Report (1st Day) (Continued)
Clause 24: Competitiveness and growth objective
Amendment 8A
Moved by
8A: Clause 24, page 38, line 23, leave out “aligning with” and insert “having regard to”
Member’s explanatory statement
This amendment, and the amendment to Clause 24, page 39, line 2, in the name of Viscount Trenchard, amends the role of international standards in relation to the growth and competitiveness objective.
My Lords, Amendments 8A and 8B were originally tabled by my noble friend Lady Noakes. In moving Amendment 8A, I remind your Lordships of the interesting debate on this matter in Committee on 1 February. I repeat that we are, in many fields, especially financial services, a leader in the formulation of international standards and best practice. The FCA says on its website:
“We contribute to and implement international standards, and supervise and enforce rules based on them in the UK”.
I believe that the UK’s influence in IOSCO, the recognised standard setter for securities regulation, has been enhanced now that we sit at the table in our own right, rather than as a member state of the EU. The same is surely true with regard to our influence within the International Association of Insurance Supervisors.
I support the new competitiveness and growth objective—although I think it should have been of equal importance with the regulators’ primary and operational objectives—but I continue to believe that it is rather curiously drafted. I am still not sure what the Government mean by
“aligning with relevant international standards”.
First, the word “relevant” is very subjective. We all know that there is often a lack of consistency as to what different people consider relevant. I already worry that the competitiveness and growth objective will be subjugated to the primary objectives, depending on which standards the regulators may choose to exempt them from the need to have regard to.
Secondly, surely the amendment is drafted in a way that gives too much weight to policies developed outside the UK, which are claimed by some to be international standards. Does my noble friend want to see a position where the PRA, for example, can ignore the secondary objective on the grounds that it is following international standards, where those standards are not core to the primary objective? International standards are a highly subjective concept and it is not at all desirable for the UK to have to adhere to everything that claims to be an international standard. The competitiveness and growth objective is already circumscribed by its status as a secondary objective. Using the PRA as an example, this means that it has only to,
“so far as reasonably possible, act in a way which … advances the competitiveness and growth objective”.
If the PRA considers that adherence to certain international standards is necessary, they are already covered by its primary objective. However, if an international standard is not necessary for the primary objective, why should such an international standard crowd out the competitiveness and growth objective?
Besides, it is not easy to define what is an international standard. As my noble friend said in Committee, the Basel capital standards have not always been followed universally—most notably by the United States, which pursued its own course for a considerable period. International standards are not matters of international law. Their implementation is always a matter of judgment for the home regulators, and therefore needs to be considered in the judgments they make on their primary objective.
My noble friend the Minister’s response on this matter in Committee was, I fear, a little disappointing, although she acknowledged that nuances of the UK market mean that the international standard is not appropriate. She added that it may be best for UK markets to go beyond the international standard. It is quite possible that I missed it, but I do not think my noble friend acknowledged that it is a largely subjective consideration as to what is relevant, and it is certainly subjective and lacking in clarity as to what international standards are.
I ask my noble friend whether she can at least bring back a definition for Third Reading if she does not consider that my amendment offers a reasonable solution, for “having regard to” is a lot less onerous than requiring “alignment with”. I beg to move.
My Lords, I have two amendments in this group. Amendment 9 is similar to one I tabled in Committee and is intended to focus the secondary objective on the advancement of the UK economy through fair and efficient operation of financial markets.
It still concerns me that the Government’s wording can be interpreted as more about general profitability of financial services, rather than the positive nature of their operation on the economy. We got into a bit of a tangle about this in Committee when the Minister focused on how financial services made money out of clients. I hope the Minister can now appreciate the nuance and at least confirm that the primary intention of the secondary objective is benefit to the economy that is served by financial services, and not maximum income generation from financial services to the extent that it is of detriment to the economy.
A great deal of attention has gone into asking what regulatory issues have risked competitiveness. A key example is how the London market lost out in new insurance products when the regulator was too slow. Criticism has been levied about delays in SMCR approval of new staff. My Amendment 115 concerns an alarming example of harm to the economy and proposes a solution through a specific legislative amendment. It aims to fix a competitiveness and investment issue with listed closed-ended investment funds. As such, I declare my interests as both a director of the London Stock Exchange plc and a director of Valloop Holdings Ltd, which has potential interest in such listings.
For the last 14 months, a dire situation has been seriously affecting the UK economy and should have been resolved but has not. It has its origins in a face-value interpretation of an EU regulation that is part of the MiFID family, relating to how ongoing charges should be presented in collective investment schemes that invest in other funds and a desire to create a consistent cost disclosure framework in a somewhat inconsistent EU framework.
As part of reviewing what should be included in cost redisclosures, the FCA asked the Investment Association —the principal trade body for the asset management industry in the UK—to provide new guidance. That guidance now requires that when a fund holds shares in listed closed-ended investment funds—also known as investment trusts—it should aggregate with the investing fund’s own charges all the underlying running costs that are incurred within the investment trust, including the listing and corporate costs, in the same way as it would were it to hold units in an unlisted open-ended fund. The IA took this line because the investment trust is regarded as a collective investment undertaking, and the EU regulation refers to collective investment undertakings.
At first sight, the cost disclosure might look reasonable, but it ignores the nature of investment trusts, which have publicly traded shares with a price set by the market: an investment trust is essentially like any other publicly traded company from an investment perspective. If a fund invests in the ordinary shares of a listed commercial company, the internal costs of that commercial company do not have to be shown in aggregated charges. For both listed commercial companies and listed investment trust companies, everyday running costs are disclosed in accounts, reflected in profit and ultimately in the share price, which embodies investors’ assessment of the company, including its underlying costs. However, the IA guidance instead equates investment trusts with open-ended funds, requiring internal running costs incurred at the investee investment trust level to be aggregated as a cost, setting aside the fact that, unlike with units of open-ended funds, investors have already factored such charges into the price that they are prepared to pay for the shares of the investment. Thus, for example, directors’ fees of an investment trust aggregate as an ongoing charge of the investing fund; the directors’ fees of a commercial company that is similarly invested in do not have to be aggregated. Likewise, various other corporate costs receive dissimilar treatment.
Therefore, that is an unfairness, but why does it matter beyond being anti-competitive, as if that is not enough? It matters because those corporate costs being in effect almost duplicated and put under the headline of “ongoing charges” suddenly elevated the ongoing charges of the fund investing into the investment trust, sometimes to levels where they hit cost ceilings put in place by various pension funds and other collective investment funds, or simply made fund managers cringe when the headline of accumulated charges suddenly looked more expensive and people started to think that they were doing something wrong. Hence, there became a disincentive to invest in investment trusts to avoid these unexpected changes, questions about them or hitting cost ceilings. A great deal of investment choice follows the headline and not deeper analysis, which separates and explains the varying nature of costs.
To make the point again, an ordinary listed commercial company, such as SEGRO plc, which invests in property, might now be deemed investable while the exact same property investments with the exact same costs, held for example by the investment trust Tritax Big Box fund, might be deemed not investable because one does not have to have its corporate costs regarded as ongoing charges and the other does.
I do not think it is a coincidence that, since the new guidance, there has been no real asset IPO and just a couple of small equity IPOs of investment trusts. At a stroke, something that has at times been regarded as a jewel in the London funding ecosystem—an expanding sector of listed funds investing into long term illiquid alternative assets such as renewable energy and other infrastructure—has been abandoned.
I just gave an example of two companies investing in property, with no intention to impugn either, but there are some sectors of the economy where using an investment trust to raise funds is the only route to capital—notably for new and innovative business in the environmental and social sectors: businesses such as HydrogenOne, which is leading investment into UK’s alternative energy, directly linked with our net-zero commitments.
It is also the case that investment trust exposures are typically more diversified and real than exposures via commercial corporates, which investors appreciate but now cannot access as they have been dropped from portfolios. This is a real loss to the UK economy that has been going on for 14 months. We have all read the news about companies switching listing from London for valuation reasons—and that is another story—but here it is not switching, it is simply regulatory asphyxiation.
Both the FCA and the Investment Association know and understand the problem. The IA thinks it should be fixed and has publicly written about it to the FCA. On the face of it, given that inherited EU legislation is the mix, I think it is more up to government and the FCA to fix it than the IA, even though it came up with the guidance. In any event, you go up the power chain to fix a disaster. It is also worth noting that there is no actual legislative EU definition of collective investment undertaking, only ESMA guidance, from which the FCA could distance itself, if only for this specific purpose.
The Government have been informed of this issue and, while dreaming up ways to help more investment in the productive economy is important for the Chancellor, all he has to do here is stop this extinction event. It is not about undermining transparency; it is about understanding what is and is not like-for-like. There are those who have been getting around it in some EU countries by saying that for cost disclosure purposes, an investment trust is a company not a fund, but investment trusts are not mainstream in EU countries; they use other channels for investment, so the issue is not really pursued.
The UK situation now is that we have essentially just clarified our law using definitions originating in soon-to-be-discarded PRIIPs and non-legislative EU guidance, front-running a wider-reaching FCA review and achieving nothing but harm. My amendment shows one way to fix it by amending the regulation so that all listed companies are treated the same for the assessment of accumulated ongoing charges. Investment trusts would then not be discriminated against by being improperly lumped together with open-ended funds whose value is not set through share price, nor by having a cost label attached, compared with competing commercial companies or funds in other countries, and the UK businesses reliant on the investment trust route could again raise the capital they need.
I would dearly like the Government just to do this now or suggest that the FCA gives immediate interim guidance. It is an emergency. It should not need months and months of consultation. It is going back to what worked for years. Quick fixes are one of the things that Brexit is meant for but, instead, we are ruining ourselves for want of flexibility and action. If we cannot do regulatory repairs like this quickly, I do not see any point in a competitiveness objective. This issue shows a monumental lack of awareness from the Government and the FCA about the sharp end in the real economy. A dire problem has been left festering.
My Lords, I rise to speak to Amendments 10 and 112 in my name; I gratefully acknowledge the support of the noble Lord, Lord Sikka. This is a bit of a diverse group, but Amendment 10 in particular heads in a similar direction to Amendment 9 in the name of the noble Baroness, Lady Bowles of Berkhamsted—a direction that seeks to lead towards a financial sector that meets the needs of the real economy rather than swallowing up the scarce human and capital resources that could be used to far better effect than creating complex financial instruments that, when they go down, threaten to take the rest of us with them.
Had it not been for events between Committee and Report, I might have chosen to sign the noble Baroness’s amendment instead of tabling my Amendment 10, which states that Clause 24—the growth and competitiveness clause to which the noble Viscount, Lord Trenchard, referred—should not be deleted from the Bill. It mirrors exactly the amendment tabled in Committee by the noble Lord, Lord Sikka, signed then by myself. However, in the light of events, I thought it really important that we tackle the “growth at any cost” foundation that underlies Clause 24: “Growth is infinite; let’s chase as much growth as we can”—which is, of course, the ideology of the cancer cell.
In Committee, the noble Lord, Lord Sikka, said:
“The secondary objectives of growth and competitiveness cannot be reconciled with the main role of ensuring financial stability and consumer protection”.—[Official Report, 1/2/23; col. GC 242.]
This is a position that we both hold. However, it was clear in Committee that there was no support from the Front Benches, and the issue might have been allowed to lapse. But then there were events that highlighted the many dangers of chasing growth in the financial sector. After several weekends of financial panic, emergency meetings and sudden bank rescues, parts of the real economy—in particular, the digital sector—were left highly uncertain of their financing. I am referring, of course, to the collapse and rescue of Silicon Valley Bank, Credit Suisse and Signature Bank, the first and last of those being mid-sized US banks and the middle one being a former European banking colossus.
These US events came after President Trump watered down the Wall Street Reform and Consumer Protection Act, better known as the Dodd-Frank Act, in 2018, reducing the supervisory oversight of banks with assets between $50 billion and $250 billion; the noble Viscount, Lord Trenchard, referred to this watering down in his introduction to this group. However, just because someone else is doing the wrong thing and reducing controls and protections, it does not mean that we should chase after and try to compete with them. As David Enrich from the New York Times put it, this was a
“crisis that has revealed the extent to which the banking industry and other opponents of government oversight have chipped away at the robust regulatory protections that were erected after the 2008 financial meltdown”.
What happened is that competitiveness had been advanced while security was lost and risk increased. A great many people had sleepless weekends as a result of that.
What has also become clear since Committee is how Credit Suisse clients withdrew nearly $69 billion from the bank in the first quarter of this year before its fire sale rescue by UBS in March. Of course, Credit Suisse had been hit by the insolvency of Greensill Capital—something that is rather close to home in your Lordships’ House—and the collapse of family office of Archegos Capital Management, which caused huge trading losses. However, the end came very quickly.
Clearly, in the digital age which SVB helped to fund, financial events can occur at a speed that was unimaginable even in 2007-08. I wonder whether, when wrapping up, any of the Front Benches are prepared to say that they believe that regulators today are truly prepared for the world in which they operate, a world that also faces the risks of other substantial shocks, as we have seen highlighted today with the Russian attack on the Kakhovka dam, geopolitical risks and, of course, environmental risks, since as we speak, Canada is essentially ablaze. That will undoubtably have enormous impacts on the insurance sector.
The IMF’s Global Financial Stability Report from April reflects on the challenges posed by the interaction between tighter monetary and financial conditions, and the build-up of vulnerabilities since the global financial crash. It says that:
“The emergence of stress in financial markets complicates the task of central banks at a time when inflationary pressures are proving to be more persistent than anticipated”—
a statement which is particularly true within the UK. There are stresses from the shadow banking sector, the effect of geopolitical tensions on financial fragmentation, the risk of potential capital flow reversals, disruption of cross-border payments, impacts on bank funding costs, profitability and credit provision, and more limited opportunities for international risk diversification. The IMF concludes that there is a need to “Strengthen financial oversight”. This is all referring to events since we were in Committee. That is my case for Amendment 10.
My Amendment 112 is much more modest and addresses in a different way a point that I raised in Committee. I discussed the growing body of literature around too much finance, but in this amendment I am not asking the Government to agree with me on that; I am asking for them to prepare a report to consider the ideal size of the financial sector. What is the Goldilocks range for a financial sector, where we can afford the risks and supply the human resources and it serves the needs of the real economy?
As the House has heard before, I approach this question in the light of the Sheffield Political Economy Research Institute’s study from 2018, which found that the UK had lost £4.5 trillion over two decades because of its oversized financial sector—£67,500 per person. To bring this right up to the present day, in a study published last week, the global hiring website Climatebase has posted more than 46,000 jobs from over 1,500 organisations in the past two years. Of these, data science and analytics were the hardest to fill, taking an average of nearly four months to fill posts compared with three months for engineering roles.
This brings me back to Amendment 10, which would delete Clause 24. I did not have a chance to speak in Committee, but I suggest that Clause 24 as it stands is internally contradictory. It gives the FCA the duty of facilitating the international competitiveness and medium to long-term growth of the economy of the UK,
“including in particular the financial services sector”.
This clause talks of growing the economy of the UK and growing the financial sector. I posit that those two objectives are mutually contradictory. I refer to a Bank for International Settlements working paper from 2018, Why Does Financial Sector Growth Crowd Out Real Economic Growth? It is actually impossible to promote growth both in the real economy and in the financial sector. It comes back to—probably the easiest part of this to understand—the need to think about human resources. We all know the labour shortages and skills shortages that so many sectors of the UK economy are suffering, and we know that many skills are going into the financial sector when they could be going into other areas.
Tomorrow, your Lordships’ House will debate the report of our Science and Technology Committee titled “Science and Technology Superpower”: More Than a Slogan? I am not asking any Front-Benchers or the Government to agree with the claims that I am making here; what Amendment 112 asks for is a report to look at the evidence, so that the Government and the country can make considered judgments about what size financial sector we both need and can afford.
My Lords, I will address the amendments proposed by the noble Viscount, Lord Trenchard. In some way, they are part of the whole privileging of the competitiveness objective, but I do not want to talk about that. I will talk specifically about his concern about aligning with international standards.
I suggest that the success of the development of international financial markets since the 1970s has been predicated entirely on the development of an international regulatory system. It was first stimulated by the Herstatt Bank crisis in the summer of 1974, which led to the establishment of the Basel committee on settlement risk. Since then, we have developed a whole international financial infrastructure of regulation—the Basel committees, IOSCO and, most importantly today, the Financial Stability Board. That, by the way, was a British idea that has greatly aided the stabilising of international financial markets.
These committees, as the noble Viscount, Lord Trenchard, pointed out, are not part of any form of international law or treaty. They are what is known in the trade as “soft law”. They are laws that countries agree it is in their mutual benefit to align with, and failing to align is against the benefit of individual countries as well as of the system as a whole. It has been the judgment of His Majesty’s Government that it is in the best interests of the United Kingdom to align with international standards.
But there are other international standards with which we align. Take the Paris-based Financial Action Task Force. Would the noble Viscount, Lord Trenchard, suggest that we do not align with the international anti-money laundering police? It is essential that we agree to align with this framework of international financial regulation, which we have been such an important element in creating.
My Lords, I am grateful to the noble Lord for giving way, but I want to correct him for criticising me for opposing all international standards. The ones he has chosen to mention are not ones that I objected to specifically. I was just saying that in general international standards are not defined.
I suggest to the noble Viscount that, in fact, the whole corpus of international soft law on finance is generally known in the trade as the international standards, and those who work in the regulatory community would immediately relate to the proposals of those particular institutions. As the noble Lord pointed out, occasionally Basel standards have not been followed. This is true in the United States, where only international competitive banks follow Basel committee standards. The US has learned painful lessons over the last year or so with the collapse of Silicon Valley Bank and others that did not follow Basel standards. The relaxation of standards was one of the elements that led to that particular collapse. Alignment with international standards and the institutions which—I say again—Britain has done so much to help develop is an important part of the maintenance of financial stability in this country.
My Lords, I will make an argument that the idea that greater competition is a public benefit is simply wrong, if you think it is inevitable. Now, I spoke about this at length in Grand Committee a couple of weeks ago, and the Minister had the benefit of my views on the matter at the time, so I am not going to repeat them at length; one or two other Members present did as well.
The idea that a bigger financial sector will benefit the economy is, to me, a non-sequitur. There is a limit to the advantage that we get from the financial sector, and my view is that we are beyond that limit at the moment. It is certainly an issue which needs to be considered, rather than the assumption that we have to get a bigger and more competitive financial sector.
I also support the deletion of Clause 24 and will speak in support of the mover of the proposition. I should say that my noble friend Lord Sikka would very much have liked to have been present, but pressing family circumstances meant that he was unable to be with us. He was strongly of the view—and I agree with him—that giving the FCA this competition objective is fundamentally wrong. To be brief, the two crucial problems are that it promotes regulatory capture—the phenomenon where the people who are meant to be regulated come to dominate the thought and practice of the regulator—and that it inevitably leads to the weakening of consumer protections. However much you may wish that it was not the case and however much you want to say that it will not happen, experience tells us that that will be the result.
Financial regulation ultimately requires robust rules, made in the long-term public interest. The public interest does not always align with the immediate interests of financial institutions. Tasking oversight bodies with promoting the industry they regulate fundamentally compromises their work. It is just the way the system works, and however much you may wish that the world was different, experience over many years demonstrates that that is the inevitable result of tasking the regulator with the job of promoting what they are meant to be regulating.
My Lords, we do not support this group of amendments. We strongly support the inclusion in this Bill of the new secondary objective for the regulators on international competitiveness and economic growth. Its position as secondary in the hierarchy of regulators’ objectives is of course key. As a secondary objective, economic growth and international competitiveness will remain subordinate to the regulators’ primary objectives of preserving financial stability and protecting consumers. The UK’s reputation and success as a leading international financial centre depend on high standards of regulation, and a stable and independent regulatory regime. These high regulatory standards are a key strength of the UK system and its global competitiveness, so we would not support any moves towards a regulatory race to the bottom. That would negatively impact international confidence in the UK, making the UK less attractive to international businesses and investment.
The UK’s financial services industry plays a vital role in boosting economic growth and delivering skilled jobs in every part of the UK. Almost 2.5 million people are employed in financial services, with two-thirds of those jobs based outside London, and the sector contributes more than £170 billion a year to GDP—8.3% of all economic output.
The City of London is one of only two global financial capitals and is at the very heart of the international monetary system. This is an enviable position, and it is vital that we support the sector across the UK to retain this competitiveness on the world stage post Brexit so that the UK can continue to be one of the world’s premier global financial centres. It is therefore crucial that the UK’s regulatory framework plays its part in supporting this positive contribution to the UK economy and society. To do this, it must enhance competitiveness and support the industry in trading with the world, including in new markets. It must attract investment into the UK and promote innovation and consumer choice.
A secondary growth and international competitiveness objective is a simple and internationally proven way to achieve this, helping to ensure that the UK remains a leading global financial centre by empowering regulators to make the UK a better place to do business and ensuring a more attractive market for international providers and consumers of financial services. The UK is, of course, in competition with other international financial centres, and many of them, including Australia, Hong Kong, Japan, Malaysia, Singapore, the United States and the European Union, have introduced a similar objective, which they balance against financial stability and consumer protection.
In future groups we will come to topics such as investment in high-growth firms, but it is precisely by having this secondary objective on competitiveness and growth that we will create an ecosystem that supports investment in new technologies, provides much-needed economic growth and secures new jobs.
My Lords, the new secondary growth and competitiveness objectives in the Bill will ensure that the regulators can act to facilitate medium to long-term growth and competitiveness for the first time, but a focus on competitiveness and long-term growth is not new. When the UK was part of the European Union and financial services legislation was negotiated in Brussels, UK Ministers went to great efforts to ensure that EU regulations appropriately considered the impact that regulation could have on economic growth and on the competitiveness of our financial services sector.
Now that we have left the EU, and as the regulators take on responsibility for setting new rules as we repeal retained EU law, it is right that their objectives reflect the financial services sector’s critical role in supporting the wider economy. We must ensure that growth and competitiveness can continue to be properly considered within a robust regulatory framework. As the noble Lord opposite said, a secondary competitiveness objective strikes the right balance. It ensures that the regulators have due regard to growth and competitiveness while maintaining their primary focus on their existing objectives. That is why the Government strongly reject Amendment 10, tabled by the noble Baroness, Lady Bennett of Manor Castle, which seeks to remove the secondary objectives from the Bill.
Turning to Amendment 9 from the noble Baroness, Lady Bowles of Berkhamsted, the Government agree that the UK financial services sector is not just an industry in its own right but an engine of growth for the wider economy. The current drafting of the Bill seeks to reflect that but also recognises that the scope of the regulators’ responsibilities relates to the markets they regulate—the financial services sector—so it is growth of the wider economy and of the financial services sector, but not at the expense of the wider economy. I hope I can reassure her on that point.
On Amendment 115, also from the noble Baroness, Lady Bowles, as noble Lords know, the Bill repeals retained EU law in financial services, including the MiFID framework. Detailed firm-facing requirements, such as those that this amendment seeks to amend, are likely to become the responsibility of the FCA. As such, it will be for the FCA to determine whether such rules are appropriate. When doing so, the FCA will have to consider whether rules are in line with its statutory objectives, including the new secondary growth and competitiveness objective.
Parliament will be able to scrutinise any rules that the regulators make, including pressing them on the effectiveness of their rules, and how they deliver against their objectives. Industry will also be able to make representations to the regulators where they feel that their rules are not having their intended effect or are placing disproportionate burdens on firms. I hope the noble Baroness is therefore reassured that the appropriate mechanisms are in place for considering the issues that she has raised via that amendment.
I understand that there are and will be mechanisms in place, but the point that I was trying to make—and the reason that I expounded at length on how we got into this mess—is that it is urgent action that is necessary. This is not something that waits for this great wheel of change that we are bringing in through this Bill to come along. This is something that should be on people’s desks tomorrow; it should have been on people’s desks a year ago. There will not be ongoing investments trusts if it is not fixed now.
I understand the case that the noble Baroness makes, but it is not for an amendment to this Bill but for regulator rules to address the issue that she raises.
I turn to Amendments 8A and 9A from my noble friend Lord Trenchard, which seek to remove the requirement for the FCA and the PRA to align with relevant international standards when facilitating the new secondary objectives and instead have regard to these standards. As we have heard, international standards are set by standard setting bodies, such as the Basel Committee on Banking Supervision. These standards are typically endorsed at political level through international fora such as the G7 and G20 but, given the need to enable implementation across multiple jurisdictions, they may not be specifically calibrated to the law or market of individual members. It is then for national Governments and regulators to decide how best to implement these standards in their jurisdictions. This includes considering which international standards are pertinent to the regulatory activity being undertaken and are therefore relevant.
Since we left the EU, the regulators have been generally responsible for making the judgment on how best to align with relevant standards when making detailed rules that apply to firms. This approach was taken in the Financial Services Act 2021, in relation to the UK’s approach to the implementation of Basel standards for bank regulation and the FCA’s implementation of the UK’s investment firms prudential regime. It was also reflected in the overarching approach set out in the two consultations as part of the future regulatory framework review.
Part of the regulators’ judgment involves considering how best to advance their statutory objectives. Following this Bill, this will include the new secondary competitiveness and growth objectives. The current drafting therefore provides sufficient flexibility for the regulators to tailor international standards appropriately to UK markets to facilitate growth and international competitiveness, while demonstrating the Government’s ongoing commitment for the UK to remain a global leader in promoting high international standards—which, as we have heard, the UK has often played a key part in developing. The Government consider that this drafting helps maintain the UK’s reputation as a global financial centre.
I turn finally to Amendment 112 from the noble Baroness, Lady Bennett. The Government consider the financial services sector to be of vital importance to the UK economy. The latest figures from industry reveal that financial and related professional services employ approximately 2.5 million people across the UK, with around two-thirds of those jobs being outside London. Together, these jobs account for an estimated 12% of the UK’s economy.
The financial services sector also makes a significant tax contribution, which amounted to more than £75 billion in 2019-20—more than a tenth of total UK tax receipts—and helps fund vital public services. It is not for the Government to determine the optimum size of the UK financial services sector, but in many of the areas that the noble Baroness calls for reporting on, the information would be largely duplicative of work already published by the Government, public sector bodies or other industry groups.
For example, the State of the Sector report, which was co-authored by the City of London Corporation and first published last year, covers talent, innovation, the wider financial services ecosystem, and international developments and comparisons. The Government will publish a second iteration of the report later this year. The Financial Stability Report—
The Minister said that was a City of London report, but then said it was a government report. Surely the City of London Corporation is not an independent source on the financial sector—it is the financial sector.
It is a joint report from the City of London and the Government that provides analysis of a number of the areas that the noble Baroness covers in her amendment.
I was just moving on to the Financial Stability Report, which is published twice a year by the Bank of England’s Financial Policy Committee, setting out the committee’s latest view on the stability of the UK financial system and what the committee is doing to remove or reduce any risks to it and make recommendations to relevant bodies to address systemic risks.
I hope that noble Lords will agree, although I am sure that not all do, that a well-regulated and internationally competitive financial services sector is a public good for the UK and something that we should continue to support. I therefore hope that my noble friend Lord Trenchard will withdraw his amendment and that other noble Lords will not move theirs when they are reached.
My Lords, I thank all noble Lords who have taken part in this short debate. The noble Baroness, Lady Bowles of Berkhamsted, talked about the senior managers and certification regime. Does she know that the Japanese banks have given up sending senior directors to London because they cannot get authorised, so they have to promote people who are already in London? All three main megabanks are now doing that because they are so exasperated with the difficulty of getting their senior officers approved by the FCA.
I entirely agree with what the noble Baroness said about the problem of the uneven playing field between listed companies and listed investment trusts. That is an urgent problem that needs to be addressed now. The FCA, with its current culture, is just not responsive to that type of situation. Everybody is aware of that, and it is why some of us are pushing so hard for a more determined effort to change things. I think that if the competitiveness and growth objective had been given equal status with the stability objectives and the other consumer protection objectives, we might have got somewhere nearer that, but I know that not all noble Lords agree.
The noble Baroness, Lady Bennett of Manor Castle, and the noble Lord, Lord Davies of Brixton, supported Amendment 10 to leave out the competitiveness objective and Amendment 112 to reduce the size of the financial services sector. If you leave out the competitiveness objective, you will not have much of a financial services sector, so we would not need both amendments.
The noble Lord, Lord Eatwell, always speaks with great authority. We served together on the original Joint Committee on Financial Services and Markets under the excellent chairmanship of the noble Lord, Lord Burns, in 1999, and it was hugely successful. I take the noble Lord’s point, but I still do not think that we should be bound to align to an international standard just because it is a Basel committee standard; we should have to have regard to it. I say to the noble Lord, Lord Livermore, that some of the other jurisdictions that he mentioned do not subordinate their competitiveness objective to the main stability objectives.
I am grateful for my noble friend’s reassurance and beg leave to withdraw my amendment.
Amendment 8A withdrawn.
Amendments 9 to 10 not moved.
House adjourned at 10.05 pm.