Local Bank Branch Closures

Debate between Peter Grant and Andrew Griffith

Tuesday 5th September 2023 Commons Chamber

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

I thank the contributors on both sides of the House, including my hon. Friends the Members for Dewsbury (Mark Eastwood) and for Broxtowe (Darren Henry), and of course the hon. Member for East Dunbartonshire (Amy Callaghan) for securing this debate, which has rightly given her constituents a voice on something that they feel very strongly about. I know there is real strength of feeling across the House about this subject, but it falls to me to be clear that the nature of banking is changing.

As in so many other areas of the modern world, the long-term trend, whether we like it or not, is towards greater use of digital or telephone services. According to UK Finance, last year only a third of UK adults had carried out any banking activities face to face in a branch. The hon. Lady talked about Kirkintilloch, but 94% of those who use that branch also use the app, mobile or telephone services. The bank asserts—whether this is right or not I do not know—that fewer than 10 people were regularly using the branch. In the same period of time last year, nine out of 10 UK adults banked online or through a mobile app. More than nine in 10 of us are now using contactless payment methods, including throughout this House, and only 6% of people are now solely using cash. That is not limited to any particular demographic: 80% of adults aged between 65 and 74 use online and mobile banking as well, and less than a third of that age group regularly use a branch.

[Peter Grant]

Given that the Minister and most of his ministerial colleagues are so fond of online services everywhere else, can he explain why in these first two days back in Parliament Members have spent about three hours doing nothing while trooping through the Lobbies to vote when we could have on voted online in about two minutes flat? Why is doing things in person the right thing to do here but the wrong thing to do everywhere else?

[Andrew Griffith]

In the interest of time I will stick to the topic, but I am delighted that the hon. Member is here in person, as indeed are you, Mr Deputy Speaker.

Change is not comfortable, but it does happen. Let us consider payphones. It would not surprise me if Hansard had records of similar debates about the decline of payphones. At one point, at their peak in the 1990s, there were almost 100,000 payphones in this country. Today there is just a fraction of that number. Technology has moved on, and nearly everybody has access to either a landline or a mobile phone.

By the same token, it would make little sense to force a business to keep a physical branch open when developments in the market mean that eyeballs and footfall have moved elsewhere. Nor would our high streets be particularly well served by bank branches gathering dust and lying essentially unused. We need to find new uses for them—perhaps the aspiration of the hon. Member for East Dunbartonshire for independence will produce new uses for these bank branches—in the same way that so many of our communities and villages today have a Blacksmith’s Arms public house.

Financial Services and Markets Bill

Debate between Peter Grant and Andrew Griffith

Consideration of Lords message
Monday 26th June 2023 Commons Chamber

[Andrew Griffith]

I am delighted to speak again to the Bill, following its passage through the other place. I thank my colleagues, Baroness Penn and Lord Harlech, for their expert stewardship of the Bill, as well as the Opposition spokespeople for their generally constructive tone.

Hon. and right hon. Members will be aware that the Bill is a crucial next step in delivering the Government’s vision of an open, sustainable and technologically advanced financial services sector. Members will also recall that this sector is one of the crown jewels of our economy, generating 12% of the UK’s economic activity and employing 2.5 million people in financial and related professional services. Few constituencies will be untouched by those jobs and economic benefits. For example, Scotland benefits from £13.9 billion of gross value added and an estimated 136,000 jobs.

The Bill seizes the opportunities of Brexit, tailoring financial services regulation to UK markets to bolster the competitiveness of the UK as a global financial centre and deliver better outcomes for consumers and businesses.

The Bill repeals hundreds of pieces of retained EU law relating to financial services and gives the regulators significant new rule-making responsibilities. These increased responsibilities must be balanced with clear accountability, appropriate democratic input, and transparent oversight. There has been much debate in this House and in the other place about how to get that balance right. As a result of the considered scrutiny, the Government introduced a number of amendments in the Lords that improved the Bill in this regard.

Lords amendments 32 to 34 require the regulators to set out how they have considered representations from Parliament when publishing their final rules. Lords amendments introduced by the Government require the regulators to report annually on their recruitment to the statutory panels, including the new cost-benefit analysis panels created by the Bill. The amendments also require the Financial Conduct Authority and the Prudential Regulation Authority to appoint at least two members of authorised firms to their CBA panels. This will ensure that their work is informed by practical experience of how regulatory requirements impact on firms. My hon. Friends the Members for North East Bedfordshire (Richard Fuller), for North Warwickshire (Craig Tracey) and for Wimbledon (Stephen Hammond) may recognise that amendment and I thank them for their efforts to ensure that the Bill delivers proper accountability.

Amendments from the Government also provide a power from the Treasury to require statutory panels to produce annual reports. The Treasury intends to use this power in the first instance to direct the publication of annual reports by the CBA panels and the FCA consumer panel. I hope the hon. Member for Blaenau Gwent (Nick Smith) will welcome this as he tabled a similar amendment on Report.

Lords amendment 37 will enhance the role of the Financial Regulators Complaints Commission, which is an important mechanism for raising concerns about how the FCA, the PRA and the Bank of England carry out their functions. The amendment requires the Treasury, rather than the regulators themselves, to appoint the complaints commissioner, significantly strengthening the independence of the role.

In response to a debate in this House, the Government amended the Bill to introduce a power in clause 37 for the Treasury to direct the regulators to report on various performance metrics. On 9 May, I published a call for proposals, seeking views on what additional metrics the regulators should publish to support scrutiny of their work, focused on embedding their new secondary growth and competitiveness objectives. We have already had a number of helpful responses and we will come forward with proposals at pace following the expiry of the deadline next week. To further support that, Lords amendment 6 requires the FCA and the PRA to publish two reports on how they have embedded those new objectives within 12 and 24 months of the objectives coming into force. Taken together, these are a significant package of improvements to hold the regulators to account.

I know that access to cash is an issue of huge importance to many Members on both sides of the House. Representing the rural constituency of Arundel and South Downs, where the constituents are older than the UK average, this has always been at the forefront of my mind during the passage of the Bill. I also pay tribute to the campaigning work done by the Daily Mail and the Daily Telegraph on behalf of their readers as well as by groups such as Age UK and the Royal National Institute of Blind People.

Let me be clear: the Government’s position is that cash is here to stay for the long term. It provides a reliable back-up to digital payments, can be more convenient in some circumstances, and many, particularly the vulnerable, rely on cash as a means to manage their finances. The Bill already takes significant steps forward in protecting the ability of people and businesses across the UK to access cash deposit and withdrawal facilities for the first time in UK law. I am pleased to report that we have gone even further and introduced Lords amendments 72 to 77, which will protect people’s ability to withdraw and deposit cash for free. The amendments will require the FCA to seek to ensure reasonable provision of free cash access services for current accounts of personal customers. This will be informed by regard to a Government policy statement, which I expect to publish no later than the end of September.

Many Members are concerned about the separate issue of face-to-face banking. The FCA already has guidance to firms around the closure of bank branches and I hope that they and the industry will listen to the concerns of Members on behalf of their constituents on that issue.

Many Members across the House will have experienced the disproportionate application of rules requiring enhanced due diligence for politically exposed persons— PEPs. They and their families should not face some of the challenges and behaviours by banks that I have heard about. The Government are taking action to ensure that PEPs are treated in a proportionate manner. Lords amendment 38 requires the Treasury to amend the money laundering regulations to explicitly distinguish between domestic and foreign PEPs in law.

[Peter Grant (Glenrothes) (SNP)]

Will the Minister be more explicit as to what the close associates of domestic PEPs might include? Will it include, for example, somebody who has been elevated to the Lords by a former Prime Minister against the advice of the security services?

[Andrew Griffith]

In the interests of making progress on this substantial Bill, I shall not be tempted to comment on this further other than to say that I undertake, as I have to many other Members, to look very closely at that issue. For example, if by “associates” we mean either the adult children of people who have no real connection to the business that happens in this House, or family businesses that, again, are not directly connected to those who have put themselves forward for public service, I shall look closely at that. That is why we have tabled the amendments.

Lords amendment 39 requires the FCA to conduct a review into whether financial institutions are adhering to its guidance on the treatment of PEPs, and to assess the appropriateness of its guidance in light of its findings. Together, the amendments will lead to a change in how parliamentarians and their families experience the regime, and I am confident that they will be welcomed by all.

I will now set out the Government’s response to the non-Government amendments made in the Lords. The Bill introduces a new regulatory principle requiring the regulators to have regard to the Government’s net zero emissions target. Lords amendment 7 seeks to add conservation and the enhancement of the natural environment and other targets to this regulatory principle. The Government cannot accept the amendment as drafted, which is very broad and open to interpretation. The regulators must balance their objectives carefully, and they have a very important job to do. At a time when the Bank of England is rightly occupied by getting a grip on inflation, and the FCA is dealing with a range of challenges including working with lenders to ensure that there is support in place for those experiencing increases in mortgage interest rates, we must not overburden them with other considerations, particularly when they are vague or of uncertain relevance.

--- Later in debate ---

[Andrew Griffith]

I am grateful to all hon. and right hon. Members who have contributed to this debate. I welcome my hon. Friend the Member for North East Bedfordshire (Richard Fuller), who together with my right hon. Friend the Member for Salisbury (John Glen) started this Bill’s progress through the House. I spoke at length and tried to cover as many topics as possible in my opening remarks, so I will be brief.

I extend my thoughts to the hon. Member for Mitcham and Morden (Siobhain McDonagh). I have never actually made it to the cash machine promised in her constituency, but her words echo whenever we talk about access to cash. I did make it to the constituency of the hon. Member for Ealing Central and Acton (Dr Huq), one of the lucky constituencies to have one of the six hubs, of which we seek to see many more.

I welcome hon. Members’ acknowledgement of the substantial steps that the Government have taken to further enhance regulatory accountability through the passage of the Bill. The hon. Members for Blaenau Gwent (Nick Smith) and for Glenrothes (Peter Grant), my hon. Friend the Member for Wimbledon (Stephen Hammond) and my right hon. Friends the Members for South Northamptonshire (Dame Andrea Leadsom) and for Vale of Glamorgan (Alun Cairns) all talked about that.

The largest part of the debate was about the importance of access to cash, and the Government have introduced Lords amendments for precisely that. I wish my hon. Friend the Member for Hyndburn (Sara Britcliffe) good luck with procuring a hub for Great Harwood. My hon. Friend the Member for Aberconwy (Robin Millar) spoke about access to cash, as did the Member with the most formidable knowledge of the important role played by the Post Office, my hon. Friend the Member for North Norfolk (Duncan Baker), and my hon. Friend the Member for Southend West (Anna Firth). I and, I hope, the banks have heard the debate. It is important that they have been listening to the strong points made about not just access to cash but access to face-to-face branch facilities.

We heard from the hon. Member for Glenrothes about why Lords amendment 7 does not cover the devolved Administrations. I understand that this is not necessarily his desired outcome, but financial services legislation is a reserved matter. As an outcome, I hope to deliver a Brexit dividend—he may not particularly welcome that—for citizens in all parts of the country to protect those 140,000 jobs that, as we heard, Scotland relies on.

[Peter Grant]

Just to be clear, the Minister is saying that if the Scottish Government set a higher target for something than the UK Government do on behalf of England, the regulators will go with the UK Government’s low target, and if the UK Government set a higher target than the Scottish Government feel comfortable with, the regulator will go with the UK Government’s higher target, even in areas where an activity is devolved.

[Andrew Griffith]

We are always happy to listen to the hon. Member, but we are in danger of repeating ourselves.

Let me briefly give my right hon. Friend the Member for Epsom and Ewell (Chris Grayling) the assurance he seeks that we will not just have another review. We seek action. We will be looking for a framework for due diligence and for how we can hold the financial sector to account. Both he and my right hon. Friend the Member for South Northamptonshire talked about how we can make the UK financial sector an exemplar on deforestation and support for nature. That is my aspiration, and I believe that it is shared across the House. The Government’s amendment in lieu of Lords amendment 36 will do that.

Government amendments made throughout the passage of the Bill reflect the comprehensive scrutiny and engagement of both sides of the House, just as we have heard tonight, and the Bill is the better for it as a result. I hope that their lordships will listen to the voice of this House. It is now time to pass the Bill and begin the really important work of tailoring our financial services regulation to serve the interests of the UK, bolster our competitiveness as a global financial centre, power growth in every part of the country and every part of the economy and, above all else, deliver better outcomes for the consumers and residents we represent.

Question put, That this House disagrees with Lords amendment 7.

Council Tax and Stamp Duty Alternatives

Debate between Peter Grant and Andrew Griffith

Wednesday 17th May 2023 Westminster Hall

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

It is a pleasure to see you in the Chair, Mrs Harris, and to serve under you today. Let me join others in congratulating my hon. Friend the Member for Barrow and Furness (Simon Fell) on securing this well-attended debate. I note the largely cross-party nature of the contributions—with the exception of the speech by the hon. Member for Ealing North (James Murray)—and I will try to reflect that in my tone. We welcome this opportunity to discuss the important issue of property taxation, including the current status of council tax and stamp duty. I have heard the concerns that have been articulately put on behalf of Members’ constituents in many different parts of the country, and those concerns have been thoughtful and constructive.

For many people, council tax is the most fundamental tax: we pay it every month, it is highly visible, it has an impact on all sorts of important decisions and, when we pay it, we know what services we are getting for it. It has the strength unique in the taxation system of being local and personal. That is not to say that it is perfect, and we have heard today about some of the difficulties manifested in some communities.

Importantly, council tax is set, collected and retained by democratically elected local authorities, and I ask colleagues to think about that as we think about potential reforms. It ensures that households contribute to the cost of local services, whether that is fire and rescue, refuse collection, transport, libraries or—this is a particular passion for my constituents in Arundel and South Downs—dealing with potholes.

Council tax is a well-understood tax and has a high rate of collection and a stable base. It does not, for example, go up and down with property prices, as some potential alternatives might. Therefore, it gives local authorities a strong degree of certainty in their financial planning. On aggregate, it raises about £36 billion for local councils in England. That is about 57%—very importantly, the majority—of their core spending power. Council tax is the largest single source of revenue for local authorities. To ensure fairness, it is mitigated—we heard a little about this—through a range of reliefs, such as support for those on low incomes, a reduction for those with a disability and an exemption for students.

Stamp duty is an efficient tax to administer and collect. It raises a really substantial sum—£14 billion that the Government use to pay for essential services, such as the NHS, schools and police.

So these are not easy issues. For all of us thinking about the best way forward and about how to chart a course for reform, this issue does pose questions that are worth thinking about. Notwithstanding the advocacy of the proposal from many hon. and right hon. Members in the debate, neither the Opposition Front-Bench spokesman, the hon. Member for Ealing North, nor the distinguished hon. Member for Westmorland and Lonsdale (Tim Farron) actually went to the point of committing to make this change, so I would contend that there is a little more work to do.

[Peter Grant]

Will the Minister give way?

[Andrew Griffith]

Although the hon. Member does not represent England, perhaps he would like to make that commitment.

[Peter Grant]

At least we agree that we are no longer a United Kingdom—I am pleased to agree with the Minister on that.

Given the increasing complexity and scale of services that local government in Scotland and England has to provide, does the Minister see any benefit in giving councils the power to raise taxes based on something other than simply property values? Is it time to broaden the base so that they can raise their own incomes tax, VAT, sales tax or tourist taxes—or are the Government obsessed with the idea that their core tax will always be based on imaginary property values?

[Andrew Griffith]

In the interests of trying to reflect the views of hon. Members, I will not be distracted by that interesting idea. Again, the proposal that has been put forward does acknowledge the opportunity for local authorities to diversify their sources of revenue. One of the issues that, as a democrat, I find most problematic with this proposal is the impact it would have on local authorities. Their ability to raise revenue for themselves would be taken away, which would be one of the single biggest—and adverse, in my view—issues for local government. The system is often accused of being overly centralised, but this proposal would absolutely remove any ambiguity whatever, and that is something that the advocates of this proposal may want to think about.

Draft Financial Services and Markets Act 2000 (Financial Promotion) (Amendment) Order 2023 Draft Financial Services and Markets Act 2000 (Commodity Derivatives and Emission Allowances) Order 2023

Debate between Peter Grant and Andrew Griffith

Tuesday 2nd May 2023 General Committees

[Peter Grant]

I can assure you I have been called worse, Mr Gray.

The Scottish National party, like the official Opposition, will not be opposing the draft order today, but I want to raise one or two points. I am concerned not about the way in which these transactions will be regulated, but about just how effective the arrangements will be. My concern is that the financial promotion regulation that we have for more traditional forms of financial products is not working. It is not protecting consumers. Too many of my constituents have lost a lot of money. I do not remember whether I have had discussions with the Minister about Blackmore Bond, which I have certainly discussed with a lot of his colleagues.

[Andrew Griffith]

indicated assent.

[Peter Grant]

I see from the Minister’s nodding that he knows what I am referring to. The Financial Conduct Authority just never got ahead of the chancers in the way that those bonds were being sold and promoted to innocent members of the public in my constituency and elsewhere. There is still an issue as to whether the Financial Conduct Authority takes seriously enough potential scams that may not break the economy, but will certainly cause untold harm to sometimes quite significant numbers of our constituents.

Will the Minister indicate what the Government are doing to make sure that the Financial Conduct Authority and others who are trying to regulate the crypto market have got the resources and expertise to do the job? If we are giving them more and more responsibilities and they are already saying that they do not have the resources they need to regulate as firmly as we would like, that means that significant additional resources will have to be put in. Will the Minister confirm whether, on the back of this order, there is an intention to increase the resourcing of the Financial Conduct Authority?

What are we going to do to make sure that where there are breaches, those who are in breach are brought to book much more quickly than often happens with more traditional promotions? One of the problems with any kind of e-commerce is that if things start to go wrong, they can go very wrong very quickly indeed. We need to make sure that the regulatory process can be speeded up.

Finally—this may be beyond the remit of the Minister today—what are the Government doing to make sure that when cases come to court, those hearing the cases understand what they are dealing with? A judge and jury trial in relation to these matters might not work, for example: where are we going to find a jury that understands the very fine points of technical detail that may be critical in deciding whether something is permitted or not permitted and therefore in deciding whether somebody is innocent or guilty?

My primary concern is whether those who will be asked to regulate under this new order will have the resources and the expertise necessary to make sure that they can do the job effectively.

Draft Economic Crime (Anti-Money Laundering) Levy (Amendment) Regulations 2023

Debate between Peter Grant and Andrew Griffith

Tuesday 21st March 2023 General Committees

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

I beg to move,

That the Committee has considered the draft Economic Crime (Anti-money Laundering) Levy (Amendment) Regulations 2023.

It is a pleasure to serve under your chairmanship, Ms Elliott.

The risk posed by economic crime is severe, and threatens the UK’s security, prosperity and resilience. Our openness and our status as a global financial centre is vital to our nation’s success. However, that great strength also exposes us to a range of economic crimes and to those who wish to harm UK businesses and individuals. In that context, there can be few objectives more critical than delivering a comprehensive response to economic crime.

That is especially important as we bear down on the Russian war machine in the wake of Putin’s illegal invasion of our ally, Ukraine. That is why the Government expedited the Economic Crime (Transparency and Enforcement) Act 2022, which introduced key reforms to crack down on dirty money and hostile actors. We have gone further still by introducing the Economic Crime (Transparency and Enforcement) Act 2022, which built on the earlier Act to bear down further on kleptocrats, criminals and terrorists.

The instrument we are considering today is the final step in implementing the economic crime (anti-money laundering) levy, which is a core component of the Government’s comprehensive and continuing response to economic crime. Announced at Budget 2020, the new levy aims to raise approximately £100 million a year to help ensure a sustainable funding model for action to tackle money laundering. The levy supplements approximately £200 million of additional Government investment to tackle economic crime over the 2021 spending review period. The funding will help to ensure a step change in our response by supporting the delivery of critical economic crime reforms, including commitments set out in the economic crime plan.

It is right that those sectors that give rise to money-laundering risk help contribute to countering that risk. That is why the levy will be paid by firms subject to the money laundering regulations only. I take this opportunity to thank the sector for their engagement throughout the levy-design process. The Government have worked closely with the industry and the levy collectors, including through policy and technical consultations. In doing so, we have ensured that the levy meets its objectives while aligning as far as possible with the core levy-design principles set out at consultation, including proportionality, predictability, simplicity and cost-effectiveness. The Government have delivered on those principles by ensuring proportionate levy fees, with no business expected to contribute more than a tenth of a per cent. of their UK revenue; by implementing a carve-out for businesses whose annual revenue falls below £10.2 million so that smaller businesses, who make up the vast majority of all those otherwise in scope, are exempt; and by aligning levy policy across the three collectors as far as possible, while adhering to existing collector processes in places for the sake of simplicity.

This instrument makes provisions for assessments and calculations of levy due, levy enforcement through financial penalties, information provision and record preservation obligations, overpayments, reviews and appeals. It has been designed with close regard to the core levy-design principles, including proportionality. It is my hope that stakeholders will welcome the clarity this instrument provides on remaining areas of levy policy and implementation. I assure the Committee that each levy collector will shortly publish information that outlines how in-scope entities should engage with these processes and pay the levy.

[Peter Grant (Glenrothes) (SNP)]

Could the Minister explain why all these amendments are being made now? Why were they not made when the original regulations were made last year?

[Andrew Griffith]

Last year’s Act was the primary legislation that enabled the levy. Subsequently, there has been extensive consultation with stakeholders about the way in which we should proceed with that levy. We are considering the detail of those procedures today.

In the consultation, stakeholders emphasised the importance of clarity and transparency throughout the development and implementation of the levy. The Government share that view, and that is one of the reasons why we are dealing with this in stages. We are committed to delivering annual reports on the operation of the levy, including a breakdown of how the levy is being spent, and a comprehensive review by the end of 2027.

The new levy represents an integral part of the Government’s comprehensive programme of work to ensure that economic crime finds no home in the United Kingdom, preserving this country’s security, resilience and prosperity. I commend the regulations to the Committee.

--- Later in debate ---

[Andrew Griffith]

I do not want to detain the Committee any longer than necessary, but I ought to respond to one or two of the points raised by the hon. Member for Glenrothes. I am slightly at a loss: are we moving too fast or too slowly? One person’s revised SI is another person’s reflection of consultation that results from listening to the industry and a desire to get things right. I accept that this was not his intent, but there was some implied criticism of the hard-working officials who are doing their best to reconcile the needs of transparency with this House and the desires of the sector.

[Peter Grant]

For clarification, the people drafting the legislation are having to do it at pace because they have been lumbered with 4,500 bits of legislation that they would not have had to revise were it not for the Government’s political dogma.

[Andrew Griffith]

We will let that matter rest. On one level, I share the hon. Gentleman’s desire for a smaller state and less legislation, but defending our country from money launderers is perhaps not the best place to start that deregulatory zeal. We can come back to that.

From his work on the Financial Services and Markets Bill, the hon. Gentleman is aware that the Government are introducing measures to protect customers and the victims of push payment fraud, which is very concerning. The quicker that Bill completes its journey in the upper House, the quicker we can get it on the statute book. The £1 billion that he referred to concerns all of us on both sides of the House.

I am not aware of the Gambling Commission having expressed concern. It has been consulted throughout, and collecting levies is within its core purpose. I will of course be open to advisement on that. That is one of the reasons why a review is baked into the regulations. It is a piece of good, proportionate best practice that in 2027 there will be a formal review. I undertake today that the outcome of that review will be brought to the attention of the House.

It is always a pleasure to respond to the hon. Member for Hampstead and Kilburn. She raised the important work of Transparency International. Although this is the final piece of this particular set of economic crime legislation, it is of course not the whole of our anti-fraud strategy. My hon. Friend the Security Minister has told the House that that will come to this place very shortly. I ask all parties to look at that and consider the strategy in the round, together with the Government’s anti-fraud strategy.

The hon. Lady asked me to publish how the levy will be used. Of course, the point of the levy is to build a fund to enhance the overall level of resources available to crime fighters. That could be for a range of purposes, including more intelligence, better reporting infrastructure and more personnel devoted to this area. It will only be in due course that we are able to see where that money is spent. I undertake to the Committee that we will publish an annual report on how the levy is spent. The hon. Lady is right that it should attract proper scrutiny. As she understands, it is only one part of the resources available to our police, anti-fraud initiatives and crime fighters.

Question put and agreed to.

Financial Services and Markets Bill

Debate between Peter Grant and Andrew Griffith

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.

Autumn Statement Resolutions

Debate between Peter Grant and Andrew Griffith

Monday 21st November 2022 Commons Chamber

[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?

Financial Services and Markets Bill (Fourth sitting)

Debate between Peter Grant and Andrew Griffith

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.

--- 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.

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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.

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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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[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.

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[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.

--- Later in debate ---

[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.

Financial Services and Markets Bill (Third sitting)

Debate between Peter Grant and Andrew Griffith

Committee stage
Tuesday 25th October 2022 Public Bill Committees

[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.

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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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[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.

--- Later in debate ---

[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.

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[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.)

National Security and Investment Bill (Twelfth sitting)

Debate between Peter Grant and Andrew Griffith

Committee stage
Thursday 10th December 2020 Public Bill Committees

[Peter Grant]

I am grateful again for those comments. The hon. Lady has referred again to what is in the explanatory notes. Unless somebody has changed the rules, the explanatory notes are not part of the eventual Act of Parliament. In borderline cases, they may be used by a court to help to interpret what the intention of Parliament was when it passed a Bill, but as a general rule, the intention of Parliament is stated by the words in the Act as it is passed. If it does not say in the Act that a Secretary of State can take those factors into account, there will be an argument that will have to be heard and tried in court, if need be, that a Secretary of State should not have taken those factors into account.

[Andrew Griffith]

I do not know how familiar the hon. Gentleman is with the process by which the courts look at the definitions for judicial review, but one of the dangers of trying to write them down—I accept that it is “may” language, not “must”—is that the court will look at them. We could inadvertently circumscribe the degree to which the Act can be used. I know that is not the hon. Gentleman’s intention, but I have to say that, in practice—he might be familiar with how the courts work, particularly for judicial review—that is absolutely a legitimate consideration. That is one of the reasons why I would argue that the new clause should not be accepted.

[Peter Grant]

I hear what the hon. Gentleman is saying, but I am also looking at the following words:

“factors including, but not restricted to”.

Are those words completely without meaning? If they are, why is it that the Library has dozens, if not hundreds, of pieces of legislation currently in force that have those exact words included in them? Those words are there explicitly to make sure that the list is not intended to be comprehensive. The fact that the word “may” is in there is because it allows the Secretary of State to take the factors into account, but it does not require them to do it in circumstances where it is not appropriate.

The final aspect that I want to look at is the very last factor in new clause 1: money laundering. Everybody knows that money laundering is bad and that it is a threat to our economy; it is a threat to honest businesses and all the rest of it. If the only concern that the Secretary of State had about an acquisition was that it was intended to facilitate large-scale money laundering in the United Kingdom, can we be sure that a court would accept that, and that alone, as evidence of a threat to our national security? I hope it would. The way to make sure it would is to put it in the Bill right now.

We know there are very strong connections between the acquisition of huge amounts of property, particularly in London, by people who got rich very quickly after the collapse of the Soviet Union, large-scale money laundering and organised crime, with the money sometimes being laundered through London, and the growing effectiveness of the threat that the present Russian regime poses to our national security. The Intelligence and Security Committee report from about a year ago highlighted that very clearly.

We know that money laundering can become part of—[Interruption.]

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[Peter Grant]

I am pleased to speak to the two new clauses, which stand in my name and that of my hon. Friend the Member for Aberdeen South. Throughout our debate on the Bill, Members have spoken—sometimes with a surprising degree of cross-party consensus—of the need to find the right balance between protecting our collective national security and allowing beneficial investment into the United Kingdom to continue. New clauses 2 and 3 aim to give some recognition to the fact that among the Bill’s potential detrimental effects may well be a disproportionate detrimental impact on smaller businesses and early start-up ventures.

Smaller businesses often lack the resources to have their own in-house team of lawyers or other trade law experts, and they certainly cannot afford the services of the very experienced experts that gave evidence to the Committee a few weeks ago. They may be more adversely affected than a bigger business would be by delays in bringing in investment, because they do not have the same resources to fall back on. Compared with bigger businesses that may have more international connections, smaller businesses are unlikely to be as well informed about which possible investors or partners are likely to raise security concerns. There is a danger that small businesses could commit time and resources to negotiating deals, acquisitions, mergers or investments that a bigger business with a more global perspective would immediately know were non-starters. Small businesses may spend a lot of time on abortive deals and negotiations.

All the way through, I have said that these things may happen. I am not trying to reignite arguments about “may” and “must”, but at the moment nobody really knows what the impact of the legislation will be. We cannot possibly know until it has been in place for a few months, or possibly even a bit longer. What we do know is that when this legislation comes into force, we will rely massively on the growth of existing small businesses and the launch of new ones to drive our post-covid recovery. Big businesses will not do it, and they certainly will not do it on their own. We have all got a responsibility to avoid putting unnecessary obstacles in the way of small businesses who want to start to grow. If we do find that we have unintentionally put those obstacles in the way, we need to be able to remove them.

New clause 2 makes two simple requests—it has two simple requirements. The first is that the Secretary of State reports back to Parliament on impacts the Act has had on small and medium-sized enterprises and early-stage ventures, giving Parliament the chance—should it need it—to consider whether we have created unintended barriers to small businesses. The second requirement is for the Secretary of State to provide guidance to those same companies to give them a bit more certainty about what they need to do to stay on the right side of the law without having to spend money on expensive consultants or legal experts.

New clause 3 tries to minimise the potential damage that the Act could do to small businesses, particularly in the early days when they may be unused to some of the impacts. Clause 32 creates a new offence of completing a notifiable acquisition without reasonable excuse and without the proper authority of the Secretary of State. New clause 3 seeks to recognise that small businesses in particular may find themselves in the wrong side of that clause in the early days of the legislation, not through any malice or wilful neglect, but simply through ignorance, lack of experience or being too busy trying to run their business to be keeping an eye on what is happening in the Houses of Parliament. New clause 3 would effectively provide a grace period of six months in which a small business can put forward the fact that the legislation is new to be taken as a reasonable excuse, which would mean that neither they nor the directors were liable to criminal prosecution. It is critically important to bear in mind that nothing in new clause 3 would do anything whatever to dilute or reduce the effectiveness of the Bill in doing what it is supposed to do. It would not have any impact on the ability of the Secretary of State to take action to protect our national security. It would not have any impact on the exercise of powers either to block an acquisition or merger or to impose conditions on it, should that be necessary. It would not change the fact that if a small business during that six-month period completes an acquisition that should not have been completed, that acquisition would be just as void under the law as any other acquisition.

I understand that new clause 3 is a slightly unusual clause for a piece of legislation, but it would allow us to make sure that the Bill continues to protect national security to the fullest extent it can, but at the same time that we do not have businesses being scared to act in case they end up on the wrong side of the law. We would not have the possibility of the courts having to take up time dealing with prosecutions of small businesses or directors who genuinely meant no harm, but who just—

[Andrew Griffith]

I welcome the hon. Gentleman’s conversion to the zealous promotion of free enterprise and the cause of small businesses, but would he extend his support to any new taxation measures, new business regulation or employment measures that are advanced by the Government? While I support the thrust, the principle and the philosophy from which he clearly speaks, I do worry that the new clause could create somewhat of a precedent, and I am not sure that all of his colleagues have fully thought through the profound implications for the application of the law on business in this land.

[Peter Grant]

I can assure the hon. Gentleman that I have been a supporter of small businesses significantly longer than he has perhaps. I did make it clear that this is a way that we can protect small businesses without in any way compromising the integrity of the Bill. There is nothing in the new clause that will in any way weaken the effectiveness of the Bill and protecting our national security. I would be happy at another time to debate the reasons why, for example, employment measures in Scotland should be taken by the Parliament and Government elected by the people of Scotland rather than somewhere down here, but that is not a debate for today. I expect, Sir Graham, that neither you nor anybody else would be too pleased if we started to take up time this afternoon on that subject.

National Security and Investment Bill (Twelfth sitting)

Debate between Peter Grant and Andrew Griffith

Committee Debate: 12th sitting: House of Commons
Thursday 10th December 2020 Public Bill Committees

[Peter Grant]

[Andrew Griffith]

[Peter Grant]

--- Later in debate ---

[Peter Grant]

[Andrew Griffith]

[Peter Grant]