Compensation (London Capital & Finance plc and Fraud Compensation Fund) Bill — House of Lords, 2021-10-19
Topic: Domestic Commerce
Denis Tunnicliffe (Labour, Centre-left): My Lords, with just two substantive clauses this legislation is uncharacteristically straightforward by Treasury standards. It is also uncontentious in what it seeks to achieve. However, as we have heard, the circumstances surrounding the Bill raise important questions such as those asked by my noble friends Lord Davies of Brixton and Lord Sikka. I particularly thank the noble Baroness, Lady Kramer, for her contribution and for setting out how the senior management regime, in respect of which so much was promised, has failed succeed I will not provide another account of the events leading up to the drafting of Clause 1, but it is right that bondholders be compensated for the numerous regulatory failings in respect of London Capital & Finance. We all want to see this compensation paid out, and the sooner Royal Assent is granted, the quicker that process can get under way. I am glad that the Parliamentary Under-Secretary of State at the Department for Work and Pensions confirmed in the Commons that the Government intend to complete payments within six months of the Bill being passed. Is the Minister confident that the preparatory work has been completed to the requisite standard to allow this to happen? Are any claims likely to be settled before Christmas The behaviour of LCF, which, among other things, ran multiple promotions wrongly implying that its minibond products were fully regulated, was wrong. There is no doubt about it and we must not forget it. As colleagues have noted, the Financial Conduct Authority’s response, whether to early warnings or later in the process, was unacceptable, as was recognised in Dame Elizabeth Gloster’s review. The compensation burden now faced by taxpayers is arguably higher than it needed to be. Both the Government and parliamentarians should, of course, hold the FCA to account and challenge it to do better A variety of concerns, some specific and others more general, have rightly been raised during today’s debate, building on others voiced during the Bill’s Commons stages. For once we have little doubt that the Government agree with our discomfort. The Minister, Guy Opperman, did not mince his words when, at the beginning of the Second Reading debate in the other place, he urged the FCA to "take a good long, hard look at itself".—[Official Report, Commons 8/6/21; col. 905.] The body has accepted the findings of Dame Elizabeth’s report in full and is under new leadership Concerns about the FCA’s willingness to hold bad actors to account are not new, nor will they go away overnight. However, during lengthy discussions on parliamentary scrutiny of the regulator during the passage of the Financial Services Bill, all sides agreed that it was for those independent bodies to determine how they ran their affairs. None of us should be happy about the events of the past, but we must allow the FCA to implement its reform programme and demonstrate an ability to do better in the future. It might be easier for concerned colleagues to trust the FCA if the Minister could confirm that, in the words of Mr Opperman, there has been "suitable input from Government". Has the Treasury, as part of this legislative process, reiterated its views on the matter to the FCA? Does the Minister believe that the message has been heard loud and clear As the Minister outlined at the start of the debate, Clause 2 amends the Pensions Act 2004 and grants the Secretary of State a new power to lend money to the board of the Pension Protection Fund. It is a response to the November 2020 ruling of the High Court, which determined that claims arising from so-called pension liberation fraud fall within the remit of the Fraud Compensation Fund. We welcome the speed at which the Government are legislating on this matter, although there are questions about how the levy on pension schemes will function and what Ministers are doing to crack down on frauds and scams. My colleague Pat McFadden MP asked a series of questions that did not receive satisfactory responses. I will ask the Minister some of those questions and, if he is unable to answer them today, I hope he will commit to writing The levy on pension schemes, which funds compensation arising from such cases, is a flat rate. This means that schemes with a large number of members but where individual pension pots are relatively modest could end up paying a significant proportion of the overall sum. Why have the Government not formulated a more proportionate means of collecting the funds? Is that one of the trade-offs of legislating on this matter as quickly as we are Pat McFadden also asked whether Ministers believed that there was a causal link between the greater pension freedoms introduced in recent years and the increased incidence of scams and financial fraud. Does the Treasury believe that there is such a link and, if so, what steps are being taken to crack down on such behaviour? In so far as some scams are carried out online, will the Treasury commit to work with DCMS to ensure that the upcoming online safety Bill contains relevant safeguards It is unfortunate that so many people have been caught up in these cases. This Bill, however, provides a means of closing the door on some unsavoury events within the financial sector. Once compensation has been delivered, in the coming months, the key objective will be to ensure that the risk of such incidents occurring again is significantly reduced. I hope that the Minister’s response will reassure the House in this regard.