Draft Financial Services and Markets Act 2000 (Regulated Activities) (Amendment) Order 2020

Pat McFadden Excerpts

Tuesday 19th January 2021 General Committees

[Mr Pat McFadden (Wolverhampton South East) (Lab)]

I am grateful for your chairmanship, Mr Mundell. I am also grateful to the Minister for his explanation of the order before us. Like many such proposals, this legislation is the culmination of a process that began, I think, about three years ago. As the Minister said, at that time reports by Citizens Advice Scotland and Fairer Finance outlined problems in the marketing of funeral plans, and called for more regulation of the providers. The Fairer Finance report pointed out that a funeral plan looks and feels like a financial services product but is not regulated like one. It also found that 75% of the people it surveyed who had one thought that it already was regulated like a financial services product, and did not realise that it was not.

The calls for regulation were further spurred by reports of high-pressure selling and a lack of understanding, in some cases, of what the plans covered compared with what people expected them to cover. Obviously, at the time of a funeral, such disparities and, perhaps, surprise extra costs, are particularly upsetting to people.

The Government carried out their consultation and most respondents, such as Age UK and the Law Society of Scotland, favoured regulation. However, it should perhaps be pointed out that there were only about 30 responses. That is not a huge number for a Government consultation. Most were in favour.

The Minister mentioned the FPA, and I held a call with it last month, when it was originally thought that the order would be debated before Christmas. That organisation is not in favour of what the Government are doing, and it made a couple of points that I would like the Minister to respond to. First, it believes that the allegations of mis-selling have been exaggerated, and that the proposed regulation will add costs to what are in many cases small, family-owned businesses.

On the plans themselves, the FPA points out that if not all current providers are approved by the FCA under the new regime that could leave some customers with unapproved plans, or plans that they took out with unapproved providers. What will happen in those circumstances? The Government might hope that an approved provider—and there are some quite big operators in the market—would take over the plans. I am sure that in some cases that would happen. However, what if it did not? Where would it leave someone who had bought such a plan? The customer has not done anything wrong and has bought a plan in good faith. The FPA points out that offers of a refund in those circumstances are not really what customers want. They want a plan that covers the cost of their funeral—not to be told to start again. It estimates that there could be up to 40,000 people in that position. I would like the Minister’s response about people in those circumstances.

The FPA also disputes the Treasury’s estimates of the costs to the sector in the impact assessment provided to the Committee this morning.

Having asked those questions I should make it clear that the Opposition will not oppose the order. The Minister and I debate such things frequently and he knows that I often say that with innovation and change in financial products there must also be innovation and change in the regulatory boundary. Plans of the kind we are discussing have been around for some time, but if we look at the 10-year horizon we can see there has been quite big growth. In 2017, when the process began, there were about 200,000 policyholders. I think it has tailed off a bit in the last couple of years, but there is still a substantial number of people who hold such plans.

Of course, the Minister would also expect me to say that as the role of the FCA changes the question of how it is resourced also comes up. The principle in such matters is usually that the fees for the regulation are raised through registration, and so on. Is the Minister confident that the fees raised will allow the FCA to devote the proper resources to the task? Its role is expanding in a number of other ways, such as through the onshoring of lots of European Union regulation.

Finally, given that we are debating this matter this morning, perhaps we should say a word about the difficult circumstances that people have been in with funerals over the past year. Every faith and tradition has its own way of saying goodbye to loved ones. In my family, it is an Irish funeral tradition, which usually involves a full wake, an open coffin in someone’s house, a full funeral mass and some kind of gathering afterwards. It is a big occasion.

The ability to say goodbye properly is so important to grieving families, whatever people’s faith or tradition. There are many ways of having a funeral, but what they all have in common normally is that family and friends come together to bid a final farewell to a loved one they have lost. With covid, that has not been possible over the past year, at least not in anything like the normal way. We have had around 90,000 covid deaths, but the funeral rules have applied to everybody, regardless of the cause of death.

Nobody in the past year has been able to have a proper funeral. The numbers are severely restricted. Wakes cannot happen. People cannot visit somebody’s home to pay their respects in the usual way. That has caused an awful lot of heartbreak to grieving relatives, and is a very painful consequence of the pandemic. Perhaps we have not talked enough about what the country is going through. We should record our thanks to funeral directors throughout the country who have tried to deal with this in the most sensitive way, trying not only to look after the dead but to help families under the severe restrictions. Of course, funeral directors have also had to do what they could to protect their own staff, with personal protective equipment and other measures, when handling funerals.

I spoke to one funeral director in my constituency yesterday, Susan Ellsmore. She runs a relatively new company; it is only three years old. She spoke of the difficulties imposed by the inability to have face-to-face contact with grieving families, of the pain imposed on families by the restrictions on numbers, with families having to make terrible decisions about who can come to the funeral and who cannot, of the financial pressures that people are under trying to pay for funerals when they might have lost their jobs or had their hours cut, and of the broader effects on the country of so many people not being able to say goodbye properly and, in a way, having grief and the normal displays of grief delayed.

I conclude by thanking Susan, and all companies like hers that have had to cope with those awful consequences of the pandemic. In a debate that is about regulation we should not forget the most human side of all this, and the impact that the past year in particular has had on grieving families.