Secondary International Competitiveness and Growth Objective (FSR Committee Report)

Lord Johnson of Lainston Excerpts

Wednesday 11th March 2026 Grand Committee

[Lord Johnson of Lainston (Con)]

My Lords, I shall first declare my interests. I am on the board of a crypto data business and have investments in companies regulated by the FCA and the PRA. More usefully for this debate, I ran a regulated asset management firm for 15 years, a job that I enjoyed greatly at the beginning, when I was able to offer my investors from all over the world a fabulous and, for us, very profitable service, but, by the end of my time, I became dominated by compliance with absurd rules designed by people with limited to no knowledge of the financial services sector who have caused untold damage to the lives of our citizens, all under the guise of a misunderstood notion of risk reduction and consumer safety.

That is why the debate today is so important, and I congratulate the members of the committee for writing one of the best reports from the House of Lords that I have ever read. I am delighted that, as the noble Lord, Lord Altrincham, suggested, some effect has been achieved, something has been done. The growth mandate, which is the main focus of the report, which I supported, by the way, as a Minister for Investment, was fought by everyone in the system who I met. I think even the noble Lord, Lord Hill, was cautious about the opportunity, sadly. It was felt that it would create untold risks, that it would distract the regulators from their task of ensuring that the consumer is treated properly and that it was not appropriate—that dreaded word. However, the people in charge should be focusing on the growth requirement every waking minute; that is their purpose. Finance is only about growth.

Of course, we need regulations and registrations for the market to function. The noble Lord, Lord Eatwell, gave some exceptionally good explanations around that. The rest is the hard bit, and it is the bit that the leadership of the FCA, the PRA, the Bank of England and, to some extent, the Government, are dodging, as the report clearly demonstrates.

Imagine an FCA that was judged by how many new firms came here from abroad to set up. The noble Baroness, Lady Moyo, gave examples of banks that have withdrawn from this market. I ask noble Lords to consider, if I may call on their imaginations, a regulator that acts as a service to business rather than a hindrance. When I set up my office in Singapore, how did the MAS, the Monetary Authority of Singapore, treat us? Did it ask for endless forms to be completed or say that it could not say how long our application would take to process but maybe six months, or a year? No. It sent two delightful people to our office in London. They helped us to navigate the documentation. They even suggested schools for the children of the staff moving out there and offered, unbelievably, some funds to manage from the Singapore Government. Can anyone here seriously think that the FCA or the PRA would do anything like that? It is a shame that they would not.

This report also shows something extremely worrying, which is that they have created a culture of fear. Firms, like some poor downtrodden citizen of a dictatorship, asked to be anonymous when discussing issues with the committee. They are frightened that if they criticise these people, they will be given some type of regulatory punishment beating. I cannot remember whether it was the noble Lord, Lord Vaux, who made that astonishing comment—today, in this country. In my view, this is unacceptable and shameful. From this House, I demand an answer to this awful culture that these people have created. I ask them to note that we are not frightened of them, and that they work for us.

Let me turn to some of the specifics of their failures. By the way, we in this House must share the blame, as should my own party, which presided over so much of this damaging nonsense. The idea that no one can die and no one can lose money is what destroys civilisations. My first point is MiFID, which was a UK, not a European, idea. We tried to blame the Europeans, but it came from this country; it came from the FCA or its predecessor. It was thought of by people with no knowledge of how research is generated or paid for or its vital importance to the market. They felt that companies were charging too much, as if that is something that a Government should question. We want companies to make money so long as the market is competitive, since the market sets the price. I know that it is a bizarre and outdated idea. Adam Smith’s 250-year anniversary seems to have been forgotten—but not, I am pleased to say, by the noble Lord, Lord Lilley; I am not sure that his dinner will be cooked by anyone at this rate. MiFID destroyed the small cap market. For those listening from the regulators—I bet no one is, by the way—that means that small companies cannot get coverage from brokers, so they cannot raise money. So we cannot grow our businesses, and they have to go abroad for capital. Does that sound familiar?

RDR is the next atrocity. This onerous regime governing advice that can be given to individuals is now so complicated and expensive that millions cannot afford to receive proper advice. The effect is that many people have no idea what to do, so either do not save or drift into non-regulated areas such as cryptocurrencies.

Not separating retail investors from institutional investors was covered well by the report. By our not properly separating these two regimes, specialist firms—which through their number and size reduce, not increase, risks to the system—cannot make their products easily available to other institutions and face the same burdens as a multinational bank.

The senior managers regime is a sclerotic absurdity designed to make us feel good about ourselves but merely discourages companies from managing their staff in a flexible and timely fashion. It thus increases risks for the system, because they cannot get the right people in the right places.

Banking regulation has been well covered in the debate. Through the fear of mis-lending, we have now prevented banks lending to businesses, especially domestic banks. This lack of capital has severely hurt our economy, stopped people getting mortgages and created a far larger unregulated credit market that could blow up at any time. I am sure that the officials who run the PRA and FCA say, like Captain Smith of the “Titanic”, “But no one ever thanked us for the icebergs we missed”, but they are creating an ever-bigger berg into which we will crash unless something is done. All Labour needs to do is tweak these requirements for capital, as we have heard, to make them sensible. It would create untold economic growth—that is my gift to the Minister, if he wishes to receive it.

Another terrible act, which I am afraid was probably thought of by some of my colleagues in the Conservative Party, is the concept of consumer duty. That too was well covered in the report, but I do not believe it has been discussed today. It is truly the worst of all—a tortuous process where a company has to work out how a user many parts down a chain may be advantaged or disadvantaged by a product or service. Every firm I know already has such a duty embedded in its mandate; it is how business works. But these days we love holding everyone to account so that blame can be apportioned if something goes wrong.

The problem is that things change—or, in another phrase, go wrong. Capital needs to be reallocated to the highest point of return for humans to progress—that is the beauty of life—and trying to prevent that is truly selfish and foolhardy. After all, that is what diversification is for: it is what risk and return are, which seems to elude the regulatory environment and the people creating these rules.

People, by the way—this is the kicker as I come to a conclusion—are also, and should be, responsible for making their own decisions. Things such as the consumer duty will remove further from the citizen good savings products and advice. The compliance costs will increase, reducing profitability for the sector and capital for growing companies. Documentation will increase in size and complexity, yet again befuddling us all, who now just click “yes” to everything. Dangerously, people will think they are protected from losing money or their house simply because of the size of the disclaimer that they have clicked, so they will act with less caution and rationality, spelling worse crises than before.

I am afraid to say that the fact is we have unsuitable people running these organisations. I have been specific in not naming anyone because I do not think that is fair. Ultimately they are civil servants—for whom I have the greatest respect. But they have no real experience —or any experience at all, actually—of running financial services firms, and their priorities are not growth but, in my mind, their own convenience and self-justification. We have seen examples of that in their responses to this report.

We in the UK are in an emergency. Unless the Government, we in this House and most especially the regulators take note of the importance of the growth mandate, we will drift further from being a middle power to becoming an emerging one, poor and defenceless. It is an unkind thing to do to us. So I ask the regulators responsible to wake up today. I am afraid I ask them to replace their leadership; I know that is a strong expectation and unlikely to happen, but it is essential that the responsibility borne by these individuals for the acts that they have committed is made clear. I ask them to correct their course of action and focus on growth and, importantly, how to serve the businesses in the same way the MAS serves the financial sector in Singapore. We forget the amazing people who work in these organisations. We need to regulate to make the financial services industry in the UK not contained, small or limited but the greatest in the world. That is why I commend this excellent report to the House.