Financial Services and Markets Bill

Debate between Lord Sharkey and Baroness Penn

Report stage
Tuesday 13th June 2023 Lords Chamber

[Baroness Penn (Con)]

My Lords, I thank all noble Lords who have spoken in this debate, and in particular the noble Lord, Lord Sharkey, for tabling this amendment. I start by emphasising that the Government take this issue extremely seriously. We have a great deal of sympathy for affected mortgage borrowers and understand the stress they may be facing as a result of being unable to switch their mortgage. That is precisely why we, and the FCA, alongside the industry, have shown that we are willing to act, and have carried out so much work and analysis in this area, partly in response to prior interest from this House, as alluded to by the noble Baroness, Lady Chapman. This has included regulatory changes to enable customers who otherwise may have been unable to switch to access new products.

The Government remain committed to this issue and welcome the further input of stakeholders. For this reason, during Committee, the Government confirmed that they were carefully considering the proposals put forward in the latest report from the London School of Economics. Since then, as noted in the debate, I have met with the noble Lord and further members of the APPG and representatives of the Mortgage Prisoners Action Group to discuss the findings of the report and the issue of mortgage prisoners more widely.

The Economic Secretary to the Treasury has also written to the noble Lord, including to provide further clarity on the proceeds from the sale of UKAR assets. The LSE report recommends free comprehensive financial advice for all. That is why the Government have continued to maintain record levels of debt advice funding for the Money and Pensions Service, bringing its budget for free-to-client debt advice in England to £92.7 million this financial year.

The other proposals put forward by the London School of Economics are significant in scale and ambition. While the Treasury has been engaging with key stakeholders, including the LSE academics behind the report, for some time, including since Committee, we have concerns that these proposals may not be effective in addressing some of the major challenges that prevent mortgage prisoners being able to switch to an active lender. For example, the proposals would not assist those with an interest-only mortgage ultimately to pay off their balance at the end of their mortgage term.

We continue to examine the proposals against the criteria put forward originally by then Economic Secretary to the Treasury, John Glen, to establish whether there are further areas we can consider. I remind the House that those criteria are that any proposals must deliver value for money, be a fair use of taxpayer money and address any risk of moral hazard. This does not change the Government’s long-standing commitment to continue to examine this issue and what options there may be. However, it is important that we do not create false hope and that any further proposals deliver real benefit and are effective in enabling those affected to move to a new deal with an active lender, should they wish to.

I will not repeat the arguments against an SVR cap, as we discussed them at length previously in this House. An SVR cap would create an arbitrary division between different sets of consumers, and it would also have significant implications for the wider mortgage market that cannot be ignored. It is therefore not an appropriate solution, and I must be clear that there is no prospect of the Government changing this view in the near term. In the light of this, I ask the noble Lord to withdraw his amendment.

[Lord Sharkey (LD)]

I thank all noble Lords who have spoken in this customarily brief debate on mortgage prisoners. I especially thank the noble Viscount, Lord Trenchard, for his contribution today and in Committee.

I am uncertain about what the Government’s response consists of. It seems to me that perhaps it consists of three things. The first is exculpatory—it was not our fault. It was the Government’s fault; it cannot be anybody else’s fault that these mortgage prisoners are in the position they find themselves in.

The second thing I am uncertain about is what the Government are actually going to do. I hear expressions of good will and care for mortgage prisoners but I do not hear anything at all that amounts to a plan, or the sight of a plan, or an objective, or something concrete that would help these people. I did not even hear whether we will get a response to the LSE report any time before the Summer Recess, or indeed whether there is a date by which response can be made—perhaps the Minister can enlighten us. I remind her again that by the Summer Recess it will be five months since the LSE report was presented, and the Treasury surely has had time to analyse it in some detail and to make a considered response.

It is quite clear that the real distress experienced by these mortgage prisoners is not understood or felt deeply within the Government or the Treasury. When we had a meeting with the Minister, we had a couple of the leaders of the Mortgage Prisoners group alongside us who told us some terrible stories about what has happened to their families over the past 10 years; 10 years of paying too much money—more than they should have done and more than they needed to in many ways—to these vulture funds.

Financial Services and Markets Bill

Debate between Lord Sharkey and Baroness Penn

Report stage
Tuesday 6th June 2023 Lords Chamber

[The Parliamentary Secretary, HM Treasury (Baroness Penn) (Con)]

My Lords, before turning to the amendments at hand, I add my thanks to those of the noble Baroness, Lady Chapman, for the contribution of the noble Lord, Lord Tunnicliffe, to this Bill and the Labour Front Bench on Treasury matters. The noble Baroness referred to the noble Lord’s generosity; I have definitely found that to be the case. He has always had a very constructive approach and approached his work with kindness and wisdom, which is a great combination to bring to this House.

The amendments before us from the noble Lord, Lord Sharkey, Amendments 1, 116 and 117, would introduce new parliamentary procedures when exercising the powers in the Bill. As noble Lords have noted, very similar amendments were proposed to the retained EU law Bill, passed and then reversed by the Commons. We have just had a debate this afternoon on a modified version of those amendments, to which I listened very carefully, although I am not as expert in the passage of that Bill as some other noble Lords in the Chamber.

Many of the arguments covered in that debate also apply here, so I do not intend to repeat them at length. I want to focus on some specific considerations in relation to this Bill, which, as the noble Baroness, Lady Chapman, noted, takes a different approach to repealing retained EU law for financial services. That is because it enables the Government to deliver fundamental structural reform to the way in which the financial services sector is regulated.

The Government are not asking for a blank cheque to rewrite EU law. This Bill repeals EU law and creates the necessary powers for it to be replaced in line with the UK’s existing Financial Services and Markets Act 2000—FSMA—model of regulation, which we are also enhancing through this Bill to ensure strong accountability and transparency. A list of retained EU law to be repealed in Schedule 1 was included in the Bill from its introduction in July 2022 to enable scrutiny of this proposal.

Going forward, our independent regulators will generally set the detailed provisions in their rulebooks instead of firms being required to follow EU law. The Bill includes a number of provisions to enable Parliament to scrutinise the regulators; the Government have brought forward amendments to go further on this, as we will discuss later on Report.

Amendments 1, 116 and 117 would introduce rare parliamentary procedures, including the super-affirmative procedure, and create a process to enable Parliament to amend SIs. As I said in Committee, those procedures are not justified by the limited role that secondary legislation will have in enabling the regulators to take up their new responsibilities. The Government have worked hard to ensure that every power in the Bill is appropriately scoped and justified. As I noted in Committee, the DPRRC praised the Treasury for a

“thorough and helpful delegated powers memorandum”.

It did not recommend any changes to the procedures governing the repeal of EU law or any other power in this Bill.

The powers over retained EU law are governed by a set of purposes that draw on the regulators’ statutory objectives. They are limited in scope and can be used only to modify or restate retained EU law relating to financial services or markets, as captured by Schedule 1. However, of course, the Government understand noble Lords’ interest in how they intend to use the powers in this Bill and are committed to being as open and collaborative as possible when delivering these reforms.

The Government have consulted extensively on their approach to retained EU law relating to financial services and there is a broad consensus in the sector behind the Government’s plans. As part of the Edinburgh reforms, the Government published a document, Building a Smarter Financial Services Framework for the UK, which describes the Government’s approach, including how they expect to exercise some of the powers in this Bill. It also sets out the key areas of retained EU law that are priorities for reform. Alongside this publication, the Government published three illustrative statutory instruments using the powers in this Bill to facilitate scrutiny.

When replacing retained EU law, the Government expect that there will be a combination of formal consultation, including on draft statutory instruments, and informal engagement in cases where there is a material impact or policy change, such as where activities that are currently taking place in the UK would no longer be subject to a broadly equivalent level of regulation. The Government will continue to be proportionate and consultative during this process, just as we have been up to this point.

Through the retained EU law Bill, the Government have also committed to providing regular updates to Parliament on progress in repealing and reforming retained EU law. I am happy to confirm that these reports will also cover the financial services retained EU law listed in Schedule 1 to this Bill.

I hope that I have satisfied noble Lords that the Government are committed to an open, transparent and consultative approach to implementing the reforms enabled by this Bill. I ask the noble Lord, Lord Sharkey, to withdraw his Amendment 1.

[Lord Sharkey (LD)]

I thank all those who have spoken in this brief debate—some more warmly than others, perhaps. In my initial speech, I forgot to be especially nice about Denis, the noble Lord, Lord Tunnicliffe; I regret that. I am of course disappointed by both his absence and the response of his successors. I repeat: when it comes to the need for real parliamentary scrutiny, the contents of this Bill are quite as important as the contents of the REUL Bill. That seems to me to be the essence of the matter. All the other arguments about the need to focus and get on with it on Report seem mechanistic; indeed, they are close to being excuses, in some ways.

The essential problem is that Parliament will be unable to scrutinise revocation and replacement, as it is set out in this Bill. I accept that it is not likely that we will revolutionise the way we treat these things as a result of this intervention, but perseverance is the only way of making any progress towards making certain that Parliament recovers its ability to scrutinise properly and does not continue to lose that ability. Although on some occasions—this is one of them—the outcome may be unsatisfactory in the short term, I am convinced that, over time and with enough persistence, we can find a way to do what the DPRRC recommended, which is restoring the balance between Parliament and the Executive. Having said all that, I beg leave to withdraw my amendment.

Insider Dealing (Securities and Regulated Markets) Order 2023

Debate between Lord Sharkey and Baroness Penn

Tuesday 16th May 2023 Grand Committee

[Baroness Chapman of Darlington (Lab)]

We agree with the Minister’s assertion that there should be serious consequences for those who break the law. We also agree with the comments from the Liberal Democrat Benches and echo the comments about the seriousness of insider dealing. We share the curiosity shown in the other place when this instrument was considered about the length of time it has taken to bring in this measure, given we understand that it came about as a result of a review that took place in 2015. I am not asking this to be facetious, but what assessment have the Government made of the number of criminal offences that would have been caught had this measure been in place sooner, which were treated under the civil regime because this instrument had not yet been brought? We want to highlight the consequences of leaving things quite this late, because we are concerned. That underscores our support for this measure. The Government are right to address this gap between the two regimes and we support this instrument.

[Baroness Penn (Con)]

My Lords, I thank both noble Lords for their support for this statutory instrument.

On the time it has taken to deliver this measure and the potential impact in the meantime of not having the criminal regime and the civil regime aligned, it is important to note that since the Fair and Effective Markets Review was published, considerable work has been undertaken to modernise the UK’s market abuse legislation. For example, the civil regime for market abuse was updated in 2016 by the EU market abuse regulation and the Government and UK regulators have implemented the majority of the recommendations from the Fair and Effective Markets Review, including making changes in the Financial Services Act 2021 to increase the maximum sentence for criminal market abuse from seven to 10 years, bringing it into line with comparable economic crimes such as fraud and bribery. The Government have also recently completed a broader review of the criminal market abuse regime as part of the 2019 to 2022 economic crime plan. While this measure has taken longer to implement, there has been other action in this space in the meantime, including delivering on other recommendations from that review.

On the impact of the length of time in which the scope of the criminal offences has been different from that of the civil offences, it is important to note that the FCA has a number of tools available to tackle market abuse, of which the criminal insider dealing offence is only one. In addition to prosecutions under the criminal regime, between 2013 and 2022 the FCA has had 36 regulatory outcomes relating to market abuse, with regulatory fines totalling more than £70 million in that period.

The Government do not have data on the number of criminal prosecutions that have not been pursued due to the difference in the scope of the regimes. The FCA does not routinely record and track cases that it cannot take forward. This includes cases taken forward under the civil regime that could have resulted in a criminal prosecution with the changes made by this SI. Moreover, it is important to remember that there are a number of reasons why the FCA may choose to pursue a civil rather than a criminal prosecution other than the scope of the two regimes. For example, the FCA will consider the severity of the offence in question and whether the evidence meets the higher legal threshold needed to secure a criminal conviction.

It is not possible to say with certainty whether the FCA’s decision not to pursue criminal proceedings in a particular case was due to the issues that this statutory instrument addresses or to other factors, and we do not believe that attempting to determine that retrospectively would be a good use of government legal resources. It is a perfectly legitimate question to ask but, given that other mechanisms were available to the FCA to tackle market abuse under the civil regime—and it has also continued to bring prosecutions under the criminal regime—we can be reassured that it has been able to take action in this period. The Government are confident that the FCA has a strong track record of identifying, investigating and prosecuting insider dealing.

The noble Lord, Lord Sharkey, asked why we include specific US and Swiss exchanges and why they are not covered under the more general definitions that have been used in this SI to avoid the need to update this list again as specific named instruments change. My understanding is that for the more general definitions there are commonly understood definitions used in the UK and EU markets that this can work for, but that when you are looking at other exchanges further afield outside that scope, there remains a need to name those trading venues. That is the difference between continuing to need to name some trading venues versus going for the more general definition-based approach that this SI has done.

As to why we have chosen to include specific US and Swiss exchanges in addition to the UK and EU exchanges that will be covered by this measure, the FCA has seen a persistent trend of organised crime groups recruiting UK insiders to disclose inside information relating to securities traded on those markets. While of course this abusive behaviour is also possible for other third-country venues, this SI includes the third-country markets where the FCA has observed the greatest risk of harm. With regard to other third-country trading venues, and indeed in respect of these ones too, you would expect the home regulator to take action to tackle market abuse in those cases.

I hope that with those remarks I have answered the questions put forward today.

[Lord Sharkey (LD)]

Will the Minister address the point about the 21 days?

[Baroness Penn (Con)]

I can write to the noble Lord on that. It is probably the standard implementation period for a change of this nature. As I said in answering on the assessment of the FCA’s tools and track record on being able to tackle market abuse before this update was made, we do not think that will have a substantial impact on the ability to tackle these issues in that implementation period. I think that that addresses the point but, if there is anything further to add to that, I shall also write to the noble Lord.

Financial Services and Markets Bill

Debate between Lord Sharkey and Baroness Penn

Committee stage
Thursday 23rd March 2023 Grand Committee

[Baroness Penn (Con)]

The noble Lord, Lord Sharkey, I believe, referred to two pieces of work that looked at the wider concern around procedures when it comes to statutory instruments and the House’s involvement and ability to respond to them. I can talk only in relation to the Bill before us. Our approach is consistent with the policy approach to the regulation of financial services that the Government have set out and consulted on—the FSMA model. That delegates some policy-making both to the Treasury and then, significantly, to the regulators. In the context of the Bill, we are comfortable that our approach is appropriate to the model of regulation that we are advocating in these circumstances. I recognise the wider debate but, in the context of the Bill, we are confident that our approach is right and appropriate.

Coming to my noble friend’s specific question, I think the concern is around the definition of “securities” in the prospectus regime. The Government intend to include certain non-transferrable securities within the scope of the new public offer regime that is being developed as part of the review of the prospectus regime, which delivers on a recommendation of Dame Elizabeth Gloster’s review of the collapse of London Capital & Finance. We intend to capture mini-bonds and other similar non-transferable securities that may cause harm to investors if their offer is not subject to greater regulation.

The Government are keen to ensure that business that does not affect retail investors or is already regulated elsewhere, such as trading in over-the-counter derivatives, is not unintentionally disrupted by the reformed regime. We have been engaging with stakeholders on this point to understand the concerns of industry, and we are considering what changes we can make to the statutory instrument to address them.

The Government do not agree that the use of the super-affirmative procedure in this case is appropriate. Examples where it has been used include legislative reform orders made under the Regulatory Reform Act 2001 and remedial orders made under the Human Rights Act 1998. In both cases, the powers in question can be used very broadly over any primary legislation, due to the nature of the situations that they are intended to address. The delegated powers in this Bill are not comparable with these powers, and I have already explained how the powers over retained EU law are restricted and appropriately scoped. Therefore, in the case of the Financial Services and Markets Bill, we are confident that normal parliamentary procedures remain appropriate. I therefore ask the noble Lord, Lord Sharkey, to withdraw his amendment.

[Lord Sharkey (LD)]

My Lords, I am grateful to all noble Lords who have spoken in this short debate. I agree with the noble Baroness, Lady Noakes, about being able to amend SIs. It is a complicated and far-reaching issue and necessarily involves the House of Commons, but we need to find a mechanism for consulting all the interested parties and formulating a plan for reform. The Minister has not mentioned this, but, as I mentioned in my speech, this is to do with the balance of power between the Executive and Parliament. Many of our committees’ reports tell us in dramatic terms that the balance of power has recently shifted very significantly towards the Executive. To change that, we need to do something about our ability to scrutinise work that comes before us. That includes being able to amend it and not relying on a toothless system of negative and affirmative SIs, and it relies on being able to amend constructively regulations that might come before us.

As the SLSC said, it is clear that there is a need for such a mechanism to amend SIs and that finding a path to this fairly quickly is important. I agree with the suggestion by the noble and learned Lord, Lord Thomas, that here and now is a pretty good place to start thinking hard about what we do before we get to Report. It is true that the volume of skeleton Bills continues to increase, as does the abuse of delegated powers in a more general sense, and I cannot see it spontaneously decreasing, unless we do something about it.

As to Amendments 243A and 243B—the super-affirmative amendments—the case for them has been accepted by all speakers, except the Minister. We shall definitely want to revisit the issue on Report. In the meantime, I beg leave to withdraw the amendment.

Financial Services and Markets Bill

Debate between Lord Sharkey and Baroness Penn

Committee stage
Tuesday 21st March 2023 Grand Committee

[Baroness Penn (Con)]

I can look to write to noble Lords on this question but I am not sure that I would be able to add more to my response at this stage, which is that the Government expect to fully engage Parliament, including through any possible legislation, in an open and transparent manner to ensure that there is full and proper scrutiny of any proposals over the coming years. As the joint consultation paper set out, the legal basis for the digital pound will be determined alongside consideration of its design; that is subject to ongoing work. If I wrote to noble Lords at this stage, I think I would be saying exactly that but, if there is anything further to add, I would be happy to do so.

[Lord Sharkey (LD)]

I just want to make sure that I understand exactly what the Minister is saying. If the Government decide to bring in the digital pound, will they commit to bringing it in via legislation?

[Baroness Penn (Con)]

I am afraid that I have gone as far as I can in detailing the approach that we would take to Parliament. We expect to engage Parliament fully. However, the legal basis for the digital pound will be determined alongside consideration of its design. Work is not yet at the stage where we can provide that further clarity.

--- Later in debate ---

[Lord Sharkey (LD)]

My Lords, I agree with everything that the noble Lord, Lord Eatwell, has said. We are happy to support this amendment. I simply have two questions and one observation about it.

The amendment says that we must include “green infrastructure”. Is there a practical, generally agreed working definition of what that actually means? I also notice that, in carrying out the review, the Treasury must consult a list of organisations. The final group of organisations is “relevant financial services stakeholders”. Is the intention also to include professional advisers? They would be a vital addition; perhaps that should be made explicit as we go forward.

My observation is that proposed new subsection (3)(c), which talks about

“establishing frameworks to enable DB pension funds to invest in firms and infrastructure alongside the British Business Bank”,

is an extremely good idea. We should make sure that this happens as soon as we can.

[Baroness Penn (Con)]

My Lords, the Government remain fully committed to the objective of unlocking pensions capital for long-term, productive investment, where it is in the best interests of members. High-growth sectors developing cutting-edge technologies need access to finance to start, scale and stay in the UK. The Government are clear that developing the next generation of globally competitive companies in the UK will require unlocking defined contribution pension fund investment into the UK’s most innovative firms.

That is why, in the Spring Budget last week, the Chancellor committed the Government to working with industry and regulators to bring forward an ambitious package of measures by this autumn. He also set out a number of initial measures to signal the Government’s clear ambition in this area. They included increasing support for the UK’s most innovative companies by extending the British Patient Capital programme by a further 10 years until 2033-34 and increasing its focus on R&D-intensive industries, providing at least £3 billion in investment; spurring on the creation of new vehicles for investment into science and tech companies tailored to the needs of UK defined contribution pension schemes by inviting industry to provide feedback on the design of a new long-term investment for technology and science initiative; and leading by example by pursuing the accelerated transfer of the £364 billion Local Government Pension Scheme assets into pools to support increased investment in innovative companies and other productive assets. The Government will shortly come forward with a consultation on this issue.

Financial Services and Markets Bill

Debate between Lord Sharkey and Baroness Penn

Committee stage
Monday 6th February 2023 Grand Committee

[Baroness Penn (Con)]

If I may, I will come on to address the noble Baroness’s point and the questions from the noble Baroness, Lady Tyler, on why the FCA took the approach it did in selecting the consumer duty approach rather than a duty of care. It is the FCA’s view that it provides not a weaker response but a stronger one; I will set that out in more detail.

The consumer duty sets a higher and clearer standard of care that firms owe their customers than now, and includes a new principle requiring firms to act to deliver good outcomes for customers. It is a package of measures comprising an overarching principle, cross-cutting rules and four “outcome rules”. It is also accompanied by extensive guidance, as noble Lords have noted, to provide clarity for firms on what is expected from them.

The FCA developed the consumer duty following extensive consultation with a wide range of stakeholders, including consumer representatives. Noble Lords may be aware that, in its consumer duty consultations, the FCA specifically sought views on whether the new principle should instead require firms to act in customers’ best interests. On balance, the FCA concluded that requiring firms to act to deliver “good outcomes” was the most appropriate approach. The FCA explained that “good outcomes” best reflects the outcomes-focused nature of the consumer duty and underlines that firms should not focus simply on processes but on the impact of their actions on consumers. The FCA also noted concerns raised by some stakeholders that “best interests” language could be confused with a fiduciary duty or a policy that required the best outcome to be achieved for each consumer, potentially resulting in unintended consequences concerning the availability of products and services to some consumers.

I hope noble Lords are therefore assured that the FCA carefully considered the wording of its consumer duty in the manner proposed by Amendment 76 and concluded that a different approach would deliver better outcomes. As the UK’s independent conduct regulator for financial services, it is responsible for developing its rules independently of the Government.

The noble Baroness, Lady Kramer, asked about the potential for the consumer duty to operate in the context of past problems. She highlighted the mis-selling of PPI and interest rate hedging products. As I said, the consumer duty sets clearer and higher standards for firms to follow, and that means clearer and higher standards for the FCA to supervise and enforce, which will enable the FCA to act more quickly and assertively where it identifies poor practice. However, within this system, even the best regulators doing everything right will not be able to, and cannot be expected to, ensure a zero-failure regime.

In respect of the two specific cases of PPI and interest rate hedging products, the Government have always been clear that mis-selling financial products is unacceptable. That is why we supported unequivocally the FCA’s work on PPI to ensure that consumers who were mis-sold PPI receive appropriate redress, and the review process into the mis-selling of interest rate hedging products, which saw over £2.2 billion of redress being paid out to almost 14,000 businesses.

[Lord Sharkey (LD)]

Before the Minister moves on, what are her views on the point I made about “reasonable expectations” for consumers, which is the standard required by firms to comply with the terms of the new consumer duty? The Minister will have heard the historical criticisms of the notion of reasonable expectations for consumers. How would she feel about having this concept at the heart of this new duty?

[Baroness Penn (Con)]

The noble Lord gave other examples of the concept in the past, but it is important to root it in this particular context. Perhaps I can write to the Committee to expand on that point.

--- Later in debate ---

[Baroness Penn (Con)]

I think I said directly what was required of the FCA, and the FCA has fulfilled its obligations under that Act. Furthermore, the FCA is not of the view that it has diluted the approach; it has taken a different approach from the duty of care. I have attempted to set out some of the reasoning and thinking behind the approach it has chosen to take versus the alternatives that were put to it. I am happy to write further.

[Lord Sharkey (LD)]

I am afraid to say that I am not sure I take much comfort from the FCA saying that it is right. Mandy Rice-Davies would know how to deal with that. My next question is about the lack of redress provided by the new consumer duty.

[Baroness Penn (Con)]

With apologies, the lack of redress is around the right to private action. I will come to that point and, when I have said my piece, the noble Lord can intervene, if it is not sufficient.

Amendment 231 from the noble Lord, Lord Sikka, is similar in intention and would introduce a statutory duty of care owed by authorised persons to consumers. Again, this proposal was considered by the FCA, and it sought views from stakeholders through its consultations. As noble Lords have noted, this issue has been under consideration for some time. In its 2019 feedback statement on a duty of care and potential alternative approaches, the FCA explained that most respondents, including industry stakeholders and a number of consumer groups, did not support a statutory duty of care. Of course, the two subsequent consultations were undertaken by the FCA in response to the amendment put down by Parliament and included in the Financial Services Act 2021.

The new consumer duty comes into force on 31 July for new and existing products. It represents a significant shift in regulatory expectations, and there is a large programme of work under way within the sector to implement it. It would be wrong to seek to replace it now or seek to duplicate it with an additional statutory duty of care before it has been given a chance to succeed.

Amendment 229, along with Amendment 76, seeks to attach a private right of action to the consumer duty. This is an issue that the FCA has considered and consulted on extensively as it developed the consumer duty.

Financial Services and Markets Bill

Debate between Lord Sharkey and Baroness Penn

Committee stage
Monday 30th January 2023 Grand Committee

[Baroness Penn (Con)]

I will write to the Committee with that information, where it is available. I will also write to the Committee on the point about the proposal to change SME definitions.

Those were all the points—

[Lord Sharkey (LD)]

The Minister mentioned the BBRS as part of this panoply of organisations that are spending their entire time defending SMEs. How many cases has the BBRS handled since its inception?

[Baroness Penn (Con)]

I do not have the figure to hand. I note that it started in 2021, so is a relatively new organisation. Perhaps I could also—

Financial Services and Markets Bill

Debate between Lord Sharkey and Baroness Penn

Committee stage
Wednesday 25th January 2023 Grand Committee

[Baroness Penn (Con)]

No, that discussion was not had. The powers are constrained in that they relate to the provisions in place to transition away from and replace retained EU law, rather than going beyond that.

Amendments 242 and 243, put together, enable provisions subject to the negative procedure under an Act other than this Bill to be included in affirmative regulations made under the Bill. This is a procedural change with well-established precedent. Where any element of a statutory instrument is subject to the affirmative procedure, the combined instrument would also be subject to the affirmative procedure, so there will be no reduction in parliamentary scrutiny.

To conclude, the Bill will repeal retained EU law to establish a model of regulation based on FSMA. It will do so in a way that prioritises growth while moving in a sequenced and measured way, and through scrutiny, engagement and consultation. At this stage, I hope the noble Lord, Lord Sharkey, will feel able to withdraw his amendment and that other noble Lords will not move theirs when they are reached. Subject to providing that extra clarification to the noble Baroness, Lady Kramer, I intend to move the government amendments when they are reached.

[Lord Sharkey (LD)]

I thank all noble Lords who have spoken. I did ask the Minister about the Treasury’s assertion, or guarantee, that it will have replacements where necessary for the stuff that gets repealed, and about the tests for what is “necessary” and what is “appropriate”, how they will be applied and how transparently. I would be grateful if the Minister could write to tell me the answer to my question.

If we are to rely on SIs as a means of scrutiny of the measures in the Bill, that is the practical equivalent of having Parliament largely bypassed in this discussion. We need two fundamental mechanisms for effective parliamentary scrutiny: an effective means of triage and an effective means of revision. I am sure we will return to those issues either later in Committee or on Report. In the meantime, I beg leave to withdraw the amendment.

Money Laundering Regulations: Politically Exposed Persons

Debate between Lord Sharkey and Baroness Penn

Monday 28th November 2022 Lords Chamber

[Baroness Penn (Con)]

I absolutely agree with my noble friend on the importance of that word and of a proportionate approach being taken in the implementation of these regulations. I know that concerns have been raised in the past. We have convened previous meetings with the FCA and the banks to make this message known to them. Hopefully, the points of contact that we have provided will provide a further remedy to any noble Lords who are affected. We are also looking at the broader system to see whether we can change the designation of domestic PEPs. However, we need to look very carefully at this and take our time to make sure that we do that work properly.

[Lord Sharkey (LD)]

My Lords, the FCA guidelines, which are five years old, make clear that Members of this House should be treated as low risk unless there are other factors at play. There is no point to these guidelines if they are not being enforced. What assessment have the Government made of the FCA’s record on enforcement of the guidelines? Have any sanctions ever been imposed on those who break them?

[Baroness Penn (Con)]

My Lords, as I have said, we have had an ongoing dialogue with the FCA around the guidelines. In turn, they have had engagement with those that they regulate. I do not have any statistics for the noble Lord on enforcement action. However, one area where we have some statistics is that, since 2018, the Financial Ombudsman Service has received fewer than 10 complaints in this area. That is not to say that people have not experienced problems, but I would encourage them to use the points of contact and, where they are experiencing problems, to advance those complaints, so that we can have better data with which to assess the impact of the issue.

UK Infrastructure Bank Bill [HL]

Debate between Lord Sharkey and Baroness Penn

Report stage
Monday 4th July 2022 Lords Chamber

[Baroness Penn (Con)]

My Lords, Amendment 13 in the name of the noble Lord, Lord Sharkey, seeks to make the bank’s delegated powers subject to the super-affirmative procedure. As indicated in Erskine May, the super-affirmative procedure has been deployed for secondary legislation where an exceptionally high degree of scrutiny is thought appropriate. This procedure has rarely been considered the appropriate one to prescribe in primary legislation; where it has, the relevant instances have tended to be of a particularly substantive and wide-ranging sort. The noble Lord, Lord Sharkey, gave us an example but I had another: the Legislative and Regulatory Reform Act 2006, where the super-affirmative procedure was used to regulate significant powers under which Ministers could amend legislation to remove regulatory burdens. It cannot be said that amending the bank’s activities or the definition of infrastructure reaches the threshold of requiring the super-affirmative procedure. I have noted comments from noble Lords, but I also draw to their attention the Delegated Powers and Regulatory Reform Committee’s response to the Bill, which stated:

“There is nothing in this Bill which we would wish to draw to the attention of the House.”


On the other amendment from the noble Lord, Lord Sharkey, in this group, Amendment 18 on the power of direction, I recognise that there has been some concern about the wording in the framework document in relation to the issuing of directions. In particular, there were concerns that the Treasury would be able to “gag” the bank. That is clearly not the intention, and I have taken away the wording in section 15 of the framework document to make it clear that Her Majesty’s Treasury is not able to prevent publication of a written direction or any reservation notice in respect of that direction.

It is incumbent on the Treasury to meet its obligation to publish the direction and any associated reservation notice as soon as appropriate. Of course, there can be circumstances in which the publication of a written direction or any associated reservation notice needs to be delayed for reasons of national security or commercial sensitivity. An example of this occurred, in relation to a similar power in a different circumstance, during the sale of British Steel Ltd, where the Secretary of State directed the Permanent Secretary to continue an indemnity with the official receiver but delayed publication during negotiations with Jingye, despite value-for-money uncertainties, as to publish at the time would likely have undermined the rescue deal due to commercial sensitivity concerns. However, I will be clear with the House that if publication of a written direction were to be delayed for reasons of commercial sensitivity or national security, we would ensure that it was sent to the chair of the Public Accounts Committee immediately and on a confidential basis.

I hope that I have addressed the points made by the noble Lord, Lord Sharkey. However, to be absolutely clear, and maybe to go further than I did in our previous discussions, we will amend the framework document to be clear that where a direction is issued, an accompanying reservation notice “must” be published—rather than “may”—and, to further clarify, the content of the direction and reservations must be published rather than the fact of their existence. I hope that that provides further reassurance to noble Lords on that matter.

The amendments to Clause 3 in the name of the noble and learned Lord, Lord Thomas, seek to ensure that the bank’s framework document is updated to reflect any strategic steer, and that any revised framework document will be laid in Parliament. In maintaining the bank’s framework document, the Treasury will follow the guidance set out in Managing Public Money. This guidance states that framework documents should

“be kept up to date as the partnership”—

between a department and its arm’s-length body—

“develops.”

The Treasury will update the bank’s framework document as needed to follow this guidance. As has already been noted, the Treasury is currently reviewing the framework document and will publish a new version once the Bill has passed, which will include changes brought about by this House; for example, the clarification which I mentioned earlier in relation to the bank’s ability to publish a reservation notice if the Treasury subsequently issues the bank with a direction, and, in reference to an earlier debate, the clarification of the second objective in local and regional growth relating to levelling up and regional inequalities.

On the publication of framework documents, Managing Public Money is clear. Any revised framework documents should be published and laid in Parliament. Further, the Chief Secretary to the Treasury laid a Written Ministerial Statement today where he set out that all departments should lay their framework documents in Parliament. This has put the question of publication beyond doubt.

On whether the bank’s framework document should be updated to reflect the content of the strategic steer, I think that in that respect I differ in opinion from the noble and learned Lord, Lord Thomas. Managing Public Money sets out that framework documents should contain information on purpose, governance and accountability, decision-making, and financial management. It does not specify that they should contain information on current policy steers or priorities.

The bank’s framework document and strategic steers fulfil very different purposes; the framework document providing an agreement to govern the relationship between the bank and the Treasury, and the strategic steer providing an opportunity for the Government of the day to provide steers on current priorities and policy emphases. That does not mean that there will never be circumstances in which the framework document is updated. I have already told the House that we will reflect on the wording in the framework document on the regional and local economic growth objective. However, I do not think that the framework document needs updating every time a strategic steer is issued. It should be updated only when necessary, to provide for continuity and to avoid creating unnecessary resource burdens. The noble and learned Lord, Lord Thomas, would be inventing a new process for the framework document, when there is already a process set out in Annex 7.2 of Managing Public Money.

On this, I also refer noble Lords to the strategic steer issued by the Chancellor in March. This provided a steer on priorities for the bank in light of the situation in Ukraine, and the recently concluded environment review, as well as other priorities for the bank to reflect in its first strategic plan. None of this information impacted the high-level framework under which the bank operates, as set out in the framework document, and therefore a mandatory update to the framework document would have been unnecessary. However, the strategic steer must be reflected in the bank’s strategic plans. This is provided for in the Bill.

Amendment 21 seeks to bring a consultation process on the use of some of the powers in the Bill with the devolved Administrations. I appreciate the intent, but this will cut directly across the negotiations that we are having with the devolved Administrations on the legislative consent process. This was brought up in Committee and I explained then that the normal practice is to bring forward any amendments required for a legislative consent Motion in the second House, which for this Bill would be the Commons. It would not be appropriate to accept this amendment until we have begun those negotiations with the devolved Administrations in earnest.

I hope that I can reassure noble Lords by saying that we have begun those discussions with the devolved Administrations in a positive fashion. Engagement with the devolved Administrations on the set-up of the bank was also positive. They all support the establishment of a national infrastructure bank. The bank has also been developing its own relationships with the devolved Administrations and their respective institutions, such as the Scottish National Investment Bank. The bank has now also completed deals in all four nations.

The tone and tenor of the bank’s relationships with the devolved Administrations and their respective institutions, and the way that the bank has gone about its business so far, give noble Lords in this House quite a bit of reassurance, I hope, about the collaborative approach that the bank has taken so far and intends to take in future. Therefore, I hope that the noble Lord, Lord Sharkey, feels able to withdraw Amendment 13.

[Lord Sharkey (LD)]

I thank the Minister for her response and thank all other noble Lords who spoke to Amendment 13. I detect a chillier wind from my right than I would have liked. Under those circumstances I can only repeat that the House will not have a substantive opportunity to scrutinise these important things. I regret that. The loss of both parliamentary authority and the ability to scrutinise what comes before us is a critical issue, which I have no doubt we will come back to in future Bills. In the meantime, I beg leave to withdraw Amendment 13.

Insurance Industry: Travel Premiums

Debate between Lord Sharkey and Baroness Penn

Tuesday 28th June 2022 Lords Chamber

[Baroness Penn (Con)]

My Lords, travel insurance is fundamentally designed to cover medical expenses, where age can be a risk factor. The Government do not intend to intervene in commercial decisions made by insurers, as this could damage competition in the market. The new rules that I referred to in my Answer came into place in April 2021—after the example the noble Lord gave. They mean that firms need to signpost consumers to a directory of specialist providers if the medical premium they are being charged is significantly higher than normal. The Government continue to want to promote financial inclusion, and have the Financial Inclusion Policy Forum in place to ensure that they consider all questions around financial inclusion.

[Lord Sharkey (LD)]

My Lords, people with serious pre-existing medical conditions often find it difficult to get travel insurance. As the Minister has said, in April last year the FCA introduced new signposting rules to make it easier. Can the Minister reassure the House that insurance companies and brokers are currently complying with the signposting rules and that this signposting is as prominent as it should be?

[Baroness Penn (Con)]

My Lords, it is for the Financial Conduct Authority to regulate the market and ensure its rules are being followed. It has the resources to do so, and I will follow up with the FCA to see its judgments on that.

UK Infrastructure Bank Bill [HL]

Debate between Lord Sharkey and Baroness Penn

Committee stage & Lords Hansard - Part 1
Tuesday 14th June 2022 Lords Chamber

[Lord Sharkey (LD)]

Perhaps I could ask again about which

“certain aspects of the Company’s activities may be subject to”

the FCA and PRA rules, as set out in the framework.

[Baroness Penn (Con)]

I will endeavour to also get back to the noble Lord during this Committee—but, if I do not, I will include my answer in my letter on his noble friend Lord Teverson’s question about what aspects of the senior managers regime we plan to apply to the bank.

Financial Services Bill

Debate between Lord Sharkey and Baroness Penn

Report stage
Wednesday 14th April 2021 Lords Chamber

[Lord Sharkey (LD) [V]]

My Lords, Amendments 21 and 37B are in my name and those of the noble Lord, Lord Stevenson of Balmacara, and my noble friend Lady Kramer, and I am very grateful for their support. I declare an interest as co-chair of the APPG on Mortgage Prisoners. The plight of these mortgage prisoners was discussed extensively—

[Baroness Penn (Con)]

My Lords, due to the technical issues that the noble Lord, Lord Sharkey, is having, I suggest that we adjourn for five minutes until a convenient moment after 8.28 pm.

--- Later in debate ---

[Baroness Penn (Con)]

My Lords, once more we will need a brief adjournment due to technical issues. I beg to move that we adjourn until 8.30 pm. Or do we have the noble Lord?

[Lord Sharkey (LD) [V]]

Yes.

--- Later in debate ---

[Baroness Penn (Con)]

Ignore me. Please go on, Lord Sharkey.

[Lord Sharkey (LD) [V]]

Thank you. I think I was talking about Amendment 21 being prescriptive; it sets out exactly what must be done and by whom.

It has two sections. The first reduces the currently usurious SVR paid by mortgage prisoners by capping it at two percentage points above the bank rate. This is what, in the end, Martin Lewis thought was necessary. He said:

“Yet in lieu of anything else, I believe for those on closed-book mortgages it is a good stopgap while other detailed solutions are worked up, and I’m very happy the All-Party Parliamentary Group on mortgage prisoners is pushing it.”


He also said:

“This would provide immediate emergency relief to those most at risk of financial ruin … No one should underestimate the threat to wellbeing and even lives if this doesn’t happen, and happen soon.”


This is all necessary, but not sufficient. SVRs are not the normal basis for mortgages, as I have already mentioned. What is needed is access to fixed-rate mortgages, as provided by normal active lenders to 90% of mortgagees. The second part of Amendment 21 sets out how that is to be done.

This is, of course, all very prescriptive, and we understand the Government’s reluctance to write such details into the Bill. That is why we have also tabled Amendment 37B. This amendment takes a simpler and non-prescriptive approach. It places the obligation to fix the problem squarely on those who caused it—the Treasury. It is explicitly fuelled by the overwhelming and undeniable moral responsibility that the Treasury has for the terrible situation in which mortgage prisoners have long found themselves. The amendment sets out what must be achieved to relieve mortgage prisoners, by whom and by when, but it does not say how. It leaves that entirely for the Government to work out.

Amendments 21 and 37B give the Government a clear choice. Amendment 21 prescribes a detailed method of solution; Amendment 37B says what the Government must achieve but leaves the mechanism to them. The Government caused the mortgage prisoner problem, which has caused and continues to cause much suffering to many families. I hope that the Government will recognise their moral responsibility and adopt Amendment 21 or Amendment 37B.

This has all gone on much too long, and it has caused, and continues to cause, far too much misery and desperation. If the Minister is not able to adopt either amendment, or give equivalent assurances, I will test the opinion of the House. I beg to move Amendment 21.

Financial Services Bill

Debate between Lord Sharkey and Baroness Penn

Committee stage & Committee: 1st sitting (Hansard) & Committee: 1st sitting (Hansard): House of Lords
Monday 22nd February 2021 Grand Committee

[Baroness Penn (Con)]

My Lords, I believe that contribution has put another side of the argument. It is the balance between these two perspectives that the Government seek to strike. We also think the FCA is in the right position to strike it, with its obligations to protect consumers and its detailed understanding of the markets that it regulates.

[Lord Sharkey (LD) [V]]

My Lords, I thank all noble Lords who have spoken on this group and I note a largely positive view of a duty of care. I thank the Minister for her response. Her counterpart in the Commons took 58 words to respond to a similar proposition; the noble Baroness took more than that, but notwithstanding the length of her response I was not convinced by any of her arguments. Many of them seemed much like medium to long grass.

The case for a duty of care still seems clear and urgent. Essentially there are, as we said, five key reasons for adopting the duty. The first is that FSMA does not protect consumers adequately; the second is that the FCA is always playing catch-up. The third reason is that poor behaviour by firms continues, as I set out in my opening remarks. The fourth is that getting redress after the event is time-consuming and very stressful, and the fifth is the incentive for real and lasting cultural change in our financial services industry. All these seem to be conclusive arguments in favour of a duty of care.

The Minister’s arguments against seem to have a strange Alice in Wonderland quality to them. They amount to saying that it is not in the consumer’s best interests that financial services firms should be obliged to act in the consumer’s best interests. That simply cannot be right. We will return to this issue on Report but, in the meantime, I beg leave to withdraw the amendment.

Banks: Authorised Push Payment Fraud

Debate between Lord Sharkey and Baroness Penn

Thursday 11th June 2020 Lords Chamber

[Baroness Penn]

I believe that the regulator has sufficient powers. However, the voluntary code is just over a year old. There will be a review of the operation of that code by the end of the year and, should that review reveal that further powers are necessary, of course the Government would consider the case for that.

[Lord Sharkey (LD) [V]]

My Lords, in February, the PSR allowed banks a three-month delay in implementing the sensible and effective confirmation-of-payee rule. One of the conditions attached to this delay was that customers were not to be disadvantaged. It is very hard to see how that would be possible, since we know the new rule to be effective in reducing scams. How will we know whether the banks have observed this condition and, if they have not, what sanctions will be applied?

[Baroness Penn]

The implementation of this is monitored by the regulator, and it will be responsible for ensuring that banks comply with that condition. Should anyone have needed to delay confirmation of payment and suffered fraud as a consequence, they will be fully compensated for it.