Financial Services Bill

Baroness Noakes Excerpts

Committee stage
Wednesday 10th March 2021 Grand Committee

The Economic Secretary to the Treasury has said that he is committed to helping borrowers with inactive lenders and that he “remains open” to “considering practical solutions”. The Chancellor told Martin Lewis after the Budget that he would keep working on the issue and was committed to finding a workable solution. Amendments 99, 116 and 117 are three practical solutions which we hope that he will consider. We very much hope that the Chancellor and the Economic Secretary will recognise their continuing moral obligation. We hope that they will support these three proposals and take action now to ensure that all mortgage prisoners are finally set free.

[Baroness Noakes (Con)]

My Lords, Amendments 99 and 116 deal with the difficult area of mortgage prisoners. Both amendments seek to go beyond what has already been achieved for mortgage prisoners by the relaxation of affordability rules by the FCA.

I have much sympathy for mortgage prisoners, but we should not lose sight of the fact that these borrowers do not have sufficient financial credentials to qualify for new mortgage lending under current regulatory rules and hence cannot remortgage. They are a hangover from the period when lending criteria were much less strict than they are now and include interest-only borrowers who lack a credible way of repaying capital.

We should be wary of going beyond what the FCA has already done. In particular, making the FCA specify maximum interest rates is an unwarranted market intervention. The FCA is best placed to judge whether any further solutions can be found for these problem borrowers. We should not try to solve the problems of a relatively small number of people with blunderbuss legislation.

My main reason for speaking on this group is Amendment 117, which is fundamentally misconceived. My noble friend Lord True, when he spoke to the large group of amendments headed by Amendment 79 on our previous Committee day, talked about the importance of the securitisation market for mortgage providers. Securitisation ensures that lenders can carry on originating new debt by freeing up capital and liquidity. This is especially important in the mortgage market.

Amendment 117, which requires written consent for every mortgage sold, is not practical. It is likely to mean that lenders will be shut out of the securitisation market. Mortgages are not sold individually: they are parcelled up into books. Requiring consent will make this very much harder to do and will significantly add to the costs of the procedure. Anyone who has tried to get responses from individual account holders where there is no incentive for the account holder to respond will tell you that this is mission impossible.

Mortgage securitisation is a normal balance sheet financing strategy for both retail and commercial lenders. Making it more difficult or expensive for mortgages will have consequences for consumers, whether by restricting the availability of credit or increasing its cost, or both. I cannot support any of the amendments in this group.

[Lord Griffiths of Burry Port (Lab)]

My Lords, I will not detain the Committee long. I would not normally be seen near a finance Bill, largely because I do not have and do not ever expect to have any finance to bother me. Nor would I presume to discuss mortgage payments, since I do not have and never will have a mortgage to worry about. However, what I do have is some experience of people in all kinds of situations, good and bad, from the cradle to the grave.

It was a conversation with someone whom I knew well that made me aware of the truly dreadful situation that we are debating and that they found themselves in. Here was someone who was in a bad—a very bad —situation: they and 250,000 others. My noble friend Lord Stevenson of Balmacara and the noble Lord, Lord Sharkey, have done us a great service in highlighting the plight of these people and have worked out a reasonable way to help them. I am happy to leave the heavy lifting on the matter to them and, no doubt, other Members of the Committee who will chip in on the same side of the argument. They have made a compelling case in detail and with passion, all of which will help to disguise the extent of my own ignorance.

I simply must express my bewilderment at the way, when this subject was debated in the House of Commons, no less a person than the Economic Secretary to the Treasury gave voice to some rather misleading statements. He said, for example, that “mortgage prisoners” were paying a mere 0.4% higher than average mortgages. That figure has been mentioned more than once and is simply not true, according to the picture that I have seen painted in reliable reports from various quarters. He also suggested that when the mortgages in question were sold to “vulture funds” and other non-regulated bodies, the borrowers retained all the same conditions stipulated in their original agreements. From the conversation that I had and other cases that I have subsequently read about, that just is not the case.

The Government seem to have treated mortgage prisoners as cash cows, a means of paying down Treasury debt, after the decision to rescue the banks after the crisis of 2008. On the day that conversation arose, I thought that it would be a friendly interchange on the streets of my home town, with perhaps a mention of the unexpected good fortune of the Welsh rugby team—but it actually opened a can of worms. The person I was speaking to is considered to be a “problem borrower”, one of the people referred to by the noble Baroness, Lady Noakes. But my friend is a problem borrower largely because of the depredation of resources due to the fact that she has been paying mortgages over the odds for 10 years now. Even someone whose only qualification for speaking in this debate is an O-level in economics found himself smelling a rat as he spotted an egregious injustice being done to mortgage prisoners.

The amendments seek to correct this situation. They are balanced and sensible. Martin Lewis, who was quoted more than once by the noble Lord, Lord Sharkey, and is a true expert in this field, writes this:

“Mortgage prisoners are the forgotten victims of the 2008 financial crash. The Government at the time chose to bail out the banks, but unfairly—immorally—hundreds of thousands of their victims were left without adequate help, trapped in their mortgages and the financial misery caused by it.”


No wonder they are problem borrowers. He continued:

“And they have been forgotten ever since.”


The Bill and the amendments give us an opportunity to unforget them, to make good on past failures, and to bring justice to a situation yearning for it. The Minister is a decent and fair man but will of course be bound by the usual conventions in a debate of this kind. It would be good to hear him promise to go back to his department to try to find a way of bringing a little hope and cheer to those who suffer in this way.

--- Later in debate ---

[Baroness Noakes (Con)]

My Lords, as many Members of the Committee have already noted, my noble friend Lady Neville-Rolfe is well known in your Lordships’ House for her pursuit of impact assessments and is a stern critic of government departments that hide behind the exact wording of Cabinet Office guidance. Recently, many of us have joined her in being appalled by the complete lack of impact statements published to support the Government’s coronavirus policies, involving—I remind the Committee—the greatest ever peacetime infringement of civil liberties. The Department of Health and Social Care used the flimsy excuse that the Cabinet Office does not require impact assessments for policies intended to have a temporary effect.

I am particularly interested in my noble friend’s Amendment 104, which requires an annual report to Parliament. I am not wholly in favour of annual reports, because they can degenerate into boiler plate and have a very short-term horizon; I prefer the concept of periodic reports that can look at impacts over a longer time span. However, whether such reviews are annual or less frequent, I suggest to my noble friend that the report could also usefully concentrate on the quality of consultation carried out by the regulators, and that would include the quality of impact statements.

Consultations by the PRA and the FCA often feel like not much more than going through the motions. They are not alone in the public sector in seeming to exaggerate the benefits and underestimate the costs. HMRC, for example, is a particular case in point, having been criticised more than once by the Economic Affairs Committee of your Lordships’ House for the use of cost assumptions that seem to bear little relationship to reality. Similarly, the PRA’s consultation on ring-fencing rules was widely regarded as a massive underestimate of the cost of compliance, as was borne out by subsequent cost experience. A superficial impact assessment, or one that overstates the benefits or systematically underestimates the costs, is worse than useless and can lead to poor policy-making. It would be wise to ensure that the regulator’s performance in this regard is kept under review.

[Baroness Kramer (LD)]

My Lords, in many of the groups of amendments to the Bill we have discussed the issue of accountability, and it has been a very important discussion. However, we have also discussed the necessity to have proper evidence and information to make that accountability worthwhile, valid and effective. These amendments follow exactly that direction.

One of the pleas that I will put in is that an impact assessment should be studied and then reviewed. The noble Lord, Lord Tunnicliffe, is not speaking in this group of amendments but I can think of numerous occasions when he has spoken on a financial services Bill and pointed out that the information in the assessment did not seem to answer any of the obvious questions that a sensible person would ask in order to understand the regulations involved. I would join him in that. We seem to have narrow definitions of what an impact assessment is, and it seems to me that it should do what it says on the tin. It ought actually to assess the impact in a way that is meaningful to the regulation or piece of legislation in front of us.

This push for evidence and information, and quality in both, is an important thrust of the conversations and debates that we have had around the Bill. I very much hope that Ministers take that on board, because this is starting a pressure that will not go away. In fact, for the Government, if they want to produce the highest-quality legislation possible, the discussion created by developing a high-quality impact assessment will lead in the end to far better legislation.