New Clause 20 - Power of a select committee to require the FCA to conduct an investigation

Financial Services Bill – in a Public Bill Committee at 3:00 pm on 3 December 2020.

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‘(1) The Financial Services Act 2012 is amended as follows.

(2) After section 77 (Power of the Treasury to require FCA or PRA to conduct an investigation) insert—

“77A Power of Treasury to require FCA or PRA to undertake investigation

(1) Where a relevant select committee resolves that—

(a) it is in the public interest that the FCA should undertake an investigation into any relevant events, and

(b) it does not appear to the relevant select committee that the regulator has undertaken or is undertaking an investigation (under this Part or otherwise) into those events, the FCA must undertake an investigation into those events and the circumstances surrounding them and lay a report before Parliament on the result of the investigation.

(2) “Relevant events” means events that have occurred in relation to—

(a) a collective investment scheme,

(b) a person who is, or was at the time of the events, carrying on a regulated activity (whether or not as an authorised person), or

(c) listed securities or an issuer of listed securities.

(3) “Relevant events” do not include any events occurring before 1 December 2001 (but no such limitation applies to the reference in subsection (2) to surrounding circumstances).

(4) A “relevant select committee” means a select committee of the House of Commons with a remit covering financial services.”’—

This new clause would give a relevant select committee of the House of Commons the power to require the FCA to undertake an investigation into relevant events.

Brought up, and read the First time.

Photo of Stella Creasy Stella Creasy Labour/Co-operative, Walthamstow

I beg to move, That the clause be read a Second time.

I do not intend to speak to this new clause for very long because my case has already been made. This is a simple clause about the powers of the FCA to do investigations and about who has the power to require it to do them—currently, that is the Treasury. The new clause suggests that a Select Committee should be able to do that. It would most likely be the Treasury Committee, but the clause says “a relevant Select Committee”, because the issues may concern the Business, Energy and Industrial Strategy Committee.

The Minister will understand my disappointment and frustration that he has not offered any opportunity to look at whether amendments or investigations are needed. Change is likely to come to our credit industry in the time that this Bill is before Parliament. If the Treasury will not act, it falls to all of us in Parliament to ask where else we can scrutinise how our constituents are being lent to and whether they are being ripped off.

The new clause would simply give the power to compel an investigation to a Select Committee. I am sure that hon. Members have buy now, pay later casework coming into their inboxes from people who are in financial difficulty, especially after Christmas, or who have credit card problems. They will be asking, “Who is looking into this?” The answer we are getting from the Government is, “Not us,” and the answer we are getting from the FCA is, “Well, the industry tells us it is all very complicated.” We could give Select Committees—they are cross-party, so this is not a partisan thing—the ability to decide that there is a public interest test. That would simply extend the power that the Treasury currently has regarding Select Committees to identify where there is a problem, gather the evidence and help make the case for change.

We will not always have financial services Bills to put things on the record, but we could do it in a Select Committee. I hope the Minister will see this proposal not as a challenge to his authority but as support for the idea that these matters should be investigated and taken up.

Photo of John Glen John Glen Minister of State (Treasury) (City), The Economic Secretary to the Treasury 3:15, 3 December 2020

The change proposed under this new clause to allow Select Committees to require the FCA to launch investigations in situations where there is suspected regulatory failure would mirror powers that are already available to the Treasury. As I set out earlier, section 77 of the Financial Services Act 2012 enables the Treasury to require the regulators to conduct investigations in cases of suspected regulatory failure in circumstances where it does not appear to the Treasury that the regulators are already doing so under, for example, the regulators’ power in section 73 of that Act.

The Treasury has used those powers to require the PRA and FCA to launch investigations where it considers that appropriate. As Members are aware, the Treasury Committee had the opportunity to scrutinise the investigation that was carried out into the Co-operative Bank in 2018, and it made a number of recommendations that were accepted by the PRA.

I am therefore confident that investigations under existing section 77 powers are useful in holding regulators to account, ensuring proper scrutiny of them and conducting investigators in the public interest. In determining whether an investigation is in the public interest, the Treasury will also consider the views of the relevant Select Committee in reaching its decision.

The Government agree that Parliament should play an important strategic role in interrogating, debating and testing the overall direction of policy for financial services. The Treasury is confident that proper mechanisms exist to allow the Treasury Committee to scrutinise and comment on investigations, as is right and proper. Ultimately, there is nothing to stop a relevant Select Committee launching its own investigation into an issue, calling witnesses, gathering evidence and making recommendations. That is a decision for the Committee.

Photo of Stella Creasy Stella Creasy Labour/Co-operative, Walthamstow

Earlier today, we talked about the fact that the Treasury instructed the FCA to get involved in the debate around payday lending. Indeed, it went into companies such as Wonga and QuickQuid and set out redress schemes. We know that they were ineffective because it ended up with the ombudsman getting involved, and it was only then that those companies went into administration because it was revealed how much they owed to our constituents. In circumstances such as that, where no doubt there would be difficult conversations about what role the Treasury and the FCA played in the process, who watches the watchmen? Who would instruct that inquiry? At the moment, that inquiry has not happened, so we do not know why that redress scheme did not work. There is no sign that the FCA wants that. Is the Minister saying that he would instruct that so that we can get to the bottom of why the redress scheme did not work? If it did not, it seems rather apposite to have an independent third party that could look at issues such as that on behalf of consumers.

Photo of John Glen John Glen Minister of State (Treasury) (City), The Economic Secretary to the Treasury

I am very happy to look at that particular case. The point I am making is that there is a mechanism to compel the FCA to investigate, and the Treasury does not do that in isolation from the its wider accountability to Parliament, individual Members of Parliament and the Treasury Committee. I am very happy to examine the point that the hon. Lady has made and I will look at it carefully, but that provision exists. Frankly, I cannot and would never expect to act in isolation and without accountability to Parliament. Given the powers available to the Treasury, which can be used in that context, and the opportunity for scrutiny by Select Committees, I ask that this new clause be withdrawn.

Photo of Stella Creasy Stella Creasy Labour/Co-operative, Walthamstow

If the Minister is saying that he is going to instruct a redress investigation, I will happily withdraw the new clause. I beg to ask leave to withdraw the motion.

Clause, by leave, withdrawn.