House of Lords (Hereditary Peers) (Abolition of By-Elections) Bill [HL]

Viscount Trenchard Excerpts

2nd reading
Friday 3rd December 2021 Lords Chamber

[Viscount Trenchard (Con)]

My Lords, the last time we debated a similar Bill introduced by the noble Lord, Lord Grocott, was on 13 March 2020, immediately before we entered the first lockdown. It seems that, notwithstanding the mutations of Covid during the intervening period, the noble Lord’s persistence with his obsession to break the terms of the 1999 agreement has not mutated at all. He is to be congratulated on his dogged perseverance, but I continue to believe that what he wants to do represents a serious breach of the basis on which your Lordships’ House passed the House of Lords Act 1999.

The Weatherill amendment, which was the basis on which your Lordships’ House gave its assent to that Act, in the words of the noble and learned Lord, Lord Irvine of Lairg, reflected

“a compromise negotiated between Privy Councillors on Privy Council terms and binding in honour on all those who have come to give it their assent.”—[Official Report, 30/3/1999; col. 207.]

The continued presence of 92 hereditary Peers in your Lordships’ House must therefore continue until stage 2 of reform is completed. Stage 2 means the introduction of at least a significant proportion of Peers elected by popular franchise. I see no evidence that another place is pressing hard for that outcome. Therefore, I believe it might take some time before stage 2 is eventually implemented.

With respect to the noble Lord, Lord Grocott, with many of whose opinions on other important policies I entirely agree, if he really thinks that the reputation of this House would be improved if it were comprised entirely of appointed Peers, I believe he is plain wrong. The removal, albeit a lingering death, of the hereditary element in your Lordships’ House would not, as he appears to believe, render the House more acceptable in the eyes and mind of the public. In a modern democracy, political legitimacy derives largely from the ballot box. Obviously, your Lordships’ House possesses no democratic legitimacy. What legitimacy this House does possess derives to a considerable extent from history—that the House has existed and made our laws for nearly 800 years, since Edward III established the House of Commons as a separate legislating body.

The exercise of patronage, under which most life Peers are appointed today, generates in many cases much more public disapprobation than the holding of hereditary by-elections, which are, in most cases, very competitive. I acknowledge that most hereditary creations too were a result of the exercise of royal or prime ministerial patronage, but, strange as it may seem to many of your Lordships, it is perhaps less offensive to many or even most people the further removed in time from the original act of patronage we are. So I do not think the public would be more supportive of your Lordships’ House shorn of its hereditary element; I actually believe the reverse.

It is also true that the continued presence of hereditary Peers contributes to a slightly more diverse geographical spread in what is an overwhelmingly metropolitan House. The noble Lord, Lord Grocott, forgot that my noble friend Lord Harlech comes from Wales and that my noble friend Lord Ridley hails from the north-east.

Noble Lords who argue that implementation of the Burns report is hampered by the hereditary by-elections are also misguided. I have the highest regard for the noble Lord, Lord Burns, and was privileged to sit on the Financial Services and Markets Committee in 1999, which paved the way for our modern system of financial regulation. However, many noble Lords accept without question the Burns committee’s recommendation that the number of Members of your Lordships’ House should be less than the number of Members of the elected House. Why? Although attitudes towards MPs having second jobs have clearly changed over the years, I have not heard many voices arguing that noble Lords should be full-time. We are still largely a part-time House. That enables us to bring to this place the current experience and knowledge that we have gained and continue to gain in our other activities. Besides, there are many logical ways in which numbers could be restricted to reflect the proportion of votes cast and seats won in one or more general elections preceding a Parliament, so I do not think that the hereditary by-elections are incompatible even with the numbers reduction proposed by the noble Lord, Lord Burns.

I believe, as I have argued before, that there is no logical reason why life Peers should be allowed to vote only in whole-House by-elections. Standing Orders should be changed to permit all Peers to vote in their respective party by-elections, which would, at a stroke, remove the point of criticism that the tiny Labour and Liberal Democrat electorates for their party by-elections are open to ridicule, which the noble Lord, Lord Grocott, correctly pointed out.

When a sensible proposal for substantive stage 2 reform of the House that is supported in another place is eventually introduced, I shall gladly support it. Until that time, I shall oppose any attempt at piecemeal reform such as the divisive and damaging measure before the House today, which I trust will never reach the statute book.

Budget Statement

Viscount Trenchard Excerpts

Wednesday 3rd November 2021 Grand Committee

[Viscount Trenchard (Con)]

My Lords, it is a pleasure to follow my noble friend Lady Foster of Oxton. I thank my noble friend the Minister for introducing this debate today and I congratulate the right reverend Prelate on her thoughtful and interesting valedictory speech.

I congratulate the Minister on the way in which the Treasury has reacted swiftly throughout the pandemic to support those sectors of the economy that would otherwise have suffered enormous and lasting damage. The bounce-back loan scheme and the furlough scheme have helped businesses across the board to survive through the dark months and many of them now contribute to the economy, which is recovering more strongly and quickly than many had predicted. The Culture Recovery Fund, administered by DCMS, has helped to ensure survival for many enterprises in the arts, cultural and heritage sector, helping to ensure that the UK remains the best place for talented artists to develop their careers and enrich our national life.

Many have suggested that this Budget indicates that the Government have abandoned their commitment to true Conservative principles, adopting policies providing a greater role for the state than we have seen since Lady Thatcher’s successful reforms. Some commentators argue that, following the success of the party in winning so many red wall seats, the Government now need to adopt tax and spend policies that reflect the priorities of their new supporters in constituencies that have never or not often elected Conservative MPs. However, the election of Ben Houchen as Mayor of Tees Valley on a platform of low taxes and support for innovative new companies and wealth creation shows that his supporters believe in Conservative ideals as the route to greater prosperity just as much as Conservative voters in the south-east.

I recognise that the Chancellor could not continue to borrow more and more, especially as the national debt has risen to an alarming £2.2 trillion, or 95.5% of GDP. This is the highest level since 1961. It is, however, encouraging that tax receipts in September 2021 have increased by 11.1% over the figure for September 2020 and government spending is modestly lower for that month. This is of course before the very substantial tax increases take effect. I worry that we are getting close to the optimal level above which further increases would be counterproductive, because they would stifle growth and act as a drag on GDP.

The UK has already become a relatively less attractive place to incorporate a company, because corporation taxes will increase by 6%—that is, an increase of 31.6% in the rate—from next April. On top of that is the effective 2.5% increase in national insurance, aggregating employers’ and employees’ contributions. I fear that we are likely to see a reduction in the number of start-up companies registered here. The costs of employment will act as a disincentive to the creation of jobs.

The Chancellor is optimistic about economic growth and the Government now need to deliver on pro-growth supply side policies that will support it. Can my noble friend tell your Lordships whether the Government recognise that we must be swifter and bolder in adopting a less cumbersome regulatory rule book for both services and goods? That means fewer quangos, not more. Many of the new Acts of Parliament being taken through your Lordships’ House establish new committees and commissions, often with increased regulatory powers. This is not what the country voted for in 2016. The Prime Minister welcomed the report of the Taskforce on Innovation, Growth and Regulatory Reform and he and my noble friend Lord Frost have said that the Government will drive forward necessary changes. Could the Minister confirm that the Government are indeed doing that?

My right honourable friend said in another place that the

“Budget increases total departmental spending over this Parliament by £150 billion. That is the largest increase this century, with spending growing by 3.8% a year in real terms. As a result of this spending review, and contrary to speculation, there will be a real-terms rise in overall spending for every single Department”.—[Official Report, Commons, 27/10/21; col. 277.]

However, the average annual growth figure shown in the Autumn Budget and spending review for the Foreign, Commonwealth and Development Office, on page 103, shows a reduction of 5% over the five years from 2019-20 to 2024-25. The FCDO is the only department facing a real-terms cut over that five-year period.

Is that the reason why the FCDO has been forced to propose the sale of around half the British embassy estate in Tokyo? Global Britain, our enhanced bilateral trade agreement, our application for accession to the CPTPP and our deepening collaboration in defence and security are all reasons why our relationship with Japan has become, without any doubt, one of our most important global partnerships. History and tradition are highly valued in Japan. Our embassy in Tokyo is the source of the special and unique status that the British Government and British people hold in Japanese society. If the embassy reduces its size, Japan will see it as the symbol of a smaller Britain. I ask my noble friend to recognise that the Treasury’s failure to provide the appropriate level of funding for our diplomatic presence around the world has led to this highly damaging proposal, which should be reconsidered as a matter of urgency.

Protocol on Ireland/Northern Ireland: Effect of Renegotiation on Other Trade Negotiations

Viscount Trenchard Excerpts

Thursday 21st October 2021 Lords Chamber

[Lord Frost (Con)]

My Lords, I like to think that I engage in a constant process of self-reflection. I am reassured that it usually reaches the same result, which is that when I look at the way that this Government have acted on the international stage since Brexit was established, the role that we have played in the world, the establishment of AUKUS and our position on issues to do with China and many other issues, I think we stand as a constructive and fully responsible international player.

[Viscount Trenchard (Con)]

My Lords, does my noble friend agree that it is internationally recognised that the UK is rightly standing by its obligations to protect the Belfast/Good Friday agreement and that the EU has also recognised this, as evidenced by its agreement to negotiate changes to the protocol? Does he not also agree that the UK can now act as a leading advocate at the WTO of free and fair principles-based international trade, leading to greater prosperity for many millions around the world?

[Lord Frost (Con)]

My noble friend makes an extremely good point: that after Brexit, as an independent global trade player, we are one of the biggest in the world. We are very influential and hope to become more so in the WTO, and to be able to stand up and speak for trade liberalisation across the world, which is of huge benefit to us all.

Trade Agreements

Viscount Trenchard Excerpts

Thursday 15th July 2021 Lords Chamber

[Lord Frost (Con)]

My Lords, we are obviously very pleased that the EU granted us data adequacy last month. We think that that was the right thing to do and a correct reflection of the situation. The EU grants data adequacy to other countries around the world as well which do not operate identical or close analogues to the EU’s legislation. That does not prevent the grant of adequacy. We think that it is entirely consistent with security of data to look at our own ways of doing these things and that is exactly what we are reflecting on.

[Viscount Trenchard (Con)]

My Lords, can my noble friend confirm that the UK does not intend to align its regulations with the EU’s in order to help the situation in Northern Ireland? Does he agree that there are other ways of reducing the administrative controls between Great Britain and Northern Ireland, such as a veterinary agreement based on mutual recognition of underlying product regulations, as the EU has agreed with New Zealand?

[Lord Frost (Con)]

My Lords, I have said it before and I will say it again: we will not align dynamically with the rules of the EU on agri-food or in other areas. That was the approach that we took into the negotiations last year and that is the consistent approach now. My noble friend is absolutely right that there are other ways of doing this and he is absolutely correct to point to an equivalence-based veterinary agreement as the way forward. That is exactly what we have proposed to the European Union and I am very hopeful that we can discuss that at the Specialised Committee created by the withdrawal agreement when it meets on Monday.

Financial Services Bill

Viscount Trenchard Excerpts

Report stage
Wednesday 14th April 2021 Lords Chamber

[Lord Blunkett (Lab)]

My Lords, this group of amendments contains issues of profound importance. It is not surprising, therefore, that our progress this afternoon has somewhat slowed. I can be blissfully short, because the noble Lord, Lord Young of Cookham, spelled out in his usual eloquent and detailed fashion why Amendment 37C should be taken very seriously and that a solution must be found to the challenge that he laid out. Like the noble Baroness, Lady Altmann, I pay tribute to the noble Lord for his dedication and commitment. I have been proud to work alongside him. One of the great pleasures of this House is that it is possible to work effectively—I hope effectively—across party. The case that he made this afternoon, which he has been making for the last few months, is in my view unanswerable. The issue, therefore, is what progress can be made and what can be done.

The noble Lord, Lord Wolfson, has taken this issue seriously and to heart since he joined the House and took up his present position. Forgive me if I call the noble Lord, Lord Young, my noble friend. As he has spelled out, it is surely not beyond the wit of woman or man—working groups that do not meet or address issues aside—to be able to unlock funds that are essential, albeit small, for those for whom they were intended. My noble friend kindly indicated my history in this area. It was blighted by not having spotted that the Mental Capacity Act, which succeeded the decision to introduce child trust funds, would inadvertently lead to those funds being blocked for the most vulnerable.

I still regret very strongly that the early part of the coalition Government abolished child trust funds—driven, it has to be said, by the then Chief Secretary and not by the leading party in the coalition. But that is water under the bridge. The paradox of course is that, had the child trust funds continued and been delivered in the way originally intended—including continuous top-up funding—we would have been in a more difficult position in releasing these funds for those with learning disabilities, because the funds would have been much greater. Sometimes there are twists in life which you do not see and sometimes there are those you wish you had not.

This is a simple issue here, whether it is about Holly who was highlighted by my noble friend Lord Young, or Mikey, highlighted by the noble Baroness, Lady Altmann. I originally heard Mikey’s father outlining these issues on “Money Box”. He was also mentioned by the now leader of the Liberal Democrats in the other place. Those young people demonstrate the wider issue of access to modest but important funding that can help them at a crucial time of transition into adulthood, as was originally intended. There is also the profound issue of the growing capital asset divide in our country. With house prices accelerating as they are now, this divide will increase still further.

So I will make a very simple appeal. The noble Lord who is leading on this amendment will not press it to a vote. However, I think that the feeling of this House—both on the numerous previous occasions on which the issue has been raised and again this afternoon by noble Lords both online and present in this Chamber —is that a solution must be found, and found quickly. My experience during eight years in the Cabinet was that there were very good civil servants who explained, quite rightly, why something could not be done. I always valued them because they prevented me putting my foot in it more often than I did. But the best civil servants were the ones who highlighted the problem and then came up with a solution.

[Viscount Trenchard (Con)]

My Lords, the noble Baroness, Lady Meacher, spoke powerfully in favour of her similar Amendment 136F in Committee on 3 March. The noble Baroness has now brought forward Amendment 16 with the same purpose. It is supported by the noble Lord, Lord Stevenson of Balmacara, my noble friend Lady Morgan of Cotes and my friend the right reverend Prelate the Bishop of St Albans. I support all their arguments.

There is a weight of evidence of unreasonably aggressive behaviour by enforcement agents even before the onset of the pandemic. Your Lordships should be pleased that the Ministry of Justice launched a call for evidence as part of its second review of the reforms introduced by the Taking Control of Goods (Fees) Regulations 2014. It is understandable that that review is taking longer than expected in current circumstances. My noble friend Lord True explained that resources had to be moved to bring about the passage of the Corporate Insolvency and Governance Act, which was intended to help businesses survive the lockdowns. I would be interested to hear from my noble friend the Minister whether the Act is working as the Government intended, and how many companies have successfully applied for moratoria under the Act.

As the noble Baroness explained, her amendment allows the FCA to outsource the powers it would assume under this amendment to another unspecified person or body. I think this is far from satisfactory, and that the FCA should not be burdened with responsibilities in this area. The FCA is going to be busy enough with its new regulatory responsibilities and with what will rightly be an onerous system of oversight by your Lordships’ House and another place.

The FCA is not the right regulator to become involved with issues relating to non-payment of utility bills, for example. I am surprised that the noble Baroness is apparently unwilling to accept the assurance of my noble friend that the Government’s response to the review of bailiff regulation will be issued within this year. I expect that the Government will recognise that something needs to be done to control overaggressive behaviour by bailiffs, balancing such control against the need to retain an effective enforcement process. In view of my noble friend’s assurance, I am unable to support this amendment.

However, the FCA is the right regulator to protect potential customers of regulated financial services firms as well as contracted customers. Every contracted customer is a potential customer before entering into a contract to purchase supplies from a supplier, or to purchase services from a supplier, and thereby becoming an actual customer. I therefore support Amendment 26 in the name my noble friends Lord Leigh of Hurley and Lady Altmann.

The right reverend Prelate the Bishop of St Albans has made a powerful case for his Amendment 27, requiring debit and credit card providers to offer an opt-in option for gambling blockers. Research by GambleAware published in July 2020 found that only eight financial services firms offered blockers on certain products and ranges, estimated to cover 60% of personal current accounts. The research also examined the effectiveness of blockers currently available and found that they needed to be improved. Of the eight banks that offered blockers, three banks’ blockers could be immediately turned on and off, meaning that they functioned more like a light switch than a lock. I would like to ask my noble friend the Minister whether he agrees with GambleAware’s recommendation that the FCA, in its guidance, should require banks to include gambling blockers as standard on debit and credit cards.

The FCA already recognises that all banks’ customers are capable of becoming vulnerable, but it does not recognise that those with a gambling addiction are included in the categories it already recognises, such as those who have a cognitive impairment, low resilience to financial shocks or poor numeracy skills. It is of course very difficult to define what is a gambling addiction, and it also begs the question of how far we want the state to go in protecting us from all the risks we may encounter in our lives. However, the right reverend Prelate’s amendment calls for an opt-in option and therefore has some merit. I look forward to hearing the Minister’s views.

--- Later in debate ---

[The Deputy Speaker (The Earl of Kinnoull) (Non-Afl)]

I call the noble Baroness, Lady Bennett of Manor Castle. We are having difficulties with the noble Baroness, Lady Bennett. We shall move to the noble Viscount, Lord Trenchard.

[Viscount Trenchard (Con)]

My Lords, Amendments 18, 19 and 20 seek to create obligations for the regulators to report to Parliament on what their policies are and what rules they intend to introduce or change. Amendment 18 is the simplest, Amendment 20 is the most prescriptive and Amendment 19 is somewhere in the middle.

These three amendments are all rather strangely worded as undertakings from regulators. Amendment 20 almost implies that it is not taken as a given that there will be a principle of openness and sincere co-operation in assisting a relevant select committee in the conduct of any inquiry. As a member of the EU Financial Services Sub-Committee, and later the EU Services Sub-Committee, I can say that we have often examined senior officers of the two regulators and it has never even crossed my mind that they would not apply a principle of openness and sincere co-operation in giving their evidence.

These three amendments refer to the provision of undertakings from regulators and cover the whole of their activities and rule-making, which is rather too broad and gives the impression that Parliament will act in a direct supervisory role. They do not specify, moreover, how and in what form the undertakings will be given to Parliament.

Contrary to the experience of the noble Baroness, Lady Bowles, the Economics Secretary has been willing on, I think, two occasions in the past year to speak to the EU Services Sub-Committee and has, as far as I know, been very willing to accept the committee’s invitation. Under the excellent chairmanship of the noble Baroness, Lady Donaghy, my noble friend Lady Neville-Rolfe, who is in her place, the noble Lord, Lord Bruce of Bennachie, and I have struggled with these issues and put in a considerable number of hours thinking about them. That experience has certainly informed my remarks today.

Amendments 37A, 45 and 48 seek, similarly, to establish a formal basis for parliamentary scrutiny of the regulators in the exercise of their new rule-making powers under the Bill. I rather prefer Amendment 37A, in the name of my noble friend Lord Blackwell, because that does not require prior parliamentary approval, which would tend to undermine the independence and authority of the regulators.

Amendments 45 and 48, in the name of the noble Lord, Lord Eatwell, and others, are much more prescriptive and beg the question as to precisely how a “relevant” committee of each House, or indeed a joint committee of both Houses, is to be charged with scrutinising proposals. These amendments compromise too much the regulators’ ability to exercise their powers, and there are at present no parliamentary committees that could effectively perform these duties with sufficient resources.

I very much hope the Minister will tell your Lordships the Government’s proposals as to how parliamentary scrutiny of the regulators’ exercise of the delegated powers should be carried out and how they think the present committee structure will be able to cope with that.

--- Later in debate ---

[Viscount Trenchard (Con)]

My Lords, my noble friend Lady Neville-Rolfe is a tireless advocate of impact assessments. I support her proposal to require the Treasury to provide an annual impact assessment of the regulators’ activities. Some of our existing financial services regulation, such as AIFMD, Solvency II and parts of MiFID II, has already had a devastating effect on small business, innovation and the competitiveness of our financial markets. My noble friend’s Amendment 24 will mitigate further damage that might otherwise be done by the application of disproportionate or unduly burdensome rules.

The FCA’s first operational objective is consumer protection, so I do not understand the purpose of the noble Lord, Lord Sharkey, and the noble Baroness, Lady Kramer, in Amendment 25, which I think would make my noble friend’s amendment read rather strangely. It is a pity that the Minister is not willing to raise the importance of competitiveness of the markets as an objective of the FCA, but, in any event, I hope he will agree that the consumers’ interests are not assisted by measures that damage competitiveness, innovation and small businesses.

Amendment 37, in the names of the noble Baroness, Lady Bennett of Manor Castle, and the noble Lord, Lord Sikka, also refers to impact assessments in its heading. But it is too wide in its coverage. It is not reasonable to make the regulators responsible for matters such as poverty, regional inequality and economic development. Market distortions such as those which would be created by the adoption of this amendment would have an adverse effect on prosperity and economic development across the country, creating more poverty and reducing the scope for the alleviation of regional inequality such as the Government are championing through their levelling-up campaign.

[Lord Sikka (Lab) [V]]

My Lords, I congratulate the noble Baroness, Lady Bennett, on her amendment and her speech. I would like to speak to Amendment 37. The amendment requires the FCA and the PRA to embrace social responsibility by considering the impact and costs/benefits of the financial services industry. Currently, that receives little attention. There are such obligations on companies—in other words, they have to embrace social responsibility—so why not on regulators?

The noble Baroness has drawn attention to the finance curse upon the UK, which has inflicted at least £4,500 billion-worth of damage to the UK economy. It would be helpful to hear from the Minister about the limits of this negative impact on the UK and whether there are any limits to the growth of the finance industry, which can drive out other industries. After all, other industries also have to compete for resources.

For far too long, the social effects of the finance industry have been dismissed as externalities, and little weight is attached to them in any annual report of the FCA or the PRA. Under the Financial Services and Markets Act 2000—FSMA—the FCA is required to

“promote effective competition in the interests of consumers in the markets for regulated financial services and services provided by a recognised investment exchange”

in carrying out certain regulated activities.

The FCA website states that one of its duties is to

“make markets work well—for individuals, for business, large and small, and for the economy as a whole.”

What analysis supports the claim that the FCA actually does this? It is hard to see how any of its statutory objectives can be met or demonstrated to have been met in the absence of any cost-benefit analysis, especially relating to the disappearance of bank branches or the very restricted access to financial services by the masses. This point was raised earlier by the noble Lord, Lord Naseby; I reuse it as an example to illustrate the failures of the FCA.

The absence of bank branches has a direct impact on poverty, regional inequality, economic development, production, distribution and the consumption of goods and services. The FCA acknowledges that 27.7 million adults at the moment are experiencing vulnerability to poor health, low financial resilience or recent negative life events. This is an increase of 15% since February 2020, when 24 million people were considered vulnerable. Yet no formal assessment is offered by the FCA as to why this is, what the role of the finance industry is and how these negative impacts can be alleviated.

I return to the issue of bank branches. Bank branch networks are a vital part of the financial infrastructure, but they have been shrinking at an accelerating rate, with many town centres and districts having no bank branches at all. Some banking services began to be provided by post offices—or bank branches moved into them—but they are closing too. Cash machines are also vanishing and increasingly require a fee, especially those located in the poorest areas. I have seen cash machines charging up to £4.99 for a withdrawal in a relatively poor area of London.

Branch closures result in exclusion from access to financial services. Many citizens, especially the elderly and those in low-income groups, do not have access to fast broadband connections or a computer. Computers in local libraries and homes are not necessarily secure and online fraud is a major risk. Strong signals for smartphones are not available throughout the country and there are too many blackspots. People without computers and smartphones cannot easily access any financial service. This cannot easily be reconciled with the government policy of reducing exclusion from financial services, and the FCA has not really said much about it.

The closure of bank branches means that the banking market is not working well, as many individuals and businesses are unable to access timely and effective financial services. Maybe the FCA interprets the “competition objective” given to it in very narrow economic terms and neglects the social dimension of making markets “work well”. It has done little to address the consequences of branch closures.

The closure of bank branches has severe consequences for financial services, local economies and the erosion of local competition. Bank branch closures impose costs on people, such as going to the next town for your banking: that is, the money spent on transport, the time taken up, extra pollution emanating from travel to the next town, road congestion and searching for the nearest suitable financial services facility—and, of course, there are cyber risks as well.

Some people may well trek to another town with a bank branch, but affordable and efficient transport from many locations, especially in rural areas, is not necessarily available. Trekking to another town is not an easy task for the elderly, the infirm, women with small children, or local entrepreneurs just keeping their head above water. A trader cannot afford to close business for a day, or half a day, to visit a bank branch in another town. In any case, the additional travel generates extra pollution and damages the environment. When people visit another town for their banking services, they end up doing their shopping there, which means that the local economy in the place where they live is also damaged.

Without local bank branches, local shopkeepers, traders and the self-employed cannot easily bank cash takings and cheques. This then increases the risks that they face. Without a local branch, banks cannot easily build an intelligent picture of local businesses, risks and opportunities, and thus cannot provide required financial support for local economies. One study has estimated that bank branch closures dampen SME lending by 63% on average in postcodes that lose a bank branch. This figure grows to 104% for postcodes that lose their last bank branch in town.

The closure of local bank branches increases commercial decline, as I indicated earlier, because people end up shopping in the town where they go for their banking. This accelerates economic decline and has effects on the local housing market, as well as on the provision already made for schools, healthcare and other facilities.

In the absence of local banking facilities, many people, especially the low-paid, may become victims of the payday lenders who charge exorbitant interest rates.

The amendment tabled asks the regulators to discharge their duties because, currently, it is one-way traffic: traffic from the state, taxpayers and people to the banks, and very little in return. On behalf of citizens and taxpayers, the state has bailed out banks; provided quantitative easing to lubricate their liquidity; acts as a lender of the last resort; provides almost free raw material—that is, cash with very low interest rates; protects bank deposits of up to £85,000; and bolsters the bank customer base, and thus the ability of banks to sell services to newer customers, because the state insists that social security payments are made through banks. What exactly is it that the banks offer the public in return? It is hard to see what we are getting in return. We are not getting competition in financial services; we are not getting bank branches that are open and accessible to the masses. There appears to be no quid pro quo from the finance industry. All that people are getting is shrinking access to financial services.

The FCA, as a regulator, has a duty to see that the markets work well for everybody. It has not done so. How can it deliver that duty when people simply do not have access to financial services or have very restricted access?

It is quite likely that, in meeting the objectives of the proposed amendment, the regulators might actually talk to normal people and ask how they are affected by changes in the financial services industry. If this amendment was to be enacted one day, I hope that it would make the regulators more people-friendly.

UK-EU Trade

Viscount Trenchard Excerpts

Thursday 18th March 2021 Lords Chamber

[Lord Frost (Con)]

My Lords, there are several potential factors affecting trade with the European Union, as well as any direct impact coming from the TCA. There is clear evidence of stockpiling at the end of last year, which will of course affect the flow of trade, and obviously there is the general economic impact of the coronavirus pandemic, which has depressed economic activity in many ways. That is why we must be cautious before drawing any firm conclusions from the January figures.

[Viscount Trenchard (Con)]

My Lords, the TCA gives us the freedom and the opportunity to develop our own regulatory regime for the City, to maintain and enhance its position as the leading global financial centre. Does the Minister agree that we should be bold and swift in making necessary changes to our EU legacy regulatory framework, while taking a proactive leadership role in international fora such as IOSCO in developing proportionate principles-based rules at the global level? Does he also agree that it will manifestly not be the EU’s interests to continue to try to prevent European companies raising capital and accessing services provided in the UK’s financial markets?

[Lord Frost (Con)]

My Lords, I very much agree with the thrust of my noble friend’s question. I endorse his view that we should use our freedom to develop our financial services industry, and the framework that regulates it, over time in a way that suits us, and build the City’s huge advantages as a global financial centre.

Dunlop Review

Viscount Trenchard Excerpts

Monday 1st February 2021 Lords Chamber

[The Deputy Speaker (Lord Lexden) (Con)]

The noble and learned Lord, Lord Woolf, whose name is next on the list, has withdrawn.

[Viscount Trenchard (Con)]

The BBC, funded by the United Kingdom taxpayer, has reduced the exposure of UK Ministers to television and radio audiences in Scotland, Wales and Northern Ireland but has greatly increased the exposure of Ministers of the devolved Administrations. This strengthens the perception of separateness and has contributed to a diminution of a feeling of Britishness and an increase in support for independence. Does the Minister not agree that in all parts of the UK much more airtime should be given to UK Ministers, and will he ensure that the incoming chairman and director-general of the BBC will correct the current harmful balance?

[Lord True (Con)]

My Lords, I am not going to issue directions to anyone in terms of the BBC but I will say that some people have certainly found aspects of the coverage confusing and, indeed, perhaps not as optimistic as it might be in certain circumstances. I believe that the nation needs optimism and hope; there should be more emphasis on the joint efforts of the National Health Service, the British Army and other armed services and volunteers right across this country, which deserve the fullest exposure, publicity and support.

Financial Services Bill

Viscount Trenchard Excerpts

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

[Viscount Trenchard (Con)]

My Lords, I declare my interests as stated in the register. I too congratulate my noble friend Lord Hammond of Runnymede on his excellent and entertaining maiden speech, and the noble Baroness, Lady Shafik, on her most inspirational one. I thank my noble friend the Minister for introducing this important Bill, which will help to ensure that the City of London remains the pre-eminent global financial centre. For more than 100 years the City has rightly enjoyed a reputation as the safest centre in the world in which to conduct financial business, and the old maxim “My word is my bond” continues to reflect the high level of trust accorded to financial firms operating in this country.

Many commentators have lamented the fact that the financial services chapters of the trade and co-operation agreement with the EU are thin. This partly reflects the fact that the EU’s single market in financial services is only partially developed, although in recent years the European Commission has made progress in its drive to harmonise financial regulation across the bloc.

We have certainly influenced the development and formulation of this regulation, but we have had to work within the EU’s Napoleonic-style framework. We therefore have cumbersome and bureaucratic rulebooks, which explains why the fastest-growing departments of banks and other regulated companies have been compliance and legal departments, rather than those devoted to innovation and the development of new products, and those that actually conduct business and earn revenues.

Sometimes we have been overruled by excessively cautious Commission technocrats and by the European regulators, especially since the pendulum swung too far towards tighter regulation after the financial markets crash of 2008. I shall give just two examples of this: first, the whole of the AIFMD, which is disproportionate and expensive for many smaller asset management companies, driving some offshore and forcing others to merge or discontinue operations. The second example is Solvency II, which prescribes excessive capital requirements for UK insurers. The Treasury has said that it intends to change the rules to make them less prescriptive and less complex, and to increase the ability of regulators to apply supervisory judgment. Can the Minister confirm that this Bill will enable that to happen?

Miles Celic, of TheCityUK, told the EU Services Sub-Committee, on which I am privileged to serve under the excellent chairmanship of the noble Baroness, Lady Donaghy, that negotiations on post-Brexit financial services arrangements are being driven by political concerns rather than regulatory or legal issues, and that equivalence is becoming increasingly politicised. Does the Minister expect that the MoU will be completed by the end of March, and does he expect the EU to have made any further equivalence assessments by that time?

I am not surprised that the EU is unwilling to grant equivalence decisions in many areas, because we have rightly made it clear that we intend to diverge from the EU model. I would encourage the Government to be bold and to develop a plan to move in an orderly manner to a completely different regulatory system, based on principles rather than prescriptive statutory regulations.

I was privileged to serve on the Joint Committee on Financial Services and Markets, chaired by the noble Lord, Lord Burns, in 1999. We had much discussion on whether the FSA should have a competitiveness objective. It was ultimately decided that the need to minimise adverse effects on competition should be supported merely by a principle, listed fifth out of five. The PRA today has a secondary competition objective, which is subordinate to its two primary objectives—to promote the safety and soundness of the firms it regulates, and to protect holders of insurance policies.

The FCA has been charged, since 2015, as the third of three operational objectives, with the promotion of effective competition in the interests of consumers. Does my noble friend think that the promotion of competitiveness of financial markets is too low down the priority list? Ultimately, as Adam Smith argued, the invisible hand of competition, and the eradication of anti-competitive behaviour, will surely accord with consumers’ best interests.

The Treasury’s phase 2 consultation paper on the future regulatory framework review suggests that the Government are responding positively to powerful evidence from the coalface, but I question any acceptance of the argument that an excessive concern for competitiveness contributed to the financial crisis. I believe that both regulators should have a clear, unqualified objective to promote the international competitiveness of financial markets. This should be an important part of the Government’s agenda for global Britain. The Minister told your Lordships that the Bill has three objectives, but none of them is competitiveness. Does he not agree that the Bill’s second objective, which is described as

“openness between the UK and international markets”,

should be “the competitiveness of the UK’s international markets”? My noble friend Lord Hill of Oareford’s review of the Stock Exchange’s listing rules should also help in this regard.

Clause 36 is especially welcome in handing the damaging PRIIPs regulation and the troublesome KIDs to the regulators. They should also deal with the corresponding parts of MiFID II. I greatly welcome the direction of travel of the future regulatory framework. It is, however, necessary to make arrangements for the proper accountability to Parliament of the regulators before they start to exercise their new powers. Can the Minister tell the House how the Government intend that that should be done? I look forward to other noble Lords’ contributions and to my noble friend’s reply.

European Union (Future Relationship) Bill

Viscount Trenchard 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

[Viscount Trenchard (Con)]

My Lords, it is a great privilege to be able to speak in this debate, which, for me, will be most memorable for the excellent valedictory speech of my noble friend Lord Cavendish of Furness. He is much respected on all sides of your Lordships’ House, and his wise and sensible interventions will be greatly missed.

I congratulate my noble friend the Lord Privy Seal on introducing the debate with a powerful speech that fully recognised the significance of the occasion. I also add my congratulations to those of other noble Lords for the triumph of the Prime Minister, my noble friend Lord Frost and his team, and all those who have worked so hard for so long to ensure that the majority of the population’s will, as expressed in the 2016 referendum and confirmed by the stunning election victory in November 2019, has been honoured in full. It is immensely reassuring for business that free trade in goods, without tariffs or quotas, will continue.

I have felt for a long time, since soon after I first went to work in Japan 40 years ago, and when I worked in Brussels, that we were uncomfortable passengers on the European train because we did not agree with most of our fellow passengers on the ultimate destination. I am delighted we have finally recognised that fact and had the courage to get off the train.

Many have expressed an opinion that the trade and co-operation agreement is somewhat thin in its services chapter. I do not think that matters much. Will the EU really put politics ahead of economics and try to stop Daimler or Axa raising funds in London’s capital markets? Anyway, the single market is only partially constructed as far as services are concerned. Furthermore, the EU has been including political as well as technical and economic criteria in its equivalence assessments. As a financial services practitioner, I agree strongly with the views expressed by my noble friend Lady Morrissey but completely fail to recognise the financial world described by the noble Baroness, Lady Kramer.

Does my noble friend agree that it is important that the UK’s regulators, rather than continuing with special pleading for equivalence, should urgently start work on devising a simpler, principles-based, innovation-friendly, more British style of financial regulation, consigning the cumbersome, expensive and complicated MiFID II, AIFMD, EMIR and UCITS to the dustbin in the process, in order to retain the UK’s position as the world’s leading financial centre and recognising that its competitors are New York, Dubai, Singapore, Shanghai and Hong Kong rather than Paris and Frankfurt? We need to adopt a completely different regulatory style and framework rather than continue with cloned copies of EU rules based on individual regulations and directives.

Spending Review 2020

Viscount Trenchard Excerpts

Thursday 3rd December 2020 Grand Committee

[Viscount Trenchard (Con)]

My Lords, I thank my noble friend the Minister for introducing this debate today, but I do think the two-minute speaking time limit is absurd. I do not understand why five hours, rather than three, could not have been set aside for this important debate. If there really are good reasons why our time today is so limited, it would have been better to reduce the number of speakers by ballot.

I will therefore concentrate on just one area: the UK’s role on the world stage. Having lived and worked abroad for many years, mostly in Japan, I have never doubted that the UK possesses enormous global reach and has perhaps underestimated the extent of its own soft power. I particularly welcome the Government’s commitment in the spending review to strengthening Britain’s place in the world, and I welcome our commitment to remaining one of the largest spenders of official development assistance, committing £10 billion in 2020-21. The Government’s commitment to spending an additional £24 billion on defence will assist greatly in underpinning our influence on the world stage as a force for rules-based trade and enhanced global security.

The UK is the second-largest winner of Nobel prizes, and the decision to establish a new UK infrastructure bank to replace our reliance on the EIB, together with a commitment to providing investment of £14.6 billion in research and development, are both important to our future as a leader in scientific innovation. Does the Minister not agree that the unattractive terms of third-country participation in the Horizon Europe programme suggest that the UK would do better not to seek association but to direct available funding to wider forms of international collaboration?