Baroness Kramer: I shall make one relatively small point. This is an area where I do not pretend expertise. At Second Reading, I referred to the importance of both guidance and advice and the significance of distinguishing between the two. At the moment, many people who are retiring will have spent a large part of their careers accruing pension benefits through a defined benefits plan and a relatively small proportion of their career in defined contributions, so for many people now the discretionary pot is probably quite small and many of them may feel that they can therefore make decisions without advice. That picture will rapidly change as a generation comes forward for whom defined contributions have essentially been the framework within which they have provided for most of their pension.

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We are moving into a situation where advice will become more significant, so this problem needs resolution. I ask that any measure the Government take recognises that this is not a front-loaded problem but a back-loaded problem, so they need to be sure that they are constantly expanding the relevant resources.

Baroness Drake: My Lords, I shall speak to paragraph (f)(i) and (ii) in the amendment which refer to the secondary annuity market, and I draw the attention of the Committee to my registered interests, in particular my membership of the board of the Pensions Advisory Service, which is a delivery body for the current Pension Wise.

In the summer Budget Statement, the Chancellor confirmed that he wishes existing annuity owners to have the freedom to sell their annuity income but announced that plans for a secondary annuities market would be delayed until 2017 to ensure that there is an in-depth package to support consumers. The Pensions Minister, the noble Baroness, Lady Altmann, confirmed that the delay was to ensure consumer protection adding:

“We can’t launch without safeguards”.

It is important, as paragraph f(i) in the amendment provides, first to identify very clearly the risks in this market and the potential advantages and disadvantages to the consumer of converting an income for life into a cash sum before agreeing the regulations with regard to guidance to be provided to individuals considering trading their annuities. If the infrastructure of such a secondary annuity market were to be put in place, it is not yet clear who would be the buyers of the annuities. There are still lots of unknowns about how that market would operate. Until we understand more about how that secondary market will operate and what regulatory restrictions will be imposed, it will be difficult to assess whether customers are able to get a good deal. If an individual got a poor deal in the first place, selling the annuity on would not necessarily reverse that; indeed, it could make it worse. If, as the Chancellor argues, the pensioner freedom reforms were needed in part because the annuity market was not working in the best interests of all consumers for the simpler proposition of selling someone an annuity, why would it be expected that the reverse secondary market, where someone would resell an existing annuity, would work any better?

Some people will certainly be tempted to cash in their annuity for what looks like a large sum but their annuity may be bought at a heavily discounted price. Selling their guaranteed income could prove expensive because of the cost of individually underwriting each transaction. There will be costs to trading, complex pricing systems and consumer vulnerability to poor behaviour by some firms. So many pensioners may not be better off as a result, and it may be difficult to assess whether the lump sum that they have been offered is a fair swap for what they would be giving up. Actually, though, once they have given that up, the decision is irreversible.

The Bill refers to protecting the interests of those who have an interest in a particular annuity, and that certainly needs to be considered. What is the situation

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in a joint life annuity? What is the definition of those who have an interest? How will their interest be protected? What if a person is not named on a joint life annuity contract? These may seem irritating points of detail, but they will be matters of significant substance for some people who may be the beneficiaries of an income stream from an annuity.

The Government have also advised, as my noble friend Lord McKenzie said, that they want to consider how to explain the interaction between annuity income, capital and deprivation laws in the welfare, social care and council tax reduction system—something that we rather tripped over when implementing pension freedoms. In making that clear to people who are considering selling their annuity, the guidance would need to explain clearly the implications of that interaction.

In the secondary annuity market, the appropriate form of consumer protection has to be an integral part of any proposals to allow people to resell annuities, and therefore a clear identification and consideration of the safeguards and guidance that are appropriate is required before regulations come into force. It is important to be assured that they are actually fit for purpose. Creating a secondary annuity market is certainly not a simple proposition, which presumably is why the Chancellor has delayed his plans until 2017, although I accept that the proposed expansion of pension guidance to those considering selling their annuity is to be welcomed. However, it will be important for Parliament to understand what guidance will be delivered, and how, to people looking to trade in a secondary annuity market, because such a market will come with risk and complexity and that has to be reflected in the quality and comprehensiveness of the guidance provided. This is not going to be a proposition without problems. Some people have suggested introducing a requirement to take independent advice but even that is not a simple proposition, not least if a requirement to take advice significantly reduces the value of the transaction to the seller.

Lastly, the complexity of a secondary annuity market means it is essential that the pension guidance that is provided is of a high quality, delivered by people with the necessary skills and expertise. This is not going to be a straightforward set of guidance. Reflecting on experience to date, it is very important that those who bear responsibility for signposting to the guidance those who want to trade in the annuity market are not organisations with conflicts of interest in whether that guidance is followed. Sometimes, being better informed and better guided does not make people such good customers. Given that this is even more complex than the pension freedoms market, it is really important to get this proposition right.

Lord Bridges of Headley: My Lords, once again, I thank noble Lords for their very useful and constructive comments and speeches. I thank the noble Lord, Lord McKenzie, in particular.

As your Lordships know, the Government want to ensure that those who will be able to sell their annuities on the secondary market have access to high-quality information and guidance that enables them to make informed choices. That was endorsed by many responses

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to the recent consultation. We want to build on the success of the existing Pension Wise service, for which the satisfaction levels remain high. The Government are committed to using the lessons learned from the implementation of existing freedoms and the Pension Wise service to help consumers in both this market and the new secondary market for annuities.

I draw your Lordships’ attention to the work that the Government are already doing—in both what is happening now and what is planned—through the prism of the amendment that the noble Lord, Lord McKenzie, has brought before the Committee. First, the amendment would commit the Government to undertake and publish a review of the new pension freedoms and pensions guidance. On this point, the Government have already set up a working group of representatives from industry, regulators and government to review the pension freedoms. This group will collect and analyse information on the choices that people are making when accessing the new pension freedoms and related guidance and advice. It will also identify key information gaps and seek to address them.

In addition, early information from HMRC and the regulators has been published, and key data from the Pension Wise service will soon be available on the Government’s performance platform. Pension Wise is also in the early stages of procuring external research, which will cover the extent to which the pensions guidance has enabled customers to make informed and confident choices about their pension arrangements.

Secondly, the amendment would commit the Government to tracking consumer outcomes from pensions guidance. The Pension Wise research that I have just mentioned will aim to do just that. It will help the Government to understand what customers do following their Pension Wise appointment.

I am conscious that the noble Lord asked me some very specific questions about uptake. If he does not mind, I would like to write to him once I have the appropriate information on those points.

Thirdly, the amendment would require the Government to review pension providers’ reporting requirements. In line with its remit to protect consumers and ensure that markets function in consumers’ interests, the Financial Conduct Authority has specifically committed to monitor developments in the retirement income market and to take action where the market is not operating as intended. The first of these mandatory data requests was sent to firms in September. It includes information on both the stock and the flow of pensions savings held by firms, as well as on sales of retirement income products by providers and cash withdrawals.

The amendment also calls for safeguards against pension scams to be strengthened. A priority of this Government is to protect people from scams. A number of cross-cutting initiatives are already in place, but we will continue to look at ways to strengthen messages for consumers and to arm them with the information they need to protect themselves against scams. For example, the Government are already co-ordinating action to raise awareness of, and tackle, scams through Project Bloom, a National Crime Agency-led task force. It includes the regulators, anti-fraud groups, such as Action Fraud, and police forces. In addition,

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both the Financial Conduct Authority and the Pensions Regulator have their own pension scam awareness campaigns.

Finally, the Government have put a number of protections in place through the directly provided pensions guidance service, Pension Wise. Pension Wise alerts customers to the risks of scams in guidance sessions, and the website and output document contain warnings and guidance.

5 pm

The amendment would also require the Government to clarify the distinction between pensions guidance and pensions advice, which the noble Lord, Lord McKenzie, and the noble Baroness, Lady Kramer, echoed. The noble Baroness’s point about how important that advice is for some pensioners was very valid and well made.

The Government are already conducting the financial advice market review. As your Lordships will know, this is exploring what more can be done to make sure that all consumers can access high-quality, affordable and tailored advice so they can make informed decisions with their hard-earned money. As part of this, the review is looking at what constitutes “advice” and “guidance” in both pensions and other markets, and will seek to clarify that distinction for consumers. As your Lordships know, this consultation is open until 22 December and the review will report by the Budget next year.

The amendment also asks that the Government identify specific risks for consumers in the secondary market for annuities and what additional safeguards are required for the extended pensions guidance service. The noble Baroness, Lady Drake, rightly made the point that it is a very complex area. The Government are committed to taking steps to build on the guidance service that is currently being delivered by Pension Wise to create an appropriate and high-quality service for the secondary market in annuities. The key consumer risks in the secondary market for annuities have already been considered and are outlined in the Government’s consultation document, published in March. Some will be similar to those around the existing flexibilities, but we fully understand, as the noble Baroness rightly pointed out, that there will be additional challenges for consumers in this market. We will need to ensure that consumers are adequately equipped with the information, tools and protection they need to help them avoid scams and, more importantly, to make decisions that best suit their personal circumstances and risk appetite, which brings me back to the point made by the noble Baroness, Lady Kramer.

The Government are also conducting further analysis to identify the needs of those who will be accessing the expanded Pension Wise service. This will ensure that the content and service delivery are appropriate for those thinking of assigning their annuities on the secondary market.

Pension Wise will form a core part of the support package. However, next month, the Government will set out further their intentions for supporting consumers in their response to the consultation on creating a secondary market for annuities. Following that, we expect

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the Financial Conduct Authority to consult in 2016 on the consumer protection measures it plans to place on regulated entities participating in the market.

Once again, I thank the noble Lord, Lord McKenzie, for raising these issues, and thank the noble Baronesses, Lady Drake and Lady Kramer, for their contributions. I take on board their concerns and reassure them that the Government are committed to taking action in the areas that have been highlighted in the proposed amendment.

In the light of this, the Government’s view is that the amendment proposed is not necessary to achieve the desired results, and I ask the noble Lord to withdraw it.

Lord McKenzie of Luton: My Lords, I thank the Minister for a very comprehensive reply to the issues raised in the debate. I think there may be one or two specifics that he will follow up on in correspondence, and that would be helpful.

I think the Minister said that the response to the consultation on the secondary annuity market would be published next month—I hope I caught that correctly; if it is not next month, perhaps he might write to me and say when that will take place.

I thank my noble friend Lady Drake for her, as ever, wise words on pensions, focusing on the risks and complexity of the secondary market system. She made the telling point that if the problem with the annuity market was the creation of those annuities in the first place and whether people were getting value for money, the situation could be compounded by overlaying a secondary market. That is a key issue to address.

The noble Baroness, Lady Kramer, made the point about the growth of DC schemes and the lapse of DB schemes, and that is right. I think we are now in the position where there are more members of DC schemes than there are of DB schemes. Of course auto-enrolment and the benefits of that will accelerate that as well.

Having said all that, and given the hour—I have been here for only one amendment but am conscious that noble Lords have sat through a very busy day— I beg leave to withdraw the amendment.

Amendment 30 withdrawn.

Clause 25 agreed.

Amendment 31

Moved by Lord Naseby

31: After Clause 25, insert the following new Clause—

“Duty on Financial Conduct Authority and Prudential Regulation Authority to consider ownership models and size of firms

(1) After section 1E(2)(e) of the Financial Services and Markets Act 2000, insert—

“(f) the importance to consumers of a diverse financial services sector that includes both firms of different ownership models (including mutual societies) and firms of different sizes.”

(2) After section 2H(2) of the Financial Services and Markets Act 2000, insert—

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“(3) In discharging its general functions, the PRA must also have regard to the importance to consumers of a diverse financial services sector that includes both firms of different ownership models (including mutual societies) and firms of different sizes.””

Lord Naseby (Con): My Lords, I thank my noble friend for taking seriously the issue of diversity as it affects the mutual movement. I also thank him for the good working session that we had last week when I was able to highlight in a little more depth the problems that have arisen for the mutual movement and how, I hope, the proposed new clause seeks to provide the answers. I shall not repeat what I said on Second Reading but merely highlight the depth of the problem. I remind your Lordships that we are talking about the mutual movement—in other words, building societies, mutual insurers, friendly societies and credit unions.

I acknowledge that the present Government have made a welcome and broad commitment to diversity, which is greatly welcomed across the nation. This is not a party-political issue. That is self-evident from the fact that the Official Opposition have generously attached their name to my amendment, as have the Liberal Democrats. Both parties have a rich history in mutuality.

The issue, basically, is whether it is sufficient for the Prudential Regulatory Authority to make a commitment in its annual remit letter. I do not deny that that is clearly helpful but enshrining it in legislation makes it totally emphatic to the Bank of England, including the PRA and the FCA, to consider diversity of provider. As well as helping competition, if executed, that would deliver a lasting commitment to the benefit of both the consumer and the wider economy.

I suspect the question that my noble friend is wrestling with is: is it really necessary? I would say yes because life is full of good intentions. However, in my 40-plus years as a representative of the people—25 years in your Lordships’ House—I like to see something in the Bill and not be dependent on good intentions. The reality is that the mutual financial institutions keep being forgotten about and left out. Frankly, that would not happen in Canada, Holland and certain other European countries where the mutual movement is that much stronger.

I gave two examples on Second Reading which helped to highlight the issue. I have now got three different examples. They are all short but at least they will re-emphasise the extent of the problem. Overall, there is still a problem in the mutual movement. The Building Societies Association commissioned a report on whether or not the movement was growing. Sectors of it are growing but other sectors are not. The report noted that one of the contributory factors for the areas that are not growing is the tendency for regulation to push for what I call uniformity and called at the time for a statutory corrective.

Both regulators can point out—I readily acknowledge this—that they have on occasions been proportionate and differentiated approaches in terms of need. However, there are also instances, which I will highlight in a minute, where this is not the case. It is important for regulators to get things right first time every time to support diversity.

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In the past, a one-size-fits-all approach to regulation, often designed for large companies with a plc ownership model, has given rise to problems for both smaller and customer-owned financial institutions. The impact can be magnified for organisations which belong to both categories, and that is not an issue we have discussed before. These issues do not occur just in the UK; they arise when one is dealing with the EU. I submit that adopting this proposed new clause, requiring the PRA and FCA to consider the size and ownership model during policy formulation, would be a first step towards stopping the channelling towards uniformity and would help to prevent some of the problems encountered by financial mutuals in recent years.

I shall give three short examples. First, in 2015 during the summer that has just gone, the PRA implemented the bank recovery and resolution directive, as it was charged to do. In the directive it is permitted to reduce the reporting requirements and frequency for smaller institutions. In practice, this would have allowed smaller institutions not to submit annual updates, but instead to do so every other year, saving significant resources. But the PRA decided not to allow this, in spite of the fact that it was spelled out in plain words in the directive. I do not think that that was a sensible decision on its part or a sensible analysis of that sector of the mutual movement.

Secondly, let us look at the credit unions. Again, in June this year the PRA proposed to reform the prudential regime for credit unions, and once more it is absolutely right that it should do that. The PRA proposed a substantial increase, however, in the capital requirements for large credit unions, taking them to a leverage ratio of 10%. By contrast, the leverage ratios expected to be applicable to banks range from 3% to 5%, depending on their systemic impact. Frankly, I find it difficult to see the justification for a large, established credit union to hold more than twice as much capital in relation to its assets as a bank. I hope that this issue will be amended so that the big credit unions can be brought in line with the banks. But had the PRA paid attention to the size diversity across the board from the start, I do not think that we would be in this situation today.

Lastly, I turn to mortgages, which are an absolutely key dimension of our society at the moment and something on which the whole of Parliament is regularly focused. In 2014, there was speculation about interest rate rises, as a result sparking a significant increase in consumers’ interest in taking out fixed-rate mortgages, which is sensible. Following the mortgage market review regulatory changes overseen by the FCA, the authority required lenders to provide full mortgage advice and test against affordability criteria. This involves stress testing against rising interest rates, with many consumers choosing a fixed-rate mortgage product.

The building societies themselves have a specialist sourcebook, issued by the PRA, which places restrictions on the proportion of fixed-rate mortgage lending that a number of societies can carry out. Some societies were close to reaching the limit of their permitted fixed-rate lending, meaning that they were likely to withdraw fixed-rate products from their portfolios. This combination of regulation by both the FCA and the PRA could still have a detrimental effect on the amount of lending that societies can advance. Building

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societies may need to advise customers to go elsewhere rather than expand their businesses, thereby concentrating consumer choice on fewer organisations, which will in fact reduce competition in the market. This is quite important when we think about who is providing mortgages today because, between 2012 and June this year, the building society movement provided £52 billion- worth of net new mortgage lending while the rest of the mortgage market produced a rather miserly £7 billion. Therefore, it can be seen how important it is that the building society movement is treated properly and with understanding.

To conclude, we are asking for an environment where all types of firms are able to operate on a fair basis, with regulations that are appropriate and proportionate to them, rather than one size fitting all. Enshrining this commitment in legislation will require regulators to give the diversity of financial provider due consideration, looking at the different business models and the sizes of the providers side by side. We believe that this will lead to a more appropriate and proportionate regulatory regime, which in turn will lead to a more competitive financial environment in the future. I beg to move.

5.15 pm

Baroness Kramer: First, I thank the noble Lord, Lord Naseby, for allowing me to put my name to his very fine amendment, and also for drafting it in such a way that I could arrange the conversation beyond just the matter of mutuals. I very much support his comments on mutuals. They are important to our past, our present and our future.

The noble Lord commented on the regulatory scope available to the PRA in dealing with the sector, which I believe is governed by CRD IV, the relevant European directive. He will know that there is a great deal of scope for flexibility under that directive precisely to recognise the various needs of mutual—and similar and smaller—institutions across quite a wide range of facets. It is a flexibility of which the PRA has essentially not availed itself. Since those flexibilities were largely negotiated by the UK with the domestic variety in mind, it seems a little extraordinary that we have not taken advantage of them. I recommend to the Government that they might want to have an appropriate conversation with my soon-to-be noble friend Lady Bowles, who will shortly be coming to this House. She was a member—in effect, chair—of ECON, the Committee on Economic and Monetary Affairs within the EU. She can provide some helpful advice and direction on this issue.

I have said many times in this House, and I shall repeat it again today, that in the UK we are missing a layer of banking. In Germany, regional government—the Länder and municipalities—are able to sponsor banking institutions. The financial institutions provide the backbone to Germany’s small and medium-sized businesses, the Mittelstand. During times of recession that banking layer provided ongoing support to those companies because they understood them and their remit was such that they had to find their routes to profit from within that scope of geography and companies. It has been a very successful model and we have no equivalent here in the UK.

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In the United States, which we also very much recognise as a competitor, local community and regional banks also play a much more significant role in supporting both individuals and small businesses. The community development movement in the US, which is very much local, has something in excess of $30 billion of assets under management. It is highly significant. It comes out of the US history of local banking, strengthened by the Community Reinvestment Act which was introduced in the late 1970s, largely as a civil rights measure, to deal with the red lines that major banks had drawn around ethnic minority communities, as they were not lending into those communities. That has been balanced out by the Community Reinvestment Act. It provided the Obama Administration with a very significant route to channel funds to small businesses during the recession in the US and again played a very significant role in making sure that those small businesses could be resilient.

By contrast, following the financial crisis, the major mainstream banks in the UK largely withdrew from SME funding. The Government tried to support various programmes and schemes, including the growing but still small P2P industry, to fill something of that gap and vacuum. However, that does not overcome the fact that we still do not have the appropriate layer of banking to provide the community and local perspective which enables companies to rely on ongoing support from financial institutions in both good times and bad.

I think that if you spoke today to the Federation of Small Businesses, it would say that even though we are in recovery, most of the mainstream banks have not returned to lending to SMEs and, where they do, it is frequently property lending, or at least property is required to provide collateral for what should be cash-flow loans, and that the banks are still fairly slow to come to decisions. Having been on this House’s sub-committee on SMEs and export finance, I know that it was evident that small businesses found it extremely difficult to source any kind of financing for exports. Even when they had a long history of exports and were well established, it was still very difficult and very expensive to find that kind of financing in the UK. Therefore, it is reasonably self-evident that we are missing a layer of banking. Frankly, the regulator has never addressed that issue but has always waited passively for the market to come forward rather than taking positive action itself.

A combined report from Newcastle and Coventry universities was recently published and states:

“In 2013, the unmet demand of individuals and businesses excluded from mainstream finance (‘the finance gap’) was estimated at around £6 billion per annum”.

That is a huge figure and it seems to me that the regulator must begin to pay attention to it.

During the passage of the Financial Services Act 2012, the noble Lord, Lord Sharkey, and I proposed a measure to require the banks to disclose their lending practices in detail and by postcode. That led to a voluntary framework for the disclosure of bank lending which came into effect in December 2013 and was supported by HM Treasury and BIS. According to a

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recent letter sent to the Treasury from the Community Investment Coalition, it is starting to have a real impact. The letter states that in 2014,

“Coventry University and Newcastle University were commissioned by Big Society Capital, Citi, the Community Investment Coalition and Unity Trust Bank to analyse the data and assess its value in supporting increased market competition and interventions to overcome financial inclusion”.

That is a very interesting report. It is supported by a sibling report, as it were, from the University of Sheffield, which looked at mortgages.

The only conclusions one can come to from reading those reports is that lending across the UK is incredibly haphazard. The data do not yet allow sufficient fineness of analysis, if you like. I hope very much that the Government will look at whether or not more measures are necessary to provide appropriate data to the degree required to enable proper analysis to take place. However, it is very clear that different parts of the country have very different experiences as regards access to lending. Strangely enough, in the London area, for example, access to lending for small businesses seems to be very much less than one would expect compared with other parts of the country. It will be very helpful when we finally have those data because they will expose where the system continues to fail. Regardless of that, I hope the Government will see that there is a role that must be played by the regulator as well as by the Government in ensuring that the patchiness and inadequacy of banking facilities for small businesses and individuals is countered. I ask the Government to look seriously at the amendment moved by the noble Lord, Lord Naseby, because it begins to tackle that particular set of issues.

Lord Davies of Oldham: My Lords, I congratulate the noble Lord, Lord Naseby, both on his amendment, for which he has secured widespread support, including from this Bench, and on the way in which he detailed the key arguments behind it, which I know the Government will take seriously. It is somewhat unnecessary for me to fill in any of the interstices that the noble Lord, Lord Naseby, may have left—which were not many—because the noble Baroness, Lady Kramer, has certainly emphasised the significant point, which is that British banking needs to be a good deal more diverse than it is at present.

After all, the Competition and Markets Authority disclosed its findings last month from its review of competition in the retail banking market and found—predictably—that the four largest banks had long dominated the British scene, stifling competition that would give consumers and businesses a better deal. We all know the limited success that has been obtained by the various reforms to make the switching of accounts easier. The British people, I am afraid, are somewhat inured to minor blandishments when it comes to their bank accounts, so there is a need for much more imaginary thought at the centre on how we can make our financial provision more diverse.

We have support from the Treasury Select Committee. The chair, Andrew Tyrie, has written to the CMA to ask it to report back before the Budget in March next year regarding the 8% surcharge on bank profits. He wants to know what impact that has had on the big four and what implications it has for the wider banking

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sector. It is clearly the case, he believes, that one size does not fit all. That phrase has obtained throughout this short debate and is one to which I entirely subscribe. The Minister will be all too well aware that the Building Societies Association has made it clear that the problems encountered by financial mutuals in recent years almost certainly would have been fewer if there had been greater diversity in the sector.

I think that the case for this amendment has been made strongly. No doubt the noble Lord will be withdrawing it on this occasion but the purpose of this debate is to give the Government the chance to show a constructive response to what we all recognise is a real issue with regard to British banking. The noble Baroness, Lady Kramer, cited the German position. Is it not somewhat extraordinary that even under the so-called northern powerhouse, our great cities do not have individual banks? They no longer have individual building societies, either. That says something about the structure of finance in this country, which surely the Government should address in the context of a Bill about the most significant banking structure of them all—the Bank of England.

Lord Ashton of Hyde: My Lords, I am grateful to noble Lords who contributed to the debate. I have listened carefully to the interesting points, particularly on banking diversity and availability, especially for SMEs, made by the noble Baroness, Lady Kramer, and the noble Lord, Lord Davies, but I will concentrate on the amendment in hand.

I am glad to say that noble Lords are pushing at an open door—or, at least, one that is slightly ajar. This amendment would add a duty to the PRA to consider diversity of ownership model and size alongside its competition objectives. For the FCA, the amendment would add diversity of ownership model and size to the list of factors to which it may have regard as part of its competition objective.

5.30 pm

I am grateful to my noble friend Lord Naseby for raising this issue, and particularly for waiting patiently for the last group of the entire Committee stage to move his amendment. I pay tribute to the work that he has undertaken in advancing the cause of mutuality, such as the Mutuals’ Deferred Shares Act 2015. As I think my noble friend said, the Minister had a constructive meeting with him recently and the Government have been actively considering his proposal, which makes a number of excellent points. I reassure the Committee that the Government strongly support a diverse financial service sector and, as has been acknowledged, the regulators’ objectives go some way to providing a mandate in this regard.

The regulators already have competition objectives: the FCA is required to,

“promote effective competition in the interests of consumers”,

of regulated financial services, and the PRA is required to facilitate,

“effective competition in the markets for”,

financial services provided by PRA-authorised firms. In advancing this objective, the regulators may take account of various factors, including barriers to entry

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for new providers of financial services, the needs of different consumers and the differences of businesses. I would expect their considerations around the intensity of competition to involve not just the number of competitors but diversity of approach, including corporate form.

The statute is also clear that the regulators should recognise the different features of a range of diverse business models when pursuing objectives. This is achieved by the principle of good regulation, whereby the regulators must have regard to,

“the desirability where appropriate of each regulator exercising its functions in a way that recognises differences in the nature of, and objectives of, businesses carried on by different persons subject to requirements imposed by or under this Act”.

Having said that, and taking on board my noble friend Lord Naseby’s point about things that are in regulations, there could be more clarity on our expectations around regulatory regard for mutuals, which might help to avoid some of the problems that he raised.

My noble friend’s amendment raises some interesting and useful points and, given this, we will actively consider how these proposals might clarify the existing competition objectives. We look forward to discussing this subject with my noble friend again before Report. I will of course take note as well of the suggestion of the noble Baroness, Lady Kramer, on consultation. In the light of that commitment, I would be grateful if my noble friend would withdraw his amendment this afternoon.

Lord Naseby: My Lords, I first give my sincere thanks in particular to the noble Baroness for putting further emphasis on the European situation, about which she is much more knowledgeable than I am, and for the one or two other points that she made. I also thank the Official Opposition, where it is a great pleasure to see my noble friend opposite—I can say that, as he is quite good as my golf partner.

Leaving that aside, I am deeply appreciative of the way in which the whole ministerial team has listened carefully. As I understand it, the team in the department will now look in considerable detail at how the points I have raised, which my colleagues have agreed with, can be addressed. I hope very much that, when we come back on Report, we will have found a solution that will meet the requirements of this very important sector of the United Kingdom—certainly I am available at any hour to discuss this further. With that, I seek leave to withdraw the amendment.

Amendment 31 withdrawn.

Clauses 26 to 28 agreed.

Clause 29: Commencement

Amendments 32 and 33

Moved by Lord Bridges of Headley

32: Clause 29, page 26, line 15, leave out “Sections 27 to 30” and insert “The following provisions”

33: Clause 29, page 26, line 15, at end insert—

“(a) section (Transformer vehicles);

(b) sections 27 to 30.”

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Amendments 32 and 33 agreed.

Clause 29, as amended, agreed.

Clause 30 agreed.

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House resumed.

Bill reported with amendments.

House adjourned at 5.36 pm.