Financial Services and Markets Bill [HL]

Lord Eatwell Excerpts

Committee stage
Monday 29th June 2026 Grand Committee

[Lord Vaux of Harrowden (CB)]

My Lords, I have added my name to the Clause 17 stand part notice. As has been explained so clearly, the Government’s intention appears to be to put most of the consideration of the regulatory principles and “have regards” into the five-year strategy created by Clause 16. They believe that, having done that and thereby provided long-term clarity as to how those principles and “have regards” will be met at a strategic level, it is no longer necessary to apply them to the nitty-gritty of individual rule-making, which is why Clause 17 effectively removes them from that process. Rightly, the Government consider the secondary competitiveness and growth objective to be extremely important, so they have singled that one out for special treatment in Clause 20, and it alone must be reported on annually. That, at least, is to be welcomed but does have the somewhat odd effect of making the secondary objective more important than even the primary objectives, or any other principles which are not subject to specific reporting.

As we have heard, there are very real problems with this overall approach in terms of the impact on the ability of Parliament to scrutinise the activities of the regulators, including the committees that have been established for that purpose. As the Minister is aware, the Financial Services Regulation Committee of this House, of which I and a number of others in this Grand Committee are members, has taken the unusual step of writing to the Minister to set out our unanimous concerns in that respect. I very much look forward to the meeting that he will attend next week on that.

In passing, just before we started today, we received a letter and a Treasury note from the Minister. Point 15 in the Treasury note would slightly bring together the strategy and the Clause 17 elements, in that it says:

“The Bill will require the regulators in their annual reports to update on the extent to which, in their opinion, they have implemented their long-term strategy”.


I spent a fair bit of time since I received that trying to find where the Bill actually says that. I may be being very dim, but I cannot find it, so perhaps the Minister could point out specifically where that is. I may well have missed it, and I apologise if I have.

I also spent part of the weekend reminding myself of what the FCA’s existing 2025-30 strategy document looks like. I lead a very exciting life, as you can see. While “vacuous” might be too strong a description, it is a classic of its type, being full of motherhood and apple pie generalities and lots of attractive diagrams and pictures, but very little of real specificity or genuine measurability. Statements such as

“We will be a smarter regulator; predictable, purposeful and proportionate”,


sound great, but is this really something that could be meaningfully scrutinised? When I compare the rules in Clause 16 with what is actually in the current strategy, it appears to me that the current strategy would actually comply with Clause 16.

During the previous day in Committee, the Minister said, in reply to a question from the noble Baroness, Lady Noakes, about the existing strategy and whether it is the model on which Clause 16 is based:

“this is the starting point. There is definitely work to do and it needs to be improved”.—[Official Report, 24/6/26; col. GC 337.]

I cannot see how Clause 16 would improve it— I think it already complies—so I have no argument with the FCA having to have a longer-term strategy, but Clause 16 does not provide a sufficient basis on its own for parliamentary scrutiny and accountability, and that is where Clause 17 becomes such a problem. Clause 17 removes the need for the regulators to have regard to the regulatory principles and other “have regards” when going about its general duties, so apart from the annual report on competitiveness and growth in Clause 20 that I mentioned earlier, the only time the regulators will have to consider the regulatory principles—including, but not only, the critical issue of proportionality—will be in its five-year strategy. This would remove the need for regulators to explain how the regulatory principles apply to any draft regulations, at a time when they should be explaining not only the application to individual regulations but the cumulative impact of those regulations.

We debated last week how there is scope for an overhaul of the regulatory principles and other “have regards”, which have a tendency to proliferate. Perhaps that is where the Bill ought to be concentrating its efforts. Clause 17 represents a considerable downgrade on the ability of Parliament and indeed the Treasury to hold the regulators to account. Even as the Bill delegates ever-increasing activities to those regulators, this is a move in the wrong direction. So, by all means let us have a long-term strategy, but that does not substitute for the need for the regulators to have regard to the principles and other “have regards” when setting regulations, and to explain how they have been met. Clause 17 should be removed from the Bill.

[Lord Eatwell (Lab)]

My Lords, I want to follow on from the noble Lord, Lord Vaux, who commented that the committee was unanimous in its letter to the Minister. It was indeed: Conservative, Liberal Democrat, Labour and Cross-Bench Members were unanimous in rejecting Clause 17. The reason is that Clause 17 embodies the requirement to remove the principles from consideration by the committee. But those principles are the essential toolkit of the committee. This actually neuters the committee and leaves it just examining five-year strategies and annual reports, and without the ability to deal with specific proposals, which is the reason why the committee was established in the first place. By removing that ability, the Bill also weakens the regulators.

I am sure there are regulators in some office who thought that that was a neat way of getting rid of a very awkward committee. But it weakens, because, as the noble Baroness, Lady Bowles, pointed out, of the need for political cover—the need for a relationship between the political decisions and regulatory decisions. At the moment there exists this “proposal, accountability, critique” relationship between the regulators and the Financial Services Regulation Committee of your Lordships’ House. Remove that and the regulators are exposed to significant issues in a way they would not have been before.

I cannot see how in any way this measure improves a regulatory system that was built on the principles relationship established in FSMA at the beginning. It became particularly important once we left the European Union and the responsibility to examine the regulatory structure shifted from the European Parliament to this Parliament; and now, Clause 17 is taking away parliamentary accountability in any serious operational sense. It really should not stand part of the Bill.

Financial Services and Markets Bill [HL]

Lord Eatwell Excerpts

2nd reading
Monday 8th June 2026 Lords Chamber

[Lord Eatwell (Lab)]

My Lords, I begin by drawing attention to my interests listed in the register. The financial crisis of 2007 to 2009 left lasting scars on the UK financial system. The costs of that crisis have reverberated in the form of embedded risk aversion, particularly among financial services regulators.

Yet, risk aversion has its uses. Since the 2009 crisis, the financial services industry has been battered by further successive crises: Brexit, Covid and the wars in Ukraine and the Middle East. It is to the credit of the Bank of England and the financial services regulators that the industry has displayed a remarkable level of financial stability throughout these storms.

Yet there remains a persistent dissatisfaction with the performance of the regulators. The costs of compliance are excessive. A PwC study puts the sector’s annual compliance bill at nearly £35 billion—roughly 13% of total operating costs. Regulators are said to take excessive time over crucial decisions, such as authorisations. There is no consistent cost-benefit analysis of regulatory measures, despite the fact that the 2023 FSMA required the FCA and the PRA to establish cost-benefit panels. Regulatory decisions often create uncertainty, stifling innovation and discouraging investment.

The fact that the Bill addresses some of these concerns is certainly to be welcomed. The simplification of the senior managers regime and other administrative requirements should reduce costs. The new provisional licences should speed up effective authorisation. The changes to the relationship between the FOS and the FCA will perhaps reduce regulatory uncertainty, although it may have other effects, as the noble Lord, Lord Sharkey, suggested. Moreover, the increased flexibility provided to the FCA and the PRA in several sections of the Bill must be used with care, lest flexibility generates uncertainty.

While I welcome these measures, I am concerned by the changes to ring-fencing. The claim in the Explanatory Notes that,

“updating the statutory framework underpinning the ring-fencing regime as part of a wider programme of ring-fencing reforms”,

sets alarm bells ringing. Updating may well be the origin of increased systemic risk. The protection of activities within the ring-fence must be a primary objective. Weakening the ring-fence in the name of financial innovation would be unacceptable.

Moreover, the claim that:

“These reforms will unlock more finance for the UK economy”,


sets alarm bells ringing even louder. When he sums up, could the Minister enlighten us about the content of the,

“wider programme of ring-fencing reforms”?

What exactly do the Government have in mind?

The Explanatory Notes claim that Bill,

“modernises how the financial services sector is regulated, supporting it to grow and to lend more to businesses”,

but overall, the Bill gives the impression of tidying up, rather than embedding greater financial commitment to investment and growth. Of course, the emphasis on investment and growth is surely correct. It is necessary for the economic well-being of the people of this country. In this vital respect, for many years the financial services industry has failed, and it is continuing to fail.

Since 2000, the share of financial services in GDP has grown by 50% from 6% to 9% of GDP. Over the same period, the share of investment in GDP has not grown at all and, indeed, has tended to decline and has been persistently lower than in other major industrial countries.

We have to reflect on the fact that the prosperity of the UK’s financial services sector is not solely a success of private enterprise; it is a success of a particular institutional framework in which public authorities and the market are deeply intertwined. The prosperity of the City of London depends upon the global prestige of English law and the public institutions that enforce it. Similarly, financial services depend on the public provision of a stable monetary framework and a respected code of financial regulation, ranging from the role of the Bank of England as lender of last resort and guardian of systemic stability to consumer protection and the prevention of financial crime.

Public provision defines the environment within which financial services prosper. In return, financial services should work in a way that serves society by funding the investment in innovation, productive capacity, research and skills that the country needs. That is the settlement between the public realm and financial services.

That settlement is not working. A new settlement is required but what might that look like? It should begin with a framework of financial institutions that are committed to the needed investment. I do not mean greater flows of funds into stocks, shares and bonds in secondary markets. Britain needs financial institutions that fund real investment, new research, new products and services, new infrastructure, new homes, new international competitive industries. The Government have made an attempt at this by creating the National Wealth Fund. However, that fund will invest only if a firm that seeks funds from it has already acquired private sector funding. In other words, an institution that exists because private markets have failed defers to those failing markets to guide its own investment decisions. That is just not good enough. The new settlement must not rely solely on government, regulators or even politicians. The financial services industry itself must play its part, building on current initiatives such as the Capital Markets Industry Taskforce, convened by the London Stock Exchange.

The Bill before us is not part of this new settlement to which I refer. It is worth while and sensible, but the task of building a financial services industry that truly serves our society needs to go a lot further.

Economic Crime and Corporate Transparency Bill

Lord Eatwell Excerpts

Consideration of Commons amendments
Monday 11th September 2023 Lords Chamber

[Lord Agnew of Oulton (Con)]

My Lords, I shall speak in favour of my Motion D. I am grateful to my noble friend the Minister for his ongoing dialogue with me as we grind to the end of this Bill: he has been patient and courteous, as ever. My problem is that the Government continue to say one thing and then do something different. Just to remind noble Lords, the reason I pressed my original amendment was that a gaping hole had opened up in this newly created register of overseas interests. It is barely a year old and we have more than 50,000 properties owned by an entity whose beneficial owners are withheld from public view. That is approaching one-third of all entries. It is rapidly becoming the default advice from cute law firms to their overseas clients to use a trust structure that is opaque.

In rejecting my original Commons amendment, the Government claimed refuge behind the principle of financial privilege. This is bizarre, if not worse, but in a spirit of collaboration I will not use the word that I had planned to use. The costs to Companies House of publishing trust information are estimated on the back of an illusory envelope at between £600,000 and £2.8 million—a figure supported by absolutely no methodology—but under the Bill, Companies House funding is going to rise exponentially. The current filing fee of £13 will rise to anywhere between £60 and £90 if the guidance we have been given is followed. Taking the bottom-end number, £60 means an increase of £47 a year times 4 million companies, or £188 million a year, against this odd figure of £600,000 to £2.8 million. Even if the higher filing fees deterred some company creation or dissolution for non-viable entities, the additional cost, frankly, is a rounding error. Indeed, if the Government were to approach this logically and calculated that as a transparency cost, it would be around about 70p per registered company per year, or about 1.25%.

I give this example only because I continually worry that I get very clear assurances from the Minister but the actions taken by the Government are rather different. I accept through gritted teeth that we cannot debate that amendment as I was blocked from tabling it. This leaves us with a much watered-down proposal to try to hold the Government to account to get on with the consultation they say they need to ensure that there are no legal challenges. The Government have accepted that they need to start straightaway, in this calendar year, but they do not yet accept the principle of my proposed new subsection (2) that the consultation includes the principle of public access to protected data on a bulk basis.

This sounds arcane, but it is crucial because currently HMRC is not providing the information when requested, and it can be requested only on a case-by-case basis. As I have shown, there are already more than 50,000 hidden owners where the public are being denied the information, so doing it individually is simply not practical. I have consistently said that those with a bona fide need for confidentiality should have it, but this would be a very small proportion of the 50,000.

On the terms of the consultation, there are a couple of elephant traps that the Government should be aware of. A few years ago, when the consultation was issued to tighten up the non-dom loopholes, the lawyers’ excuse for not tightening them up was that anyone who declared non-dom status should have a reasonable expectation that it should last in perpetuity. That sounds pretty sinister to me, but apparently that argument has already been rolled out to civil servants on the issue of more transparency with trusts. I warn the Minister to be alert because, as I understand it, civil servants have already expressed their compliance with this idea. I hope that we as politicians are still running the country, not the civil servants.

We have heard from my noble friend the Minister and he has given commitments, which I very much appreciate. However, I hope he understands why I am extremely nervous: what he says and what the Government do are not always totally aligned. I will take his words exactly as he says them, though, and I ask him to keep a very careful eye on this process over the next few months. I think he has learned enough about me to know that, for all my many weaknesses, one thing I am is dogged. We will keep a careful eye on this. On that basis, I will withdraw my amendment.

[Lord Eatwell (Lab)]

My Lords, I strongly support the amendment from the noble Lord, Lord Agnew. I do this as a former chair of the Jersey Financial Services Commission. In Jersey we made a major effort to increase the transparency of trust information so that beneficial ownership could be accurately identified. One of the inhibitions for cleaning up, if you like, the register in Jersey was the behaviour of the Government in the United Kingdom, and their persistent obfuscation of the way in which trusts were to be treated.

The amendment from the noble Lord, Lord Agnew, contains exactly the process that needs to be dealt with in a consultation. I understand the assurances he may have received and that he may feel it appropriate to withdraw his amendment, but I hope he proves as dogged as we know him to be in pursuing this. I assure him of my continuing support.

[Lord Faulks (Non-Afl)]

My Lords, I also support what the noble Lord, Lord Agnew, has said and done. I am very sorry that the Government did not accept the amendment in relation to trusts. It was entirely in keeping with the purpose of the Bill, and more specifically with the purpose of the introduction of the register of overseas entities.

Some of us have been advancing the cause of this register—some would say banging on about it—for some considerable time. I had the privilege of chairing the Joint Committee on a draft Bill. We recommended legislation as soon as possible. Unfortunately, it took the invasion of Ukraine for the Government to incorporate the necessary legislation into the last economic crime Bill.

During the taking of evidence by the committee in 2019, the need to avoid trusts being used to avoid the identification of the true owner of property was specifically brought to our attention. It then became part of our recommendations that the legislation, when it came before your Lordships’ House, should cater for this obvious loophole. The Government ignored the recommendation then and have now resisted the amendment passed by your Lordships’ House.

If there is concern about minors and keeping them ignorant about their status as beneficiaries, this could have been catered for by an appropriate provision. Instead, the Government, against whom the former Lord Chancellor voted in the other place on this issue, have resorted to “financial privilege” as a means of blocking the amendment.

Trust lawyers are going to be very busy, as foreign owners will set about frustrating the purpose of the register and the aspirations that we all share for this and related legislation. I hope the Government bear that in mind.