Lords Chamber

Monday 7th September 2026

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14:39
None Portrait Introduction(s): Baroness McAnea and Lord Smith of Ranmoor
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Charles Charles III. Charles III. By Charles III. By the Charles III. By the grace Charles III. By the grace of Charles III. By the grace of God Charles III. By the grace of God of the United Kingdom of Great Britain, Northern Ireland, and of our other realms and territories. King, head of the Commonwealth. Defender of the faith to all, Lord, spiritual and temporal, and all other. Our subjects, whatsoever to whom these presents shall come. Greeting. Know ye that we. Of our especial grace, certain knowledge and mere motion, in pursuance of the Life Peerages Act, 1958, and of all other powers in that behalf us enabling do by these presents advance, create, and prefer our trusty and well-beloved Christina Campbell McKinney, to the state degree, style, dignity, title and honour of Baroness McAnea of Kelvingrove in our city of Glasgow, and for us our heirs and successors do appoint, give and grant unto her the said name, state, degree, style, dignity, title and honour of Baroness McAnea to have and to hold unto her for her life willing, and by these presents granting for us our heirs and successors, that she may have hold and possess a seat, place and voice in the Parliaments and public Assemblies and councils of us, our heirs and successors within our United Kingdom, amongst the Barons, and also that she may enjoy and use all the rights, privileges, Preeminences, immunities, and advantages to the degree of a Baron duly and of right belonging, which Barons of our United Kingdom have heretofore used and enjoyed, or as they do at present, use and enjoy in witness whereof we have caused these our letters to be made patent.

Witness ourself at Westminster in the forenoon of the 17th day of August, in the fourth year of our reign, by sign-manual.

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I. Christina Baroness McAnea, do swear by Almighty God that I will be faithful and bear true be faithful and bear true allegiance to his Majesty. King Charles, his heirs and successors Charles, his heirs and successors Charles Charles III. Charles III. By Charles III. By the Charles III. By the grace Charles III. By the grace of Charles III. By the grace of God Charles III. By the grace of God of the United Kingdom, of Great Britain and Northern Ireland, and of our other realms and territories.

King, head of the Commonwealth. Defender of the faith to all Lords, spiritual and temporal, and all other. Our subjects, whatsoever to whom these presents shall come. Greeting. Know ye that we. Of our especial grace, certain knowledge and mere motion, in pursuance of the Life Peerages Act, 1958, and of all other powers in that behalf us enabling do by these presents advance, create, and prefer our trusty and well beloved Timothy John Smith, commander of our most excellent order of the British Empire, to the state degree, style, dignity, title and honour of Baron Smith, of Ranmoor of Ranmoor in our city of Sheffield, and for us our heirs and successors do appoint, give, and grant unto him the said name, state, degree, style, dignity, title and honour of Baron Smith, of Ranmoor, to have and to hold unto him for his life willing.

And by these presents granting for us our heirs and successors, that he may have hold and possess a seat, place, and voice in the Parliaments and public Assemblies and councils of us, our heirs and successors within our United Kingdom, amongst the Barons, and also that he may enjoy and use all the rights, privileges, Preeminences, immunities, and advantages to the degree of a Baron duly and of right belonging, which Barons of our United Kingdom have heretofore used and enjoyed, or as they do at present, use and enjoy in witness whereof we have caused these our letters to be made patent.

Witness ourself at Westminster in the afternoon of the 17th day of August, in the fourth year of our sign-manual.

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I, Timothy Lord Smith of Ranmoor, do solemnly, sincerely, and truly declare and affirm that I will be declare and affirm that I will be faithful and bear true allegiance to his Majesty. King Charles, his to his Majesty. King Charles, his heirs and successors according to

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My My Lords, My Lords, I My Lords, I should

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My Lords, I should like My Lords, I should like to notify the House of the retirement with effect from yesterday of the
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None Portrait Oral questions: Review and update of the public/private partnerships machinery
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Second, Oral Question Lord Brooke of Alverthorpe leave to ask.
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None Portrait Business of the House
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My Lords. >> Motion standing. >> In my name on the Order Paper. >> En bloc question is that the eight motions in the name of the Senior Deputy Speaker be agreed to? En bloc as many to that opinion will say. Content Of the contrary, not content. the contents have it, my Lords, we now come some instruments previously debated in Grand Committee Building Safety

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Levy Amendment England Regulations 2026. Baroness Blake of Leeds. The motion.

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The motion. Standing in my name on the Order Paper. Question is that this motion be agreed to. As many as are of that opinion will say content contrary, not content. The contents have it. Digital Government Disclosure of Information Regulations 2026. Baroness Lloyd of Effra.

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Baroness Lloyd of Effra. My Lords, I beg to move the motion on the Order Paper in the name of my noble friend Baroness

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Lloyd of Effra. The question is that the motion in the name of Baroness Lloyd EFRA in the name of Baroness Lloyd EFRA be agreed to. As many as are of that opinion will say, content to that opinion will say, content to the contrary, not not content. The contents have it. Oh Building contents have it. Oh Building Societies Act 1986. Assimilation to company law and Changes to Funding

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Limit Order 2026 and two other motions. Lord Pitt-Watson. My Lord Beith Leader of the House.

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I beg to move the motion standing in my name on the Order

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Paper. En bloc. I beg to move. Question is the three motions in the name of Lord Pitt-Watson be the name of Lord Pitt-Watson be agreed to? En bloc as many as you say. Content Of the contrary, not content. the contents have. It has to be in committee on the local

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to be in committee on the local plans. Burial space bill Lord Mohammed of Tinsley. My Lords. I understand.

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That no amendments. Have been set down to this Bill, and that no noble Lord. Has indicated.

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Has indicated. A wish to move a manuscript amendment or to speak in Committee, amendment or to speak in Committee, unless, therefore, any noble Lord objects, I beg to move that the order of commitment is discharged.

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order of commitment is discharged. Is that the order of commitment be discharged? As many as are of that opinion will say content, not content. The contents have it. Questions on an answer to an urgent question asked in the House of Commons on Thursday, the 3rd of September, on the future of Jackdaw and Rosebank oil and gas fields.
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Baroness Neville-Rolfe Portrait Baroness Neville-Rolfe (Conservative)
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Report stage on the Financial Services and Markets Bill, a bill Services and Markets Bill, a bill which we support in general but are seeking to improve. I again congratulate the noble Lord, the congratulate the noble Lord, the Minister, on his new position and thank him for his engagement. I thank him for his engagement. I also thank the noble Lord Lord Stockwood, whom I'm glad to see in Stockwood, whom I'm glad to see in his place, and other noble Lords for their constructive approach.

In six expert committee sessions. Despite the scale of the Bill and the complexity of the subject, we also ran to time to the satisfaction, I hope, of the noble Lord Lord Wilson of Sedgefield, as is the first day of report, I declare my registered interest in Meta and Amazon. My Lords, this is a large group of amendments reflecting the anxiety of many of us over the excessive use of delegated powers and the uncertainty this creates in the modernisation of consumer credit law, a move we support.

I will be a moving amendment one to clause one, but I intend to focus my remarks on the final amendments in this group. Amendment 93 an amendment to 100 to 103. In the name of myself and Lord Altrincham, whom I also thank for his work on this bill. My Lords, I hope these amendments might provide a compromise going forward. They address one of the most serious concerns that we in noble Lords across this House have raised about the approach taken in this Bill.

This is the question of how we preserve meaningful parliamentary oversight as increasingly significant powers are transferred away from primary legislation and into the regulatory model established by the Financial Services and Markets Act 2000. This was passed when we were still in the European Union, with scrutiny of new areas of regulation in the European Parliament and at econ. The committee, chaired by the noble Lady, Lady Boz, post-Brexit, there is a democratic gap and therefore a huge task for the Treasury Committee in the Commons and the Financial Services Regulation Committee in your Lordships House so well chaired by my noble friend Baroness Noakes, we recognise there are considerable advantages to the Fisma model.

Greater regulatory flexibility can allow the framework to respond quickly to changing markets, new technologies and innovation in areas such as consumer credit. The industry itself has argued that moving away from parts of the Consumer Credit Act 1974 could make the regime simpler and less costly to operate. However, flexibility must not come at the expense of accountability. The effect of this bill is to place considerable trust in the Treasury and ultimately in the regulators to use their new powers proportionately, effectively and with sufficient clarity for both consumers and industry.

Yet we simply do not know what the regulatory landscape will look like once these provisions have been commenced. These amendments propose a simple and practical safeguard before the relevant powers are brought into force. The Treasury would publish and lay before Parliament a report explaining how it expects them to be used. The requirement would apply both where the new areas of regulation are being transferred to the FCA, the PRA or the Bank of England, and where the Bill creates significant new powers.

This includes consumer credit regulation currently provided for under the Consumer Credit Act 1974. Payment Systems Anti-Money Laundering Supervision transferring from existing professional and industry bodies the powers relating to Overseas Recognition Regimes and the new powers concerning crypto assets under clause 46. As will be apparent, many of these powers are presently in primary legislation. There's a further problem with the excessive powers on access to banking in clause three of the Bill, but we will come on to discuss a different solution to that in Group two, the transparency that would be achieved by our proposed approach would benefit not only Parliament, but also consumers and industry.

Greater clarity before commencement should mean better scrutiny, greater certainty and better regulation. I hope the Minister will recognise these amendments for what they are a constructive, workable and proportionate compromise to an issue that has plagued our discussions on this Bill because of the sheer scale of change envisaged, they preserve the flexibility that the government says it needs, while introducing a modest but meaningful mechanism of parliamentary accountability. I would be grateful if the Minister could set out what assurance the government can give that Parliament will receive this kind of information before these significant powers are brought into effect.

If we do not receive sufficient comfort from the government, I reserve the right to test the opinion of the House on amendment 93 and its consequentials on Wednesday. Finally, I thank other noble Lords for their amendments in this group, and I look forward to hearing from them. My Lords, I beg to move. Amendment proposed. Leave out clause one. And my Lords, I will speak to my non diminution. Amendments two and three and to amendments four and five stemming from them during committee, the government made it clear that it wishes to remove
16:07
Baroness Bowles of Berkhamsted Portrait Baroness Bowles of Berkhamsted (Liberal Democrat)
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terrorists for firms. A theme running through the CCA and FOS running through the CCA and FOS changes. I agree that issues such as font sizes and business practices need updating. I would practices need updating. I would certainly prefer not to have to agree instantly to a garbled recitation of terms and conditions recitation of terms and conditions over the phone just to access basic service contracts, but the Consumer service contracts, but the Consumer Credit Act is fundamentally about protecting consumers from bad corporate behaviour.

And aside from the much cited font issue, tail risk usually arises from bad behaviour that simply takes a long time to surface. So there's no justifiable reason for remedy to disappear. While I see the attractions of using the FCA framework, I do not accept that there should be a time limit after which bad behaviour is insulated from rectification, or that protections requiring judicial remedy might fall away, over which there is no current certainty. That is the purpose of my non diminution amendment to allow modernisation, but not at the cost of significant consumer rights.

Now, a long standing defect in the CCA illustrates the point. The act was drafted in 1974, before securitisation existed. As a result, consumer credit had been sold on in ways that mean the statutory definition and thus obligations of the lender no longer apply. This was a happenstance of financial evolution, not intentional design. Yet it seriously degrades a regulated product and directly created the modern mortgage prisoner problem that my noble friend Lord Sharkey has brought to this house more than once.

One can see foresee the same happening with student loans. Once they are sold off. The solution is straightforward. Whenever any rights stemming from lending or credit is exercised, including the setting, levying or collecting of interest, the corresponding obligations must travel with that right and that must hold even where responsibilities are split across multiple entities under securitisation structures that currently allow each actor to claim it is not the statutory lender. This is entirely consistent with the Cca's original assignment provisions, and we have precedent because the rules already require obligations to follow the exercise of rights in mortgage servicing.

This principle works. We have explained it to the previous Minister and officials before the summer, providing copies of my amendment, my First Amendment and documentary explanation. Now, I recognise there have been changes on the government's side, but it's regrettable that there's been no engagement since, especially as collaborative. Working on good ideas was a stated commitment of the new Prime Minister. Now some may ask who loses? The answer is no one suffers unjustified loss when a regulated consumer product is transferred, the protections attached to it must remain intact rather than be severed, whether by design or accident.

For consumer credit, this simply maintains existing rights or, in the case of mortgage prisoners, prisoners restores them prospectively. But they had those rights when they took the mortgages out, taking the same principle to student loans. Bonds sold into the private financial system. They must carry with them the standards of respectable financial products. Borrowers must be protected from predatory interest rates, and under international accounting rules, when projected Non-repayment exceeds 50%, the entire corpus of loans, not just the unpaid part, is pulled onto national national debt metrics, allowing predatory interest rates simply deepens that problem.

This is the logic behind this family of amendments. I urge the Minister to engage constructively as the bill progresses, and as he will know, when I have a principled solution in my sights, it does not go away because it rests on my conscience, as it should on his.
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Lord Sharkey Portrait Lord Sharkey (Liberal Democrat)
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My Lords, I'll speak to >> My Lords, I'll speak to amendment five in this group, and structurally, the amendment follows the approach used by my noble the approach used by my noble friend Baroness Bowles in her previous amendment, and I'm very grateful to her for the help and grateful to her for the help and support in drafting the amendment. My amendment has a simple purpose which is to bring relief to mortgage prisoners. As many of your Lordships will know, mortgage prisoners are people who are stuck with their existing mortgage holders, who are not active lenders on very high interest rates, who cannot access a better deal, such as the normal market fixed rate deals.

As a result, mortgage prisoners continue to pay interest at around four percentage points over the normal market fixed term rates. This costs them hundreds and even thousands of pounds extra per year, according to the Mortgage Prisoners Action Group. There were originally around 195,000 mortgage prisoners, and this number is declining slowly due to death reaching the end of term and repossessions. The largest group of mortgage prisoners are former northern Rock customers. After nationalisation in 2007, these mortgages were placed in a government owned company run by UK Asset Resolution UK AR.

When returning these mortgages to the private sector, the conservative government could have sold them to active lenders who would have offered the prisoners a fair market deal. The government did not do that. Instead, they sold the mortgages to non-active lenders and vulture funds. And the consequences we continue to see. It's not as though the government was not warned about the problem this would cause the risk to customers was clearly identified. In January 2016, Lord McFall wrote to the Treasury and UK AR warning them that, and I quote, many of those affected by these sales will be mortgage prisoners and will be unable to switch lenders.

He told the government that the customers affected by the sales should be protected, offered a fair deal and given access to fixed rates. He warned that given the prospect of rising interest rates, it's important that all mortgage customers are given the opportunity to achieve certainty over their payments by accessing a fixed rate. He told the government that he was, and I quote, concerned that some customers affected by these mortgage sales will not be offered reasonable fixed mortgage rates.

UK AR responded by saying that returning these mortgages to the private sector will mean that there will be, I quote, the option to be offered new deals, extra lending and fixed rates should become available. This requirement was not written into the contract. When the mortgages were sold to the Vulture fund. Cerberus and this despite UK AR telling the BBC Panorama programme that Cerberus had the ability to lend to former northern Rock customers and that UK AR believed Cerberus intended to do so.

These terms were not written into the contract of sale. The mortgage prisoners were left unprotected by UK ARs incompetence, naivety and neglect. Martin Lewis commented that the conservative government have sold these loans to professional debt buyers who do not offer mortgages, and left these people in the types of mortgages which have been too expensive, crippling their finances and destroying their well-being. He also said that mortgage prisoners have been left paying obscene interest rates for over a decade, through no fault of their own.

This is still the case, despite repeated attempts to bring relief and despite open acknowledgement of the suffering caused. In 2021, for example, Labour crossbenchers and Lib Dem peers passed an amendment to Fisma 2000 to cap rates for mortgage prisoners. Conservative MPs removed that amendment, which is why, through no fault of their own mortgage, prisoners remain prisoners. Their hardships continue. There have been suicides, attempts at suicide, homes repossessed and uncertainty about the future, especially for those with expiring interest only mortgages.

We now have an opportunity to provide some relief going forward. The amendment before us addresses the three failures that together created mortgage prisoners. The first is that statutory rights did not travel with the loan. This is fixed by subsection two of the amendment. The second failure is that SPVs and inactive lenders have continued with predatory pricing. This is fixed by subsection three. The third failure is that SPVs claimed they were not the creditor. Subsection four fixes this, and subsection three also places a limit to be determined by reference to a market proxy determined by the FCA on interest rates, fee structures, or other pricing terms.

All of this is perspective. None of it is retrospective. It is time that mortgage, the mortgage problem had some real help, and this amendment sets out how to do that for the future.
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Lord Bishop of Manchester Portrait The Lord Bishop of Manchester (Bishops)
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Lord says, I rise to. Speak to support amendment two in the name of the noble Lady Baroness Bowles of Berkhamsted, to which I've added my name. As you've already heard, this amendment will ensure that when provisions of the Consumer when provisions of the Consumer Credit Act repealed or replaced by FCA rules, the overall level of consumer protection is not consumer protection is not diminished. Consumer Credit Act has long provided established routes to redress for consumers. It's done so for decades. It provides a core of fundamental protections enshrined in primary legislation and developed through parliamentary scrutiny, and probably is fairly well known as financial services continue to evolve.

Of course, the ways in which consumers are protected has to be capable of adapting to change. Well, to open up the CCA, a CCA to repeal by the Treasury and the FCA without putting statutory protections in place, significant statutory protections risk reducing standards of consumer protection for all people. Indeed, in their own review of the Consumer Credit Act, the FCA stated that many of its provisions could not be replaced by FCA rules under their current powers without adversely affecting consumer protection.

I've spoken many times before about the importance of equal financial opportunity for underserved communities, but especially those who have got less financial literacy or who face language barriers, the Joseph Rowntree Foundation tells us. A record number of people in this country currently living in very deep poverty without access, equal access to financial services are deprived of the tools that might help them stay afloat. For many families, credit is a lifeline in the face of the cost of living crisis. It's what enables them to make ends meet.

But accessibility has to be accompanied by adequate protection. Data from the last year shows that 25% of cases seen by the Financial Ombudsman involve vulnerable consumers. It's these groups who are least able to advocate for themselves when things go wrong, or to navigate complex complaints processes on their own to increase access to financial services for vulnerable groups, while simultaneously hollowing out the protections from which they disproportionately benefit, introduces greater risk for those already stand to lose the most Lord Sikka protections of the Consumer Credit Act are to be opened up to repeal, we must be certain that consumers will enjoy protections that are at least as strong as those from which they benefited before.

This amendment is, I believe, essential for preserving the fundamental rights which enable vulnerable groups to participate fully in economic life, will provide consumers with the confidence they need, that they will be protected when things from time to time, they do go wrong.
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Baroness Altmann Portrait Baroness Altmann (Non-affiliated)
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I would like to support. >> The amendments in this group, and I feel that this bill has an opportunity to improve, or at least opportunity to improve, or at least not diminish, the protections that are offered to consumers of financial services. We have long known that, from a consumer perspective, the asymmetry of information and the asymmetry of understanding leaves ordinary consumers open to being taken advantage of by financial services companies, and the law is supposed to protect them.

And currently we do have legal protections in place, albeit they are out of date and need updating, which of course we have already discussed. But I certainly would hope that the noble Lord, the Minister who I warmly welcome to his his place, would understand that the aims of these amendments are to ensure that the financial consumer is protected, both at the retail level and against practices that have arisen in the past and may well arise in the future, which they do need protection from.

I particularly feel that Baroness Bowles amendments about non diminution when it comes to consumer credit. When it comes to student loans, these things are extremely important to the ordinary person in the street, and I commend Lord Sharkey and Baroness Bowles on continuing the attempts to ensure that mortgage prisoners are treated much more fairly. We have another opportunity now to remove this stain on our financial services landscape, and I really do hope that the government will be able to agree and accept that capping, at the very least, the costs that and the interest rates that mortgage prisoners have had to pay at such great cost and pain to them, will indeed be a possibility that we can introduce within this bill.
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Baroness Kramer Portrait Baroness Kramer (Liberal Democrat)
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My Lord, grief. very clearly on this issue, can I say that I share with the conservative frontbench concerns about accountability that with a about accountability that with a further, further removal of powers directly into the hands of the regulator, and had they moved their regulator, and had they moved their amendment one, we would have supported it. But but I want to address the other amendments just very briefly. I still am in somewhat in a state of genuine concern that the government will not accept an amendment that would confirm that the changes that it's proposing to the Consumer Credit Act, which will be absorbed now into the role of the FCA, that will not involve a non diminution of consumer credit protection.

This is the non diminution of rights that Baroness Bowles described across the FCA could keep those rights in place, but there is nothing that compels it to do so. And I find it extraordinary that we can't be given this reassurance. But, my Lords, that I am more exercised than anything else about the position of mortgage prisoners. The people have been impacted that are now, many of them elderly. Their situation has been shocking over the past years and we could now give them relief for the remaining years that in which they will be tangled with paying extraordinary levels of interest on mortgages that were taken out in good faith, for which they properly qualified.

That and were at the time, market standard mortgages. And it's happened because essentially an arm of government that made mistakes when it's sold on those loans to vulture funds, it is shocking that we haven't corrected this. The amendment that he is in this on the paper today is incredibly effective. It's new thinking, and it's incredibly effective at making sure that going forward, this incredible injustice is ended. And I hope very much, even in these last few minutes, that the government will think again and provide support.
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Lord Pitt-Watson Portrait Lord Pitt-Watson, The Parliamentary Secretary, HM Treasury (Labour)
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Here, here. >> It is a privilege to be here today to debate the Financial Services and Markets Bill, and I would like to put on record my would like to put on record my thanks to my noble friend Lord Stockwood for leading the earlier stages of this debate, and also to thank all of those Lords who have contributed to this debate at Committee stage and beyond. If you would allow me, I would like to say a few things about the bill itself before moving on to addressing the amendments that have been put.

I think this bill has a purpose on which I think we are all agreed. That is, that we're trying to construct rules which help the financial services industry to serve its customers better and to prosper as a result of doing so. In responding to the debate in committee, you will therefore see that the government has been persuaded of some significant points that have been made there and is proposing some significant amendments, which I hope will be welcomed by the House.

There are also amendments that will be suggested at Report stage, where the government will disagree with the specific measure proposed, but in many cases, the government does have great sympathy with the ultimate goals of the particular amendment. However, there are many where we do not believe that they belong as part of the bill, in part because they are complex and require consultation and go beyond the scope of the Bill, in part also because the aims of the amendment are not best served.

We believe, by changing primary legislation, but where the government often would want to help promote the goals of the amendment. Indeed, sometimes it already is, and perhaps seek to encourage better practice. Central to all of this, I know, is accountability, and I will come to that at the beginning and end this session and then again later on a. But let me now turn to these specific amendments. Amendments one and six would remove clause one and schedule one to the bill and prevent the government's Programme of Consumer Credit Act reform amendments two and three, to ensure that the reforms do not diminish consumer protections.

A amendments four and five relate to the assignment of student loans and mortgages. Similar amendments were debated in committee, and the government has carefully considered the concerns raised. However, we have concluded that we wish to press ahead with these much needed reforms. I think we all in this House agree that the FCA is the right body to take on the role of consumer protection, and Parliament has already given it the right powers and objectives to do so, including a consumer protection objective.

Since the 1914 transfer of consumer credit to the FCA important protections, including credit worthiness and affordability assessments, have successfully operated through the FCA framework. I recognise the concern raised both in committee and again today, that Parliament is being asked to approve reform before replacement FCA rules have been finalised. However, I would emphasise that the FCA must consult on proposed rules and engage with parliamentary committees as part of the established statutory framework. This includes the Financial Services Regulation Committee, chaired by the noble Lady Baroness Noakes and both the FCA and the PRA are keenly aware of scrutiny.

Last week they wrote to me a letter which I think has been circulated to all of you making a number of commitments further to enhance parliamentary scrutiny, and I have placed those letters in the library. I expect to cover this detail, including those letters in detail, in a further grouping at the end of today. Turning to amendments two and three, I fully agree that consumers must continue to benefit from robust protections and effective routes to redress. The government would not be proceeding with this reform if we felt otherwise.

However, I do not consider that the duty proposed is an appropriate mechanism to be able to achieve this. The government has already concluded that certain important protections should remain in legislation, including section 75, which allows consumers to claim their money back from their lender where products and services purchased on credit are faulty or do not arrive, and the unfair relationships provision contained in sections 140 A to 140 C, and as I have said, the FCA rulebook already contains important protections including credit worthiness and affordability assessments.

So I do not think there is anything in what we are doing here that is seeking to lessen consumer protections. A the concern of the right reverend Prelate the Bishop of Manchester and also of the noble Baroness Altmann. However, the Consumer Credit Act is highly prescriptive in the information requirements, which I think can produce poor outcomes for consumers. The current regime can be difficult for those with lower literacy and financial capability. Some documents require a reading ability of an undergraduate level.

These reforms will make it possible for the FCA to enable firms to tailor communications to consumer needs, which will improve accessibility and support better outcomes for vulnerable customers. The bill also repeals the statutory sanctions attached to these prescriptive requirements. Sanctions were designed for a very different regime under the Office of Fair Trading, with limited regulatory powers to ensure consumer protections are no longer necessary to secure robust protections. Sorry that that to ensure robust protection for consumers, instead, consumers will be protected through the modern system of Financial Services Regulation, where the FCA supervises firms, enforces rules and can require redress.

Consumers have access to firm complaint processes, and the Financial Ombudsman Service, and firms are required proactively to redress consumer harms under the FCA regime. On the basis of consumer complaints or their own regular compliance monitoring. Finally, repeal of the Consumer Credit Act provisions will not be commenced without replacement arrangements being in place. The government's intention is an orderly transition that avoids any gap in consumer protection and provides certainty for consumers and firms alike, and to ensure that consumers can benefit from an updated framework to bring consumer credit regulation into line with comparable comparable financial services product, the government does not believe that it would be right to either to remove clause one, which would prevent this reform, or to introduce the sort of duties set out in 2 or 3, where, for example, there could be an argument about a the information that was provided to consumers which might well have been expressed in a way that would not be to their advantage or to their understanding.

But in all of this, there is no intention to reduce consumer protections. Turning to the important issue of mortgage prisoners, I also recognise the absolute legitimate strength of feeling across the House, and I recognise the very real pressures that are faced by the affected households at a time when families are already facing pressure from energy bills and food prices from other essentials, we must ensure that people are treated fairly as noble. Lords may be aware, the number of borrowers in closed books is still at 105 000 down, I should say, from 190 500 0 in 2021, but still too many.

The fall is welcome, but it doesn't lessen the seriousness of the circumstances faced by those who remain. Nor should the reduction in numbers be taken to mean that the underlying challenges have been resolved. Those who remain may be facing particularly persistent barriers to switching or obtaining a mortgage that is appropriate to their circumstances. My noble Lord, the circumstances of mortgage prisoners deserve our serious attention. I am sure many agree with me on that. I hope that many of you will also agree that the government must ensure that any proposed intervention in this market is fair, but is also effective.

And with that in mind, we have considered whether a rate cap of the kind proposed in part by these amendments, would improve outcomes for mortgage prisoners. We understand the intention behind the amendment to provide relief to borrowers who may be be paying more than they can reasonably afford. That is a case made quite articulately by Baroness Bowles and Lord Sharkey. Nevertheless, a cap on the rates paid as envisioned by this amendment would not in itself address the reasons why some borrowers cannot switch products.

Indeed, previous analysis by the London School of Economics also raised concerns about the effectiveness and wider consequences of reducing such a cap. The government is sympathetic to the challenges that mortgage prisoners face. It is, however, clear that a cap on rates does not seem to be the right solution. Our focus is on ensuring fair treatment, proper oversight and practical routes for borrowers who are struggling or who may have been unable to access appropriate support as to the right course of action.

As I have said, this deserves the attention of the government and we will continue to work with the FCA and the industry to ensure that lenders and administrators do make their responsibilities, communicate clearly with effective borrowers and provide appropriate support where people are in difficulty. We will also continue to pay close attention to the experience of those who remain unable to access suitable mortgage products as we do so. I'm sorry that that answer will not meet the issues that a the noble Baroness Kramer and others pay have raised, but we are unconvinced that this amendment will solve the problem that needs addressed.

I now turn to the issue of the sale of student loans raised by Baroness Bowles. The last student loan sale took place in 2018, and the government has no active programme of student loan sales and currently has no plans to undertake further sales. I can reassure the noble Lords that existing legislation already includes protections for borrowers whose loans have been sold, including provisions in the Sale of Student Loans Act 2008, designed to ensure that such borrowers are not placed in a worse position as a result of the sale.

Finally, I will turn to the question of delegated powers and amendments 9300, 101, two and three in the name of Baroness Neville-Rolfe. The amendments would require the Treasury to lay before Parliament a report setting out how the powers conferred conferred in several parts of the Bill will be used before it can use the powers or can or commence the relevant provisions. Delegated powers are a long standing and accepted part of the legislative and regulatory framework for financial services.

The pace of innovation means that detailed primary legislation becomes out of date and ineffective. The Consumer Credit Act a good example of this, and enabling the Treasury to adjust the scope of regulation to reflect market and technological developments, keeps our framework effective. This is not a shortcut or bad policy making. I think it is how the system is supposed to work. But the government wants to be as open as it can about how these delegated powers will be used.

It doesn't think for that that legislation is necessary. I would note that there is material already set out in the bills delegated powers memorandum. This covers both powers delegated to the Treasury and to the regulator, and that report is 65 pages long. And we have published two supplementary memoranda to reflect changes introduced through the amendments. A I'm sure we've all heard complaints. Regulations can be slow to change, meaning it takes longer for consumers and firms to benefit from reforms.

And I fear that these amendments would slow us down still further. It would also set a precedent to restrict the powers available to the government in this way, and might delay the delivery of important reforms. And I do note that the Delegated Powers and Regulatory Reform Committee, which did have comments on this bill, had not raised concerns about any of the delegated powers to which these amendments reply. But look, in the spirit of openness that I think has characterised this bill throughout its transition, I would be more than happy to meet with the noble Baroness to discuss how the government can continue in a spirit of openness, but I do not think that legislation is the correct answer to this issue, and therefore asked the noble Baroness to withdraw her amendments.
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Baroness Neville-Rolfe Portrait Baroness Neville-Rolfe (Conservative)
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My Lords. >> Grateful for the Minister for his response and his detailed explanation of how clause one is explanation of how clause one is framed, and I'm also grateful for those others who have contributed to the debate. Baroness Bowles, Bishop of Right reverend, Bishop of Manchester, and Lady Altman on the recasting of consumer protection law, which is very important to us all, and from the noble Lord, Lord Starkey on on mortgage prisoners. I would describe that as a sorry tale.

My. My Lords, we remain of the view that when this process of recasting takes place, Parliament and industry must have a practical mechanism through which they can exercise oversight and make such representations that they need to make, such as those that we've heard today on how the powers are used. On the first occasion, the system would not be undermined by that. It's a first occasion proposal, and that's what amendment 93 and its consequentials seeks to provide. And I believe it's a workable and proportionate mechanism which allows the government to achieve its broader objective of introducing a more flexible regulatory framework, but not wholly at the expense of scrutiny, transparency and democratic accountability.

We should not be signing away any rights and protections without knowing what will replace them. I am very grateful to the Minister for engaging with us on our concerns. I don't think the delegated power memorandum does it, because it doesn't explain what all these new powers and these areas, areas are going to be useful, including consumer credit. So I think there must be a meaningful mechanism to acquaint the House with how the powers are exercise to ensure, and also indeed to ensure regulatory officials turn up to the committee at the convenience of the committee and are able to question them on a suitable report on how these important changes are taking place.

We support the general drift of these changes, as the Minister knows too well, but we are worried about accountability. So I do. I I'm happy to have further discussions, but if need be, I plan to test the opinion of the House when we reach amendment 93 on

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Wednesday. To withdraw amendment.

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To withdraw amendment. What I withdraw amendment one is that this amendment be withdrawn. Amendment by leave withdrawn. Amendment by leave withdrawn. Amendments 2 to 4 Baroness Bowles not moved. Amendment five Lord Sharkey.

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Sharkey. My Lords, I had hoped that the life crippling injustice visited on life crippling injustice visited on mortgage prisoners by government would produce a more sympathetic approach, and in fact, it's hard to tell what approach, if any, the
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Baroness Kramer Portrait Baroness Kramer (Liberal Democrat)
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Ceedingly remiss of me when I >> Ceedingly remiss of me when I spoke earlier that not to welcome Lord Pitt-Watson to his role. We've Lord Pitt-Watson to his role. We've had so many conversations. I think I've begun to think of him as the established Minister, and yet, sitting just a few benches away, Lord Stockwood who's whose presence we. We're so glad that he's going to stay engaged with this bill. But and and Lord Livermore, who was with us earlier, that he was a relentless proponent of the government position, and I, I will miss my engagements with him, sir.

My Lords. Clause three deals with access to banking services, and the government has told us that the powers in clause three are intended to allow the government to incorporate into law and regulation recommendations from the independent public Review of Access to Banking Services, chaired by Richard Lloyd, and due in October. The review will evaluate the impact of ongoing bank branch closures and will review access to face to face banking across the UK. We on these benches strongly support this review.

Banks have closed a third of their branches in the last five years, and since 2015, nearly 7000 bank and building society branches have shut down. We have been strong advocates of the Banking hub scheme to create at least some minimal access to services. 235 have opened, but the commitment is only to a total of 350 hubs. Much stronger action is needed and soon. But. And it is beyond my comprehension, why clause three has not been drafted for the narrow purpose stated by the government of implementing the recommendations of the Lloyd review.

It allows Treasury to amend any Act of Parliament and to give any powers it wishes on access to banking to the FCA. Nothing is confined to the Lloyd review. It is Henry the Eighth on steroids. Now I put down amendment seven, which would limit powers to allow the Treasury to implement only those provisions arising directly from the Lloyd review, which at least the Lloyd's review, though we haven't yet seen them. But we cannot set the precedent of allowing sweeping powers that go way beyond the stated objective to be incorporated in a bill of this

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significance. Amendment. Proposed clause three,

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Amendment. Proposed clause three, page two. Line four at end. Insert the words as printed on the

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Marshall's list. As this is the first time I speak at Report stage, I should speak at Report stage, I should remind the House of my interests as a shareholder and Fidelity National Information Services, Inc. which provides services to the financial provides services to the financial sector and as a non-practising member of the Institute of Chartered Accountants in England and Wales. I'd also like to welcome
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Lord Vaux of Harrowden Portrait Lord Vaux of Harrowden (Crossbench)
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the noble Lord Lord Pitt-Watson to his new role, and perhaps to apologise to the noble Lord Lord Stockwood for when we discussed this clause Committee stage, I jokingly referred to the noble Lord, the Minister, not always being the Minister, for which I apologise. I have amendment nine in this group which would remove the egregious Henry the Eighth power from clause three altogether. And I've also added my name to amendment ten, ten, ten, which would delete clause three altogether.

As I explained at Committee stage. As someone who lives in a very rural area, my nearest bank branch. Now that the last branch branch in my nearest town has closed, is a 100 mile round trip. So access to banking is a subject to which I have a lot of sympathy personally, and I do look forward to seeing the Lord Lloyd Report once it's been published in October. And like the noble Lady Baroness Kramer, I expect to support an awful lot that will be in it.

The problem with clause three, though, is that it gives the government incredibly broad and unfettered powers in this respect, including an unlimited power to amend any Act of Parliament. Indeed, indeed, there's actually nothing in the clause that prevents a government actually reducing access to banking if it so chose to do. I don't think I can put it any better than our delegated powers and Regulatory Reform Committee. In its report of the 17th of June, which brought these wide powers to the House's attention, and it concluded that the problem, and I quote the problem with clause three, is that it confers a wide regulation making power on Ministers before any key policy decisions have been made, before any problem has been clearly identified and assisted by a power to amend any Act of Parliament ever made.

Such a power severely compromises effective parliamentary scrutiny. We consider that the power in clause three is inappropriately wide and should be removed from the Bill. My Lords, this government has form on pushing through legislation before it really knows what it wants to do with it, and this example, I think, is particularly egregious. I asked the noble Lord Lord Stockwood, when he was the Minister at the Committee stage, which acts of Parliament the government had in mind to alter using this power.

The response, I am sorry to say, was less than illuminating. He said, and I quote, The Treasury expects to use the power, if needed, to amend relevant legislation. For example, financial services legislation, end quote. And he went on to say, as the recommendations of the independent Access to Banking Services Review are currently unknown, it is necessary for clause three to be able to amend primary legislation to respond to any recommendations that are made. In other words, we don't know what we want to do, so we're just going to make it as wide as possible.

My own guess is that it's actually highly unlikely that any primary legislation will need to be changed as a result of this, but we shall see. Well, I think that makes the case against clause three. It is not satisfactory for the government to give itself the widest powers, including the unlimited power, to change any existing Acts of Parliament when it has no idea what it actually wants to do with those powers. Now, the government claims in the explanatory memorandum and elsewhere that it will narrow the powers once the Lloyd report has been received.

But, my Lords, this is Report stage. We have not seen the report. It will take I don't know how many months for the government to come up with recommendations based on the report. The Bill will already probably be law by then, so there will be no real opportunity to narrow the powers. Now. I'm sure the House will support moves to improve access to banking when in due course, the government actually has a plan, and in the unlikely event that the changes are in fact required to existing law, a short focus bill can be created to do that which, as all changes to the law should be, can be subject to the proper scrutiny process of Parliament.

This unfocused clause is too wide and any resulting changes to law would not be subject to proper scrutiny. And that is not the right way to legislate, my Lords. At the very least, the Henry the Eighth clause should be removed, as I suggest in amendment nine. But the clauses clause as a whole, I think is too wide. And therefore I would urge all noble Lords to support Baroness Neville-Rolfe amendment ten to remove this

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unrestricted power. My Lord, I am. I wanted to support amendment eight, but no one seems to be moving it. So is it. In order for me to say a few words on order for me to say a few words on it and move it? Because I think it's actually a very important amendment because it deals with the amendment because it deals with the only mention really in the whole bill on post offices. And of course,
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Baroness Hoey Portrait Baroness Hoey (Non-affiliated)
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bill on post offices. And of course, this amendment in the name of Baroness Tyler Lord Holmes of Richmond and Baroness Kramer is talking about the Treasury, considering the effectiveness of alternative frameworks, including the Post Office banking framework in providing access to banking and cash services. And I think that's a really, really important aspect of all of this, because increasingly, we are seeing that people, particularly in rural areas, particularly in areas where there is high deprivation and people don't have access to online facilities, don't particularly want to use online, don't trust banks enough to go online, don't trust the internet, are using their post offices and the post offices, yet could be doing so much more to widen the whole question of access to cash and money.

And I would draw attention. I'm sure most noble Lords will have seen the National Federation of Subpostmasters report on Access to Banking Review, which is a really well worth 18 pages of showing statistically just how much more post offices are being used by people and how they could be used even more to do services. That that is that when banks close in areas now, it is usually the Post Office is picking up a lot of that. And I think that it's it's very, very important that the.

I'd like to hear what the noble Lord, the Minister, and I welcome very much to his his position that he would say whether, in fact, the government is serious about increasing the use of post offices, not just on, on on some of the issues to do with banking, but also, you know, you can no longer pay your television licence if you still want to pay it. You can no longer pay that in the Post Office. There are so many services that have been taken away from the Post Office.

That actually would be make it much, much easier and more accessible for people, particularly in in rural communities. People do trust their local Post Office and, and they find that that is somewhere that they can go and get the advice and the reassurance that they can now get in a local bank because they don't ever see, see a bank into a bank themselves. And the lack of trust which which I mentioned. So could I ask the noble Lord to respond to that this particular amendment and say whether he is willing to actually talk directly to the National Federation of Subpostmasters to discuss these issues further, and how we can make our post offices more vibrant, more more involved with the local community by being able to offer them the services

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that they want. While others. Follow the noble Lady. And in doing so. As it's the first.

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As it's the first. declare. My. Interest to set out in the register as advisers to the Crown register as advisers to the Crown Estate, Simmons and Simmons LLP and as non-executive director at Avalanche Foundation, avalanche BVI Avalanche Foundation, avalanche BVI Inc. My Lords, I rise to speak to amendment eight, which I had
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Lord Holmes of Richmond Portrait Lord Holmes of Richmond (Conservative)
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amendment eight, which I had pleasure in signing. How many brands, how many businesses have we in the UK that have been on our high street for over half a millennia? That's what we have with the Post Office, which rode into our lives in 1511 and continues to have just shy of 12,000 branches up and down the country. Whatever happens with digital and finance certainly is going to become, and already in many areas is digital.

We need and must support physical presence and human access and interaction to finance, not least for those who find themselves at the sharpest end of financial exclusion. Because as I've already mentioned, with digital financial inclusion often and perniciously goes hand in hand with digital exclusion, compounding both of those exclusionary forces, the Post Office has a unique role. Of course, they have had well-known difficulties in recent times, but that does not diminish the potential role that they can play as other financial services providers retreat and have already retreated from so many of our high streets, it can be the core of the community with inclusive, accessible finance at that core and rippling out all kinds of other financial, digital and small s social services.

It has such positive potential. We've seen this with the hub model. I'd be interested in the minister's responses to whether the government believe we have enough hubs, whether the plan for hubs is ambitious enough, whether we need to bring other players into this hub model as well to ensure that wherever you are, whoever you are in the country, in socio economics, you can have effective access to finance. And through that meaningful, sustainable and often physical access to cash and financial services.

I very much look forward to the minister's

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response to this amendment. My Lords, I rise briefly to support the noble Baroness Neville-Rolfe amendment ten and to add a few of my own concerns on clause three and also support the remarks made earlier by the noble remarks made earlier by the noble Lord Lord Faulks and the noble Lady Cramer on this matter. Protecting customer access to essential
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Lord Massey of Hampstead Portrait Lord Massey of Hampstead (Conservative)
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customer access to essential banking services is, of course, a goal we all share. However, the granting of such wide ranging executive powers basically conferring almost unlimited powers on the Treasury for this matter seems an unnecessary measure, even allowing for the understandable desire to act quickly. The Treasury's own review of in-person banking access doesn't report until October, as has been mentioned, and we're being asked to legislate before we know the nature of the problem. We're solving all the policy decisions that might follow.

Would they be proportionate? Would they be effective? We really have no way of knowing this at this stage and don't even have the benefit, of course, of seeing the report in October, the Treasury's memorandum to the DPRC seeks to narrow these powers. When the when the review concludes so the government is implicitly aware. I would assume that the delegated powers are too broad, but the answer is not to grant excessively wide powers now and then tidy up later.

Surely it would be better to wait, or to bring back a properly bounded set of powers when the evidence exists. So I'd like to offer my support to amendment ten, which would delete clause three

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altogether. I. I also. Support the amendments in this

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Support the amendments in this group. I believe that the description of these extremely wide description of these extremely wide powers should in itself alert the powers should in itself alert the House to the dangers that this element of the Bill, clause three,
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Baroness Altmann Portrait Baroness Altmann (Non-affiliated)
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element of the Bill, clause three, could pose, and I do believe that it is important for the government to understand, for example, what has been revealed in the latest report just a few days ago from age UK about digital exclusion among the older age groups in this country. It is all very well for policymakers and members of this House, indeed, to believe that everyone can manage to bank online. You don't need to go into a physical branch, but when it comes to the older generations, that is simply not the case.

And certainly in terms of the population over age 65, the research suggests that only 15% of pensioners, or of the over 65, are fully digitally included. That means they're able to do all services digitally, and that is 20% of men and 10% of women and one point 4,000,000/65 are fully digitally excluded. So the more we see bank closures, the less access to banking these people have, the more excluded from society they become.

And I hope that the government will recognise that. We do need to make sure that there is an opportunity for Parliament and for the legislation to ensure that these older people are not forgotten, are not left behind, and that the access to banking that they may well rely upon is not just removed, perhaps inadvertently, from legislation that could have been avoided. For example, if we have some of the amendments in this group, that would ensure either that the clause three is altogether removed and or that the most egregious parts of it are removed.

As the noble Lord Lord Faulks was saying, and also as the noble Lady Baroness Kramer was saying, that we make sure the Lord Wood review, which is meant indeed to directly deal with this, is part of the

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legislation going forward. I very. Briefly, to support Baroness

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Briefly, to support Baroness Neville-Rolfe amendment. To leave out. Clause three. And also to say to say how much

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And also to say to say how much I agree with Lord Howe and other noble Lords who have spoken in this noble Lords who have spoken in this debate, I. I support these amendments on constitutional grounds because of the importance
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Baroness Lawlor Portrait Baroness Lawlor (Conservative)
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grounds because of the importance of the separation of powers and the role of Parliament in checking executive power, as Lord Massey has mentioned. How can we keep the government to account if we have no knowledge of the powers proposed and. But as clause three puts it, allows the Treasury power to make regular. Any regulations it considers appropriate. Now, with no knowledge of what they are. And it also. Clause three also gives the Treasury power to delegate powers to the FCA and the FCA to make rules, amend an Act of Parliament, or to make provision for different purposes.

Now, there are many concerns about the regulators, and I just mentioned two, the regulators do not supervise or explore. Predictably, in accordance with their own rules, you can find different sorts of interpretations given to their own rules in their rulings. And and we must ensure their decisions are consistent between firms which operate businesses of similar size. And one other example is formal decisions by the regulators do not necessarily include sufficient explanation to serve as precedents to allow the application of the relevant rules.

So I'm very pleased to welcome the the noble Lord, the Minister, to the front bench and say how much we also miss Lords, the noble Lord Lord Stockwood, but I. I wish the noble Lord well, and it's on constitutional grounds that I would ask the noble Lord to think

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very carefully about these amendments. My Lord, I just have a couple of words on.

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words on. Amendment ten, which I fully support. In the name of my noble friend Baroness Neville-Rolfe, friend Baroness Neville-Rolfe, because that that phrase here the Treasury may, by regulations, make such provisions as they consider appropriate in connection with providing access to banking services. That isn't just wide,
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Lord Mackinlay of Richborough Portrait Lord Mackinlay of Richborough (Conservative)
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services. That isn't just wide, that is ocean wide, and that is far too wide without parliamentary consent or or any investigation as to what our democratic processes consider to be the right level of banking services and access to banking across this country. Well, also, sir, few words on amendment eight, and I'm very pleased my the noble Lady Baroness Hoey said something about the Post Office. Now, was a constituency MP, I faced as as anyone who.

Services which always caused concern, particularly to older residents. Now I purposefully kept my father, now deceased, away from digital banking because of the risk of scam and the risk of those dodgy emails coming in. I mean, he was of perfectly sound mind and very capable, but he perhaps wasn't as scam aware as younger people are. So I wanted him a long, long way away from digital banking services. And why shouldn't he stay away from digital banking services? But we were always told by the banks that were closing.

Well, fear not, we have a Post Office network that will do all that your constituents and customers need to do in terms of access to cash and banking checks and that that more standard stuff. Now, I, I don't know about other noble Lords, but I, you know, I do do digital banking. Of course I do. But when faced with a cheque which are a little bit more rare these days than they used to, I do struggle for obvious reasons to hold the camera, go up a bit, go left a bit, go right a bit, go down a bit.

It's not all in the picture yet, and press the button. And I'm sure we've all shared that frustration. But let me leave you this with a Post Office. They are not the panacea of everything because Lloyds Bank over the last few months, have stopped the use of Post Office services to their customers. I don't know why. So this is a two way street. The banks can have a relationship with the Post Office, or they can, at their discretion, not to have a relationship with the Post Office for reasons known only to themselves.

Lloyds have decided not to use the services of the Post Office, and for those reasons I sympathise massively with the noble Lord Lord Foulkes, who now has to go hundred miles round trip to a bank. No doubt there is a Post Office nearer than that. But if you're a Lloyds customer, hard luck 100 miles. So this is this isn't about, you know, the the the quantity and texture of tomato sauce and a can of beans that we might lead to officials and Statutory Instruments.

These are fundamentals of life that everybody faces on a daily basis. So to allow this extent of power, I think is a power too far. And I have to say, we do see far too much, Henry, the Eighth in all legislation. That's not just from this government. That was from the government I was with. Over the years. There's been a temptation for this creep to happen. I think this creep must not enter this bill.
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Baroness Neville-Rolfe Portrait Baroness Neville-Rolfe (Conservative)
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Here, here. My Lords. noble Lady, Lady Hoey, my noble friend, Lord Holmes, and Lord McKinley, for reminding us of the McKinley, for reminding us of the value of post offices and the importance of banking hubs, especially in this ever expanding especially in this ever expanding digital world. There are serious issues here across the country, but I rise to speak to my amendment ten, which does a very simple thing. It removes clause three from the bill altogether, and my argument for it is equally simple.

Clause three contains no detail about what the government actually intend to do. Instead, as the noble Lady, Lady Cramer has explained, it grants Ministers extraordinarily broad powers, including the power to amend primary legislation on access to banking. So once the Richard Lloyd Review has concluded, the government may legislate for whatever it subsequently decides is necessary. That could include anything on banking services, with huge implications for consumers, for banks, other financial services and the high street. As Lord noble, Lord Lord Vaux has said, a power to amend any Act of Parliament.

It's a huge power grab by the Treasury. It's a very significant delegation of power to ask Parliament to approve in advance. We do not know what problems these powers will ultimately be used to address. We do not know what regulations the government envisage making. We do not know which acts of Parliament they wish to amend. Yet Parliament is nevertheless being asked now to hand over the power to do all of these things. We should be very cautious about giving any government powers of this breadth on the basis that they will decide later in good faith how they wish to use them.

Parliament shouldn't be asked to give Ministers carte blanche, particularly where the powers include the ability to amend primary legislation with minimal parliamentary scrutiny. That would set a terrible precedent. So the right course is straightforward. Clause three should come out once the government has completed the review of access to banking and know what they actually wish to do, they can return to Parliament with legislation setting out the policy, the powers required to deliver it and the appropriate safeguards. I'm very grateful to the noble Lady Cramer, Lady Altmann and the noble Lord, Lord Foulkes, and indeed, my noble friends Lord Massey, Lord McKinley and my noble friend Lady Lawler for supporting this.

The Minister has a problem. We have a lot of concern across this House, and it's not only amongst those engaged on the bill, it reflects the concerns by the Secondary Legislation scrutiny Committee, with its very expert membership. They've also advised that the clause should be removed. That is usually, I would say to the Minister a killer argument. For these reasons, I do not believe clause three can remain in the bill. And when amendment ten is called, I intend to test the opinion of the

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House a. My Lords, I'm hearing two

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My Lords, I'm hearing two arguments here. One, a huge consensus across the House of the consensus across the House of the need for access to banking and for the appropriate actions to be taken the appropriate actions to be taken to make sure that that takes place.
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Lord Pitt-Watson Portrait Lord Pitt-Watson, The Parliamentary Secretary, HM Treasury (Labour)
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to make sure that that takes place. But I'm also hearing a concern raised. It was a concern also raised in committee, about the breadth of the power, in particular, its constitutional implications and the degree of scrutiny that Parliament would be able to exercise over any regulations made under it. These are serious points, and the government has considered them and consider them seriously, but has concluded that clause three is needed at this stage because the independent review the Lloyd review into access to banking has not yet concluded.

We don't know whether it will recommend intervention, which consumers may be most affected, the nature of any detriment, what sort of form and any intervention should take. Removing clause three altogether, as amendment ten would do, would risk leaving the government without a mechanism in this bill to respond promptly. If the review identifies a focussed and time sensitive need for intervention, amendment nine would remove the ability to amend primary legislation through regulations made under clause three.

If acting on the review's finding required changes to an Act of Parliament, removing this ability would risk removing the mechanism to respond promptly to the review and could delay implementation. Amendment seven would take a different approach by limiting the powers to matters arising directly from the review. I understand the intention behind that amendment, and the review should clearly play the central role in shaping any future intervention. That is why the Bill already requires the Treasury to have regard to the review's recommendation, but it would not be right to prevent Ministers from considering other relevant evidence alongside the review, when deciding whether and how to act, the government needs to preserve the ability to respond proportionately to the full evidence that is available.

Let me then come to amendment eight. I think it's probably one on which we all do agree. Lord Holmes and a Baroness Hoey about the absolutely central part that the post offices can play in making sure that a, a a a banking access is available, I can confirm that the chair of the review into Access to Banking Services has received representations from and has engaged with the Post Office and the National Federation of Subpostmasters, and the officials will continue to engage as part of the development.

As you know, the target is more than 350 full banking hubs. Plus, I think it was. My numbers were 10,500 post offices that were going to be involved in this. And I would thoroughly commend the points that they have made. But I do absolutely understand the concerns about the Henry the Eighth powers, which seem very broad. Look, clause three does not itself impose new obligations on firms or any specific model of banking provision. Any regulations under the power would also be subject to the affirmative procedure.

However, I would like to assure my noble Lords that the government does not expect clause three to remain in its current form. I forget how Baroness Kramer A said her hopes would be fulfilled, but they would be fulfilled, I think, by amendments that were focussed on the thing that we're all agreed to, which is that we have proper access to to banking, a that for older people, for younger people, for everyone. The government remains committed to keeping the scope of the power under review as the independent review completes its work.

We expect to narrow this power after the review has reported in October, when I expect the bill will be in the Commons. Once the Lord review is concluded, the government will be in a better position to consider the correct scope of this power. It would, therefore, we believe, be premature to narrow this power at this stage, and for those reasons, I would ask the noble Baroness to withdraw her amendment a perhaps more in hope than expectation. Thank you.
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Baroness Kramer Portrait Baroness Kramer (Liberal Democrat)
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House will know that I have long been an advocate for Cdfis Community Development Bank financial institutions, usually banks or credit unions, which are dedicated to serving the banking and finance needs of local communities and small businesses. As our high street banks once did, they do what, I suppose in modern terms we would call place based lending. Knowing the community, its businesses, its people and they are structured, staffed and skilled to provide those services. By contrast, SMEs struggle to get mainstream bank credit.

Now the government has taken steps to grow Cdfis, providing 150 million to the British Business Bank to develop a community, enable, fund and increasing the Growth Guarantee scheme by a significant 6.5 billion over four years. It has set up a UK Community Finance Partnership Taskforce with an impressive membership, to build partnerships between cdfis and mainstream banks. But the key piece of the puzzle is missing. We do not have the driver to create many more cdfi's or community banks, if you prefer that term, and credit unions across the country, especially in our most disadvantaged areas.

And that is what my amendment 11 tackles. It takes a British approach inspired by success in the United States, the FCA would assess lending to individuals, households and small businesses against deposit, taking in a community to determine if the lending is proportionate. Where a bank does not wish to lend in reasonable proportion, it can fund a CDfi rather than change its business model. UK Cdfi's have very low default rates and create impressive numbers of businesses and jobs.

So the mainstream banks are not losers by this mechanism, just as they haven't been in the United States. And thanks to the Growth Guarantee Scheme, the banks are required to hold capital only against 30% of their contribution. So in the USA, Cdfi's now hold over 300 billion in outstanding loans. They are the primary way in which small businesses borrow. In the UK, the amount of borrowing is 188 million. If anyone wants to understand the difference in resilience and growth in our two economies, much of it lies in those numbers.

This amendment creates, in effect, a local banking network committed to lend to local people and to local small businesses. So it is absolutely key to delivering the very promise which John Healey as Chancellor, made today. Good growth in every postcode. And yet I understand that Labour will oppose it and that is perverse. Without this change, the change that the amendment delivers, the Chancellor's goal is really not achievable. Liberal Democrats have brought this forward because we are determined to actually achieve growth in every postcode, and to make that a reality.

My Lord, my Second amendment in this group is number 60. The amendment is to limit an unfolding sadness. Young people turning 818 and eligible to access their own child trust funds or junior ISAs cannot do so for themselves if they lack the mental capacity, usually because of learning difficulties. The families and guardians of these youngsters, who typically manage significant sums of money on their behalf, are unable to access the funds to spend on the youngsters because of administrative and legal obstacles which take months to surmount and require paying a whole variety of court and administrative fees.

That's often amounting to £1,000. Even though the typical child trust fund for these youngsters only has £2,000 in it, 80,000 disabled young people are caught up in this awful snafu, and some 210 million is locked in the child trust funds now in our house. Lord Young of Cookham and Lord Blunkett have campaigned extensively on this issue and can confirm that the obstacles that are created were never intended. Every government Minister seems to accept that something must be done, but changing the Mental Capacity Act is incredibly complex because of concerns for precedents.

Now, this amendment takes the tack of using this bill to empower the FCA to provide cover for financial institutions holding these funds to release them based on documents from registered medical practitioners confirming incapacity, and from the families or guardians acknowledging their duties. The FCA would report to Parliament annually. It's a practical way to get the money where it needs to go, and none of this costs the government a penny. In meetings with the government, I was told that the FCA does not have scope in this case.

Then last week, the FCA announced a review into child trust funds, in part to see if there are obstacles for vulnerable youngsters. Now, it's not going to finish that review until next year, and any action will take far longer than that. But clearly that very act of initiating the review demonstrates that the FCA does have scope. And I've also talked extensively with lawyers who have confirmed that any authority created under FCA rules still sits inside the Mental Capacity Act framework and does not challenge it in any way.

Fairness for these youngsters, many of whom have life limiting conditions and for whom this money is a chance to use their own money to do something special, should not have to wait on an FCA review, which may or may not yield anything. The amendment in this legislation can deliver change

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in weeks. 80,000 very vulnerable youngsters need us to act. My Lords, Let.

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Let. Me briefly address other amendments in this group. My colleague Baroness Tyler, whom I colleague Baroness Tyler, whom I had anticipated was going to move the Post Office amendment that I cannot be here today, and she sends cannot be here today, and she sends her apologies. I have signed her amendment 61, as has Lord Holmes, amendment 61, as has Lord Holmes, and we very much appreciate his comments in the previous group as well. It's a very modest amendment requiring the FCA to report annually on financial inclusion to Parliament and its committees on the grounds that what gets measured gets managed.

The Consumer Duty does not fill the gap, as it does not apply to those whom financial institutions decide not to serve. The financial inclusion strategy is widely regarded as insufficient and doesn't include measurable targets. Now, how else is Parliament meant to scrutinise the FCA's progress on financial inclusion? If we don't follow the thrust of these amendments, this amendment, Lord McKinley's amendment on probate, I think, frankly, should be a complete no brainer for the government to support. I know he'll make that case strongly, but.

And I also am in support of Baroness Neville-Rolfe amendment 94 on financial education, though I think, as I've said to her in the past, I'm a bit cautious about trusting something as important as financial education to the FCA. But the underlying thrust that we need to be making huge headway on financial

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correct. As after clause three, and insert the new clause as printed on the marshals list. OK.

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the marshals list. OK. My Lord, it's a pleasure to speak in this group and indeed to speak in this group and indeed to follow Baroness Kramer. There is a thread which unites all of the
17:52
Lord Holmes of Richmond Portrait Lord Holmes of Richmond (Conservative)
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thread which unites all of the amendments in this group. They all make sense. They're all clear and the government should accept them. I want to talk about the amendments in my name and the ones I've signed. But before I get to that point, I want to very much echo the points that Lady Cramer made around child trust funds, and indeed, to follow her and acknowledging the great work that Lord Blunkett and Lord Young of Cookham in particular, have done for years on this issue.

Lord Blunkett words are particularly pertinent to this point. He was the Minister in charge at the time in a Labour government, and he has said on numerous occasions in this House along the lines of this was never the intention. If this was never intended. Government policy from a Labour government. We now have a Labour government. Wouldn't this be the ideal opportunity to stop this being government policy and to make the changes as set out in this amendment, and if not to make the changes along the lines of these words, for the Department to come up with some words of their own to make this change, because a review isn't the solution.

We know the issues. They've been well set out over years. We have the opportunity with this bill to resolve this issue and to make such a difference, not just to the 80,000 or so individuals who have those trust funds, but to the hundreds of thousands of family members and friends and communities who are adversely affected by this current position, adversely affected for want of government action, which could make this change and through that, make such a difference. On to my amendments around financial inclusion and the role of the various regulators.

The regulators have a lot of obligations put upon them, but I would suggest just this. How can we have in the United Kingdom a financial services regulator which doesn't have clear responsibility for financial inclusion and a clear obligation to report on what they have done to advance it? Specifying in detail all of those affected, because financial inclusion and indeed the adverse financial exclusion isn't just a matter of the same people having the same effects and suffering the same exclusion.

It is specific to older people, to disabled people, to those in certain socio economic groups, to those in certain geographies and specific solutions, and a strategy which incorporates all of that and puts it into an operational roadmap, is required if we are going to get behind solving for financial inclusion. We have a financial stability Board. I would argue that you can't have financial stability if you don't have effective, sustainable financial inclusion. It may not be measured because the adverse impact are often in other government departments and other parts of the state.

But be in no doubt when you gross all of the costs and the implications and the consequences of financial exclusion up. That is financial instability, not just for individuals, but for the communities, for our country, the financial regulators should take a role, a leading role amongst others, to get after this pernicious problem of financial exclusion. Because dogs, our society for decades blighted lives, impacted individuals and had an impact when all put together on what the government constantly and rightly go on about in terms of growth.

Well, if you want growth financially, including individuals right across this country would be a fine place to start.
17:56
Lord Mackinlay of Richborough Portrait Lord Mackinlay of Richborough (Conservative)
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My Lords, I have only put forward one amendment to this entire bill and that is amendment entire bill and that is amendment 70. Now, I spoke at great length in Committee stage and highlighted then, as I will highlight now, I'm a chartered accountant and chartered tax adviser and conducted probate work over many years. Now let's just lay out a little the framework of, of where we got to in the provision of, of IHT four two, three because it won't be familiar with, with everybody in this house, I'm sure.

The I see 423 arrangement was first rolled out in 2003 and only applied to banks and building societies or cash based liquid accounts, and it allowed for the breaking of the catch 22 situation, which executors find themselves in when they're administering estate. Because an estate is often in two parts. There are two parts called the estate, which is your cash and liquid investments, and the tax on that has to be paid six months after the end of the month of death.

Now, there's also the other part of the estate is, is property and often unquoted securities where there is a non liquid market and an instalment basis can apply over ten years. But given that the new rate of IHT interest chargeable on unpaid tax following Rachel Reeves first budget is now 7 or 4% above base, so it's currently 7.75%, no matter if it's free estate payable immediately or part of the estate, that can be paid over ten years. Given the 7.75% interest rate, which is truly penal.

Most executors would like to pay the tax as soon as they possibly can, and certainly by the due date of six months after the date of death. In the old days where IHT 423 procedure, which is a means by which a financial institution before probate can release funds. I think it was it was working because there were very few estates that were actually hit by IHT, but because of fiscal drag, and I will admit as much as anybody else, a lot of that fiscal drag occurred over our government, where the the levels of free amounts for IHG have remained unchanged since 2009 has meant that more and more estates are dragged into the IHT pot, and so the IHT 423 arrangement of getting funds out of an estate before probate can be obtained.

As I say, you're in a catch 22 chasing one's tail of having to pay the tax before probate can be obtained. The IHT 423 procedure was widened to investment, any types of investment, and that was negotiated by HMRC in 2024. So fairly recently, I think in recognition of the huge number of estates that are now facing IHT. Now, if we think the situation is fairly tough today, it gets a lot more tough from April next year when pension schemes get dragged into the scope of inheritance tax.

So I, I very much fear as a practitioner how HMRC are going to cope with this because frankly, my experience is they're not coping terribly well with the system they have to deal with today. So to then land a lot more work on a system, I would love to hear the the minister's ideas about how that would work in the future, but the IHT four, two, three procedure is going to become more and more important. Now it is a discretion exercisable by financial institutions as to whether they want to take part or not.

My amendment seeks to make it non-discretionary and rather statutory, that if a financial institution wants to do business in the UK and Richard under the FCA, they must allow IHT four, two, three and for IHG to be paid at the appropriate time. Now this came to light in my own personal experience recently in dealing with my father's estate who, sadly for me suffered an IHT bill. So the estate has a liability to discharge and it has an asset in an investment with M and G plc, one of the biggest investment houses in the UK.

It has £380 billion under management and it has 5 million customers, which means there will be a lot of executors within those customers and a lot of executor estates within those customers, for reasons unknown and known only to them. M and G have decided they do not want to take part in the IHT 423 scheme, one of the biggest investment houses in the country. So my amendment is very simple. It's good for the Treasury because money will come in at the right time.

It's good for executors and this section is about financial inclusion. Executors are often family members and they're facing a pretty tough time to then be told by institutions, no, we're not going to assist you at this very tough time. In my view, is not good enough and the government can put that right. Now, I know Committee stage. I spoke in similar terms and I know the noble Lords Minister was fairly new to his place then, and perhaps the scope of what I was asking for, perhaps not quite landed, but he's had some months to consider this.

I know one of the issues that he raised then was a worry about risk. Now, HMRC negotiated back in 2003, the IHT 423 scheme, with institutions on cash based accounts, because the only place the money can go is from that institution to HMRC bank account. And I certainly hope that that is not a bank account of risk, and I'm sure it is not. And HMRC negotiated with the other institutions in 2024 to expand the ability to use the IHT 423 scheme to a far wider range of investments.

They negotiated it themselves, and they do not feel this is an area of risk. So I certainly hope that the Minister may be able to give me some assurance that this is an area that. Well, quite frankly, will need to be looked at because of the expansion of inheritance tax into pensions next year, when executives are going to struggle even more to extract funds to pay the tax at the right time, to avoid those rather horrendous rates of 7.75% IHT, which, I'm sorry to say, given the state of the economy and the bond market, given that it's 4% above base, it could go that little bit higher.

Reading in the media today, there is an expectation that interest rates will go up by two quarter points within the next six months. So you could have executors facing 8.25% interest rates, which isn't just high, it's truly damaging. So I leave the Minister with a bit there to think about, and I very much look forward to his response. Thank you.
18:04
Baroness Altmann Portrait Baroness Altmann (Non-affiliated)
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My Lords. I fully echo the >> My Lords. I fully echo the comments that the noble Lord McKinley has just made, having had McKinley has just made, having had personal experience, sadly myself of just what he is describing. And of just what he is describing. And amendment 70 would be at least some relief to those executors who cannot access funds who see the interest racking up. While probate delays or other delays are occurring to the estate beyond their control.

But I do also urge the noble Lord, the Minister, to take back to his Department that if inheritance tax is indeed levied on unused pension funds from next April, there isn't even the allowance in the new system for a ten year delay, as there is with property. So it won't just be interest that racks up, there will be penalties and so on as well. There is a real problem in in that regard, and indeed there is a real issue with the costs involved in probate for those executors who cannot have the money released, because some institutions have decided that even though the money is going to be paid directly to HMRC to satisfy inheritance tax, they still won't release the money.

And of course, they will still be charging fees on the funds that they retain. So I do hope that the noble or the Minister will take seriously the ideas in amendment 70. And I would also very strongly like to support, and I would have added my name had I been more on the ball to amendment 60, which was so nobly moved by the noble Lady Baroness Kramer in terms of the Child Trust Fund issue, where parents and families of children who cannot make the decision for themselves.

But those parents or carers who are managing the money and have done since birth in some cases for these children, are being told that they must go through an enormously lengthy legal process just to be able to take a bit of money out of the money that the government gave for those children, which was safeguarded until age 18. And as soon as they reached that age, they were unable to access the funds. These child trust funds started in 2005.

So this problem has already been going on since 2023. For many of those who have been unable to get money from the Child Trust Fund, and indeed, there was a consultation in 2022 which recommended that at least a small payment scheme should be introduced. But in the meantime, nothing has happened. And as the noble Lady Baroness Kramer said, the costs of going to court and obtaining an order to be able to take money out of the trust fund could use up most, or even in some cases, all, of the money in the fund.

So there is an issue which does need to be addressed. Amendment 60 is a way of helping these families, and I hope that the noble Lord, the Minister, will take this back to the

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Department and come back with some positive news on this issue. Yes.

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Yes. My Lords, I have sympathy for all the amendments in this group, but I'm going to focus my comments on amendment 11 in the name of the noble Baroness Kramer to which I've added my name. If you've heard, this would require the FCA to this would require the FCA to establish a framework for assessing banks and building societies. Provision of affordable credit. Provision of affordable credit. Credit is a lifeline for families who are facing financial hardship and debt. According to a recent
18:08
Lord Bishop of Manchester Portrait The Lord Bishop of Manchester (Bishops)
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report, 60% of the clients of Christians Against Poverty and organisations that are very active organisations that are very active in my diocese find they have to borrow money to pay for household essentials and bills, not borrowing for luxuries and credits unavailable. They're left to delay essential spending and go without meeting their most basic needs and sometimes spending a little now. So if you're spending a lot more down if you're spending a lot more down the line, I'm extremely grateful for the remarks we've already heard from the noble Lord Holmes of Richmond credit inaccessibility has real consequences for those who are struggling the most.

And according to the same organisation, cap, 47% of UK adults who currently have debt they're struggling to manage have been unable to access their preferred credit option for the past two years. This kind of financial exclusion means that we're locking vulnerable families into a cycle of poverty. We're depriving them of the tools they need to climb their way out, unable to look beyond the pressing need to put dinner on the table, which those with the most desperate need are forced to sacrifice the most to get by.

Left with limited choices, they're the ones most likely to enter riskier credit deals and to pay the greatest poverty premium. And I've worked as a vicar in parishes where loans were enforced by men with baseball bats. Since Committee stage, we've had the report of the Commons Treasury Committee on the government's Financial Inclusion Strategy report highlights the need for proportionate, firm level financial inclusion metrics, focus on the largest providers and markets where exclusion causes the greatest harm, and that specifically includes affordable credit.

Report proposes that metrics should be designed to identify whether progress is being delivered consistently across firms and sectors. The committee also concluded that voluntary action pilots can't be the main driver of a national financial inclusion strategy without being clear routes to scale and consequences for voluntary action fails. So what's proposed in this amendment, my Lords, clearly has much wider parliamentary backing than simply the noble Lady and myself. Indeed, several major lenders have indicated the Treasury Committee. They'd be entirely happy to provide financial inclusion data as part of a statutory system.

My Lords, this Bill and this amendment to it provide a sensible and a practical solution to implement what the Treasury Committee itself is advocating. Importantly, it places responsibility for access to affordable credit on the lender. It introduces a clear framework by which banks and building societies can be assessed on how effectively they're meeting the financial needs of underserved communities. The new requirement for this framework to be kept constantly under review would ensure that those requirements remain open to scrutiny and are adaptable to the ever changing patterns of financial exclusion patterns that will only become more dynamic and entrenched.

Society rapidly changes. This amendment is an important step toward ensuring that our financial services meet the needs and uphold the dignity of real people, rather than expecting individuals to adapt to systems that too often exclude them from full participation in economic and community life, the only people who won't like it are the dodgy lenders who harass my people in my diocese. I pray that we will support this amendment.
18:12
Baroness Neville-Rolfe Portrait Baroness Neville-Rolfe (Conservative)
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My Lords, I am grateful to all noble Lords who have contributed to noble Lords who have contributed to this interesting debate, and I much look forward to the Minister's response, particularly on child trust funds for those who lack trust funds for those who lack capacity. I agree with my noble friend Lord Kinley, that we have a friend Lord Kinley, that we have a problem with HMRC administration of estates. With the risk of more chaos in prospect as I t on pensions arrives, we should be finding a way to improve the system, for example, by widening the application of IHT423.

I will focus on amendment 94 on financial education. This is an issue on which I have campaigned for a long time. It reflects my belief that financial capability is an essential life skill, and indeed that it is essential if we are to have financial inclusion. For those struggling to make ends meet. I will not repeat the strong case I made in committee on the 8th of July. Hansard column 149 r revised amendment would require the FCA to take reasonable steps to work with the Money and Pension Service.

The Secretary of State for education, relevant education bodies, providers of teacher training and professional development and industry bodies to support the effective delivery of financial education. And it is good that I now have the support of my. The noble Lady, Lady Cramer. My Lords, the financial decisions that people are expected to make are increasingly complex. Young people, as well as adults of all ages need a working understanding, a concept such as compound interest, inflation, pensions, savings, taxation, borrowing, and so on.

My noble friend Lord Agnew was on the BBC this weekend and has written about how 10 million adults in Britain right now have the numeracy of a primary school child. Yet we are asking young people to make extremely significant financial decisions, sometimes, for example, taking on tens of thousands of pounds of student debt without necessarily giving them the grounding in financial concepts that would allow them to understand these decisions. I was very grateful to the Minister for helping to arrange a meeting with the Money and Pensions Service, and I recognise the good work they are doing.

However, one concern I took away from that meeting was that a considerable amount of financial guidance focuses on moments when an individual has reached a major financial event, so taking out a mortgage, dealing with a divorce, approaching retirement or experiencing financial difficulty, I believe we need to be more ambitious. Our objective should be to build financial capability throughout the population, before people reach these moments, and indeed, to encourage sound investment and savings for a rainy day. This is what this amendment is intended to encourage.

It does not seek to make the FCA responsible for teaching financial education in schools. It seeks to establish a practical framework for cooperation between the regulator, maps, government, education providers and industry. I have discussed these issues positively with the Minister, and I hope he can tell the House more about what the government are doing to build financial capability, particularly among young people and through schools, and how the FCA might contribute to the cause. I'd also be grateful if you could explain how noble Lords and others with an interest in this important area can engage with work on financial education in schools and elsewhere as it develops, the prize is considerable a population that is more financially resilient and better equipped to make decisions for itself.

That's good for consumers, good for investment, good for financial services, and good for growth.

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Very good.

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Very good. I'm grateful to the noble Lords for raising these issues on financial inclusion, and I think the government does fully recognise the importance of improving access the importance of improving access to appropriate and affordable financial services, particularly financial services, particularly those. For people on low incomes and in vulnerable circumstances,
18:16
Lord Pitt-Watson Portrait Lord Pitt-Watson, The Parliamentary Secretary, HM Treasury (Labour)
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and improving the financial and improving the financial education of the nation. And therefore, a in terms of the amendments, I think we would support the intention behind many support the intention behind many of them, but are not persuaded that putting this into primary legislation is necessarily the legislation is necessarily the right way forward. But I hope I can describe what the government is doing, including actions that we have taken as a result of some of the issues that have been raised to buy a have been raised at committee.

But look, let me start with the A amendment 11. So this is measuring a what banks and building societies are doing in terms of affordable credit and then setting standards for them where if they set up something like a C DfE, that would count against what they were required to do. And I'd like just to take a step back, because there is quite a lot that is already happening by the government. Important stuff articulately described to us by Lord Holmes.

So, for example, if I start just with small businesses, the mansion House. In July, the Chancellor announced the expansion of the British Business Bank Growth Guarantee Scheme, doubling SME lending to 3.5 billion. I share the noble Baroness Cass focus on community development finance institutions through the Community Finance Task Force, we brought together banks, community finance advisers and the government at mansion House, over £10 million of philanthropic funding from JP Morgan Chase and support from BNI was announced for the sector.

The task force will publish a roadmap early next year to support the ambition of unlocking a further billion pounds of SME lending over five years. The British Business Bank's Community Enable funding programme committed nearly £120 million of funding, with a second phase intending to grow to £500 million. We're improving competition and supply through the enhancement of the commercial credit data sharing to stank to a strengthened bank referral arrangements on personal lending the government's Financial Inclusion Strategy includes measures to strengthen community finance and partnerships between Main Street Stream lenders and CDfi.

We're supporting practical interventions, including a small sum credit pilot, which Monzo has already announced as the first participant, and a transformation fund for credit unions, alongside the common bond reforms, which are even part of this bill to make sure that credit unions can do their job better. I am quite taken by what it is that the right Reverend Bishop of Manchester has said about the centrality of being able to provide this sort of fund, and I would even note that the only business person to receive a Nobel Peace Prize is someone who did that by finding a way of lending money at Unsubsidised.

I should say to poor people in Bangladesh, this is important, but there is a lot that is already going on, and I wonder whether supporting that might be something that we would want to think about. This amendment would require the FCA to act against firms who do not meet minimum lending standards. But don't we want customers and businesses to access appropriate credit and balance that with risks of overindebtedness? But noble Baroness Kramer is right when she says what gets measured gets managed.

But equally, we need to be worried that we don't create a system where people are hitting the target and missing the point. And for these reasons, I'm not sure that the government is persuaded that these amendments are the right way of. Improving behaviour or pricing, and would ask the noble Baroness to withdraw the amendments, but please to support the other actions that are being taken by the government to address this critical question. Amendments 57 and 61 concern how the regulator's report on Financial Inclusion, Amendment 57, seeks to require the FCA and PRA to publish annual reports on how they have advanced financial inclusion.

61 to require the FCA to publish an annual report on financial inclusion detailing how it had regard to financial inclusion and exercising its functions, and assess the impact of its activities on financial inclusion outcomes. These amendments would impose new statutory reporting duties that risk duplicating existing arrangements. For how the FCA reports about the state of financial inclusion and its impact on it. I amendment 57 would also place reporting duties on the PRA, whose statutory duties. Prudential regulation, creating uncertainty about what the Pra's remit is and what it would be expected to report against.

Financial inclusion, is a shared responsibility across government, regulators and particularly the industry, rather than a matter for regulators alone. My Lords, we know that exclusion is driven by a broad range of complex and overlapping factors, including wider economic conditions, technological change, behavioural drivers, accountability for improving financial inclusion should therefore remain a collective effort rather than being placed on 1 or 2 institutions whose powers extend only part to only part of the challenge. The government has set out this collective approach through its financial inclusion strategy.

It continues to work closely with regulators and firms and consumer groups to improve access to financial services and support those who are underserved. The strategy is subject to a public review next year to assess the progress made through this collective effort, and where further work is needed, and I would look forward to members of this House's input when that is published on amendment 60. This is about a. The Child Trust funds and has been spoken about passionately and very articulately by a number of people, including Baroness Altmann.

Lord Jones look decisions about who may act on behalf of persons lacking capacity are governed at bottom by the Mental Capacity Act 2005 and determined by the courts. The act provides a well-established framework, including oversight by the Court of Protection, to ensure that access to and management of a vulnerable person's account takes place with, where appropriate safeguards are in place and in that person's best interest. This reflects the very real need to safeguard and protect vulnerable people, and this amendment seeks an alternative route of access outside that framework.

But we think it's really difficult to ask the FCA to put that court protection aside. And the FCA do not even have the power to do so. Legislating to permit that would essentially require giving the FCA the power to alter the effect of primary legislation through their rules via the Henry the Eighth power, but without the same degree of oversight. And I don't think that can be the right way forward. But, look, I think Baroness Kramer mentioned this, but on the 8th of July, the Ministry of Justice convened a round table on this issue of matured child trust funds, not least because of debates in your Lordships House and young adults who lack the mental capacity that a a meeting was attended by Baroness Kramer as well as by other stakeholders and by the previous Economic Secretary to the Treasury, Rachel Blake.

Baroness Levitt spoke directly with members, with Baroness Kramer and with members of the public, and made clear that any solution to this issue would likely need to be delivered through primary legislation. Ultimately, this is not an issue that can be resolved through the FCA rules to tax or changes to tax legislation. Primary legislation would be required, but we do take this matter very seriously. I have raised this with the Ministry of Justice. I'd like to reassure Baroness Kramer that they are exploring how the government can best facilitate access for parents and carers to child trust funds on behalf of their children.

I do not have a solution, but I think we are trying. And in the meantime, the FCA is conducting a review into provider practices under child to Child Trust fund accounts, including whether there are barriers to vulnerable young adults accessing their money. And we welcome this review. But as I have said, as of now, the underlying issue lies in the Mental Capacity Act and it's not possible for the FCA to subsidise, substitute or override primary legislation in that act.

Addressing amendment 70 next. This would require the FCA to ensure that financial institutions that are registered or regulated by the FCA facilitate the payment of inheritance tax by executors before probate is obtained through direct payment schemes. And I would thank the noble Lord McKinley for raising this question. My Lords, I'm I'm sorry to hear of the difficulties that he had experienced. The duty of administering an estate often arise at one of the most difficult times in a person's life, and under the.

Understand the noble Lords desire to AR to ease that process for people who face similar circumstances to himself. Look. In the past the noble Lord has himself acknowledged that the direct payment scheme generally works well in its existing voluntary form, and that it's rare to come across a case where an institution refuses a request to pay tax due. And following our debate on this amendment, we did ask HMRC officials to contact the company where the money was lodged to understand more generally their policy on the direct payment scheme.

They confirmed that they do in fact facilitate direct payments to HMRC, normally through investment holdings. But there were, however, some type of investment products which they did not consider suitable for release directly to HMRC before grant of probate, and these included certain types of bond products that as far as we've got on this. But I would put it to the noble Lord that his amendment proposes to mandate the use of direct payment scheme by FCA regulated institutions.

However, they are. Experience and I think his experience is that most financial institutions, most of the time do facilitate direct payment schemes. There may be certain types of financial product where releasing funds to HMRC before the grant of probate does present a particular legal and technical complexity. The advantage of a voluntary scheme, but perhaps one that we can write to people who are not following well. But the advantage of a voluntary scheme is that institutions can assess the level of risk involved and make payment only if they are satisfied that they are releasing those funds correctly.

And the amendment as drafted would not allow for that to happen. Noble Lord has also suggested that this change be made through FCA rules. However, changes to primary legislation may also be required to make this change. FCA rules do not generally displace the private law framework, and making this change through FCA rules could leave financial institutions on an uncertain legal footing. But we have taken most seriously the points that he raised. They are good points and this may still be an area that needs to be addressed, but I think not by the amendment that we're looking at here.

Turning then to amendment A 94, which is very close to my heart, I am grateful to the Baroness, Lady Neville-rolfe, for continuing to raise this important issue of financial education. As you know, I teach finance at Cambridge University and so have a shared interest with her at all sorts of levels on how we do this. But I'm not sure that placing new statutory duties on the FCA to to support financial education is the right way to achieve our aims here.

The FCA already does carry out substantial work to promote financial capability and helping customers navigate their financial lives is one of their priorities. In the 2025 to 30 plan. That noble Baroness is right to highlight that the FCA cannot do this work in in isolation. It works closely with bodies such as the Money and Pension Service and she, as she said, has met up with the Money and Pension Service to discuss exactly this and I hope that she mentioned the subject of compound interest to them when she did.

There is also to be a consultation from the Department of Education that I believe is coming out this month, and I'm hoping that perhaps members of the Lords, including myself and Baroness Neville-Rolfe, might have an early meeting with the Minister to discuss our concerns here. We have also been approached. I hope I can say this at least for an introductory call from the Financial Times, who do do lots of work in this area at all, and I would be happy to recruit any other members of this House who were particularly interested in in this and to continue my engagement with the noble Baroness on this topic.

But I do not think a legislative solution is needed, and would ask the noble Baroness to withdraw her amendment. Thank you very much.
18:32
18:33
None Portrait Division
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I'm I'm not I'm not afraid. I'm not afraid. No, I'm not afraid. No, no.

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My My Lords. My Lords. My My Lords. My Lords.

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My Lords. My Lords. My Lords. My Lords. My My Lords. My Lords. My Lords. The question is that amendment 11 The question is that amendment 11 be agreed to. As many as are of that opinion will say content. To

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that opinion will say content. To the contrary, not content. Not content. Contents will go to the right by the throne, the not contents to the the throne, the not contents to the left by the bar. Very Justice

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My My Lords, My Lords, my My Lords, my Lords, My Lords, my Lords, question My Lords, my Lords, question is

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My Lords, my Lords, question is

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Content Content 69 Content 69 not Content 69 not contents

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Content 69 not contents Content 69 not contents 171. Content 69 not contents 171. So

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Content 69 not contents 171. So the not contents have it. My Lords, before I move to the next amendment, before I move to the next amendment, I should just inform the House that there was a small discrepancy in the numbers announced for the the numbers announced for the second Division, which didn't affect the result, but the result should have been as follows. Contents 246 not contents 165 that was Division two on amendment ten. And after clause for amendment 12.

Lord Pitt-Watson.
18:43
Lord Pitt-Watson Portrait Lord Pitt-Watson, The Parliamentary Secretary, HM Treasury (Labour)
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I beg to move the amendments in >> I beg to move the amendments in my name in this group, and before turning to the detail, I should turning to the detail, I should briefly note that almost all the amendments in this group were previously tabled by the Government at Committee stage, where, in light of concerns expressed about the way in which they were tabled, the government agreed to bring them back at Report stage, and it contains a modest number of minor and technical amendments, which are not unusual for a bill of this size.

They don't alter the underlying policy of the bill. Their purpose is to ensure the bill is relevant and relevant. Provision in Fisma operate clearly and consistently. I will try and be quite quick, therefore, in going through them all so as not to tire your Lordships. First, turning to amendments 1821, 23, 25. Minor technical corrections to schedule two of the bill, which, taken with clause 13, abolishes the Payment Systems Regulator and gives broadly equivalent functions to the FCA.

Amendment 18 removes the duplicative provision from the new section 131 Z nine. Amendment 21 corrects a cross reference so that the bill refers to the correct FCA payment system. Amendment 23 to 25. Ensure that references to the chair of the PSR, which should be obsolete after the PSR is abolished, are deleted in the correct places. I hope this is all making sense, but if Lords have a particular thing they want to talk about, please to indicate for amendment 73 to 75.

Once again, there are minor and technical amendments. A turning to amendment 12, which relates to clause four a it makes a consequential amendment. The new paragraph one of schedule 17 to the Fsma inserted by clause four of the bill, permits any function of the Financial Ombudsman to be performed by any member of staff as regards amendment 76 to 79, they relate to clause 33 as the noble Lords will be aware that the Bill introduces a more flexible Senior Management Approvals framework, including the ability for firms to apply for conditional or time limited approval in specified circumstances.

These amendments are technical amendments that ensure that the framework operates consistently and in line with the original policy intent. As regards amendment 81. Finally, when the bill before US grants is gains Royal Assent, there will already exist a number of overseas recognition regimes created under existing powers in fiscal 2023 to restate regimes inherited from the EU, and the amendment enables the Treasury to make consolidating provision, which would restate the existing regimes within the new Overseas Recognition Regime framework.

This is essentially a tidying up exercise. So in summary, this group of government amendments makes technical corrections to ensure the bill works as intended. I hope that noble Lords will join me in supporting these amendments.

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Amendment. Proposed clause four. Clause four, page three. Line 34. Insert the words printed on the

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Marshalled List. I thank the noble Lord, the Minister, for bringing forward Minister, for bringing forward these already tabled amendments assembled this evening in Group four, and declare my interests as a director of South Molton Street director of South Molton Street Capital. These amendments, as the Minister has explained, remove duplication. They correct drafting.
18:47
18:48
Lord Sharkey Portrait Lord Sharkey (Liberal Democrat)
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independent Fos into a subset of the FCA and make successful complaints harder to progress or achieve. Parliament designed and brought the Fos regime into being brought the Fos regime into being to provide accessible, no cost procedures for quickly determining procedures for quickly determining complaints. At its heart is the fair and reasonable test. This test fair and reasonable test. This test is abolished by the Bill. Despite having been explicitly confirmed in July last year in the Memorandum of Understanding signed by the FAS and the FCA.

This bill would reduce access to free and impartial redress, would introduce additional bureaucracy and costs, and ultimately risk damaging confidence in the financial services industry. The government has not supplied any meaningful, hard evidence that might justify, or at least explain convincingly the rationale for these reforms. It says only that I quote the government's review found that in a small but significant number of cases, FAS has acted as a quasi regulator. Close quote. It does not say how small or how significant these cases are, or how significance was defined and engaged, and it has completely ignored repeated requests from these benches to provide a clear description of the problem being addressed and of the necessity for such radical changes.

Three months ago, Second Reading, I asked for hard evidence. I got none, not even an acknowledgement of the request. I asked again on the first day of committee and again with no result, and I asked again on the last day of committee. This time the then Minister, who is in his seat, apologised for not writing in answer to my questions and promised to get back to me as soon as we have information to hand again. And I quote and I've heard nothing since.

This lack of response displays an almost contemptuous approach to parliamentary scrutiny, and it also makes it obvious that the government is unclear about the existence of any significant problem in the way the FAS and the FCA operate under their current MOU, and I am grateful to Sarah Pritchard, FCA deputy CEO, for her attempts to persuade the government to answer our questions in a meaningful way. In her letter to me in Baroness Kramer of August the 6th, she said, and I quote, we recognise that you have consistently sought further evidence from HM Treasury to support the case for reform, particularly the contention that uncertainty in decision making may be constraining innovation.

Following our meeting, she continues, we have formally reiterated this request to HM Treasury and highlighted the importance of ensuring Parliament has access to the evidence and analysis underpinning these proposals. HMT appears to deal with these things even handedly. They've ignored her as well. Her letter went on to say that one area where legislative change is being proposed concerns the interaction between our rules and the Ombudsman's fair and reasonable test. The aim is to provide greater consistency in alignment between regulatory requirements and complaint outcomes, while preserving the Ombudsman's discretion to consider the wider circumstances of the case.

This sounds like the arrangements currently in place under the MOU, but in practice the bill goes much further. It effectively reduces the scope of this discretion and reduces the Foz to a subset of the FCA. With the FCA rule book being the Determinator, it's very hard to see that this preserves the independence of the forest. And of course, independence is desirable. In evidence given to the Treasury Select Committee on July the 15th, Nikhil Rathee said that from the FCA's perspective, and I quote, we want an independent financial ombudsman service that is a really important safeguard for your consumers.

Both Mr. and Mr. Alder, the FCA chair in the same TSC session, went on to express concern about the interaction between the FCA's interpretation of rules and Fozzy's decision making. Mr. Ethi said with the system where people can try to instrumentalize it so that everything they disagree with can get pushed up to us to try to deal with in 30 days because it's deemed ambiguous. You will gum up the system. His chair emphasised the point of this, saying to Nicola's point if we get this wrong, the system will be gummed up.

As a result, the main objectives of those changes in legislation will not be met. It's very important that we get this right, and this seems to me, and still Mr. Alder saying this seems to me the very real dangers of a requirement for the FCA to respond within 30 days to a referral from the Fos. In the same session, Sarah Pritchard said we have been clear that we want the force to deliver quickly for consumers. We do not want to turn into a back door appeal mechanism where there are important matters around the intention of our rules.

Absolutely, we should be there to clarify, we already take referrals from the force to do that. The July 2025 MOU between the Fos and FCA is in operations now. It seems clear that this blueprint has taken into account current and anticipated problems, but it differs radically from the Fos proposals in clauses seven and eight, including on the absolutely critical criterion for Fos making a determination if the MOU is working and if it is working as it says, with a fair and reasonable test.

At its heart, why, then, is the government proposing to abolish that test and the Fos effective independence? Why amendments 13 and 14 address these issues? Amendment 13 removes clause seven with its referral method and four other pages of prescriptive micromanagement, including a kind of Henry the Eighth power. On page six, amendment 14 restores the fair and reasonable test, as agreed in the MOU. Consumer groups have noticed the proposed changes in the bill and many are very strongly opposed.

For example, Martin Lewis and MoneySavingExpert strongly support the removal of clause seven and the replacement of clause eight with the current fair and reasonable test. In all, 12 leading consumer organisations have written to us asking for support for amendments 13, 14 and 15. I won't read out the whole list, but they have all agreed a statement that says at a time when the cost of living crisis is pushing household budgets to breaking point, the government should not be altering the fairness test and introducing new bureaucratic hurdles in the very system that provides redress for financial loss.

Finally, my amendment 15 would create a breathing space to enable a proper evidence based review to take place and report to Parliament on its findings and recommendations. Amendment 15 sets out the proposed independent review process and scope and timelines. It requires the review to take place not before the second anniversary of the signing of the MoU, and then to report within 12 months. Amendment 99 simply puts the commencement of clauses seven and eight on hold until the reviews report has been

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laid before Parliament. Amendment proposed leave out

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clause seven. Anyone else? I congratulate them over Lord

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I congratulate them over Lord Doyle Lord Sharkey are making a very powerful case for keeping the existing system under which the Fos
18:56
Lord Davies of Brixton Portrait Lord Davies of Brixton (Labour)
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operates. I think the problem we have here expressed in the considerable representations we've received from consumer groups, is a received from consumer groups, is a lack of clarity about what the lack of clarity about what the problem is that this is meant to address, and coupled with the clear concerns about the loss of the fair and reasonable requirement, I think that's the central point. We have a system that works. We have a system in which there is a degree of consumer confidence, and the reason for interfering in that system is not clear to the bodies representing consumers.

So I think the government does have my government does have more to do in order to justify these changes now. Interestingly, I had some discussions with the previous Minister who's now sharing the same benches. Me. And one of the points that came out in discussion is that it's actually quite difficult for the government to point to cases where they expect a different result following this change to what was happening before. You can't it would be unreasonable for the government to pick on individual cases and say, those people really shouldn't have had that finding from the Ombudsman.

But that is at the heart of what is being proposed here. Now, I have had. Before my noble friend the minister's elevation. I discussed this issue with him at length, and he assured me at the time that the impact on the consumer would not be material, that the way the legislation is worded in particular, what counts as the rules that the FCA has to interpret for the falls would have to interpret for the false embraces.

The concept of fair and reasonable. And so it will certainly help me a great deal in the labour concerns that I have that if if if those assurances could be given to the House, and also to say that he probably can't express it in these terms. But to say these changes are contingent, and they will be reviewed and judged on the effect they have. And that would allow my continued concerns about what's being proposed here.
18:59
Baroness Bowles of Berkhamsted Portrait Baroness Bowles of Berkhamsted (Liberal Democrat)
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My Lord, I rise briefly to support my noble friend Lord Sharky's. Amendments. Some years ago, I gave a speech on ethics in ago, I gave a speech on ethics in finance in connection with the International Robin Cosgrove Prize, where I outlined what I called my eggshell strategy. The premise was simple we must force firms, boards, and employees to think, not merely to comply. Worry is a warning system, and the question is never how close to the line can we fail? But how far have we been? And the core issue here is exactly that rule compliance is not a substitute for fundamental fairness, and the FCA is.

Consumer Duty expresses the same principle, but that does not mean that the FCA should become the sole repository of judging fairness. We have always had the courts as the backup and the Financial Ombudsman Service, more recently, because courts are financially inaccessible for most consumers. So the proposal to tie the Ombudsman strictly to FCA FCA rule compliance assumes that if a firm follows the letter of a rule, it has acted fairly. The motor finance saga demonstrated the opposite.

For years, firms relied on nuances in the FCA's disclosure rules to argue that discretionary commission arrangements were permissible, but these were hidden discretionary commissions and any reasonable person looking at those structures from a consumer's perspective could see that various hidden commissions with costs levied on the consumer were inherently unfair. Its honesty and transparency that are always the best policy, irrespective of rural nuances. They are your defence. Firms must think like a consumer when considering what is fair, not ask their compliance officers how close to the line can they sail.

If we shackle the Ombudsman to technical rule compliance, we destroy its core statutory purpose to provide an independent common sense check where formal regulations have fallen short or lagged behind market practice. Equally, imposing a rigid ten year absolute long stop creates dangerous incentive in long tail products or hidden commission structures. Unfairness may be actively concealed. A ten year cut off rewards firms that manage to keep material facts hidden for a decade, while shutting the door on consumers who only discover the harm years later.

And a section 32 of the Limitation Act. The courts do not allow time to run when material facts have been concealed. Why should the Financial Ombudsman be forced to do so? A regime that rewards concealment is not a regime that promotes fairness.
19:03
19:04
Lord Pitt-Watson Portrait Lord Pitt-Watson, The Parliamentary Secretary, HM Treasury (Labour)
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My Lords, could I start with an >> My Lords, could I start with an apology to Lord Sharkey if I have failed to respond to him a failed to respond to him a appropriately. But perhaps I can. appropriately. But perhaps I can. In the remarks that I now make, and to Lord Davis that I am very clear that treating customers fairly is one of the business principles of the FCA and therefore is one of the criteria by which a complaint will be able to be made to the falls.

Because, look, the force plays a vital role in the redress framework for financial services, ensuring that consumers have confidence that if there is a complaint about a financial services provider, there is an independent, impartial service which can resolve that complaint and has got the ability to put things right. And that role will not be changing as a result of these reforms. However, the framework within which the falls operates is not as consistent as it needs to be, and that's not good for consumers or for financial services firms.

And that inconsistency is not surprising because the falls fair and reasonable was determined before the Consumer Duty came to the FCA, and the government's review of the falls found there is a small but possible minority of cases where that a a a inconsistency in the framework could cause falls determinations to have the effect of quasi regulations by setting standards which may not be in line with a. The FCA regulations. To be clear, these are all the FCA regulations and if you had been with me three months ago, you would have seen me writing letters to my predecessor confirming that that was indeed the case.

As far as the House of Lords is concerned, of course, the Financial Services Regulation Committee has stated in its report Growing Pains, that the falls actions can have regulatory impacts by creating precedent that the FCA firms require to follow a quasi regulator. So that's the background to why it is that we're doing this. So let me look at clause eight and amendment 14. Certainly.

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Back to the key issue that I think he rather glossed over, which is the evidence base for making is the evidence base for making these changes. We have been told it would be coming. It has not come consistently. We've told letters consistently. We've told letters are being developed, letters have not arrived. And I asked for one not arrived. And I asked for one specific letter and was told that indeed, of course it could be provided, which is to say, in the provided, which is to say, in the motor in the car finance scandal, which was basically exposed through the falls.

Well, the FCA stood to the side that a what would be different now in the consequences of the complaint? What would happen to the complaints that would be different, because this seems to be the issue that lies at the heart of this. The falls exposed a very major scandal. As the Minister will know, car finance is the second largest financial market in the UK. Nine out of ten people who buy a car that finance that car. So the redress scheme that the FCA has been forced to put into place is currently £7 billion.

And if I understand correctly, from listening to him and to his various advisers in the future, the FCA approach to the problem would have reigned. This scandal would never have been exposed. There would never have been redress. But I'm waiting for the letter that is supposed to tell me if that's exactly correct.

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Try and address that question. Look, both the FCA and the force Look, both the FCA and the force are independent. It is not for the government to decide what it was government to decide what it was that was a correct or a false decision to be made. All that the decision to be made. All that the government is saying is that the criteria by which the force criteria by which the force adjudicates should be similar to the rules by which practitioners are trying to exercise a, a, the the way in which they are working.

I think that is just good common sense. Now, there have been, and I believe there will be a publication coming out shortly from the industry of examples where the industry may think that the force treated them in a way that was inconsistent with the FCA. It is not for me to judge whether that took place or not. It's for the force to judge whether or not they think that took place or not. And I think that may be the reason that I'm proving so frustrating in being able to write back properly to the noble Baroness.

To go back, though, to amendment 14. This removes clause eight from the bill and adds a list of factors that force must take into account when determining what is fair and reasonable in all the circumstances at committee, the noble Lord and others raised concerns that clause eight might remove the ability of the force to consider fairness in the round. This is not the case. The force will still make its determination based on all the circumstances of the case. The amendments to a Fsma made by clause eight do not abolish the fair and reasonable test.

That is the final adjudication that will be made by the force and because of the principles of business, treating customers fairly is one of the criteria by which a complaint could be made, but without relevant FCA rules do apply. The government considers that false determinations should be consistent with those rules. Consumers and firms should be able to understand and rely on the FCA rules as providing the standards against which conduct is going to be assessed. Let me be very clear this extends to all the FCA rules, and I think this addresses Lord Davis's question.

That includes the principles for business. It includes the Consumer Duty. It concludes the code of conduct and these are designed to secure high standards of conduct and consumer protection. If a firm fails to meet its obligations under these broad principles based rules, then the falls may conclude that it should pay redress to the complainant. Taking into account this failure in any other relevant information, such as the impact the failure had on the complainant, there is no requirement for for a firm to have breached one of the more specific, detailed rules in the FCA's rule book, the Consumer Duty, was introduced by the FCA to improve consumer protection across all financial services and the government, confident that it sets a high standard of care that firms should provide to their customers.

It includes a requirement to act to deliver good outcomes, an expectation that firms will act in good faith, avoid causing foreseeable harm and enable and enable and support retail customers to pursue their financial objectives. The Consumer Duty, as I pointed out, did not exist when the falls was established and the fair and reasonable test was introduced. It's right that the framework governing the falls should be updated to reflect this landmark piece of consumer protection regulation. Without clarification, we're left with a situation where two different bodies are independently making assessments of what standards firms need to meet, and that does not seem like a sensible approach.

The reforms to the fair and reasonable test strengthen consistency across the framework. They do not weaken consumer protection. Turning to amendment 13, which would remove clause seven from the bill in committee, the noble Lord suggested that the referral mechanism would, in effect subordinate the force to the FCA. This is not the case. The force will remain completely independent and responsible for resolving complaints between consumers and financial services firms. The FCA will not determine individual complaints.

It will not investigate disputes. It will not direct the outcome of cases. These functions will remain entirely with the force. What the amendments to Fsma made by clause seven do is ensure that, where the force considers there to be an ambiguity within the FCA rules, the FCA must provide an opinion requested by the FOS. It is entirely consistent with its statutory role as a rule maker. The force will then use that opinion, applying it to the individual circumstances of the case to make a determination.

Lastly, some noble Lords express concerns about the potential for referrals to lead to delays, including with reference to the FCA's comment about the potential operational load. The government recognises the importance of maintaining the force's quick and informal model, but the government anticipates only a very small number of cases are going to be referred to the FCA. The vast majority will be resolved without the need for referral to avoid the. To avoid delays, the timeline for the FCA to respond will be set out in secondary legislation.

The FCA and the falls are already gaining practical experience of operating such a mechanism by trialling arrangements through their Memorandum of Understanding. The experience gained through this trial has provided valuable lessons for the implementation of the legislative mechanisms. The government will continue to work closely with the falls and the FCA ahead of these changes, taking effect, preparing them to ensure that the new system works effectively. The memorandum of understanding by the ways is creating a very small number of referrals from the falls to the FCA as regards amendments 50, 15 and 99.

These provide for independent person to carry out a review of the operation of the Memorandum of Understanding between the falls and the FCA. The combined effect of these amendments would mean that changes delivered through the Bill would not take effect until at least 2028. That means two more years of ongoing misalignment. The government conducted a review of the FOS in spring 2025, with the conclusions announced by the then Chancellor, July 2025. It then took a 12 week consultation period on the government's proposals.

A further review would duplicate the government's review and introduce unnecessary delays in delivering these important reforms, and is therefore not necessary. My Lords, the Bill makes important reforms to the redress framework to increase clarity and consistency while preserving the strengths and the independence of the falls, and I therefore ask the noble Lord to withdraw amendments 13, 14, 15 and

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99. AML said. My Lords. I want to thank the

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My Lords. I want to thank the Minister and all the others who've spoken for the way in which they've covered the issue, but it is notable, I think, that. A lack of notable, I think, that. A lack of evidence for the proposals, reform evidence for the proposals, reform proposals still exists. We still have not seen what it is that is wrong in the current system. We've not seen any hard data. We've soft data that suggests that there is a problem with the operation of the falls, and it is the case as well that, of course, the definition of
19:17
Lord Sharkey Portrait Lord Sharkey (Liberal Democrat)
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the determinator contained in the Memorandum of Understanding actually contains direct references actually contains direct references to the FCA rules in their book, and that is the expanded definition that is the expanded definition that is currently being worked on by the Fos and the FCA. But I still the case that I can't see a problem, a compelling problem that's being a compelling problem that's being addressed by the radical changes that the government seems bent on making. I would like, if possible, at some stage, to continue the conversation about the evidence, because I do feel that we're somewhat wide apart and perhaps unnecessarily, when in fact we seem, on the one hand, to have a system that works very well.

And on the other hand, we have a desire for fairly radical reform. I'm not sure that plays out happily together, but I'd be happy to discuss that if the Minister is willing to do that. Having said that, particularly in my remarks about the evidence, I would like to. Withdraw amendment 13.

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Is it Your Lordship's pleasure that amendment 13 be withdrawn? It

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is by leave withdrawn. I would like to test the opinion

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I would like to test the opinion of the House on amendment 14. Is that amendment 14 be agreed

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Is that amendment 14 be agreed to. As many as of that opinion will say content. And to the contrary,

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say content. And to the contrary, not content. Not content. I'll put the question again, my Lords. The question is that amendment 14 be agreed to. As many as of that opinion will say content and to the contrary, not content. The. The question will be decided by a division. I will advise the House when voting is open. Voting
19:19
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19:30
None Portrait Statement: Local Government Reorganisation
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Local Government reorganisation Baroness Taylor of Stevenage.
19:30
Baroness Taylor of Stevenage Portrait Baroness Taylor of Stevenage, Parliamentary Under-Secretary (Housing, Communities and Local Government) (Labour)
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My Lords. delivering. >> Good growth across the country, empowering every postcode with places able to set their own ambitions and integrate services to ambitions and integrate services to meet people's needs. Achieving that requires a fundamental rewiring of the state, giving power held in Whitehall back to the people and the places where they live and work. As we set out in the Cabinet statement on rewiring the state, effective and sustainable local government is the vital foundation of our devolution ambitions, as we are now more determined than ever to devolve power closer to the people we represent.

It is only right that, as a new Secretary of State, I make sure that everything we do is working towards that plan to change Britain without delay, the Prime Minister told the House last week he was prepared to look at local government reorganisation, and he has asked me, as his community secretary to do that. Throughout this process, the government has listened to representations from members of this House, councils and the public, and I want to be clear how critical, given how important they are to our democracy and the services they provide for local people.

But there will always be a wide range of divergent views, which means achieving perfect consensus will never be possible. I understand that feelings run high and people naturally have strong views, but in different directions. In that context, in the light of legal advice, I want to satisfy myself, firstly, that the right processes in place, that it is robust and of course complies with the law. And secondly, I want to fully test whether our proposals for local government reorganisation meet the priorities of a new administration and a new Prime Minister, and any additional considerations.

With those two considerations in mind, I have decided to withdraw the decisions made in March this year for Essex, Hampshire, Norfolk and Suffolk and, where relevant, their neighbouring unitary authorities. The government's legal representatives, have notified the court of this step. I have also decided to conduct a full review of the local government reorganisation programme, including the decisions that were announced in July of this year for a further 14 areas and those two areas where decisions have not yet been taken, and I ask that reorganisation activity be paused.

These 14 areas are Derbyshire, Devon, East Sussex, Gloucestershire, Hertfordshire, Kent, Lancashire, Leicestershire, Lincolnshire, Nottinghamshire, Oxfordshire, Staffordshire, Warwickshire and Worcestershire. And where relevant, their neighbouring Unitaries. I do not take this lightly. I recognise the huge amount of work that has already gone into progressing reorganisation in each of these areas and I'm very grateful for it. I know that many members of the House and many council leaders outside the House will have lots of questions about what this means for them and their communities, and I will try to address those as best I can today.

Firstly, we are working across government on rewiring the state following the Cabinet statement. We recognise that effective and sustainable local government is fundamental to our ambitions for a devolved country, which works better for and with communities. We will consider this issue as part of this wider approach. Secondly, as an immediate step, I have asked the Minister for Local Government Devolution and regional growth to undertake a rapid review of the current local Government reorganisation programme, including the position in the four areas where we have withdrawn and the further 14 areas that we are reviewing and pausing alongside the two remaining areas.

New councils for East and West Surrey will be unaffected because they are already established in law and have had their first elections and are on track to go live in April 2027. Thirdly, I want to be clear in terms of what this means for elections scheduled next May. Elections will go ahead in May 2027 on existing council boundaries. Finally, my department will provide support to council leaders, officers and members representing impacted areas, and the Minister for Local Government has written to leaders and copied members of this House.

I want to ensure that all those of you who represent these areas feel included in considering their future, and will update the House at the earliest opportunity. My ministerial team and senior civil servants from the department

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are ready to discuss and to work with you. My team will proactively reach Out to discuss the implications

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Out to discuss the implications locally in detail. My department remains committed to working in partnership with local government, partnership with local government, both in this immediate period and in the longer term, and I commend this statement to the House.

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this statement to the House. My Lord, I thank the noble Baroness, the Minister, for repeating this quite significant statement. The government has suddenly paused the reorganisation plans it started for local government. My Lords, this is astounding. Proposals to merge
19:35
Baroness O'Neill of Bexley Portrait Baroness O'Neill of Bexley (Conservative)
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councils in Norfolk, Suffolk, Hampshire and Essex have been Hampshire and Essex have been withdrawn. The 14 areas that formed the third tranche of the programme have also been put on hold. Cambridgeshire and Peterborough and West Sussex, who were awaiting the government's decision, now face further uncertainty. Uncertainty further uncertainty. Uncertainty for residents, councillors and council officers. We're told this new review follows updated legal advice, but also to align the plans for local government with new government priorities.

The only area which is unaffected is Surrey, where the two new unitary authorities have already been established. This has come too late for them. It was only in June that we were told that this government remains fully committed to the timetable already set out that their local government reorganisation programme was a once in a generation opportunity to ensure that councils genuinely represent the communities they serve today and stand and stand the test of time. Time has hardly passed and the programme is paused.

Let us not forget local elections were postponed. Now elections in May 27th will go ahead on existing council boundaries. So much time, not to mention money spent drawing together proposals, conducting and responding to consultations nationally and locally. Staffing, governance, finance and service delivery about to be restructured without, by the way, any guarantee that this would end up saving taxpayers any money or improve services for local people? Are we now being told it may have all been for nothing because the government did not think through the legal implications, or because the new Prime Minister simply doesn't fancy it? What now is the estimated total cost of this review, both to national government as well as to the authorities affected? Do those making those decisions have any idea how damaging the uncertainty and inconsistency is to many councils, including staff, recruitment and staff morale, councils are losing large numbers of staff who want certainty on their futures and for the same reason, cannot recruit replacements.

Your Lordships House spent eight days in committee and two days in Report stage on the English Devolution and Community Empowerment Act and the noble Baroness. The Minister said at Second Reading that would drive the biggest transfer of power out of Whitehall to our regions and communities in a generation. However, we now have the rewiring of State White Paper to look forward to, which will focus on devolution and local government. Can the noble Baroness, the Minister, please clarify if this new Bill is to deliver? Devolution? Was the English Devolution and Community Empowerment Act, not devolution at all.

As we said at the time, this is not community empowerment. It shifted power away from the local to the regional and to Whitehall, from locally elected councillors to mayors, from democracy rooted in local identities to new managerial, technocratic boundaries. Will this new bill reverse that direction of travel? My Lords, we are hearing the same platitudes from this government to disguise its lack of long term vision. So can the noble Baroness, the Minister, tell us what exactly are the priorities of the new Prime Minister? How will they differ, and what certainty can she give to local councils receiving this news? I look forward

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to her response. My Lord, I do thank the noble

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My Lord, I do thank the noble Baroness, Minister, for repeating the statement. My Lords, across the statement. My Lords, across England there will be thousands of councillors and council officers councillors and council officers who have worked for months, some for years, in seeking to deliver an effective solution to the government's top down reorganisation diktat. They will
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Baroness Pinnock Portrait Baroness Pinnock (Liberal Democrat)
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have devoted scarce resources in funding as well as in precious time today. They will be despairing all their careful planning has, with the stroke of a ministerial pen being confined to the waste bin. Now the principle of devolution is Now the principle of devolution is the right one. Unfortunately, the government has conflated devolution with local government reorganisation and that has resulted in this sorry mess. There are any number of questions that the noble Baroness the Minister, must answer.

Given that in July the Minister gave an assurance in this chamber that a decision on the final reorganisation plans for the remaining councils would be made in October. So I am confident that there will be many specific questions about individual county councils. So I will restrict my questions to general principles. So the first one is this. Given that the government decision has been made following legal advice, can the noble Baroness, the Minister, publish that advice and provide a summary for us in her response tonight? Will the Minister tell the House when those councils with agreed plans were informed? Some councils had already developed financial planning on the basis of agreed reorganisation.

What support will the government provide for those councils now facing severe financial pressures? This announcement today has left councils and their residents in limbo. The statement makes it clear that elections for districts will take place next year. Now that indicates a longer time frame for reorganisation than a speedy review. Asking people to become councillors for a non-specific period is difficult and equally encouraging. Voter enthusiasm will be more challenging. What are they voting for? How long will it last? Local democracy has been the real loser in all this.

With elections cancelled and democratic terms of cancelled and democratic terms of office extended on a whim. Now that knew the parameters for this were determined by the government for reorganisation and the process defined defined the importance and relevance defied. I beg your pardon, the importance and relevance of local communities. For example, new councils were told they had to be at least 300,000 in population, with a maximum around 500,000. Though of course, one of the sorry new councils is 700,000.

That was stated when many existing unitary metropolitan councils are smaller than that. Calderdale, for instance, in my own West Yorkshire, has a population of just over 200,000. Many of the councils in the Manchester mayoral authority are around 300 000 or less. And that was one of the reasons why communities lost out in this top down reorganisation. This is a thorough and embarrassing dog's breakfast for the government. Does all stemmed from the flawed notion that the financial crisis facing county councils could be resolved by changing the the seats around the table, by changing, by going for reorganisation and ignoring the historic community ties that wrap around which many councils were created.

So the government has a much to do to put the local back into local government, and I do look forward to a good explanation from the Minister.
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Baroness Taylor of Stevenage Portrait Baroness Taylor of Stevenage, Parliamentary Under-Secretary (Housing, Communities and Local Government) (Labour)
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My Lords. >> Have to deal with the front benches first. Lord Fuller. Thank you, though, for your enthusiasm. I'm very grateful to both noble I'm very grateful to both noble Baroness Cass for their comments, and believe me, I do understand the frustration that's been expressed. The. The noble Baroness O'Neill asked about updated legal advice and government priorities and spoke about the. The fact that in June we were saying we were fully committed to the timetable. I think it's really important that we don't conflate the the timetable and the commitment to LGR.

We have. As I said, first of all, there has been additional legal advice, but also we have a new Prime Minister and a new Secretary of State. I think it's only right that in the view of both of those, we take a step back and have a look at these issues. It wouldn't be right not to do so. The noble Baroness O'Neill spoke about elections being postponed and time and money that's been spent, and about improving services and financial gain.

The vision from the government is still that local government reorganisation will go ahead. We're not stepping back from that in any way whatsoever. And my my right hon. Friend in the House of Commons stated that quite specifically and many times this afternoon that our intention is not to roll back from local government reorganisation. We do see that as a way of improving services, of generating the growth we all want to see and of making much more use, efficient use of the finances that go into local government and the work that's gone in already, which the noble Lady mentioned, is certainly not wasted, because we're not scrapping the LGR process.

We're taking a step back to have a look at it. But we are not scrapping the process. The noble Lady asked about the cost of the review and the uncertainty. Well, I think the uncertainty that's caused by legal uncertainty is just not tenable. This programme that we're setting in place will last probably for at least 50 years and maybe longer. The last local government reorganisation did, and it's very important that that's built on a firm foundation of legal certainty. Otherwise, our colleagues, not just in local government but their partners in business and in the third sector, will be facing that uncertainty going way forward into the future.

So we need to make sure that we have the certainty we need. And I still stick by what I said when we were debating the English Devolution and Community Empowerment Bill. This is the biggest transfer of power out of Whitehall. That's why it's not it's never going to be straightforward or easy to do. It's a dramatic change to the way the state is wired, and the Prime Minister wants to see that happen. We do want to get powers and funding out of Whitehall.

I think there wasn't much disagreement to that in the chamber when we debated the English Devolution Bill. And to do that, we need a firm foundation of local government to build on. And the other question the noble Lady asked me was around the Prime Minister's commitment and the long term vision. I don't think, in terms of promoting devolution, you could have a stronger advocate than our Prime Minister. He has lived and breathed devolution and the devolution agenda during the time when he was the mayor of Manchester.

He genuinely believes in the transfer of power to every postcode in the country, and I think he set out very clearly that he does have a long term vision for this country to do just that. The noble Baroness Pinnock spoke about top down reorganisation. Well, it absolutely was not that. I've sat through many meetings with our local government colleagues. They came forward with their own proposals. They didn't always agree in each area, and it was very difficult sometimes to work through the the different options that they came forward with.

And it will continue to be so as can their views, some of them very strongly aware as we go through this review process. Certainly the process is not confined to the waste bin, as she put it. It is very firmly still on the table and there to be worked on. And I look forward to working with our colleagues in local government as we go forward. The noble Baroness Pinnock spoke about the assurance that decisions for those areas where we hadn't taken decisions already would be made in October.

Well, that's we are going to work as quickly as we possibly can on this review. My Right Honourable colleague, the Secretary of State, referred many times this afternoon to the fact that she wants this review to proceed at pace. This is not a kicking into the long grass or anything like it. She wants that to move forward as quickly as possible, so we can provide the certainty that local government needs the noble Baroness Pinnock mentioned the legal advice and of course we considered legal advice provided as part of the judicial review process and the decision to withdraw the four decisions reflects that legal advice.

It is a long standing principle. She will know only too well that government does not publish or comment on legal advice. The legal powers for local government reorganisation remain valid. There are no court findings against the government and it's, as I said, it's a long standing principle that government doesn't comment on or publish legal advice. We want to be able to review the decisions to reassure, so the Secretary of State can reassure herself and the Prime Minister the right ones. And respecting the court process means the way to do this is withdraw those and consider the programme afresh.

The noble Baroness, Lady Pinnock, also asked about what provision, when will councils informed. Sorry, was her next question. They were told today because we didn't. We hadn't. This was being. The legal advice was being considered. Over the weekend, the Secretary of State informed the councils involved today of the fact that the. Well, the 14 that were going to be paused and reviewed and the four that have been withdrawn from the court process. So that's the answer to that question.

In terms of financial provision, Secretary of State received many questions on this this afternoon. It is, of course, the case that the government were putting forward some £63 million to help councils through the transition phase of local government, and she will consider that the issues around funding, as we go forward through the review process process in terms of elections for next year, the elections will be held on the usual boundary elections. So if your council was up for electing by thirds next year, that will happen.

And if it's elections of a full council, that will happen. I think from talking to councils, in councils in my local area, they are all very keen on the process of LGR going forward and I think they will look forward to this. They know that the process is coming. They know the process is paused and not stopped, so they will continue to work with their local parties and their local councils as they have done so well in the past.

I think in terms of the importance and relevance of council size, we have always said that council sizes were not fixed and having gone through all of the all of the applications myself, it was very clear to see that you can't make a fixed point in terms of size. You have to look at each area individually. Geographies are different, demographics are different, and it's very important that each area is considered separately according to its needs. And on the issue around historic communities and all of the other issues, this pause will give the opportunity for people to who had those strong views, to put them forward again in the review process.

I'm sure they'll do that. Nobody's backward in coming forward in this process. I look forward to hearing from many of them, but I do think the right thing to do at the moment is to take this short pause and go over, particularly in respect of, as I said, the legal advice and the Prime Minister's and Secretary of State's wish to review this so that when we go forward, we will go forward with the certainty that everybody in local government needs.
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Baroness Taylor of Stevenage Portrait Baroness Taylor of Stevenage, Parliamentary Under-Secretary (Housing, Communities and Local Government) (Labour)
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Yeah, yeah yeah yeah, very good. >> Yeah, yeah yeah yeah, very good. >> Well, I think the the strength of the noble Lord Fuller representations on this matter representations on this matter shows the differing opinions that we have seen throughout this process. There are different views taken. They are very strongly held on all sides in relation to his question. And it's important that we continue to take those into account, and we will be continuing to look at those as we go through the review process.

First of all, and I should have made more emphasis on this when I was speaking earlier, I do recognise the amount of work that councils have already put in to preparing for reorganisation. I did say that this work isn't wasted and it won't be, but I appreciate that comes with a cost and that financial commitments may have been made and we will look at this as part of the review. In terms of I've already spoken about the transition costs, the overall costs of reorganisation are, of course to be taken into account.

But of course, we also know that reorganisation can save money. There was a £90 million saving in North Yorkshire and £75 million in Buckinghamshire since their unitaries were established, and I know that the noble Lady Scott saved money when she reorganised Wiltshire into unitary. So there are also. There are legal costs associated. LGR is often contested in the courts. It's a right and proper part of our democratic system that important issues can be challenged in the court system. Government engages legal advisers to defend those decisions whenever challenges are brought, and that does bring costs with it.

But the questions are so significant, and the implications are so long lasting, that the extent of legal costs should be viewed in that context. And of course, legal costs will be determined in the usual way.

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My Lord. Can I start by acknowledging the very hard work and real work that very hard work and real work that the. My noble friend the Minister has been putting into this work over the last couple of years, and over the last couple of years, and also to those councillors who've been arguing for these changes in their boroughs and counties over their boroughs and counties over the last few months. Now, I speak as someone who's entirely supportive of these proposals. I
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Baroness Taylor of Stevenage Portrait Baroness Taylor of Stevenage, Parliamentary Under-Secretary (Housing, Communities and Local Government) (Labour)
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I thank my noble friend for his >> I thank my noble friend for his his support for the overall programme. We are asking councils to pause work on progressing local government reorganisation. It will be a short pause and this means that councils should cease work on implementing previous decisions. But of course there are shared projects that it will be useful in any potential reorganisation and of course they can be continued. We want this process to be done with good local engagement, and we will listen very carefully to the views that councils provide.

Officials, of course, will be as they have been throughout this process, will proactively engage with places and support them throughout the period. Ongoing work, for example, could include improving data quality and data sharing, mapping services, financial finances, workforce assets and contracts, identifying key risks and dependencies, undertaking ICT and digital recovery discovery work, and continued engagement with partners and residents. So we want we recognise the need to provide certainty as quickly as possible so areas have clarity over their future and we will work at pace on the review and we will report back

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to Parliament at the earliest opportunity. I draw.

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I draw. Attention to my registered interest as chair of the Cambridgeshire Development Forum. I Cambridgeshire Development Forum. I think the House understands that the government will not publish its legal advice, but whether these legal advice, but whether these these decisions are the result of specific legal advice about the nature of the decisions that were nature of the decisions that were made, or indeed changes of mind on the part of the Prime Minister and the Secretary of State. Wouldn't it
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Baroness Taylor of Stevenage Portrait Baroness Taylor of Stevenage, Parliamentary Under-Secretary (Housing, Communities and Local Government) (Labour)
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Yeah, yeah. >> Yeah, yeah. >> And I thank the noble Lord Lansley on in terms of criteria that will be looked at as part of that will be looked at as part of this review process, I think. So I think it's important that we we think it's important that we we take account of the legal advice. We're not going to publish it, but that we take account of it and look at what the impact is on the future programme. It would be unwise not to do that in terms of the the issues around Cambridge.

You asked me about elections. Well, elections will let me start with the October decision making. We had said to colleagues in Cambridge and Peterborough and in indeed in West Sussex, where decisions have been taken that we would endeavour to get decisions in October, those both of those areas will go into the review process. So those decisions will be announced alongside the other areas that are being reviewed now. So I hope that won't give too much of a further delay for people in Cambridgeshire and Peterborough and West Sussex, but I know that noble Lords will be aware that there is.

The very important part of this process is the Statutory Instruments that have to go through both houses. So we were on a very tight timetable for all of this anyway. So it's it's not likely that elections will be able to go ahead to the authorities as planned in 27. That's why we've said that elections will go ahead. But on the old boundaries. So I hope that answers his questions. Oh, sorry. The noble Lord Lansley asked me about spatial planning. I think the the devolution work can continue to look at planning and how that's going to work through in the devolution process.



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My Lord. My Lords, if the.

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My Lords, if the. Branches, then we can hear. From the Labour benches and the conservative benches.

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conservative benches. My Lords, if the legal concerns were serious enough to halt the were serious enough to halt the programme today, suddenly rapid action. Can the Minister tell the
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Baroness Taylor of Stevenage Portrait Baroness Taylor of Stevenage, Parliamentary Under-Secretary (Housing, Communities and Local Government) (Labour)
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Well, I hope I've already made clear that I don't think any of the clear that I don't think any of the money that's been spent is wasted, that the work will go ahead on that the work will go ahead on local government reorganisation and on devolution. So the work that's been done, and, you know, when I did the engagement meetings on this, it was really interesting to me to hear stories from around the country of councils that had literally not spoken to each other for 20 years or more, who had sat down and worked together on this.

Now, we've really appreciated that working together. It's been a really good way of bringing councils and councillors together to work on this jointly, and we have no intention of rowing back on it so that money is not wasted. The the money's not down the drain, the money that has been spent and the

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work that's been done will be used to in the future programme. My Lords, I want to say how much

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My Lords, I want to say how much I support the government's policy in this area. It's a brave policy in this area. It's a brave policy and one I think the opposition parties have behaved shockingly badly about over the last few badly about over the last few months. Today's a difficult day. Absolutely. I feel it difficult as well, but I think it needs to be said that this government has support for the prospect of proper devolution. How can proper devolution take place without some
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Baroness Taylor of Stevenage Portrait Baroness Taylor of Stevenage, Parliamentary Under-Secretary (Housing, Communities and Local Government) (Labour)
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I thank my noble friend. I don't think it's helpful for me to comment on individual areas. comment on individual areas. However, he's right to point to the the focus on growth. There were the focus on growth. There were three main focuses. There were that we we looked at were the the potential for growth and making sure we could achieve that across the country. Obviously, they're very key services that local government delivers and making sure that those are protected and supported going forward, and that will be possible to deliver those key services to vulnerable people.

And, of course, the issue that the noble Baroness Pinnock mentioned, which is community identity, wherever we we looked at those issues, there were different opinions in different areas, but that's why we stuck very firmly to the criteria we set ourselves. The growth criteria came in the first criteria. We looked at all of the proposals that were before us in respect of that, but we mustn't make any bones about the fact that we do need to change things to get the growth we want to see.

That involves both making sure that local government is enabled to drive that growth forward in the way it's organised, and that we have the devolution so that people who are taking the decisions around growth and the economy in their local areas, as well as on key services, are in that local area and have some skin in the game in

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relation to the decisions that are being taken. Can I ask. Baroness Shephard?

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Baroness Shephard? Lib-dem elections. Do take place.

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Do take place. Next year? What period will the people serve that are elected? Will it be one year, two years, three

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it be one year, two years, three years, four years? Good question. No one has a clue.

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No one has a clue. Well, elections that take place next year, if the program works through as we anticipate it will, the shadow elections will be in 28.
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Baroness Hoey Portrait Baroness Hoey (Non-affiliated)
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is shrinking in insurer capacity, it's becoming less competitive and it's leaving consumers and businesses facing higher premiums businesses facing higher premiums and fewer choices. And it's an issue that the British Insurance Brokers Association has been Brokers Association has been highlighting for some time, and has been getting in touch with noble peers and members in the other peers and members in the other place. The evidence suggests, my Lords, that the root cause is claims inflation, driven by various factors that are within the power of government and regulators to address.

Now, let me be clear to noble Lords and especially to the noble Lord, the Minister. I am not calling for a new, immediate regulatory regime without proper consultation. Rather, the amendment would provide the Treasury with a targeted enabling power, subject to consultation and affirmative parliamentary approval, to extend FCA regulation of claims management companies to Northern Ireland. They are, of course, currently regulated in Great Britain by the FCA. I would like to give just a short backdrop to this amendment, which paints a very stark picture in home insurance.

Brokers in Northern Ireland now have access to just six markets, down from 11 in 2020. In motor insurance, the number of available providers has fallen from more than 15 to just eight over the same period. And as competition is reduced, premiums in Northern Ireland have continued to rise to rise, even as prices in Great Britain have begun to stabilise or fall. In terms of motor insurance, northern Ireland consumers are being affected by premiums increasing year on year, and they're already paying much higher premiums than compared to the rest of the UK.

And of course, as noble Lords will know, the access to public transport in the extensive rural areas is very limited in Northern Ireland, so there is no regulation of claims management companies in Northern Ireland, and this has led to many of them exercising poor practices, which in turn leads to inflated claims settlements and therefore higher premiums for consumers and businesses as fewer insurers have a physical claims handling presence in Northern Ireland. So the prevalence of cmcs has become more apparent.

The number of cmcs has grown rapidly. We estimate there are probably twice the number operating in a year ago, suggesting that it's a very lucrative enterprise. Adverts appear everywhere, pointing people to them if they have a car accident, etc. and of course in GB, since the regulation came in, Cmcs operating have halved since 2019. Another reason for the growth of Cmcs is their attraction of higher personal injury awards in Northern Ireland, which makes it a lot more lucrative for them. The difference between Northern Ireland and England and Wales is striking whiplash, for example, in England and Wales, a compensation of around 1500 would be paid.

In Northern Ireland it could be up to 15,000, with psychological claims added on. Those higher awards obviously feed directly into higher insurance premiums for consumers and businesses alike, and in some cases we have clear conflicts of interest. Vehicle hire, legal services and cmcs are brought together under the same commercial structure, creating clear conflicts of interest, with some cmcs operating various companies under different names but with the same overall ownership. Ultimately, these additional costs are paid by consumers through higher premiums.

Now, my Lord, as we all know, insurance is not a luxury. It's essential. It must be accessible and affordable for all. And it's very unfair that we in Northern Ireland are paying a higher premium compared to those in Great Britain, and the consequences of no regulation at all of cmcs are becoming increasingly clear. Major insurers have already withdrawn from the entire Northern Ireland, from Northern Ireland, and new entrants are refusing to come into it. Some insurers are refusing to insure young drivers at any cost, and some insurers are refusing to cover certain postcodes where there's a high prevalence of cmcs and perhaps perhaps a more perceived evidence of collusion.

One insurer has reportedly reduced its Northern Ireland motor business by 75%, and customers of the major broker have seen their premiums rise by 45% between 2023 and 2026. And all of this, of course, could lead to market failure. Northern Ireland consumers deserve access to affordable, fair and competitive insurances, and to achieve that, we will need coordinated action from the Northern Ireland Executive, the Treasury, Westminster regulators and industry alike and we have to work together to make this happen. Everyone agrees there is a problem and now we have to fix it.

And the issue has become quite a political hot potato in Northern Ireland, because the Department of Justice, the Department of Finance, the Department of the economy and the Department for for infrastructure have all been examining it. The FCA are aware of the problem but powerless to protect consumers. The Treasury is aware of the problem. MPs and MLAs continue to hear from frustrated constituents. And yet, despite all this, and I think probably an agreement between certainly between the opposition frontbench, I hope, and and and the Liberal Democrat front bench.

Despite all this, nothing actually has changed. And there is no regulation while responsibility is passed from one department, committee regulator and jurisdiction to another, premiums remain higher, choice remains limited, and opportunities are denied to people who can least afford it. The solution does not require years of further review or consultation. It requires action. Primary legislation is needed and this bill provides the perfect vehicle to deliver it. The amendment is practical, it's proportionate and it's targeted. It seeks to address what may become a market failure and creates the conditions for a more competitive, affordable and accessible insurance market in Northern Ireland.

This is not a party political amendment. It is simply an amendment which seeks to ensure fairness in Northern Ireland for consumers and to stop the rip off merchants operating in this field. I hope that the government will engage constructively with this amendment and work with us before it goes back to the other place so that we can get the regulation needed. It was interesting that this bill, the actual title of the bill, is all about regulation. This is the one place in the United Kingdom that we do not have that regulation.

We have the ability to make it happen. And I hope that the noble Lord, the Minister, will have some positive things to say. I beg to move.

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Proposed after clause 12 insert the new clause set out on the

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the new clause set out on the Marshalled List. I rise to. Support the amendment standing in the name of Baroness Hoey. I believe it's an amendment which is believe it's an amendment which is well thought through, which is balanced and modest. I think the House will be relieved that for House will be relieved that for once neither myself or Baroness Hoey, or even mentioning the Northern Ireland Protocol or the Windsor Framework as part of this, albeit that that may or may be to our shame in that regard, it is
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Lord Weir of Ballyholme Portrait Lord Weir of Ballyholme (Democratic Unionist Party)
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about actually trying to tackle what is a genuine problem for consumers, and I believe it is one consumers, and I believe it is one that is very much within the keeping of this bill, because I think if part of the purpose of this bill is not necessarily to create increased regulation, but to have better and smarter regulation, have better and smarter regulation, and this proposal, I think, very much fits in with that. It is one much fits in with that. It is one that is cautious in its nature, because it does not compel the government to take immediate action.

It gives the power to Treasury and indeed, before any next steps could be taken, there would need to be both consultation, discussion and agreement with the devolved institutions and indeed the with the respective departments, and also be in a situation in which it simply would not be acted upon by government, but would have to be brought forward through the affirmative procedure. So I think this is taking this in a sensible approach, one step at a time. But ultimately it's a deal with a very real problem.

I think, for any of us who've been involved politically in Northern Ireland, and I'm sure across the chamber, there will be agreement that in every election, whenever you're out canvassing, there will be people will raise the issue about the higher rates of insurance. And indeed, even as recently as the last general election, there were a number of candidates of different parties who said that this is something that had to be tackled, whatever the long standing problem. And I think part of the issue is highlighted, I think, by Baroness Hoey, that has tended to fall between the cracks, that it's not particularly under the exact remit of any one particular department.

But whatever the long term issue in relation to this, it has become exacerbated in recent years. We have seen, particularly since the end of Covid, in the last few years, where we've seen shrinking choice, that we've seen the number of insurance brokers and companies reducing within both home and motor insurance. This has led also to a vicious cycle of increasing premiums. And that in and of itself has meant that it has been more and more dependent upon the role of cmcs.

And we know that the direct impact of Cmcs has perhaps been to raise the overall premiums by around about 30% in Northern Ireland. Now, as indicated by the proposer of this amendment, it is not purely the role of Cmcs that has led to those increases, but they've played a very significant role. And when you have part of the industry which is unregulated, which is unaccountable and unchecked, it is no wonder this has become for some almost a licence to print money.

And the reality is that how that is then filtered down to the consumer has been a major impact for any of us in Northern Ireland. We will be used to the annual exercise when we are renewing either house insurance or motor insurance of our brokers, quoting us an exorbitantly increased level of cost. You will then, generally speaking, try to probe that by asking them to explore if there's any other options, and at best they will come back with something that is slightly less than what they originally quoted.

But the prices go up and up and up for everyone. But it is particularly acute for, for example, first time motorists who will face a situation either they are facing exorbitant motor insurance costs or in some cases, simply not quoted at all. I think this is something which can be tackled. I think we've offered a very practical way forward by with this amendment, and the government has indicated, particularly, the new Prime Minister has put at the heart of the agenda the issue of cost of living, but not simply cost of living in a general sense, but doing so, I think, for every postcode in the country.

And I think that if we are looking for something which can deliver on that promise, this is effectively quite low hanging fruit. So I would urge the government either to accept this amendment or alternatively find some form of formula through discussions in which the spirit of this amendment can be brought forward so that once and for all, we can actually start to tackle this problem, because this does offer a solution either by way of the government intervening through Treasury, or I think at the very least, the sheer threat of the power may well lead to cmcs reducing back what they are costing.

It may lead to hopefully good behaviour on their part. So I would urge the government to give this very serious consideration, and I look forward to the Minister responding.

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To, say, taking up Lord Weir last point about the Prime Minister last point about the Prime Minister and his recent visits and tours of the UK, he has emphasised the the UK, he has emphasised the primary focus of government is to help people with the cost of living, because our population in Northern because our population in Northern Ireland is spread out more than it is in Great Britain, there is much
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Lord Empey Portrait Lord Empey (Ulster Unionist Party)
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is in Great Britain, there is much heavier reliance on motor vehicles to get around, and it does have a huge impact on not only farmers, but people who are resident in rural areas. I, at one point a number of years ago, was Minister for enterprise. I did have responsibility for consumer protection, but I'm. I have no recollection that financial matters of this nature were actually incorporated in the devolution settlement. So I do believe the Treasury here has a key role to play.

Now, it does seem odd that we have a sector here that is unregulated. It's the only part of the United Kingdom where it is unregulated. And what I think people need to perhaps grasp is there is a different legal framework for dealing with a claims for damages under insurance, for instance, Baroness Hoey referred to a list of settlements that should be reached, whereas we have a thing called the Green Book at home, and that allows for much greater flexibility and has resulted in much higher claims.

So she quoted one example for soft tissue injury, but that's only one. It does spread out along. And of course, that is not the only potential claim, because there could be other mental health claims arising from from the situation as well. So I think the Minister should perhaps reflect on this. And if he's not content with this particular amendment, cautious though it might be, he could bring forward something at Third Reading. But the fundamental point is we have here an opportunity to start and help with the cost of living, because as brokers are advising, insurers and market makers are withdrawing from the province simply because the economics of the claim system just doesn't pay, because an insurance company, like any other business, has to make a profit.

And if claims are exorbitant and the management of them is expensive, which it is, because quite often these claim companies, it results in the amount of time the vehicle is on the road expanding. And that also means that the car hire charges are expanding in parallel. And of course, that is a source of very significant profit. And therefore they have their own garages in some cases. And obviously they have their own hire cars. So that all ends up on the bill of the insurer.

And then it ends up with the consumer. So I think the government would have an opportunity to take a practical step forward to help people with the cost of living. It is simply by extending a regulatory regime that exists in other parts of the United Kingdom. There are no legal or other risks attached, and indeed there's no cost to the government. Quite the opposite. And I would therefore urge the Minister to seriously consider the points that are being made. And I would like to think that he could bring some

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forward. Some proposals by Third Reading. The noble. Baroness, lady. Harry.

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Harry. And also the noble Lords. Lord

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And also the noble Lords. Lord Weir Ballyholme and Lord MP, and in doing so I should declare my doing so I should declare my interest as past chairman of the British Insurance Brokers
20:32
Lord Hunt of Wirral Portrait Lord Hunt of Wirral (Conservative)
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British Insurance Brokers Association and a practising solicitor in the City of London. We have campaigned within the broking community for proper regulation of claims management companies for a very long time, and therefore Biba was particularly disappointed that this bill didn't address the problem, which is urgent. Average motor claims costs in Northern Ireland have tracked more than 30% higher than in England and Wales since 2021, and I think the figures given by the noble Baroness bear that out.

So there is a need to do something about this problem. And I agree with the noble Lords who've spoken that this is a great opportunity for the government to put right the anomaly, I'm afraid claims management companies do add between 15 and 30% to a total claim by taking a percentage out of compensation. That does not reach the claimant. And we have to keep reminding ourselves of that. So we believe that this amendment would be a practical, targeted correction compared compared with the bill's, alongside the bill's wider focus on consumer protection, redress and

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better regulation. Notwithstanding the anomalies

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Notwithstanding the anomalies that have been discussed. And of course, there are significant anomalies in insurance in England anomalies in insurance in England as well. My Lords, we have some concerns about this amendment as it would hand the Treasury very extensive powers to act through extensive powers to act through secondary legislation, including the ability to amend primary legislation. We have raised concerns consistently throughout
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Baroness Hoey Portrait Baroness Hoey (Non-affiliated)
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Amendment 16. Minister, who was going to be much more reassuring. But in fact, I think that was quite a very negative response, because all the negative response, because all the things he said were things that actually have already happened and could be happening in more detail could be happening in more detail if the government was to move forward with this. And I think it really is a missed opportunity of of the government on this. And it's it's not going to go away.

It's going to have to come back in in a different form. I like I think many people probably here tonight hadn't realised just until recently how appalling this situation is. And you know, his facts and figures. I don't know where he, the Treasury or whoever he's got them from have come from, but they're certainly not come from the people who know what's going on in Northern Ireland. There's no point putting this to a vote tonight, obviously, but I would say that I hope that in following this, that actually the noble Lord would meet with a group of us who understand this a bit more and actually make it clear to him that, you know, to, to the noble Lord that perhaps sometimes he might be being given the wrong advice.

I beg to withdraw.

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That the amendment be withdrawn. No changes to the noble Lady who No changes to the noble Lady who was seeking the amendment is withdrawn. Amendment number 17.

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Baroness Kramer. No words are. Let me address amendment 17 in my name, which is also signed by Lord Faulks, which I very much appreciate. It addresses authorised appreciate. It addresses authorised push payment fraud and would require the tech companies whose
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Baroness Kramer Portrait Baroness Kramer (Liberal Democrat)
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platforms are host to this fraud to share in the reimbursement of share in the reimbursement of losses to the victims of such fraud. At present, the victims of app At present, the victims of app fraud are reimbursed up to £85,000 half by the bank, sending the payment and half by the bank receiving the payment. This is under rules set by the Payment Systems Regulator. Now the rules Systems Regulator. Now the rules and the cost of reimbursement have had a positive effect in that banks have set up a much more effective regime to alert people to the possibility of fraud.

Many of us have seen that in tracks as we do. And the warnings that we receive. But APPG continue. MP fraud continues to grow relentlessly, and on the most recent figures is up by 19% in the last year, reaching £576 million in the UK. Payment fraud altogether in the UK has reached £1.3 billion a year. It is essentially 40% of all serious crime now. 66% of these scams, because that's what they are, originate on online tech platforms.

And these platforms made £430 million in revenue last year from advertising these scams. I find that outrageous. Surely these platforms should be picking up at least part of the cost of reimbursement instead of the cost falling wholly on the banks. Well, the tech companies pocket the advertising revenue. I don't think that the tech companies will ever stop scams and take them seriously until it starts costing them money. Now, I can't understand why the government is rejecting my amendment.

Is it so afraid of the tech companies and Trump that it can't provide this protection to ordinary consumers who are being defrauded on such a scale? But then I also had a eureka moment in understanding why the FCA hasn't acted. It came from an absolutely chance conversation. Neither the FCA nor Ofcom is apparently sure which one of them should take the initiative. In trying to deal with tech companies and this form of fraud, regulatory courtesy has led to inaction.

And frankly, when I look at the number of victims and the size of the losses, this is completely unacceptable. So this amendment breaks that conundrum. And I would expect the government to try and attempt to break that conundrum, ensure that action takes place. My Lords, other amendments in this group, I support amendments 19 and 20. In this group. I know they will be spoken to eloquently, but I admit to not fully understanding the issues in amendments 95 and 97. But I will

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listen carefully. Proposed after clause 13 insert the new clause set out on the

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marshals list. My Lords, I've added my name. In support of amendment. 17 that the noble Lady. Baroness

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17 that the noble Lady. Baroness Kramer has already explained, and I've also tabled amendment 19. Both amendments relate to the continuing amendments relate to the continuing problem of fraud, as noble Lords are probably aware, the last Financial Services and Markets Act Financial Services and Markets Act led to the introduction of the compulsory reimbursement for App
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Lord Vaux of Harrowden Portrait Lord Vaux of Harrowden (Crossbench)
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fraud. Losses by the banks split 5050 between the paying and the receiving bank, and this has had two effects. Firstly, it has increased reimbursement to victims, but also importantly, by imposing but also importantly, by imposing financial costs of fraud onto the banks, it has given them a strong incentive to take steps to protect incentive to take steps to protect their customers from fraud. And my Lords, they have done so. Now, there are some valid concerns about how this might change victims behaviour, the question of moral hazard and I hope the FCA will keep that under review.

But I think it is fair to say that the requirements to reimburse customers of fraud has generally been seen to be successful. The logic for pushing the obligation onto the banks is that almost every fraud has to be cashed out through the banking system at some point in the chain. But it is also true, my Lords, that very little fraud arises from the banks themselves. As we've just heard, most app fraud starts either online or on a telecoms service, around 66% online and 17% from telecoms.

Once again, I'm going to name check Mehta from Who's platforms. The greatest amount of such fraud originates in my Lord Sewell. It would be better to try to prevent fraud where it originates than just reimburse it. Now, despite various voluntary charters, this is not improving at all. Your Lordships Fraud Act Committee 2000 Fraud Act 2006, and Digital Fraud Committee, of which I was a member, recognised this in its report four years ago. We said, and I quote, until all fraud enabling industries fear significant financial, legal and reputational risk for their failure to prevent fraud, they will not act.

My Lords, we were right. They have not acted. The government's most recent fraud strategy also recognised this. And it says, and again, I quote, if industry partnership and market incentives incentives alone remain insufficient to drive improvements, the government will take legislative action. Within this Parliament. There have been no improvements. My Lords, it is time to legislate now. I'm sure the noble Lord, the Minister is going to explain that the Online Safety Act is going to deal with all this, and it does help, but only to a certain extent.

It is quite limited on what is actually covered and where in relation to fraud, primarily in relation to paid for advertising, which is only a small area from where fraud originates. Amendment 17 would make the tech companies directly liable for their share of the cost of the fraud that arising on their platforms, and this bill gives us the perfect opportunity to take the legislative action the government has itself committed to, to make the tech and telco companies take their responsibilities to their customers seriously without further delay.

It's four years, as I said, since the committee made its conclusion on this. So I would urge noble Lords to support the noble Lady Baroness Kramer if she decides to move amendment 17, as I hope she will do. Amendment 19 that I have tabled is very simple. During the passage of the Financial Services and Markets Bill, the then government agreed to ensure that the Payment Services Regulator should prepare a report every six months that sets out how the payment services providers are performing in relation to paying out and receiving fraudulent payments, as well as their reimbursement performance.

Since the compulsory reimbursement scheme started, that reporting has stopped. But the reports were very helpful, not only in relation to reimbursement performance under the then voluntary scheme, but also in identifying and publicising which of the payment providers were the most risky. And it did lead to some actually being closed down because their performance in identifying preventing fraud was so poor. The amendment would simply require the FCA into which the PSR has now been subsumed. To continue with that valuable reporting, including, where reasonably possible, identifying where the fraud originated, for example, which tech platforms, as we've just been talking about, which would allow us to take targeted action against those platforms that are doing least to protect consumers from fraud.

The amendment introduces no new obligations, no new work. It just requires the FCA to continue to do what it was, what was previously agreed and was being done by the PSR. I hope the noble Lord, the Minister, can provide some reassurance that this

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important reporting will continue. My Lord.

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My Lord. My amendment 95. Raises the issue of non-compete

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Raises the issue of non-compete legislation. When this was raised at committee, the noble Lord the Minister undertook to undertook to respond. His response was to refer
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Baroness Bennett of Manor Castle Portrait Baroness Bennett of Manor Castle (Green Party)
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I rise to speak to amendment 97, which appears in this group on my which appears in this group on my name. I wish to start by commending the noble Lady Baroness Kramer and the noble Lady Baroness Kramer and Lord Vaux for providing us with powerful arguments for amendments, particularly 17 and I echo Lord Vaux comments that if the noble Lady wishes to put it to the vote to the Green Party would certainly support it. We need to see the tech companies being made to pay for huge profits they are collecting, while continuing to allow illegality to operate in their spaces.

However, I'm just going to primarily speak to 97 and I begin by actually, I wish to acknowledge the work of Joshua, Terrence and who's my King's College London intern who has actually identified this issue for me and done a great deal of work on this amendment. So this is an amendment about a different sort of fraud from Baroness Kramer amendment. It's about ransomware fraud. Now, this is something that I'm sure noble Lords have in many cases, come across a great concern to business people, to individuals, to institutions.

I'm thinking particularly of the NHS, and this is where a computer system or a database is locked, prevented from access. The ransomware takes it over and companies are told, pay up or you'll never get this back. Now, I think it's worth thinking about what the circumstances of this are like. Very often, payment is demanded in cryptocurrency. People are told if you don't do this in the next hour, the figure will double and double again and double again, etc.

this is through alerts appearing on someone's computer screen. It's a tremendously frightening, difficult, challenging circumstance to face. Now, the figures that we have for this come from report fraud. In the year from April 2025, 323 UK organisations reported such an attack. More than half of those were small and medium enterprises, and the average loss for those was £270,000, which is, of course, for SMEs, a huge sum of money. Now, I said reported because of course, there's generally acknowledged by experts in the field that there's a real issue of stigma here.

Companies, organisations do not want to admit that they've fallen victim to such a fraud. And I think it's generally agreed that those figures are a tip of an iceberg situation. And so the accepted advice from law enforcement is don't pay. But I think it's generally acknowledged, although it's very hard to put figures on it. A lot of people are paying right now, and this is something that must be very lucrative for some very nasty criminals. So I come now to the actual amendment, which is a new clause that places a duty on the Financial Conduct Authority to make rules within 12 months of Royal Assent prohibiting the firms it regulates from making, offering, authorising or facilitating a ransom payment and also prevents the insuring or indemnifying of anyone against such a ransom payment.

Firms would have to notify the FCA within 72 hours of becoming aware of a ransom demand. The only exception provided is where the payment is needed to prevent an imminent risk to life or of serious injury, and then only with the prior approval of the Secretary of State. It covers authorised persons and firms supervised, supervised by the FCA under Payment Services and Electronic Money regulations. Now, I think it's worth going back over how we've got to the point where we still don't have any action, because in January 2025, the Home Office consulted on three proposed measures on ransomware a targeted ban on ransom payments by public sector bodies and operators of critical national infrastructure, a payment prevention regime under which other organisations would have to notify the government before paying, and mandatory incident reporting.

The response was reported on the 22nd of July 2025, recorded 72% support for a targeted ban, and the announcement said that all the public sector bodies and CNI operators would be banned from paying, and there would be a notification requirement on the 14th of October 2025. Answering Lord Fox questions on lessons from the Jaguar Land Rover attack, Lord Leong told the House the Home Office was progressing a package of measures and undertook to update the House in December 2025.

The security Minister said the ban remained a priority and was progressing. And now you know the dreaded phrase that's going to come back when parliamentary time allows. Now you might think that there'd be coverage of this in the Cyber Security and Resilience Bill, but my understanding is that there is no coverage of such issues. Now, what why does this amendment work? Why can we do this through the Financial Services bill? Nearly every payment would pass through a financial company.

If there's any kind of scale of this at all, whoever the victim is, the money will go through a firm that the FCA supervises. A rule on these firms therefore reaches most payments made from the UK, not just payments by financial firms themselves. Now, the amendment I think, is quite elegant. It does not create a new offence or a general ban on businesses. The bill's office said this would be outside the scope of this bill. Instead, it makes a duty on the FCA to create the rules within 12 months.

This is a step forward, dealing with an absolutely critical, critical issue which is affecting businesses organisations right now on which the government has promised to act. It follows the government's own design. Now, I'm not expecting the noble Lord, the Minister, to stand up and say, yes, yes, I accept this amendment, and I'm also not going to put this to a vote, because I think we haven't had the time and the capacity to work through the detail of exactly how this is written.

But nonetheless, I really hope that we're going to hear from the Minister word that there's going to be really significant progress in this area very soon. I'm really hoping not to hear the phrase when parliamentary time allows, because this is something that the government has done. The consultation on has promised to act on, and surely we need to see protection in this fraud capital of the world, the UK for firms, if ransoms cannot be paid, then it will not be in the interests of criminals to put the effort in to try and get ransoms.
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Baroness Neville-Rolfe Portrait Baroness Neville-Rolfe (Conservative)
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My Lords. >> My Lords. >> We are. >> Concerned about the scale of fraud and. In particular by the fraud and. In particular by the continued growth of authorised push, payment fraud and other forms of payment fraud and other forms of online economic crime. Government and the banks have made progress. But the truth is it is hard to keep up with the scammers and the sums at stake are significant. As the noble Lady, Lady Cramer, has explained. I therefore strongly welcome the noble Lord Lord Faulks.

A proposal for an annual report. My noble friend Lord Howard of Rising is right to be concerned about future protection of commercially sensitive information as part of a competitive UK sector. I'm glad he's brought his amendment back, and I hope the Minister will be able to provide an assurance that this will be addressed. The amendments in this group raise important questions about transparency, monitoring and the practical steps firms can take to identify scams earlier, warn consumers, share information more effectively and pay compensation where that is appropriate.

Indeed, there's been considerable progress since the app reimbursement regime was introduced in 2024. I always remember my card being used in Korea to buy £2,500 worth of Louis Vuitton luggage. Now, that would not happen today as banking procedures and scrutiny are so much better. However, I think the proposal by the noble Lady, Lady Cramer, is a difficult one as it's not clear what the technology companies could do to stop fraud systematically. They're not passing money on in the same way as the banks.

And I think that may have been what Lord Stockwood was getting at in committee when he responded to this amendment at an earlier stage. New regulations of this kind could also have a chilling effect on the supply of online services in the UK. So I think more analysis is needed before the FCA introduces new rules. We believe this is an area where the government and the regulators should be prepared to make progress, but we also understand the constraints. I should add that it is also important that people learn to avoid scams with simple procedures like face ID, and to take care over what they buy online.

And I think this should be a very important part of education and indeed the work of Ofcom working with the FCA and the tech companies should be able to make more progress here. But I very much look forward to the minister's response in this important area and how he thinks we can best take forward this problem.
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Lord Pitt-Watson Portrait Lord Pitt-Watson, The Parliamentary Secretary, HM Treasury (Labour)
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Before I respond, my Lords, I must start with a correction because as part of the third debate, I said commercial data I said commercial data sharing schemes improves bank referrals and strengthening. However, the CCDS and the bank referral scheme are different schemes and to correct the record, I meant that the government is improving competition and supply through enhancements to commercial credit data sharing in this bill and working with industry to strengthen bank referral arrangements. Both of these schemes help improve lending to SMEs.

I do apologise for that, and I was speed reading my way through my responses. I will try and be more careful going forward. Look, I'm grateful to the noble Baroness Cass and the noble Lords for tabling these amendments and to all the noble Lords who have contributed to this debate on amendment 17 fraud cases. Fraud causes profound financial and emotional harm. As you know, this government takes the issue of fraud very seriously and is dedicated to protecting UK citizens.

As my noble friend Lord Stockwood explained during the committee debates, the Online Safety Act requires tech companies to take proactive steps to prevent fraudulent content. The government remains committed to ensuring that Ofcom makes full use of its powers to undertake fast and decisive action against illegal online harms, including fraud, at the request of the Secretary of State. Ofcom will share an annual update on their enforcement strategy for online safety with Parliament. In July, Ofcom published the Fraudulent Advertising Code consultation, proposing over 40 new measures to tackle online fraud on the UK's biggest digital digital services.

Amongst these measures, Ofcom proposes mandatory verification of financial services advertisers. This will support legitimate financial promotions from FCA authorised firms while cracking down on illegal financial promotions such as scam investments and crypto ads. Ofcom also proposed that the largest services will have to introduce new ad libraries that ensure all paid for advertising advertisements are publicly traceable. This will support experts and law enforcement to quickly detect and report suspected scam ads that UK users may find online.

It seems clear to me that we must let Ofcom get on with this job. Martin Lewis and consumer group, which have said that timely implementation will be key. I now turn to amendment 19, tabled by the noble Lord Lord Vaux on the publication of authorised push payment fraud performance data. This amendment was also debated at Committee stage. The government agrees that transparency over firms performance in preventing authorised push payment fraud is important. The payment system regulator has previously published data on the performance of individual payment service providers, including data on where fraud originated.

However, the government does not consider that a specific annual reporting requirement needs to be set in legislation. Following the consolidation of the Payment Systems Regulator, the FCA will have the powers and flexibility to determine the most appropriate approach to the publication of fraud performance data. Adopting reporting to developments, available data and the wider authorised push payment fraud framework. Moving on to amendment 20, tabled by the noble Lord, Lord Holmes. This was also discussed in

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committee. Sorry. To interrupt the noble Lord Minister, but perhaps you could explain why the FCA have stopped the reports that the PSR were

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previously providing. I am unable to answer the noble Lords question, but might I write Lords question, but might I write to him with an answer? Thank you. Lord Monks was discussed in committee, and the government's committee, and the government's position remains unchanged as set out in committee. There is already a range of measures in place and further work underway across government, regulators and industry. This includes firms use of increasingly sophisticated fraud detection systems. Confirmation of payee checks. Work to improve data sharing between payment service providers and steps to ensure that fraud prevention is built into the design of future retail payments infrastructure.

Turning now to amendment 95 concerning the protection of intellectual property. I agree that weak protections can be a drag on competitiveness on non-compete clauses in particular, there are no provisions in the Employment Rights Act 2025 that would affect the use of non-compete clauses by financial services firms. The government has published a working paper on options for reform of non-compete clauses in employment contracts. Budget 2025. The government is currently reviewing responses and will respond to the working paper in due course.

The focus of the working paper was on options for reform of non-compete clauses in employment contracts. It does not consider reform to intellectual property law or other means to protect confidential information. The government understands that a well-designed, balanced intellectual property system offers confidence for business investors and consumers to contribute to a growing our economy. Turning finally to amendment 97 in the name of the noble Baroness, Lady Bennett, I recognise the continued threat posed to the UK by ransomware criminals.

Following public consultation last year, this government is already taking forward work through the Home Office to break the business model of ransomware and provide law enforcement with the information it needs to understand, investigate and disrupt ransomware activity. This includes proposals for targeted ban on ransomware payments and mandatory reporting for businesses above a certain size. Taken together, the government's government considers that the objectives of these amendments are already addressed through the existing framework, and work underway does and work is underway.

It does not believe that further statutory requirements are needed. And so with that in mind, I ask the noble Baroness and noble Lords to

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withdraw their amendments. Lord, the Minister sits down.

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Lord, the Minister sits down. Can I just ask for a potential time frame on when the noble Lord expects to see progress on that

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work in the Home Office? Again? Mike, the Baroness, accept that I will write to her on

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accept that I will write to her on that comment. I don't know the timetable offhand. My Lords, the online platforms

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My Lords, the online platforms know exactly what they have to do to stop online fraud. They are just choosing not to do it. And frankly, to say that the answer will come from Ofcom. That certainly hasn't worried the platforms one iota. So the platforms will only take notice when they actually have to pay out to reimburse people who have been victims of those fraud scams. And victims of those fraud scams. And that is why amendment 17 matters.

And that is why I am going to test the opinion of the House.
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Lord Pitt-Watson Portrait Lord Pitt-Watson, The Parliamentary Secretary, HM Treasury (Labour)
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I beg to move amendment 22 in my name. I'll also speak to the name. I'll also speak to the government's amendment 58 and 59 a and this is an amendment from the government that is developed from our discussions in committee. My Lords, payment systems are essential National infrastructure. They allow households to pay bills, businesses to trade, financial institutions to transfer funds securely. As technology changes, how we pay those systems must continue to evolve, becoming more efficient and capable of supporting new services while remaining trusted and resilient.

The Bank of England has a critical responsibility to protect and enhance UK financial stability. The Bank is also working with the government and other authorities to support safe innovation in payments and digital finance. The Bank has welcomed this measure and will reinforce that work while preserving the primacy of financial stability. Amendment 58 places the bank's role in facilitating innovation on a clear statutory footing when exercising certain key functions for recognised payment systems, recognised digital settlement assets, service providers and in-scope service providers.

The Bank must, so far as is reasonably possible, facilitate innovation with a view to improving the quality, functionality and economy of those systems and related services. The objective is expressly secondary and does not require the bank to facilitate innovation, where doing so would undermine its primary financial stability objective. This change will also bring the regulation of systemic payment systems and digital settlement assets into closer alignment with the bank's supervision of other financial market infrastructure. The bank already has a secondary innovation objective for central counterparties and central securities depositories, providing a comparable objective for systemic payment systems and digital settlement assets provides the bank with a clear and consistent statutory framework.

Amendment 58 also ensures that the bank can be held accountable under its new objective. It enables the Treasury to make recommendations about aspects of the government's economic policy for the Bank to have regard to when considering how to advance its financial stability and secondary innovation objective in relation to payment systems. Those recommendations must be published and laid before Parliament. The Bank must explain the action it is taken or its reasons for not acting, and provide updates where required. The bank's annual reports must now also explain how it has advanced the secondary innovation objective and engaged with interested stakeholders.

Amendment 59 reinforces that accountability by requiring the Bank to publish a standalone annual report on both secondary innovation objectives, the report must explain how objectives have been embedded in the bank's operations, processes and decisions, and how it has advanced them with respect to relevant functions. This will give Parliament and industry clear sight of how the objectives operate in practice. Amendment 22 is consequential. It ensures that the mechanism already in the Bill for coordination between the Financial Conduct Authority, the Prudential Regulation Authority and the Bank with respect to relevant payment functions, makes appropriate reference to regulator objectives, which would now include the bank's secondary innovation objective.

So in summary, together, these amendment placed the bank's role in facilitating safe innovation on a clear statutory footing while preserving financial stability as its primary objective. They also provide stronger and more transparent accountability for how the bank applies the objectives. In practice, I hope noble Lords will

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join me in supporting these amendments. Amendment proposed schedule two,

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Amendment proposed schedule two, page 85. Line 13. Insert the words as printed on the Marshalled List.

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as printed on the Marshalled List. My Lords, I just have a couple of very brief comments. Obviously I of very brief comments. Obviously I support the. I'm comfortable with the with the amendments that the Minister has just described, but I do have one note of caution. The drive for innovation, which we all
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Baroness Kramer Portrait Baroness Kramer (Liberal Democrat)
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There's a. My Lords, that's all >> There's a. My Lords, that's all the amendments in this group. I'm afraid of mine. Amendment 29 has also been signed by Lord Faulks, also been signed by Lord Faulks, and for that I am most grateful. I will also be brief as the hour is late. The government in this Bill will transfer all supervision of professional service firms in respect of anti-money laundering and counter-terrorism financing from the current professional bodies to the FCA.

Now, members of this House have received representation from a wide range of professional groups who are frankly, utterly dismayed. They recognise that the FCA is trying to respond to their needs and to their issues, but it seems to have very little ideal. The FCA does how to fund all resource. The complex guidance and education that is required as part of that supervisory and monitoring process. And it seems that, as far as I can understand that the FCA is now saying it would like the professional bodies themselves to continue to provide all of that work, but essentially on an unpaid basis, which is not realistic.

The FCA has produced a high level roadmap, but I hear universally that it is very short of information, very low on timing details. My Lords, I can agree that the current system has historically suffered from fragmentation, but I'm not sure that we needed a remedy on the scale of the changes that are in this bill. The fragmentation issue that was being dealt with reasonably effectively by OPBAS, the office for Professional Anti-Money Laundering Supervision that was that had been created a set above the professional bodies to provide coordination standards and to make them effective.

Where OPBAS had a weakness was its communication with enforcement agencies. But this is an issue that could have been remedied without the radical change on the scale that is represented in this bill. My amendments require an assessment of this transition process, particularly on issues like education guidance and compliance support, on timetables, on regional coverage, and on supervisory fees, because there is real concern now with an additional layer that of supervision brought into the picture, that fees are going to increase very significantly.

That's a and also, my amendment would require the FCA to have regard to having the appropriate expertise on hand to be able to provide that support and guidance. And that's significant expertise, ranging from such things as accounting to taxation. That's it hasn't really taken these issues on historically. So I'm going to I will not be pressing this issue because the FCA is trying to find ways in which to make this system work, but I honestly don't think the FCA would have wished this upon itself, nor would the professional of bodies rest upon themselves.

And it really is just important. I think, that the government understand that it needs to think much more carefully when it introduces radical change, when, frankly, much more modest and targeted change would have served

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the purpose better. Amendment proposed articles 14. Insert the new clause as printed on

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Insert the new clause as printed on the Marshalled List. Briefly to add my support to the

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Briefly to add my support to the noble Lady Baroness Kramer on her amendment 29, to which I have added amendment 29, to which I have added my name. Noble Baroness has already explained with her usual clarity the concerns that lie behind this group of amendments, so I'll try
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Lord Vaux of Harrowden Portrait Lord Vaux of Harrowden (Crossbench)
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group of amendments, so I'll try not to repeat what she said. The changes proposed by the bill to the AML supervisory regime will move the AML elements of supervision from the relevant professional body to the FCA, and so firms will now have to deal with two separate regulators rather than one, the FCA for AML and the professional body for everything else. And it seems to me it's inevitable that this will have cost impacts for those firms, even if, as the FCA argue, the actual regulatory rules themselves won't change.

And that's likely to be especially true. I think, for smaller firms, the impact assessment that accompanies the bill on this section is, frankly, almost laughably poor, and it relies almost entirely on the statement that the AML rules themselves won't change. It doesn't address in any meaningful way the question of moving from one supervisor to two. So it must therefore be sensible, surely, to carry out an assessment of what the impact of the changes will be on firms, and to ensure that the costs remain proportionate to the benefits that the FCA and the government argue will accrue before going ahead with the changes.

And that's what amendment 29 is looking to achieve. The government's commendably keen to reduce the regulatory burden on businesses. So I look forward to hearing to what the noble Lord, the Minister has to say on this. Does he agree that there is likely to be an increase in costs for firms from having to deal with two supervisors rather than one? And how will he ensure that that's proportionate to any benefits that will arise?
21:29
Lord Altrincham Portrait Lord Altrincham (Conservative)
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And, my Lords, these amendments concerns. >> About the proposed transfer. Supervision. >> To the FCA. We do not believe that each of these points requires legislative commitment. However, we've also been made aware of serious concerns from industry about how this transition is being communicated and how the new regime will work in practice. These concerns include the governance arrangements following the transfer of the timetable and transitional process, the maintenance of professional standards, proportionality and the extent to which the FCA will retain specialist expertise needed to supervise highly technical sectors such as the legal services and trust and company service provision.

There are also legitimate questions about the practical support available to firms, the likely cost of the new regime, and whether smaller firms in particular, will face disproportionate burdens. This is why our amendment amendment 93. In my name, in the name of my noble friend, Lady Neville-rolfe, covers the transfer of AML supervision, parliamentary and industry oversight of these changes will be vital in making sure that this new architecture works in the way the Minister wants. The common thread running through our amendment and the amendments in this group is therefore a sensible one.

If the government are going to centralise this responsibility within the FCA, they must demonstrate that the FCA is genuinely equipped to undertake it and provide clarity to industry about how this process is going to be practically achieved. That means not simply having the formal regulatory powers, but having the right people, the right sectoral knowledge, appropriate transitional arrangements, and a clear understanding of how supervision will operate across the country. Industry is concerned about these questions, and those concerns should be taken seriously.

I therefore hope that the noble Lord, the Minister, can make a firm commitment today to provide considerably greater clarity about how this transfer will be implemented, how professional expertise and standards and proportionality will be maintained, and what firms should expect during transition.
21:31
Lord Pitt-Watson Portrait Lord Pitt-Watson, The Parliamentary Secretary, HM Treasury (Labour)
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My Lord, I'm grateful to Baroness Kramer for tabling these Baroness Kramer for tabling these amendments concerning the implementation of the reform of the UK's anti-money laundering and counter-terrorism financing supervisory regime. The points I think, that everyone is raising about the implementation of this needing to be well done are is extremely important, as is Lord Altrincham or a comment about parliamentary oversight of what it is that is taking a place here. But if I could just talk to each of the amendments, First amendment 26 and 27 concerning support for firms and implementation planning, so amendment 26 would require the Treasury to publish and lay an assessment before Parliament, including a comparison between education guidance, compliance assistance currently available to firms, and the support will be provided by the FCA.

Now, the government recognises the concern that professional services firms would continue to receive clear guidance, appropriate support and access to sector specific expertise following the transition to the FCA existing professions in the Money Laundering Regulations, which require supervisors to provide information about money laundering risks to supervised populations, will apply to the FCA in relation to its expanded responsibilities, and the FCA already has significant experience in providing AML CTF information and guidance to large and diversified, super supervised population.

For these reasons, the government does not believe that a statutory assessment is necessary. Amendment 27 would require the Treasury to publish a statutory timetable for implementation. While I do not believe that such a requirement is necessary, the FCA has provided some additional clarity on the expected implementation timetables. The current expectation is that the first businesses will begin to be supervised by the FCA before the end of 2028. Further onboarding will take place in phases, with the broad aim that all firms within scope will be supervised by the FCA by mid 2030.

Implementation should proceed, though only when the necessary preparations are complete. This includes ensuring appropriate systems and effective information sharing arrangements are in place that supervisory staff are adequately trained, and sufficient clarity is provided to firms about the future regime. Retaining flexibility will allow the government and the FCA to respond to stakeholder feedback and lessons arising during the transition.

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Existing supervisors will continue to supervise firms taking enforcement action where necessary enforcement action where necessary and maintain standards until the FCA assumes its new responsibility. The Office for Professional Body AML supervision OPBAS will continue to oversee the existing Professional Body Supervisors during that period. The FCA is during that period. The FCA is already engaging with Professional Body Supervisors and HMRC on information and data sharing arrangements. Amendment 28 concerns professional expertise the government fully recognise recognises that effective supervision depends on supervisors understanding the sectors they regulate.

Legal services providers, accountancy firms and trust and company service providers have different business models, risks and regulatory arrangements. The FCA, of course, does already supervise a large and diverse population, including many smaller firms, and has extensive experience applying a proportionate, risk based approach across different business models and firm sizes. The FCA's Independent Small Business Practitioner Panel also provides direct insight into the perspectives and challenges facing small, smaller, regulated firms. This reform is not about applying a banking style or one size fits all supervisory model to professional services firms.

The future regime will be proportionate and risk based, establishing a more consistent and effective framework while recognising the different characteristics and risks of those sectors. I now turn to amendment 28 on supervisory fees. All businesses, particularly smaller firms and sole traders, want assurance that the future regime will remain proportionate and that firms will not be required to pay excessive supervisory fees. The FCA will consult on the design of its future fee model before assuming responsibility for these sectors.

The government expects the fees to be proportionate and consistent with the FCA's wider, free from fee framework, where smaller firms generally face lower costs than larger firms. The detailed fee structure will depend on the final supervisory model and is therefore better developed through consultation. I turn finally to amendment 30.

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Interrupting. He hasn't answered the question of what what the question of what what assessment I suppose the government has made of the cost impact of firms, of moving from a single firms, of moving from a single supervisor to dealing with two, and particularly for small companies, small firms.

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small firms. So I'm not aware of an individual calculation having been individual calculation having been done for that. I don't think that there is a belief that there will be a materially greater cost once the move is made. But the key issue that's trying to be addressed here is that we have 23 regulators right now of AML, and that that job needs to be done in a more coordinated and consistent fashion. But look, if I have information on that, I would be delighted to write to the would be delighted to write to the noble Lord on on those costs.

A yeah. Finally, amendment 30 concern concerning the FCA's capacity to undertake effective AML CTF supervision across all parts of the United Kingdom. Amendment 30 would require the FCA to report on its capacity to supervise firms throughout the UK. Now the FCA already operates across the UK through its offices in London, Leeds, Edinburgh and anticipate having a significant presence for the new arm regime outside London. This provides, I think, a strong foundation for maintaining regional coverage, preserving local knowledge and ensuring that distinct jurisdiction, specific issues continue to inform supervision and implementation planning.

This will also help with ensuring that regional risks and jurisdiction specific considerations are understood and addressed, while maintaining a consistent approach across the United Kingdom. My Lords, I recognise the objectives behind these amendments. Careful implementation. Appropriate support. Maintenance of expertise, proportionate fees and sufficient FCA capacity. The government understands why these assurances are being sought. However, we do not believe that additional statutory reports, assessment and fixed requirements are necessary. These matters are being addressed through implementation planning, capability building, stakeholder engagement, consultation and parliamentary scrutiny of the necessary secondary legislation.

The government will continue to work closely with Parliament, industry, existing supervisors and the FCA. Our aim is to deliver a more consistent, effective and coordinated AML/CTF supervisory framework while ensuring that firms receive proportionate supervision and appropriate support. I therefore, asked the noble Lady

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amendment. Sorry. I. I will withdraw the amendment.

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amendment. OK. Is it Lordships 26 be

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OK. Is it Lordships 26 be withdrawn. As many as that of content. And then we've got 27 to content. And then we've got 27 to 30 not moved. Right. We now come to clause 16. Lord Pitt-Watson amendment 31.

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My Lords, I beg to move. Amendment 31. Growth is the top Amendment 31. Growth is the top priority for the government, and the financial services sector is key to delivering this. As my noble friend Lord Stockwood set out at Committee stage, the government always intended the FCA's long term strategy would set out its priorities for advancing its international competitiveness and international competitiveness and growth. Objective. The noble Lady Baroness Noakes rightly questioned if our legislative drafting was clear on this point, and after further consideration, the government has tabled this amendment to ensure that the law is clear on this point.

I thank the noble Lady for bringing this matter to our attention. Turning to amendments 32 and 33, which would place detailed statutory requirements on the content of the FCA's and Pra's long term strategy, including requiring descriptions of future regulatory initiatives, indicative timelines and assessment of potential trade offs. The government agrees that this is an important part of Parliament's role in scrutinising the work of the regulators, and I welcome the commitments made by the CEO of the FCA.

In a letter he sent to me on the 2nd of September, which has been shared with the Lords Financial Services Regulation Committee. The opposition Front bench and interested peers. The letter made a commitment to proactively engage relevant parliamentary committees on their priorities before it settles future strategies. Katharine Braddock, the new CEO of the PRA, also made commitments in her letter of the 3rd September to engage its stakeholders and parliament in the development of its strategy. As I committed earlier in today's debate, I am placing these letters in the library today.

Much of the information that the noble Baroness seeks is already available or should be already available through existing channels, including the Regulatory Initiatives grid, which is updated regularly and is specifically designed to provide firms and stakeholders with forward looking information on forthcoming regulatory activity. The FCA also publishes and will continue to publish an annual work programme that details what it will deliver in the coming year against the strategic priorities in its current strategy. The purpose of the long term strategy is different.

It's intended to set out the regulator's strategic direction and priorities over a five year period, rather than to operate as a detailed business plan. As the FCA sets out sets out in its letter, the strategy is intended to provide greater clarity and predictability about its priorities and provide a strong basis on which Parliament and others can hold them to account for their performance against those priorities. The government, therefore, does not consider that these additional statutory requirements are necessary.

I now turn to amendment 68, which seeks to create new statutory offices for regulatory evaluation within the FCA and the Bank of England. I recognise the concerns expressed during Committee stage about ensuring that Parliament has access to meaningful information about the performance of the financial regulators. It is a point well made, but this amendment would go further than this. It would establish a permanent statutory bodies, dedicated directors, governance arrangements, reporting requirements introduce additional costs on the regulators and as we discussed at Committee stage, there already exists a range of mechanisms to provide this information.

This proposal could potentially duplicate these arrangements, and the government does not agree that more institutional machinery will necessarily lead to better scrutiny. We discussed at Committee stage the importance of the Fisma model that Parliament has enshrined the principle of regulatory independence into primary legislation through the Financial Services and Markets Act 2000, and the government continues to believe that this is the model that best serves the UK's long term interests. But I recognise the challenges that the noble Lords have raised, especially the challenge that as new activities become regulated, the breadth of delegation grows, the responsibility of our regulators is continued to grow over time, and it is appropriate that parliamentary accountability mechanisms be kept under review to ensure that they are in step with the work of the regulators.

The government therefore, welcomes and encourages the engagement engagement between the regulators and the parliamentary committees, and it welcomes the commitment from the FCA and the PRA to provide Parliament with further information and other assistance needed to help it fulfil its role. This includes more written updates, additional context in the Pra's annual reports in person sessions, where I welcome the Pra's offer of external members of the Prudential Regulation Committee, also appearing before committees on a more regular basis.

I know that the noble Lady Baroness Noakes, is keen that her committee has the ability to scrutinise the PRA and FCA before regulation is finalised. That is a very proper objective and indeed I particularly enjoyed hosting the FCA's recent drop in session on measures in the bill that relate to it, which was a great example of both live scrutiny and of gaps being found in action. But I would now urge the committee and the regulators to try and work together to agree a sensible model for ongoing scrutiny and engagement, and I would therefore respectfully ask the noble Baroness not to press her amendment.

Let me now come to amendments 51, 54 and 56, which seeks to amend clause 18 or remove it in its entirety. The reforms in clause 18 form a core part of the government's approach to improving the regulatory framework by striking a better balance between ensuring only those accountability mechanisms which are appropriate and valuable are retained, while not overloading the regulators with administrative requirements which fail to provide commensurate benefits. The government has targeted only a limited subset of lower value requirements.

The broader accountability framework remains in place, with very significant reporting and transparency requirements, and the bill also introduces new accountability measures, including long term strategies and reporting on competitiveness and growth. Amendment 51 would restore a number of requirements, which the government continues to believe. Following careful consideration and engagement with stakeholders, don't need to be prescribed in statute. Indeed, during committee proceedings, noble Lords expressed differing views on the value of these requirements. That underlines the case for allowing regulators greater flexibility rather than imposing increasingly prescriptive reporting obligations, and amendment 54 would require regulators to produce further explanations of how they have applied regulatory principles and statutory duties.

This would reintroduce process focussed reporting requirements that the government is seeking to streamline. Our approach is to focus accountability on outcomes and performance, rather than requiring ever more detailed reports on internal methodologies. The government agrees with the importance of Parliament being able to hold the regulators to account through this bill. The government is introducing new requirements to support more effective scrutiny, including through the new long term strategies. Indeed, the regulators will need to set out for the first time in one place their long term priorities and approach for advancing their objectives.

This is intended to help Parliament better understand the regulator's priorities and how they are translating their objectives into action and results, helping Parliament carry out its vital scrutiny. Parliament will continue to have significant powers to scrutinise the regulators through existing accountability mechanisms. The regulators will continue to notify relevant parliamentary committees on relevant consultations to set out how the proposed the proposal advances their objectives and in response to concerns raised at committee. As a result, the government's amendments 37, 47, 48, 49.

These notifications will continue to set out how the regulator has had regard to the two proportionality regulatory principles. My Lords, we are in agreement with that Parliament has a vital role to play in scrutinising the work of the regulators, and that effective parliamentary scrutiny is an essential element of our regulatory framework. We must all Parliament, government and the regulators work together to ensure that we have a regulatory environment that is effective and proportionate. The government has heard the strength of feeling across the House and welcomes the commitments that we have had from the regulators to work with Parliament to ensure it has the information, that is, that Parliament has the information that it needs to fulfil its role, and I am confident that the government, Parliament and the regulator have shared ambition and commitment here, that we can work together on to make a reality, and it's for those reasons that the government does not consider further legislative amendments are needed, and I would

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ask the noble Lady to withdraw her amendment. Amendment. Proposed clause 16,

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Amendment. Proposed clause 16, page 18. Line 38. Attendance at the Competitiveness and Growth

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objectives C, section one B and. It's late, so I shall be

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It's late, so I shall be relatively brief and not revisit the issues that we did at Committee stage when. When I tabled these amendments. I still hope that there would be some agreement reached on restoring the information hooks that Parliament has relied on until
21:51
Baroness Bowles of Berkhamsted Portrait Baroness Bowles of Berkhamsted (Liberal Democrat)
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now for oversight, and to suggest a minimum set of reporting minimum set of reporting requirements in the current void of the strategy report. But it has the strategy report. But it has been made clear by the Minister now, and also including in discussions between the Minister and the noble Baroness, Lady Nokes, as chair of the Select Committee, that the the Select Committee, that the government will not accept any statutory requirements. If that is the case, then the committee will have to draw that information in itself and the letters from the regulators do offer the promise that they will cooperate in that, and I suggest that we should take that opportunity to be able to do more things in real time, rather than long after decisions are made.

Now, obviously, it's for the committee to decide what it wants and when. In both written and oral information. But one way to address the gap would be a triennial cycle of structured meetings with regulators, and each session could explicitly track developments in consultations and rule making, including the work of the statutory panels, with an additional cycle of other matters. So suitable timings could be late February. Things you could do in February would include an operational alignment review of draft business plans, budgets and cost benefits analysis variances before they're locked in for the financial year.

In mid June, a session could be focussed on the secondary competitiveness and growth objective tracking, live alteration, authorisation times, licensing, service level agreements and regulatory overlap arising from current consultations and rulemaking activity. In October, one could do a post recess review of rulemaking. Dear CEO letters and summer period backlogs ahead of the autumn budget. Those are just examples of how you can get things to fit in with the other fiscal events. So adopting that kind of timetable would give Parliament timely visibility.

I think we could avoid boilerplate reporting and ensure accountability, even though we lose the statutory hooks. But it I don't think that either the regulators or the government really appreciated the message that crossing out all of these previous statutory things indicated, and it seemed as if Parliament had been totally ignored as a stakeholder and as a party that should have been consulted. I hope that we can recover and and actually come through this, probably with more reporting in the end.

But putting it in at our request, I don't see that this is something that we have to negotiate. This is something where Parliament can ask, and we expect that the regulators will comply. Now that sounds aggressive. I actually think that it will be able to be negotiated relatively reasonably, at least if it's anything like the experience that anything like the experience that

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the that I have had elsewhere. The first time I've spoken at this Report stage. And so I need to this Report stage. And so I need to declare my interest as shown in the register, namely, that I held shares in listed financial services shares in listed financial services companies, which may well be affected by the content of this affected by the content of this bill. I should start, my Lords, by thanking the government for tabling amendment 31, which is in fact
21:55
Baroness Noakes Portrait Baroness Noakes (Conservative)
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amendment 31, which is in fact identical to an amendment which I tabled for committee. Now the Minister, the noble Lord Lord Stockwood, who is in his place, then said that he could not accept my amendment because the government were looking into this point to determine if this was fully clear in the drafting of the clause. My Lords, that was nonsense, and I feel sorry for Ministers who are told by their officials to say these sorts of things. It was clear that the drafting of the bill was wrong, and that my amendment put it right.

And I'm very glad that the government have now caught up with me. The assessment of the amendments in this group deal with the knotty issue of accountability of the regulators. The noble Baroness, Lady Bones of Berkhamsted, has tabled several amendments to try and improve what is in this bill and reverse some of the changes in this bill, which undoubtedly weakened the accountability arrangements. And, of course, I support those amendments. But accountability means much more than than plans and reports, which is what the noble Baroness amendments tended to focus on.

And some of us put forward various ideas in committee about how we could improve accountability. The point being that we were looking to get a step change in the accountability arrangements. Now it all comes back to the Fisma model, which my noble friend Lady Neville-rolfe spoke about in the first group, and I support the Fisma model in principle, but it is under increasing strain, as has been mentioned already today. It was first of all invented long before Brexit, when swathes of financial regulation were drawn up in the EU and scrutinised in detail by the EU Parliament.

So when Fisma, 23 paved the way for this additional delegations to the regulators of all of those EU competences, it was partially offset only partially by strengthening the role of Parliament so that when the regulators use their powers to create rules and guidance, they now have to send that into the parliamentary committees, including the Financial Services and Regulation Committee, which, as has already been said, I currently chair. Now I am clear that holding the regulators to account for how they are using their powers, that is real time accountability rather than the external.

The ex post accountability, which annual reports deal with, is an uphill battle for very many reasons, not least an imbalance between the the sort of resources, the scale of resources devoted to parliamentary committees compared with the vast resources that are deployed within our financial system. Regulators. Now, as we know, this bill creates yet more areas of delegated powers to the to the regulators consumer credit, which we debated earlier today, but also the payment systems which the noble Lord, the Minister spoke to a few moments ago.

And this, again, is why we need to strengthen the accountability arrangements rather than weaken them, as this bill currently does. Now, the government have partially recognised that the bill went too far and have tabled amendments on proportionality, which we will debate on our next report day, but I believe that the balance is still shifted away, too far from Parliament being able to operate effective accountability mechanisms, and that is why I tabled amendment 68. And I thank my noble friend Lord Bridges of Headley Noble, Baroness, Lady Wolves of Berkhamstead, and the noble Lord Lord Vaux of Harrowden for adding their names.

Amendment 68 proposes that both the Bank of England and the FCA set up an Office of Regulatory Evaluation, which would be independent within their organisations and tasked with reviewing and reporting on the full range of their regulatory actions. Now, this could produce a much wider ranging sort of work than the parliamentary committees are able to do, and if it were done well, would very much enhance the way in which parliamentary accountability works and offices of regulatory evaluation exist in many international regulatory bodies.

The Bank of England also set one up about a decade or so ago, though in fact it did relatively little and is now being disbanded. Now, I do thank the Minister for acknowledging the concerns of about effective accountability that have been expressed throughout our Committee stage. But of course, the the Minister has said that he will resist my amendment, and instead, the Minister wants the regulators to work with the parliamentary committees, including the Financial Services Regulation Committee, to try and improve accountability.

The Minister has already referred to the letters which the Treasury orchestrated from the FCA and the PRA, setting out how they see parliamentary accountability. They do not say very much more than the regulators. Take parliamentary accountability seriously. And I would also note there's been no equivalent letter from the Bank of England in respect of its non PRA regulatory activities, and many of the. The regulator's suggestions do not seem to me to address the core concerns of wanting to increase the effectiveness of real time scrutiny of what the regulators are doing now.

The FCA's letter did declare itself open to views on how best to improve parliamentary scrutiny. The Pra's letter did not go quite that far, and in conversations with the Minister, he asked me, as chairman of the Financial Services and regulator, the Financial Services Regulation Committee, to try and take something forward with the FCA to see if we can strengthen parliamentary accountability in ways which do not involve structural changes, such as in amendment 68 and the naval. The Minister will have heard that one of my fellow committee members has already applied her mind to some creative ways in which that might take place, and it would, of course, have to include not only the FCA, but all of the other regulatory bodies operating in the financial services space.

Now, my Lords, I am sceptical about whether such engagement will do more than improve things at the margin. But in spirit of being constructive, I am prepared to give it a go. Through the Financial Services Regulation Committee and on that basis I shall not be moving my amendment. Now. My Lords, I predict that when we in Parliament consider the next Financial Services Bill, which we do every few years, we will be returning to accountability. We may well not get a step change in how we hold the regulators to account.

Until there has been a major regulatory failure, which the regulators then do not manage to talk themselves out of. And then,

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my Lords, hindsight on accountability will be a wonderful thing. My Lords. I rise. And I should.

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And I should. Declare my interest as an adviser to and shareholder in Banco Santander. You will be very pleased to know. I will speak very briefly on amendment 68. My noble friend Baroness Noakes has just covered the waterfront and her exemplary
22:04
Lord Bridges of Headley Portrait Lord Bridges of Headley (Conservative)
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the waterfront and her exemplary manner incredibly well, making all the key points. But let me just briefly say this first leg of this amendment about the FCA office for Regulatory Evaluation. My Lords, I think this is an extremely measured and well constructed proposal. From my noble friend. I propose to set up something somewhat different an office for Financial Regulatory Accountability, which would stand outside all the regulators and would look at financial services, regulation, consultations and proposals in the round so as to provide an independent source for Parliament and everyone else to look at the impact of those actions, and so that they could be analysed and critically holding the regulators and supervisors to account.

Many said to me that this, they felt, would become a back seat driver for the regulators and the supervisors, and we'd have a essentially someone second guessing their actions, undermining potentially the operational independence that they have been given. This proposal from my noble friend, I think, overcomes that very, very well. And while I'm very pleased that the noble Lord, the Minister, is making very constructive noises about the need for greater accountability and scrutiny, I'm somewhat disappointed that it seems that this proposal, which builds, as far as I can see it, on the work of cost benefit, the cost benefit panels within the FCA would actually help Parliament hold the FCA to account with much greater independent analysis.

So I'd like the Minister when he sums up to give us a bit more argument as to why this is a bad idea. Let me now turn to the second leg of this amendment, which relates to the Bank of England and the office for Regulatory Evaluation. Now, my Lords, it's rather sad that we are here at 10:05, about 15 of us debating one of the most important institutions in this country and how it is held to account and the means by which it evaluates its own performance.

And I think this speaks volumes about how we in Parliament potentially need to up our game in how we hold the Bank of England to account. That is a criticism maybe aimed at all of us rather than than the government. But my Lords, the the Independent Office for evaluating the Independent Evaluation Office within the Bank does perform and has performed a very critical role. And when you look back and you see what various chairman of the court have said about it, many of them have gone on the record over the last decade praising its work and saying it provides valuable input to them at the court, at analysing what the bank is up to and making sure that the bank is internally held to account.

And so when the Financial Times reported several weeks ago that the Bank of England was dismantling the I o. I have to say alarm bells started to ring. So maybe the noble Lord, the Minister, when he sums up, can answer some simple questions, and I obviously realise he's speaking on behalf of the Treasury, not the Bank of England. But what I'm trying to understand is, first of all, what is the problem that this decision to dismantle the IEO trying to solve? What is it that they're actually trying to achieve? What is the progress they're trying to make by abolishing and dismantling the I o in particular? As I say, given so many chairmen of the court have spoken in favour of it, that's the first point.

The second point builds on what my noble friend Baroness Noakes said when the IEO is abolished and these internal, external, independent analysts are brought in, how many reviews does the court expect to commission? As my noble friend pointed out, the IEO has actually only published a relatively small handful of reviews. Is it going to be more or is it going to be less? Next, if the court chooses the subjects, how will we ensure that the uncomfortable issues that the Bank needs to confront will be confronted? And finally, does? What does the noble Lord, the Minister, think that this move will increase the accountability and the scrutiny of the bank? That is really the litmus test that I have.

Will it make sure that the bank's performance is going to be held even more to account? So, my Lords, I do think that there are questions to answer here. I very much welcome, as I say, what the noble Lord the Minister has said about his wish to increase accountability and scrutiny. I think that we're disagreeing here on the means by which to do so. So I look forward to his answers.
22:08
Baroness Neville-Rolfe Portrait Baroness Neville-Rolfe (Conservative)
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My Lords. >> I want to begin by paying tribute to my noble friend Lady Noakes, to the Financial Services Regulation Committee, including Lady Bowles and Lord Vaux, and to the noble Lord Lord Bridges of the noble Lord Lord Bridges of Headley for their persistent pursuit of a very simple but important principle. As regulators gain more power and their remit expands, so too should the scope and effectiveness of the oversight to which they are subject. Lady Noakes has powerfully articulated the concern that the Fisma model has been stretched too far, and that even our export expert parliamentary committees are struggling with the volume and complexity of oversight.

We need stronger, not weaker, democratic accountability, which is why we saw value in the Office of Regulatory Evaluation and or Lord Bridges original model tabled at committee. We also share his concern about the dismantling of the Bank of England's IEO my Lords, this is an area where the opposition will continue to develop our thinking for future legislation and would welcome engagement. We are not comfortable with a system whose reaction seems to be to delegate every new or persistent problem to our regulators.

We are very pleased that Lady Noakes will continue to work with the Treasury and the regulators on improving parliamentary oversight through the relevant committees, and we look forward to working with her and others across the House, including Lady Bowles. I think what she's proposed represents a practical compromise which allows us to move on. However, a positive response to amendment 93 on first use of new. The new powers will also be important. One practical way in which accountability could be narrowed a little and indeed, trust in the FCA improved, would be to strengthen the remit of the cost benefit analysis panels, which already sit within the regulators.

Their remit could extend beyond rule changes to include guidance and enforcement activity. They could be given the ability to request an assessment of changes, which the regulator has judged to be immaterial. This would strengthen internal challenge, improve confidence in the regulatory process and provide Parliament with more useful and more independent information. I haven't wrote back yet another amendment on this, but I hope the Minister can commit to looking seriously at this proposal as part of a follow up to this useful debate.

I should add, finally, that I welcome the First Amendment, that the government's amendment on competitiveness and growth. And I'm only sorry that the name of the Financial Services Regulation Committee does not seem to have made its way into the statute.
22:11
Lord Pitt-Watson Portrait Lord Pitt-Watson, The Parliamentary Secretary, HM Treasury (Labour)
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My Lords, I won't take up too much of your time, because I think I've responded to many of the I've responded to many of the points at the beginning of this debate. As regards the Independent Evaluation Office at the Bank of England, I think the Bank is England, I think the Bank is committed to independent evaluation. It's strengthening the independence of the reviews it commissions by of the reviews it commissions by moving to a model where it commissions external independent experts to to lead the reviews.

But look, what I would want to say would very much echo what a Baroness Neville-Rolfe has said in thanking Baroness Noakes and actually Baroness Bowles as well, I should add, because we do have a commitment from the FCA. And indeed, if you want to be cynical about it, it's maybe not as wholesome a commitment as you might want, but it does say accountability, scrutiny and proportionality are central and they want to support effective parliamentary scrutiny, which I think is where it is that we are all coming from.

And I would just thank her and her committee for a picking up the baton on all of this, because we must. All Parliament and regulators, and with the help of government, where we can help work together to have a regulatory environment that is effective and proportionate. But with that in mind, a, a a, the government does not think that at this stage further legislative amendments are helpful, and I would ask the noble Lady to withdraw her amendment.

Oh, in that case I well,

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I've made it to the end of day one. Phil. Yep, yep. Good. I think the noble Lord is

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I think the noble Lord is pressing his amendment number 31, clause 16, page 18. Insert the words on the master list, as many as the agreements they content. Of the contrary, not content. The the contrary, not content. The contents have it. Amendment 32 Baroness Bowles moved. Amendment 33 Baroness Bowles moved. Amendment 33 Baroness Bowles not moved.

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My Lord, speak to me of that further consideration on report. Be adjourned. The question is that the

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The question is that the consideration on report be now adjourned, as many of that opinion will say. Content contrary, not

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will say. Content contrary, not content. The contents have it. Now adjourn.

**** Possible New Speaker ****

Now adjourn.
This debate has concluded
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