‘(1) Part 7 of the Proceeds of Crime Act 2002 (money laundering) is amended in accordance with subsections (2) to (6).
(2) In section 327(2C) (conversion or transfer of criminal property: exceptions), after “deposit-taking body” insert “, electronic money institution or payment institution”.
(3) In section 328(5) (arrangements: exceptions), after “deposit-taking body” insert “, electronic money institution or payment institution”.
(4) In section 329(2C) (acquisition, use and possession: exceptions), after “deposit-taking body” insert “, electronic money institution or payment institution”.
(5) In section 339A (threshold amounts)—
(a) in subsection (2), after “deposit-taking body” insert “, electronic money institution or payment institution”,
(b) in subsection (3), in the opening words, after “deposit-taking body” insert “, electronic money institution or payment institution”,
(c) in subsection (3)(a), for “deposit-taking body’s” substitute “body’s or institution’s”,
(d) in subsection (3)(b), for “deposit-taking body” substitute “body or institution”,
(e) in subsection (4), after “deposit-taking body” insert “, electronic money institution or payment institution”, and
(f) in subsection (8)—
(i) after “deposit-taking body” insert “, electronic money institution or payment institution”, and
(ii) after “the body” insert “or institution”.
(6) In section 340 (interpretation)—
(a) in subsection (14)—
(i) omit “or” at the end of paragraph (a), and
(ii) after paragraph (b) insert “, or
(c) a person specified, or of a description specified, in regulations made by the Treasury or the Secretary of State.”,
(b) after subsection (14) insert—
“(14A) In subsection (14)(a)—
(a) the reference to the activity of accepting deposits is a reference to that activity so far as it is, for the time being, a regulated activity for the purposes of the Financial Services and Markets Act 2000 by virtue of an order under section 22 of that Act, but
(b) the reference to a business which engages in that activity does not include a person specified, or of a description specified, in regulations made by the Treasury or the Secretary of State.
(14B) Before making regulations under subsection (14A)(b), the Treasury or the Secretary of State (as appropriate) must consult such persons likely to be affected by the regulations, or such representatives of such persons, as they consider appropriate.
(14C) ‘Electronic money institution’ has the same meaning as in the Electronic Money Regulations 2011 (S.I. 2011/99) (see regulation 2 of those Regulations).”, and
(c) at the end insert—
“(16) ‘Payment institution’ means an authorised payment institution or a small payment institution (each as defined in regulation 2 of the Payment Services Regulations 2017 (S.I. 2017/752)).”
(7) In section 459 of the Proceeds of Crime Act 2002 (orders and regulations)—
(a) in subsection (4), before paragraph (aa), insert—
“(azb) regulations under section 340(14)(c) or (14A)(b),”,
(b) before subsection (6A) insert—
“(6ZC) No regulations may be made by the Treasury or the Secretary of State under section 340(14)(c) or (14A)(b) unless a draft of the regulations has been laid before Parliament and approved by a resolution of each House.”, and
(c) in subsection (6A), before “would” insert “or of regulations under section 340(14)(c) or (14A)(b)”.’—(John Glen.)
There are exceptions to certain money laundering offences where the amounts in question fall below a prescribed threshold. The exceptions are currently available for deposit-taking bodies. This new clause extends the exceptions to electronic money institutions and payment institutions and makes changes to the meaning of deposit-taking body.
Brought up, and read the First time.
With this it will be convenient to discuss the following:
Government new clause 28—Forfeiture of money: electronic money institutions and payment institutions.
New clause 1—Report into standards of conduct and ethics in the financial services industry—
“(1) The Treasury must prepare and publish a report into standards of conduct and ethics of businesses regulated or authorised by the Financial Conduct Authority.
(2) The report must include—
(a) an assessment of the prevalence of unlawful practices in the sector, including—
(i) tax evasion, and
(ii) money laundering;
(b) an assessment of the prevalence of other practices including—
(i) the charging of excessive fees,
(ii) the provision of inadequate advice to customers, and
(iii) tax avoidance;
(c) consideration of the case for the establishment of a public inquiry into standards of conduct and ethics within the UK financial services industry, under the Inquiries Act 2005; and
(d) an assessment of the present arrangements for the regulation of the financial services sector and the Government’s plans for further reform of the regulatory system.
(3) This report must be laid before Parliament within six months of this Act being passed.”
This new clause would require the Government to publish a report into the standards of conduct and ethics of businesses regulated or authorised by the Financial Conduct Authority, including consideration of the case for the establishment of a public inquiry.
New clause 2—Report into anticipated use of the Debt Respite Scheme—
“(1) The Treasury must prepare and publish a report into the anticipated use of the Debt Respite Scheme over the five years following the passing of this Act.
(2) The report must include an assessment of—
(a) the number of people likely to use the Breathing Space scheme
(b) the number of people likely to be offered a Statutory Debt Repayment Plan,
(c) the scale of personal and household debt within the UK economy and the impact of this on use of the Debt Respite Scheme,
(d) the effectiveness of current mechanisms to prevent people having recourse to the Debt Respite Scheme, and
(e) the potential for additional policies and mechanisms to complement the work of the Debt Respite Scheme.
(3) This report must be laid before Parliament within six months of this Act being passed.”
This new clause would require the Treasury to publish a report into the anticipated use of the Debt Respite Scheme, including the effectiveness of the current mechanisms to prevent people having recourse to the Debt Respite Scheme.
New clause 4—Facilitation of economic crime—
“(1) A relevant body commits an offence if it—
(a) facilitates an economic crime; or
(b) fails to take the necessary steps to prevent an economic crime from being committed by a person acting in the capacity of the relevant body.
(2) In subsection (1), a ‘relevant body’ is any person, including a body of persons corporate or unincorporated, authorised by or registered with the Financial Conduct Authority.
(3) In subsection (1), an ‘economic crime’ means—
(a) fraud, as defined in the Fraud Act 2006;
(b) false accounting, as defined in the Theft Act 1968; or
(c) an offence under the following sections of the Proceeds of Crime Act 2002—
(i) section 327 (concealing etc criminal property);
(ii) section 328 (arrangements etc concerning the acquisition, retention, use or control of criminal property); and
(iii) section 329 (acquisition, use and possession of criminal property).
(4) In subsection (1), ‘facilitates an economic crime’ means—
(a) is knowingly concerned in or takes steps with a view to any of the offences in subsection (3); or
(b) aids, abets, counsels or procures the commission of an offence in subsection (3).
(5) In proceedings for an offence under subsection (1), it is a defence for the relevant body to show that—
(a) it had in place such prevention procedures as it was reasonable in all circumstances for it to have in place;
(b) it was not reasonable in the circumstances to expect it to have any prevention procedures in place.
(6) A relevant body guilty of an offence under this section shall be liable—
(a) on conviction on indictment, to a fine;
(b) on summary conviction in England and Wales, to a fine;
(c) on summary conviction in Scotland or Northern Ireland, to a fine not exceeding the statutory maximum.
(7) If the offence is proved to have been committed with the consent or connivance of—
(a) a director, manager, secretary or other similar officer of the relevant body, or
(b) a person who was purporting to act in any such capacity, this person (as well as the relevant body) is guilty of the offence and liable to be proceeded against and punished accordingly.”
This new clause would make it an offence for a relevant body authorised or registered by the Financial Conduct Authority to facilitate, or fail to prevent, specified economic crimes.
New clause 6—Money laundering: electronic money institutions—
‘(1) The Proceeds of Crime Act 2002 is amended as follows.
(2) In section 303Z1 (Application for account freezing order)—
(a) In subsection (1) after “bank” insert “, electronic money institution”
(b) In subsection (6) after “Building Societies Act 1986;” insert—
“‘electronic money institution’ has the same meaning as in the Electronic Money Regulations 2011.”
(3) In section 303Z2 (Restrictions on making of application under section 303Z1), in subsection (3) after “bank” insert “, electronic money institution.”
(4) In section 303Z6 (Restriction on proceedings and remedies), in subsection (1) after “bank” insert “, electronic money institution.”
(5) In section 303Z8 (“The minimum amount”), in subsection (4) after “bank” insert “, electronic money institution.”
(6) In section 303Z9 (“Account forfeiture notice”), in subsection (6)(b) after “bank” insert “, electronic money institution.”
(7) In section 303Z11 (“Lapse of account forfeiture notice”)—
(a) in subsection (6) after “bank” insert “, electronic money institution”
(b) in subsection (7) after “If the bank” insert “, electronic money institution”
(c) in subsection (7) after “on the bank” insert “, electronic money institution.”
(8) In section 303Z14 (“Forfeiture order”), in subsection (7)(a) after “bank” insert “, electronic money institution.”
(9) In section 327 (Concealing etc), after subsection (2C) insert—
“(2D) An electronic money institution that does an act mentioned in paragraph (c) or (d) of subsection (1) does not commit an offence under that subsection if the value of the criminal property concerned is less than the threshold amount determined under section 339A for the act.”
(10) In section 328 (Arrangements), after subsection (5) insert—
“(6) An electronic money institution that does an act mentioned in subsection (1) does not commit an offence under that subsection if the arrangement facilitates the acquisition, retention, use or control of criminal property of a value that is less than the threshold amount determined under section 339A for the act.”
(11) In section 329 (Acquisition, use and possession), after subsection (2C) insert—
“(2D) An electronic money institution that does an act mentioned in subsection (1) does not commit an offence under that subsection if the value of the criminal property concerned is less than the threshold amount determined under section 339A for the act.”
(12) In section 339A (Threshold amounts)—
(a) in subsection (1) leave out “327(2C), 328(5) and 329(2C)” and insert “327(2C), 327(2D), 328(5), 328(6), 329(2C) and 329(2D)”
(b) in subsection (2) after “deposit-taking body” insert “or electronic money institution”
(c) in subsection (3) after “deposit-taking body” insert “or electronic money institution”
(d) in subsection (3)(a) after “deposit-taking body’s” insert “or electronic money institution’s”
(e) in subsection (3)(b) after “deposit-taking body” insert “or electronic money institution”
(f) in subsection (4) after “deposit-taking body” insert “or electronic money institution”
(g) in subsection (8) after “deposit-taking body” insert “or electronic money institution.
(13) In section 340 (Interpretation), after subsection (14) insert—
“(14A) “Electronic money institution” has the same meaning as in the Electronic Money Regulations 2011.”’
This new clause would update definitions in the Proceeds of Crime Act 2002 to reflect the growth of financial technology companies in the UK by equalising the treatment of electronic money institutions with banks in regard to money laundering regulations.
New clause 7—Regulation of buy-now-pay-later firms—
“Within three months of this Act being passed, the Treasury must by statutory regulations make provision for the protection of consumers from unaffordable debt by requiring the FCA to regulate—
(a) buy-now-pay-later credit services, and
(b) other lending services that have non-interest-bearing elements.”
This new clause would bring the non-interest-bearing elements of buy-now-pay-later lending and similar services under the regulatory ambit of the FCA.
New clause 8—European Union regulatory equivalence for UK-based financial services businesses—
“(1) Within three months of this Act being passed, the Treasury must prepare and publish a report on progress towards regulatory equivalence recognition for UK-based financial services firms operating within the European Union.
(2) This report should include—
(a) the status of negotiations towards the recognition of regulatory equivalence for UK financial services firms operating within the European Union;
(b) a statement on areas in where equivalence recognition has been granted to UK based businesses on the same basis as which the UK has granted equivalence recognition to EU based businesses; and
(c) a statement on where such equivalence recognition has not been granted.”
This new clause would require a report to be published on progress towards, or completion of, the equivalence recognition for UK firms which the Government hopes to see following the Chancellor’s statement on EU-based firms operating in the UK.
New clause 9—Debt Respite Scheme: review—
“(1) The Chancellor of the Exchequer must review the impact on debt in parts of the United Kingdom and regions of England of the changes made by section 32 of this Act and lay a report of that review before the House of Commons within six months of the date on which this Act receives Royal Assent.
(2) A review under this section must consider the effects of the changes on debt held by—
(b) individuals with protected characteristic as defined by the Equality Act 2010,
(c) small companies as defined by the Companies Act 2006.
(3) In this section—
‘parts of the United Kingdom’ means—
(c) Wales, and
(d) Northern Ireland; and
‘regions of England’ has the same meaning as that used by the Office for National Statistics.”
This new clause would require a review of the impact on debt of the changes made to the Financial Guidance and Claims Act 2018 in section 32.
New clause 10—Legal protections for retail clients against the mis-selling of financial services—
(2) In paragraph 1(a), after “individual”, insert “, partnership or body corporate that is or would be classified as a retail client”.
(3) In paragraph 1(b), leave out “who is not an individual” and insert “not within the definition of paragraph 1(a)”.
(4) For the purposes of this regulation, a “retail client” means a client who is not a professional client within the meaning set out in Annex II of Directive 2014/65/EU of the European Parliament and of the Council of
This new clause seeks to give retail clients greater legal protections against the mis-selling of financial services products.
New clause 11—Legal protections for small businesses against the mis-selling of financial services—
‘(1) Regulation 3 (Private Person) of the Financial Services and Markets Act 2000 (Rights of Action) Regulations 2001 is amended as follows.
(2) In sub-paragraph 1(a), leave out “individual” and insert “relevant person”.
(3) In sub-paragraph 1(b), leave out “individual” and insert “relevant person”.
(4) After paragraph 1, insert—
“(1A) For the purposes of this regulation, a ‘relevant person’ means—
(a) any individual;
(b) any body corporate which meets the qualifying conditions for a small company under sections 382 and 383 Companies Act 2006 in the financial year in which the cause of action arises;
(c) any partnership which would, if it were a body corporate, meet the qualifying conditions for a small company under section 382 Companies Act 2006 in the financial year in which the cause of action arises.”’
This new clause seeks to give small businesses greater legal protections against the mis-selling of financial services products.
New clause 12—Pre-commencement impact assessment of leaving the EU Customs Union—
“(1) No Minister of the Crown or public authority may appoint a day for the commencement of any provision of this Act until a Minister of the Crown has laid before the House of Commons an impact assessment of—
(a) disapplying EU rules; and
(b) applying rules different from those of the EU as a consequence of any provision of this Act.
(2) A review under this section must consider the effects of the changes on—
(a) business investment,
(e) financial stability, and
(f) financial liquidity.
(3) A review under this section must consider the effects in the current and each of the subsequent ten financial years.
(4) The review must also estimate whether these effects are likely to have been different in the following scenarios—
(a) if the UK had left the EU withdrawal transition period without a negotiated comprehensive free trade agreement, or
(b) if the UK had left the EU withdrawal transition period with a negotiated agreement, and remained in the single market and customs union.
(5) The review must also estimate the effects on the changes if the UK signs a free trade agreement with the United States.
(6) In this section—
‘parts of the United Kingdom’ means—
(c) Wales, and
(d) Northern Ireland; and
‘regions of England’ has the same meaning as that used by the Office for National Statistics.”
This new clause would require the Government to produce an impact assessment before disapplying EU rules or applying those different to those of the EU; and comparing such with various scenarios of UK-EU relations.
New clause 13—Review of Impact of Scottish National Investment Bank Powers—
“(1) The Chancellor of the Exchequer must review the effect of the use of the powers in this Act in Scotland and lay a report of that review before the House of Commons within six months of the date on which this Act receives Royal Assent.
(2) A review under this section must consider the effects of the changes on—
(a) business investment,
(e) financial stability, and
(f) financial liquidity.
(3) The review must also estimate the effects on the changes in the event of each of the following—
(a) the Scottish Government is given no new financial powers with respect to carrying over reserves between financial years,
(b) the Scottish Government is able to carry over greater reserves between financial years for use by the Scottish National Investment Bank.
(4) The review must under subparagraph 4(b) consider the effect of raising the reserve limit by—
(a) £100 million,
(b) £250 million,
(c) £500 million, and
(d) £1,000 million.”
This new clause requires a review of the impact of providing Scottish Government powers to allow the SNIB to carry over reserves between financial years beyond its current £100m limit.
New clause 14—Application of money laundering regulations to overseas trustees: review of effect on tax revenues—
“(1) The Chancellor of the Exchequer must review the effects on tax revenues of section 31 and lay a report of that review before the House of Commons within six months of the date on which this Act receives Royal Assent.
(2) The review under sub-paragraph (1) must consider—
(a) the expected change in corporation and income tax paid attributable to the provisions in this Schedule; and
(b) an estimate of any change attributable to the provisions of section 31 in the difference between the amount of tax required to be paid to the Commissioners and the amount paid.
(3) The review must under subparagraph (2)(b) consider taxes payable by the owners and employees of Scottish Limited Partnerships.”
This new clause would require the Chancellor of the Exchequer to review the effect on public finances, and on reducing the tax gap, of section 31, and in particular on the taxes payable by owners and employees of Scottish Limited Partnerships.
New clause 15—Parliamentary scrutiny of FCA provisions—
“Any provision made by the Financial Conduct Authority under this Act may not be made unless a draft of the provision has been laid before and approved by a resolution of the House of Commons.”
This new clause subjects FCA provisions under this Act to the affirmative scrutiny procedure in the House of Commons.
New clause 16—Scrutiny of FCA Powers by committees—
“(1) No provision may be made by the Financial Conduct Authority under this Act unless the conditions in subsection (2) are satisfied.
(2) The conditions are that—
(a) a new statutory committee comprising Members of the House of Commons has been established to scrutinise financial regulation, and
(b) a new statutory committee comprising Members of the House of Lords has been established to scrutinise financial regulation.
(3) The Treasury must, by regulations, make provision for and about those committees.
(4) Those regulations must provide that the committees have at least as much power as the relevant committees of the European Union.”
This new clause requires statutory financial regulation scrutiny committees to be established before the FCA can make provisions under this Bill.
New clause 17—Review of impact of Act on UK meeting Paris climate change commitments—
“The Chancellor of the Exchequer must conduct an assessment of the impact of this Act on the UK meeting its Paris climate change commitments, and lay it before the House of Commons within six months of the day on which this Act receives Royal Assent.”
This new clause would require the Chancellor of the Exchequer to review the impact of the Bill on the UK meeting its Paris climate change commitments.
New clause 18—Review of impact of Act on UK meeting UN Sustainable Development Goals—
“The Chancellor of the Exchequer must conduct an assessment of the impact of this Act on the UK meeting the UN Sustainable Development Goals, and lay it before the House of Commons within six months of the day on which this Act receives Royal Assent.”
This new clause would require the Chancellor of the Exchequer to review the impact of the Bill on the UK meeting the UN Sustainable Development Goals.
New clause 19—Money laundering and overseas trustees: review—
“(1) The Treasury must, within six months of this Act being passed, prepare, publish and lay before Parliament a report on the effects on money laundering of the provisions in section 31 of this Act.
(2) The report must address—
(a) the anticipated change to the volume of money laundering attributable to the provisions of section 31; and
(b) alleged money laundering involving overseas trusts by the owners and employees of Scottish Limited Partnerships.”
This new clause would require the Treasury to review the effects on money laundering of the provisions in section 31 of this Act, and in particular on the use of overseas trusts for the purposes of money laundering by owners and employees of Scottish Limited Partnerships.
New clause 20—Regulatory divergence from the EU in financial services: Annual review—
“(1) The Treasury must prepare, publish and lay before Parliament an annual review of the impact of regulatory divergence in financial services from the European Union.
(2) Each annual review must consider the estimated impact of regulatory divergence in financial services in the current financial year, and for the ten subsequent financial years, on the following matters—
(a) business investment,
(e) financial stability, and
(f) financial liquidity. in each English region, and in Scotland, Wales and Northern Ireland.
(3) Each report must compare the analysis in subsection (2) to an estimate based on the following hypothetical scenarios—
(a) that the UK leaves the EU withdrawal transition period without a negotiated comprehensive free trade agreement;
(b) that the UK leaves the EU withdrawal transition period with a negotiated agreement, and remains in the single market and customs union;
(c) that the UK leaves the EU withdrawal transition period with a negotiated comprehensive free trade agreement, and does not remain in the single market and customs union; and
(d) that the UK signs a comprehensive free trade agreement with the United States.
(4) The first annual report shall be published no later than
This new clause requires a review of the impact of regulatory divergence from the European Union in financial services, which should make a comparison with various hypothetical trade deal scenarios.
New clause 21—Duty of care specification—
“(1) The Financial Services and Markets Act 2000 is amended as follows.
(2) After Section 1C insert—
‘1CA Duty of care specification
(1) In securing an appropriate degree of protection for consumers, the FCA must ensure authorised persons carrying out regulated activities are acting with a duty of care to all consumers.
(2) Matters the FCA should consider when drafting duty of care rules include, but are not limited to—
(a) the duties of authorised persons to act honestly, fairly and professionally in accordance with the best interest of their consumers;
(b) the duties of authorised persons to manage conflicts of interest fairly, both between themselves and their clients, and between clients;
(c) the extent to which the duties of authorised persons entail an ethical commitment not merely compliance with rules;
(d) that the duties must be owned by senior managers who would be accountable for their individual firm’s approach.’”
This new clause would mean that the FCA would need to ensure that financial services providers are acting with a duty of care to act in the best interests of all consumers.
New clause 22—Extension of the Breathing Space and Mental Health Crisis Moratorium—
‘(1) The Debt Respite Scheme (Breathing Space Moratorium and Mental Health Crisis Moratorium) (England and Wales) Regulations 2020 shall be amended as follows.
(2) In section 1(2), for “4th May 2021” substitute “31st January 2021”.
(3) In section 26(2), for “60 days” substitute “12 months”.’
This new clause would bring forward the start date of the Debt Respite Scheme and extend the duration of the Breathing Space Moratorium from 60 days to 12 months.
New clause 23—Impact of COVID-19 on the Debt Respite Scheme: Ministerial report—
“(1) The Treasury must prepare and publish a report on the impact of the COVID-19 pandemic on the implementation of the Debt Respite Scheme.
(2) The report must include—
(a) a statement on the extent to which changes to levels of household debt caused by the COVID-19 pandemic will affect the usage and operation of the Debt Respite Scheme;
(b) a statement on the resilience of UK households to future pandemics and other financial shocks, and how these would affect the usage and operation of the Debt Respite Scheme; and
(c) consideration of proposals for the incorporation of a no-interest loan scheme into the Debt Respite Scheme for financially vulnerable individuals affected by the COVID-19 pandemic.
(3) The report must be laid before Parliament no later than
This new clause would require the Treasury to publish a report on the impact of the COVID-19 pandemic on the implementation of the Debt Respite Scheme, including consideration of a proposal for the incorporation of a no-interest loan scheme into the Debt Respite Scheme.
New clause 24—Mortgage contracts: regulation of management and ownership—
‘(1) Article 61 of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 shall be amended as follows.
(2) After paragraph (2), insert—
“(2A) Managing a regulated mortgage contract is also a specified kind of activity.
(2B) Owning a regulated mortgage contract is also a specified kind of activity.”
(3) For sub-sub-paragraphs (3)(a)(ii) and (3)(a)(iii) substitute—
“(ii) the contract provides for the obligation of the borrower to repay to be secured by a legal mortgage of land (other than timeshare accommodation) in the United Kingdom;
(iii) at least 40% of that land is used, or is intended to be used, as or in connection with a dwelling.”
(4) After sub-paragraph (3)(c), insert—
“(d) ‘managing’ a regulated mortgage contract means having the power to exercise or to control the exercise of any of the rights of a lender under a regulated mortgage contract.
(e) ‘owning’ a regulated mortgage contract means holding the legal title to a regulated mortgage contract or to own beneficially the rights of the lender under a regulated mortgage contract.”
(5) For paragraph (4), substitute—
“(4) For the purposes of sub-paragraph (3)(a)—
(a) ‘mortgage’ includes charge and (in Scotland) a heritable security;
(b) the area of any land which comprises a building or other structure containing two or more storeys is to be taken to be the aggregate of the floor areas of each of those storeys; and
(c) ‘timeshare accommodation’ has the meaning given by section 1 of the Timeshare Act 1992(c).”’
This new clause would require the regulation of the ‘management’ and ‘ownership’ of a regulated mortgage contract.
New clause 25—Standard Variable Rates: Cap on charges for Mortgage Prisoners—
“(7) The FCA must make rules by virtue of subsection (1) in relation to introducing a cap on the interest rates charged to mortgage prisoners in relation to regulated mortgage contracts with a view to securing an appropriate degree of protection for consumers.
(8) In subsection (7) ‘mortgage prisoner’ means a consumer who cannot switch to a different lender because of their characteristics and has a regulated mortgage contract with one of the following type of firms—
(a) inactive lenders: firms authorised for mortgage lending that are no longer lending; and
(b) unregulated entities: firms not authorised for mortgage lending.
(9) The rules made by the FCA under subsection (7) must set the level of the cap on the ‘Standard Variable Rate’ at a level no more than 2 percentage points above the Bank of England base rate.
(10) In subsection (9) ‘Standard Variable Rate’ means the variable rate of interest charged under the regulated mortgage contract after the end of any initial introductory deal.
(11) The FCA must ensure any rules that it is required to make as a result of the amendment made by subsection (7) are made not later than 31st July 2021.”
This new clause would require the FCA to introduce a cap on the Standard Variable Rates charged to consumers who cannot switch to a different lender because of their characteristics and who have a regulated mortgage contract with either an inactive lender or an unregulated entity.
New clause 26—Conditions for the transfer of a regulated mortgage contract—
“(1) A regulated mortgage contract shall not be transferred without the written consent of the borrower.
(2) When seeking consent from either an existing or a new borrower the lender must provide a statement to the borrower containing sufficient information in order for them to make an informed decision.
(3) The statement provided pursuant to subsection (2) must be approved in advance by the Financial Conduct Authority and shall include—
(a) a clear explanation of the implications in terms of the interest rates which will be offered to the borrower including details of the policies and procedures which will apply for the setting of mortgage interest rates and for the making of repayments if the transfer takes place;
(b) how the transfer might affect the borrower;
(c) the name and address of the intended transferee, and of any holding company applicable;
(d) the relationship, if any, between the lender and the transferee;
(e) a description of the intended transferee and of its business, including how long it has been in operation, and details of its involvement in the management of mortgages; and
(f) confirmation that in the absence of a specific consent the existing arrangements will continue to apply.
(4) Each borrower shall be approached individually and shall be given a reasonable time within which to give or decline to give their consent.
(5) In this section, ‘regulated mortgage contract’ has the meaning given by article 61(3) of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001.”
This new clause would require the written consent of the borrower for the transfer of a regulated mortgage contract and require lenders to provide specified information to borrowers when seeking this consent and for this statement to be approved in advance by the FCA.
New clause 30—Offence of facilitation of or failure to prevent financial crime (No. 2)—
“(1) A financial services company commits an offence if it—
(a) facilitates, aids or abets a relevant offence;
(b) does not take all reasonable steps to prevent the commissioning of a relevant offence.
(2) A financial services company guilty of an offence under this section shall be liable—
(a) on conviction on indictment, to a fine;
(b) on summary conviction in England and Wales, to a fine;
(c) on summary conviction in Scotland or Northern Ireland, to a fine not exceeding the statutory maximum.
(3) For the purposes of this section—
‘financial services company’ means any person, including a body of persons corporate or unincorporated, authorised by or registered with the Financial Conduct Authority’;
‘relevant offence’ means—
(a) fraud, as defined in the Fraud Act 2006;
(b) false accounting, as defined in the Theft Act 1968;
(c) any offence under the following sections of the Proceeds of Crime Act 2002;
(d) tax evasion;
(e) an offence under Part 7 of the Financial Services Act 2012; and
(f) insider dealing, as defined in the Criminal Justice Act 1993.”
This new clause would create an offence in cases where financial services companies facilitate or fail to prevent financial crime.
Government amendment 15.
Amendment 13, in clause 33, page 39, line 37, at end insert—
“(c) the successor account must bear, in each financial year, at least the same level of bonus as the mature account before maturation.”
This amendment would ensure customers do not lose any bonus should their funds be moved from a matured account into a new one.
Amendment 14, in clause 33, page 39, line 37, at end insert—
“(7) Regulations under sub-paragraph (2) may only be made if the conditions in sub-paragraph (8) are met.
(8) The conditions referred to in sub-paragraph (7) are—
(a) There must be an account available to any affected customer which provides at least as generous a bonus structure as the matured account.
(b) The customer must have been successfully contacted by a relevant Department or public body.
(c) The customer must have been given full and accessible information on the effects of changing account.”
This amendment would ensure customers are contacted and informed before their funds are transferred.
Amendment 4, in clause 37, page 44, line 9, at end insert—
“(c) after subparagraph (2) insert—
(2A) A person may not be appointed as chief executive under paragraph 2(2)(b) unless they have the consent of the Treasury Committee of the House of Commons.”
This amendment would require a candidate for the position of chief executive of the FCA to receive the consent of the Treasury Committee for their appointment.
Amendment 3, in clause 37, page 44, line 14, at end insert—
“(2C) A person may not be appointed as chief executive under paragraph 2(2)(b) until the Treasury has prepared and published a report on the effectiveness of the FCA under the tenure of the previous chief executive.”
This amendment would require the Treasury to prepare and publish a report on the effectiveness of the previous chief executive in advance of the appointment of a new chief executive.
Government amendments 16 to 21.
Government new schedule 1—Forfeiture of money: electronic money institutions and payment institutions.
Government amendment 22.
Government amendment 23.
Amendment 5, in schedule 2, page 60, line 18, at end insert—
“(f) impose requirements relating to the publication of quarterly statements on portfolio holdings.”
This amendment would allow the FCA to impose requirements on investment firms to publish quarterly statements on their portfolio holdings.
Amendment 6, in schedule 2, page 60, line 18, at end insert—
“(3A) General rules made for the purpose of subsection (1) must impose requirements relating to the publication of quarterly statements on portfolio holdings.”
This amendment would require the FCA to impose requirements on investment firms to publish quarterly statements on their portfolio holdings.
Government amendments 24 to 26.
Amendment 1, in schedule 2, page 63, line 5, at end insert—
“(ba) the target for net UK emissions of greenhouse gases in 2050 as set out in the Climate Change Act 2008 as amended by the Climate Change Act (2050 Target Amendment) Order 2019, and”.
Amendment 7, in schedule 2, page 63, line 5, at end insert—
“(ba) the promotion of ethical investments with reference to the judgements of the International Court of Justice or the High Court of England and Wales concerning genocide under Article II of the United Nations Convention on the Prevention and Punishment of the Crime of Genocide, and findings of genocide or ethnic cleansing by a United Nations-mandated investigation.”
This amendment would require the FCA, when making Part 9C rules for investment firms, to have regard to findings of genocide by the courts and UN-mandated investigations.
Amendment 8, in schedule 2, page 63, line 5, at end insert—
“(ba) the likely effect of the rules on trade frictions between the UK and EU, and”.
This amendment would ensure the likely effect of the rules on trade frictions between the UK and EU are considered before Part 9C rules are taken.
Amendment 9, in schedule 2, page 63, line 5, at end insert—
“(ba) the likely effect of the rules on the UK meeting its international and domestic commitments on tackling climate change, and”.
This amendment would ensure the likely effect of the rules on the UK meeting its international and domestic commitments on tackling climate change are considered before Part 9C rules are taken.
Amendment 10, in schedule 2, page 79, line 25, after “activities” insert
“in the UK and internationally”.
This amendment would ensure the likely effect of the rules on the relative standing of the United Kingdom as a place for internationally active credit institutions and investment firms to be based or to carry on activities are considered both in terms of their UK and international activities before Part CRR rules are taken.
Amendment 2, in schedule 3, page 79, line 29, at end insert—
“(ca) the target for net UK emissions of greenhouse gases in 2050 as set out in the Climate Change Act 2008 as amended by the Climate Change Act (2050 Target Amendment) Order 2019, and”.
Amendment 11, in schedule 3, page 79, line 29, at end insert—
“(ca) the likely effect of the rules on trade frictions between the UK and EU, and”.
This amendment would ensure the likely effect of the rules on trade frictions between the UK and EU are considered before CRR rules are taken.
Amendment 12, in schedule 3, page 79, line 29, at end insert—
“(ca) the likely effect of the rules on the UK meeting its international and domestic commitments on tackling climate change, and”.
This amendment would ensure the likely effect of the rules on the UK meeting its international and domestic commitments on tackling climate change are considered before CRR rules are taken.
Government amendments 27 to 31.
Our financial services sector is critical to our national effort to recover from the impacts of covid-19 and move towards a resilient, open and sustainable future for the UK economy. The Bill is the next step in a process to take back control of our financial services legislation, having left the European Union and come to the end of the transition period.
There are a large number of amendments to address, so I will speak at some length, but hopefully as succinctly as possible. Let me start with the 20 new clauses and amendments tabled in my name, which do four things. I will first address new clauses 27 and 28, new schedule 1 and amendments 16 to 20. I hope that Mr McFadden will be pleased to see this set of new clauses and amendments, which have been tabled in response to an issue that he raised in Committee.
The Government remain committed to supporting the FinTech sector. The UK is widely considered to be a leading market—probably the leading market—for starting and growing a FinTech firm, and I am proud of that reputation. It has recently become clear that provisions in the Proceeds of Crime Act 2002 are creating challenges for some types of smaller firms known as e-money institutions and payment institutions. These institutions, which include industry leaders such as Revolut, Worldpay and TransferWise, have experienced significant growth over recent years. Currently, they need to submit a defence against money laundering request—which I shall refer to as a DAML from now on—to the National Crime Agency, to seek consent before proceeding with any transaction involving criminal property, however small.
I will not on this occasion, if the hon. Gentleman does not mind, because I need to make progress.
In the context that I just outlined, e-money and payment institutions are subject to greater bureaucracy than banks and building societies, which benefit from a £250 threshold amount, under which, in certain circumstances, they do not need to submit a DAML and can proceed with the transaction. E-money and payment institutions must submit a large number of DAML requests for low-value transactions, which are generally of extremely limited use to law enforcement. Processing these requests consumes law enforcement resource, as well as placing a disproportionate burden on these firms, so the amendment equalises the treatment between banks and payment and e-money institutions.
Alongside this change, new clause 28 amends the scope of account freezing and forfeiture powers in the Proceeds of Crime Act and the Anti-terrorism, Crime and Security Act 2001 to include accounts held at payment and e-money institutions. That will ensure that law enforcement are able quickly and effectively to freeze and forfeit the proceeds of crime and terrorist property when held in payment and e-money institution accounts. I hope that, given this, the Opposition will consider withdrawing new clause 6, which has a similar purpose. I am grateful to the right hon. Gentleman for his co-operation on this matter.
I want to ask this question because it is very important. We have had tremendous difficulties in Northern Ireland with paramilitaries and money laundering. I am just wondering, in the context of the legislation to which the Minister has just referred and money laundering in particular—we have this in my constituency of Strangford and across the whole of Northern Ireland—what discussions has he had with the police and those in the Northern Ireland Assembly to ensure that loyalist paramilitaries and republican paramilitaries, who are really criminals at the end of the day, are stopped from using that money? Will that be able to be stopped in Northern Ireland if this legislation goes through?
I thank the hon. Gentleman for his point. It really does stray beyond the provisions of this particular amendment. He makes an important point, but it is not one that I can address at this point. I would be very happy to write to him to answer his question more appropriately.
I shall now turn to the remaining amendments in my name, which ensure that the powers that the Prudential Regulation Authority and the Financial Conduct Authority have over holding companies function as intended. Amendments 25, 26 and 27 enable the PRA and the FCA to make rules directly over holding companies to void employment contracts and require recovery of remuneration paid to individuals when rules prohibiting them from being paid in a certain way are breached. This is important because, as a result of the measures brought forward in this Bill, responsibility for ensuring compliance with a banking or investment group’s capital requirements is moving from its operating companies to its holding company. This amendment ensures that the regulator can enforce breaches of the rules at the level at which they are set.
Amendments 15, 28, 29, 30 and 31 are a set of relatively small amendments that ensure that the PRA has the full suite of enforcement tools at its disposal for the supervisory regime over holding companies. Amendment 24 is a technical drafting point. Amendments 22 and 23 are clarificatory amendments, which are necessary to ensure that the investment firm’s prudential regime applies to the correct set of firms and does not have extraterritorial effect. I know that this is an important point for my hon. Friend Bim Afolami. I thank him for his work on this and hope that he will welcome these amendments.
I shall now turn to the other amendments that have been tabled by Members of this House. First, there are a number of amendments that relate to criminality and money laundering. New clause 4 and new clause 30 would create a new criminal offence for FCA-regulated persons of facilitating and of failing to prevent economic crime. This is an important and complex topic, so I will seek to address it in detail.
The Government have taken significant action to improve corporate governance and culture in the financial services industry. We introduced the new senior managers and certification regime, which enables the FCA more easily to take action against the responsible senior manager where there has been a failure in a firm’s financial crime systems and controls. Separately, the Government have recently strengthened the anti-money laundering requirements on financial services firms.
In 2017, the Government issued a call for evidence on whether corporate liability law for economic crime needed to be reformed. Unfortunately, the findings were inconclusive and, as a result, the Government have tasked the Law Commission to conduct an expert review on this issue to report by the end of this year. That will ensure a more comprehensive understanding of any issues with current economic crime law, as well as the implications of any potential options if reform is considered necessary. Before any broader new “failure to prevent” defence for economic crime is introduced, there needs to be strong evidence to support it, as there was when similar bribery and tax evasion offences introduced in 2010 and 2017 respectively took place. A new offence will also need to be designed rigorously, with specific consideration given to how it sits alongside associated criminal and regulatory regimes and to the potential impacts on business.
The proposed new offences in this amendment would lead to a discrepancy in treatment between FCA-regulated businesses and other businesses under criminal law. The 2017 call for evidence did not provide any evidence to suggest financial services businesses should be specifically targeted with a new offence. Indeed, many of the examples provided related to businesses in other sectors.
In terms of the corporate offence of failing to prevent economic crime, the Minister asked for evidence on that, but there is a wealth of evidence that the FCA is not holding either corporations or individuals to account for some egregious behaviour, particularly in the banking system and many other parts of corporate life. We are seeing fraud, but £9 billion of fines in the US in a 10-year period and only £260 million in the UK. Is that not proof alone that we need legislation in this area?
It is easy to point to headline differences in rates of fines, but it is quite different to intervene with a new piece of legislation that is fit for purpose. That is why I am absolutely clear that the call for evidence this year will gather that evidence—I am sure that my hon. Friend will be keen to submit his evidence to that—and, in due course, we will look at it and examine what the implications are. However, I am not suggesting from the Dispatch Box that everything is perfect with respect to regulation, and of course, there are regulatory failures from time to time and criminal activity. The question is what the most appropriate legislative response is.
I turn to new clause 14, which would add a requirement for the Government to report on the effect of clause 31 on tax revenues. This does not reflect the effect of the provision that we have included in the Bill. The Bill provision merely ensures the continuation of, and the ability to vary in future, the original powers assigned to Her Majesty’s Revenue and Customs with respect to registration of overseas trusts. It does not make any change to taxes.
Similarly, it is not necessary to introduce a report on the impact on money laundering of clause 31, as proposed by new clause 19. Existing legislation already requires the Treasury to carry out a review of its existing provisions within money-laundering regulations and publish a report setting out the conclusions of its review by June 2022. This wider review will provide a more meaningful evaluation than the one envisaged in the amendment.
Amendment 7 raises a very important issue. This amendment would require the FCA to “have regard” to the promotion of ethical investments with reference to findings of genocide by the High Court and the International Court of Justice when making rules for the investment firm prudential regime. While I am extremely sympathetic to the issue raised by Members on both sides of the House, including Rushanara Ali and my right hon. Friend Sir Iain Duncan Smith, this Bill is not the right place to address the issue. This amendment would require the FCA to make political choices about whether to associate itself and its rules with countries that are guilty of genocide or ethnic cleansing. These important decisions on UK foreign policy are for Government to take and not an independent financial services regulator.
I will now address a number of amendments that seek to bring new activities—
I am glad he gave me time to get this awful mask off.
I understand fully my hon. Friend’s arguments, and I will come to that in a second when I have an opportunity to catch Madam Deputy Speaker’s eye, but on the point he is making, I simply ask him this question: can he conceive that any UK Government would ever authorise trade arrangements on a special basis with any country guilty of genocide?
My right hon. Friend has raised this matter in the context of his raising it in a number of other regards with respect to the Trade Bill, and it would obviously be appropriate for my ministerial colleagues in that Department to address it in that context. Today, it is my responsibility to deal with it in the context of financial services regulation, as I think I have done, but I do not want to deny the grave significance of the matter that he is raising, and indeed, my right hon. Friend Mr Mitchell has raised it with me, too. Obviously, these are complex matters on which others will respond in due course.
I will now address a number of amendments that seek to bring new activities into FCA regulation. New clause 7 relates to “buy now, pay later” products and would require the Treasury to bring those products and other interest-free credit products into the scope of financial services regulation. Those products can play an important role by providing a lower-cost alternative for people making purchases, especially larger items. As an interest-free credit product, “buy now, pay later” is inherently lower-risk than other forms of borrowing, and can be a useful part of the toolkit for managing personal finances and tackling financial exclusion.
However, I am very aware of the potential risks, particularly in relation to consumers’ taking on unsustainable levels of debt. A delayed payment on an occasional basis for someone who has the means to make those repayments is different from accumulating unsustainable levels of debt, which cause that individual to seek additional financing from high-cost lending. I recognise that the conflation of those two activities is the motivation. The former interim CEO of the FCA, Chris Woolard, is undertaking a review into change and innovation in the unsecured credit market—specifically, the emergence of “buy now, pay later” products, which I recognise have grown considerably in recent months. Mr Woolard is due to publish his findings shortly, and I stand ready to take swift and proportionate action following the conclusion of the review, reflecting carefully on what he says. I have worked closely with him over the past three years when he has made interventions in his previous role, and I will address his report and engage with the industry and interested parties at that point.
I now turn to new clauses 24 to 26. I have a great deal of sympathy for borrowers who are unable to switch their mortgage deal and I am committed to finding practical ways to help. Progress has been made over recent months. This is an important topic and I will respond in a little detail. I am afraid that the new clauses risk a number of unintended consequences. It would be disproportionate to support a small number of borrowers, as it would be likely to have an impact across the whole of the mortgage market and in the worst case could damage financial stability.
On new clause 24, the benefit to borrowers of extending the FCA’s regulatory perimeter is likely to be minimal. The vast majority of firms that manage the key mortgage activities, such as rate setting, are already FCA-regulated. Furthermore, where those are separate organisations, the beneficial owners, the ultimate economic owners, do not manage relevant activities. Therefore, extending the FCA’s oversight to ownership would also have little material impact on consumer outcomes.
This is a live matter for discussion with the FCA. If I believe that there is a meaningful additional value from that premature extension, I will look at that sympathetically, but that is not my judgment at this point. We are yet to see evidence that the challenges that borrowers are facing would be remedied by extending the FCA’s remit. It is important to emphasise that extending the perimeter would not allow consumers to access new deals or cheaper rates that they could not already. The new clause not only seeks to extend the FCA’s remit to more firms that engage in mortgage lending, but also to the type of mortgages that are regulated. That would bring into regulated scope lending such as buy-to-let mortgages and would fundamentally reshape the regulation of the mortgage market in the UK.
New clause 25 seeks to cap the interest rates paid by mortgage prisoners. Data from the FCA suggests that a narrow majority of borrowers with inactive lenders pay less than 3.5% interest. Compared with those with similar lending characteristics, consumers with inactive lenders only pay marginally more—about 0.4 %–than those with an active lender. Capping standard variable rates on mortgages with inactive lenders would represent a significant intervention into the market, potentially having an impact on financial stability, as it would restrict lenders’ ability to vary prices in line with market conditions. I believe that such an intervention would be disproportionate, and potentially counterproductive.
Yesterday I was looking at a document written by a former lead analyst in that very market—someone who used to work for PIMCO. He very clearly sets out that the proposed change would have a transformational effect on tens of thousands of mortgage prisoners who will not be helped by any other measure that could be put in place. He says quite clearly:
“Introducing an SVR cap on closed, non-lending books would not disrupt the residential mortgage-backed security market”.
That is a direct contradiction of my hon. Friend’s position.
Indeed, Martin Lewis, who does some excellent work in this regard and whom I met on this topic recently, looked at this very matter—he commissioned some work from the London School of Economics to look into it—and recommended that we should not take this cap on the SVR. There will always be a variety of views, but I have set out very clearly why I think this is the right position.
The Minister is full of reasons, as Treasury Ministers always are, for not accepting amendments or new clauses that people have tabled to solve problems. Does he appreciate the frustration that mortgage prisoners and those who are trying to do something about financial crime feel when they hear Ministers giving us all the technical reasons why things cannot be done but not really proceeding with much alacrity to solve the problems that we raise, albeit not necessarily in the correct format?
I am very happy to respond to that. That is why, over the last three years, I have engaged with the problem and worked with the FCA to change the lending criteria so that an estimated 125,000 of the 250,000 mortgage prisoners have been able to switch to more affordable mortgages if they are not taking on lending and are not in arrears. This a complex problem. I am still focused on the 55,000 that we estimate are in that difficult position. I will continue to work with stakeholders and industry representatives to find solutions, working closely with the FCA, but that does not permit me simply to allow any intervention. I did start my remarks with a concession on something that I thought was constructive.
Let me move on to new clause 26, which would require a lender to seek a borrower’s permission before transferring their loan. That would give rise to significant financial stability concerns, especially if a firm was entering liquidation, since it would prevent the timely transfer of the mortgage book. Selling a mortgage book can also represent a sensible way for a lender to manage its balance sheet and does not change the terms or conditions of a borrower’s mortgage contract.
I turn to a number of amendments relating to EU exit and financial services. New clause 12 would require the Treasury to assess the impact of adopting different rules from those of the EU through the Bill. It is right that the UK is able to adopt rules that best suit our own markets. The Government have published an impact assessment alongside the Bill, so the new clause is unnecessary.
There is one overseas territory that is intimately connected to the EU: Gibraltar, which values its financial independence. I would just like to use this opportunity—I am sure the Minister will not mind commenting—to reassure the people of Gibraltar that their financial services are absolutely safe under this Government and this Bill.
I am very happy to do that. Indeed, the Bill makes provision to ensure that there is ongoing certainty for financial services—particularly the insurance industry, which is so significant to the Gibraltarian economy.
New clause 20 would require the Government to review the cost of divergence from EU rules. I just do not accept that characterisation. Regulatory regimes are not static. There are a lot of myths around this area of divergence. Rules evolve all the time. Where we make changes to our frameworks as they stand today, those will be guided by our continued commitment to the highest international standards and by what is right for the UK’s complex and highly developed markets, to support our world-class environment for doing business. The Bill is the first part of that journey.
New clause 8 would require the Government essentially to report on the status of the EU’s considerations about UK equivalence. That is an autonomous process for the EU, and therefore that is not something that the Government can agree to do. The Chancellor recently announced a package of equivalence decisions—17 decisions out of the 30 that we had to make for the EU—and I will keep the House updated on the UK’s approach to equivalence, just as I did throughout the transition period.
I turn to new clauses 15 and 16, and amendments 3 and 4, which relate to how the regulators’ actions under the Bill will be scrutinised by Parliament. The UK’s regulators are internationally renowned as leaders in financial services regulation, and the Government believe that it is right that powers to implement often highly complex rules are delegated to the bodies with the appropriate technical expertise.
The FCA is already accountable to the Treasury, Parliament and the public. There is a statutory requirement for the FCA’s annual report and accounts for the financial year to be laid before Parliament by the Treasury, and a requirement to hold an annual public meeting at which the annual report can be discussed. There is currently nothing preventing a Select Committee of either House from reviewing the activities of the FCA at an inquiry, taking evidence, calling witnesses and reporting with recommendations. The Treasury recently published a consultation document on the review into the future regulatory framework for financial services, which seeks to achieve the right split of responsibilities between Parliament, Government and the regulators, now that we have left the EU. That is a significant undertaking that we must get right, and I look forward to continuing to engage with Members as part of that review.
I have spoken at length about a number of topics that are not directly addressed in the Bill. I will now address amendments relating to some of the measures that make up the Bill itself. I have already said that the prudential measures contain accountability frameworks, and I will begin by addressing a number of amendments that seek to add additional elements to that framework. As I said to the Public Bill Committee, amendments 1 and 2, along with amendments 9 and 12, all add considerations relating to climate change to the accountability frameworks. They are not necessary, as the Bill grants the Treasury a power to specify further matters to the accountability framework at a later date. I can assure Members across the House that the Treasury will carefully consider adding climate change as an issue to which the regulator should have regard, in the future. However, any such addition needs careful consideration and consultation on how it can be best framed. Therefore, the Government cannot support these amendments.
Amendments 8 and 11 would require the FCA and the PRA to have regard to the impact of their prudential rules on frictionless trade with the EU. Similarly, amendment 10 would require the PRA to have regard to the UK’s relative standing when making rules on capital requirements. These amendments are unnecessary. The accountability framework introduced by the Bill already requires the regulators to consider the impact of their rules on financial services equivalence. That is the main mechanism for financial services relationships between the UK and all overseas jurisdictions, not only the EU, and the Bill already requires the PRA to consider the UK’s standing in relation to other countries and territories.
Amendments 13 and 14 relate to the Help to Save scheme. We expect the majority of account holders to make an active decision about where they want to transfer their money where their accounts mature. However, I recognise that some individuals will become disengaged from their accounts, and before I turn to the specific amendments, I want to update the House on the Government’s plans for supporting these disengaged customers. Successor accounts, which are enabled by this clause, are one of the options that have been under consideration. Having carefully assessed the options, the Government have decided not to use the power provided by this clause at this point. This is primarily because of the operational issues, which mean that we would not be able to guarantee that every customer would be able to have a successor account opened for them automatically. I was therefore unable to conclude that this approach represented value for money. Instead, the Government propose to support customers who do not provide specific instructions for the transfer of their money, by ensuring that they receive their funds into their nominated bank account—the account into which they already receive their bonus payments. If the bonus payments are paid into that account, the principal amount will revert to that account. This will ensure that disengaged customers will be reunited with their savings and bonus payments.
Amendments 13 and 14 would, in effect, extend the four-year term of the Help to Save scheme by providing a guaranteed bonus for the successor account. The aim of Help to Save is to kick-start a regular long-term savings habit and encourage people to continue to save via mainstream savings accounts. The Government’s view is that a four-year Help to Save period is sufficient to achieve this objective. Amendment 14 also seeks to mandate the contacting of customers regarding the transfer of balances to a successor account. This amendment is unnecessary, as all customers will be contacted ahead of their accounts maturing, to encourage them to engage with their accounts and to provide instructions on where to transfer their funds.
New clause 2 would require the Treasury to publish a report on the anticipated use of the debt respite scheme. The expected demand and take-up of both elements of the debt respite scheme have been quantified to the extent possible at this stage and published in the appropriate impact assessments. I share right hon. and hon. Members’ determination that these schemes should work for those who need them. The Government will of course closely monitor both schemes’ usage and consider the impacts of covid-19 and the wider economic recovery on them. I am afraid that producing a report within six months evaluating the impact of changes made by clause 32 on levels of debt across the UK, as proposed by new clause 9, is not possible, as the regulations establishing a statutory debt repayment plan are unlikely to have been made and implemented by that point. I can assure Members that the Government are committed to properly evaluating both the statutory debt repayment plan and the breathing space after their commencement.
New clause 22, standing in the name of Christine Jardine, would require the breathing space scheme to commence on
The amendment would also extend the duration of a breathing space moratorium from 60 days to 12 months. I can reassure Members that the breathing space scheme has been subject to extensive consultation, and 60 days balances the interests of a debtor and the rights of creditors, and is longer than the six weeks originally committed to in the 2017 manifesto.
I am afraid that the report on the impact of covid-19 on implementation of the new debt respite scheme proposed by new clause 23 is not feasible by the suggested date of
I conclude by addressing a number of small, separate amendments. New clauses 17 and 18 would require the Government to report to Parliament on the impact of the Bill on meeting our international obligations under the Paris agreement and the UN sustainable development goals. The Government are committed to meeting those goals and believe that doing so will require effort from all sectors of the economy. That includes the need for strong commitment from the financial services sector to continue developing into an open, green and technologically advanced industry, serving the communities and citizens of this country. Green finance will be integral to the future of financial services legislation in the UK, and our international commitments will be considered extensively. However, as the Bill is part of a much wider process, it would not be appropriate to review its impact on our international obligations in isolation.
I do not believe that new clause 1, which seeks to require the Treasury to publish a report on the standards of conduct and ethics in FCA regulated or authorised firms, is necessary either. The FCA supervises, monitors and investigates authorised firms and individuals to ensure that the relevant principles and rules are being met. It also has wide-ranging powers to investigate potential rule breaches and is further required to have regard to the principle that it should exercise its functions as transparently as possible.
New clauses 10 and 11 relate to the mis-selling of financial services. The Government have given the FCA a strong mandate to stop inappropriate behaviour in financial services, using a wide range of enforcement powers—criminal, civil and regulatory—to protect consumers and businesses alike. Following the expansion of the remit of the Financial Ombudsman Service in April 2019, 97% of small and medium-sized enterprises in the UK can now put forward a complaint.
New clause 13 relates to the Scottish National Investment Bank. We have already agreed significant financial flexibilities with the Scottish Government as part of the Scotland Act 2016 and their fiscal framework, including a £700 million reserve. The Scottish Government can manage the Scottish National Investment Bank through these existing arrangements if they choose to prioritise it.
I know that a number of Members have strong views on a proposed statutory “duty of care” for the FCA. As the FCA is already taking steps to ensure that financial services firms exercise due care and regard when offering products, services and advice, a statutory duty of care, as proposed by new clause 21, is not necessary. I am afraid that I do not see the case for amendments 5 and 6, which would respectively seek to provide a power for or impose a duty on the FCA to require investment firms to publish quarterly statements on portfolio holdings. The FCA already has the ability to impose public disclosure requirements on FCA investment firms under its general rule-making powers. The content and frequency of any disclosure requirements should be determined by the expert regulator, and the FCA is best placed to determine that level of detail.
I look forward to another session of robust and informed debate, and I hope that I have provided the House with clear and reasonable explanations for the Government’s position on the amendments before us today. Thank you for your patience.
Before I call the shadow Minister, I should say that we have until 6 o’clock for this debate and a number of colleagues want to get in. I have introduced a five-minute time limit to start with, to try to accommodate some of the main people behind other amendments, but it is very likely that I will quickly have to take that down afterwards; I just warn colleagues that that may well happen.
I remind hon. Members that when a speaking limit is in effect for Back Benchers, a countdown clock will be visible on the screens of hon. Members participating virtually. For hon. Members participating physically in the Chamber, the usual clock in the Chamber will operate.
The Bill returns to the House at a very important moment for the country’s economy and our financial services industry. We have just come to the end of the transition period with the European Union, and we are of course in the teeth of the battle against the virus. Against a background like that, the business of legislating can seem even more prosaic than usual, and perhaps that is even more the case with a Bill such as this one. It is a mixed bag of measures dealing with everything from onshoring various EU directives to the length of the term of office for the chief executive of the Financial Conduct Authority. Some of it is a necessary consequence of our withdrawal from the European Union, and other parts look as though they have been sitting in the Treasury waiting for a legislative home, like policies hoping for a passing bus.
I want to focus on the amendments tabled in the name of the Leader of the Opposition and then turn to some of those tabled by my right hon. and hon. Friends. The first amendment I want to speak to is our amendment 1 on the UK’s net zero commitments. The Bill sets out, in schedules 2 and 3, a list of things that the regulators have to have regard to in the exercise of their new and expanded functions under the Bill. It talks of international standards and competitiveness, yet nowhere is there a mention of the overarching goal that will shape so much of our economy in the decades to come.
In this place, we have rows and arguments about all manner of issues, but sometimes the things that generate the most heat, if the Minister will pardon me the pun, are not always the biggest or most important issues. Conversely, just because an issue has bipartisan support does not make it less significant, and there is no doubt that the Climate Change Act 2008, as amended by the Climate Change Act (2050 Target Amendment) Order 2019, is one of the most significant pieces of economic legislation to pass in this country for many years.
To achieve our net zero goals will require wholesale change in many walks of life. The briefest of looks at the Committee on Climate Change’s report on how this should be done shows what the main areas will be. On energy, we need to find replacements for fossil fuels, we have to invest in the shift to hydrogen and we are still trying to make carbon capture and storage a practical reality. On transport, the transition to battery power will have to proceed at an ever-increasing pace. On housing, we need not only to build new zero-carbon homes, but to retrofit millions of existing homes with zero-carbon heating systems. Agriculture, food production and even the clothes we wear—all these things will undergo big change, and all of them will require significant financial investment.
The UK financial services sector has a huge role to play. In seeking a post-Brexit role, what better long-term mission could there be than empowering the change that we need to make to preserve the planet for future generations? This is not just my view—the Chancellor himself has said as much. In his statement on the future of financial services, given two months ago from the Government Dispatch Box, he not only announced the first green gilts, but said he wanted to see
“the full weight of…capital behind the critical global effort to tackle climate change”.—[Official Report,
Yet this Bill, which empowers the regulators in so many other ways, is totally silent on that issue. The Minister says we might do it in the future. [Interruption.] He says from a sedentary position that we will do it in the future. He has an opportunity to do it today—he could just accept the amendment. What is the point of waiting until the future to do this, as he has indicated he will, when there is an amendment that does not seek to add any new commitments but simply to make this part of the remit of our financial services regulators?
There are many reasons, as my newly ennobled—if that is the correct word; newly honoured, perhaps—hon. Friend Dame Angela Eagle said, to say no to amendments, but “not invented here” is one of the worst if the Government have indicated they are going to accept it.
The Government say they want the UK to be the centre for green finance globally, but their first legislative outing on this sector since we left the European Union says nothing about mandating the regulators of the industry to make that part of their mission. As I said, our amendment does not seek to add to the commitments on net zero that the UK has already made, which are already set out in legislation and enjoy the support of all sides of the House, but to make these part of the remit of the regulators that shape our financial services industry. There is already a move towards greater environmental investing from investment funds and from consumers who want to invest in this way, and there is a desire for these products, so why do the Government not back that up by making it part of the regulators’ remit?
We know that these commitments cannot be met without large-scale investment. To anyone who says to just leave it to the market if there is an investor desire, we also know that it cannot be done by the private sector alone. This will take both the private sector and the public sector working together and pulling in the same direction. It is in that spirit that we put forward the amendment. We ask for something that has bipartisan support, is in line with the post-Brexit goal for the sector as set out by the Chancellor himself and will make it easier for the country to achieve its commitments.
Further to that, we are also asking for something that the Minister said in recent minutes that the Government will do at some point anyway. We very much hope that, between now and six o’clock, the Government will reconsider and accept the amendment, which they said they agree with and will bring forward in some way themselves at some point.
Just two weeks ago, the House approved the post-Brexit trade and co-operation agreement, but for financial services this is basically a no deal agreement. The references within it do no more than repeat standard pledges of co-operation in every free trade agreement. The Prime Minister himself acknowledged that, for this sector, he did not achieve as much as he hoped. Indeed, within a few days of the agreement, £6 billion-worth of euro-denominated share trading shifted from London to European exchanges—an immediate response to the new situation.
Does my right hon. Friend agree that the way the Government approached the Brexit negotiation means that there is literally no incentive for the EU to agree equivalence arrangements, because the lack of them means exactly what he just pointed out—jobs and trading formerly done in London migrating to the EU? Does he also agree that, in this new environment, any move by the Government to give the City a competitive edge is likely to lessen the chances of progress on equivalence in the EU, and the market access that comes with it? That is another threat to jobs in the City and to tax revenue for the Exchequer.
My hon. Friend is absolutely right that this throws into sharp relief the claim that we hold all the cards. It also throws into sharp relief the debate about divergence, as that remains undecided. The fact that the agreement approved by this House two weeks ago did not cover financial services in any meaningful way was not an accident; it was a choice that the Government made. Step by step, the Government abandoned any attempt to prioritise the market access that the financial services sector, and indeed services in general, had until the end of last year. I remind Conservative Members of the Chequers paper published in 2018, of which they may have more or less fond memories. It acknowledged that on this issue,
“there will be more barriers to the UK’s access to the EU market” than there are today. On equivalence regimes, it said:
“These regimes are not sufficient to deal with a third country whose financial markets are as deeply interconnected with the EU’s as those of the UK are. In particular, the existing regimes”— that is, the equivalence regimes—
“do not provide for…institutional dialogue…a mediated solution where equivalence is threatened by a divergence of rules or supervisory practices”.
That which was deemed insufficient by the Government two and a half years ago has now become the height of their ambitions, and even that has not yet been achieved. With each step back from what they aimed for before, the incentives to shift funds and people become bigger.
A few days ago, the Chancellor talked in an interview about a big bang 2.0 for the financial services sector. Would it not be better to secure the basics—a minimal level of market access—rather than indulging in another bout of meaningless overclaim? There is a potential route to saving something, because the agreement calls for a memorandum of understanding on financial services to be agreed by the end of March. Can the Minister confirm that it is the Government’s objective to secure equivalence recognition by the end of that three-month period?
That is what our new clause 8 calls for: a report on the progress within the timescale set out in the agreement approved by the House a couple of weeks ago. Achieving such equivalence would be a far lower and more precarious level of market access than the sector has enjoyed until now, but it would be more than the no-deal outcome that the Government have given it at the moment. Will the Minister commit to reporting to the House on the progress of that issue? Without progress, the sector has no clarity about the basis on which it will trade with the European Union in the future.
We do not need to move new clause 6. The Minister is correct to say that we raised the issue of FinTechs and money laundering in Committee, where an amendment was moved by my hon. Friend Abena Oppong-Asare. The new clause seeks to equalise the rules on seizure of assets and the proceeds of crime for FinTechs and traditional financial institutions. I am grateful to the Minister for responding positively to our plea about that issue and for bringing forward new clause 27 and the associated amendments.
I now turn to some of the other issues on the amendment paper. We support the efforts of my hon. Friend Stella Creasy in new clause 7 to bring the operations of the buy now, pay later sector under the auspices of the FCA. That is a good example of how regulation has to respond to innovation; the Minister rightly said that it cannot stand still. This is a sector that innovates, and the emergence of the sector is an innovation, at least on the scale on which it is currently operating, and it has been growing over the past year. Much of the sector does not charge interest or fees, but the model is based on encouraging people to buy more. There are certainly financial penalties for borrowers who get into more debt than they can handle or who find themselves unable to make the payments.
To those companies that have taken the approach of St Augustine—“Make me just, Lord, but not yet!”—and have said that they favour regulation, but not now, which is a bit like the Minister with net zero, I would say, look again at the terms of new clause 7. All it calls for is the protection of consumers from unaffordable debt. Exactly how to regulate and do that is left to the FCA to decide. The new clause simply establishes the principle, which we support.
My right hon. Friends the Members for Barking (Dame Margaret Hodge) and for Hayes and Harlington (John McDonnell) have tabled amendments on the failure to prevent economic crime. We received strong representations on this issue in written evidence, and the problem is focused in this way: when wrongdoing happens within a company, far too often it is in the interest of directors and senior managers to plead ignorance. That way, if anyone carries the can at all, it will be someone further down the line, and the culture and the circumstances that allowed the economic crime to happen go unexamined.
That happened time after time during the LIBOR scandal a few years ago. I had the task, maybe the pleasure, of serving on the cross-party parliamentary inquiry, and chief executive after chief executive of major financial institutions came into this building to express their incredulity at what their own traders were up to. These were some of the highest-paid people in the world, and each one testified that they learned what was happening in their own company only when they read about it in the newspapers. It worked for them, and there were no corporate prosecutions for this in the UK.
The amendments essentially seek to remove the defence of ignorance when it comes to corporate crime. The truth is that we have already legislated to remove that defence in other areas. Such a defence would be regarded as completely bogus and illegitimate when it comes, for example, to tax evasion or bribery. We would not let directors and senior managers plead ignorance in those circumstances.
The right hon. Gentleman is speaking to an important amendment that not only allows for corporate prosecution but allows for a person who is registered with the FCA to be prosecuted. Is that not a critical point? Unless we start holding individuals to account for these wrongdoings, we will never stamp out these corporate failures and this corporate abuse.
The hon. Gentleman makes a very strong point, and it is why we believe these are strong amendments. We should do this because it is right in itself, and it is an important signal to send about financial services in this post-Brexit world. We do not want to send a signal that we are going for relative weakness in anti-fraud and anti-money laundering laws. Instead, the signal should be that we insist on the strongest possible measures.
New clause 21 seeks to establish a duty of care. This is a long-running debate, and we tabled a similar amendment in Committee. The new clause is intended to make companies ask not just whether their products are legal but whether they are right and are in the consumer’s interest.
New clauses 25 and 26 seek to address the plight of mortgage prisoners. These are people who are stuck on very high standard variable rates and have no ability to switch. All I would ask is, if the Minister cannot accept these amendments, will he continue to work on this issue to try to help these people who are trapped, through no fault of their own, on very uncompetitive rates? He mentioned 3% or 4%, which is much higher than is available in a mortgage environment where the base rate is 0.1%. That can mean paying thousands of pounds more per year, depending on the size of the mortgage, so this is a real material difference for people.
We have a global financial sector in this country that, if properly regulated and paying its way, is a huge asset to the people of this country. We want it to be innovative and successful, but we also want to ensure the public are properly protected against risks if things go wrong. That is the spirit in which we tabled these amendments, and it is the spirit in which we have approached the Bill throughout. I hope the Minister will consider that when it comes to the votes in a couple of hours’ time.
I rise to support amendment 7, in the name of Rushanara Ali, myself and 41 other Members. The Minister knows well, because we have had this discussion before—just in case it was to be private, I want to make it public, not because I do not trust him, but I just think it is helpful for him to know that—that the amendment seeks to bind or hold those involved in financial trade and investment to a definition of who they should not trade with and why. To that extent, it introduces the concept of a genocide definition. This measure is also in the Trade Bill, which is coming back to the House, and I make no apology for supporting the hon. Member for Bethnal Green and Bow in this. She will speak later, but as I understand it, she may not move the amendment. However, that is not the point. The point is that it is time to air this argument.
For too long, we have allowed ourselves to walk away from the issue of genocide without ever managing to hold any country guilty of this. Successive Governments have found it impossible to act because these issues are apparently referred to the International Criminal Court. The Government say to me, “It’s a matter for the international courts,” but they know full well that any reference to the ICC has to come from the Security Council, and it will never come from the Security Council because at least two of the nations there will always block it, particularly if it is to do with them or their allies. That is a distinct weakness, and I refer, of course, to the Chinese Communist party and Russia.
Let me give a couple of examples. We have discussed many times—the Foreign Secretary made a statement on it this week—the fact that many companies invest in, take trade from and take goods from areas of the world that are using slave labour. We know that this is happening in many places. For example, what is happening to the Rohingya is, in my view, likely to be defined as genocide. We can also look at what is happening to the Uyghurs in China. It is becoming more and more apparent every day that between 1 million and 3 million Uyghurs have been moved into labour camps. They are used as slave labour. They face forced sterilisation. There has been an 85% drop in their birth rate in that area. They have been moved out of their original area of work, and they are no longer allowed to speak their own language.
That is just one aspect, but a very brutal one, of what the amendment tries to deal with. After the Rwandan genocide in 1994, nothing happened. After the Bangladesh genocide in 1970, nothing ever happened. After the Cambodian genocide, nothing ever really happened. We still do not know what will happen, if it ever does, about Daesh’s genocide against Christians, Yazidis and so on, and companies will never be held to account for what they were involved in.
I realise that time is short, so I will conclude. Neither this amendment nor the one to the Trade Bill ties the Government’s hands. It does not give courts the right to proceed with investigations without reference. It does not give them the power to make criminal punishment, and it does not strike down trade deals or force criminal prosecutions. It would raise to the attention of the Government and the world that, at last, a domestic court here in the UK—the High Court or maybe the Court of Session—will be able to rule that, by all probability, genocide has taken place, and any financial institution, company or organisation involved with that area where genocide has taken place or with that country would no longer be allowed to do so. The Government would have to make that decision; that is the point.
I understand that, this week, the Board of Deputies is coming out in support of the amendment to not only this Bill but, importantly, the Trade Bill. I also understand that the US Senate, having seen what we have put forward, now plans to do the same. We have a chance here for leadership in the world. I thought we left the European Union to empower our courts and to give leadership. Again and again, I have been told by Ministers, “Not this, not now, not here.” The simple question I ask is, “Exactly when, what and how?” because that is never answered.
I finish by reading this:
“First they came for the socialists, and I did not speak out—
Because I was not a socialist.
Then they came for the trade unionists, and I did not speak out—
Because I was not a trade unionist.
Then they came for the Jews, and I did not speak out—
Because I was not a Jew.
Then they came for me—and there was no one left to speak for me.”
We need to speak out for all these oppressed peoples, whether it is in finance or in trade, and take the moral high ground.
Thank you, Madam Deputy Speaker. I will certainly do the best I can within the constraints of the technology that we have. I wish everybody a guid new year.
As colleagues will see, the SNP has tabled a range of amendments to this wide-ranging portfolio Bill. We have done so because we feel very strongly that the Bill was an opportunity to strengthen consumer protection; to take on the long-running and vexed issue of mortgage prisoners; to look at the wider responsibilities of financial services firms in areas of climate change, the sustainable development goals, ethics, money laundering and criminality; and to try our very best to mitigate the unfolding disaster that is Brexit.
On the first day of trading after the transition period ended, the City of London lost €6 billion in euro-denominated trading to venues in Amsterdam and Paris by companies such as London Stock Exchange Group, CBOE, and Aquis Exchange. Ernst & Young has said that £1.2 trillion of assets and 7,500 jobs had moved from the UK to the EU before
SNP amendment 8 would ensure that the likely effects of the rules on trade frictions between the UK and EU are considered before part 9C rules are taken. Amendment 11 does the same for CRR—capital requirements regulation—rules. Our new clause 20 would force the Tories to come clean on the impact of financial services divergence from the EU. We feel very strongly that it is possible that if Scotland had been permitted to negotiate its own EU deal, taking into account our priorities, financial services operations could well have moved to Edinburgh, Glasgow and Aberdeen. It would certainly be better than how things are operating currently, with added layers of complexity. I have heard that a trader in London now cannot speak to an EU-based client without an EU-based trader also on the call to chaperone. The UK Government face a choice of two options: to try to achieve equivalence with the EU, which will essentially leave them a rule-taker with no seat at the decision-making table, or to forget about equivalence altogether and tear up the rulebook. It is expected that this latter option will encourage EU efforts to strip financial services businesses from the UK, losing well-paid jobs and skills not just in London but in Glasgow, Edinburgh, Aberdeen and other places too. We certainly did not vote for such an outcome.
Moving on to money laundering and financial crime, successive UK Governments have failed to tackle money laundering. The Minister gave this a hefty further kick into the long grass of a further call for evidence in his response to the amendments proposed by John McDonnell. Kevin Hollinrake also reiterated the need for action. Our new clause 14 would force Westminster to come clean on tax avoidance and the misuse of Scottish limited partnerships, about which the Minister knows I care a great deal. New clause 14 would show how little impact this Bill has on tax avoidance. With the Chancellor talking of a return to austerity, tax rises and public pay constraint, it is galling that there is no urgency by the UK Government in tackling tax avoidance and evasion on the other side of that balance sheet. It beggars belief, still, that the Tories’ 2018 Bill left an oligarch loophole allowing money laundering by overseas trusts to buy UK property with impunity—and they still have not acted on SLPs.
Clause 31 amends schedule 2 of the Sanctions and Anti-Money Laundering Act 2018 to ensure that regulations can be made in respect of trustees with links to the UK. Without this, any powers that Her Majesty’s Revenue and Customs sought to exercise to access information on such trusts are at risk of being held invalid under legal challenge. The UK Government must introduce a robust and transparent system of company registration in order to combat money launderers’ attempts to register entities for illicit purposes. The UK Government must also act to tackle the ongoing improper use of SLPs via proper, thorough reform of Companies House.
The UK Government really ought to accept cross-party amendment 7 to tackle financial crime and genocide, standing in the name of Rushanara Ali, my relentless colleague on the Treasury Committee. Failure to take action on this important human rights agenda will never be forgotten. This UK Government are forever keen to talk up their global Britain credentials, so this amendment is a significant opportunity to take that lead. It builds on the UK Government’s adoption of Magnitsky sanctions. I implore the Minister: we should never allow those who have had a hand in genocide to make their investments in the UK.
We also strongly support cross-party new clause 4, which would make it an offence for a relevant body registered by the FCA to facilitate, or fail to prevent, specified economic crimes. That is an area in desperate need of tightening, because too many are getting away with that at the moment.
I have previously given the Minister a wee bit of slagging for the Bill, and I made a pretty safe prediction that our diligent amendments would be dismissed in Committee. The Government’s U-turn on electronic payment legislation, which they dismissed in Committee, shows why our financial safety depends on parliamentary scrutiny, and the introduction of such a measure at this late stage gives me some concern. In Committee, the Government dismissed the need to cover electronic money institutions and the difficulties around DAMLs—defences against money laundering—despite the urgency of that issue, yet today we have a slew of Government amendments, new clauses, and even a whole new schedule.
Electronic money institutions expected to see something in the Bill. The Opposition tabled amendments to correct that. The Minister said that he would update Members on Report, but it is late in the day to bring such comprehensive amendments to the House. I would be grateful for clarity on whether Government amendments missed the boat in the first draft, or whether there is another reason. I am concerned that we have not been given the evidence to ascertain whether the drafting and content of the amendments provides what electronic money institutions are looking for. It would have been good to have such information, so that we could have taken evidence on it at the start of this process.
This issue goes to the heart of many of the concerns felt by me and my colleagues. Legislation is not done well here at the best of times, and financial services is a huge area that requires legislation, oversight and expertise. The Government say they are taking back control, but they are taking it from Brussels and giving it straight to unseen bureaucrats and regulators, with little role for this House. At the very least, MPs must be afforded the same level of power and influence that MEPs enjoyed. We know that little time and priority is given to SI Committees, and that Committees such as the European Scrutiny Committee have no real impact on regulation. Select Committee business is already incredibly busy, and scrutiny of these new powers must not be squeezed into already limited time and space, especially given the work that the Treasury and BEIS Committees now have, due to the covid fallout and the economic recovery.
With this place not having even a budget committee, SNP Members find it doubtful that the Treasury’s new powers will receive the scrutiny they deserve. That is why we want a specific committee to deal with the swathes of powers that are being handed back to the Treasury, the FCA and the PRA. We must ensure that the use of those powers is subject to the affirmative scrutiny procedure, and new clauses 15 and 16 seek to address that issue. Until the regulatory framework review has been published, and a new oversight structure agreed, such clauses are vital to ensure that Government and the FCA consult Parliament, before using the powers in the Bill in a way that would make Henry VIII blush.
On areas of consumer interest, I fully support new clause 7, tabled in the name of Stella Creasy. Her speech in Committee was well-informed and passionate, and I suspect the Minister knows as well as the rest of us that she was correct to raise those concerns. There must be consumer protection for those using buy-now, pay-later schemes of all types. Clearpay and Klarna are on just about every retail website these days, and the lack of regulation around them exposes all our constituents to significant risk. Covid has led to approaching 1 million job losses, with implications for those who have outstanding debts. That toxic situation will only cause hardship in the long run, and the UK Government would do well to listen to the hon. Member for Walthamstow and act today, rather than wait for trouble to be heaped on our constituents in future.
I was glad to see the Minister make moves towards Help to Save accounts which I raised in Committee. I still have serious concerns that people who have managed to save some cash might lose access to it, although his assurances go some way to addressing those fears. It makes a degree of sense to transfer money into the same account that Help to Save bonuses were paid into, but the proportion of accounts where that is not possible must be closely monitored. I would like to know more about how National Savings and Investments will contact those who have poor literacy and may be disengaged, and I assure the Minister that I will be keeping a close eye on that. Saying that customers will be contacted could mean they get a letter in the post that they do not open and it goes into a pile with the rest of the unopened mail—we all have constituents who do that, and they have a right for their savings to be protected, along with those of everybody else.
I intend to press SNP new clause 21 on the financial services duty of care to a vote this afternoon. Macmillan Cancer Support was incredibly helpful in drafting the new clause, and I pay tribute to all those who are struggling not just through covid, but though cancer treatment as well. Under new clause 21, the FCA must ensure that financial services providers act with a duty of care and in the best interests of all consumers. It would amend the Financial Services and Markets Act 2000 by inserting a “duty of care specification” and bringing that into the FCA’s general duties. There would be an explicit requirement on the FCA to secure an appropriate degree of protection for consumers, and to ensure that authorised persons carrying out regulated activities act with that duty of care.
Who would not want to see this? Macmillan has been clear that at present things are quite piecemeal and the current system is just not working for consumers. It has proposed this change for several reasons, not least because its research suggests that only 11% of people tell their bank about a cancer diagnosis. Macmillan suggests that it would be much better if the banks assumed that people may be vulnerable, rather than waiting for people to get into difficulties while going through cancer treatment, which will only add to their stress. One in three people with cancer experience a loss of income from employment following a diagnosis, losing an average of around £860 a month. That makes it more difficult for them to pay their bills, or to meet any other debts and obligations, which is why this proposal is so important and relevant.
Our new clauses 24, 25 and 26 would ensure that no more homeowners have their mortgages sold to vulture funds. As I said at the beginning, the Bill gives the UK Government an opportunity to deal with this long-standing injustice, and I urge them to give it further consideration. Some have argued that those who ended up as mortgage prisoners were somehow just bad borrowers who got into trouble when they lived beyond their means, but more often than not that is actually very far from the reality. As the hon. Member for Thirsk and Malton pointed out, an expert analyst enlisted by the all-party parliamentary group on mortgage prisoners, has concluded that it is not the case, and it is not how markets and ratings agencies see the situation either.
The APPG’s analysis of the mortgage books has established that at the point of origination, Northern Rock loans were all prime mortgages with lower than average default rates, exhibiting good borrower behaviour; that if we adjusted for standard variable rate overpayments coming in line with other high street lenders, not only would these borrowers potentially be up to date with the payments, but their loan balances would also be around 10% lower; and that if we adjusted to competitive rates on the market, the difference would be even more substantial. The bond markets paid over the market value for the books, indicating that anyone in those books is, in fact, paying over the market value for the standard variable rates. People have been stuck in these mortgages for nine years and it is high time for the UK Government to act. I appreciate what the Minister says about other actions, but for those listening there is very little to justify further delay in doing the right thing, on top of the delays that they have already faced.
We will rely on SMEs for our economic recovery, and our new clause 11 would ensure that they are treated fairly by the big banks to avoid the mistakes of last crisis. Many conversations at the Treasury Committee have reflected that the banks and regulators do not want to repeat scandals such as RBS GRG, but we feel very strongly that we must take the opportunity of this Bill to go further. The Federation of Small Businesses has issued a stark warning that around a quarter of a million small businesses could be forced to close this year due to a lack of Government support. In a survey of 1,400 small firms, 5% stated that they expected to pull down the shutters this year. If replicated across the UK, these figures would mean 250,000 firms closing down if the Tory Government continue to sit on their hands.
The owners of these SMEs are often very heavily personally exposed if their business fails. Their family homes are at risk, just as if they were mis-sold a mortgage. The FCA has already recognised in its 2015 discussion paper, “Our approach to SMEs as users of financial services” that they are often no more financially sophisticated than everyday consumers, but are at risk of mis-selling because of product complexity, limited choice and poorly managed expectations. I could say an awful lot more about this, but I appreciate the time constraints. I would just point out that, as things stand, a sole trader with a property empire of £30 million can sue for breaches of the rules, whereas an ice cream van owner whose accountant tells him to incorporate for tax reasons cannot. It is a very illogical distinction between individuals who can take action and companies that cannot. I very much urge the Minister to look at that.
This Bill was an opportunity to do an awful lot more in a number of areas. As I and the Labour Front Benchers have set out, there is still much more that should be done to secure a future for financial services—a future that has been entirely undermined by Brexit, which will make things significantly more difficult. Huge questions on equivalence remain unanswered, and there is still no certainty of an agreement on a regulatory equivalence deal between the UK and the EU. For financial services, this deal is effectively a no-deal Brexit, which neither Scotland nor the City of London voted for. UK firms and their employees can no longer freely operate in the EU, and this has been a source of shockwaves across the sector. Worse still, there is no timescale for any kind of agreement.
Many companies are choosing to move their operations to the EU, rather than hang around for an indefinite period of time for an equivalence deal. The UK Government have given very little consideration to financial services in the negotiations, and there are far-reaching implications—far beyond those who work in the sector, but to each and every one of our constituents who needs that certainty and who needs interactions with financial services to be done properly for their own protection.
I refer to my entries in the Register of Members’ Financial Interests. I also wish briefly to thank the Leader of the House for eventually listening to sense and allowing virtual participation in debates of this sort; it has been a positive development.
I know from our discussions that the Economic Secretary to the Treasury agrees with me when I suggest that the Bill provides an excellent opportunity to tidy up and improve the regulatory landscape for investors, particularly those with smaller portfolios. I suggest that, in helping to achieve that aim, we must reduce the needless obstacles to better investing, a good example of which is what are called key information documents, or KIDs. In the past, EU regulations have insisted that every single investment trust must produce KIDs to help investors better to understand what they are buying.
Briefly, for those who do not know what investment trusts are, they are like any other publicly quoted or listed company, such as a Shell or a Glaxo, but instead of managing oil or pharmaceuticals, they manage investments on behalf of their shareholders. They have a very good track record—they have outperformed unit trusts and, indeed, the benchmarks—and over the years they have played an integral role in helping investors to achieve their financial goals. The first one, Foreign and Colonial, was established in 1868, and the largest now, the Scottish Mortgage Investment Trust, is a FTSE 100 company with assets under management of around £15 billion.
Investment trusts have played an important role, yet they are having to labour under these things called key information documents. The EU’s intention might have been good, but the execution has been poor, and perhaps even dangerous. The central problem with these documents is that, as the Economic Secretary knows, they are very misleading, particularly when it comes to the assessment of risk and the projection of returns. The most dangerous aspect is that they ignore the age-old advice that past performance is no guide to the future, because they extrapolate recent returns as a guide to the future; KIDs produced in a bull market—or a good market—will therefore suggest higher returns, and vice versa.
KIDs are also misleading when it comes to risk, in the sense that they use summary risk indicators—SRIs—to express risk in a single figure, from 1 for low risk up to 7 for high risk. They have misled investors into believing that investment trusts are lower risk when they simply are not. It is generally accepted that investment trusts are higher risk, at least in the short term, because of their higher volatility, but long-term investors are prepared to accept that volatility because of their better track record, on average over time, when compared with both unit trusts and the benchmarks.
The real problem for the UK authorities is that although the more experienced investors will just ignore the key information documents, the less experienced, typically smaller, investors will suffer the most. It is little wonder that the industry reaction generally has been very poor: the investment trusts’ respected trade body, the Association of Investment Companies—the AIC—has advised investors to “burn before reading”.
Now that we have left the EU and the transition period has come to an end, and having onshored the relevant EU regulations, Government amendments will enable the FCA to address the key problems, including the misleading performance information and the SRIs. We are now looking to the FCA to conduct a wide-ranging consultation as to the way forward and, as previously promised, to work closely with the AIC and other bodies and investors; it has a duty to act swiftly. I have suggested to the Economic Secretary that the KIDs regime should be completely suspended, and if not, KIDs should be excluded from scope. If they are not, perhaps they should even be allowed to be pushed to one side, to enable proper consultation courtesy of the FCA.
I strongly urge the Economic Secretary to keep a watchful eye on the FCA’s progress. I look forward to hearing from him when he sums up, and to continuing our constructive dialogue on trying to ensure that these unnecessary regulatory hurdles come to an end for the betterment of investors generally. We must remove KIDs from investment trusts so that they can do no more harm.
I will speak about new clause 4, which is in my name and those of others from across the House. I start by thanking Sue Hawley and Spotlight on Corruption for their support in our work.
Historically, Britain has prided itself on offering honesty and integrity, particularly in financial services, but, tragically, the Government’s actions and inactions have helped to breed an environment where fraud and corruption flourish. Today Britain is the jurisdiction of choice for too many villains and kleptocrats. The National Crime Agency estimates that £100 billion is laundered through Britain annually. The recent FinCEN leaks named 3,267 UK-incorporated shell companies and nearly £70 billion flowed from Russia into the UK’s overseas territories. The banks and those who run them often get away scot-free if they turn a blind eye to dirty money or engage in fraud.
New clause 4 would provide law enforcement agencies with a powerful tool in their fight against money laundering and fraud. A new criminal offence would hold individuals, corporations and their directors to account for either facilitating or failing to prevent economic crime. The argument is overwhelming; everyone agrees that the existing powers are weak and ineffectual. We need criminal as well as regulatory powers.
A new offence would provide both an effective deterrent and stronger consequences.
We are way behind our international competitors. We pursue small businesses and let the big banks and well-heeled bankers off the hook. The British public hate feeling that there is one law for the powerful institutions and their leaders and another for the rest of us. As we build Britain outside Europe, it is foolish and wrong to think that we can create a sustainable and strong finance sector on the back of dirty money and fraud. Losing our reputation for integrity will over time damage our prosperity, so we have to clean up our act, and clean it up now, not promise to do so some time in the future.
It is shameful to find that America is more effective at pursuing corporations and their directors than we are. Let us consider Standard Chartered, a British-headquartered bank. In 2019, it was fined for money laundering failures and breaching sanctions—£102 million in the UK, but £842 million in the USA. In both the LIBOR scandal and the subsequent rigging of foreign exchange rates, most of the outrageous behaviour took place here in the UK, but most of the fines were imposed in the US. In 2019, the US dished out £1.67 billion-worth of money laundering fines. We took less than £300 million. The Government may want to promote outsourcing, but does that really mean we want to outsource enforcement to the Americans?
That is why the director of the Serious Fraud Office has called for corporate liability reform. Last October, she said:
“So, what would be on my wish list for the SFO, if I had a magic wand?
Unsurprisingly, a ‘failure to prevent’ offence still tops it.”
I agree, and I agree with the Financial Times comment, after the Barclays fraud case failed, that,
“the bank could not be held accountable for the actions of the chief executive, but neither could the chief executive be accountable for the actions of Barclays.”
Is that really what the Government want? Jeremy Wright described the LIBOR scandal as demonstrating,
“weaknesses in our current law”,
and noted the
“clear implications for the reputation of our justice system.”
The Minister is wrong: when the Government called for evidence on a new corporate liability offence, three quarters of respondents urged the Government to toughen up the regime with criminal sanctions, and most of those were private companies and law firms. Why are the Government reluctant to act? They promised action in their 2015 manifesto. They took forever to complete a consultation and now they are parking the proposal with the Law Commission. Why? The House should not need to divide on this issue. Most people strongly agree with our proposal. If Ministers kick the proposal into the long grass, they will anger the public, damage the long-term integrity and reputation of our financial services sector, and fail to build a better Britain. I urge support for our new clause.
It is a pleasure to follow the right hon. Lady. I want to speak in support of new clause 4, and I will start where she finished by reminding the House that this was a manifesto promise of the Conservative party back in 2015. We said that we would introduce criminal sanctions for failure to prevent economic crime. We got as far as introducing sanctions for bribery and tax evasion. What those two measures have shown is that these “failure to prevent” rules actually work: they do crackdown, they do change behaviours and they do stop businesses allowing their staff to carry out the activity or turning a blind eye to it. When the main counter-argument is that these regulations would be too expensive or too hard to implement, we have to understand that the world has carried on with those two powers in place; that is not a compelling argument for not extending them to the rest of the economic crimes as this clause would do. Most economic crime around bribery or tax evasion includes some money laundering as well, so all that we are really doing is tidying up the rules to make sure that they are consistent across the piece.
I think that it is probably fair to say that, since we made that manifesto promise, we have been a little busy on other matters, but now we are through most of those it is time to get back to delivering on that promise. I suspect that we will not convince most Members this evening to accept this new clause, but, hopefully, when we see the Law Commission review later in the year, we can then make some rapid progress on getting our law to the right place.
The Minister said at the start of this debate that the Bill was a part of our taking back control following Brexit, that we will try to make our regulations world-leading and that that was our aspiration. Surely as we embark on our vision of global Britain, we should make it very clear that our values are to be the cleanest financial services sector in the world—not the dirtiest, not a magnet for dirty money, and not one that tolerates any kind of bad behaviour. We need the powers in the new clause so that we can say clearly to the whole world that this behaviour is not tolerated here and that we will go after not only those who behave in that way, but those who allow it to happen: we will go after those businesses that seek to profit from allowing their staff to behave in such a way. That is the kind of vision that a global Britain should have—more beacon than buccaneer in this kind of situation.
Finally, if we are really after world-leading regulation in this area and setting an example, I personally would support more divergence. That is one reason why I supported Brexit, but I am not sure that the best place to start diverging is by not following the EU’s anti-money laundering rules. Last month, it introduced its sixth anti-money laundering directive, which included the requirement that member states take criminal sanctions for failure to prevent money laundering. We did not opt into that directive before the end of the transition period. I would have thought that, as a signal of goodwill when we want the EU to recognise our financial services regulation, it would be a good thing to adopt. It is the right thing to do. It is the right measure. It is one that, given the size of our financial services industry, we should be leading on, not following. Let us not make that our first divergence. Let us introduce these rules. Let us pass this new clause and have real powers in place which we need to tackle this awful economic crime.
From the speeches of the previous two speakers, we can see that there is a thread running through the bulk of the amendments. It is that no matter how significant the contribution of our financial services to our economy, the widespread concerns about the probity of their operations should not be ignored.
New clause 1 standing in my name and the names of other hon. Friends would require the Government to publish a report; to come clean about the standard, conduct and ethics of businesses in the financial services; and to assess publicly the prevalence of unlawful practices such as tax evasion and money laundering and the prevalence of charging excess fees, tax avoidance and providing inadequate advice to consumers. New clause 1 would require the Government to consider and report on the case for a public inquiry and any plans for further reform of regulation.
The FCA plays a core role in the regulatory structure, and in this Bill it is gaining even greater powers. The appointment of the FCA chief is critically important therefore in determining the effectiveness of our whole regulatory system. For that reason, amendment 3 in my name would ensure that before the appointment of a new chief executive, the Treasury would publish a report on the FCA’s effectiveness under the outgoing chief executive. That would allow lessons to be learned. Amendment 4 would give some teeth to parliamentary scrutiny of the FCA by making the appointment of the chief executive subject to approval by the Treasury Committee.
If Members have any doubts about the need for regulatory reform, I recommend a swift read through the litany of recent reports of scandals, highlighting the FCA’s shortcomings and how it has been asleep at the wheel. London Capital & Finance was a large-scale Ponzi scheme. Connaught Income Fund was ripping off consumers. The notorious Woodford Equity Income Fund was milking investors. RBS has been forcing companies into administration in order to seize their assets.
Many Members have dealt with constituents who have been the victim of these scandals and who have lost their livelihoods, their savings and pensions, their firms, their homes and, in some tragic instances, their lives through stress or suicide. As has been mentioned, the US Financial Crimes Enforcement Network now assesses the UK as a “higher risk jurisdiction”, and that is based upon the number of UK companies appearing in suspicious activity reports. I share the view of other Members who have spoken today. The Government should not be complacent on this matter. It is time to start cleaning up the stables.
I have also tabled new clause 2 on debt. Due to the covid pandemic, the number of households in severe problem debt has doubled to 1.2 million. It is estimated that 800,000 households are behind on their rent. New clause 2 simply asks the Government to bring forward to this House, within six months of this Bill becoming an Act, a report assessing the scale of the debt problem, the effectiveness of current mechanisms and the potential for additional mechanisms and policies.
To be helpful, let me put a few ideas to the Government. Some of these issues with debt have been caused by the Government themselves, so I urge them to scrap the benefit cap, the two-child limit and the bedroom tax, to introduce a real living wage of £10 an hour and to abandon their proposals for a public sector pay freeze.
The Treasury Minister will also be aware that the Bank of England base rate is currently just 0.1%. That is not the rate for many consumers, who are paying 25% interest on credit card debt, or payday lenders, who can charge up to 0.8% a day, nearly 3,000 times the Bank of England base rate. It is time the Government brought forward legislation to curtail these appalling interest rates. When debt was a problem for the banks in the 2008 crisis, the Government intervened to lift the burden of bad debts. It was good enough for the banks, so I suggest that the Government examine the work of Johnna Montgomery, who is calling for a similar long-term refinancing scheme now to lift the debt burden from our hard-hit constituents. They need the Government to act to lift them out of potential poverty and penury now.
It is a pleasure to speak in this debate in support of new clause 7, which is in the name of Stella Creasy, who I gather will speak shortly. It is absolutely vital that we accelerate regulation of this newly emerging sector before we see the sort of problems that emerged in the rent-to-own sector in recent years.
I am glad to hear that the Government, the FCA and the sector recognise that regulation is necessary, but I also note that there is little consensus over what that regulation should consist of, nor what legislative vehicle it could be contained within. I further note that support from the sector is conditional on it being, in its view, in consumers’ interest. I am not sure it should be the judge of what is in consumers’ interest.
Clearly, it is far better for people who can afford to pay just once to do so, but I recognise that there is a legitimate market for a well-regulated “buy now, pay later” sector. However, it has to ensure that consumers are not taken advantage of. The sector likes to point out that the fastest rate of growth is in the over-40 market, thereby suggesting that its users are among the more financially responsible, but younger customers represent the majority of those missing payments and putting themselves at risk by having recourse to risky forms of lending. As innovative as “buy now, pay later” might be, that innovation is driven by competition—by a desire for market capture by the major players. So while one proposes a voluntary code of conduct, another chooses not to sign up to it. That makes me worried as to the willingness of the sector to co-operate with the regulators. What we do not want to see is regulatory capture by these major players.
I want to ensure that those who miss their payments are unable to make further purchases with not only one provider, but all providers of BNPL. If Klarna prevents a further purchase by a consumer because they have already missed a payment, they should not be able automatically to switch to Laybuy, Clearpay or one of the other providers. Moreover, these providers should not be a default purchasing option on a website when a consumer seeks to make a purchase; this is a clear example of the growing lockdown phenomenon of ‘emotional e-commerce’. I recognise that this Bill is not perhaps the right vehicle to manage how the websites are laid out, but this is a clear driver in the growing use of this form of payment.
I have already seen the problem debt my constituents have accrued in the rent-to-own sector, and those firms also sought to portray themselves as acting responsibly to protect consumer interests. I do not want to see those same constituents using BNPL schemes and getting into a similar situation, with a similar rhetoric from those providers. Regulation is now needed sooner rather than later, before these commercial models become ever more entrenched. With every week that passes, the influence of BNPL increases, the more we see the adverts on the TV and the more we see it appearing when we make online purchases. The lack of consumer protection in this regard puts more of those purchasing online at risk.
I very much welcome what the Minister has had to say to me, both in the House and privately. I look forward to seeing the Woolard review and hearing the next steps that will be taken to make practical progress on this very pressing matter.
It is a pleasure to follow Paul Maynard. I, too, want to focus on new clause 7, but I also want to mention breathing space, which is addressed in new clauses 22 and 23, and the statutory debt repayment scheme, which is dealt with in clause 32. We all know that BNPL has exploded in the past year. More and more retail outlets, and even online gambling companies, are using it, and it is being sold to companies on the basis that, on average, customers spend 40% more. It is also being sold to customers as an easy way to spread the load, with the thought, “There are no credit checks so it is not debt.” But of course it is, because people are using someone else’s money to pay and it then has to be repaid. I looked into the business model for one company and found that 25% of its income is predicated on late fees and people being unable to pay on time. Surely that has to ring alarm bells, with the echoes of the high-cost lenders and their practices. The regulation is needed sooner rather than later and I look forward to a swift response to the Woolard review.
Breathing space is welcome, and I have long called for it; 60 days will often be enough, but there will be a need for flexibility in exceptional circumstances. The scheme was designed prior to the pandemic, where people are furloughed, have lost their job or have a period of illness, and 60 days is not long enough to give people time to recover from a temporary financial difficulty caused by the pandemic and set up a long-term solution. People affected by the pandemic simply need a bit more time to straighten themselves out. I also think that the midway review needs to be looked at again. It simply wastes time and resources, which are scarce in the debt field.
Breathing space alone is not enough, however, given the impact of coronavirus on household finances. Bailiffs’ visits should be suspended, as they were during the first national lockdown, and other enforcement action should be halted when a debt adviser alerts the creditor that a client has financial or other issues due to coronavirus. We should also be suspending the use of non-priority benefit deductions from universal credit and bringing forward plans to extend the repayments over a longer period.
Moving on to the statutory debt repayment plan, I am pleased that the intention is that people seeking debt advice should not be charged for any aspect of the plan. It has always seemed counterintuitive that people in debt should be charged to get out of the very same debt. However, there are areas that need to be tightened—for example, where creditors are objecting to the level of payments. That needs to be seen within the existing debt advice methodology and budget standards. We cannot have creditors objecting just because they do not like the level or they think that someone else has more. There is a common standard, and creditors need to accept that.
In general, the Bill is a welcome step forward in assisting people in debt, but the landscape of debt solutions is complicated and difficult to navigate. I believe that a full review of all debt solutions needs to be undertaken to clarify and simplify, and to ensure that people in debt are always able to access the solution that best suits their needs.
I draw the House’s attention to my entry in the Register of Members’ Financial Interests. I rise to say just a few words about new clause 4 and amendment 7, both of which I support. New clause 4, on the facilitation of economic crime, has been ably tabled by Dame Margaret Hodge, who, together with me and many others across the House, has sought to drive forward this agenda. The agenda is driven forward by the Bill, which has been so ably handled by my hon. Friend the Minister. It goes with the grain of Government policy and builds on the changes already achieved. I do not think that the House should be divided on it today, but we should send a signal to the Government about the importance of pursuing this agenda.
We have, as I said, achieved considerable change. The right hon. Member for Barking and I managed to persuade the Government to introduce open registers of beneficial ownership, both for the overseas territories and now for the Crown dependencies. The Foreign Office was not in favour of that at the time, but it now strongly supports it, so progress can be made. We are building on the excellent G8, where these matters were first championed by David Cameron as Prime Minister, and also on the recent US legislation. The evidence of the Paradise and Panama papers showed without any doubt the sophistication of financial advisers and the fact that there is an inequality of arms in so much of this. They are ahead of the financial enforcement authorities, and we need to be aware of that. The Bill helps, but new clause 4 would drive the matter further forward in clamping down on the facilitation of economic crime. I hope that the Minister will send a clear message on that when he sums up. I would also say to him that the reforms to Companies House led the world, but the trouble is that Companies House has become a sort of library, rather than an investigator. What it needs is more resources, and I very much hope that he will make the point across Government that Companies House with more resources would be an extremely valuable tool in the fight against economic crime.
Amendment 7—the genocide clause, as it were—has been tabled so ably by my right hon. Friend Sir Iain Duncan Smith. He makes the point that money cannot somehow be divorced from its provenance. We have had much focus on money laundering, on dirty money and on money stolen by corrupt dictators from Africa, by business people and by warlords. Shining the light of transparency on this is incredibly important, and this is a good amendment because it underlines our abhorrence of genocide. I have worked with much pleasure with Rushanara Ali on what the UN Committee that visited Burma and Bangladesh referred to as the genocidal activities over the Rohingya, and with my right hon. Friend the Member for Chingford and Woodford Green on the human rights abuses in China. The House is right to take a very strong line on the issue of genocide. If global Britain means anything, it is driven by values. These values matter, and when regimes such as the Saudis, for example, butcher journalists in foreign consulates or imprison women campaigning for human rights, we should speak out.
However, I have to tell the House that we have questions to answer here in the UK on the issue of genocide. There are today five alleged perpetrators of genocide living freely in the UK, one of whom was involved in the terrible genocidal massacre at Murambi. They have been caught up in the British legal system now for 13 years—lost in an ineffective legal system, with huge legal costs and huge benefit claimant costs to the taxpayer.
I hope very much that my hon. Friend on the Front Bench will make it clear that, when the genocide debate takes place later this month, we expect the Minister to say from the Dispatch Box what Britain is doing to ensure that these five alleged perpetrators are brought to justice.
I support amendments 1, 2 and 8 and the remarks made by our Front-Bench team to oppose any post-Brexit race to the bottom in regulation. It is also vital that we move towards a deal on equivalence in financial services with the EU.
Financial regulation has to adapt to market innovations to ensure that consumers are well protected, and it is under this call for consumer protection that I also speak in support of new clauses 24 to 26. These push for a fair deal for the 250,000 mortgage prisoners stuck for 10 years paying high interest rates. The all-party parliamentary group on mortgage prisoners, which I co-chair, has been contacted by hundreds of mortgage prisoners, who describe the worry and the stress that comes from being trapped as they are. The Minister suggested that the SVRs paid by mortgage prisoners are just 0.4% higher than SVRs at other lenders. Our case studies, which include nurses, teachers, members of the armed forces and small businesspeople, tell another story.
It is inappropriate to compare the rates that borrowers with inactive lenders are currently paying with those paid by SVR customers at other active lenders. If mortgage prisoners were with an active lender and up to date with payments, they would have access to a product transfer giving them a lower fixed rate. I will illustrate this through two constituents. The first is with an active lender. Last year, when she contacted my office, she was paying an SVR of 4.14%, but as she was with an active lender, we were able to help make representations. She is now on a two-year fixed rate of 1.79%, and saving over £5,000 a year in mortgage payments.
The second constituent’s Northern Rock mortgage was sold to Landmark and is ultimately owned by Cerberus—a mortgage with a fully regulated high street bank sold off to a vulture fund. The family are not being offered any new deals, costing them over £6,000 a year more than if they were with an active lender. I cannot put into words the stress that this has caused the family, who have nearly lost their home more than once.
When the Government sold these loans to Cerberus, UK Asset Resolution told Lord McFall that returning these mortgages to the private sector would result in their being offered fixed rates. In a “Panorama” investigation two years ago, a UKAR spokesperson said that Cerberus had the ability to lend to former Northern Rock customers and that they had believed they intended to do so. They said:
“The reply to Lord McFall sent on behalf of the UKAR board of directors was based on information presented to UKAR and the board had no reason to disbelieve this at that time.”
If UKAR was misled by Cerberus, to date there have been no consequences, and today we have Landmark refusing to offer my constituent any fixed rates. Capping SVRs for mortgage prisoners is an issue of consumer protection.
I turn briefly to new clauses 24 and 26. Expanding the regulatory perimeter to help mortgage prisoners is supported by the APPG and the UK Mortgage Prisoners campaign group, and there is support from the Building Societies Association, which has said:
“It is essential that the FCA and the Government take action urgently to ensure that consumers whose mortgage is sold to an unregulated lender have robust consumer protections extending to interest rates.”
An expansion of the regulatory perimeter would give the FCA all the power it needs, in the words of the Governor of the Bank of England to the Treasury Committee in his appointment hearing, to “conclusively address” the question of mortgage prisoners. New clause 26 says that consumers would need to consent before their mortgage is sold on to an inactive lender. Supporting these amendments provides immediate help to mortgage prisoners who have suffered far too long and are now hit harder by the pandemic.
The core purpose of the Bill is to ensure that the regulatory framework for financial services will continue to be effective now that we have left the EU. Of course, there are other measures in the Bill, on matters such as the open market arrangements with Gibraltar and debt advice; it is wide in scope.
In Committee, we considered the Bill in detail, and I commend my hon. Friend the Minister for his knowledge and vision. It would be fair to say that some of the measures that we looked at were in very specialist areas and were perhaps a little dry; I am thinking about the work to transition away from LIBOR and implement the Basel standards. That obviously had not been easy work; it had been detailed work, and the development had taken place over a significant period.
The Minister has placed certain underlying principles at the heart of his work, and we see them in the Bill. The first is ensuring that the UK will have world-leading prudential standards, and that those will be overseen by regulators with the powers they need. There is no doubt that the world, including the UK, has seen appalling financial scandals; I am thinking about insider dealing, money laundering and bank fraud. Our regulators must be equipped to deal with this fast-moving market. They must be careful that they are not so backward-looking that they are solving the last crisis, but they are also nimble enough to have proportionate regulations for the sector.
The second principle that my hon. Friend the Minister is operating under is the recognition that different types of activity, and different scales of company, require different approaches. The Bill enables the introduction of the tailored investment firms prudential regime. I believe that the whole Committee wanted to see a firmer approach taken to wrongdoing, alongside measures to ensure that the UK’s strong position in this critical sector is maintained. I think that the Bill does that—indeed, that is the bulk of the Bill—but it does, of course, require regulators to enforce that properly.
A further principle of my hon. Friend’s work is helping people with debt problems. We have already heard about clause 32, which introduces changes to the debt respite scheme. Those are of great significance to many of our constituents up and down the country. Essentially, there are two elements: a breathing space and a statutory debt repayment plan, the point being early intervention and recognition of the problem. That will help people escape the cycle of debt, which is sometimes very easy to get into and very hard to break out of.
In our evidence session, the Committee heard from Peter Tutton, head of policy at the debt charity StepChange. Mr Tutton described this as “a cracking scheme”—I wrote down the quote when he gave us his evidence. That is a significant endorsement of the Minister’s work. The Bill also contains a measure to provide a route for a successor account when the Help to Save term matures, so that the balance is transferred to an alternative savings account—again, practical support that will help many people.
There are many new clauses and amendments before us. I welcome Government new clauses 27 and 28 and new schedule 1, which basically broaden—update, really—the Proceeds of Crime Act 2002 to include e-money institutions. I am pleased to see that that is supported by the Labour party in its own new clause 6, which will not be moved. There is clearly a recognition on both sides of the House that the Act needed to be updated and tackled.
New clause 7, in the name of Stella Creasy and many others, looks at the unregulated “buy now, pay later” market. It is easy to see how an interest-free product could help people spread payments for a sofa or other high-cost item, but it could also be a route into debt trouble. I am pleased that the Minister has commissioned a review, which is due to finish very shortly. May I just ask him to consider its recommendations very promptly?
Overall, this is a good Bill. I thought that the Committee scrutinised it well, and I will support it this evening.
I shall speak to new clause 7 in my name and those of over 70 other Members from across the House.
This Christmas, one in four consumers used “buy now, pay later” credit to pay for their Christmas shopping. It is a simple premise: these companies allow people to spread payments for items over a series of weeks, breaking what seems a high cost up-front into chunks they can take out on their debit or credit card, with no interest charged. There is a place for this industry in the UK, just as there is a place for payday lenders like Wonga, but Wonga is no longer with us because it used technology to exploit an age-old problem that many face: too much month at the end of their money. In lending to who it did and in the way that it did, ultimately Wonga went bust, but not before it had plunged millions in the UK into debt.
The companies in question say that it is not fair to compare—that this is just how millennials want to buy. Well, as old as I am, I do know this: when it comes to credit, if the deal is too good to be true, it probably is. Compare the Market research shows that these forms of credit have been used 35% more during the pandemic as everybody shops online. Most UK retailers have Klarna, Clearpay or Laybuy now as a payment option—indeed, it is often the first one people are given. Retailers pay for their services because they know that if people use them, they will probably spend more than they are meant to—on average 30% to 40% more. Which? research shows that 24% of users spent more than they planned to because such an option was available at the checkout. As the Minister said, many then end up taking out debt to repay that debt. If it looks too good to be true, it is.
Increasingly, consumers are being caught out, committing to more spending than they can afford. Twenty-seven per cent. of users said that they used the option because they could not afford the product they were buying outright in the first place. Currently, this slips through a regulatory loophole because the companies do not charge interest and make you pay within—[Inaudible.] It means that they do not have to abide by the existing information offers that other forms of credit have to.
FCA rules require lenders, before they lend, to highlight the key costs and risks of the credit product. Contrast that with the behaviour of these companies. Shortly before Christmas, the Advertising Standards Authority upheld my complaint about adverts by Klarna that involved social media influencers encouraging followers to use Klarna to buy products to improve their mood during lockdown: if they had mental health issues, debt was the answer. On its Twitter, it tells its customers who ask about its product that it is the “smoother” way to shop. You can get
“what you want, when you want”— with no mention of what happens if you do not pay or checking of whether you can afford to repay. And because it is not regulated, there is no redress through the Financial Ombudsman Service either.
Ministers say, “Let’s wait for the FCA report”, and that they are ready to take swift and proportionate action. That is exactly what new clause 7 does. It ensures that whatever comes out of that review will get the parliamentary time to be put into practice within three months of the Bill becoming law. If we leave it longer, waiting and waiting as we did with the payday lenders, our constituents will suffer. Even the companies themselves, just like turkeys who think Christmas is a good idea, say that regulation should happen.
So much of the history of credit regulation in this country has been one of delay and dither—and debt as a result for our constituents. Constituents are now living through a time when millions are furloughed and many more are facing redundancy, so their income will get lower, not higher. I know that the Minister recognises that there is a problem here. I brought forward new clause 7 so that we can put his words into practice and make sure that it is not our constituents who end up paying the price later.
It was an honour to serve on the Financial Services Bill Committee and it is a privilege to speak on Report today.
I will speak to specific amendments, but first I would like to say that last century—well before the global financial crisis of this century—I was cutting my teeth in this sector, settling trades, including derivatives, for a US investment bank in New Zealand. We watched in shock as the actions of a lone trader in Singapore caused the collapse of Barings bank. I worked through the subsequent insertion of Chinese walls between departments, saw the creation of compliance and risk management roles and the impact of a change in culture on the institution. I therefore understand the importance of proper regulation and confidence in our regulators. I was pleased to hear the Minister confirm in his opening statement that this corporate governance continues to be strengthened today.
It is only appropriate that the scope of the Bill extends to effectively tackling money laundering and providing clear, streamlined procedures for dealing with entities that engage in this type of activity. As more aspects of our lives, including financial activities, move online, so do illicit activities such as money laundering. Therefore, legislation aiming to prevent and deal with illegal financial activity must have as broad a scope as possible, bolster existing legal provisions and be as clear and as easy to enforce as possible.
New clause 6 rightly aims to broaden the scope of the Bill to prevent money laundering in the context of electronic money institutions. However, the language of the new clause is inconsistent with legislation already in place, potentially generating confusion that could result in diminished enforcement ability. The Government’s new clauses 27 and 28 and new schedule 1 better achieve the desired effect of a more robust and comprehensive enforcement regime, which is why I will support them today. I am pleased that the Opposition Front-Bench team will not move new clause 6.
New clause 7 was introduced by Stella Creasy with her usual passion. I will not support it this evening, although I acknowledge her intention to protect consumers as a good thing. The Government should not legislate until we hear from the experts and have a thorough understanding. The market is so broad for buy now, pay later interest-free products that passing a time-limited amendment could in fact restrict our full understanding of these products, who uses them and how. It is important to acknowledge that, in protecting one cohort of consumers, we might unnecessarily prevent another from acquiring much-needed household goods and so on, curtail choice in the market and penalise those who are capable of budgeting the repayment of a known cost. Much better is the full and thorough public consultation and independent review, which is currently being conducted by Chris Woolard. It was helpful to hear the Minister say that the review is due to conclude soon, and that he is ready to move swiftly on evidence presented in that report.
In conclusion, the Bill is part of ensuring the future success and competitiveness of our financial services sector. An enormous amount of work has gone into producing what is a lengthy and technical Bill, and I look forward to supporting the Government in the Lobby tonight.
Obviously there is much in the Bill that deserves support, although some of it has come about through our self-inflicted wounds from Brexit. However, the greatest comment I will make is on the opportunities of what should be added and on what is currently missing. I endorse the comments of my hon. Friend Alison Thewliss and support points made by other Members, particularly those who spoke to amendments 4 and 30, which deal with economic and corporate crime.
We are in a difficult time at the present moment. People are suffering. They are making sacrifices. They welcome fixed penalties being given out to those who act rashly—sometimes stupidly, sometimes deliberately. Equally, they are aware that huge rip-offs are not being dealt with and remain unpunished, which causes a great deal of angst and upset, which needs to be addressed.
When I was Justice Secretary of Scotland, I recall that we set up a serious organised crime taskforce, with a model that has been replicated elsewhere and indeed has been extended to issues beyond serious organised crime. It had clear benefits, but there were also obstacles faced by law enforcement. It had the benefit of bringing together all the agencies, but they faced the same challenges. We had to recognise the extent of the challenge and bring in organisations that had previously been left out, from environmental protection through to local government. There were clear challenges in dealing with corporate crime. There is a lack of a legislative framework—there is insufficient legislation there—to allow Police Scotland, City of London police or police services elsewhere, or the Crown Office and Procurator Fiscal Service in Scotland, or indeed the Crown Prosecution Service south of the border, to carry out a diligent, good job. They lack the powers.
“As through this world I’ve wandered, I've seen lots of funny men.
Some will rob you with a six-gun, and some with a fountain pen.”
The tragedy in this country is that it is usually quite easy to deal with those who rob you with a six-gun. Dealing with those who rob you with a fountain pen has proven far harder, which is why significant changes are required, because it is just not good enough that corporate criminals go unpunished, which we know happens. Anyone who has seen “The Inside Job”, which includes Matt Damon, will know the fraud that went on in the financial crash. We have seen LIBOR and forex. We have seen Serco.
Meanwhile, fixed penalty notices are issued for rash and stupid actions, and rightly so, but where is the responsibility being taken by the shareholders and corporate leaders? They have to be held to account. These amendments would help to address that, making sure that we have greater fairness between the small guy and the big guy, bringing us into line with the United States of America, where the wolf of Wall Street is being prosecuted, while ensuring that we keep up corporate standards, which sadly in some instances have slipped quite shamefully. It is only right and appropriate that we make sure that fraud and money laundering are dealt with every bit as strenuously and firmly as bribery and tax evasion.
These are hard times. People are making sacrifices, and it is about time that those who are abusing their powers in the corporate boardroom were held to account. We need to have the legislative framework.
I rise to support the Bill and to focus my brief remarks on the wholesale market, rather than the retail market, which most Members have addressed so far. In particular, Government amendments 22 and 23, which the Minister mentioned in his opening speech, clarify beyond any doubt that non-UK firms—all firms that do not have the UK as their principal place of business—are not within the scope of the rules on the parent undertaking. That is particularly relevant to me. I brought the subject up in my Second Reading speech and it is something on which I have corresponded with the Minister and his team. I am very glad that he and the Treasury have engaged on the Bill in this way. It is a telling example of how good Ministers behave, and the Minister has been exemplary in taking on board comments on the Bill from a range of Members. I commend him for that.
I have a couple of short comments on what others have said. On new clause 16, tabled by the SNP, in my speech on Second Reading I gave my view that there is a need for increased scrutiny by this House of the regulators, but the Minister is right to say that we need to consider that in its entirety in the consultation on the future of the regulatory framework. That is the right way to do it. It is very important to get it right, and I look forward to sending in my remarks if I have not already, and seeing the Government’s response to those points.
I shall finish by addressing certain amendments that were introduced in Committee or that have been mentioned today, on the European Union—new clause 12, new clause 20 and many others—whereby, effectively, Opposition Members have tried to impose requirements on the FCA or the PRA to assess the impact of the differences between the EU and UK regulatory frameworks. The conceptual problem with that is—as I think that all hon. Members, and indeed the Government, need to see—that over the next five to 10 years we are going to be in a very different regulatory world. We need to think of attracting companies and investment on a global basis, not with a purely European focus as was the case in the past.
The Minister has already mentioned our success in relation to FinTech. The Chancellor has mentioned his focus on making sure that the London stock exchange is more attractive and effective for others coming from abroad. The European Union’s drivers and incentives are not the same as ours in this country, so it would be wrong for us to necessarily seek to follow the rules blindly. It is not a race to the bottom; it is a race for us in this country to win the global competition for safe, beneficial, productive capital and business. That is what the Bill helps set us up for.
It is an honour to follow Bim Afolami in this Report stage debate and to speak on a Bill that is of so much importance at this juncture for our economy and the circumstances that we face. The sector that it deals with is so important, and it cannot be overstated. The financial services sector is vital to our recovery, not just because of the jobs it provides and the tax that it contributes to the Exchequer, but because of the number of people, families and communities in this country whose future wellbeing depends on a well-regulated and successful financial services sector.
The Liberal Democrats, my own party, have tabled two amendments—new clauses 22 and 23, both of which address the issue of debt repayment and recovery, but at this stage we shall not be pressing them to a Division, so I prefer not to discuss them. Instead I shall discuss the amendments that we will be supporting, specifically new clause 7, tabled by Stella Creasy, of which I am one of the signatories. As I alluded to, our support is recognition of the need to act now to create an environment that enables our economy and the people at the heart of it to recover as quickly and as financially painlessly as possible. The scale of the potential problem that awaits us as we emerge from the current crisis is frightening for businesses and for households. The most recent research from StepChange estimates that more than 3 million people are in arrears and priority debts, and potentially 6 million people—more than the population of Scotland—are behind on household bills. For those people, that creates stress, financial hardship and sleepless nights worrying about how to feed their children.
We should have no truck with any company or organisation that in any way exploits the difficulties that covid has created. That is why I put my name forward as a co-sponsor of new clause 7, which would bring the non-interest-bearing elements of buy now, pay later lending and similar services under the regulatory ambit of the FCA. We need to act now, before we have another scandal. Such companies facilitate overspending online and costs appear lower than they actually are. One in four shoppers used such companies in the run-up to Christmas. More people are being furloughed and made redundant, so even if something seems affordable now, it might not be in future, either for the country or for individuals.
In the past year, we have heard much about the crossroads at which our economy, and indeed the country, stands. Our financial services sector was worth £132 billion to the UK economy in 2018 and had more than 1 million jobs. It has suffered. It is worth 7% of our economy. In my city of Edinburgh, we have the second-largest financial services sector in the UK and the global financial centres index ranks it as 13th in the world. The scale of what we are facing cannot be underestimated, which is why the Bill should be amended as I suggest.
I very much appreciate the efforts that the Minister is making to try to tighten up in many areas. We are on the same page about many different aspects of the measures that we are talking about. Looking at the Bill from afar and taking a helicopter view, for decades, we have been willing to preside over a system that I would describe as financial feudalism. Some people live by a completely different set of rules and are not held to account properly by the rules that are in place. Unless we start to put measures in place that hold individuals to account for some of that egregious behaviour, we will not stamp it out.
That behaviour undermines the faith in the very system that we believe in—the free market system. We cannot simply hold our hands up and say, “It’s the bankers again,” or, “It’s the money launderers again.” We have to tackle those issues and put measures in place to do that. We did with the Bribery Act 2010, which was effective in giving individuals a corporate responsibility to stamp out bribery. Again, the Government acted on tax evasion in 2017.
There are still other areas, however, where we allow people to steal, defraud, launder and lie. That is not to say that there are not some good people in our financial institutions, and there are some very good bankers, but we need to hold individuals to account for things such as LIBOR, foreign exchange rigging, and the disgraceful scandal at HBOS and the Royal Bank of Scotland, where only one individual has been held to account with a directorial ban. As I have said before, over a similar period of time, between 2008 and 2018, there were £9 billion of criminal and corporate fines in the US, but £260 million in the UK.
I am glad that the Government support the principles behind new clause 4 and will bring their own measures forward. It is absolutely vital that that is not just kicking things into the long grass and that those measures are brought forward quickly so that we can hold individuals to account for failing to prevent corporate fraud and money laundering.
The key thing that I will talk about in my last 54 seconds is mortgage prisoners. Again, the fact that we let people’s mortgages be sold to vulture funds in the first place is because we do not have proper regulatory oversight and we do not lean on them as the FCA can on regulated firms. The promises that were made to Lord McFall and others were simply not carried through.
New clause 25 in particular is a nuclear option. I am not a person who would like to cap anything—the market should deliver those solutions—but we do not have a proper solution for the many people who are trapped on very expensive rates. The evidence that we have says that it would not affect the marketplace of residential mortgage-backed securities, about which the Minister is concerned; that it would be highly effective; that we could define it for a certain cohort; and that it would relieve hundreds of thousands of people from dire financial straits overnight. I ask him to look at that again.
I speak in support of new clause 2. I must stress to the Minister that debt advisers in Salford have already warned me that the Government’s debt respite scheme is inadequate. First, debt advisers should be provided with the discretion to extend breathing space. Secondly, the midway review requirements will waste valuable resources and should be eliminated. Thirdly, there must be the option for debtors to access breathing space on more than one occasion in a 12-month period when needed.
Those minor changes would be extremely helpful, but, of course, any breathing space can only be successful if there are effective and accessible debt solutions at the end of it. Sadly, that is rarely the case, and the pandemic has exacerbated this, with millions more households now in financial difficulty. The situation is dire, and the Minister must recognise that to encourage any level of growth as we rebuild after the pandemic, we must tackle the impending tsunami of household debt.
One solution the Minister could consider is to cap interest rates. Another is to cap the total amount that can be paid in overdraft fees or interest payments. A more comprehensive solution, however, would be the creation of a consumer version of UK Asset Resolution, the public finance company set up to purchase problem debts from the banks during the financial crash. As we know, many lenders will sell on their problem debts for a fraction of their value, only for them to be enforced again by debt collectors at their full value. Such a public vehicle would allow the offloading of these problems debts to be refinanced at affordable rates for borrowers. Only Government can borrow at low interest rates to make that happen effectively.
Lastly, the debt jubilee is the option of writing off some debts for households and businesses that will simply never be able to repay them, even at more affordable rates. Even the former Chancellor George Osborne has advocated this for small and micro businesses that have been given emergency coronavirus loans. In practice, this could mean that if a lender decides that an outstanding loan simply will not be repaid, it could discharge that debt and be given a tax break. Of course, to be truly fair, such a policy would require stringent checks and balances.
I hope the Minister will examine those proposals urgently, because to be frank, if the Government do not set out radical policy options on how to tackle the tsunami of debt, we can wave goodbye to a recovery, and many people across Salford will have their lives destroyed. If these proposals were good enough to bail out the banks in 2008—and they were—they are good enough to bail out the people.
There are a lot of good things in the Bill that I welcome, and I refer to my entry in the Register of Members’ Financial Interests. I welcome the assistance given to financial services in Gibraltar, and I welcome a number of the technical changes to the operation of retained European law in relation to markets. I particularly welcome new clause 6, on FinTech, which is a really important growth sector for this country. Added to the listing regime changes in the Bill, this gives us the opportunity to encourage the bringing forward of initial public offerings of FinTech companies in the UK and to build a critical mass.
I have sympathy for new clause 4, but I do not want to pre-empt the work of the Law Commission. That said, the Government do have to act more swiftly and with more urgency in relation to reform of corporate criminal liability. It has been kicking around for a long time. The Justice Committee has heard compelling evidence on the need for reform. I do not accept the contention that there is a balance on this. The balance of evidence is clearly in favour of reform. Both the current and former directors of the Serious Fraud Office have highlighted the deficiency in criminal liability in this field, as have at least two former Attorneys General. I hope that as soon as the Law Commission reports, we will move swiftly to enact this reform, because we lag behind other jurisdictions in this regard.
The other area where I do not think it is necessary to legislate is progress on equivalence. Although we may not need to legislate, it is really important that the Government address this with urgency. Of course, as we build our way forward outside the EU it will not always be appropriate to follow everything by way of regulatory equivalence, but there are many instances in which it will be very much in the interest of the City and the broader financial services sector to do so.
In the immediate term, is important that we acquire further equivalence agreements with our EU partners; that is in the interests of both sides. Currently, we have a commitment to a memorandum of understanding by the end of March, but the EU says that it has no immediate plans for further equivalence discussions. That needs to be resolved. Although it does not require legislation, we need from Ministers greater commitment to resolving the issue. There has sometimes been a feeling that financial services are being taken for granted in the Brexit negotiations; that needs to be put to bed. Financial services are the jewel in the economic crown of this country and need to be front and centre of our ongoing economic policy.
I wish to focus my remarks on amendments 1 and 2, tabled in the name of the Leader of the Opposition. As my right hon. Friend Mr McFadden said, the amendments are desperately needed now to ensure that regulators must take into account the Government’s target of achieving net zero carbon emissions by 2050. I was therefore disappointed to hear from the Minister that the Government will not support the amendments but might “consider” the matter “in the future”. We cannot afford to wait. Climate emissions are cumulative, and a large part of the carbon that we produce today will stay in the atmosphere for hundreds, if not thousands, of years.
If we are serious about tackling the climate emergency and reaching our 2050 target, we must reduce our emissions as quickly as possible. The sensible and least-destructive way to do that is to start to adapt our economy now; the irresponsible thing would be to leave it too late, thereby making the inevitable economic adjustment more painful for everyone. Regulation is one of the most powerful tools in our box of options and will ensure that the whole financial sector is unified in its actions towards this really important goal and, most crucially, acts within a timeframe that reflects the climate emergency we face.
I do not want my two young children to ask me one day why I missed the opportunity to fight for a better, more sustainable future for them. That is why I will support amendments 1 and 2, and I urge all Members in the House to join me.
I wish to speak briefly in support of new clause 7, tabled by my hon. Friend Stella Creasy, to whom I pay tribute for her work with campaigners on the issue. Her new clause would require buy-now-pay-later operators to be regulated by the FCA.
As others have said, buy-now-pay-later is a new and growing industry, the popularity of which has rocketed in the pandemic, with one company reporting a 43% increase in sales. It is a form of credit that promotes impulse buying—one in four users spend more than they planned—and it is targeted at young consumers who are pursued by companies using celebrity influencers and targeted ads. StepChange, the debt charity, is seeing many more under-40s coming forward for advice with this type of debt. Let us protect consumers and properly regulate the sector, which is currently uncontrolled and operating with a social media-savvy face. Let us not wait for people to get into trouble with unsustainable levels of debt, particularly when we will see an increase in personal debt because of the pandemic.
I wish to focus on two areas: equivalence with the European Union for our financial services sector and financial crime. I also support the efforts to provide more protection against abuses in the consumer credit market and the mortgage market.
As a result of the Government’s decision to pursue a very hard Brexit and the ending of the transition period, UK financial service companies have now lost their passporting rights to EU countries. The Government’s trade and co-operation agreement with the EU in effect sidestepped financial services, putting at risk many jobs in the sector and much tax revenue for the Exchequer. The deal means that there is an agreement for goods, in which the EU has a trade surplus with the UK, but nothing for services, in which the UK has a huge trade surplus with the EU. There is a feeble non-binding declaration to establish a framework for co-operation on financial regulation, but there is no sign of any rush from the EU to grant the UK equivalence so that the loss of passporting rights can be overcome and continued market access to our financial services sector can be achieved. Perhaps the fact that €6 billion of share trading formerly done in London migrated to Paris and Amsterdam on the first day of post-Brexit trading is encouraging Brussels to drag its feet and hope that much more will follow. Over time, I fear that this Government’s lack of interest in protecting equivalence for financial services is more likely to lose us jobs and revenue than inaugurate the big bang 2.0 that the Chancellor was fantasising about in the Commons earlier this week.
Financial and economic crime is a huge problem, and one that the Government have been far too slow to address. Their own estimates suggest that one in five people in the UK falls victim to fraud every year. There is £6 billion of organised fraud against business, and this is getting worse. The extent of economic crime in the UK, including money laundering, fraud and corruption, led the Intelligence and Security Committee in its report on Russia to note that London is now considered a “laundromat” for corrupt money. As the scale of global corrupt wealth enmeshed in the UK property market becomes visible, we need an urgent step change in the Government’s response, especially on transparency of overseas property ownership, and a tightening up of the company formation process in the UK. More needs to be done, and urgently, to crack down on this behaviour.
Thank you, Mr Deputy Speaker; and I thank all Members who have tabled amendments and spoken to them today. The Bill deals with a number of important issues, and this has been reflected in the wide-ranging contributions that we have heard today and over the last couple of months at various stages. I will take this opportunity to add to my earlier remarks and respond to some of the points raised in the contributions this afternoon.
On economic crime, I have already set out a number of actions that the Government have taken. On the specific issue of whether corporate criminal liability law should be reformed, the Law Commission is undertaking an expert review and we should await its outcome, but I note the range of views expressed today. We have discussed amendments that would bring additional activities into FCA regulation, including “buy now, pay later” products. I have heard the points raised on this matter today, particularly by my hon. Friend Paul Maynard, who gave a sensible, thoughtful and constructive analysis, but I believe that it is right to wait for the Woolard review.
On the question of equivalence and divergence, I have said before that there are some areas where the UK will want to take a different approach from the EU to better suit the UK market, and some areas where we will not. I do not accept the characterisation of divergence. Regulatory regimes are not static—they evolve—and it is right that regulators should adapt to them. We have heard about the relationship between the regulators, the Treasury and Parliament. Again, I look forward to continuing these conversations through the future regulatory framework review, which will be ongoing in the coming weeks and months.
We have discussed several amendments that would require the regulators to have regard to different objectives when implementing the prudential regimes provided for in the Bill. It is right that the regulators set the detailed rules implementing these regimes, as they have the right technical expertise. That has long been a principle by which our regulators have worked over the past 20 years. These regimes are vital, but I do not believe that regulators should be required to have regard to broader questions that are not so closely related to prudential standards.
Several of today’s amendments relate to issues not included in the Bill. I emphasise to the House once again that the Bill is just one part of the wider long- term strategy for financial services that will ensure that the UK financial services industry continues to be a global leader.
As is traditional at this stage of the Bill’s passage, I would like to take this opportunity to thank those who have contributed to its development and scrutiny. In particular, I thank Mr McFadden and Abena Oppong-Asare on the Opposition Front Bench, as well as the hon. Members for Glasgow Central (Alison Thewliss) and for Aberdeen South (Stephen Flynn), for the care and attention that they have brought to scrutinising the Bill and the constructive way in which they have approached it. I thank the Public Bill Committee for its detailed engagement with the legislation, particularly the Chairs, my hon. Friend Philip Davies and Dr Huq.
The hon. Members for Walthamstow (Stella Creasy) and for Wallasey (Dame Angela Eagle) have provided thorough examination and important contributions on parts of the Bill, as has just been seen, and I congratulate the hon. Member for Wallasey on the recognition of her services to Parliament over nearly 29 years in the new year honours list. On this side of the House, my hon. Friends the Members for Basildon and Billericay (Mr Baron), for Bromley and Chislehurst (Sir Robert Neill) and for Hitchin and Harpenden (Bim Afolami), and others, have provided characteristically thorough and thoughtful contributions.
I am grateful to the many experts who gave evidence to the Committee, and I thank the Commons staff and Clerks, Kevin and Nick, who have managed the process so smoothly. Not least, I thank the Treasury officials, Alex Patel, Liz Cronin, Fred Newman, Catherine McCloskey and Tim Garbutt. I hope the House has found my—
Order. I am sorry to interrupt the Minister; I know he wanted to thank more people, but we will have to take that as read, because under the Order of the House of
Debate interrupted (Standing Order 9(6) and Programme Order,
New clause 27 accordingly read a Second time, and added to the Bill.