Financial Services: UK Economy

Debate between Stephen Hammond and Anthony Browne

Thursday 9th December 2021 Commons Chamber

[Anthony Browne]

I basically agree with the hon. Member, a fellow member of the Treasury Committee.

[Stephen Hammond (Wimbledon) (Con)]

This is a really important point that we discussed in the debate last November prior to the Financial Services Act 2021, which came into force earlier this year. The key point is that we are giving the regulator huge increases of power with almost no appropriate increase in parliamentary scrutiny of those powers.

[Anthony Browne]

I thank my hon. Friend. That is exactly the point I was about to come to.

This will give the regulators more power, as my hon. Friend said, over issues that will directly affect the lives of voters. That means that they must be made more accountable to voters’ representatives—that is, to Parliament. The Government and the Treasury Committee are considering how that might work, and the Committee has held various hearings on the issue.

One proposed solution is a stand-alone financial services committee such as exists in Washington—the US House Committee on Financial Services, a stand-alone committee that just considers financial services. However, there is a real risk that that would tread on the toes of and undermine the existing Treasury Committee, which must retain oversight of all the Treasury’s functions. Another alternative is a full Committee of both Houses—the House of Commons and the House of Lords—but that would be unmanageable on an ongoing basis. It has worked as a task and finish group, such as the Parliamentary Commission on Banking Standards, but it would be very difficult on an ongoing basis. I am coming to the conclusion that the Treasury Committee needs—I totally agree with the hon. Member for Wallasey (Dame Angela Eagle) on this—a well-supported sub-Committee, or secretariat, that can do the work in focusing on financial services regulation and holding the newly empowered regulators to account. It could include appointed expert advisers, as well as members from the House of Lords, on an appropriate basis.

Obviously, we would need to agree the governance around that. As the Government have made clear, this is an issue properly for Parliament itself to decide. The Treasury Committee will make its own recommendations in due course. Indeed, if any Members here have other thoughts on it, I would be very interested to hear them.

The regulators themselves are also changing. The Government have proposed giving them international competitiveness objectives, but that must be very much secondary to their principal objectives of financial stability and consumer protection. They must not lose focus on their principal objectives.

[Stephen Hammond]

My hon. Friend is right that we must not move away from the primary focus, but does he agree—he made the point earlier on the difference between wholesale and retail—that there ought to be a more balanced view between wholesale regulation and those two objectives if we are to remain a global centre internationally?

[Anthony Browne]

I agree. I support having a secondary objective of international competitiveness and growth. A regulator could decide on policy A or policy B and, from a UK perspective, it could make no difference in terms of consumer protection or prudential stability, but one could mean that we were more able to compete internationally. We asked the chief executive and chair of the Financial Conduct Authority about this in the Treasury Committee yesterday and they went through the details on how that might affect their thinking. But we absolutely must not lose sight of prudential stability. We have had a crisis once and we do not want it again.

We must maintain our support for innovation in financial services, as long as it brings real consumer and economic benefits. We must ensure that the fintech sector thrives. Creating a digital identity ecosystem, which the Government are looking at, will certainly help. As cryptocurrencies grow, it is inevitable that they will need some form of regulation to protect consumers, but it must be done in a proportionate way that focuses on tackling any harms. It is absolutely right that the Bank of England is exploring central bank digital currencies. We do not know whether retail customers want direct access to central bank funding, but it is absolutely right that we try to find out.

Finally, I want to cast our eyes across the world, and look at international partnerships. We are no longer part of the EU, and we do not know what our future relationship with it will be. As I said earlier, I consider any memorandum of understanding as a “nice to have” rather than a “must have”, and it certainly must not shackle the UK’s new regulatory regime. Any partnership would require both sides to agree it, and there seems little political desire for that at the moment on the other side of the channel. Rather, UK-based banks are worried that the EU is considering ways deliberately to make it more difficult to offer services to their EU-based clients, and we have to keep an eye out for that. That makes it all the more important that the UK forms meaningful partnerships with other international financial centres. I have long advocated a close financial services partnership between the UK and Switzerland, a major financial centre. We share a common approach, a global outlook and pragmatism.