Financial Services and Markets Bill

Wera Hobhouse Excerpts

2nd reading
Wednesday 7th September 2022 Commons Chamber

[Wera Hobhouse (Bath) (LD)]

Further to the previous question, does the hon. Lady agree that one does not exclude the other?

[Tulip Siddiq]

rose—

[Wera Hobhouse]

I am referring to competitiveness and having a green agenda.

[Tulip Siddiq]

I had to think for a second about what the hon. Lady was referring to, but she is absolutely right. I agree with her on that, and I will address it a bit later in my speech.

The Opposition particularly welcome the inclusion in the new secondary objective of a focus on the medium-term and long-term growth of the UK economy. Financial services are already an important driver of growth in the UK, but much more can be done to support the sector to invest in companies in every sector and every region in the country, to deliver long-term growth and well-paid jobs in the real economy. I understand that clause 26 requires the PRA and FCA to report annually on the new secondary objective, but will the Minister confirm in his closing speech whether that will include being held to account specifically on the advancement of long-term growth in the real economy?

That brings me on to the provisions in clauses 27 to 46, which deal with accountability more broadly. The Bill facilitates an unprecedented transfer of responsibilities from retained EU law to the regulators. We recognise the need for a rethink of how the FCA and PRA are held accountable by democratically elected politicians and Governments. We particularly welcome clause 36, which will formalise and strengthen the role of the Treasury Committee in holding regulators to account. However, as my hon. Friends the Members for Wallasey (Dame Angela Eagle) and for Kingston upon Hull West and Hessle (Emma Hardy) said, we need to be able to scrutinise decisions taken by the Treasury, and I hope the Minister will elaborate on that. Any new powers allowing greater involvement of and policy input from Government in the FCA’s and PRA’s rule making process must be carefully balanced with the need to protect their regulatory independence. We will be scrutinising these provisions closely in the weeks ahead.

The UK’s reputation for regulatory independence is a key driver of our competitiveness on the world stage, as I am sure the Minister will agree. Equally important, however, is ensuring that the City has a clear direction of travel on post-Brexit reform. I was worried about that, because over the summer the now Prime Minister made a series of off-the-cuff policy announcements and people around her were spreading rumours, which left the sector in a state of uncertainty about her Government’s plans for this Bill. The Minister has today confirmed that the intervention powers, or so-called call-in powers, will be included in the Bill through an amendment. I am disappointed that the Government have decided to cause greater uncertainty in the City by introducing a significant change at this stage, and I hope he will reassure me that they will publish the details of these new powers as soon as possible. I would also be grateful if the Minister would confirm in his closing remarks whether the Government have plans to abolish the FCA and PRA. That would seem to undermine many of the provisions in the Bill.

I also wish to discuss the issue of access to cash and banking services, which some Members have spoken about. The Opposition broadly support the Bill, but we are concerned that there are some serious gaps in it as it stands. Of course, we strongly welcome clauses 47 and 48, which will finally, after years and years of Government delay, protect access to cash. The industry, and particularly the major banks, should be applauded for coming together to help protect cash services at the end of last year, in advance of this legislation being put on a statutory footing. But the Bill does nothing to protect essential face-to-face banking services, which the most vulnerable in our society depend on for financial advice and support.

On this Government’s watch almost 6,000 bank branches have closed since 2015, and the “Community Access to Cash Pilots” report found significant overlap between those reliant on cash, estimated at about 10 million people, and those who need in-person banking support. Those without the digital skills to bank online, people in rural areas with poor internet connection and the growing number of people who are unable to afford to pay for data or wi-fi as the cost of living crisis deepens are at risk of being left behind. Banking hubs or other models of community provision, such as banking kiosks, will need to be part of the solution. These are spaces where dedicated staff can provide vital face-to-face support for those who need it, and tackle digital exclusion by teaching people how to bank online.

--- Later in debate ---

[Wera Hobhouse (Bath) (LD)]

My hon. Friend the Member for Richmond Park (Sarah Olney) has already indicated that there is quite a lot to welcome in this Bill, but there also are a number of things that we Liberal Democrats do not agree with and would like to be improved. The Bill does not actively promote the leading green finance sector that we were promised. According to the WWF, we need $32 trillion by 2030 to tackle the climate emergency. The Bill in front of us could be a unique opportunity to develop the green economy that the future needs by providing routes to roll out net zero technologies and allowing UK businesses to capitalise on green transitions.

As the chair of the Climate Change Committee pointed out only this morning, tackling soaring energy bills—currently the most important thing we are considering—and tackling the climate emergency go hand in hand. Net zero technologies could reduce household bills by £1,800 a year—a reduction that is desperately needed by so many people. This Bill could be a unique opportunity to make that happen, but it falls dramatically short.

In its current form, the Bill prioritises competitiveness over net zero and accountability. Clause 25 adds the need to advance compliance with the UK net zero emissions target to the list of regulatory principles to be applied by the FCA and the PRA. However, the new principle—namely, that regulators must “have regard” to the UK net zero target—is not strong enough. Additionally, they will have limited margin to acknowledge the role of nature in achieving net zero. This approach is reckless. The Bill opens up the possibility, as has been mentioned today, of soaring food prices by throwing out reforms introduced in 2008 to protect consumers from volatile trading practices.

The Government always defend their net zero strategy by placing responsibility on the markets, yet before the 2008 reforms, food prices rocketed after speculative trading on future food prices drove up prices. Regulators are vital to ensuring that consumers are protected and that markets function well but not out of control. A former UN special rapporteur has said that speculators

“are indeed betting on hunger, and exacerbating it”.

Our country cannot afford to have another dimension added to the cost of living crisis.

Rather than volatile competitiveness, the Bill must provide clear legal obligations and a commitment to the UK’s net zero target. Net zero must have the same priority for regulators as economic competitiveness. The scale of the climate crisis requires massive shifts in approach that can be achieved only with explicit legal duties, which must include a new objective to decarbonise the financial system. As I have already said, regulations and net zero aims have to work hand in hand. The Government must add climate targets to the primary objectives and thereby give them a status higher than the one the Bill currently proposes.

We Liberal Democrats would go even further and ban new fossil fuel companies from being listed on the London stock exchange. We would also create new powers for regulators to act if banks and other investors do not properly manage climate risks. That is the sort of ambition that we need, but the Government’s ambition is lacking. We have less and less time to act on the climate emergency. The time is now. I urge Ministers not to miss this unique opportunity.

Financial Services and Markets Bill

Wera Hobhouse Excerpts

Report stage
Wednesday 7th December 2022 Commons Chamber

[Danny Kruger (Devizes) (Con)]

I am going to speak briefly to new clause 7 on access to cash, and to new clause 27 on access to banking services. I very much support the Bill and completely commend what the Government are trying to do. It is a source of great pride that they are bringing financial regulation home as one of the great benefits of Brexit. I applaud what they are doing and appreciate all the engagement that Ministers have had with colleagues on the new clauses that I am speaking to.

I understand that there is an intention not to push new clause 27 to a vote, and I intend to abstain on new clause 7 if there is a Division on it, because I look forward to the policy statement that the Government have promised. I support the principle behind both the new clauses. As Members have mentioned, we seem to be moving inevitably towards a cashless society, and we can all see the personal convenience of that. Like the royal family, I personally do not carry cash around. It is only embarrassing when I am in church and the platter comes around. That is pretty much the only occasion when I feel the need for it, but that is not the case for everyone.

For anyone using a digital payments system, the operator of the platform has potentially immense control over their life, in principle and in practice. That is why what PayPal did to the Free Speech Union and others a few months ago is so important. Yes, we can acknowledge that that event was an outlier. It was a rare and slightly inexplicable event and, yes, it was quickly corrected in some of the cases of the accounts that were closed, but the fact is that it happened. It was a straw in the wind, and the fact that individuals and organisations with heterodox political opinions found themselves unable to operate economically because of the decision of a private company acting entirely on its own initiative, possibly under pressure from external campaigns, is a troubling development. So it is vital that we send the strongest regulatory, and also cultural and political, signal to these private payment platforms that the opinions of their customers are none of their business.

Nor are private opinions any business of the state, and this is why the question of access to cash is about more than the important issue of protecting the vulnerable, although I agree with the points that have been made on that. It is also about liberty. Just now, behind the scenes, the Government and the Bank of England are developing plans for their own central bank digital currency. Again, we can see the practical appeal, but the threat is that the Government will have oversight of the economic activity of private citizens, which is something that no Government of this country have ever had in our history. It is therefore vital that the debate on a central bank digital currency has liberty front and centre. We can all say warm words about the importance of safeguards and freedoms, but the fact is that if the emergency is bad enough and the powers are available, those powers could well be used.

We saw this happening around the world, and to some degree in our own country, during the covid crisis. We have only to look at what the Canadian Government did to block access to the bank accounts of truckers protesting against the covid policy there to see what can be done in a modern liberal western country. It would be a shame if we took back control of financial regulation from the EU only to empower private payment platforms, or indeed our own central bank, in that way. Cash services and banking services are part of the infrastructure of our communities. They are also part of the infrastructure of liberty.

[Wera Hobhouse (Bath) (LD)]

I rise to speak in support of new clauses 34 and 35. Both are tabled in my name and deal with the rules and duties of pension schemes and investments.

This Bill could be a unique opportunity to develop the green economy we need by providing the finance required to support our net zero transition. Unfortunately, this Government might again miss the boat. The Bank of England recently warned that UK banks and insurers will end up shouldering nearly £340 billion-worth of climate-related losses by 2050. Such losses will be unrecoverable, so it is cheaper to save the planet than to destroy it.

The World Bank suggests that up to 216 million people could be forced to move within their countries by 2050, but immediate climate action could reduce that by up to 80%. Limiting global warming to 1.5°C instead of 2°C could result in around 42 million fewer people being exposed to extreme heatwaves. We have pensions to provide adequate quality of life after retirement. How absurd it would be if the climate catastrophe meant that there was little quality of life left.