Financial Guidance and Claims Bill [Lords]

Stephen Lloyd Excerpts

2nd reading: House of Commons
Monday 22nd January 2018 Commons Chamber

[Stephen Lloyd (Eastbourne) (LD)]

On behalf of my party, may I say that it is a pleasure to welcome you back to the Chair, Mr Deputy Speaker?

I support the Second Reading of this Bill because I support its key purpose of merging the Money Advice Service, the Pensions Advisory Service and Pension Wise into a new, single financial guidance body. The current landscape for free financial advice and guidance is unnecessarily complex, convoluted and often difficult to access, with several different agencies providing support. The Bill will, sensibly, improve the situation by creating a single, visible body, making it easier for people to find debt advice and consequently make more informed choices about their personal finances and pensions.

Another key reason why I support the Bill is that it transfers responsibility for regulating claims management companies, including PPI claims companies and the more dubious personal injury legal businesses, from the Ministry of Justice to the Financial Conduct Authority. I believe that the FCA, with its powers to cap the charges of claims management companies, will be a much tougher regulator than the Ministry of Justice has been.

The original version of this Bill when it was introduced in the other place was fundamentally flawed, but thanks to the Herculean efforts of Liberal Democrat peers Lord Sharkey and Baroness Kramer, along with some highly expert cross-party support, crucial amendments were made to it that have addressed many of those flaws. I pay tribute to my colleagues in the other place, as their amendments will benefit the consumer—the public—and that is what this Bill should be all about.

First, we tabled an amendment—to be frank, it is astonishing that this was not already part of the Bill—to ensure that one of the core objectives of the single financial guidance body will be to protect consumers. The SFGB will have to pass on evidence of malpractice to the FCA, so that perpetrators are properly investigated and punished. In my view, that is essential for the legislation’s whole premise to work properly and for it to receive the necessary confidence of the public.

Secondly, Liberal Democrat peers recognised that cold calling can be a real scourge, which has a negative impact on millions of people across the country, in some cases leading to severe financial distress and even ruin. Consequently, I am delighted that they succeeded in attaching an amendment to the Bill to give the Government the power to ban cold calling in specific sectors, if the SFGB concludes that it is harming consumers. That represents a positive game change for ordinary consumers in the cold calling industry and is long overdue. Ministers have also promised several concessions in this area to ensure that any ban is implemented faster. I am delighted that they will keep the amendment in the Bill, because its broadness in scope means that any financial services within the SFGB’s remit could face a ban.

We also ensured that pension companies must ask their customers whether they have received financial guidance before accessing or transferring their pension benefits. The FCA can then force companies to refer vulnerable customers for financial guidance, if they have not already received it. I was pleased that the Pensions Minister told the Work and Pensions Committee that he would not

“fundamentally amend anything that emerges from their Lordships”,

and I will hold him to that commitment.

Last but not least, Liberal Democrat peers worked closely with Labour peers and expert Cross Benchers to put the necessary pressure on the Government to introduce a breathing space scheme for people in severe financial distress—in other words, a limited debt moratorium to give someone affected the time to get debt advice and support. The amendment had been called for by leading charities in the sector, including StepChange and the Children’s Society, and by my right hon. Friend the Member for Twickenham (Sir Vince Cable), for quite some time, so it is good to see it in the Bill.

However, despite such a breathing space scheme being in the Conservative 2017 general election manifesto and already existing in Scotland, where it is a proven success, the Government tried to argue in the other place that such a scheme was not in the scope of the Bill. Frankly, that was a ridiculous position to take, but fortunately our joint pressure paid off and the Government conceded by introducing a clause giving Ministers the power to introduce a breathing space scheme. The consultation that Her Majesty’s Government launched on breathing space wrapped up last week, and I will be watching them closely to ensure that it is not kicked into the long grass like so many of their other promises. The 8.3 million UK citizens suffering from debt problems and the 2.4 million children living in families with problem debt simply cannot afford to wait or be ignored any longer.

The Bill is still not perfect. For example, although the single financial guidance body has an objective to promote financial awareness and education, it will have no statutory powers to do so. We believe that financial literacy must be taught to all age groups, not only in schools but in the workplace, and that there should be strong mechanisms to enforce that. Otherwise, one of the root causes of poor financial management and financial distress will remain unaddressed. We hope that the Government will think again and beef that up in the Bill. If they do not, the constant talking, discussing and complaining about the lack of financial literacy among many members of the public will never change, and we will be in the same place in 10 years’ time. The Bill presents the Government with the opportunity to finally address that properly. I urge the Minister to respond to that point.

None the less, the Bill is a clear improvement on the current situation, which is why I and my party will support its Second Reading. I hope that the Government recognise and appreciate the significant improvements that were made to the Bill in the other place by the Liberal Democrats and other parties, and that they will build on our amendments rather than fail to do so. To be honest, the public would deservedly be outraged if they did not do as they said.