Hidden Credit Liabilities: Role of the FCA

Lucy Rigby Excerpts

Tuesday 14th April 2026 Westminster Hall

[The Economic Secretary to the Treasury (Lucy Rigby)]

It is a pleasure to serve under your chairmanship, Sir Roger. I am grateful to my right hon. Friend the Member for Hayes and Harlington (John McDonnell) for securing this debate and for further airing these issues. As he mentioned, there has been a long history of parliamentary interest in these issues, over at least 14 years. That is for good reason, for not only are we deeply committed to justice and do we abhor injustice in this country, but SMEs are the lifeblood of our economy. The events of the IHRP scandal were completely wrong and abhorrent.

From a personal point of view, I cannot deny how hard it is to hear and read about horrific personal circumstances, not least those of the Glanville family, referred to by my hon. Friend the Member for Poole (Neil Duncan-Jordan); the Evans family, referred to by the Liberal Democrat spokesperson, the hon. Member for North Norfolk (Steff Aquarone); and the Lilley family, referred to by my hon. Friend the Member for Middlesbrough and Thornaby East (Andy McDonald). As my right hon. Friend the Member for Hayes and Harlington referred to, in some instances there are hideous personal tragedies, as no doubt may have been experienced by some of the people who are sat behind him in the Public Gallery today.

To that end, I thank and acknowledge my hon. Friends the Members for Poole, for Southgate and Wood Green (Bambos Charalambous), for Liverpool West Derby (Ian Byrne), and for Middlesbrough and Thornaby East, and the hon. Members for Strangford (Jim Shannon) and for Brecon, Radnor and Cwm Tawe (David Chadwick)—the latter knows I struggle sometimes to pronounce the name of his constituency; I hope he thinks I had a decent go—and the spokespeople from other parties for their contributions to the debate. They have shared experiences of those they represent and broader views, and in doing so, they have been clear about the deep sense of injustice and harm felt by many businesses that were affected by these issues—I know of the same in my own postbag.

Not least because of the correspondence I have had and what we have heard today, I recognise that some businesses remain deeply dissatisfied with the operation of the original redress scheme and that its conclusions continue to be strongly contested. Although there have been a number of reviews and pieces of litigation, as I will come to later, the main redress scheme for IRHP resulted in over £2 billion paid in total to thousands of affected businesses.

It was undeniably unsatisfactory that the overall response to these issues has been piecemeal and complex, and the process was very often slow and frustrating to deal with. However, I am told that the IRHP redress scheme was conceived as a means of providing redress within the legal and regulatory constraints of the time. That time was more than 10 years ago, and some instances of the subject matter that we are discussing today go back around 25 years.

Clearly, I was not part of the Treasury in 2012, nor were Labour in government—the party of the shadow Economic Secretary to the Treasury, the hon. Member for Wyre Forest (Mark Garnier), were in government for the last 14 years—so I want to set out the current Government’s understanding of the framework within which decisions about the redress scheme were taken at the time. The constraints, in so far as they concern regulatory oversight, reflect the constitutional settlement that underpins the UK’s regulatory system, with which I know hon. Members are familiar.

I would imagine that we would all wholeheartedly agree with the hon. Member for Southgate and Wood Green that regulators should at all times act with integrity and independence. Indeed, partly with that point in mind, I say that the Treasury does not have the power to direct the FCA to intervene in individual cases or to investigate matters that fell outside the regulatory perimeter that applied at the time—I am not sure that is what my right hon. Friend the Member for Hayes and Harlington is asking the Treasury to do at this point in any event.

The Treasury also does not have investigative or prosecuting powers of its own. I am sure hon. Members are aware that the independence of the FCA and the Financial Ombudsman Service is fundamental to our constitutional settlement. The separation between the Treasury and the wider regulatory authorities is not a technicality; it is, in theory, a safeguard for businesses and for consumers.

I acknowledge the argument that the Government should act independently of the regulator and the regulatory system and look again at this issue with fresh eyes using their own statutory powers. Given the many reviews of these issues, the independent and broad-based redress schemes over more than a decade, the successful prosecutions, convictions, judicial reviews, and other investigations, the question that the current Government must ask is whether steps to reopen these issues now will lead to better or different outcomes, and, importantly, more redress for those affected.

There are questions as to whether this Government would have made the same decisions if confronted with the same problems as the previous one—and if our decisions would have been different or indeed more or less effective. Without prejudice to the gaze of the shadow Economic Secretary to the Treasury, I am sure that most of us would like to think not only that might we have dealt with the situation rather better, but that in a best-case scenario regulation and supervision would have been designed such that none of these issues would have arisen in the first place. That goes right to the root of why we are all here today, and indeed critical regulatory changes were made following this scandal. However, this Government inherited a set of decisions, conclusions, judicial findings, judgments and levels of compensation that were delivered some time ago.

Several hon. Members, including the hon. Member for Strangford, a consistent champion of his constituents whose specific points I will come to shortly, and my hon. Friend the Member for Hexham (Joe Morris), who articulated Catherine and Nigel’s heartbreaking story very well, have spoken about hidden credit lines or contingent obligations. Those are clearly very serious allegations, and it is right that they are treated seriously. For the reasons I have set out, where issues relate to the conduct of regulatory firms, they are for the FCA to consider using its statutory powers, evidence base and judgment—with that judgment being independent, again for the reasons that I have set out.

In the light of the independence that we have been discussing, I should say that the FCA firmly refutes the claims made in the BankConfidential report—which I have here—about the nature and impact of the credit lines that we have been discussing. It also refutes the allegations of collusion and regulatory failure which have been referred to today.

With reference to the independence of the courts, in a series of cases, the courts have made findings in relation to disclosure, and Jonathan Swift KC referenced those findings as settled legal context, concluding that the FCA acted lawfully in defining the scope of the IRHP redress scheme. It is true that past regulatory reviews were conducted within the scope of the powers available to the regulator at that time and within the regulatory perimeter that Parliament had set. It is of critical importance that the wider regulatory framework has now changed.

However, before I come to that, I want to address the previous redress scheme in more detail. I recognise that many of those represented here remain deeply dissatisfied with how that scheme operated and that its conclusions continue to be strongly contested. I do not intend to in any sense minimise or underplay any of that frustration, which is clearly very strongly felt. While I understand that the process at the time regarding that redress scheme was slow and sometimes no doubt deeply frustrating, it was established with the intention of delivering redress within the legal and regulatory constraints that applied at that time. One such constraint related to tailored business loans. Most business lending fell outside the scope of the FCA and therefore beyond its powers to compel redress. We cannot extend regulation retrospectively. Indeed, even outwith these current issues, reopening past decisions would create significant legal uncertainty and risk that could affect the availability and cost of finance for SMEs today.

Although I appreciate it is known by those here, I should note that subsequent reviews, and ultimately the courts, considered whether the regulator had acted lawfully in setting the scope and perimeter of that scheme, and concluded that it did. I mention that because it is an important consideration in any assertion that it is for the current Government to seek to reopen these issues.

I referred to a different regulatory environment from that existing now. I will briefly explain why our regulatory landscape is now better. Since 2019, the vast majority of SMEs, around 99%, have been able to bring complaints to the Financial Ombudsman Service. That was a direct response to the gaps exposed by earlier scandals, including those we have talked about today. The ombudsman now provides a far wider safety net for small and medium-sized businesses than existed during the period under discussion.

In addition, the senior managers and certification regime has transformed accountability in financial services. Senior individuals can now be held personally responsible for the way that firms treat SME customers, whether activity is regulated or unregulated. That cultural shift, which stems from both of those, is profound. It did not exist during the years that Members have understandably focused on today.

Today’s debate, like other parliamentary activity on the same topic over a long period, some of which I have reviewed for this debate, has highlighted the serious and clear injustices that some businesses suffered and the impact that had. The current Government obviously cannot undo the harm that has already occurred, more is the pity, but nor can we, or should we, override independent decisions taken by the courts within the legal framework that applied at the time.

I want to address this directly, hard as it may be to hear. I understand that my right hon. Friend the Member for Hayes and Harlington wishes me to commit today to opening a full judge-led public inquiry into these issues. I do not wish to downplay the seriousness of the matters we have discussed today, but the Government do not believe that a full public inquiry would be the right course to take. I say that with reference both to the long history of reviews, prosecutions, redress schemes and judicial reviews, which would all require unpicking to some degree, and importantly, to the changes to the regulatory landscape that were made subsequently, as a result of the gaps that this scandal exposed.

I want to be clear that the Government are instead focused on ensuring that the regulatory landscape is fit for purpose and on supporting SMEs to grow with confidence, improving their access to finance and ensuring that the financial services sector operates to high standards that command trust. We are backing that commitment with real action, with record support for the British Business Bank and reforms that strengthen accountability without undermining growth.

We are committed to robust regulation to international high standards, so that we have a strong financial services sector. Those ought not to be intentions but the bedrock of the financial services system. That is why access to redress for SMEs has been widened so significantly and why accountability at the top of financial firms is now personal and enforceable. It is also why the regulatory perimeter continues to be kept under careful review, deliberately and responsibly.

The hon. Member for Strangford referred to discretionary commission arrangements.

[John McDonnell]

There are only a few seconds left. I have heard the Minister’s arguments. I fully agree on the independence of the FCA from Treasury, but that does not mean that we must accept the FCA as infallible. In other instances where separate organisations have made mistakes, the Government have intervened. I understand that the Minister is not convinced this morning, but will she meet the all-party parliamentary group on investment fraud and fairer financial services, so that we can take her through the report with our experts to convince her that there might be a different way forward from the one she is setting out this morning?

[Lucy Rigby]

My right hon. Friend has pre-empted my offer. To be direct, yes, I will come and meet his APPG to listen further. I hope I have successfully communicated this morning that the Government do believe—

Motion lapsed (Standing Order No. 10(6)).