WIREDGOV

• Government response: IT failures in the financial services sector: Government and Regulators Responses to the Committee’s Second Report of Session 2019: Report
• Government response: Economic Crime: Consumer View: Government and Regulators’ Responses to Committee’s Third Report of Session 2019: Report

In the last few weeks of the previous Parliament, the Treasury Committee published three reports:

• IT failures in the financial services sector (28 October 2019)
• The impact of business rates on business (31 October 2019)
• Economic crime: consumer view (1 November 2019)

The Treasury Committee has today published the Government and regulator responses to the reports on IT failures and on economic crime. The Government published its response to the Committee’s business rates report on 27 February 2020 (Government Response: The impact of business rates on business).

IT failures in the financial services sector

The Committee’s report made the following conclusions:

• Current level of financial services IT failures is unacceptable
• Regulators must act to improve operational resilience of financial services sector
• Financial sector levies should increase so regulators can hire experienced staff
• Regulators must use enforcement powers to ensure failures do not go unpunished
• Strong case for concentrated cloud services sector to be regulated
• Firms must resolve customer complaints and award compensation quickly

Chair's comments

As well as the Government’s response, the Committee has also published the response from the regulators (Bank of England, Financial Conduct Authority, and Prudential Regulation Authority). Commenting on the responses, Rt Hon. Mel Stride MP, Chair of the Treasury Committee, said:

“The harm caused to consumers from IT failures in the financial services sector is unacceptable. The previous Committee sought to get to the bottom of what’s causing these failures and how consumers can be better protected.

“The Committee urged regulators to take action to improve the operational resilience of firms in the financial services sector. It recommended that regulators should increase financial sector levies if greater resources are required, ensure individuals and firms are held to account for their role in IT failures, and ensure that firms resolve customer complaints and award compensation quickly.

“HM Treasury has rightly recognised that operational resilience of the financial services sector and the protection of consumers are key priorities. It is considering some of the recommendations made in the Committee’s report.

“The regulators’ response echoed that of the Government, noting that they will take forward the Committee’s recommendations as they develop and implement changes to regulation to ensure adequate operational resilience.

“The Committee will follow up on these responses as part of our regular scrutiny sessions with HM Treasury and the regulators to ensure that all required actions are being taken to protect consumers.”

The Impact of business rates on business

The Committee’s report made the following conclusions:

• Business Rates are outpacing inflation and growing as a proportion of the tax paid by business
• Unfair system places a greater cost on high street shops and sectors like manufacturing than online businesses
• Complex web of reliefs show that current Business Rates system is broken
• Government should examine alternatives to current system in time for Spring Statement 2020
• VOA must resolve appeals urgently as long delays are unacceptable

Chair's comments

Commenting on the Government’s response, which was published last month, Mr Stride said:

"The Treasury Committee in the previous Parliament recognised that the current Business Rates system is broken. It concluded that the Government must examine alternatives.

“In the response that it has published, the Government has rightly listened to the Committee and has announced a fundamental review of Business Rates.

“The Committee also urged HM Treasury to review the complex system of Business Rates reliefs. In its response, HM Treasury has confirmed that it will revise the transitional relief scheme for the 2021 revaluation, and will produce a guide to Business Rates reliefs for local government.

“The Committee will hold the Government’s feet to the fire to ensure that these actions are followed through.”

Economic crime: consumer view

The Committee’s report made the following conclusions:

• Firms should consider retrospectively reimbursing victims of push-payment fraud
• Contingent Reimbursement Model should be compulsory
• 24-hour delay on all first-time payments needed
• Firms missing Confirmation of Payee deadline should be sanctioned
• Targeted information campaigns needed for potential money mules
• Banks should be more transparent around de-risking

Chair's comments

Commenting on the Government’s response, Mr Stride said:

“The previous Treasury Committee’s report sought to examine how consumers are affected by economic crime and what can be done to prevent it.

“It made a series of recommendations on the role that Government and regulators have to play in enhancing consumer protection against a wave of criminal activity.

“One such suggestion focussed on supporting victims of fraud who were not to blame for their loss. The Committee recommended that the Contingent Reimbursement Model should be put into legislation and made compulsory as not all banks have voluntarily agreed to it.

“It’s disappointing that the Government made no commitment to investigate this proposal. The Committee will follow up the responses as part of its regular scrutiny of the Government and regulators.”

Further information

• About Parliament: Select committees
• Visiting Parliament: Watch committees