Oral Answers to Questions

Peter Grant Excerpts

Tuesday 7th February 2023 Commons Chamber

[James Cartlidge]

I have also met the FSB. The one crucial point I would make is that I understand why businesses are concerned in these very challenging times—I ran a small business myself before entering Parliament—but we have to balance out the costs of these schemes to the Exchequer. We have to run sound public finances, not least because that engenders a platform of stability and confidence, which is in the interest of every single business in this country.

[Peter Grant (Glenrothes) (SNP)]

I may have missed it, but I do not think the Minister even attempted to answer the question asked by my right hon. Friend the Member for Dundee East (Stewart Hosie) a wee while ago. How can a small retail business possibly be expected to survive if it is facing an increase of more than £100,000 a year on its overheads while at the same time its customers cannot afford to support it because they cannot afford their own electricity bills? Could it possibly be related to the news that BP shareholders are today celebrating the biggest profits in the company’s long history? Does that give the Minister an indication as to where he might look to find the tax revenue to support small businesses and householders?

[James Cartlidge]

The hon. Gentleman is aware that we have already introduced two new levies: the energy profits levy, which relates to North sea oil and gas; and the electricity generators levy, which relates to the exceptional returns that generators will have received because of the exceptional prices following the invasion of Ukraine. I said to the right hon. Member for Dundee East that he was more than welcome to write to me with the specifics of the case he mentioned, and I look forward to receiving that letter.

Oral Answers to Questions

Peter Grant Excerpts

Tuesday 20th December 2022 Commons Chamber

[John Glen]

I gave evidence to that inquiry and I heartily agree with its conclusions. Stability is at the core of the regulators’ objectives, but so is the need to look at the competitive landscape across the globe and ensure that the UK, with the city of London as a global hub for financial services, evolves and remains competitive, taking account of the risks but also developing frameworks in line with expectations, so that we can remain that world-leading global hub.

[Peter Grant (Glenrothes) (SNP)]

5. What recent assessment he has made of the potential impact of his policies on levels of poverty in Scotland.

[The Exchequer Secretary to the Treasury (James Cartlidge)]

The Chancellor published the “Impact on households” document alongside the autumn statement 2022, containing analysis of how policy announcements affect household incomes. The results show that the autumn statement decisions on tax, welfare and changes to the energy price guarantee in 2023-24 benefit low-income households across the UK, including Scottish households, the most. The autumn statement announced further support targeted at 8 million of the most vulnerable households across the UK, who will benefit from additional cost of living payments in 2023-24.

[Peter Grant]

The Joseph Rowntree Foundation found that, by October this year, one in five households in Scotland had already had to go without food or without heat because they could not afford both—and that was before the recent severe cold snap. The JRF also described the Scottish child payment, introduced by an SNP Government, as

“a watershed moment in tackling poverty”.

Does the Minister have any plans to speak to the Scottish Government to find out how the Scottish child payment works so it can be introduced here? Who knows—they might give him some tips on how to avoid a nurse’s strike at the same time.

[James Cartlidge]

I am, as ever, grateful to the hon. Gentleman for his advice. Of course, we engage closely with the Scottish Government. The latest official statistics from the Department for Work and Pensions, based on data up to 2019-20, show that, compared with 2009-10, there were 55,000 fewer people in absolute poverty after housing costs in Scotland. But I think the key point is that we are supporting everyone in every single part of the UK with their energy bills this winter. It is a challenging time, but our extraordinary help is making a real difference.

Financial Services and Markets Bill

Peter Grant Excerpts

Report stage
Wednesday 7th December 2022 Commons Chamber

[Andrew Griffith]

I thank my hon. Friend who, as one of my predecessors, has made a significant contribution to getting the Bill to where it is today. I will try to indulge him, but he will also recognise that the Bill is about putting enabling powers in place, and there will be opportunities on future occasions to discuss how we deploy those.

New clause 18 introduces a requirement for the regulators to ensure that all members of their statutory panels are external and independent of the Treasury, the Bank of England and the regulators. That will codify the current approach taken by regulators, putting it in statute, building confidence in their independence and ensuring that it is maintained on a long-term basis.

New clause 19 introduces a new requirement for the regulators to publish a list of respondents to their public consultations, provided that the respondents consent. The requirement is limited to the financial services regulators and their specific statutory consultation in existing financial services legislation. New clauses 18 and 19 also address points raised by my hon. Friend the Member for North East Bedfordshire (Richard Fuller) and the hon. Member for Richmond Park (Sarah Olney).

I also note the interest of my hon. Friend the Member for Harrow East (Bob Blackman) in enhancing regulator accountability through his new clauses on a new regulators’ supervision council and ending regulators’ statutory immunity from civil damages. I understand where he is coming from, and I note that he chairs the all-party parliamentary group on personal banking and fairer financial services, but the Government’s position is that a new supervisory council would duplicate existing accountability structures. Indeed, none of the representations that I receive from industry says that the biggest thing that will help growth and competitiveness is another layer of regulators. There is also a great deal of existing accountability structures, including the role undertaken by this House and its various Committees, which is why that position was supported by the Treasury Committee in its July 2021 report. Removing the regulators’ statutory immunity from liability and damages would risk regulators over-regulating to avoid the risk of liability. There are already mechanisms for holding regulators to account, including the complaints scheme. That scheme is overseen by the independent complaints commissioner, who has powers to recommend redress.

[Peter Grant (Glenrothes) (SNP)]

I certainly appreciate the Minister’s concern that we might see precautionary regulation, but is the best way to avoid that not simply to restrict the removal of liability to cases in which the regulator has clearly and negligently failed to act to deal with a situation in which an already regulated activity was being carried out in an unacceptable way? That is what happened with Blackmore Bond. It was not an unregulated activity; it was an activity that fell within the scope of the Financial Conduct Authority, but it failed to act and £46 million was stolen from people as a result.

[Andrew Griffith]

The hon. Member draws our attention to the very tragic cases that occur when financial regulation goes wrong and does not do its job in the way every Member of this House would like to see. He also talks about a legal threshold for that. He will perhaps appreciate that I do not have the facts of that particular case before me and that we are not drafting things here and now. I have heard from Members on both sides of the House about some of the problems in what we are talking about, which is essentially the conduct of the regulator, and I understand colleagues’ desire to look at legal liability as one remedy, but there are many powers in the Bill, and as I say, the Bill will not constrain the ability of this House or Ministers going forward.

The hon. Member for Kingston upon Hull West and Hessle (Emma Hardy), with whom I spent a lot of time in the Bill Committee—I suspect we will hear from her later this afternoon—has tabled a new clause on considering economic risks in regulators’ cost-benefit analysis panels. I would like to reassure her that the regulators already take steps—and, to assuage her concerns, they could perhaps do more—to think about economic crime when they do that. They have the power, of course, to consult experts where they consider it relevant.

I thank my hon. Friend the Member for North East Bedfordshire again for raising the issue of regulatory proportionality. I wish to reassure him that the Government are clear that the burden of any regulation should be proportionate to its benefits, and that is set out in existing legislation. I am very happy to reiterate again today that I expect the regulators to fully and proactively embrace that principle, which is embedded in statute. That is particularly important, as the Bill confers on them greater rule-making responsibilities. I suspect we will hear from my hon. Friend later on.

I will now turn to Government amendments 8 to 11 —I apologise, but there are quite a lot of amendments to crack on through. Clause 6 already enables the Treasury to exempt regulators from the statutory requirement to consult on rules when they are replacing retained EU law repealed by the Bill without making material changes. Amendments 8 to 11 go further. They create a blanket exemption from the statutory requirement to consult in situations in which the regulators remove EU-derived rules from their rulebooks without replacement. The amendments also allow the Treasury to exempt the regulators when they are amending EU-derived rules or replacing retained EU law in their rulebooks, and when the only material effect of the change is to reduce regulatory burdens. That ensures that the regulators can take that proportionate approach to consultation, accelerate the repeal of retained EU law, and not let the requirement to consult be an obstacle or delaying factor. It is a long time since the British people voted for Brexit, and it is time to start delivering those benefits. Nothing in the amendments changes the obligation on the regulators to act to advance their statutory objectives, so any reduction in regulatory burdens must be compatible with those objectives.

Let me briefly cover the two remaining Government amendments, and I will then move on. New clause 20 ensures that a new type of fund vehicle currently being explored—the unauthorised contractual scheme—would be commercially viable if it were introduced. The proposed fund has the potential to improve the competitiveness of the UK by filling a gap in the UK’s existing fund offering and supporting the domestic growth agenda by facilitating greater investment in UK real estate by UK funds. Amendment 17 is a minor and technical amendment to rectify an inadvertent omission in drafting.

I will now address the amendments tabled by other Members. I am conscious that I am speaking before Members have had a chance to introduce their amendments, so I look forward to responding in more detail, where necessary, at the end of the debate. Let me start with the important issue of access to cash. I represent a rural constituency with a higher-than-average proportion of elderly and vulnerable residents, so I am acutely aware of the very real concerns around this topic. As of today, there remains extensive access to cash across the UK as a whole—over 95% of people live within 2,000 metres of a free cashpoint. I want to be clear that it is not acceptable for people to have no option but to travel large distances or pay ATM fees to access their own money.

If hon. Members have a concern in their local area, as I know many have, I strongly recommend that they reach out to LINK, which is leading the industry-led initiative to see what can be done to help constituents. LINK is delivering, for example, a new free-to-use ATM in the Pollards Hill estate in the constituency of the hon. Member for Mitcham and Morden (Siobhain McDonagh)—I have already made a commitment to her to visit and open it.

--- Later in debate ---

[Peter Grant]

Thank you, Madam Deputy Speaker. I am pleased to speak on behalf of the Scottish National party in this afternoon’s debate, and I find myself in a strange position: after welcoming the new SNP leader last night, it is quite possible that, having stood up from the Front Bench, I might be sitting down on the Back Benches. It is a strange experience for me, but it has been quite common on the Conservative Benches for most of this year.

Colleagues who served on the Bill Committee will know that I had to miss most of its considerations for family reasons, and I want to place on the record my thanks to my hon. Friend the Member for West Dunbartonshire (Martin Docherty-Hughes), who unhesitatingly took on my share of the work on the Committee as well as his own. By all accounts, from what I have heard from Members of all parties, he did so very well. None of them said that he did it better than I would have done, although quite possibly he did.

We have well over 60 new clauses and amendments in front of us today, and we are not going to do justice to 10% of them—that is the nature of the way this place operates. I am also well aware that since we started the Committee deliberations, only three parties have had the chance to contribute, and I think it is only fair—I hope it is possible—that that balance be addressed later today. Other parties have voices and constituents, and the voters and constituents who do not like the governing party have a right to have their voices heard in the debate, which will be the only chance that they get.

I intend to simply restate the SNP’s position on the main themes of the Bill, as an indication of where we stand on most of the amendments. I will mention some specific amendments, but I hope that my comments will give an indication of which ones we support.

We recognise that there is a need for a complete overhaul of the UK’s financial services regulatory framework, although possibly in a slightly different direction from where the Government want to take it. For example, I have long argued that the Financial Conduct Authority does not have enough powers or resources. It has to be said that sometimes it does not seem to have the desire to take swift and effective action to stop frauds before they happen, and sometimes it does not have the power to compensate victims afterwards.

The SNP continues to have severe reservations about forcing regulators to put international competitiveness on an equal and sometimes higher footing than their actual regulatory responsibilities. There is a potential and very clear conflict of interests between being responsible for regulating the conduct of organisations and being responsible for helping them to become profitable. There are ways that companies can become more competitive that are quite clearly helpful to the public interest, and there are ways they can do it that are neutral to the public interest. There are also ways that a company can become more competitive that are extremely damaging to the public interest—for example, look at the way P&O treated its workers a few months ago. That made the company more competitive, but it was clearly against the wider public interest.

The regulators should have clear responsibilities on matters such as financial stability, consumer protection, fraud prevention and climate change objectives. On climate change objectives, I will not shilly-shally and make excuses; I will support new clause 25 if the House divides on it.

The Government have missed the chance—although from the Minister’s comments, I think we can assume that they have deliberately ignored the chance—to put financial inclusion at the heart of the Bill, so we will support amendments that address that. My understanding is that the official Opposition will press new clauses 2 and 7 to a Division today and we will certainly support them. As has been mentioned, free access for people to get their cash out of the bank is important and has to be available as a legal right, not simply as a by-your-leave on behalf of the banks and other financial institutions. I share the suspicion that if the amendments had not been tabled and if the banks had not known that those were coming, they would not have been nearly so keen to adopt voluntary codes of practice, and so on. We will also support new clause 23, which will force the FCA to give much more recognition and priority to the requirement for greater financial inclusion.

As I mentioned, we welcome the Bill’s anti-fraud measures, but they do not go nearly far enough. The Bill is hardly even present-proof, never mind future-proof. It is almost as though we are finally catching up to legislate, at the end of this year, for last year’s scams, and we are failing to notice that the bad guys and gals have designed new scams for this year and are already working on next year’s. For example, I welcome the fact that the Bill will give the Payment Systems Regulator a duty to improve the reimbursement of authorised push payment scams, but the same provision will not be carried over to the victims of crypto-scams, pension scams, investment scams or various others.

We will support new clause 1, as well as new clause 36, if that is pushed to a vote. New clause 36 emerged from a conversation between Public Accounts Committee members after we took evidence recently on the Government’s record on tackling fraud. A lot of us were struck by the fact that we knew, but had never really thought about, the fact that nobody has any idea of what the real level of fraud is in the United Kingdom, because, too often, financial institutions have a self-interest in choosing to cover it up rather than to report it. We know that 40% of reported crime in the United Kingdom is fraud, and the proportion is probably higher than that because a lot of the frauds against individual institutions are covered up rather than reported.

I am grateful to the hon. Member for Sheffield, Hallam (Olivia Blake) for taking the time and trouble to introduce that new clause. If, as I strongly suspect will happen, the Government say that they are not against the principle but that they do not like the way in which it has been drafted, I hope that they commit to introducing a similar amendment in the other place in due course.

I remember—I think a lot of Opposition Members do—that not that long ago, the Tories were very enthusiastic about the idea of forcing people, including Members of Parliament, to report cases of suspected illegal immigration. It will be a real test and give a real indication of how seriously the Government take the damage that fraud causes to all our constituents if they refuse to even consider a similar requirement to report cases of suspected fraud.

The final serious concern that we have about the Bill, as with several other Bills that we have seen being rammed through this place, is the relentless drive to become as different as possible from the European Union, just for the sake of it. Although I do not know whether amendments 8 to 11 will be voted on tonight, had the Government submitted those as new clauses in Committee, or had they been part of the Bill as published, it is almost certain that we would have opposed them.

It will come as no surprise that, on behalf of the people of Scotland, the SNP will resist any attempt to drag us further from our European friends and neighbours than we already are. We make no secret of our intention to keep our country in a position where the restoration of our independence will be followed as swiftly as possible by our restoration to our rightful place as a sovereign nation in the EU. We want the transition back into EU membership to be as easy as possible, so we want that to be from the starting point of being as close to alignment with the EU as we can be.

This morning, an opinion poll showed support for Scottish independence at 56%—by jings! The new leader of the SNP group has fairly made his mark, has he not? Fifty-one per cent. would vote SNP in a Westminster election; that is even more than the landslide that we had in 2015. That increases to 53% if, as the SNP intends, the Westminster election becomes a de facto referendum.

The prospect of Scotland applying to rejoin the European Union as an independent nation within the next few years is not just a fanciful idea, nor is it just likely; it is now highly probable and is rapidly becoming a certainty. We have to act in the best interests of the people of Scotland by making sure that after independence we remain as close as possible to our friends and neighbours in the European Union so that our transition back to European Union membership can be as swift and smooth as possible.

When we rejoin the European Union, it is very likely that central Scotland will immediately become its second biggest financial services centre. It matters to our economy to be able to get back into the European Union with as little fuss and disruption as possible. For that reason, the future of our financial services sector lies not in isolationism from the Government, but in internationalism through membership of the European Union.

[Several hon. Members rose—]

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[Peter Grant]

I endorse and share the thanks of both the previous speakers to all those who have helped the democratic process to happen. Obviously, we are not particularly happy about the results of some of the votes, but that is what happens in life. If we go back to the day before this Bill got its First Reading, we will see that the six Treasury ministerial posts have been held by 21 different people. Who knows, we might have the same Minister on the Front Bench by the time the Bill comes back from the Lords, but I would not bet on it.

Among the people I want to thank personally are my very good and hon. Friend the Member for West Dunbartonshire (Martin Docherty-Hughes), who did such a power of work on his own in the Bill Committee, and someone who will not be a well-known name to most people here, although those of us who know her will understand she has been an absolute star, and that is Sarah Callaghan of the SNP research team. She joined a very good research team not long ago and she has been a fantastic support to me and my colleagues in preparation for this Bill, so I say thanks to Sarah.

I thank the Minister for the courtesy he has shown throughout political debates in which we have not always agreed, but in which I hope we have always been able to be courteous to each other. We will not oppose the Bill; we have reservations about it, but on balance it is just about good enough to get through.

[Madam Deputy Speaker (Dame Eleanor Laing)]

I pause, lest there be further excitement—but no.

Question put and agreed to.

Bill accordingly read the Third time and passed.

Finance Bill

Peter Grant Excerpts

Committee stage
Wednesday 30th November 2022 Commons Chamber

[Anthony Browne]

I am well aware of how fiscal drag works. I have been studying it, reporting on it and commenting on it for about 20 years. My point was that, as the amendment is worded, the person would have become liable to pay the base rate of income tax when they were not previously so liable. If they are not liable now, they will not become liable as a result of this Bill. The hon. Lady could have changed the wording of the amendment—she would need to go to lawyers to work out the wording—but, as it stands, literally no one falls into that category. The one category in which people could end up in higher tax bands as a result of the Bill is not actually mentioned, which is the lowering of the threshold for the additional rate of tax from £150,000 a year to £125,000 a year. So for example, if a person was earning £130,000 a year, they would not be liable for the additional rate of income tax—the 45p rate—now, but they will be as a result of the Bill. However, the hon. Lady’s amendment does not mention that; it mentions the standard rate and the lower rate, for which the thresholds are kept stable.

New clause 8 has not been selected, but the hon. Members for Ealing North (James Murray) and for Gordon (Richard Thomson) both talked about non-doms. I just point out that there is a lot about non-doms that I would tidy up. It is clearly not a perfect system, and I do not think that anybody would defend it. None the less, it was there throughout the time of the last Labour Government. They did many reviews on it—I remember those reviews—and they sort of tinkered with it a little bit, but fundamentally left it the same. They agreed with the arguments currently put out by the Government that it is an overall net gain for the UK economy and for the UK taxpayer.

[Peter Grant (Glenrothes) (SNP)]

I am wondering whether the teddy should be moved on to the Front Bench. It could become one of the most effective Members of the present Cabinet.

The hon. Gentleman mentioned his belief in tax transparency, which is clearly something that we would all welcome. In his autumn statement, the Chancellor made a great deal of the fact that it would mean that somebody working full time on a minimum wage would get a pay rise of about £1,900. He did not mention that the Treasury would then take back almost £500 of that because of the increased tax they would have to pay. Does he believe that it would have been more transparent for the Chancellor to admit how much additional tax somebody on a minimum wage would be paying as a result of there being no increase in the tax bands in this Finance Bill?

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[Peter Grant]

Does the hon. Lady agree that the Government have missed a huge opportunity in limiting the windfall tax to oil and gas companies? They could have introduced a windfall tax on other companies that have, fortuitously, made massive profits as a result of the pandemic.

[Caroline Lucas]

I certainly agree with the hon. Gentleman. If I had to make a suggestion about where the Government should look next, it would be the distribution network operators—the companies that run the grids. There has been no spotlight on them at all even though they are making massive profits right now.

The hole at the heart of the windfall tax has led Shell—the UK’s fourth largest oil and gas producer—to pay no windfall tax or, indeed, any normal oil and gas tax at all. Indeed, oil and gas companies, which have made frankly grotesque profits, will still be able to claim £91.40 in tax relief for every £100 invested in oil and gas infrastructure. What is more, from January 1 a company spending £100 on upstream decarbonisation—which essentially translates as reducing emissions from the process of extracting oil and gas that goes on to be burned—will now be eligible for £109 relief. In other words, the taxpayer is actually paying the oil companies, which are already raking in massive profits—not the other way around.

The Government plan to make real-terms cuts to Departments that have already been starved of funding. They talk about “sacrifices” and “difficult decisions”, as the Chancellor has. Charities warn of a humanitarian crisis, and new research published this weekend shows that almost 200,000 additional young families will be pushed into fuel poverty come April when the energy price guarantee rises to £3,000. In that context, how can the Government possibly justify a situation in which taxpayers are supporting oil and gas companies, whose profits have absolutely ballooned, to fulfil obligations that they can perfectly well afford to pay for themselves.

It is also worth comparing this tax with the one on low-carbon electricity generators, which will be subject to a windfall tax of 45% for revenues above £75 per MWh, yet will not be eligible for investment relief at all. That leads to a ludicrous situation whereby companies will get a bigger tax break for building a wind turbine to power an oil rig than for building one that generates power for the energy grid. I simply cannot see how that is defensible in any shape or form.

The autumn statement should have been the moment where the Chancellor launched a transformation of our economy, powered by abundant renewable energy and with good green jobs. Instead, we had continued support for a costly and slow nuclear white elephant, and for the fossil fuels choking our planet. The so-called investment allowance—it is better termed “obscene subsidy”—is, frankly, a disgrace that fails to tax oil and gas companies properly and comes at huge cost to the public purse. Indeed, it has been estimated that if Rosebank—the UKs largest undeveloped oilfield—is developed, its owners would effectively receive more than £500 million in taxpayer subsidies.

To put that figure into context, it would be enough to extend free school meals to every child whose family receives universal credit, to pay the annual salaries of more than 14,000 nurses, or to build one new medium-sized hospital. Choosing between genuinely improving our society or subsidising a climate-wrecking project—Rosebank, in this case, which would produce more emissions than 28 low-income countries combined—should not be a difficult choice.

Make no mistake, it is a subsidy—including, it would appear, according to the Government’s own definition in the Subsidy Control Act 2022. I am sure the Government will deny that, but perhaps they will be more inclined to take note of the Institute for Fiscal Studies, which has stated that the investment allowance

“means that North Sea investment will be massively subsidised”,

through which loss-making investments could be rendered commercial.

Put simply, my new clause would require the Government to publish an assessment of the impact of the investment allowance on revenue raised by the windfall tax. The Government estimate that the oil and gas sector will pay around £80 billion in tax over the next six years, but it is essential that we have greater transparency on how much revenue will be forgone. That revenue could help to finance a real retrofit revolution to upgrade the UK’s leaky homes so that we get off gas for good.

Of course, I welcome the £6 billion investment in energy efficiency from 2025, but that will be of little comfort to households that are struggling to heat their homes right now. Crucially, my amendment would also require the Government’s assessment to cover the impact of the investment allowance on the UK’s ability to meet its domestic and international climate targets. The Glasgow climate pact, which the UK presided over, includes the commitment to pursue efforts to limit global heating to 1.5°C degrees, but the UN has made it clear that Governments plan to produce more than double the amount of fossil fuels in 2030 than would be consistent with staying below that critical threshold. I am aware that a number of amendments seek that kind of assessment of the investment allowance, and I welcome them, but I believe mine goes further because it would require the assessment to consider the impact on the 1.5° target, in addition to net zero and the UK’s carbon budgets.

It is no longer acceptable for the Government to look at its policies in isolation from our planet’s shared carbon budget. Not only does oil and gas extracted in the UK add to global emissions regardless of where it is burned, but, as the Committee on Climate Change has acknowledged, further extraction

“will support a larger global market overall”—

I remind hon. Members that that global market already has more oil and gas planned than we can possibly burn in keeping below 1.5°, and that is before we start extracting more. I therefore urge the Government not only to accept my new clause but to scrap the investment allowance once and for all, for the sake of our climate and the lives of so many people who are struggling with the cost of living crisis.

Autumn Statement Resolutions

Peter Grant Excerpts

Monday 21st November 2022 Commons Chamber

[John Glen]

Let me take those points in turn. The hon. Member for Strangford (Jim Shannon) made a point about nurses’ salaries and the cost of not having that workforce in place. That is exactly what this work will do: we will look at the gaps and respond to the pay demands in due course.

The hon. Member for Bristol South asked what the Treasury has done in terms of the money that has already been expended in looking at the changes; I cannot give her a precise figure but I would be happy to write to her. The Treasury is focused on working closely with Patricia Hewitt, the Department of Health and Social Care and NHS England to grip this issue in the fullest possible way, recognising the interaction between hospitals and social care, to ensure that we have the best possible solution to deal with the challenges we face.

Members will recognise that only by expanding the capacity of the social care system will we free up hospital beds, so we are making up to £2.8 billion of extra funding available to the adult social care system in England. That will increase to £4.7 billion in 2024-25. We of course need the NHS to continue to look at where it can squeeze more out of every pound—not at the expense of those on the frontline, but so that we can deliver ever-greater care—yet even with efficiency savings we will not have the NHS we all want without more money so, because of the difficult decisions taken elsewhere, we will increase the NHS budget in each of the next two years by an extra £3.3 billion. Taken together, our actions will ensure that up to £8 billion of additional funding is made available for health and social care in 2024-25.

The NHS and schools in Scotland, Wales and Northern Ireland face equivalent pressures, so the Barnett consequentials of today’s announcement will mean an extra £1.5 billion for the Scottish Government, £1.2 billion for the Welsh Government and £650 million for the Northern Ireland Executive. We make this investment not just because it is the right thing to do but as a central plank of our economic policy.

Similarly, as my right hon. Friend the Chancellor said, an investment in education is an investment in growth. The foundation of our success lies in the classroom just as much as it is found in the boardroom. I was very pleased to see representations from my parliamentary neighbour, my right hon. Friend the Member for North West Hampshire (Kit Malthouse), who made that point very clearly, as did a number of colleagues.

We are not just going to protect the education budget; we are going to increase it. The core schools budget will rise by £2.3 billion in both of the next two years—2023-24 and 2024-25—restoring 2010 levels of per pupil funding in real terms. Not only is that the right thing to do, but it makes economic sense: more opportunity will not only reap a fairer society, but deliver a more prosperous economy.

Just as we look to improve opportunities for those aged 16 and under, we are determined to help people already in work to raise their incomes, progress in work and become financially independent. That is why we have uprated working age and disability benefits in line with inflation, at a cost of £11 billion. It is also why we will ask more than 600,000 more people on universal credit to meet a work coach, so that they can get the support they need to increase their hours or earnings, and we will invest an extra £280 million to crack down on benefit fraud and error over the next two years.

[Peter Grant (Glenrothes) (SNP)]

The job conditionality that the Minister has just referred to has been welcomed in certain sections of the right-wing press, whose agenda says that the only reason somebody is not working full time is that they are too lazy and would rather be on benefits. For the record, can he state categorically that that is not the way His Majesty’s Government regards people on benefits?

[John Glen]

My view is that we want to maximise the productive capacity of the labour force that exists in this country. That means doing everything we can to encourage people to take the opportunities that exist across the economy.

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[Peter Grant (Glenrothes) (SNP)]

The Office for Budget Responsibility and the document that accompanies the Budget tell us that it was asked to prepare forecasts six times in six weeks for a succession of Chancellors. Most of the time, it did not even have time to do a proper assessment before it had to go back and change all the numbers because of yet another screeching handbrake turn by the Government. Perhaps if the Government had thought about the economy during the months over the summer, when they were more interested in fighting over jobs for the boys and girls, there would not have been so many urgent changes this time.

What we have arrived at is a Budget that will see the vast majority of people in these islands worse off, with probably the biggest and most rapid fall in living standards since records began. Millions of families will be plunged even deeper into poverty, hundreds of thousands of jobs will be lost, and there will be unsustainable cuts, even to the areas of public services that the Tories claim to care a jot about. If that is a well-balanced Budget, it is balanced in the way that the bus was at the end of “The Italian Job”. Practically the only good thing that even the Government’s supporters can say about the Budget is that the cliff edge that they are driving us off is not quite as high as the cliff edge that they tried to drive us off a few weeks ago.

It seems a long time ago, because it was, that the Chief Secretary said that we need to be honest with people, but nobody on the Government Benches has been honest enough to mention the B-word. The reason that the cuts are so bad and our economy is in such a mess is as much to do with Brexit as anything else. Putin’s war has affected many people across the world, as did the covid pandemic, but why will the United Kingdom’s growth be lower than that of any of the 27 EU member states next year? Why is the United Kingdom the only place in the G7 that has still not caught up with pre-covid? What kind of global phenomenon always picks on poor Britain to make things worse here than anywhere else?

What Britain has done that none of those other places has done is: first, have a succession of calamitous and incompetent Governments; and secondly, take the ridiculous decision to isolate itself from the biggest single internal market on the planet. Not only are we now back in recession, but OBR and European Commission forecasts say that the fall in UK GDP in 2023 will be worse than in any EU member state.

In fact, 23 of the 27 EU member states are likely to see economic growth next year while we are in recession. Incidentally, the two highest are Ireland and Malta—two countries that, if we believe the Conservative party, could not survive without the broad shoulders of being part of the United Kingdom to lean on. Interestingly, I discovered only recently that in 1956 Malta voted to become part of the United Kingdom. Eight years later it changed its mind and voted for independence in a referendum. Well, well—how history can repeat itself sometimes.

The Institute for Fiscal Studies has pointed out another great dishonesty, which is that this is two Budgets—one for before the election, and the other for the really savage cuts to happen after the next election. If the Government believed that the cuts were the right thing to do, they would be doing them now and then going to the people and asking them to cast a verdict.

Yes, there are parts of the Budget that I welcome, and perhaps they do not go far enough. I support the wealth tax in principle, but why is it only on energy companies? They are not the only companies whose directors and shareholders have become billionaires overnight, and not through their own hard work but through circumstance. The directors and shareholders of suppliers—in many cases, failed suppliers—of personal protective equipment were making millions overnight, and other covid contracts were given in very dubious circumstances, with huge amounts paid for nothing or next to nothing. What about the big tech companies, which made massive windfall profits as a result of covid? Does nobody think that perhaps they should pay a wee bit more towards the customers who made those profits for them?

I welcome any increase in the legal minimum wage, but an indication of the lack of honesty from those on the Government Benches is that they call it a living wage. It is not enough to live on, and if anybody left on the Government Benches wants to challenge me on that, I would like to see them live on the minimum wage and nothing else for six months and see how they get on. Even the increase that the Government have announced is not enough to keep pace with inflation, which means that the 2 million lowest-paid earners in the United Kingdom will see a real-terms pay cut under this Government. That is before we take into account the stealth tax of leaving all the tax bands where they are while inflation is in double figures, and it means that somebody working full time on the minimum wage will pay £400 of their money back to the Treasury by way of increased income tax.

This Budget responds to the cost of living crisis by making it even worse for most people. It forces Scotland to pay a per capita share of the eye-watering costs of a new nuclear power station that we neither want nor need to meet our current and future energy demands. At the same time, it does nothing to address the scandalous anti-Scottish discrimination that charges electricity providers in Scotland more to feed their electricity into the grid, and charges customers in Scotland more to take the same electricity back out again.

This is a Budget in hock to the xenophobic, anti-immigrant elements on the far right of politics in these islands, some of which, I am ashamed to say, we have heard from Members on the Tory Benches today. It is so in hock to that xenophobia that not only do Conservative Members want to build barriers around their own country, but they insist on building them around my country, to stop my country welcoming back the workers on whom our economy and essential services depend. If Conservative Members want to turn their country into an immigrant-free isolationist society, that is up to them, but they have no right whatsoever to do it to my country. We want to welcome people back in.

This Budget is the economic manifesto on which Labour, the Lib Dems and the Tories will hold hands in Better Together mark 2 next year. They will try to tell us that this manifesto is better than what we could get with independence. They will tell us that this manifesto is the best our country can do, and the best our people deserve, but our people deserve a lot more. This Budget, even as we speak, is persuading more Scots than ever before to conclude that the question is not, “How can we afford to be independent?”, but rather, “Can we afford not to be independent?”, and the answer to that is a resounding no—we cannot.

--- Later in debate ---

[The Economic Secretary to the Treasury (Andrew Griffith)]

In these challenging times, this was an autumn statement that responds directly to the needs of our country. It is serious and sensible, it delivers on stability, growth and public services, and it does so at a time of great geopolitical uncertainty. Inflation is on the march around the world, with higher rates in Germany, the Netherlands and Italy than in the United Kingdom. Interest rates are up from historic lows across the Atlantic and in the euro area. Growth forecasts around the world have been downgraded.

We are not immune from these global challenges, and so many colleagues on the Government Benches were right to provide that context. My hon. Friends the Members for South Cambridgeshire (Anthony Browne), for Poole (Sir Robert Syms), for Ipswich (Tom Hunt) and for Delyn (Rob Roberts) talked about how anybody who denies that economic context is taking the British people for fools. Those of us on this side of the House will never take the British people for fools. We will tell them the truths.

In designing our response, we have focused on the need to be compassionate, honest and fair, just as we did during the covid pandemic, spending £400 billion to protect the people and businesses of this country. We have put our values front and centre, and that means, despite a downturn, delivering a stronger NHS and protecting pensioners. It means spending £55 billion this winter to protect households on energy bills, and it means, as my right hon. Friend the Member for Gainsborough (Sir Edward Leigh) talked about, giving us the time to deliver the public service reform that will make sure that we spend every pound of taxpayers’ money in the right way. It means that, even with underlying debt as a percentage of GDP falling, we are investing in an education system that gives people the skills they need to take advantage of the job market of the future that we are going to create. And it means that, even with public sector borrowing kept below 3%, we will be building the infrastructure we need to compete in the world.

As my hon. Friend the Member for West Worcestershire (Harriett Baldwin), the Chair of the Treasury Committee, talked about, inflation is the most invidious thing, and that is why this autumn statement goes with the grain of the action that we need to take now. These are immensely difficult decisions. Increasing taxes is not something that any Government want to do, but right now it is what a responsible Government, facing these challenges, must do. My right hon. Friends the Members for Gainsborough and for Middlesbrough South and East Cleveland (Mr Clarke), and my hon. Friends the Members for South Dorset (Richard Drax) and for Don Valley (Nick Fletcher) talked passionately about that. None of us on this side of the House came here to do that. Conservatives believe in people keeping more of what they earn. We are on the side of strivers, and the quicker we can get back to that, the better, but now is not that time.

We are going to grow public spending, but we are going to grow it slower than the economy. As my right hon. Friend the Chief Secretary to the Treasury said in his opening speech, for the remaining two years of this spending review, we will protect the increases in departmental budgets that we have already set out in cash terms. We will then grow resource spending at 1% a year in real terms for the three years that follow. Although Departments will have to make efficiencies to deal with inflationary pressures in the next two years, that means that overall spending on public services will continue to rise in real terms for the next five years.

This was not just a statement about stability and our public services. Central to it was growth. As my right hon. Friend the Chancellor said to the House last week:

“Sound money is the rock upon which long-term prosperity rests; but it is not enough on its own. Our plan is designed to build a high-wage, high-skill economy that leads to long-term prosperity.”—[Official Report, 17 November 2022; Vol. 722, c. 851.]

This autumn statement delivers on that: more money for education; working with the Department for Work and Pensions and seeking to tackle the crisis of inactivity, at a time when employers are crying out for workers, with more than 600,000 people off welfare and into work; and increasing public funding for research and development to £20 billion by 2024-25, as part of our mission to make the United Kingdom a science superpower, with the highest level of research and development that the country has ever seen. We are investing in high-risk, high-reward research, and we seek for the constituency of every Member, the vision that my hon. Friend the Member for Don Valley seeks for his constituents.

We will grow by using our Brexit freedoms to take the next step in our supply-side transformation, targeting five growth industries of outsize opportunity. [Interruption.] Opposition Members may disagree that these are outsize opportunities, but do they disagree with digital technology, life sciences, new low carbon industries, our wonderful financial services, and advanced manufacturing? We need to be better at turning world-class innovation into world-class companies, but the capital to invest in opportunities cannot come solely from the taxpayer, whatever the hon. Member for Coventry South (Zarah Sultana) may wish. That is why our decision last week on the reform of Solvency II is so important for growth. Without compromising policyholder protection, the changes will better mobilise the UK’s £3.4 trillion of pension wealth. As the Association of British Insurers estimates, that will unlock £100 billion of new investment here in our economy over the next 10 years. That is investment in sustainable assets, clean energy, house building and local communities, and it is just the start of a series of measures that will combine with the Financial Services and Markets Bill—the first ab initio review of financial services regulation for over 20 years, and the first since we left the European Union—and will make the UK the world’s most innovative and competitive global financial centre.

That is why, unlike those on the Opposition Benches who yearn wistfully for powers to be returned to their Brussels overlords, the Prime Minister and the Chancellor were right to reaffirm today that we must never go back, and never pursue a relationship with Europe that relies on alignment with EU laws. Brexit can deliver and is already delivering enormous benefit and opportunities—something my hon. Friend the Member for South Dorset reminded us.

[Peter Grant]

Will the Minister give way?

[Andrew Griffith]

I will happily give way. Perhaps the hon. Member will tell the House how dividing this great Union will grow our economy.

[Peter Grant]

As I think everyone on these Benches will agree, the Budget we have just had presented to us means that the Union is anything but great. Will the Minister tell my constituents one thing from Brexit that is a definite benefit even to 20% of people in my constituency—something about which they will notice a difference?

Autumn Statement

Peter Grant Excerpts

Thursday 17th November 2022 Commons Chamber

[Jeremy Hunt]

It was a tough choice to increase taxes by £25 billion, largely for the well-off, so that we could find more money for schools in the hon. Lady’s constituency.

[Peter Grant (Glenrothes) (SNP)]

Far the best way to take people out of poverty is to pay them a decent wage so that they never get into poverty. I see that the Chancellor is nodding. Why has the nodding Chancellor announced today that the minimum wage will fall behind the cost of living? The Tories’ pretendy-kiddy-on living wage is even more pretendy-kiddy-on than it was before—a real-terms pay cut for the 2 million lowest-paid earners in the United Kingdom. What assessment, if any, has the Chancellor made of how long he expects it to be before every single worker in the United Kingdom has a legally guaranteed right to that most basic of employment rights, a decent wage that is enough to live on?

[Jeremy Hunt]

We may have political disagreements on the Union, but I hope the hon. Gentleman will welcome the fact that we have made enormous progress with our national living wage. Today’s announcement means that for someone working full time it will go up by £1,600, which will help a great many of his constituents—and that is before all the other help that we are giving with heating costs—fuel costs—for people on means-tested benefits. So I think we are doing a lot, and we will continue to look at whether we can do more.

Oral Answers to Questions

Peter Grant Excerpts

Tuesday 15th November 2022 Commons Chamber

[Jeremy Hunt]

I can absolutely give the hon. Gentleman that undertaking. We must remember that, for those businesses, very often the most insidious taxes are those that they have to pay before making any kind of profit, because those are the taxes that can make them go under. As the Conservative party—the party of small business—we will think very hard about their needs.

[Peter Grant (Glenrothes) (SNP)]

Governments do not create wealth, says the Chancellor. Well, this Government certainly do not, nor did any of their predecessors.

Can the Chancellor tell us at what point in his predecessor’s so-called plan for growth did he realise that it was a recipe for economic disaster? If, like everyone on the Opposition Benches, he realised that before his predecessor had sat down, why did it take him so long to speak up about it?

[Jeremy Hunt]

I did actually reverse most of those measures within three days of becoming Chancellor, so, among my many failings, the one thing I cannot be accused of doing is being slow to change things.

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.

--- Later in debate ---

[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.)

Financial Services and Markets Bill (Fourth sitting)

Peter Grant Excerpts

Committee stage
Tuesday 25th October 2022 Public Bill Committees

[Andrew Griffith]

On the question posed by the hon. Member for Hampstead and Kilburn, I do believe that the definition is broad enough. If there are specific concerns or use cases that the hon. Member feels are not encompassed, I am happy to take that back offline or to write to her with advice. The intention is clearly to allow sufficient flexibility to broaden the perimeter.

I am not fully familiar with the works that the hon. Member for West Dunbartonshire talks about, but I am happy to become more familiar with them over time. It is clearly not part of the Government’s intention to legitimise what would not otherwise be legitimate or to create the opportunity for issuers to evade responsibility to society. That is not the Government’s aim and objective.

Amendment 22 agreed to.

[Peter Grant (Glenrothes) (SNP)]

I beg to move amendment 35, in clause 8, page 9, line 25, at end insert—

“(ba) in cases where the regulations make provision for liability, make provision for nominated representatives of organisations against whom liability has been found to be held personally liable for actions undertaken in relation to carrying out a designated activity,”.

This amendment would allow for nominated representatives to be held personally liable for the carrying out of a designated activity when an organisation has been found liable.

This is another amendment that attempts to improve the protection of consumers, small investors and others who in the past have been far too easy prey for unscrupulous company directors and other people in charge of companies. In a number of the recent financial services scams, we have seen that even once the investigatory regulatory process has been completed, which in itself can take five, even 10 years, any attempt to recover money from where it should be recovered from—the pockets of criminals—is frustrated by the fact that the companies at the centre of the scam have at best no money left in their books. Most of the time, they have been placed into liquidation long ago.

Part of that liquidation process is always moving the money into other companies, very often hidden in offshore anonymous companies owned by the exact same person. Effectively, the person who works the scam takes steps to get their money well out of the reach of the UK regulators and enforcers long before the liability of the company is established. Amendment 35 seeks not to require but to allow the designated activity regulations in specific circumstances to make regulations that say, “There will be occasions when individuals who have carried out the misconduct will be held personally liable to people who have suffered.” That means that those who have been scammed in a way that is not covered by the financial services compensation scheme at least have a chance of getting their money back. Possibly more importantly, the amendment would be a further deterrent to those who would carry out such scams, because it will at least partially close down the option of their hiding their ill-gotten gains in a different company, where they are no longer within reach of the regulator.

I appreciate that anything that starts to blur the distinction between a shareholder, a director and the legal personality that is a limited company should be used with caution. I fully understand why, in UK law, a company is its own person with its own legal identity, but there are times when we cannot allow the director of a company to hide behind that—times when natural justice says that if we know who is responsible for people losing their money, and know that they have buckets full of money sitting in a company somewhere, it is perfectly reasonable to say to them, “We will have that money to compensate the people you scammed.”

The victims of Blackmore Bond will never see their money again. I understand that one of its directors is now bankrupt, but the other definitely is not. Most of the victims of Safe Hands Plans will probably not see their money again. Remember, its director bought the company at a time when he knew that it would have to wind up in a year or two; we have to ask why he was so keen to buy it. He is not a poor person; he is extremely wealthy. He just managed to move his money out of that company and into others.

Clearly, the amendment could not be retrospective, but if it was agreed to, it would mean that if any person tried the same dodge in future, their victims could, in court, try to get their money back from the person who stole from them, rather than from the company, which will often no longer exist.

[Dame Angela Eagle]

I do not want to row in behind the hon. Member and support absolutely everything that he says on his amendment, but I know what he is trying to do: to put something in statute that would solve the problem of fraud, which is more and more prevalent in our financial system, especially in and around the perimeter that we have been talking about. There can be questions about whether a person is inside or outside the perimeter, or whether a bit of their company is inside and a bit outside. That kind of fraudulent hiding behind being regulated when the things being sold are outwith the perimeter does fool a lot of people, and a lot of money is scammed out of our constituents’ bank accounts in that way. Does the Minister have any observations on how we could—

--- Later in debate ---

[Andrew Griffith]

Thank you, Dame Maria. You are right: many of these matters fall within the domain of clause 8, which we shall discuss shortly.

[Peter Grant]

I thank Members on both sides of the Committee who have supported the intention behind the amendment. As I said in my opening remarks, I accept that it does not sit particularly comfortably in a financial services Bill under the Treasury, because the Treasury is not usually responsible for the general regulation of businesses. Nor does it sit comfortably in the Economic Crime and Corporate Transparency Bill, which I understand is shared between the Department for Business, Energy and Industrial Strategy and the Home Office. BEIS, through Companies House, is not responsible for the regulation of financial services and will not be responsible for the regulation of designated activities. Nobody is entirely responsible, and that is the problem.

To those who say, “Yes, we agree with you, but this is not the time,” I say, “If not us, then who, and if not now, then when?”. Tomorrow, some of our constituents will be scammed, and more will be scammed the next day. Every day that we delay, waiting for the Government to introduce the perfect clause that has no unintended consequences, causes unintended consequences for our constituents. I accept that the amendment might have unintended consequences, but the Government’s inexcusable delay in closing the loopholes once and for all has already led to unintended consequences. I intend to press the amendment to a vote for that reason.

Question put, That the amendment be made.

Division 2

Ayes: 2

---

Scottish National Party: 2

Noes: 10

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Conservative: 10

[Peter Grant]

I beg to move amendment 36, in clause 8, page 10, leave out lines 22 to 27.

This amendment would remove the Treasury’s proposed power to make regulations which modify legislation of the Welsh Senedd, Scottish Parliament or Northern Ireland Assembly for purposes connected with the regulation of designated activities.

[The Chair]

With this it will be convenient to discuss amendment 37, in clause 8, page 11, line 38, leave out from the first “Parliament” to the end of line 40.

See the explanatory statement for Amendment 36.

[Peter Grant]

The amendment can be summed up in four words: “Hands aff oor Parliament”, whether that Parliament is the national Parliament of Scotland, Senedd Cymru or the Northern Ireland Assembly. Those who claim to respect the devolution settlement cannot do so with any credibility if they continue to give power to Ministers of the reserved Parliament to override decisions of the democratically elected national Parliaments of three of the four equal-partner nations in the Union. This is a power grab of the kind we have already seen in other EU withdrawal legislation. Some of those power grabs will now happen, because the House has voted for them, but that does not make them right or any less of an outrage against democracy. Amendment 36 must be agreed to for the Committee to be able to hold its head up in public and say, “We support democracy and we respect the devolution settlement.”

Amendment 37, although not technically a consequential amendment, is as close to one as makes no difference, because the wording that it would delete on page 11 would no longer be relevant if we agreed to amendment 36. It is my intention to press amendment 36 to a vote.

[Emma Hardy (Kingston upon Hull West and Hessle) (Lab)]

I hope that when the Minister responds to the debate on the clause, he will cover proposed new section 71R of FSMA 2000 before reaching the point mentioned by the hon. Member for Glenrothes. Subsection (1) of the new section is a Henry VIII power that allows the Treasury to amend legislation, including primary legislation. Will the Minister outline when, why and how the Government intend to use those Henry VIII powers, and what safeguards we have in the Bill against their abuse?

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[Andrew Griffith]

indicated dissent.

[Peter Grant]

I hope that the record of the sitting will clearly indicate that the Minister was given the chance to reply to the hon. Lady’s question—twice, in fact—but chose not to.

It is a fundamental principle of the devolved settlement that the Conservative party insists that it wants to protect that if a decision is made by a devolved Parliament under its devolved powers, nobody should have the right to overturn or amend that decision other than that Parliament. The Minister has said that he is not aware of any circumstances when he would want to use the power, so why not wait until the circumstance arises? Why not speak to the devolved Parliaments then—or, indeed, why have the Government not spoken to them already—to say that devolved legislation is causing problems, and to ask whether they can agree, cross-party and cross-nation, to change it, rather than pushing aside the devolved nations and the devolution settlement, and imposing rules on our people against the devolution settlement? Let us not forget that 75% of our people voted for the establishment of the Scottish Parliament.

I do not agree with everything Senedd Cymru does. It is not my party that is in government in Wales; it will never be my party that is in government in Northern Ireland. I will not agree with everything they do, but I utterly respect the rights of those Parliaments to legislate in the best interests of their people. If the Minister is saying that he does not think that he will be able to trust the devolved Parliaments to make a sensible decision if and when that becomes necessary, we have a big problem.

[Martin Docherty-Hughes]

My hon. Friend talks about not trusting the Scottish, Welsh or Northern Ireland Government. Any legislation brought forward in those places receives the attention of senior legal advice, whether that be from the Lord Advocate or from others in the devolved Administrations. The amendment defends the legitimacy and independence of the legal advice given by senior legal officers to devolved Administrations.

[Peter Grant]

My hon. Friend makes a valid point. It is sometimes forgotten that the devolved Parliaments have a number of checks in place to prevent them from attempting to legislate on things that are clearly beyond their powers, and there is a clear example of that happening at the moment, but there is no statutory or constitutional check on this place’s ability to push aside the devolution settlement to legislate on matters that are clearly devolved. That is simply not acceptable. Remember, we were talking about what the Government still call the most powerful devolved Parliament in the world. How can it be anywhere near being that if the Parliament that devolved powers to it can grab those powers back at the drop of a hat or the stroke of a pen? I will not withdraw the amendment. Every time I see such a power grab in legislation, I will speak against it, stand against it, and vote against it.

Question put, That the amendment be made.

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[The Chair]

Given that amendment 36 has fallen, may I encourage the hon. Member for Glenrothes not to press amendment 37, which is similar?

[Peter Grant]

It does not make a lot of sense to press amendment 37 now that amendment 36 has gone. In fact, arguably, on its own, amendment 37 would weaken the position of the devolved Governments, so I will not press it.

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

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[Andrew Griffith]

Retained EU law contains frameworks to regulate a number of entities that facilitate the proper functioning of financial markets. These entities are collectively referred to as financial market infrastructure, or FMI.

FMI helps to maintain stability in the financial services sector and performs critical functions that help make markets safer and more efficient. To establish a comprehensive FSMA model, the regulators will need the power, when retained EU law is revoked, to make rules to appropriately supervise and oversee FMI. That is provided for in the clauses that we are considering.

Clause 9 gives the Bank of England, which I will refer to as the Bank, a general rule-making power over central counterparties and central securities depositories, or CCPs and CSDs. CCPs sit between two parties to a trade and ensure that if either firm defaults on its obligations, the CCP can fulfil the firm’s trade. This reduces the possibility of contagion to the wider financial system. CSDs settle securities trades—that is, they complete the trade by transferring ownership of the assets, such as shares or bonds, between two parties.

The clause delegates the setting of regulatory standards to the Bank as the expert, operationally independent regulator. That is in line with the overall approach taken to the financial services regulators in the Bill. With the new rule-making powers provided for in the clause, the Bank will be able to adapt the regulatory regime in an agile and responsive way—for example, to take account of changing market conditions, address emerging risks or facilitate innovation. This will be accompanied by appropriate accountability arrangements that will apply to the Bank when it is exercising these new powers; we will discuss those when we get to new clauses 43 to 45.

The clause also enables the Bank to apply some or all of the domestic rulebook to overseas CCPs that are systemically important to the UK.

[Peter Grant]

Can the Minister give us an indication of whether there are existing institutions that he believes would be regarded as CCPs that are systemically important to this country? Apart from the obvious factor of the amount of business that a body does with the UK, what other factors will be taken into account when deciding whether to designate an institution in that way?

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[Emma Hardy]

I want to add to the points made by my hon. Friend on our concerns around clause 12 and the independence of the Bank of England, given that the Treasury has such significant powers over it. I refer the Minister back to the evidence given by Sheldon Mills from the FCA. He said:

“I have worked in regimes with public interest tests. I ran the mergers division at the Office of Fair Trading and the Competition and Markets Authority, and my learning from that is that, if put in place, such a test should be used exceptionally and with care, and that there should be specificity about the matters of public interest—in this case, financial services—on which it would be used.”––[Official Report, Financial Services and Markets Public Bill Committee, 19 October 2022; c. 7, Q3.]

That is the FCA asking for specificity—it is easy for them to say—on exactly when the power would be used and when it would not be used.

Victoria Saporta from the PRA stated:

“A formulation whereby the Government can force or direct us to make or amend rules that we have already made, and that fall squarely within the statutory objectives that Parliament has given us, may be perceived as undermining operational independence and all the benefits that I talked about earlier.”––[Official Report, Financial Services and Markets Public Bill Committee, 19 October 2022; c. 7, Q3.]

Those were really stark warnings from two of our key witnesses from the FCA and PRA, talking about the difficulties they had with this specific clause and how this could be seen as undermining their independence.

Martin Taylor went further in his evidence, when I questioned him on these intervention powers. He said:

“One of the problems that led to the recent turmoil—a very English description of what has just happened—was that the Prime Minister and the former Chancellor chose not to subject the mini-Budget to the scrutiny of the Office for Budget Responsibility.”

He continued:

“However, international investors looking at London will have noted this and it has a bad smell, if I can put it that way.”

Later, he said:

“If you were in Singapore or New York, you might be more tempted to do that than you would have been a month ago. We should not do anything else to make this worse. Everything is being done by the new Chancellor to steady the ship…but moves like this proposed measure just go in entirely the wrong direction as far as I am concerned. I think it is very dangerous.”–– [Official Report, Financial Services and Markets Public Bill Committee, 19 October 2022; c. 76, Q149.]

Every single witness seemed to talk about the concerns they have over the level of intervention the Treasury could have over the Bank of England. I would like to hear reassurances from the Minister that he has been talking to the FCA, the other regulators and the markets about this. What reassurance can he give us that this is not HMT trying to again overrule our independent regulators?

[Peter Grant]

Again, I fully understand the intention behind these clauses and I am not minded to move against them, but I am a bit concerned by some of the interplay between the clauses. I asked the Minister what factors he thought might be taken into account in determining that a CCP is actually a systemic third country CCP, rather than an unsystemic one.

The Bill, on lines 39 to 42 on page 13, suggests that a systemic third country CCP is

“any third country central counterparty that the Bank has determined is systemically important, or is likely to become systemically important, to the financial stability of the United Kingdom.”

The word “systemically” is doing quite a lot of work in that definition. As far as I know, there is no definition of “systemically” in this Bill, or indeed anywhere else, so I am concerned about whether the wording of the clause is tight enough that everybody, including the Bank of England, knows exactly when it can use these powers and when it cannot.

That is important because of the difference that being designated a systemic third country CCP makes. Under proposed new section 300G to the Financial Services and Markets Act, the Bank of England can exercise most of the powers

“only by the application of corresponding rules”,

according to proposed subsection (1)(a). However, proposed subsection (1)(b) says

“except in the case of systemic third country CCPs…only so far as authorised by regulations made by the Treasury.”

That seems to mean that if the Bank of England forms the view that it is dealing with a systemically important CCP, it is free to act in a way that is not explicitly permitted by Treasury regulations, whereas if the Bank decides that it is not systemically important, the ability to act becomes more restricted.

--- Later in debate ---

[Andrew Griffith]

I will try to respond to all the points in turn. First, in answer to the hon. Member for Kingston upon Hull West and Hessle, clause 12 is not an intervention power. It clarifies that the power to direct is effectively removed in respect of the new regulations around CCPs. In many ways, it will give the Bank of England the independence and autonomy that the witnesses she cited sought, although in a more general context. There is a separate point, which is probably not in order for today, about the intervention power, as and when that is tabled. However, that is not the purpose of clause 12, which is a clarifying point in respect of the Bank of England.

The hon. Member for Wallasey raised the issue of resources. The Bill gives the regulators, including the Bank, powers to fund themselves using a levy. That is a stronger financial position than they are in today. The hon. Member knows that I am relatively new—that could change during the sittings of this Committee—but in all my interactions with the regulators, they have expressed themselves satisfied with the resources available to them, but we must be collectively careful about the burdens that we place on them and ensure that those are appropriate.

On the question of what is systemic and whether it is right to regulate overseas CCPs and CSDs, the thrust of what the Bill tries to achieve, and the broad thrust of the debate, is that those are precisely matters that should be decided by the operationally independent regulators in this domain. Although I and others may have views, it will be for the Bank to use its new powers—as now, and as in other domains that are in scope—in consultation with the Treasury, Parliament and others.

[Peter Grant]

To clarify, if the Bill is enacted as it stands, does the Bank have the option to create a different regulatory regime for overseas parties than it has for those that are based in the UK, or is the intention that the same set of rules will apply regardless of where the organisation is based?

[Andrew Griffith]

If an organisation is overseas, the approach will be that the Bank, in using those powers, will defer to the overseas regulator where that is appropriate, as it does now. I would not want us to fetter the Bank. It is for the Bank to lay out how it proposes to use the powers that the Bill enables, so as to be able to make the appropriate regulation that it feels comfortable with. I think we can all agree that this is a prudent enhancement of its powers. It broadens their scope, and allows the Bank to follow the risks to this country in a CCP, wherever those may lead it.

Question put and agreed to.

Clause 9 accordingly ordered to stand part of the Bill.

Clauses 10 to 12 ordered to stand part of the Bill.

--- Later in debate ---

[Dame Angela Eagle]

That is true. Blockchain has certainly been around for quite a while. Its use has implications for transparency and for the levels of employment that there might be in the old, more bureaucratic banks.

What would be the use of artificial intelligence in trying to decide how automated these things could become? Would there be worries about over-automation? How would that be looked at in terms of regulation? How open are we going to be about the way in which AI is applied and how it might evolve in ways that might embed discrimination such that we get a system where certain people may be discriminated against and excluded? There are a range of issues that need to be tested in these kinds of environments. It is hard to do that under a negative resolution procedure. I take the Minister’s point, however, about affirmative resolutions. If one of these things worked during the trial period, was issued and became permanent, it is important, as the Minister has said, that any changes are subject to affirmative regulation.

There are a whole load of black boxes in the Bill that we might need to debate further. Could the Minister give us more colour on whether there will be parallel sandboxes, on transparency on what will be used and how it will be compiled, and on how large the sandboxes will be in terms of money on the exchanges or turnover, or however he wants to put it. Then we could consider whether risk is being mitigated and how we can develop a system using trundling and analogue legislation, if I may put it that way, in an environment where innovation is digital and rapid.

I understand what the Minister is trying to do, but this Parliament must still be aware that we need to be on top of the detail of this Bill, rather than just passing shells of enabling legislation that do not give us enough of a handle on what is intended.

[Peter Grant]

Thank you, Dame Maria, for clarifying earlier that we are talking about sandboxes, not sandwich boxes. Some Members seem to have been a bit confused about that. I am intrigued by the use of the term “sandbox”. To me, a sandbox can be a road safety feature: it is literally a gravel or sand pit on a bad bend in the road to allow someone who loses control to get off the road safely. Alternatively, a sandbox is something that any cat owner will be familiar with. I am genuinely intrigued as to which of those metaphors somebody thought was appropriate for what we are discussing.

The principle behind these measures is absolutely sound. By this time next year, new practices in financial services will have evolved that none of us can begin to imagine just now. That is how things are moving. I take the point made by my hon. Friend the Member for West Dunbartonshire that the technology itself has not significantly changed—it is certainly not new—but the way in which people will use the technology is. The kinds of products that people will start to devise may well mean that existing regulatory practices need to be changed very quickly. The idea of being allowed to pilot something that is genuinely new in a safe space before letting it loose on the wider world is absolutely correct in my view. However, the devil, of course, is in the detail.

I am a bit concerned that the first in this group of clauses says that the purpose of the sandbox will be to test

“for a limited period, the efficiency or effectiveness of the carrying on of FMI activities”.

It does not say that one of the purposes is to test the effectiveness of any regulation that may go with it, which concerns me. Obviously, if someone knows that the activity they are carrying out in a sandbox will be looked at very carefully, they are going to behave themselves. How can we be sure that as well as being effective, it will work for the purposes of the providers? How do we know that the regulation that goes with it will also be effective? Again, that has to be effective as soon as the thing goes live. We cannot wait and regulate it effectively a few weeks later, because it will be far too late by then.

--- Later in debate ---

[Peter Grant]

Again, I do not oppose the clauses, but I do have a couple of questions. First, the Minister pointed out that the ultimate sanction that the regulator can take is to prevent somebody from carrying out the actions of a critical third party. However, given that it becomes a critical third party because the system would collapse without it, is that not the nuclear button that can never be used? Simply trying to enforce the protective regulation could cause more damage than allowing the issue to continue. I understand that it is a difficult issue to square, but is there any proposal to, for example, introduce new criminal offences? Rather than being placed in a position where we would have to damage a system in order to protect it, are there proposals at least to give the option of taking criminal action against the individuals concerned?

I understand why the Bill does not go into detail about the kind of directions and requirements that might be appropriate, but will the Minister reassure us that there is no intention to use the powers to restrict the rights of people working for critical third parties to take industrial action, should they consider it to be important? That would take us into a completely different area of legislation, but the Bill does not say that the Government cannot do that. I would appreciate an assurance from the Minister that that will not happen as a result of the Bill.

Finally, proposed new section 312N refers to immunity. Certainly we must ensure that, if an organisation acts in accordance with the requirements of the regulator, they cannot be sued simply for doing what they were required to do. Is there a potential issue that they could be sued by an overseas party in an overseas court? Has the Minister considered how we might prevent that from becoming an issue? Clearly, this Parliament cannot legislate to give anybody immunity from being sued elsewhere, and there are people who will tout around the jurisdictions all over the world to find somewhere they can lodge a legal action. Is the Minister concerned that the inability to give international immunity might mean that some of the provisions become less effective than we might have hoped?

[Andrew Griffith]

Let me try to answer hon. Members’ questions. Nothing in the clause restricts people’s ability to take industrial action. That is not in scope. The powers are not anticipated as analogous to existing ones elsewhere, and the provision is not intended to be all or nothing. The powers are in essence an extension of scope into this domain and would relate to activities such as reviewing the senior manager regime, the ability to compel the requirement of information and looking at things such as resilience. They are not designed to be binary in that respect.

The hon. Member for Glenrothes made a point about the fact that the functions have been designated as critical, but that does not necessarily mean that they are monopolistic. With respect, while that is an important consideration, which we would expect the Bank, in this case, to take into consideration, it is also perfectly possible that, in the case of cloud providers, for example, a number of providers offer identical services. If one was not able to demonstrate a degree of resilience but another was, it would be possible to direct that one ceases to be used without causing the sort of systemic risk that the Bill seeks to prevent. I will write to the hon. Member in respect of what is a complex question about international immunity in law. I hope that he will respect the fact that I should not answer that on my feet this afternoon.

Question put and agreed to.

Clause 18 accordingly ordered to stand part of the Bill.

Clause 19 ordered to stand part of the Bill.

Clause 20

Financial promotion

[Peter Grant]

I beg to move amendment 39, in clause 20, page 31, line 37, at end insert—

“(1A) Where the content of a communication for the purposes of section 21 has not in the first instance been approved by an authorised person, approval by another authorised person may only be sought the FCA’s approval for the other authorised person to do so being provided in writing.”.

This amendment would prevent operators from “shopping around” for approval from an authorised person where one authorised person has not given approval, unless the Financial Conduct Authority permits this.

[The Chair]

With this it will be convenient to discuss the following:

Clause stand part.

That schedule 5 be the Fifth schedule to the Bill.

[Peter Grant]

The amendment is quite simple. I understand the reason behind the concept of the authorised person. The Financial Conduct Authority will never have the resources or capacity to authorise every single financial promotion that somebody wants to publish, so that role needs to be outsourced. My concern is that, in some of the scams that my constituents have fallen victim to, the authorised person has sometimes been a key part of the web of deceit and concealment that has been laid for my constituents and others to fall into. Very often, when it all goes wrong, we find that the authorised person who approved the financial promotion has gone out of business themselves, so there is nobody left to take responsibility.

I am concerned that something that I have seen happen in a small number of cases might become more common. If someone takes a financial promotion that is clearly not compliant with legislation to an authorised person, the authorised person might well say, “No, I am not going to authorise it.” There is nothing to stop the person from then shopping around and finding someone who will agree to approve the promotion on their behalf. Because these promotions are so common, and because there are so many of them being authorised and then issued, it is very difficult for the regulator or anyone else to pick up on the ones that should not have got through. We are relying on the integrity of the authorised person.

The intention behind the amendment is to ensure that, regardless of which authorised person someone goes to, they get a consistent answer—either yes or no. If one authorised person refused to give approval for a promotion, it could then be approved only with the consent of the Financial Conduct Authority. I am not sure that I am minded to press the amendment to a vote, but I hope that the Minister will be sympathetic to the intention behind it. If he feels that the amendment is not necessary, or that its purpose could be achieved by a better route, I would be quite happy to hear his reasons.

[Tulip Siddiq]

We welcome clause 20, which we recognise would introduce tighter controls on those who approve financial promotions for others, to ensure that consumers are better protected. How does the Minister foresee the clause facilitating improved approver expertise, due diligence and challenges in exercising appropriate regulatory oversight?

[Andrew Griffith]

I thank the hon. Member for Glenrothes for raising the issue, which I understand is of concern to Members on both sides of the Committee. I also thank him for indicating that he will not press the amendment to a vote. I think the reason for that is that clause 20 is a genuine enhancement of the regulatory infrastructure. It creates a new, two-tier regulatory structure that speaks directly to the issue of those who have been authorising harmful financial promotions. It does so by introducing a new assessment by the FCA that requires that they be assessed as fit to do so. I will come on to what that could look like in a moment.

We understand what financial promotions are. They are inducements or invitations to engage in investment activity in its broadest form.

[Peter Grant]

The Minister says that we all understand what financial promotions are, but do we really? Is the existing definition agile enough? One of the dodgy directors I mentioned earlier has now set himself up on TikTok as a lifestyle guru. Everybody knows he is doing this to groom people. He will say to someone, “I’ve got this brilliant investment plan that nobody else knows about. Why don’t you do it?” Does that sort of thing count as a financial promotion or not? Quite clearly it is an inducement and an attempt to get someone to sign up to an investment that may or may not be legitimate.

[Andrew Griffith]

I am not familiar with the precise incident that the hon. Gentleman talks about. We have to reflect that there will be a continuum from someone being a lifestyle guru to someone promoting a financial product. Our job as legislators is to understand where those cliff edges lie and to bring forward procedures that mean that the scope is laid in the right place, so that cliff edges are legislated for appropriately.

--- Later in debate ---

Schedule 5 amends FSMA simply to ensure the effective implementation and operation of the regulatory gateway. It expands the FSMA definition of “regulated financial services” to include inducements to engage in investment activity, bringing the full range of financial promotion activity within the scope of the FCA’s general duties. In effect, the schedule makes provision to apply existing offences within FSMA to the approval of financial promotions, and applies other relevant parts of FSMA to ensure that the FCA can effectively oversee the gateway. In short, it expands the scope of existing legislation to include more activities, and creates a two-tier authorisation structure.

[Peter Grant]

I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 20 ordered to stand part of the Bill.

Schedule 5 agreed to.

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

Financial Services and Markets Bill (First sitting)

Peter Grant Excerpts

Committee stage
Wednesday 19th October 2022 Public Bill Committees

[Craig Tracey (North Warwickshire) (Con)]

I chair the insurance and financial services all-party parliamentary group and am a former insurance broker.

[Peter Grant (Glenrothes) (SNP)]

I have money saved and invested with Nationwide building society, which has submitted evidence on its own account. I am also with a credit union that I believe is affiliated to the association of one of the witnesses.

--- Later in debate ---

[Tulip Siddiq (Hampstead and Kilburn) (Lab)]

Q I thank the panel for coming today. The Government announced on Second Reading that they intend to introduce an intervention power enabling the Treasury to direct a regulator to make, amend or revoke rules in matters of significant public interest. Do you think such a move would represent a significant departure from the UK’s model of regulatory independence, and would such a power affect your regulatory decision making process? Sheldon Mills, you touched briefly on that, so may I ask you first?

Sheldon Mills: Of course. It is a matter for Government as to what amendments they put to Parliament, and it is then a matter for Parliament as to what you do with them. You always have to be careful as a regulator not to tell Parliament what to do, but I will put some thoughts forward.

Independence needs to be at the heart of the regulatory system, so I think it will be important, if and when that amendment is put forward, to think about how the independence of the regulators is sustained. I understand from Government pronouncements that there is a commitment to the independence of the regulators, and that the proposed amendment, which I have not seen, is meant to ensure that where a public interest mechanism is needed—where the Government wish to think about the public interest—there is one to bring forward.

I have worked in regimes with public interest tests. I ran the mergers division at the Office of Fair Trading and the Competition and Markets Authority, and my learning from that is that, if put in place, such a test should be used exceptionally and with care, and that there should be specificity about the matters of public interest—in this case, financial services—on which it would be used.

We are working constructively with HMT in relation to this, and we would do so if such a power were introduced. The only point I would make—Vicky may come to this—is that the standing of the UK financial system is also built on its independence and its consistency of regulation, and it is important that we think through that as we design this regime.

Victoria Saporta: I very much agree with what Sheldon said. We have not yet seen the amendment, so we have to reserve judgment on it, but it will depend on the formulation.

A formulation whereby the Government can force or direct us to make or amend rules that we have already made, and that fall squarely within the statutory objectives that Parliament has given us, may be perceived as undermining operational independence and all the benefits that I talked about earlier. That could have adverse implications for our international standing and, ultimately, our competitiveness.

A formulation that is squarely outside our objectives—for matters of national security, for example—and does not have to do with safety and soundness, or the other objectives and “have regards”, could be a different matter if it is tightly done.

Finally, sometimes I have read in the press and in previous ministerial comments that it makes sense in a parliamentary democracy to ask the regulators to take another look. I just want to say that in clause 27 there is a review power that gives the Treasury powers to force us—to direct us—to take another look and, indeed, to appoint a third party to do so.

[Peter Grant]

Q Good morning to the witnesses. Mr Mills, you mentioned to Ms Siddiq that you had not seen the proposed amendment. Has the FCA been consulted at all about the text or the principle behind that amendment?

Sheldon Mills: Of course we have had discussions with HMT in relation to the proposed amendment. I personally have not seen it.

[Peter Grant]

Q Thank you. When you appeared before the Public Accounts Committee earlier this year about the British Steel pensions scandal, you and your colleague indicated that many of the things that MPs might have expected you to do to protect British Steel pension holders, you did not have the power to do at that time. Does the Bill, as it currently stands, give you sufficient powers to intervene in the way that we would have liked in the event of another pension scheme getting into difficulty?

Sheldon Mills: That was some months ago, but I recall that in the context of the British Steel pension scheme we have a power that allows us to do some particular things that provide redress en masse for British Steel pension holders. That is what we are using. We have most of the powers that we need to support British Steel pension scheme holders. The Bill does not interfere with any of our existing powers. I do not think it gives us any additional powers that are relevant to the British Steel pension scheme holders issue.

[Peter Grant]

Q I was thinking particularly about the powers to stop the damage from being done, rather than simply the power to pay financial redress, which usually takes a long time, is very stressful for victims and sometimes comes too late for victims who do not live long enough to see the compensation. The gross misbehaviour of a large number of financial advisers led to that scandal and many others. Are you telling us that, as it stands, the Bill does not give you significantly greater powers to intervene and get these people out the market as soon as you realise there is a problem?

Sheldon Mills: I think that what we would have said—I would need to look at the record to see the context—is that, effectively, we have to go through due process and understand the evidence and the data that would be there to see how those independent financial advisers are behaving. Therefore, the speed and processing of that may be what we were referring to.

If I remember at the time in relation to the British Steel pension scheme, the law was changed to allow people to exit their pensions under pensions freedoms. There was a range of issues in relation to understanding how independent financial advisers were going to respond to that. The speed and pace with which they did respond led to issues such as some of the challenges that British Steel pension holders have now. To confirm: there is nothing the Bill that specifically gives us additional powers in relation to those individuals.

Sarah Pritchard: I want to come in on a slightly broader point, which is that in the transfer of retained EU files, which encompasses part of the Bill, there are some EU files where, at the moment, the FCA will have limited lawmaking powers. The Bill will provide a framework that, file by file, the FCA will need for rule-making and enforcement powers to be considered at that time. That does not answer your question specifically in relation to British Steel, but it provides a mechanism, so you go through that analysis and assessment file by file.

[Stephen Hammond]

Q I thank the panel for coming this morning. I have two questions. Can we be clear that in the UK regulatory landscape and the international financial regulatory landscape there are public interest tests that are operated but do not affect the operational independence of regulators?

Victoria Saporta: In the financial regulatory space, the only example I know of where there is a test whereby the Government—I am not talking about Parliament—can intervene and revoke regulatory rules is in Australia. APRA—the prudential regulatory authority in Australia—has never been exercised. Whenever the IMF has done financial sector assessments, it has been critical. There are provisions, again in Canada, but the US system does not have any. It is Congress who can revoke material pieces of regulatory standards within 60 days. This is my understanding of it in financial regulation, which is separate to how it might exist in other types of regulation.

--- Later in debate ---

[Gareth Davies]

Q Thank you. Do you have a view on that, Emma?

Emma Reynolds: I defer to David.

[Peter Grant]

Q Clause 1 proposes to repeal around 250 pieces of European legislation, pretty much at the stoke of a pen. The rest of the Bill then expects the Treasury to replace all those bits of legislation by a process that will allow for very minimal parliamentary oversight. Do you have concerns either that there may be a period where parts of the market are inadequately regulated or, alternatively, that there is uncertainty as to what the regulations are, because of the process of repealing something before you know what is going to replace it?

Emma Reynolds: From what is in the Bill, I do not think that is the Government’s intention. As I understand it, the Bill gives the power to the Treasury to transfer—restate—EU legislation, and we have encouraged the Treasury to think of this as a sequence, because we do not want big regulatory change in one go, as the compliance costs are quite high. We absolutely see that there is an opportunity to tailor EU legislation to our markets, so I do not think it is the case that this legislation would not apply; I think this is going to be done in a phased way.

[Peter Grant]

Q You are using terms such as “transpose” and “translate”, and the representatives from the FCA that we heard from earlier used similar terms. Are we talking about almost literally translating all these documents into the English of the United Kingdom or are we talking about significantly changing the legislation as part of that process?

Emma Reynolds: That is a matter for the Government. The Bill gives the Government broad legislative powers to amend the legislation that they have transferred, as I understand it.

[Peter Grant]

Q I have another question for both you. There have been suggestions that the Bill should place responsibility on the regulator to promote competitiveness. There have been suggestions that matters such as consumer protection and compatibility with the UK’s climate change obligations should be given the same importance in the regulator’s responsibilities as international competitiveness. If the Bill was amended to put that in place, would it cause significant difficulties for the financial services sector?

David Postings: It is not in the Bill at the moment. We would need to see the wording of what was proposed and the timescale. If you think about your first point, which I did not respond to, the difference is that the regulation will now be through rules rather than in legislation. We have had a fruitful working relationship with the Treasury and the regulators over the past year and a half since Brexit to produce what is in the Bill. Those changes have been well thought through with industry involvement and therefore get the balance right between protection, regulatory stability and the ability to be commercial. I would hope that, as the rules get translated over time, that process would continue.

On the green agenda, it is difficult for me to comment on something that is not in the Bill at the moment. What I would say is that we need to be thoughtful about the transition to net zero, as opposed to just the taxonomy and the drive to get to net zero. There is a danger that, in prescribing that financial institutions have a balance sheet in a particular form by a particular day, you risk not having a transition to net zero, so that whole thing needs to be well thought through. We risk financial exclusion on the back of that for consumers as well. I would urge caution rather than lumping something into the Bill at this late stage.

[Peter Grant]

Q Are those comments made within the context that achieving a permanent change in net zero targets is not optional? It is absolutely necessary.

David Postings: The banking industry is 100% behind that transition, but the transition is the important point, not just greening the balance sheets of the firms.

Emma Reynolds: May I add to that? There is a huge commitment from financial services, and we also represent related professional services, in playing a part in enabling the transition to net zero. Financial services and financial regulators are an important part of a much broader picture, which is why green finance is actually led by the Department for Business, Energy and Industrial Strategy, not His Majesty’s Treasury. It is about not just the supply of green finance, but the demand for such products. If we have a transition to net zero, it has to be about every sector pursuing a transition. Financial services has a critical role to play, but that has to be done in tandem with the transition in other sectors too.

[Sally-Ann Hart]

Q Good morning. Looking at the culture in the regulatory system and the culture of the regulators, do you think our regulators need a culture change? For example, do they need more commercial experience? We are looking at rules. There is a need for speed. Speed is of the essence when trying to make decisions or make things happen. Is that something we need to focus on?

Emma Reynolds: I certainly think there is room for a more commercial mindset in the regulators. This is not just about regulation by the way; it is about operational efficiency. One of the things we have been working on is delays in authorisations for senior managers, which can slow things down. There are other authorisations as well. We are encouraging the regulators to have a more commercial mindset and to be aware of the businesses’ priorities. It is not just about regulation; it is about how efficient they are. If, for example, you want to bring in a senior manager to a bank or other institution in the UK and it takes you 18 months to 2 years, you could be doing that elsewhere, and that puts us at a competitive disadvantage. So, absolutely, we think that there is room for improvement in having a commercial mindset in the regulator.

--- Later in debate ---

[Stephen Hammond]

Q The Bill intends to do that; it is not intending to rip up regulation. It intends to make us more competitive, while ensuring the primary objective.

Karen Northey: Absolutely, and I think the process that comes has to be done in a way that is sequenced in the right way to allow proper consultation and proper input.

[Peter Grant]

Q Ms Clark, can I come back to your comment earlier about insurance companies having been set up in Gibraltar and elsewhere offshore but not in the UK? Do you have reasonable grounds to believe that the UK regulatory environment has been a significant factor in those decisions? Can you point to particular regulatory requirements that are preventing people from setting up insurance companies here?

Charlotte Clark: Why would you set up in Gibraltar and sell into the UK market? There is not a big market in Gibraltar.

[Peter Grant]

There could be a number of reasons why UK business owners choose to set up companies offshore, including in Gibraltar, and they are not always reasons that have the best interests of consumers at heart.

Charlotte Clark: I think that is fair. I am certainly not casting aspersions on the Gibraltar regime, because they should have the same regime as the UK—equivalence with Gibraltar was in the last financial services Bill. The question would be: why would they do that if we haven’t got the right regulatory environment for companies to set up here and to have the oversight of our regulators?

Bermuda is probably a good example. If you speak to the regulators there about how they think about it, how they work with businesses and what they need to do, they have a slightly different culture. I do not think that is to the disadvantage of consumers. The Bermuda market is very similar to the London market in insurance. I do not think it is to the detriment of consumers; it is to the advantage of business, and I do not think that those two things are necessarily against one another.

[The Chair]

Order. I am afraid that brings us to the end of the time allotted for the Committee to ask questions and the end of this morning’s sitting. I thank our witnesses on behalf of the Committee. The Committee will meet again at 2 pm this afternoon here in the Boothroyd Room to continue to take oral evidence.