Financial Services and Markets Bill

Debate between Baroness Wheatcroft and Baroness Penn

Report stage
Tuesday 6th June 2023 Lords Chamber

[Baroness Penn (Con)]

My Lords, the UK is a leading jurisdiction for sustainable finance, and the Government are proud of that record and determined to maintain and further that position. Since Committee stage, London has been ranked as the leading global green finance centre for the fourth consecutive time. Government effort, including on sustainability disclosure and reporting, has played a vital role.

The Government’s success in green finance has been down also to the responsiveness and technical capability of our independent regulators, who have collaborated to drive forward our policy on sustainability disclosures. The Government’s approach was established in the 2021 paper, Greening Finance: A Roadmap to Sustainable Investing, where we set out the foundations of sustainability disclosure requirements—or SDR—which build on our world-leading implementation of the recommendations of the Task Force on Climate-related Financial Disclosures, or TCFD. This includes taking forward an approach across the economy to implementing international standards, enabling firms to plan for the transition and ensuring that this information flows to investors and financial consumers. Credible, usable information is a core component of green finance that will allow us to reach our goals on sustainability. When this information is available, market participants can use it to take sustainability into account when making investment decisions. Our plan for SDR is central to delivering this.

In Committee, some noble Lords raised concerns about the Government’s ongoing commitment to implementing these important reforms, the legal basis for implementing them, and the timelines for doing so. I am therefore pleased to be able to update noble Lords on a number of substantive developments since then.

Significantly, the Government published an updated green finance strategy on 30 March. This set out next steps across core elements of SDR. The Government will consult on extending the transition planning requirements—a core component of SDR—to the largest private companies once the Transition Plan Taskforce has completed its work later this year. The Government will also set up a framework to assess the suitability of the IFRS International Sustainability Standards Board’s standards for adoption in the UK. The Government remain committed to delivering a usable and useful UK green taxonomy and expect to consult on this in autumn 2023. They are also committed to setting out further detail on SDR implementation and the timeline for it this summer to reflect the rapid development of international standards.

Alongside this, the Financial Conduct Authority continues to take forward SDR for authorised persons, including consumer-facing disclosure requirements, under its existing objectives and rulemaking powers, which are sufficiently broad for the purpose. The FCA intends to issue its policy statement on SDR and investment labels in the third quarter of this year.

However, the Government recognise that SDR policy has strong links to wider environmental policy and that they therefore have an important role to play in shaping SDR. That should be recognised in legislation. Parliament must be able effectively to scrutinise the actions of government and the regulators in this area.

Amendment 4 will therefore require the FCA and the PRA to have regard to any policy statement made by the Treasury on SDR when they make rules in connection to sustainability disclosures. The amendment obliges the regulators to consider the Government’s wider policy goals when bringing forward SDR rules, while still maintaining their independence.

Regulators will also be required to report on how they have satisfied the requirement to have regard to any such policy statement on an annual basis. This will support Parliament in scrutinising the regulator’s actions on SDRs. This ongoing reporting will support transparent, structured co-operation between the regulators, government and Parliament to achieve the UK’s objectives in this space.

We will be debating a number of other sustainable finance issues today, and disclosures are at the heart of some of the matters that they raise. The amendment is therefore an important measure in that context as well as in its own right. I beg to move.

[Baroness Wheatcroft (CB)]

My Lords, I thank the Minister for her introduction of Amendment 4 and her willingness to engage with Peers on the topic of sustainable disclosure requirements. However, while a government amendment on this important topic is welcome, what we have heard is yet more delay. A cynic might judge the amendment to have a whiff of green- washing about it. It does not do enough and does not do what is required. The amendment seeks to give regulators and Ministers the necessary powers to bring forward rules and regulations on SDRs in fulfilment of commitments that they made in 2019, 2021 and again in the green finance strategy in March this year.

Amendment 114 is an effort to be helpful because, despite making commitments for five years, the Government still do not have the powers to make sustainable disclosure requirements happen. Amendment 4 does not confer those powers. The noble Baroness, Lady Ritchie of Downpatrick, submitted a Parliamentary Question on this issue on 14 November last year, and the Government’s response was that:

“The FCA has extensive powers to … impose some of the Sustainability Disclosure Requirements”.


The noble Baroness also asked about the powers available to the Department for Work and Pensions, which would legislate for sustainability reporting by occupational pension schemes. An extensive search of the powers held by the DWP in relation to public reporting and sustainable reporting has found none that is suitable.

Amendment 4 gives the Treasury the power to issue a policy statement on SDRs and to require the regulators to report against it, but it is not an obligation—the Treasury “may” prepare an SDR policy statement. As the Minister admitted in her response last year to the noble Baroness, Lady Ritchie, the FCA does not have the powers to actually implement SDRs. It seems that we are looking at a Whitehall paper trail that keeps everyone occupied but with no meaningful legislation.

I am in favour of easing unnecessary burdens on business. However, repeatedly indicating—as they have for five years—that the Government are planning to legislate but not actually doing it creates a burden in itself for business. Should it invest in data, in systems or in strategy? After so many reassurances but so little progress, and more reassurances today, no one really seems to know the answer.

I noted with interest that the Minister’s letter to Peers ahead of tabling this amendment said that

“the Financial Conduct Authority is taking forward Sustainable Disclosure Requirements (including consumer facing requirements) under its existing objectives and rulemaking powers which are sufficiently broad for the purpose”.

I would like to understand the misalignment between that statement and the earlier Answer to the Question from the noble Baroness, Lady Ritchie. Is it because there has been a change of heart and the Treasury has discovered that the powers exist after all? I would be grateful if the Minister could clarify that. Or has the Treasury limited its proposals from its original ones so, while it did not have the powers for the original proposal, it does for the new, limited proposals? Or—and it would be deeply disappointing if this were the case—is the reference in the Minister’s letter to the FCA to “taking forward” SDRs intended to mean that the FCA would be merely progressing the work but not actually implementing it? Again, I would be grateful for clarification. The FCA consultation on SDRs closed on 25 January. We are promised a policy statement in the third quarter but, without statutory powers, that would be pointless.

I hope the Minister will be able to answer those questions and now, if we are able to accept the amendment, I hope she will be able to go a little further. While the amendment sets the right tone, it does not do what is needed. It embraces the idea of SDRs but does not make them a reality. The same governmental reluctance to take real action lies behind my Amendment 7, concerning vote reporting. If investors are to make serious decisions on ensuring that their savings are put to work in a sustainable way, it is essential that they be able to see how those who manage the money choose to vote on corporate issues. That is a crucial part of being an engaged investor. The FCA itself acknowledges that. Earlier this year, its vote reporting group stated:

“Improving transparency of how asset managers vote on behalf of their clients will mean investors can better hold them to account on their stewardship”.


We would all want that, but currently it is not possible for investors always to learn how their investments are being voted. Yes, there is now an FCA requirement under the shareholder rights directive that fund managers and insurers produce an annual report on how they have voted, but it is only that they must comply or explain; and even then, the requirement is only that they should report on significant votes. The FCA gives no guidelines as to what should be deemed significant, and what one investor feels is significant may not concur with what a fund manager deems so.

The fund manager is required to report only at group level, so, in terms of the individual funds in which investors and pension funds might be invested, how their votes have been voted in the individual funds cannot be seen; it is only possible to see across the group, which is effectively meaningless for many people who want to find out how their money is being used. A report is required to be made only annually—a hopeless timescale in an industry that moves as fast as this one. Nor is there any standard form for vote reporting. It is not a lot to ask in a digital age. The SEC in the US certainly demands it.

For all those reasons, the current situation does not serve investors as well as it should. Amendment 7 would require FCA-regulated investment managers and insurers to provide clients and those investing with them with voting information that they requested in a standard format and within 30 days. In Committee the amendment on this topic included pension funds in the requirement to report but, mindful of the DWP review of pension fund reporting, the current amendment is much narrower and does not prejudge the review. However, in the meantime it should help pension funds to monitor the way their investments are being voted. It is true that the FCA vote reporting group has yet to reach conclusions, but there is no reason to wait for that. Parliament has the power to put demands on the FCA, and this is a case where it should.

The Government accept the need for good stewardship by investors, and transparency on voting aids that. It is important, indeed crucial, for good corporate governance that decisions taken on behalf of investors should be clear and easily ascertainable. Making voting records available speedily in a machine-readable way would be a service to investors that, thanks to digital innovation, should be easy and relatively cheap to implement. Why would the Government resist that? I beg to move.

Tourist Spending: VAT

Debate between Baroness Wheatcroft and Baroness Penn

Wednesday 24th May 2023 Lords Chamber

[Baroness Penn (Con)]

It is difficult to disaggregate the impact of this policy versus the overall take of VAT, which will be affected by a wide range of economic factors during this time. When we think about the tourism sector, we must remember that China represents a large number of visitors to the UK and China opened up only at the beginning of this year. Based on that, we hope to see a stronger recovery this summer, compared with previous summers.

[Baroness Wheatcroft (CB)]

My Lords, it is not the number of tourists that is important but the type of tourist. The higher-spending tourists are being deterred from coming to this country because of the lack of VAT-free shopping, as the figures quoted by the noble Baroness, Lady Doocey, made clear. Those tourists are heading to Spain and France and spending their money there. I declare an interest as chairman of the Association of Leading Visitor Attractions. Our members are losing out because these high-spending tourists are not coming to this country, doing their retail therapy and then taking in museums, galleries et cetera. Will the Minister undertake to take into account our cultural heritage when she looks at this issue?

[Baroness Penn (Con)]

I do absolutely appreciate the point that the noble Baroness is making. As part of the research that we did in considering this question, HMRC surveyed VAT RES users and the scheme did not make the top 10 in their list of reasons for visiting Britain—and that was for the 8% of visitors who qualified for the scheme who actually used it. We also asked them whether they would continue to purchase in the way they had previously. Two-thirds of those surveyed said that they would have purchased the same items regardless of the scheme, and 95% of people said that they would still shop. I appreciate that there is a wider impact, but we considered that when taking this decision.

IMF Economic Outlook

Debate between Baroness Wheatcroft and Baroness Penn

Tuesday 31st January 2023 Lords Chamber

[Baroness Penn (Con)]

I completely agree with my noble friend on the importance of the financial services Bill to unleashing further growth in our economy. It is also a really important example of how we will take the opportunity of the freedoms of Brexit to design regulation in a way that works best for the United Kingdom. Growth forecasts are inherently uncertain, but they still play a valuable role for government, economists, industry and others. Their uncertainty is a fact of life, but we should still look carefully at what they say.

[Baroness Wheatcroft (CB)]

My Lords, as of November this year, the EU will require additional travel documentation for those leaving the UK and heading into Europe. Do the Government have any estimates of the effect that will have on UK trade?

[Baroness Penn (Con)]

I do not, but I will write to the noble Baroness if there is something available on that matter.

Crypto Asset Technology

Debate between Baroness Wheatcroft and Baroness Penn

Thursday 21st July 2022 Lords Chamber

[Baroness Penn (Con)]

My Lords, I have not seen the specific report the noble Lord refers to, but he is absolutely right that the risks of online fraud are significant, particularly for potentially vulnerable people. The Government put a huge amount of effort into our anti-fraud measures, including some of the public messaging the noble Lord referred to.

[Baroness Wheatcroft (CB)]

My Lords, as the Minister has already said, derivatives of cryptocurrencies are regulated. However, for many years now, the FCA has been considering regulating cryptocurrencies. Can the Minister tell the House exactly how many years it has been considering it and what it would take to make it actually do something?

[Baroness Penn (Con)]

My Lords, as the noble Baroness noted, there have been a number of different interventions to regulate this market over the years, including the regulation of derivatives, including bringing crypto into anti-money laundering regulation, into the regulation of financial promotions and, in the forthcoming financial services Bill, the regulation of stablecoin. Action is happening now but, in terms of the broader market, there will be action this year in terms of the consultation on future regulation.

Tax Cuts: Fiscal Impact

Debate between Baroness Wheatcroft and Baroness Penn

Wednesday 13th July 2022 Lords Chamber

[Baroness Penn (Con)]

The noble Lord will know that it is international factors that are driving high rates of inflation, including supply chain disruption after the pandemic and the war in Ukraine. However, he is right that the UK has a combination of factors. It is more exposed to higher energy prices than economies such as the US and it has a tighter labour market than fellow European countries. These put us in a slightly different position. However, people should be reassured that the Government are absolutely determined to tackle inflation. We have a plan that will bring it back under control.

[Baroness Wheatcroft (CB)]

My Lords, the Minister said that the Government have been successful in repairing the country’s finances. However, at the end of April, the net public sector deficit stood at nearly 95.7% of GBP, almost an all-time high for this country. Of course, Covid accounts for part of that, but can she elaborate on how the country’s finances have been rebuilt?

[Baroness Penn (Con)]

The noble Baroness says that Covid accounts for part of that. The Covid pandemic caused the biggest recession that we have seen in a generation. The response was the biggest galvanising of government action, in both our healthcare response and our response to support the economy. We were in a position to do that because we had taken responsible decisions in the lead-up to that period. If we look at how we are coming out of that period, the public finances will be returning to a more stable footing.

Economy Update

Debate between Baroness Wheatcroft and Baroness Penn

Thursday 26th May 2022 Lords Chamber

[Baroness Penn (Con)]

My Lords, as I have said already, we are looking at certain parts of the energy generation sector that are also making extraordinary profits, because the price that electricity generators are paid is linked to the price of natural gas. So, like many other countries, we are looking at what measures we might want to take to correct that and engaging with industry urgently on it. On how the support we are providing is delivered and targeted, the Chancellor, as my noble friend would expect, looked at many different options for how best to support people. This package strikes the right balance in terms of targeted and universal support, simplicity of delivery mechanism and the speed at which support can get to people, and it should be very welcome.

[Baroness Wheatcroft (CB)]

My Lords, we are told that the windfall tax will raise around £5 billion and that the cost of the £650 for households will total around £5 billion—it is probably £5.2 billion. Can the Minister tell us the cost of the other measures announced today and how those are to be funded? Given that the Chancellor has also said that he will honour the pledge to restore the triple lock on pensions, and that they will go up by CPI at the rate that is likely to be in September, how is that going to be funded?

[Baroness Penn (Con)]

In terms of the funding, the noble Baroness is absolutely right: the total cost of the package is around £15 billion. It will be part funded by the levy and the rest will be funded by borrowing. As my right honourable friend the Chancellor said, it is part of an overall fiscally responsible approach. We have ensured that our approach is both targeted and time-limited, so that is the case. I am afraid that I have forgotten the noble Baroness’s other—

[Baroness Wheatcroft (CB)]

If I may, the Chancellor’s Statement says that the levy raises around £5 billion of revenue and that

“it avoids having to increase our debt burden further.”

I am slightly puzzled.

[Baroness Penn (Con)]

My Lords, I have remembered the noble Baroness’s second point about increasing benefits next spring in line with September’s CPI inflation. I can confirm that that is the Government’s intention and I think that would be costed by the OBR in the fiscal forecasts already in place. The other spending will be paid for by borrowing, but it is a one- off cost.

School Governing Bodies: Diversity

Debate between Baroness Wheatcroft and Baroness Penn

Thursday 28th April 2022 Lords Chamber

[Baroness Penn (Con)]

The noble Lord is right that local governance is a vital way to connect trusts to their local schools and communities. The vast majority of trusts already have local governance arrangements in their trust structure, and it is our intention that all trusts should reap the benefits of having effective local governance arrangements. We will discuss with the sector the best way to achieve that.

[Baroness Wheatcroft (CB)]

My Lords, a survey in 2019 by the National Governance Association found that the average age of governors was 55. Does the Minister agree that when searching for more diversity, diversity of age should be encouraged because at 55 many people will be out of touch with the education system?

[Baroness Penn (Con)]

My Lords, I agree with the noble Baroness. Age is something we are looking at in terms of diversity as well as gender, ethnic background and other characteristics.

Spring Statement Affordability Test

Debate between Baroness Wheatcroft and Baroness Penn

Wednesday 23rd March 2022 Lords Chamber

[Baroness Penn (Con)]

My Lords, I think I have been clear about the health and social care levy, which is being used to fund people’s number one priority, our National Health Service. In good news for my noble friend, I am sure he will have noticed that today we are raising the employment allowance to £5,000. That is a £1,000 tax cut for small businesses, cutting employers’ national insurance bills.

[Baroness Wheatcroft (CB)]

My Lords, how does the Minister expect hard-pressed local authorities to divide £500 million between the 11 million families who are dependent on universal credit now? Does she really believe that giving that money to local authorities is preferable to giving people an extra uplift in universal credit?

[Baroness Penn (Con)]

My Lords, as many noble Lords will know, people on universal credit are often in work and earning. They will benefit from the increase in the national insurance threshold and from the increase in the national living wage by 6.6%. They will also benefit from the previously announced cut to the UC taper and work allowance. The Household Support Fund has been in operation for a period of time. As for the extra money going into it, the local authorities have already been managing that money and distributing it, and I am sure they are doing a very good job.

Financial Conduct Authority: Financial Inclusion

Debate between Baroness Wheatcroft and Baroness Penn

Tuesday 22nd March 2022 Lords Chamber

[Baroness Penn (Con)]

In addition to the answer which I gave previously, it is also possible for consumers to use Post Office services to carry out many of the functions they need to access banking. That network is distributed around the country.

[Baroness Wheatcroft (CB)]

My Lords, the Centre for Social Justice estimates that 1 million people are currently borrowing from illegal moneylenders. Clearly, they do not feel financially included. What steps will the Government take to stop that, and to ensure that these people known more about credit unions, for instance?

[Baroness Penn (Con)]

The noble Baroness is right to raise the issue. The Government are taking a number of actions in this area. I previously referred to the pilot of a no-interest loan provision which the Government are supporting. They are also putting record financing into consumer debt advice to ensure that if people are in trouble, they get access to the help which they need.

Cash Infrastructure

Debate between Baroness Wheatcroft and Baroness Penn

Monday 19th July 2021 Lords Chamber

[Baroness Penn (Con)]

My Lords, the Government are committed to ensuring that all individuals have access to financial products, including a bank account, but the DWP recognises that some customers may be genuinely unable to open or manage a bank account. For those customers, payment is made via the payment exception service. My understanding is that this may already be available to a wider set of customers than the noble Lord referred to, but I will take up this point—as it is a very good one—with the DWP and get back to him.

[Baroness Wheatcroft (CB)]

My Lords, today another 12 sub-postmasters have had their convictions for fraud overturned, so would this be a good time for the Post Office to salvage its reputation by relaunching as a mutual with a cause of providing cash and the other services that communities need? Would the Minister agree with me that the “people’s bank” could be a useful step towards levelling up?

[Baroness Penn (Con)]

My Lords, I think I join noble Lords across this House in being shocked at the outcome of these cases and the ongoing issue. The Post Office has an incredibly important part to play in the provision of access to cash and free-to-use access to cash. The Government’s intention is that that role will continue.

NHS Test and Trace

Debate between Baroness Wheatcroft and Baroness Penn

Monday 28th June 2021 Lords Chamber

[Baroness Penn (Con)]

I believe my noble friend may be referring to the low rate of registration for lateral flow tests issued for asymptomatic testing. That is something we are looking at very carefully. Around 40% of people say they have taken tests but not registered the results. NHS Test and Trace is taking steps to improve the registration of test results by streamlining the reporting process and improving communications about the importance of reporting results.

[Baroness Wheatcroft (CB)]

My Lords, test and trace can work only if those who are told that they should isolate do indeed isolate. I believe that companies are now being paid to send people to knock on doors to check whether people are at home as they should be. One report stated that the hit rate was 40% success. Can the Minister tell us the current rate of success on that sort of check?

[Baroness Penn (Con)]

My Lords, I do not have data for those who might be physically checked in their home, but the ONS conducts surveys of those who have been asked to isolate, which show a higher compliance rate of about 80%. The Government’s focus in ensuring isolation is to provide the right incentives and support for people to isolate, including, for example, the £500 self-isolation payment for those on low incomes. We take enforcement measures, but we seek to persuade and then enforce.

Build Back Better Business Council

Debate between Baroness Wheatcroft and Baroness Penn

Thursday 25th February 2021 Lords Chamber

[Baroness Penn (Con)]

My Lords, the noble Lord has highlighted an important issue. Global health security is one of the Foreign Secretary’s seven priorities for development and aid. Recovery from coronavirus and resilience against future pandemics is one of the UK’s priorities for the G7. Covid has demonstrated the importance of this, but we must not lose sight of the impact of other major diseases, including TB. The UK will continue to step up its support for global efforts to tackle it.

[Baroness Wheatcroft (CB) [V]]

My Lords, charities have a huge role to play in ensuring that we build back better. Can the Minister say what steps the Government will take to ensure that charities are themselves run in a sustainable way?

Covid-19: Furloughed Space Grant Scheme

Debate between Baroness Wheatcroft and Baroness Penn

Monday 15th June 2020 Lords Chamber

[Baroness Penn]

The noble Lord is right: some businesses have had trouble accessing the initial loan support schemes. One thing that the Government have done to change this was the introduction of the bounce-back loan scheme, which has significantly increased the speed of approvals for those businesses that qualify. We are also doing other things to help with cash flow that do not rely on such approvals. As I said, 99% of eligible businesses that are also eligible for a rates holiday have already been granted that and we have released £10 billion of cash grants to them as well.

[Baroness Wheatcroft (Non-Afl) [V]]

My Lords, many of the landlords of the retail properties now in need of the sort of help being discussed are local authorities. They are allowed to borrow money from the Government to invest in commercial property to the tune of £6.6 billion. This was always going to end in disaster, so will the Minister give an assurance that in future, the Government will lend to local authorities only to invest in social housing, not in ill-judged ventures into commercial property?

Banks: Authorised Push Payment Fraud

Debate between Baroness Wheatcroft and Baroness Penn

Thursday 11th June 2020 Lords Chamber

[Baroness Penn]

The code is little over a year old. However, the Lending Standards Board will follow up on the review it has made of reimbursements with each of those firms. The follow-up exercise will take place later in 2020, to ensure that all actions recommended are fully embedded and that customers are properly reimbursed.

[Baroness Wheatcroft (Non-Afl) [V]]

My Lords, the code is clearly not perfect, but it is better than nothing, yet several significant banks have not signed up to it. Does the Minister believe that those banks should make it crystal clear to their customers that they have not signed up to the code?

[Baroness Penn]

Some banks have not signed up to the code, because they believe that their actions go further than it but take a slightly different approach. However, 90% of the total volume of transactions is covered by banks signed up to the code, and we welcome further banks signing up.