Financial Services Bill (Tenth sitting)

Pat McFadden Excerpts

Committee stage & Committee Debate: 10th sitting: House of Commons
Tuesday 1st December 2020 Public Bill Committees

[The Chair]

Before I call Pat McFadden, it might be helpful if I give a bit of guidance so that we do not go off-piste from the scope of the clause.

To clarify, the scope of the clause takes in the debt respite scheme, similar schemes to assist individuals in debt, and measures to stop people getting into debt in the first place, where these are specifically connected to businesses regulated by the Financial Conduct Authority. Items outside the scope of the clause include: personal insolvency, including reforms to debt relief orders, and any other matter set out in the Insolvency Act 1986; the provision of advice to the public about personal finance decisions; corporate debt, and measures to stop people getting into debt in the first place that do not concern businesses regulated by the FCA. I hope that is helpful.

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

I beg to move amendment 29, in clause 32, page 38, line 22,  leave out subsection (2) and insert—

“(2) Section 7 of that Act (debt respite scheme: regulations) is amended in accordance with subsections (2A), (3) and (4).

(2A) For subsection (2), substitute—

(2) After receiving advice from the single financial guidance body under section 6, the Secretary of State shall make regulations establishing a debt respite scheme within 12 months of this Act coming into force.”

This amendment would require the debt respite scheme to come into force within 12 months of this Act being passed.

I cannot think that anyone on this Committee would try to push the boundaries of what it is legitimate to include in our debates, Mr Davies. That would be a truly shocking thing for anybody on a Public Bill Committee to do, so I hope that we will not see any of that in the next few hours.

I will not push amendment 29, which I am sure is in scope even if it is not perfect, to a vote; rather, I will use it to ask the Minister a question. The purpose of tabling the amendment was to make the point that we want to get a move on with this debt respite scheme, which has support on both sides of the House, because of the current pandemic situation and the difficult economic impact it is having on the household finances of a large number of people. Unfortunately, this will lead to increased problems of debt and to more people looking for the kind of help that is envisaged in the clause. People should have access to thr debt respite scheme, so I would be grateful if the Minister set out a little more about the timetable for introducing the scheme after Royal Assent.

[The Economic Secretary to the Treasury (John Glen)]

Let me see if can get straight to the right hon. Gentleman’s point. The statutory debt repayment plan is an option that will be available to people who go into the breathing space scheme. That will be up and running on 4 May next year, and the SDRP is an option that we would move the regulations for as soon as possible after this Bill is passed. After Royal Assent, we will consult on those regulations. Given the challenges and complexity involved, we need to work very closely—as we did on the breathing space scheme—with the debt advice sector, creditors and regulators to ensure that we deliver the policy successfully.

The regulations that come from this work will need to be developed and consulted on over a longer timetable, and we will consult on those draft regulations as soon as possible after the Bill receives Royal Assent. In the meantime, we are pushing ahead with the implementation of the breathing space scheme, which will come into force on 4 May next year. Other voluntary and statutory debt schemes will continue to be available to debtors in the meantime. This is an option to add to the list of options available to those who go into the breathing space scheme.

Amendment 29 would require the Government to make regulations establishing a debt respite scheme within one year of the Financial Guidance and Claims Act 2018 coming into force. As that Act has been in force since 1 October 2018, that would make it a retrospective requirement and I do not think that is quite what is intended. The regulations establishing the first half of the Government’s debt respite scheme—the breathing space scheme—were made in November 2020, and the right hon. Gentleman participated in the debate on that statutory instrument. That part of the scheme will commence in May 21, as set out in those regulations.

Leaving aside the drafting issues, I understand that hon. Members are keen that the Government do not delay introducing the second part of the scheme, the statutory debt repayment plan. I assure the Committee that it is our intention to support those who are experiencing problem debt swiftly and effectively. The Government will consult on those regulations as soon as possible after the Bill receives Royal Assent. We set out our outline policy in the June 2019 consultation response, but there is significant ongoing work to be done. In the meantime, the breathing space scheme will be up and running from next May and all existing statutory and voluntary debt solutions remain available to those in problem debt. I respectfully ask that the amendment be withdrawn.

[Mr McFadden]

As I said, I do not intend to press the amendment today. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Stella Creasy (Walthamstow) (Lab/Co-op)]

I beg to move amendment 34, in clause 32, page 38, line 23, at end insert—

“(2A) After subsection (3) insert—

(3A) Where, by virtue of subsection 2, the Secretary of State makes regulations establishing a debt respite scheme, the time period that the debtor protections provided for by virtue of section 6(2)(a) and section 6(2)(b) shall be no less than 120 days.”

This amendment would require the breathing space to provide debtors with a minimum of 120 days protection from the accrual of further interest and charges and enforcement action.

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The amendments are about how to make the breathing space work for everyone. There may absolutely be people seeking help for whom 60 days is enough time to get things sorted and make some difficult decisions about what assets—if they have any—they can sell.

[Mr McFadden]

My hon. Friend has done a huge amount of work on this over the years. Amendment 34 seeks to extend the breathing space period to 120 days. Does she think that covid factors add to the case for having a longer period than was initially envisaged?

[Stella Creasy]

My right hon. Friend is right, and that was one of the points I was going to make. If we are dealing with a new group of people who have never been in financial difficulty before, one of the sources of help and support for them may well be our welfare system. Anybody who has ever dealt with people trying to make new claims in our welfare system knows that 60 days is an incredibly tight timeline for that to happen—to deal with any appeals and paperwork, and to even get a response to the claim that has been made. Yet experience tells us then when people do get into problem debt, sometimes they do not know what support they are entitled to.

The amendments speak both to the reality of people and to the practicality of making a breathing space work. I hope the Minister will see them in that way and recognise that that is why so many debt advice providers support the amendments and say, “Yes, actually, what’s proposed does feel too tight to get things right.” Some people’s situations can be resolved in 60 days; others’ will take longer. It is not right to close off the opportunity of a breathing space by setting a deadline or threshold that means that for some people who are waiting for information it will be too late. The amendments speak to how we can make the process work for everyone, giving debt advice providers the discretion to be able to work with people and to use the breathing space for its intended purpose, which is to give those who recognise they have a problem the chance to get it sorted before we go into some of the more serious options.

The brutal reality is that we know that, with jobs thin on the ground, debt already mounting up and the cost of living not reducing any time soon, not everybody who gets a breathing space is going to be able to breathe again. I know the Minister would be frustrated if, rather than the financial position of the people involved, it was that timing, that threshold, that meant the breathing space did not work in the way in which it is intended.

The Minister will have seen that I have tabled other amendments on we make this breathing space work. I know he cares about getting this right. In these Committees, there is always pressure on Ministers to say no to amendments, but I hope he will acknowledge that this is about making the policy work, recognising the evidence on the ground about what works with people who are in problem debt and how long it takes them to see that they have a problem. If he does not accept the timescales, if he does not accept the intentions of myself and the hon. Member for Edinburgh West in acknowledging the distress people feel when they have to front up and talk to a stranger about the financial position they are in and their fears in an environment where unemployment is widespread. Goodness knows, getting people to take debt advice at the start of this year, when there seemed to be jobs in our economy, was difficult—anybody who tried to refer a constituent to Citizens Advice knows that. Getting people to a point where they have the chance to breathe again means making this process work.

If the Minister does not think the extension is right, I am keen to hear what he thinks we should do to make sure that that threshold is not a cliff edge over which people fall and cannot come back from. We are all going to be seeing a lot of people in financial difficulty in the coming months in our surgeries—people who have nowhere else to turn, people who are very frightened, and people whose families, homes and mental welfare depend on us getting this right.

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The policy intent may not have changed, but the context has, as I hope the Minister recognises. It is therefore right to remove the mandatory review. Perhaps it could be put into statutory guidance or something as a good idea; StepChange was relatively flexible about that in its evidence to us. Mandating the review, though, and saying to debt advisers that they have to police people during a time of economic restriction, when we know the shame that comes with debt, is a retrograde step.

[Mr McFadden]

Is my hon. Friend’s fear about the midway review that it is too onerous a burden on the debt advisers, or that it may exclude from the breathing space people who still need it, but who are pushed out halfway through?

[Stella Creasy]

My right hon. Friend raises a real concern. If we have a large influx of people needing to speak to a debt adviser, and there are no appointments, will they get access to help? One reason why they will not be able to get an appointment is because debt advisers will have to do a midway review with people. We should simply trust debt advisers. Anybody who has worked with them, as the Minister has, will know that they are part Martin Lewis, part Alison Hammond from “This Morning”—a kind person who makes jokes so that a person feels better about themselves. They are trying to help people in distress. Through the legislation, we are asking them to do a job; we should let them do it as they see fit.

I hope that the Minister will listen to the sector when it says, “Let us hold those reviews when we need to, rather than telling us that we have to hold them, because if we are overwhelmed by people, we can’t do the job that you are asking us to do.” I do not disagree on the policy intent, but the context is different, and if we do not react to the context, all this good work, and all the legislation, will be for nothing, because there will not be appointments. There will be a negative relationship between debt advisers and the people whom they are trying to help, which will affect whether people listen to what advisers are saying; debts will continue to rise; creditors will go unpaid; and for people, the breathing space will feel like holding their breath, rather than coming up for air.

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[Alison Thewliss]

I rise to support new clause 25, which appears in my name and that of my hon. Friend the Member for Aberdeen South. I also want to speak in favour of new clause 12, because what it asks for would be quite useful.

Our new clause on the debt respite scheme review asks for the Government to take a wider look at the impact of debt and the effects of changes on debt held by households, individuals with protected characteristics and small companies, as defined by the Companies Act 2006. The Government should do so across different parts of the United Kingdom, because there may well be differential impacts in different parts of the country in terms of support schemes and what is happening on the ground. It is important to look at the matter in this wider context. It looks to the very complexity of people and their businesses, and how they organise their finances and their debt.

I will start by giving an example involving some of my constituents. They are a couple who live in socially rented accommodation. He is a taxi driver and she is a wedding and events planner. Covid has hit them incredibly hard because he cannot go out and earn the same way that he could. He was able to access some Government support, but she was not. She did not have a premises or a shopfront, but just a small unit where her wedding kit was kept. She has not been able to access any Government support at all. She was told to go on to universal credit, but the people at the Department for Work and Pensions did not understand what she did in her business and how that support ought to have worked for her, and she feared she would have to give up her business altogether.

The point of raising this example is the decision she made in the circumstances. She looked at the debts that she had and the bills she had to pay, and decided that the most pressing and dangerous debt was her credit card. She paid down the credit card because she knew if she did not paid that, the consequences would be financially much greater. However, when she went to the Glasgow Housing Association and said she was having trouble paying her rent, they said “Well, how did you pay your credit card?”. She said, “I think you’re not going to evict me.” That was her gamble and her choice.

My constituent thought that there would be some way of managing her housing debt better than her credit card debt. That was the decision she took. It might not be the decision she would have taken had she had financial advice, but she was looking at the different balances and debts, as well as looking to the months ahead and not knowing whether her business would be able to get up running. She was not able to access any Government grants for business support, and it was a difficult time for her husband as a taxi driver as well.

Families and businesses are often one and the same. My constituents are two individuals but also a business and a family together, and their debts are all wrapped up together. That is why I am asking the Government to look at these different things in a holistic way. She is a woman and she is disabled, so she would fall into that characteristic as well. She is doing a brilliant job trying to run her business and balance things, but it is important that the Government understand all these intersecting things that are going on for people right across the UK.

The hon. Member for Walthamstow talked about some people being able to pay back their debt. There is evidence to suggest that because some people have been able to keep working and have less outgoings—because in many cases there is nothing much to do and to spend money on—they have been able to pay back their debt and make quite a dent in it, or to put money towards a mortgage or other things. However, some are very much unable to do so. There is evidence of a growing division between those who have been able to keep working, and those who have had no support and are not able to work. It would be useful for the Government to do a wee bit more work on that and on how it affects people.

The Minister talked about Government debts and debt to Government Departments. I want to reflect a wee bit on how the Department for Work and Pensions often treats debts. I have constituents who are struggling to pay back overpayments of tax credits to the DWP, to the point where it is making it difficult for them to put food on the table or pay their other bills because so much is being wheeched off at the start and they have very little income coming in.

I have another constituent who had issues with HMRC wanting additional money. Again, they went through all his finances and started taking money back. He was fairly well off, having worked in a sector that was reasonably well paid, but HMRC was going through his finances pretty much the point where it was questioning whether he should be giving his children money for their school dinners. These are the kind of outgoings that are being questioned, and that makes it incredibly difficult for people to plan for the future.

The other aspect of Government debt that I will pick up on is the vast cost of people’s immigration status in this country. I have constituents who put their and their children’s leave to remain applications or citizenship applications on credit cards. That is a vastly expensive way to try to pay for status in this country. If they do not do that, they will not have all the freedoms that the rest of us enjoy, so they take that difficult choice of paying an absolute fortune for citizenship. Some of that was down to their child wanting to go on a school trip with their classmates, so they had to pay for citizenship and a passport for that child so that they can go on a school trip with their school pals. That is a horrible choice for families to have to make, but that is the expense of the immigration system and the impact that it has on the debts of many people who have a protected characteristic. The Government need to be aware of what the different parts of Government are doing in that regard.

The last point I will make on that is about people who have no recourse to public funds who end up going into huge debt, either on their housing or bills or other things. For many of my constituents, it is people who are out working every hour that they can, but because they have no recourse to public funds, they do not get the social security support that their next-door neighbour would get. Again, those protected characteristics come into play here. It is worth the Government looking at what they are doing to force people into debt, to force them into difficulties and to force them into situations that make it difficult to live a normal life and deal with the debt that the Government are causing through the costs of the DWP, Home Office and HMRC systems.

Lastly, I will speak to new clause 12. It is important that we look specifically, as the hon. Member for Edinburgh West (Christine Jardine) asks for, at the impact of covid- 19 on the debt respite scheme. It is important that the Government understand exactly what has happened to those people who I mentioned at the start, who do not have any income coming in, who have not been eligible for support schemes and who cannot work, perhaps because they or a member of their family are shielding, and plan for future pandemics and shocks in a similar way. While I think an awful lot of work was done on the public health aspects of pandemics, very little—nothing really—was done on the economic impact on households and individuals and on how people can get themselves back out of this.

It is worth considering the long-lasting effect of having or being affected by covid and on the impact on people’s ability to work in the future if they or a family member have had long covid, for example. That will completely change a family’s financial circumstances in a way that they could not possibly have anticipated. It may force that family into debt, and a long-term debt at that. It is worthwhile the Government doing a bit of extra work, as new clause 12 pretty much gets at, to see what the impact of that is, because we will need to understand that going forward. We should not be pushing people into a circumstance that they cannot easily get out of. The Government need to understand that better and to do some further the work on that, so I very much support new clause 12 and what it asks for.

[Mr McFadden]

I should begin by acknowledging that the Minister has put an awful lot of work into the debt respite scheme. He has encouraged it, consulted the sector widely and really tried to get it right. As I said at the beginning, the Opposition support it. It is a valuable addition and a source of help for people in debt.

The new clauses call for a review of the scheme at some point in different ways, which is the right thing to do with a new scheme. It makes sense to look at how it works and see if any changes need to be made to it. We have already had a debate about whether 60 days or 120 days is the best timescale, and a review could consider that sort of thing. Of course, there is also the covid impact, which new clause 12(2) specifically references. Covid will have an impact on household finances. We had an exchange in Treasury questions an hour or two ago about corporate debt and small business debt. I therefore do not think that the new clauses on review are in any way a threat to the basic integrity of the scheme. They simply ask for a look back at the scheme after a year or so of operation.

I could give the Committee a long and enthusiastic speech about the merits of the third way, but I suspect I will fall foul of your instructions about scope, Mr Davies. I award the prize for word of the day to my friend the hon. Member for Glasgow Central who has given Hansard the challenge of spelling “wheeched”, which I can roughly translate as forcibly or speedily removed. I think we would agree on that definition, but I look forward to seeing how that appears in our record.

[John Glen]

We are considering several amendments and I turn first to new clause 12. Its effect is to require a report to be published by 28 February 2021 on the impact of covid-19 on the debt respite scheme. That would include statements on the impact on levels of household debt and financial resilience, and what that might mean for how the scheme works, and consideration of the incorporation of a no interest loan scheme. 

As the Committee knows, covid-19 poses many uncertainties. The Government have responded dynamically to the challenges posed and taken unprecedented action to support individuals and businesses during this time. With that in mind, teamed with the fact that both elements of the debt respite scheme are new policies, arriving at any sort of meaningful estimate of the impact of covid-19 on the scheme’s expected usage and operation will be very difficult. 

Expected demand and take-up of both elements of the debt respite scheme have been quantified to the extent possible and published in the appropriate impact assessments, which have been approved by the Regulatory Policy Committee. A more detailed impact assessment will be developed alongside implementing regulations establishing the statutory debt repayment plan to a longer timetable, which will of course need to consider the full impact of covid. We will be more able to evaluate it over that period. The Government will of course closely monitor both schemes’ usage once they are up and running, and consider the impacts of covid-19 and the wider economic recovery. 

Turning to the suggestion for the report to explore financial resilience more broadly, I point towards the Government’s annual financial inclusion report, which was published only last week. We also work closely with the Money and Pensions Service, which was established in the last two years, the FCA and other stakeholders to monitor personal finances, including financial resilience. Earlier, I mentioned some of the measures I have been engaged in as the Minister for this area with the Pensions and Financial Inclusion Minister.

Finally, the new clause also requires a report exploring the incorporation of a no-interest loan scheme into the debt respite scheme. The Committee will be pleased to hear that the Government are working closely with stakeholders towards a pilot of a no-interest loan scheme, building on the findings of a feasibility study published earlier this year. I am personally passionate about that. It will be an amazing breakthrough if we can institutionalise the scheme and establish its credibility. That will have to be on the basis of international comparisons, establishing which groups of people would benefit most from it, and how we can establish a protocol around the cost. Clearly, given the vulnerability of the people to whom we seek to apply it and make it available, it will be expensive to deliver, but I continue to persist with it.

Any pilot will take time. Of course, it is urgent, but I would rather ensure that it is credible and can be supported more broadly. Reporting by February 2021 on the viability of a no-interest loan scheme risks coming to a premature judgement based on inadequate evidence—I say that with some experience, given that I have been working closely on this for some while. I can assure the Committee, however, that I will keep Parliament updated on progress as we continue that work over the coming months.

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Clause 32 accordingly ordered to stand part of the Bill.

[Mr McFadden]

I think there is some confusion about why the new clauses were not put. Can you clarify that, Mr Davies?

[The Chair]

The new clauses are determined at the end, so although we have debated them, I will put the question at the end of the process. The opportunity to divide the Committee on the new clauses has not been lost, should that be the wish of those who have tabled them—that applies to all new clauses. I hope that helps.

Clause 33

Successor accounts for Help-to-Save savers

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[John Glen]

Understandably, this topic brings out some very deeply held beliefs about the sort of society that we live in and the inequalities and challenges we face. I very much respect the points made by the hon. Member for Walthamstow and the hon. Member for Erith and Thamesmead.

I will try to respond to new clause 3 and new clause 14, but before I do, I think it would be helpful to clarify a few points about the Help-to-Save scheme. It is open to new entrants until September 2023 and those individuals will then be able to have it open for four years from that point. It is possible to save between £1 and £50 a month, so various modest savings can be made.

The hon. Member for Erith and Thamesmead asked about the schedule of promotion activities. Some of the full schedule was curtailed for this financial year because of covid, but we anticipate resuming our promotional activity early in 2021. We promoted Help-to-Save through Talk Money Week, we have engaged with Martin Lewis, who is also a key advocate of this scheme, and we will continue to work with the DWP to target those in receipt of universal credit and on working tax credits. The other point I would like to make clear to the Committee is that if somebody is in receipt of either of those benefits for just one week, they are eligible to open an account that is then valid for four years.

New clauses 3 and 14 require the Government to publish reports into the Help-to-Save scheme. Of course, the Government are prepared to inform Parliament on the progress of the scheme. Indeed, the Government committed to Parliament in 2018 to monitor and evaluate the scheme and has been publishing data every six months, in February and August. Therefore, we do not consider it necessary to enact these amendments as a statutory requirement. The latest statistics, published this August, show that by the end of July 2020 more than 222,000 accounts had been opened, with over £85 million in deposits between them. This has been a 37% increase in the total number of accounts opened by the end of January 2020, and a 57% increase in the total deposits into the scheme, compared with in the previous six-month period from August 2019 to January 2020. I am sure the Committee will agree that this is excellent progress, despite the difficult economic period.

The Government already work closely with stakeholders to monitor personal finances, including financial resilience; the Money and Pension Service monitor financial difficulty through an annual survey; and the Financial Conduct Authority undertake the biannual financial lives survey. It is not clear that this amendment would improve the data available to the Government in shaping policy. The Government are also working with stakeholders to raise awareness and encourage eligible individuals to open an account and benefit from the scheme, and I indicated some of the ways that is happening earlier. In fairness to the hon. Member for Walthamstow, who made a passionate and wide-ranging set of observations about these matters, I do not think I can fully do justice to them today. However, I share her belief that there are significant inequalities and certain obligations on people who have more to do more to support those who are more vulnerable in society. This measure is a good policy that we should all be able to promote and I am committed to promoting it further. I would ask the hon. Members to withdraw the new clauses.

Question put and agreed to.

Clause 33 accordingly ordered to stand part of the Bill.

Clause 34

Amendments of the PRIIPs Regulation etc

[Mr McFadden]

I beg to move amendment 30, in clause 34, page 40, line 33, after “performance” insert

“including information relating to environmental, social and governance standards.”

This amendment would require that consumers are given information about the environmental, social and governance standards of PRIIPs.

[The Chair]

With this it will be convenient to discuss the following:

Amendment 31, in clause 34, page 40, line 33, at end insert—

“(4A) The FCA shall ensure that in practice the amendment made as a result of subsection (4) does not result in consumers having a reduced understanding of the risks associated with a particular investment product.”

This amendment would require that consumers are not left with a reduced understanding of the levels of risk involved in buying products covered by this clause.

[Mr McFadden]

In this portfolio Bill we now move on to another different subject, that of PRIIPs—packaged retail and insurance-based investment products. Clause 34 amends the consumer information requirements for the sellers of these products. These requirements are also known as key information documents—or KIDs—and we heard in the oral and written evidence that the current information requirements can be misleading for consumers. It is said that this is because they imply that past performance can be too much of a guide to future performance, which we know is not the case. At the European level, where the regulation of these products has taken place, there has also been a big debate about these key information documents and their deficiencies, so this has been an ongoing issue for some time now. It is in no one’s interest to defend misleading or potentially misleading information for consumers.

Removing or substantially altering the requirements of the key information documents does prompt the question of what should be put in their place. It is important that the Government and the regulators take this seriously. In selling anything like this, there is always a major information mismatch between what the seller knows about the product and what the consumer knows. The products are sold and designed by professional staff working for financial services companies, and bought by retail investors. Unless those investors have a professional background in the industry, they are likely simply to be looking for somewhere safe for their money that can hopefully earn them a decent return. There is a major information mismatch in these situations. Who can the consumer look to, to redress that to some extent? It has to be the Government and the regulators, through legislation on the kind of information to which consumers are entitled before making a purchase.

How do the Government and the regulator equip the consumer to make a reasonably informed choice? That is where amendments 30 and 31 come in. Earlier, when talking about capital requirements and the regulator’s duties, we had a debate about environmental, social and governance criteria being part of the regulator’s remit. The Minister rejected the idea, and the Committee voted it down, but what about making this information available to consumers? More and more investors want to invest in a way that helps, rather than damages, the planet. People care about the working conditions under which goods and services are produced, and about good governance—about companies being well run. So why not make this information available to investors? That is what amendment 30 calls for.

If the argument against making that the regulator’s job is that investors are making these decisions for themselves, let us at least give investors the tools to do that job—the information to make those judgments. The Chancellor has spoken warmly about the Task Force on Climate-related Financial Disclosures, which was set up by the Financial Stability Board a few years ago precisely to help companies inform investors about risks related to climate change in investments. The founding statement of that organisation says:

“Without reliable climate-related financial information, financial markets cannot price climate-related risks and opportunities correctly”.

The Financial Stability Board wants this to happen, and has set up the TCFD to advise companies and market regulators on how to do it. Why not take the opportunity in the Bill to ensure that consumers are provided with this kind of information? They can, of course, still make their own investment choices. They can ignore the information and say, “I don’t care about any of that; all I care about is the rate of return.” Investors are completely free to do that, but an increasing number of them do not want to, partly because they see the rate of return and the sustainability of their investments as being closely related. This is not about interfering with investor choice; it is about helping investors to make a choice, and giving them the information to do that.

Amendment 31 deals with the broader issue of the information balance that I spoke about between sellers and buyers. It is a no-detriment clause. It does not seek to prevent the abolition of the performance scenarios referred to in clause 34; it seeks to ensure that whatever replaces these scenarios does not result in consumers having less understanding than at present of the risks involved in a particular investment.

Both amendments are about the regulator taking seriously its duty on consumer information. They are about trying to make sure that public bodies are on the consumer’s side when it comes to making decisions about buying these kinds of products, and that the consumer has someone to look to for help with the information mismatch inherent in the sale of these kinds of products. They are modest and sensible amendments, and I commend them to the Committee.

[John Glen]

Amendment 30 seeks to require that information about the environmental, social and governance standards of PRIIPs products be included in the key information document, the KID. Now is not the time to address this, as I shall explain, but I have a lot of sympathy with the intent behind the amendment proposed by the right hon. Member for Wolverhampton South East. The reason I do not believe it is the right time to address this is that it would result in significant uncertainty for industry.

Clause 34 makes changes to the PRIIPs to address the potential for unintended consequences for consumers. The PRIIPs were created by the EU to improve the quality of financial information given to retail investors purchasing PRIIPs, by introducing a short, consumer-friendly and comparable disclosure document. The Government are committed to the original aim of the regulation and has proposed changes in this Bill to ensure it functions as intended.

In particular, there is not a fixed definition of environmental, social and governance standards and no standardised precedent for how such disclosures could be made in a comparable way for PRIIPs products. That is why I sincerely say that I agree with the sentiment, but I do not think we are yet at a level of maturity in definitional terms for such a measure to work. To put this in place, and ensure that the ensuing disclosures are appropriate and useful for consumers, significant policy development would be required.

As a result, the amendment would bring significant industry uncertainty, as they do not report in a standardised way on environmental, social and governance issues at a product level, which is what this would be, and have minimal guidance on how to do so. That would come at a time when the Government are intending, through the Financial Services Bill, to provide more certainty to industry on PRIIPs disclosures.

I recognise that high-quality sustainable finance disclosures that enable investors to take environmental impacts into account in their investment decisions will be crucial in facilitating the growth of green finance and supporting the transition to a lower-carbon economy. As I have previously stated, it would also be premature to adopt an environmental, social and governance amendment in the specific context of PRIIPs when the Government are considering the requirements for legislation relating to the sustainable finance disclosure regulation.

Amendment 31 also seeks to amend the PRIIPs disclosure regime, to require that changes to performance information that will be made by the FCA do not leave consumers with a reduced understanding of the levels of risk involved in buying PRIIPs products. I respectfully submit that the amendment would have little or no effect. The Bill is already intended to address concerns about the information provided to consumers in order to avoid the potential for consumer harm. The issues with the PRIIPs regulation, addressed by the Bill, include concern that the requirement to include performance scenarios in the key information documents may result in potentially misleading disclosures. That has been the key concern that has led to that measure being included.

Clause 34 will replace

“performance scenarios and the assumptions made to produce them”

with “information on performance”. That change will allow the FCA to amend the PRIIPs regulatory technical standards to clarify what information on performance should be provided. The FCA already has a statutory objective to secure an appropriate degree of protection for consumers and, as the expert regulator, is best placed to work with consumers and industry to understand issues and respond to them effectively. Moreover, changes the FCA makes to the information provided to consumers in the key information document are subject to a consultation, which it expects to publish next year. Requiring the regulator to ensure that changes to the KID do not reduce consumer understanding of risk would have no effect.

The changes we are making to the Bill address the potential for consumer harm and the FCA is best placed to ensure the appropriate degree of consumer protection. I hope that offers reassurance to the right hon. Member for Wolverhampton South East. I therefore ask that he withdraw the amendment.

[Mr McFadden]

At this stage in our proceedings we begin to recognise the debates that we are having, because we have had them more than once. I find the Minister’s answers on the subject of ESG slightly circular. He says—and I believe him—that he has great sympathy with the intent, but now is not the time or this is not the quite the way to do it, and so on. The reason I find that unconvincing is that I think the Government will do this, or something quite close to it, and will then claim credit, saying that doing it makes the UK a more friendly environment for environmentally sustainable investments. Because of that, I will press the amendment to a vote. Then, as is the way of these things, what we did when we had the chance to make a decision about this, both at the level of the regulator and at the level of the investment product, will be on the record.

[John Glen]

May I express my regret at the right hon. Gentleman’s decision? I acknowledge that this country is going on a journey, and it is very important that we make progress with regard to such disclosures, but this specific measure in this specific Bill at this time would not be in the interests of consumers or the regulation. I respectfully disagree, and I look forward to the vote.

Question put, That the amendment be made.

--- Later in debate ---

[John Glen]

Clause 35 makes two small technical amendments to the UK’s version of the European market infrastructure regulation. This is important to help improve the overall functioning of the UK’s regulatory regime for derivatives.

The first amendment to UK EMIR will promote transparency and accessibility in the clearing of derivatives transactions, by ensuring that the clearing members of UK central counterparties and their clients offer clearing services on

“fair, reasonable, non-discriminatory and transparent”

commercial terms. Clearing contributes to the safety of the UK’s financial markets, especially our derivatives markets. It does this by ensuring that a trade will still be honoured if one party to a contract does not fulfil their side—for example, if a firm goes bust. This will reduce barriers to accessing clearing services, which will in turn make it easier for firms to fulfil their clearing obligations. It will strengthen incentives to clear centrally and reduce systemic risk in financial markets.

The second amendment to UK EMIR will increase transparency in derivatives markets. Such transparency is vital to ensure that regulators in the UK can monitor risks in financial markets and ensure financial stability. This amendment will also make the environment in which trade repositories operate more competitive. This is achieved through ensuring that trade repositories put in place procedures to improve the quality of the data they collect, and establish policies to transfer their data to other trade repositories in an orderly fashion when it is necessary to do so. Trade repositories collect and maintain records of derivatives trades with the aim of helping regulators to monitor the build-up of systemic risk.

Overall, these two sensible technical amendments to UK EMIR will bolster the UK’s regulation of derivatives markets, further delivering on the UK’s G20 commitments in this area. I therefore recommend that the clause stand part of the Bill.

[Mr McFadden]

I have just one question. As the Minister said, this clause deals with the EMIR directive, which governs the sale of over-the-counter derivates. To add to our joys, we have EMIR and something called EMIR refit. The clause is about access to clearing for people dealing in these products. Over-the-counter derivates are perhaps among the more opaque financial services products on the market, but we learnt during the financial crisis that whatever their other qualities, these products exposed the interconnection between different companie, and the vulnerability of that interconnection. That is why clearing is important. It acts as what could be called a circuit breaker to ensure that if one party to the transaction gets into trouble, we do not have a domino effect right throughout the system, so the clause is designed to ensure that smaller traders have access to this circuit breaker or clearing activity. I ask the Minister: is what we are doing here mirroring what the EU have done through this EMIR refit process, or are the two measures in this clause—the data one, and the fair and transparent one—a departure in any way from that?

[John Glen]

The changes are almost identical to those made through EMIR refit in the EU. The UK played a pivotal role in the design of the EMIR refit and previously voted in favour of this legislation. Now that the UK has left the EU, we continue to believe that these measures are helpful to UK industry and will improve the financial stability of the UK. As I said, the FCA will design the implementation of the new frameworks in a way that works best for the UK. In making these observations, I underscore the comments I have made throughout that we will always seek to maintain the highest standards but to make them work optimally in the United Kingdom.

Question put and agreed to.

Clause 35 accordingly ordered to stand part of the Bill.

Clause 36

Regulations about financial collateral arrangements

Question proposed, That the clause stand part of the Bill.