Regulation of Financial Services (Land Transactions) Bill

Today is a very special day for me. Four years ago today, my wife and I were married in the Kettering constituency, and my hon. Friend the Member for Cities of London and Westminster (Mr. Field) was with me on that occasion. Little did we think that, four years on, we would be sitting here on a sun-drenched Thursday afternoon discussing the delights of this Bill. I am hoping that placing Mrs. Hollobone on the parliamentary record might prove some compensation for my not being with her this afternoon. I am delighted that you have called me, Mr. Deputy Speaker, because this Bill has tremendous relevance to my Kettering constituents. The percentage of home ownership in the constituency is high and rising, the age profile of the local population is high and rising, and life-expectancy—thank goodness—is increasing. House prices have risen a lot, especially in the past decade, and continue to do so. Many local residents want to remain in the homes that they have lived in all their lives. They do not want to sell them and move elsewhere. As has already been said, taking out a mortgage and buying a house is for most people the single biggest investment decision of their lives. I share the view of those Members who have said that the number of equity release schemes is likely to increase in the years ahead, as the British population’s age profile rises. My main theme is that, as a new Member, everything to do with Parliament and its procedures is new to me, including the way in which the Government bring their legislation before this House, but in this regard there is one thing that strikes me as odd. This is a relatively uncontroversial Bill and it is generally agreed that the Government’s proposals are broadly right. The Bill consists of only two clauses and enjoys the support of organisations such as the National Consumer Council, the Association of British Insurers and the Council of Mortgage Lenders. It was first proposed in 2002, yet here we are in June 2005, discussing its implementation. In the intervening three years, the equity release market has exploded. While the Government and Parliament have gone through all the necessary procedures, nothing, in effect, has been done in law to protect consumers from the dangers that we all realise are inherent in this marketplace. I shall cite some revealing figures. By the end of 2003, there was almost £2.9 billion in the lifetime mortgage market, with 69,000 lifetime mortgages having been taken out. That market in itself increased by a staggering 69 per cent. in 2003 alone. In 2004, a further £1.2 billion-worth of equity release schemes were taken out, of which some £45 million-worth were to do with home reversion products. According to the Government’s own estimate, the equity release market in 2005 is likely to be worth some £1.5 billion—an even higher figure than that for 2004. The market has been exploding while we have been waiting for the Government to introduce legislation to address everyone’s concerns, and there have indeed been concerns in the marketplace. In 2003, the home reversion market totalled some £129 million, yet because of the lack of regulation and the uncertainty surrounding its introduction, that figure fell to £45 million in 2004. While the procedures that the Government are going through to get this legislation on to the statute book may be necessary, they have been unnecessarily protracted, given that the Opposition parties support such legislation. As I said, the idea was first floated in 2002. In June 2003, the then Chief Secretary to the Treasury announced that the Government were going to introduce"““legislation to bring mortgages and the selling of general insurance within the scope of Financial Services Authority (FSA) regulation””.—[Official Report, 5 June 2003; Vol. 406, c. 33WS.]" We then had to wait until November 2003 for the Government to publish their ““Regulating Home Reversion Plans”” consultation paper. However, a month later the then Financial Secretary argued that, in fact, home reversion products are"““sale and purchase arrangements rather than financial services products””," and that they therefore"““fall outside the scope of the Financial Services and Markets Act 2000.””—[Official Report, Westminster Hall, 17 December 2003; Vol. 415, c. 280WH.]" Then, in July 2004, a further consultation document, ““Defining Home Reversions””, was published and the consultation was on the content of the definition of these products. We then had to wait until December 2004 for the Treasury to publish its summary of the responses received. In January 2005, a ten-minute Bill was introduced to enable these activities to be regulated. Finally, after the eighth stage in the process, the two-clause Bill was announced in the Queen’s Speech this May. As if that were not enough, as I understand it, there are still four stages to go. This afternoon, we are at the stage in which the Government introduce primary legislation to deal with the issue. We are told that in the next stage the Government will consult and bring forward secondary legislation to amend the Regulated Activities Order 2001. The FSA will then draw up and consult on rules regarding the sale of home reversion products and, finally, firms will need to apply for the FSA’s permission to sell them. I may be naive, but it is not unreasonable to make the point, on behalf of local residents in the Kettering constituency, that the wheels of government need to be far more responsive to the genuine needs of the people we represent. Taking so long to come up with legislation that enjoys cross-party support and the industry’s approval strikes me as disappointing. When the rest of the world is speeding up, it seems that Parliament is in many ways slowing down. Will the Government provide more clarity on when the legislation is likely to come into force? In the intervening period before the new rules and regulations hit the statute book, will the Government take steps to give consumers extra protection to prevent them from falling victim to people who want to sell more of their products? I recently went on to the world wide web to find out about a variety of equity release products. Some looked very reputable with the SHIP organisation—safe home income plans—doing its best to control the industry. One responsible website said clearly in the small print:"““Reversion schemes are not regulated at the moment, although the Government has agreed that they will be regulated by the FSA in the future””." Fair enough—that is all in black and white. At the end of the product advice, however, it said that XXX equity release company and products were provided through YYY Ltd., which was ““organised and regulated”” by the FSA. The Minister will know, as we know, that it is the company that is authorised and regulated by the FSA, but to the ordinary man and woman in the street, who may not be familiar with this type of product, that creates the firm impression that the equity release product itself is regulated by the FSA. My worry is that my constituents may fall victim to misunderstanding the small print in some of these publications. I am delighted to have had the opportunity to speak this afternoon and I am keen to listen to the contributions of other hon. Members. This is an important debate and we will all have constituents who will be affected by the impact of the legislation.