Financial Services and Markets Bill
Public Bill Committee, 19 October 2022.
Virendra Sharma (Labour, Ealing, Southall)
I have a couple of preliminary announcements to make. Hansard colleagues will be grateful if Members could email their speaking notes to hansardnotes@parliament.uk. Please switch electronic devices to silent. Tea and coffee are not allowed during sittings.
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 a motion to allow us to deliberate in private about our questions before the oral evidence session. In view of the time available, I hope that we can take those matters formally, without debate.
Virendra Sharma (Labour, Ealing, Southall)
Copies of written evidence that the Committee receives will be made available in the Committee Room and circulated to Members by email. We will now go into private session to discuss lines of questioning.
Examination of Witnesses
Virendra Sharma (Labour, Ealing, Southall)
Before we start hearing from the witnesses, do any Members wish to make any declarations of interest in connection with the Bill?
Stephen Hammond (Conservative, Wimbledon)
I guide the Committee and witnesses to my entry in the Register of Members’ Financial Interests.
Craig Tracey (Conservative, North Warwickshire)
I chair the insurance and financial services all-party parliamentary group and am a former insurance broker.
Peter Grant (Scottish National Party, Glenrothes)
I have money saved and invested with Nationwide building society, which has submitted evidence on its own account. I am also with a credit union that I believe is affiliated to the association of one of the witnesses.
Martin Docherty (Scottish National Party, West Dunbartonshire)
I am chair of the all-party parliamentary group on blockchain.
Gareth Davies (Conservative, Grantham and Stamford)
I am a vice-chair of the APPGs on environmental, social, and governance and on financial markets and services. I also spent 14 years in financial services and my wife works in financial services.
Shaun Bailey (Conservative, West Bromwich West)
I am chair of the all-party parliamentary group on financial resilience.
Sally-Ann Hart (Conservative, Hastings and Rye)
My husband and two sons work in financial services.
Virendra Sharma (Labour, Ealing, Southall)
Anybody else? No.
We will now hear oral evidence from Sheldon Mills, interim executive director of strategy and competition at the Financial Conduct Authority; Sarah Pritchard, executive director of markets at the Financial Conduct Authority; and Victoria Saporta, executive director of prudential policy at the Prudential Regulation Authority. Before calling the first Member to ask a question, I remind all Members that questions should be limited to matters within the scope of the Bill and that we must stick to the timings in the programme order that the Committee agreed. For this panel, we have until 10.10 am. Will the witnesses please introduce themselves for the record?
Andrew Griffith (Conservative, Arundel and South Downs)
Q Good morning. Thank you for appearing before the Committee. I have a general framing question to open up the conversation. I suspect that the Chair would like you to keep your answers short, because I know many colleagues on both sides of the Committee want to come in.
The opportunity of the Bill, which will be the first piece of ab initio legislation for 23 years in the financial services domain, is to help the effective functioning of financial markets in society and to help the economic prosperity on which we all depend. Will you talk a little about how you see the opportunities in the Bill? How do you think about the competitiveness of the UK regulatory corpus? How would you advise the Committee on making the best advantage of changes in technology—such as digital ledger technology, but that is just one—and of the opportunity to pare back the corpus of inherited European legislation to those purposes?
Andrew Griffith (Conservative, Arundel and South Downs)
Q Does anyone want to more directly address my question on competitiveness and opportunity?
Tulip Siddiq (Labour, Hampstead and Kilburn)
I thank the panel for coming today. The Government announced on Second Reading that they intend to introduce an intervention power enabling the Treasury to direct a regulator to make, amend or revoke rules in matters of significant public interest. Do you think such a move would represent a significant departure from the UK’s model of regulatory independence, and would such a power affect your regulatory decision making process? Sheldon Mills, you touched briefly on that, so may I ask you firstQ ?
Peter Grant (Scottish National Party, Glenrothes)
Q Good morning to the witnesses. Mr Mills, you mentioned to Ms Siddiq that you had not seen the proposed amendment. Has the FCA been consulted at all about the text or the principle behind that amendment?
Peter Grant (Scottish National Party, Glenrothes)
Q Thank you. When you appeared before the Public Accounts Committee earlier this year about the British Steel pensions scandal, you and your colleague indicated that many of the things that MPs might have expected you to do to protect British Steel pension holders, you did not have the power to do at that time. Does the Bill, as it currently stands, give you sufficient powers to intervene in the way that we would have liked in the event of another pension scheme getting into difficulty?
Peter Grant (Scottish National Party, Glenrothes)
Q I was thinking particularly about the powers to stop the damage from being done, rather than simply the power to pay financial redress, which usually takes a long time, is very stressful for victims and sometimes comes too late for victims who do not live long enough to see the compensation. The gross misbehaviour of a large number of financial advisers led to that scandal and many others. Are you telling us that, as it stands, the Bill does not give you significantly greater powers to intervene and get these people out the market as soon as you realise there is a problem?
Stephen Hammond (Conservative, Wimbledon)
Q I thank the panel for coming this morning. I have two questions. Can we be clear that in the UK regulatory landscape and the international financial regulatory landscape there are public interest tests that are operated but do not affect the operational independence of regulators?
Stephen Hammond (Conservative, Wimbledon)
Q But in the US there is obviously a different system in terms of the scrutiny of the financial system, which is probably why that power is vested there. I think that, from what Mr Mills said, there is actually already a public interest test in the CMA.
Stephen Hammond (Conservative, Wimbledon)
I just wanted to ensure that was on the record. Can we talk a bit about the metrics and transparency you might use to show that you are meeting the secondary objective—that the cost-benefit panel’s analysis will be transparent—and also how you consider you will need to show that you have met the accountability tests?
Stephen Hammond (Conservative, Wimbledon)
Q And those would be transparent?
Emma Hardy (Labour, Kingston upon Hull West and Hessle)
Good morning. Sheldon, I read a speech of yours before about financial inclusion; I know it is something you care about. On the Treasury Committee, we have had a conversation similar to the one we are about to have. You probably know what I am going to ask you.Q
The Government have opted so far to not have a “have regard” for financial inclusion in the Bill. Do you believe that such a “have regard” for the FCA would ensure financial inclusion as a greater priority for the regulator? What else could be done with the Bill to ensure that financial inclusion is given a greater prominence?
Emma Hardy (Labour, Kingston upon Hull West and Hessle)
Q As we have discussed before, the current system is not working for everyone because too many people are excluded. We have also previously asked what happens to the customers who nobody wants, in terms of financial inclusion. Are there any other opportunities in the Bill to strengthen your role within financial inclusion? With respect, what has happened so far has not been altogether successful.
Emma Hardy (Labour, Kingston upon Hull West and Hessle)
Did you want to add anything, Victoria?
Gareth Davies (Conservative, Grantham and Stamford)
Q Good to see you again, Sheldon. Can you confirm whether you know of any country in the world that has a competitive objective for its regulators?
Gareth Davies (Conservative, Grantham and Stamford)
Q Australia and Japan also have regulators with a competitive objective. Would you regard Singapore, Hong Kong, Japan and Australia as being robust regulatory financial centres?
Gareth Davies (Conservative, Grantham and Stamford)
Q You consider them to be robust financial centres. Would you consider those financial centres of Japan, Australia, Singapore and Hong Kong to be competitive financial centres to the United Kingdom?
Gareth Davies (Conservative, Grantham and Stamford)
Which respects?
Gareth Davies (Conservative, Grantham and Stamford)
Q Thank you. Sarah, how do you believe the secondary competitiveness objective might change your behaviour and your policy making?
Siobhain McDonagh (Labour, Mitcham and Morden)
The FCA announced in June that you would be strengthening the protection of access to banking services. Some might say that this was closing the stable door after the horse has bolted, given that 50% of branches in town centres have now closed. What powers does the FCA currently have to protect banking services, and why were you not doing that beforeQ ?
Siobhain McDonagh (Labour, Mitcham and Morden)
Q Sorry, but my question is: what powers do you have and what are you doing?
Siobhain McDonagh (Labour, Mitcham and Morden)
Q I am really pleased that your mother gets good access to banking services. Unfortunately, that does not extend to a lot of the people in my constituency who do not feel able to use online services, either because they do not have access to the internet or know how to use the internet or because they are frightened because they are worried about being scammed. As I understand the current rules, it is only when the last bank in town closes that there is there any consideration of banking hubs or other facilities. That is far too late for the vulnerable customers that my hon. Friend the Member for Kingston upon Hull West and Hessle referred to in her earlier question. What power does the FCA have to do something real to help those excluded customers, and what extra powers would you need in order to make that real?
Siobhain McDonagh (Labour, Mitcham and Morden)
Q But you are not slowing the number of branch closures, and people are still experiencing these difficulties in Mitcham. Please: I would love you to come to Mitcham—
Siobhain McDonagh (Labour, Mitcham and Morden)
And I will show you around. It is a great place. I will even buy you lunch in one of the cafés.
Siobhain McDonagh (Labour, Mitcham and Morden)
Q In the case of the Halifax, I could not even convince the Halifax to come to a public meeting to talk to people about their experiences. The banks are just carrying on in the way they have always carried on—with hope of some service tomorrow. We are told that the post office will be great, but what if the post office is not accessible? What if people are worried about accessing cash right in the middle of other people and fearful of not being able to hang on to their money? What if they are disabled and just cannot get into their post office branch? These are the things that are really happening, whatever the current regulations are.
Siobhain McDonagh (Labour, Mitcham and Morden)
Q Lovely. You will be very welcome; the people there would love to meet you. Finally—I crave your indulgence, Mr Sharma—I want to ask about access to cash. For most people’s constituents, access to cash is only any good if it is access to free cash withdrawal.
Emma Hardy (Labour, Kingston upon Hull West and Hessle)
Yes.
Siobhain McDonagh (Labour, Mitcham and Morden)
If people have to pay £1.99 every time they try to access £10 from a machine to keep them going for the week, that is a huge premium on being poor. In Pollards Hill in my constituency, we have only two pay-for machines, and that is what happens on a daily basis—people have to pay £1.99 for every bit of money that they get out. People take small amounts of money to try to control their budgets. We were delighted when the Co-op came to the parade, but it could not get free cash machines because its lease prevented it from having one.
Virendra Sharma (Labour, Ealing, Southall)
Order. I am afraid that brings us to the end of the time allotted for this panel.
Siobhain McDonagh (Labour, Mitcham and Morden)
Can we just have a few words about free cash?
Virendra Sharma (Labour, Ealing, Southall)
No. That is the time allotted for the Committee to ask questions.
Virendra Sharma (Labour, Ealing, Southall)
I thank our witnesses on behalf of the Committee.
Virendra Sharma (Labour, Ealing, Southall)
We will now hear oral evidence from David Postings, chief executive officer of UK Finance, and Emma Reynolds, managing director of public affairs, policy and research for TheCityUK. We have until 10.40 am for this panel. Will the witnesses please introduce themselves for the record?
Andrew Griffith (Conservative, Arundel and South Downs)
Q Good morning. We will alternate questions; I will try to be brief and give you a broad opening question for the benefit of the Committee. Representing practitioners in the industry, could you give us your assessment of our competitiveness, how it has changed over time and how it compares internationally? Could you give us your views on the competitiveness duty in the Bill and where that should sit, and on any other matters that relate to how the Committee should use the Bill to make the most of the economic opportunities available to us? Could each of you take that question in turn?
Andrew Griffith (Conservative, Arundel and South Downs)
Q What is your members’ view on the competitiveness duty in the Bill?
Andrew Griffith (Conservative, Arundel and South Downs)
Q Emma, the same question to you.
Andrew Griffith (Conservative, Arundel and South Downs)
Q I have one supplementary. Thank you both for those answers. It was put to me this morning that the UK capital markets raised just 1% of all global equity issuance last year. I will have to verify that statistic, but does that worry you, and should it worry us?
Tulip Siddiq (Labour, Hampstead and Kilburn)
Q Thank you very much for coming in to give evidence. I will ask about the intervention powers and whether TheCityUK and UK Finance have seen or been consulted by the Government on the intervention powers that they are bringing forward. When the intervention powers come in, what risks are there to the international reputation and stability of UK financial services?
Tulip Siddiq (Labour, Hampstead and Kilburn)
Q I have a quick follow-up. How do you think “significant public interest”, which is the phrase that is being used, should be defined? At what threshold do you think such a power should be triggered?
Tulip Siddiq (Labour, Hampstead and Kilburn)
Do you have anything to add, David?
Stephen Hammond (Conservative, Wimbledon)
Q Good morning, panel; thank you for coming. In their evidence to us a moment ago, the regulator said they would be transparent with regard to their responsibilities for accountability in the metrics and reporting of CBA, but Emma, in your written evidence to us, you suggest:
“The Financial Services and Markets Bill should be amended to include a power to require regulators to transparently report metrics”.
I wonder if you could comment on that a little, please.
Secondly, you have mentioned proportionality, and again in your written evidence to us you suggest that there may necessarily need to be more of it when we consider the risk, the nature and the scope of businesses, who they are there for and who their customers are. Does the Bill set the right tone for proportionality, or do you think there is still more we should consider?
Stephen Hammond (Conservative, Wimbledon)
Q So, like you have just said with regard to the first question, we should look at ways of making sure that that is firmly set down, rather than just a principle.
Martin Docherty (Scottish National Party, West Dunbartonshire)
Q May I ask you both about clauses 21 and 22, and digital settlement assets? Ms Reynolds, you talked about high standards. I wonder if you could both say whether you agree that the definition of a digital settlement asset is satisfactory and robust enough to safeguard consumers. It is rather broad.
Martin Docherty (Scottish National Party, West Dunbartonshire)
Q But if the technology is moving that fast, how is Parliament—and, therefore, any legislation—going to keep up with it? That is a concern.
Martin Docherty (Scottish National Party, West Dunbartonshire)
Q Would that include the smaller and medium-sized companies that might be involved, not just the big players? That halo effect is a concern for others, because the definition is literally to safeguard them, not the smaller and medium-sized players in the market.
Emma Hardy (Labour, Kingston upon Hull West and Hessle)
Q David, may I ask you about the role of banks in tackling fraud? The legislation focuses narrowly on APP scams. Would you welcome the introduction of a broader national strategy to tackle fraud, delivered by key Government Departments and agencies, law enforcement, major banks and wider partners in the financial services sector? Would you welcome something on fraud that is a bit broader than what is in this Bill?
Emma Hardy (Labour, Kingston upon Hull West and Hessle)
Q For example, would you support new provisions in this Bill to facilitate data sharing agreements on financial crimes that extend beyond the banks to include fintechs, electronic money institutions, cryptoasset firms and payment systems operators? Wider data sharing agreements could be covered by the Bill. Would you find that helpful?
Emma Hardy (Labour, Kingston upon Hull West and Hessle)
Q It is not, but, in principle, something in the Bill to facilitate ways—
Emma Hardy (Labour, Kingston upon Hull West and Hessle)
Q Would you welcome something else in the Bill to look at banks unlocking suspended accounts so that money can be used for fraud prevention?
Emma Hardy (Labour, Kingston upon Hull West and Hessle)
Q Okay. So, in general, would you welcome anything that we can do to strengthen provisions against fraud?
Gareth Davies (Conservative, Grantham and Stamford)
I just want to pick up on one thing you said, David. Can you confirm that the removal of the share trading obligation will make the UK a more competitive and open market?Q
Gareth Davies (Conservative, Grantham and Stamford)
Thank you. More broadly, concern has been expressed about the Bill in some quarters that a freer derivatives market will push up commodity prices. Do you have a view on that?Q
Gareth Davies (Conservative, Grantham and Stamford)
Do you believe that derivatives in general and competitive trading markets push up commodity prices?Q
Gareth Davies (Conservative, Grantham and Stamford)
Thank you. Do you have a view on that, EmmaQ ?
Peter Grant (Scottish National Party, Glenrothes)
Q Clause 1 proposes to repeal around 250 pieces of European legislation, pretty much at the stoke of a pen. The rest of the Bill then expects the Treasury to replace all those bits of legislation by a process that will allow for very minimal parliamentary oversight. Do you have concerns either that there may be a period where parts of the market are inadequately regulated or, alternatively, that there is uncertainty as to what the regulations are, because of the process of repealing something before you know what is going to replace it?
Peter Grant (Scottish National Party, Glenrothes)
Q You are using terms such as “transpose” and “translate”, and the representatives from the FCA that we heard from earlier used similar terms. Are we talking about almost literally translating all these documents into the English of the United Kingdom or are we talking about significantly changing the legislation as part of that process?
Peter Grant (Scottish National Party, Glenrothes)
Q I have another question for both you. There have been suggestions that the Bill should place responsibility on the regulator to promote competitiveness. There have been suggestions that matters such as consumer protection and compatibility with the UK’s climate change obligations should be given the same importance in the regulator’s responsibilities as international competitiveness. If the Bill was amended to put that in place, would it cause significant difficulties for the financial services sector?
Peter Grant (Scottish National Party, Glenrothes)
Q Are those comments made within the context that achieving a permanent change in net zero targets is not optional? It is absolutely necessary.
Sally-Ann Hart (Conservative, Hastings and Rye)
Q Good morning. Looking at the culture in the regulatory system and the culture of the regulators, do you think our regulators need a culture change? For example, do they need more commercial experience? We are looking at rules. There is a need for speed. Speed is of the essence when trying to make decisions or make things happen. Is that something we need to focus on?
Sally-Ann Hart (Conservative, Hastings and Rye)
Q And more speed and less regulation.
Sally-Ann Hart (Conservative, Hastings and Rye)
Q That causes serious hold-up and affects our economic growth.
Andrew Griffith (Conservative, Arundel and South Downs)
Q We have a few minutes left. One perception is that this is about the City of London. Your members, I assume, hail from all parts of the UK, creating employment and wealth in Edinburgh, Glasgow and some of our other great cities. Will you expand on that a little for the Committee?
Virendra Sharma (Labour, Ealing, Southall)
We have two minutes left. Any quick questions for a quick response?
Sally-Ann Hart (Conservative, Hastings and Rye)
Q Very quickly, the hon. Member for Mitcham and Morden raised the issue of access to cash and the reduction in banking services. The Bill contains substantial provisions to safeguard access to cash and halt the decline in banking closures and free-to-use ATMs. Do they go far enough? Will the Bill work?
Sally-Ann Hart (Conservative, Hastings and Rye)
Q Is there anything you want to add, Ms Reynolds?
Virendra Sharma (Labour, Ealing, Southall)
Order. I am afraid that brings us to the end of the time allotted for the Committee to ask questions. I thank the witnesses on behalf of the Committee.
Examination of Witness
Virendra Sharma (Labour, Ealing, Southall)
We will now hear oral evidence from Chris Hemsley, managing director of the Payment Systems Regulator. For this panel we have until 10.55. Could the witness please introduce himself for the record?
Andrew Griffith (Conservative, Arundel and South Downs)
Q Thank you, Chris. I think we would all agree that payment systems are an increasingly important feature of our financial system. To be fair to them, I am trying to ask all the witnesses today broadly the same open, wide question, which is this: as we think about the Bill and the importance of the United Kingdom as a location for financial services—they are a really big part of our economy and, as we have just heard, produce jobs and prosperity across the whole United Kingdom—where do you think the opportunities for us are in the Bill, not just as we diverge from European-mandated regulation, but as we embrace new technology and seek to make ourselves more competitive? I will lead you a little, because some of the witnesses have struggled to get there: who is your competitive set when you think about the corpus as well as the operation of regulation? I hope that is open enough to give you the chance to speak.
Tulip Siddiq (Labour, Hampstead and Kilburn)
Q Do you think that the PSR has the expertise and resource to effectively regulate payment systems using digital assets such as stablecoins? What I am getting to is the pros or the challenges and risks that stablecoins might pose in terms of consumer access and competitiveness. I want to hear your opinion on that.
Tulip Siddiq (Labour, Hampstead and Kilburn)
Q I hear what you are saying, but it is not the same thing. I know those issues still exist with other forms of payment, but for stablecoin and digital assets, consumer protection levels need to be monitored more; consumers are more vulnerable, just because of the lack of knowledge. I am trying to get to whether you have specific tactics to ensure access, consumer protection and competition.
Martin Docherty (Scottish National Party, West Dunbartonshire)
Q Perhaps we could come back, Mr Hemsley, to the issue of stablecoin. Some countries have actually banned its use; the European Union, as we have heard from the markets in cryptoassets regulation, is going ahead, along with the United States in terms of the Commodity Futures Trading Commission and the Securities and Exchange Commission, both at state and federal level, with getting regulation in process.
I am glad to see that there is some regulation in the Bill, but you used terms such as “future-proofing”. With this technology, we bandy around terms such as “innovation” and “future-proofing”. What does that actually mean, in real financial terms? Frankly, it is not the type of language that I, as a legislator, would like to see used in regulation of a market. It is not just that it is unfamiliar; it does not seem like the correct kind of language or descriptives to use when we can have an impact, predominantly on consumers who might use these commodities and assets digitally. What do you mean by “future-proofing”?
Martin Docherty (Scottish National Party, West Dunbartonshire)
Q Forgive me, but you said there are similar issues. Frankly, there is nothing new under the sun. I am a fan of the technology, but it is the technology that has changed, not the issue. My concern is that these broad definitions, using terms such as “innovation” and “future-proofing”, do not give us the proper ability to scrutinise what is in front of us, because we are not talking about the reality on the ground. You face the same issues either in a fiat currency or a digital fiat currency.
Virendra Sharma (Labour, Ealing, Southall)
I call Emma Hardy. You have five minutes.
Emma Hardy (Labour, Kingston upon Hull West and Hessle)
Q I will be super-quick. The Bill provides for the reimbursement of fraud victims who send money using the faster payment system. Could that result in a legislative barrier that prevents you from implementing mandatory reimbursement for fraud on other payment systems?
Emma Hardy (Labour, Kingston upon Hull West and Hessle)
Q David Postings said that anything we could do to improve fraud prevention would be welcome. Are there any other areas of the Bill that could be strengthened to improve fraud prevention?
Emma Hardy (Labour, Kingston upon Hull West and Hessle)
Q Do you support data-sharing agreements and things like that?
Sally-Ann Hart (Conservative, Hastings and Rye)
Q PayPal Europe decided to exit accounts, including those of the Free Speech Union and the Daily Sceptic, and although PayPal reinstated the affected accounts, what happened raised concerns about the protection of freedom of speech in the UK. Are the regulators—you and the FCA—able to address the apparently unchecked ability of financial service operators, such as PayPal, to effect private economic sanctions and censorship in the UK through denial of service actions? Are legislative safeguards needed in the Bill, or in other relevant legislation?
Sally-Ann Hart (Conservative, Hastings and Rye)
That would be good.
Sally-Ann Hart (Conservative, Hastings and Rye)
Q That would be helpful. Even though they are part of the temporary permissions regime, should operators such as PayPal be subject to the UK’s Financial Ombudsman Service, so that dissatisfied customers can seek redress?
Sally-Ann Hart (Conservative, Hastings and Rye)
That would be great; thank you. Maybe we can take that up with the FCA.
Virendra Sharma (Labour, Ealing, Southall)
Order. I am afraid that that brings us to the end of the allotted time for this panel. On behalf of the Committee, I thank our witness.
Examination of Witnesses
Virendra Sharma (Labour, Ealing, Southall)
We will now hear oral evidence from Charlotte Clark CBE and Karen Northey. We have until 11.25 am for this panel. Would the witnesses please introduce themselves for the record?
Andrew Griffith (Conservative, Arundel and South Downs)
Q Good morning, and thank you for being with the Committee. I have been trying to ask every witness an open, framing question. The Bill is designed to bring our corpus of financial services regulation up to date, with a view to sustaining and, ideally, improving the competitiveness of a really important part of the UK economy that touches everybody’s life up and down the country. How important is that? Where are the opportunities in the Bill? I know this will come up, so I will lead a bit: what are your thoughts on what is referred to as the competitiveness objective, and on a potential intervention power? If you think that those would have utility for financial services firms operating in this space, why?
Andrew Griffith (Conservative, Arundel and South Downs)
Q What is the competitive set you look at? Can you give us examples of jurisdictions that we are in competition with?
Tulip Siddiq (Labour, Hampstead and Kilburn)
Q Charlotte Clark, you mentioned net zero. Do you think the provisions relating to net zero in the Bill will have a significant impact in your sector, in terms of the green transition?
Tulip Siddiq (Labour, Hampstead and Kilburn)
Q I was referring to provisions in the Bill relating to net zero—as you say, it is not direct—but I hear what you are saying. I have a similar question for you, Karen. How should the regulators’ new secondary objective on long-term growth take account of investment in green industries, which is what Charlotte was talking about?
Craig Tracey (Conservative, North Warwickshire)
Q I think Charlotte partially answered my first question, which was about whether you think the objective should be a primary or secondary one. Karen, I think you said that you were happy with it as a secondary objective. First, do you think it will be enough to shift the culture of the regulator as a secondary objective? Secondly, when the FCA gave evidence it was unable to say, at this stage, what its key performance indicators or metrics would be; in the interests of helping it to form its opinions, do you have any views on that and how it could be effectively reported?
Craig Tracey (Conservative, North Warwickshire)
Q Let me follow up before Charlotte comes in. Where do you see Parliament—not just Government but Parliament—sitting in that process?
Craig Tracey (Conservative, North Warwickshire)
Q I have a final question. How much of a barrier to investment is the current regulatory framework? We have heard about the time that it takes to get regulated, and the insurance and financial services all-party parliamentary group has had reports on the cost—that it is up to 14 times more expensive to be regulated in the UK. How much of a barrier do your members see that as? Will the Bill help to address it?
Emma Hardy (Labour, Kingston upon Hull West and Hessle)
Q Karen, I wonder whether you heard the back and forth between me and Sheldon on financial inclusion. What are your thoughts about introducing a “have regard” provision for the FCA on financial inclusion? What else could be done through the Bill to strengthen financial inclusion?
Emma Hardy (Labour, Kingston upon Hull West and Hessle)
Q Would you have supported a “have regard” provision for the FCA on financial inclusion?
Emma Hardy (Labour, Kingston upon Hull West and Hessle)
Q So would you like to see measures within the Bill to strengthen that and make it mandatory that advice, guidance and financial barriers are addressed?
Emma Hardy (Labour, Kingston upon Hull West and Hessle)
Is there anything you want to add, Karen?
Stephen Hammond (Conservative, Wimbledon)
Q May I refer to my themes of transparency, accountability and proportionality? Charlotte, in your written evidence you say that the Bill should be amended to achieve the correct balance between customer protection and proportional regulation, and that the opportunity for improved accountability is falling short. I rather detect from your evidence that you agree with what Emma Reynolds said about the regulators marking their own homework. Will you comment on that? Karen, in your written evidence you talk about an evolutionary rather than a revolutionary approach to regulation. Could you explain what you mean by that?
Stephen Hammond (Conservative, Wimbledon)
So you are suggesting that we should make some other amendments to the Bill to make sure that those things are there. Sally-Ann asked another witness earlier about the need for culture change.Q
Stephen Hammond (Conservative, Wimbledon)
The Bill intends to do that; it is not intending to rip up regulation. It intends to make us more competitive, while ensuring the primary objective.Q
Peter Grant (Scottish National Party, Glenrothes)
Q Ms Clark, can I come back to your comment earlier about insurance companies having been set up in Gibraltar and elsewhere offshore but not in the UK? Do you have reasonable grounds to believe that the UK regulatory environment has been a significant factor in those decisions? Can you point to particular regulatory requirements that are preventing people from setting up insurance companies here?
Peter Grant (Scottish National Party, Glenrothes)
There could be a number of reasons why UK business owners choose to set up companies offshore, including in Gibraltar, and they are not always reasons that have the best interests of consumers at heart.
Virendra Sharma (Labour, Ealing, Southall)
Order. I am afraid that brings us to the end of the time allotted for the Committee to ask questions and the end of this morning’s sitting. I thank our witnesses on behalf of the Committee. The Committee will meet again at 2 pm this afternoon here in the Boothroyd Room to continue to take oral evidence.
Examination of Witness
Virendra Sharma (Labour, Ealing, Southall)
We are now sitting in public and the proceedings are being broadcast. We will now hear oral evidence from Sir Jon Cunliffe, deputy governor of the Bank of England. For this panel, we have until 2.25 pm. Could the witness please introduce themselves for the record?
Andrew Griffith (Conservative, Arundel and South Downs)
Q76 Thank you, Sir Jon, for giving us your time today and for the work you and your team have done on the financial stability side for the past fortnight. I am sure it is very much appreciated on both sides of the House. Sir Jon, in your role you have an understandable natural bias towards the prudential side. Notwithstanding that, we heard this morning, particularly from all the industry participants, that they perceive there to be a real problem with international competitiveness, both in terms of the rulebook and its lack of agility, but also sometimes with the application of that. There are two axes: the rulebook itself and the way in which that is applied by regulators.
I do not reach a conclusion on those matters myself, but I thought it would be helpful if we could start with your evaluation of the United Kingdom’s competitiveness in financial regulation, which is one of the core purposes of the Bill, and how well you think the Bill achieves that objective of improving our competitiveness. The other thing a number of our previous witnesses talked about was which markets in the world they consider to be our competitor set.
Andrew Griffith (Conservative, Arundel and South Downs)
I thank the deputy governor for his comprehensive comments.
Tulip Siddiq (Labour, Hampstead and Kilburn)
Thank you for coming to give evidence, Sir Jon. I wanted to ask a question about the intervention power, which you mentioned. We have seen in recent weeks the danger of Government signalling to markets that they are prepared to undermine or sideline national institutions. Is there a worry that, if intervention powers are brought in, the markets might think this indicates an undermining of the independence of the Bank of EnglandQ ?
Tulip Siddiq (Labour, Hampstead and Kilburn)
Q Andrew Bailey wrote a letter to the Treasury Committee in July, which I am sure you are aware of. It stated:
“Anything that would weaken the independence of regulators would undermine the aims of the reforms”
implemented by the Bill. Do you think he was referring to the proposed intervention powers?
Craig Tracey (Conservative, North Warwickshire)
You mentioned credible regulation before, and I do not think anyone would argue with that. There seems to be a need to have proportionate regulation as well. The FCA confirmed in its evidence that it saw the Singapore regulation as robust, which was good to hear because, on things like insurance-linked securities, they took our regulation, but, because they have this competitiveness duty, there have been 18 new firms set up in Singapore as opposed to five here. That is about $700 million-worth of business. It seems to suggest that the competitiveness duty needs to exist. Do you accept that there are areas where we could do better and we could be more proportionate in how we regulate, particularly where we deal with more sophisticated customersQ ?
Craig Tracey (Conservative, North Warwickshire)
Q On the technological side of it and the flexibility, do you think there will be a culture shift as a result of the Bill to try and encourage the regulators to be more nimble and flexible?
Martin Docherty (Scottish National Party, West Dunbartonshire)
It is good to see you, deputy governor. In June this year, at the annual lecture of the Bank for International Q Settlements, the former Governor of the Bank of England —who I believe is your former boss—said in relation to stablecoin, the adoption of cryptocurrency and the concerns about systemic crises:
“In baseball, it’s three strikes and you’re out. In cricket, it’s only the equivalent of one. For systemic payment systems, one is too many. If that means, as it must, very rigorous oversight and rules for private stablecoins, what would then differentiate them from CBDCs?”
First, could you answer the former Governor’s question—what then does differentiate them from a central bank’s digital currency? Secondly, I am glad to hear you rightly say that the industry wants good regulation; is this regulation rigorous enough to enable that to happen?
Martin Docherty (Scottish National Party, West Dunbartonshire)
Q Let me say a little extra on that. I do not want you to conflict with your former colleague, but—
Martin Docherty (Scottish National Party, West Dunbartonshire)
He did say this, which I take in terms of stablecoin as well:
“Ultimately, crypto either has such extrinsic value without a use case, or has a use case as an NFT that perfects ownership (which is niche by definition in that it is non-fungible).”
His critique is that it becomes niche.
Virendra Sharma (Labour, Ealing, Southall)
Order. I am afraid that brings us to the end of the time allocated for the Committee to ask questions of this witness. On behalf of the Committee, I thank our witness.
Emma Hardy (Labour, Kingston upon Hull West and Hessle)
Could Q the deputy governor write to the Committee with an answer to that question?
Emma Hardy (Labour, Kingston upon Hull West and Hessle)
Crypto.
Virendra Sharma (Labour, Ealing, Southall)
Thank you, Sir Jon.
Virendra Sharma (Labour, Ealing, Southall)
We will now hear oral evidence from Paddy Greene, head of money policy at Which?. For this panel, we have until 2.45 pm. Will the witness please introduce himself for the record?
Andrew Griffith (Conservative, Arundel and South Downs)
Q Good afternoon, Paddy, and thank you. I commend the work that you do on behalf of consumers to protect them in this domain and others. I am starting each panel by asking a general question as the Minister, and we then throw it open. Could you just tell us this, starting from first principles? I am familiar with your work, but there is, I hope you would accept, always a balance to be struck—it is for this Committee to try to ensure we get the right balance in the Bill—between consumer protection and putting obligations on firms that are operating in the sector. There are sometimes firms lifting away and creating pockets where people go unbanked or unprovided for, because we have put burdens on them. I wonder whether you acknowledge that and whether you could talk about where you think the right balance lies between a vibrant, competitive sector and a sector that fulfils its social obligations.
Andrew Griffith (Conservative, Arundel and South Downs)
Q Let me invite you to bring that to life a little more. There is a lively debate with others— I am not sure it is the point that you will be drawn on—about consumer credit, for example. Consumer credit can be life changing. It can give people opportunities. It allows them to access capital that lets them make better lives for themselves and their families. Consumer protection can also—the more forms, checks, tests and hurdles that people have to overcome to access that provision—leave people unbanked, because providers withdraw entirely and then people are left with something that none of us would want, which is the unregulated credit sector. Can you bring that to life a little bit for the Committee with some examples of where you see that trade-off?
Andrew Griffith (Conservative, Arundel and South Downs)
Between putting in place—I am not making a point; I am just trying to open this up for the Committee—good, valuable seatbelts and protections versus over-protecting consumers to the degree that large numbers of participants exit the market and then consumers are left with door-to-door, unregulated providers of credit.
Tulip Siddiq (Labour, Hampstead and Kilburn)
Q The Bill does have provisions for access to cash, but not many provisions for free access to cash. Do you think that is a cause for concern?
Peter Grant (Scottish National Party, Glenrothes)
I do not know whether your responsibilities at Which? include consumer protection, particularly in relation to the financial services market, but from your perspective do the millions of small-scale retail consumers of financial services have confidence in the current regulatory framework of the United KingdomQ ?
Peter Grant (Scottish National Party, Glenrothes)
Q Does the Bill as it stands strengthen or weaken that regulatory framework? Or does it leave it as is?
Peter Grant (Scottish National Party, Glenrothes)
Q I was interested that the Minister in his question used the metaphor of a good seatbelt. Some of us think that the regulatory environment for road traffic should ensure that nobody needs to rely on a seatbelt, but that is perhaps a discussion for later.
I have had a number of representations, as I think other members of the Committee have, from individuals or groups of people who have been victims of financial services scams on a colossal scale. One of their common comments is that they do not think it is justifiable for the regulators to have such a strong degree of immunity from civil liability, even in cases where it is clear that the regulator has failed and that that failure has contributed to members of the public losing what for them are significant amounts of money. Do you have a view as to whether it is time to revisit that very broad immunity that so many of the regulators have?
Peter Grant (Scottish National Party, Glenrothes)
I am sorry. I will try to speak into the microphone, so forgive me for not looking at you. Do you have a view on the numerous representations we have had from victims of financial scams who think it is time to revisit the very broad immunity from civil liability that the regulators have?
Peter Grant (Scottish National Party, Glenrothes)
Q Is there a need to specify in the Bill, or to enable in later regulation, a widening of the mandatory compensation scheme to types of scams that we do not yet know about?
Sally-Ann Hart (Conservative, Hastings and Rye)
Good afternoon. We were just talking about access to cash and the proposals in the Bill to safeguard access to cash and free ATMs. As an MP who represents a rural constituency, I am concerned about my residents being able to access cash. How far do you think people should be expected to travel to access free cash, or cash? Is it geographically dependent? Would you treat regions separately, on density of populationQ ?
Sally-Ann Hart (Conservative, Hastings and Rye)
Q So you are not necessarily specifying a mileage.
Siobhain McDonagh (Labour, Mitcham and Morden)
I thank Which? for all the work it has done about the imperative of free access to cash. I do not think any of us are surprised that the Post Office announced that it had £3.45 billion taken out in cash in August, which is the highest figure since its records began. Does the Bill ensure that people will have free access to cash, or is there a need for an amendment to be very specific about thatQ ?
Emma Hardy (Labour, Kingston upon Hull West and Hessle)
Q I will be super quick. Do you think we need to see regulation of buy now, pay later firms?
Emma Hardy (Labour, Kingston upon Hull West and Hessle)
Thank you.
Tulip Siddiq (Labour, Hampstead and Kilburn)
Q The Bill provides reimbursement only for fraud victims who send money using the faster payments system. Do you think other payment systems should be included? Will you tell us a bit about that?
Virendra Sharma (Labour, Ealing, Southall)
If there are no further questions from Members, I thank the witness for his evidence and we will move on to the next panel.
Examination of Witnesses
Virendra Sharma (Labour, Ealing, Southall)
We will now hear oral evidence from Natalie Ceeney, chair of the Cash Action Group, and Martin Coppack, director of Fair by Design. We have until 3.10 pm for this panel. Could the witnesses please introduce themselves for the record?
Andrew Griffith (Conservative, Arundel and South Downs)
Q Thank you for the work that you do. For the benefit of the Committee, I want to open the conversation by rehearsing some of the interventions. We all represent constituents, and obviously this is a concern on both sides of the House. What are the mechanical options for a diligent Member of Parliament, for example, if they are concerned about access to cash in a particular location? Will you talk us through that?
Andrew Griffith (Conservative, Arundel and South Downs)
Q That is very clear. So there is a solution out there in the marketplace. What are the benefits of this industry-led initiative versus the legislative approach? Where do you think there are gaps, if there are any?
Andrew Griffith (Conservative, Arundel and South Downs)
Thank you. I think you may get an invitation to some parts of the country.
Tulip Siddiq (Labour, Hampstead and Kilburn)
Q Thank you for coming to give evidence. My first question, to Natalie Ceeney, is about the overlap between people who need access to cash and the people who require face-to-face banking services. I want to ask about the overlap between those pools of people, and whether you think the Bill protects banking services. I have a different question for Martin Coppack, but I will come to you later.
Tulip Siddiq (Labour, Hampstead and Kilburn)
Q Thank you. My next question is for Fair by Design. It is about the additional costs that people on lower incomes face and the so-called poverty premium. Do you think the legislation in the Bill addresses the poverty premium, or could it be strengthened?
James Davies (Conservative, Vale of Clwyd)
Many thanks for all your work in this area. I am interested in your thoughts on the increasing number of businesses refusing to accept cash. If that becomes commonplace and we become a virtually cashless society, will that not pose a risk for SMEs, if payment transaction costs rise, for exampleQ ?
Siobhain McDonagh (Labour, Mitcham and Morden)
Q To both our witnesses, do you agree that there is a societal duty for the Government to ensure that the most vulnerable people in our society have free access to cash?
Craig Tracey (Conservative, North Warwickshire)
Q Martin, as you alluded to, you gave some powerful evidence to our all-party parliamentary group last year on the poverty premium, which I think was off the back of a report from the FCA that said there were about 27 million people with characteristics of vulnerability. I think most of those were around buying insurance. In the last 12 months, has any progress been made? One of the areas we have talked about as much as cash machines is, when looking at things like insurance, the digital disadvantage that is a problem. There seems to be an ever-growing push to push people online. You are a former teacher, but I am a former insurance broker, and I think that the benefits of advice, in particular to vulnerable customers, should not be understated. What are you seeing now?
Craig Tracey (Conservative, North Warwickshire)
Do you have anything to add, Natalie?
Craig Tracey (Conservative, North Warwickshire)
Q I have one quick follow-up. With that in mind, is the FCA the right one to have a remit for financial inclusion? If not, who should?
Emma Hardy (Labour, Kingston upon Hull West and Hessle)
Q Thank you both for your work in this area. Martin, you might have heard Sheldon from the FCA earlier trying to reassure us all that we do not need to have regard to financial inclusion, and that it is all fine and there is nothing to see here. Will you elaborate? If the FCA had a “have regard” to financial inclusion, what difference would it make to the lives of people facing financial exclusion? Can you provide any examples of the interventions that the FCA could make if it had that “have regard”? What difference would it make? The FCA is saying, “It’s all fine, and we do something anyway”, and it pointed to the consumer markets—that was its answer.
Emma Hardy (Labour, Kingston upon Hull West and Hessle)
Q You mentioned before the letter and the number of people supporting the “have regard” to financial inclusion. I wonder whether it is worth sharing with colleagues who the people who support the “have regard” to financial inclusion are, and whether they elaborate on the reasons why they have supported that. Even though you are a wonderful spokesman, it is not just you supporting it, is it?
Martin Docherty (Scottish National Party, West Dunbartonshire)
Q I think both of you will agree with what I am about to ask you. Would you agree that those most in favour of a cashless society are those with the most money in their bank?
Martin Docherty (Scottish National Party, West Dunbartonshire)
Q If you look at other countries that are far more digitally enabled than the UK and Northern Ireland, notably Estonia—let me declare a non-pecuniary interest as the chair of that all-party parliamentary group—the vast majority of Estonians, who do have more or less a cashless society, believe that a cashless society or access to cash, should I say, needs to be supported with the infrastructure that you mentioned earlier, Natalie.
Virendra Sharma (Labour, Ealing, Southall)
I think this will be the last question, asked by Stephen Hammond.
Stephen Hammond (Conservative, Wimbledon)
MartinQ , you have mentioned that you were a regulator, and I think I heard you say a moment ago, “If it doesn’t get measured, it doesn’t get done.” Therefore I am keen to ask you about and understand—you have obviously looked at the Bill in its totality—the need for metrics on net zero, competitiveness and proportionality. Do you think there is enough in the Bill and that is testing and stretching enough? And do you think that there is enough transparency in relation to the regulators to show that they have met those metrics?
Stephen Hammond (Conservative, Wimbledon)
Okay.
Gareth Davies (Conservative, Grantham and Stamford)
Martin, I want to ask you very quickly about all the data that you have been listing in the evidence. I take this evidence session very seriously. I think that it would be really helpful if you could share the constituency data, but also, importantly, the workings. Can you just confirm that the way in which you are working out the poverty premium is not based on a best-case counterfactualQ ?
Gareth Davies (Conservative, Grantham and Stamford)
Q Well, it is based on either a best-case counterfactual or average consumers’ costs. Which is it?
Gareth Davies (Conservative, Grantham and Stamford)
Q But is the data that you have been rattling off today to all of us specifically on the best-case counterfactual or on an average cost per consumer?
Gareth Davies (Conservative, Grantham and Stamford)
Q Okay. Maybe write to me with your workings and we will go from there. If you rattle off data in an evidence session such as this, it is important for you to know how that data was calculated.
Emma Hardy (Labour, Kingston upon Hull West and Hessle)
How they have worked it out is on the website.
Gareth Davies (Conservative, Grantham and Stamford)
That still does not answer my question. If you are going to come to a Committee such as this, please provide your data.
Virendra Sharma (Labour, Ealing, Southall)
Order. I am afraid that brings us to the end of our allotted time for this panel. On behalf of the Committee, I thank our witnesses.
Examination of Witness
Virendra Sharma (Labour, Ealing, Southall)
We will now hear from William Wright. We have until 3.25 pm for this panel. Would the witness please introduce himself for the record?
Andrew Griffith (Conservative, Arundel and South Downs)
Q Thank you very much for being with us this afternoon. I am asking each witness a general opening question before handing over to colleagues. To what extent do you think the Bill fully unlocks opportunities? We have not had ab initio financial services regulation for nearly a quarter of a century. In that period, technology and trade flows have changed, and the imperative for us to remain competitive as an economy remains constant. How well does the Bill meet that objective, and who are our competitive set in the world?
Tulip Siddiq (Labour, Hampstead and Kilburn)
Q Do you think there is a disconnect between the Government’s stated ambition to become the world’s first net zero financial centre and the actual levels of green finance in the UK today?
Tulip Siddiq (Labour, Hampstead and Kilburn)
Q On the catching up or lagging behind that you have mentioned, would you recommend any legislation? Is there a role that the Bill we are discussing could play to strengthen us and pull us forward?
Peter Grant (Scottish National Party, Glenrothes)
Q I know that your website describes one of your key aims as developing a larger capital market across Europe. There is a trick to be pulled off in encouraging all the right kinds of people to come and invest in your financial markets while keeping the wrong kinds of people out. How effective has the UK’s previous regulatory regime been at keeping Russian money out of our financial markets?
Peter Grant (Scottish National Party, Glenrothes)
Q A number of transparency and anti-corruption campaigners regularly say that London has become or is in the process of becoming one of the go-to locations of choice for money laundering and similar activities. Is that a concern that you think is grounded in fact? Or is it just an urban myth with nothing behind it?
Sally-Ann Hart (Conservative, Hastings and Rye)
Q Good afternoon. I will pick up on a few things in respect of the competitiveness of the UK financial markets. Our competitiveness is really important for our economic growth; do you think the Bill goes far enough with regard to the deregulation of existing EU rules? When it comes to new regulation, does the Bill enhance the ability of Britain’s financial services to be agile and dynamic and to look at the best possible outcomes? We are very good in Britain at gold plating our rules and regulations, so we need to make sure we are not putting ourselves on the back foot and can be the most competitive, agile, dynamic market.
Virendra Sharma (Labour, Ealing, Southall)
Order. I am afraid that brings us to the end of the time allotted for the Committee to ask questions. I thank our witness on behalf of the Committee.
Examination of Witnesses
Virendra Sharma (Labour, Ealing, Southall)
Q We will now hear oral evidence from Robin Fieth, chief executive of the Building Societies Association and director of Co-operatives UK, and Robert Kelly, CEO of the Association of British Credit Unions Ltd. For this panel we have until 3.55 pm. Would the witnesses please introduce yourselves for the record?
Andrew Griffith (Conservative, Arundel and South Downs)
Q Thank you, Robin and Robert. This is a general question. The Bill’s objective is to bring the rulebook up to date nearly quarter of a century after the last piece of ab initio financial services legislation, the Financial Services and Markets Act 2000. There is obviously a lot in this Bill; I invite you to comment in general on how you think it achieves the objective of creating a competitive, well-regulated and vibrant sector. The Government are very supportive of a diverse range of financial services providers, which includes both of you, representing building societies, credit unions and co-operatives, and I am personally very supportive of that.
I would like to ask questions in both directions, if I may. First, does this legislation go far enough to meet your objectives? When I was in front of the Treasury Committee a week ago, I was challenged on the fact that it might give a greater ability to sell a broader range of products. That question came specifically in the context of co-operatives and credit unions. Do you have the necessary expertise and the regulatory rulebook to do that without prejudicing consumers? Sorry, there is a lot there, but hopefully that gives you something to open up with, and we will then hand the questioning to colleagues.
Tulip Siddiq (Labour, Hampstead and Kilburn)
Q Compared with the US or the rest of Europe, in the UK we lack mutually and co-operatively-owned regional banks. You have touched on this already, Robin, but I want to hear a bit more about why you think that is. What is the role of regulators when it comes to that lack of access?
Peter Grant (Scottish National Party, Glenrothes)
Q Mr Fieth, let me first come to you and the comment that you made previously about the UK not really having a tradition of mutually owned lending banks. Was not the first trustee savings bank set up in Dumfriesshire in 1810? There has been a very long and proud tradition of locally and community-owned banks, which survived for a long time. They were basically wiped out in a series of corporate takeovers in the 1970s and ’80s. Is that not the case?
Peter Grant (Scottish National Party, Glenrothes)
Q Thank you. Mr Kelly, a lot of the evidence that we heard earlier today—I do not know how much of it you were able to watch—came from the big institutions, which clearly have a large part of UK exports—a significant part of the UK economy. Could you briefly explain the importance of credit unions, particularly with regard to the promotion of financial inclusion?
Peter Grant (Scottish National Party, Glenrothes)
Q Thank you. You referred to the need to be competitive. When earlier witnesses used that phrase, they often clarified it with reference to overseas businesses or overseas financial services sectors. When you talk about being competitive, who are you competing with? Is there anything in the Bill that helps you to become competitive, or is there anything that could be added that would help?
Peter Grant (Scottish National Party, Glenrothes)
Q According to the Financial Conduct Authority website, in just over the last year, eight credit unions have gone into administration; only one did in the preceding three years. Is there something about the current financial services sector, or about the credit union model, that means there is a systemic problem? Or is it simply that, if we move from having a small number of big players to a large number of small players, inevitably we will lose some of the small players?
Siobhain McDonagh (Labour, Mitcham and Morden)
Q Would both our witnesses support giving the FCA and the PRA an explicit remit to report on how they have considered specific business models—including credit unions, building societies and mutual and co-operative regional banks—to ensure that they are given parity of esteem with other providers? If so, how would that support your sector?
Virendra Sharma (Labour, Ealing, Southall)
Order. I am afraid that brings us to the end of the allotted time for this panel. On behalf of the Committee, I thank our witnesses.
Examination of Witness
Virendra Sharma (Labour, Ealing, Southall)
We have until 4.10 pm for this panel. Would the witness please introduce himself for the record?
Virendra Sharma (Labour, Ealing, Southall)
Thank you. Does anybody on the Government side wish to open the questioning?
Sally-Ann Hart (Conservative, Hastings and Rye)
Q It is not a general question, but I want to ask about push payment fraud and APP. If we set a specific amount for APP fraud reimbursement, would a suggested £1 million limit encourage fraudsters to try to act like the victim? Would a limit set that high be an incentive for fraud?
Tulip Siddiq (Labour, Hampstead and Kilburn)
Q Thank you for coming to give evidence. You do not need me to tell you the amount of money directly stolen from people’s bank accounts through fraud and scams—a record high of £1.3 billion, as you will know. Why do you think we have reached that amount?
Virendra Sharma (Labour, Ealing, Southall)
Order. We resume our session. I think a question was put to you. Do you want it repeated?
Emma Hardy (Labour, Kingston upon Hull West and Hessle)
Q Thank you for your answer. Fraud is a huge issue, and I am sure we all have individual stories from constituents who have been impacted by it. I just wonder what else could have been done in the Bill to tackle fraud. Specifically, should we have legislation on a single dedicated national strategy to tackle fraud, or should we have provisions to support investigators in the sector to prevent fraud and track stolen money? I asked a previous witness about putting in place data-sharing agreements that extend beyond just the banks to include fintech, electric money institutions, cryptoasset firms and payment system operators. What more can be done? Would you support what one of the witnesses—I forget who it was—said about data sharing?
Emma Hardy (Labour, Kingston upon Hull West and Hessle)
Q Something on the face of the Bill that says that they have to do this.
Emma Hardy (Labour, Kingston upon Hull West and Hessle)
Q Fantastic. Are there any other things that you think could be done with the Bill to try and tackle fraud that we have not covered so far?
Emma Hardy (Labour, Kingston upon Hull West and Hessle)
Q Like an economic crime assessment?
Emma Hardy (Labour, Kingston upon Hull West and Hessle)
That is really helpful, thank you.
Andrew Griffith (Conservative, Arundel and South Downs)
Q Do you think this is a good example of an area where it is important that the Government have an intervention power? We have seen some patterns of behaviour emerge very rapidly and cause significant public policy concern.
Martin Docherty (Scottish National Party, West Dunbartonshire)
Q In terms of clauses 21 and 22 on digital settlement assets, how effective do you think the Bill will be in ensuring that we reduce fraud with digital settlement assets that use blockchain? I am not having a go at the technology, because that is a completely different discussion. How effectively will an open or closed blockchain, and the differences between the two, be regulated by this Bill?
Martin Docherty (Scottish National Party, West Dunbartonshire)
Q My concern is that blockchain has been around for a long time. Fraud is not new—there is nothing new under the sun. Do you have a concern about the ability of the regulators to keep on top of this, as they do not have the knowledge that they should have, nor do they have the access to resources to develop it?
Virendra Sharma (Labour, Ealing, Southall)
Order. I am afraid that brings us to the end of the time allotted for the Committee to ask questions. I thank our witness on behalf of the Committee.
Virendra Sharma (Labour, Ealing, Southall)
Q Order. We will now hear evidence from Adam Jackson, policy director for Innovate Finance. For this panel, we have until 4.40 pm. Will the witness please introduce himself, for the record?
Andrew Griffith (Conservative, Arundel and South Downs)
Q Thank you, Adam, for being with us this afternoon. The UK has much to commend it as a location for fintech and the other segments that you talked about. We have a supportive Government, a conducive framework and good liquidity in many markets. Let us take that aside for one moment, and the good work that Innovate Finance has done itself, and look at where there are opportunities to go further, or delve into the areas where you think there is a gap. Telling us how good things are does not take us very much further forward. When you look at this Bill, and at the overall behaviour and corpus of regulation, how are we doing, and how could we do better?
Andrew Griffith (Conservative, Arundel and South Downs)
That is very helpful, thank you.
Tulip Siddiq (Labour, Hampstead and Kilburn)
Q You have touched on this very briefly. I would like you to expand a bit more on the comparison between our approach and the EU’s approach to crypto regulation in general. You will be aware of the EU’s regulation deal, which effectively brings together cryptoassets and activity into regulations, whereas we, at the moment, are limited to stablecoins. Are we at some sort of risk of falling behind because we have not had that sort of regulation? Does it compromise our competitiveness in the fintech sector because we have not had that sort of regulation deal?
The other thing I wanted to ask about is investment in the UK fintech industry, which was down to £9.6 billion in the first six months of this year, which is three times less than exactly the same period last year. Do you want to comment on the reason for that decline? What should we be doing as politicians to try and help with that?