Financial Services Bill

Lord Rooker Excerpts

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

[Lord Rooker (Lab) [V]]

My Lords, I pay a real and sincere tribute to the two maiden speakers, the noble Lord, Lord Hammond of Runnymede, and the noble Baroness, Lady Shafik. I found their speeches really useful and interesting, and they will make major contributions to the House in the future.

I shall be brief but I want to say a few words about three items. The first concerns Clause 34, on the debt respite scheme. This is much welcomed and we can leave the detail for Committee. It was useful to hear the Minister confirm that priority debts include council tax arrears, energy arrears and benefit overpayments—in other words, broadly speaking, public sector government debts.

Such debts can be a nightmare for people and get worse when, with the best of intentions, attempts are made to repay and are then frustrated because the odd creditor or two believes that more should be repaid quicker. I certainly had experience of that when I advised constituents in the 1970s and 1980s. I got their debt sorted out, but then either a creditor that I did not know about or one of the existing creditors decided that they wanted to speed things up. The Money Advice Trust has provided a really useful and supportive brief on Clause 34.

We now have Covid in play, which, by common consent, has affected poorer families financially more than others, besides the million self-employed people who have not received any help from the Government, many of whom will have taken on debts. Will such debts be covered by Clause 34?

An affordable timeframe is the one element that can give people hope, so this clause is a very big incentive for people to enter into agreements to repay debts in full and not simply ignore them, letting them build up and hoping that something will turn up. It can prevent an escalation of the problem, which of course is a worse nightmare. The key, according to the Money Advice Trust, is the timetable. The mental pressure on people with debts is enormous. Having a timetable which is affordable is key. My question is whether this is a priority for the Treasury, as it is needed as soon as possible.

Secondly, I would like to touch on the issue of economic crime. The Bill—I wrote my speech before my noble friend Lord Reid spoke—appears to be a parliamentary Christmas tree, on which we can hang new bits of legislation. The one I would cite is that regarding the prevention of economic crime. Spotlight on Corruption has made it clear that there is problem. The rules for holding large companies and financial institutions to account for economic crime are unfair and ineffective, and they undermine good corporate governance.

Prosecutors have requested that laws on fraud, false accounting and money laundering be strengthened in line with the laws on bribery and tax evasion. The Commons Treasury Select Committee is in favour of that, and over 70% of those responding to a consultation —last year, I think, or the year before—said that current rules inhibit holding companies to account. It is also in line with previous Conservative Party manifestos, and I am sure, although I have not gone back to check the text today, that it is consistent with the seminal speech that David Cameron made on the issue. I will leave it there, as it is a detail for Committee.

In a way, my final point follows what the right reverend Prelate the Bishop of St Albans said. I have never favoured Gibraltar becoming a brass-plate economy. It is true that we more or less passed it over to Spain after Brexit, so it might well now be a bigger income generator. I have no interest to declare—I had two private holidays there in 1977 and 1979 as a gesture of solidarity when the Spanish closed the border—but the fact is that there are some serious issues to debate given the amount of the Bill that relates to Gibraltar and the fact that it is becoming a bigger brass-plate economy than it has been in the past. This will need further exploration in Committee.

Financial Services Bill

Lord Rooker Excerpts

Committee stage
Monday 1st March 2021 Grand Committee

[Lord Rooker (Lab) [V]]

My Lords, unlike the noble Baroness, I consider both the amendments to be probing in nature. As I said at Second Reading, I have no expertise or knowledge. I visited Gibraltar privately on holiday in 1977 and 1979, both times quite deliberately to give support because at that time the border with Spain was closed. As I had talked to the Foreign Office beforehand, I had the opportunity to speak with the Governor and members of the Government and the then trade union leader who later became First Minister. The dockyards were winding down, but one thing those people told me they did not want was Gibraltar to be dependent on being a brass-plate economy, and in effect that is what we are talking about. The right reverend Prelate gave some good examples. Transparency is crucial. It is a global issue. Identification of what is going on is required. The gambling figures the right reverend Prelate gave are a concern. My noble friend Lord Eatwell gave the figure of 20% of UK motoring. It is not for no reason that the biggest single donor to the Brexit campaign for exiting the EU has his insurance companies working out of Gibraltar, so there must be some reason that you can make a lot of extra money working through Gibraltar than you can in the UK.

The danger is that if we leave it as it is and build on it, Gibraltar will become the UK’s state of Delaware, the backstreet way to money laundering and other issues. Frankly, the EU will not stand for it. The financial structures of the services of the EU will be working closely and looking in detail at what is happening following Brexit. They are not going to stand for, effectively, a state of Delaware that has been inserted into Europe by the UK. Therefore we have to find a better way of doing this. One way of dealing with it is by openness and transparency. As the right reverend Prelate said, this is in no way an attack on the people of Gibraltar or, indeed, on the structures of Gibraltar. I have always been a strong supporter of Gibraltar having the right to choose, and 96% of Gibraltarians voted not to leave the EU. It was right at the time we did it that we incorporated Gibraltar into one of European UK constituencies. It is different from the other overseas territories of the UK, and because it is different, we must not allow the undermining of the financial system, so we have to find a better way of dealing with it. I look forward to the Minister giving some assurance on this and perhaps explaining, in answer to my noble friend’s question, why such a large proportion of the UK motor insurance system is worked out of Gibraltar. What is the reason for that? It cannot be the sunshine. The only reason can be money and profit—profit where less tax is paid. That is the basic reason that we have these probing amendments today. I look forward to the Minister’s answer.

[Baroness Bennett of Manor Castle (GP) [V]]

My Lords, it is a pleasure to follow the noble Lord, Lord Rooker. What we might label in shorthand “the Delaware danger” is very real. It was my pleasure to attach my name, as has the noble Lord, Lord Sikka, to Amendment 46 in the name of the right reverend Prelate the Bishop of St Albans. I also welcome Amendment 47 in the names of the noble Lords, Lord Tunnicliffe and Lord Eatwell. We heard from the noble Lord, Lord Eatwell, a clear and welcome outline of the peculiarities of the Gibraltar authorisation regime and the reason why we need to hear a lot more from the Minister about the justification for it and an explanation for some of the peculiarities that the noble Lord, Lord Rooker, just outlined.

I do not regard Amendment 46 as a probing amendment; I suggest that it is a modest amendment for improvement. It builds on an amendment from the noble Baroness, Lady Bowles of Berkhamsted, debated last week, which made broader country-by-country reporting proposals. Given that we have just seen the Government’s welcome incorporation into the Domestic Abuse Bill of a significant number of amendments proposed by noble Lords in that debate, we might hopefully see the same thing here before we get to the next stage of this Bill.

The noble Baroness, Lady Neville-Rolfe, suggested that this might be extraordinary, or be targeting Gibraltar in some way. As the noble Lord, Lord Eatwell, outlined, we are incorporating it in a truly extraordinary way within our system, so it is surely important that we have full transparency about what is happening. The noble Baroness, Lady Neville-Rolfe, said that we should not make it more difficult for Gibraltarian businesses. Whether it is motor insurance or the gambling industry, we are not talking here about the issue for Gibraltarian businesses; we are talking about businesses operating and making their profits in the UK, which should be paying their tax in the UK. On the Tax Justice Network corporate tax haven index—what might be called the ranking of infamy—I note that Gibraltar is ranked 28 on a scale where number 1 is the worst. While it is not the worst, given that there are scores of tax havens around the world, it is pretty well right up there.

It is estimated by the Tax Justice Network that the tax loss that Gibraltarian arrangements inflict on other nations is about US$4 billion. I do not have a breakdown of figures of where those losses are inflicted but, given what we have heard about both the motor insurance and the gambling industries, it is clear that a very significant portion of them will be in the UK. We also have to think about the nature of those industries; the gambling industry, in particular, inflicts significant major damage on individuals and communities in the UK and I believe that even the Government are looking to tighten controls on it.

Certainly, Amendment 46 offers a modest measure towards transparency, honesty and openness. If that should mean that certain industries pay tax on their profits in the UK, I do not see how that could be opposed. I ask the Government to comment on that.

Financial Services Bill

Lord Rooker Excerpts

Committee stage & Lords Hansard
Wednesday 3rd March 2021 Grand Committee

[Baroness Altmann (Con) [V]]

My Lords, I apologise for the inadvertent interruption to the Committee’s proceedings on Monday. I declare my interests, as shown in the register.

I have sympathy with the intentions of all the amendments in this group. I have added my name to Amendment 51, in the name of my noble friend Lord Holmes. I also support Amendment 84, in the name of the noble Baroness, Lady Bowles. I have added my name to Amendments 82 and 83 in the name of my noble and learned friend Lord Garnier. All these amendments relate to confidence in our financial system, whether of customers using financial services or of corporates—both domestic and overseas—engaging with British firms in our financial services sector. Both of these are important.

In his introduction to Amendment 51, my noble friend Lord Holmes clearly explained the need for a review of the “know your customer” regulations, and I agree with him. That, hopefully, could help to improve customers’ confidence in the suitability of products sold to them. One example would be the sale of annuities by firms without having previously asked what state of health the customer was in and whether the annuity they were being quoted was at all suitable for them. Another would be credit companies extending credit without necessarily knowing the credit position of the customer. I do hope that the Government may agree to a review, whether in the context of the Bill or not.

Amendments 82 and 83, so comprehensively and expertly spoken to by my noble and learned friend Lord Garner, would strengthen corporate criminal law to ensure that companies do not profit from criminal acts committed by their employees. These companies need to have much stronger reasons and incentives to ensure that crimes are avoided, rather than blind eyes being turned, so that we have a zero-tolerance approach for corporates. These amendments, in the name of the noble and learned Lord, supported by the noble Lords, Lord Rooker and Lord Faulks, demonstrate this. A change to corporate practice is long overdue, so that senior managers in financial services firms will themselves change their procedures to try to prevent employees committing financial crimes and will install adequate processes to demonstrate that they have taken this issue seriously. I am grateful to my noble and learned friend Lord Garnier for raising this issue.

The pre-emptive nature of financial services processes that can avoid problems needs to be encouraged. These amendments could do this and would be a welcome addition to our financial landscape. All too often, firms and, indeed, regulators, seem to be taken by surprise when offences occur and then have to react to them, rather than doing more to prevent the wrongdoing occurring in the first place. I hope that my noble friend the Minister will consider these amendments sympathetically and that the Government will accept them or bring forward their own version. They would be a useful addition to this legislation. I will now mute myself.

[Lord Rooker (Lab) [V]]

My Lords, this has been a fascinating debate on a fascinating part of the Bill. I know that progress has been slow in Committee and I certainly do not intend to speak for too long. In fact, most of what I was going to say has been covered. I will make a few comments in support of Amendment 84, but first, I point out that I certainly support the speeches of my noble friends Lord Eatwell and Lord Sikka. My noble friend Lord Eatwell made the point about the history of dealing with this in Companies House. I remember reading about Kevin Brewer.

I also remember the remarkable speech in, I think, September 2015 in Singapore by David Cameron when he was Prime Minister; it foreshadowed a lot of change in this area regarding access to beneficial ownership, which seems to have been buried. It was absolutely solid, but obviously it was not supported by those who followed him. It is certainly worth looking back on.

The other issue is the reluctance regarding the financial intelligence unit. It is almost the same as the Home Office’s reluctance to institute an inquest when we had the murder by polonium in London. We had an inquest in that case only after the family had been to court. The Home Office’s defence for having no inquest was the effect on international relations. The reluctance to operate on money laundering is exactly the same. I am sure that the Minister will not admit that—he probably has not been given the evidence for it—but the suspicion has to be that the effect on international relations is slowing matters down.

My noble friend Lord Sikka made the point on his Amendment 51A, which I much support, about the trade bodies and the anti-money laundering organisations. It is exactly the same in property transactions. I remember a Bill from a couple of years ago, when a dozen or more organisations were involved in checking money laundering property transactions and they were all trade bodies. Trade bodies will not operate that way. They exist only because of income from their members. It is exactly the same situation. Now we have regulation in secret. That is the real danger: it is regulation in secret by bodies that cannot be checked on.

Amendment 84 was admirably spoken to by the noble Baroness, Lady Bowles, so I do not intend to go over the detail, but I will add a few points based on the briefing I received before Second Reading from Spotlight on Corruption, which was incredibly helpful. As has been said, bribery and tax evasion are already on the statute book in terms of failing to prevent crime, so what is the difference in including false accounting, fraud and money laundering? By the way, I might say something about the Chancellor’s very last point in his Budget, about free ports. I read the report yesterday from UK in a Changing Europe. The scope for money laundering via free ports is enormous. That will certainly have to be added to the list.

The amendment would widen the scope of the existing statute book: this is not reinventing the wheel. It is supported by the Treasury Select Committee and the prosecutors. In the consultation that took place—I know that it was some ago—it was supported by more than 70% of those who responded. The list of examples given by Spotlight on Corruption of companies that could not be prosecuted or brought to book for corporate wrong- doing in recent times—whether it was Serco, Olympus or Barclays—is enormous. I do not see why they should be allowed to get away it, but there are gaps in the law.

I am not an avid reader, but it is always worthwhile reading the manifestos of the various parties. I do not read too many of my party, by the way, but the 2015 Tory manifesto made this commitment, which resulted in the consultation. But the consultation closed three and a half years ago. It has just been one delay after another. It shows a lack of commitment and a lack of drive from the top. If the drive from the top is there, things happen in government—that is the key that I picked up during my 12 years.

The key benefit of the amendment is greater fairness for how large and small companies are held to account. It is dead easy. The small companies are the ones that are gone after by the prosecutors: they are low-hanging fruit and it is easy. That can make the numbers look good, but it is not fair.

Of course, bringing the UK into line with international standards of corporate crime is where we come up against our friends in the European Union. This is a situation where UK companies operating in the European Union are going to operate to a higher standard than they do at home. It is preposterous. It is going to make the UK top of the list for those who want to engage in money laundering. It puts the UK’s reputation in tatters.

The charge that my noble friend Lord Eatwell made about London being the money-laundering capital is true. There are so many different allegations and they are tied up with the operation of many of our blue-chip accountancy firms and blue-chip corporate lawyers and legal firms, because these actions cannot take place without the acquiescence of these home-based enablers.

My final point is the obvious one. The amendment would bring these offences into line with bribery and tax evasion. Why leave a big gap? Bribery and tax evasion can and do involve money laundering and fraud on a grand scale. It is absolutely inconsistent to have different models operating for different economic crimes, where the crimes are linked. I look forward to listening to the Minister get out of this one.

--- Later in debate ---

[The Deputy Chairman of Committees (Lord Duncan of Springbank) (Con)]

Thank you for the clarification. I call the next speaker, the noble Lord, Lord Rooker.

[Lord Rooker (Lab) [V]]

My Lords, I counted at least three occasions when I thought that the noble Lord, Lord Lucas, had finished his incredibly thoughtful speech as he moved from one group to another. That is not a criticism by any stretch of the imagination, by the way. I will be extremely brief.

My name is on only a couple of amendments: Amendments 52 and 67. I have nothing new to say from what I said at Second Reading. I simply wanted to get my name on the amendments to show the widespread support for the issue raised by the noble Baroness, Lady Coussins. The key amendment in her name—Amendment 67—might be thought to be far too reasonable. If I were the Minister—and I have been in that position—I would accept it, I must say. I would go back and tell the boss that I had to accept it because it would have been made worse on Report—it may well do with another amendment with another date on it—and it would save everybody a lot of time. I did that more than once as a Minister, and it usually turned out okay.

I am very grateful for the work of the Money Advice Trust. This amendment affects what could be millions of people. We are talking about some really serious problems. I was taken by the examples given earlier in the debate on this group by the noble Lord, Lord Holmes of Richmond. I fully support the amendment and cannot see why it cannot be accepted now just to tidy everything up so that we do not have to spend more time on it on Report. I am not saying that it is not important but it is likely that, on Report, Ministers will be faced with a different date. I would accept this amendment and run with it. Everyone will be grateful if the Minister does so.

Finally, the Government deserve great thanks for Clause 34. I want to give credit where it is due. I have finished.

[Baroness Morgan of Cotes (Con) [V]]

My Lords, it is a pleasure to speak in this debate and follow the noble Lord, Lord Rooker. Like him, I will speak to Amendments 52 and 67, as well as to Amendment 54. I have added my name to all of them. I will also speak in support of Amendment 111. I declare my interest as a pro bono adviser to the board of StepChange, the debt advice charity, which has already been mentioned—quite deservedly—in the course of the debate. I am sorry that I could not speak at Second Reading.

We have heard some excellent speeches. I do not want to detain your Lordships for too long. As we have already heard, even before the pandemic, tens of thousands of households faced personal debt situations requiring debt advice. A recent report by Pro Bono Economics said that, because of the pandemic, an extra 480,000 households are likely to be pushed into debt. In the worst-case scenario, that would mean the overall number would rise to 1.5 million by the middle of this year. Of course, the cost to society of problem debt is likely to exceed £1 billion this year through things such as extra mental health support and housing provision.

Like the noble Lords, Lord Rooker and Lord Stevenson, I also recognise the Government’s work to address this issue through introducing the Breathing Space scheme and the forthcoming Statutory Debt Repayment Plan. I added my name to Amendments 52 and 67. I pay tribute to the way they were introduced by the noble Baroness, Lady Coussins, and I thank the Minister for the conversation we have had about them. Like other noble Lords, I think that we need a firm timetable for the introduction of the SDRP so that debt agencies and advisers can plan for that introduction. I understand that 1 May 2024 basically fits in with the Treasury’s timetable, so I hope my noble friend can take the Committee’s advice. I wait to hear what he will say about whether that timetable can be accepted.

The noble Lord, Lord Stephenson, introduced his Amendment 54, which he said is a probing amendment. It asks some good questions about the new Statutory Debt Repayment Plan. I will listen to what the Minister has to say in response. I echo in particular the points he made about the fair share funding, which will obviously be very important for organisations such as StepChange. There is a concern that, without the clarifications the noble Lord has been seeking, the SDRP statutory fair share will not be successful in increasing access to free debt advice and might actually reduce access for clients who are not suitable for an SDRP. Clarification on that funding model would be extremely welcome.

The other subsection of the amendment that I particularly want to pick up relates to bailiffs. There is currently a confusing landscape in this third national lockdown where bailiffs are permitted to appear on doorsteps but not, for example, enter premises. However, they can seize goods such as cars sitting on the highway. I know that Amendment 36F, which has recently been tabled, is in a different group, but having bailiffs clearly bound by the terms of the SDRP and, as suggested in that amendment, by a regulator would help to ensure compliance with the SDRP scheme. I hope the Minister will confirm that bailiffs will absolutely be bound by the terms of the Statutory Debt Repayment Scheme that has been agreed.

I also offer my support to my noble friend Lord Holmes’s Amendment 111, which he so graciously introduced. It seeks government action to regulate lead generators for debt advice and debt solutions. We have already heard how easy it is for people, who are often extremely vulnerable at the point that they seek debt advice, to think that they are contacting StepChange or National Debtline and instead find that they are speaking to other people who then, as my noble friend said, harass them thereafter. Even when they have got themselves into a better position, they are harassed for continued work and debt advice. I also know that StepChange has to spend a significant amount of time monitoring and reporting misleading advertisements and, obviously, that time could be better spent helping more clients with their debt advice. I hope the Minister will be able to indicate whether the Government will now require FCA authorisation.

As I said, the Government have shown a very welcome intention to act in this space. I thank and pay tribute to Treasury Ministers for that. However, as we heard in the Chancellor’s Budget Statement today, it is not just the public finances that are being thrown into disarray by Covid. Sadly, more households’ and individuals’ personal debt situations will have been created or exacerbated by the past 12 months. They will really need these schemes to help them get back on their feet. Therefore, I very much hope that the Minister will be able to confirm that the Government are minded to accept the 1 May 2024 dead- line and also to answer the points raised by other noble Lords in these amendments to help to confirm exactly how the Statutory Debt Repayment Plan will operate.