Bobby Dean

Uncertainty is always unwelcome in the financial services industry, but Governments must make decisions for the very long run, and I think that in the very long run it would be in our best interests to be part of the single market again. The industry has remained resilient, not only in the face of Brexit but in the face of other challenges, but that should not be taken for granted. It is due, at least in part, to hard work and the reforms that were introduced after the 2008 financial crash. Prior to that, a reckless, deregulatory and ignorantly optimistic environment led to a complete and utter disaster, and not only for the industry but for society as a whole. The debts that stacked up in response to that crash are still squeezing the present Government’s potential to deliver better public services or lower taxes to this day, and the reputation of the industry among the public still suffers because of that event. However, it is worth stressing that the reforms made in the aftermath have broadly worked. The sector has remained financially stable. Repossessions are low, pension funds are healthy and stable, and bank failure is rarely speculated about—and if it were to happen, I trust that it would happen in an orderly way. This has remained the case despite some serious stress tests in recent years, not least the global pandemic and the global energy shocks, and it shows that measures such as the bank capital requirements, the liquidity rules and the ringfencing have created a system that can hold. I think that the Government should be mindful of that as they set out on a path to—in their own words—deregulate again. They should resist the Conservative party’s calls to abolish ringfencing entirely. I think that savers across the country will be shocked to hear that there is a party advocating for that money once again to become available to the investment banking industry. In a wider context, the Government should tread cautiously. They should not fall for the same old cycle of deregulation, crisis, and then regulation again. Instead, they should try to plot a more stable path through this moment. Nevertheless, there of course remains a case for reform. We are decades on from the financial crisis, and there will be plenty to do to modernise, to move with the times, to learn lessons, to tidy, to simplify, to clarify and to adjust, to make our financial services system work for the 21st-century economy. There is much to be supported in the Bill. I support, for instance, the move to make the Payment Systems Regulator part of the Financial Conduct Authority, and I hope that will mean we can continue some of the good work on open finance. I broadly support what I think is the intention in relation to improvements in access to banking, although we have yet to see some of the detail because we are waiting for the review to be published. I support the move to expand credit unions, and of course I support the intention to table amendments on child trust funds, for which I credit my hon. Friend the Member for Horsham (John Milne) and my right hon. Friend the Member for Kingston and Surbiton (Ed Davey). More broadly, the Liberal Democrats support the thrust of the Bill, but there are some key areas where we want to work with the Government to get this rare opportunity for reform right. In particular, on consumer protection I fear that the Bill is in danger of overcorrecting. It starts from a false premise, which is that consumer rights and economic growth are somehow in contention. They are not; they are two sides of the same coin. There can be no booming economy without consumer confidence, and poorer protection and more difficult redress are in the interests of neither consumers nor firms. I am struck by the volume of lobbying material that I receive from industry, and by how little I receive from the voice of the consumer. It is because of that inequality of arms that we in this place should be so mindful of the decisions we make in respect of this legislation. Some of it looks like a shopping list of demands from industry, and that should give the Government pause for thought. We should remember that the same inequality of arms in the lobby industry is repeated when it comes to legal disputes, and indeed at the point of purchase of financial products. Information asymmetry is a known economics concept, and in the development of financial products there is a huge information asymmetry. Experts are developing complex products that are inherently difficult for consumers to understand, and we should legislate accordingly with that in mind. I therefore ask the Government to listen carefully to the 15 organisations—including Martin Lewis’s MoneySavingExpert, Citizens Advice and Which?—that have got together and warned that the reforms of the Financial Ombudsman Service could lock consumers out of independent redress, removing that vital safety net of free dispute resolution. Indeed, the former Member of Parliament for Makerfield, Yvonne Fovargue, has concerns that these reforms do not meet the Prime Minister’s “Makerfield test”. That should be a strong warning to the Chancellor. The Financial Ombudsman Service stands accused of being a quasi-regulator, making precedent-setting decisions that firms cannot anticipate. I admit that there has been dysfunction in the service in recent years and that there is a case for better co-ordination and clarity, but the reforms, as they stand, will tip the balance too far in favour of firms, and I think we are in danger of making the FCA a quasi-ombudsman. The rules set by the FCA are necessarily high-level, especially if they are principle-based, and they cannot account for every situation in detail. The ombudsman must retain the power to make a judgment on what is fair and reasonable in the round, or we will descend into a dispute over strict legal compliance that will always favour firms in the way that I have described. The chief executive of the FCA has repeatedly expressed concerns to the Treasury Committee about the possibility that the referral mechanism may create a back-door appeals mechanism for firms, gum up the system, and lead to the regulator doing the job that the ombudsman should rightly be doing. We will go into all the details in Committee, but I urge the Government to find a way through this that suits consumers too. There are further issues that we will want to pursue in Committee. The Consumer Credit Act protections that are being rolled into the FCA are important provisions that need to remain in primary legislation. I recognise the need for regulatory power to respond to developments dynamically, but we must also ensure that such important provisions are protected in law, and I do not think that the FCA’s strategies will afford sufficient protection. Other Members have mentioned access to affordable credit, and this is a huge opportunity for us to take meaningful action in that regard, looking at some of the provisions proposed for the fair banking Act, and ensuring that when the washing machine breaks down or the car fails, people can access the credit they need to get through those crisis moments. I have some simple asks in relation to the Bill, involving transparency and the current status of the access to affordable credit that banks are providing, and their links with credit unions and other community organisations to improve that access. I note that we now have a Co-operative Prime Minister. The Co-operative party backs such amendments, so I look forward to seeing whether they make it into the Bill. We would also like to see tougher action on the big tech companies in relation to fraud and scams. At present, the UK financial industry is on the hook for scams that nearly always originate on big tech platforms. Just last week I heard in the Chamber that Ofcom’s regulations would probably be sufficient, but we now have an opportunity to write into legislation liability for those tech firms, and I do not think we should miss it. There is more that I could talk about, but in the interests of time I will move on. I support the Conservatives’ point about the digital asset strategy, and I think it would be a missed opportunity not to include something about that in the Bill. I would also like to speak up on the injustice facing mortgage prisoners, and I will say more about that in Committee. Let me end by saying that we welcome the thrust of the Bill. It reinforces the position of the financial services sector as a great contributor to the UK economy, and its status as a global leader and a beacon of stability. However, there is a real danger of overcorrection and damage to consumer rights, as well as the potential to miss some big opportunities for long-running problems to be solved. I look forward to working with the Government in Committee to further the Bill’s progress.