Financial Services and Markets Bill [Lords]

2nd reading
Tuesday 10th November 2026 Commons Chamber

Second Reading

18:05

[The Chancellor of the Exchequer (John Healey)]

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

Two weeks ago at this Dispatch Box, I set out a Budget to provide breathing space now and fresh hope for the future. It was a Budget to steer Britain through the global economic storms and a Budget built on fiscal discipline, which now more than ever underwrites every promise that this Government make to the British people. But as I said then, the only way for British families and for Britain’s finances to be secure in the long term is to have an economy that is growing more strongly. That means we must raise investment, back wealth creation, support innovation and help to create good jobs in all parts of the UK.

I welcome the constructive spirit in which the Opposition in the other place have approached this Bill, and let me also pay tribute to our Treasury Minister, Lord Pitt-Watson, for the way in which he led the Bill in the upper House and for the expertise he brought to the debates. It was during those debates that the Opposition Front Bench declared that this Bill was

“moving in the right direction”.—[Official Report, House of Lords, 8 July 2026; Vol. 858, c. GC122.]

I hope we can continue in this House in a similar spirit of cross-party support.

Let us take the example of child trust funds. Back in 2003, I was with the then Chancellor, Gordon Brown, when he promised that the funds would

“enable all young people to have more of the choices that were once available only to some.”—[Official Report, 9 April 2003; Vol. 403, c. 286.]

Around 6.3 million of these accounts were then opened, but then, regrettably, they were closed in 2011 when the child trust fund was abolished under the Conservative-led coalition. For some families, accessing that money since has not been straightforward. Where a young person lacks the mental capacity to manage their own financial affairs, their parents or carers generally have to obtain formal legal authority through the Court of Protection before they can access a matured child trust fund on their behalf. That can be lengthy and confusing, and up to 126,000 young people have struggled to get and benefit from the money that was set aside for them. I am grateful to the right hon. Member for Kingston and Surbiton (Ed Davey) and the hon. Member for Horsham (John Milne)—who I had expected to see in this place, but he is not—and others for their work on highlighting this issue. The Government have listened, and we will amend this Bill in Committee to deal with this frustration and unfairness.

There is also strong cross-party recognition that the financial services sector is a growth powerhouse for Britain, not only in London but across the rest of the UK, where nearly two thirds of the jobs in this sector are based: in Leeds, Manchester and Birmingham, for example. In Scotland, 94,000 people work in financial services, alongside 36,000 in Wales and 20,000 in Northern Ireland. This one sector generates 8% of the UK’s entire economic output, exports to all corners of the globe, and every year backs thousands of British firms to start and succeed here in Britain.

[Jim Shannon (Strangford) (DUP)]

In relation to Belfast, the Chancellor mentions those 20,000 jobs. The sector gives young people in Northern Ireland an opportunity to gain an exceptional job with good remuneration, and to travel, should the opportunity arise, within their companies. What has he done to increase the number of jobs and give more such opportunities to young people in Northern Ireland in the future?

[John Healey]

The short answer is more investment—encouraged by the UK Government, but decided, often, by the financial services sector itself. My right hon. and learned Friend the Economic Secretary was in Belfast recently to mark the opening of new Bank of America offices—a sign to the hon. Gentleman, I hope, of a flourishing financial services sector in Northern Ireland, and one with a good, strong future.

[Graham Stuart (Beverley and Holderness) (Con)]

Has the Chancellor made an assessment of the investment and wider economic benefits that would arise from these deregulatory measures? If so, can he share it now? If not now, will he publish it and share it with the House?

[John Healey]

We have indeed. As the right hon. Gentleman would expect, an economic impact assessment, which he may see in the Vote Office, has been published alongside the Bill. In rough terms—this is probably a conservative estimate—we think that the benefit of the measures in the Bill as it stands will have a value of about £1.6 billion over the next 10 years.

The UK is home not only to some of the deepest and most liquid capital markets in the world, but to some of the largest global banks, the world’s premier insurance market—Lloyd’s of London—and huge digital success stories such as Revolut and Wise. That is why I will always talk up the immense contribution that the sector makes to our economy and to the services that underpin everyday life: funding for the small firm looking to expand, mortgage finance for the first-time buyer and investment for the saver planning for the future. That comes not only from our world-leading banks, insurers and asset managers, but from our mutuals, building societies and credit unions, which are all essential parts of the UK financial system. Just last week, I was pleased to appoint my hon. Friend the Member for Peterborough (Andrew Pakes) as the first ever co-operatives and mutuals champion in Government. He will help to fulfil our aim of doubling the size of the co-operative and mutual sector.

[Chris Vince (Harlow) (Lab/Co-op)]

I was remiss not to mention my Harlow constituency earlier, so I will make up for that now. Will the Chancellor join me in paying tribute to Harlowsave, a brilliant credit union in my constituency of Harlow—I think that is three times—which supports residents in Harlow to save over the long and medium term?

[John Healey]

I had not come across the Harlowsave Credit Union, but I am sure that my hon. Friend will be encouraged by the provisions in the Bill, and will tell the members and trustees of the credit union about them. Its provisions, as well as those we will introduce in Committee, are designed to reinforce the strength of credit unions, their ability to extend membership and the common bond that binds them.

[Gareth Thomas (Harrow West) (Lab/Co-op)]

My right hon. Friend rightly mentions our commitment to double the size of the co-op and mutual sector. One key measure that is needed to achieve that aim is allowing financial co-operatives and mutuals to have better access to our capital markets. I understand that the Law Commission has completed the work to prepare the legislation to enable that to happen, but those proposals are yet to emerge into the sunlight. Does he have any indication of when those proposals might be made public?

[John Healey]

I cannot tell my hon. Friend exactly when our response will be brought into the sunlight and made public, as he puts it, but I can reassure him that we have followed closely the Law Commission’s work. My right hon. and learned Friend the Economic Secretary has the commission’s report, and we are giving it due consideration, as my hon. Friend would hope and expect.

Britain is in the midst of global economic storms and uncertainties. The conflict in Iran is driving up energy costs, inflation and the cost of borrowing. At the Budget, I rejected broad-based tax rises—keeping the promises made in our manifesto—and crude cuts to public services, but there were difficult decisions to meet our fiscal discipline, to fully fund the new policies I set out, and to provide some breathing space for families. Those included asking banks, through the bank surcharge, to help to pay for the energy help for households this winter. This is time limited and will end in March 2028. The time limitation is set out in the Finance Bill.

The ask that we made of banks at the Budget goes hand in hand with support. On my second full day as Chancellor, I convened a roundtable discussion with leading executives in the City, because I wanted to confirm my fullest commitment to the Government’s financial services and growth strategy and to this Bill.

[Michelle Scrogham (Barrow and Furness) (Lab)]

I welcome the commitment to make changes to the financial sector, but I have deepening concerns over security and cyber-attacks. The banks’ rush to go digital and pull out of our high streets has left a huge vulnerability for people, particularly in rural areas. What work is being done to ensure that cash services and face-to-face services remain in our towns and high streets, given that such attacks may occur in future?

[John Healey]

As a very active member of the Defence Committee, my hon. Friend probably knows better than many about the threats to our computer and cyber-systems from cyber-attacks. She will be aware that Richard Lloyd has recently completed a report on access to banking, which the Government have just received. In Committee, we will look to reinsert a provision that will allow us to respond to the recommendations of Richard Lloyd’s report. I aim to publish that report and the Government’s response shortly.

The Bill does four key things. First, it streamlines regulation and reduces administrative burdens on business while maintaining high standards.

[Rupert Lowe (Great Yarmouth) (Restore Britain)]

Why does the Chancellor not go the whole hog by, rather than reforming regulation, scrapping the Financial Conduct Authority and the Prudential Regulation Authority, which since 2000 have held back London as a risk-taking centre? That would allow people to return to the concept of caveat emptor, which is what our success was built on, and release the UK economy from the manacles that are holding it back.

[John Healey]

I think that most would regard the total removal of consumer protection or regulation as a reckless move. I hope the hon. Gentleman accepts that the Bill will reduce and remove unnecessary and duplicative regulation. I also hope that, where he has constructive, practical suggestions to offer, he will offer them as part of the House’s scrutiny of the Bill.

[Vikki Slade (Mid Dorset and North Poole) (LD)]

I am grateful to the Chancellor for talking about consumer protection, but one group of consumers is missing from the Bill: people who have been victims of economic abuse. They are trapped with financial products through no market failure or fault of their own, even if they want to move to something that is cheaper and therefore a smaller risk to their joint borrower. The Bill does not do anything for those people. Will the Chancellor consider some amendments to help them?

[John Healey]

If the hon. Lady wishes to table amendments for debate and consideration, she should please do so. If she looks at the detail of the financial inclusion strategy that we have published, with some of the measures now being put in place, she will see a recognition of concern for that group of people and some of the measures that may help in the future.

I will return to the four headline purposes and definitions of the content of the Bill, the first of which is the streamlining of regulation, and the second is allowing credit unions to expand, enabling more people to benefit from membership. Thirdly, the Bill modernises consumer protections and access to redress. Fourthly, it supports business lending and investment here in Britain. I am grateful that the Bill has received support from across the sector. UK Finance has confirmed that the Bill supports

“growth and competitiveness while strengthening consumer outcomes”.

TheCityUK has reasonably and rightly said, “Get on with it” and that the priority now needs to be on fully delivering these reforms. Before I move on, I want to pay tribute to my right hon. and learned Friend the Economic Secretary to the Treasury for all her work in developing the policy in the Bill and on the issues ranging from financial inclusion to the digitisation of markets.

Let me take those four major sections briefly in turn. First, on regulation, good growth demands an active state that is willing to deliver better regulation and quicker decisions. The Bill does that by updating the regulatory framework to support innovation, speed up decision making and streamline processes that at the moment add little value. It does so in five ways. First, it reduces the number of regulators that firms need to engage with by abolishing the Payment Systems Regulator and consolidating its functions within the Financial Conduct Authority. Secondly, it speeds up regulators’ decision making with ambitious new deadlines, including when deciding to authorise a new firm. The Bill also creates a new provisional licence regime to support innovative new firms while they apply for full authorisation. Thirdly, it strengthens oversight of the regulators. The Financial Conduct Authority and the Prudential Regulation Authority will now be required to publish long-term strategies, so that regulated firms and consumers can better understand their priorities, and Government and Parliament can better hold them to account against delivery.

[Sam Carling (North West Cambridgeshire) (Lab)]

The Chancellor mentioned the importance of widening access to lending, which I value very much. On the topic he is talking about, does he agree that it would be great to see in some of the new strategies brought forward by the regulators a greater focus on access to credit for people who are perhaps disadvantaged, who have thin credit files or who have had adverse experiences, such as domestic abuse, as the hon. Member for Mid Dorset and North Poole (Vikki Slade) mentioned, such that we can get them back on to the credit ladder?

[John Healey]

One of the things I like about my hon. Friend is that he is a regular attendee of a range of different debates in this Chamber, and I welcome him here tonight. He may not have had a chance to study it, so after this debate I will send him our financial inclusion strategy, in which he, like the hon. Member for Mid Dorset and North Poole (Vikki Slade), will see set out some of the points of concern he raises. If not, then either I or my right hon. and learned Friend the Economic Secretary would be happy to discuss it with him further.

[Kirsty Blackman (Aberdeen North) (SNP)]

Will the Chancellor give way?

[John Healey]

Of course, and then I will make a bit more progress.

[Kirsty Blackman]

The financial inclusion strategy does indeed highlight the problems and areas where improvements could be made. However, the actual strategies for doing that, and the things that actually need to be put in place to ensure better access to credit across the board, for example, are not quite solid enough. Could the Chancellor commit to looking again at how to improve fair access to credit for everybody?

[John Healey]

As my right hon. and learned Friend the Economic Secretary has just said to me, the strategy and action plan are relatively new. In many ways—the hon. Lady will know this from her own nationalist Government in Scotland—government is always, in some ways, a work in progress, and where there are improvements and strengthening measures that we can take, we are certainly willing to consider those.

The fourth measure on deregulation is that the Bill will give the Bank of England a new secondary innovation objective when regulating systemic payment systems and digital settlement asset service providers. This will ensure that the UK remains at the forefront of innovation in payments and digital finance. Fifthly, it reforms the senior managers and certification regime, retaining its core guardrails while saving firms an estimated £240 million a year.

Turning to the second part of the Bill, credit unions expand access to affordable credit, encourage saving and strengthen financial resilience in communities right across Britain. At the heart of a credit union is its common bond—the connection that brings together its members, be that place, employer or sometimes occupation. Yet in too many areas, the rules that govern how credit unions operate have simply not kept pace with the way people live and work today. In many cases, moving home, retiring or studying somewhere can stand in the way of someone benefiting from credit union membership. The Bill therefore ensures that credit unions will be able to admit a wider range of relatives, to deal with retirement and to accommodate students, even when they do not live or work in the same place as they study.

I turn to the third part of the Bill: consumer protections and redress. The Consumer Credit Act 1974 was designed and passed over 50 years ago. Research from the debt charity StepChange shows that parts of the Act can be harmful, resulting in many consumers feeling scared, depressed and overwhelmed by what they face. In part, that is because currently much of the information sent to consumers about their credit product is tightly specified by this 50-year-old Act—down in some cases to specific words and even which letters must be capitalised in the advice given. It requires the reading age of an undergraduate, when at least one in seven adults have the literacy skills expected of a nine to 11-year-old. The Bill repeals many of the prescriptive provisions in the 1974 Act, enabling the FCA to develop new rules around the information that consumers will receive, allowing this to be more flexible and tailored to the particular needs of different consumers.

[Josh Babarinde (Eastbourne) (LD)]

I have raised previously in this Chamber the situation of my constituent Pam Beevers, who had a cheque cashed in and misread, which meant she lost out on £125,000—down to a bank error. We are talking about punctuation being the real killer. What is in this Bill to help constituents such as Pam to find redress when a bank admits an error and the ombudsman says there is a problem, but they fail to properly compensate people?

[John Healey]

If the hon. Member would write to me or the Economic Secretary, she would be willing to take another look at that. I was not quite certain whether he was saying that Ms Beevers’s cheque was misread by a human or a machine, but it sounds in any case like there is an established error and that some form of redress and recognition is required. If he writes to us with the details, we will certainly take a look at it.

Alongside these measures, we are reforming the legal framework governing the Financial Ombudsman Service to improve the consistency and predictability of its decision making. Currently, decisions made by the ombudsman are not required to align with FCA rules. That has the potential to cause, and indeed has caused, delays in redress for consumers. It has caused uncertainty among firms on what standards they should apply. The Bill takes measures to ensure that all decisions taken by the ombudsman apply FCA rules, including the FCA consumer duty. That should deliver a more consistent set of standards across the board, both for firms and for consumers.

[Dr Sam Rushworth (Bishop Auckland) (Lab)]

The FCA failed to protect many people—mostly pensioners—who invested in legal investment scams. Does the Chancellor feel that the FCA’s current mandate and remit is broad enough to protect people from scams such as London Capital & Finance in future?

[John Healey]

The straight answer to my hon. Friend is, yes, I do regard it as sufficient. If he has a stronger case to make to the contrary, I encourage him to make it. To answer his question directly, as things stand, I do regard it as sufficiently robust and strong.

[Dame Meg Hillier (Hackney South and Shoreditch) (Lab/Co-op)]

The Financial Ombudsman Service is much loved by consumers because it provides an impartial fairness test. The Chancellor can correct me if I am misunderstanding this, but under the new proposed rules there is a presumption that the firm is right, and the consumer therefore has to go through more hoops to raise a concern. Is that really fair on consumers?

[John Healey]

My hon. Friend is so expert and well read in this area. In fact, her assertion about an assumption that the firm is always right is incorrect. At the heart of what is proposed in the Bill is the consumer duty of the FCA, with a single, clear set of standards that firms must meet and that consumers who feel their service has fallen short are able to use as reference for challenge, redress and appeal to the ombudsman. Instead of the ombudsman having its own set of standards and criteria and the FCA having its own, which has led to confusion and inconsistency, we will have a single set of standards that are clear and consistent for both the consumer and firms.

Turning to the fourth and final area, we must do more to increase lending and encourage firms to start and succeed here in Britain, as I did with measures in the Budget.

[Graham Stuart]

Will the Chancellor give way?

[John Healey]

The right hon. Gentleman has had one go. Quite a few Members wish to speak, and it is beginning to get into the evening, so I am going to make a bit more progress and let others come in. But if he wants to sit on the Bill Committee, he would be welcome— I am sure the Whips on his Front Bench will have noticed his keen interest in the debate. If that does not put him off, I don’t know what will!

The ringfencing regime requires major banks to separate their UK retail banking services from riskier investment banking activities. This regime has strengthened the resilience of UK retail banking since the financial crisis, but the independent Skeoch review identified areas where the ringfencing regime and the resolution regime could be better aligned. That is why we are introducing a series of reforms, such as the new growth allowance, to give ringfenced banks greater flexibility to provide growing businesses with the support they need as they grow. The measures in the Bill go a stage further, including allowing the Prudential Regulation Authority to remove unnecessary duplication in its rules, and we are introducing new powers to expand the commercial credit data-sharing scheme.

[Graham Stuart]

In lieu of other people seeking to intervene, would the Chancellor allow me to?

[John Healey]

The right hon. Gentleman makes an irresistible plea.

[Graham Stuart]

I am grateful to the Chancellor, who is being typically generous. On the subject of lending, he will be aware that the doubling of the bank tax, which was red meat for his Back Benchers, will raise £1.5 billion in just 15 months. The regulatory rules suggest that that could reduce the lending pot by a maximum of perhaps £25 billion. Is it not fair to say that that dwarfs any of the benefits of this Bill? My final question is, can he commit that it will be 15 months and 15 months only before this credit-reducing measure is brought back again?

[John Healey]

Two questions in one intervention—that really will be the last time I give way to the right hon. Gentleman. The answer to his first question is that, as I have said already, this is time limited. It will end in March 2028. If he looks at clause 7 of the Finance Bill, he will see that set out.

On the question of hitting investment, I have to tell the right hon. Gentleman that none of the discussions I have had with banking and financial sector leaders before or subsequent to the Budget suggests they want to do anything other than raise their levels of investment into British firms. I understand the reaction to and view of the temporary 3% additional surcharge that I put on banks to help pay for household energy help this winter. I certainly would not describe it as welcomed by the banks. I do believe it is manageable. I do not believe, and I have seen no evidence, that it is going to hit the levels of investment or the commitment they make to this country. As I said earlier, I will miss no opportunity to talk up the importance of the financial services sector to the UK.

[John Glen (Salisbury) (Con)]

Will the Chancellor give way?

[John Healey]

Given that the right hon. Gentleman has served with such distinction in the Cabinet Office and the Treasury, I will give way one last time.

[John Glen]

I am extremely grateful. Of course, one way of mitigating the anxieties of the banking sector is to ensure that the capital requirements directed by the PRA are significantly reformed. I understand from what the Chancellor has said that there is provision for that possibility, but what instinct does he have about the space that exists for the PRA to move decisively to signal to the banks that there is room for more capital to be lent by British banks in London, as a way of countering the concerns about the tax?

[John Healey]

I think I can do better than answer about my instinct on the scope for that. I would point the right hon. Gentleman to the measures in the Bill. I would also point him to my exchange of letters with the Governor of the Bank of England about capital requirements and the expectation to see material change, bearing in mind the importance of the internationally competitive position of UK banks. He will know that the Bank is undertaking its own review of this area at the moment, and I hope we will get the results and any consequent changes before too long.

Finally, I have spoken about the importance of maintaining the UK’s pre-eminent position as a global financial centre. That requires maintaining the very highest standards in tackling illicit finance. We have in the UK a strong set of anti-money laundering rules, but the supervision of compliance with those rules is currently fragmented and inconsistent. Last year, the Government announced that the Financial Conduct Authority will take on responsibility for the anti-money laundering supervision of legal and accounting service providers, as well as trust and company service providers.

The Bill enables the FCA to take on those new responsibilities, meaning that we can reduce the number of bodies that have a role in anti-money laundering supervision from 25 to three. Additionally, as financial crime increasingly involves cryptoassets held outside the UK, the Bill will enable the Government to update existing cryptoasset recovery powers through secondary legislation. [Interruption.] Madam Deputy Speaker, you are encouraging me to conclude, so I will, but I hope you appreciate that I have taken a large number of interventions.

I believe there is a shared determination in this House to ensure that the UK remains the global location of choice for financial services firms to invest, innovate and grow. This Bill is a necessary step to strengthen that leading UK position on financial services: streamlining regulation and reducing the burden on businesses, supporting financial resilience through our credit unions, reforming consumer protection so that it is fit for this digital age, and raising levels of investment in our high-growth firms, all while maintaining our high standards of regulation and oversight. It is a Bill to generate good growth in every postcode and provide fresh hope for the future. I commend this Bill to the House.

[Madam Deputy Speaker (Ms Nusrat Ghani)]

I call the shadow Minister.

18:39

[Mark Garnier (Wyre Forest) (Con)]

I thank the Chancellor for his speech’s very positive tone. As he so rightly said, there was a lot of collaboration in the House of Lords as our colleagues were taking through this Bill, and I certainly intend to enter the conversation in a similar spirit of collaboration over the coming weeks and months.

As the Chancellor has said, the financial services sector is incredibly important to this country. It is the engine room that powers our economy. As the Chancellor has also said, it generates 8% of our national economic output, contributes £12 in every £100 of tax paid and makes up 3% of all jobs in the UK. As the Chancellor so rightly said, two thirds of those jobs are outside London.

The sector truly is a jewel in our economic crown, but it is important to remember that financial services underpin our everyday lives—for example, they support my constituents in opening and running businesses. They support all our constituents across this great country to get on to the housing ladder. They support people across the UK in ways that are not truly understood, including financial support for their employer; ensuring that their homes and other assets are insured; providing liquidity to buy expensive items such as a car; and helping to provide for our retirement. What happens just a mile or so up the road and across the country helps every one of us in pretty much every aspect of our lives.

Despite that, we must be careful. The UK’s financial services and related professional services sector are at a crossroads. TheCityUK published earlier this year its “No Time to Lose” report in conjunction with PwC, which I will quote directly. It said that

“the hard truth is that overall industry growth has stalled over the last decade and the UK is falling behind other financial centres.”

Our international competitiveness should be our priority, because the UK market is so internationally focused. As we know, London is the second-biggest financial services centre on the planet, second only to New York. However, while New York’s financial services market is 80% led by its domestic economy, here in the UK London is 80% international. At the most basic level, our international competitiveness is four times as valuable to us here as it is to the Americans across the Atlantic.

The Chancellor rightly mentioned the Budget, during which he said to the banks that

“I celebrate, and am grateful for, the role that you play.”—[Official Report, 28 October 2026; Vol. 792, c. 307],

But then he increased the bank levy by 3%. To be fair to him, bank stocks did go up on the day, because they were expecting a 5% permanent levy. None the less, we have to bear in mind that that takes the marginal tax rate on banks to 49.5%. That is not competitive on the international stage. We need to be mindful of that, because we need to attract international banks to come to our shores, and it is very important that we get this right. We understand that that generates a little more tax, but we want more people to invest in this country, and that is why we were against that measure. It sends the wrong signal.

[Tom Hayes (Bournemouth East) (Lab)]

Will the hon. Member join me in congratulating J.P. Morgan? It is in its 40th year of operation in Bournemouth, and this year it is investing £350 million into Bournemouth and the wider UK economy. It is doing that because it sees the overriding talent in Bournemouth and across the UK. The Bournemouth site is the second-most important site across 38 in Europe, the middle east and Africa for the world’s largest bank and seventh-largest technologist. Is that not a vote of confidence in the UK economy?

[Mark Garnier]

The hon. Gentleman is absolutely right. It is incredibly important to remember that banks such as J.P. Morgan invest in the wider community, but Jamie Dimon has said that he is worried about uncertainty around the tax regime on banks in the UK. He has warned that if we are uncertain and increase the level of tax on banks, they will not invest another £300 million or so into Canary Wharf. That is the point: we have to be mindful of international competitiveness. It does not take much, when we are taxing close to 50% on banks, for them to change their mind and go to another financial services centre. However, the hon. Gentleman’s point is absolutely right: the value of international investment by banks in communities such as his is really important.

[Graham Stuart]

Following that last intervention on the tremendous importance of banks to this country, does my hon. Friend share my concern? Notwithstanding what it says on the face of the Finance Bill, I rather fear that a Labour Chancellor with this particular set of Back Benchers will not turn up after 15 months and say, “I have a great idea, comrades: let us get rid of the doubling of the bank tax.” I fear that there will be some other new financial pressure—there are always financial pressures—that will mean that this socialist Government further reduce the credit available to this country and make us all poorer as a result of satisfying Government Back Benchers, who understand nothing about economics.

[Mark Garnier]

My right hon. Friend makes a very reasonable point. It is certainly easier to tax banks than it is to cut benefits, for example, but we have to be careful about this. He raises a very good point; if we reduce the amount of cash available to banks, we reduce the amount of money getting into the wider economy. I will come to that a bit later in my speech. We have identified certain areas where we can make it easier for banks to lend more money in the economy, but, as I say, I will come to that in a minute.

This Bill is an important opportunity to change the signal that we are sending to the wider world. We believe that, in general terms, this Bill takes steps in the right direction, so the Chancellor and the Economic Secretary to the Treasury will be glad to hear that we will not vote against it tonight. There is a one-line Whip, and it is fantastic that so many people have turned up on the Government Benches for this debate. However, while the Bill takes a positive step, it should be taking a positive leap. Just like the Budget, it feels like a missed opportunity to take the bold action needed. As I have said, we intend to work constructively with the Government, but we want them to be braver and go further.

Let me be clear: when it comes to this Bill, we should be talking about the level of risk that we are willing to accept, not how we can pursue perfection. This is about how we can keep talent in the UK, not about how we can make it jump through more hoops. This is about how we can empower the financial services sector, not about how we can bind it in further red tape. This is about the bold action that we should take to cement the future of the sector, not about how we can tinker at the edges. I hope that colleagues will follow that advice as the Bill progresses.

First, though, we should celebrate our past, because we have so much to be proud of in this country. The financial services ecosystem started in the UK in the 12th century, when the Knights Templar first issued receipts to pilgrims and crusaders for valuable assets such as gold. Those could be exchanged in the Holy Land for funds, creating what we recognise as the first iteration of bank notes. In the 17th century, Jonathan’s Coffee House was the first to advertise share prices. From there, the London stock exchange grew, setting up the model for equity ownership the world over. Similarly, Lloyd’s Coffee House created the insurance market that we see today. From that, the UK has continued to be a world leader in innovation, and we have built a reputation as a major financial centre.

The statistics do not lie. We are the largest net exporter of financial services in the world, at £119 billion last year. The London market alone is larger than its five closest international competitors combined. We have the most unicorns in Europe, the second largest asset management sector globally, the third largest insurance market globally and the fifth largest domestic banking sector globally. The point is that we start in a good position, and we have a great deal to be proud of. However, if we are to continue to succeed today and in the future, we must be bold, and we must be aware that others seek to steal our advantage. We must respond to that challenge and restore our economic powerhouse.

Where do we want the Government to go further? The first area is ringfencing. As the Chancellor alluded to earlier, the Bill talks about ringfencing, which, as we know, is the structural separation of certain retail banking activities from the activities conducted by international wholesale and investment banks. It was proposed by the Parliamentary Commission on Banking Standards back in 2013—following the Wright review, if I remember rightly—which was created in response to the global financial crisis.

Let me be clear that ringfencing was well intentioned— I know that well, because I sat on the Parliamentary Commission on Banking Standards and was part of the process that recommended it. However, 13 years later, I can see that the implementation of the ringfencing regime has not gone in the way that was intended. It costs our banking sector about £1.5 billion a year to implement. To go back to the competitiveness point, no other jurisdiction ended up bringing in ringfencing at all, and it has been superseded by more recent regulatory developments, such as the resolution regime. That last point is especially important. To quote the 2022 independent review of ringfencing and proprietary trading:

“The reduction in the implicit government guarantee and progress in ending too-big-to-fail was not found to be attributable to ring-fencing. The last point is instead attributable to the development of the UK resolution regime”.

As I say, that is from an independent review of ringfencing.

The Government are making changes in the Bill that will make ringfencing more flexible. That includes amending the PRA’s duty to make ringfencing rules, helping it to avoid duplicating protections that are already provided by the bank resolution regime. Along with other measures in the Bill, that measure takes a positive step forward, but we feel that the Government could have been bolder.

At times of change, we need to remove rules that no longer serve their intended purposes. Some of these rules have been superseded by subsequent legislation—last year’s Bank Resolution (Recapitalisation) Act 2025 is a case in point, together with bail-in bonds and the minimum requirements for own funds and eligible liabilities regime. We believe that ringfencing is the clearest example, so we will push the Government to go further and not just reform ringfencing, but remove it altogether.

[Dame Meg Hillier]

I am interested in the hon. Gentleman’s thoughtful comments and the research he is quoting, but he is now talking about removing ringfencing completely. Can he explain to the House how that would mitigate the risk posed by the bad players who led to some of the problems in 2008? As a result, some of us were in this place voting to nationalise banks, at a cost to the British taxpayer. How can the hon. Gentleman be confident that that could never happen again? We do not legislate for today; we legislate for the worst possible scenario—the mad, the bad and the dangerous—not the good people who I am sure he is talking about.

[Mark Garnier]

The point of ringfencing at the time was to separate the retail banks from the wholesale and investment banks. If the hon. Lady remembers, the Liikanen reforms sought to cage the tigers and ringfence the investment banks into units, whereas our reforms looked to put a fence around the deer park to look after the retail banks. The problem is that this creates a cliff edge as customers get past a certain turnover—I think they go from being in the retail bank to being in the wholesale bank when they get to £5 million of turnover. The only bank that has changed that is Barclays; it has set that limit at £100 million, which makes the retail bank much more open, and arguably could make it slightly more vulnerable.

Of course we do not want the big banks to fail—although, having said that, we have to have an element of risk within the banking system. It is important that we keep that. However, we have a number of systems that have come in later and that other countries have looked at, such as the bail-in bonds and the MREL regime. Returning to the competitiveness point, we now find ourselves with a ringfencing regime that creates extra costs and administrative burdens for banks that other countries do not have. We also have a system that can protect consumers, the bail-in bonds, whereby we have regulatory capital that can potentially be converted from bonds into equity to solve that problem.

[Noah Law (St Austell and Newquay) (Lab)]

I am sure that many Members of this House would entertain the idea of taking a targeted look at the way in which ringfencing regulation is implemented and agree that, where it is helpful, there should be much more of a free flow of information and discussions with clients across universal banks. However, can the hon. Gentleman categorically rule out the complete abolition of ringfencing that he has suggested, if only for the sake of consumers who do not want to see their retail money swirling around in an investment bank?

[Mark Garnier]

The hon. Gentleman raises a number of points. We are getting deep into the debate, but the very quick answer to his question is no, I cannot rule out getting rid of the ringfencing regime. It has already been made public that the policy of a future Conservative Government will be to do so. That is the debate we will be having in Committee, and I am sure the hon. Gentleman will be delighted to join us in Committee, where we can get into the debate in depth. It is great to see so many Members across the House putting themselves forward with their enthusiasm to get involved in the debate—my right hon. Friend the Member for Beverley and Holderness (Graham Stuart) will have found a friend.

My second point—of a number of points, although I am conscious that I am taking up a lot of time—is that we would like the Government to go further on bank capital requirements. UK banks, building societies and PRA-designated investment firms are required to maintain minimum levels of capital in proportion to their risk-weighted assets. That is to help ensure that firms remain resilient and to reduce the impact of failure. Clearly, no responsible Government would abolish capital requirements, but we need to question whether banks should be required to hold capital beyond what is genuinely needed for resilience. This is an important point.

We should acknowledge that the Bank of England has eased bank capital requirements in recent years, specifically at the end of 2025, when it revised down the benchmark for tier 1 capital from 14% of risk-weighted assets to 13%. However, it is worth remembering that the Parliamentary Commission on Banking Standards recommended 11%, so that benchmark is higher than we originally asked for. We believe that the current level is still too high. The most recent stress test carried out by the Bank of England found that

“all banks remained above their set capital minima at the low-point of the scenario. No individual bank was required to strengthen its capital position as a result of the test.”

From memory, it was a one-in-250-year event that the banks were being stress tested on. The system has to allow an element of risk—when I was on the banking commission, we made it very clear how important that was. We made it clear that it was okay for a bank to fail, but it was not okay for banks to bring down the entire system.

The important point is that there has to be an element of risk in the system, but that is not what has been delivered, meaning that the potential lending and financing capacity of our banking sector is significantly reduced—to the tune of about £450 billion each year, we reckon. That is an awful lot of money that is not going into the economy. UK Finance has advised me that each percentage point of the tier 1 capital stack potentially represents about £600 billion in liquidity, so 2% above the recommendation of the Parliamentary Commission on Banking Standards represents about £1.2 trillion. Leverage that up under the banks and we are potentially talking about £12 trillion that is not in circulation because of over-interpretation of the rules. But we do not want to get ahead of ourselves; we reckon that £450 billion is not in circulation because of that over-enthusiasm on the tier 1 stack. That is money that could be used more productively. It could be invested in our communities or in businesses, but it remains stuck on banks’ balance sheets.

While the Bill does not contain any specific measures dealing with bank capital requirements, we believe that it is a perfect opportunity to make the necessary changes—specifically, to reform the parameters within which the Financial Policy Committee and the PRA operate. As such, we will be putting forward changes in areas where we believe the Government may be encouraged to take some advice from the Opposition.

As we have heard, the Financial Ombudsman Service plays an incredibly important role in the UK financial services sector. It provides redress for consumers and small and medium-sized enterprises against FCA and PRA-regulated firms outside of the court system, and crucially, it provides a service that is low-cost and accessible for consumers. However, over the years, the FOS has gone beyond being a dispute resolution mechanism and has become a quasi-regulator. This is creating significant costs for firms, with research from TheCityUK suggesting that the cost of regulatory compliance across the financial sector now exceeds £34 billion. Importantly, firms are also being retrospectively penalised, despite having followed the law on the day of an occurrence that was subsequently deemed to be problematic.

The Bill makes some positive changes in this area, which we welcome. It narrows the fair and reasonable test so that there is no longer a presumption of guilt, and creates a 10-year complaint deadline. Those positive changes will help prevent the FOS from acting beyond its remit. However, again, we do not believe that they go far enough, and there are a number of issues that we will raise during our debates in Committee.

Madam Deputy Speaker, you will be pleased that this brings me to my final point.

[Madam Deputy Speaker (Ms Nusrat Ghani)]

Ah!

[Mark Garnier]

We are getting there. As I said at the beginning of my speech, the UK is a major financial centre with a rich history of innovation. We cannot afford to lose that reputation, so we must also be looking to the future. Digital assets will be a key part of that, as will the technologies that underpin them. We have been told time and again that the UK has no clear direction on digital assets, meaning that companies in the UK are being restricted from innovating, so we need to create a strategy that sends a clear signal to that industry. That is why the digital assets strategy in clause 50, which was introduced in the other place, is so important.

We tabled that amendment in the Lords for a few reasons. First, we want to send a clear message about where the UK is going; it is incredibly important that we define what the UK’s ambition is. Secondly, going back to the competitiveness point, other jurisdictions have these strategies. Thirdly, the significance of digital assets has not been identified in any recent Government strategy. Finally, the digital assets sector is incredibly diverse, beyond where the Government are currently looking—it is very innovative. For all of those reasons, we believe that the digital assets strategy and clause 50 are necessary, and that removing that clause from the Bill—if that is the Government intend to do—would send the wrong message to the sector.

Do not take our word for it; take the word of the organisations that support clause 50: the UK Cryptoasset Business Council, TheCityUK, Innovate Finance, the Payments Association, techUK, Global Digital Finance, the Crypto Council for Innovation, the International Digital Assets Counsel Association, CryptoUK and the Digital Money Association. All of those organisations know that

“Other jurisdictions are moving rapidly to attract digital-asset businesses, investment and talent.”

A clear strategy will help the UK to keep up with those other jurisdictions and demonstrate that we are embracing these new technologies. I know that the Economic Secretary to the Treasury feels passionately about this area of her brief, so I hope she will use her closing remarks—we will all be waiting in the Chamber until 10 o’clock to hear them—to reassure the industry and commit to retaining the digital assets strategy in the Bill.

To conclude, financial services and the related professional services are incredibly important to the UK. When they succeed, they help to empower our communities and unlock growth. The Economic Secretary to the Treasury understands that. She has a very good reputation in the City of London as being somebody who gets it, so I look forward to working with her over the next few weeks and months. I am sure we will have our disagreements, but where we do, it will be about the detail, not the overall direction of this Bill. I know we can remain focused on empowering the sector.

The financial services sector is also important to me personally. I spent the bulk of my working life—27 years—working in the City, and I know the amazing things it can do. Being the shadow Economic Secretary to the Treasury, I have seen at first hand that we still have so much potential across this great country of ours. If we get this Bill right, we can unlock even more. While the financial services sector may be at a crossroads, it is now time for us to get behind the sector, to shift into gear, to accelerate our efforts and to focus on the exciting journey ahead.

[Madam Deputy Speaker (Ms Nusrat Ghani)]

I call the Chair of the Treasury Committee.

19:00

[Dame Meg Hillier (Hackney South and Shoreditch) (Lab/Co-op)]

I agree with both the Chancellor and the shadow Economic Secretary, the hon. Member for Wyre Forest (Mark Garnier) that the financial services sector has an important part to play in our economy. As the shadow Economic Secretary said, the sector represents 3% of jobs in the UK, and it is important for growth and investment. It is therefore important that we understand its role and that we get things right. This Bill, in the Government’s terms,

“will modernise how the sector is regulated, and enable it to grow and lend more to businesses. It will also make consumer protections fit for the digital age”.

I do not think any of us would disagree with those intentions.

The Government have also set out clearly that they want to maintain high standards of regulation and oversight at the same time. There is a balance to be struck in leaning in to support a sector, while also protecting the many consumers—millions of our constituents—who are borrowing, investing and using the services of financial institutions. Having a strong and competitive financial services sector is important for driving growth, but the protection of consumers is important, too. The Treasury Committee has looked at that balance between the growth objective that the previous Chancellor set the Financial Conduct Authority and its role in regulation.

As a side point, I mention remit letters. The new Chancellor has not had a chance to write too many yet, but the number of remit letters that go to our regulators runs into quite high numbers. Those bodies then have to consider the “have regard to” comments in those letters in their work, and it makes for a very long list of things to do, some of which just cannot all be done at the same time. The Treasury could look to prune some of these requirements, or to decide what the key areas are at any point, so that those organisations know what they should be focusing on.

This Bill could be seen as moving the pendulum more towards the financial services sector and further from regulation to support consumers, and we should be careful about that. The Committee has made some comments on it, but for me, consumers should be front and centre. My question to the Government—the Economic Secretary may expand on this in her closing remarks—is: how far should that pendulum swing? How far is too far? Who is the arbiter of what level of protection constituents and consumers should expect? We have a number of bodies, and I will speak about the Financial Ombudsman Service a little later.

It is not just me or the Treasury Committee who have been raising these issues. Nikhil Rathi, the chief executive of the Financial Conduct Authority, said to us in July that the FCA needs a clear indication of the Government’s risk tolerance when it comes to markets. He is up for the challenge, but he needs to know as a regulator where to draw the line between promoting growth and consumer protection. We know that even a small increase in the percentage of customers harmed is a lot of people. One of the pleasures of our role as MPs is that we get to see people face to face at our surgeries. We see people in the raw. Whitehall is a long way from that direct contact, and it is us who will be picking up the problems if they arise. As this Bill proceeds through Committee, we need to be cautious and make sure that we are stress-testing that point about consumer protection at each stage.

The Government are encouraging more investment. In fact, the Economic Secretary, during her previous time as Economic Secretary, made a number of public statements encouraging people to invest more. I can understand the Government’s position. People can make a lot more money from savings if they invest them carefully and well, but it is about changing the language. There has been concern about investment, particularly since the financial crash of 2008—it is a bit like the “Smoking kills” signs on cigarette packets—so the Government are changing the language, but I need to ask what level of risk they are willing to take. As they change the language and encourage people to take not risky, but less safe approaches to managing their money, where will the Government draw the line?

My main concern is the changes to the Financial Ombudsman Service, which has been a vital consumer protection. It is popular with consumers, and the source of much complaint from the City. The shadow Economic Secretary highlighted some of those concerns, as did the Chancellor. We know that the Financial Ombudsman Service is not perfect. It has had a bit of a rocky ride in the past few years, but it is already undergoing some changes without the need for legislation. It is having to adapt to the modern world, and AI is no doubt causing it even more challenges, but it was dealing with a high volume and not always reacting quickly enough.

I have a couple of particular concerns to raise. One is the time limit on complaints. While 10 years sounds like a long time, some of the financial products that our constituents take out have a very long life, with pensions being the obvious example. When something goes wrong in that area, it can have a long reach back into the past. I understand the challenges for banks, such as we have seen with the motor finance issues. When the issue was payment protection insurance, I spoke to one bank that employed 10 people just to go through the complaints coming in from people who were not even customers of the bank. There is a lot to be done in that area. This partly relates to those online promising the earth to people if they take up a complaint, even if they do not have legitimate grounds. I do not believe setting the time limit at 10 years is the answer. The Economic Secretary might not be able to discuss it now, but perhaps she will meet the Committee or me—whoever—to talk about how the Government will protect people taking out long-term financial products, including pensions.

The Treasury Committee has heard evidence on the Financial Ombudsman Service from the Citizens Advice, which noted that although it believes that consumer protection and growth do not have to be competing objectives—I agree with that—this Bill reduces protections and access to redress for consumers. Which? wrote to the Committee and noted that the proposed referral mechanism in clause 6 risks making redress slower and more complex, creating additional barriers to redress for consumers. I know that the Chancellor answered that point to a degree in response to my question earlier.

Clause 7 constrains the fair and reasonable test that the FOS has worked under for such a long time, which will make it harder for consumers to receive redress, even when they have been treated unfairly. I can see clearly what the Chancellor and the Government are trying to do here. We have heard the noise from the financial institutions, saying, “We adhere to the rules of the FCA. We take into account the consumer duty, as the FCA requires us to do. Then something goes to the ombudsman and suddenly it seems to be judged by a whole different set of rules.” Most financial institutions do a reasonably good job most of the time and treat their customers fairly, and the consumer duty weighs heavily on them. When something goes to the ombudsman and is not considered to meet the fair and reasonable test, it should be something that is egregiously outside that consumer duty. It is important to have that backstop for our constituents. The Financial Ombudsman Service is already, as I said, undergoing non-legislative reforms. We should focus first on improving the system, rather than adding more layers of legal reform. Perhaps giving it that chance to reform itself would be the best first step.

In March this year, the Committee wrote to the Government outlining the importance of the Financial Ombudsman Service’s independence. The perception of that independence is vital. I propose—I would like to talk to the Economic Secretary further about this—that we introduce a statutory lock for the Treasury Committee on the appointment and dismissal of the chair of the Financial Ombudsman Service. There is precedent; the Chancellor of the Exchequer may not know it, but he cannot appoint or sack a chair of the Office for Budget Responsibility without the agreement of the Treasury Committee. That is a lock on a mad, bad or dangerous Chancellor taking away the independence of that important body. We think that there should also be a lock on a mad, bad or dangerous Chancellor doing the same for the chair of the FOS.

[Catherine West (Hornsey and Friern Barnet) (Lab)]

Does my hon. Friend, who chairs the Treasury Committee, agree that in other jurisdictions it is quite common to have more parliamentary oversight of these sorts of appointments?

[Dame Meg Hillier]

I agree with my hon. Friend, who is also a member of the Treasury Committee and a constituency neighbour of mine in London. We are not suggesting for a moment that the Treasury Committee starts rolling up its sleeves, conducting job interviews or getting in CVs. That is not our role. Our role is to be a check and a balance on the Government.

As I said to the Opposition Front Bench spokesman, the hon. Member for Wyre Forest, we are not legislating for the people here in this Chamber, who I believe are good and honourable Members with all good intent. We have to legislate for the worst possible set of legislators and the worst possible Government, and we need to make sure that we have that commitment to the independence of the Financial Ombudsman Service. This would be one small step that would take nothing away from the rest of the Bill. It would not damage any of the Government’s set-out intentions. I know that the Chancellor is a strong advocate for a strong Parliament, and he should be praised and recognised for that, so I hope he will consider this option. I am happy to share my thoughts with the Economic Secretary on how an amendment could be tabled; it may be that it can come up in Committee—I would hope that it would not have to wait until a later stage, on Report.

It is essential that the Chair of the Financial Ombudsman Service, which is a key public role, has the necessary independence and professional skills to maintain the balance between consumers and the financial services industry. The Treasury Committee has a number of pre-appointment hearings—more than a number of Committees do—and our measure is professional competence and independence. I would hope—and so far, Members will be glad to know, this has proved to be the case—that when the Treasury goes through a proper recruitment process, it recruits people with professional competence. We measure against that. Again, if there were a mad, bad or dangerous Government in future, that might not always be the case, but so far it has been. The independence point is important too, and that is what is often tested in the room when we have someone before us for a pre-appointment hearing. We do not have a power to sack, but in this case, we think we should have an extra power of a lock on that appointment.

The Financial Ombudsman Service is accountable to Parliament. The Treasury Committee was compelled, due to the actions of a previous chair of the Financial Ombudsman Service, to underline that point in our ninth report of the session 2024-25, which was entitled— I say this for Hansard’s purposes and I am sure that colleagues will avidly look this up in a moment—“Financial Ombudsman Service: Accountability to the House of Commons”. Providing the Treasury Committee with a statutory lock on the appointment of the FOS chair would help to guard against a repeat of that incident. I was saddened at the time to receive a letter from a public appointee to say that they did not have to appear in front of the Treasury Committee because they were a Member of the other place. That is another issue that I will take up in due course. The Second Reading debate is obviously about arguments in principle, but I am happy to have a further conversation with the Economic Secretary on the detail.

I want to raise a couple of other quick points while I have the floor. On financial inclusion, I know the Economic Secretary has played her part—I think four Economic Secretaries have dealt with the financial inclusion strategy. Now that it has been published, the Committee will keep an eye on how it is going. We published a report on the matter, and the Government told the Committee that the Bill would include a reserve power on access to face-to-face banking services, recognising the limitations of voluntary action. The power was removed in the other place following concerns about its breadth. In their response to our report, the Government said they intended to restore that power during the passage of the Bill in the Commons, and that they would use evidence from the access to banking services review to do so. I would be interested, if the Economic Secretary could cover that in her closing remarks.

[Deirdre Costigan (Ealing Southall) (Lab)]

I entirely agree with the point my hon. Friend is making. In my constituency of Ealing Southall, Santander and NatWest have recently closed down, although Barclays is still there and is being refurbished. There is a very large north Indian population in the constituency and many of them are first generation, with English as another language. Does my hon. Friend agree that face-to-face banking is particularly important for those people and for older communities?

[Dame Meg Hillier]

My hon. Friend raises an important point, because there are many excluded groups. There is an important challenge here, too. I am proud to be the Member of Parliament for Hackney South and Shoreditch, representing a very high percentage of fintech companies. Of course, those companies never had branches on the street, so it is not unreasonable for the larger banks, which have had a network of high street banks, to say that the playing field is not level. Some tech innovation has been amazing, making banking very accessible to some people, but there are still points in life—for instance, death, or maturity to 18 when products have to be turned from junior to adult—when we need to have conversations face to face.

Even if it is not very often, there will be times when even the most digitally-savvy will need to have face-to-face contact. I recognise this is a difficult challenge for the Government to wrestle with, and there is no easy, simple answer, but it is important if there is to be financial inclusion. The danger is that if there is no proper ability to have contact with trusted banks, people get advice from elsewhere—a friend or a relative—that is not good advice; I have seen that in my own constituency. There is a danger that people get driven to the wrong place if we do not have a lock on some sort of provision, though I recognise that particular challenge for the Government.

[Gareth Thomas]

One of the encouraging things in the financial inclusion strategy was a proposal to build a coalition of employers willing to offer a payroll deduction service to their employees to join and save with a credit union. Does my hon. Friend think that one of the ways to give that coalition new life and new energy would be if more parts of Whitehall—perhaps even the Treasury itself—were willing to make that commitment?

[Dame Meg Hillier]

There we go: a stretch target for the Chancellor to sign up every civil servant in his Department to a credit union. I am sure that he is listening closely to that suggestion.

I do not want to segue too much from the subject, but many years ago I tried to establish a mutual in Government and there was a limited understanding of what that meant. I am proud that we now have a co-operatives champion in my hon. Friend the Member for Peterborough (Andrew Pakes)—a Labour and Co-operative MP—who has access to all areas and can go in and challenge, shake up and educate parts of Whitehall about the benefits of mutuals.

To finish on financial inclusion, the financial inclusion strategy is a good first step, but we said that the Government cannot rely solely on voluntary action from financial services to drive financial inclusion. We have made our comments clear in our report, and I hope that we will continue that dialogue with the Government to ensure that financial inclusion is a real thing.

There has been some talk about access to capital markets in the banking sector, but there is a particular issue for building societies too. It is interesting how very few failures and repossessions there are with some building societies. I was talking recently to the chief executive of Skipton Building Society, whose default rate is very low—in fact, a number of those are people who have voluntarily given up their mortgage. That means the building society’s repossession rate is even lower, yet it has to capitalise to a very high degree to ensure that it is covering any potential losses. I think there is a real opportunity there.

As was raised earlier, changes to credit unions are necessary and overdue. We have seen some of the measures for co-ops and mutuals in government get stuck, whether with the Law Commission or somewhere in the depths of Whitehall. We now have an agenda in government to double the size of the co-operative sector. We are seeing a strong building society sector and a mutual sector in finance. We have an opportunity to get credit unions on a stable footing. This is the opportunity to ensure that we get those things in place so that they are embedded and we make sure that the sector works and delivers.

If it is about growth in every postcode, those are the organisations that reach every postcode, that are from the grassroots up and that can make this Financial Services and Markets Bill much more relevant to the people on the ground. It is not that the City of London is not relevant to me in my constituency and to a number of us who neighbour it, but for people in other parts of the country, Whitehall and the City seem like a long way away. Having co-ops and mutuals written in is important. I hope that the Economic Secretary will respond to some of those points when she sums up.

[Madam Deputy Speaker (Judith Cummins)]

I call the Liberal Democrat spokesperson.

19:18

[Bobby Dean (Carshalton and Wallington) (LD)]

The UK financial services industry is vital to our economy. It enables us all to buy houses and cars, to save and invest safely and to insure against bad outcomes; it provides millions of jobs, not only in London but right across the UK; and it contributes hundreds of billions of pounds to GDP. It is one of the UK’s only world-leading industries. We have 160 foreign banks in the City and twice as many US dollars are traded on the UK foreign exchange in the UK than in the US. We have the largest source of pension funds in Europe—and if I mention Europe, as a Liberal Democrat I must also mention Brexit.

It is true that the UK financial services industry has remained strong after Brexit. Of course it has: it is a world-leading industry that has many advantages beyond its access to European markets. We have, for instance, the advantages of location, language and law, and there is enormous talent here in the capital. However, we should not mistake that resilience for evidence that Brexit did not harm financial services. Exports of financial services have declined by 5.9%, and, according to TheCityUK, that is at least partly due to Brexit frictions. The loss of passporting rights, for example, makes it harder to acquire clients across the continent. Compliance and administrative costs have risen, and we are now less attractive in relation to becoming a pan-European headquarters. Whatever the dispute may be when it comes to the precise numerical impact of Brexit on financial services, this negative track has to be acknowledged.

[John Glen]

I recognise the case that the hon. Gentleman is quite predictably making on Brexit, but given that we are where we are, what does he think would be the view of the financial services sector and the City of London on changes to where we are now?

[Bobby Dean]

Uncertainty is always unwelcome in the financial services industry, but Governments must make decisions for the very long run, and I think that in the very long run it would be in our best interests to be part of the single market again.

The industry has remained resilient, not only in the face of Brexit but in the face of other challenges, but that should not be taken for granted. It is due, at least in part, to hard work and the reforms that were introduced after the 2008 financial crash. Prior to that, a reckless, deregulatory and ignorantly optimistic environment led to a complete and utter disaster, and not only for the industry but for society as a whole. The debts that stacked up in response to that crash are still squeezing the present Government’s potential to deliver better public services or lower taxes to this day, and the reputation of the industry among the public still suffers because of that event.

However, it is worth stressing that the reforms made in the aftermath have broadly worked. The sector has remained financially stable. Repossessions are low, pension funds are healthy and stable, and bank failure is rarely speculated about—and if it were to happen, I trust that it would happen in an orderly way. This has remained the case despite some serious stress tests in recent years, not least the global pandemic and the global energy shocks, and it shows that measures such as the bank capital requirements, the liquidity rules and the ringfencing have created a system that can hold. I think that the Government should be mindful of that as they set out on a path to—in their own words—deregulate again. They should resist the Conservative party’s calls to abolish ringfencing entirely. I think that savers across the country will be shocked to hear that there is a party advocating for that money once again to become available to the investment banking industry. In a wider context, the Government should tread cautiously. They should not fall for the same old cycle of deregulation, crisis, and then regulation again. Instead, they should try to plot a more stable path through this moment.

Nevertheless, there of course remains a case for reform. We are decades on from the financial crisis, and there will be plenty to do to modernise, to move with the times, to learn lessons, to tidy, to simplify, to clarify and to adjust, to make our financial services system work for the 21st-century economy. There is much to be supported in the Bill. I support, for instance, the move to make the Payment Systems Regulator part of the Financial Conduct Authority, and I hope that will mean we can continue some of the good work on open finance. I broadly support what I think is the intention in relation to improvements in access to banking, although we have yet to see some of the detail because we are waiting for the review to be published. I support the move to expand credit unions, and of course I support the intention to table amendments on child trust funds, for which I credit my hon. Friend the Member for Horsham (John Milne) and my right hon. Friend the Member for Kingston and Surbiton (Ed Davey).

More broadly, the Liberal Democrats support the thrust of the Bill, but there are some key areas where we want to work with the Government to get this rare opportunity for reform right. In particular, on consumer protection I fear that the Bill is in danger of overcorrecting. It starts from a false premise, which is that consumer rights and economic growth are somehow in contention. They are not; they are two sides of the same coin. There can be no booming economy without consumer confidence, and poorer protection and more difficult redress are in the interests of neither consumers nor firms.

I am struck by the volume of lobbying material that I receive from industry, and by how little I receive from the voice of the consumer. It is because of that inequality of arms that we in this place should be so mindful of the decisions we make in respect of this legislation. Some of it looks like a shopping list of demands from industry, and that should give the Government pause for thought. We should remember that the same inequality of arms in the lobby industry is repeated when it comes to legal disputes, and indeed at the point of purchase of financial products. Information asymmetry is a known economics concept, and in the development of financial products there is a huge information asymmetry. Experts are developing complex products that are inherently difficult for consumers to understand, and we should legislate accordingly with that in mind.

I therefore ask the Government to listen carefully to the 15 organisations—including Martin Lewis’s MoneySavingExpert, Citizens Advice and Which?—that have got together and warned that the reforms of the Financial Ombudsman Service could lock consumers out of independent redress, removing that vital safety net of free dispute resolution. Indeed, the former Member of Parliament for Makerfield, Yvonne Fovargue, has concerns that these reforms do not meet the Prime Minister’s “Makerfield test”. That should be a strong warning to the Chancellor.

The Financial Ombudsman Service stands accused of being a quasi-regulator, making precedent-setting decisions that firms cannot anticipate. I admit that there has been dysfunction in the service in recent years and that there is a case for better co-ordination and clarity, but the reforms, as they stand, will tip the balance too far in favour of firms, and I think we are in danger of making the FCA a quasi-ombudsman. The rules set by the FCA are necessarily high-level, especially if they are principle-based, and they cannot account for every situation in detail. The ombudsman must retain the power to make a judgment on what is fair and reasonable in the round, or we will descend into a dispute over strict legal compliance that will always favour firms in the way that I have described.

The chief executive of the FCA has repeatedly expressed concerns to the Treasury Committee about the possibility that the referral mechanism may create a back-door appeals mechanism for firms, gum up the system, and lead to the regulator doing the job that the ombudsman should rightly be doing. We will go into all the details in Committee, but I urge the Government to find a way through this that suits consumers too.

There are further issues that we will want to pursue in Committee. The Consumer Credit Act protections that are being rolled into the FCA are important provisions that need to remain in primary legislation. I recognise the need for regulatory power to respond to developments dynamically, but we must also ensure that such important provisions are protected in law, and I do not think that the FCA’s strategies will afford sufficient protection. Other Members have mentioned access to affordable credit, and this is a huge opportunity for us to take meaningful action in that regard, looking at some of the provisions proposed for the fair banking Act, and ensuring that when the washing machine breaks down or the car fails, people can access the credit they need to get through those crisis moments.

I have some simple asks in relation to the Bill, involving transparency and the current status of the access to affordable credit that banks are providing, and their links with credit unions and other community organisations to improve that access. I note that we now have a Co-operative Prime Minister. The Co-operative party backs such amendments, so I look forward to seeing whether they make it into the Bill. We would also like to see tougher action on the big tech companies in relation to fraud and scams. At present, the UK financial industry is on the hook for scams that nearly always originate on big tech platforms. Just last week I heard in the Chamber that Ofcom’s regulations would probably be sufficient, but we now have an opportunity to write into legislation liability for those tech firms, and I do not think we should miss it.

There is more that I could talk about, but in the interests of time I will move on. I support the Conservatives’ point about the digital asset strategy, and I think it would be a missed opportunity not to include something about that in the Bill. I would also like to speak up on the injustice facing mortgage prisoners, and I will say more about that in Committee.

Let me end by saying that we welcome the thrust of the Bill. It reinforces the position of the financial services sector as a great contributor to the UK economy, and its status as a global leader and a beacon of stability. However, there is a real danger of overcorrection and damage to consumer rights, as well as the potential to miss some big opportunities for long-running problems to be solved. I look forward to working with the Government in Committee to further the Bill’s progress.

19:29

[Seema Malhotra (Feltham and Heston) (Lab/Co-op)]

I, too, welcome this legislation and its goal of modernising consumer protection arrangements and making them fit for the digital age. I congratulate the Chancellor and the Economic Secretary to the Treasury on their work, and on their ongoing engagement with Members from across the House as the reforms proceed.

I am very pleased to see measures that enable credit unions to expand by widening access to membership. I have seen the challenges experienced over the years as a Labour and Co-op MP, and I have worked to increase access to credit unions for local people in Feltham and Heston. It has been a challenge, and I look forward to working with my hon. Friend the Member for Peterborough (Andrew Pakes) on these reforms and on making sure that they become a reality for our constituents. It is clear that if anything can focus our mind’s eye on how important this is, it is seeing the importance of household resilience and being able to plan financially, given the challenges that the cost of living crisis has brought.

It is important for us to think ahead and make sure that we do all we can to improve household resilience, and these reforms will help more than 200 credit unions across Great Britain to reach new communities, with millions of people having more access to affordable and community-based financial services. Credit unions are known and trusted by local communities, and trust is really important for giving people confidence about where to save, how to save and whom to trust. It is also vital that we take steps to protect access to in-person banking services for the future, and we look forward with anticipation to the publication of the access to banking review and the Government’s response.

I want to raise three matters that I believe need to be further addressed in the Bill, some of which have already been referred to: the proposed 10-year time limit on complaints, the referrals process, and the fair and reasonable test. Finally, I will mention mortgage prisoners, as discussed by the Liberal Democrats’ spokesperson, the hon. Member for Carshalton and Wallington (Bobby Dean)

First, on the 10-year time limit, the Government are putting forward a wide range of reforms to the Financial Ombudsman Service, but I am concerned that they are not being clear about the impacts on the public. The proposed 10-year time limit on Financial Ombudsman Service complaints risks locking thousands of consumers out of compensation. It can take years for people to realise that they have been ripped off, and firms often do everything they can to conceal misconduct.

[Dame Meg Hillier]

On that point, one of the issues is document retention. Firms do not necessarily keep information, so the process can rely on the consumer keeping it. Even if they can get redress from a firm, they may not have the documentation.

[Seema Malhotra]

I think we all agree with my hon. Friend’s important point.

I am concerned that the Government’s assessment appears to underestimate the true cost by assuming that historical cases are worth little more than average complaints, and by ignoring many complaints that firms will simply reject, without considering their merits, due to the application of the new time limit. I am very happy to share with the Minister more of my analysis of the implications and of what is in the impact assessment.

Secondly, the process of referral to the FCA could create a bureaucratic logjam, with firms incentivised to seek FCA rulings whenever a case looks likely to go against them, adding delay and administrative costs while allowing binding interpretations of the rules to be made without proper consultation. The referrals process should be reformed so that it is a rare occurrence, rather than the 1,000 to 3,000 referrals a year that the FCA expects will happen, which will cause delays as well as administrative costs and all the pain that that will entail. Proper consultation needs to be built in, so that the FCA gets full input from consumer groups before making binding decisions on what the new rules mean.

Thirdly, there are important questions about changes to the ombudsman’s fair and reasonable test, which could narrow the ability of the FOS to take account of industry codes and good practice, including protections that victims of economic and financial abuse rely on. If we want economic growth, we need consumers to save for retirement, take out insurance and engage confidently with long-term financial products. We need small businesses, like many of those across Feltham and Heston, to borrow and invest, and undermining trust in dispute resolution mechanisms risks undermining that confidence. Martin Lewis has warned that

“Restricting consumers’ access to free and fair redress is not a recipe for economic growth. Once consumers are warned about the erosion of their rights, it’s possible it will lead to disengagement from the financial services industry and diminishing trust.”

That is why we must look very closely at the proposals in order that we are confident that consumers will retain the necessary confidence in financial services.

Finally, in the last Parliament, the all-party parliamentary group on mortgage prisoners, which I co-chaired for a number of years following the experience of mortgage prisoners in Feltham and Heston, raised concerns that poor decision making at the FOS was leading to detriment for mortgage prisoners. In all honesty, no real progress was made. The situation is ongoing, as thousands of mortgage prisoners remain stuck and are suffering significant detriment. Many are still trapped on expensive variable rates with inactive lenders and are unable to switch to cheaper deals, so they are paying hundreds or thousands of pounds more each year and facing a far greater risk of losing their homes.

In 2024, the previous Prime Minister promised to get everyone around the table and ensure that this issue was properly addressed, but that has not yet happened. Mortgage prisoners remain trapped, and are paying higher interest rates to inactive lenders and vulture funds. They are told that they cannot pass affordability tests in order to pay less for their mortgage, and as the Bank of England increases interest rates following six cuts, there is nothing that vulnerable mortgage prisoners can do to gain any certainty on their payments. Many are former Northern Rock customers who are still experiencing severe harm because their loans were sold to inactive lenders by the previous Conservative Government. The London School of Economics report, funded by Martin Lewis, put forward solutions including improved access to financial advice, targeted equity loan schemes, and a Government-backed guarantee mechanism to help borrowers move back into the active market. I would be grateful to hear when the Government plan to respond in full to the proposals in the LSE report, and I would also be grateful for a meeting to discuss what more the Government can do to help mortgage prisoners.

I very much look forward to the Minister’s response and to working with colleagues from across the House on these reforms to make sure that, together, we can ensure the leadership and the fairness of our financial services sector, which is so renowned across the world.

[Several hon. Members rose—]

[Madam Deputy Speaker (Judith Cummins)]

Order. After John Glen, I will introduce an immediate eight-minute time limit.

19:38

[John Glen (Salisbury) (Con)]

I refer the House to my entry in the Register of Members’ Financial Interests, and to my ministerial experience as the Economic Secretary between January 2018 and July 2022. Listening to the opening speeches gave me pause to reflect on some of my decisions. I hope that I am the sort of politician who is ready to concede where I did not go far enough or where mistakes were made, but after I have gone through some of the measures in this Bill, I want to offer some broader observations about the interaction between the Treasury, this place and our regulators, because it goes to the heart of how we move forward effectively as a country.

as the shadow Economic Secretary said, the Bill contains some very welcome measures. Although the detail will be worked through in Committee, I think we can be positive about the reforms to credit unions. I made some changes to expand the common bond, and I wish the Government well with their extension of it. I ask the Economic Secretary to examine the issue of the interaction of credit unions and Help to Save. For many of the people who use credit unions, the opportunity, on an automated basis, to sign up to Help to Save—it gives everyone on universal credit the opportunity to save up to £600 a year, and after two years receive a 50% bonus from the Government—in these times would be very welcome. I am not sure exactly how that would be achieved, and I realise it is complicated, but it just stands to reason that it should be more readily accessible.

I also welcome the reform of consumer credit. These matters were discussed in my office four or five years ago, and I welcome the Government bringing it forward. I certainly did not seek to slow it down, but it is an incredibly complicated piece of work to update our consumer credit framework and how we protect consumers in a world where financial products and the interactions of consumers when taking out products have transformed considerably over the last 52 years. However, as we look at the changes—I note the comments of the Chair of the Treasury Committee, the hon. Member for Hackney South and Shoreditch (Dame Meg Hillier), on the Financial Ombudsman Service changes—we have got ourselves into a bit of a mess in this country.

In the Treasury Committee, I found myself talking about motor finance, and reflecting on being told that harms have been done to me when, from my perspective, I had made a decision about the amount of the deposit and the monthly payment in a financial agreement. However, I fully accept that the consumer credit legislation as it is at the moment means there was an obligation of proactive disclosure on behalf of whoever provided me with that product, rather than some reasonable test of what I should reasonably ask of the person providing the product. To me, that goes to the heart of the dilemma we face in financial services: to what extent can we in this place legislate against risk or put some reasonable responsibility on an individual consumer to take ownership of the decisions they make?

[Bobby Dean]

Will the right hon. Gentleman give way?

[John Glen]

I am very happy to give way to hon. Gentleman, as he did to me.

[Bobby Dean]

I am sure the right hon. Gentleman was anticipating my intervention, as we have had this conversation in the Select Committee. I made a point earlier about information asymmetry. Does he not accept that when financial products can be so complex, if providers are not utterly up front about the conditions, it is quite impossible for the consumer to take the responsibility he implies they should take?

[John Glen]

I absolutely take on the challenge, but I think we need to level with the British public about this and have a better conversation about it, rather than say there is an ultimate backstop provision apparently for absolutely everything. We have to reset that dynamic.

I have mixed feelings about the proposed reforms of the Financial Ombudsman Service. I feel it has become an unreliable pathway to resolution, but I am also concerned that by wrapping it into the FCA, as with the decision to apparently streamline regulations by putting the Payment Systems Regulator into the FCA, we will just create a bigger FCA, with different functions under one banner.

[Dame Meg Hillier]

It is worth noting that, in the end, there were two redundancies as a result of the merger, all the backroom costs were the same and the only thing that will change, when the legislation finally goes through, is that the board will go, which is a saving of about £100,000.

[John Glen]

I am very grateful for the hon. Lady’s characteristic grasp of the detail of this subject, and she absolutely makes the point. Just removing a banner from a front office does not streamline, so I urge the Economic Secretary to retain a forensic view, as I know she will, of what processes faced by businesses and consumers are actually streamlined.

I note the streamlining of the senior managers and certification regime by abolishing mandatory annual employee certification below senior manager level. I note the comment of the hon. Member for Great Yarmouth (Rupert Lowe), who is no longer in his place, on that regime, which was, “Abolish everything.” I understand the frustration that leads to many people saying that, but I think we have some new challenges, which have not been properly addressed, when it comes to AI in financial services.

The Chair of the Select Committee mentioned this in passing, but AI, in automating the evaluation of which products would suit individuals, is transforming most consumers’ interactions with financial services. Following the Mills review, there does seem to be a bit of a gap in what will happen with appropriate regulation. It seems that the essence of the position of the FCA is that it does not want to slow down the pace of innovation and growth in financial services, so it will be very reticent to put in any regulation. That is not an unreasonable sentiment, but we must discuss where we as a society feel responsibility should lie. If a financial services firm essentially allows an AI regime to produce offers of products that are sold, somebody has to be responsible for the terms and the basis for such a product going to market.

I welcome the changes to the PRA to streamline the bank rules on ringfencing, but I was the Minister who commissioned the Keith Skeoch review, which essentially came to the conclusion that it was not really necessary, but because of the legacy of the global financial crisis, we had better keep it in place. I urge the Economic Secretary to ask this question: what does that ringfencing actually give us? Many senior people at the PRA told me that we do not really need it, and we have a resolution regime that would actually satisfy all our requirements. However, it has a totemic significance, because it is associated with that season of under-regulation that led to the global financial crisis. We must have an honest conversation, not one based on received wisdom about what happened 18 years ago. We should not be reckless, but we do not need to carry unnecessary burdens when they do not really add anything.

Time goes quickly in this place, and I respect the need for everyone to speak, but I would like to make two or three broader points. One is about the imbalance of power and expertise. When I became the Economic Secretary, I hardly slept for the first few weeks because it was just so complicated, after I had been the arts, heritage and tourism Minister. From museums to MiFID in one step was a big move, but I did my best to master it. Every six weeks or so, I met the head of the FCA and the head of the PRA. These are some of the most brilliant people in public service, who have at their disposal some of the most intelligent, numerate individuals who are aware of all the nuances of different conditions, the capital requirements of banks of different sizes and the different mitigations for them. I was trying to mediate all the representations I had had from TheCityUK, UK Finance, the Association of British Insurers, the London Market Group and all the consumer organisations, essentially to try to challenge them on the right way of liberalising the regime or having a strong and simple regime to, for example, make it easier for smaller banks.

I probably got that right sometimes and on other occasions did not press hard enough, while at times there was a reasonable expectation that I would be moved on. Indeed, since July 2022 there have been eight Economic Secretaries—I am glad the sixth one is now back again as the eighth one. I just do not feel that that is a grown-up way to deal with our financial services Minister—the person responsible for this industry that we have all said is so important in terms of the jobs it creates and the GDP it accounts for. There is well-meaning intent, when we come to this place, to mediate consumer groups’ concerns and the concerns of our constituents, but we need to think about how we can do this better. Perhaps there should be a joint committee of the Commons and the Lords, properly staffed with the sort of expertise and advice that would really allow us to take on our friends at the PRA and the FCA, but it is something that does need scrutiny.

The legacy of the global financial crisis is important. It obviously had an enormous impact on our country and our public finances. “Too big to fail” must never happen again, but we must recognise that financial services in this country compete on an international basis. Too often, when legislation is passed in this place, there is another “have regard to”. I have been in Select Committees where colleagues have asked about some piece of legislation—some provision or “have regard to” that I probably allowed to pass through the House of Lords because I wanted to be collegiate—that led the regulator to make assessments that were not going to go anywhere, but added significant compliance costs to our financial services industry with no material outcome. I urge the Minister to really think about what is a necessary legacy of the global financial crisis and what is a sort of received wisdom of defensiveness that does not serve us well any more.

My final point, which I alluded to earlier, is about the consumer reset. The Chair of the Select Committee rightly pointed to Nikhil Rathi’s challenge to us at the Select Committee that we, as politicians, need to be clear about what level of risk we are prepared to tolerate. That is a difficult question for us as Members of Parliament. We are never going to want to say to our constituents, “We are happy to allow lots of risk,” but we have to put it in context. The measures we put in place on risk mitigation, the mandate and responsibilities we give the FCA and the PRA, make quite a big difference to the way the industry functions and how competitive it is.

I welcome what the Government have done on financial education. The Economic Secretary and I were at the launch of a report by UK Finance this morning. I welcome the progress that has been made and needs to be made in that area, but we must get to a better place in terms of enabling people, when so much more information is available, to own the choices that they make. Of course the responsibility to look after consumer interest exists, but let us calibrate that appropriately for the age we live in.

Thank you for the opportunity to contribute.

[Madam Deputy Speaker (Judith Cummins)]

With an eight-minute time limit, I call Lauren Edwards.

19:53

[Lauren Edwards (Rochester and Strood) (Lab)]

I thank my right hon. and learned Friend the Minister for her work in bringing the Bill to Parliament, and the other place for its scrutiny to date. I should begin by making it clear that before being elected, I worked in supervision at both the Prudential Regulation Authority and the financial market infrastructure directorate at the Bank of England. I associate myself with some of the comments others have made about the importance of the financial services industry not just to London, but to the whole of the UK.

I would like to begin by welcoming the Government’s retention of the proportionality requirements, following debate in the House of Lords. Although I worked on the larger financial companies when I was a frontline supervisor, the proportionality lens was very important in day-to-day decision making, alongside a robust risk framework, not least because as the person who had to deliver a message to a firm, I needed to make sure that I could justify it. In line with that risk-based and proportionate approach to supervision, which I believe is the right one, I wonder if the Bill could make more of the opportunity to stimulate growth in the commercial and specialty insurance markets.

The London insurance market is a world leader, with annual income larger than its five closest competitors combined. It insures everything from planes to nuclear power stations, and has an important role to play in helping the Government to tackle climate change, protect against cyber-threats and unlock investment across the UK. As others have said, it competes internationally against markets in places such as New York, Singapore and Hong Kong. Its market is for sophisticated corporate clients, professional investors, insurance firms, banks and pension funds, rather than the individual purchasing travel insurance ahead of a holiday or pet insurance for the family dog, but currently the supervisory approach is rather similar for those very different types of customers.

Will the Minister and the Government consider whether more could be done in the Bill to differentiate the way we supervise wholesale insurance markets that have professional clients versus retail markets, where the focus, quite rightly, is on protecting the individual consumer? An obvious example to follow would be Australia, the country of my birth, which makes that distinction between wholesale and retail insurance through the Australian Corporations Act 2001, and tailors its supervision accordingly. There is scope in the Bill to consider what a UK version of that approach could look like to ensure that regulation is proportionate while maintaining strong protections where they are most needed.

I support the Government reintroducing the power to be able to act quickly after the access to banking services review reports, but hope that when it is reintroduced it will be narrower in scope to address the concerns raised in the other place that saw the original provision removed from the Bill. It is also important that any action that follows from that review is properly consulted on.

In my constituency, my initial efforts to get a banking hub were frustrated by the focus on access to cash under the current rules, when it is really access to face-to-face banking, advice and services that my constituents want to have, particularly on the Strood side of the River Medway and in the more rural populations on the Hoo peninsula. Digital inclusion is very important for people of all ages, but we know that the over-65s in particular place a lot of value on face-to-face banking services and it is important that they do not lose out. Age UK statistics from September suggest that 1.4 million over-65s are fully digitally excluded. Banking hubs can be part of the digital inclusion plan if we follow the example of places such as Singapore, which I know from a recent visit with the Public Administration and Constitutional Affairs Committee has very high levels of digital take-up and success using hubs to assist older citizens with building their confidence in using digital services for banking and public services.

[Matt Rodda (Reading Central) (Lab)]

My hon. Friend is making an excellent point, and I have a similar need in my constituency. Does she agree that the benefits of banking hubs extend to many disabled people, as well as to older residents?

[Lauren Edwards]

I absolutely agree with my hon. Friend that they should be part of our efforts to ensure that our services are as inclusive as possible.

Moving on to the Government’s aim to halve the burden of the senior managers and certification regime for firms, the cost saving is expected to be material. The Bank of England quotes an estimated £2 billion over a decade. It is important that those who present the biggest systemic risk to financial stability remain on the hook if things go wrong. There were very good reasons why the SMCR was introduced after the 2008 global financial crisis and there is scope for streamlining and shorter processes, but we must remember, as we do that, how few people were accountable for the risks that were run in the lead-up to the crisis and how the taxpayer was left to pick up the bill. Once again, it is a question of balance in proportionality and risk. We must always ensure that we maintain high standards of conduct and accountability.

Finally, on authorised push payment fraud, I believe that during debates in the other place the Minister said that there were other vehicles, such as the Government’s online safety legislation and fraud strategy, to address APP fraud and so provision was not needed in the Bill. However, we should consider whether the tech giants have been required to sufficiently take on their share of the responsibility for tackling this pervasive harm. The economic cost of APP fraud is significant. It was estimated at £450 million from UK businesses and individuals in 2024, although thankfully the Payment Systems Regulator reports that reductions have been achieved since then, thanks to the APP reimbursement policy. Call me cynical, but I think the only way that online tech giants will care about tackling APP fraud is if they also have some responsibility for reimbursement, rather than it all falling to the retail banks. They should also be held to higher standards for preventative measures, such as user identity verification and enhanced fraud monitoring.

To conclude, I welcome the Government’s approach and the progress being made through this legislation, but hope that Ministers will remain open to further refinement. Working in partnership with industry, regulators and Parliament, we have an opportunity to strengthen the UK’s position as a world-leading financial services centre, while maintaining the high standards and consumer protections for which our system is rightly respected.

19:59

[Mike Martin (Tunbridge Wells) (LD)]

We on the Liberal Democrat Benches broadly support the Bill. Modernising a framework that has grown complex over decades is sensible and there is much here to welcome, from wider credit union membership to protecting in-person banking and tougher defences against financial crime.

I want to use my brief time to talk about a missed opportunity, and I hope the Government will take me up on it. It relates to the Chancellor’s former job. The Government rightly want to rebuild our defence industry, and small firms are one of the bedrocks of that goal. With the way that warfare is accelerating, the cutting, bleeding edge is with small tech firms innovating in things such as AI and autonomy. The Ministry of Defence works with around 12,000 small and medium-sized enterprises through its supply chains, and spends about £5 billion a year with them. It is further set out in the defence investment plan and the strategic defence review that the MOD wants to spend a further £2.5 billion with SMEs by the summer of 2028. That is where defence is moving—if we want to win wars in the modern age, we have to have a robust defence SME sector,

Every small business, no matter what sector it is in, knows how hard it can be to raise finance, but many defence firms face an extra barrier. They are often refused bank accounts, loans or insurance simply because they work in the defence sector. SC Group—formerly Supacat—has won MOD contracts worth tens of millions of pounds, yet it has struggled to get investment or loans because it is not seen as acceptable. Another example is 4GD, which uses AI and robotics to run training simulators for British soldiers; the company stopped attending investment meetings and was actually turned away from one once the host found out it was a defence firm.

A couple of years ago, 15 SME defence firms formally raised the issue with their trade body, ADS, as they had actually had accounts closed by UK financial institutions. Obviously, those were just the firms that were willing to speak up; there are plenty that will have suffered adverse reactions when seeking credit but have chosen not to speak out—because what firm wants to advertise that they are unable to get capital or credit? The crucial point is that this is not because of regulation. In March 2025, the FCA stated very plainly that:

“There is nothing in our rules, including those related to sustainability, that prevents investment or finance for defence companies.”

The problem is that many investment and financial services firms have environmental, social and governance policies that explicitly name defence firms as being unacceptable for investment. The Government know that, because in the MOD’s SME action plan, which was published in July, they commit to working with everyone, from venture capital to high street banks, to make it easier for the financial sector to back defence SMEs. But there is a difference between knowing about a problem and setting out a robust way of fixing it, and that is what I want to focus on.

The Bill started in the House of Lords, where my noble Friend Baroness Kramer tabled amendment 67, which proposed a practical step that might go some way towards solving the problem. The amendment essentially required the Financial Conduct Authority to review how easily SMEs in sectors critical to our national security can get finance. More specifically, that review would examine the availability and cost of finance for defence firms, whether the FCA’s rules create barriers, whether lenders’ ESG policies, sector exclusions or risk assessments are shutting defence firms out, and whether defence SMEs find it materially harder to get finance than firms in other industries. Crucially, the review would finish with the changes that should be made to improve access to finance for defence SMEs—it should speak to the problems identified in the review.

When my noble Friend Baroness Kramer presented the amendment, among a package of others, the Government declined, saying that the framework was already proportionate to SMEs. I think something has been lost in translation there. Proportionality is not the issue; the FCA has told us that its rules are not the barrier. The question is about what regulated investment firms are actually doing. At the moment, nobody is monitoring that, but amendment 67 sought to do so, by mandating the FCA to carry out a review on a regular basis—once every two or three years.

I urge the Government and the Economic Secretary to use the Bill to honour the commitment made by other parts of Government to support SMEs—including defence SMEs—to have access to finance on a level playing field with other sectors. This is not a party political issue: in March 2025, more than 100 Labour MPs and peers wrote to banks and investors about exactly this problem, and it has also been raised on the Conservative Benches. On Report, pursuant to any conversations that the Minister might like to have with me, I intend to re-table the same amendment and seek cross-party support. I am pretty sure there will be robust support across the House. I would welcome the chance to meet with the Minister to discuss the issue, because I think we have an opportunity to strengthen the Bill as it goes forward.

20:06

[Andrew Pakes (Peterborough) (Lab/Co-op)]

This is my first speech in this House since being appointed as the Government’s co-operatives and mutuals champion, a role that speaks to my purpose in public life and gives me the responsibility of championing the co-operative and mutuals sector across Parliament and Government. It is a pleasure to contribute to a debate with my right hon. and learned Friend the Economic Secretary sat on the Front Bench; I know she is a champion for the sector in a diverse and resilient financial market. In the spirit of cross-party consensus that we have had this evening, I also pay tribute to the hon. Member for Wyre Forest (Mark Garnier), who I know secretly carries a co-operative dividend card in his wallet and is a champion of the sector as well.

I am proud that this Government have an ambitious plan to double the size of the co-operative and mutual economy, and this Bill will contribute to that ambition. I am proud to take on the role that I have been given, because mutuals, building societies and credit unions embody a simple but powerful idea: that financial services should work in the interests of the people who use them. They are owned by their members, rooted in their communities and focused on long-term value rather than simply short-term shareholder returns.

On taking the role last week, my first meeting was with the boards and executives of building societies from across the country, and this morning I met with Royal London. I put on record my thanks to the boards of all our building societies and credit unions, and the staff who work for them and support them in their endeavours, providing growth in every postcode already. We see people like this working in our building societies and mutuals across the country.

We have seen this movement in Peterborough, just like in many other cities. In 1954, the Co-operative Permanent Building Society opened its office in our city. More than 70 years later, now as Nationwide, it continues to serve and help people to save, buy a home and access trusted financial advice. That long-term commitment to communities is exactly why building societies and the wider mutual movement remain such an important part of our economy and financial services. It brings somewhere to save, somewhere fair to borrow and somewhere that understands the communities that the institutions serve.

[Robin Swann (South Antrim) (UUP)]

I am a director of Slemish ń tha Braid Credit Union. Will the new champion meet me, the Irish League of Credit Unions and the Ulster Federation of Credit Unions to ensure that the support he is talking about covers the whole United Kingdom and all the savers who use those services?

[Andrew Pakes]

One of the delights of my role will be juggling my diary to meet all the brilliant different mutual movements and community banks and assets across everywhere represented in Parliament—I will be delighted to do so.

In particular, I welcome reforms to the credit union common bond. By increasing the membership limit, we can help credit unions to reach more communities, widen access to affordable credit, and help more people to build savings and financial resilience. At a time when many families are still feeling pressure on household budgets, access to fair and affordable lending matters more than ever. Credit unions provide a trusted alternative to high-cost lenders and, as other Members have said, they play an important role in tackling financial exclusion.

The Bill also gives us an opportunity to recognise the contribution that building societies make to banking access. Across the country, many banks have reduced their physical presence, yet building societies have continued to invest in local services and maintain branches. Evidence cited by the Building Societies Association shows that building societies now account for around a third of UK banking branches, operating more than 1,400 branches nationwide. That commitment should be recognised and encouraged, but any future banking access requirements must also be fair—building societies cannot be expected to become the catch-all provider for responsibilities abandoned by others.

We need a framework that reflects local need, supports innovation and ensures that mutuals are not penalised for continuing to serve the communities that others have left behind. I echo comments made by my hon. Friend the Member for Harrow West (Gareth Thomas) and the Chair of the Treasury Committee, my hon. Friend the Member for Hackney South and Shoreditch (Dame Meg Hillier), that the rules governing capital and mutuals need to be looked at as well, so that we do not leave the mutual movement behind as we modernise and reflect on financial services as a whole.

More broadly, regulation should reflect the distinct nature of mutual organisations. We can maintain strong consumer protections while ensuring that the rules are proportionate and support growth, competition and innovation. Mutuals are not asking for special treatment—they are asking for a level playing field of access and role.

The test for this legislation is straightforward: will it help people to save, borrow and own a home? Will it support access to financial services in every community? Will it enable mutuals, building societies and credit unions to grow and serve more people? Mutuals, building societies and credit unions are a vital part of the future of our diverse, resilient and community-focused financial services sector, and I hope the Minister will ensure that the legislation helps them to grow, to serve more people and to continue making a difference in communities such as mine in Peterborough and those of the hon. Members we have heard from this evening.

20:12

[Robin Swann (South Antrim) (UUP)]

I want to pick up on the Chancellor’s comments in opening the debate, when he said that he wanted to continue moving the Bill in “the right direction” with a collegiate approach across the House. I intend to table an amendment to the Bill on one specific issue, which builds on the work of Baroness Hoey of Lylehill and the British Insurance Brokers’ Association. It relates to an ongoing campaign of mine to tackle the rising and disproportionate cause of car insurance costs across Northern Ireland.

The amendment will seek to include claims management companies in Northern Ireland under the FCA regulations. As it stands, Northern Ireland remains the only part of the United Kingdom where claims management companies are not regulated by the FCA, due to the fact that the Northern Ireland Assembly was not sitting when the legislation was introduced in England, Scotland and Wales. With no room to legislate under the current timetable and an Assembly election coming in May—who knows what happens after May—I believe that the Bill provides the perfect vehicle for bringing forward the solution to what is a technicality on the support of claims management companies and car insurance users in Northern Ireland.

Motorists across Northern Ireland continue to face disproportionately high premiums, placing severe financial pressure on our households and particularly on young drivers. Unregulated claims management companies actively pursue customers after collisions and can take anywhere between 15% and 30% of compensation payouts, which significantly inflates overall claims expenses. Those excessive costs then act as a major driver pushing up the cost of car cover for our drivers.

[Claire Hanna (Belfast South and Mid Down) (SDLP)]

I know that the hon. Member has been working extensively on this matter. He rightly highlights Northern Ireland’s higher premiums; there are also fewer providers, as well as the matter of the unregulated claims management companies. He will know that public transport and cycle infrastructure is failing as well, driving more people into their cars. Does he agree that it is a symptom of Stormont’s failure that another collapse meant that this gap was not plugged, and does he share my concern about the sluggish response of Stormont on providing data and agreeing to co-operate on this matter, and the belief of many drivers that nobody is really at the wheel?

[Robin Swann]

The hon. Lady is correct in some of her assertions on this matter, because correcting this legislative anomaly has not been on the Executive’s agenda. I do not think it will be on their agenda even after the election coming in May.

This vehicle—this piece of legislation—does provide the solution for those who need affordable car insurance in Northern Ireland more so than in other parts of the United Kingdom. Extending the FCA’s regulatory remit to Northern Ireland is a vital, practical step to properly govern those firms. It will prevent exploitative practices and bring much-needed fairness to our local insurance market.

While various factors contribute to higher insurance costs in Northern Ireland, closing that regulatory gap, which the Bill will be able to do, will actually make a tangible difference. As the Economic Secretary will see, there is support for such a measure across the Northern Ireland parties. It has also been brought in the other House, too. I hope she will listen, and meet me to explore this anomaly and bring about the solution.

20:16

[Callum Anderson (Buckingham and Bletchley) (Lab)]

It is a pleasure to contribute to this debate and to follow the hon. Member for South Antrim (Robin Swann). Members on all three Front Benches have rightly set out the importance of financial services to the UK economy. It is indeed one of the UK’s most international sectors, and one that holds great significance for the prospects of UK industry, businesses and households across the United Kingdom, including in my constituency.

I am very pleased to support the Bill this evening, as it retains the UK’s hybrid combination of strong institutions, high-quality regulators and, ultimately, clear rules that are critical not only to maintaining investor confidence—a currency more valuable than ever before in an incredibly volatile world—to put their money here, but to people and businesses across the UK who use financial services in their everyday lives.

Given the limited time I have, I will restrict my comments to a few areas. First, I will mention credit unions and clause 2. My hon. Friends the Members for Feltham and Heston (Seema Malhotra) and for Peterborough (Andrew Pakes), whom I congratulate on his appointment as co-operative and mutuals champion—a very wise choice by the Chancellor and the Economic Secretary—have made incredibly powerful points on credit unions. They are absolutely right to say that the current common bond rules date from another era, when society organised itself very differently. I am pleased that the Bill fixes those matters by ensuring that relatives can join in if they live in different households, that retirees can stay in and join after they stop work, and that students can qualify under the new locality bond. I also welcome raising the membership cap from 3 million to 10 million, as it enables credit unions across the UK to once again have a fair go at expanding and scaling.

I want to make a few comments about the regulators. Clauses 15 to 25 reshape how the FCA and the PRA do their jobs, and I welcome the broad direction of travel that the Government have set. Clause 16 makes regulators more considerately and thoughtfully weigh the experience of small and medium-sized firms by having greater regard for proportionality, which is important both in terms of the size of firms that are required to comply with rules and regulations and the cost and benefit of any rule that is made. Having worked supporting smaller quoted companies and then large institutions at the London Stock Exchange Group before I entered this place, it is to me pretty much intuitive common sense that a small firm cannot staff a compliance department or answer every consultation that is issued by Government or a regulator with the same vigour as larger counterparts.

It is therefore incumbent on all our regulators—in this case the FCA and PRA, but I would similarly make the comment with regard to regulators operating across our economy—to properly and proactively account for this if they want to be a genuinely constructive partner in supporting economic growth and cultivating meaningfully competitive domestic markets. I also understand that the Government will retain the Lords amendment to keep proportionality as an explicit test in the day-to-day work of both regulators. If that is the case, I very much welcome that.

Under clause 19, the FCA and the PRA will be required to report at least once a year on how they are advancing the competitiveness and growth secondary objectives. These reports will feed in the Treasury’s twice-yearly performance reviews with the regulators’ respective chief executives. I think that is a highly appropriate measure, given that almost all the financial institutions—be they large or small, market infrastructure, bank or insurer—were incredibly keen for the previous Government to ensure that regulators adopted such an objective. Given that it has probably been four or five years now since that obligation was placed on our regulators, it is right that those regulators who have such a large impact on our economy explain their record to Parliament, in particular the Commons Treasury Committee and the Lords Economic Affairs Committee.

In the three minutes or so that I have remaining, I want to close on the Bill’s most forward-facing clauses: those relating to cryptoassets and digital assets more broadly. FCA analysis has found that as many as 7 million Britons own or have owned cryptoassets, and just a few more—9.3 million—hold a stocks and shares ISA. I will spare the Economic Secretary one of my sermons on the virtues of retail investing, but I just mention that statistic because it demonstrates how the consumer landscape is quickly shifting and, with it, the risk that consumers are increasingly exposed to.

It has never been more important for the UK— Government and regulators—to ensure that we are keeping up with developments in cryptoassets and delivering appropriate consumer protections, as my hon. Friend the Chair of the Treasury Committee explained earlier. But we must also do that without restraining the inevitable opportunities that digitising our financial markets offers us and risking letting Britain fall behind.

On digital assets themselves, the Government are making welcome strides forward, particularly in supporting Chris Woolard’s first report as the UK’s wholesale digital markets champion. The main challenge facing the UK is how we maintain momentum in the years ahead, given that other jurisdictions such as the United States, Hong Kong and Singapore are pursuing these agendas with great pace. I hope that the Government will use their regular engagement with the Bank of England to ensure that it moves with as much vigour on stablecoins as the Government are on digital gilt. With the geopolitical volatility that I mentioned earlier, Britain can offer something quite rare: a consistent, predictable environment for innovation in stablecoin and across asset classes, be they fixed income or equities.

Turning to clause 50, while the digital assets strategy, which has been proposed by the Opposition, is an interesting addition to the Bill, I am not instinctively sure whether legally mandating the Government to produce a strategy is necessarily appropriate. But I am sure that the Minister will explain the Government’s position in her wind-up speech.

I am very pleased to support this Bill. A competitive financial services sector provides so much more value than just itself and is a massive asset to all the companies and people in our constituencies.

20:24

[Kirsty Blackman (Aberdeen North) (SNP)]

This is quite a wide-ranging Bill, as we can tell from the variety of speeches that we have heard. It focuses not only on financial markets and financial services, but on consumer protection. In some ways, those are opposite ends of the spectrum, and we can talk about anything within that spectrum.

I will talk about a few measures in the Bill, but first I want to raise a concern that I have raised before, which is that any piece of legislation that originates in the House of Lords does not take oral evidence. It is immensely frustrating that no oral evidence will be taken regarding this Bill, despite the fact that it is immensely technical and we would really benefit from that. I have been on many Bill Committees, so I know that oral evidence sessions are invaluable for providing information that we can take forward. I urge the Government to have a rethink about whether oral evidence can be taken on House of Lords Bills when they come to the Commons, because it is not fair that we miss out on that evidence.

Turning to specific measures in the Bill, part 1 on credit unions is really important, and I agree with widening the membership. I think that the “Fair Banking for All” movement is really positive, and I would be keen to support it, including with access to credit. A number of Members have said things like, “We all rely on banking services”, but some people do not, because they cannot access those banking services because they are so financially excluded. Ensuring that those people who have suffered from economic abuse, for example, have access to those services is really important.

I am glad that credit unions will have their common bond widened, but I do wonder about the timeline for the statutory instrument that is coming through to widen the limit of people from 3 million to 10 million. It would be really helpful if the Minister could let us know what is happening with that statutory instrument and when it will progress, because it is happening in parallel to this Bill rather than being included in it.

On complaints and consumer redress, I agree with the majority of what the Chair of the Treasury Committee said. I have concerns about the absolute limit of 10 years. I do not think that that is appropriate, and consumer organisations also believe that.

I also have concerns about the general principle that consumers should take responsibility for their decisions. As a general principle, that makes sense, but when it comes to specific issues it does not necessarily always work. Consumers can take responsibility in situations where they had the full information and the capacity to understand the information that they were given, but in some cases they will not have been given the full information or had the ability to understand it. They should be able to take responsibility for informed decisions but not have to take responsibility for those in which they were not properly informed. I would appreciate it if the Minister could clarify that before we come to Report stage—it relates to clause 7, which proposes amendments to section 228 of the Financial Services and Markets Act 2000.

On payment systems regulation, I absolutely agree that changes that can be made. I feel strongly that it is really important to future-proof the regulation of cryptoassets particularly and the transfer of those cryptoassets in relation to payment systems regulation and fees that are regulated by the FCA. Charities have seen a massive increase from a significant number of banking institutions in the payments that they make. For example, charities that have only a small amount of money and might be taking out a float to run a small event will now be seeing massive fees that they were not seeing before because of changes to charitable banking systems. I am not sure whether that exactly falls within payment systems regulation, but I do not think it is fair that they have to do that. Those changes disproportionately harm smaller charities and those who deal with small amounts of cash.

I have a specific question on anti-money laundering supervision. I understand the move away from professional body supervisors so that we can have fewer than 25 organisations doing that supervision, but I am worried about specialisation. For example, if we put the work of the organisation that supervises lawyers and solicitors in Scotland into the FCA as a regulator that supervises lawyers, that may not be appropriate for the legal system in Scotland, and we may end up with only one person—the one who understands Scottish law—having the knowledge and doing that supervision. There, again, we would have a single point of failure, and that is really concerning in a place supervising people who are doing anti-money laundering. Will the Minister confirm that there will be appropriate specialism and understanding of all the different organisations currently supervised by professional bodies as that work is moved into one organisation? I am concerned about potential failure points.

In relation to Scottish-specific things, those looking to get a child trust fund unlocked for someone in Scotland who has become an adult and does not have the capacity to manage their own finances has to go to the Office of the Public Guardian. Will the Minister please ensure that any changes in regulation made here do not make the system worse in Scotland? I understand that it is currently better than the system in England—there is no requirement to go through a court process—so will she talk to the people who understand the system in Scotland to ensure that our people will not be disadvantaged? I would love the system in Scotland to be made better, but at the very least it should not be made worse as we move forward here.

I believe strongly that we need access to in-person banking services, as have been mentioned. A huge many banks have closed in my constituency—a city constituency—and some people are required to go on public transport for an hour to get to banking facilities.

When banks close, they regularly say, “It’s fine, because there’s a post office.” That is not fine, because post offices are run by postmasters and postmistresses, who may get ill and have to step down at short notice, and post offices do not have to consult before they close to ensure that provision will always be there. Therefore, in terms of access to in-person banking services, if a post office is to be relied on as a backstop, that service needs to be better and better regulated, and we need to ensure that that backstop service will continue to be there.

On data sharing for consumer credit and ensuring that people have credit agreements, I am concerned that if the data sharing system is to be more flexible than currently, it may be more at risk given the number of hacks we are seeing. I urge the Government to ensure that the National Crime Agency, for example, has looked into that so that people’s data is as safe as possible.

I have one very last thing. On Henry VIII powers and the creation of things here, banking services should never have been a delegated authority; that should have been in the Bill. We should also have done the consultation before the legislation.

[Several hon. Members rose—]

[Madam Deputy Speaker (Ms Nusrat Ghani)]

Order. I call Gareth Thomas, after whom the speaking limit will drop down to six minutes.

20:32

[Gareth Thomas (Harrow West) (Lab/Co-op)]

I welcome the Bill and commend both the Chancellor and, in particular, my hon. Friend the Economic Secretary for their commitment to modernising financial services. Like the hon. Member for Aberdeen North (Kirsty Blackman) and other Government Members, I welcome in particular the proposed changes to credit union rules as well as recently announced measures to increase funding for community development finance institutions through the British Business Bank. But I want to focus my remarks specifically on what more the Bill could do to ensure that our financial system works for everyone, particularly by improving access to affordable credit for people and businesses in every region.

The Prime Minister has rightly said that ours must be a “cost of living Government” putting money back into people’s pockets and giving families breathing space. That must surely include tackling the extra costs that people face simply because they are on a low income. Research published this summer by Fair By Design found that 95% of low-income households pay a poverty premium, of an average of £380 a year extra, for essentials such as energy, insurance, food and, crucially, credit.

That research suggests that some 98% of households in poverty in my constituency pay a poverty premium that includes £178 a year on credit. That is not by any definition a small amount for a family already struggling to make ends meet. A household with savings can, for example, replace a broken fridge outright, but almost 40% of UK adults have less than £1,000 in savings and one in four people in financially vulnerable circumstances have no savings at all. A household without savings in that situation might have to borrow at eye-watering rates, paying far more for exactly the same appliance. The people with the least paying the highest price during a cost of living crisis is particularly unjust, and sometimes the consequences are far more serious than higher interest payments.

The Centre for Social Justice estimated earlier this year that close to 2 million people in England are borrowing from illegal money lenders. These loan sharks can trap people in escalating debts, using intimidation, threats and sometimes violence to extract repayments. The number of people using them has risen and sadly will continue to rise unless people have safe, affordable alternatives. Credit unions and community development finance institutions already provide those alternatives, but they need support to be able to scale up and meet demand. Public funding, while important and welcome, cannot do the job alone.

Some 850,000 SMEs already view access to finance as a major obstacle to growth, fewer than half of SME loan applications to traditional banks are successful, and in surveys, 40% of SMEs cite the high cost of the loans on offer as a problem for their business. Women business leaders, businesses led by disabled people, ethnic minority business leaders and businesses in the poorest areas of our country all face higher barriers to accessing the finance they need to unlock their expansion plans.

Concern has grown that a number of high-cost lenders are exploiting this situation, targeting small businesses with slick, online marketing offering very rapid access to cash. As with the payday lending scandal of a decade ago, these lenders do not have to display or explain the total cost of borrowing or accurate representative rates. The often quite aggressive use of personal guarantees, loan stacking and the behaviour of some brokers are also significant concerns. Court judgments, ombudsman complaints and wider efforts to refinance these loans all underline the need for tighter regulation of the rules on high-cost credit and for bolder measures to improve access to affordable credit.

Research for the Treasury and the Department for Business, Innovation, Science and Trade published in January this year by the National Institute of Economic and Social Research underlined how much our increasingly centralised banking services had driven up the cost of lending for businesses, compared with other European countries with much larger regional and mutual banking sectors. The OECD’s most recent analysis of SMEs’ and entrepreneurs’ financing suggests that the UK had higher average SME interest rates in 2024 compared with the US, France and Germany.

I am therefore pleased that Ministers are backing with enthusiasm the CDFI taskforce that I initiated in government, and I welcome the progress on the Government’s financial inclusion strategy, but lasting change surely means looking beyond voluntary measures to ensure that people in the most vulnerable parts of the market are not excluded from essential financial services, including credit—a point members of the Treasury Committee made in their recent report. The Bill is the opportunity to bridge this gap and enact that change.

There is no consistent, transparent framework for assessing how well major banks serve the people and places excluded from affordable credit. There is no systematic way to compare their contribution or assess how they encourage partnerships with credit unions and CDFIs that can make a real difference. We should surely require the Financial Conduct Authority to assess and publish banks’ performance in meeting affordable credit needs, including their support for responsible community lenders. Assessments should be transparent, comparable and, of course, proportionate, with action expected where performance falls short. A similar thing is about to happen with pension schemes.

This is not about forcing banks to lend to people who cannot afford to repay. It is about ensuring that those who can repay are not excluded and that banks fulfil their part of the social contract. Banks have had huge success in the last decade—a decade when, according to Which?, almost 7,000 bank branches have closed, shutting down opportunities for basic advice, making access to financial services more difficult and leaving small businesses on our high streets facing yet another challenge.

[Kirsty Blackman]

Is the hon. Gentleman aware that a lot of this data is collected already, and that it would not place a significant additional regulatory burden on banks to have to gather it? It is just not being published.

[Gareth Thomas]

Indeed, the FCA said something similar to me at a roundtable with some charities. What is clearly needed is the will to publish that data and to sort out the remaining gaps in the data.

The banks’ success has come through being particularly selective in who they lend and offer detailed financial advice to. Their contributions to helping build the capacity of those financial institutions that do lend to everybody have been much more limited—in some cases, non-existent. It is the responsibility of Government to lead on tackling market failures, but as in other countries, banks in the UK have a responsibility to help, and not enough of them are helping to build the capacity of community banks, credit unions and CDFIs to do so. Just as it was right to ask banks to pay a bit more tax to support people with their energy bills, so we should ask them to work with us to create a more diverse, resilient and, crucially, inclusive financial system that will serve every community in the decades ahead.

Everyone in this House surely supports easing the cost of living and delivering good growth in every postcode. Fair access to credit is critical to both those ambitions. I hope that Ministers can be persuaded to back further steps on affordable credit as the Bill progresses. A financial system that works for everyone is fundamental to tackling the cost of living crisis.

20:40

[Joe Powell (Kensington and Bayswater) (Lab)]

I am proud of our world-leading financial services sector and the many constituents I represent who work in it. I put on record my thanks to the Chancellor for announcing measures in the Budget that will continue to help Britain attract global talent to work in those services.

Our reputation for strong financial services that respect the rule of law depends on our ability to keep dirty money out of the City and out of our country. The Bill will make huge strides on that through clause 13, on which I will focus. No one should turn a blind eye to the source of funds for an investment, whether into a company, a property, art or even some of our national institutions. The former Foreign Secretary, my right hon. Friend the Member for Tottenham (Mr Lammy), was right to say that this Government’s ambition should be to change our reputation from the dirty money capital of the world to

“the anti-corruption capital of the world”.

One of the historical weaknesses has been the regulation of legal, accountancy and company service providers, which are sometimes referred to as enablers or potential enablers of money laundering. It should not be a badge of honour that dirty money in our country has spawned an entire genre of excellent books: “Kleptopia”, “Treasure Islands”, “Butler to the World”, “London Falling”—hon. Members can read my review in “The House” magazine—and many more.

In my Kensington and Bayswater constituency, we similarly do not celebrate the fact that we are home to numerous sanctioned luxury properties and thousands more whose ownership is unknown or opaque. I invite the Minister to join my next “Kensington Against Dirty Money” walking tour, which will show her the impact of dirty money entering our country—often through the vehicles of anonymous trusts registered in the British Virgin Islands and other overseas territories and Crown dependencies. That distorts our property market, hollows out our local communities and, in the worst cases, leaves properties frozen in limbo. That is not sustainable investment. It does not promote economic growth or shine a good light on our professional services.

I am therefore delighted that the Bill will significantly strengthen anti-money laundering measures. The Financial Conduct Authority will take on an expanded supervising role, rather than the more than 20 different professional bodies that currently oversee lawyers’ and accountants’ compliance with money laundering rules. The capacity of those bodies simply does not align with the complexity of modern anti-money laundering efforts, and the incentive for private professional bodies to compete for membership does not align with the most rigorous oversight. For a long time, anti-corruption campaigners have called for this consolidation. I pay tribute to those organisations. As the Bill progresses, the transition will need to be managed. There is a clear risk that, as responsibilities shift to the FCA in cohorts, some firms will be left behind. It would be helpful for the Government to provide a reform road map that makes it clear that existing anti-money laundering duties will apply.

Funding is obviously key—other Members will speak to the benefits of an economic crime-fighting fund, which the Minister already knows my views on well—but enforcement also means ensuring that the FCA has the right powers to inspect legally privileged material when that is necessary for anti-money laundering supervision. The Minister will no doubt be aware of the action taken by Carter-Ruck against the Solicitors Regulation Authority to challenge its statutory power to compel disclosure, which the SRA has now appealed to the Supreme Court. There is a risk that the FCA will therefore inherit a legally flawed responsibility for anti-money laundering. It is crucial to get that right, and I hope this Bill is the place to do it.

On property investment, I know that the Government are committed to looking at the issue of abuse of trust, and the anti-corruption champion’s report into asset ownership in Britain will be published soon. In my constituency, over 40% of the foreign-owned properties are registered in trust. My concern with our registry of overseas entities and the exemption given to trusts is that we might create a perverse incentive to use more opaque corporate structures to shield the true ownership. Indeed, those opaque structures are likely to be the product of conversations with the very professional services to which the Bill aims to bring more consistent money laundering supervision. I hope that in the spirit of joined-up government, the Minister will work with colleagues across Government to look at this abuse of trust. That would be another significant step forward.

The measures in the Bill support our leadership on the global stage. We have the financial action taskforce review next year, which I am sure will welcome the steps in the Bill, as well as the G20 presidency and our flagship illicit finance summit, which I am glad the Government have committed to host next year. I hope the Minister will see the illicit finance summit as an opportunity to work with like-minded countries on consistent international anti-money laundering supervision of professional services.

Finally, it is well past time for action on the overseas territories and Crown dependencies. The uncomfortable truth is that while some of the most notorious and brazen enablers of illicit finance and money laundering operate as part of the UK family, we will not be able to claim the leadership role that the Bill has the potential to support. Despite years of commitments and communiqués, the overseas territories are still one of the main global destinations for dirty money, and it is high time for that to change. The harms are severe, from sanctions evasion to serious organised crime, and they damage our financial services here and support kleptocrats and criminals who take advantage of them. With the Joint Ministerial Council happening this month, I hope we can continue to take action on that front. I hope that the Bill can help end that reputation as the butler to the world and instead create the modern, secure financial services regulation that we need.

20:45

[Neil Duncan-Jordan (Poole) (Lab)]

I have spoken before about the issue of hidden credit liabilities and the role of the Financial Conduct Authority, and the Bill touches on some of the concerns I have raised.

My constituents James and Becky Glanville built a successful family-run nursing home business, but it was destroyed by undisclosed risks embedded in complex financial products sold by NatWest, part of RBS. They were never told that interest rate swaps carried significant liabilities that would be treated as secured debt, erode their borrowing capacity and trigger covenant breaches as interest rates fell.

Despite clear regulatory requirements for transparency and informed consent, those risks were never disclosed. The regulatory framework then let my constituents down, too. The FSA and FCA’s redress scheme excluded the hidden credit lines from its review, denying fair compensation to victims like the Glanvilles. The regulator effectively colluded with the banks to suppress this fraud and reduce compensation costs, and by 2019 the Glanvilles were owed £6.3 million, but to date they have received absolutely nothing.

The Glanvilles’ case is not isolated. It reflects a wider systemic failure and underscores the urgent need for a full independent investigation and a fair, comprehensive redress scheme. I would be interested to hear the Economic Secretary’s views on the issue and whether the Bill would have protected the Glanvilles had it been in place at the time.

After a decade and a half of austerity, an estimated 4.4 million people have taken out £13 billion-worth of credit to pay for essentials. According to the Centre for Responsible Credit, over a million households have potentially been lent to irresponsibly in the last two and a half years. We know that when the rules are vague, it is borrowers who ultimately pay the price. When the cost of living crisis has already pushed household budgets to breaking point, the Government must not undermine the vital safety net that underpins consumer trust in the entire financial system.

The FOS is a vital safety net for consumers when something goes wrong, but clause 7 introduces a vastly more complex system for how the FOS determines complaints. The shift from a level playing field with an impartial fairness test to one that initially presumes the firm was in the right means that consumers could now face a harder uphill battle to receive redress and could even be denied the redress they would have received under the old test.

The Bill’s stated aim is to introduce deregulation to stimulate growth, but there are serious questions to be asked. Who determines the rights of consumers? Who determines the obligations of firms? Who determines the balance between commercial freedom and public protection, and ultimately, who answers when that balance proves inadequate?

We know that the more authority Parliament delegates to the FCA, the more essential it becomes to preserve democratic accountability. That matters when the rights of ordinary citizens are at stake, and particularly when there is good reason to question the FCA’s judgment and priorities. We cannot simply place all the responsibility on to borrowers. I hope that the Economic Secretary to the Treasury will be able to provide some much-needed reassurance on these genuine concerns.

20:51

[David Burton-Sampson (Southend West and Leigh) (Lab)]

Having worked for more years than I like to remember in financial services, I recognise the importance of regulation, but I also recognise that at times, regulation can be restrictive to economic growth, and given the size and contribution of the financial and insurance services industry, it is rightly an area of focus for reforms. Consumer protection is vital, but I am pleased that the Bill looks to simplify regulation while maintaining high protections and regulatory standards.

I want to focus on two areas of particular interest to me. The first is the abolition of the Payment Systems Regulator and the transfer of responsibilities to the FCA. When I chaired the all-party parliamentary group on open finance and payments—the hon. Member for Carshalton and Wallington (Bobby Dean) has now taken over—this was a matter of regular discussion and interest for many members. Currently, four bodies are responsible for regulating different parts of the payments system: the Bank of England, the Payment Systems Regulator, the FCA and the PRA. Absorbing the PSR’s responsibilities into the FCA is a sensible reform, and it sits alongside the Government’s plans set out in the “National Payments Vision” in 2024.

The payments sector has spent untold resources trying to satisfy two distinct bureaucratic masters on identical operational metrics, submitting duplicate data on financial crime and systemic resilience. By integrating those systems under a single FCA handbook framework, we can strip out this waste and allow our scaling payments and open banking firms to reinvest that capital back into technical development and national and international growth.

The core message from the industry is that the absorption of the Payment Systems Regulator must be strictly managed to protect the open banking and payments sector from transitional friction, accelerate open banking rails and ensure that a single regulatory structure does not slow down the competitive dynamism of the UK’s payments sector. The Payments Association has warned that without precise detail of the merger, it risks being a “reshuffle” rather than a reform, and we must avoid that.

Another area of particular interest to me is the plan to widen access to credit unions through the expansion of their common bond in clause 2. When I was chair of the all-party parliamentary group on fair banking, I was often lobbied by organisations such as Fair4All Finance, which made passionate calls for the expansion of credit unions and CDFIs. In 2025, there were around 1.53 million credit union members in Great Britain, but that is equivalent to only 2% of our population, compared with around 40% in Northern Ireland and 64% in the Republic of Ireland. Credit unions are much closer to their communities and their members, and therefore much better set up to take objective, local lending decisions, made by a human, based on the circumstances laid out in front of them, as opposed to a “computer says no” approach.

[Sarah Smith (Hyndburn) (Lab)]

My hon. Friend is making a really important argument about the financial inclusion reforms. Does he agree that equally important is the Minister’s commitment to finally tackle in this Bill the age-old problem that the parents of disabled children are unable to access their child trust funds by bringing forward reforms that will take away the bureaucratic Court of Protection process?

[David Burton-Sampson]

My hon. Friend must have been reading my speech, because I am about to talk about financial inclusion, and I agree with her. Having worked in banking when child trust funds came out, I know that they were a fantastic initiative by the former Labour Government, but we now need to close the gap to ensure that those adults—they are no longer children—can get access to the funds, whoever they are.

In the drive for greater financial inclusion, the credit union model can be incredibly effective, so increasing the common bond limit from 3 million members to 10 million members is a positive move forward. While that measure is not in the Bill, I am pleased to hear that it will be implemented via secondary legislation. Relaxing common bond rules on who can be a member—for example, to relatives of an existing member, people who live in the same household as a member, retirees from a firm in the local area, and students who study but do not live in the area—is an excellent feature of the Bill. Those moves are all welcomed by the Association of British Credit Unions Ltd, Fair4All Finance and the Building Societies Association.

Credit unions are invaluable assets in ensuring that people are not financially excluded when they need support the most. An unexpected expense does not disappear because someone cannot access mainstream credit. Expanding access to safe and affordable alternatives to high-cost and illegal lending should remain an important part of the Government’s wider financial inclusion agenda. We should also recognise the key role that credit unions play in encouraging members to save on a regular basis.

I want to see more credit unions opening and expanding across the country. For example, in my constituency, we have access to only one credit union, which is in north London. However, if I search by my childhood home in Liverpool, I see that I would have had access to five different credit unions. In fact, Fair4All Finance carried out research involving 1,000 members across those five credit unions and found that they offered increased access to essential affordable credit, supporting people’s financial resilience. Nearly half of the members’ most recent loans were below £1,000—a market that is not typically served by mainstream lenders, but vital for households managing small ups and downs. The credit unions encouraged the development of saving habits, with nine in 10 members reporting that they saved regularly, and half of the members making regular deposits of £20 or more—that is not much, but it is better than nothing—including those on low incomes. Around eight in 10 respondents reported a positive impact on their wellbeing, mental and physical health and family life as a result of their membership.

[Josh Fenton-Glynn (Calder Valley) (Lab)]

My hon. Friend is making a powerful point, and he is right to identify credit unions as a brilliant opportunity. In America, some 145 million people use credit unions, compared with a very small amount of the British population. How can we catch up with our transatlantic cousins?

[David Burton-Sampson]

I agree with my hon. Friend; I was just about to conclude by saying that the continued growth of credit unions and the CDFI market is essential. I encourage the Minister and her team to continue to remain open to further options for expanding reach, including to SMEs, so that we can truly drive forward good growth in every postcode.

20:54

[Phil Brickell (Bolton West) (Lab)]

As a former banking employee, let me be clear that a strong financial regulatory system and strong economic growth are not competing objectives. If Britain is to remain one of the world’s leading financial centres, we must ensure that it is not also one of the world’s preferred destinations for dirty money.

As the chair of the APPG on anti-corruption and responsible tax, I have consistently worked with colleagues, including my hon. Friend the Member for Kensington and Bayswater (Joe Powell), to strengthen the UK’s response to economic crime. After a number of meetings with the Economic Secretary to the Treasury and her predecessors, I am pleased to see that she has taken up the cudgel of anti-money laundering supervisory consolidation—that is a bit of a mouthful. That matters, because those who wish to subvert our financial and professional services sectors, launder their ill-gotten gains and drag down the UK’s reputation as a clean place to do business will always seek to exploit the weakest point in our regulatory and supervisory armour. To that end, I am proud to support the Bill, which will modernise the way in which the legal and accountancy sectors, and trust and company services providers, are supervised for money laundering risk, with those responsibilities consolidated within the Financial Conduct Authority.

Working in the industry, it always baffled me that anti-money laundering oversight is currently divided among 22 professional body supervisors, many of which are also membership organisations. That creates an inherent conflict of interest—it leads to inconsistent supervision, variable enforcement, fragmented intelligence sharing and uneven suspicious activity reporting. The Office for Professional Body Anti-Money Laundering Supervision’s March 2026 progress report perfectly sums up the situation, stating that professional body supervisors

“still report common breaches…and no or inadequate firm-wide risk assessment by their supervised population.”

The FCA itself is not immune to this; it only took seven formal actions in the period 2024-25, down from a pre-pandemic high of 60 in 2018-19. The total number of on-site visits conducted by all 22 professional body supervisors has not yet returned to pre-pandemic levels.

Economic crime is not victimless—it fuels corruption, organised crime, fraud and kleptocracy. It distorts markets, undermines competition and damages Britain’s international reputation. That is why clause 13, which deals with supervisory consolidation, is so important. By ending the fragmented system of 22 separate professional body supervisors and moving towards a single supervisory model for those sectors under the remit of the FCA, this Government are taking a significant step forward. There are three important opportunities to further enhance the Bill that I would be grateful if the Economic Secretary to the Treasury would consider.

First, we need a sustainable solution to the chronic underfunding of economic crime enforcement. The anti-corruption APPG has long called for the creation of an economic crime fighting fund. The principle is straightforward: a proportion of receipts from economic crime enforcement, including confiscated assets, penalties and deferred prosecution agreement receipts, should be reinvested into the very agencies responsible for tackling those crimes. Rather than allowing enforcement proceeds simply to disappear into the consolidated fund, we should create a virtuous circle in which successful enforcement generates additional capability for future enforcement.

The Government’s 2025 anti-corruption strategy promised to explore the funding landscape for strengthening economic crime enforcement, and I think something could be done within the framework of this Bill. The FCA has secured more than £1 billion in regulatory and criminal fines over the past decade, yet enforcement receipts are largely either returned to the industry through rebates or transferred to the Treasury. I understand that the banks are paying their way via the economic crime levy, so I do not begrudge the principle of rebates, but as the Government are now legislating for the FCA to take on growing responsibilities in the face of increasingly sophisticated criminal threats, I encourage the Treasury to consider allowing the FCA to offset the costs of AML enforcement with the fines it imposes for breaches. The Competition and Markets Authority, Ofcom and the Information Commissioner’s Office already possess comparable powers. Giving the FCA similar flexibility would allow it to invest in specialist expertise, advanced technology and enforcement capability, thereby ensuring that it has the cutting-edge capabilities it needs to effectively police the regulated perimeter.

Secondly, the Government must ensure that the current supervisors do not take their eye off the ball during the transition period.

Finally, I urge the Government to ensure that legal sector regulation works effectively under the new regime. At present, there remains a significant problem concerning access to legally privileged material. When the Bill was in the Lords, Ministers confirmed that the FCA will not have powers to compel disclosure of privileged material, yet recent litigation involving the Solicitors Regulation Authority has exposed serious uncertainty regarding regulators’ ability to access such information when investigating misconduct. That litigation should prompt a rethink. If the FCA inherits the same limitations, there is a real risk that serious wrongdoing by solicitors involved in money laundering or abusive litigation practices will remain beyond effective scrutiny. The Bill should therefore clarify that the regulator can access legally privileged material where necessary for the purposes of anti-money laundering supervision, while continuing to protect clients’ rights and confidentiality.

I support the Government, and I trust that my right hon. and learned Friend the Economic Secretary to the Treasury will reflect on my constructive proposals as the Bill progresses through this place.

21:04

[Jim Dickson (Dartford) (Lab)]

I welcome the Bill, and the opportunity to follow so many excellent contributions this evening, particularly those of the Chair of the Treasury Committee, my hon. Friend the Member for Hackney South and Shoreditch (Dame Meg Hillier), and other colleagues from the Treasury Committee.

One of the key items on our agenda in the Treasury Committee over the past year or so has been the Government’s financial inclusion strategy. We made an important recommendation for Ministers to consider whether the Bill should include further targeted powers to intervene if voluntary action fails to secure reasonable access to essential financial services. I am glad that the Government is doing that; the measures in the Bill will give them more powers to protect access to banking services. So many Members have said this tonight, but I suspect we all have constituents who have seen their access to banking services dramatically reduce in recent years. It is right that the Government are giving themselves powers to address that.

We want our financial services industry to contribute as much as it can to economic growth, and I endorse the changes to the operation of the Financial Conduct Authority and the Prudential Regulation Authority, both of which are regular attenders at our Select Committee and play important roles in our economy. It seems eminently sensible that both should produce long-term strategies that balance their responsibilities as regulators with the Government’s growth objectives, and I know that many across the sector will welcome efforts to streamline their reporting requirements.

My children were of the generation who received child trust fund contributions under the last Labour Government. We promised to create that programme in our 2001 manifesto, and we set it up in 2002. It has assisted many young people with getting started in life. Many invested in ISAs to build up a fund to bring home ownership closer, or funded driving lessons or a first vehicle. It was a tremendous shame that the Government post 2010 scrapped that programme. Inclusion regarding how those child trust funds are managed is critical, and the Bill takes steps to facilitate access to those funds for parents and carers who manage them in situations where the young people concerned are unable to do so themselves. That is long overdue and I, like many others present, have received correspondence from constituents about the issue. I welcome the change.

[Sarah Smith]

It will come as no surprise that I also welcome what my hon. Friend is talking about. Does he share my relief that hundreds of his constituents will finally get access to their £2,600—as will mine in Hyndburn—just the same as those young adults who do not have that problem of lacking capacity?

[Jim Dickson]

My hon. Friend is absolutely right. The funds should be accessible to those young people, and hitherto they have not been. When the money is available, it can help that young person with a start in life and give them the financial means to better themselves at a crucial time. That is a critical measure in the Bill.

Credit unions are also critical to inclusion and to this Bill. The legislation contains some important reforms to help us modernise the sector. I was pleased to visit Wave Community Bank over the summer. Along with Greenwich and Bexley Credit Union, it plays a vital role in supporting residents in Dartford to access affordable credit in times of acute financial stress. Awareness of credit unions remains far too low, and these changes are welcome to ensure that more Dartford residents can join them. We know that 37,000 people across my constituency—almost half the adult population—are in financially vulnerable circumstances. Many people have limited savings and a life event, such as a job loss or a break-up, will leave them in a particularly dire situation. That is where credit unions, as we know, can play a vital role.

Earlier this year, the Government published the outcome of their call for evidence on reform of the common bond, which included proposals welcomed by the Association of British Credit Unions and Fair4All Finance to widen access to membership. Some of the measures announced in the Bill, including steps to allow students studying locally to join or those retired to maintain their access, are incredibly welcome. I understand that the measures to increase the potential membership cap of the common bond will come a bit later through secondary legislation, but I welcome indications from the Government that the cap is likely to be raised to cover a population of as much as 10 million, from the current 3 million. Taken alongside the very welcome credit union transformation fund, which is there to build operational resilience in the sector, I hope the measures will see a long-term, sizeable increase in membership of credit unions across the country and particularly in my constituency, and see the Government deliver an important part of their financial inclusion strategy.

Finally, I join others in expressing concern that the changes to the operation of the Financial Ombudsman Service in clause 6—and in particular the need to refer significant volumes of cases to the FCA—will “gum up the system”, in the words of senior figures in that organisation. This means that consumers may wait longer for less favourable outcomes, which is surely something that Members should not welcome. I am also concerned, alongside others, about the changes to, or indeed the weakening of, the fair and reasonable test in clause 7, as applied to future complaints. Again, this may well reduce the rights of consumers through the process. I hope that when the Minister responds, she will deal with the points made by myself and others about concerns that are clearly important to us all in an otherwise hugely welcome Bill.

21:11

[John McDonnell (Hayes and Harlington) (Lab)]

I declare an interest as the chair of the all-party parliamentary group on investment fraud and fairer financial services. It was admirably chaired by the hon. Member for Harrow East (Bob Blackman) for a number of years, and I took over 18 months ago. The all-party group grew organically: a number of Members were coming to Parliament with concerns about individual instances of fraud, and as a result, people came together and set up the all-party group. We work on the principle that we all support the idea that we need an effective and vibrant finance sector, but that the foundation of that sector is trust. “My word is my bond”—that is exactly what the whole element of trust is about.

There is a real concern at the moment that there is a lack of trust. If we look at the FCA’s polling, 36% of people said they did not feel that they had been treated fairly or honestly by a financial firm, and I can understand why. Let me run through just a few examples from my experience here: payment protection insurance; endowment mortgages; pension transfer mis-selling; London Capital, which I believe my hon. Friend the Member for Bishop Auckland (Dr Rushworth) mentioned; Connaught; Woodford; and hidden credit lines. I warn the House that the issue of micro-bonds is coming down the track as well, and that will be enormous.

We can see why people have lost confidence to a certain extent and why, as the hon. Member for Carshalton and Wallington (Bobby Dean) mentioned, we should listen to the 16 organisations that represent consumers, which have come to explain to us their concerns about the Bill. Concerns have also been set out by my hon. Friend the Member for Dartford (Jim Dickson). On clause 7, the concern is the interference with the fair and reasonable test. Way back in the year 2000, when that Financial Services and Markets Bill was going through the House, there was a long discussion that came to a fair proposal to establish the fair and reasonable test in the legislation. If I remember rightly, it was agreed on a cross-party basis. To now introduce conditionality, in terms of compliance with FCA rules, does not necessarily result in a fair outcome; certainly, in many instances, we have found that compliance with FCA rules is just not good enough to secure justice for people.

To reassure us, the Chancellor of the Exchequer said, “Don’t worry—the consumer duty will still apply.” It is not in the Bill, as far as I can see. I think that is a real issue. If we are to reassure people out there, we need to ensure that elements of that reassurance are in the legislation. As my hon. Friend the Member for Dartford also said, on clause 6, the issue of having to refer ambiguities from the FOS to the FCA draws the FCA into an adjudication role. I have to say that a number of the cases that we have dealt with have concerned omissions and failures on the part of the FCA. Again, there is an element of conflict of interests there. I know that an element of discretion can be involved, but it is a question of the elements of discretion to which the FCA is subject. The Bill states that the ombudsman must take into account

significant implications in relation to the functioning of relevant markets”.

I think that the FCA will be under pressure to ignore some of those elements if they fly in the face of issues relating to market success.

Clauses 42 and 43 undermine the ringfence between investment and retail banking. I was here in 2008. Others claim it, but it was I who first raised the subject of Northern Rock in this Chamber. We are seeing the same cycle: there is a financial crisis, regulation is introduced, memories fade, there is pressure to reduce that regulation, and we go into another crisis. That is what was happening from the 1980s onwards. Curiously, there were two books that people reached for when the crisis happened in 2008. One was J. K. Galbraith’s analysis of the 1929 crash. The other, funnily enough, was Marx’s “Capital”, but that is another discussion. J. K. Galbraith said that the best protection against another crash was memory. What is happening now is exactly what Andrew Bailey, the Governor of the Bank of England, has described: memories are beginning to fade, which is why people become so susceptible to the pressure for deregulation.

I want to make a couple of points before I quieten down. A number of issues have not been addressed in the Bill, and I should like them to be addressed. The first is the FCA’s treatment of whistleblowers. One of our advisers, Simon Andriesz, recently committed suicide. He was a whistleblower, and it was, I believe, as a result of the lack of support from the FCA that he took his own life. We have referred it to the FCA, and what has it done? It has launched an investigation, but it is not an independent investigation; it is an investigation by an incoming member of the FCA’s own board. That is unacceptable. We need to ensure that we protect whistleblowers.

The other issue is the Hillsborough legislation that we are introducing. I would like to see that legislation applied to the FCA, because I think that a duty of candour for the FCA would give reassurance to consumers outside.

Finally, this is not a choice between regulation and growth; both are essential for a successful finance sector.

21:17

[Dr Sam Rushworth (Bishop Auckland) (Lab)]

The Bill contains many good things that other Members have spoken to. The Chancellor pitched it as a Bill that will unlock investment for growth. If we want people to invest, we need them to have confidence. My right hon. Friend the Member for Hayes and Harlington (John McDonnell) and I did not collaborate on our speeches, but, as he pointed out, 36% of people surveyed by the FCA believe that financial firms are not honest. When the Bank of England asked people to sum up the finance industry in a word, the word that the British people picked was “corrupt”. The Financial Services Ombudsman is receiving 216,000 complaints a year, and it is easy to see why: £1 billion is now being lost every year in investment scams. The most notable example is London Capital & Finance, but there are others, including Blackmore Bond, Basset & Gold, Astute Capital and Godwin Capital.

The Bill addresses complex issues in which I claim no expertise, but I take a strong interest in them because they are of interest to the people I represent. I want to share the experience of ordinary people who have lost their savings to unregulated investment products. I myself lost a few thousand pounds to a scam. I set up a Facebook group years ago, and the first person who contacted me was a man from Manchester. He had worked as a binman throughout his career, getting up early in the morning, working in all weathers and saving for his pension. He took the lump sum of his pension and invested it in Astute Capital. He lost all of it.

I want to talk about what that looks like as a process. It begins with an ordinary person searching to compare high-interest savings accounts with banks. They put their contact details on the internet, and then they get unsolicited calls from people with posh accents offering them investment advice and suggesting that they put their money in an ISA. They have probably heard of ISAs, and they know it is a Government-approved and tax-incentivised way to save. The person will admit to them that they are not FCA-regulated, but they probably have not heard of the FCA and may not know what that means. They may also be told that their capital is at risk, but then that nice person with a posh voice explains to them, “I have to tell you that—it’s the legal bit—but let me explain to you why you’re actually okay. Everything you’re investing is fully asset-backed up to several times its value, and we spread the risk across multiple portfolios.”

The individual trusts, they invest and they wait three years. They look forward to getting their money back with the interest they were promised, but when that time comes—this happened to customers of Astute Capital—they get told, “We’re sorry; we can’t pay you. But if you just stick with us for another six months, it’s better than causing someone to whom we’ve lent your money to default.” So they wait another six months. Six months later, their bonds are forcibly converted into shares and they are told, “Don’t worry; soon enough you’ll be able to sell those shares, and your shares are worth more than what you invested”—except they are not, and eventually the company goes into administration.

And then what happens? The person loses everything. When they investigate it, they find that a director of Astute Capital was simultaneously a director of the firm to which their money was lent. As a director of both firms, he took away the security on the debt. An ordinary person would expect that, in such a situation, there is some sort of recompense. They would think it is illegal, but it is not. People are told that they are at fault because they should have known that they were investing in an unregulated company. I had a man say to me on the phone, “I can’t look my wife in the eye. I’ve lost everything that we’ve saved over all these years.”

What happens to the directors? What happened to Timothy John Smith, who was the director of two companies? According to Companies House, he is now at Axecap Ltd, another unregulated offshore broker with many warnings against its name not to invest. For me, the most troubling part of this is that these unregulated investment schemes are entirely legal or, if there has been illegal activity, there has been no investigation and nobody has ever been held accountable. That is why the public are in disbelief, because they expect the Government and laws to protect them. They do not think this unregulated space should be allowed.

When I was elected, I raised this issue with the Financial Conduct Authority. It told me that it needs a bigger mandate to regulate this space, which it has not been given. In my last 30 seconds, I ask that the Bill be amended to give a mandate to the FCA to have oversight of unregulated activity, to make directors personally liable, to require directors of unregulated investment companies to demonstrate that they have acted responsibly, to automatically bring unregulated mini-bonds within FCA supervision, and to create a general compensation scheme for the victims of unregulated investments.

[Madam Deputy Speaker (Ms Nusrat Ghani)]

I call Noah Law to make the final Back-Bench contribution. Those who contributed earlier should make their way back to the Chamber.

21:23

[Noah Law (St Austell and Newquay) (Lab)]

I warmly welcome the Bill and its goal of creating a more transparent financial services sector that can continue to play a key role in creating growth and prosperity for the whole of the UK. I refer the House to my entry in the Register of Members’ Financial Interests.

Having spent a decade in investment banking and financial advisory work, I have some understanding of both the potential of our financial services and the reforms that they need. The proposed reforms to credit unions are extremely positive. By virtue of being owned by their members, credit unions are uniquely incentivised to put surplus profits into providing better services, rates and returns for their members—something that, as a Co-operative Member, I am delighted to support. I am delighted to support the efforts of my hon. Friend the Member for Peterborough (Andrew Pakes) in this space too.

The Bill will make it easier for credit unions to accept new members. It removes unnecessary administrative blocks and provides greater support, allowing more people to join credit unions, which are rooted in their communities and committed to delivering for them. Expanding access to credit unions also means access to more affordable lending, which gives those in the most dire financial circumstances access to credit at reasonable rates, instead of leaving them at the mercy of predatory lenders. Credit unions encourage saving, responsible borrowing, and investment in our communities and local economies. The reforms in this Bill will make accessing them easier than ever. As my hon. Friend the Member for Harrow West (Gareth Thomas) pointed out, we eagerly await the response to the review of fair access to banking and capital markets.

More widely, I am glad to see the industry support the aims of this Bill and the support for the better regulatory strategy, accountability, deadlines and the proposed improvements to the senior managers and certification regime. By requiring the FCA and the PRA to report annually on their efforts towards competitiveness and growth, we ensure that the Government, regulators and the industry pull together in one direction for the financial sustainability of our country.

Additionally, by improving the way in which regulators make decisions, we can improve the confidence of investors in our financial services. The reduction in the statutory period of authorisations and variations of permission from six to four months, and the period for incomplete applications being reduced from 12 to 10 months, ensures a smoother system for firms and leaves a lot less up in the air. Delays in regulatory decisions can be hugely costly for firms, and can even mean postponing fund launches and major investment decisions, and affect firms’ ability to grow, innovate and compete internationally. A simple regulatory system provides greater clarity for firms, better transparency for the public and the Treasury, and benefits us all. I welcome the Bill’s allowing the Treasury to introduce secondary legislation to amend specified determination periods, once again demonstrating the Government’s willingness to work closely with Britain’s most valuable and prosperous of industries.

I am very grateful to the Chancellor for his acknowledgment that we have asked the sector to do its bit to contribute to sound and prudent public finances— I would argue that that prudence, to quote the right hon. Member for Beverley and Holderness (Graham Stuart), who is no longer in this place, “dwarfs” short-term fiscal interventions—and it directly contributes to sound and prudent finances in an otherwise globally turbulent macroeconomic environment, after the public did their bit to safeguard the sector through its most challenging of times. Consequently, we in this House must also give due care and attention to this incredibly valuable sector. I do believe that the Chancellor has shown that, even when those difficult decisions have to be made, this need not be a zero-sum game.

I would like to think this Bill can be just one of many stepping stones as part of an ongoing effort throughout this Parliament to ensure a healthy level of risk taking in this most expert of financial markets that we have in the UK. In that regard, I welcome the targeted reviews of ringfencing requirements alongside the Bank of England’s own review of capital requirements to promote thriving banking and capital markets—public, private and, of course, mutual.

[Madam Deputy Speaker (Ms Nusrat Ghani)]

I call the shadow Minister.

21:28

[Gareth Davies (Grantham and Bourne) (Con)]

It is a great pleasure to close this debate on behalf of the official Opposition, and to follow on from my very good friend, the shadow Economic Secretary—my hon. Friend the Member for Wyre Forest (Mark Garnier)—who has done excellent work both in this Chamber and behind the scenes to engage extensively with the industry. Indeed, I am sure there is not a lunch table in the City of London that has not been graced by my hon. Friend—all, of course, in the service of his great country.

I draw the House’s attention to my entry in the Register of Members’ Financial Interests, particularly my long career in asset management, my active involvement in the industry going back many years, and my current chairmanship of the APPG for blockchain, which is relevant to this Bill.

It has been a privilege to be joined by many Members from across the House who clearly have extensive industry experience. I firmly believe, as I have for a long time, that we need more people in Parliament who have worked specifically in this sector, and who understand its importance and its power to help and influence our economy and our communities.

I thank all Members from across the House for their contributions to the debate, but I will name a few in particular. The Chairman of the Treasury Committee, the hon. Member for Hackney South and Shoreditch (Dame Meg Hillier) who is not currently in her place, provided a typically detailed and very thoughtful contribution. She expressed concerns about whether the pendulum is swinging away from consumer protection, as well as outlining her concerns about the reforms to the FOS. I do not agree necessarily with everything she said, but the House is better for the scrutiny that she and her Committee provide.

Let me pay tribute to our country’s longest-serving Economic Secretary, my right hon. Friend the Member for Salisbury (John Glen), who moved with grace from museums to MiFID back in the day. He spoke about his mixed views of the FOS. He acknowledged that it is—in his words—an unreliable path to resolution, and helpfully warned us that we need to consider the challenges posed by AI to the financial services sector.

I congratulate the hon. Member for Peterborough (Andrew Pakes) on his appointment as the Government’s co-operatives and mutuals champion. I have to say it is an appointment that passed me by, but I very much welcome it. One person who has always been a champion of co-operatives and mutuals is, of course, the hon. Member for Harrow West (Gareth Thomas), who spoke of the high cost and burden of credit, especially for those in poverty.

We on the Conservative side of the House want sensible deregulation. We want less bureaucracy in our system. We want lower burdens and more growth. Where the Bill does that, we will welcome it and we will help make it happen. The Chancellor was right in his opening remarks when he said that it is important to recognise the cross-party work that has gone on already with the Bill. He rightly echoed the views of those us on the Conservative Benches when it was said in the other place that the Bill moves us all in the right direction. Having said that—I am loath to depart from the happy and collegiate atmosphere of the debate so far—I am reminded of what Disraeli once said:

“No Government can be long secure without a formidable Opposition.”

So, if Members will forgive me, I have a job to do tonight. In certain areas, as my hon. Friend the Member for Wyre Forest set out, we believe the Bill does not go far enough. I would like to highlight two areas in particular.

First, on digital assets, the United States has legislated for stablecoin. South Korea and even the European Union have their own regimes. Our competitors globally are moving ahead. That matters because stablecoins could revolutionise the way we pay for goods and services. Blockchain technologies could transform the way we interact with companies and the state. The Bill was our chance to set out a more advanced vision and policy agenda in those areas, but the Government chose not to.

Secondly, ringfencing forces our largest banks to separate retail banking from the rest of their business. That was right after the financial crisis, but the world has now moved on and our resolution regime has moved on with it, as my right hon. Friend the Member for Salisbury pointed out. If we look at our competitors from New York, Amsterdam, Frankfurt and Paris, not one imposes ringfencing like ours—not one. We believe that we should not either. The Bill gives a little and takes a little, but there is a simpler option. If true deregulation is the aim, we believe the Government should adopt the Conservatives’ plan to scrap ringfencing altogether.

No matter how well intentioned the measures in the Bill are—and I believe they are very well intended— I am afraid that I must point out that they are being brought in alongside a barrage of anti-growth taxation and regulatory burdens imposed on our financial services sector and British business more widely. This afternoon, the Chancellor praised Britain’s financial services sector, and I welcome his words; 13 days ago, he spoke similar words but then doubled the bank surcharge—a £1.5 billion hit to the very companies and people he says he supports.

It is all about choice. The Chancellor could have chosen to cut welfare, which is spiralling above £400 billion, but he chose the easier route for a Labour Chancellor, as my right hon. Friend the Member for Beverley and Holderness (Graham Stuart) said, and decided to tax one of our country’s most-important sectors. Be in no doubt that this will have an impact, and specifically, I fear it will lead to more bank branch closures on our high streets, which none of us in this House wants.

I have no doubt that the Economic Secretary will shortly reference banking hubs in her wind-up, speaking with pride about how the Government are rolling out more. She is right to welcome them—I welcome them too—but she should also be clear about who pays for them. Banking hubs are funded by the banks—every one of them. Cash Access UK is funded by the banks. The mobile libraries and the pop-ups in our communities are funded by the banks. We cannot celebrate banking hubs on a Tuesday and then the next day tax the companies that pay for them. I am in favour of banking hubs, but I would much rather the branches not be closed in the first place.

To her credit, the Economic Secretary understands the sector. She is respected in the City and she understands the importance of banks to our high streets, which makes it all the more disappointing for the sector that she did not act to prevent the latest tax raid. The high street bank tax is just one example, but we also have the hike to national insurance and higher taxes on carried interest. That all results in more jobs put at risk, more high street banks closing and investment and innovation heading elsewhere rather than contributing to growth here in Britain.

For the most part, the Conservatives of course welcome the Bill, and we have been clear about that. Sadly, however, it will do little to overcome the barriers and burdens that this Government have inflicted on the financial services sector over the past two years. Warm words cannot undo cold taxes. The world’s capital has a choice about where it goes, and the Government have not acted in our favour. The Chancellor has a choice: he can back the sector or tax it until it becomes uncompetitive, but he simply cannot do both.

21:38

[The Economic Secretary to the Treasury (Lucy Rigby)]

It is a pleasure to close this debate on the Financial Services and Markets Bill. I am grateful to hon. Members from across the House for their contributions, including those on the Conservative Benches who have joined us on a one-line Whip. I am grateful, as has been highlighted, for the spirit of collaboration in the other place, and for the constructive criticism—I think—that has been offered here. I know that Madam Deputy Speaker is being strict in the time limits applied to the wind-ups, so I will do my level best to cover as much as I can and spend most of my time addressing the reform of the regulatory landscape, which is where hon. Members have put most focus. To the extent that I cannot cover things, I will follow up in writing. As was pointed out by the hon. Member for Aberdeen North (Kirsty Blackman), I think the breadth of today’s debate reflects the importance of these reforms and, indeed, the importance of financial services to this country.

I will start by going back a step, if I might, because this party came into office with a really clear purpose: to bring stability back to the British economy, give working people greater security and get Britain back on the path to prosperity. At Budget, the Chancellor took the responsible decisions needed to protect the public finances and provide breathing space for firms and families across the country. However, stability and fiscal responsibility are the foundations, not the destination. If we want to see more good jobs, opportunities for our young people and people feeling more secure in their finances, we know that we need a thriving, dynamic economy that delivers for the British people.

Few sectors are more important to that task than financial services. From providing SMEs with finance to expand, innovate and hire to helping a family to buy their first home, getting capital to some of our most exciting start-ups and supporting people saving for retirement, financial services provide the ecosystem that underpins our economy and each of our daily lives. In Leeds, Bristol, Bournemouth, Manchester, London, Edinburgh, Belfast and Cardiff, financial services right across the United Kingdom provide the services we rely on every day, supporting more than a million good, highly skilled jobs and the ambitions and the aspirations of the country.

As hon. Members have pointed out, we are recognised as a world leader in financial services—something that all of us in this place should be very, very proud of, and something we must protect as a critical strategic asset. Members have also pointed out that global competition for capital is intensifying, and it is therefore vital that we strengthen the sector’s ability to deliver for the country, which is exactly what this Bill does.

Members have spoken to the key reforms in this Bill. Let me start with child trust funds, an issue raised by my hon. Friends the Members for Hyndburn (Sarah Smith), for Southend West and Leigh (David Burton-Sampson) and for Dartford (Jim Dickson), where we are righting injustice that has existed for far too long. Child trust funds were a product of the previous Labour Government, and they were based on a simple promise: every single child in this country, no matter their background, would start adult life with a financial asset of their own.

However, for far too many families of children with disabilities, that reality has been very different. Parents have been forced to go to court in a lengthy and complex process to access their children’s funds on their behalf. That is why we announced last week that we will use this Bill to make it simpler, easier and fairer for parents and carers to access child trust funds on behalf of young people who lack mental capacity. That means that up to 126,000 young people will be able to more easily access funds currently worth an average of £2,600. This money was always theirs, and with this Bill, it will reach them.

Many hon. Members—far too many to mention—have rightly highlighted the vital role that mutuals, co-ops and credit unions play in our financial services ecosystem. Member-led and rooted in their communities, mutuals and co-ops are central to this Government’s commitment to seeing good growth in every corner of the country, which is why we are committed to ensuring that the mutuals economy can flourish.

My hon. Friend the Member for Harrow West (Gareth Thomas) highlighted the importance of CDFIs, which, as he knows, we have backed in the Budget. I know that he wants us to go further, and I am more than happy to meet him to talk about exactly how we can do that. I can confirm that we intend to further extend the reforms to the common bond in Committee, bringing forward an amendment to enable credit union members who do not themselves directly meet the common bond to introduce family or household members on the same basis as other members. We have a lot more to do when it comes to the scale of our ambition on mutuals and co-ops, and I look forward to working with hon. Members across the House, and especially my hon. Friend the Member for Peterborough (Andrew Pakes) as the first ever co-operatives and mutuals champion in Government.

In addition to allowing our mutual and co-op sector to expand and best support growth, the Bill backs greater investment across our economy as a whole. It will give banks greater flexibility within the ringfencing regime to provide more capital to businesses, encouraging and supporting growth. The right hon. Member for Salisbury (John Glen) has urged us to be thoughtful when considering these reforms, and I can reassure him that we will be.

The shadow Economic Secretary, the hon. Member for Wyre Forest (Mark Garnier), spoke about capital requirements, as did the right hon. Member for Salisbury. The Chancellor and I acknowledge the importance of the Bank’s review of capital requirements. As the Chancellor said, that is made clear in his remit letter. I acknowledge the shadow Economic Secretary’s intention to table amendments in this regard, and I look forward to discussing those with him.

At the heart of the Bill is the protection of our global reputation for financial regulation. As has been said today, we have a reputation for sophisticated regulators, high standards and regulatory stability. We are very clear that we will protect each of those things. We are equally clear that where regulation can be made better, more up to date with the modern world, more effective in achieving its aims and more proportionate, we will do that.

The hon. Member for Tunbridge Wells (Mike Martin) raised an important point about how regulation affects defence SMEs. We are very clear that no legitimate company should be denied access to financial services solely because they are involved in the defence sector. The forthcoming defence finance and investment strategy will review how we can ensure that barriers to investment of the kind that he described are removed.

I thank my hon. Friend the Member for Buckingham and Bletchley (Callum Anderson) for his supportive comments on the regulatory aspects of the Bill. I know that he has tremendous experience in this area.

As I expected, plenty of hon. Members raised access to banking, including my hon. Friend the Member for Hackney South and Shoreditch (Dame Meg Hillier). I am happy to confirm, as did the Chancellor, that we are going to insert back into the Bill our ability to act on the conclusion of Richard Lloyd’s access to banking review. We will publish the review and our response very soon.

The Chancellor noted earlier that the Consumer Credit Act was enacted more than 50 years ago. That was before the iPhone and the laptop, and probably before the shadow Economic Secretary was even born—[Interruption.] I know that it was. It was the same year that this nation was introduced both to Ceefax and, I found out, to Bagpuss. The Act needs to be updated to ensure that the regulator can develop new rules around the information that consumers will receive, including via digital means, based on rigorous consumer testing.

Let me come to the FOS. It is clearly critical that when things go wrong, redress is accessible, consistent and predictable. Some hon. Members have questioned the respective roles of the FCA and the FOS. Under the proposed reforms, it will be the FCA as the independent regulator that sets the standards that firms must meet, including in relation to the consumer duty, and it will be the financial ombudsman that applies them.

I thank my hon. Friend the Member for Hackney South and Shoreditch for her input on this matter, including in today’s debate. She raises really important considerations about protections. Even if I cannot fully endorse her likening of risk warnings on retail investment to those on smoking, I can say that we will consider her input further in Committee. She raised concerns about the referral mechanism, as did other hon. Members. We have had constructive engagement with the FCA and interested groups on the referral mechanism and intend to bring forward a number of amendments at Committee stage to ensure that the mechanism functions well.

Madam Deputy Speaker, I fear that you are running out of patience with me, so I will do my best to conclude. I want to acknowledge the 10-year rule, as that was raised by hon. Members including my hon. Friend the Member for Feltham and Heston (Seema Malhotra). It is entirely right that some products will not be suitable for the operation of the 10-year rule, and the FCA will set out exactly which products those are.

I will skip over my comments on anti-money laundering and fraud, although that is an important part of the Bill. I will skip over my comments on digital assets, save to say please do not doubt the ambition of the Government. We will carefully consider the Lords reforms in that regard.

Financial services, as hon. Members across the Chamber have said, touch every part of our lives, from the mortgage that turns a family into homeowners to the small loan that turns a good idea into a growing business, and indeed the savings that turn a lifetime of hard work into security. The Bill backs the sector and it backs our economy to succeed.

[John McDonnell]

May I put on record again my concern that, as we may be facing a significant global crisis as a result of AI debt problems, now is not the time to undermine the protections we brought forward after 2008 and, in particular, the separation between retail and investment banking?

[Lucy Rigby]

I am grateful to my right hon. Friend for his comments. We are approaching our reforms of the ringfence very carefully. A detailed review has been conducted. We have to ensure that where regulation exists, it is fit for purpose and fit for the circumstances of the modern age. I am more than happy to meet him and talk about the new growth allowance, for example, which will ensure that we can get more capital into the real economy, more homeowners on the ladder and more investment to businesses.

The Bill will deliver a stronger economy to deliver opportunity, hope and prosperity in every corner of the country. I commend the Bill to the House.

Question put and agreed to.

Bill accordingly read a Second time.

Financial Services and Markets Bill [Lords] (Programme)

Motion made, and Question put forthwith (Standing Order No. 83A(7)),

That the following provisions shall apply to the Financial Services and Markets Bill [Lords]:

Committal

(1) The Bill shall be committed to a Public Bill Committee.

Proceedings in Public Bill Committee

(2) Proceedings in the Public Bill Committee shall (so far as not previously concluded) be brought to a conclusion on Tuesday 15 December 2026.

(3) The Public Bill Committee shall have leave to sit twice on the first day on which it meets.

Consideration and Third Reading

(4) Proceedings on Consideration shall (so far as not previously concluded) be brought to a conclusion one hour before the moment of interruption on the day on which those proceedings are commenced.

(5) Proceedings on Third Reading shall (so far as not previously concluded) be brought to a conclusion at the moment of interruption on that day.

(6) Standing Order No. 83B (Programming committees) shall not apply to proceedings on Consideration and Third Reading.

Other proceedings

(7) Any other proceedings on the Bill may be programmed.—(Gregor Poynton.)

Question agreed to.

Financial Services and Markets Bill [Lords] (Money)

King’s recommendation signified.

Motion made, and Question put forthwith (Standing Order No. 52(1)(a)),

That, for the purposes of any Act resulting from the Financial Services and Markets Bill [Lords], it is expedient to authorise the payment out of money provided by Parliament of:

(a) any expenditure incurred under or by virtue of the Act by the Treasury, and

(b) any increase attributable to the Act in the sums payable under any other Act out of money so provided.—(Gregor Poynton.)

Question agreed to.

Financial Services and Markets Bill [Lords] (Ways and Means)

Motion made, and Question put forthwith (Standing Order No. 52(1)(a)),

That, for the purposes of any Act resulting from the Financial Services and Markets Bill [Lords], it is expedient to authorise the charging of fees and charges under or by virtue of the Act.—(Gregor Poynton.)

Question agreed to.