under the jurisdiction of the Solicitors Regulation Authority—which, incidentally, bans cold calling. However, it is suggested in some quarters that the SRA regulation is less rigorous than the current MoJ regulation of CMC activity and as a consequence some CMCs are changing their business structures to take advantage of this. Is the Minister satisfied that there is no weakening of the regulation through this route?

There is another, tangential matter I would like to raise, of which I have given notice to the Minister—frankly, seeking a meeting rather than a detailed answer to an amendment. This is to do with tax refund companies. These are businesses which help people who have had too much tax deducted at source from their wages complete and submit the paperwork required by HMRC to claim back the overdeducted tax. There is absolutely nothing wrong with that—it is a vital service. This will include employees who have spent their own money on tax-deductible employment expenses; for example, care workers who do mileage in their own cars. Tax refund companies generally make their money by making high volumes of low-value, simple claims that they charge fees for. While some of these tax refund companies make sensible claims and charge proportionate fees for the service they provide, others are less scrupulous. It is these which we want to focus on. It is worth noting that tax refund companies’ bread-and-butter activities—refunds based on unused personal allowances —have recently been curtailed by HMRC’s auto-reconciliation service, which makes it harder for them to stay in business.

How do the companies work? There are some similarities with the points made by the noble Lord, Lord Hunt. They are mainly online businesses, typically with fun and appealing websites that contain eye-catching claims such as “Let us maximise your refund” or “We make claiming your refund easy”. They may somehow imply that they have an inside track with HMRC. They often pay for advertising space so that they appear at the top of search engine results, where their ads are not necessarily distinguishable from organic search results by those who are not IT-savvy. The costs vary but there can often be two elements: a minimum admin fee—the Chartered Institute of Taxation says that it has recently seen a minimum fee of £90—and a charge based on a percentage of the refund, such as 20%. Percentage fees of up to 40% for relatively straightforward claims have been seen, which are a scandal. The company will normally mandate the refund back to itself in the first instance and collect its fee before transferring the balance to the individual. Often, the two fee elements taken together will outweigh the tax refund if it is small. Sometimes the companies add on charges for transferring money to a bank account, which they are not always transparent about. The pricing structure incentivises poor practices such as putting in inflated or fraudulent claims.

Who do these companies target? It can be workers who are unaware of or confused by the rules around when a refund might be due. The work-related travel expense rules are a particular example. It can be people who may have an inkling that they are due a refund but who lack confidence or knowledge of the tax system to initiate a claim themselves, or those who could probably organise a claim but do not have the time or the inclination.

Some tax refund companies meet a genuine need in the market and operate according to appropriate standards but the area is unregulated, like the issue we have just been debating, and there is a huge spectrum of providers. The Chartered Institute of Taxation’s report on tax refund companies identified a range of consumer protection issues with some of the more exploitative agents and made pages of recommendations. While some of these were taken up, many were not. We acknowledge that HMRC has invested in improvements in certain areas by offering online channels to apply for refunds, restricting agent access to taxpayers’ pay and tax details, and dealing with refund agents who gave the impression that they were in some way affiliated to or approved by HMRC. However, tax refund companies continue to proliferate, which suggests that things are still too complex or that taxpayers are still being swayed because of things such as overinflated promises or misleading information as to fees.

I apologise for taking the Committee’s time to focus on this issue. I was not quite sure how to address it otherwise. My purpose is to give this an airing and to seek from the Minister the opportunity of a meeting in due course, together with the Chartered Institute of Taxation and the Low Incomes Tax Reform Group, to delve further into the issue. Having said that, I reiterate that we support the two amendments proposed by the noble Lord, Lord Hunt, and do so enthusiastically.

[Lord Mackay of Clashfern (Con)]

My Lords, I very much support the amendments proposed by my noble friend Lord Hunt of Wirral. I just wonder whether regulation should sometimes encompass outlawing these activities altogether. It is probable that the amendment is sufficiently broad for that to happen but some of these activities may well be best outlawed rather than regulated.

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[Baroness Kramer]

My Lords, I was a member of the Parliamentary Commission on Banking Standards, which looked at the duty of care issue. In the end, the commission made the decision not to pursue the matter and to empower the FCA to take up regulation and play a role. I thought at the time that was not a good decision but the argument was very much based on the idea that the remit of the Parliamentary Commission on Banking Standards was to do with banking, and that the new banking standards body would tackle many of these culture issues, of which duty of care is obviously an inherent part. Looking at the work of that banking standards body, I do not think most of us think it has followed that direction. I do not see any significant change in pressure from the various bodies, whether applied to banks or financial institutions, to make them become much more conscious of the needs of their customers, especially vulnerable ones.

I have never understood why the industry has resisted this duty. Frankly, it is akin to constraints on mis-selling as behaving in the wrong way towards any individual, providing them with an inappropriate service and not giving them adequate support to understand whether that is the service they need surely falls into that mis-selling category. Expanding the powers of the FCA to allow it to provide a more general approach through the mechanism of duty of care would make the FCA’s job on issues such as mis-selling significantly easier. Therefore, I hope very much that the Government will take this on board. Frankly, the long-grass decision is very frustrating. Whenever I hear that an important piece of legislation is being postponed because we have the Brexit Bill, I begin to wonder whether we recognise appropriately the needs of the country.

[Lord McKenzie of Luton]

My Lords, this is an important amendment and we should congratulate the noble Lord on its introduction. It goes to the heart of what the regulation of claims management companies should be about, although I think we recognise that it is a surrogate for a broader duty of care issue. It is understood that there will anyway be a consultation around the regulatory principles that the FCA should adopt. Others have commented on the timing of that. Perhaps the Minister will let us have his view on whether the current timescale attached to that is appropriate.

The issue takes us back in part to our debates on earlier sections of the Bill, and to the current position of the FCA and the CMRU. As the Brady report sets out, the primary objectives of the CMRU are protecting and promoting the interests of consumers, protecting and promoting the public interest and improving standards of competence and conduct of authorised persons. This is quite different from the operational objectives of the FCA, which are to secure appropriate protection for consumers, protect and enhance the integrity of the UK financial system and promote effective competition in the interests of consumers.

Some of the “ideal organisational objectives” for claims management regulation proposed by the Brady review co-mingled some of this but included empowering consumers to choose a value-for-money service as well as maintaining adequate and effective access to justice.

While I support the noble Lord’s proposals, I quibble on the inclusion of “where appropriate”. Where is this not appropriate? Certainly, the proposed new subsection (1)(a) places a strong and proper focus on consumers, which we support. It addresses dealing with conflicts of interest, and although it is implicit in the noble Lord’s amendment, it seems desirable that transparency should feature in the requirements. However, the noble Lord has given us at least a starter for 10 on this important topic, and we look forward to the Minister’s reply.

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[Baroness Kramer]

My Lords, I support the amendment. We all understand that the amendment has drafting problems, but the intent behind it is an important one: to avoid delay in taking action against pernicious behaviour by some of these companies.

[Lord McKenzie of Luton]

My Lords, I will be brief in a similar vein. We support the thrust and spirit of the amendment, which is to make progress on the cap before we get to the stage where PPI claims have all gone through the system. It would be a tragedy if people continued to lose significant amounts of money from claims management companies when there is a clear remedy available.

This also partly picks up the issue, which we touched on earlier, regarding SRA regulation being less rigorous than MoJ regulation of CMC activity. The noble Lord felt that that was not a problem, but as I understand it a thematic review of solicitors who undertake claims management activities has been commenced, with the intention of strengthening their approach to regulation on this activity. The noble Lord may be able to confirm that or help us, but it seems to be a clear worry of some whether being able to escape CMC regulation because a solicitor is on board—albeit that brings in a different form of regulation—is a fair way to proceed.

However, the substantive point is to have the opportunity to get that cap in place well before the PPI claims have run their course.

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[Lord McKenzie of Luton]

My Lords, this has been an extensive and fascinating debate. We on these Benches support the call for a ban on cold calling, as laid out in Amendments 72 and 73. As to which is the right formulation, the answer is probably neither of them as they stand, but we can work on that between now and Report.

My noble friend Lady Drake argued for a well-regulated market and the need for access to justice. That is not inconsistent with a ban on cold calling; it seems to me entirely consistent. I hope that deals with the concern expressed by the noble Baroness, Lady Kramer.

We have heard some very powerful presentations. The noble Lord, Lord Sharkey, introduced the amendment with a range of statistics. His term was “omnipresent menace”, which has been demonstrated extensively in this afternoon’s debate. The noble Lord, Lord Elystan-Morgan, said that such cold calling was a social nuisance of massive proportions, and I agree. For me, it interrupts my slumbers on the sofa on the Sunday afternoon, but that may be a minor inconvenience.

The noble Lord, Lord Deben, said it was an industry we could do without. My noble friend Lady Drake dealt with that point: we need a well-regulated industry because we need a means of helping people reach justice.

[Lord Deben]

I am sorry; it was a slip of the tongue. It is a mechanism which we could do without from this industry.

[Lord McKenzie of Luton]

I take the noble Lord’s point.

The noble Baroness, Lady Stowell, made the interesting point that some of the behaviours that the existence of cold calling has generated have an impact on our reputation not only here in the UK but around the world. Many other points were made, all in favour of a ban on cold calling.

We should reject the suggestion that we should shy away from such a move because the Government have perhaps set their face against it for the time being. Anybody from outside the Chamber who has listened to this debate would readily see the consensus reflected on all these Benches. We should test the democracy of this Chamber and bring forward amendments that are in scope but focus on claims management as a start. We realise that the Ministers are not unsympathetic, so it would help them in their cause of persuading Secretaries of State and the wider mechanisms of government to support the measure. The Government have done the right thing, although too slowly, on pensions; here is an opportunity to follow that up swiftly and ban cold calling for claims management operations as soon as we can. We should do that quickly.

Financial Guidance and Claims Bill [HL]

Lord McKenzie of Luton Excerpts

Report: 1st sitting: House of Lords
Tuesday 24th October 2017 Lords Chamber

[Lord Kirkwood of Kirkhope (LD)]

My Lords, I will be quick, as the House obviously wants to make progress on this. As a former business manager, I can see where all this is going and can anticipate what the Minister is going to say. The position was warmed up rather nicely by the noble Lord, Lord Faulks. He is an honest man, whose opinions always have to be weighed in the balance, but anybody who seriously suggests that there is going to be legislative time in the future for some other vehicle lives on a different political planet.

The noble Viscount, Lord Brookeborough, made an important speech, and I agreed with my noble friend Lady Kramer when she said a lot of colleagues have done a lot of serious work on this. I was first alerted to the extent of the evidence while serving as a colleague of the noble Viscount, Lord Brookeborough, on the Financial Exclusion Committee. There is a sense of rage and anger about this, which has been going on for far too long. The evidence is there, and as an institution we have a chance of changing it. I for one think it is inconceivable that any Minister in the position that the noble Baroness finds herself can convince this House—certainly me—that this is something we can do another day. We will be deep into European withdrawal for the next two years, and the DWP will be lucky if it gets any Bills during that time—I assert that based on my experience over many years. We have to deal with this now, and I support these amendments. I hope they will be pressed to a Division and passed.

[Lord McKenzie of Luton (Lab)]

My Lords, I start by thanking the noble Lord, Lord Sharkey, for his comprehensive introduction of this important package of amendments, which we support in its entirety. As we have heard, fundamentally it would enable a ban on cold calling across the piece, together with related reporting functions to the FCA on consumer detriment. We should congratulate the noble Lord, Lord Sharkey, on his drafting, which would enable us to proceed now with a ban. We know the detriment that cold calling can bring, not only by CMCs but in the pensions arena, and the harm that can produce.

A number of noble Lords touched on this. The noble Viscount, Lord Brookeborough, talked about vulnerability in the digital age and how damaging that can be. The noble Earl, Lord Kinnoull, spoke about the opportunity to do something today to help deal with a process that causes real mental harm. We agree with that. The noble Lord, Lord Sharkey, talked about the scams around holiday sickness and the impact of the advance of technology if we do not get stuck into this sooner rather than later—the need to deal with the “omnipresent social menace”, as he put it. I agree with the noble Lord, Lord Kirkwood, on his challenge to the noble Lord, Lord Faulks. If it is not in this piece of legislation, when will it happen?

The FCA recently published its Financial Lives Survey 2017, which identified that in the last 12 months, 23% of adults, or 11.6 million, received an unsolicited approach, although of course that does not mean that they would all have necessarily suffered detriment from that. Banning cold calling is not only an opportunity to deal with a nuisance, it is an effective way of disrupting the business models of the scammers and fraudsters. Perhaps this would be an opportunity to get to those higher-end activities to which the noble Lord, Lord Elystan-Morgan, referred.

I know the Minister is supportive of a ban on “every type” of call, because she told us so in Committee, but the strenuous efforts of Ministers have apparently failed to deliver on that aspiration. Notwithstanding the asserted complexity that the legislation might entail, we were told that if it was in scope, it would be in the Bill. It seems that it is in scope. That hurdle has been overcome, so what is the problem? We accept that there may be some complexity in drafting, but surely nothing beyond the wit of parliamentary counsel.

We urge the Government to make progress. Every day that goes by without the ban holds the risk that someone somewhere will be defrauded of their savings, their life turned upside down. We may hear from the Government, as we have before, that there are already restrictions on cold calling and unsolicited direct marketing, but this has not prevented consumer detriment continuing. On several occasions during our debates the Minister has told us she has disconnected her landline. If there is such confidence in the current framework, why on earth would that be necessary?

This is a hugely important issue, which is why we have common cause around the Chamber from pretty much all Benches. This is an opportunity to do something now. If we do not do it now, when will it be? I urge the whole House to support the amendments of the noble Lord, Lord Sharkey.

[The Parliamentary Under-Secretary of State, Department for Work and Pensions (Baroness Buscombe) (Con)]

My Lords, I thank all noble Lords who have taken part in this important debate with which we begin our Report stage on this important Bill. Amendments 1, 2 and 7, tabled by the noble Lords, Lord McKenzie and Lord Sharkey, my noble friend Lady Altmann and the noble Earl, Lord Kinnoull, would introduce a consumer protection function for the body and a statutory duty in respect of cold calling. I want to say straightaway that we do not believe that Amendments 1, 2 and 7 would depend on each other to work.

Amendments 1 and 7 would set a statutory function for the Financial Conduct Authority to pass on casework from consumers to the FCA on inappropriate, misleading or harassing approaches by financial services providers to consumers, as well as poor behaviour by providers in the areas of activity related to the body. The Government agree with the logic behind this but the Bill already gives the body the power to share information with the FCA under its information-sharing provisions. Specifically, Clause 12 contains a two-way information-sharing gateway between the single financial guidance body and the FCA that allows the disclosure of information, provided it is pursuant to the functions of either organisation. This would include information relating to cold calling on debt advice, debt management and pension access services.

The single financial guidance body will not exist in a vacuum. It will need to work closely with key stakeholders, and Clause 12 is designed to facilitate close working between the body and its sponsor department, the devolved authorities, the Financial Conduct Authority and the body’s delivery partners. The clause allows these key stakeholders to share information with the body and vice versa. The intention is to allow unpublished data, such as performance-related statistics and confidential insights gained into the financial guidance landscape, to be shared. This information may include personal data as long as any disclosure is in accordance with the Data Protection Act. The clause also allows information to be shared regarding suspected dishonest, unfair or unprofessional conduct by those supplying financial services so that the FCA can take appropriate action against the offending firm.

The powers would enable casework to be passed between the body and the FCA. We would expect that, subject to provisions in Clause 12 and the Data Protection Act, the body would share this with the FCA if that were the right thing to do for the individual. The Bill does not require the body to supply information of this kind to the FCA because there will often be circumstances in which it would be more beneficial for the customer to be signposted elsewhere—for example, to the Pensions Ombudsman Service or the Financial Ombudsman Service. As such, it is best for the body and the FCA to work out how this handover could take place using the powers in Clause 12.

To illustrate, let me give an example of what a consumer’s journey looks like today when impacted by fraud or scams, and what we see as the new body’s role to support the consumer. Where the body believes there has been wrongdoing, we would expect it to contact the FCA or other appropriate authorities. If an individual feels that they have been subject to inappropriate approaches or misconduct by an authorised firm, we would expect the new body to recommend to the individual that they contact the Financial Ombudsman Service or the Pensions Ombudsman Service, depending on the particular nature of their complaint. If an individual suspects that they have been contacted by an unauthorised firm or individual carrying out an FCA-regulated activity, it is already possible for the new body to transfer the casework to the FCA.

Furthermore, organisations involved with Project Bloom, a multi-agency group dedicated to tackling pension fraud scams—of which the FCA is part—have an agreed customer journey to which we would expect the new body to sign up. Part of this journey is that, if the individual or the body believes that a customer may have been a victim of a scam, the body should encourage them to contact Action Fraud, which is the UK’s national fraud reporting centre. The body would also recommend that customers contact Action Fraud when a customer or the guider suspects that the customer has been a victim of types of fraud other than pension scams. Action Fraud will collect information from the customer about the alleged fraud, and then act as a co-ordinator to cascade the information to the City of London Police or other relevant local police forces to investigate the issue further.

When you report a fraud to Action Fraud, you are given the option for your contact details to be passed on to Victim Support, a national charity that helps those affected by crime. If you take up this option, you will then be contacted by someone from the charity and offered free and confidential emotional support and practical help. Indeed, the Pensions Advisory Service currently encourages those who have been a victim of a pension scam to come back and contact TPAS for support in rebuilding their retirement savings, and offers a bespoke appointment where they discuss rebuilding pension funds and potential next steps. We would expect that the body would perform a similar service.

I hope this illustrates that a blanket obligation to share casework with the FCA would be unnecessary. A requirement for the body to share the casework could lead to adverse consequences; at worst, this could result in the customer being hindered in getting the right help that they need. I hope this reassures noble Lords that there is provision in the Bill for individuals to be channelled to the appropriate services if they have been victims of fraud or scams. It is of paramount importance that the body helps customers in this situation.

Amendment 2 introduces a statutory duty in respect of cold calling, which has been the subject of most noble Lords’ interventions this afternoon. The amendment seeks to do a number of things: to require the new body to publish an annual assessment of consumer detriment as a result of cold calling; to require the body to advise the Secretary of State to institute bans on cold calling if it thinks that would be conducive to its functions; and to give the Secretary of State the power to introduce a ban on cold calling, if recommended by the guidance body. I assure the House that the Government already do work to consider the impact that unsolicited calling has on consumers. Indeed, we have been clear that there is no place for nuisance calls or texts and there are already a number of measures in place to protect consumers from the impacts of such nuisance calls.

As I noted in Committee, the Information Commissioner’s Office enforces restrictions on unsolicited direct marketing. We have already increased the amount that regulators can fine those breaching direct marketing rules. On top of that, we have forced companies to display their number when calling people, and made it easier to prosecute wrongdoers.

As noble Lords will be aware, cold calling is already illegal in certain circumstances, such as where a person has registered with the Telephone Preference Service or has already withdrawn consent. Furthermore, the Bill already provides the possibility for the body to alert other organisations to any issues relating to cold calling. Clause 12 contains a two-way information-sharing gateway between the single financial guidance body and the FCA that allows the disclosure of information to each other, provided it is pursuant to the functions of either. This would include, for example, information relating to cold calling on debt advice, debt management, and pension access services. This information may include personal data, as long as any disclosure was in accordance with the Data Protection Act. The clause also allows information to be shared regarding suspected dishonest, unfair or unprofessional conduct by those supplying financial services, so that the FCA could take appropriate action against the offending firm.

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[Baroness Altmann (Con)]

My Lords, I too congratulate the Government on their decision to host the pensions dashboard and to put in place the necessary measures for the dashboard to be held in one place. I congratulate the noble Baroness, Lady Drake, on her persistence and her excellent description of why it is so important that this measure is implemented in the manner she set out.

The public need a single dashboard. If individual private sector organisations each released their own dashboard, it would be too confusing for the public. One thing that will certainly assist in any dashboard is standardised statements, required perhaps by the FCA and the Pensions Regulator, whereby anyone who receives a statement about what pension they have—what terms it has and so on—has to be given a piece of paper. Sometimes called a pensions passport—although it does not matter what it is called—this will be a standardised, simple statement that tells people in one place what they have and clearly explains the kind of terms that the pension has, its value and any special features. Sadly, too often, the private sector has not been able to achieve that. Very often the statements that people get are almost unintelligible. They are sometimes far too long and use different language for the same type of pension, so that people struggle. I support this amendment and congratulate the Government and the noble Baroness.

[Lord McKenzie of Luton]

My Lords, I too thank the Government for the announcement that the dashboard is to be taken forward and acknowledge the role that has been played by several Members of your Lordships’ House, particularly my noble friend Lady Drake, who with her impeccable logic and powers of persuasion has really led the charge on this. I also acknowledge the noble Baroness, Lady Altmann, who has long campaigned on this issue.

We know that the delivery of the dashboard will be a huge challenge, but it is an opportunity for individuals to see all their savings and pensions in one place, including the state pension. As my noble friend Lady Drake said, the key fact is that it is a single, public service dashboard, so that individuals who use it can have confidence that there will not be a conflict of interest between those seeking to use information and data to sell products and those who are genuinely attempting to help people to understand the pension pots that they have. The data shows that over their lifetime people could change their jobs 11 times. I am not sure how current that is, but 11 changes of jobs could mean as many as 11 pension pots. We know the challenges of small pension pots and how difficult it is for people to access those—they forget where they are. It is particularly an issue for women.

Hearing that the dashboard is to be taken forward makes this a good day. There is lots of hard work to do, and there are many governance issues for your Lordships’ House and others to keep an eye on as it gets developed.

[Baroness Buscombe]

My Lords, this amendment, tabled by the noble Baroness, Lady Drake, is identical to the one tabled on 17 July 2017, which I have to say sounds an awful long time ago and feels it too. It would require the body to provide a pensions dashboard as part of its pensions guidance function. The purpose of pensions dashboards is to provide a clear picture of all an individual’s pension savings in one place, accessible online. Pensions dashboards are potentially an important tool to help people to take control of their retirement planning. With automatic enrolment, more people than ever before are saving into workplace pensions, and we know that the nature of work is changing, with more people taking a number of jobs in their lifetime—the noble Lord, Lord McKenzie, has just talked about 11 times possibly becoming an average. The ability of people to view their pension savings in one place could make a real difference in assisting them to plan and save for their retirement, including making better-informed choices on the financial impact on their pension provision of working longer if they choose to do so.

I promised to come back on Report with a full statement on the Government’s position on the dashboard project. The Government are firmly committed to the delivery of pensions dashboards and have restated our commitment, as announced last week at the Pensions and Lifetime Savings Association conference in Manchester by the Parliamentary Under-Secretary of State for Pensions and Financial Inclusion in another place. It was announced that, to take forward this work, the Department for Work and Pensions will take lead responsibility for the policy within the Government and manage the next phase of the project. Working with industry, consumer organisations and regulators, the department will conduct a feasibility study to examine the complex issues that still need to be addressed, such as those highlighted by noble Lords today, particularly the noble Baroness, Lady Drake. We will share an update on this work by spring next year.

The very helpful report published on 12 October by the ABI-led pensions dashboard project sets out many of the key questions to be explored, and we will look at its research findings and recommendations in detail as part of the feasibility work. We are grateful to all those organisations involved in the project so far. The aims of the feasibility study will include the following: exploring in more detail what will be of the most use to individuals to help them plan effectively for their retirement, as consumers’ needs must be at the heart of our approach; the viability and implications of different delivery models; determining a suitable framework of governance for pensions dashboards; ensuring that consumer interests are safeguarded and their personal information is protected—as the noble Baroness, Lady Drake, has said several times today, we are talking about providing a safe space for public good so it is incredibly important to get this right—and thinking through issues of regulation, standards, data security and identity verification; establishing how to ensure the widest possible contribution of data from pension providers, bearing in mind that effectiveness will be linked to how much information individuals can see in one place, while also taking account of the potential impact on industry; determining the indicative costs of potential models and how they might be funded sustainably; and setting out a pathway for delivery with provisional milestones and recommendations around communications and publicity.

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Moved by

[Lord McKenzie of Luton]

8: Clause 2, page 2, line 28, after “support” insert “financial inclusion and to support”

[Lord McKenzie of Luton]

My Lords, I will also speak to Amendment 17. Together, these amendments revisit the issue that we raised in Committee concerning the SFGB’s role in financial inclusion and add as a specific objective of the body contributing,

“to the reduction and elimination of financial exclusion”,

particularly for vulnerable people. Our amendments spring in particular, as will be recognised, from the House of Lords Select Committee report on financial exclusion, which regrettably has still to receive the Government’s response. I would press the Minister on when this might be forthcoming, but can anticipate that the answer will be some variation of “soon”, “in the near future”, “imminently”, or perhaps even “before Christmas”.

The amendments raise two particular issues: where are we as a country on financial inclusion and financial exclusion; and what, if any, should be the role of the SFGB in addressing these challenges? Dealing with the latter first, we argue that it should be included in the strategic function of the new body and that it should have as one of its objectives contributing to the reduction—or elimination, although we accept that that is perhaps overly ambitious at the moment—of financial exclusion, especially for vulnerable persons. We should stress that this does not seek to have the SFGB usurp the role of the FCA or the Treasury in these matters—a point made by the Minister on our original amendments—but to support financial inclusion and help reduce financial exclusion.

As defined by the Minister, the noble Lord, Lord Young, financial inclusion is about individuals and businesses having access to useful and affordable financial products and services that meet their needs. If the single financial guidance body does not have a role in addressing these matters through its money guidance function or improving the financial capability of members of the public, then what is its purpose? Will the Government be clear on this issue and say precisely what role they believe the single body should play in promoting financial inclusion and combatting financial exclusion? What is the Government’s view on that?

The need for a strategy to improve financial inclusion in the UK was a key recommendation of the Select Committee. We have already acknowledged the importance of appointing a Minister for financial inclusion and the need to engage across government to lead, co-ordinate and monitor a strategy. We accept that leadership on this might reside primarily outside the SFGB, but to suggest that it does not have a role seems perverse. If financial inclusion is about access to financial services, capacity to manage financial transactions and avoiding problem debt, then financial exclusion would clearly cover circumstances when this is not the case. That more should be done to advance financial inclusion can hardly be in doubt. Promoting financial inclusion was a key recommendation of the Financial Inclusion Taskforce, whose mission was to increase access to banking, improve access to affordable credit, savings and insurance, and improve access to appropriate money advice. It undertook monitoring of financial inclusion initiatives as well as regular research. Unfortunately, the taskforce fell by the wayside when abolished under the coalition Government and thus left a gap. We hope that that gap can be filled with the help of the single financial guidance body.

There are a raft of statistics that identify the levels of financial exclusion in the UK, those at risk of being financially excluded and those at risk of facing significant barriers to engagement in modern society. Some 13.5 million people live in low-income households or in poverty, and 1.7 million adults do not have a bank account. One-third of people over the age of 80 have never used a cash machine or prefer to avoid them; 3.8 million UK households do not have any internet; and 40% of the working-age population have less than £100 in savings. The vulnerable or potentially vulnerable are not a fixed or homogeneous group, but a common characteristic is often poverty—simply not having enough money—and having to transact on the most expensive terms.

The Select Committee outlined some of the particular circumstances that made various groups vulnerable: those with identity verification issues, such as ex-offenders; those with mental health challenges, where financial exclusion can have a variety of negative consequences; and the disabled, where often reasonable adjustments are inadequate. We have very serious issues to confront.

We could debate these important issues all day, but I am aware that we have a further amendment coming up in the name of the noble Baroness, Lady Finlay, which might be a formulation on which the Government can offer a measure of support. It certainly has our support. In the meantime, I beg to move.

[Baroness Kramer]

My Lords, I was glad to add my name to Amendment 8, moved by the noble Lord, Lord McKenzie of Luton. Amendment 17 is almost the other side of the coin.

I think that most Members of this House, including those in the Government, feel that financial inclusion is sufficiently important that it should be expressed through most of the financial bodies that we create. The noble Lord laid out very well the depth of the problem; others on the committee may speak to that in a moment.

It would be helpful to have clarification under the Bill, in part because we have genuine confusion. I am pretty sure that Ministers have all been under the impression that this matter is wrapped up and dealt with in the context of the powers, responsibilities and objectives of the FCA but, having talked to the FCA, they will now be aware that it has a very constrained role in this area and does not provide capacity to deal with the problem—for example, filling in gaps—that most people assume that it has.

Part of our problem, of course, is that we never consolidate financial legislation, so there is genuine confusion over who does what and assumptions that particular issues are taken care of when they are not. Financial inclusion is one of those that has fallen right through the holes, due to the mismatch of a whole variety of different pieces of legislation. This is an opportunity to provide for a body to consider these issues centrally to everything that it does. What it does is very relevant to that process. That is obviously not a complete answer to the problem of financial inclusion—that involves many others—but we have to make a start somewhere. It should now become a regular habit for financial inclusion to be addressed in each piece of financial legislation.

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[Lord Young of Cookham (Con)]

My Lords, the co-pilot is in charge for this leg of the journey. I take this opportunity to address the amendments tabled by the noble Lord, Lord McKenzie, and the noble Baroness, Lady Kramer, on the common theme of financial inclusion, and welcome the contributions from the noble Baroness, Lady Tyler, and my noble friend Lord Trenchard, who anticipated in part some of my response.

Having listened to the noble Lord, Lord McKenzie, I would not disagree with what he said about the challenges that confront the Government in this area: the problems of financial numeracy and the serious issues, to use his words, that he identified as needing to be addressed. I will come to that in a moment.

As I said in Committee, we take the issue of financial exclusion very seriously and are grateful for the important work of the Financial Exclusion Select Committee in highlighting this important issue. We have considered the committee’s wide-reaching report, including its recommendations concerning government leadership and the welfare system.

In answer to the two questions about timing, the Government aim to respond to the committee’s report—here I use an option not mentioned by the noble Lord, Lord McKenzie—before Third Reading. I understand noble Lords’ impatience that we did not have our response to the report available for Report, but I hope that there will be adequate time to consider it before Third Reading. I reassure noble Lords that the Government’s response will address the committee’s recommendations and will bring forward new proposals on how better to co-ordinate across government, the regulators and the wider sector on the key issue of tackling the significant issue of financial exclusion.

As was mentioned in our debate, this area has been given new prominence within the DWP ministerial team by the appointment of my honourable friend Guy Opperman. At the same time, it is important that this change is seen in the context of HM Treasury’s ongoing, government-wide policy responsibility for financial inclusion and exclusion. A key part of the Government’s approach to tackling these issues will be to require the relevant departments to work collaboratively, and the response may say something about that.

I stressed in Committee the Government’s understanding of the terms “financial inclusion” and “capability”, and I thought that we had established an element of agreement on this point. At the risk of reopening a theological discussion, financial inclusion refers to ensuring that members of the public have access to financial services. Financial capability is ensuring that the public are best able to make use of the financial services to which they have access. These terms are widely accepted by, for example, the World Bank. It is important that we build on this shared understanding of the terms so that there is clarity about the intentions for the body, which is to build financial capability among members of the public. To put this another way, the new body should not have a role to regulate the supply of financial services and products by the industry. It should, however, play a key role in helping people engage with or consume these products and services.

This does not mean that the supply of these products is not important. The point is that it is the role of the Financial Conduct Authority—not the SFGB—to ensure that appropriate action is taken when the market fails to supply useful and affordable services and products. So the omission of financial inclusion in the Bill is not an oversight; it is deliberately omitted from the body’s functions and objectives which refer to the supply of useful services such as savings, credit and insurance products. The proposed amendments would greatly expand the body’s statutory remit and are also likely to create confusion over the roles of the Treasury and the FCA, both of which have the relevant responsibilities and powers and are better placed to influence the supply of financial services and products.

In terms of financial exclusion, as the noble Lord, Lord McKenzie, rightly observed in Committee, even more important than these definitions is the question: what will the Government do to act in a more co-ordinated way to tackle financial exclusion? I want to assure noble Lords that, following the Select Committee’s work in this area, the Government will propose, in their response, more appropriate and effective ways to address this issue than through the functions and objectives of the SFGB.

With regards to the particular issue of improving access to financial services for vulnerable people—which comes under Amendment 17—we consider that the FCA, and not the SFGB, is more appropriate to deliver that role. The FCA has already carried out a great deal of work in this area. Many Peers had a helpful meeting with the FCA last week. I hope it reassured noble Lords that the FCA takes its responsibility on consumer protection very seriously. The FCA published two pieces of in-depth research, carried out in 2015 and 2016, which supported the development of current initiatives to address access issues for vulnerable people. I came away from that meeting with a slightly different impression from that of the noble Baroness, Lady Kramer.

As discussed in the meeting, issues regarding access and vulnerability are at the core of the FCA’s mission and business plan, published in April this year. To quote from the mission:

“Understanding vulnerability is central to how we make decisions. Consumers in vulnerable circumstances are more susceptible to harm and generally less able to advance their own interests”.

The FCA is due to undertake a number of further projects to understand better the concerns of vulnerable groups, not least through its forthcoming work to develop a consumer strategy by means of its consumer approach paper to be published in the next few weeks. This will provide a means for the FCA to measure outcomes for vulnerable consumers. It will work to develop vulnerability mapping so as to ensure that it has captured the needs of vulnerable consumers when finalising its business priorities.

In Committee, I mentioned the FCA’s TechSprints, so I do not need to do so again. It is also exploring issues for those living with cancer and the problems they face in gaining affordable access to travel insurance. In due course, the FCA will publish a feedback statement with its findings and the next steps in the light of responses to its call for input.

More recently, in September, the FCA published an occasional paper outlining the findings of its ageing population project. This paper reviews the policy implications of an ageing population and the resulting impact on financial services. The FCA highlights risks to older consumers who are more likely than other groups to be vulnerable—an issue raised by the noble Lord, Lord McKenzie. To try and minimise harm, it has suggested areas where financial services firms could give greater consideration to how they treat older consumers.

Finally, even more recently, the FCA published its inaugural, annual financial lives survey—its largest tracking survey of consumers and their use of financial services. This is a huge undertaking, drawing on responses from just under 13,000 UK consumers aged 18 and over. The report tells the financial story of six different age groups to show key themes at each life stage, from those aged 18 to 24 to those aged 60 and over. The survey shows that 50% of UK adults—25 million—display one or more characteristics that signal their potential vulnerability. The FCA will use the results of the survey to prioritise its work. I hope the description of some of what the FCA is doing reassures noble Lords that it takes seriously its responsibility towards those who are vulnerable.

As a result of the FCA's work and its engagement with firms, there have been tangible developments from the industry in this area. This includes work led by the Financial Services Vulnerability Taskforce. In addition, the FCA has also seen increasing evidence that firms identify and then improve outcomes for vulnerable consumers.

To reiterate, as my noble friend Lord Trenchard said, the current amendments would greatly expand the remit of the body and could cause confusion over the role of different public institutions. I hope that, having heard this explanation, the noble Lord might be willing to withdraw his amendment.

[Lord McKenzie of Luton]

My Lords, I thank the Minister for his reply which does not surprise me in great detail. May I start by saying to the noble Baroness, Lady Tyler, what a great pleasure it is to see you with us this afternoon? I hope we will have another occasion—perhaps before Third Reading—to acknowledge the role that she played in producing this important tome on financial exclusion.

The noble Viscount, Lord Trenchard, said it would be too much of a burden. Throughout our discussions, we have been told that this is a framework Bill. What use is made of this framework will depend on who ends up as the chief executive and the role that they have. From this point of view, these amendments are deliberately non-prescriptive. Are we seriously saying that this body would have no role in relation to a strategy to improve financial inclusion or combat financial exclusion; that this would be off limits and nothing to do with it? I accept entirely what was said about the role of the FCA and the importance of its remit in these circumstances. We may not agree with it in its entirety but are we to say that this new body, which has a range of functions relating to information guidance and the obligation to develop a strategy—particularly on this important issue of financial exclusion—must be silent on these matters; that it has no role at all? This does not seem right.

I have taken on board the debate we had in Committee about it being the role of the FCA to lead on this; or the FCA now and the new Minister across government. I accept that. Perhaps before we had formulated a lead role for the single body; I think we have moved back from that and accepted the points that were made. However, I have difficulty in accepting that it would have no role in the future. The Minister looks as though he is about to spring to his feet.

[Lord Young of Cookham]

Perhaps I can reassure the noble Lord, Lord McKenzie. Of course, the SFGB is going to work closely with the FCA and the Treasury on issues regarding financial inclusion. As I said, we envisage a partnership, with the FCA promoting access and the SFGB promoting capability; this is where the two meet. We do not see the SFGB leading on inclusion in the way in which it will be leading on financial capability. This is why we have difficulty with the particular amendment that the noble Lord has put forward.

[Lord McKenzie of Luton]

I thank the noble Lord for that clarification. The amendment does not suggest that the single body would be leading on it. This is the change between the debate we had in Committee and the debate tonight. We recognise that it has a role to play in supporting but not in running the show. Perhaps we had better move on because I am not sure that we are going to reach agreement on this. The Minister’s notes may reflect our original position, but he seems to have acknowledged that there is a role for the SFGB in supporting the activities around financial inclusion and exclusion. At this late stage, I am not sure if there is anything that can be done to reflect this. If we are to get a report, feedback or the Government’s response to the report of the House of Lords Select Committee before Third Reading, I hope that the Minister will acknowledge that this issue will not necessarily be off bounds when we come to Third Reading, as that potential new information runs through a lot of the debate that we have had. I hope that before we conclude on this the Minister will give an assurance that we can raise these issues at Third Reading. If he wants to give that assurance now, that would be good.

[Lord Young of Cookham]

The noble Lord may be tempting me to say something beyond my pay grade about what is in order at Third Reading and what is not. However, I will reflect on what he said and about the impact of publishing the response. I would be rash to give a commitment at the Dispatch Box that this issue will definitely be addressed at Third Reading but I will do my best.

[Lord McKenzie of Luton]

Clearly, the Minister is a safe pair of hands in the cockpit. I thank him for that. I am grateful to the noble Baroness, Lady Kramer, for her support. Her remarks mirrored our position. We are not saying that the FCA should not lead on some of this, but it cannot and will not do everything and there is a role for the body we are discussing. Having said that, I look forward to the amendment that will come up soon. I beg leave to withdraw Amendment 8.

Amendment 8 withdrawn.

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[Baroness Drake]

I will carry on the spirit of the contribution of the noble Lord, Lord Kirkwood. In Committee, several Peers ran several amendments trying to capture this issue of vulnerability—whether it was vulnerability because of a health shock or because of some standing reason. As the noble Baroness, Lady Finlay, explained in moving her amendment, the attraction of Amendment 11 is that it does not seek to list or define. It just tries to capture the principle that there is a category of people who become or who are vulnerable for a series of reasons, and they need to be addressed.

The purpose of the single financial guidance body is to achieve a series of improved public and individual outcomes by improving a person’s financial capability, but a person’s capability cannot be improved—it just cannot happen—if they are excluded from the market for financial services or denied the access or the means to make good decisions. As my noble friend Lord McKenzie and I frequently say, the fundamental, immutable requirement of financial capability is that you are included and have access. You cannot begin to become capable without it. One feels the sense around the Chamber, which I hope the Minister is able to find a way of recognising, of a wide concern and a very constructive amendment. It is not overprescriptive but allows the financial guidance body to recognise that it needs to address this problem.

[Lord McKenzie of Luton]

My Lords, this has been a good debate. I emphasise that we support the amendment, which is no surprise given that I put my name to it. I am sorry that we pre-empted someone: I am happy to step back.

This is a very elegant formulation, which stops a whole list being produced. It instinctively recognises that people might be vulnerable for reasons to do with their circumstances but that this is not necessarily something endemic to them. There are fluctuating circumstances which particularly fit that description: in our short debate we have had discussion of learning disabilities, mental capacity and addictions. A broader issue, but still within the key definition of vulnerability, is isolation. The noble Viscount, Lord Brookeborough, made a very telling point on that. The noble Lord, Lord Kirkwood—I keep calling him my noble friend; we have debated too often over the years—spoke about the impact of vulnerability because of destitution. We should recognise that people may be perfectly fit and able-bodied and have all their mental capacity but if they are broke and have no money then they are potentially vulnerable or in vulnerable circumstances.

The formulation is powerful and succinct and we support it. I hope the Minister will find some way of incorporating it into the Bill—even if not in the precise wording, although it seems excellent to me—so that we can support it.

[Baroness Buscombe]

I thank all noble Lords who have taken part in this extremely helpful debate. A number of issues have been raised about the scope of the term “vulnerability”. This is incredibly helpful to us and to our overall approach to the Bill. The noble Lord, Lord Stevenson, made reference to his hope that the report of our debate in Hansard will be seen and our words read by those who are charged with taking forward the delivery of this body. I assure the noble Lord that, thus far, everyone I have spoken to who is involved in this world, in the three current bodies, is very aware of our debates and I trust that they will be taking on board what is said.

Amendment 11, tabled by the noble Baronesses, Lady Finlay, Lady Coussins and Lady Hollins, and the noble Lord, Lord McKenzie, would add an element to the body’s strategic function, so it could include issues of access to financial services for vulnerable people in the national strategy. I hope that noble Lords will forgive me for being a bit repetitive, following my noble friend’s remarks in previous debates, but it is important to have this on the record. As I mentioned in Committee, the Government take the issue of financial exclusion very seriously. As my noble friend Lord Young mentioned earlier, the Government are grateful for the important work of the Financial Exclusion Select Committee in highlighting this important issue and will aim to publish their response to the committee’s wide-reaching report ahead of Third Reading.

The Government’s response will address all the committee’s recommendations and bring forward new proposals on how to better co-ordinate across government, regulators and the wider sector to tackle the significant issue of financial exclusion. I see that my honourable friend from another place, Guy Opperman, the Minister for Financial Inclusion at the Department for Work and Pensions, is here. We have been working extremely closely on this Bill and on developing our response to the report.

My noble friend Lord Young earlier highlighted the difference between financial inclusion and capability and the Government’s intention that this body will be designed to build financial capability among the public. The Government have therefore deliberately omitted from the Bill references to financial inclusion and individuals’ access to financial services. An appropriate supply to people of useful and affordable financial services and products is very important, and the Government therefore work closely with the industry regulator, the Financial Conduct Authority, to ensure that appropriate action is taken when the market fails to supply services and products. The amendment would greatly expand the body’s statutory remit and we fear it is likely to create confusion over the roles of Her Majesty’s Treasury and the Financial Conduct Authority, both of which have the relevant responsibilities and powers to influence the supply of financial services products.

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[Baroness Finlay of Llandaff]

I am most grateful to the Minister, particularly for those final phrases in her speech, and to all noble Lords who have spoken and contributed to an extremely rich debate. It has become evident that this is not just about vulnerable people, but about everybody who can find themselves in a vulnerable circumstance. There should be no stigmatisation of any sort; this could happen to anybody.

The Bill seems to be a good one, aiming to look after the whole population. Of course, it needs to look after people in bad times as well as good. That is the purpose of the amendment: to have better public outcomes, not just when capability can be increased, but when it cannot be, with services then adapting to meet the needs of the people they are there for. That is what a community is all about.

We can go away and look at the wording again, to think about whether it can go somewhere else or be adjusted slightly in the Bill, then come back at Third Reading.

[Lord McKenzie of Luton]

I just want to press the point made by the noble Baroness about Third Reading. If we could come back to it at Third Reading, that would be good.

[Baroness Finlay of Llandaff]

Through being able to come back at Third Reading, we have the assurance that we can tailor the Bill to try to get it absolutely right and to meet all the needs that have been outlined during this rich debate. Because of that, I beg leave to withdraw the amendment.

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Moved by

[Lord McKenzie of Luton]

12: Clause 2, page 2, line 32, at end insert—
“( ) the awareness of scams and frauds relating to financial products,”

[Lord McKenzie of Luton]

My Lords, the amendment revisits the now familiar theme of creating awareness of scams and fraud relating to financial products as part of the strategic function of the single financial guidance body.

Unfortunately, financial scams are many and varied. We have already heard about that matter, so I will be brief. People who perpetrate such scams are inventive and merciless. According to the Economic Crime Directorate of the City of London Police, financial crime has cost the UK a staggering £50 billion-plus. Techniques encompass scams such as phishing, bogus investment opportunities—particularly for pensioners—intercepting home deposits, freebie scams, fake websites and many more. They can devastate people’s lives, and, as we have heard, destroy a person’s retirement.

Given the so-called pensions freedom, people around the age of 55 are being bombarded with investment opportunities. Citizens Advice calculates that nearly 11 million consumers have received calls about their provision since 2015. The FCA Financial Lives Survey 2017, already referred to by some, gives a fascinating insight into behaviours and the potential harm associated with some of them: 5.3 million UK adults have given a debit or credit card to someone else to use, shared account PIN numbers with another person or provided current account details by email or over the phone following an unsolicited approach; 23% of all UK adults have received unsolicited calls which could potentially be a scam; 8% of them received one or more requests to access a pension scheme before the age of 55 or the chance to unlock a pension early; and 6% were offered a chance to make a high-return investment or buy shares in a company. The survey shows that a smaller proportion of people responded to such offers, but we should be mindful that a small percentage of a big number means many individuals affected.

Citizens Advice report that last year, it helped consumers with a scam or fraud every 17 minutes, with pension scams moving up the table. It recites that pension scams are most frequently initiated by unsolicited telephone calls. The detriment is not only to individuals but to the level of trust that exists in the wider pension scheme. The Government have previously pointed out that the SFGB would have the power, as currently proposed, to focus on awareness of scams and fraud under its money guidance function and the financial capability element of the strategic function. However, we would urge the Government to be more specific. We know from our earlier debate that the SFGB will not be operational for a while. Perhaps the Minister can say what is proposed for and will happen in the interim.

We have heard that the Government have committed to ban cold calling over a wide scope of pension issues, but have been reluctant, notwithstanding the earlier vote, to clarify the legislative programme. In the meantime, the scams and fraud will go on. What is to be done? I beg to move.

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The noble Lord, Lord McKenzie, asked what is happening now given that it will take time for the body to come to fruition. I hope that I laid out in responding to the amendment all that is being done at the moment. One reason for our not even naming the body yet is that we want to avoid it being scammed and copied by somebody else. I trust that the noble Lord is reassured that all is being done that can be done and that the body with its strategic partners will take seriously the matter of raising awareness of fraud and scams. I urge him to withdraw his amendment.

[Lord McKenzie of Luton]

My Lords, I am grateful for the very full explanation that the Minister has given to the point that I raised. It is a very serious issue that is accelerating in its importance. Notwithstanding the work that is going on and is planned, which I acknowledge, I think that the matter is of such significance that it should be specifically mentioned in the Bill. It may seem a little churlish, but I would like to test the opinion of the House.

Financial Guidance and Claims Bill [HL]

Lord McKenzie of Luton Excerpts

Report: 2nd sitting (Hansard): House of Lords
Tuesday 31st October 2017 Lords Chamber

[The Viscount Thurso (LD)]

My Lords, I have followed the passage of this Bill with great interest but I have not felt the need to intervene. However, today I support my noble friend in this amendment based on two experiences.

The first is as a trustee of the Parliamentary Contributory Pension Fund, which, as I am sure many Members know, is a well-run fund and gives a great deal of excellent advice. However, it is always surprising to discover how many well-educated, highly numerate and literate people fail to grasp much of what there is to do with pensions. If those of us who regard ourselves as reasonably well educated, quite numerate and quite literate are having difficulty with pensions, it stands to reason that many people who have not had those advantages will have even greater problems. To my mind, therefore, the need for advice is a case that is clearly made.

The second experience arises from my time on the banking commission of the Treasury Select Committee in another place. We worked extremely hard to ensure that the Financial Conduct Authority had a proper consumer remit. I am delighted that the Government accepted what we had to say because the FCA has proved to have undertaken the remit well and with a degree of teeth. If we want to ensure that a regulation works, we must make sure that the person promulgating it has teeth. It is absolutely right that the FCA should be the body to make the regulations and to follow up on them.

In summary, it would not surprise me if there is considerable resistance from the Treasury, but that is simply a manifestation of its well-known terminal “not invented here” syndrome. Experience shows that where the Treasury is obliged to take on regulation, it comes round to accepting its wisdom in due course. The test of this amendment, therefore, is not “Why should we?” but “Why shouldn’t we”.

[Lord McKenzie of Luton (Lab)]

My Lords, I have added my name to this amendment. We support not only the manner in which it was moved by the noble Lord, Lord Sharkey, and spoken to by the noble Baroness, Lady Altmann, but all other noble Lords who have spoken in support of it. The noble Baroness, Lady Altmann, said that it was about making the system work better, while the noble Lord, Lord Sharkey, reminded us that it is not about making this mandatory. The noble Earl, Lord Kinnoull, talked about the need to look at pensions. We have looked at mortgages in the past, but now is the time to make sure that pensions are fully protected. The noble Lord, Lord Deben, said that having freedoms is one thing, but being able to use those freedoms effectively with financial knowledge is important. The noble Viscount, Lord Brookeborough, reminded us again of the importance of financial education and the noble Viscount, Lord Thurso, outlined the importance of the FCA.

Amendment 24 is clear in its purpose. The FCA must require all trustees and managers of pension schemes to ask people, at the point at which they seek to access or transfer their pensions, whether they have received the information and guidance available to them from the new financial guidance body under Clause 3. If they have not received that guidance, the FCA may require the trustee or the pension scheme manager to provide the individual with access to it before the manager proceeds with the access or transfer request. In effect, the FCA can require that people at risk are defaulted into guidance through their scheme.

Public pension policy is now predicated on, effectively, dividing pensions into two elements: a saving phase and an access phase. In the saving phase, the barriers to individuals’ acting in the face of complexity, which inhibits optimal decision-making, are recognised and regulated defaults have been introduced—auto-enrolment and default investment funds. In the access phase, policy assumes behaviours to be dramatically different, with individuals bearing direct responsibility for making good choices, even though the evidence is clear that they need more support. People are nudged by public policy to save, but they are left to their own devices when accessing or transferring their savings. As the chief economist at the Bank of England, Andy Haldane, commented on 18 May at the annual dinner of the think tank New City Agenda,

“I consider myself moderately financially literate. Yet I confess to not being able to make the remotest sense of pensions. Conversations with countless experts and independent financial advisers have confirmed for me only one thing—that they have no clue either. That is a desperately poor basis for sound financial planning”.


The radical reforms to accessing savings, introduced in the 2014 pension freedom and choice flexibilities, introduced new risks attached to individual decision-making, which will only increase over time as more pensioners become dependent on defined contribution savings. Many people are not well-equipped to make informed decisions. Many of the pension draw-down products do not have the governance and value for money requirements that workplace pensions possess in the savings phase. The prevalence of scams has increased as a direct result of the new freedoms as, increasingly, fraudsters try to get hold of people’s hard-earned savings.

As the FCA observed in the interim report on its retirement market study following the introduction of the new pension freedoms, consumers are poorly placed to drive effective competition. The retirement income market is not working well and the introduction of greater choice and more complex products will reduce consumer confidence and weaken the pressures on providers to offer good value.

The governance of the UK private pension system remains a challenge and the creation of the single financial guidance body is intended, in part, to address market failures and support people to make informed decisions that are in their interest. That will happen only if people access the guidance available—if those at risk of poor decisions use it and are referred to it before they make their decisions or their decisions are implemented. That is precisely what the amendment seeks to achieve, by requiring trustees and scheme managers to ask people whether they have taken the guidance available before they access or transfer their pensions and, if necessary, by requiring the trustees and managers to provide access to that guidance, in line with rules drawn up by the FCA, before proceeding to implement the individual’s decision. Requiring providers to ask people before they make their decision whether they have received guidance from the new body will improve public knowledge of the service and, in some circumstances, address the known barriers put in place by some providers that are reluctant to see their customers access impartial guidance, for fear that they will not buy a product or service from them as a result. Requiring trustees and managers to provide access to that guidance before proceeding to act will directly help to protect savers from making poor decisions.

The case for the amendment is also provided by the FCA’s recent Retirement Outcomes Review: Interim Report. The FCA observed that,

“pension freedoms have made consumer decisions much more complex … consumers struggle to understand their options and to think through the implications of their decisions … leading consumers to choose what … may not be the best decision for them”.

Some consumers cannot, or will not, engage with those decisions. Not all will take advice because of its cost and availability. That is a market gap. Indeed, the FCA expressed concern about whether a competitive market in retirement products can ever develop in the future. It identified four areas of remedy, one of which was to get savers to use the free and impartial guidance. That guidance is currently available from Pension Wise, the Pensions Advisory Service and Citizens Advice, but will transfer to the new body. The FCA explicitly recognises that favouring more guidance will,

“require cooperation across the Government, regulators”,

and industry. The amendment is an important requirement in securing that co-operation and protecting the increasing number of vulnerable savers. For the vast majority of people, a poor financial decision at the point of retirement or on transfer is a mistake for life. It cannot be remedied.

In conclusion, if noble Lords needed further reason to support the amendment, I refer them to the briefing from the Association of British Insurers on the amendment, delivered yesterday evening, which states:

“Enhancing access to advice and guidance is essential, and the SFGB has the potential to play a crucial role in helping more people understand their pension options. This should include exploring with industry and the DWP how we can make the use of guidance a recognised, positive norm when people choose to access their pension savings. The ABI would like to explore how this could work in practice, for example through options such as defaulting or auto-enrolling customers to guidance, earlier retirement communications to prompt people to use guidance, and introducing a Midlife MOT”.


I urge support for the amendment.

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[Lord Hunt of Chesterton (Lab)]

My Lords, I am not an expert on these things, as most people obviously are. A scam was carried out on me in France in the summer, and that was very educational. The point is: would a person in a remote village who is confused and has already been scammed trust the mail or any other form of communication? Surely there needs to be somewhere—perhaps the post office or the bank—where worried people can go. At the moment they have to write to some governmental body far away. We are in a desperate situation and I would be interested to know the Minister’s opinion on this.

[Lord McKenzie of Luton]

My Lords, I can be brief. We welcome the Government’s amendments, which would place in the Bill a duty on the FCA to make rules requiring information to be given to consumers and members of the public by relevant organisations and persons about the availability of impartial financial guidance. This requirement will cover all information, guidance and advice provided by the single financial guidance body.

The substance of our debate on this group has been Amendment 29A, which strengthens the government amendment with the intent of increasing the use of the new financial guidance service by placing a duty on the FCA to make general rules requiring specified persons to refer specified members of the public to the new body for guidance. The FCA must also specify the manner and circumstances in which the duty to refer applies. Therefore, the amendment puts the FCA in the driving seat, which is the thrust of the amendment. The noble Baroness said that this was basically what the FCA was about in any event, in which case I would ask: if we are at one in what we are trying to achieve here on the authority that the FCA should have, why not enshrine it in the Bill?

[Baroness Buscombe]

I have already spoken in detail on Amendment 29A, so I am possibly at risk of repeating everything that I have said. However, I would ask the noble Lord, Lord Hunt of Chesterton, to refer to Hansard, where he will see that since 19 July we have been discussing the very issue about which he is concerned.

The truth is that we are setting up a single financial guidance body which we hope will be even better than the bodies that already exist when it comes to improving people’s financial capability and giving them regulated advice and guidance. That is the purpose of the Bill. I hope that I have persuaded noble Lords that Amendment 29A is not necessary and that the noble Lord will be happy to withdraw it.

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[Baroness Buscombe]

Amendments 34, 35, 36, 37, 38 and 39 would revise Clause 14 and insert a new clause into the Bill. Clause 14 makes provision for the winding up of the single financial guidance body and for its functions, property, rights or liabilities to be transferred to the Secretary of State or another body. These amendments would add safeguards to the procedures for dissolving the body should that be necessary in the future.

In drafting these amendments, we have listened carefully to the concerns raised in previous debates by the noble Lord, Lord McKenzie, and the recommendations of the Delegated Powers and Regulatory Reform Committee. As a result, we have studied the approaches taken in both the Public Bodies Act 2011 and the Enterprise Act 2016 to provisions to dissolve arm’s-length bodies.

As I explained in Committee, we would expect stakeholders, the public and other interested parties to have the opportunity to give their views before any decision to dissolve the new body was made. We are now putting that beyond doubt by setting out clearly that a public consultation will be required before the Government can lay any draft regulations to dissolve the body.

The amendments also provide assurance that any draft regulations cannot be laid until at least 12 weeks after the consultation has begun. This allows a suitable period of time for consultation and consideration of the responses to take place. In addition, the amendments require that the Secretary of State must, alongside any draft regulations, lay before Parliament a document to explain the rationale behind dissolving the body.

The amendments also give Members of both Houses the opportunity to request that the period for scrutinising the draft regulations be increased from the usual 40-day period to 60 days. During this time, the Secretary of State must have regard to any representations, resolutions and recommendations made by either House, their Members or committees.

I trust that noble Lords will agree that we have listened carefully and responded fully to the strength of feeling on the need for consultation and parliamentary scrutiny. I trust too that they will agree that these amendments provide those important safeguards. I beg to move.

[Lord McKenzie of Luton]

My Lords, when we debated in Committee an amendment to Clause 14 requiring a more extensive parliamentary process for the dissolution of the SFGB than that set out in the Bill, the Minister promised to reflect on the matter. This she has done and we are grateful for that.

As the Delegated Powers and Regulatory Reform Committee set out in its first report of Session 2017-19, under the Bill as drafted the Minister does not have to be satisfied as to anything before deciding to abolish the body, does not have to consult, does not have to conduct a formal review and does not have to wait a certain time to see whether the new body is working well before deciding to abolish it. Each of those deficiencies appears to have been taken into account in the government amendments. Amendment 39 enables the super-affirmative process to be applied if either House or a relevant committee of either House so determines, and the process is reflected in the detail of the amendment. This requires that the Secretary of State must have regard to the representations received and any recommendations of either House or of a relevant committee. Effectively this means that Parliament can directly influence the terms of the regulations.

We should note that the provisions of Clause 14 have effect not only to dissolve SFGB but to determine where and to whom its functions are to be transferred.

We can support the amendments and I thank the Minister again for addressing the concerns which have been raised.

[Lord Kirkwood of Kirkhope]

My Lords, I welcome the amendments and congratulate the Minister on bringing them forward. It makes a huge difference if Ministers listen carefully to what is said on the Floor of the House and changes are brought forward as a direct result.

I acknowledge also the important work that the Delegated Powers and Regulatory Reform Committee does in its service to this House. In its first report it made clear the comparisons that the Minister has alluded to with the Public Bodies Act and the Enterprise Act and the earlier precedents they contained. We should study carefully the work the Committee does because it provides an important service to the House. The Minister has listened carefully and she deserves credit for that.

As a member of the Secondary Legislation Scrutiny Committee, which assists the Delegated Powers and Regulatory Reform Committee, I welcome these amendments. Both committees enhance the work of the House.

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[Lord McKenzie of Luton]

My Lords, we should be grateful to the noble Lord, Lord Kirkwood, for moving the amendment on behalf of the noble Baroness, Lady Meacher. If I understand the points he made it looks as though this will be another issue for us to consider on Third Reading, so I do not propose to dwell on it extensively. If that is not the case it will be good if the Minister tells us.

The thrust of the amendment is to try to get interim rules in place to put a cap on the charges levied, particularly relating to PPI as the ability to claim is coming to the end of its natural life. The noble Lord raised an interesting point on what the remedy would be when people exceed the cap. Will the Minister confirm that the route would be that the excess is recoverable by the claimant, rather than some other more direct remedy? I look forward to his reply.

[Baroness Altmann]

My Lords, I thank the noble Lord, Lord Kirkwood, for moving the amendment on behalf of the noble Baroness, Lady Meacher. I ask the Minister whether we have considered the issue, supported by a number of consumer groups, that I raised in Committee requiring a company that has been found to need to pay out on a claim to pay the claims management fee, rather than taking it out of the compensation. That should perhaps be more acceptable with a cap, but also more effective for those who receive compensation, as well as encouraging companies that have mis-sold something or perpetrated harm to the consumer to voluntarily contact consumers who have been harmed, rather than waiting for a claims management firm to do so on their behalf, thus saving them the extra cost of the claims management fee.

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[Baroness Kramer (LD)]

My Lords, I congratulate the noble Lord, Lord Holmes of Richmond, on sticking with this issue, because it is fundamental. I say to the Government that a duty of care is so important and should be so central to every piece of our financial services industry that we should not let the perfect—having a general duty of care—be the enemy of the good, which is the opportunity to put a specific duty of care in this Bill. I hope the Government will consider that.

I have the privilege to be on the Parliamentary Commission on Banking Standards. As we sought to strengthen the framework of regulation and to expose a lot of misdirection within the financial services industry, I think everybody, not only on the committee but far more broadly, agreed that the key problem lay in culture. We have turned to the banking and financial services industries and asked them through various bodies to improve their culture, but surely we also have a responsibility to drive that with every piece of legislation that comes our way. Duty of care reflects that whole-culture approach: the underlying, underpinning approach that we expect our financial services to take, where the interests of the customer are at the centre. It is not that the financial services should not be able to make profits—of course, that is the business they are in—but it should never be at the expense of that central interest of the client or customer.

I urge the Government to take seriously this opportunity in an area where there has been extraordinary abuse. I listened to the noble Lord, Lord Hunt of Wirral, for example; others talked about whiplash and issues around holiday sickness. In issue after issue, we have seen a complete failure in the culture of the bodies that provide such services. We should tackle that issue head on and not be afraid to use language that is clearly around that duty of care—not considering it too soft or too difficult—so that it becomes a general habit. I hope we will not rely just on general duties of care, because those can sometimes be imperfect, but will make sure that in every piece of financial services legislation this issue is underscored. In that, this legislation could be a leader.

[Lord McKenzie of Luton]

My Lords, like the noble Baroness, Lady Kramer, we have added our name to the amendment of the noble Lord, Lord Holmes of Richmond, which takes us back to regulatory principles and the duty of care.

The noble Lord is right to have removed the “where appropriate” qualification from his earlier amendment. The amendment deals with the regulation of claims management, although this is seen as an opportunity to debate the wider calls for a duty of care across the financial services piece.

On the narrower point, we acknowledge that in Committee the Minister gave assurances about the FCA consulting on the design of new rules for claims management companies and taking account of its statutory operational objectives, including an appropriate degree of protection for consumers. However, we note that there is no current alignment of the objectives of the CMRU and the FCA, and there seems to be no certainty about where this process will end up.

Financial Guidance and Claims Bill [HL]

Lord McKenzie of Luton Excerpts

3rd reading (Minutes of Proceedings): House of Lords
Tuesday 21st November 2017 Lords Chamber

[Baroness Buscombe]

Perhaps I may respond quickly to my noble friend Lord Hunt. Both we and the Financial Conduct Authority are aware that our plans for whiplash reform could have an impact on this market. I reassure him that the FCA will certainly keep this sector under review and will monitor developments closely during the implementation phase.

[Lord McKenzie of Luton (Lab)]

My Lords, given the strong consensus that has emerged from the noble Lords who have spoken on these amendments—the noble Baronesses, Lady Kramer and Lady Altmann, the noble Earl, Lord Kinnoull, and the noble Lord, Lord Hunt—I can be brief. We support these amendments and we also support the provisions in the Bill, particularly in relation to a senior manager regime. That is very important.

Amendments 14 to 24 respond to the Scottish Government’s request for the regulation of CMCs to be extended to Scotland, and they will also help to negate the concerns that have been expressed about cross-border planning.

With regard to Amendment 25, although she is not here today, we should place on record our thanks to the noble Baroness, Lady Meacher, for leading the charge on this issue. As others have noted, the cap has been set at 20% exclusive of VAT, which is at the upper end of the range on which the Government consulted. However, we should see that in context. Currently it is suggested that the average fee rate for CMCs is some 37% of gross revenue, which is almost double the level at which the cap has been set.

It may be appropriate to remind ourselves of the scale of PPI, which I know will be coming to an end in August. I think that banks’ finance companies have paid out more than £26 billion in compensation over recent years. That is an extraordinary amount of money, and I wonder what that injection of funding to the consumer has done to the economy. It is important that the cap bites as soon as possible. Can the Minister confirm that the cap will apply to charges arising after the entering into force of Clause 21—just two months after this legislation comes into force—notwithstanding that the claims to which they relate may have preceded that? Can she confirm that it is not the date of the claim that is relevant for these purposes but the date when the compensation is paid?

Amendment 29 would appear to limit the application of the cap so that it does not apply to Scotland in respect of charges relating to claims prior to the transfer of regulation to the FCA. Perhaps the Minister could confirm that my understanding is correct. It would also seem to deny the application of Schedule 4 to Scotland. This schedule is concerned in part with transfer schemes in relation to the FCA. Perhaps the Minister could say what, if any, restructuring in Scotland might be affected by this change and how it would be affected if Schedule 4 were not applied to it.

Overall, we support these important amendments and look forward to the Minister’s reply.

[Baroness Buscombe]

I thank the noble Lord, Lord McKenzie. I am so afraid of making a mistake at this late stage that I would prefer to write to him in reply.

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[Baroness Buscombe]

My Lords, I would like to take a moment to reflect on the Bill and its passage through your Lordships’ House. This is important legislation that will benefit members of the public and provide a sustainable legislative framework for public financial guidance and the regulation of claims management companies in the future. It has improving financial capability at its heart and I am proud to be associated with it.

At Second Reading I said that I hoped we would have constructive engagement as the Bill progressed through this House. Your Lordships have not disappointed. The Bill has rightly been accorded due and diligent attention from noble Lords across the House, and I would like to thank all those who have engaged on the Floor of the House and also in the many meetings we have had outside.

I would like also to thank my noble friend Lord Young of Cookham for all his help and assistance as the Bill has progressed. He has been a tower of strength and a more than able co-pilot throughout.

Finally, but importantly, I would like to thank the Bill team and officials across the Department for Work and Pensions, Her Majesty’s Treasury, the Department for Digital, Culture, Media and Sport, and the Ministry of Justice. Many of them have put in incredibly long hours to support my noble friend and me during debates, facilitate briefing meetings and provide the updates, letters and briefings that many noble Lords have received. I may add that other noble Lords, in particular the noble Lord, Lord Stevenson, referenced the cross-departmental support we have had. It has been amazing and has made an enormous difference to the outcome of the Bill.

Throughout the passage of the Bill we have listened to the arguments and suggestions made by noble Lords, and, in many cases, have agreed and brought forward amendments that strengthen it. I think we can all agree that this Bill leaves here in good shape, and I believe that this is in no small part due to the helpful and constructive manner in which all sides of the House have engaged with it.

[Lord McKenzie of Luton]

My Lords, I will say just a few words. I start by thanking the noble Baroness, Lady Buscombe, for her kind words. We are grateful again for the open-minded manner in which she and her co-pilot, the noble Lord, Lord Young, have approached the Bill. I never had the opportunity to ask him whether Luton Airport was on the flight path, but I will try to on a future occasion.

Invariably it is said at the end of a Bill process that the House of Lords has improved the Bill from its starting point. While tenuous in some instances, it is definitely true with this Bill. Support across the Chamber has enabled the framework for a debt respite scheme; consumer protection on cold calling; strengthening access to information and guidance on accessing pensions; a duty of care on setting standards; requiring that pensions guidance functions are provided freely and impartially; strengthening offences of mimicking; as well as securing the dashboard. These changes have come about because, broadly, we have had a shared analysis of what the Bill could achieve; a shared analysis with the Lib Dems and Cross-Benchers as well as with the Government, including the noble Baroness, Lady Altmann.

We are very grateful for the proactive approach of the Bill team, which went above and beyond in trying to fit our amendments into the confines of the scope of the Bill. I do not know how many variations of the debt respite provisions the team had to cope with, but there were many. I offer my thanks to the Lib Dems for their joint working on some key areas, among them the noble Lords, Lord Sharkey and Lord Kirkwood, and the noble Baroness, Lady Kramer.

Finally, I thank my colleagues, my noble friend Lady Drake, our pensions supremo who unfortunately is not in her place today, and of course my noble friend Lord Stevenson for his experience and passion on matters of the debt space. It has made my role a good deal easier.

Bill passed and sent to the Commons with amendments.

Financial Guidance and Claims Bill [HL]

Lord McKenzie of Luton Excerpts

Ping Pong (Hansard): House of Lords
Tuesday 1st May 2018 Lords Chamber

[Lord McKenzie of Luton (Lab)]

My Lords, we are happy to support the Government on this group of amendments. Amendments 7 and 8 in particular are very important, relating as they do to pensions guidance. Amendment 7 relates to personal pension schemes, Amendment 8 is a parallel one relating to occupational schemes, and there is a further subset of provisions relating to occupational schemes in Northern Ireland.

Our earlier deliberations and those of the other place had a strong focus on consumer protection, recognised this afternoon, on pressing back against pension scams and on the risks that can arise from an imbalance in information. These issues have been heightened in significance since the advent of pensions freedom, and we are wholly supportive of the requirement on the FCA to make rules which require trustees, managers and stakeholders, when liquidating and transferring entitlements, to refer members to appropriate guidance provided by the SFGB or its delivery partners to ensure that effective explanations and/or opting-out processes are in place.

Amendments 1 and 35, which we support, enable transfer schemes under Schedule 2 to transfer staff rights properly from the Consumer Financial Education Body to SFGB and devolved authorities. It would be relevant if devolved authorities became responsible for provision of debt advice in their area. This facilitates the devolved authorities being responsible for the debt advice in their area. As the Minister explained on introducing the Bill into your Lordships’ House, the devolved authorities currently deliver a broad range of guidance services. By transferring responsibility for debt advice, there will be opportunities for joining up the commissioning of services—and we obviously support this.

As has been evidenced from the earlier discussion on this item, there has been discussion about whether the clauses are robust enough in enabling impartial advice. We know the view of the noble Baroness, Lady Altmann. It seemed to me that the Minister had dealt with this; a note provided by the Minister would appear to put that matter to rest—in particular, about the need to look at the interaction between Clauses 3 and 5. I think that my noble friend Lady Drake touched on that matter. New subsection (7) in Amendment 7 and new subsection (6) in Amendment 8 define the pensions guidance referred to in the amendments as the “information or guidance” provided in pursuance of Clause 5 of the Bill. That clause requires the new body, as part of its “free and impartial” pensions guidance functions in Clause 3, to deliver what we know as Pension Wise guidance. That seems to address the very real concern that the noble Baroness, Lady Altmann, raised.

We enter the final straight on this important Bill, and we might reflect just briefly on the journey that we have made and the changes that have occurred, with yet more to follow this afternoon. This is an important measure, encompassing as it does the creation of a single financial guidance body and its reach to cover pensions guidance, debt advice, money guidance and consumer protection functions. It is charged with developing a national strategy to improve financial capability. It further deals with the regulation of claims management services, in particular to challenge fraudulent practices and excessive charging.

Some important changes have been made to the Bill, especially in your Lordships’ House, and this can be attributed to the open-book approach of the Minister in particular, for which we thank her, as well as the engagement cross party of your Lordships around the House. Key matters now include the duty of care for the FCA, and the breathing space scheme—a very important provision. My noble friend Lord Stevenson was heavily involved in that, of course. Then there is the prohibition on cold-calling for pensions and CMCs, with enabling legislation to cover other financial products; the interim fee cap for PFI claims management; default guidance for pensions; the extension of CMC regulation to Scotland; and much more. I hope that we will have the opportunity finally to thank the Minister and her colleagues in due course, but is right that we reflect on the journey that we have made so far in the Bill.

[Lord Flight (Con)]

My Lords, I support these amendments. I put on record the fact that, in the largest area of pensions saving, occupational schemes, participants typically do not seek advice but allow their savings to go into the default fund, which typically may have taken up as much as 90% of the total savings. There is nothing wrong with that, and default funds are generally constructed very sensibly for long-term pension fund investment. However, it is the area where most money ends up and where individual beneficiaries do not really take decisions themselves.

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[Baroness Altmann]

My Lords, I support Amendment 10A and I hope that my noble friend will be able to accept it. Of course I welcome the Bill and the concept of a ban on cold calling but I fear, as we have expressed and the noble Lord, Lord Sharkey, in particular has pointed out, that unless we ban the use of any leads that have been obtained from cold calling we will not protect consumers.

What is cold calling? It is unsolicited, direct marketing. Companies try to approach potential customers to entice them into buying products that in most cases end up being scams and on which those customers often end up losing significant sums of money.

The legislation tends to focus on this issue from the perspective of protecting people’s information and data, but this issue of banning cold calling needs urgently to be considered from a customer perspective as one of business selling practices. That is very different from the concept of protecting someone’s data. Even if there were consent in some way to cold calling, the practice that is currently prevalent—whether from overseas or within the UK—tends not to be calling people whose numbers have been found by invading their data privacy. Very often, it is random number calling from an automated device or merely trawling through telephone directories. Even those people who sign up to the Telephone Preference Service receive cold calls.

Cold calling is effectively already banned, but what the Bill seeks to do, what noble Lords were trying to do and what this amendment would help to achieve would be more than that, because we will never effectively stop someone trying to call people. However, if we ban the business reasons for which they do so we will properly protect consumers. That leads on to my plea to my noble friend to consider this from the point of view of the selling process and the customer buying process. If we ensure that the regulators in charge of the sales process do not permit the use of data that has been obtained from an unsolicited call, in any form, as we have already done for mortgages, that would be much more likely to ensure the kind of protection that I know my noble friend and the Government wish to achieve.

I thank David Hickson from the Fair Telecoms Campaign. He has tirelessly attempted to help people understand why these things are so important. The ICO is of course responsible for enforcing compliance with data protection legislation but the regulation of business practices is undertaken by the specialist regulators. In the case of pensions, it is the FCA or the Pensions Regulator. Indeed, the FCA already prohibits unsolicited direct marketing of mortgage products. The SRA prohibits unsolicited direct marketing of claims management services by solicitors, so it is possible to stop. I urge my noble friend to consider and respond to these concerns when she makes her closing remarks.

[Lord McKenzie of Luton]

My Lords, I start by acknowledging the role played by the noble Lord, Lord Sharkey, in our deliberations—particularly on cold calling, which he has been focused on. I am not sure that we are meant to, under the rules, but I also welcome the Minister from the other place, who is with us and hoping not to get the Bill back for another round of ping-pong. We will see.

The consumer protection function of the single financial guidance body is part of the armoury to build a case for banning cold calling and unsolicited direct marketing for consumer financial products. It adds to the abolition of cold calling for pensions and CMCs that is now in the Bill. As sent back from the Commons, the Bill requires the SFGB to consider the impact of unsolicited direct marketing on consumers, publish from time to time an assessment of whether such activity has a detrimental effect on consumers and advise the Secretary of State whether to make regulations under the cold calling provisions of the Bill.

The amendment in the name of the noble Lord, Lord Sharkey, seeks to add a requirement for the SFGB to additionally publish an assessment,

“not less than once every two years”.

Given where we are in the process, I frankly doubt that this requirement would add value. Surely the key is to have flexible arrangements so that the body can respond to emerging issues and report expeditiously as and when evidence of detriment is available. If the noble Lord’s concern is that the SFGB will somehow let this function lie fallow, I am sure that the Minister can put something on the record in her response.

Amendment 10A—also in the name of the noble Lord, Lord Sharkey—seeks to ban,

“the use by any person of data obtained in contravention of the prohibition”,

of cold calling for pensions and,

“determine the penalties for any such contravention”.

A further amendment seeks a parallel prohibition on data from cold calling for claims management services. It is understood that through measures in this Bill—which will be complemented by existing and forthcoming data protection legislation—where personal data is obtained through an unlawful cold call, further use of that data would be contrary to the Data Protection Act 1998. I understand that fines for such abuse are about to be raised significantly. Through the general data protection regulation and the Data Protection Bill going through Parliament, these matters will be addressed and prohibited. The issue is important and it is certainly important that we hear from the Minister on the second amendment of the noble Lord, Lord Sharkey.

[Baroness Buscombe]

My Lords, I thank all noble Lords who have taken part in this brief debate. I thank the noble Lord, Lord Sharkey, for his amendments, which give us an opportunity to reiterate some of the assurances that I hope I have already made, both through the passage of the Bill and about where we go now. It is a pleasure to echo the words of the noble Lord, Lord McKenzie: although we appreciate the sentiments of the noble Lord, Lord Sharkey, and understand where he is coming from, the Government expect—I stress this—the body to be flexible and responsive to emerging issues. We expect it to report promptly as and when evidence of consumer detriment in relation to cold calling is available. Our concern is that as soon as one says, “It’s every year” or “It’s every two years”, the situation in departments and bodies such as the new one can so easily become a box-ticking exercise. We do not want it to be that. We want to be sure that the body will be able to respond as issues emerge, particularly real evidence of consumer detriment. Having been through the process of the Bill and talked to all those currently working in the three existing bodies that will be transferred shortly into the one single financial guidance body, I have great trust that the level of expertise and experience we will be able to transfer to the new body is such that they will have a strong eye on this. I assure noble Lords that there is strong feeling in support of what we seek to do both in your Lordships’ House and way beyond. We have listened to noble Lords on these issues and we will act firmly to protect consumers where appropriate.

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[Baroness Buscombe]

My Lords, Amendment 19 places a duty on the Law Society of England and Wales to cap fees in relation to financial services claims management activity, as well as giving a power to the Law Society of Scotland to restrict fees charged for this activity. It also gives a power for some legal services regulators in England and Wales to restrict fees charged for broader claims management services. Alongside this, Amendment 20 gives the Treasury a power to extend the Law Society of Scotland’s fee capping power to broader activity in future.

Amendments 16, 17 and 18 ensure that the interim fee cap provisions, introduced as a concessionary amendment in your Lordships’ House, work together with the fee capping powers for legal regulators. Taken alongside the fee restriction powers for the FCA that we have already agreed should form part of the Bill, these provisions will ensure that consumers are protected, no matter which type of claims management service provider they use, and whether it is regulated by the legal service regulators or by the FCA.

They will also ensure that the relevant regulators are able to adapt to any future changes in the market and that there is continuity of coverage for the interim fee cap throughout the transfer of regulation. Indeed, the honourable Member in another place Jack Dromey MP put it well when he said:

“The clauses are sensible because they go beyond claims management companies. … Of course it is about not only CMCs, but legal service providers”.—[Official Report, Commons, Financial Guidance and Claims Bill Committee, 6/2/18; col. 95.]


I hope that noble Lords will agree with this sentiment and will accept Amendments 16 to 20, as made in the other place. I beg to move.

[Lord McKenzie of Luton]

My Lords, if my honourable friend Jack Dromey is happy with these, I have to be as well.

Motion on Amendments 16 to 20 agreed.

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[Baroness Buscombe]

I once again thank very much all noble Lords who have taken part in the many debates in your Lordships’ House on the Bill. We have come a long way and there has been huge consensus. We have improved the Bill, along with our honourable friends in another place, and I hope that all noble Lords can wish it well. In particular, on the future of the new body, I hope that we will know its name soon so that we can start calling it something in our future debates on this subject.

[Lord McKenzie of Luton]

My Lords, if it is time to say our thank yous, I will add mine to those of all noble Lords who have participated in these debates. There have been robust exchanges on what was initially quite a narrow Bill, but its coverage has been expanded, quite appropriately. I certainly thank the Bill team. I know that, on our side, we have probably put them through some misery with our questions from time to time, but when we have had the opportunity to touch base in that way, it has been really helpful to the passage of the Bill in this place. I wish the Bill well on its passage into legislation.

[Lord Sharkey]

I associate myself with the comments of the noble Lord, Lord McKenzie, and the other noble Lords who have spoken. Not only has the Bill been significantly improved but, oddly, I think we have managed to enjoy the process as we have gone through it—perhaps it is not odd at all. I thank the Minister and her officials.