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Baroness Greengross: My Lords, I support the amendment moved by the noble Lord, Lord Lipsey. In spite of the medical advances and the advances in social care and healthcare that have been made, we know that our society is ageing fast. In the foreseeable future, there will be many more people suffering from chronic disease who will need long-term care. From my experience of the organisations that represent old people, I can say that people are getting more and more anxious. They are anxious to ensure that they can retain some dignity in later life and can ensure for themselves that they get the care they need.
Long-term care insurance is usually purchased by older people, although it can, of course, be purchased by people of any age. Most people do not think about it until they are of advancing years. Therefore, the people who purchase long-term care insurance policies are sometimes vulnerable when they do so, as their need is imminent. It is essential that the industry be regulated. We have had enough examples of the consequences of having no regulation or poor regulation and of the mis-selling of financial products. Home income plans are one example of a good idea to which extraordinary damage was done by just such a lack of regulation. Long-term care insurance, as we all know, is not suitable for everyone, but it has an important role to play in its own right and in appropriate cases. However, selling such insurance to the wrong person is, itself, a form of mis-selling and can do great damage to the whole market, if it happens in that way.
It is necessary that regulation be introduced. It must be introduced quickly. As the noble Lord, Lord Lipsey, said, there have been huge delays. When we are dealing with older people, such huge delays are unacceptable. Older people cannot wait indefinitely. Why should they have to?
Baroness Dean of Thornton-le-Fylde: My Lords, I also support the amendment moved by my noble friend Lord Lipsey. When the original amendment to the Bill was before the House, I spoke in the debate and, like my noble friend, I believed that the Treasury genuinely intended to do something about the matter. It is not as though we were discussing people with their life ahead of them. It is now nearly two years on—longer if we take into account the recommendations from the commission of which my noble friend was a member. We are talking about some of the most vulnerable members of our community.
The intermediaries directive was referred to. I gather that the Treasury Minister said that it would cover the matter and talked about a date in 2004. That depends on directives being delivered on time from Europe. There is no guarantee of that.
I should declare that I am a member of the General Insurance Standards Council. That is not why I intervened this evening. Nor was it the reason for my intervention in the debate on the original amendment. I intervened then—as I do now—because I see the life-damaging impact that the pensions scandal has had on elderly people. Many thousands of people in Britain are worried about their pension. They are worried about final salary schemes that are in huge deficit and the move to money purchase schemes, many of which are themselves worth less than they were when they were bought.
If there is one crumb of comfort that we could give to older people, it would be this regulation. There is no reason why we could not have the regulation. If it is necessary to subsume it into future regulations from 2004, because of the intermediaries directive, that could be done then. It is wrong to expect people to wait
for fair regulation of a major investment that has great impact on their life until 2004 at the earliest. That is why I support the amendment.
Lord Blackwell: My Lords, I add my support for the amendment moved by the noble Lord, Lord Lipsey. As long ago as 1996 or 1997, there was a Green Paper on long-term care. It made various proposals but, for several reasons—one of which was a change of government—none of them went forward. Since then, little has happened to develop the market, even though, as the noble Lord, Lord Lipsey, said, it is a critical issue that we must get right. There is a huge need to cover the cost of long-term care, but the matter is in a vacuum. It is important that we move forward with regulation.
I have a question for the Minister. How will the order relate to electronic money that might be stored on mobile phones? If there is an electronic wallet on a mobile phone, linking into the Internet, that would be regarded under the order as electronic money. I am less clear on the situation in respect of payments in advance that are registered on mobile phones. Such pre-payments may be primarily for the purposes of pre-paying calls, but they could also be used to pay for other services. For example, if the mobile phone holder calls a premium call number, he may be using the money stored on the phone to pay for services through the premium number or to pay for services registered back to the phone through text message ordering. It is a simple point of information. I am not clear as to how pre-payment vouchers and pre-payments stored on a phone would relate to the order.
8 p.m.
Lord Newby: My Lords, I have considerable sympathy for the arguments put forward by the noble Lord, Lord Lipsey. When his original amendment came before the House, we supported it. We had expected that it would have been acted upon by now. We look forward to hearing the Minister give some reassurance that action will be taken. The noble Lord, Lord Lipsey, spoke of the possibility of introducing what I think he called "interim protections". I shall be interested to know what such measures might be. I suspect that something either is or is not formally covered by the FSA, but if there is such a thing as an interim protection, it is hoped that it could be brought forward quickly.
The only comment I wish to make with regard to the remit of the FSA in respect of any insurance products is that, at the time that the Bill was passing through this House, we were keen to ensure that the FSA would cover not only the specific area of insurance for the long-term care of the elderly, but the insurance industry more generally. At the time we were persuaded by the Minister and the Treasury that we should not press those amendments, on the basis that such a proposal would greatly increase the scope of the work of the FSA. In its first years the body would have enough on its plate simply to fulfil what was required of it under the terms of the Bill. It could not also take on insurance matters.
Having watched the FSA take on its new powers, I suspect that the staff are extremely grateful that, at least last year, they did not have to worry about insurance matters. However, I think that the time has now come for the whole area to be looked at again.
I turn now to the main order. It seems sensible, although in terms of order of priority, electronic money does not strike me as a hugely important area in comparison with that raised by the noble Lord, Lord Lipsey. Furthermore, it will form one of a series of amendment orders because I believe that there are a number of other areas in which the remit of the FSA is not as wide as it needs to be.
Noble Lords who participated in the debate some weeks ago on the accountancy industry will have heard me speak about the position of the split investment trust sector, in which many savers, principally pensioners, have invested substantial amounts of money in products that were sold to them as low-risk investments, but which have since proved to be extremely high-risk investments. In many cases, people have lost a large proportion, if not all, of their savings. I understand that as many as 30,000 people stand to lose in this way. It is a major problem.
A further problem that the matter has brought to light is that those people who invested in splits, other than through independent financial advisers, are not covered by the FSA. They may have lost all their money, but they are not covered by the compensation scheme and they are not covered by the financial services ombudsman. I believe that this may well be another case where the regulatory scope needs to be examined.
At the moment the FSA is undertaking a review of the entire splits sector. I believe that that review will demonstrate that there has been mis-selling of such products. Logic dictates that they should now be regulated under the Financial Services and Markets Act 2000. I should be grateful if the Minister could confirm that such products could be brought under the control of the FSA by means of an amendment order along the lines of that which we are discussing tonight.
Lord Kingsland: My Lords, we are most sympathetic to the substance of the amendment tabled by the noble Lord, Lord Lipsey. We also have a few technical concerns with regard to the order, of which I understand the Minister is already aware.
Article 3 states that proposed Article 9A provides that cash paid to buy electronic money is not a deposit for the purposes of the regulated activities order if the cash is immediately exchanged for electronic money. Can the Minister tell the House whether this covers a situation in which cash is paid in when applying for an electronic device?
Article 4 makes it clear that the issuing of electronic money is a regulated activity requiring a FISMA authorisation certificate, unless the requirement is waived. Waiver is dealt with by proposed Article 9C, upon which I have certain observations.
First, why, by virtue of Article 9C(2), can the activities of credit institutions never be waived?
Secondly, there appears to be an inconsistency between paragraph 10.2 of the Explanatory Memorandum and Article 9C(5)(c)(ii). According to the Explanatory Memorandum, the FSA can issue a waiver certificate to an issuer of e-money if it is accepted by the issuer's parent, subsidiaries of the issuer which perform functions ancillary to the issuing of electronic money or subsidiaries of the parent. However, we observe that paragraph (5)(c)(ii) excludes all subsidiaries of the issuer.
Thirdly, in our view, paragraph (6)(b) of Article 9C should be amended to make it clear that the waiver applies where some of the "one hundred persons" fall in paragraph (6)(b)(i) and the remainder in paragraph (6)(b)(ii) so as to be consistent with paragraph 10.3 of the Explanatory Memorandum.
I have a few concluding observations. First, under Article 9E, we think that the deeming provision in paragraph (3) ought to apply to the Part IV permission as well.
Secondly, contrary to the view expressed in paragraph 13 of the Explanatory Memorandum, we think that the compensation scheme ought to be extended to small issuers, at least if they are exempted under paragraph (4).
Thirdly, Article 9(4)(b) of the order suggests that the regime applies where e-money is issued from outside the UK to a recipient inside the UK. If that is so, it would be helpful to provide an exemption under Article 72 of the regulated activities order, which is the article dealing with exemptions of overseas persons generally.
Finally—the Minister will be relieved to hear—paragraph 20 of the Explanatory Memorandum states that the proposal under Article 12 seeks to ensure that a,
- "security repayable on notice of less than one year should be treated as commercial paper",
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