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Financial Services Bill

Volume 811: debated on Monday 19 April 2021

Report (3rd Day) (and remaining stages)

Amendment 28

Moved by

28: After Clause 40, insert the following new Clause—

“Digital identification in the UK financial system

(1) The Treasury may by regulations establish a scheme for the use of a distributed digital identification for individuals and corporate entities operating in the UK financial system.(2) Regulations under this section are subject to the affirmative procedure.(3) In this section, “the UK financial system” has the same meaning as in the Financial Services and Markets Act 2000 (see section 1I of that Act).”

My Lords, I shall speak to Amendments 28 and 29 in my name on digital identification, and I thank my noble friends Lady Mcintosh of Pickering and Lord Holmes of Richmond for their support. I take a substantial interest in facilitating the provision of digital ID and have done so for several years. It is the sort of thing where the UK, with its early adoption of digital and skills in matters of security, should be ahead of the curve. Perfectly good systems exist in a number of areas and have been rolled out in other European countries and Asia but, unfortunately, not here.

I tabled amendments in the same sense during the passage of Covid legislation last year. I did not press the matter because I was promised progress and I had good meetings with my noble friend Lady Williams and with the Digital Minister, Matt Warman MP, who published proposals for the UK digital identity and attributes trust framework on 11 February. Last week, my noble friend Lord Holmes and I had another constructive meeting, this time with my noble friend Lady Penn—currently on the Front Bench—and civil servants in DCMS and the Treasury.

I am perhaps a little too impatient for the Civil Service or, indeed, for the Front Bench, which is no doubt why I am better suited to these Benches, but I warn noble Lords that I will continue to press this matter until we introduce a reliable system of online ID—not a consultation and not a plan, but a government-approved system. But I am very reasonable, so let us start in financial services—the subject of today’s Bill. So much progress has been made already that it ought to be possible to capture this in regulation now. As we discussed in Committee, this could be helpful in reducing fraud, which has mushroomed in financial services.

Likewise, we should be able to introduce digital ID for sales of alcohol; the supermarkets already use such methods for preventing the sale of knives to those aged under 18. We should also allow a trial in a pub chain or two, and we could use digital ID in the property sector, where the ID checks for domestic house sales are needlessly bureaucratic and repetitive. We do not need to get into the question of domestic vaccine passports, of which I strongly disapprove, or of ID cards, but evolutionary progress on digital ID—starting in financial services and honed to appropriate use—is overdue.

I have tabled two alternative amendments. Amendment 28 is an enabling power allowing the Treasury to press ahead, subject to a parliamentary debate, as soon as it has sorted out a system of digital ID—whether on a trial basis or when it has a definitive solution for the sector, which should be soon. We do not want to wait for the online harms Bill or another legislative vehicle. Amendment 29 provides for a review by 1 September this year. My own experience as a Minister and a civil servant is that such reviews and a clear date can be effective where there is a political will to get something done, as I believe there is here. I beg to move.

My Lords, it is a pleasure to follow my noble friend Lady Neville-Rolfe; in doing so, I declare my financial services interests as set out in the register.

My noble friend and I came into the House in the same autumn and, since 2013, we have both talked very much about distributed digital ID. It was pressing in 2013, so it certainly is in 2021. I will speak to all the amendments in this group briefly. I had pleasure in adding my name to my noble friend Lady Neville-Rolfe’s amendments; they are clear, succinct, short and to the point, and do the job. Does my noble friend the Minister agree?

My Amendment 30 merely seeks to flesh out some of the elements which must be considered if we are to have a successful distributed digital ID—the issues around scalability, flexibility and, crucially, inclusion. Does my noble friend the Minister agree that not only are these three issues vital to any distributed digital ID but that any ID should be predicated on the 12 principles set out in self-sovereign identity? Does she also agree that, because of the nature of this issue—as my noble friend Lady Neville-Rolfe pointed out—including issues around ID cards and Covid passports, there is a pressing need not only to move forward with this work but to have a public engagement to enable people to understand the issues and really get to grips with a system that can work for all?

My Amendment 31 seeks only to push the opportunity for the UK around open finance. We have seen the advantages open banking has brought; does my noble friend the Minister agree that open finance could be a boon for the UK, and could she set out the Government’s plans to enable this? I brought Amendment 32 forward in Committee so I will not dwell on it, except to seek a specific answer on subsection (2)(a) of the proposed new clause. Does my noble friend the Minister agree that we need to seriously consider the dematerialisation of UK securities at least at the same speed as that proposed in the EU? This is a competitive market; it is a race.

Finally, my Amendment 37E was brought forward simply to push the need for a review of access to digital payments. Digital payments are the future, accelerated by Covid, but, crucially, huge swathes of the population rightly rely—and must be allowed to rely—on cash. Does my noble friend agree that we urgently need a review of access to digital payments?

I call the noble Lord, Lord Davies of Brixton. Lord Davies? I call the noble Baroness, Lady McIntosh of Pickering.

I am delighted to support my noble friends who have tabled amendments in this group, particularly my noble friends Lady Neville-Rolfe and Lord Holmes of Richmond; they are very timely contributions to this debate. I am delighted to lend my support by co-signing Amendment 28 in the name of my noble friend Lady Neville-Rolfe and co-signed by my noble friend Lord Holmes of Richmond. My starting point is with my interest in developing digital ID and proof of age through digital verification. I speak as chairman of the Proof of Age Standards Scheme board.

For the reasons that both my noble friends have so eloquently given to the House this afternoon, time is passing, and we are living in a digital age; it is extremely important that this is recognised by all departments affected. I pay tribute to the work of the working group, of which PASS is a member, which is, I think, set up under the auspices of the Home Office and the Department for Digital, Culture, Media and Sport. I hope that my noble friend the Minister will be able to confirm that the Treasury is also co-ordinating aspects of digital identification with these other departments. It is extremely important that, if it is the wish of my noble friend Lady Neville-Rolfe that we proceed initially with financial services, we co-ordinate with other aspects. It has been a huge success in terms of sales of alcohol and knives, as my noble friend expressed. In Scotland, where 16 year-olds are able to perform and purchase so many more services than 16 year-olds in the rest of the United Kingdom, the proof-of-age PASS card has been especially important in that jurisdiction.

With these few remarks, I hope that my noble friend will look favourably in particular on Amendment 28. It is important to proceed prudently but with some pace to make sure that we are ahead of the game. This is the time for digital identification—with the proviso that we have the ability to verify age. I absolutely agree with my noble friend Lady Neville-Rolfe that there is space for digital identification in the terms of the online harms Bill, but there is no reason to delay by not passing this amendment to the Financial Services Bill before us this afternoon.

My Lords, I draw attention to my interests as set out in the register, particularly as one of the independent directors of the LINK scheme, the UK’s largest cash machine network. I support my noble friends Lady Neville-Rolfe, Lord Holmes of Richmond and Lady McIntosh of Pickering, on Amendment 37E in particular.

It is, of course, far too soon to be drawing definitive conclusions based upon our experiences of the past year or so. However, it is striking how the pandemic has tended to accelerate some existing trends. One has been the declining use of cash. For many people, this decline is something to be embraced. Last summer and again in recent days, pubs and restaurants have begun to reopen, almost universally on the basis of card payments only; the commonly preferred method is to order from the table and pre-pay through a mobile device—no cash, no cards even, and with minimised physical contact. Home delivery of food has expanded dramatically. It is therefore hardly surprising that withdrawal of cash from ATMs almost halved during the worst of the pandemic. I know people who have stopped carrying cash. However, as my noble friend Lord Holmes of Richmond pointed out, this approach does not work for everyone.

Think, for example, of the disadvantages for isolated, elderly people who have to rely upon neighbours for food shopping. Unless they bank online, how can they repay them? My noble friend’s amendment reminds us that even when a trend is broadly welcome to the vast majority of people, it can isolate a minority from the mainstream, sometimes with cruel and unjust consequences. Financial exclusion, digital exclusion, social exclusion and economic exclusion all too often go hand in hand. I know from my work with LINK that those in charge of the UK financial system are acutely aware of these problems and challenges. Indeed, they are working tirelessly to address them, and LINK in particular is committed to maintaining free access to cash across the country, for as long as consumers want and need it.

As part of this commitment, LINK maintains a financial inclusion programme. This has so far provided 1,800 communities with a new, free-to-use ATM service, by providing financial subsidies to operators who install the machines. Consumer and community groups, local authorities, Members of Parliament—including Members of this House—and indeed any other interested parties, can help to identify further, suitable sites. Some providers of ATMs base their business model on charging for transactions. That is a perfectly valid approach, but no one should underestimate just how precious a resource a free-to-use ATM is.

It may be that this amendment is too prescriptive, and I look forward to hearing from my noble friend the Minister on the wording, but these challenges can be overcome only by partnership, including banks, the Post Office, retailers, regulators and the Government, all founded upon the latest possible information and analysis. This will require leadership and a positive, co-operative spirit.

We would be wise to take care in drawing any lasting conclusions from our experience of the pandemic. Much more analysis needs to be done of how financially marginalised people, particularly those without bank accounts, have fared since the beginning of 2020. I am confident that the trends and suggested responses set out in Natalie Ceeney’s excellent report of March 2019 will broadly stand the test of time. All that has changed is the acuteness of the challenge and the urgency of coming together to fashion a sustainable response.

My Lords, the amendments in this group all deal in one way or another with the digital world and its implications for financial services. We all understand that we are in the midst of a revolution which will gather pace, rapidly expand, and reshape how we lead our lives. It is important that the UK is at the front of the curve in delivering those changes, to underpin its financial services industry. I was very pleased to see that the Bank of England and the Treasury have just announced the creation of a joint task force on central bank digital currency, a potential linchpin to those changes.

These amendments are all extremely useful. On digital identity, the noble Lord, Lord Holmes, hit the nail on the head, when he talked about the importance of engagement with the public. There are a lot of issues around identity, including issues of privacy. It is not an easy issue but a complex one. I hope that this engagement is dealt with more broadly. It may well be that the kind of targeted examples that the noble Baroness, Lady Neville-Rolfe, is concerned to see delivered much more quickly are easier to deal with, but of course, they will always lead to further questions, and this is something that we must confront head on.

We will be discussing access to cash in another group, as the noble Lord, Lord Holmes, has a specific amendment related to that, but it also points out how when we go through revolutionary change, there are always people who will be part of the “left behind”, either by choice or by capacity. Those people have every right to be able to pay a full part in our society and in our communities. Finding those mechanisms may be expensive, since it is much more efficient to go with a single strategy, but we must recognise the full complexity of the societies in which we live, the different pace at which people accept change and the degree to which they need support through that change.

I very much hope that we see something strategic coming from the Government, because we are dealing with each issue in a rather piecemeal way. We have reached the point where we need that fundamental underpinning, and I hope that we can begin to develop that strategic view, and quickly.

My Lords, we welcome the amendments tabled by the noble Baroness, Lady Neville-Rolfe, and the noble Lord, Lord Holmes of Richmond, on digital ID and other, broader, fintech issues. They provide the Government with an opportunity to elaborate on the responses given in Committee. I hope that those who tabled the amendments will forgive me for not speaking to each in turn, but to do so would be to repeat many of the points already made.

While we would not necessarily endorse some of the timescales envisaged in the amendments, the questions asked by the noble Baroness, Lady Neville-Rolfe, and the noble Lord, Lord Holmes, are sensible. In commissioning a review of fintech, the Government have demonstrated a level of interest in it, but the key question is how that is developed into concrete initiatives that grow the financial services sector while also improving the customer experience. The use of distributed digital identification could bring about a fundamental shift in how individuals and financial service businesses operate and interact on a day-to-day basis.

Properly considered implementation of digital ID could empower consumers by giving them greater choice in the services that they can access and better control over their personal data. The latter point is crucial. Any steps to further digitise the sector must come with security and privacy safeguards built in. It may not be possible or desirable to roll out digital ID overnight, but it would be interesting to hear more on the steps being taken by the Treasury and others to assess the opportunities and risks that exist. I hope that the Minister can also speak to potential timescales, even if they are not as ambitious as those spelled out in the amendments.

Amendment 37E in the name of the noble Lord, Lord Holmes of Richmond, appears to be a probing amendment, but I hope the Government will take seriously his suggestion of studying the links between digital and financial exclusion. In an earlier debate I referred to the need to tackle some of the bigger, more complex issues that contribute to financial exclusion. Without concerted effort now, one can envisage a scenario in which certain sections of the population already susceptible to financial exclusion will be unable to avail themselves of the products and services facilitated by new technologies.

We are at an interesting point in the fintech debate following publication of the Kalifa review. Items such as digital ID are mentioned in that document, albeit in the context of the need to establish international codes and standards. The UK has long been a leader in this sector. If we are to continue being so, both government and business must seek to participate fully in relevant cross-border discussions and initiatives.

I note from my latest perusal of the House of Lords business that the ever-tenacious noble Lord, Lord Holmes, has secured an Oral Question on 27 April regarding the Government’s response to the Kalifa review’s recommendations. I hope the Minister can provide sufficient reassurance that the Treasury recognises and wishes to harness the potential of fintech, but I am sure that any gaps in the response today will be revisited in just under two weeks.

My Lords, this group of amendments returns to the use of technology and data in financial services, a topic we have discussed at length at earlier stages. It is an important debate, and I welcome the efforts of noble Lords to bring this to our attention again.

As the noble Baroness, Lady Kramer, noted, as part of UK FinTech Week 2021 my right honourable friend the Chancellor, just this morning, delivered a speech setting out the Government’s commitment to fintech as a crucial component of the future of UK financial services. The Chancellor made several announcements, including the launch of a new task force between the Treasury and the Bank of England to co-ordinate exploratory work on a potential central bank digital currency; a new financial market infrastructure sandbox; confirmation that the FCA will take forward the idea of a regulatory scale box; a package of measures to support fintech firm growth; and a commitment to work with the fintech community to realise the idea of a new, industry-led centre for finance, innovation and technology.

The Chancellor also reiterated his thanks to Ron Kalifa for his landmark fintech review and confirmed that the Government will shortly provide a detailed response to Parliament via a Written Statement. I am not sure I can say to the noble Lord, Lord Tunnicliffe, whether that will be before the Oral Question on 27 April.

I turn to the amendments before us today. Amendments 28, 29 and 30 all relate to the establishment of a system of digital identification and call on the Government to publish plans for achieving this. Digital identity is a vital building block for the economy of the future. The Government recognise that digital identities have the potential to make it quicker, easier and more secure for people and businesses to get things done, to simplify people’s lives and to boost business. We want to offer people the choice to provide their identity digitally where and when it suits them, securely, easily and with confidence.

I was pleased to be able to meet my noble friends Lady Neville-Rolfe and Lord Holmes last week. In that meeting, we discussed the ambitious programme of work that the Government are taking forward on digital identities that work across the economy, some of which I will summarise here.

The Government published their response to the digital identity call for evidence in September 2020 and committed to creating a framework of standards, governance and legislation to enable digital identities to be used in the greatest number of circumstances. I assure my noble friend Lady McIntosh of Pickering that this work is being co-ordinated by the Department for Digital, Culture, Media and Sport across all departments, including the Treasury, so that the policy on digital ID captures the widest number of applications and uses for it. An important part of this work was the recent publication of the draft UK Digital Identity and Attributes Trust Framework. This framework sets out a vision of the rules governing the future use of trusted digital identity products.

I agree with my noble friend Lord Holmes, the noble Baroness, Lady Kramer, and the noble Lord, Lord Tunnicliffe, about the importance of public engagement in this area. A public survey accompanied this publication, inviting industry, civil society groups and the public to share their feedback, so that the final trust framework meets the needs of all users. This is an important first step in the Government’s plans to enable the development of digital identities that work across the economy, including with financial services.

DCMS is working with a range of stakeholders across the public and private sectors, academia and civil society to further refine and develop the trust framework. To ensure the delivery of a productive digital identity market, the department is working with stakeholders so that they understand the framework and the ways in which it can be used. A second iteration will be published this summer, followed by a further period of in-depth consultation with stakeholders to ensure that they are confident with their understanding of new or updated sections.

The Government are also looking at how legislation can help to support widespread adoption of secure digital identities across the economy. We want to give legal certainty on how to use digital identities and legal gateways to check identity attributes against government data. The Government plan to formally consult on an enabling framework later this year.

The Government therefore consider that progress is already under way to support the use of digital identity products that will work across the economy and between different economic sectors, and that industry stakeholders and the public are engaged on how this work is being shaped. The Treasury will continue to work with financial services and the Department for Digital, Culture, Media and Sport to ensure that the Government’s approach to digital identity reflects the needs of financial services businesses and customers.

Amendment 31 would introduce a mandatory regime for open finance through the laying of draft regulations. I agree with my noble friend Lord Holmes on the importance of open finance to the UK. The UK is widely considered a global leader in open banking, which enables customers to share their data with third-party providers to increase access to a wider range of products and services. The Government therefore recognise that applying these principles to a wider range of financial services data through open finance has the potential to offer significant benefits to customers. However, increased data sharing also carries significant associated risks, and it is therefore essential that an appropriate regulatory framework is in place.

Such initiatives also stand to present a notable undertaking for firms to deliver. That is why the FCA published a call for input on open finance to increase understanding of how to enable data sharing in a way that is proportionate while maximising benefit and mitigating risk, including the right use of regulation. The FCA’s response to the call for input, published on 26 March, sets out its next steps for a regulatory strategy for open finance. Central to this strategy is supporting industry-led efforts to develop common standards and road maps to open finance.

Further, the Department for Business, Energy and Industrial Strategy has already announced plans to bring forward legislation that will give government the powers to mandate data sharing across sectors, including powers to legislate for open finance if required in future. As part of its next steps on open finance, the FCA has highlighted that it will continue to work to support the design of legislation.

On Amendment 32, I agree with my noble friend that this is a hugely important area and wish to reassure him that the Government are determined to ensure that the financial sector is able to take advantage of the opportunities of greater use of technology in financial markets. The Government are carefully considering the current legislative framework and what changes may be required to facilitate digital securities.

Earlier this year the Government put out a call for evidence on distributed ledger technology, DLT, in financial market infrastructures, which asked for feedback regarding what regulatory or legal barriers exist that currently limit the adoption of DLT in UK financial markets. The Government have today committed to setting up a new financial market infrastructure sandbox for firms innovating with new technologies such as DLT.

Similarly, the amendment seeks to require the Government to consider matching the EU’s timetable on dematerialisation. We have now left the EU and, while we should be considering the approach that other jurisdictions take, it would be inappropriate to refer to just one in legislation. The Government will of course update Parliament on any planned legislative changes as appropriate.

On Amendment 37E, the Government recognise that digital payments are playing an increasingly important role for businesses and individuals, with many making payments faster, easier and cheaper, and managing finances more straightforward. Amendment 37E calls for a review of access to digital payments, in particular among those with protected characteristics, those from different socioeconomic groups, and those from each nation and region of the United Kingdom.

I assure my noble friends Lord Holmes and Lord Hunt that the Government recognise the importance of ensuring that consumers are not left behind by trends and innovation within the payments sector. I also assure the noble Baroness, Lady Kramer, of our commitment to protecting access to cash, and that the Government are committed to advancing legislation in this area to provide further protections separate from the amendment we will debate later.

In addition, the Government have a range of existing policies designed to support inclusion. The Treasury and the Department for Work and Pensions jointly publish an annual report on financial inclusion. This outlines the Government’s work and progress in key areas, including access to banking, credit, insurance, work with credit unions and support for financial capability, such as debt and savings. We are taking action to require banks to provide basic bank accounts, rolling out world class digital connectivity across the UK, and improving access to digital skills training for adults, including disabled and older people.

I hope that I have demonstrated the Government’s commitment to this important area, and that noble Lords will therefore feel able to not press their amendments.

My Lords, I thank all who have spoken in this short but wide-ranging debate. Time is passing, and we live in a digital age, as my noble friend Lady McIntosh of Pickering said—a revolution indeed, in the words of the noble Baroness, Lady Kramer. My noble friend Lord Hunt of Wirral reminded us that the withdrawal of cash halved during the pandemic, with some cruel consequences. LINK does great work; I remember that from my time at Tesco. We need a network to endure as normality returns. I thank the Minister for updating us on the Chancellor’s statement on fintech and open finance today.

It may not surprise noble Lords that I remain disappointed at the pace of change on digital ID. The Minister is right to emphasise what has been done in recent months, and I strongly support this. However, years are passing, our leadership in digital is eroding, and we can no longer blame the EU. We must solve this problem for the industries, services and, above all, consumers involved. Of course there must be public engagement, but this must not be used as an excuse for undue delay. I will be back, but for today, I beg leave to withdraw my amendment.

Amendment 28 withdrawn.

Amendments 29 to 32 not moved.

We now come to the group consisting of Amendment 53. Anyone wishing to press this amendment to a Division must make that clear in the debate.

Amendment 33

Moved by

33: After Clause 40, insert the following new Clause—

“FCA duty to make a statement about ministerial directions on investigations

(1) The Financial Services and Markets Act 2000 is amended as follows.(2) After section 1T (right to obtain documents and information) insert—“1U Duty to make a statement about ministerial directions on investigationsWhere a Minister directs, comments on, or intervenes with an FCA investigation into wrongdoing or malpractice by a company, the FCA must make a public statement about the nature of any such intervention.””

My Lords, I am very grateful to the noble Baroness, Lady Bennett of Manor Castle, and the right reverend Prelate the Bishop of St Albans for supporting this amendment. It was discussed in Committee, but the Government’s response has raised more questions than answers.

The amendment seeks transparency about ministerial interventions or directions on investigations, especially into malpractice by companies. It would require the FCA to make a statement as and when Ministers intervene. Currently, ministerial interventions and directions, especially those that stymie investigations, are made in secret. Parliament and the public are not informed, and there is no opportunity to question Ministers. Such interventions mean that selected corporations receive ministerial favours and others do not. In the absence of investigations into the criminal practices of major corporations, it is impossible to develop effective legislation or financial regulatory practices.

In Committee, I provided some evidence of how the UK Government protected criminal organisations. It related to HSBC, which, by its own admission, had been engaged in criminal conduct in the US. In 2012, it was fined $1.9 billion for money laundering offences, which at that time was the largest fine ever levied upon a corporation. HSBC also faced the prospect of a criminal prosecution.

HSBC was supervised by the Financial Services Authority, an independent regulatory body in the UK. The US fine did not persuade the FSA to investigate. Instead, on 10 September 2012, the then-Chancellor George Osborne, the Bank of England and the FSA secretly wrote to US regulators and urged them not to prosecute HSBC, as the bank was apparently too big to fail.

The ministerial interventions came to light not because of any statement made by the Government but through a July 2016 report by the US House of Representatives Committee on Financial Services. The report was titled Too Big to Jail, and reproduced the Chancellor’s letters and some email and telephone conversation records, though these are not comprehensive. It is clear that the Bank of England, the Treasury and the regulator colluded to protect a bank engaged in criminal conduct. The matter came to light in July 2016, but there was no Statement made to Parliament to explain why a criminal organisation was being protected by the Government. By July 2016, the FSA had morphed into the FCA, but the FCA did not launch an investigation either.

The report by the US House of Representatives Committee on Financial Services shows that the Government were also shielding other UK banks. These included Standard Chartered, which was fined £670 million for money laundering, and a closer reading of the same report shows that the Government also intervened to protect Barclays.

In Committee, I referred to my legal endeavours to secure a copy of the Sandstorm report, which provides some information about frauds and fraudsters at the Bank of Credit and Commerce International. The bank was closed in July 1991, but there has been no forensic investigation into the biggest banking fraud in the 20th century. Most of the Sandstorm report is available in 1,300 US libraries. The UK courts have forced the Treasury to release a copy to me, and it shows that the Government are still protecting individuals linked to al-Qaeda, Saudi intelligence, and the royal families of Abu Dhabi and other countries in the Middle East, as well as arms dealers, smugglers, fraudsters, convicted criminals, BCCI senior personnel, and some politicians.

What kind of Government protect criminal organisations and wrongdoers? What kind of democracy do we have when such interventions are not explained to Parliament and the people? One of our greatest failures is to not develop durable institutional structures, effective laws and enforcement, and a major reason for this is that many frauds and abuses are simply covered up.

The Minister, the noble Earl, Lord Howe, said in Committee that Section 77 of FiSMA provides safeguards and that

“the Treasury can require the regulators to conduct an investigation into relevant events where the Treasury considers there to be a public interest”.—[Official Report, 10/3/21; col. GC 691.]

None of the examples I have given has been subject to any investigation. Were they not in the public interest? Looking at even contemporary events, how can the Treasury be satisfied with the FCA’s failure to investigate fully and take action against those who perpetrated frauds at RBS and HBOS?

The Thames Valley police and crime commissioner has repeatedly said that there has been a cover-up of the HBOS and RBS frauds. The commissioner secured convictions and prison sentences for six individuals in connection with fraud at HBOS. He acted because the FCA and the Treasury did not. In an article in the London Evening Standard on 8 February 2019, the commissioner stated:

“I am convinced the cover-up goes right up to Cabinet level. And to the top of the City.”

I have in front of me some correspondence between the commissioner and the Prime Minister’s office, from which I shall read some extracts. On 30 May 2017, possibly in response to previous invitations, the commissioner wrote to Prime Minister Theresa May, saying:

“There is a serious problem with bank governance, which appears to be corrupt at the highest level in a number of our major banks. The governance system itself is being run by those most involved in cover ups and corrupt practices. For instance, the senior partner of the audit company that failed, either through incompetence or complicity, to notice a £1 billion fraud within HBOS is now Chairman of the Financial Conduct Authority, and the Chairman of the bank when much of this was covered up is now Chairman of the Financial Reporting Council.”

The letter goes on:

“Some of the cover up also involves the Treasury and two past Chancellors”.

These are serious allegations by a senior law enforcement officer, in a letter to the Prime Minister.

On 12 June 2017, Sir Jeremy Heywood replied from the Cabinet Office on behalf of the Prime Minister, saying:

“I was very concerned to read the extremely serious allegations set out in your letter. I would strongly urge you to pursue them formally through the proper channels, by contacting Andrew Bailey at the Financial Conduct Authority.”

Sir Jeremy went on:

“Given the extremely serious nature of your allegations, I will keep a close eye on this matter, and would be happy to meet you if you would find it useful.”

The commissioner wanted to meet Sir Jeremy, and said so on 19 June, but did not hear anything. He sent a reminder on 27 June 2017, saying:

“I would like to meet with you if possible to show you some of the compelling evidence”.

I do not know who was consulted after that by the Cabinet Office but, despite the initial offer, Sir Jeremy subsequently declined to meet the police and crime commissioner. What directions did the Cabinet Office and the Treasury provide, to whom, and when? I hope the Minister can give a commitment to publish all this correspondence and bring it to public attention, so that we can all judge whether the Treasury, No. 10 or anyone else is indeed engaged in a cover-up.

I also take issue with some of the replies provided in Committee. The Minister’s reply seemed to suggest that the evidence that I cited related to the era of the FSA and not the FCA, but forgot to mention that both these agencies were presided over by the Conservative Government and both were labelled as “independent”. It is no good saying that the matters are old or predate the creation of the FCA. That would be akin to saying that the police should not investigate matters just because the crimes predate the appointment of a new police commissioner. It is not uncommon for the police to investigate matters going back 10, 20 or 30 years, or even longer. So, why is it so different for the FCA and the finance industry’s activities?

Interestingly, on 16 March 2021, the FCA announced criminal proceedings against National Westminster Bank for money laundering offences between 11 November 2011 and 19 October 2016. These offences occurred before the FCA formally appeared on the scene. Why is it that the FCA can take on NatWest but not HSBC, Standard Chartered Bank and Barclays Bank? HSBC was fined in 2012 in the US. The Government cover-up came to light in 2016. At that time, the FCA was the regulatory body, so why did it not act? Was it overruled by the Treasury? There was certainly direct involvement by a Chancellor, as I have mentioned.

In my evidence in Committee, I referred to BCCI; that issue continues. On 22 March, the Minister, the noble Earl, Lord Howe, wrote to Members of the House who had participated in the Committee stage of the Bill, saying that

“there are currently no plans to publish an unredacted version of the report by Lord Justice Bingham into the supervision of BCCI, otherwise known as the Sandstorm Report.”

No justification was offered in that letter for suppressing a 30 year-old document. No time has been made available to ask questions about the nature of that report or its implications. As I have said, this document is sitting publicly available in 1,300 US libraries, but it continues to be a state secret in the UK.

If the Government accept the principle of transparency, they can improve the wording of this amendment and make it part of this or future legislation. The outcome can only be better regulation and government accountability, as well as higher public confidence in the finance industry—something we all seek. I beg to move.

My Lords, it is a great pleasure to follow the noble Lord, Lord Sikka, who has just delivered what I can describe only as a bombshell of a speech—one that makes the case for the extraordinary importance of this amendment and for a far broader cleanout of the Augean stables of our financial sector and its so-called regulation and, indeed, of our entire UK system of government.

I remind noble Lords that Amendment 33 in the name of the noble Lord, Lord Sikka—also signed by the right reverend Prelate the Bishop of St Albans, and to which I am pleased to attach my name—creates for the FCA a

“duty to make a statement about ministerial directions on investigations”.

I also remind noble Lords of a key part of the speech that we have just heard. On 30 May 2017, possibly in response to previous invitations, the Thames Valley police and crime commissioner wrote to Prime Minister saying:

“There is a serious problem with bank governance, which appears to be corrupt at the highest level in a number of our major banks. The governance system itself is being run by those most involved in cover ups and corrupt practices.”

That came from the Thames Valley police and crime commissioner, yet it appears that nothing has been done in response to that letter. I note also, as the noble Lord, Lord Sikka, said, that despite an initial offer of a meeting, the late Sir Jeremy Heywood subsequently declined to meet the police and crime commissioner.

Who should be paying attention to this? I would say everyone in the UK, and indeed the world, for while it might be more than a decade since the threat presented by the financial sector to the security of us all was made so starkly evident, the threat remains and is undoubtedly even greater now than in 2008. Among those who should be paying particular attention, I strongly suggest, are all those who have been assuring us in this House and elsewhere that everything is fine: “Nothing to see here, just a few bad apples being cleared out”. People have been saying that there is no problem with regulation or transparency, or the risks that the financial sector presents. They should pay attention to the noble Lord’s speech.

The House has heard my views before on the deep-rooted, decades-old—indeed, centuries-old—issues with our financial sector. I am not going to repeat those, which I explored at some length in Committee. Instead, I focus in this stage on the financial sector as a huge global crime issue, as a major United Nations initiative has recognised. I refer to the High-Level Panel on International Financial Accountability, Transparency and Integrity for Achieving the 2030 Agenda—the so-called FACTI panel. It is calling on Governments to agree to a global pact for financial integrity for sustainable development. This reminds us that while we often think of white-collar crimes and fraud as victimless, in fact they are crimes that damage the whole world, but particularly the poorest and most vulnerable in the UK and globally.

The FACTI panel, consisting of former world leaders and central bank governors, business and civil society heads and academics, says that as much as 2.7% of global GDP is laundered annually, while corporations shopping around for tax-free jurisdictions cost Governments up to $600 billion a year. We have heard often in debating the Bill, and elsewhere from the Government in particular, about how prominent the UK financial sector is on the global stage and about its world-leading role. There can be no conclusion from the FACTI report except that it is directed clearly at the UK and at your Lordships’ House.

The FACTI panel says that stronger laws and institutions are needed to prevent corruption and money laundering, and that the bankers, lawyers and accountants who enable financial crime must also face punitive sanctions. The report also calls for greater transparency on company ownership and public spending, stronger international co-operation on the prosecution of bribery, to which this amendment is particularly relevant, on minimum corporate tax, which I asked a question about last week, and on the global governance of tax abuse and money laundering. In Committee, I also referred to the Center for American Progress, not necessarily an organisation with which I often ideologically agree. However, it was making similar arguments to those of the FACTI panel. I invite any noble Lords with an FT subscription—which is all of us, through the Library—to look at stories tagged “financial fraud”. They make for a sober set of reading.

Action is needed. We hear often about the need for the UK to be world leading. I want to reflect on a meeting—which I know was before the pandemic because it was in person, conducted upstairs in one of the Committee Rooms of your Lordships’ House—when I had a discussion with a group of University of Michigan master’s students. They were visiting with their professor while in Europe to study fraud; their entire master’s degree was in fraud and corruption, examining the scale of it around the world. Pointing down the road from your Lordships’ House, I said to them that the City of London was one of the global centres of corruption. I was perhaps not surprised but still interested to discover that there was no expression of shock or surprise from those students. They simply nodded in agreement, as if I had made a statement that to them was blindingly obvious.

The City of London has been trading on its global reputation with centuries of propaganda, backed for much of that time by the muscle of colonial power. The world has moved on and is less and less likely to believe the propaganda. Amendment 33 is a simple, modest and far from sufficient step, though an important one, to ensure transparency in the governance of our financial sector—indeed, transparency of our governance. I commend it to your Lordships’ House.

My Lords, I rise to speak on Amendment 33 in the name of the noble Lord, Lord Sikka, having studied the comments made in Committee and repeated today. I can understand his frustration with history in this area. In particular, I would highlight the long delay and prevarication by Lloyds and the then regulator in dealing with the HBOS scam, which led to the demise of a number of small businesses banking with HBOS’s corporate division in Reading. Maybe more transparency would have helped there but it was actually a failure by the bank itself and by the regulator, which I very much hope would not happen again today. I am still not entirely sure what eventually happened; I know that there were some high-profile convictions. Perhaps my noble friend the Minister could update us on that sorry tale. I share everyone’s wish to see a system where it could never happen again.

However, I always worry that bad cases make bad law. The cases being quoted are generally old, while the FCA’s powers have been strengthened over the years and the culture has changed so that it is now very pro-consumer. Moreover, as my noble friend the Deputy Leader of the House explained on 10 March, the FCA is an independent body and the power of Ministers to intervene is very circumscribed. I suspect we will come back to these issues in the next financial services Bill, so I would like to make two points today.

First, reports from the United States have to be treated with some care. It is a sad fact that, unlike our own regulatory authorities, the US ones are more than a little protectionist. They come down harder on foreign entities than their domestic ones and like to levy huge fines whenever they can. It is not a level playing field, unlike the UK, which is of course one of the reasons why investors like it here. Secondly, in the sort of cases we are talking about, Ministers—I speak from experience, first as a civil servant and secondly as a Minister at BEIS, DCMS and HM Treasury—act on advice, not as free-talking politicians. If they make a direction in an investigation, it will reflect a public policy need and that could be a confidential matter, such as security or a government interest. Once that is made public it might be difficult for those being investigated to get a fair hearing, which is unfortunate in itself and likely to lead to aborted prosecutions. Whichever party is in power, this would not be in the public interest. For all these reasons, I encourage those involved to withdraw their amendment today.

My Lords, I will be brief in my support for this amendment. I am very grateful to the noble Lord, Lord Sikka, and the noble Baroness, Lady Bennett of Manor Castle, for speaking at great length. I therefore do not need to add a huge amount more, not least as I intend to go into a bit more detail on my concerns about transparency when speaking in support of Amendment 34, which touches on similar issues of accountability.

I am a little puzzled why the noble Baroness, Lady Neville-Rolfe, thinks that this is a case of bad cases making bad laws. It seems to me that there have been very considerable concerns in the past. Surely those ought to be investigated.

We are facing a real crisis of trust in public bodies at the moment, and I believe that this amendment will be a beneficial addition to this Financial Services Bill. In making provisions for an additional layer of transparency, it will act as an incentive against any possible interference; whether done formally or informally, it will still have that effect. The truth is that we do not know whether ministerial interference in FCA investigations has occurred, and positively stating either way is speculative.

Although I was not privy to the written response from the noble Earl, Lord Howe, which he promised to send to the noble Baroness, Lady Kramer, confirming whether there were provisions within the Ministerial Code to allow for interventions in FCA investigations, the assumption in Committee was that any attempt to steer an FCA investigation would constitute a breach of the Ministerial Code. That would require breaches of the Ministerial Code or other offences to be taken seriously, and not treated lightly or even dismissed. Last year, an inquiry found evidence that the Home Secretary had breached the Ministerial Code, yet the consequences extended little further than an apology. In February, it was revealed that the Health Secretary had acted unlawfully when his department failed to reveal details of contracts signed during the Covid-19 period. Just before Easter, we all started reading about allegations surrounding conflicts of interest in a former Prime Minister’s dealings with the financial services firm Greensill, and there have been concerns about the current Prime Minister’s dealings during his time at City Hall. It is vital that, if we are to rely on breaches of the Ministerial Code, they are given some teeth and have some effect.

I have no evidence, but it may be that no Minister has ever interfered in any FCA investigation, in any way. I sincerely hope that that is the case, but we cannot rule it out. If interferences have occurred, it would be doubtful to assume that investigations are always steered in the interests of consumers. Although provisions are in place to prevent misconduct, they should not discount the contribution that this important amendment can make in strengthening those rules and further disincentivising any possible ministerial interferences in FCA investigations. If Her Majesty’s Government have concerns about small parts of the wording here, I hope they come back with some improvements to ensure that the levels of transparency are clear to everybody, in every part of the system.

My Lords, unfortunately, I did not bring with me a copy of the letter that the noble Earl, Lord Howe, kindly sent me in response to my question about the Ministerial Code. I expect that a copy is in the Library and available to everyone, but I am sure that the Minister will follow through. While reading the content was reassuring, I do not want it to be a distraction—it is one of the reasons that I have not signed this amendment—from the underlying issue of whether there is adequate transparency to act as the cleansing light that we need in an industry sector that will always be subject to misbehaviour. There is just too much money and opportunity, and an awful lot of power, washing through this industry. Insight, clarity and visibility are probably more important than in almost any other sector of our economy.

The noble Baroness, Lady Neville-Rolfe, talked as if all the misbehaviour was in the past, but we are talking about Greensill today and I have questions. I know that there are many task forces and investigations going on, but I still have no understanding of how a company with as many red flags against it as Greensill got through the accreditation process to enable it to participate in the CBILS. Other than writing to the British Business Bank—and I doubt that I will get an adequate answer—I am not sure what mechanism I can possibly use to get to the bottom of that. We do not have transparency in the areas where we need it.

I remember many conversations, in the midst of the 2008 financial crisis and subsequently, with regulators that were anxious not to rock the boat. The economy and industry were fragile enough, and they were disinclined to investigate. It is to that which I have always attributed the FCA’s inaction with regard to HBOS. I support the description of the HBOS crisis given by the noble Lord, Lord Sikka. It was purely by chance that the fraud—it was literally fraud that sent people to jail for 10 years—at HBOS was exposed. Thames Valley Police decided to investigate when all the regulators, the Serious Fraud Office and the most relevant and obvious police forces had refused. Part of that was due to a lack of resources, from the police forces’ perspective.

I do not think I have ever forgiven the Treasury for its actions in this regard. It cost £7 million for Thames Valley Police to investigate that fraud and it was never reimbursed that money. The fine, of about £45 million, went to the Treasury and was deliberately not shared with the police force. Had it been, it would have encouraged and enabled police forces around the country to be more acutely aware and engaged when there was evidence of fraudulent behaviour. Even today, the various companies that were defrauded have not yet been fully compensated. Nearly 14 years on, it has not been resolved. We have two more bodies now involved in trying to clean up that mess.

The other area that leaves me with great concern is that the response I always get when I raise issues around transparency and enforcement in financial services is: “We now have the senior managers regime.” I was on the Parliamentary Commission on Banking Standards, which drove a lot of the thinking that led to that regime, but, as we have often discussed in this House, it has been holed below the waterline by decisions of the FCA not to pursue senior executives. We know mostly about Barclays and Jes Staley—who had hired private investigators to track down a whistleblower—being fined but not declared unfit to hold his position. The fine was of a size that was more than made up by the bonuses he received in the following years, so it was pointless.

We have an underlying problem. It is not that the senior managers regime does not do some good—it establishes some procedures and processes—but it focuses on more junior people and does not hold people accountable at the senior level. With Greensill coming into the picture now and triggering a much wider discussion, I very much hope that the Government will take back the message that they have to sit the regulators and the various enforcement bodies down, and work out a way to make this system more effective. They are up against powerful forces and there is inequality of arms, but this industry has to be kept under oversight and control because, when it goes wrong, it takes a large part of our economy with it, as well as creating many individual victims.

My Lords, my noble friend Lord Sikka facilitated perhaps one of the most interesting debates in Grand Committee. The amendments raised several important questions about the independence of the FCA, as well as the nature and success, or otherwise, of its past investigations. My noble friend was not happy with the response provided by the Minister last time; nevertheless, I felt that we had a helpful initial response in Committee, with references to legislation that requires FCA action in certain circumstances and allows a Minister to initiate an investigation in others. The response was perhaps a little light on the limits of ministerial power; recent times have shown that the Ministerial Code is not always considered binding. I hope that we will hear more on this later.

Some of the concerns that my noble friends cited related to events preceding the financial crisis, and I wonder whether this is an area where Ministers can go further today. For example, the noble Earl mentioned Section 73 of the Financial Services Act 2012, which imposes a duty on the FCA to investigate in the event of certain regulatory failures. As the measure was introduced after the global crash, it is clearly of no use in shedding light on events that took place before it. However, is he confident that, if some of the instances cited by my noble friend were to happen today, the current legal provisions would be sufficient to trigger an independent investigation?

In his final remarks on 10 March, my noble friend Lord Sikka recalled the wishes of many would-be criminals to be prosecuted in the UK on the basis that our enforcement machine is seen as less effective than that of others. My noble friend Lord Eatwell raised that issue in several of his earlier contributions on the Bill. Ultimately, and irrespective of the wording of different amendments, we need to achieve a widespread perception of both independence and effectiveness. This is true not only of the FCA but also of our other financial services regulators and the various enforcement agencies that they work with. If he were here, my noble friend Lord Eatwell would say that there remains some way to go. However, the responses that we received to other amendments in Committee satisfied us that the Treasury understands the challenge and is grappling with it. I hope that my noble friend finds some comfort in the wider discussions we have had and that the Minister can shed more light on the issues of the constraints on ministerial power.

My Lords, before I respond to this amendment, I would like to express my sadness on behalf of us all at the news of the death of the noble Lord, Lord Judd. Lord Judd took part in our debates on the Bill only just before Easter. He was a Member of this House for some 30 years, a man of great wisdom and wide experience, but above all a man of great kindness, who had an abiding concern for those less fortunate than himself both in this country and across the world. We shall miss him.

Amendment 33 seeks to require the FCA to make a public statement on the nature of any intervention a Minister may make concerning an FCA investigation into an individual firm. The noble Lord, Lord Sikka, made a number of allegations against Ministers, past and present, and the Treasury. I do not have the facts or the briefing to enable me to respond to him today on so many detailed issues. Indeed, I have to say that, for the most part, I did not recognise the picture that he painted. I hope, therefore, that he will allow me to write to him on what he has said, copying in noble Lords speaking in this debate, and in doing so I shall attempt also to address the points made by the noble Baroness, Lady Bennett of Manor Castle. However, I can respond to the issue of principle raised by this amendment, which is what we are here to focus on for the purposes of the Bill.

The House may recall that, in Committee, I outlined the current legislative framework which establishes the FCA as an independent, non-governmental body. In my remarks today, I hope to build on that discussion and reassure noble Lords that this amendment is not necessary. Ministerial intervention in the activities of the FCA, were it to occur, would be one of two things: either legally permitted under existing statute, or illegal. What actions are legally permitted within the legislative framework? Under the framework established by Parliament, the Treasury and hence Ministers have strictly limited powers in relation to the FCA. Indeed, the Treasury’s ability to direct or influence the regulators is set out in statute. Most crucially, the Treasury has no general power of direction over the FCA.

The Financial Services Act 2012 sets out the legislative mechanisms through which the Treasury can launch investigations, provided under Section 77 of that Act, which provides a mechanism for the Treasury to direct the FCA to conduct an investigation into events related to a person carrying on a regulated activity. Section 77 was made use of recently, as noble Lords will know, in relation to the regulation of London Capital & Finance, or LCF. Under Section 78, the Treasury can provide direction as to the scope of an investigation, the timeline that it should cover and how it is conducted. So the scope of the powers available to the Treasury is tightly circumscribed by statute. That has to be right, because the ultimate independence of the FCA is vital to its role. Its credibility, authority and value to consumers would be undermined if it were possible for the Government to intervene in its decision-making or ongoing supervision of authorised firms.

As the FCA has acknowledged in its mission statement, Parliament has given the FCA a range of tools in order to deliver its objectives. These tools range from guidance, to censure, to its Section 166 FSMA powers, which allow the FCA to seek the view of an independent third party or “skilled person” on aspects of a regulated firm’s activities if it is concerned or wants further analysis. These accompany independent powers for the FCA to make decisions on how to use these tools most effectively. In my remarks in Committee, I did not intend to suggest that the FCA cannot investigate events that occurred before it was created. I merely pointed out that the events being discussed were historical. The FCA can and does look at historical behaviour of the firms that it supervises.

In the context of this amendment, it is necessary to appreciate that the FCA is an independent body and that there are laws which govern and strictly limit the directions that the Treasury can and cannot give it. However, were such directions to be given under Section 77 and 78 of the 2012 Act, I cannot conceive of a situation where Ministers and the Treasury would not make that fact public.

That covers the intervention that is legally permitted; what about nefarious interference? In Committee, the noble Baroness, Lady Kramer, raised the Ministerial Code, as indeed she has today, and asked whether the provisions of the code were applicable in this instance and strong enough in relation to engagement with regulators. I have since written to the noble Baroness on this topic and a copy has indeed been placed in the Library. However, for the benefit of the House I will expand on that now.

The Ministerial Code requires Government Ministers to

“maintain high standards of behaviour and to behave in a way that upholds the highest standards of propriety.”

In addition, Ministers must act in accordance with the highest standards as set out in the seven principles of public life: selflessness, integrity, objectivity, accountability, openness, honesty and leadership. I particularly point to the requirements under the openness principle for Ministers to

“act and take decisions in an open and transparent manner.”

I hope that this assures noble Lords that, even if Ministers were tempted to interfere improperly, the Ministerial Code provides the proper protections against this. In short, if a Minister were to attempt it, he or she would simply not get away with it. The right reverend Prelate the Bishop of St Albans in a real sense made my point for me. If anyone has evidence of improper behaviour by Ministers, the regulators or firms, they should of course raise that through the proper channels.

It is not a case of my arguing along the lines of “Trust me—I’m a Minister.” I hope that I have demonstrated that the appropriate legislation and the appropriate code and principles of ministerial behaviour are already in place in this space to safeguard against any undue interference as envisaged by this amendment. I hope that this reassures noble Lords that this amendment is simply not necessary, and that the noble Lord is thereby content to withdraw it.

My Lords, I join the noble Earl, Lord Howe, in expressing sadness at the death of Lord Judd, and send my condolences to all his loved ones.

In her response, the noble Baroness, Lady Neville-Rolfe, raised the interesting point that some matters were confidential and that Ministers or the Government cannot therefore talk about them. There is also a broader issue of parliamentary accountability and public interest, and of being open and accountable, which should always triumph over the pursuit of private interests. I do not think that any of the issues I have spoken about touch upon the position of spy satellites or troop movements and are not, therefore, a real threat to national security. They may be a threat to private arrangements which some elites have negotiated with Governments, but that is another matter.

I am grateful to the noble Earl, Lord Howe, for his detailed explanation. He said that if there is any evidence about ministerial interventions it should be brought to the attention of the proper authorities, but the difficulty is that there is no mechanism by which this intervention is placed on public record. We only become aware of it because of revelations in other cases. In the case of BCCI, which I cited, it was after five and a half years of litigation against the Treasury that I managed to secure a copy of the Sandstorm report. The Government did their utmost to prevent the disclosure of that document, so there simply are no formal channels for any evidence. That means that we can only investigate past events, try to put the bits and pieces together and build up a picture about ministerial interventions.

This issue will remain with us, but one thing we cannot deny is that, even under the FCA’s rules and the Ministerial Code, which the Minister cited, the unredacted version of Lord Justice Bingham’s report on the Bank of England’s supervision of BCCI still remains a secret document. That is really bizarre. The Sandstorm report is on the internet, because I put it there, but as far as the state is concerned it is somehow a secret document.

As I said, this issue is not going to go away. In the post-Covid world there may well be more scandals and more issues. There will, therefore, be more questions about government accountability and interventions. For the time being, I withdraw the amendment, but hope to return to it in the future. I thank noble Lords for their indulgence.

Amendment 33 withdrawn.

We now come to the group consisting of Amendment 34. Anyone wishing to press this amendment to a Division must make that clear in debate.

Amendment 34

Moved by

34: After Clause 40, insert the following new Clause—

“Supervisory Board

(1) There is to be a Supervisory Board to perform the function of monitoring the FCA and PRA.(2) The Supervisory Board must consist entirely of stakeholders.(3) Recruitment for the membership of the Supervisory Board is to be conducted through open competition and the appointments are to be confirmed by the House of Commons Treasury Committee, or another relevant House of Commons Select Committee.(4) The Chancellor of the Exchequer may nominate individuals to the Supervisory Board.(5) The following are ineligible for appointment to the Supervisory Board—(a) current and past employees of the FCA and the PRA, and(b) current employees of organisations supervised by the FCA and the PRA.(6) A member’s membership of the Supervisory Board cannot exceed a period of five years beginning with the day the member’s appointment is confirmed under subsection (3).(7) The Supervisory Board has no responsibility for—(a) the day-to-day operations of the FCA or the PRA, and(b) investigations and enforcement of the rules devised by the FCA and the PRA.(8) The Supervisory Board’s functions are to—(a) provide strategic oversight of the Executive Boards of the FCA and PRA responsible for day-to-day operations;(b) inquire into the adequacy of resources used and available to the FCA and the PRA;(c) seek explanations from the Executive Board for reasons for the delay in launching and completing investigations; and(d) seek explanations from the Executive Board in relation to the efficiency and effectiveness of the FCA and the PRA in discharging their statutory duties.(9) The Supervisory Board shall have powers to—(a) demand explanations from the Executive Board on any matter affecting the protection of consumers from harmful practices;(b) secure information from the Executive Board about their transparency and accountability to the public; and(c) liaise with whistle-blowers and examine FCA and PRA policies for protecting and rewarding whistle-blowers.(10) The Supervisory Board must hold open meetings with the Executive Boards of the FCA and the PRA at least once every three months.(11) The working and background papers of the Supervisory Board must be made publicly available.(12) The Supervisory Board must lay before each House of Parliament an annual report highlighting matters of concern relating to the operation of the FCA and PRA which it has discovered in exercising its powers and functions.(13) The Supervisory Board must be consulted on appointment and reappointment of the Chief Executives of the FCA and the PRA.”Member’s explanatory statement

The new Clause will create a Supervisory Body for each of the FCA and the PRA. Its function would be to internally monitor the Executive Boards of the FCA and the PRA and provide a diversity of views on the conduct and practices of the FCA and the PRA.

My Lords, I thank the noble Baroness, Lady Bennett of Manor Castle, and the right reverend Prelate the Bishop of St Albans for supporting this amendment, which seeks to democratise regulators by giving the people a direct say in their governance structure, and thus act as a bulwark against capture by corporate interests. Almost every regulator claims to serve the people, but normal people—as I like to call them, rather than ordinary people— are kept off the boards. This amendment would put people inside the regulatory bodies. The amendment proposes a two-tier board structure for the FCA and the PRA. One tier, the executive board, would be responsible for the day-to-day operations, just as it is today. The second tier, a supervisory board consisting of stakeholders, would exercise oversight of the executive board and its practices. The amendment sketches out the composition and some of the powers, rights and duties of the supervisory board and its modus operandi, which is complete sunshine.

Throughout the debate on the Bill, many noble Lords have expressed concerns about the failures of the FCA. Capture by corporate interests has been identified as a major factor. The colonisation of the FCA and the PRA boards, working parties and committees by corporate interests means that their interests are prioritised and anything threatening is filtered out of consideration altogether. The FCA and the PRA are more likely to have one-to-one meetings with finance industry elites than with the victims of banking frauds or mis-sold financial products, or individuals concerned about the RBS and HBOS frauds and bank forgeries.

All too often, regulators come from the finance industry and see the issues through the lenses that they have been accustomed to, rather than through the eyes of those are negatively affected by the industry. All too often, regulators return to the industry and they have few incentives to antagonise their potential employers. They have become psychologically standardised and that is the essence of what is often called cognitive capture. In the absence of a diversity of views, organisations remain colonised and are therefore unable to identify possibilities of crisis, so democracy and public accountability are the best ways of tackling corporate capture. With people sharing similar world views, the FCA has become an echo chamber where emerging, and often vital, issues are neglected. This is well noted in Dame Elizabeth Gloster’s report on the collapse of London Capital & Finance, which stated:

“The FCA’s flawed approach to the Perimeter resulted in LCF being able to use its FCA regulated status to present an unjustified imprimatur of respectability to the market, even in relation to its non-regulated bond business.”

A similar pattern has been repeated at Greensill Capital (UK), which was registered with the FCA for anti-money laundering purposes and was not authorised to function as a bank, even though it was effectively lending money. Therefore, the FCA was not required to supervise its wider conduct, apply capital adequacy or stress tests. However, Greensill is part of the $200 trillion a year unregulated shadow banking industry. It gets its resources from investment and retail banks, insurance companies, pension funds and local authorities. Any problems and turbulence in shadow banking has the capacity to infect the entire financial system. The warning signs at Greensill were flashing red last year when three of its major clients—NMC Health, BrightHouse and Agritrade—collapsed, with billions in undisclosed borrowing. Insurance companies also began to withdraw cover or make it more expensive for the provision of supply-chain financing.

Yet that did not ring any alarm bells at the FCA, possibly because of its insular governance structure. Through the presence of diverse stakeholder views, the supervisory board might have asked the executive board to explain how it could safeguard the stability of the financial system when it neglects the impact of shadow banking on the regulated sector or the economy as a whole. It might also have asked questions about accounting for reverse factoring, which has been an issue for decades but has been utterly neglected by the regulators. The presence of stakeholders on regulatory boards changes the dynamics of regulation by empowering them to question executives. No doubt, some would oppose democratisation of regulatory bodies by arguing that finance is a complex issue. That may be, but most major scandals are rarely exposed by experts, even though stakeholders provide plenty of evidence. So why not co-opt them into the governance structures and empower them to hold the executives to account on a day-to-day basis?

Some may claim that the supervisory boards would increase the cost of regulation. That cost would be miniscule—certainly far less than the cost of the last banking crash, the possible shadow banking crisis or the pain suffered by stakeholders in LCF, Blackmore Bond, the Woodford fund and many other headline scandals. I do not intend to divide the House on this amendment, but I believe that we can find a solution together to the capture of the regulators, which is a most pressing issue facing us. I beg to move.

I start by sharing the powerful words of my noble friend the Deputy Leader on the sudden loss of the noble Lord, Lord Judd, who contributed so very recently to this Bill and whom I remember well as an effective Minister of State at the FCO when I was a young civil servant. His death is a great loss.

As I understand it, Amendment 34 is designed to improve the culture of the financial services sector—a sentiment that I empathise with—although it would do so by adding an extra layer of regulation through a stakeholder supervisory board. I am against this for the FCA, the PRA and other regulators. I have substantial experience of regulation from my Civil Service past, as an executive and a non-executive of non-financial companies, as a Minister and, currently, as a non-executive of a small bank. In my judgment, adding an extra layer of board members without practical experience could have a perverse and negative effect.

For good outcomes, one needs clear, simple and outcome-based regulation, and company directors who take their responsibilities seriously and promote a good culture, with a focus on customers and protection, on risk and the good use of capital, on fraud and cyber, on the people who operate the business—from the top right down to the bottom—and on innovation and cost control. Above all, one needs directors who will challenge, get into the detail and be listened to.

I have been a non-exec for over 20 years and, until recently, there has not been enough attention paid to, or appreciation of, the challenge function and directors who challenge. Cases such as the HBOS scam, which we have been concerned about today, are the result. This needs to change, in terms of the selection of non-executives and with strong internal challenge in the executive structure of companies. This applies to financial services companies and more broadly.

An extra layer in the form of a supervisory board will not solve the problems of culture that have been highlighted. It risks introducing a further confusion of responsibility. To my mind it is, I am afraid, a bad idea.

My Lords, I am sure that the noble Lord, Lord Sikka, will not be surprised to find that I do not support his Amendment 34. In particular, as a former director of a supervised bank, I do not recognise the regulatory capture that he majored on in Committee and again today. In my experience, the relationships are always challenging and, sometimes, worse than that.

I have two main reasons for opposing the amendment. First, a supervisory board sitting over the top of the existing regulators undermines a fundamental characteristic of regulation in the UK—namely, that regulators are independent. That means that they are independent of government, certainly, and of Parliament and anyone else who thinks that they might have an interest in what they do. They are certainly accountable for delivering against their objectives and expect to be scrutinised by Parliament, but they are autonomous bodies. This amendment runs against that.

Secondly, the regulators already have governance structures that oversee the work that the executives undertake. In the FCA, it is the FCA’s own board, which has a chairman and a majority of non-executive directors. I believe that the only executive on the FCA board is, in fact, its chief executive. In the case of the PRA, there is a Prudential Regulation Committee, which has Bank of England executives and outside members, and is chaired by the Governor of the Bank of England. More importantly, in governance terms, as the PRA is part of the Bank of England it is overseen by the Court of the Bank of England, which, again, is a largely non-executive body chaired by a non-executive, although it does have the governor and the deputy governors, including the head of the PRA.

Governance of the regulators is carried out in the way in which governance in the UK is normally done. It covers the very things mentioned in proposed new subsection (8), which is therefore duplicative. If there are concerns, they should be dealt with within the organisations concerned, without writing reports to Parliament. I believe in transparency, but there is a point at which transparency becomes counterproductive, and I am sure that this amendment is way beyond that point.

Accountability to Parliament takes many forms, a key one being the annual reports that are laid before Parliament, setting out the regulators’ performance against their objectives, which is required by existing statute. It really is difficult to see what added value this amendment would create.

The amendment is also deficient in a number of respects. Perhaps the most glaring is the reference to the “Executive Board” of the PRA and of the FCA. As far as I am aware, there is no such thing specified in legislation or the governance arrangements of either body. I believe that each regulator has an executive committee or equivalent, but they do not have an “Executive Board”, with a capital “E” and a capital “B”.

The amendment would require the exclusion from the supervisory board of anyone who might actually understand what the PRA and the FCA actually do. Proposed new subsection (5) would disqualify “current and past employees” not just of the FCA and the PRA but of any organisation that they supervise. I have never thought that ignorance was a good qualification to be a member of a board.

Proposed new subsection (10) talks about “open meetings” but does not explain what that means in practice. Proposed new subsection (11) says that all the supervisory boards papers must “be made publicly available”, but it seems to pay no heed to the need for confidentiality or data protection. I could go on. These are unnecessary and ill-thought-out proposals, and I hope that my noble friend the Minister will not accept them.

My Lords, I will speak in support of Amendment 34, in the name of the noble Lord, Lord Sikka, which is an interesting contribution to the question of governance. I am keen that we find any ways that we can to speak into those organisational cultures that every industry adopts and promotes, and which sometimes lead to groupthink.

There are times when it takes someone from the outside to ask intelligent questions. I am reminded of Her Majesty the Queen asking the Bank of England why there had been a financial crash back in 2008, when many people in the industry, who were paid extraordinary amounts of money because of their supposed expertise, had not spotted that it was coming. I do not think that this is about inviting people who are ignorant to come on to boards; this is a question about whether there is a wider contribution that might be very useful and of help to thinking about issues of governance responsibility.

I will comment briefly on a further development in the FCA’s investigation into car finance, which I have referred to in the House in the past. Since the FCA introduced its new rules banning discretionary commission models in January 2021 and subsequently closed its investigations into Lookers, the car dealership firm, for possible mis-selling, it was revealed that the UK’s accounting watchdog, the Financial Reporting Council, was investigating accounting giant Deloitte for its role in auditing the very same Lookers that the FCA had only just ended its investigation into a few weeks earlier. The FCA never confirmed or dismissed whether there had been any mis-selling, remarking that it had made its concerns clear and did not intend to impose penalties on this FTSE 250 firm. However, the opening of a new investigation relating to Lookers raises questions about the thoroughness of the original FCA investigation: were all aspects investigated?

The introduction of a supervisory board with the statutory functions set out by this amendment—able to scrutinise the FCA and PRA’s decisions where it is reasonable to seek an explanation, such as in the case of Lookers—is an interesting idea that we ought to think about. This would not only strengthen accountability but provide the FCA with a chance to explain its responses and relay any concerns, whether they are structural or to do with resourcing. Where its investigations are delayed or prematurely completed without any subsequent action, the danger is that some may be tempted to think something is being hidden.

The FCA has been criticised during these proceedings and some of those criticisms have been justified. Other Members of the House have pointed out that this is a huge area, where there will always be some problems and they are to be expected. However, a lack of regular communication between the FCA and parliamentarians certainly does not help. If there are internal problems in the FCA that contribute to what some feel is a lack of enforcement, I am sure they and many others would be interested in hearing about this.

Through the annual report provided by this supervisory body, a better understanding of the problems within the FCA, and justifications where action has not been taken, could be facilitated. This would lead to more robust and accountable financial service regulators. This amendment, with its limited oversight and non-interference in running operations, could refine our financial services regulators over time to better undertake their functions and enhance communications between them and parliamentarians.

Any efforts to increase transparency and accountability are always welcome. I hope that the Government will reflect on this short debate and, if these are not the particular ways to enhance our financial regulators, come up with other ideas and resources so that we can work out how to be more effective in this vital area as we look to build a national and international reputation for these services.

My Lords, I declare my interests in financial services businesses, as stated in the register. I would also like to record my sadness and offer my sincere condolences at the passing of both the noble Lord, Lord Dubs, and the noble Baroness, Lady Williams. Both made an enormous contribution to your Lordships’ House over very many years and will be much missed on all sides of the House.

It is a great pleasure to follow the right reverend Prelate the Bishop of St Albans. We agree on so much, but on this question and this amendment I have to take a slightly different view from his. The noble Lord, Lord Sikka, has brought back Amendment 34, substantially in the same form as his Amendment 120 in Committee.

The drafting of the amendment suggests that it is intended that there should be a single supervisory board of both regulators, the FCA and PRA. The Member’s explanatory statement on the other hand states:

“The new Clause will create a Supervisory Body for each of the FCA and the PRA.”

This implies one supervisory board for each of two regulators. That at least makes more sense than a single supervisory board for the two separate regulators, which is an impossible concept, as I pointed out on 10 March.

As the FCA and PRA are not the same organisation—although I sometimes wish they were—each has its own executive board. In the case of the FCA, this is the FCA board. However, the PRA board was replaced four years ago on 1 March 2017 by the Prudential Regulation Committee and the PRA was absorbed into the single legal entity of the Bank of England. I pointed this out to the noble Lord on 10 March, but he has not altered his approach. My noble friend Lady Noakes has also explained these fundamental errors clearly. A supervisory board such as he proposes, charged with exercising oversight over the board of the FCA and the Prudential Regulation Committee of the Bank of England, could not be a single entity. It would have to have two distinct personae, one within the FCA and one within the Bank of England.

My noble friend Lord Howe explained to the noble Lord that both the FCA and PRA must already

“attend … hearings before parliamentary committees, and those committees may also hear evidence from stakeholders about the performance of the regulators.”

He said:

“Parliamentary committees of both Houses are also able to summon the regulators to give evidence whenever they may choose.”

He added,

“the Treasury already has the capacity to order independent reviews into the regulators’ economy, efficiency and effectiveness. Therefore, all told, the amendment would result in a duplication of existing opportunities for scrutiny and oversight of the regulators’ resourcing.”

As I said on 10 March:

“I do not think that such a supervisory board would replace the need for parliamentary scrutiny of the regulators, which will in itself provide appropriate transparency and accountability, rather than the completely crushing, destructive oversight that I believe the noble Lord’s new board would cause.”

The noble Lord said that his new board would

“not duplicate in any way whatever what any parliamentary committee or review board might do. The supervisory board would simply be engaged in day-to-day strategic oversight. Those people would be in the organisation on a permanent basis, observing, requiring reports, making recommendations”.—[Official Report, 10/3/21; cols. GC 723-26.]

Such an advisory board would seriously and negatively impact the operation of the regulators.

The noble Lord has said that he will not press his amendment, which I think is a wise decision because I believe your Lordships would have rejected it as unworkable, impractical and likely to have a negative impact on the attractiveness of our financial markets which provide so many jobs and a large slice of the country’s tax revenues.

I suspect that the noble Viscount, Lord Trenchard, was referring to the loss of the noble Lord, Lord Judd, which was just announced, rather than the noble Lord, Lord Dubs. I join with him; I am still feeling slightly in shock, frankly, at the news. We have all lost too many people of significance to this House over this last year. I think we all want to pay tribute to all of them, but we are all struggling a little with some of the very significant people who will not be here for future debates.

On this amendment, I will speak briefly. I understand where some of the thinking of the noble Lord, Lord Sikka, is coming from, but I cannot say that I see a supervisory board as the answer to the issue he raises. I am much more taken with the proposal made by my noble friend Lady Bowles in Committee, for an expert body—it takes experts to really understand how the regulator functions—regularly to follow the Australian model and review the regulators. This could be every three years; the number of years is not exactly the key issue. It would not second-guess the decisions the regulators have made but look at operations, resources and effectiveness. With the regulator now so detached in many ways, that is essential.

I would want the Treasury to be a good distance from anything like this because, like it or not, the Treasury will always be seen as an influencer of decision-making. An expert view is needed to help us ensure that our regulators are functioning in the way that they need to, given the enormous challenges and responsibilities that they have. With that, I have to say that I cannot support this amendment.

My Lords, I am grateful to my noble friend Lord Sikka for bringing back this amendment. In Grand Committee, it was discussed in the context of our wider debates on parliamentary scrutiny and the financial services regulators. My noble friend was not content with this, and while I believe that there is a degree of overlap, I accept the point that his amendment focuses on detailed day-to-day oversights rather than taking what some might call a “helicopter view”.

In his previous response, the Minister indicated that supervisory bodies are not necessary because of the various panels that must be consulted by the PRA and the FCA as they fulfil their duties. However, while these panels undertake valuable work, the extent to which the regulators take their views on board is unclear; for example, I sense that the FCA’s consumer panel would take a very different view on the duty-of-care amendment passed on day 1 from the positions taken by both the Treasury and the FCA.

The Minister also pointed to the future regulatory framework review as the correct vehicle for taking this issue forward. I have some sympathy with that view: I will be very surprised if the review endorses the status quo. If it does, we have had assurances that there will be further primary legislation and that means further opportunities for my noble friend to pursue this initiative.

My Lords, the Government agree that effective oversight of the FCA and PRA is a crucial component of our regulatory framework. The Government also agree that having a diverse range of independent views in such an oversight regime is key to its success. However, as I have touched on previously, a number of mechanisms already exist to ensure effective independent oversight of the regulators by a diverse range of stakeholders. I believe these are sufficient and I do not propose to go into them in detail here, given our other debates on Report. However, I know from our previous debate in Committee, and from what he has said today, that the noble Lord, Lord Sikka, is seeking particularly to address potential issues arising from so-called regulatory capture and groupthink with his amendment.

Regulatory capture becomes a risk in situations where regulators do not have the views of others—particularly stakeholders—to influence their work. I assure the noble Lord that there are already extensive arrangements in place to allow a wide range of stakeholders to contribute their views to influence the regulators’ work. There are also arrangements in place to provide effective scrutiny of the regulators and to require them to explain their actions; for example, both the FCA and PRA are required under the Financial Services and Markets Act 2000 to consult independent panels on the impact of their work, as the noble Lord, Lord Tunnicliffe, has just mentioned. For the PRA, this involves consulting an independent practitioner panel of industry representatives, while the FCA must consult four different statutory panels. These four panels are: the consumer panel, the practitioner panel, the smaller business practitioner panel and the markets practitioner panel. The FCA considers the views of each of these panels, as appropriate, when developing policies and making regulatory interventions.

I point to the work of the FCA’s consumer panel in particular. This panel meets twice a month to advise and challenge the FCA from the earliest stage of policy development, and to bring to the FCA’s attention broader issues for consumers. This ensures that different perspectives on how the FCA should take forward its consumer protection objective can be taken into account. The FCA board receives a report on the panel’s work each month, which helps to inform the FCA’s rule-making and policy development. Through the panel’s annual report, press releases and public statements, the consumer panel can publicly hold the FCA to account, enhancing transparency and reducing the risk of regulatory silence or capture. Furthermore, the regulators are already under a statutory obligation to organise and publish the results of their public consultations. These consultations allow interested parties—including financial services firms, but also consumer organisations and members of the public—to make representations on issues such as proposed new rules.

Other elements of the amendment also duplicate existing arrangements. The regulators’ annual reports to the Treasury already allow for oversight by stakeholders of the boards’ activities. These reports provide analysis of how the regulators have discharged their functions and advanced their objectives, and are published and laid before Parliament for interested parties to examine. This is not to suggest that the Government or the FCA are complacent about the need to continue to focus on high-quality regulation and supervision.

The noble Lord, Lord Sikka, mentioned LCF and the investigation by Dame Elizabeth Gloster. I welcome the FCA’s apology to LCF’s bondholders and fully support the changes that the FCA has made to date in response to Dame Elizabeth’s recommendations. I am confident that its ongoing transformation programme is the right next step to further improving the FCA’s approach to regulation. Consumers can take confidence from the comprehensive plan that the FCA has put in place to address Dame Elizabeth’s recommendations and continue its ongoing programme of reform. The FCA has committed to issuing regular public updates on progress and the Government will also be closely monitoring the FCA’s progress in implementing the recommendations. Therefore, Dame Elizabeth’s report and the FCA’s response demonstrate that the current arrangements for addressing any failures are working as intended.

The amendment proposes that the supervisory board should have the power to inquire into the adequacy of resources used by and available to the FCA and the PRA. On that point, I emphasise that the Treasury already has the statutory power under FiSMA to order an independent person to conduct a review of the economy, efficiency and effectiveness with which the regulators have used their resources in discharging their functions. Furthermore, the National Audit Office undertakes annual reviews of the regulators’ accounts, which are laid before Parliament. This provides ample opportunity to scrutinise the adequacy of resources used by the regulators. The FCA is already required to organise annual public meetings, where stakeholders and members of the public can question the chair and members of the board, thereby openly holding them to account.

The amendment also proposes that the FCA and PRA be required to attend hearings in front of a supervisory board. Here, again, I remind the House that they must already attend such hearings before parliamentary committees. Parliament is well placed to ensure that these hearings focus on the most vital areas. The FCA, for example, must attend general accountability hearings before the Treasury Select Committee twice a year. The PRA must appear before that committee after the publication of its annual report. In addition to these regular hearings, as I have stated previously, parliamentary committees of both Houses are able to summon the regulators to give evidence on an ad hoc basis. Requiring the regulators to also attend regular hearings before a supervisory board would therefore be unnecessarily burdensome; it would not substantively enhance our current oversight regime. Therefore, given the existing processes that I have just set out, which already offer ample opportunity for independent supervision of the regulators, I hope the noble Lord will consider withdrawing this amendment.

My Lords, I thank everyone for their contributions and deep insights. As I listened to the noble Baronesses, Lady Neville-Rolfe and Lady Noakes, I was briefly reminded of the historical development of the role of the non-executive director, which became popular after the 1973 US crash due to fraud at the Equity Funding Corporation. After that, audit committees staffed by non-executive directors became mandatory for companies listed on the New York Stock Exchange.

However, if you look at the history from about 50 years before that you will find non-executive directors frequently described as inexperienced, lacking in technical knowledge and not knowing enough about business. How could they really invigilate boards of directors in 15 to 20 hours a year? It is strange that so many years after non-executive directors were established we are now hearing the same kinds of points being made against the involvement of stakeholders in the governance of regulatory bodies.

To my mind, democratisation of regulatory bodies is essential. Periodic scrutiny by parliamentary committees is not a substitute for the real-time involvement of stakeholders and their oversight of the executive board. I have listened to all the arguments carefully and will withdraw the amendment; no doubt, I will refine it and return to it at some time in the future.

Amendment 34 withdrawn.

Amendment 35 not moved.

We now come to the group consisting of Amendment 36. Anyone wishing to press this amendment to a Division must make that clear in debate. I call the noble Baroness, Lady Bennett of Manor Castle.

Amendment 36

Moved by

36: After Clause 40, insert the following new Clause—

“UK Finance Watch

(1) A body corporate called UK Finance Watch is established.(2) The purpose of UK Finance Watch is to provide oversight of—(a) the United Kingdom’s financial services industry,(b) its impacts on the real economy, and(c) all associated regulations.(3) The PRA and FCA must fund the activities of UK Finance Watch.(4) UK Finance Watch must produce reports on the following matters—(a) proposed changes in financial legislation and regulations;(b) deficiencies identified in retained EU law relating to financial regulation;(c) any other issue relating to financial markets and the financial services sector which, in the opinion of UK Finance Watch, threatens the stability and prosperity of the economy of the United Kingdom.(5) The Treasury, PRA and FCA must have regard to any publication produced by UK Finance Watch.(6) The Chancellor of the Exchequer must appoint members to UK Finance Watch.(7) When appointing members to UK Finance Watch, the Chancellor of the Exchequer must have regard to the desirability of appointing members who, between them, have expertise in— (a) academia;(b) accounting;(c) law;(d) climate, biodiversity and the environment;(e) trade unions.(8) UK Finance Watch may appoint officers and staff to assist their functions.”

My Lords, before moving the amendment, I join the noble Earl, Lord Howe, the noble Lord, Lord Sikka, and the noble Baroness, Lady Kramer, in expressing my sadness at the death of the noble Lord, Lord Judd. I send my condolences to his family. The noble Lord, Lord Judd, was the first person to ask me a question while I was in the middle of delivering a speech in your Lordships’ House and did so in his characteristically kind and generous manner. It was a good lesson—perhaps intentionally so—for a newbie.

In light of our time-truncated debate in Committee, Amendment 36 in my name, also backed, kindly, by the noble Lord, Lord Sikka, is a somewhat adapted version of the amendment that I presented there. It would create a UK equivalent of the EU’s Finance Watch. I have chosen at this time to use this name for clarity as well as pronounceability.

I really must thank the noble Lord, Lord Eatwell, who made the case for this amendment—intentionally or not, I am not sure—in our previous session on Report. He suggested that there were flaws in my Amendment 37, criticisms with which I would not necessarily disagree. He said the amendment

“asks the FCA and the PRA to—to use a phrase that has become popular today—mark their own homework. They are not really the right people to assess themselves; there are plenty of research institutes around this country that do a first-class job of assessing exactly these issues. However, we have not brought them together very well.”—[Official Report, 14/4/21; cols. 1425-26.]

I highlight the last sentence in particular because bringing together expertise, knowledge and analysis is exactly what “UK Finance Watch” would be designed to achieve—to bring together the undoubtedly wide range of expertise around the country to provide independent technical advice to enable Members of your Lordships’ House and the other place to contribute to public debate.

I set out in Committee and in briefings circulated before the Committee debate a detailed explanation of what the comparable EU body has achieved, and I will not repeat that here; nor will I repeat comments I made then about the thinness of the scrutiny of this Bill by your Lordships’ House, except to repeat that that is not a criticism of those here but rather a call for many more Peers to be engaged. The financial sector impacts on every aspect of modern life. We live in a financialised society, whether it is hedge fund ownership of care homes, water supplies or the PFI contracts and their successors doing such damage to our schools and hospitals. Peers who are experts in these areas have interests in these areas and many other Peers from all aspects of society need to be engaged in debates on financial Bills. But that is clearly not customary and could easily be daunting.

However, there is a need for a co-ordinated independent source of information, expertise and detailed knowledge that can, in some way, match the lobbying firepower and influence. I have in mind here the position of remembrancer, to empower Peers concerned with every aspect of society in overseeing the impact of the financial services laws and regulations that are so crucial. This would help the House obtain the complete picture that I was calling for in the amendment last week.

I thank the noble Baroness, Lady Kramer, for her comments in that debate. She said that

“one of the big questions that has never been answered is: how does our financial services industry impact on the real economy, in contrast to something much more circular within the financial services economy?”—[Official Report, 14/4/21; col. 1425.]

She has entirely identified what I was seeking to do with that amendment. This amendment would not, as drafted, achieve that aim, being focused on ensuring the quality and effectiveness of legislation and regulation. However, when I put the words of noble Baroness, Lady Kramer, and the noble Lord, Lord Eatwell, together, if UK Finance Watch proved to be a network, a clearing house—as the noble Baroness, Lady Kramer, suggested it could be in our debate in Committee on a similar amendment—of the information that the noble Lord, Lord Eatwell, referred to, then we would have made real progress in the oversight and public legislative understanding of what is currently a far too opaque and little-understood area. As the right reverend Prelate the Bishop of St Albans said earlier, we need far more people asking questions about the financial sector from the outside, but they need help to be able to do that effectively.

I feel that the noble Baroness, Lady Kramer, made the arguments for me but I note that Greensill is just the latest brand name for which the UK financial sector will be famous—or infamous. I hope this model being based on one in the EU does not prejudice noble Lords or, indeed, the Government against it. Being world leading surely means looking around the world, seeing best practice and copying it.

It is not my intention to divide the House on this amendment. The oversight and scrutiny of regulation and laws for our financial sector is clearly an ongoing debate of considerable concern to a wide range of Members of your Lordships’ House. I beg to move.

My Lords, we simply do not need another body set up to look at the financial services industry. It is already in effect a core function of the Treasury and if the Treasury thought that it needed some help in identifying the issues that the proposer of this amendment identifies, it does not need the cover of primary legislation to set one up. In addition, Parliament itself has always taken a keen interest in the financial services industry. The long-standing Treasury Select Committee of the other place examines regulators as well as key emerging themes in relation to financial services and your Lordships’ House has recently created an Industry and Regulators Committee, which is having its first meeting as we speak. Indeed, the noble Lord, Lord Eatwell, the noble Baroness, Lady Bowles of Berkhamsted, my noble friend Lord Blackwell and I are members of the new committee. Therefore, it should not surprise the House if in due course there is a focus on matters relating to the financial services sector.

I suspect that the subtext of this amendment is a belief that the financial services sector is wicked and has a negative impact on the UK economy. I do not believe that belief is widely shared in your Lordships’ House. On the other hand, there are few—if any—Members of your Lordships’ House who think that the financial services sector is perfect, and that includes me. The important point is that we already have the scrutiny mechanisms that I have described to give a proper focus to the activities and the impact of the financial services sector. I agree with the noble Baroness, Lady Bennett of Manor Castle, that this amendment should not be pressed to a vote.

My Lords, it is always a pleasure to speak after the noble Baroness, Lady Bennett of Manor Castle. The key issue, which has been touched on by a number of speakers, has been how to secure effective, responsible and accountable regulation. This amendment presents another model. We have already heard about a number of models.

Numerous aspects of life have been financialised, and the finance industry affects every household and almost every walk of life—all the more reason to examine its effects on the economy and daily life. The last 50 years have been littered with examples of mis-sold financial products. We have had a banking crisis in every decade since the 1970s, but still the finance lobby is too powerful for Governments to resist. We need structures and policies that can mitigate the negative effects of the finance industry.

Amendment 36 invites us to think about the consequences of what is now popularly known as the finance curse. We have already seen how former Prime Ministers and other legislators are recruited by the finance industry to do its bidding in Parliament and advance its interests; and the Treasury officials jump to it. This has a corrosive effect on democracy and other industries, as they too are persuaded to join the arms race and hire former ministers and current legislators for their cause.

The finance industry’s false narratives of competitiveness and light-touch regulation need to be critically scrutinised. They certainly delivered the last banking crash. The resulting never-ending austerity should again encourage reflections on the claims that an oversized finance industry can somehow deliver long-term jobs and wealth creation. Of course we all need financial services—bank accounts, debt and credit cards, insurances, pensions and much more. But we can certainly do without much of its speculative and destructive practices. That is why the amendment calls for assessment of the impact of the finance industry on the real economy

Education and good citizenship are other casualties of the march of the finance industry. Thirty years ago, many UK universities delivered degrees in science, engineering and mathematics. Today, with the expansion of the finance industry, that number has shrunk. Almost all offer degrees in accounting and finance, which make shareholders the primary focus of corporate decisions. We all know that shareholder-centric and capital market-centric approaches lead to deep distortions in the measurement of business performance and the culture of its people and services. Look at any corporate fraud: it will tell a story. Organised tax avoidance and illicit financial flows have become central to the finance industry and continue to destabilise societies.

One consequence of the finance curse is that we have ended up with nearly 375,000—probably more—professionally qualified accountants, the highest number per capita in the world. Yet we have scarcity of good corporate accounts and effective audits, and plenty of financial and accounting scandals. Just think of the number of graduates who have gone into accounting and finance rather than into more productive sectors of the economy. That cannot be good for the future of our country. Finance has to be the servant, not the master, of the economy. That is exactly what this amendment seeks to deliver.

This amendment is one of a number of proposals that seek to promote a responsible finance industry. That task cannot be undertaken by the finance industry itself and necessarily involves stakeholders hitherto ignored. I support this amendment.

My Lords, I think we may end up coming to something like a UK Finance Watch, but I hope not, because I hope Parliament will step up to the plate. The kind of issues described here ought to be part of parliamentary accountability, but that will take support from significant expertise that I do not think currently exists for many of the committees we operate. This is such an important industry; it is so huge, complex and powerful. That specialist knowledge will be necessary.

I was on the Parliamentary Commission on Banking Standards, and it is fair to say that the noble Lord, Lord Tyrie, then in the Commons and chair of that commission, had to beg and borrow to find the staff we needed to support that commission. It was scratched together probably with the minimum number of staff with which it could have operated. We were so lucky; we had brilliant people totally dedicated and working the most ridiculous hours. That commission was a good demonstration of how we often underresource around critical issues. That is going to have to be remedied.

I hope Parliament, as it works out how it is going to manage this process of accountability, will take all that on board, so we will come back and look at this amendment for UK Finance Watch and see that a lot of what it proposes has been ticked off as “satisfactory,” because it has been embedded in the support and expertise that will be provided to Parliament. But anyone who thinks that two meetings a year with the Treasury Select Committee, and ad-hoc meetings on whatever happens to be the issue of the day, is anything close to satisfactory, and anyone who thinks that the annual report—never one of the most informative documents from any organisation—is accountability, completely misunderstands the animal with which we are now dealing.

I hope we will not have to go back and resort to an equivalent to the EU Finance Watch body. We may have to, but I would almost regard that as a mark of failure by this House and the other place. Our committees that look at these issues are going to need to be resourced and provided with the real expertise that they need to deal with both the quantity and the quality of the investigation and challenge that they will have to undertake.

My Lords, the noble Baroness, Lady Bennett, gave us fair warning that she was likely to bring an amendment back on Report for further debate, which is reasonable given the time constraint we faced in Grand Committee. As with the amendment of the noble Lord, Lord Sikka, we agree that implementing the right forms of oversight is of utmost importance. In Committee, several speakers mentioned the potentially valuable contributions to policy debates that could come from academics, think tanks and others, if they only had access to the data they needed. We agree that more must be done to facilitate such research, and I hope the Minister will say something on this.

The noble Baroness’s redrafting of her amendment addresses some of the points raised in the previous debate. However, her original pitch was for

“a network, not reinventing the wheel, not creating a whole new institution.”—[Official Report, 10/3/21; col. GC 735.]

Yet Amendment 124 from Committee and today’s Amendment 36 would create a whole new institution. I believe that the comments from the noble Baroness, Lady Kramer, bear consideration. Surely the first thing we should do is to make sure that this role is fully taken up by Parliament. We have already established, informally at least, that much more scrutiny of how the FCA and the PRA work will be necessary, and I look forward to how well Parliament reacts to this challenge. It is also important to recognise that resources may be needed to give parliamentary scrutiny the expertise necessary in this complex area.

One area that interests me is the impact of the financial services sector on the real economy. We are all familiar with the arguments advanced by the Minister last time on jobs, tax take and so on, and colleagues will remember that I reflected on the successes of the sector at Second Reading. However, as the UK comes out of the pandemic and as government support schemes begin to disappear, we will need to monitor the extent to which lenders continue to support business expansion and other aspects of the economy. This brings us back to the point about ensuring the availability of data.

My Lords, as I set out in our earlier debate, the Government agree that effective oversight of the regulation of our financial services sector and consultation with a diverse range of stakeholders are crucial to the sector’s ongoing success. As we have discussed previously, Parliament has a unique role to play in that oversight function.

In that context, I will set out the existing mechanisms that ensure effective independent oversight of the sector and its regulation by a diverse range of stakeholders. I will not repeat my previous remarks on the regulators’ arrangements for publishing consultations and the manifold ways in which they are already held to account by various panels and Select Committees.

I understand that this amendment is partly inspired by Finance Watch in the EU, an organisation which conducts research, monitors financial services legislation inside the EU and advocates on financial services issues. As the noble Baroness indicates in her amendment, we do not have a body in this country that performs an equivalent role; were we to have one, I imagine it would be made up of industry stakeholders of various kinds. As noble Lords will know, parliamentary committees can and do seek input from a wide variety of experts. In doing so, they can bring together the existing expertise of academics, think tanks and industry stakeholders.

Nothing prevents the creation of such a body in this country without a legislative basis; indeed, the EU organisation was not created by EU law but was simply set up as a non-profit organisation under Belgian law. It is funded by a combination of contributions from its members and philanthropic foundations and grant funding from the EU, for which the group has to bid.

The Government and the regulators regularly consult on their plans and proposals, and interested parties, including those from the backgrounds set out in this amendment, are free to respond. The Government and regulators consider all responses to such consultations carefully and consider how the views expressed should influence final policies and rules. I am concerned that this amendment would therefore duplicate existing practices in a very real sense.

In addition, it would appear to duplicate the work carried out by the Financial Policy Committee of the Bank of England. The FPC acts as the UK’s macroprudential authority; it identifies, monitors and acts to remove or reduce systemic risks to the UK financial system. It may make recommendations to the Treasury, the FCA and the PRA, and is required to publish a financial stability report twice a year setting out its view of the outlook for UK financial stability, including its assessment of the resilience of the UK financial system and the main risks to UK financial stability.

Given this, and the existing processes that I have set out in previous debates today that offer ample means for achieving the outcomes sought by this amendment, I hope the noble Baroness will feel able to withdraw it.

My Lords, I thank the Minister for his response and all noble Lords who have taken part in this debate.

The noble Baroness, Lady Noakes, suggested that what this amendment covers is actually a core function of the Treasury. That is very much not the case. The Treasury is the definition of the establishment, part of the Government; this is an outside, independent oversight body. She also said that Parliament takes a keen interest in financial regulation. That conclusion can be questioned by looking down the lists of speakers through the progress of this Bill and contrasting them to the lists of speakers for, for example, the Domestic Abuse Bill.

The noble Baroness, Lady Noakes, also said that we can see the current model working out. As the noble Lord, Lord Sikka, powerfully pointed out, we very much can. One of the big issues is the revolving door between business and government. It goes well beyond the financial sector, but it is particularly an issue there. Far too many stakeholders in the financial sector are ignored—not so much not having access to that revolving door, not quite even on the other side of the street, but more in an entirely different suburb altogether. She also questioned the negative impact of the financial sector on the UK economy, saying that that view might not be widely shared in this House. I agree with that, but there are multiple global studies which have their own label for “too much finance” literature, which is extensive and wide-ranging and comes from highly respected sources.

I again thank the noble Baroness, Lady Kramer, for her very useful and helpful contribution, and her reflections on her experience with the Parliamentary Commission on Banking Standards, having to beg and borrow to find staff. We clearly need a continuous, continuing structure, with staff having time to develop expertise over years or even decades, not an occasional, ad hoc arrangement—a point the noble Baroness went a long way towards making, although I very much agree with her focus on the need for more parliamentary resources.

I thank the noble Lord, Lord Tunnicliffe, for stressing the need to strengthen research and for his understanding of and detailed attention to the process of this amendment. Like the noble Lord, Lord Sikka, he reflected on the impact of the financial sector on the real economy, something we have made real progress in highlighting in the debates on this Bill.

The Minister pointed to our current procedures and outlined them very clearly. However, given our current state, I respectfully submit that any suggestion that these are adequate does not stand up. He noted that the EU Finance Watch was set up on a network, mixed-funding kind of model; indeed, but it was EU funding that got the ball rolling—I know quite a bit about this, as the European Greens were at the forefront. He suggested that we have universities and institutions, think tanks and granting bodies that might create something like this off their own bat. I suggest that, in the age of austerity, with our universities struggling with their current financial model, we simply do not have the resources available in the UK for that to happen. He also referred to the role of the FPC in macroeconomic oversight. I would see Finance Watch covering those kinds of issues, but also getting deep into the weeds of detail, which I do not believe that the FPC does.

None the less, we have had very useful debates through this Bill’s progress. We may not have made legislative progress, but I hope we are highlighting these issues for a broader range of people and drawing them to the attention of a broader range of stakeholders. I very much hope that, in future finance Bills, we will see a much broader range of stakeholders and Members of your Lordships’ House engaged in these debates. In the meantime, I beg leave to withdraw the amendment.

Amendment 36 withdrawn.

Amendments 37 to 37C not moved.

We now come to the group beginning with Amendment 37D. Anyone wishing to press this or anything else in this group to a Division must make that clear in debate.

Amendment 37D

Moved by

37D: After Clause 40, insert the following new Clause—

“Payment services and the provision of cash

In Part 2 of Schedule 1 to the Payment Services Regulations (S.I. 2017/752) (activities which do not constitute payment services), after paragraph 2 insert—“3_(1) The provision of cash otherwise than through an automatic teller machine does not constitute a payment service where—(a) there is a transfer of a corresponding amount from a payment account held by the recipient of the cash to a relevant person, and(b) the payment account is not provided by a relevant person.(2) In sub-paragraph (1), “relevant person” means—(a) where the cash is provided by a person (“P1”) through one or more persons acting on P1’s behalf, P1 and each person acting (directly or indirectly) on P1’s behalf;(b) where the cash is provided by a person (“P2”) otherwise than on behalf of another person or through one or more persons acting on P2’s behalf, P2.(3) The execution of the transfer referred to in sub-paragraph (1)(a), and other services enabling that transfer, are not excluded from the meaning of payment services by this paragraph.””Member’s explanatory statement

This amendment provides that, in certain circumstances, the provision of cash does not constitute a “payment service” for the purposes of the Payment Services Regulations 2017. Persons would no longer have to be authorised by, or registered with, the FCA in order to provide that service.

My Lords, it is a pleasure to speak to these amendments, both of which are in my name. In doing so, I declare my financial services interests as set out in the register. I will move also Amendment 40A when we get to that stage.

I thank my noble friend the Minister for the way that he has engaged not just on this amendment but across the whole of the Financial Services Bill. Indeed, I thank the whole ministerial team and all Treasury officials for having numerous meetings with myself and other noble Lords. It has been the model of how to progress legislation through your Lordships’ House.

There is a very simple and, I hope, clear purpose at the heart of the amendments: to enable cashback without a purchase. As with so many other areas of our lives, Covid has had a dramatic impact on cash usage across the United Kingdom, which has been divergent across different nations, regions, socioeconomic groups and people with different protected characteristics. If cash is no longer king, to millions across the UK it is certainly still more than material. It is beholden on all of us to ensure that people have a right to rely on cash and that a network exists across the country where they can reasonably access it. ATM withdrawals have dropped by over 50% since 2019. We have to look to other resources, other things that we have across the country where individuals and small businesses can access cash. That is the purpose of my Amendment 37D.

Currently, it is possible to get cashback with a purchase and, under the Payment Services Regulations, it is not possible to get cashback without a purchase. This amendment would change that, enabling cashback without a purchase and taking it away from what would be considered a payment service under the PSR 2017. The amendment has wider implications, I hope, than just the ability to access cash. It speaks to well-being, social isolation and a real sense of community, and to using the resources that currently exist far more efficiently and effectively for the benefit of all. In 2019 there were 123 million cashback with purchase transactions. Clearly, there is huge potential for cashback without purchase if we pass the amendment this evening.

The amendment is drawn in a deliberately permissive way to enable innovation. For example, if a fintech wanted to offer a service across a number of locations on behalf of those locations, the amendment would enable it to. Similarly, if a rural café wanted to offer cashback without a purchase on its own behalf, the amendment would enable it to.

We have seen such dramatic changes in the use of cash in recent years, heavily accelerated by the Covid crisis, yet cash still matters. If we do not act, the network that supports cash could disappear in a trice, or become inordinately expensive and leave millions of people without access to cash and, through that, to social inclusion, financial inclusion and an ability to play the part that they have a right to in our society.

Amendment 40A merely enables the regulation to come in two months after the passage of the Bill to give a reasonable period post passage.

I hope that Amendment 37D is clear and that it achieves what it seeks to: enabling cashback without a transaction for millions across the country. I believe it is good for individuals, financial inclusion, business and the high street. Cashback without a transaction could enable part of our Covid build back. I beg to move.

My Lords, I again draw attention to my interests as set out in the register, particularly as an independent non-executive director of LINK.

In speaking to an earlier amendment, I touched on the challenges of financial exclusion. The problem is complex and the answer, in so far as there is one, is never going to be simple. However, I congratulate my noble friend Lord Holmes of Richmond, particularly on his vision in seeing a way to at least meet the problem that he so clearly set out. I welcome word that the Government propose to act along the lines set out in this amendment and the subsequent one to help create greater flexibility in access to cash. Of course we all accept that financial services require regulation, but that regulation should always be proportionate, not stifling.

In some respects we have been fortunate in the past year. Not only have food supplies been maintained, but our digital infrastructure held up remarkably well, despite the increased demands on it. Imagine if it had not—if the internet had crashed for a few days or our banking system had cracked and digital payments had failed. I believe there would then have been rather less talk of cash being a thing of the past.

The principal theme of recent months has been resilience, which demands diversity and innovation. The amendment, and my noble friend Lord Holmes of Richmond’s vision and thinking behind it, perfectly captures that.

For the foreseeable future, cash will continue to be a vital medium of exchange for millions of people. The viability of our system for providing access to cash is therefore a necessity, not a luxury. I pay tribute also to the foresight and leadership shown by my noble friend Lord True. These decisions demand innovation and flexibility, and the kind of thinking captured by my noble friend’s amendment will be vital. I know that everyone involved in the payment system will be very supportive.

My Lords, on reading Amendment 37D I think I recognised some of the distinct phraseology to denote an expert hand in its drafting, so I am exceedingly hopeful that the noble Lord, Lord Holmes, has been effective in persuading the Government that this is language they can accept and live with.

Of course, I join in all the calls to make sure that access to cash remains. Despite Covid and all the pressures that have encouraged people to change to digital and electronic payments, 5 million people have stuck to cash, and those people deserve to be served as much as anyone else. Indeed, the point made by noble Lord, Lord Hunt, that digital systems can always go down and that you had better have a back-up, did not occur to me but strikes me as fundamentally important.

My concern is this: I hope the Government do not think this is all they need to do and that this is part of a broader programme of ensuring access to cash. I spoke to quite a number of the storekeepers in my local area. It is a mixed area, with a lot of wealthy and middle-class people but also many people living on a former council estate, now housing association. Among that range, quite a number of people, for a whole variety of reasons, still want to use cash—but I could not find a single shop that would be willing to do cashback without a purchase. In fact, they did not want to do cashback with a purchase in most instances, simply because they did not want to have the cash on the premises, especially at night. Frankly, because of all the various bank branch closures, it would be at least a 35 to 40-minute drive to get to a place where you could deposit the cash overnight. Then you would have to collect it in the morning, which of course would make no sense because most of the shops would be open before the bank was available to hand it over.

There really are some significant issues. I do not want to denigrate this in any way, simply to point out that it is an important step but that it will take a lot more to make sure that cash continues to be accessible. That means we need an ATM network that continues to work. I think the Post Office’s contract with LINK is up for renewal shortly. There are a lot of issues around that arena. We need to make sure that the right results happen.

We need something to deal with the closures of various bank branches. After talking to a couple of the banks, none of which wished their names to be mentioned, there is a sense that creating community hubs—where a number of financial institutions might have machines and a staff member or two, collectively paid for, who would support people using those digital machines in accessing a wide range of financial services—would be an interesting way to go.

I continuously press this argument that basic bank accounts are not the answer. The banks that provide them hate providing them and really do not develop those services, but they could be required—in other countries they have been made to—to link up with credit unions, community banks or various social enterprise folks, put money and staff resource into them and make sure that those services they do not want to provide themselves are provided to the community at large.

A lot of imaginative work can be done in this area, and I very much hope that, in addition to supporting this important step—I do not underestimate its importance and the impact it will have in some key areas—the Government will also recognise that they have to do a lot more and do it quickly, because of the changes overtaking us so fast.

My Lords, we are grateful to the noble Lord, Lord Holmes of Richmond, for bringing forward these amendments, which would enable individuals to obtain cashback from retail settings without first having to make a purchase. We have not spent a huge deal of time discussing access to cash during the Bill’s passage, which is a surprise given the challenges we face in this area. It is beyond doubt that the Covid-19 pandemic has accelerated the transition to cashless payment, but this does not mean that cash is becoming obsolete. Many millions of people continue to feel most comfortable making physical payments. While small businesses have access to low-cost options for taking card payments, many will still prefer to deal with cash.

While we welcome this initiative, I hope the Minister can briefly touch on the Government’s response to the wider challenge we face with access to cash, such as the continued closure of bank branches. It is also worth noting that, while people may soon be able to access cash more easily, these amendments do not deal with the fact that some businesses have chosen no longer to accept it. That is their choice, of course, but acceptance is as important as access. I urge the Government to accept these amendments, which would be beneficial to an important part of society.

My Lords, I join the expressions of sadness at the news of the death of the noble Lord, Lord Judd, such a tireless campaigner for all the causes he held dear. Even though we meet, of necessity, in an almost entirely empty House, it says everything about the noble Lord that one feels that one particular place over there is empty. Our thoughts go out not only to his family, particularly, but to all those in the Labour Party family who were inspired by his example and loved him as a man.

Amendments 37D and 40A seek to facilitate the provision of cashback without a purchase. I say at the outset to the noble Lord, Lord Tunnicliffe, my noble friend Lord Hunt of Wirral and others that the Government will support these amendments. The noble Baroness, Lady Kramer, is able to divine the language of draftsmen even better than I am.

These amendments introduce an exemption for cashback without a purchase, such that it will no longer be a regulated payment service. Under the current legislation, which derives from the EU’s second payment services directive, if a business or its agent, such as a corner shop or supermarket, wanted to offer you cashback without requiring you to make a purchase, it would have to be authorised or registered with the FCA to give you cash from your own accounts. That is a significant burden for even the largest of retailers, let alone small, local shops along the various high streets across the UK.

This amendment removes this requirement; it will take effect two months after Royal Assent. From that point, industry will have discretion to make the service available across the United Kingdom. Where the service is offered, customers will be able to walk into a local business that wishes to participate, such as a corner shop, café or pub, and withdraw cash without having to make an accompanying purchase.

As part of the community access-to-cash pilots, LINK—the UK’s main ATM cash machine network—and PayPoint are already testing a cashback without purchase service in a small number of local stores in Cambuslang, Hay-on-Wye, Burslem and Denny. Indications from this trial are positive, and the Government look forward to the outcomes. This amendment will allow for such initiatives to be rolled out across the UK more easily.

The Government recognise that, as my noble friend Lord Holmes of Richmond said, widespread access to cash remains and will remain extremely important to the daily lives of millions of people across the United Kingdom. Although it was not possible in time for this Bill, I can certainly assure the noble Baroness, Lady Kramer, that the Government have committed to legislate to protect access to cash and to ensure the cash infrastructure is sustainable in the longer term.

The Government published a call for evidence on access to cash in October 2020. This highlighted the potential benefit of facilitating cashback without a purchase through legislation. Cashback with a purchase was in 2019 the second most frequently used method of withdrawing cash in the UK, behind ATMs. As my noble friend Lord Holmes of Richmond told us, there were 123 million cashback transactions, amounting to a total amount withdrawn of £3.8 billion.

The Government’s view is that cashback without a purchase has the potential to be a valuable facility to cash users and to play an important role in the UK’s cash infrastructure. This legislative change, which is possible only now we have left the European Union, would help both to support the availability of cash withdrawal facilities across the United Kingdom, benefiting individuals’ access to cash, and to support local cash recycling. These amendments are therefore a welcome step towards protecting access to cash.

I am particularly grateful to my noble friend Lord Holmes of Richmond, who raised this important issue in Grand Committee, for the constructive way he has engaged with the Government and officials since then on this important issue. I am very pleased to be able to say that the Government are proud to support these amendments. Meanwhile, as I covered in my earlier remarks, the Government are considering responses to the call for evidence and look forward to setting out next steps on legislation to protect access to cash in due course.

My Lords, I thank all noble Lords who have contributed to this debate on such an important issue. Cash still matters, and it matters materially to millions. I thank particularly my noble friend the Minister for the way in which he and all Treasury officials have engaged with this issue. It is a key part, but, as other noble Lords have rightly identified, only one part, of what it means to have a cash-enabled, easily accessed economy across the UK. It adds to financial inclusion. More than that, it adds to complete social inclusion.

We all need to think innovatively about how we can do more to enable, empower and unleash true financial inclusion across the UK. It matters economically, socially and psychologically. If we can enable it, it can address so many of the issues that have dogged our nations for decades.

Again, I thank all noble Lords who have contributed, and I thank particularly the Minister and Treasury officials.

Amendment 37D agreed.

Amendment 37E not moved.

We now come to the group consisting of Amendment 37F. Anyone wishing to press this amendment to a Division must make that clear in debate.

Amendment 37F

Moved by

37F: After Clause 40, insert the following new Clause—

“Response from the regulators to Parliamentary scrutiny

(1) The PRA and the FCA must have regard to the findings of any Parliamentary scrutiny of their work and operational performance, including but not limited to consultations, rules, supervision and enforcement.(2) The consultations and rules under subsection (1) include but are not limited to—(a) prospective or actual rule changes, and(b) rules and rule changes that have already taken place.(3) The PRA and the FCA must provide a written response to any committee of either House of Parliament in relation to any concerns it has expressed following such scrutiny.(4) The written response in subsection (3) must be received by the committee—(a) in the case of a prospective rule change, before that rule change takes place, or(b) in any other case, within 12 weeks following publication of an expression of concern.”

My Lords, it seems very fitting that the last amendment for debate on Report should return to the issue of parliamentary scrutiny. Of all the issues that we have discussed over the past many days, and of all the sections of this Bill, it seems to me that that is the one that stands out as being extraordinarily important. It refers to the constitution, in a sense, and the constitutional roles in this country. It deals with the largest economic sector, the way in which it is regulated, and Parliament’s role in scrutinising the regulation of that sector.

The amendment itself is quite brief; it is almost a summation of some of the previous amendments that we have looked at. But let me reassure the House that we have made the decision not to press it today. We will be relying on the Government’s many assertions that the future regulatory framework will offer far more than it appeared to offer in the first days when we looked at the initial consultation.

I want to thank the Minister for persuading—the word is probably not “persuade” but let us use it—both the FCA and the PRA to write to him with their views on this issue. He knows that I consider the FCA letter to be one that simply confirms the status quo, which is inadequate. The PRA letter, however, recognised that, with our departure from the European Union, a whole layer of scrutiny over financial regulation had been stripped away. Although the PRA would obviously not dictate to Parliament how it should replace that accountability, it recognised that it was very likely that Parliament would feel the need to enhance the way in which it scrutinised financial regulation. In the end, we also had a letter from John Glen, using some language to say that it was his view that there must be some toughening of parliamentary oversight—I do not think I paraphrase him incorrectly.

I say to the noble Earl, Lord Howe, that I have been particularly concerned by the focus on consultation as a core mechanism for scrutiny. Consultation processes have to be initiated by the regulator. We have a long-standing history in those consultations of regulators who pay the greatest attention to the industry players. There have been many discussions here around the concern that we have about industry capture. The role of Parliament will be simply to submit to those consultations, if individual parliamentarians so wish—I suppose groups of parliamentarians can submit their views as well. I am somewhat disturbed that the response to Parliament will be only as part of the general response that is made to the consultation by the regulator. Although it will, I am sure, touch on all of the relevant issues, I question how thoroughly it will address the various relevant issues.

Of course it then falls to Parliament to decide how it will organise its side of scrutiny: how it will organise its committees and what resources it is willing to commit to the necessary expertise to make sure that those committees have the information that they need. I repeat the comment that I made earlier to the Minister: if he thinks that two hours a year in front of the Treasury Select Committee on a huge range of issues is adequate scrutiny, he misunderstands. If he thinks that just ad hoc scrutiny around whatever happens to be the crisis of the day is all that needs to be added to that, he misunderstands. This House, and the other place as well, will need to come together collectively to get to grips with the work that they have to do.

We have moved forward on this issue. We are not in the place we were when this legislation started. We have had some outstanding contributions across the House—the noble Baroness, Lady Noakes, has spoken with her deep knowledge of the industry—that make it very clear that this is not a party-political or an industry-versus-parliamentarian issue, and that it is absolutely fundamental that Parliament exercises its proper right of sovereignty.

With that, I will sit down quietly and assure the House that I am not going to move this amendment. But I am very glad and very impressed by the debate that has taken place on all Benches.

My Lords, it is a pleasure to follow the noble Baroness, Lady Kramer, and I thank her for correcting my earlier incorrect inadvertent reference to the noble Lord, Lord Dubs, to whom I apologise, while expressing my sincere condolences on the death of Lord Judd.

The noble Baroness rightly returns again to the subject of parliamentary oversight, which we have discussed extensively, including on the second day of Report, last Wednesday. My noble friend the Minister has argued that it is difficult to decide definitively how parliamentary scrutiny will work ahead of the conclusions of the future regulatory framework review.

I had put my name to Amendment 37A in the name of my noble friend Lord Blackwell, which provides for timely scrutiny of rules proposed by either regulator, either before taking effect or, at latest, within five days of taking effect. It does not refer to a specific committee of either House or a specific Joint Committee of both Houses, but provides for both Houses to agree and resolve which committees or Joint Committee should be charged with this responsibility.

I prefer Amendment 37A to Amendment 37F, because it does not damage the independence of the regulators. Furthermore, it requires a written response to any prospective rule change before the rule change comes into effect, whereas if the rule change has already come into effect, a written response is required only within 12 weeks of any expression of parliamentary concern.

This does not provide for a consistent approach. In the first case, it shackles the regulators too much, but in the second case seems to provide for a very relaxed response, devoid of a necessary level of influence on the regulators. I regret that the Government have not brought forward their own ideas about parliamentary scrutiny, especially as the House has accepted their proposal to dispense with a separate Third Reading for this Bill. I trust that the Minister will let us know the apparent thinking of the Government on this matter.

I thank the Minister and my other noble friends on the Front Bench for the courteous way in which they have conducted the House’s scrutiny of the Bill. I thank the Bill team for all their work, and will welcome passage of the Bill as it completes its remaining stages.

My Lords, it is a pleasure to follow the reflections of the noble Viscount, Lord Trenchard, on how oversight of this Bill has been truncated, despite all the hard work put in, and the fact that we still do not have a clear picture of what the Government propose, as the noble Baroness, Lady Kramer, said in introducing Amendment 37F.

As this is the last amendment, and we have already covered this ground extensively, I will be brief. I wanted to speak on this group to offer my support for the amendment in the names of the noble Baronesses, Lady Kramer and Lady Bowles of Berkhamsted, both of whom have done extraordinary, sterling work on this Bill.

We have a real problem of oversight, which has been seen and expressed on many sides of your Lordships’ House. Looking at the real-world situation, the circumstances now and the headlines coming out, we have huge problems with our financial sector, and any independent outside observer would see that clearly. Although we know that this amendment will not be put to a vote, it would ensure that there is a chance to properly question and scrutinise the work of the regulators, which has to be at the heart of the system, and of trying to fix our broken system.

It has been a long debate, if often cut up into different stages and occurring at odd intervals, and we have a long way to go. The Government tell us we are to expect many more financial Bills coming down the track. We will have to keep coming back to these issues again and again, until we finally see progress.

My Lords, we had a fruitful debate on the issue of parliamentary scrutiny and the regulator’s rule-making powers last Wednesday. Since this amendment was tabled, I have viewed it as an opportunity to tie up any loose ends, rather than being likely to result in a Division.

It is fair to say that nobody is particularly happy with the current arrangements, particularly given the loss of European Parliament scrutiny of new prudential rules, and the glut that will come once the Bill becomes an Act. However, there is little sense in repeating the arguments made in previous debates. I recognise that the Minister was able to make some important additional commitments in his response to last week’s group of amendments. Since this amendment was tabled, we have seen correspondence from the Economic Secretary to the heads of the FCA and PRA, asserting that Parliament, as we have all said in recent months, has and must enjoy a special role in overseeing the regulators’ output. The letter provided what my noble friend Lord Eatwell has long referred to as the final component of a three-legged stool.

Having reached agreement that Parliament should be treated as a significant stakeholder, the key is to now put in place a mechanism for meaningful scrutiny to take place. Our Amendments 45 and 48 envisage the establishment of a dedicated committee of each House, or a Joint Committee of both, and that remains an attractive prospect to us. Therefore, as we move into a new Session, I hope the Minister can assure me that the Treasury and business managers in both Houses will look at making it a reality. We await the outcomes of the future regulatory framework review, which I hope will represent a significant step forward for all strands of oversight. Once we have digested the findings, our task will be to scrutinise a successor to FiSMA, and I repeat our call for legislation to receive the detailed pre-legislative scrutiny it deserves.

Scrutiny has been the central theme of the Bill. The noble Baroness, Lady Kramer, said that we must look forward, and she commented that, in many ways, the theme of scrutiny has crossed parties as an apolitical discussion. I hope it will not be a matter of conflict between regulators and Parliament, and that the opposite will be true, as they must work together to make this scrutiny work. I also hope it will mean that we can have real confidence in the work of the regulators, and a real sense that their actions are fully understood by responsible politicians.

My Lords, I am grateful to the noble Baroness, Lady Kramer, for her helpful and constructive introduction to this amendment. I begin by stating my agreement with her on what I am confident is common ground between us in two respects: Parliament has a unique and special role in scrutinising the regulators and shaping the financial services regulatory landscape, and scrutiny and accountability of regulators has emerged as the foremost issue throughout our debates on the Bill. The noble Baroness, Lady Hayman, will forgive me for not putting the issue alongside that of climate change.

I appreciated the noble Baroness’s remarks on the way in which our cross-party discussions have enabled us to make progress on this issue, which we debated in some detail last week. I will not repeat all my remarks from that occasion, but I will summarise them. I confirmed to the House that the Economic Secretary to the Treasury has written to the chief executives of the PRA and the FCA, to endorse the commitments that they made in their recent letters, and emphasised the importance that the Government place on them. I assured noble Lords that the Government agree that the regulators should provide a comprehensive response to parliamentary committees on any issues they raise in the course of their scrutiny. I also confirmed that the Government remain committed to further considering this issue as part of the ongoing future regulatory framework review, and to engaging with Members of this House and the other place, as we continue that review.

As I said then, delivering the reforms that the Government have proposed in this area could be done only through further primary legislation. Therefore, Parliament will have the opportunity to return to this issue where it can be considered fully. The noble Baroness, Lady Kramer, noted that consultations are not the only relevant issue here, and I agree with her. I am happy to confirm again that the Government view parliamentary scrutiny much more broadly, also to encompass the regulators’ wider work.

I also set out the current arrangements that allow Parliament to scrutinise the work and operational performance of the Financial Conduct Authority and the Prudential Regulation Authority. This includes the regulators’ annual reports to the Treasury, which are published and laid before Parliament, and their regular appearances before parliamentary committees. The FCA, for example, must attend general accountability hearings before the Treasury Committee twice a year, as I mentioned earlier. The PRA must also appear before the TSC after the publication of its annual report. In addition to these regular hearings, parliamentary committees of both Houses are able to summon the regulators to give evidence on an ad hoc basis, and these committees can ensure that the hearings focus on what they consider to be the most important issues.

The FCA and the PRA also take into account and respond to the judgments of parliamentary committees. For example, following the Treasury Committee’s publication of its report, IT Failures in the Financial Services Sector, in October 2019, the FCA and the PRA, as well as the Bank, published a comprehensive response setting out in detail their plans to address the committee’s recommendations. Similarly, following the publication of the Treasury Committee’s report on cryptoassets in September 2018, the FCA announced that it would issue a series of consultations to address key issues raised by the committee.

I share these examples as they helpfully demonstrate where the regulators have not merely responded to questions raised by parliamentary committees but have taken direct and tangible action. This is, of course, in addition to the many examples of the regulators responding to questions raised on regulatory decision-making by parliamentary committees through correspondence with the committee chair. As discussed at length in last week’s debate, I hope that noble Lords will take comfort from the letters of 19 March from the FCA and the PRA, which reiterated their commitment to working with Parliament in whatever way that Parliament determines is appropriate.

I want to pick up one or two points made by the noble Baroness, Lady Bowles, in her winding-up speech last week; although she has not been able to speak in today’s debate, some of her points represent loose ends from our discussions. She made a point that it is necessary to ensure that Parliament has access to the information that it needs to properly scrutinise and consider the regulators’ activities. Here, again, I refer to the recent letters from the PRA and the FCA, which commit to ensuring that Parliament has the information necessary for comprehensive scrutiny of the regulators.

On the noble Baroness’s specific point about access to firm-level data to understand how capital requirements are calibrated, as we have discussed in our scrutiny of this Bill, capital standards for global banks are written by the Basel committee, and are extensively consulted on with industry. Where appropriate, following industry feedback, they may be revised. The Basel committee publishes annual quantitative impact studies designed to assess the ongoing and likely future impact of Basel reforms on banks, in aggregate.

While the regulators have emphasised their commitment to openness, this House will appreciate that there will be some instances where it is simply not appropriate to share confidential regulatory data from firms with Parliament. The protection of this information is important, given the risks that broader disclosure may pose to a firm’s ongoing business or the even broader risk of contagion and wider financial instability. We cannot dismiss that. Regulators would need to consider whether any requests for information were appropriate under the relevant legislation, which is set out in the Financial Services and Markets Act 2000 (Disclosure of Confidential Information) Regulations 2001.

I reassure the noble Baroness, Lady Bowles, in her absence, that I am not aware of any instances of the regulators refusing to respond to reasonable information requests from relevant parliamentary committees, but in keeping with the assurances made by the regulators and the Government during last week’s debate, I know that my honourable friend the Economic Secretary would be very willing to discuss with the noble Baroness any specific concerns that she has regarding information sharing with Parliament. If there are any inappropriate constraints on the sharing of information, we would want to return to the matter in the future regulatory framework review.

I hope that my assurances, and those of the regulators, have demonstrated the Government’s appreciation of Parliament’s unique role in relation to scrutiny. I therefore hope that the noble Baroness, Lady Kramer, feels even more comfortable than she did earlier in withdrawing her amendment.

My Lords, I am going to do something quite dangerous and put myself for a moment in the shoes of my noble friend Lady Bowles, picking up a couple of points from the Minister, because they are necessary.

First, one of the underlying points of my noble friend Lady Bowles is that, certainly in the European Union but in other places too, there are mechanisms for confidential information to be shared with Parliament, and shared in such a way that the individual firm is not afraid that this will get out into the wider world and therefore compromise it in any competitive way. Sometimes that is a necessary part of appropriate oversight and scrutiny of the decisions the regulator is making. On behalf of my noble friend, I think I can say that she would be delighted to meet with the Economic Secretary to discuss how this could be addressed.

Secondly, it is always slightly disingenuous to treat Basel as though it were some distant body that, essentially, comes out with a set of regulations and tells us what we have to do. The UK regulators are incredibly influential—or they traditionally have been—on the Basel process; they fundamentally shape it. Therefore, engagement with those regulators before they trot off to a Basel meeting and use their various resources to affect the outcome and decisions at the Basel level is particularly significant and important. I want to make sure that it is understood that this is not just a question of our regulators following instructions from a world body; our regulators have a very big impact on what that world body chooses to say. It is a very important way for us as a Parliament to make sure that our concerns that regulation is appropriate are communicated through that route and help shape—or, at least, are in the minds of regulators when they engage in shaping—that world environment.

Having said that, I think we all recognise that we are at the early stages of a process that will not be completed in this Bill. That process now takes off to a series of consultations and eventually to legislation. I have said to the Minister before that I hope there will not be any more measures that end-run that final regulatory framework, but that may happen, and if it does, we will have to deal with it as it occurs. We are doing this backwards—a lot of legislation is going through, shaping the relationship between Parliament and the regulator, before we have even done the consultation on what that should look like, but I appreciate the time that the Minister has taken to respond to my noble friend’s points. With that, I will sit down and be quiet until the next opportunity to take on this issue. I beg to withdraw the amendment.

Amendment 37F withdrawn.

Clause 44: Extent

Amendments 38 to 40

Moved by

38: Clause 44, page 47, line 33, leave out “subsection (2)” and insert “subsections (2) and (2A)”

Member’s explanatory statement

See the explanatory statement for the Minister’s second amendment at page 47, line 34.

39: Clause 44, page 47, line 34, leave out subsection (2) and insert—

“(2) In section 34 —(a) subsections (1), (3) and (5) extend to England and Wales only, and(b) subsection (4) extends to England and Wales and Northern Ireland only.”Member’s explanatory statement

This amendment provides that certain amendments of sections 6 and 7 of the Financial Guidance and Claims Act 2018 in Clause 34 extend only to England and Wales.

40: Clause 44, page 47, line 34, at end insert—

“(2A) In Schedule 12, paragraph 14(3A) extends to Northern Ireland only.”Member’s explanatory statement

This amendment and the Minister’s amendment at page 47, line 33 provide that subsection (5B) of section 303Z1 of the Proceeds of Crime Act 2002, inserted by Schedule 12 to the Bill (see the Minister’s amendment at page 182, line 26), extends to Northern Ireland only.

Amendments 38 to 40 agreed.

Clause 45: Commencement and transitional provision

Amendment 40A

Moved by

40A: Clause 45, page 48, line 18, at end insert—

“(e) section (Payment services and the provision of cash).” Member’s explanatory statement

This amendment provides for the new Clause about payment services and the provision of cash to come into force two months after the Bill receives Royal Assent.

Amendment 40A agreed.

Amendments 41 and 42

Moved by

41: Clause 45, page 48, line 21, leave out from “appoint” to end of line 22

Member’s explanatory statement

This amendment is consequential on the Minister’s amendment at page 182, line 26.

42: Clause 45, page 48, line 34, leave out subsection (9)

Member’s explanatory statement

This amendment is consequential on the Minister’s amendment at page 48, line 21.

Amendments 41 and 42 agreed.

Schedule 2: Prudential regulation of FCA investment firms

Amendment 43

Moved by

43: Schedule 2, page 65, line 27, at end insert—

“(ba) the target in section 1 of the Climate Change Act 2008 (carbon target for 2050), and”Member’s explanatory statement

This amendment requires the FCA to have regard to the carbon target for 2050 when making Part 9C rules (defined in section 143F of the Financial Services and Markets Act 2000, inserted by Schedule 2 to the Bill).

Amendment 44 (as an amendment to Amendment 43) not moved.

Amendment 43 agreed.

Amendment 45 not moved.

Amendment 46

Moved by

46: Schedule 2, page 80, line 22, at end insert—

“Carbon target

21A_ In relation to the making of Part 9C rules that are made on or before 1 January 2022—(a) paragraph (ba) of section 143G(1) of the Financial Services and Markets Act 2000 (duty to have regard to carbon target for 2050) does not apply, and(b) section 143H(1)(b) of that Act does not require an explanation in respect of matters specified in that paragraph.”Member’s explanatory statement

This amendment disapplies the FCA’s duty to have regard to the carbon target for 2050 (see the Minister’s amendment at page 65, line 27) in relation to Part 9C rules made on or before 1 January 2022.

Amendment 46 agreed.

Schedule 3: Prudential regulation of credit institutions etc

Amendment 47

Moved by

47: Schedule 3, page 82, line 14, at end insert—

“(ca) the target in section 1 of the Climate Change Act 2008 (carbon target for 2050), and”Member’s explanatory statement

This amendment requires the PRA to have regard to the carbon target for 2050 when making CRR rules (defined in section 144A of the Financial Services and Markets Act 2000, inserted by Part 1 of Schedule 3 to the Bill) and also when making section 192XA rules (see sections 192XA and 192XB, inserted by Part 2 of Schedule 3 to the Bill).

Amendment 47 agreed.

Amendment 48 not moved.

Amendment 49

Moved by

49: Schedule 3, page 90, line 20, at end insert—

“Carbon target

24A_ In relation to the making of CRR rules or section 192XA rules that are made on or before 1 January 2022—(a) paragraph (ca) of section 144C(1) of the Financial Services and Markets Act 2000 (duty to have regard to carbon target for 2050) does not apply, and(b) section 144D(1) of that Act does not require an explanation in respect of matters specified in that paragraph.”Member’s explanatory statement

This amendment disapplies the PRA’s duty to have regard to the carbon target for 2050 (see the Minister’s amendment at page 82, line 14) in relation to CRR rules and section 192XA rules made on or before 1 January 2022.

Amendment 49 agreed.

Schedule 12: Forfeiture of money: electronic money institutions and payment institutions

Amendments 50 and 51

Moved by

50: Schedule 12, page 182, line 26, leave out sub-paragraph (3) and insert—

“(3) After subsection (5) insert—“(5A) In this Chapter as it extends to England and Wales and Scotland, “relevant financial institution” means—(a) a bank,(b) a building society,(c) an electronic money institution, or(d) a payment institution.”(3A) After subsection (5A) insert—“(5B) In this Chapter as it extends to Northern Ireland, “relevant financial institution” means—(a) a bank, or(b) a building society.””Member’s explanatory statement

This amendment provides that it is only Chapter 3B of Part 5 of the Proceeds of Crime Act 2002 as it extends to England and Wales and Scotland that is amended to provide for forfeiture of money in accounts maintained with electronic money institutions and payment institutions.

51: Schedule 12, page 183, line 24, leave out “303Z1(1A)” and insert “303Z1”

Member’s explanatory statement

This amendment is consequential on the Minister’s amendment at page 182, line 26.

Amendments 50 and 51 agreed.

Third Reading agreed without debate.


Moved by

My Lords, it is right that we take a brief time to offer some concluding remarks. I begin by thanking all noble Lords who have taken part in our debates for their thorough consideration of this Bill. The Bill is a very important step towards the Chancellor’s vision for the future of the UK’s financial services sector. As the first major piece of financial services legislation since our leaving the EU, it will enhance the UK’s world-leading prudential standards, promote financial stability, promote openness between the UK and international markets, and maintain an effective financial services regulatory framework and sound capital markets.

It has been a great privilege to guide this legislation through the House alongside my noble friends Lord True and Lady Penn; I thank them both. I am especially grateful to both opposition Front Benches for their constructive engagement on the Bill. All those involved have brought to bear huge experience as well as great enthusiasm and insight. There are too many other noble Lords for me to thank individually, but I do so collectively. I for one have appreciated the very thoughtful and expert contributions from all quarters of the House, not least from my noble friends on these Benches.

As my right honourable friend the Chancellor has set out, the financial services sector will be crucial to our economic recovery from the pandemic, offering job creation and economic growth in all corners of the economy. In these debates, noble Lords across the House have demonstrated their appreciation of the important role that this sector will continue to have, and this legislation is undoubtedly better for their consideration.

We have discussed some extremely technical issues as well as broad issues that reach far beyond the specifics of the Bill. We have looked at the role that the financial services sector will play in our efforts to tackle climate change. We have discussed at length the special role that Parliament must continue to have in relation to the scrutiny of the financial services regulators and their activities. As the Government move forward in delivering their vision for the financial services sector, the debates that we have had during the passage of this Bill will continue to be of vital relevance.

I conclude these brief remarks by acknowledging the hard work undertaken by the Treasury Bill team, the numerous Treasury officials and the clerks in the Public Bill Office, who have worked incredibly hard to support the passage of the Bill. I express my warmest appreciation to them for the unstinting support that they have provided. I beg to move.

My Lords, this is a very significant Bill. At the point of discontinuity between the days of EU involvement and control to the new world after leaving the EU, the depth of involvement that we have had with both other parties and the Government has been significant. We have had conversations on the Floor of the House and in other meetings, and we have all at least understood one another. We have gone some way to address the central point of the Bill, which is how to scrutinise the regulators while, at the same time, leaving them independent and effective. We will see whether the compromises that have been agreed work, over the next several months, in both the day-to-day examination of the regulators’ output and the development of subsequent law.

I thank the noble Earl, Lord Howe, the noble Lord, Lord True, the noble Baroness, Lady Penn, and their teams, for all their efforts. The leader of the Labour side in this debate was of course my noble friend Lord Eatwell who, unfortunately, was not able to be with us today, but he asked me to read the following statement. These are his words, not mine.

“Standing at the Dispatch Box for the Opposition, I have always believed that my job is to oppose; to expose the flaws in the Government’s erroneous and sloppy thinking. It has, however, been a very new experience working on this Bill with the noble Earl, Lord Howe. It was evident from the start that his objective was to achieve something useful—a constructive experience that I value and for which I am grateful.”

I was less surprised than my noble friend Lord Eatwell, because I have been on the opposite side of this Chamber from the noble Earl, Lord Howe, for many years, and have always found him very committed to finding a consensus way forward, where possible.

I thank my researcher, assistant and speechwriter, Dan Stevens, for all his work, because I would not have survived without it. Finally, I thank the House for its tributes to Frank Judd. He was a wonderful person and he carried on being a wonderful person right to the end. He was voting last week—the right way, of course. I was also his whip, but it really felt the other way round, because he was always so supportive. I have lost not only a member of my team but a very good friend, who has always supported me and been helpful. I thank the House once again for its tributes.

My Lords, once again I thank Lord Judd, because he contributed to this Bill, so it is entirely appropriate to reference him, as we close and the Bill passes. This was originally presented as a “limited, technical Bill”. Whoever thought up that phrase is probably now assigned to writing detailed amendments on obscure financial practice, because it has been anything but.

From my perspective, we had three major areas to tackle in this Bill. We have talked about the constitutional issues of regulator accountability to Parliament, which are overwhelmingly important to this House and the other place. We have also dealt with extensive legislation that impacts ordinary consumers. One can never overstate the importance of dealing with issues such as debt, mortgage prisoners, sharia finance, access to cash or financial exclusion. They are crucial to the people of this country and to everyday lives, so I am very glad that they formed a major part of this Bill. Thanks to the noble Lord, Lord Holmes, we have had some particular success—and perhaps will have more success with the amendments that we passed.

We also dealt with the environment and made some real progress in that area. I regret that by one vote only—because it was a tie—we did not get our capital adequacy amendment through but I think the House will, at some point in time, be back discussing that issue. I also suspect that, at some point, the PRA will announce the changes to capital adequacy ratios that reflect the underlying stranded assets associated with fossil fuels in various forms. That, too, I see as a work in progress but it was an important discussion and put down some very significant markers.

I want to thank the Public Bill Office. I cannot remember a piece of legislation where so many amendments appeared in each round, both in Grand Committee and on Report. Its work in turning around those amendments to ensure they were in an appropriate form was very much appreciated.

I join in thanking the noble Earl, Lord Howe, the noble Baroness, Lady Penn, and the noble Lord, Lord True. I say to all three of them that we appreciate that they listened to what we had to say and, whether they agreed or disagreed, always responded to us with respect and looked for common ground. Frankly, I regard the noble Earl, Lord Howe, as the Conservative Government’s secret weapon because he certainly brings us to a common point that finds a way through when relatively few other people could.

I really want to thank others for the co-operative working across the House. We have worked closely with all those on the Labour Benches, but it has been with the Conservative Benches as well. It really shows this House at its best when it deals with issues of fundamental importance.

On my own team, Sarah Pughe in the Whips’ Office kept us co-ordinated; she also kept us informed, which was quite some challenge. My noble friends Lord Bruce, Lady Sheehan and Lady Tyler stepped in to contribute some special knowledge. I thank in particular my noble friends Lady Bowles, Lord Sharkey and Lord Oates, each of whom took on one of those three areas that I categorised as crucial in this Bill and brought to them absolutely exceptional levels of expertise, real dedication and hard work. They supported their positions with extraordinary diligence. Sometimes when people come with not only expertise but passion and concern, they can make an effective difference in the way they communicate with the House. I have to say to those three how much I appreciated them.

My noble friends Lady Bowles and Lord Sharkey are off at the Industry and Regulators Select Committee. I understand that the noble Lords, Lord Eatwell and Lord Blackwell, are there. I am sure they are missing the noble Baroness, Lady Noakes, today but I hope she will make that up at the next meeting and ensure that her imprint is on the work of that committee.

This has been a real pleasure. I believe we have achieved something. It is not all I would have wanted but, as I say, this is only the beginning of a long process.

From these Benches, I too am grateful for the opportunity to express my thanks to all noble Lords who participated at all stages of the Bill. The noble Earl, Lord Howe, the noble Baroness, Lady Penn, and, from the point of view of my own particular interest in the Bill, especially the noble Lord, Lord True, have steered the Bill skilfully through your Lordships’ House. Although he is not in the Chamber at the moment, I place on record my grateful thanks to the noble Lord, Lord True, for his constructive engagement and for meeting me and the noble Baroness, Lady Morgan of Cotes, on two occasions to discuss amendments concerning the statutory debt repayment plans.

Together with the Bill team and the wider group of Treasury officials, the noble Lord, Lord True, has given me and the network of debt advice charities a great deal of confidence that these plans will be brought into effect in 2024. We are all grateful for this positive attitude. I thank all other noble Lords who spoke on this issue and on a variety of other matters of concern to consumers. As well as SDRPs, I welcome the fact that the Bill paves the way towards regulating buy now, pay later products, for example. Indeed, it has been very pleasing to see the level of consensus across the House on the need to improve support for people in financial difficulty and to tackle financial exclusion.

Finally, the passage of the Bill has been an important opportunity to look at what more needs doing on the financial services regulatory framework to ensure that it is as effective as possible at protecting consumers; for example, one area that was raised but ultimately found to be beyond the ambit of the Bill was oversight of bailiffs, but the commitment from the Government to work with stakeholders to develop this is very welcome.

I thank all concerned, including the excellent Lord Judd, whom we will all miss very much indeed.

My Lords, I am grateful to all noble Lords for their remarks in bringing our proceedings to a conclusion. I beg to move.

Bill passed and returned to the Commons with amendments.

House adjourned at 6.26 pm.