Contribution
I declare an interest as the chair of the all-party parliamentary group on investment fraud and fairer financial services. It was admirably chaired by the hon. Member for Harrow East (Bob Blackman) for a number of years, and I took over 18 months ago. The all-party group grew organically: a number of Members were coming to Parliament with concerns about individual instances of fraud, and as a result, people came together and set up the all-party group. We work on the principle that we all support the idea that we need an effective and vibrant finance sector, but that the foundation of that sector is trust. “My word is my bond”—that is exactly what the whole element of trust is about.
There is a real concern at the moment that there is a lack of trust. If we look at the FCA’s polling, 36% of people said they did not feel that they had been treated fairly or honestly by a financial firm, and I can understand why. Let me run through just a few examples from my experience here: payment protection insurance; endowment mortgages; pension transfer mis-selling; London Capital, which I believe my hon. Friend the Member for Bishop Auckland (Dr Rushworth) mentioned; Connaught; Woodford; and hidden credit lines. I warn the House that the issue of micro-bonds is coming down the track as well, and that will be enormous.
We can see why people have lost confidence to a certain extent and why, as the hon. Member for Carshalton and Wallington (Bobby Dean) mentioned, we should listen to the 16 organisations that represent consumers, which have come to explain to us their concerns about the Bill. Concerns have also been set out by my hon. Friend the Member for Dartford (Jim Dickson). On clause 7, the concern is the interference with the fair and reasonable test. Way back in the year 2000, when that Financial Services and Markets Bill was going through the House, there was a long discussion that came to a fair proposal to establish the fair and reasonable test in the legislation. If I remember rightly, it was agreed on a cross-party basis. To now introduce conditionality, in terms of compliance with FCA rules, does not necessarily result in a fair outcome; certainly, in many instances, we have found that compliance with FCA rules is just not good enough to secure justice for people.
To reassure us, the Chancellor of the Exchequer said, “Don’t worry—the consumer duty will still apply.” It is not in the Bill, as far as I can see. I think that is a real issue. If we are to reassure people out there, we need to ensure that elements of that reassurance are in the legislation. As my hon. Friend the Member for Dartford also said, on clause 6, the issue of having to refer ambiguities from the FOS to the FCA draws the FCA into an adjudication role. I have to say that a number of the cases that we have dealt with have concerned omissions and failures on the part of the FCA. Again, there is an element of conflict of interests there. I know that an element of discretion can be involved, but it is a question of the elements of discretion to which the FCA is subject. The Bill states that the ombudsman must take into account
significant implications in relation to the functioning of relevant markets”.
I think that the FCA will be under pressure to ignore some of those elements if they fly in the face of issues relating to market success.
Clauses 42 and 43 undermine the ringfence between investment and retail banking. I was here in 2008. Others claim it, but it was I who first raised the subject of Northern Rock in this Chamber. We are seeing the same cycle: there is a financial crisis, regulation is introduced, memories fade, there is pressure to reduce that regulation, and we go into another crisis. That is what was happening from the 1980s onwards. Curiously, there were two books that people reached for when the crisis happened in 2008. One was J. K. Galbraith’s analysis of the 1929 crash. The other, funnily enough, was Marx’s “Capital”, but that is another discussion. J. K. Galbraith said that the best protection against another crash was memory. What is happening now is exactly what Andrew Bailey, the Governor of the Bank of England, has described: memories are beginning to fade, which is why people become so susceptible to the pressure for deregulation.
I want to make a couple of points before I quieten down. A number of issues have not been addressed in the Bill, and I should like them to be addressed. The first is the FCA’s treatment of whistleblowers. One of our advisers, Simon Andriesz, recently committed suicide. He was a whistleblower, and it was, I believe, as a result of the lack of support from the FCA that he took his own life. We have referred it to the FCA, and what has it done? It has launched an investigation, but it is not an independent investigation; it is an investigation by an incoming member of the FCA’s own board. That is unacceptable. We need to ensure that we protect whistleblowers.
The other issue is the Hillsborough legislation that we are introducing. I would like to see that legislation applied to the FCA, because I think that a duty of candour for the FCA would give reassurance to consumers outside.
Finally, this is not a choice between regulation and growth; both are essential for a successful finance sector.