Financial Services and Markets Bill

Lord Remnant Excerpts

Committee stage
Wednesday 1st February 2023 Grand Committee

[Baroness Lawlor (Con)]

My Lords, I support this group of amendments to improve and tighten arrangements to monitor, scrutinise, measure, consult on and report on the competitiveness and growth objective. As matters stand, I fear that the Bill’s provisions here are without clear and precise external measures against which the regulators’ success can be assessed and scrutinised.

Yet, as noble Lords across the Committee have pointed out, we are giving the regulators greater powers in the new regime than under the old and, with the Treasury, are responsible for the legacy of retained EU law for deciding which rules will be kept, which are adapted and which are modified, and how they will be applied. The operation of the new system will be critical to the sector’s competitiveness and growth and how the regulator objective works will be central to that operation. If it is to be anything other than a vague aspiration under the heading of Chapter 3 in Part 1 of “Accountability of regulators”, all who want or need to know must know what, in practice, is being done to achieve it and how well it is being done against clear criteria.

These amendments for reporting on the numbers and metrics of market entrants, rules simplified, new regulations, performance measures or the time taken to process the various stages of authorisations will make things more transparent and give an outline of how, and how well, the new objective is working. I think particularly of Amendments 66, 115, 116, 121 and 196, although that is not to say that I do not welcome the support of the noble Lord, Lord Tunnicliffe, and other noble Lords for strengthening the mutual sector.

These amendments would serve another, vital purpose: they would help the regulators to focus on outcomes—tangible measures in assessing and defining the regulator objective of competitiveness and growth. This is particularly important, given that regulators will now be on a steep learning curve, having, for the most part, trained in an EU approach to rule-making, influenced by the precautionary principle in devising rules to cover every potential situation in a system based on process. They will now have to change course to the UK approach—the outcomes-based approach—which is indeed facilitated under UK law, which accommodates innovation and develops case law in the courts.

These amendments indicate a range of outcomes on which success can be measured. If such specific measures are included in this Bill, the regulators will be helped to make the change and to adapt from the EU law approach to one designed for UK markets in a way that builds on the UK’s own approach—an approach that, in practice, over many centuries, has facilitated and encouraged international competitiveness and growth.

I therefore support these amendments and urge the Minister to accept the strong case made by noble Lords.

[Lord Remnant (Con)]

My Lords, I declare my interest as a director of Prudential and chairman of Coutts.

I apologise to the Committee that I was unable to attend the first two days of this debate, but I spoke at Second Reading. I said then that I was very much in favour of the additional reporting requirements introduced to the Bill at that stage but hoped that they could be strengthened further. Many of these amendments do just that. I will not repeat the eloquent arguments of those noble Lords advancing them—indeed, there seems to be a large amount of consensus in this Committee—but I would like to emphasise my support in two areas.

First, on Amendments 45 and 63, in the names of the noble Earl, Lord Kinnoull, and my noble friend Lord Naseby, and Amendment 66, in the names of my noble friends Lord Holmes of Richmond, Lady Noakes, Lord Trenchard and Lord Naseby, I regard as of paramount note the introduction of the secondary objective for our regulators to promote the sector’s international competitiveness to support long-term growth. As this is a new objective, it is critical that the regulators should account to Parliament for their performance against this objective and against a clear set of reporting and performance metrics, measurements which are indeed measurable, verifiable and independently set.

Secondly, I especially support Amendments 115 and 116, in the names of my noble friends Lord Holmes of Richmond and Lady Noakes. I have direct experience, both personally and at firms with which I am involved, of how long it can take for seemingly eminently well-qualified individuals to gain authorisation. For the avoidance of doubt, I exclude myself from that category. Businesses have choices about where they place capital and people. The burden and cost of regulatory supervision really can damage London’s ability to attract talent and capital. I do not for one moment suggest that there should be any diminution in the rigour with which applications should be assessed, merely that in pursuance of their competitiveness objective, our regulators should give enhanced emphasis to the speedier clearance of the applications before them. These amendments should help them do just that.

[Lord Bridges of Headley (Con)]

My Lords, I will make a brief intervention. I declare my interests as an adviser to and shareholder in Banco Santander in Madrid. I have a lot of sympathy with some of the amendments in this group, especially those in the name of my noble friends Lord Holmes of Richmond and the noble Earl, Lord Kinnoull.

I will take a quick step back. The Bill needs to be improved in three key ways. First, we need to improve the reporting by the regulators. Secondly, as the noble Baroness, Lady Bowles, said, we need to make sure that the regulators are not marking their own homework, which is why it is important that we create a form of independent analysis. Thirdly, we need to improve parliamentary accountability. The amendments clearly address the first point on reporting. I will not repeat the number of points made very eloquently by the noble Earl and others, especially my noble friend Lady Noakes. However, I strongly believe that, as has been said, this will help regulators define their actions and, in so doing, help address confidence in the regulators that they are meeting those objectives.

I listened to the noble Baroness, Lady Kramer—I was about to call her my noble friend; she is a good friend—and she is absolutely right. We absolutely have to get right the balance between competitiveness and stability here. I do not think anyone here is arguing for a race to the bottom; that would be a disaster for our financial services sector. A strong financial services sector is based on robust, proportionate and simple regulation, so I completely heed that concern. However, I look at some of the amendments, especially some of the metrics being quoted here, and the data that they would provide would be exceptionally valuable to us as Parliament when we come to assess the performance of our regulators in a critical sector for our economy, and we can then judge them on those actions. I look at the consultation that the PRA set out, which states that it will include its performance in meeting this new objective but it does not say how. It is important that we send a signal, and at least have a very thorough debate as to what that might be.

I end on this point: does the Minister seriously think that the current reports we get from our regulators are satisfactory and adequate, especially in the light of the new powers and the new objective that the Bill confers on them and the concern that I think many on both sides of the Committee have about what that means for their powers and their accountability? That is a simple question.