Financial Services and Markets Bill [HL]

Baroness Bowles of Berkhamsted Excerpts

Report stage
Monday 7th September 2026 Lords Chamber

[Baroness Neville-Rolfe (Con)]

My Lords, I am honoured to open our discussions on Report on the Financial Services and Markets Bill, which we support in general but seek to improve. I congratulate the Minister on his new position and thank him for his engagement. I also thank the noble Lord, Lord Stockwood, whom I am 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 it is the first day on Report, I declare my registered interest in Meta and Amazon.

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 am moving Amendment 1 to Clause 1, but I intend to focus my remarks on the final amendments in this group: Amendment 93 and Amendments 100 to 103, in my name and that of my noble friend Lord Altrincham, whom I also thank for his work on this Bill.

I hope these amendments might provide a compromise. They address one of the most serious concerns that we and noble Lords across the House have raised about the approach taken in the Bill: 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. That Act 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 Baroness, Lady Bowles. 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, which is so well chaired by my noble friend Lady Noakes.

We recognise that there are considerable advantages to the FSMA 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 the Bill is to place considerable trust in the Treasury and, ultimately, 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 under Clause 46 concerning crypto assets. As will be apparent, many of these powers are presently in primary legislation. There is a further problem with the excessive powers on access to banking in Clause 3, but we will come on to discuss a different solution to that in group 2.

The transparency that would be achieved by our proposed approach would benefit not only Parliament but 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 on an issue that has plagued our discussions on the Bill because of the sheer scale of change envisaged. They preserve the flexibility that the Government say they need 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 look forward to hearing from them. I beg to move.

[Baroness Bowles of Berkhamsted (LD)]

My Lords, I will speak to my non-diminution Amendments 2 and 3, and to Amendments 4 and 5, which stem from them. In Committee, the Government made it clear that they wish to remove tail risk for firms—a theme running through the changes to the CCA and FOS. I agree that issues such as font sizes and business practices need updating—I would certainly prefer not to have to agree instantly to a garbled recitation of terms and conditions over the phone just to access basic service contracts—but the Consumer Credit Act is fundamentally about protecting consumers from bad corporate behaviour. Aside from the much-cited font issue, tail risk usually arises from bad behaviour that simply takes a long time to surface. There is no justifiable reason for remedy to disappear.

Although 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 amendments: to allow modernisation, but not at the cost of significant consumer rights.

A long-standing defect in the CCA illustrates the point: the Act was drafted in 1974, before securitisation existed. As a result, consumer credit has been sold on in ways that mean that 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 foresee the same happening with student loans once they are sold off.

The solution is straightforward. Whenever any right stemming from lending or credit is exercised, including the setting, levying or collecting of interest, the corresponding obligations must travel with that right. 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 MCOB rules already require obligations to follow the exercise of rights in mortgage services.

This principle works. We explained it to the previous Minister and officials before the summer, providing copies of my first amendment and documentary explanation. I recognise there have been changes on the Government’s side, but it is regrettable that there has been no engagement since, especially as collaborative working on good ideas was a stated commitment of the new Prime Minister.

Some may ask: who loses? The answer is that 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, restores them prospectively. But they had those rights when they took the mortgages out.

Taking the same principle to student loans, once 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 on to 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. 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.

[Lord Sharkey (LD)]

My Lords, I will speak to Amendment 5 in this group. Structurally, the amendment follows the approach used by my noble friend Lady Bowles in her previous amendment, and I am very grateful to her for the help and support in drafting. 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 and 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 UK Mortgage Prisoners action group, there were originally around 195,000 mortgage prisoners. 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—UKAR. When returning these mortgages to the private sector, the Conservative Government could have sold them to active lenders, which 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; the consequences we continue to see.

It is not as though the Government were not warned about the problem this would cause. The risk to customers was clearly identified. In January 2016, the noble Lord, Lord McFall, wrote to the Treasury and UKAR, warning them that:

“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 is 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,

“concerned that some customers affected by these mortgages sales … will not be offered reasonable fixed mortgage rates”.

--- Later in debate ---

[Baroness Bowles of Berkhamsted (LD)]

My Lords, I rise briefly to support my noble friend Lord Sharkey’s amendments. Some years ago, I gave a speech on ethics in finance in connection with the international Robin Cosgrove Prize in which 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. The question is never “How close to the line can we sail?” but “How fair have we been?” The core issue here is exactly that: rule compliance is not a substitute for fundamental fairness. The FCA’s 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 to most consumers.

The proposal to tie the ombudsman strictly to 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 variable hidden commissions, with costs levied on the consumer, were inherently unfair.

Honesty and transparency are always the best policy, irrespective of rule nuances. They are your defence. Firms must think like a consumer when considering what is fair, rather than asking their compliance officers how close to the line they can 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 10-year absolute long-stop creates a dangerous incentive. In long-tail products or hidden commission structures, unfairness may be actively concealed. A 10-year cut-off rewards firms that manage to keep material facts hidden for a decade, while shutting the door on consumers who discover the harm only years later. Under 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.

[Lord Altrincham (Con)]

My Lords, we take a different view on the Financial Ombudsman Service. Our position is that the present FOS model now requires more fundamental reform. We propose that the Treasury should publish draft legislation to replace the FOS with a new financial adjudication service, alongside a dedicated financial services chamber within the First-tier Tribunal.

We accept the need for consumers and SMEs to have access to redress that is fast, expert and affordable. Our concern is that the FOS has evolved well beyond a simple dispute resolution function. Its decisions can shape market behaviour and influence how FCA rules are understood, without the same accountability as a regulator or the legal certainty created by binding precedent.

At the heart of that concern is the fair and reasonable test. A firm may comply with the law, FCA rules and its contractual obligations but still face uncertainty about whether the ombudsman will take a different view. We simply cannot have this situation if we want a regulatory landscape that is conducive to business confidence. We therefore understand the position taken by the noble Lord, Lord Sharkey, but we start from a different premise. Our position has not changed. We want a redress system that remains accessible to consumers but is also more predictable, legally certain and consistent.

Financial Services and Markets Bill [HL]

Baroness Bowles of Berkhamsted Excerpts

Committee stage
Wednesday 8th July 2026 Grand Committee

Moved by

[Baroness Bowles of Berkhamsted]

162: Clause 44, page 51, line 21, at end insert—
“(5) After section 284A insert—“284AA Tax treatment of risk transformation arrangements(1) The Treasury must, after consultation with the Commissioners for His Majesty’s Revenue and Customs, publish guidance concerning the tax treatment of investments issued in connection with risk transformation arrangements within the meaning of section 284A.(2) Guidance under this section must include the circumstances in which a risk transformation arrangement is to be regarded as having been entered into for genuine insurance risk-transfer and capital markets purposes. (3) In exercising functions relating to the assessment, collection and management of taxes, the Commissioners for His Majesty’s Revenue and Customs must ensure that arrangements falling within a description specified by guidance under subsection (2) are treated in a consistent and certain manner.(4) Where—(a) a risk transformation arrangement falls within a description specified in guidance under subsection (2), and(b) the arrangement complies with applicable requirements relating to authorisation and supervision,the arrangement is to be treated for all tax purposes as a commercial arrangement entered into for bona fide insurance risk-transfer and capital markets purposes, and not as having as its main purpose, or one of its main purposes, the obtaining of a tax advantage.(5) The treatment in subsection (4) applies without any requirement to consider the purpose of the arrangement other than by reference to the conditions in that subsection.(6) Subsection (4) does not apply only where the Commissioners can demonstrate that—(a) one or more of the conditions in subsection (4) is not met, or(b) there has been fraud, deliberate misrepresentation, or material non-disclosure of relevant facts.(7) The Treasury must review guidance published under this section at intervals not exceeding three years.””Member’s explanatory statement
The amendment requires HM Treasury to produce guidance in consultation with HMRC to confirm the tax status of Insurance-Linked Securities vehicles.

[Baroness Bowles of Berkhamsted (LD)]

My Lords, this amendment is about insurance-linked securities—ILS—which are the UK’s version of fully funded risk transfer vehicles, which were legislated for in 2017. They include catastrophe bonds, collateralised reinsurance, sidecars and other fully funded mechanisms used by insurers to transfer peak and speciality risks to the capital markets. Catastrophe bonds are the most visible part of the market, but they represent only a portion of a global ILS market now estimated at over $136 billion. The catastrophe bond market alone is estimated at somewhere between $35 billion and $65 billion.

When the regime was introduced, the hope was that London, as the world’s leading commercial reinsurance marketplace, would become a major provider but, almost immediately, Singapore copied the PRA’s work and moved faster. I recall hearing evidence about this when I was on the Industry and Regulators Committee before the formation of the Financial Services Regulation Committee. At that time, the PRA was being blamed for sluggishness. However, it is not the problem now. Since then, London has not built a substantial market, and we now have only 2% of the global market that we should have led.

Clause 44 on transformer vehicles is part of the reforms to which the Government have committed under the Leeds reform package. Those reforms are welcome. They will improve flexibility and the ease of delivering transactions, including allowing the PRA to widen the scope of permissions. But even with Clause 44, one major block remains: tax uncertainty. HMRC continues to rely on a main-purpose anti-avoidance test that is inherently subjective. Investors and sponsors are forced into a costly, months-long clearance process with the Treasury for every single transaction. This destroys the speed to market that is required for catastrophe bonds, so they are out of the game. There is no hope of competing with jurisdictions that do not impose this hurdle, which rightly puts more trust in these fully funded, transparent risk transfer mechanisms. They are not tax-driven structures, yet they must prove that fact afresh every single time for every single contract.

A competitive ILS market cannot grow while this situation prevails. The window of opportunity closes before HMRC’s clearance process reaches a conclusion. When Parliament created the ILS regime in 2017, it included a deliberately broad anti-avoidance clause because the market was new. Ten years on, HMRC should be comfortable that these are not avoidance vehicles. There are no cases of mass tax avoidance via these vehicles. They are, by definition, highly regulated and fully funded, yet HMRC appears unwilling to update its existing guidance. Some recent case law on avoidance purposes has only increased uncertainty. The existing guidance is non-binding and investors cannot rely on it. Amendment 162 would require the Treasury to publish clear guidance that provides a presumption of commercial purpose for vehicles that meet all regulatory and authorisation requirements. It would shift the burden of proof away from the investor and provide the certainty that our major competitors already offer as a matter of course.

This is not the only area where the clearance culture is acting as a drag on growth and competitiveness. It also affects infrastructure investment, and it casts a long shadow over the Mansion House Accord. How can we expect a trustee to back a vital infrastructure project if they fear that the tax status of the vehicle will be held hostage by a subjective, years-long tax process? The Government have recognised the need for certainty by launching the Advanced Tax Certainty Service this July, but that service is restricted to multi-billion-pound megaprojects; they are looking after their own. This might work for the largest infrastructure schemes, but what of the hundreds of medium-sized and local infrastructure projects and the ILS transactions that form the backbone of our growth agenda?

I recognise that tax avoidance is a sensitive subject, and that none of us wants a return to the abuses of the past, but there is a world of difference between a structure designed to extract value from a company—that is cheating—and a structure designed to ring-fence risk for a power plant or a catastrophe bond. One is misuse of corporate law and the other is a structural necessity of it. HMRC’s current main-purpose test fails to distinguish between the two and treats structural necessity as a potential abuse.

--- Later in debate ---

[Lord Stockwood (Lab)]

My Lords, risk transformation is a key element of the UK’s insurance market, and the growth of this market is critical to the Government’s objective of making the UK the location of choice for specialist and complex insurance. The Government’s reforms in Clause 44 aim to support this market by increasing the attractiveness of the UK for establishing the legal vehicles used to undertake risk transformation. I am glad to hear the noble Baroness, Lady Bowles, and the noble Lord, Lord Ashcombe, broadly welcome these reforms.

The Government recognise the role that the bespoke tax regime for transformer vehicles plays in ensuring that the UK is competitive in this area. We also recognise, as does this amendment, the role that robust anti-avoidance measures and clear guidance have in ensuring a well-functioning regime for transformer vehicles. These anti-avoidance requirements are set out in the bespoke tax regulations for transformer vehicles, the Risk Transformation (Tax) Regulations 2017. HMRC has worked extensively with industry to produce guidance on how anti-avoidance measures apply to transformer vehicles.

I appreciate that some people consider that this guidance could be clearer, but it is important that any guidance does not constrain the Government’s ability to apply anti-avoidance rules. It must be aligned with the broader approach taken by HMRC to anti-avoidance. The current guidance allows HMRC the flexibility effectively to pursue instances where vehicles are established for the purposes of avoiding tax. It is important that we preserve that ability. I therefore ask the noble Baroness to withdraw her amendment.

[Baroness Bowles of Berkhamsted (LD)]

My Lords, I thank all those who have spoken in the debate. I must say that I find the Minister’s response rather disappointing. He is saying that the status quo is all right, but the status quo is not all right, so we will not have the business. I think that is all there is to it. Surely, there must be a way in which you can have something that moves faster when you have to negotiate things faster: otherwise, the door is shut on these transactions. So I ask the Minister to engage with the industry on this and find out more detail, because it is being treated as if it is something dodgy. How will an investor invest in something that has a ticket on it saying, “Careful, I might be slightly dodgy”? That is in effect what is happening. How will we get these things into pension funds if the trustees are thinking, “Whoa, something might happen way down the track”?

These are very serious questions. I realise that it is very specialist, but we need to take action: otherwise, we are closing the door on opportunities for good investment and opportunities for pension funds. The fact that the ATCS solves the problem for really big infrastructure shows that the Government know what they are about when they are in the business of having to negotiate contracts, but the smaller people are being left out. That is just not the right way to proceed. So I hope that the Minister will report back to the Treasury and reread my speech and that of the noble Lord and come to a better conclusion. For now, I beg leave to withdraw my amendment, although I think that this is so important that I may wish to return to it on Report.

Amendment 162 withdrawn.

Stock Market: First-time Investors

Baroness Bowles of Berkhamsted Excerpts

Monday 3rd February 2025 Lords Chamber

[Baroness Bowles of Berkhamsted (LD)]

My Lords, I declare my interest as a director of the London Stock Exchange. I commend my noble friend Lord Lee of Trafford for securing this debate and for his enlightened vision on school investment portfolios.

For anyone starting to invest, perhaps with an idea or two but wanting diversification, a go-to investment for 144 years was listed closed-end investment companies, which offer a treasure chest of good things. Some offer portfolios of other quoted equities, both UK and international, but over half invest directly into social infrastructure such as hospitals, homes, schools and renewable energy. Some have local connections. How inspiring would that be to be able to visit projects or attend a shareholders’ meeting showing, for example, how unrecyclable waste wood is turned into energy instead of landfill? Can we not just get this off the ground? This requires listed investment companies to still be around to inspire all investors, especially in the infrastructure sector.

Let us remind ourselves why they were the jewel in the crown of the City for so long. They are diversified and can hold a wider range of assets than open-ended mutual funds—notably, real assets such as vital infrastructure and housing. They provide permanent capital to the underlying investment because, when investors buy and sell listed investment company shares, the manager does not need to disturb the underlying asset; nor are they exposed to run withdrawals. There are no deductions from investor share value, with market share prices already discounting expected expenses from net asset value. The wisdom of markets scrutinises and sniffs out performance and all other issues with alacrity; they are transparent public listed companies with audited accounts.

Unfortunately, the Government are contributing to killing them off. How? They are doing this by legislating that listed investment companies must be double-regulated; growing the mountain of lost investment to £100 billion while we wait for FCA rules; undermining the stock market and its reputation; opening the door to attack by Saba and their ilk, and not being internationally competitive.

Why? It is because we cling to EU legislation that, since 2022, we alone enforce, counterproductively, so that listed investment companies’ internal expenses—already discounted in share prices—are presented as additional deductions to be paid directly by shareholders, when they are not.

The FCA is consulting on change, with products such as open and closed-ended funds being described as substitutable, when they are not. It continues its obsession with comparing costs as the yardstick for selection. Open-ended funds have different mechanisms behind their costs. They have to continually rebalance portfolios. They cannot use leverage. They do not have maintenance cost for real estate. The list goes on, so why compare? It is far better for each to explain what each does.

It is easy for a Government who need growth and a stock market recovery to do one simple thing: end double regulation and return listed investment companies to their original status, when they made small fortunes for countless private savers while supplying essential capital to British infrastructure and industry.

Procurement Act 2023

Baroness Bowles of Berkhamsted Excerpts

Tuesday 15th October 2024 Lords Chamber

[Baroness Twycross (Lab)]

The Procurement Act has provisions around defence to enable a contracting authority to exclude suppliers from procurement if they present a threat to national security. This can identify suppliers that must be excluded from certain contracts, as well as suppliers that contracting authorities should consider excluding from the procurement. I hope that at least partly addresses the noble Lord’s point.

[Baroness Bowles of Berkhamsted (LD)]

My Lords, can the Minister max out, as it were, on the provisions to help small businesses achieve procurement? As well as doing that, can she look at the Subsidy Control Act and its effect on early-stage procurement and pre-procurement? Can she look at the chilling effect of contracts requiring the sharing and licensing of innovative companies’ development of intellectual property with competitors in order to comply with the Subsidy Control Act?