Financial Services Bill
Public Bill Committee, 17 November 2020.
Philip Davies (Conservative, Shipley)
Before we begin, I have a few preliminary announcements: please switch electronic devices to silent. Tea and coffee are not allowed during sittings. Can I emphasise the importance of social distancing? Spaces available to Members are clearly marked. As you can see, not all Members can fit around the horseshoe. Will Members sitting at the side of the Room or in the Public Gallery please use the standing microphone if they wish to ask a question?
Today we will first consider the programme motion on the amendment paper. We will then consider a motion to enable the reporting of written evidence for publication, and then a motion to allow us to deliberate in private on our questions before the oral session begins. In view of the time available, I hope we can take these matters without debate. I call the Minister to move the programme motion standing in his name, which was discussed yesterday by the Programming Sub-Committee for this Bill.
Philip Davies (Conservative, Shipley)
Copies of written evidence that the Committee receives will be made available in the Committee Room. I call the Minister to move the motion about deliberating in private.
Philip Davies (Conservative, Shipley)
We will now go into private session to discuss lines of questioning.
Examination of Witnesses
Philip Davies (Conservative, Shipley)
Q We now resume our public sitting. We will hear evidence from Victoria Saporta from the Prudential Regulation Authority and Sheldon Mills and Edward Schooling Latter from the Financial Conduct Authority, all remotely. Before calling the first Member to ask a question, I remind Members that all questions should be limited to matters within the scope of the Bill and that we must stick to the timings in the programme motion that the Committee agreed. We have until 10.25 am, at which point I must cut off this session. Do any members of the Committee wish to declare any relevant interests in connection with the Bill? No. In which case I call the first witnesses. Could you please introduce yourselves for the record?
John Glen (Conservative, Salisbury)
Q It is good to have you before us for this first session. I have a question for each of you, but I will start with Vicky. Obviously there is a strong working relationship between the regulators and the Treasury. It would be really helpful if you could explain how your organisations worked with the Treasury on the preparation of the Bill.
John Glen (Conservative, Salisbury)
Q Shall I move to Sheldon? One of the themes that has already come out in early observations is around the commitment, or not, to maintain our highest international standards. I just ask you to make any observations about that, in terms of that commitment and how you will ensure that that continues.
John Glen (Conservative, Salisbury)
Q Thank you, Sheldon. If I could move to Edwin, one of the 17 measures in the Bill deals with the wind-down of the LIBOR benchmark, which is an incredibly complex process by which we are giving the FCA power. Could you explain to the Committee how you see the FCA executing the power and using it in practice?
John Glen (Conservative, Salisbury)
Thank you. That is all.
Pat McFadden (Labour, Wolverhampton South East)
Before I begin, can I get some sense from you, Mr Davies, about whether we can have a few questions?
Philip Davies (Conservative, Shipley)
Yes, absolutely. Fire away.
Pat McFadden (Labour, Wolverhampton South East)
Q Thank you. I would like to begin with you, Vicky. The Bill goes through a process of onshoring a number of EU directives that are concerned with financial services. Can you tell us conceptually whether there is a difference between the way the UK regulators tend to go about their business or think about these things, compared with the way the various EU directives have been drawn up, debated and discussed in the EU institutions until now?
Pat McFadden (Labour, Wolverhampton South East)
Q If you are a bank that wants to lobby about the rules or a trade body representing financial institutions, do you think there is any advantage in your lobbying in one of these systems or the other—the more rule-based one or the more flexible one that you have outlined? Which is the more open to lobbying?
Pat McFadden (Labour, Wolverhampton South East)
Q Thank you. Sheldon, I want to ask you about the accountability framework in the Bill. It asks you and the PRA to take account of various things. In going about your work in the FCA of regulating conduct, products and so on that financial bodies distribute, what account is taken of wider Government objectives? I am thinking most obviously of things such as the net zero commitment and the legislation that has been passed for that. Do you consider those things or do you say: “Look, our day job is the fairness and stability of financial products and it’s somebody else’s job to worry about that”?
Pat McFadden (Labour, Wolverhampton South East)
Q Thank you very much. My final question is to Mr Latter. In the onshoring of all these EU directives, where do you see, if you like, the main opportunities not to do things that the directives currently mandate us to do? Where are the divergence opportunities for the UK financial services sector?
Pat McFadden (Labour, Wolverhampton South East)
Thank you.
Alison Thewliss (Scottish National Party, Glasgow Central)
I have a couple of questions, first to the FCA. Can you explain a wee bit more why you feel that you need a change in primary legislation in order to remove companies from your registerQ ?
Alison Thewliss (Scottish National Party, Glasgow Central)
Q Thank you. Is there a reason why you cannot just remove them now? Is that more a resourcing issue than a legality issue?
Alison Thewliss (Scottish National Party, Glasgow Central)
Q I think that you referred to 60,000 firms. What proportion of that 60,000 would you expect to remove from the register by using this process?
Alison Thewliss (Scottish National Party, Glasgow Central)
Q Okay, thank you. Let me move on to other issues, about capacity. It is a huge amount of regulation coming back to the UK. Do you feel at the moment that you have sufficient capacity to deal with this, given the huge amount of responsibility that you are taking on, in addition to the pandemic and everything else that is happening?
Alison Thewliss (Scottish National Party, Glasgow Central)
Q On the risk of a cliff edge, Nausicaa Delfas of the FCA said that financial services face a cliff-edge situation in January. She raised particular issues with derivatives trading, the transfer of personal data and offering services to customers in the UK. Are there any improvements that could be made to the Bill in order to smooth that transition and make that process a bit simpler and easier?
Alison Thewliss (Scottish National Party, Glasgow Central)
Okay. I will leave some questions for colleagues.
Angela Eagle (Labour, Wallasey)
Mr Mills, I wonder whether you could say a little more about the resource implications of the Bill. An awful lot of our financial services regulation—well, all of it—used to go on in the European Union, but now that is ending and all these complex and technical issues are being onshored. That must be the cause of a huge amount of extra technical work for the FCA, and in fact for the PRA. Is the FCA getting any extra resources? Are you trying to import all the people who used to live in Brussels back into the FCAQ ?
Angela Eagle (Labour, Wallasey)
Q Mr Mills, I am glad you think you can manage but, given that this onshoring is happening, we have already seen the beginnings of some quite fierce competition—if I may put it in a non-technical way—to nick some of the financial services that we have in this country and to take them abroad. We have already seen quite a competitive and non-co-operative environment develop, seeing who can get what when we are outside the European Union. That is an entirely new form of activity that somehow you have to take account of, and that has not had to be taken account of in the past.
Are you sure that will not cause your resources to be stretched in a way that you had not anticipated? For example, if we have to approve new ways of doing things, onshore all these things and get new systems up and running, those who might wish to carry on can just shift to the internal market and carry on doing things, without having to wait for all the consultations that you and your colleagues will be doing to try to re-establish a UK-based regulatory system.
Angela Eagle (Labour, Wallasey)
Q Thank you. It appears that the EU will not be in a position to offer us any equivalence, or to certify any of the things that we are doing as equivalent, until at least the middle of next year. There are noises that we will be diverging in some of the areas that we are re-onshoring. You said that would be the exception rather than the rule. Can you give us a bit more information on how divergence will work? I am concerned that the Bill has its Committee stage this side of the transition, and then its Report stage the other side of the transition, when we might be in a different situation. Are you planning for there to be big importations of new stuff into the Bill at the last minute?
Angela Eagle (Labour, Wallasey)
Q Just to make that clear, you are basically saying that you are neutral on the amount of divergence or equivalence, and that you can cope with whatever is thrown at you?
Angela Eagle (Labour, Wallasey)
Q Finally—I am conscious that I have put questions only to you, but I am sure colleagues will put questions to other witnesses—you were saying at the beginning that part of what the FCA has to do is protect financial services in this country and create a good environment for them, as well as protect consumers and ensure market stability. There is only so much bandwidth, so will all the work relating to onshoring compromise consumer protection?
Angela Eagle (Labour, Wallasey)
Thank you, Chair.
Abena Oppong-Asare (Labour, Erith and Thamesmead)
Thank you for taking the time to speak to us. I know that you are in favour of the Bill, as it will give you greater agility and flexibility to deal with things. Going back to some of the comments you made earlier about the consultation process, in which you were clearly fully engaged, one of the things I want to find out relates to the consultation discussions, and obviously you have more responsibilities. Will you shed some light on what came out of those discussions in terms of making sure that there is effective accountability and oversight in relation to the additional powers that you are likely to be given?Q
Abena Oppong-Asare (Labour, Erith and Thamesmead)
Q Just for clarification, during the consultation period there was no analysis looking, in terms of the additional powers, at how the accountabilities need to be changed. My understanding, from what you have just told me, is that it is very much reliant on the processes you think you have got already, which I have concerns about, if I am honest, because the current processes do not appear to take into consideration the additional powers.
Abena Oppong-Asare (Labour, Erith and Thamesmead)
Q I put the same question to the other witnesses.
Harriett Baldwin (Conservative, West Worcestershire)
My questions are for the FCA. In terms of the impact of the Bill on the end consumer and the end user of financial services, what impact assessment has the FCA done on the potential regulatory cost and how that might affect the consumer? We hear a lot from financial services firms about the cost to them, not only of regulations, but also of the fees that they have to pay to the FCA. What business plan and cost assessment has the FCA done on the impact that the measures and the responsibilities in the Bill will have on the industry, which will then be passed on to the consumerQ , or will it be a reduction in cost?
Harriett Baldwin (Conservative, West Worcestershire)
Q The FCA has not prepared anything specific demonstrating that—it is a hunch based on what is in the Bill—but has it done any cost-benefit analysis of the breathing space measures that you mentioned?
Stella Creasy (Labour/Co-operative, Walthamstow)
I should like to explore what you have said, particularly about how the Bill will benefit consumers—after all, we are all concerned about the regulation of financial services marketsQ . You set out your interest in the debt respite scheme. We all agree that that is very welcome, but debt prevention is an ultimate aim. How do all three of you think that this way of regulation will help businesses and households with debt prevention?
Stella Creasy (Labour/Co-operative, Walthamstow)
Q I do, but I should like to hear about one of the roles that the FCA has tacked on to the Financial Services Act 2012—investigating regulatory failure. The Bill is about how we address that regulatory regime and the things to which you have regard under that regime. Your colleagues might have a view on whether explicitly having regard to whether a product or a firm is likely to cause debt—unsustainable, unaffordable debt—should be built into the new regulatory regime, given some of the investigations that have, or have not, taken place over the past couple of years.
Stella Creasy (Labour/Co-operative, Walthamstow)
Q Perhaps I can come at that question from another angle, because the FCA has been performing this role for several years now. Are there any examples of where the Financial Ombudsman Service has stepped in? I am thinking particularly of the high-cost credit industry, where a lack of proactive regulation in the past could be addressed by having stronger, robust, and clearer direction from us that we wish to see the FCA intervene to protect consumers from unaffordable debt, and to have regard to firms that may be promoting unaffordable debt.
Stella Creasy (Labour/Co-operative, Walthamstow)
Q A final question to you and colleagues. With that in mind, in moments where there has not been as strong an intervention and early in the process of new products coming to the UK, could you tell us a little bit about what you see coming ahead? We are all very aware of FinTech coming to these shores, and you will be dealing with an awful lot of legislation, as my colleagues pointed out, that you will be onshoring. When you do your horizon scanning—this is a question to all three witnesses—are there any particular products or markets that we should be aware of when thinking about how this legislation will be applied in the coming, say, five years?
Stella Creasy (Labour/Co-operative, Walthamstow)
Q Do you regret, then, not moving more quickly on the buy now, pay later industry, because that is not regulated by the FCA at the moment, yet that is exactly an industry which we all now recognise is causing consumer detriment to people on low incomes?
Philip Davies (Conservative, Shipley)
Victoria, I think you were about to say something.
Philip Davies (Conservative, Shipley)
Order. I am afraid that brings us to the end of the time allocated for this session. I thank our witnesses on behalf of the Committee for their evidence.
Philip Davies (Conservative, Shipley)
We will now hear from Simon Hills and Daniel Cichocki from UK Finance, who are joining the sitting remotely. Can you introduce yourselves for the record?
Philip Davies (Conservative, Shipley)
I remind colleagues that we have until 10.55 am for this session, so it is much shorter than the previous one. I hope that colleagues will be mindful of that.
John Glen (Conservative, Salisbury)
Q Simon, I want to focus on your responsibilities with respect to the Basel rules and the expertise of the regulator. Can you set out the competence that you have within your organisation to do this, and could you comment on the suitability of the UK to implement its own approach to the Basel framework, perhaps with reference to what happens in other jurisdictions to give the Committee a sense of how we fit alongside international comparisons?
John Glen (Conservative, Salisbury)
Q I am conscious of time, so I will allow others to come in, but I wish to ask Daniel about the work that you are doing on LIBOR. This is an incredibly complex area with lots of challenges, and the key issue is around the wind-down of the benchmark and the move to deal with the tough legacy contracts. Could you comment on what the Bill achieves with respect to that, whether there are any alternatives to it, and what the implications would be if we did not do what we are planning to do in the Bill?
John Glen (Conservative, Salisbury)
Thank you very much. I shall pass over to my colleagues.
Pat McFadden (Labour, Wolverhampton South East)
Q Thank you both for coming along this morning, virtually. Could I begin with you, Simon, and ask about onshoring and divergence? The Bill onshores significant bodies of EU legislation and directives. From the point of view of UK Finance, where would you like to see the Government and regulators diverge from that body of EU law in the future?
Pat McFadden (Labour, Wolverhampton South East)
Q We have had the Chancellor’s announcement on equivalence from the UK end of the telescope last week. Do you think there is a relationship between the degree of divergence we pursue in the future from the EU rulebook and equivalence decisions from the other end of the telescope, that is, by the EU or EU member states to UK companies selling into their markets?
Pat McFadden (Labour, Wolverhampton South East)
Q May I ask you, Daniel, a question about LIBOR to fill in a small gap in the knowledge of those of us who have not followed every twist and turn of this? The measure became a scandal because it was being manipulated for the benefit of the traders who were submitting information. That information was based sometimes not on actual trades but on their estimates of what trades would cost. What changes have been made to the administration of LIBOR in recent years to stop those things?
Pat McFadden (Labour, Wolverhampton South East)
Q One more for you, Daniel. As things stand with LIBOR today, is it still possible for traders to submit information based on their estimates of what trades would cost rather than actual trades that have taken place?
Pat McFadden (Labour, Wolverhampton South East)
So no more cases of champagne? Thank you.
Alison Thewliss (Scottish National Party, Glasgow Central)
Q Are there any further measures that you expected to see, or would have liked to see, in the Bill?
Alison Thewliss (Scottish National Party, Glasgow Central)
Q So when the EU makes its regulations, and it goes ahead with what is in its interests, essentially you would want us to mirror the EU wherever possible?
Alison Thewliss (Scottish National Party, Glasgow Central)
Q Are there any international competitors that you think have struck the correct balance with a regulation that you would want to see us take on here?
Alison Thewliss (Scottish National Party, Glasgow Central)
Q That is useful, thank you. Can you give any particular examples of how far you think divergence could go before you risk withdrawing equivalence?
Alison Thewliss (Scottish National Party, Glasgow Central)
Thank you very much.
Philip Davies (Conservative, Shipley)
Do any other Members have any questions?
Angela Eagle (Labour, Wallasey)
Q I was wondering, Daniel, whether there are any dangers in the move away from LIBOR. Obviously, we know about the dangers of staying with it, but are there things that keep you awake at night about the transition?
Angela Eagle (Labour, Wallasey)
Q Obviously, LIBOR is a benchmark. Any benchmark is a sign of some of the profit that can be made on a transaction. If there are differences of approach or changes, there are areas where customers can be fleeced or left out of pocket without, in some ways, even realising it because of the very technical nature of these kinds of transactions. To what extent do you have a consumer protection voice helping you with these changes? Do you think that the protections for consumers who may be disadvantaged during this transition are strong enough?
Angela Eagle (Labour, Wallasey)
Q Obviously we will be keeping an eye on that as it happens.
Mr Hills, the industry has been lobbying the Government, Parliament and regulators to design regulations that will make UK firms more internationally competitive. Indeed, all of us in the room would share the aim of protecting our financial services industry. Do you think that the Bill achieves that?
Angela Eagle (Labour, Wallasey)
Q So you are not too worried about divergence because you do not think there will be very much of it.
Angela Eagle (Labour, Wallasey)
Thank you very much.
Philip Davies (Conservative, Shipley)
If there are no further questions, I thank the witnesses for their evidence.
Examination of Witness
Philip Davies (Conservative, Shipley)
Q We will now hear from Paul Richards from the International Capital Market Association, who is here in person. I remind colleagues that we have until 11.25 am for this session. Paul, would you please introduce yourself for the record?
John Glen (Conservative, Salisbury)
Q Thank you, Paul. The Committee will be very aware of the breadth and depth of your experience in this domain. You have gone into three quite specific issues. Could you set out, at a higher level, the LIBOR challenges that you think this Bill does not deal with, and where you think it is going to be defective? Obviously, a lot of work has been done with regulators to get to this point and we have had evidence previously about the nature of this change and the more general desire for it. Perhaps you could contextualise the specific issues you talked about with respect to continuity and the other matters you raised.
John Glen (Conservative, Salisbury)
Thank you for clarifying that. That is very helpful for the Committee.
Pat McFadden (Labour, Wolverhampton South East)
Q Thank you for appearing before us, Mr Richards. Can you set out for us, in as simple terms as possible, the difference between how prices are set under SONIA and how they were traditionally set under LIBOR?
Pat McFadden (Labour, Wolverhampton South East)
Q Can I just focus on the point about expert judgments? That is quite a polite term for some of things that happened with LIBOR. They were not really expert judgments in some cases, were they? They were effectively deals between different traders to put in submissions at particular prices, to the individual advantage of the traders, based on the trades that they were doing. To what degree is SONIA insulated against that kind of manipulation?
Pat McFadden (Labour, Wolverhampton South East)
Q Can I take you back to the second point you made about the danger of litigation? We might all agree that moving away from LIBOR is a good thing, partly because we do not want to see a benchmark manipulated in the way that LIBOR was. However, as a consumer, I might have agreed trades or contracts based on a particular price set by LIBOR. What is the situation with potential litigation from a consumer who says, “You’re telling me that SONIA is a more honest benchmark because it’s based on actual trades and actual prices in market transactions, but now I’m being told that instead of paying x%, I will be paying x% plus y%”? What does the Bill say about that kind of situation at the moment, and what would you like it to say?
Pat McFadden (Labour, Wolverhampton South East)
Q So how would this safe harbour provision that you are advancing work? Why is it needed beyond the FCA acting to ensure continuity for legacy contracts, as is I think is already envisaged in the Bill?
Pat McFadden (Labour, Wolverhampton South East)
Q Have you already made these arguments to the Treasury only to be rebuffed, or is this the first chance you have had to make them because the Bill was published only a few weeks ago?
Alison Thewliss (Scottish National Party, Glasgow Central)
I have some follow-up questions. You mentioned how the FCA will determine these things. Do you feel that that needs to be set out quite Q explicitly in the Bill—how the FCA will make those determinations around benchmarking and LIBOR contracts?
Alison Thewliss (Scottish National Party, Glasgow Central)
You mentioned the uncertainty of how the FCA makes decisions around LIBOR contracts and benchmarking. Do you feel that needs to be set out more explicitly in the Bill so that you can know what to anticipate?
Alison Thewliss (Scottish National Party, Glasgow Central)
Okay, that is useful. IQ have been looking through some of the lawyers’ statements and I would be grateful if you could clarify something for me, as this is not an area of expertise for me but it is for you. You mentioned article 23A benchmarks, and something else I read mentioned the types of contracts that would fall within the article 23C exceptions. Can you tell me a wee bit more about what that would mean?
Alison Thewliss (Scottish National Party, Glasgow Central)
Thank you. You talked about the costs of litigation and the impact that that would have. What is the extent of these legacy LIBOR contracts—their value, their number and the cost that that litigation might entail?Q
Alison Thewliss (Scottish National Party, Glasgow Central)
And the potential cost of litigation?Q
Alison Thewliss (Scottish National Party, Glasgow Central)
Okay. It sounds like a good time to be a lawyer in this area. Thank you.
Angela Eagle (Labour, Wallasey)
Q Do the provisions of continuity and safe harbour apply in America as it converts away from LIBOR? Are the things that you are asking the Committee to consider putting in the Bill happening in other jurisdictions?
Angela Eagle (Labour, Wallasey)
Q Okay. You did not answer the question from my right hon. Friend the Member for Wolverhampton South East earlier about whether you had asked the Government for this and they had said, “No, the FCA can do it; we’re not putting it on the face of the Bill,” and so you have come here to make the argument again, or whether it is work that you are in the process of doing and you have got to the stage where you want to make these proposals, as the Bill has arrived. Have the Government considered this and said no, or is it something that you have just proposed?
Angela Eagle (Labour, Wallasey)
Q I understand your point about how those things would calm things down in the changeover, but why do you not trust the FCA to do this? Why does it have to be in the Bill?
Philip Davies (Conservative, Shipley)
If there are no further questions from Members, I thank the witness for his evidence. That brings us to the end of our morning sitting. The Committee will meet again at 2 pm in the same room to take further evidence.
Rupa Huq (Labour, Ealing Central and Acton)
I remind members of the Committee sitting on this side of the room, or in the Public Gallery, to use the standing mikes when posing their questions. Our first witness this afternoon is Chris Cummings from the Investment Association. Mr Cummings, welcome.
Rupa Huq (Labour, Ealing Central and Acton)
We have until 2.45 for this session. Mr Cummings, can you first of all introduce yourself for the record?
Rupa Huq (Labour, Ealing Central and Acton)
Thank you. We will start with the Minister, John Glen.
John Glen (Conservative, Salisbury)
Q57 Chris, it is good to see you. Thank you very much for addressing the Committee. Obviously, the Bill has a large number of measures, some of which will be of more interest to your members than others. I think it would be useful for the Committee if you could set out the significance to consumers of introducing a more proportionate regime for overseas funds to access the UK based on equivalence, and why it is important for consumers to be able to access funds based outside the UK. Perhaps you could tell us what your members feel about that measure and whether you have any reservations about it.
John Glen (Conservative, Salisbury)
Q It would probably be worth talking about equivalence. I am keen at this point to get an explanation of the measure for the Committee. I am sure others will want to probe some of the weaknesses or disadvantages that they may perceive.
John Glen (Conservative, Salisbury)
Thank you very much, Chris, and thank you, Chair.
Pat McFadden (Labour, Wolverhampton South East)
Chris, good afternoon and thanks for giving evidence today. I want to continue to ask about the same things.Q
The Bill does lots of different things, but I would like to mention two. First, it onshores or incorporates a significant body of EU law through different directives into UK law and gives the governance of those to the UK regulators. Secondly, it sets up this overseas fund regime, by which it grants equivalence on a country-by-country basis. It says that the Treasury will make these equivalence decisions as well. The Chancellor announced the direction of travel last Monday.
How do you see the relationship between these two different parts of the Bill? In theory, in future, having onshored the body of EU law and the directives, we are now at liberty to depart from them if we so choose. Do you see a relationship between that debate around divergence and the degree of divergence that the UK decides to opt for and the equivalence decision that we now need from the rest of the EU?
Pat McFadden (Labour, Wolverhampton South East)
Q What would be the practical implications for UK-based investment companies— your members—if we stayed where we are now, with the UK having granted equivalence recognition to EU-based companies but not having a reciprocal recognition in return?
Pat McFadden (Labour, Wolverhampton South East)
Q Thanks. Can I slightly switch subjects now, to ask you about packaged retail investment and insurance-based products? The Bill removes the requirement for performance scenarios on PRIIPs. Could you just set out for us, in as simple terms as possible, what is wrong with these performance scenarios, and why there is a desire to remove them? If they are removed, what kind of information should be provided to consumers to help them make as informed an investment choice as people can?
Alison Thewliss (Scottish National Party, Glasgow Central)
I have a couple of questions on equivalence. Equivalence is a bit of a point in time. How far do you feel that the limits of equivalence could go? How much change would happen before that was withdrawn?Q
Alison Thewliss (Scottish National Party, Glasgow Central)
Q That is a good point about equivalence working on both sides; even though we have got off the bus, we might need to try to catch up with the bus to make sure we are still going in broadly the same direction. In your earlier answer, you mentioned other jurisdictions having more experience, having dealt with this for longer. Are there any particular examples that you feel would be useful, which the UK could learn lessons from?
Alison Thewliss (Scottish National Party, Glasgow Central)
Q Thank you. That is useful. Is there anything else that you expected to see in the Bill or that you would like to see in the Bill?
Alison Thewliss (Scottish National Party, Glasgow Central)
Q Thank you. Lastly, are you clear enough on what happens for existing investors if equivalence is withdrawn?
Alison Thewliss (Scottish National Party, Glasgow Central)
Thank you.
Rupa Huq (Labour, Ealing Central and Acton)
I have second the shadow Minister, Abena Oppong-Asare.
Abena Oppong-Asare (Labour, Erith and Thamesmead)
Q Thank you, Chair. Thank you for coming to speak to us. There are four audit firms and one of the allegations is that they are very close to each other and cosy with big companies. What are your thoughts on that? In the Bill, it is not very clear that that has been addressed.
Abena Oppong-Asare (Labour, Erith and Thamesmead)
Q The four audit firms: there are concerns that they are very cosy with each other and are very close with the big companies. The Bill does not essentially address that kind of issue. It does not seem very clear to me. Do you have any thoughts on how that could be addressed in the Bill to strengthen it so that there is better transparency and the relationship is less cosy?
Abena Oppong-Asare (Labour, Erith and Thamesmead)
Q I want to follow up on that, because I recently read your comments about a new audit regulator in the Financial Times. The proposals gave me the impression that you felt that it would be able to ensure better reporting, and essentially hold the governance authority accountable to Parliament. Are you able to explain further about that?
Abena Oppong-Asare (Labour, Erith and Thamesmead)
Thank you, Chair.
Rupa Huq (Labour, Ealing Central and Acton)
I call Gareth Davies. Gareth, I think you will have to move to the microphone over there.
Gareth Davies (Conservative, Grantham and Stamford)
First, Mr Cummings, thank you for your comments about the extended permissions and the overseas regime, which I would agree with. However, can I specifically ask about these 9,000 funds? My understanding is that around 75% of all EU-domiciled funds are a SICAV vehicle, and I have two questions on that. First, what is your assessment of the demand level from UK investors for the SICAV vehicle, given that typically, historically, they have been much more expensive than the UK-domiciled equivalent? Secondly, can you explain more about the complementary nature of these funds to our market, specifically as relates to money market funds?Q
Rupa Huq (Labour, Ealing Central and Acton)
Does anyone else on the Committee wish to catch my eye in the remaining four minutes? In that case, thank you very much, Mr Cummings, for your evidence.
Examination of Witnesses
Rupa Huq (Labour, Ealing Central and Acton)
We move on to our second panel of the afternoon, and the fifth in total. We have Emma Reynolds, formerly of this parish, now at TheCityUK, and Catherine McGuinness from the City of London Corporation. We have until 3.30 pm for this panel, and I will pull the plug if it goes over. Emma and Catherine, could you first introduce yourselves for the record, please?
Rupa Huq (Labour, Ealing Central and Acton)
Thank you. We will start with the Minister, John Glen.
John Glen (Conservative, Salisbury)
Q Emma, I will come to you first. Obviously, TheCityUK represents, as you said, a range of institutions and firms. It would be helpful for the Committee if you could set the context by summarising the industry’s reaction to the Bill, and try to give us the widest possible view of the industry’s reaction to the measures in it and what the consequences would be if we did not pass it. Afterwards, I will come to Catherine separately.
John Glen (Conservative, Salisbury)
Q Would you like to spell out where you think anything is missing from the Bill? The second part of your answer seems to suggest that there is a lack of an overall strategy. Is that what you are seeking to say? Obviously this has been contextualised as a first step, as we get towards the end of the transition period. I have indicated, as the Minister, that there will be subsequent legislation in future Sessions. Would you like to set out in more detail where you think there are specific gaps at this point?
John Glen (Conservative, Salisbury)
Q May I turn to Catherine? Thank you for giving evidence. One of the issues that has come up generally is an apprehensiveness about the capacity of the regulators in terms of their technical expertise to implement detailed rules such as the Basel rules. I have been fortunate enough to have been a Minister for a while and I recognise the complexity of the dynamic between the Treasury and the regulators. There is an intimate relationship, but could you give us a view on how you see the role of the regulators in the context of this Bill? Do you see any risk that they are being asked to do something that stretches them beyond what they should normally be able to do? Could you give the Committee a sense of that responsibility and how well placed they are to do what we have asked them to do?
John Glen (Conservative, Salisbury)
Q You are referring to the response of both yourselves and TheCityUK to the consultation on the future regulatory framework, separate and additional to the Bill?
Pat McFadden (Labour, Wolverhampton South East)
Q Good afternoon, Emma and Catherine. It is very nice to see both of you. Emma, I want to come to you first. You are the fifth panel to appear and there is beginning to be a pattern to the questions that we have asked. I feel that I have asked this of a few people.
The Bill does lots of different things but two big things are that it transposes, or onshores, lots of different parts of EU regulation from many different directives. It gives powers to the UK regulators to govern all that. In doing that, as we come to the end of the transition process, there is greater freedom for either the Treasury or the regulators to diverge from that body of EU law. The Bill does that, but it also has this overseas markets vision, which is granting equivalence on a country-by-country basis, to the 9,000 funds that are domiciled overseas but which operate in the UK. I want to talk a bit about these two different parts of the Bill. Starting with you, Emma, what do you think your members’ attitude is to onshoring this body of EU law? Do they broadly regard it as something that they would like to stick with or are there areas that they would quite quickly want to diverge from and, if so, what would be the most prominent areas?
Pat McFadden (Labour, Wolverhampton South East)
Q You referred to the equivalence decision announced by the Chancellor last week. That is one end of the telescope; the other end is hoping—I am sure the Chancellor hopes, too—that this is reciprocated. Do you see a relationship between the degree of divergence, which may occur and the decision-making process from the other end of the telescope on equivalence for UK firms trying to sell into EU markets? In other words, Mr Barnier talks a lot about the level playing field, but if it looks like we are departing from a level financial playing field, will that impact on those equivalence decisions you hope for?
Pat McFadden (Labour, Wolverhampton South East)
Q Yes. Catherine, can I turn to you on the question of regulators? This gives a huge amount of new powers to the regulators. I have a two-part question. One, do you think they can handle it? Two, returning to what you said about a new Select Committee on financial services regulation—or whatever the exact title was—do you think that is an important part of a new accountability regime for the regulators, given the enhanced powers that the Bill gives them?
Pat McFadden (Labour, Wolverhampton South East)
Thanks very much. I have no further questions.
Rupa Huq (Labour, Ealing Central and Acton)
For the Scottish National party, first of all, their spokesperson, Alison Thewliss.
Alison Thewliss (Scottish National Party, Glasgow Central)
Q Just to pick up where Pat left off on the idea of scrutiny, Catherine, I think you mentioned that the City of London has a joint committee on that. Could you tell me a bit more about how that operates and whether there is something Parliament can learn from that?
Alison Thewliss (Scottish National Party, Glasgow Central)
Q That is really helpful, thank you. I think I share some of the nervousness that people have about all of these regulations being introduced and not having that level of scrutiny. Are there any particular areas where you feel that more scrutiny is necessary?
Alison Thewliss (Scottish National Party, Glasgow Central)
Q Thank you. Emma, are there any particular aspects that you feel require additional scrutiny and transparency over decision making within the regulator’s new powers?
Alison Thewliss (Scottish National Party, Glasgow Central)
Q Thank you very much. One of the recommendations within TheCityUK briefing that was sent round was around working towards implementing EU capital regulation requirements and requiring further guidance on that. Do you feel that you have clarity since the briefing was sent, or do you still require more clarity?
Alison Thewliss (Scottish National Party, Glasgow Central)
That is useful. I will hand back to my colleagues.
Rupa Huq (Labour, Ealing Central and Acton)
I saw Angela Eagle indicate she wanted to speak.
Angela Eagle (Labour, Wallasey)
Catherine, you said that the City of London welcomes the Bill. What more would you have liked to see in it that is not in it?Q
Angela Eagle (Labour, Wallasey)
Q Emma, does TheCityUK have any thoughts on the same question?
Angela Eagle (Labour, Wallasey)
Q There is this tension between equivalence, which you fairly unambiguously said you wanted a few minutes ago, and the argument made that we should leave the European Union so that we can have competition and—this argument is made implicitly—make our own regulations, so that we can make ourselves more competitive. Do you think that divergence could make us more competitive, or is it more likely to be destructive to UK financial services’ ability to trade globally?
Angela Eagle (Labour, Wallasey)
Q Thank you. Catherine, we are coming out of the European Union, where we used to wield great heft in the technical discussions around this regulation. I assume that is still the case. I speak from my experience as Treasury Minister. Are you worried that, untethered, the EU will go off in a different direction and regulate in a way that makes it much harder for us to trade into the single market?
Angela Eagle (Labour, Wallasey)
Q With our leaving the EU, there has already been some competitive behaviour on the part of certain countries in the EU that shall remain nameless, which are trying to grab some of our business. Emma, do you think that that kind of dynamic, competitive, semi-predatory behaviour is going to trigger a kind of race to the bottom? Would whether or not there is a deal in the next few weeks make any difference to how you would contemplate that activity?
Angela Eagle (Labour, Wallasey)
Q Thank you, Emma. Catherine, I know this is a slightly invidious question, but I am going to ask it anyway. Do you think the FCA is properly equipped and resourced to take up the duties that the Bill confers on it?
Angela Eagle (Labour, Wallasey)
Q Please do.
Stella Creasy (Labour/Co-operative, Walthamstow)
My colleague, Angela, has asked most of the questions that I wanted to ask. I just want to get a bit of clarity. Clearly, there is the question of whether your members are thinking about how the Bill will affect the future landscape for their operation. Could you give us some sense of how you feel the Bill will affect the many who are thinking about whether to stay in the UK or go overseas? What issues around the regulatory framework would be the tests for them? Are there things that we could do in the Bill to make it even more likely that people will commit to the UK, and are there things that would make it less likely?Q
Rupa Huq (Labour, Ealing Central and Acton)
Are there any further questions? In that case, I thank our two witnesses on this fifth panel. Emma and Catherine, thank you for your evidence.
Rupa Huq (Labour, Ealing Central and Acton)
For this third afternoon evidence session—the sixth in total—we have Adam Farkas and Constance Underwood from the Association for Financial Markets in Europe. It is our first panel in person. We have until four o’clock for this session. Adam and Constance, do you want to start by introducing yourselves for the benefit of the Committee, and for the record?
John Glen (Conservative, Salisbury)
Q Welcome to the Committee, and thank you for giving evidence. Adam, may I start with you? We have heard a number of references today to the role that the UK has played in the EU financial services legislation process. Given the wide experience that you have just mentioned, it would be useful if you could explain how you see the UK, in terms of the role that it has played. In the context of the investment firms review, do you think it is right that we should be implementing a more proportionate regime for investment firms?
John Glen (Conservative, Salisbury)
Q If I may probe just a little further, you are saying that this proportionate change for the UK is in line with your members’ expectations and does not offer any serious threat to the integrity and reputation of the UK in this area?
John Glen (Conservative, Salisbury)
Q May I ask you about the LIBOR benchmark? This is a complex area, as we have already heard today. Do you agree with the approach that we have taken in the Bill? What would be the implications if we did not take this approach, and can you say what other approach we could take if you disagree with it?
John Glen (Conservative, Salisbury)
Q Just to be clear, there is no substantively different path that you anticipate that we could have taken on this matter that would give us a better outcome than the one that we are headed for, notwithstanding the need for the further clarification that is in train?
Pat McFadden (Labour, Wolverhampton South East)
Q Thank you for coming today. I want to start with our current situation on equivalence, where we had an announcement from the Chancellor that the UK will grant equivalence recognition to companies based in current EU member states but we have not got a reciprocal equivalence recognition for UK companies selling into EU markets. What are the practical implications for UK-based financial services companies if that situation continues to exist for some time?
Pat McFadden (Labour, Wolverhampton South East)
Q Can you give us some practical examples of what kind of barriers companies could face and of what decisions they might have to take to overcome them?
Pat McFadden (Labour, Wolverhampton South East)
Q So the main mechanism for preparation, as you put it, is to establish an operation inside the EU if you have not already got one.
Pat McFadden (Labour, Wolverhampton South East)
Q Can I ask you about LIBOR? We have heard that the Bill facilitates a move away from LIBOR. The weaknesses and manipulation of LIBOR are well documented. The L in LIBOR stands for London—it is the London interbank rate. Are there any implications for London’s status as a global financial centre from a move away from LIBOR towards different kinds of benchmarks?
Pat McFadden (Labour, Wolverhampton South East)
Q Finally, I would like to ask if you a question about future direction. We have heard today about British influence on the EU directives that govern financial services—that there has been quite heavy British influence over the years in designing this set of regulations, which this Bill onshores back to the UK as a result of Brexit. That means that, come the end of the year, we will be very closely aligned with what has been developed over the years so far.
What is your view of what will happen on the EU side, absent a British influence, as financial services regulation inevitably evolves and develops? We no longer have one table, if you like. We have two tables—a British one and a European one. Does that mean, inevitably, that the two sets of regulations gradually spin off in different directions, or is that not the case?
Pat McFadden (Labour, Wolverhampton South East)
Thank you. Constance, do you want to add anything?
Rupa Huq (Labour, Ealing Central and Acton)
We will now move on to the SNP spokesperson, Alison Thewliss.
Alison Thewliss (Scottish National Party, Glasgow Central)
Q Thank you very much, Chair. I was having a look at the policy recommendations of the Association for Financial Markets in Europe for the EU-UK relationship. To what extent do you feel the Bill achieves those recommendations?
Alison Thewliss (Scottish National Party, Glasgow Central)
Q So we are still some way from finding out what the building looks like.
Alison Thewliss (Scottish National Party, Glasgow Central)
Q With regard to the point that you made about legacy contracts and LIBOR, to follow up on the questions I put to Chris Cummings of the Investment Association earlier, do you think that there is merit in having something in the Bill, rather than having FCA rules on this matter?
Alison Thewliss (Scottish National Party, Glasgow Central)
Q That is fair enough. I was trying to get at whether there is stronger ground if it is in legislation, rather than dependent on rules, for any disputes that might arise.
Alison Thewliss (Scottish National Party, Glasgow Central)
Q Constance, if I am right, you have been responsible for working on some green finance work. Do you think that there should have been more in the Bill to look at those things, rather than waiting for a later stage? Is this a good opportunity to perhaps look at some of the green finance issues, rather than waiting until later?
Alison Thewliss (Scottish National Party, Glasgow Central)
Thank you very much.
Angela Richardson (Conservative, Guildford)
Adam, in your earlier comments you said that London is the financial services hub of the EU and that it has been a strong voice in shaping the EU’s regulatory framework. First, do you believe that we will continue to be a strong voice in global regulator-to-regulator discussions? Secondly, Q do you agree that the Financial Services Bill will increase the UK’s resilience to economic shocks, while meeting our international commitments on protecting the global financial system?
Angela Richardson (Conservative, Guildford)
Thank you.
Gareth Davies (Conservative, Grantham and Stamford)
My understanding is that the British Government have so far filled out something like 2,500 pages of questions from the European Union, all of them to strict deadlines. What do you think has caused the delay in the EU granting equivalence or making any public statement on that? Clearly the UK is equivalent, so what is causing the delay?Q
Gareth Davies (Conservative, Grantham and Stamford)
Q But there is still the big question mark on overall equivalence for the United Kingdom. You hit the nail on the head when you referred to the potential for politicisation of the regulatory process. Looking at what happened recently with Switzerland, my understanding is that the Swiss stock market had its equivalence removed because the Swiss Government had the temerity to put Swiss citizens first in new Swiss labour laws. My fear is that the EU will politicise the process, and I would love your view on that.
Gareth Davies (Conservative, Grantham and Stamford)
Dr Huq, can I ask one more question?
Rupa Huq (Labour, Ealing Central and Acton)
We have until 4 o’clock for the entire session, so you can ask a quick question.
Gareth Davies (Conservative, Grantham and Stamford)
Q Given that in your opening remarks you said the UK had played a significant part in the formation of regulation as a major financial centre, to what extent are you worried that the European Union will now take a more localised, protectionist stance?
Rupa Huq (Labour, Ealing Central and Acton)
Adam, can you please speak into the microphone? For the recording, you need to be in the right place.
Rupa Huq (Labour, Ealing Central and Acton)
Constance, do you have anything to add?
Julie Marson (Conservative, Hertford and Stortford)
Constance, when he was the interim chief executive officer of the FCA recently, Chris Wollard made the point that having the highest international standards of regulation and doing the best for the markets are certainly not mutually exclusive. You might even go further and say that they are actually vital for each other. To what extent do you feel that the Bill achieves those two objectives—having the highest standards and the best framework for the markets?Q
Angela Eagle (Labour, Wallasey)
Q Adam, I wonder whether there is anything that you would have liked to see in this Bill that is not there, given that it is an initial first step. Is there anything that you think should have been paid attention to and dealt with in this Bill that has not been?
Angela Eagle (Labour, Wallasey)
Q We heard earlier today about the shift away from the LIBOR benchmark—which is obviously another part of the Bill—by the bond markets, and that they want continuity of contracts to be in the Bill, particularly for tough LIBOR contracts that cannot be phased into something else. They also want a safe harbour provision to minimise the possibility of legal challenges on how LIBOR is interpreted as it exists. Do you agree with that?
Angela Eagle (Labour, Wallasey)
Q The Bill also contains powers for the PRA and the FCA to create a prudential regulation; an entire new system for credit institutions and investment firms. Do you represent such companies?
Angela Eagle (Labour, Wallasey)
Q So are you happy with the framework that has been set out in this Bill? Given that it is only a framework and you do not know the details yet, I am assuming that you think the details will be fairly similar to the European directives that the UK had so much input in forming.
Angela Eagle (Labour, Wallasey)
Q Is that what you mean when you are talking about accountability—to the companies that are regulated rather than the consumer? Clearly a great deal of detail will have to be decided by the regulatory authorities; we simply cannot do it in primary legislation. Do you think the Bill gets the balance right between setting a framework in primary legislation and allowing the regulatory authorities to do the detailed work?
Angela Eagle (Labour, Wallasey)
Q In what period do you expect the impact assessment to arise after the rules have been specified in a consultation period? Is that the kind of process that you would like to see the FCA follow?
Angela Eagle (Labour, Wallasey)
Thank you.
Rupa Huq (Labour, Ealing Central and Acton)
If there are no further questions, I thank our two witnesses for their evidence.
Examination of Witness
Rupa Huq (Labour, Ealing Central and Acton)
Q We move on seamlessly to Gurpreet Manku from the British Private Equity and Venture Capital Association, who is joining us remotely. We have until half-past four. We are three minutes early; we have made up some time. Gurpreet, could you introduce yourself for the record and for the Committee, please?
Rupa Huq (Labour, Ealing Central and Acton)
Thank you very much. We are going to follow the time-honoured tradition of going first to the Government, then to the Opposition, and then to other members of the Committee. We will start with the Minister, John Glen.
John Glen (Conservative, Salisbury)
Q Thank you very much, Gurpreet, for coming before us to give evidence. I will start by addressing one of the key headline measures in the Bill that enables the FCA to implement a more proportionate prudential regime for investment firms. I would like you to give us your perspective on that measure, how you think it could be helpful, what you are looking to see come out of it, and whether you expect to see improvements based on the discretion that the FCA will have.
John Glen (Conservative, Salisbury)
Q Thank you. I will follow up with one question. You have helpfully set out the context of the range of firms and the different and proportionate levels of capital requirements that are required. Can I ask about your level of confidence in the FCA’s ability to implement the appropriate regime with the degree of customisation and detail, in terms of competence? Do you have any reservations about their capacity to do that? How comfortable is your working relationship with them?
John Glen (Conservative, Salisbury)
Thank you.
Rupa Huq (Labour, Ealing Central and Acton)
I call the shadow Minister, Pat McFadden.
Pat McFadden (Labour, Wolverhampton South East)
Q Good afternoon, Gurpreet. Thank you for speaking to us today. Does the Bill mean that your members will have to hold less capital against their activities than would otherwise be the case?
Pat McFadden (Labour, Wolverhampton South East)
Q Looking to the future and the onshoring of all this EU regulation, from your members’ point of view, what do you think needs to change in order for the UK to become more competitive in the BVCA field?
Pat McFadden (Labour, Wolverhampton South East)
Q What are the EU regulations that you would most like to get rid of? What is on the bad list?
Pat McFadden (Labour, Wolverhampton South East)
Q Finally, we have heard about a difference in philosophical approach between the European approach of codifying lots of financial services regulation in very detailed directives—often lengthy and dense documents—and the more independent British regulator approach, which it has been argued is more flexible. From the point of view of the BVCA, what would you rather be dealing with—the UK regulators or the traditional European directive approach?
Pat McFadden (Labour, Wolverhampton South East)
Thank you.
Alison Thewliss (Scottish National Party, Glasgow Central)
Q You have talked about the importance of having clear and effective regulation, which all of us around the table can probably agree with. Have you any concerns about the transparency issues around the regulations, with the regulator taking on so much more of the responsibility?
Alison Thewliss (Scottish National Party, Glasgow Central)
Q What kind of time period would you be looking at? You mentioned that some of the firms that you represent are quite small, so obviously there might be capacity issues in making sure that they can turn responses round.
Alison Thewliss (Scottish National Party, Glasgow Central)
Q That is useful. A lot has been reported about the impact on venture capital of the uncertainty around Brexit, with money going elsewhere and all the rest of it. Do you feel that the Bill gives enough confidence to the sector for people to continue to invest money in the UK?
Alison Thewliss (Scottish National Party, Glasgow Central)
Q Lastly, is there anything more that you can tell me about the impact of equivalence decisions within your sector?
Alison Thewliss (Scottish National Party, Glasgow Central)
That is useful. Thank you.
Rupa Huq (Labour, Ealing Central and Acton)
If there are no further questions from Members, let me thank Gurpreet—who did a panel all on her own, remotely—for her evidence.
Rupa Huq (Labour, Ealing Central and Acton)
We will now move on to our final panel of the afternoon. It is another one-man virtual panel, with Peter Tutton from StepChange joining us remotely. We have until 5 o’clock, when we must adjourn. Peter, could you introduce yourself for the record and for the members of the Committee?
John Glen (Conservative, Salisbury)
Q Thank you very much for joining us and giving your input this afternoon. I think that there are probably two measures that would be of most interest to your organisation––please correct me if I am wrong––in the statutory debt repayment plans and the measure to transfer the Help-to-Save bonus. May I ask you about the first one? Obviously, your organisation has been a key consultee and driver of the moratorium that we introduced in May. The statutory debt repayment plan is a key option during that eight-week period. How do you think this will work and what do you see as its challenges? How does it sit within the context of what is available at the moment for people who get into difficulty?
John Glen (Conservative, Salisbury)
Q Thank you. I appreciate the work that you and your organisation have done, and Phil Andrew as well. On my second question, can I ask you about the Help-to-Save provision, under which people can save up to £50 a month for four years, and after two years, if they have saved up £1,200, they have £600 transferred to them by the Government? As you know, the provision makes sure that that money can be transferred to a NS&I account. Could you set out your understanding of why this would be necessary and how people become disengaged? Why is this measure, which may appear to some unnecessary, needed?
John Glen (Conservative, Salisbury)
Go for it.
John Glen (Conservative, Salisbury)
I agree with that. We are trying to do what we can to improve awareness and get people to use small amounts; I think they can put by up to £1 or £2 minimum.
John Glen (Conservative, Salisbury)
Thank you very much indeed, Peter.
Pat McFadden (Labour, Wolverhampton South East)
Q Peter, we are talking about things that have broad support: the debt respite scheme, Help-to-Save and so on. The Minister and I debated some regulations about these matters about a month ago. This is really just a short question. You have looked at how these things have been set out in the Bill and you have been very warm about them today. Is there anything you would change, given what you have seen in the Bill? Are there any gaps or any changes you would suggest to the way in which these things have been set out in the Bill?
Pat McFadden (Labour, Wolverhampton South East)
Q Thank you. Covid has had a paradoxical effect this year because, on the one hand, some people have become better off as the year has gone on because they are still getting paid but are not spending as much as they would normally—that is why we have seen bank deposits going up around Europe—while on the other hand, there has been an increase in unemployment and a lot of people with increased debt burdens and so on. Does anything about the covid impact suggest to you that there should be changes in the timing order of the introduction of the proposals and their content?
Pat McFadden (Labour, Wolverhampton South East)
Thank you.
Rupa Huq (Labour, Ealing Central and Acton)
For the Scottish National party, Alison Thewliss.
Alison Thewliss (Scottish National Party, Glasgow Central)
Q Can I ask about help to save accounts? I think there is somewhere in the region of 222,000 of those accounts, with about £85 million in them, and you are dealing with people who are very much on the brink of things. Can you tell me how you think it would be best for the Government to communicate with those people about what is likely to happen to their account and what they need to do?
Alison Thewliss (Scottish National Party, Glasgow Central)
Q Is there an argument for continuing the accounts and allowing them to keep earning some interest, rather than closing them after four years?
Alison Thewliss (Scottish National Party, Glasgow Central)
Q I have had it flagged via Macmillan that they think there is a bit of a weakness in the FCA’s reliance on guidance. They are arguing for a legal duty of care for all financial services providers. Do you think that would be helpful when it comes to getting ahead of people getting into trouble?
Alison Thewliss (Scottish National Party, Glasgow Central)
Thank you very much.
Andrew Jones (Conservative, Harrogate and Knaresborough)
Peter, thank you for your evidence and written submission, which has been circulated to the Committee. One thing you say in that is that your evidence points to the importance of statutory protections as a key way to alleviate the harm of problem debt. Could you tell us a bit more about that evidence?Q
Andrew Jones (Conservative, Harrogate and Knaresborough)
Q That is very interesting. Do you have any data that can quantify some of the anecdotal evidence that you have just been giving us? If you can, could you please circulate it around the Committee?
Stella Creasy (Labour/Co-operative, Walthamstow)
Q Peter, thank you for articulating so clearly all the different challenges that we face in trying to prevent debt as well as deal with its consequences. I have a couple of questions about the Bill and some of its provisions, and then about your sense of where we might be able to make some progress in strengthening the protection for consumers from unaffordable debt.
With the debt repayment schemes, I think all of us recognise that the breathing space is a very positive development. First and foremost, I want to ask for your view on the midway review element. Do you have any thoughts on what impact that might have as currently drafted?
Stella Creasy (Labour/Co-operative, Walthamstow)
Q I ask because I wonder whether you can give us your professional opinion on whether there is a point at which a breathing space should stop. It might become apparent in the review process that somebody is in a level of debt for which a breathing space is not suitable. If it becomes apparent that the person will not be able to repay under the terms of the breathing space, do you perhaps have in mind a length of time over which it would be appropriate to look at some other form of intervention? Do you have a view about when to end the breathing space, essentially?
Stella Creasy (Labour/Co-operative, Walthamstow)
Q I am conscious that I have one other element that I want to ask you about, but just on that, let me ask this. You have talked about debt relief orders. Obviously, you can access them only if you have less than £50 left after all your outgoings. You seem to be saying that actually the cost of moving into some other forms of debt relief that might be part of this would be something that would be helpful to make the breathing space work. Is it worth looking at those thresholds, as part of making the breathing space process work, so that people can move in, rather than being stuck in a breathing space or, possibly, stuck in a position where you get to the point where you need to write off a debt entirely?
Stella Creasy (Labour/Co-operative, Walthamstow)
Q Yes, but my question was particularly on the debt relief orders, because you have to be on such a low income for them to be possible. Is there a case, from what you are saying, in terms of making this legislation work, to be more flexible about that threshold—to make it, say, the bottom two deciles, rather than the bottom one decile of income before you can access a debt relief order?