Financial Services and Markets Bill [HL]

Lord Davies of Brixton Excerpts

Committee stage
Wednesday 8th July 2026 Grand Committee

[Lord Davies of Brixton (Lab)]

I cannot but support the desire for greater public understanding of financial matters. The noble Baroness, Lady Neville-Rolfe, and the noble Lord, Lord Holmes of Richmond, have made a powerful case for better understanding, but I am not convinced that they have made the case for it to be focused in the way that they have set out in their amendments, so I look forward to the response from my noble friend the Minister. I want to make two points about these amendments.

The first is that better understanding is not a magic trick. We can be in favour of it but we must never overstate what it can achieve. It certainly does not weaken the case for effective regulation or remove the need for it at all. We need to be clear about that because, sometimes, when the issue is discussed there is a slight—or sometimes more than a slight, perhaps an overt—suggestion that that is what it would achieve.

It is worth my quoting a bit from the interim report from the Second Pensions Commission, which is obviously about pensions but gets to the heart of the matter. It says in its report:

“As with the principles underlying automatic enrolment, the pensions system needs to work in the interests of savers as they enter retirement and protect those who do not, or cannot, engage”.


That is the bottom line: whether people choose to take education or are capable of taking it, they are still entitled to first-class financial services. I am sure everyone here would agree with that, but sometimes it is not front and centre to the way that people think about it.

[Lord Holmes of Richmond (Con)]

Just to be clear, is the noble Lord suggesting that in anything that I have set out—I will not speak for my colleagues—financial education and financial capability would then be used to weaken and have lesser regulation? I do not believe that that is what I said.

[Lord Davies of Brixton (Lab)]

No, I am not for one moment suggesting that. I am saying that, in other discussions, I have heard it said explicitly or by implication. It is a danger and, given what we are trying to achieve, it is one that we should recognise and take account of.

My second point is that both amendments refer to the FCA. The first amendment, from the noble Baroness, Lady Neville-Rolfe, specifically refers to pensions. Let us be clear: the FCA knows little or nothing about pensions. It is the wrong body to undertake any form of public information about pensions. I have heard the discussion on the regulation of pensions and people asking, “Why do we have two regulators?” Well, we do have two: one is the Pensions Regulator and the other is the FCA, but the FCA’s involvement is narrow and we should understand that it is dying. It is going because personal pensions are dead, and the FCA will have little or nothing to do with pensions in the future. The life companies have not quite realised this yet—they are fighting against it—but history will remove them from this market.

Clearly, pensions do not fall within the ambit of the FCA for these purposes. It can provide information about life insurance products and annuities, but those are not pensions. The word “pensions” is wrong in Amendment 167.

[Baroness Kramer (LD)]

My Lords, I suspect that nobody in this Room would not speak out very strongly in favour of financial education and that, in this House, we would be really grateful if there were some capacity for it, particularly in the ever-changing world that we are dealing with today, with all its complexity. I sign up totally to that underlying concept, although I think that the noble Lord, Lord Davies, alighted on an important point. I know that my noble friend Lady Tyler speaks a lot on financial inclusion and always talks about financial education as part of that, but she becomes extremely frustrated when people seem to think that, somehow, financial education is a substitute for the other actions that are needed, such as access to cash or to personal services. The noble Lord is completely right that we want financial education, and it is brilliant if we have good financial education, but that does not take away from the need to make sure that our financial services sector delivers proper, safe, first-class services, appropriately regulated.

Of all the bodies to choose to provide financial education, the FCA would be right at the bottom of my list. This is a body that has so many responsibilities already, and to take on another absolutely massive task—communicating with the ordinary person on the street, among other things—would be way beyond its capacity. It has plenty to do without this. Also, has anybody read letters from the FCA? It does not write human in its general communication. I think this is probably a government responsibility, and to me it makes a whole lot more sense to fund someone—I am picking this out of the blue—such as Citizens Advice, with people who speak with normal people and understand the issues they face and how they face them, if we are going to look for a financial education champion. I am sure people will come up with others.

I want to address Amendment 171 in the name of the noble Lord, Lord Holmes, because it is very important. It would provide a right of action to SMEs for breaches of the FCA handbook. I have from time to time, in this House and even in this series of debates, expressed my very deep frustration with the regulatory perimeter: the consumer protections that the FCA provides are limited to individuals—consumers. It now includes very small micro-businesses, but it does not include small businesses. Bad actors in the industry completely exploit that. We have seen that in example after example of mis-selling, whether back in the days of asset stripping or the mis-selling of derivatives or a play with mini-bonds. That perimeter has been used as a mechanism, because, on the far side of the perimeter, from the FCA perspective, there is not protection: it is entirely caveat emptor. In the complex world of today, where small businesses have to deal with so much and compete on a scale that they never had to if you go back a generation or so, I think it is wrong not to recognise that they will not have the capacity to be able to deal with some of that financial complexity.

I have always been keen on a right of private action; it is a very old and core tradition in British common law. One of my frustrations with the FCA has been that, in a sense, it went down the path of adopting the consumer duty to avoid doing what this House had intended it to do: look for a duty of care—because embedded in a duty of care is a right of private action. The FCA opted for a tick-box approach, rather than the principled approach that lies with a duty of care and the right of an individual citizen to get redress through the court system if they feel they have been damaged. For small businesses to now have a right of private action when they deal with the regulator seems to be an important step forward and a recognition of the reality of the challenges that small businesses face today.