Financial Services and Markets Bill (Third sitting)

Peter Grant Excerpts

Committee stage
Tuesday 25th October 2022 Public Bill Committees

[The Chair]

I have a few preliminary comments to make. Will Members who speak send their notes by email to Hansard in the usual way—it really helps? Will you ensure that you have turned off all your electronic devices, so that you do not disturb anyone? As ever, tea and coffee are not allowed during sittings—just a reminder. Everyone in Committee is experienced, but there have been a lot of changes over the past couple of years, so I will remind you about proceedings and how we run Bill Committees.

Today, we begin line-by-line consideration of the Bill. The selection and groupings list for the sitting is on the table—it is worth getting a copy—and it shows how the clauses are selected and the amendments grouped together for debate. Amendments grouped together are generally on the same or similar issues. I know you are aware of this, but decisions on amendments do not take place in the order in which they are debated; they are taken in the order in which they appear on the amendment paper. The selection and groupings list shows the order of debates. Decisions on each amendment and on whether each clause should stand part of the Bill are taken when we come to the relevant clause.

The Member who has put their name to the lead amendment in a group is called to speak first—so, I will call Peter first, because his amendment is the first listed today—and other Members are then free to catch my eye in the usual way. I urge you to make that obvious, as sometimes it is a little difficult to tell. A Member may speak more than once in a single debate. At the end of a debate on a group of amendments, I shall call the Member who moved the lead amendment again. Before they sit down, will they please indicate whether they wish to withdraw the amendment or take it to a vote? Will any Member who wishes to press any other amendment in a group to a vote please let me know in advance, because it helps the organisation of our proceedings?

Clause 1

Revocation of retained EU law relating to financial services and markets

[Peter Grant (Glenrothes) (SNP)]

I beg to move amendment 44, in clause 1, page 1, leave out line 6 and insert—

“(1) The Treasury may, by regulations, revoke the legislation referred to in Schedule 1.

(1A) The Treasury may not make the regulations referred to in subsection (1) if the Chancellor of the Exchequer considers that the revocation of legislation provided for in the regulations would have the effect of prejudicing the interests of consumers, unless alternative and adequate legislative provision has been enacted which mitigates these prejudicial effects.”

This amendment would mean that the Treasury cannot revoke retained EU law relating to financial services if such revocation would be prejudicial to the interests of consumers, unless other provision has been made to mitigate these prejudicial effects.

[The Chair]

With this it will be convenient to discuss the following:

Clause stand part.

That schedule 1 be the First schedule to the Bill.

[Peter Grant]

It is a pleasure to see you in the Chair this morning, Dame Maria.

As Members know, the SNP group came close to voting against the Bill on Second Reading. In fact, we tabled a reasoned amendment, primarily because of our concern about how the clause intends to take matters forward, but it was not selected by Mr Speaker. A sad fact for many of us is that the United Kingdom is no longer part of the European Union and that, therefore, all European Union legislation needs to be reconsidered. My problem is that it has already been decided in the Bill that, on financial services, all European Union legislation needs to be thrown out.

We hope that someone in the Treasury will at the same time, or very quickly afterwards, replace that legislation with something at least as good, if not better. I mean no disrespect to anyone here, to any Member of Parliament, the Minister or anyone working in the Treasury, however, when I say that I can have no confidence that that process, on that scale and at that speed, will work—we need only look at the number of amendments that the Government have had to table to the Bill because of mistakes in it, as published. In Delegated Legislation Committees on which I have sat, there have been instances where we have had to correct the correction to the correction of an initial piece of secondary legislation arising from Brexit.

It is simply not realistic to believe that all the revocations and repeals proposed under the clause can be replaced with equally good regulation without mistakes being made. When mistakes are made in the regulation of financial services, people get scammed, companies that should survive go under and the United Kingdom’s reputation as a dodgy place to do financial services becomes even worse. For all that I am not a big fan of the United Kingdom, I do not want to see that happen. I am not a big fan of the United Kingdom Parliament either, but I do not want to see its right to scrutinise in detail any suggested changes to legislation undermined, simply because it suits the Government of the day.

While it may be that the right thing to do with all 200-plus pieces of legislation listed in schedule 1 is to revoke and repeal every single word, Parliament should be given a choice, at reasonable speed, to decide whether that is correct. Ideally, at the same time as Parliament is asked to revoke the legislation, we should be given the chance to consider what will be put in its place.

My view on clause 1 altered slightly when we heard from the witnesses last week, especially those from the financial institutions. Some of them said that they genuinely felt that some of the existing EU legislation needs to go or to be changed significantly. I did not hear anybody asking for a wholesale revision of all 200-plus pieces of legislation. The motivation appears to be to take the European Union sticker off the number plate and put a Union Jack on it instead. If that is the only difference that is being made, what the Government suggest here is far too risky and undermines the right of Members of Parliament, including those who are not on the Committee, and their responsibility to scrutinise legislation that is crucial not only to the wellbeing of the economy on a big scale, but to the wellbeing of the economies of hundreds of thousands of our constituents. For many of them, this legislation has come too late, because they have been ruined by financial services scams that could perhaps have been prevented if this legislation had been introduced sooner.

It is my intention to press the amendment to a Division, Madam Deputy Speaker—I mean, Dame Maria. I do not know whether I should apologise for promoting you. Accepting the amendment would not significantly delay any legislative changes that the Government intend to introduce, but it would ensure that they are scrutinised properly to increase the chance that when mistakes are made in the replacement legislation, as they will be, they are picked up and dealt with before it is too late.

[Dame Angela Eagle (Wallasey) (Lab)]

Good morning, Dame Maria. It is a great honour to be on a Bill that you are chairing—I think it is our first time together in this iteration.

The Opposition do not have a problem with the principle of repealing some of the EU legislation, but I rise to invite the Minister to give us more detail on precisely how he envisages the wide-ranging power in clause 1 will be exercised in practice. I speak as a former member of the European Statutory Instruments Committee, which did a great deal of work in sifting all of the EU legislation to onshore it ahead of Brexit, including all the legislation covered by the Bill. We sat regularly and looked at thousands upon thousands of pieces of EU legislation, which we brought onshore ahead of Brexit. A great deal of work was done to achieve that, but a great many mistakes were made during the process in the drafting, the interpretation and the way in which powers were onshored in areas where we have not legislated directly for 47 years. This is a great accumulation of technical, but also extremely important, legislation that impacts on our constituents’ experience of everyday life as consumers and on how they use financial services and insurance, banking and savings products. If we get it wrong, there can be a great deal of detriment to our constituents.

Will the Minister give the Committee an idea of how the wide-ranging power to amend a large amount of legislation that has been on the statute book for many years will be done in a way that reassures all our constituents that we have the right balance between consumer protection and consumer rights on the one hand and our financial services industry and the way that it operates on the other? How will Parliament get to look at this? It is possible to argue that clause 1 would allow Parliament to be run over roughshod, without providing proper scrutiny, so will the Minister indicate how it will work in practice? How does he propose the powers will be exercised? What can Parliament do if we perceive that an issue that has been overlooked in all the technocracy impacts on our constituents? We need to ensure we have proper accountability.

I would be less worried if, as the hon. Member for Glenrothes said, we are just taking off an EU flag and sticking on a Union Jack, but I assume the Minister is taking these powers because he wants to use them. Will he set out in his comments on clause 1 precisely how he expects that to happen?

[Shaun Bailey (West Bromwich West) (Con)]

It is a pleasure to see you in the Chair, Dame Maria. We often cross paths in these Committees and it is great to see you once again in the Chair.

I will speak briefly about amendment 44, following the comments of the hon. Members for Wallasey and for Glenrothes. The Government need to be nimble in how they lay regulations, particularly in this transitional period. Clause 1 provides the ability to be agile, particularly as we redevelop our financial services framework following our departure from the European Union. The Government clearly need the ability to do that. We are dealing with a vast array of regulation, primary legislation and laws that will require a significant amount of time to be developed, but at speed. Clause 1 enables the Minister to do that, and I trust my hon. Friend the hon. Member for Arundel and South Downs to develop the legislative framework in the right way.

[Peter Grant]

If there is such an urgent need for speed, why has it taken so long for the Bill to be brought before the House?

[Shaun Bailey]

Perhaps I should have finished my comments, which would have led to the point that the hon. Gentleman has made. There is a need for speed and also a need to make things right. I think that is the point that he and the hon. Member for Wallasey were making, particularly as it is so vital that we get it right. I agree with the hon. Lady that there is a place for scrutiny. Drafting errors are a concern, and we have to make sure that as we build the framework, it is done in the right way. I pay tribute to the work that she did on the EU sifting Committee, because it is a thankless task to go through.

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[Andrew Griffith]

The Committee will indulge me if this sounds repetitive, but the thrust of the questions is the same: there is no change in the fundamental approach to UK financial services regulation, which is that the pen is held by the operationally independent regulators—primarily under the scrutiny of the Treasury Committee, to which they regularly give evidence—and they use the established statutory consultation procedure. That is the position, and will be the position going forward.

If the hon. Member for Kingston upon Hull West and Hessle would like to table an amendment that would dispense with operationally independent regulators in the UK, so that Parliament holds the pen on rule making, the Government will consider it. That is not the Government’s view of what should happen, however, and I do not believe that it is the view of the official Opposition. I understand the important role of parliamentary scrutiny, but an embedded feature, and one that I hear hon. Members pushing back on or challenging, is that regulators—in consultation with industry, following the statutory consultation process—are that ones that make the rules.

I will make some progress. To address a point made by a number of hon. Members, the Treasury will, as it does now, work closely with the Financial Conduct Authority and other regulators to ensure that the transition from retained EU law to UK regulations is orderly and meets the need of UK consumers, and that there is no gap in protections or relevant rules. As I have said, that work will be subject to the statutory consultation process in the normal way.

Amendment 44, tabled by the hon. Member for Glenrothes, is about consumer protection. I can assure the Committee that clause 3(2)(f)—we are getting ahead of ourselves—specifically enables the Treasury to modify retained EU law to protect consumers and insurance policyholders. Clause 4 enables the Government to restate retained EU law in domestic legislation for the same purpose. Consumers of financial services are already assured of appropriate protections under the UK framework for financial services regulation. Parliament has given the FCA a consumer protection objective—one of its core objectives—to ensure an appropriate degree of protection for consumers, which the FCA is required to advance when discharging its general functions. As evidence of that, the FCA has, among other things, recently introduced a new consumer duty. I hope that assures the Committee that there are already adequate consumer protections, both in the Bill and in the wider body of regulation. I therefore ask the hon. Member for Glenrothes to withdraw his amendment.

I will now explain the approach that clause 1 and schedule 1 take to repealing retained EU law. Retained EU law is revoked by clause 1. Schedule 1 lists the retained EU law revoked by clause 1. Part 1 of the schedule captures retained direct principal EU legislation, which means EU regulations such as the prospectus regulation. Part 2 captures secondary legislation that was made to implement EU directives or other obligations. That includes statutory instruments made under the European Communities Act 1972, which implemented significant pieces of EU law, such as Solvency II and the markets in financial instruments directive, known as MiFID.

Part 3 captures EU tertiary legislation, including delegated regulations, implementing Acts and EU decisions. Part 4 repeals part of primary legislation that relates to retained EU law, in particular part 9D of FSMA 2000, which relates to rules defined in relation to the EU capital requirements regulation, and chapter 2A of part 9A of FSMA, which governs technical standards. Those parts of FSMA will not be necessary following the repeal of the retained EU law to which they relate. Part 5 acts as a sweeper provision: it revokes all EU derived legislation relating to financial services that is not directly listed in the schedule. That does not capture any domestic primary legislation; it simply captures the kinds of EU law covered by parts 1 to 3 but not specifically listed. I therefore recommend that clause 1 and schedule 1 stand part of the Bill.

[Peter Grant]

I thank all the hon. Members who contributed to the debate. I notice that the Minister did not explain why amendment 44 is a bad idea. He has not given any reason why it would make things worse. He has argued that it would not make things better, would make them only slightly better or would make them better in a way that is not needed.

I take the Minister’s point that later parts of the Bill give the Treasury the power to act in the interest of consumer protection. I want to go further than allowing the Treasury to protect my constituents; I want Parliament to force the Treasury to protect my constituents. We do that by not allowing the Treasury to revoke consumer protection legislation until we, the House of Commons, are on behalf of our constituents satisfied that there is a suitable replacement for it.

I draw the Committee’s attention to part 5 of schedule 1, on page 96 of the Bill. It essentially states, “We have listed 200 bits of legislation that we are going to revoke. There are probably lots of other ones that we have not found yet, so we are going to put in a catch-all clause, so that they will all be revoked as well.” That does not strike me as a good way for the House of Commons to revoke legislation. The Minister has repeatedly said that the Government do not expect all the legislation to be revoked overnight. In fact, the explanatory notes to the Bill point out that the Government think that changing all that EU law will take several years. What happened to, “We got Brexit done”? We have hardly even started on the financial services part of Brexit.

As I said in my opening remarks, although I was against the suggestion that that law needs to be changed, I accept that the United Kingdom has to start to change parts of EU law. The wholesale nature of the change intended in clause 1 is not necessary and is extremely dangerous to the interests of our constituents. Amendment 44 would not necessarily remove all of that danger, and I am still concerned about what we would be left with. I have nothing but respect for the Minister as an individual, but let us face it: if recent history is anything to go by, he will not be there when decisions on revoking legislation are actually taken. Who knows? Maybe he has his phone on just now, and is waiting for that call.

Let us be honest: over the summer, this has not been a Government who have honoured their promises. They have not honoured the assurances made to their own party members so that one Member could become Prime Minister—the Prime Minister who recently resigned. Promises made at the Dispatch Box have been unmade almost before the Minister making them sat down. This Government have severely damaged the tradition that assurances given by a Minister, either here in Committee or in the Chamber, will always be honoured. That does not happen any more. I am afraid the House is entitled to ask for a bit more than might have been accepted a few years ago, when the traditions of this House were actually respected by each and every member of the Government.

[Dame Angela Eagle]

Clearly, Pepper v. Hart applies when a reassurance is given by a Minister. That is partly why we ask questions in these proceedings. We wish to have on record reassurances about the meaning of the statute in front of us, how the Government interpret it, and what the Government’s intent was. If there is any subsequent doubt about that, the record can be looked at under the provisions of Pepper v. Hart.

[Peter Grant]

I am grateful for that intervention. I do not disagree with a word of it. My point is simply that whatever the conventions, traditions and proceedings of this House might tell us, in practice the doctrine of ministerial responsibility does not apply in the way that I just about remember learning about 50 years ago as a schoolchild, in what was then called modern studies. There are numerous examples of Ministers behaving in a way that would require them to go, if they believed in the conventions of the House. I am not suggesting for a second—

[The Chair]

Order. I remind the hon. Member that we really need to stick to the text of the Bill, rather than giving a lesson on constitutional law. That would be really helpful.

[Peter Grant]

Thank you, Dame Maria. I hear the Minister’s assurances, but this issue is too important for us to rely on the conventions of the House, which have been broken far too often. The protection of our consumers and the financial services industry is important enough that any changes to regulations that had to be at least initially consented to by this Parliament should be made only with the consent of this Parliament, to which power was supposed to be returned by Brexit.

Question put, That the amendment be made.

--- Later in debate ---

[Peter Grant]

It is interesting that we have three clauses here, each of which give the Treasury the power to amend legislation in very, very closely defined and restricted ways, and every one of them needs regulations to be approved by Parliament. Most of them require approval by the affirmative procedure. However, two minutes ago we were told we could wipe out 200 different items of legislation in their entirety without Parliament needing to have any oversight of the process. It does seem a strange contradiction.

The way the clauses are worded and the restrictions that are placed on them mean that this is one of the very few occasions where I would be comfortable in allowing regulations to be used to amend primary legislation. However, I have to say that for some of the restrictions, one wonders why they are there. Subsection (6) to clause 3 requires the Treasury to consult the regulator, and subsection (7) basically says, “But the Treasury only needs to consult the regulators if the Treasury thinks it is a good idea”. Why on earth does that need to be put into an Act of Parliament?

If clause 1 had been worded in a similar way to these clauses, there would have been no need for my amendment. There would have been no question at all from my point of view about that clause being accepted. I hope the Minister can explain why it is that these very limited and restricted powers to amend legislation are subject in most cases to the affirmative procedure, whereby Parliament has to approve them, when all the legislation that was put up for repeal and revocation in clause 1 needs no further detailed scrutiny from Parliament.

As far as the concerns raised by the hon. Member for Kingston upon Hull West and Hessle, I think those comments perhaps related to an amendment that the Government have flagged that they intend to introduce that may well give the Government far too much power to direct the supposedly independent regulators. If and when that amendment comes forward, we will certainly have concerns about it. I do not think those comments were related to the clauses in the Bill as it stands. On that basis, I will not oppose the clauses today.

[Dame Angela Eagle]

I want to register some concern and get the Minister’s reassurances on the record about what are very broad-ranging powers for the Treasury, which are then subject to constraints. Was it necessary to have such broad-ranging powers? It is not a good way of approaching things unless there are no other options. Is the Minister worried that, over time, those constraints might loosen and the broad powers will remain? The dynamic of this kind of structure is what worries me, rather than the balance that he has explained the Government have currently set.

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[Andrew Griffith]

I welcome the contributions from the hon. Members for Kingston upon Hull West and Hessle and for Wallasey, and my hon. Friend the Member for West Bromwich West. Both sides of the House are wrestling with exactly the same issue, which is taking what is acknowledged to be an unprecedented corpus of European law, which the Westminster Parliament had no opportunity to have oversight of or change—

[Peter Grant]

Will the hon. Member give way?

[Andrew Griffith]

I will not give way at the moment. The issue is therefore about docking that corpus into an established framework of operationally independent regulators, with Parliament establishing the perimeter and ultimately having the right degree of scrutiny. That may be through the public interest intervention power that the hon. Member for Kingston upon Hull West and Hessle talked about, but which is not tabled in the Bill at the moment and is subject to continuing debate. That was the main thrust of the witness in the final session of last week’s sitting.

As currently written, clause three does not interfere with regulatory independence. Repealing retained EU law means the regulators will generally, as the default position, take over setting the detailed requirements, replacing the function of the European Commission and the European Parliament. However, that will take time and so we will not repeal those rules immediately. The regulators, under direction and intervention, as currently, from the Treasury Committee, will decide on the areas of most focus.

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[Dame Angela Eagle]

Obviously, this is an extremely complex area of technical regulation. It requires the regulators, alongside the Basel Committee and the international authorities regulating the flow of this kind of stuff, to operate effectively. If securitisation goes wrong or if markets begin to be opaque, with transparency going down, there can serious consequences for the countries in which such firms are based. That might also engage systemic threats to the banking structures of those countries. We have been through that before, and we know what happened when securitisation went wrong in the global financial crisis and what damage that caused to the global infrastructure.

Clearly, those tasked with ensuring that that does not happen again—those in the Bank of England, the prudential regulators and the FCA who have a handle on this, as well as the international regulators trying to set standards—have to be very aware of how such regulation might change and effect firms in the markets. However, there will always be a push in these markets to move the boundaries towards something less opaque and more profitable for those doing business, hoping that the risks can be left somewhere else. When risks crystallise, however, they are left on the balance sheets of nations that have to cope with cleaning up the mess. So, while I approve of modernising such regimes, little alarm bells go off in my mind when I think about attracting more such business. That kind of business is attractive if it is safe; it is not attractive if it is unsafe.

The Minister ploughed through his speech about all the technicalities of the shift away from EU-regulated systems and about how onshoring back to the UK will be done. Given how large our banking, financial services and insurance sector is, we are clearly at systemic risk if we get this wrong. We have to get the balance right between ensuring that any new regimes are transparent and safe enough to be hosted in our country. The Minister took us through some of the technical changes, but will he reassure us about the transparency and safety issues in the new regime that I have hinted at?

[Peter Grant]

If the sun moves much further, I will have to sit on the other side of the room to keep it out of my eyes, so my apologies for having to move seat during the debate, Dame Maria.

I thank the Minister for doing what I hoped he would have done in the debate on the revocations in clause 1: outlining in terms understandable to a lay person why some specific items of EU legislation are no longer appropriate for the United Kingdom—in fact, it is questionable whether they are appropriate elsewhere. I would have wanted to see that before the changes proposed in other parts of the Bill. On the basis of the Minister’s comments, and the fact that none of the regulators we heard from raised concerns, I am willing to accept that the changes suggested in the clause and the details in schedule 2 are appropriate.

I want to draw attention to a comment the Minister made earlier and to give him the chance to correct it. He suggested that this is EU legislation that Parliament never had the chance to scrutinise, but that is not the case. I spent several years, as other hon. Members did, on the European Scrutiny Committee. Every single piece of legislation the European Union intended to implement came before that Committee, which had the authority to call in Ministers and to put a stop on them approving things at EU Council meetings if the Committee was unsatisfied as to the impact. The House of Commons—the whole of Parliament—had the right to take action to prevent any of those directives from coming into force. The fact that Parliament seldom did that is a failing of this and previous Parliaments. The fact that Ministers had so much free rein to do what they liked, and could ignore Parliament if they wanted to, is not the fault of the European Union; it is because of the relationship between Parliament and Government. This Parliament is unfit for purpose, and Ministers from other members of the European Union would not have been allowed to agree to those directives without a vote in their respective Parliaments. I hope the Minister will be willing to correct the record. We can agree or disagree about legislation that the European Union put in place, but to suggest that this Parliament was somehow unable to have any impact on that legislation is simply not accurate.

[Tulip Siddiq]

Has the Minister picked up any feedback from the sector about the Government’s proposed reform to the position limits—a regulation under MiFID II—and the fact that they have not been adequately assessed for commodity market speculation risks? How does he plan to keep that issue under review? If he has heard of concerns, is he planning to address them?

[Andrew Griffith]

I am happy to stand corrected by the hon. Member for Glenrothes, but I am not happy to relitigate matters that the British people settled, given the chance in a referendum. I hope the hon. Member will reciprocate by looking forwards, not backwards, so that we can go forward with the best financial services regulation for the UK.

The matters raised by the hon. Members for Wallasey and for Hampstead and Kilburn are precisely within the scope of the regulators, and they have been consulted on. The hon. Member for Hampstead and Kilburn raised important points about the commodity market. The regulators are aware of those, and they will remain under constant review. Parliament itself has the ability, as always, to set the perimeter within which the regulators operate. Having addressed those points, I have no further comments.

Question put and agreed to.

Clause 2 accordingly ordered to stand part of the Bill.

Schedule 2 agreed to.

Clause 8

Designated activities

[Peter Grant]

I beg to move amendment 34, in clause 8, page 7, line 4, after “activity” insert—

“(c) the extent to which the activity has the effect of raising finance for any business purpose by means of soliciting financial contributions other than by—

(i) an authorised issue of shares, or

(ii) borrowing from an authorised financial institution.”

This amendment would allow the Treasury to designate and regulate businesses which seek to raise finance by soliciting contributions from the general public other than by an authorised share issue.

First, I welcome the intention behind the clause, because it seeks to close a number of loopholes that have become evident in the way financial regulators are allowed to regulate and in the way that activities come within or fall beyond their scope. Far too often we see dodgy operators deliberately choosing to operate in empty spaces between the remits of different regulators. Too often the regulators seem more concerned about arguing that something is someone else’s responsibility than about taking responsibility themselves.

It is not clear whether the amendment falls within the scope of this Bill or that of the Economic Crime and Corporate Transparency Bill, which is about to start its Committee proceedings, so I am pleased that it has been ruled competent. Essentially, the problem that the amendment is designed to address is what Blackmore Bond and Safe Hands Funeral Plans became. Quite possibly, it was always the intention of the directors that they would move away from being businesses carrying out particular business activities, and towards being businesses of which the main purpose in life was to get the general public to fund those activities. Although Safe Hands was a funeral plan business on the face of it—that was how it was set up—it became a way for the director, who took over a few years before the company collapsed completely, to take money from people who thought their money would be kept safe to pay for their funeral when the time came. The director then used that money to speculate on wildly high-risk and potentially high-profit investments.

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[Stephen Hammond (Wimbledon) (Con)]

I understand exactly what the hon. Gentleman is trying to do with the amendment, and I have a lot of sympathy, but I am not clear about its scope and extent. Is he trying to ensure that the Treasury starts to regulate crowdfunders? That is potentially what the amendment would allow. It is a very widely drawn amendment, and I seek clarification on this point.

[Peter Grant]

If it became clear to the Treasury or the relevant regulator that crowdfunders were using funds for illicit purposes, rather than for genuinely good causes, I would expect the Treasury and the relevant regulator to step in. My amendment is designed to put primary legislation in place to allow the regulators to step in, and to allow the Treasury to take action, if it becomes clear that there is a problem, regardless of whether that is through crowdfunding or any other method of raising finance. The important part of the amendment is about finances being raised as a way of raising capital. The amendment does not in any way imply that it would cover, for example, crowdfunding for a good cause or to raise funds for someone who has had a serious accident. That would not be covered by the wording of the amendment.

I can understand the concerns, and I am quite happy if someone can come up with better wording—possibly in an amendment to a different piece of legislation—that achieves the aim of the amendment, but I am utterly convinced that there is a serious weakness in our current regulation. As currently worded, neither this Bill nor the Economic Crime and Corporate Transparency Bill will close down that loophole sufficiently.

At Blackmore Bond, the abuse that was taking place was stopped after it was too late. At Safe Hands Funeral Plans, the abuse that was taking place was stopped after it was too late and people had lost their money. The selling of mini-bonds to the general public, which is what Blackmore Bond was up to, is now outlawed, so action has been taken on that specific kind of abuse. Funeral plans are now regulated, so action has been taken on that specific kind of abuse. I do not want the regulator or the Treasury having always to see where the next specific company disguise is going to be, however; I want them to have the power to regulate based on how businesses take money from the general public.

With those comments, I look forward to hearing the Minister’s response. If he is not minded to accept the amendment, I hope that we can get an assurance that the intention behind it will be addressed at a later stage.

[Emma Hardy]

I have a general question on the clause and the designated activities regime. In the consultation response document produced by the Treasury—“Financial Services Future Regulatory Framework Review: Proposals for Reform. Response to Consultation” to be precise—some consultation respondents were concerned about what activities would physically be regulated, what constraints were to be placed on the powers of the Treasury and what the consequences for failing to comply with the regulator’s rules would be. I have not yet seen their concerns answered by the Minister. Will he address that?

[Andrew Griffith]

The amendment seeks to make it clear that offers of non-equity securities to retail investors—for example, as cited, retail bonds—can be brought into regulation through the designated activities regime. That is the important subject we are talking about. That regime—the DAR—has been designed to allow for the proportionate regulation of activities involving interactions with financial markets in the UK and conducted by many that are not traditional financial services firms. In essence, it is the core scope of regulation. The DAR includes a range of activities, such as an activity connected to the financial markets or exchanges of the UK, or an activity connected to financial instruments, financial products or financial investments issued or sold in the UK. Any of those can be designated under the DAR. Our contention is that it is therefore already sufficiently broad in scope. We will discuss that further when we consider clause stand part later.

Offers of non-equity securities to retail investors as proposed by the amendment would fall within the definition of the DAR should the Government wish to designate that activity in future. Indeed, proposed new schedule 6B of the Financial Services and Markets Act 2000, which is to be inserted by the Bill and which provides illustrative examples of the types of activities that His Majesty’s Treasury may designate, includes

“Offering securities to the public.”

I can therefore give my hon. Friend the Member for Wimbledon the comfort that he seeks, in that the provision does extend to crowdfunding, which was his specific point.

[Peter Grant]

I am grateful for that assurance, but does the Minister take my point that in the examples of abuses that I mentioned, people did not say that they were offering any kind of securities? They said that they were selling funeral plans. Next time, they will be selling school or university fees plans or Christmas hamper plans; it will not be presented as the selling of equities as he and I would understand it.

[Andrew Griffith]

We will refer to that in more detail when we return to the DAR this afternoon. The DAR is the important establishment of the perimeter. I hear the hon. Gentleman on how we set the scope and those definitions, but the position of the Government is that the Bill already enables the Government to take action to ensure that offers of retail bonds are appropriately captured by regulation.

In April 2021, the Government consulted on the future regulation of non-transferable debt securities such as mini-bonds. In response to the consultation, the Government decided to bring certain non-transferable securities, including but importantly not limited to mini-bonds, within the scope of the reformed prospectus regime. The Government confirmed that we would bring forward our reforms to the UK prospectus regime using the powers in the Bill to replace retained EU law—following commencement. I am therefore confident that the Bill as drafted can achieve what is needed to regulate such activities. I ask the hon. Gentleman to withdraw his amendment.

[Peter Grant]

I am still not sure that the Minister gets this. I will not push the amendment to a vote, but I sincerely hope that he will see the need for such a measure in financial services legislation or, more appropriately, in the Economic Crime and Corporate Transparency Bill on its way through the House. If the clause as worded had been in place 20 years ago, Blackmore Bond would still have happened, Safe Hands would still have happened, and my constituents and all others would still have been scammed out of hundreds of millions of pounds.

A couple of years ago, when I spoke about Blackmore Bond, I said that I had a horrible feeling—an almost certain feeling—that it was already happening again somewhere else; six months later, Safe Hands collapsed and tens of thousands of people lost all their funeral plan money. I do not know the nature of the business that is being used as a cover for the latest scam, but deep in my guts I know that it is happening now, and that it will happen again next year and the year after. Nothing in this legislation as framed adequately clamps down on that.

I will not push the amendment to a vote, not because I do not think it is important but because I would rather not put it to a vote to see it voted down, which would be a serious mistake by the Committee. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Ordered, That further consideration be now adjourned. —(Joy Morrissey.)