Financial Services and Markets Bill

Eleanor Laing Excerpts

2nd reading
Wednesday 7th September 2022 Commons Chamber

[Peter Grant (Glenrothes) (SNP)]

It gives me pleasure to speak on this Bill on behalf of the Scottish National party. I am going to agree with the former Chancellor, the right hon. Member for Richmond (Yorks) (Rishi Sunak), for the first and probably the last time in either of our careers, in placing on record my thanks to his colleague the former Economic Secretary to the Treasury, the hon. Member for Salisbury (John Glen), for the constructive and courteous way in which he conducted a large number of debates with me during his time in office.

When the SNP decided to table a reasoned amendment asking the House not to give this Bill a Second Reading, we did so with a significant degree of reluctance, because there is a lot in the Bill that we see as not only desirable, but essential and, in some cases, long overdue. It is disappointing that the Government have chosen to package them with other provisions that give us very serious concern, and to package them in such a way that it will probably prove to be impossible to amend the Bill to take out the damaging parts.

For example, we welcome the provisions relating to the regulation of digital settlement assets or cryptocurrencies and on access to cash—we would have welcomed them several years ago, if the Government could have been bothered to bring them in. Our only real concern is that they do not yet go far enough. However, the dangers posed by other more substantial parts of the Bill are so great that they may be too high a price to pay to get those necessary pieces of legislation on the statute book.

In the Queen’s Speech we were promised a Bill that would,

“strengthen the United Kingdom’s financial services industry, ensuring that it continues to act in the interest of all people and communities”.

This Bill does not do that. In fact, the former Chancellor has confirmed what the Minister strongly hinted at: the Government’s main objective here is to force through a damaging, totally unnecessary divergence from our European Union neighbours, for no other reason than that they can.

The very first sentence in clause 1, which the former Chancellor thinks is a great idea, invites us to wipe out well over 200 pieces of legislation with no idea what will replace them. The Bill gives the Treasury the power to decide when and if each of those 200-plus laws is revoked and the Treasury gets the power to decide when, if ever, it will bring forward replacement legislation for them. Despite the Minister’s apparently not understanding our concerns earlier on, if that is done through secondary legislation in delegated legislation Committees, there will be no opportunity for the House to amend it, to make it better or to insist on legislation’s coming forward if the Government do not want to bring it.

The Bill gives the Treasury the power to amend or revoke Acts passed by this whole Parliament, and to revoke laws passed under devolved authority by the elected national Parliaments and Assemblies of three quarters of the supposedly equal partners in this Union. A Treasury whose Ministers were appointed by a Prime Minister who got the first-choice votes of 14% of her own Members of Parliament will be allowed to overrule Parliaments elected on a franchise of more than 8 million citizens. How can that be anything other than an unacceptable power grab? That is because of the Government’s obsession with purging our four nations, even those that wanted to stay in, of anything that they regard as tainted by contact with the European Union.

There has not been any attempt to sift the 200-plus pieces of retained EU law to identify which are helpful and necessary and which are potentially damaging. If it has an EU tag, it has to go. There is even a sweep-up provision in part 5 of schedule 1 that says that if they discover any other EU legislation hiding somewhere that was missed from the schedule, that will automatically go as well. We have literally been asked to agree to revoke legislation that none of us knows is there. Even the people who drafted the Bill do not know what that legislation might say. That would be a gross abdication of our responsibility as Members of Parliament.

I find it comical that barely 24 hours ago the sacked Prime Minister was still spouting nonsense about getting Brexit done. Now we are told that not only are there hundreds of bits of Brexit that have not been done yet—and that is only in financial services and markets—but that no one knows where they all are, how many there are or what they say. Brexit has not been done by a long chalk.

Turning to the specific powers in other parts of the Bill, we generally welcome the new regulatory powers and related matters in part 2, but the Minister will appreciate that we will want to look closely at the detail in the Bill Committee. I am concerned that the Committee will be pushed for time, despite the number of days that it has been allocated. Members will be well aware of concerns I have often raised about the inadequacies of the Financial Conduct Authority’s powers and resourcing, as well as its reluctance to use the powers that it has.

The Labour spokesperson mentioned the lack of effective anti-fraud measures in the Bill, which is a major concern. Financial fraud and scams are becoming a bigger menace every day, and they hit hardest the people who can least afford to be hit. Something I have noticed about a lot of the financial scams I have looked into on behalf of my constituents is that they have features that are not immediately obvious. They often involve company directors effectively soliciting loans from the general public in order to finance their own investments. Rather than put their own money at risk, they put someone else’s money at risk. If the investment goes well, the directors win; if it goes badly the victims lose and the directors walk away Scot free. That was an obvious feature in the Blackmore Bond scandal, but exactly the same thing happened with Safe Hands funeral plans. Safe Hands appeared to be a funeral plan scam, but that was not the case. The company blatantly lied to its customers about how their money would be safeguarded, and it used it to invest in potentially profitable but high-risk offshore investments. Although it appeared at first glance to be a funeral plan, Safe Hands was in fact a good old-fashioned financial services scam.

When Safe Hands was on the way down, regulations were coming into force that meant that funeral plan providers had to be registered with the Financial Conduct Authority, which I warmly welcome. However, we should provide the same degree of regulation and the same protection to customers for other “pay now, collect later” schemes. If a customer gives their money to a company that blows it and they lose their money, it does not matter whether they thought their money would fund at some future date the cost of a funeral, a wedding, their children going to university, or anything else. The risks are the same and the opportunities for fraud are the same, so the protection offered to customers should be the same in all those schemes.

We should not have to go through measures industry by industry picking up where scams take place. The key point is that it is not about the product or service that the company claims to be selling—it is about making sure the customer’s money is kept safely until the time comes for that product or service to be provided. We should legislate to prevent company directors from gambling recklessly with money that belongs to their customers. It is possible to address this with a fairly simple amendment to proposed new section 71K of the existing Act, and I hope to have an opportunity to table that in Committee.

There is more that we could do with a bit of imagination. I like the idea of designated activities as well as regulated activity—that is a positive step. There are ways that we could significantly improve the accountability of companies carrying out designated activities and, importantly, improve enforcement against those that go rogue. We could reduce the exemptions that they have, which many of them abuse to avoid having to produce meaningful financial statements. We could look at extending the circumstances in which directors of high-risk companies can be held personally liable for their faults.

I realise that the disjointed way that the UK regulates businesses means that those things fall under the remit of the Department for Business, Energy and Industrial Strategy rather than the Treasury, so it may not even be competent to introduce them for consideration in Committee, but I ask the Minister and his BEIS colleagues to find a place in the Government’s legislative programme as soon as possible for these things to be considered. Too many directors of dodgy companies carry on with their scams because they think they can get away with it, and far too often they can.

As the Minister knows, because he responded to the debate, I spoke this morning in Westminster Hall about the regulation of cryptocurrencies. Incidentally, that is a good example of the fallacy in one of the arguments that the Minister advanced earlier. When we are talking about businesses, growth and stability are not the same thing. Some cryptocurrencies had almost supersonic growth and then evaporated. They had high growth but no stability whatsoever. Growth and stability may both be desirable—although, as the hon. Member for Brighton, Pavilion (Caroline Lucas) keeps reminding us, there have to be conditions attached to that growth and it has to be sustainable—but to conflate the two is a serious mistake.

The debate on cryptocurrencies is a useful reminder that the way that financial markets operate is changing at an almost bewildering rate. In fact, it is becoming difficult to define exactly what we mean by financial services and financial markets. The Bill makes provision for the Treasury to allow limited testing of new technologies or practices. It is effectively trying to legislate for things that have not been invented yet. I think the approach taken in clauses 13 to 17 is a sensible way forward, but we will be looking very closely at how the use of those powers is scrutinised. For example, Members should be aware, if they are not already, that clause 15 as currently worded will allow the Treasury to amend certain Acts of Parliament on the basis of a pilot test in one of the sandboxes without even waiting for the test to be completed to see what the results are.

Let me move on—briefly, because I am aware of the shortage of time—to some of the other matters covered by the Bill. I am extremely alarmed at the confirmation that the Government want to allow Ministers to call in and potentially overrule decisions by the regulators. Either our regulators are independent or they are not. The regulators must be accountable, but their accountability should be to Parliament. Accountability to a Minister is not the same as accountability to Parliament; it is a very poor substitute.

I share the concerns that have been raised about the lack of emphasis on sustainability, green finance and compliance with our climate change obligations. I also share the concerns that the provisions on access to cash do not go far enough and probably will not lead to action quickly enough. As I mentioned, the anti-fraud measures in the Bill are wholly inadequate.

The Government appear to think that the biggest problem facing financial services regulation is that parts of it were designed and implemented in partnership with our nearest neighbours and trading partners. I think the biggest problem is that, again and again, the regulators fail to act, or act so slowly that it is far too late, and effective enforcement becomes almost impossible. I remind the House that about half of the £46 million lost in the Blackmore Bond scandal was paid by customers to the company after the Financial Conduct Authority had been not only given full details of what the company was up to, but told exactly where and when it could go to witness its illegal activities at first hand. It did nothing for three years.

The Financial Conduct Authority tells us that it does not have sufficient powers to act in the way we would like it to act. It is certainly obvious to all of us that it does not have the resources to properly carry out the responsibilities we ask it to carry out just now, let alone the new ones we intend to give it. At the moment the Bill does not address that.

We will not oppose Second Reading this evening, but that should not be taken as a guarantee that we will allow the Bill to be read the Third time unopposed. If the Minister wants our support in the Bill’s final stages, he has a long way to go to persuade us that it will make things better, rather than worse, for the victims of financial crime.

[Madam Deputy Speaker (Dame Eleanor Laing)]

I call the Chair of the Treasury Committee, Mel Stride.

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[Several hon. Members rose—]

[Madam Deputy Speaker (Dame Eleanor Laing)]

Order. It will be obvious to everyone in the Chamber that a great many Members wish to speak and that we have limited time. However, we do have quite a lot of time, so I will have to put on an official time limit of seven minutes, but not quite yet. After the next speaker, who has had no notice of this, there will be a time limit of seven minutes.

--- Later in debate ---

[Several hon. Members rose—]

[Madam Deputy Speaker (Dame Eleanor Laing)]

We now have a formal time limit of seven minutes, but that is likely to be reduced later in the day.

--- Later in debate ---

[Several hon. Members rose—]

[Madam Deputy Speaker (Dame Eleanor Laing)]

Order. Most unusually, after I imposed a time limit of seven minutes, several colleagues have decided that they do not want to speak in the debate after all. I am therefore able, most unusually, to extend the time limit to eight minutes, starting with Paul Maynard.

Financial Services and Markets Bill

Eleanor Laing Excerpts

Report stage
Wednesday 7th December 2022 Commons Chamber

[Peter Grant]

I endorse and share the thanks of both the previous speakers to all those who have helped the democratic process to happen. Obviously, we are not particularly happy about the results of some of the votes, but that is what happens in life. If we go back to the day before this Bill got its First Reading, we will see that the six Treasury ministerial posts have been held by 21 different people. Who knows, we might have the same Minister on the Front Bench by the time the Bill comes back from the Lords, but I would not bet on it.

Among the people I want to thank personally are my very good and hon. Friend the Member for West Dunbartonshire (Martin Docherty-Hughes), who did such a power of work on his own in the Bill Committee, and someone who will not be a well-known name to most people here, although those of us who know her will understand she has been an absolute star, and that is Sarah Callaghan of the SNP research team. She joined a very good research team not long ago and she has been a fantastic support to me and my colleagues in preparation for this Bill, so I say thanks to Sarah.

I thank the Minister for the courtesy he has shown throughout political debates in which we have not always agreed, but in which I hope we have always been able to be courteous to each other. We will not oppose the Bill; we have reservations about it, but on balance it is just about good enough to get through.

[Madam Deputy Speaker (Dame Eleanor Laing)]

I pause, lest there be further excitement—but no.

Question put and agreed to.

Bill accordingly read the Third time and passed.

Financial Services and Markets Bill

Eleanor Laing Excerpts

Consideration of Lords message
Monday 26th June 2023 Commons Chamber

Consideration of Lords amendments.

[Madam Deputy Speaker (Dame Eleanor Laing)]

I must draw the House’s attention to the fact that financial privilege is engaged by Lords amendment 35. If Lords amendment 35 is agreed to, I will cause the customary entry waiving Commons financial privilege to be entered in the Journal.

Clause 25

Regulatory principles: Net Zero emissions target

[The Economic Secretary to the Treasury (Andrew Griffith)]

I beg to move, That this House disagrees with Lords amendment 7.

[Madam Deputy Speaker (Dame Eleanor Laing)]

With this it will be convenient to discuss:

Government amendments (a) to (c) in lieu of Lords amendment 7.

Lords amendment 10, and Government motion to disagree.

Lords amendment 36, Government motion to disagree, and Government amendment (a) in lieu of Lords amendment 36.

Lords amendments 1 to 6, 8, 9, 11 to 35 and 37 to 86.

[Andrew Griffith]

I am delighted to speak again to the Bill, following its passage through the other place. I thank my colleagues, Baroness Penn and Lord Harlech, for their expert stewardship of the Bill, as well as the Opposition spokespeople for their generally constructive tone.

Hon. and right hon. Members will be aware that the Bill is a crucial next step in delivering the Government’s vision of an open, sustainable and technologically advanced financial services sector. Members will also recall that this sector is one of the crown jewels of our economy, generating 12% of the UK’s economic activity and employing 2.5 million people in financial and related professional services. Few constituencies will be untouched by those jobs and economic benefits. For example, Scotland benefits from £13.9 billion of gross value added and an estimated 136,000 jobs.

The Bill seizes the opportunities of Brexit, tailoring financial services regulation to UK markets to bolster the competitiveness of the UK as a global financial centre and deliver better outcomes for consumers and businesses.

The Bill repeals hundreds of pieces of retained EU law relating to financial services and gives the regulators significant new rule-making responsibilities. These increased responsibilities must be balanced with clear accountability, appropriate democratic input, and transparent oversight. There has been much debate in this House and in the other place about how to get that balance right. As a result of the considered scrutiny, the Government introduced a number of amendments in the Lords that improved the Bill in this regard.

Lords amendments 32 to 34 require the regulators to set out how they have considered representations from Parliament when publishing their final rules. Lords amendments introduced by the Government require the regulators to report annually on their recruitment to the statutory panels, including the new cost-benefit analysis panels created by the Bill. The amendments also require the Financial Conduct Authority and the Prudential Regulation Authority to appoint at least two members of authorised firms to their CBA panels. This will ensure that their work is informed by practical experience of how regulatory requirements impact on firms. My hon. Friends the Members for North East Bedfordshire (Richard Fuller), for North Warwickshire (Craig Tracey) and for Wimbledon (Stephen Hammond) may recognise that amendment and I thank them for their efforts to ensure that the Bill delivers proper accountability.

Amendments from the Government also provide a power from the Treasury to require statutory panels to produce annual reports. The Treasury intends to use this power in the first instance to direct the publication of annual reports by the CBA panels and the FCA consumer panel. I hope the hon. Member for Blaenau Gwent (Nick Smith) will welcome this as he tabled a similar amendment on Report.

Lords amendment 37 will enhance the role of the Financial Regulators Complaints Commission, which is an important mechanism for raising concerns about how the FCA, the PRA and the Bank of England carry out their functions. The amendment requires the Treasury, rather than the regulators themselves, to appoint the complaints commissioner, significantly strengthening the independence of the role.

In response to a debate in this House, the Government amended the Bill to introduce a power in clause 37 for the Treasury to direct the regulators to report on various performance metrics. On 9 May, I published a call for proposals, seeking views on what additional metrics the regulators should publish to support scrutiny of their work, focused on embedding their new secondary growth and competitiveness objectives. We have already had a number of helpful responses and we will come forward with proposals at pace following the expiry of the deadline next week. To further support that, Lords amendment 6 requires the FCA and the PRA to publish two reports on how they have embedded those new objectives within 12 and 24 months of the objectives coming into force. Taken together, these are a significant package of improvements to hold the regulators to account.

I know that access to cash is an issue of huge importance to many Members on both sides of the House. Representing the rural constituency of Arundel and South Downs, where the constituents are older than the UK average, this has always been at the forefront of my mind during the passage of the Bill. I also pay tribute to the campaigning work done by the Daily Mail and the Daily Telegraph on behalf of their readers as well as by groups such as Age UK and the Royal National Institute of Blind People.

Let me be clear: the Government’s position is that cash is here to stay for the long term. It provides a reliable back-up to digital payments, can be more convenient in some circumstances, and many, particularly the vulnerable, rely on cash as a means to manage their finances. The Bill already takes significant steps forward in protecting the ability of people and businesses across the UK to access cash deposit and withdrawal facilities for the first time in UK law. I am pleased to report that we have gone even further and introduced Lords amendments 72 to 77, which will protect people’s ability to withdraw and deposit cash for free. The amendments will require the FCA to seek to ensure reasonable provision of free cash access services for current accounts of personal customers. This will be informed by regard to a Government policy statement, which I expect to publish no later than the end of September.

Many Members are concerned about the separate issue of face-to-face banking. The FCA already has guidance to firms around the closure of bank branches and I hope that they and the industry will listen to the concerns of Members on behalf of their constituents on that issue.

Many Members across the House will have experienced the disproportionate application of rules requiring enhanced due diligence for politically exposed persons— PEPs. They and their families should not face some of the challenges and behaviours by banks that I have heard about. The Government are taking action to ensure that PEPs are treated in a proportionate manner. Lords amendment 38 requires the Treasury to amend the money laundering regulations to explicitly distinguish between domestic and foreign PEPs in law.

--- Later in debate ---

Finally, I want to raise the issue of politically exposed persons, which I am glad the Bill is addressing. There are enough drawbacks to taking on a life of public service without them being added to by finding that our adult children—as is the case with my kids—struggle to open a bank account on the grounds of having a mother who is in politics. That really is not fair. The Government need to do everything possible to ensure that the very real need to protect politically exposed persons does not extend to their offspring, who have got absolutely nothing to do with it. Overall, I think this is an excellent Bill, and I look forward to supporting the Government.

[Madam Deputy Speaker (Dame Eleanor Laing)]

I call the SNP spokesman.

[Peter Grant]

As has been said throughout the passage of the Bill, our chief concern has always been that too many provisions in it do not go far enough. I am pleased to say that the other place has tightened up some aspects of the Bill. It is disappointing that this evening the Government seem determined to oppose some amendments that could have addressed more of our concerns and, in at least one case, seem determined to make an amendment that makes things even worse.

In the interests of brevity, I will not go through all the Lords amendments that the Government are happy to accept; I ask Members to take those as read. The first Government proposal that I have some concern about is their motion to disagree with Lords amendment 7. I appreciate that they have tabled alternative amendments, which they might think say pretty much the same thing or better, but Lords amendment 7 explicitly refers to targets set by any of the UK’s national Parliaments. They are not mentioned anywhere in the Government’s amendment (a) in lieu. I hope the Minister can explain why the Government are opposed to giving targets set by the devolved nations of this Union of equals the same status as those set in this place, because some of those targets and activities will relate to responsibilities that are explicitly devolved to one or more of the other nations of the United Kingdom. It does not seem very equal that some Parliaments can have their targets effectively regulated and others cannot.

I do not have any issue with Government amendments (b) and (c) in lieu of Lords amendment 7, although it seems strange that they have been tabled as alternatives, because they are entirely compatible with it. In fact, the Government could quite easily have tabled them in the Lords at the time.

As was said by the Opposition spokesperson, the hon. Member for Hampstead and Kilburn (Tulip Siddiq), Lords amendment 10 is a good amendment. I do not understand why the Government want to take it out. Are they against financial inclusion? If they think that financial inclusion is a good idea but that this amendment is not best way to pursue it, I would remind them that they have had months to come up with a better amendment. “Take it back, don’t agree it just now, and we promise to bring something back in the near future.” However, we have been promised effective measures on financial inclusion since before I was a Member of this place, but it has not happened yet, and the problem is getting worse all the time.

To answer the right hon. Member for South Northamptonshire (Dame Andrea Leadsom), it is all very well for the Government to find ways to make post offices the last bank in town, but they are being shut left, right and centre as well, so there is no long-term protection for access to cash, especially in our poorest and most deprived communities, of which I represent more than my fair share. It is no comfort to them to be told, “The bank has closed, but you can use the post office,” if, as I have seen happen literally at the same time, the Post Office is saying, “We’re going shut the post office, but you can still use the bank.” That does not give any protection or comfort whatsoever.

Lords Amendment 36, on illegal deforestation and so on, is also a good amendment that we would have supported. We are willing to accept the Government alternative as an improvement in some regards. The biggest concern we have—it is one on which we would very much want the opportunity to give the House the chance to express its will this evening—is about one of the crazy ways in which this place deals with things, especially once legislation has been back and forth between here and the Lords. If this House wanted to disagree with Lords amendment 38, as I think quite a few of us will, we will not be allowed to do that unless the debate finishes within three hours. The ability of the democratically elected House of Commons to scrutinise and perhaps overturn a decision taken by the undemocratic, unelected House of Lords along the corridor therefore depends on how many people want to speak, how long they want to speak for, and how fast they want to talk.

Lords amendment 38 is about politically exposed persons and the way they are risk-assessed in relation to money laundering. It makes a very broad assumption about the amount of due diligence that needs to be exercised to prevent money laundering in the case of a politically exposed person from the UK—someone who, in the words of the amendment, is

“entrusted with prominent public functions by the United Kingdom”.

The assumption is that they are always less of a potential money laundering risk, as are their family and “close associates”, whatever that means. That is far too broad and sweeping an assumption.

I do not have an issue with any regulation being worded in a way that is proportionate to the risk, and I can understand the attraction of being able to designate some individuals as less of a risk than others, but this exemption is far too sweeping. What do we mean by “entrusted with prominent public functions”? As we all know, we have had very recent examples of people who were entrusted with the most prominent public function of all—the office of Prime Minister—turning out to be totally untrustworthy. How do we define a “close associate”? Would, for example, Evgeny Lebedev have been regarded as low risk simply because he could accurately have been described as a close associate of the then Prime Minister, who himself has turned out, as the House now agrees, to have been untrustworthy? When is a close associate not a close associate?