Question proposed, That the clause stand part of the Bill.

With this it will be convenient to discuss the following:

Clauses 275 and 276 stand part.

That schedule 21 be the Twenty-first schedule to the Bill.

Clauses 277 to 282 stand part.

New clause 7—Regulation of consumer savings schemes—

“(1) The Secretary of State must by regulations establish a system under which the Financial Conduct Authority has responsibility for regulating consumer savings scheme contracts.

(2) Regulations under this section—

(a) must be made within six months of this Act being passed, and

(b) are subject to the affirmative procedure.

(3) In this section, a ‘consumer savings scheme contract’ has the meaning given in section 274.”.

This new clause would make the FCA, rather than local authorities, responsible for regulating consumer savings scheme contracts.

Part 4, chapter 3 of the Bill introduces requirements that businesses operating consumer savings schemes such as Christmas savings clubs adequately protect consumers. Clause 274 defines consumer savings scheme contracts for the purposes of the Bill as including contracts that seek to incentivise members not to withdraw their money until a certain time.

Clause 275 sets out definitions. Clause 276 gives the Secretary of State the power to amend schedule 21 to exclude contracts or arrangements in specific sectors. That will ensure businesses are not subject to dual regulation and safeguards them from overburdensome or potentially contradictory regulations.

Schedule 21 provides a specific set of exclusions from the regulations for certain arrangements, including for small businesses with low-value schemes.

Clause 277 sets out that consumer savings schemes must be underpinned by arrangements covering the cost of refunding consumer payments in the event of the trader’s insolvency. It allows traders to choose trust arrangements or insurance. This is the heart of the regulations. Users of consumer savings schemes make payments in good faith expecting to be able to redeem their money at the end of the savings period, and these provisions will protect consumer payments and maintain confidence in the sector.

Clause 278 specifies the baseline requirements for traders choosing the insurance option. They include a requirement that it must be sufficient to return all moneys saved by scheme users not redeemed at the time of insolvency.

Clause 279 specifies minimum requirements for traders protecting payments via trust arrangements. Those requirements cover the protection of consumer moneys and also permitted uses of funds, ensuring they can only be used to supply the goods and services consumers signed up for.

Clause 280 places traders under a legal duty to convey certain information to a consumer about the protection mechanism used. That is necessary to ensure consumers can check their money is protected as required and know what to do if they need to reclaim it.

Clause 281 adds this part of the Bill to the Regulatory Enforcement and Sanctions Act 2008, which means that businesses with primary authority partnerships will be able to receive tailored advice, helping reduce the costs of compliance without reducing regulatory protections. Clause 282 defines certain terms in this part of the Bill.

New clause 7 seeks to create an enforcement role for the Financial Conduct Authority within six months of Royal Assent. When designing the provision, we considered who should undertake the enforcement role and concluded it was not appropriate for the FCA. Its primary role is to license and oversee banking and financial services before market entry. Consumer savings schemes are nearly all offered by retailers and groups that service the retail industry. The FCA has no existing relationship with many of these service providers. The Law Commission also considered whether savings schemes should be regulated as financial products by the FCA. It concluded that the additional burdens placed on the FCA in terms of resources would be disproportionate. In contrast, we believe that trading standards will be able to use their existing relations with business to oversee these rules. To that end, we have agreed to work with the Primary Authority Supermarkets Group to develop guidance for enforcers and traders. I hope the hon. Member for Bermondsey and Old Southwark will not press his new clause.

I have a couple of points; I will try to keep them brief. The clause fundamentally rejects where the Government suggest the responsibility for oversight of a savings scheme should sit. I was just listening to the Minister, and it is probably worth flagging up the message from the Chartered Trading Standards Institute on this. The Government say that they have assessed where this should sit; they say that they have worked with partners and consulted, but that does not seem to be the feeling of the chartered institute covering the sector, whose language is interesting:

“These brand new provisions have been inappropriately dumped on local authority trading standards to deal with, but it would be much better placed to give the Financial Conduct Authority the responsibility to regulate new provisions on savings schemes which are similar in nature to banking and other financial matters already regulated by the FCA. Saving schemes are often national schemes”— such as Farepak, which Members will be familiar with. No individual local authority could have prevented what happened with Farepak; I think that is the point it is making. I will come back to its direct comments—

“and therefore should be in the remit of a national regulator with the experience and resources to deal with financial matters. CTSI would like to see all references to local authorities removed in these provisions and to pass on responsibility.”

The Minister says that the FCA is not the right vehicle or body. Perhaps there is space and time to examine what that body should be. The point made by trading standards is that they do not have the skillset to oversee financial services in the way that the Government are demanding. They do not have the resources—that is the point made in our evidence sessions. This follows 13 years of cuts to weights and measures—to trading standards—which we have seen across the country; there has been a 50% cut in their capacity to do the job. Again, this is the Government trying to insist that local government take on greater responsibility after cuts to their own resources.

Southwark is a case in point. We have seen similar cuts to trading standards, but also to the overall council’s budget. The Government reduce the responsibilities of central Government Departments, such as the Home Office, and pass on additional costs running into the millions for things such as emergency children’s services with no recourse to public funds, without giving additional resources to councils to do so. This is another case in point where the Government are trying to push a new power and demand on to an already overstretched and under-resourced arena.

New clause 7 would have made the FCA the relevant body, rather than local authorities, but the point of the new clause is that trading standards should not be made responsible for something when they do not have the expertise or resource to be effective. If the Government do not think it should be the FCA, it is up to the Government to come back and find the right body. It is the Government’s legislation; they want it to be effective, and for these saving schemes to not collapse and leave people without, so it is incumbent on the Government to come up with either the resources and skills—training, whatever it might take—for trading standards to do this, or an alternative body to oversee these specific saving schemes. It is important at this stage to flag that concern, because there is a deep resentment, almost, from the sector over the Government’s suggestion that trading standards take this on, yet the Government still insist that it is the appropriate vehicle.

I hope there is still time to review which alternative body might be able to take on this task. This feels like something that a national body should deal with, and it should not sit with local authorities as operators and rogue traders may cover whole regions of the country, not one single local authority. I did listen to the Minister, and take onboard his suggestion that the FCA is not necessarily the right vehicle, therefore I am prepared to withdraw this amendment, as drafted, but I would like to see a commitment to reconsider where this responsibility sits.

Clause 274 introduces the definition of a “consumer savings scheme contact” for the purposes of this chapter. Specifically, the clause defines it as a contract under which the consumer makes payments to a trader,

“the trader credits those payments to an account that is held by the trader for the consumer…and the payments credited to the consumer’s account provide a fund for the consumer to redeem as goods, services or digital content”.

The definition forms part of new provisions introduced by this chapter which are important for protecting consumers who use consumer savings schemes, and we welcome this. Clause 275 defines other terms used in this chapter—and in clause 274—and we welcome the further clarity this brings.

Clause 276 introduces schedule 21, which sets out arrangements that are excluded from the scope of a consumer savings scheme contract. It includes regulated financial services activities, arrangements for the supply of utilities, a contract between a consumer and a trader where the trader’s turnover is less than £1 million per year, childcare voucher schemes, and package holidays .

We welcome that exclusions might be necessary in cases where it is impractical for these regulations to apply. However, I would welcome some further clarification on paragraph 3 of the schedule to set out how contracts offered by small businesses are exempt. Is that in relation to wanting to have the right balance between smaller businesses and consumers? We obviously want to ensure that the consumer is as protected as possible in these contracts, so I would be grateful for a response from the Minister on that.

Clause 277—“insolvency protection requirement”—introduces provisions regarding the event of a trader’s insolvency and covering the costs of returning to the consumer any protected payments at the time of the insolvency. We do welcome that, and it is important in the context of record levels of insolvencies. It is a particularly unstable period, and it is important for consumers to have protections.

Clause 278 sets out what is understood to be an “appropriate policy” in the instance of a trader complying with the provisions in clause 277 by taking out an insurance policy. Under the Bill, an appropriate policy is one in which consumers are insured with cover for the refunding of prepayments held in the consumer’s account that have not been redeemed at the time of insolvency. The insurer must also be authorised by UK authorities. We welcome this clause, though I ask the Minister to expand on subsection (3), which requires the trader to

“meet the costs of arranging and maintaining an appropriate policy” and explicitly inhibits traders passing that cost on to consumers.

I would be grateful for two things. First, will the Minister explain how we can be confident that the trader will not find a way to pass on this additional cost to the consumer? Secondly, will the Minister confirm how quickly, in the event of insolvency, consumers can expect to have their prepayment refunded? It would be helpful if he could clarify that. Does he feel that provision is tight enough in the Bill?

Clause 279 applies in circumstances where a trader complies with the insolvency protection requirements in clause 277 by using a trust arrangement. It sets out how it must ensure consumer prepayments are held in a trust located in the UK. The consumer’s prepayments must also be held in a trust until either the funds have been redeemed or the payments have been returned to the consumer. Similarly to clause 278, the Opposition welcome this clause as providing greater protections under consumer savings schemes in circumstances where the trader becomes insolvent.

I refer the Minister to subsection (7), which requires the cost of administering the trust to be paid for by the trader. Again, how will the Minister be able to safeguard against the trader passing this additional cost on to the consumer?

Clause 280 sets out the information requirements attached to this chapter. Specifically, it sets out that, within 30 working days of the consumer’s first payment into the savings scheme, the trader must provide:

“the name, address, telephone number and email address of the insurer or trustees responsible for protecting the consumer’s payments; where insurance arrangements are in place, the policy number for the policy under which the consumer’s payments are protected; where trust arrangements are in place, a copy of the trust deed under which the consumer’s payments are held.”

It is a welcome provision, but will the Minister expand on the 30-day time period? On what basis does the Minister believe that the trader would need 30 days to put these arrangements in place? Would these arrangements not happen automatically as soon as the consumer enters the scheme? That is an important question for ensuring that the consumer is informed of their protections.

Clause 281 would add chapter 3 of part 4 of the Bill to the list of enactments in schedule 3 of the Regulatory Enforcement and Sanctions Act 2008. We welcome the clause.

Clause 282 introduces definitions for the purposes of this chapter. Similarly, we welcome the clause in providing the transparency, consistency and clarity needed.

The hon. Member for Bermondsey and Old Southwark thinks that trading standards is not the right body; the Government think that it is, and that position—of it not being the Financial Conduct Authority—is supported by the Law Commission. These are clearly not financial products. They are not defined as such in the relevant legislation.

Trading standards already has a business relationship with supermarkets. There is already a Primary Authority Supermarkets Group in the trading standards network; it therefore seems logical, given that supermarkets will probably be offering these kinds of services, that this should be handled by trading standards.

Why does the Minister think that the Chartered Trading Standards Institute does not want this responsibility?

That is not the feedback that I have heard. I am very happy to see the information that the hon. Member has in front of him and to try to meet those concerns of the trading standards body. Trading standards is the most relevant body in our view; the hon. Gentleman may take a different view, and he is entitled to do so.

The shadow Minister mentioned small businesses. The small businesses that are excluded are those with an annual turnover of less than £1 million and collect less than an average of £10 a month from customers, so we do not see those as having the same potential detriment as with other, larger organisations.

As for traders passing on the costs of the insurance or the trust, they are clearly prohibited from doing so in this legislation. There is a requirement, as the hon. Lady will have seen, for the accounts of a relevant trader to be audited every three years; we would expect those checks to take place at that point to ensure that it was being done appropriately.

On payments being made, clearly that will be a case for either the insolvency practitioner or the insurance company, but we would expect that fees held in trust would be rapidly returned to people who were due to have their money returned. On the shadow Minister’s point about 30 days, well, it is

“before the end of 30…days”,

so the information may well be provided, as she would desire, much more quickly than that.

Question put and agreed to.

Clause 274 accordingly ordered to stand part of the Bill.

Clauses 275 and 276 ordered to stand part of the Bill.

Schedule 21 agreed to.

Clauses 277 to 282 ordered to stand part of the Bill.

Ordered, That further consideration be now adjourned. —(Mike Wood.)

Adjourned till Tuesday 11 July at twenty-five past Nine o’clock.