Kalifa Review of UK Fintech

Lord Davies of Brixton Excerpts

Tuesday 27th April 2021 Lords Chamber

[Lord Agnew of Oulton (Con)]

My Lords, as I touched on in answer to an earlier question, we absolutely recognise how important is to get our young people enthused by this industry of the future. I referred to computer science, and we are certainly looking at increasing the number of maths teachers so that children can be more enthused at an early age. I hope to meet the Israeli ambassador shortly in order to understand more about Israel’s Magshimim programme, which gets 14 year-olds involved in a career in cybersecurity.

[Lord Davies of Brixton (Lab) [V]]

My Lords, this is an important report, laying down the way to go in this area, but what I find lacking is consideration of how it will affect the consumer of financial services. It is important not to fall into stereotypes, but there is a real problem with the digital exclusion of some consumers across all sections of our society. Will the Minister assure the House that, hand in hand with the development of financial technology, consideration will be given to ensuring the widest possible sharing of the benefits by consumers?

[Lord Agnew of Oulton (Con)]

The noble Lord is right: we do not want to see citizens excluded from the digital world into which we are heading, and that matter is under continual consideration. It is also worth stressing that, as a country, we are very much innovators and our consumers are keen for the sort of products that are coming out. For example, 2.5 million UK consumers and businesses now use open banking-enabled products; indeed, we were the first country to develop open banking standards, in 2018.

Financial Services Bill

Lord Davies of Brixton Excerpts

Report stage
Wednesday 14th April 2021 Lords Chamber

[Baroness Noakes (Con)]

My Lords, I have added my name to Amendments 45 and 48 in the name of the noble Lord, Lord Eatwell. I also support the intent behind the amendments in the name of the noble Baroness, Lady Bowles of Berkhamsted, and I know that she too supports his amendments. As has been said, these amendments concern one of the key issues that emerged during scrutiny of the Bill: the parliamentary accountability of regulators and the scrutiny of their actions. As already noted, there was widespread agreement around the House at Second Reading and in Committee that Parliament should have a role in scrutinising the rules that the FCA and PRA may make under the new rule-making powers created by the Bill.

Of much greater importance will be what happens when the Government expand the rule-making powers of the FCA and the PRA, as they have outlined in their consultation document on the review of the financial regulation framework. What we do in the context of the Bill is clearly important in signalling what we expect in the context of a larger shift in rule-making powers, if that is what the Government decide to do following consultation. This is particularly important because the Government’s analysis of parliamentary scrutiny in their consultation document was not encouraging; it was largely a defence of the existing committee activities in each House, with no regard to the new circumstances created by the extensive new rule-making powers. The Government—somewhat surprisingly, given their excellent Brexit credentials—seem not to have taken on board that the scrutiny context has changed significantly with the repatriation of financial services regulatory powers from the EU. That context should drive how we see the way forward.

Since our debate in Committee, my noble friend Lord Howe has made available to us the texts of letters from the PRA and the FCA which broadly say that they will do whatever Parliament decides, which is only right and proper. I do not think the letters add much to the analysis of the issues we debated in Committee, but they nevertheless demonstrate a constructive willingness to co-operate with parliamentary scrutiny. When my noble friend responded to our debate in Committee, I was not filled with confidence that the Government really understand the dimensions of the issues around scrutiny and accountability in the context of these additional rule-making powers. I have seen the rather late-in-the-day letter from the Economic Secretary which landed in our email boxes this afternoon. I shall be kind and say that the direction of travel is positive, but we have not yet reached a satisfactory landing point for this debate. I expect we will continue to pursue this issue well beyond the passage of the Bill.

As my noble friend Lord Blackwell knows, I do not support his Amendment 37A because it is a rear-view mirror amendment. I strongly believe that Parliament should have the opportunity to get involved with the rules made by the FCA and the PRA in time to influence their final shape. It is not satisfactory to think that ex-post scrutiny is an effective mechanism for parliamentary involvement. I do not believe the independence of the PRA and the FCA is threatened by this intervention in how rules are made, given the context of the very significant new regulatory rule-making powers expected to be devolved to them. That is why I support the amendments in this group in the names of the noble Lord, Lord Eatwell, and the noble Baroness, Lady Bowles of Berkhamsted, which provide a much better basis for Parliament’s future involvement in additional rule-making powers.

[Lord Davies of Brixton (Lab) [V]]

My Lords, these amendments are all on the same broad theme. As the previous speaker mentioned, there is a broad consensus that something needs to be done to provide a formal role for parliamentary scrutiny in the work of financial regulators. I do not want to detain the House, but I will take the opportunity to emphasise points that I have made at earlier stages. The basic question, to me, is: who regulates the regulators? The question is why we should trust the regulators; the answer is openness and engagement. Clearly, we have a particular interest here but can, I believe, contribute massively to the work of the regulator.

For us to raise these issues is not to question the expertise or good will of the people who serve on the regulators’ boards or work in their offices. It is simply wrong to assume that, once appointed, they can be left to get on with the job. As is apparent in the debate, there is clear consensus about the need for scrutiny. That is not contested. Obviously, there are clear reasons why they would benefit—the expertise of this House is a factor—but my particular concern is to establish systems that minimise the risk of regulatory capture. This is the experience, widely found, whereby regulators tend to become dominated by the interests they regulate and not by public interest.

I emphasise that this is not about corruption; it is more, in my mind, a social and cultural problem. I do not think the concept, in theory, is contested. The answer is to strengthen and develop the widest possible involvement of all sorts of bodies in the work of the regulators. Clearly, Parliament has a particular role and these amendments explore possible approaches to it. I hope the Minister can say a bit more than what was in the letter. Does the Minister consider regulatory capture to be something that occurs, and where the systems that are established address it and minimise the risk?

[Lord Sharkey (LD) [V]]

My Lords, I will speak to Amendments 18, 19 and 20 in this group. I support them all but prefer the more prescriptive Amendment 20. In these matters, it seems to me that ambiguity is not our friend. Wide latitude in interpretation can easily frustrate intent. As my noble friend Lady Bowles has so forcefully explained, that intent here is to ensure that Parliament has some effective scrutiny role in the activities and rule-making of the PRA and the FCA, by requiring that the information Parliament may need to do this is properly supplied. At present, this is absent or insufficient or likely to be post hoc and ineffective.

This is a specific example of a much larger problem in the relations between the Executive and the legislature. There is an increasing tendency for the Executive to bypass, or try to bypass, Parliament or to reduce scrutiny to formulaic rituals with no real influence on outcomes, such as our SI procedures. The seriousness of this tendency has been commented on fairly widely and frequently in the past few years.

Financial Services Bill

Lord Davies of Brixton Excerpts

Committee stage & Lords Hansard
Wednesday 3rd March 2021 Grand Committee

[Baroness McIntosh of Pickering (Con) [V]]

My Lords, I am delighted to follow the right reverend Prelate. We both sit on the rural action group of the Church of England. I should also declare that as a Bar apprentice in Edinburgh, one of my first duties was as a debt collector. I cannot claim that I had any particular training in that regard, and I was probably the least sympathetic at the time, given my youth and inexperience. I therefore congratulate the noble Baroness, Lady Bennett, on the research that she has carried out in preparing for the amendment and bringing it forward. I also thank the Reset The Debt campaign for what they have achieved, as well as the Church Action on Poverty campaign in bringing these issues to the fore.

It may be that my noble friend the Minister is not minded to look sympathetically on the amendment but, at the very least, I ask him whether he accepts that there is a problem that needs to be addressed in this regard, for the simple reason that there will be an uplift in council tax of some 5% in some areas. It would also seem that, as yet, we have failed to address the issue of zero-hour contracts, which remains vexatious.

In moving the amendment, the noble Baroness, Lady Bennett, referred to food banks. My experience is not that recent but occurred between 2010 and 2015, when I had cause to visit them in my area. What impressed me most is that it was often not people on benefits who used them but those in work but who did not work sufficient hours to make ends meet. This is a category of people to whom we owe something, and is an issue that should be addressed.

In particular, I ask my noble friend what instruction is given to IVAs and others that administer debt relief orders on the power they have to be more sympathetic to and imaginative about the circumstances in which debtors find themselves. Given the rather modest remit set out in Amendment 55, I hope that my noble friend might look at it fairly sympathetically. If he feels unable to support it, perhaps he will bring forward something along these lines at the next stage.

[Lord Davies of Brixton (Lab) [V]]

I want to say a few words at this late hour strongly in favour of Amendment 55 and mention the possibility of a wider-ranging debt jubilee. There is clearly a case for this amendment, and the same case can be made for a wider-ranging approach to relieving the burden that debt places on us all, not just on the individuals. Clearly it ruins lives and leads to much misery, but it also affects the rest of us: it acts as a drag on the economy and the recovery that we now so desperately need. Anything that we as a society can do to relieve the absolute burden of debt, the better.

The proposal in the amendment for a fair debt write-down is a welcome development to the debt relief scheme. The moral case for passing on some of the discount that currently goes to debt collection agencies is clear, and there is an advantage to the Treasury. The same case fundamentally applies to us as a whole. We need a more comprehensive package of debt cancellations, targeted at the household sector. We want a way of writing off debts, just as so many debts were written off in the financial sector 12 or 13 years ago. We were told then that some banks were too big to fail, because of the harm it would cause the economy. I argue that the challenges facing individuals, because of their debt, mean as much or even greater harm for us all.

The main argument today is that such a scheme, as well as relieving much individual misery, would provide a direct, targeted macroeconomic boost to the economy, exactly where it is needed, helping some of the most hard-up in our society. It will boost economic growth, and help those who have fallen into the misery of debt—and all of us.

[Baroness Noakes (Con)]

My Lords, I will offer a slightly different perspective on this. I understand the problems of overindebtedness among poor people, but I do not believe that Amendment 55 makes sense. If I understand the proposed scheme correctly and if a debt under a debt respite scheme is sold for less than its face value, the original borrower has to pay back only that lower amount plus 20%. Let us say that I buy a debt with a face value of £100, for which I pay £80. I can recoup £96, which is £80 plus 20% of £80. That might seem reasonable on a loan-by-loan basis but, in practice, loans are sold in groups or books.

To the extent that there is a market for debt respite scheme debts, the amount that a purchaser pays will take account of two main things—first, the likelihood that the debt will be repaid; and, secondly, the difference between the income receivable on the debt, if any, and the purchaser’s cost of funds.

Financial Services Bill

Lord Davies of Brixton Excerpts

2nd reading & 2nd reading (Hansard) & 2nd reading (Hansard): House of Lords
Thursday 28th January 2021 Lords Chamber

[Lord Davies of Brixton (Lab) [V]]

My Lords, I congratulate the noble Lord, Lord Hammond, on his maiden speech. I particularly welcome his entry to the House because I am also an unapologetic fan of spreadsheets. The Bill is necessary, of course, consequent on leaving the European Union. To a large extent, it is intended simply to replace what we had before but it provides the opportunity to go further, as we have been promised. I shall mention a couple of points that I hope we can pursue in more detail in Committee.

First, there is the Financial Conduct Authority. I do not have enough time at this stage to go into any detail but I want to put down a marker, that the FCA has failed too often in the past and simply has to do better in future. In the Bill, Clause 39 deals with the appointment of the chief executive. What is required here is clearer and greater accountability, and I would argue that Parliament has a crucial role there.

Secondly, Clause 34 relates to the debt respite scheme. I support debt respite, particularly given the situation in which we find ourselves, and I support the remarks of the noble Baroness, Lady Coussins. However, the proposals in the Bill totally lack ambition, given the scale of the problems we face. We need to understand that while debt has a personal impact, ruining lives and leading to much misery, it also affects us all by acting as a drag on the economy and the recovery that is so desperately needed.

There should be a modern debt jubilee—that is, a comprehensive package of debt cancellations targeted at the household sector. We need, in effect, a debt write-off for households, broadly along the lines established for the financial sector 12 years ago. We were told then that some banks were too big to fail because of the harm that it would cause to the economy. I argue that the failure of individuals because of debt means as much, or even greater, harm for us all.

That is not such a radical proposal. The ancient kings, under the Mosaic law, would announce debt forgiveness for their people so that they could start anew. Traditionally, that would be every 50 years, hence the jubilee. It is crucial to understand that those rulers were not being idealistic or kind in forgiving debts; in fact, they were being very practical. If the economic imbalance was not reset, there was a danger that their kingdom would fall. The main argument for such a scheme, therefore, is that in addition to relieving much individual misery it would provide a direct and targeted macroeconomic boost to the economy, exactly where it is needed. Relieving household debt would generate economic growth in the same way as a tax cut would, but it would be better targeted, allowing people to keep more of their income as pounds in their pockets. The money would flow into consumption, savings or investment, rather than into debt repayment.

There will, of course, be concern that cancelling any debts, even those debts long-abandoned by the lender, will punish the prudent and reward the profligate. That is to misunderstand how the credit system functions and how retail financial markets operate. It is hard to believe that a debt write-off will cause greater harm to those who are unaffected by indebtedness than it will benefit those who are already struggling. The beneficial effects will come to us all. Abolishing household debt, starting with the most pernicious and harmful, will generate gains that are generalised and distributed across the people of the UK as a whole.

As noble Lords will be aware, plans are already being made to celebrate one jubilee next year. Let us also plan a jubilee that will assist not just those among us who are the hardest pressed in our society but all of us. How far we can go towards such an objective in the context of the Bill, I hope we can explore in Committee.

EU-UK Trade and Cooperation Agreement

Lord Davies of Brixton Excerpts

Friday 8th January 2021 Lords Chamber

[Lord Davies of Brixton (Lab) [V]]

My Lords, I would like to make two points to the Minister—first, a response to his wish to end the argument on our role in Europe and then a question. In his winding-up speech last week he said

“I agree with those who say that we should close the book … on 47 tempestuous years in which the European question bedevilled British politics.”—[Official Report, 30/12/20; col. 1920.]

I do not know which book he has been reading, but he is very much mistaken if he thinks the treaty has brought an end to our debates about the European question. My two daughters cried they heard the result of the referendum. They, along with millions of other young people, will not forget or forgive the wanton vandalism of the Brexiteers. Rest assured—the book is far from closed on this issue.

I also do not understand how he can say that the book is closed when many crucial issues are unresolved. Discussions will inevitably continue for many years. For example, as has just been mentioned, there is inadequate provision for mutual recognition of professional qualifications. The treaty simply provides a framework, with the practice to be agreed through the Joint Partnership Council along the lines of the CETA treaty. This really is not good enough. Judging by the slow process of recognition under CETA, it means years of uncertainty. This not only leaves UK professionals at a competitive disadvantage, but it will make matters worse for our hard-pressed health and education sectors, where EU nationals provide so much essential support. It also poses an additional challenge for delivering the world-class academic research that underpins much of the UK’s competitive advantage. Can the Minister and his colleagues offer any concrete hope of expediting action in this area?

European Union (Future Relationship) Bill

Lord Davies of Brixton Excerpts

3rd reading & 2nd reading & Committee negatived & 2nd reading (Hansard) & 2nd reading (Hansard): House of Lords & 3rd reading (Hansard) & 3rd reading (Hansard): House of Lords & Committee negatived (Hansard) & Committee negatived (Hansard): House of Lords
Wednesday 30th December 2020 Lords Chamber

[Lord Davies of Brixton (Lab) [V]]

My Lords, I support the regret amendment, but with the greatest reluctance will vote for the Bill. Leaving the EU on the Tory Government’s terms—with or without this Bill—will produce immense economic and social damage to the UK. But the option of having no legislation to implement the Government’s deal would be worse. I have three substantive points.

First, it is clearly nonsense to suggest that the treaty means that we take back control, as the Brexiteers claim, particularly if we mean democratic control. The Bill creates a whole panoply of joint regulation and control between the UK Government and the European Commission, with the partnership council, 19 specialised committees and four working groups. These bodies will reach agreements at the European level, without parliamentary scrutiny, which will apply directly in British domestic law. So the UK Government will be subject to next to no democratic scrutiny or oversight of what they negotiate with the EU. There will be less democratic oversight than we had as a member of the European Union. What we will see are truly the horrors of unaccountable power, with laws being made by administrative diktat.

Secondly, of the many unknowns left open by the treaty I want to highlight the inadequate provision for mutual recognition of professional qualifications. What we have here is simply a framework, with the practice to be agreed through the joint partnership council along the lines of the CETA treaty. What this means in practice is unknown, but, judging by the slow progress of recognition under CETA itself, this means years of uncertainty. This will not only affect UK professionals, who will be at a competitive disadvantage, but will make matters worse for our hard-pressed health and education sectors, where EU nationals have provided essential support. It also poses an additional challenge for delivering the world-class academic research that underpins so much of the UK’s competitive advantage.

This undercooked and ill-thought-out Bill presents not the solutions we need but simply a long list of undecided but vital UK links that have provided great advantage to the UK, its economy and its standing in the world.

Thirdly, and all too briefly, I must mention the failure to guarantee labour standards. We know that it is the Prime Minister’s ambition to weaken employment rights in a race to the bottom. This has not been forgotten and it is most certainly an issue to which we will return in future debates.

Spending Review 2020

Lord Davies of Brixton Excerpts

Thursday 3rd December 2020 Grand Committee

[Lord Davies of Brixton (Lab)]

I draw attention first to my entry in the register of interests. I simply want to focus on a single word in the spending review document. On page 20 the word “generous” appears, where the review states:

“Public service pensions are generous”.


Well, generosity has nothing to do with it. Pensions, like pay, are simply part of the terms and conditions of employment agreed between the employer and the worker. It is true that public service pensions are better than many found in the private sector, but the policy response should be to see improvements—levelling all up, one might say, at least to the levels suggested by the Pensions Commission and endorsed by my noble friend Lord Hutton in his review of public service pensions.

The choice of words is not a trivial matter, particularly at a time when public service pay is already under attack. I hope that the choice of the word does not betray any lack of commitment to the pensions deal that was reached with the many people who work so hard on behalf of the public services.