Financial Services and Markets Bill

Richard Fuller Excerpts

2nd reading
Wednesday 7th September 2022 Commons Chamber

[The Economic Secretary to the Treasury (Richard Fuller)]

I beg to move, That the Bill be now read a Second time.

The provisions of the Bill create the conditions for the United Kingdom to roll back or reform all European Union legislation for financial services that remains on our statute book. The Government will move at pace to implement a more agile and more internationally competitive set of rules that will harness the potential of UK financial services to stimulate growth across the United Kingdom.

Financial centres in the European Union, in the United States and across Asia are engaged with the United Kingdom in a global competition to attract financial services expertise, and to be the most successful in adopting the benefits of technology-driven change that may radically alter the shape and reach of financial services. The Bill will enable the United Kingdom to assert its leadership, and to drive forward change to capture a greater share of the global market for financial services. As the Prime Minister has said, the financial services sector is the

“jewel in the crown of the UK economy”,

and we are committed to supporting its ability to realise its full potential. An effective, efficient and easily accessible financial services sector is a vital foundation for the ease of daily life and for the national economy. The Government are therefore taking forward an ambitious set of reforms in this landmark Bill.

[Caroline Lucas (Brighton, Pavilion) (Green)]

The Bill contains a new statutory objective on competitiveness and growth, which ranks those elements above the UK’s legally binding nature and climate targets. Given that a thriving economy depends on a thriving environment, will the Minister look at this again and consider introducing a climate-and-nature-specific statutory objective as well, so that there are two statutory objectives rather than a statutory objective and a regulatory principle, which are not the same thing?

[Richard Fuller]

The hon. Lady is right to point to the importance of the objectives that are set for the regulators in financial services, but surely she will accept that the most fundamental principle for each of them should be the stability of financial services in the United Kingdom, and we pay regard to that in the Bill. We have added, as she pointed out, some focus on global competition and on achieving growth across the United Kingdom. Those are the fundamental demands that the British people have of the financial services sector. However, it is important that we have regard to the issues that the hon. Lady has mentioned, and I am sure we will discuss them, and the priority that should be attached to them, in more detail in Committee.

[Chris Grayling (Epsom and Ewell) (Con)]

May I pursue the point about environmental issues? I take my hon. Friend’s point about the need to secure the stability of the sector—that is not in dispute—but one of the things we have not done in this country is to take steps to place a duty on financial institutions not to invest in businesses that support deforestation around the world. Our combat against deforestation has run through a range of policies that the Government have pursued, and it should be continued. I will be asking my hon. Friend, as we go through this process—ahead of, possibly, tabling amendments on Report—to consider placing such a duty on the financial services sector, so that before it invests internationally, it at least asks the question “Will this lead to deforestation?”

[Richard Fuller]

I am grateful to my right hon. Friend for that addition to the debate. It is clear that there is interest in the House in debating the priority that is given to these particular issues, and I look forward to hearing the contributions of my right hon. Friend—and those of Opposition Members—in Committee, to establish whether we have got these matters right.

[Dame Angela Eagle (Wallasey) (Lab)]

Will the Minister give way?

[Richard Fuller]

I will give way one more time, and then I will make a little progress.

[Dame Angela Eagle]

There is much on the Bill for which I think there will be cross-party support, but there are some elements that worry me, and I wonder whether the Minister can reassure me about them. I refer to the Henry VIII powers, and the fact that a great deal of extra power will be given to the regulators and the Treasury. I worry about a lack of appropriate accountability to the House. Can the Minister give us some reassurances on the Henry VIII powers, and can he give us proper undertakings that he is not creating a system that will leave the House out?

[Richard Fuller]

Not surprisingly, the hon. Lady has put her finger on one of the most fundamental elements of the debate that we need to have on the Bill, which is the accountability of regulators, as expressed through the House and, if I may say so, through the Government. I can assure the hon. Lady that that will be a fundamental part of our debate throughout the Bill’s progress, and, indeed, I will say more about it later in my speech.

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

Will the Minister give way? This is further to that point.

[Richard Fuller]

If it is further to that point, of course I will.

[Emma Hardy]

I think that one of the points made by my hon. Friend the Member for Wallasey (Dame Angela Eagle) was not just about regulation post-Brexit, but about the power grab in the Treasury. Clause 3 deals with the Treasury’s powers during the transition, and it states that the primary legislation in schedule 1 will be bypassed, with powers given directly to the Treasury because of the need to move EU regulations speedily into domestic law. That, I think, is where one of the problems lies. It is a question of how much power is going directly to the Treasury and bypassing Parliament entirely.

[Richard Fuller]

The hon. Lady has made a useful point. She has identified the fact that there is an extensive amount of change in this Bill. As we repeal EU legislation, there will clearly be some measures on which there is a common view that they can easily be repealed and are unnecessary. It is right that the Treasury, and the Government, should be able to take those actions directly. Equally, there will be measures that will require full consultation by the House through secondary legislation, and I can give a commitment that that will be done apace, but with the ability for parliamentary colleagues to debate those measures fully. It is important that we achieve the primary objective of the Bill, which is to make the United Kingdom a solid global financial service centre.

In fact, the Bill has five objectives. They are to implement the outcomes of the future regulatory framework review, which involves reshaping our regulatory and legislative regime as an independent state outside the EU; to bolster the competitiveness of UK markets and promote the effective use of capital; to promote the UK’s leadership in the trading of global financial services; to harness the opportunities of innovative technologies in financial services; and to promote financial inclusion and consumer protection. I will take each of those in turn.

Let me deal first with the implementation of the outcomes of the FRF review. Clause 1 and schedule 1 repeal retained EU law for financial services so that it can be replaced with a coherent, agile and internationally respected approach to regulation that has been designed specifically for the UK. This will build on the existing model established by the Financial Services and Markets Act 2000, which empowers our independent regulators to set the detailed rules that apply to firms. They do this while operating within the framework and guard rails set by the Government and by Parliament.

Schedule 1 contains more than 200 instruments that will be repealed directly by the Bill. While in some cases these rules can simply be deleted, in many areas it is necessary to replace them with the appropriate rules for the UK, in our own domestic regulation. These instruments will therefore cease to have effect when the necessary secondary legislation and regulator rules to replace them have been put in place.

As we have already heard from Members today, giving these measures effect will require a significant programme of secondary legislation to modify and restate retained EU law. I can confirm that in most cases, this will be subject to the affirmative procedure in the House.

[Peter Grant (Glenrothes) (SNP)]

I welcome the Minister to his new post. Is it not a fact—I mention this partly for the benefit of those watching our proceedings who may be unfamiliar with it—that the House has the choice of taking or leaving each piece of secondary legislation that is presented to it, and Parliament will have no opportunity to amend secondary legislation if it does not think it is good enough?

[Richard Fuller]

As the hon. Gentleman will know, there will be plenty of opportunities for him to review each of the 200 measures in Committee, should he so wish, and to make recommendations. He will also be aware that the Government have already undertaken significant consultations with industry and others, and that there are ongoing reviews of a number of measures that are in place, some of which are contained in schedule 2. I do not feel that what he fears will actually be the case. There will be a process of consultation on a number of these measures, and there will be ample time for questions to be asked in the House as those consultation proceed.

As I have said, we have already undertaken fundamental reviews in some areas to ensure that we are seizing the opportunities of leaving the European Union, and this Bill delivers their outcomes. Let me touch on these briefly.

The Bill gives the Treasury the powers to implement reforms to Solvency II, the legislation governing prudential regulation for insurance. The Government are carefully considering all responses to their recent consultation and will set out their next steps shortly. The Bill also allows the Government to deliver on the outcomes of the UK’s prospectus regime review, taking forward key recommendations from Lord Hill’s UK listings review. These reforms will ensure that investors receive the best possible information, help to widen participation in the ownership of public companies and simplify the capital raising process for companies on UK markets. This can help to boost the UK as a destination for initial public offerings and optimise its capital raising processes.

The Bill also delivers, through schedule 2, the most urgent reforms to the markets in financial instruments directive—MIFID—framework, as identified through the wholesale markets review. It will do away with poorly designed and burdensome rules, such as the double volume cap and the share trading obligation, which will allow firms to access the most liquid markets and reduce costs for end investors. We intend to bring this into effect shortly after Royal Assent.

In reforming our regulatory framework, it is right to think about the regulators’ objectives so that they reflect the sector’s critical role in supporting the UK economy. For the first time, the Prudential Regulatory Authority and the Financial Conduct Authority will be given new secondary objectives, as set out in clause 24, to facilitate growth and international competitiveness. The FCA and the PRA will do this within an unambiguous hierarchy that does not detract from their existing objectives.

It is critical that these new responsibilities for regulators are balanced with clear accountability both to the Government and to Parliament. This is addressed in clauses 27 to 42, alongside clause 46 and schedule 7. The Bill includes new requirements for the regulators to notify the relevant parliamentary Committee of a consultation and to respond in writing to formal responses to statutory consultations from parliamentary Committees. The regulators are ultimately accountable to Parliament for how they further their statutory objectives, so these measures recognise the importance of the Committee structure for holding the regulators to account. While I welcome the new Treasury Select Committee Sub-Committee, it is ultimately for Parliament to determine the best structure for its ongoing scrutiny of the financial services regulators.

[Mark Garnier (Wyre Forest) (Con)]

I was on the Treasury Committee a number of years ago when we were looking at the Financial Services Act 2012, when competitiveness was not properly addressed. Is my hon. Friend convinced that the Treasury Committee will be able to instil a sense of urgency in the regulators and convince them that competitiveness is incredibly important? It is one thing to hold the regulators to account, but another to be able to drive them to implement the will of Parliament.

[Richard Fuller]

My hon. Friend opens up what was an area of particular personal interest to me when I was a Back Bencher, and I therefore feel tempted to stray, during what might be my rather temporary position on the Front Bench—[Hon. Members: “No!”] That was a cheap attempt for a laugh, but if I may just say this without straying too far, I think it is recognised across the House that the role of Parliament in holding regulators to account needs further investigation. The Bill is quite remarkable because we are building on a structure from the year 2000 that put tremendous power in the hands of the regulators. We think that is right. We do not think that we should have the same prescriptive statute-based approach as the European Union, because we feel that is too rigid, does not promote competition and does not help growth. But we must recognise, as we take the Bill through the House, that we have a responsibility carefully to ensure that those structures of parliamentary oversight are appropriate.

[Alison Thewliss (Glasgow Central) (SNP)]

I very much enjoy serving on the Treasury Committee, but it has an incredibly busy agenda. What the Government are doing here is taking a huge amount of scrutiny of incredibly important structural issues relating to financial services from 650 Members of Parliament and giving it to a Committee of 11 and a perhaps yet smaller Sub-Committee. Does the Minister really think that is adequate?

[Richard Fuller]

The hon. Lady tempts me to talk beyond what is really the responsibility of the Government. She is raising questions that are correctly and appropriately for the parliamentary authorities to respond to. On her more general point about whether the system is correct to rely on the regulatory framework that was established in 2000, I think the answer is absolutely yes. As I have just mentioned, it provides the ability for an agile, pro-growth, competitive set of financial services regulations, and I believe that Parliament itself is capable of providing that democratic oversight over the regulators. If she is concerned about that, I encourage her to take it up with the parliamentary authorities in the usual way.

So I welcome the Treasury Sub-Committee. I have said that ultimately it is for Parliament to determine the best structure for the ongoing scrutiny of financial services regulators. The Bill also includes a new power for the Treasury to require the regulators to review their rules when that is in the public interest. Following any such review, the final decision on potential action would be for the regulators to make.

Following the repeal of retained EU law, the Government will have no formal mechanism to bring public policy considerations directly into rule-making. It is right for the democratically elected Government of the day to be able to intervene in a matter of financial services regulation where there are matters of significant public interest. The Government’s intention is therefore to bring forward an intervention power that will enable Her Majesty’s Treasury to direct a regulator to make, amend or revoke rules where there are matters of significant public interest. The Chancellor will take a final decision on the precise mechanics of the power and the Government will table an amendment in Committee.

Let me now turn to the Bill’s second objective: bolstering the competitiveness of UK markets and promoting the effective use of capital. I have already spoken about the improvements to the UK’s regulation of secondary markets in this Bill through reforms to the MIFID framework in the wholesale markets review. These changes will lower costs for firms and align our approach with that of other international financial centres such as the United States. To improve the smooth functioning of markets, we will introduce a senior managers and certification regime for key financial market infrastructure firms. We will expand the resolution regime for central counterparties to align with international standards, and enhance the powers to manage insurers in financial distress.

The next objective of the Bill is to strengthen the UK’s position as an open and global financial hub. Outside the EU, the UK is able to negotiate our own international trade agreements, including mutual recognition agreements—MRAs—in the area of financial services. The Government are currently negotiating an ambitious financial services MRA with Switzerland. Clause 23 enables the introduction of any necessary changes through secondary legislation to give effective to this and to any future financial services MRAs. Schedule 2 contains measures that enable the United Kingdom to recognise overseas jurisdictions that have equivalent regulatory systems for securitisations classed as simple, transparent and standardised, allowing UK investors to diversify their portfolio while maintaining the level of protections they currently enjoy.

The Bill takes the UK further forward as a centre for financial markets technology. Clause 21 and schedule 6 extend existing payments legislation to include payments systems and service providers who use digital settlement assets that include forms of crypto-assets used for payments, such as stablecoin, backed by fiat currency. This brings such payments systems within the regulatory remit of the Bank of England and the payments system regulator, allowing for their supervision in relation to financial stability, promoting competition and encouraging innovation.

To foster innovation, clauses 13 to 17 and schedule 4 enable the delivery of a financial markets infrastructure sandbox by next year, allowing firms to test the use of new and potentially transformative technologies and practices that underpin financial markets, such as distributed ledger technology. In parallel, the Bill promotes the finance sector’s resilience by allowing the financial service regulators to oversee the services that critical third parties provide to the sector.

Let me turn to the Bill’s final objective, which I know will have the commendable focus of colleagues throughout the House: the promotion of financial inclusion and consumer protection. The Government will continue to foster an industry that supports everyone so that individuals do not feel left behind by the rapid advancement in financial technology. There is an extensive programme of ongoing work related to consumer protection, especially in the areas that were legislated for in the Financial Services Act 2021, such as buy now, pay later agreements and the FCA’s rules on the consumer duty.

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

The Minister is relatively new to his role, but he cannot help but be aware that it is now almost two years since this House recognised the real threat to our constituents’ bank balances posed by buy now, pay later and its lack of regulation. There is agreement throughout the House that these legal loan sharks must be regulated. The Minister may say that this is a complex policy area, but political will and the cost of living crisis demand fast action. Why is the necessary regulation not in the Bill? It could have been the perfect vehicle, ahead of Christmas, when these companies will profit again, to act to protect our constituents.

[Richard Fuller]

The hon. Lady is right to talk about the urgency and complexity of the issue. She understands that it is complex and will invigorate us all to move as quickly as possible. I note that even as recently as 19 August the FCA has followed up with the buy now, pay later companies to remind them of the rules that they have to operate under, and that the Government have committed to bring forward the consultation on the draft legislation before the end of the year. I look forward to discussing matters further with the hon. Lady.

The 2021 Act made legislative changes to support the widespread offering of cashback without a purchase by shops and other businesses. Clause 47 and schedule 8 go further and give the FCA the responsibility to ensure reasonable access to cash across the UK. The FCA will have regard to local access issues and a Government policy statement on access more generally. The Treasury will designate banks, building societies and cash co-ordination arrangements to be subject to FCA oversight on this matter.

[David Mundell (Dumfriesshire, Clydesdale and Tweeddale) (Con)]

I very much welcome the provision in the Bill, because access to cash is an extremely important issue not only for rural communities that I represent but for deprived areas. Will the Minister make sure that when the various reviews and mechanisms are put into place they focus on the specific needs of rural and deprived areas in their determination of cash requirements?

[Richard Fuller]

My right hon. Friend is absolutely right. He will know that the question of access in urban areas is very different from that in rural areas. I can give him the assurance that he seeks.

[Paul Maynard (Blackpool North and Cleveleys) (Con)]

I, too, welcome all the provisions, but will the Minister confirm that when he says “access to cash” what he actually means is free access to cash, not paid-for ATMs.

--- Later in debate ---

[Richard Fuller]

When I say “access to cash” I mean access to cash. My hon. Friend raises the question of whether that access should be free; that is a matter to which we will return in Committee, but I cannot give him that assurance at this stage.

As the country faces cost of living pressures, we must ensure that the door to affordable credit is open to all. The credit union sector plays a crucial role in this respect by delivering for its members and providing an alternative to high-cost credit. Clause 63 allows credit unions in Great Britain to offer a wider range of products and services to their members. To improve consumer protection, the Bill will strengthen the rules around financial promotions. Clause 62 enables the Payment Systems Regulator to mandate the reimbursement of victims of authorised push payment scams by payment providers, for all PSR-regulated payment systems, and places an additional duty on the regulator to mandate reimbursement in relation to the faster payments service specifically.

Clause 48 and schedule 9 give the Bank of England new powers to oversee wholesale cash infrastructure, to ensure its ongoing effectiveness, resilience and sustainability. Clause 47 and schedule 8, on cash access, will ensure that the FCA has regard to local access issues and a Government policy statement on access more generally. The Treasury will designate banks, building societies and cash co-ordination arrangements to be subject to FCA oversight on this matter.

[Emma Hardy]

rose—

[Richard Fuller]

I am afraid I am going to conclude.

This is a significant Bill and I look forward to the House considering each measure in detail as it makes its passage through Parliament. The Bill has a single vision: to tailor financial services regulation to the UK’s needs, to promote global competitiveness and innovation, and to contribute growth in our economy. I commend it to the House.

[Several hon. Members rose—]

--- Later in debate ---

[The Economic Secretary to the Treasury (Richard Fuller)]

With the leave of the House I would like to speak for a second time, and I will start by thanking right hon. and hon. Members for their contributions to the debate. As the hon. Member for Erith and Thamesmead (Abena Oppong-Asare) has just said, I welcome the broad support across the House for the Bill.

As has been clear throughout the debate, I am really a small person standing on the shoulders of the two giants responsible for the Bill—my hon. Friend the Member for Salisbury (John Glen) and my right hon. Friend the Member for Richmond (Yorks) (Rishi Sunak). I will seek to address what I can of what has been said in the time available—[Interruption.] Shush. Where I am not able to, I shall write to colleagues where I feel that I can add something meaningful. I also look forward to Committee, where I will be able to address some of the points in more detail.

As I said in opening the debate, this is an important and ambitious Bill that seizes opportunities afforded by EU exit to make important reforms to the regulation of financial services. As my right hon. Friends the Member for Richmond (Yorks) and for South Northamptonshire (Dame Andrea Leadsom) and my hon. Friend the Member for Salisbury said, the resilience of the United Kingdom financial services market as we exit Brexit has been much stronger and greater than the naysayers said. Once again, people who talked down our country have been proved wrong.

There were questions on a number of areas, but I will start with access to cash, which was raised by a several Members. The UK Government remain absolutely committed to protecting consumers and supporting inclusion. The impact of bank branch closures should already be understood, considered and mitigated where possible so that all customers, wherever they live, and especially the most vulnerable, continue to have appropriate access to face-to-face banking services. Meanwhile, innovative, shared bank hubs allow customers of participating banks to withdraw and deposit cash and seek support from a representative of their bank in person. It was pleasing to hear the contribution from my hon. Friend the Member for Cleethorpes (Martin Vickers) regarding the hub at Barton-upon-Humber, and that of my hon. Friend the Member for Mid Derbyshire (Mrs Latham) about Belper. She mentioned the knock-on benefits that banking hubs can have on high streets both in Belper and in other parts of the country. My hon. Friend the Member for Vale of Clwyd (Dr Davies) and the hon. Member for Mitcham and Morden (Siobhain McDonagh) spoke about the importance of financial hubs in their constituencies.

Those are an important part of access to cash, but the Bill also provides the FCA with powers to protect access to cash specifically. Where appropriate, the FCA could exercise the powers in the Bill to prevent a branch closure where in doing so it is seeking to ensure reasonable provision of cash access services. That may be the case, for example, if a closure would result in a significant adverse impact in relation to accessing cash in that area. The Government expect such situations to be exceptional and temporary while alternative arrangements to meet cash needs are put in place, but ultimately that access to cash must and will be protected.

The Bill allows the FCA to determine standards to ensure reasonable access to cash access services. In determining reasonable access, the FCA may take into account factors that it considers appropriate, which may include appropriateness of facilities for vulnerable users, including cost, security availability and accessibility for, for example, disabled people. The FCA is developing its regulatory approach for access to cash and will consult in due course.

[Tulip Siddiq]

Does the Minister support free access to cash—yes or no?

[Richard Fuller]

I was about to come to that. As I said earlier, while I cannot give an assurance on free-to-use ATMs, I do expect us to return to the matter in more detail in Committee. I tried to write down those right hon. and hon. Members who used those four letters—F, R E and E—in describing their wish for access to cash. They included my hon. Friends the Members for Blackpool North and Cleveleys (Paul Maynard), for Cleethorpes and for Mid Derbyshire as well as the hon. Members for Kingston upon Hull West and Hessle (Emma Hardy), for Feltham and Heston (Seema Malhotra), for Richmond Park (Sarah Olney) and for Mitcham and Morden. As I said, we will return to these issues in Committee, particularly given the level of interest in them.

I turn to other matters. The shadow spokesperson, the hon. Member for Hampstead and Kilburn (Tulip Siddiq), asked about the new secondary objectives for growth and competitiveness and whether they were aimed at advancing long-term growth in the real economy. Those secondary growth and competitiveness objectives will enable the PRA and the FCA to make rule changes to advance the long-term growth and competitiveness of the UK economy, including the financial sectors. The new objectives refer to the UK economy as a whole, including in particular the financial services sector.

The hon. Member for Richmond Park, who is in her place, and the hon. Member for Brighton, Pavilion (Caroline Lucas), who I do not think is in her place, talked in an intervention about whether the regulator should have a green objective. Including the net zero target specifically in the regulatory principles ensures that the Government’s commitment to reach net zero will be embedded in regulator considerations. Therefore, it is more appropriately progressed by regulators as a regulated principle, which means they will consider the Government’s target when they advance their own objectives. We heard a lot about what the Government are doing on green finance which did not pay enough regard to the progress the Government have made already on that. Let me just list it. The UK is rated No. 1 globally in the Z/Yen Global Green Finance Index. The UK has had the largest green gilt instruments globally. The UK had the first green savings account issued with the national savings fund. The UK is the first major economy to implement fully the taskforce for nature-related financial disclosures across both financial services and the real economy. The UK is the largest donor to multilateral climate investment funds. That is a record this Government can be proud of. That is a record that this country can be proud of as well.

The hon. Member for Kingston upon Hull West and Hessle asked about having regard to financial inclusion. The Government believe that the FCA’s current and ongoing initiatives around financial inclusion demonstrate that it can already effectively support the Government’s leadership of this agenda through its additional operational objectives and regulatory principles.

The shadow spokesperson asked how seriously Parliament should take the speculated proposals to merge the regulators. There are no plans to merge the PRA and the FCA. Again, she asked about the independence of regulators and how we can ensure the continued independence of our regulators. The legislative framework underpinning financial services regulation in the UK provides for the regulation to be independent of the Government.

My hon. Friend the Member for Wimbledon (Stephen Hammond), who I think may be in his place, asked about whether we could commit to an annual report on the key performance indicators of the regulators. Both regulators, I am pleased to say, will be required to report on their performance against their growth and competitive objectives on an annual basis. This will be similar to the PRA’s current reporting requirements for its secondary competition objective. My hon. Friend also asked about the important issue of cost-benefit analysis panels and what the accountability of the regulators will be. The Government expect that the panel will operate in the same way as other statutory panels, where they appoint external members. Ensuring the right membership of panels is crucial to their success in promoting and challenging a range of expertise.

The Chair of the Treasury Committee, my right hon. Friend the Member for Central Devon (Mel Stride), asked an important question about the Bank of England’s independence. I can tell him and the House that the Chancellor today met the Governor. I refer him and other hon. Members to Her Majesty’s Treasury’s statement on that meeting. The Chancellor affirmed that the UK’s long-standing commitment to the Bank of England’s independence and its monetary policy remit. The Chancellor and the Governor agreed that getting inflation under control quickly is central to tackling cost of living challenges.

My right hon. Friend the Member for Richmond (Yorks) asked whether the European regulations on PRIIPS will be reformed. Yes, the Bill will repeal and retain EU law for PRIIPS. He also asked about ringfencing and whether ringfencing will be reformed. The Treasury welcomes the comprehensive set of recommendations to the Independent Panel of Ring-fencing and is committed to publishing a Government response later this year.

There were many other questions, particularly on MRAs—mutual recognition agreements—crypto-assets and other issues. I will have to write to Members, given the amount of time available. On the important issue of scams and fraud prevention, which was raised by many Members, I acknowledge the seriousness of the issues we face, but I do not accept that the Government and regulators are not taking action to prevent fraud, both in relation to financial services and more widely. The Government are clear that prevention is better than cure and that a multifaceted approach is needed to tackle fraud. The shadow City Minister asked what we were doing beyond financial services. I point to the Online Safety Bill, which the Prime Minister committed to in the House today.

There were many, many issues also raised that I have not had time to refer to today, but that just indicates the wide breadth and importance of the Bill. The Bill capitalises on our freedoms outside the EU by bringing forward an ambitious set of reforms that assert the UK’s global leadership in financial services, and I commend it to the House.

Question put and agreed to.

Bill accordingly read a Second time.

Financial Services and Markets Bill

Richard Fuller Excerpts

Report stage
Wednesday 7th December 2022 Commons Chamber

[Andrew Griffith]

The financial services sector is central to our Government’s ambition to bolster our global competitiveness and boost growth in all parts of the United Kingdom. This Bill delivers on our ambition by seizing the opportunities of our departure from the European Union, tailoring financial services regulation to UK markets and delivering better outcomes for the economy, consumers, victims of fraud and businesses. There are many amendments for consideration today, so I will be as succinct as possible, and I look forward to having time to respond to hon. Members’ contributions later.

In Committee, I heard from colleagues on both sides of the House about the importance of holding the operationally independent regulators to account regarding their performance—in particular, that there should be regular reporting on their performance to support scrutiny, beyond just the annual report. Regulation is about not just the contents of the rulebook, but how effectively and on how timely a basis those rules are enforced and implemented.

The Government and regulators are both committed to the highest standards of operational effectiveness. That is why last week we published an exchange of letters with the regulators, making clear the intention to publish more detailed performance data in relation to their authorisation processes on a more regular basis. However, I also noted the clear consensus in Committee on the need to enhance the existing statutory provisions. In particular, I thank my hon. Friends the Members for Wimbledon (Stephen Hammond) and for North Warwickshire (Craig Tracey) for raising this important issue.

As a result, new clause 17 provides a new power for the Treasury to require the regulators to publish additional information on a more regular basis, where that is necessary to support this House’s scrutiny of their performance in discharging their general functions.

[Richard Fuller (North East Bedfordshire) (Con)]

I have seen the exchange of letters—that is very welcome—and I have read new clause 17. Both lack any specificity about what those metrics may be. I do not expect the Minister to respond now, but perhaps in his summing up, to reassure those of us on the Back Benches, he could provide some comfort about how specific he and the Treasury will get.

[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.

--- Later in debate ---

[Siobhain McDonagh]

I am tempted to give way, because I want to debate this, but I am observant of the Chair’s ruling on limiting speeches, so I apologise to the hon. Gentleman.

Adding the word “free” into the Bill would not result in the loss of a single paid ATM. It would simply preserves free access for every community, so that no one is obligated to pay for their own money. We have all seen how devastating the impact of bank branch closures can be on our communities, particularly for the elderly, the disabled and the most vulnerable, who are least likely to be able to use online banking and most reliant on access to cash. For them, cash is king. It is why MP after MP has led local campaigns fighting to save bank branches in their town centres, but what is the point of the photo in the local newspaper or the packed public meeting unless the rhetoric is matched by a vote in favour today?

It is time for Members to put their money where their mouth is, to listen to their constituents, to challenge their Whip, and to make a simple, lasting change for the most vulnerable people in their community. It is uncontroversial, tangible, straightforward, no nonsense, common sense and cross party. Free access to cash is, quite simply, bang on the money, and I hope that it will have the support of the House.

[Richard Fuller]

After such a thoughtful presentation by the hon. Member for Mitcham and Morden (Siobhain McDonagh), I am sure the Minister will consider carefully her entreaties and also the opinions of those on the Conservative Benches.

I congratulate the Minister and his Treasury team on this important and big Bill passing through its Committee stage and maintaining its cross-party support, which is so evident here today.

One of my greatest concerns about the Bill is that we underestimate the importance and the severity of the international competition that our financial services face. We are in a fierce global competition and the balance of risk has to be that the UK will not move fast enough, it will not be smart enough and its moves will not be significant enough to maintain and build the comparative advantage of our financial services sector, which is why I have tabled some of my new clauses. It is also why I am looking forward to hearing what the Minister will say to reassure me in his closing remarks.

We need a Bill, a Government and a country that are pro the financial services sector. That is where the wealth is created in this country. If we do not allow the financial services sector in this country to grow to be globally competitive we are harming the taxes that then pay for all the public services on which our constituents depend. In addition, as my right hon. Friend the Member for Chelmsford (Vicky Ford) has said, and as is the case in my constituency and the constituency of my hon. Friend the Member for North Warwickshire (Craig Tracey), I have many constituents whose incomes are directly related to the success of our financial services sector.

My new clauses put down some requirements on the regulator to get with that spirit behind its new objective of international competitiveness. New clause 12 would make it a requirement to publish regulatory performance information that is material to new authorisations, because new authorisations mean growth for the United Kingdom’s financial services sector. We need a very close focus on how effective the regulators are being on that, and the new clause asks for some general statistics.

New clause 13 talks about how the Financial Conduct Authority and the Prudential Regulation Authority work effectively to support already authorised firms, and is specifically to do with approved persons, rules and timings on change in control, variation of permissions and waivers and modifications. Those are the tools of doing business, and if they are not greased and moving quickly enough, that is a source of competitive disadvantage.

New clause 14 is about determination of applications. It would create a new key performance indicator for the FCA. None of this is a criticism of the two individuals who run the FCA and the PRA. They are doing a fine job, but the FCA has a lot of KPIs, which have nothing to do with how effective it is in building the financial services sector in this country. It needs to rebalance—I know the Minister is supportive of this—and I will talk about that in a minute.

New clause 15 would create a duty for the regulators to report on their competitiveness and growth objectives. For me, this is a crucial new clause, and I would like to hear from the Front Bench today that the Minister will commit to this report. If he could look through some of the specific items in my new clause about what should be included, I would very much appreciate a specific response.

The Minister talked about the proportionality principle, and there is indeed a proportionality principle, but I reworded it, because it was not done in a way that was effective for the success of our financial services sector and made a difference between wholesale and retail financial services firms. I have tabled amendments about the cost-benefit panel, which gets to the root and branch of how Government should work out whether to enact a new regulation: what are the cost and what are the benefits?

I appreciate that the Minister has said that he is excluding people who are direct employees of the regulators from being part of those panels, and it seems a pretty basic principle that people should not mark their own homework. However, we need the voices of those who are being regulated in that cost-benefit analysis—their opinions, their views and their data.

[Several hon. Members rose—]

[Richard Fuller]

I am afraid I cannot give way because of your desire to get on, Madam Deputy Speaker, which I completely agree with.

Amendments 1 and 4 bring in the importance of transparency for those two regulators, the FCA and the PRA. We do not want to see regulators going away into a secret room, not telling anyone what the cost-benefit analysis is, and then coming out and saying, “We’ve decided it is X.” We need true transparency on their deliberations and on the opinions that they have received. I am very specific in those amendments.

The hon. Member for Hampstead and Kilburn (Tulip Siddiq), the shadow spokesperson, who is not in her place, spoke about her concerns about the intervention power, which I think she completely mislabelled as a dangerous thought—I think it is a fairly reasonable thought. In her absence, I will just say to those on the Opposition Front Bench that what looks good in an era of declining yield curves and quantitative easing in a democratic country may look differently in an era of rising yields and quantitative tightening.

My amendments are quite specific. The Minister has been supportive throughout the process and I look forward very much to hearing his conclusions in his summing-up.

[Sarah Olney (Richmond Park) (LD)]

The Liberal Democrats recognise the importance of good regulation. Well-designed, effectively administered, properly enforced regulation creates a level playing between competitors and instils confidence in consumers and players in all markets. As the Liberal Democrats’ Treasury and business spokesperson, I have spoken to many businesses in many sectors, including in the City, and I have not found anywhere an appetite for the sweeping away of regulations often advocated by Members on the Conservative Benches. Everywhere I hear calls for effective regulation, properly administered.

--- Later in debate ---

[Andrew Griffith]

Fraud is of course a shared responsibility between the Treasury and my hon. Friends in the Home Office, and when it comes to the report that the hon. Member for Hampstead and Kilburn is quite rightly challenging us to produce as quickly as possible, we want that report to be right rather than quick, but we do need to bring it forward as quickly as possible. We will use the time wisely to engage with expert stakeholders, which could well include the training of which my hon. Friend speaks, and we will come forward with that early in 2023.

In addition, this Bill is a seminal moment in protecting victims of authorised push payment fraud. It will ensure swift protections for the vast majority of APP scam victims, reversing the presumption and making sure they receive swift reimbursement so that they are no longer victims of this crime. The measure enables the Payment Systems Regulator to take action across all payments systems, not just faster payments, which is where the fraud occurs most, so that it does not merely get displaced. The Government expect protections for consumers across all payments systems to keep pace with that.

[Richard Fuller]

My hon. Friend has not yet had an opportunity to talk about the Government’s initiative on stablecoins and digital currencies. Given that he has just talked about scams and some of the concerns with cryptocurrencies, is he reassured that what is in this Bill relating to stablecoins remains absolutely front and centre of the Government’s attention?

[Andrew Griffith]

I again thank my hon. Friend, who did so much work on this Bill. It is absolutely right that the Government keep an open mind to new technologies, and my hon. Friend the Member for Devizes (Danny Kruger), who is always very thoughtful, talked about this, but we have to understand the risks. While the risks to consumers of scams in the crypto-space, among others, is extremely high and has been well telegraphed, when it comes to looking at different payment systems—with the power of distributed ledger technology to solve issues such as settlement to make our financial markets cleaner, faster and more efficient—it is absolutely right that the Government consider looking at that, and we will be looking to do more in that domain.