Compensation (London Capital & Finance plc and Fraud Compensation Fund) Bill

Debate between Rehman Chishti and Gareth Thomas

Report stage & 3rd reading
Wednesday 22nd September 2021 Commons Chamber

[Kevin Hollinrake]

That is very welcome.

The key point in the amendment is about oversight. I am concerned that the FCA is not as accountable as it could be to this House. With repatriation, a number of regulations and regulatory oversight of the FCA have now passed back to us domestically whereas before there was accountability through the EU institutions. I am concerned that we have proper oversight of what the FCA does. The hon. Member for Glenrothes and the hon. Member for Harrow West (Gareth Thomas) are quite right: the jury is still out on the FCA. It has made some bold claims that it is reforming and becoming more effective. I welcome the fact that only a couple of weeks ago it set out some clear targets for a reduction in the number of investors investing in high-risk investment and being subject to scams. There are some specific criteria that the House can now hold it to account for; I am just not clear how we do so. I can see how the Treasury does so, but it is important that the House can, too.

In the work that I have done on the all-party parliamentary group on fair business banking, we have seen numerous cases in which the FCA has not been proactive or used the mechanisms at its disposal to sanction the people responsible. That is simply unacceptable. The FCA must be a much more proactive organisation and, for it to be held account for such proactivity, we need a clear line of responsibility between it and the House and its Members. The amendment is a good attempt, but not one that I can support.

[Gareth Thomas]

I am sympathetic to the broad thrust of the amendment tabled by the hon. Member for Glenrothes (Peter Grant) and his concern, which I alluded to in my intervention, that the Government, and certainly the FCA, appear to be saying, “Don’t worry—we’ve had a change of leadership and everything is going to be all right now. You don’t need to worry about the quality of the regulation of investment firms going forward, or the implementation and enforcement of consumer financial regulation, whether in this case or more generally.” I have some sympathy with the point of the hon. Member for Thirsk and Malton (Kevin Hollinrake) that we should be sceptical about such a claim. It is good that Treasury Ministers will be having a more regular dialogue with the FCA, partly as a result of this scandal.

As the House knows, I have taken a particular interest in the demutualisation of Liverpool Victoria. That is very different from the case of LCF, so it would not be appropriate for me to go into the particular details, but there are parallels in the treatment of Liverpool Victoria consumers and those of LCF products. Some of those parallels relate to the culture that appears to exist within the FCA. The all-party parliamentary group for mutuals received a letter from the FCA and one from the PRA, and they reveal that there have been almost 60 meetings between the regulators and the board of Liverpool Victoria, but not one meeting with its consumer-owners on its demutualisation. I wonder whether there is not a frog in hot water-type problem here, with the FCA so close to the Liverpool Victoria board in this case—and potentially to other financial firms—that it fails, perhaps accidently, to do its job on behalf of consumers with sufficient robustness.

I welcome the Dame Elizabeth Gloster report, which was excoriating in its findings. To pick out some key concerns, it said that there were “unclear” policy documents for use by FCA staff, a

“flawed approach to the Perimeter”

and a “failure to consider” the behaviour of particular businesses holistically. It also said that there was insufficient training of staff and pointed to confusion between Her Majesty’s Revenue and Customs and the FCA—our regulators—over the handling of particular issues.

I appreciate that the FCA has not only had a change of personnel but brought forward proposals for a consumer duty to try to rebuild some confidence. However, my problem with the duty, which it consulted on until the end of July, is that there is no sense of understanding the difference between consumers who also own a business—a mutual in this case—and consumers per se, or a willingness to take additional actions for consumers who are also owners. I worry about whether that additional duty will be robust enough.

[Rehman Chishti]

I really appreciate all the work that the hon. Gentleman has done on this matter. On the consumer duty, my concern, raised with me by local residents, is that the company was allowed to continue trading without investigation in 2015 after warnings of malpractice and maladministration. With his expertise and experience, does he think that, whether through the consumer duty or further regulation following the Gloster inquiry, the measures proposed would prevent what happened in 2015?

[Gareth Thomas]

The hon. Member invests an awful lot of confidence in me to predict what might happen, but I can well understand a Conservative looking to the Labour party for such guidance. I certainly hope that the consumer duty and better enforcement will help to prevent such a terrible debacle from happening again, because, as the House has rightly noted, many good people have lost an awful lot of money and deserve the compensation that the Bill will provide. However, many others who have been victims of similar cases would have also merited better protection from the FCA.

I will ponder aloud, in response to the Minister having some sympathy with the points made by the hon. Member for Glenrothes and my right hon. Friend the Member for Wolverhampton South East (Mr McFadden) in Committee, whether there is a need for a smaller body that does not just concentrate on the FCA but looks at some of the strategic issues around consumer protection and financial products in particular, and has a small number of inquiries each year looking at the performance of regulators in that regard, in part to help prevent a repeat of the LCF debacle.

As a model for such a body—I do not suggest it is perfect—I put on the Floor of the House, so to speak, the Independent Commission for Aid Impact, which the House uses to consider how our international aid money is being spent and the strategic challenges in that. It is a small, dedicated body that operates in a completely different sphere from this, but it produces important and useful reports that are used by the relevant Department, experts in the sector and, crucially, the International Development Committee. I wonder whether such a body would be appropriate to keep the PRA and FCA’s feet to the fire. It could be used by the Treasury Committee, and indeed other Committees of the House, to assess the quality of consumer financial regulation and the job that the FCA, PRA and other regulators are doing to protect consumers from any repeat of the LCF debacle.

[Rehman Chishti]

The hon. Gentleman’s idea of an independent committee should be considered among the wider tools to get the right support for consumers. Of course, I have admiration for him because, being a fair man, I see he also went to the University of Wales Aberystwyth, and we were taught at university always to respect other colleagues’ talents. That is why I respect his expertise on this matter.

[Gareth Thomas]

I am not sure I need to respond other than to thank the hon. Member for his intervention.