Solvency 2 and Insurance (Amendment, etc.) (EU Exit) Regulations 2019
Baroness Drake Excerpts(5 years, 2 months ago)
Lords ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Baroness Drake (Lab)
My Lords, I rise to comment on the Solvency 2 and Insurance (Amendment, etc.) (EU Exit) Regulations, applying in the event of a no-deal departure from the EU. My concern is from the perspective of the policyholder. Unlike the noble Lord, Lord Deben, I am keen to keep hold of some of the gold-plating that may exist in the current regulatory framework.
The driving intent of the Solvency II directive was policyholder protection, achieved by insurers complying with risk and capital requirements. The benefits are so important to both businesses and individuals that it is not surprising that the Government believe that provisions need to continue after Brexit.
The statutory instrument transfers responsibility for important technical functions from the EU authorities to the UK. The PRA will assume hugely important decision-making powers. Significantly, the risk-free rate—the rate that insurance and reinsurance firms must use to value their liabilities—will be transferred from the European Insurance and Occupational Pensions Authority to the Prudential Regulation Authority.
The PRA will take on responsibility for making binding technical standards. There must be robust checks and balances on how it exercises those functions. Similarly, the Treasury will be given power to make regulations dealing with the system of governance and risk management and methods and assumptions used in valuations and risk modules.
The UK insurance market attracts business from across the world. An efficient UK insurance sector is essential to businesses and individuals, allowing them to manage their risks. The sector is of systemic importance to the functioning of the real economy and individuals’ ability to manage their lives, but in a no-deal scenario there is a risk of the sector moving into uncertain territory.
Given the systemic importance of the insurance industry, continued confidence that capital requirements are sufficient to protect insurers and policyholders against insolvency is essential. There is a risk, and a growing fear, that in a no-deal scenario the Government will allow regulatory standards to drop in this area. My question is simple: can the Minister give an assurance that there will be no weakening of the standards of regulation, governance and capital requirements on exit from the EU?
Bank Recovery and Resolution and Miscellaneous Provisions (Amendment) (EU Exit) Regulations 2018
Baroness Drake Excerpts(5 years, 4 months ago)
Grand CommitteeRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Deputy Chairman of Committees (Baroness Fookes) (Con)
My Lords, before the debate begins, it may be helpful if I explain that the rather quaint little hats sitting on the ends of some of the microphones are an indication that they are not working.
Baroness Drake (Lab)
Thank you. On the assumption that I do not have a little hat on my microphone, I should say that when I read through these two sets of draft regulations and their Explanatory Memoranda, they were a depressing reminder of the consequences of leaving the EU with no Brexit deal in place.
The regulations allow the Treasury and relevant regulators to take steps to ensure that, in the event of no deal, the UK has a functioning financial services regulatory regime, can protect consumers and ensure financial stability. At the heart of that stability are the prudential standards developed in the aftermath of the 2008 financial crisis, measuring and mitigating risk through maintaining adequate capital reserves and establishing an effective recovery and resolution framework. No one who can recall the vivid fear of a financial meltdown in 2008 can fail to understand the importance of a robust system of prudential regulation. The capital adequacy and resolution regime for banks and other financial institutions was the subject of considerable debate and scrutiny post 2008.
These SIs make amendments to certain aspects of the capital requirements regulation, to ensure that it continues to operate effectively after Brexit day, and to certain other statutory instruments that implement the capital requirements directive. Key changes for when the UK leaves the EU include: amending the geographical scope of supervisory consolidation of capital and liquidity reporting processes to restrict it to the UK; transferring functions from the European supervisory authorities to the UK regulators; transferring responsibility for all binding technical standards from those European authorities to the UK regulators; and macroprudential measures that ensure that the tools available to national regulators in the event of systemic risk, for example an asset bubble, remain available to the UK regulators.
The draft SI which addresses the onshoring of the bank recovery and resolution framework post Brexit aims to ensure that the UK special resolution regime is,
“legally and practically workable on a standalone basis”,
when the UK leaves the EU. The draft regulations also make further provisions on contractual recognition of bail-in, with new Bank of England powers to make technical standards on requirements for recognition. The Bank of England, the Prudential Regulation Authority and the FCA are expected to consult on changes to their rules affected by these regulations, and the special resolution regime code of practice will be updated. These are matters of significance that will have to be addressed with urgency.
Obviously, if the UK were to crash out of the EU with no deal, I would certainly want the Treasury and regulators to take action to protect the UK’s financial stability. Any Government faced with a no-deal exit will have to firefight and move quickly to protect the national interest. Those would be exceptional times. However, it is 12 December 2018, and we are due to leave on 29 March 2019. Ignoring Christmas, that gives us about 12 weeks to introduce measures to ensure continuing confidence in the UK financial services regulatory regime. Delivering such a challenge in such a tight timetable requires a great deal of assurance.
I therefore want to ask the Minister four questions. Will the Treasury, the PRA and the FCA have sufficient staffing resources with the necessary level of skill and expertise to deliver what is needed by 29 March? The Bank of England, the FCA and the PRA will update their rules and relevant binding technical standards to mirror the changes introduced by these SIs and consult on their proposed changes. Is there sufficient time to identify and make all the necessary changes required by 29 March, as well as fit in the promised consultation? What happens if there is not sufficient time? Finally, under these regulations, to what extent will the PRA and the FCA have the authority to weaken the binding technical standards currently required to be met by firms to a standard below those currently applied?
Payment Accounts (Amendment) (EU Exit) Regulations 2018
Baroness Drake Excerpts(5 years, 4 months ago)
Grand CommitteeRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Minister of State, Department for International Development (Lord Bates) (Con)
My Lords, as in the previous debate, this statutory instrument is part of the Treasury’s legislative programme which aims to ensure that there continues to be a functioning UK legislative and regulatory regime for financial services in the unlikely event that the UK leaves with neither a deal nor an implementation period.
The statutory instrument will fix deficiencies in UK law in the Payment Accounts Regulations to ensure that they continue to operate effectively post exit. The payment accounts directive had three main objectives: first, to improve the transparency and comparability of fees related to payment accounts; secondly, to facilitate the switching of those accounts; and, thirdly, to ensure access to payment accounts with basic features. The Payment Accounts Regulations 2015 transposed the directive into UK law.
Many noble Lords will be familiar with payment accounts, as they are the day-to-day bank or building society accounts that we use to hold funds, to make and receive payments, and to withdraw and deposit cash. In the UK, the most common form of payment account is a current account.
In a no-deal scenario, the UK would be outside the European Economic Area and the EU’s legal, supervisory and financial regulatory framework. The Payment Accounts Regulations 2015 therefore need to be updated to reflect this to ensure that the provisions work appropriately in a no-deal scenario.
The draft regulations are concerned mostly with removing references to the EU. Therefore, the impact on customers and businesses will be minimal. However, I will go into more detail on three changes to which it may be helpful to draw the Committee’s attention.
The first is that this draft instrument transfers the responsibility for making technical standards for customer documents setting out fees and charges associated with a payment account from the European Banking Association to the Financial Conduct Authority.
Secondly, the draft instrument removes the requirement for payment service providers to facilitate the cross-border opening of payment accounts. This means that payment service providers will no longer be required to provide certain information relating to a customer’s payment account—for example, direct debits or closing balance—or transfer a balance to an EU payment service provider when the customer wants to switch from a UK payment account to an EU payment account. Repealing this provision does not affect the ability of UK customers to open payment accounts abroad.
Lastly, the SI makes changes to the regulations governing payment accounts with basic features, which are more commonly known as basic bank accounts in the UK. For those who may not be familiar with this financial inclusion product, a basic bank account is a fee-free bank account, with no overdraft facility but which otherwise has the same features as a standard current account. The nine largest current account providers in the UK must offer these accounts to those who are unbanked in the UK or who are ineligible for a standard current account.
As the UK will no longer be a member of the EU’s single market for financial services after exit day, the instrument removes the requirement on the nine providers to offer these products to customers resident in the EU or to offer EU currency services on any basic bank account as standard. It will therefore be at their discretion whether to continue to offer basic bank accounts to customers resident in the EU after exit day or keep existing accounts of EU residents open.
The Secondary Legislation Scrutiny Committee was concerned that, should the nine providers choose to make use of these changes and close the basic bank accounts of customers resident in the EU, customers would be placed into financial difficulty as a result. I assure the Committee that this is unlikely to be the case because the nine providers must give customers at least two months’ notice in writing if they plan to close the account, which should give customers adequate notice to open another account.
Furthermore, a customer’s right to a basic bank account is EU-wide, so these customers should be able to open a basic bank account in the member state in which they reside. The nine providers have also signed a 2014 agreement with the Treasury that makes clear that basic bank accounts are designed to help the less affluent and most vulnerable in our society. The Government therefore expect that providers will have due regard to the spirit of this agreement when making any changes to its basic bank account policy.
In summary, this Government believe that the proposed legislation is necessary to ensure that the Payment Accounts Regulations 2015 will continue to function appropriately if the UK leaves the EU without a deal or an implementation period. Most importantly, this means that fee-free basic bank accounts, which are a key financial inclusion product, remain available and robustly regulated to customers legally resident in the UK who are unbanked or ineligible for other payment accounts. I hope this introduction will have been helpful to noble Lords, and I commend the regulations to the House.
Baroness Drake (Lab)
My Lords, this SI is part of the series providing contingency planning for the no-deal Brexit scenario. The Payment Accounts Regulations 2015 established a right of access to a basic bank account with basic features for customers legally resident in the EU, which were fee-free for services in sterling, with EU currency services provided at a reasonable fee. The Explanatory Memorandum advises that this SI seeks to ensure that those regulations operate effectively in the UK in the event of no deal and continue to deliver the existing three main objectives of, first, transparency and comparability of fees on day-to-day payment transactions such as cash deposits, withdrawal and card payments; secondly, the facilitation of account-switching; and, thirdly, ensuring access to accounts with basic features for EU residents. Paragraphs 2.2 and 2.12 of the Explanatory Memorandum set out what I have just described.
Privacy and Electronic Communications (Amendment) (No. 2) Regulations 2018
Baroness Drake Excerpts(5 years, 5 months ago)
Lords ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Minister of State, Department for International Development (Lord Bates) (Con)
My Lords, for most people in the UK, their largest financial asset will be their pension, which unfortunately makes pensions an attractive target for fraudsters. As I am sure the House is aware, pension scams have had devastating consequences. Scams can leave people to face retirement with limited income, unable to rebuild their pension savings. Cold calling is not only a nuisance but the most common method used to initiate pension fraud. I am aware of the strength of feeling on tackling cold calling from recent debates in this House and in Committee. According to Citizens Advice, the most recent statistics show that 97% of pension fraud cases brought to it originated from a cold call. That is why the Government are taking action to ban pensions cold calling.
Before we discuss the legislation I will present to the House today, allow me to briefly explain how the current system works. Currently, the Privacy and Electronic Communications Regulations 2003, or PECR, permit firms to cold call consumers for marketing purposes, subject to a couple of exceptions: where the consumer has notified the caller that they do not wish to receive such calls, or has listed their number on the telephone preference service. The current regime therefore permits cold calling unless a consumer has proactively opted out.
The purpose of the legislation under discussion today is to amend PECR in order to much more tightly restrict firms from cold calling consumers on their pensions. It does so by creating an explicit opt-in regime prohibiting all such calls unless one of two tightly drafted exemptions applies. Importantly, the exemptions do not apply to so-called introducers. Introducers are the marketing firms which seek to establish “leads” which they pass to financial advice firms. It is introducers who undertake the majority of pensions cold calling.
The ban will make it clear to consumers that any pensions cold call they receive from an unknown caller is illegal and likely to be a scam call, so they should hang up. To help future-proof the regulations, the definition of,
“direct marketing in relation to pension schemes”,
in the SI has been drafted widely. This will help to ensure that we capture new activities which may evolve in future, as well as activities that we know scammers already use today.
So that the ban does not have an unnecessary or disproportionate impact on legitimate activities, the Government have provided two narrowly defined exemptions. The first is where the consumer has given consent to a caller to receive direct marketing calls on their pensions. This exemption has been included so that consumers seeking information on pension products are able to do so. The SI is fully in line with the GDPR, which sets a high standard for consent.
The second exemption is where the consumer,
“has an existing client relationship with the caller”,
such that they would expect to receive such calls. This is so that individuals are able to receive information about investment opportunities from firms with which they have a client relationship. Crucially, the exemptions apply only where the caller is authorised by the Financial Conduct Authority or is the trustee or manager of a pension scheme. This means that there are no circumstances in which introducers, as defined, are permitted to call consumers on their pensions.
As many noble Lords will be aware, a similar ban on cold calling by claims management companies was implemented through the Financial Guidance and Claims Act 2018, which was skilfully taken through your Lordships’ House by my noble friend Lord Young, who joins me on the Front Bench this evening. The present SI has been drafted so as to achieve a consistent approach to both bans. The ban will be enforced by the Information Commissioner’s Office, a world leader in the protection of information rights. The Information Commissioner’s Office has tough enforcement powers, which include fining offenders up to £500,000. From 17 December 2018, directors of companies making unlawful calls may be personally liable for penalties of up to £500,000.
The Government are working with partners across the public, private and charity sectors to ensure that news of the ban reaches as many people as possible. To support the industry to keep within the law, the Information Commissioner’s Office will publish updated guidance when the ban comes into force. I will take this opportunity to thank stakeholders across the industry and the third sector for their helpful comments on the drafting of the regulations through consultation over the summer. As a consequence, I am pleased to say that we have a set of regulations which our stakeholders can get behind.
In summary, the Government believe that the proposed legislation is necessary to tackle the scourge of pension scams and help protect customers and consumers from pension fraudsters. I hope that noble Lords will join me in supporting these regulations and I commend them to the House.
Baroness Drake (Lab)
My Lords, I welcome these regulations, which restrict firms in cold-calling individuals regarding their pension schemes. The Explanatory Memorandum was clear and helpful in setting matters out. This was a point of considerable concern during the passage of the Financial Guidance and Claims Act 2018, when the Government gave a commitment to ban cold calls on pensions. It is pleasing to see the product of that commitment in these regulations.
As we all know, the threat of pension scams—in fact, the threat of financial scams—is a growing problem. The scale of these unsolicited calls and the number of people impacted is alarming. The estimates from the Money Advice Service indicate that there are 250 million scam calls per annum. Most cases involving pension scams start with cold calling and if someone is scammed out of their pension savings, the effect can be not only devastating but lifelong and irreversible. Scams can originate from sources other than onshore cold callers—for example, from social media and offshore callers—but these regulations will make a significant contribution to protecting individuals. I acknowledge that there are many positives in the regulations. The definition of direct marketing set out in paragraph (5) of new Regulation 21B in relation to pension schemes has been drafted widely, which is helpful. Organisations which breach the ban may be liable to pay compensation to the victim, be subject to enforcement activity by the Information Commissioner’s Office and, as the Minister referred to, face a penalty of up to £500,000.
Markets in Financial Instruments (Amendment) (EU Exit) Regulations 2018
Baroness Drake Excerpts(5 years, 5 months ago)
Lords ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Baroness Drake (Lab)
My Lords, the Government are planning for all eventualities, including the UK leaving the EU without an implementation period, and changes made in this statutory instrument might not take effect on 29 March 2019 if the UK enters an implementation period. None the less, statutory instruments intended to deal with all eventualities, even though they might not happen, should not set precedents and practices in the use of SIs that are undesirable.
As the Minister said, MiFID II is the EU legislation that introduces a transparency and disclosure regime into financial markets, particularly by requiring firms to provide trade data to give transparency on the best-execution obligation and transaction reporting requirements, which are used by regulators to detect market abuse. The intended outcome of this regime is to improve protections for investors, increase confidence in financial markets and maintain financial stability.
The functions under MiFID II are carried out by EU authorities, so if the UK leaves in a no-deal scenario this legislation needs to continue to work, and these regulations transfer responsibilities to the FCA, the PRA and the Bank of England, with overall responsibility reserved to the Treasury. In particular, it gives the FCA a set of temporary powers to operate the MiFID II transparency regime with flexibility during a four-year transitional period—with the intention, it states, of preserving the existing outcomes of the transparency regime as far as possible: that is, improving protections for investors, increasing confidence in financial markets and ensuring financial stability.
The FCA has to issue a statement of policy on its use of these temporary powers but, as the Secondary Legislation Scrutiny Committee observed in its report of 1 November, and as the Minister has acknowledged, that policy statement is not available to consider alongside these draft regulations. That is not helpful, given that the FCA is taking responsibility for complex legislation which governs the buying, selling and trading of financial instruments.
It will take four years for the FCA to become operationally ready to carry out its functions relating to transparency and disclosure, and these regulations could result in significant policy changes. Yes, this SI addresses a deficiency by transferring the functions of the European Securities and Markets Authority to the relevant UK regulator and the functions of the Commission to the Treasury, but it also gives the FCA a set of temporary powers that allow it the scope to operate the transparency regime in a stand-alone UK context.
It is clear from reading the Explanatory Memorandum that these temporary powers go beyond the narrower issue of correcting deficiencies into making policy. For example, as the Explanatory Memorandum confirms, waivers and thresholds for disclosure contained in the current transparency and disclosure regime are calculated on the basis of EU-wide market data. An abrupt move to using UK-only data will pose operational challenges for the FCA and could result in outcomes that do not enhance investor protection and market confidence.
The Explanatory Memorandum further confirms that the FCA is given powers that include amending and freezing obligations on firms where it is considered appropriate. Certain transparency conditions could be suspended during the four-year transition period. In effect, there could be a weakening of the transparency regime, with implications for investor protection. These are important matters which necessitate the FCA statement of policy on how these temporary powers will be used being in place before exit day if there is no implementation period.
There is also a time-sensitive issue. Firms will need to review their contracts, and contracts on derivative trades may need to be agreed some time in advance. So I ask the Minister for an assurance that an FCA policy statement will be in place before exit day and that Parliament will have the opportunity to consider that statement, as the Secondary Legislation Scrutiny Committee flagged. In his opening speech the Minister acknowledged the need for the FCA to have the necessary resources. But it is not simply a matter of saying that it needs extra FTE of 200, 500 or whatever; it is about whether the Government are confident that there is the supply of staff with the necessary expertise to carry out what is going to be a hugely complex challenge for the FCA.
As the Treasury made clear in response to a question from the Secondary Legislation Scrutiny Committee, it can refuse to approve the FCA policy statement on the use of its temporary powers if the department considers that the statement would prejudice an international agreement it hoped to reach. That again prompts a series of questions. Can the Minister confirm that, in the event of the Treasury refusing such approval, its reasons will be made known to Parliament, and Parliament will be able to consider them? If the Treasury vetoes an FCA policy statement, what policy will apply in its stead? These temporary powers are given to the FCA to maintain a transparency and disclosure regime intended to protect investors and maintain confidence in financial markets, so could the Minister give an illustrative example of when potential prejudice to concluding an international agreement could justify vetoing an FCA policy statement and possibly weakening the transparency regime?
Baroness Bowles of Berkhamsted (LD)
My Lords, once again I thank the noble Lord, Lord Bates, for his introduction and declare my interest as a director of the London Stock Exchange plc. I will speak on many of the things that the noble Baroness, Lady Drake, has just mentioned. I too echo the feelings of Secondary Legislation Scrutiny Committee (Sub-Committee B) about being asked to approve this legislation in the absence of the FCA policy. Even if it is not completed, we could have been given more clues about its shape and type of content.
In its reply to the sub-committee, the Treasury says the response to the FCA consultation is needed first. I think that refers to the FCA consultation that came out last Friday, and I wonder whether it was timed to come out after we would have, under the normal scheme of things, approved this the previous Wednesday. So was it actually being kept away from our beady eyes? I could not get around to looking at it until today; in fact, I could not even find it when I looked earlier. In fact, it just repeats that the policy is yet to come. It is 986 pages long, but on pages 39-41 I found some useful information. It says:
“We will issue a statement of policy on how the temporary powers will be used”.
That refers to the transparency regime. Everything else in there just details the powers it has been given.
I found a little more useful information around page 770, but only about the new Article 17A of the relevant BTS, which appears to say how it will operate those waivers that will remain, such as “large in scale”, and how it will operate deferred publication on venues—but these are not actually among the main things that the FCA has been given the power to suspend.
The only firm policy we have been given is that the FCA does not have the necessary resources and that some of the most controversial, industry-disliked parts of MiFID II and publication on waiver volumes are to be suspended by up to four years. It is a major policy change to go from mandatory measures to suspension for such a long period and yet the Government say that they aim to preserve existing outcomes of the transparency regime as far as possible.
I shall go on to test that statement in a moment but, before I do, I should mention that the Treasury, in reply to the Secondary Legislation Committee, in Appendix 1, states:
“A properly considered statement of policy on the use of the temporary powers would need to be informed by”,
the FCA consultations. However, there is nothing in the FCA consultations that informs how the policy of suspension will be used. In another reply, it states:
“HM Treasury received no objections from any of the industry stakeholders on the way these powers would be used by the FCA”.
So it seems that industry has been consulted. However, it was not a public consultation—I have looked for that too. Industry has been spoken to and has some knowledge of what is going on but we, who have to approve this legislation, are the ones most kept in the dark. This is a decision in search of a policy and that is not the way properly to treat Parliament.
I shall go on to test the statement about preserving existing outcomes of the transparency regime as far as possible. With equities, the double-volume cap is suspended because the FCA does not have all the information, but here there is a mitigating measure in that the FCA can suspend two of the transparency waivers for six months at a time. The formulation used for the suspension of those waivers is,
“if the FCA considers that it is necessary to do so to advance the FCA’s integrity objective under section 1D of FSMA”.
I have asked the Minister to confirm whether the policy intention of the double-volume cap—which, broadly speaking, is to limit the amount of dark trading—is fully encompassed in that integrity objective, taken together with the additional conditions of having reference to consumer protection, competition and the pre-Brexit thresholds.
I ask this question about the integrity objective because the FCA objectives as defined in FSMA are not coupled to MiFID II, and historically UK regulators have gone to less-strict standards. For example, on best execution, the UK regulators always went with “all reasonable efforts”—indeed, I remember the fight to get that wording into MiFID I—rather than the strict “best endeavours” that the EU finally went out with as the standard of MiFID II. So if we fall back on FSMA objectives, my concern is that they are not as strict as the requirements of MiFID II.
There is a mechanism here for the FCA to address the dark-trading policy, but it is thrown into doubt by the statement that there will be no publication of trading under waivers and that the FCA will not have sufficient data. Does this mean that there will be no way of checking whether the FCA has done its job? I do not understand why the FCA will not have data, because it collects UK data. What lack of data is preventing information under the equity waivers when they are used?
There are other things that the FCA could also do. Under MiFID I, venues had the task to monitor waivers and impose restrictions under conduct of business rules. My next question is: is the FCA empowered to revert to such a mechanism should they wish and are there any plans to do so? I certainly have not seen any in the consultation because it was all silent about how these powers would be used. Concerning equities, my conclusion is that there is, possibly, the ability to live up to the statement about preserving the outcomes of the transparency regime because there is a substitute regime, but there is still no way for observers to know that if there is no information about the use of waivers.
Financial Services and Markets Act 2000 (Claims Management Activity) Order 2018
Baroness Drake Excerpts(5 years, 5 months ago)
Grand CommitteeRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Baroness Drake (Lab)
My Lords, I welcome the order. The FCA’s greater range of powers allows for tougher regulation to address the conduct issues and other problems that we are familiar with in the CMC market. The reauthorising of existing claims management companies will ensure that they can comply with the new regime, and the senior managers regime can be used to hold managers accountable for the actions of their businesses. All this is to be welcomed.
Is there any estimate of how many existing claims management companies will not get authorisation under the new regulatory regime? What will happen to the cases that such companies are handling if they are not authorised? The previous regime required only one permission to enable claims management activity across all six sectors—personal injury, financial products and services, employment, industrial and criminal injuries, and housing disrepair. The order creates seven different permissions across those sectors, which again is a positive because it strengthens and focuses the regulation of the CMCs. However, it maintains the same exclusions and exemptions from FCA regulation that existed in the previous regime, even though there have been a number of responses to consultation suggesting that additional sectors should be brought into scope, particularly claims about cavity wall insulation, aviation and timeshares.
Ofgem’s response to the Treasury consultation, by way of example, was prompted by an increase in correspondence with claims management companies dealing with cavity wall insulation, which are not regulated under the current regime. In eight months it received over 2,250 such requests compared with only 80 in the same period for the previous year. The energy company obligation scheme, which Ofgem administers, places an obligation on larger energy suppliers to deliver energy efficiency measures, including cavity wall insulation, particularly to individuals in fuel poverty and therefore vulnerable households. Ofgem considers that the significant increase in the number of subject access requests reflects claims management companies looking to pursue claims for clients against failed or wrongly installed insulation.
Somewhat wryly, Ofgem observes that over 6.2 million homes have cavity wall insulation under government schemes. It is clearly an emerging area for claims management companies, and it is in the interest of consumers for this area to be regulated. The Government’s response was to the effect that further work was needed to understand whether this and other claims sectors should be regulated. Against that, though, we are hearing from an authoritative regulator telling the Government that there is an escalating problem that needs to be addressed. I ask the Minister to confirm the extent to which the order allows for additional claims sectors to be included in the new regime and to what extent a further statutory instrument is required to extend its scope. When can we expect a decision on the inclusion of cavity wall insulation claims? What other sectors are the Government currently considering whether to include?
It is proposed that the exemption afforded to claims management activity by independent unions, if they adhere to a code of practice, is maintained. Again, in my view that is a positive because thousands of trade union members get service through their union. The existing code applicable to trade unions will be replaced by a new code to be published by the Treasury in time, I understand, for the regulatory transfer on 1 April 2019. What is the process for consulting the trade unions? Could the Minister give a steer on what areas in the code the Treasury is looking to change?
The Minister referred to solicitors carrying on claims management activity also being exempt if that activity is carried on as part of their ordinary legal practice because regulation comes via the Solicitors Regulation Authority. If a solicitor is not acting in the ordinary course of their legal practice but is carrying on claims management activity separately, the exclusion does not apply. Again, I noted that several responses to the Treasury consultation questioned that exemption or expressed concern about the robustness of the Solicitors Regulation Authority, suggesting, as one sees if one reads the submissions, that a risk of regulatory arbitrage could arise where the presence of a legal professional in a company allows it to seek SRA authorisation rather than meeting the more robust FCA process. Although the SRA and the FCA can develop memorandums, which I am sure they will, what assurances can the Minister give that this risk of regulatory arbitrage will be closely monitored, and does this order allow the FCA to revoke that exemption—that is, if it wants to consider that exemption, can it do so under this regulation?
Finally, under the General Data Protection Regulation 2018 and the Data Protection Act 2018, where personal data is obtained through an unlawful cold call, further use of it is prohibited. This is something that many of my colleagues were concerned about during the debate on this matter in the House. I know from reading the documents that the FCA is consulting on requiring claims management companies that buy leads from third parties to carry out due diligence to determine whether the lead generator is authorised and complies with the relevant legislation and regulations. However, again, I ask the Minister: when will the FCA conclude what is required of claims management companies—that is, to undertake due diligence and ensure that the leads they are buying are authorised—and will that be available before April 2019?
Baroness Kramer (LD)
My Lords, given the hour, I shall try to be very brief. I support this statutory instrument but want to reiterate some of the points made by the noble Baroness, Lady Drake, and others.
Obviously, I support the transfer of supervisory responsibility to the FCA and the Financial Ombudsman Service, but it will be effective only if the FCA decides that it will use its powers. The notes accompanying the statutory instrument refer to the senior managers and certification regime, which has been in place for two and a half years. The industry was initially very afraid of that regime and the discipline that might follow, but it is not so any longer. Can the Minister tell us or ask his officials to write to us setting out how many actions have been taken under that regime? Obviously, you do not expect anything in the first months but, by now, given the fairly constant level of misbehaviour within the financial services industry, we should be seeing something coming through. I fear that the number will be quite low—possibly even zero.
I also reflect the concerns that the noble Baroness, Lady Drake, expressed about exemptions. The Minister referred in particular to the concerns expressed in consultation about the exemption for the legal profession, and he talked of the Solicitors Regulation Authority. I am afraid that its reputation is not good, and it is certainly not one of a body that is rigorous in its enforcement. I understand that there will be a memorandum of understanding and some sort of joint regime between that body and the FCA, but it would have been handy to have sight of that before we saw the SI. Can the Minister expand on that to give us some level of confidence both that these two bodies will work together and that they will be determined to be rigorous—something that, frankly, sits in neither’s history?
I pick up the issue of cold calling, which the noble Baroness, Lady Drake, addressed. As the Minister knows, we have been very concerned that there is not a much more vigorous prohibition on using data obtained in an unauthorised way, and cold calling was a particular issue. The fact that no penalty will be paid by those who use the information is a really significant loophole. Can the Minister give us any update on whether there will be action in this arena? He will know that, although Parliament has provided many powers for regulators to tackle cold calling, anecdotally we are aware that its incidence has not slacked; it has just become much more targeted against vulnerable people. That is almost the worst outcome that any of us could have anticipated and something that needs to be dealt with very rapidly.
Lastly, I turn to the issue of new areas. This industry has a long history of producing one new wheeze after another. We could use some assurance that the FCA and others will be able to move rapidly as it begins to become evident that the industry has found yet another way to target individuals in some abusive form. I do not want to damn all claims companies. Some of them are very good; some are extremely responsible, but it is an industry that has managed to draw in quite a number of rogues. We all want them to be expelled as soon as possible.
Lord Bates
That is something that I think the FCA would be liaising on. If it felt that its activities were aligned with a CMC then, as I mentioned earlier, that would mean it would have to continue to be regulated by the FCA. On the specific point, unless there is any inspiration on its way, I will write with clarification to the noble Lord.
The noble Baroness, Lady Kramer, asked if any action had been taken on CMCs doing their due diligence on data under GDPR. The FCA is in the process of updating and publishing its rules for the CMC regime. It will be working closely with the Information Commissioner’s Office, which is responsible for the oversight of data protection laws, to ensure that CMCs comply with the order, FCA rules and data protection legislation.
The noble Baroness asked whether the SRA was an effective regulator. The MoJ is responsible for the oversight of the SRA. The FCA and the SRA are currently reviewing their memorandum of understanding, and their conclusions will be published in due course. I think that covers most of the points.
Baroness Drake
Could the Minister clarify a point from one of my questions? Where an existing claims management company, authorised under the previous regime, transfers across to the FCA on the due date in April and is then subjected to the reauthorisation process but is not reauthorised, what happens in that instance to the caseload that it has been managing?
Lord Bates
They will be given 30 days to wind down their business in the event that that happens. I can write to the noble Baroness when I write to the noble Lord, Lord Tunnicliffe, and expand on that point if that would be helpful.
Baroness Drake
It is more about the consumer protection aspect that a group of people would be caught up in that, and I wondered who would carry on managing their cases. I am happy for the noble Lord to write to me about that.
Children and Families Bill
Baroness Drake Excerpts(10 years, 6 months ago)
Grand CommitteeRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Lord Northbourne (CB)
My Lords, I support the noble Baroness, Lady Massey, and my noble and learned friend Lady Butler-Sloss on this issue. I declare an interest as I am also a member of the Grandparents’ Association. One point that my noble and learned friend did not make is that there is a history of some social workers going round at 2 am with little Johnny and saying, “Are you prepared to take him in? We are otherwise going to take him into care”. Of course the grandparent takes him in and then she has lost her money.
Baroness Drake (Lab)
My Lords, I support my noble friend Lady Massey’s amendments because it is worth restating that we are addressing here a community of an estimated 300,000 children. It is not a minor group of children; this is a major group for whom friend and family carers are caring. They are being raised by these carers, in many instances as an alternative to being in the care system. In most instances, that produces better outcomes for these children than entering the care system and with huge savings to the state. Yet many of them get too little help and too little support. Therefore, on the one hand as a society we depend on them to protect many children, but we reciprocate with such limited support.
Research reveals that a minority of kinship carers receive financial or practical support from their local authority. Only the foster carers—about 5% of all kinship carers—are entitled to financial support, as my noble friend said. For other carers, the support is discretionary. Yet kinship and family and friends care is the most common form of permanency for children who cannot live with their birth families. Research from Joan Hunt at the University of Oxford shows that there is no relationship between a child’s needs and whether they receive support from the local authority, and that those with the highest needs may in fact be less likely to get any help. This disparity between those needing support and those getting support is reinforced by research findings, which suggest that most family and friends care arrangements—86%—are initiated by the carers themselves rather than the social workers, so giving rise to some of the situations that the noble and learned Baroness referred to a moment ago.
However, it makes no sense at all that such vulnerable children and their carers should face such a lottery when it comes to support. Kinship carers have done the right thing by taking in a child who cannot live at home but then they are often left to struggle alone. However, the children for whom they care have similar high needs to those of the children looked after by the local authority. As a survey conducted by Grandparents Plus found, 45% of kinship carers were looking after children who had experienced abuse or neglect, 44% cared for children who had experienced parental drug or alcohol misuse, 22% were in kinship care because of parental illness, mental illness or disability, and 21% because of domestic violence. Therefore, despite the importance of these placements and the experience of the children, they are often left without adequate support, many under great strain.
Notwithstanding the existing statutory guidance on providing support for carers, to which my noble friend Lady Massey referred in great detail, I reiterate that the legal position remains that, while local authorities have to provide support for looked-after children, they do not have to support the remaining vast majority of children in family and friends care who are not looked after. These amendments would begin to address that failure by putting the onus on local authorities to provide support to meet the identified needs of children who cannot live with their parents and would otherwise be in care.
Research also reveals that many of these grandparents and kinship carers are living in poverty or on low incomes. Analysis of census micro-data from 2001 found that 71% of children in kinship care were experiencing multiple deprivations. I can put it no better than a powerful quotation from a study called The Poor Relations? By Elaine Farmer, Julie Selwyn and others from Bristol University:
“We found that many informal kinship carers lived in grinding poverty, which wore them down and reduced their quality of life. Yet, this was often a consequence of caring for the kinship children—many had given up good jobs to take the children … or in the case of retired carers, had only their pensions to live on … Most carers were under significant strain bringing up the kinship children on low incomes, often when they themselves were unwell”.
Yet these carers face significant additional costs, as eloquently detailed by my noble friend. An example is the widowed grandmother living on a pension raising a six year-old grandson due to the mother’s drug and alcohol difficulties, quoted in the Grandparents Plus report Too Old to Care:
“All my child benefit, £20 a week, goes on my bus fares and his bus fares to get him to school and back. I did say to him about moving schools but he just got so upset. He’s had enough people in his little life so I just keep taking him to school”.
Women in Society
Baroness Drake Excerpts(13 years, 9 months ago)
Lords ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Baroness Drake
My Lords, I begin by thanking your Lordships warmly for the quality and depth of the welcome I have received. I am also most grateful to my sponsors, my noble friends Lord Young and Lady Warwick, for their kindness and their generous support. I wish to thank all the staff who have been so helpful, and for the courtesy extended to my father on the day of my introduction, it being necessary for him to use a wheelchair and his portable oxygen cylinder. It made the day so memorable for him and I extend my heartfelt personal thanks.
I was born in a small Devon village not far from Plymouth, which makes me a Plymouth Drake. As a little girl I gazed in wonder at some of the great ships moored at Devonport dockyard, so it was fitting to see the Armada exhibition in the Royal Gallery. In 1588, the English—including Sir Francis Drake—were the beneficiaries of a kind of stand-off between the Dutch and the Spanish. Unfortunately, in 2010, an almost equally belligerent contest between those countries in the World Cup was final confirmation that the English had already been sunk.
I worked for many years in the trade union movement. I was an equal opportunities commissioner on a commission which, with a small budget and talented staff, was able to punch well above its weight. For the past eight years I have been engaged in pension policy and reform, whether as a member of the Pensions Commission chaired by the noble Lord, Lord Turner, at the Pension Protection Fund, or in the building of the National Employment Savings Trust.
When young, I purchased a copy of the May 1909 edition of the journal Votes for Women, edited by Frederick and Emmeline Pethick-Lawrence. I reread this precious purchase recently and was reminded of the intensity of that campaign. Perhaps I may share with noble Lords an extract from that edition, which refers to the occasion of a visit in that year by Mr Winston Churchill to Manchester:
“Wherever he went he found that he could not get away from the subject of 'Votes for Women' and although the most elaborate precautions had been taken to exclude women from the great meeting in the Free Trade Hall ... when Mr Churchill raised his voice to congratulate himself on the absence of suffragettes … he was immediately interrupted by Miss F Clarkson and Miss Helen Tolson … who had been hiding [there] all night”.
Mr Churchill's arrival at the city was equally disturbed:
“All the way to the Reform Club he was pursued by a Miss Drummond in a taxi-cab, who asked him, THROUGH THE MEGAPHONE, when he intended to deal with the women's grievance”.
In preparing for this debate, I took the opportunity to read the very first maiden speech of a lady Peer. On 4 November 1958, Lady Elliot of Harwood, on the occasion of her maiden speech, remarked:
“I am very conscious that, except for Her Majesty's gracious Opening of Parliament, probably this is the first occasion in 900 years that the voice of a woman has been heard in the deliberations of this House”.
She then added wryly:
“I shall try to set a precedent and be short and to the point”.—[Official Report, 4/11/1958; col. 161.]
We have come a long way since 1909, but 10 years into the 21st century we still see substantial under-representation of women in political and public life. It is not the ability of women but the barriers they face which prevent them from contributing to their full potential and to being effectively represented. This point was recognised by Lady Elliot in that first speech. She acknowledged that she was making history but concluded insightfully that,
“we who are women may be regarded as having come here not because we are women but rather because women are now admitted”.—[Official Report, 4/11/58; col. 166.]
Women are performing strongly in education. The report of the National Equality Panel in 2010, headed by Professor Hills, confirmed that of every 100 pupils, girls have a median achievement ranked between eight and 12 places higher than the median achievement for boys. More women now have higher education qualifications than men in every age group up to the age of 44.
This performance by women, however, contrasts negatively with their wider representation in public life. In 2010, the percentage of women MPs and lady Peers had increased to a little over 20 per cent, but the figures are far fewer, as has been demonstrated, for FTSE 100 directors, editors of national newspapers, senior police officers, high court judges and a long list of so many other professions.
However, underutilising a large proportion of the country’s talent is not good for UK plc. Equality of access should not be seen exclusively as an issue of social policy; it is also a matter of economic importance. To borrow from a UK Treasury Committee report published earlier this year,
“not wasting a large proportion of talent seem more than sufficient to conclude that increased gender diversity is desirable”—
and who ever argues with the Treasury or a Treasury Committee?
There are many causes contributing to the underutilisation of women's potential, but these matters should not be solved by an over-reliance on litigation. There needs to be a collective will to address these issues. With the growing acknowledgement of the basic fairness in representing half the population and enriching decision-making by drawing on a full range of experience and expertise, countries are increasingly considering the merits of positive action on gender representation. The democratic process and business decision-making can only be enhanced by the increase in women's representation.