I beg to move,
That the following provisions shall apply to the Financial Services and Markets Bill:
I am pleased and privileged to move the motion. Its effect is to stay proceedings on the Financial Services and Markets Bill in Standing Committee A at the end of this Session and to carry it over into the next Session. The Bill will then be resumed in the next Session at the point in Committee that it reached before Prorogation.
This is the first occasion on which a motion has been moved to carry over a public Bill and I am grateful to Opposition Front Benchers for their agreement to apply this procedure to this important Bill. I think that we can all agree that it will receive better and more detailed parliamentary scrutiny through being considered to a timetable that will not be constrained by the end of the current parliamentary Session. I hope that, in time, this procedure will become regular parliamentary practice because it will help to maximise parliamentary time and will lead to more thorough scrutiny.
The carry-over procedure was recommended to the House in the first report from the Modernisation Committee in July 1997. That report was agreed unanimously by the Committee, which included representatives of the official Opposition. The report said:
The Committee agrees with the principle that, in defined circumstances and subject to certain safeguards, Government bills may be carried over from one session to the next in the same way as hybrid and private Bills".
The Modernisation Committee's first report was approved by the House, without a vote, on 13 November 1997. In that debate, the right hon. Member for South Norfolk (Mr. MacGregor), a distinguished former Leader of the House, said:
On the carry-over of Bills and paragraph 102 of the report, I think that it is right to have the flexibility that applies to private and hybrid Bills, not least because it is one way of handling the too frequent problem where many amendments come back from the House of Lords and we rush them through in the last three or four days.
No one could argue that this is satisfactory. The problem arises because, inevitably, some Bills will be introduced later in the Session; they cannot all be done earlier. A genuine pressure on time causes that. Used sensibly, this proposal is a way of ensuring better scrutiny at that stage.—[Official Report, 13 November 1997; Vol. 300, c. 1080.]
Is the Minister really saying that it is a good thing to bail the Government out of difficulties caused by the bad management of business? It is bad management for a Government to leave the conclusion of important Bills to such a late date in a Session that a large number of amendments from another place cannot be handled properly in the House of Commons. The reason that the Minister has given for introducing this new policy is not very convincing. Should not he concentrate on getting the Government's act together and managing business more effectively?
The right hon. Gentleman is right to say that we need to manage business effectively and make good use of parliamentary time. I have no criticism of any of his tactics in the House, as he uses the conventions properly. With the support of Opposition Front-Bench Members, the Government advocate this approach in the case of the Financial Services and Markets Bill because we believe that it is a complex and important measure with important principles that require careful thought and analysis. It would not make sense to lose the Bill, and the City would not support that.
The Modernisation Committee subsequently produced another report on the more detailed arrangements. That report recommended, first, that Bills be carried over by ad hoc motions, rather than under a general Standing Order. Secondly, it recommended that the procedure should be used on Bills that had not yet left the House in which they originated, rather than on ones already going through the second House. The Committee's third recommendation was that the eligibility of Bills for carry-over must be settled by agreement through the usual channels. That report was also unanimous and was agreed by the House, without a vote, on 4 June 1998.
The Committee set out a number of conditions for carry-over. The first was that the Government should identify as early as possible any Bill that they wished to be carried over. The second was that carry-over should be used only for Bills that were to be subject to Select Committee-style scrutiny, or which were introduced after a certain period in the Session. The third recommendation was that no Bill should be carried over more than once. The Financial Services and Markets Bill fully satisfies all those conditions.
The introduction of such provisions is one of those matters that the House must consider very carefully indeed. For my part, I have long advocated the notion of carry-over. As I said, the Financial Services and Markets Bill has satisfied the conditions for carry-over set by the House.
The Government gave the earliest possible notice of their intention by announcing at the time of last year's Queen's Speech that they would seek agreement to carry the Bill over.
Does the Minister think that carry-over would have been necessary if the original draft Bill, which was published on the last day before the summer recess in July 1998, had been halfway decent? Instead, it was so heavily flawed that much additional work had to be done on it.
The Bill is a complex measure, and it has the support of the City. Clearly, such Bills can be improved by parliamentary scrutiny, and I am delighted that this Bill was able to benefit from new procedures. A Joint Committee was able to look at the Bill and make recommendations, many of which have been accepted.
The Minister's emollient style—it resembles that of a good general practitioner—is almost universally admired in the House. It seems, however, not entirely to atone for the relative weakness of his argument. Will the Minister reflect on the fact that, if the logic of his answer to my hon. Friend the Member for East Worthing and Shoreham (Mr. Loughton)—that a good and complex Bill can be improved by scrutiny—is pursued too far, it may come to justify rolling over every legislative measure that the Government introduce to the House?
I am grateful to the hon. Gentleman for his generous comments—emollience in a great dose. For my part, I admire the hon. Gentleman's more usual rough and ready style. Individual Bills must be judged on their merits. The Government do not seek to carry over a host of Bills to the next Session. We made it clear at the beginning of the current Session that the Bill was complex and that we would seek to carry it over.
Parts of the Bill were published in draft form in July 1998 and April 1999. The Joint Committee was set up to consider the draft Bill in March. It conducted a thorough examination, and the Government have agreed many of its recommendations. The Financial Services and Markets Bill is detailed and complex. It has been improved by the Joint Committee, and I expect further improvements to be made by the Standing Committee and during the remaining parliamentary stages.
If such great consideration and so much time was given, why had the Joint Committee less than two months to complete its deliberations before the deadline for the first report? The Committee was limited to looking into only six areas among the 367 clauses of the Bill. If the Government offered time so generously, why was the Committee, which was so important and which did such a good job, not given more time for scrutiny?
I thank Lord Burns and the Joint Committee for their work on the Bill. My impression is that the Committee examined the key points and made helpful and valuable adjustments to the Bill, many of which the Government have been prepared to consider. The Committee's report, when it eventually came, was unanimous, but—let me be emollient again—we are proposing a new procedure and it may be that we should in future look again at the timetabling of Bills.
Today marks another stage in the implementation of the Modernisation Committee's work to adjust the procedures of the House to the needs of an effective Parliament, ensuring greater parliamentary scrutiny of an important Bill. Many people outside the House will benefit from the Bill, which has substantial economic implications. I thank, again, the Joint Committee for its work, and the members of the Standing Committee for their current and future work on the Bill. I commend the motion to the House.
The Minister has outlined a case for modest constitutional reform in line with the proposals of the Select Committee on Modernisation. I approach such proposals with considerable caution. As a member of the forces of conservatism, I recognise that these proposals are not always brought forward entirely with the public good in mind. There is usually a strong element of party advantage in any reform proposal. A healthy dose of scepticism is, therefore, in order when reforms are proposed. I do not go quite as far as the Duke of Wellington who, when presented with a proposal from one of his Ministers, is supposed to have responded: "Reform! Reform! Aren't things bad enough already?"
Nevertheless, without going quite as far as that previous leader of my party, I believe that any proposal of this nature should be carefully approached and circumscribed. For instance, I do not accept the Minister's observation that the occurrence should be a regular one and that the carry-over of Bills from one Session to another should take place more than infrequently. This proposal—if used—should be used with great precision; for example, it is certainly not appropriate to use it when a Bill has become bogged down in another place. Furthermore, it should be considered only when the Bill in question is of a technical nature.
After those opening observations, I turn to the Financial Services and Markets Bill, which could have been dealt with in one Session of Parliament if it had been brought forward more speedily and in better order. Undoubtedly, in the past, the rule of the House has been that a Bill should complete all its stages in both Houses in a single Session. This Bill—currently in Standing Committee—could have satisfied that rule if the Government had better understood, earlier, the complexity with which they were dealing.
The proposal to reform the regulatory arrangements for financial services was announced soon after the 1997 general election. At that time, the important issues of justice and fairness were not fully understood by the Treasury; nor was the possible conflict with the European convention on human rights—a convention which the Government are simultaneously incorporating into British law. The Bill published a year later, in 1998, was seriously defective; indeed, it was unworkable in a number of respects. To improve that draft Bill, it was submitted to a Joint Committee. It was planned that the Committee would sit in January this year, but it was eventually convened in March. As I pointed out on Second Reading, all participants found that the innovation was successful. The Committee did not examine the whole Bill; because of the shortage of time, it concentrated on only six areas. It produced two reports—the latter of which appeared in May this year.
The Government accepted the majority of the Committee's conclusions. I am glad that they did so. Indeed, they stated:
The Government finds itself strongly in agreement with the great majority of the Committee's conclusions, although in some cases our proposed way forward is not identical to that recommended by the Committee.
Based on the recommendations and the Government's statement, the Opposition agreed that an amended Bill should be introduced immediately, and that its Committee stage should start in July and carry over to the next Session. Thus, we intended that the financial services industry should acquire a Bill that it needs urgently—indeed, without legislation, the present uncertainty is damaging to the market. It is also damaging that, in effect, the Financial Services Authority is operating without proper statutory cover. On the one hand, our intention was to get a Bill on the statute book without unnecessary delay. On the other hand, we intended further to improve the Bill—especially to ensure that the recommendations of the Joint Committee were fully implemented.
My right hon. Friend is being overly generous to Treasury Ministers. The Parliamentary Secretary, Privy Council Office, said that "very many" of the Burns Committee's recommendations had been accepted and that was later downgraded to "many", whereas my right hon. Friend has said that "most" of the recommendations were accepted. In fact, analysis of the final Bill shows that fewer than half of the Burns Committee's recommendations were taken on board when drafting the Bill.
In the light of my hon. Friend's remarks, I shall briefly outline some of the Bill's provisions that were recommended by the Joint Committee. The Bill introduced in July was an improvement on the original draft. However, I and others, including my hon. Friend, said on Second Reading that the improvements, welcome though they were, left considerable gaps in the legislation and that we expected further major improvements to be made thereafter.
In some cases, our concerns centred on the items recommended by the Joint Committee that were not accepted by the Government. I refer particularly to the proposal to split the role of chairman and chief executive of the Financial Services Authority after the current incumbent leaves that—
Order. The right hon. Gentleman has given the House a long explanation and he will now come to his arguments relating to the procedural matters on the Order Paper.
I bow to your judgment, Madam Speaker. I thought that it would be for the benefit of the House to set out the stage we had reached in our deliberations on the Bill, so that the House could assess whether it was appropriate to carry the Bill over to the next Session.
If the hon. Gentleman had been alert to the earlier part of my speech, he would have heard me say that the Opposition agreed to the carry-over, and I am now outlining the reasons for that. I hope that the hon. Gentleman will not weary the House by asking me to repeat matters that I have already covered.
I have mentioned one or two of the Joint Committee's recommendations that the Government did not accept. I am also concerned about certain of the Committee's recommendations that the Government did accept, but which have not yet been fully incorporated in the legislation—for example, recommendations relating to market abuse. Those who engage in that practice can be fined, but that is not properly defined in the Bill as it stands. That defect in the Bill has attracted widespread criticism from outside.
Substantial areas of the Bill were not scrutinised at all by the Joint Committee and defects in those areas have become apparent only under scrutiny. During sittings of the Standing Committee in July and in the past week, we have found several examples. I have time to give only one example—that of internet trading or e-commerce, which is not satisfactorily dealt with in the Bill. The Bill attempts to regulate financial services on the basis of country of reception, whereas the Government as a whole, including the Department of Trade and Industry, have been urging this country to adopt country of origin regulation. Unless that part of the Bill is corrected, there will be a standing contradiction between the legislation and the Government's overseas negotiations.
My right hon. Friend makes a powerful case, which would persuade me that we should drop the Bill completely at this stage and rethink it properly, so that it can be re-presented at a future stage and dealt with carefully. The logic of my right hon. Friend's case is not that we should do some fudge and carry-over, but that the Bill should be dealt with in the proper, traditional way. It should be taken away and rethought entirely. All the weaknesses that he is so admirably pointing out should be resolved, and the Bill should be brought back to the House in a proper manner.
The Bill is proceeding in Standing Committee. I hope that my right hon. Friend will interest himself in our future deliberations. We have reached clause 52 out of 367 clauses, so there are plenty of opportunities for him to engage in the debate and seek the improvements that we all want.
The course of the Bill will depend on how the Government respond to the concerns, of which I have mentioned just two or three. The timing is also in the hands of the Committee. Although we are aware that the City and the financial services industry as a whole do not want any unnecessary delay, we all agree that it is better to produce a good Bill than one that proceeds on an unrealistic time scale.
We want a Bill that regulates a huge and very important British industry, but it must be the right Bill. We will support the Government when they do something right in the Bill—parts of the Bill have been significantly improved—but we will oppose the Government when there is something wrong in the Bill or when they refuse to accept the necessary improvements. The motion will assist the House if it helps the process of scrutiny and thereby gives the industry an Act of which the House can be proud.
I am grateful for the opportunity to speak briefly on the procedural motion relating to a complex Bill, which the Government seek to carry over and which, as my right hon. Friend the Member for Wells (Mr. Heathcoat-Amory) said, we agree should be carried over into the next Session.
As this is the first time that any Bill has been carried over, it is important to put down one or two markers, as the Parliamentary Secretary did. I fear that unless we are careful, and unless future Governments of all persuasions are disciplined about the carry-over procedure, it will come to be used at times when legislation has been held up because it is highly controversial, or has been brought in late because other highly controversial legislation was held up and took too long.
I remind the House of the old nostrum, which has certainly been true during my 20 years here, that one of the few weapons, if not the only weapon, of an Opposition is delay. The proposed modernisation reduces the power of opposition. That should be done extremely carefully. Practically no one who has entered the House has not at some stage during his or her period here parroted the notion, which has a great deal to recommend its being parroted, that there is far too much legislation, it is far too complex and most of it is too little thought out. That would certainly apply to the Bill.
I am not saying that a great deal of work has not gone into the Bill behind the scenes and in Committee, but the fact that it has 367 clauses and 16 schedules is not a compliment to the Bill. It is an indication that Pascal's famous nostrum—"I am sorry I have had to write you such a long letter, but I did not have time to write you a short one"—applies in the present case, as elsewhere.
It has been noted in Standing Committee more than once, and perhaps more than half a dozen times, that the Bill will effectively achieve two things: it will create a framework within which the new Financial Services Authority can regulate and govern almost every aspect of financial services in the City; and, getting down to the nitty-gritty, it will give almost unfettered powers, to both the Treasury and the FSA, to regulate exactly how they choose. The Bill's 228 pages, which contain those 367 clauses and 16 schedules, are nothing more than broad guidelines that frequently descend into detail, but which always, I think I am right in saying, have a mop-up clause that provides for reopening the widest possible discretion for the Treasury and the authority.
For that reason, it is no exaggeration to say that, if he had been invited to do so, the parliamentary draftsman could have published a 50-page Bill, and it would have been a great deal better if he had. Then, at least, what I have described, and what I believe to be entirely true, would have been seen by the public at large and either accepted or not accepted. That would have enabled us to focus better on one or two fundamental points, which we may get wrong, and which we would have found easier to do without the obfuscation of length and detail. I shall give two examples.
First, we have frequently said, and have voted for the fact, that competition or competitiveness should be one of the objectives of the authority when regulations under the Bill are drafted. It should be included in the Bill. We would have no difficulty with that, because we have argued for it, but any Minister or Opposition Front-Bench spokesman backed into a corner would undoubtedly say on "Question Time" or elsewhere that he strongly believed in the competitiveness of the City. There are four objectives, which rightly deal with proper regulation, but I do not think that we would have the slightest difficulty in combining those with competitiveness. That would help to keep the regulators, who will have massive discretion, on the right lines thereafter.
I am afraid that I am a lone voice on my second point. I said on Second Reading, and I repeat now, that one aspect of the Bill is deeply unwise: it makes anybody without the proper regulatory authority a criminal—I am not complaining about that—which of course puts enormous firepower into the hands of the FSA, but it goes on to say that anybody who fails, for one reason or another, to get himself properly authorised will be unable to enforce the deals into which he enters unless he can slot himself into some very narrow exceptions.
I am quite prepared to see unenforceability as a principle that is available for the safeguarding of citizens who do business with those who are unregulated, but I have emphasised more than once—and as anyone who has sat in the House and watched financial affairs debates over the past decade or two knows—that there are sharks on both sides of the water at all times in the City. There are sharks who will seek to prey on those who invest their money and there are investors who will seek to escape their legitimate liabilities by fair means or foul.
Are we to create a regulatory system that will enable someone to escape what would otherwise be his legitimate liabilities because of some technical mistake, which may have been caused by carelessness? It is a grave mistake to make something totally unenforceable. One should leave it to the discretion of the court so that the citizen who is trading, if he is in the wrong, can at least fall back on the court's discretion without fetter.
A 228-page Bill covers this area, as do mountains of useful paperwork produced by the authority in consultation, regulation and technical books. The one that I have had the pleasure of reading was written in part by a lawyer who has given us a great deal of help. It amounts to 400 pages of detail that could not possibly be read by anyone who is not merely a lawyer, but a lawyer specialising in the field. It simply could not be understood by anybody else.
Order. May I bring the right hon. and learned Gentleman and the House back to the procedural motion on the Order Paper? It is interesting to have some of the examples that have been given, but I now ask hon. Members to stay within the motion before us. Given my ruling, does the Hon. Lady still wish to intervene?
Does the right hon. and learned Gentleman agree that the Bill has involved so much time because detailed consideration is being given to every precise point that Opposition Members, including him, are making? Does he agree that that is a strength of the Bill and the reason why this procedural motion should be agreed to without much more ado?
I am most grateful to you, Madam Speaker, and to the hon. Lady for bringing me back to the point. The answer to her question is yes and no. Yes, there has been valuable scrutiny and, without wishing to praise the Opposition too much, we have made and tested some sensible points and shall continue to do so for some months to come. However, it is not too unfair to those with the job, in both the Government and the Financial Services Authority, of getting the Bill into workable order to say that they are still busy consulting and thinking through much of the detail, which, ideally, should have been thought through before the Bill began.
This brings me solidly on to procedural ground, Madam Speaker. Had the Bill been thought through before we started, we would have been far less likely to need a carry-over motion. Such motions should be extremely rare. The Government should be as good as their word and should not table carry-over motions without giving full notice in advance—to be fair, that was given—except when the matter is technical and highly complex or when such a motion is absolutely necessary for proper scrutiny. I take exception, politely, to what the Minister said. Carry-over motions should not be used simply because a Bill was started late in a Session. They should certainly not be used for that reason without agreement behind the scenes.
On the carry-over procedure, the House has an underlying difficulty because those with the power to change procedure are inevitably the Government of the day, while those most in favour of reinforcing the powers of the House are inevitably those who sit on the Opposition Benches. Thus, at any stage of any Parliament, a delicate balancing act must be performed if the House's procedures are to be moved forward constructively. Our carry-over procedure achieves that delicate balance, and will achieve some extra capacity for the House to keep a grip on legislation that the Government put before it.
The right hon. and learned Member for North-East Bedfordshire (Sir N. Lyell) made some of my points for me. This is a difficult and complex Bill. The alternative to carrying it forward is not to abandon it, as the right hon. Member for Bromley and Chislehurst (Mr. Forth) might hope, but to rush it through in the remaining fortnight of this Session. That is traditionally how Governments have dealt with complex Bills when they have got to the end of their time and the end of the Session.
This motion enables us to give complex Bills proper consideration right the way through, and thereby improve them. I am a new Member and, like every inhabitant of the United Kingdom, I have been subject to the laws of the House since the day of my birth—and probably even before that. The laws produced by various Governments and endorsed by the House in various configurations have frequently had serious defects and have had to be revisited. Those defects have often arisen because proper consideration had not been given to the detail of the Bill. I am sure, Madam Speaker, that you would not want me to illustrate that at great length; it can be taken for granted.
This provision will allow the House to exercise better scrutiny in better time, which it is hoped will produce better outcomes. The Bill has already gone through consultative procedures that are new to the House and to the other place, and they have produced improvements. More improvements can be made if we proceed with this motion.
The right hon. and learned Member for North-East Bedfordshire asked whether the carry-over procedure should become more widely used. I hope that it will be more widely used. Legislation is sometimes rushed and fumbled, because our legislative cycle inevitably compresses the consideration of detail into the end of the parliamentary Session when we are least able to manage it. If we were rational, not only would we have an announcement in the Queen's Speech of the Bills that the Government propose to introduce during the Session, but we would be given the order in which they would be introduced so that the work on those Bills could proceed in an orderly and thorough way through the procedures of the House. Inevitably, Bills introduced in the second half of the Session might require the carry-over procedure.
The hon. Gentleman may have a point that fewer and better laws would be good for everyone, and perhaps our summer recesses would be even longer. However, given the complexity of our modern society, every successive Government since the war has introduced more Bills than their predecessor, regardless of their political complexion. I do not foresee that changing unless we get a legislative benefit from devolution, but I shall not hold my breath on that. Although it is a nice wish, it is not a realistic proposition.
Does not the hon. Gentleman realise that there is a benefit in the House of Commons having a limited time to examine legislation? In other legislatures, including the so-called European Parliament, which do not have that discipline, consideration of legislation goes on for ever, and they often do not have the ability to take legislation off the books when it manifestly should not be proceeded with, and when any sane person would say that it should be dropped. Does the hon. Gentleman accept that there is a benefit in the House of Commons having a set timetable and knowing that at the end of that time it must deal with a Bill?
I am grateful for the hon. Lady's intervention, because it enables me to say that the Modernisation Committee considered the point very carefully. That is why the carry-over procedure allows a Bill to be carried over only once, which I consider appropriate.
It has been suggested that if we had had more time, we could have had a shorter Bill. That is along the lines of the observation by the hon. Member for Altrincham and Sale, West (Mr. Brady) that perhaps we should have fewer laws. In fact, we are not likely to have either fewer or shorter laws in the future. What comes before the House needs to be considered carefully by hon. Members. We may or may not be able to make Bills shorter: I would not want to hold my breath on that. The main point is that output from the House must be good law which is enforceable. That may involve a little extra time and effort, but I believe that that is what we are here for.
I consider the case for carrying over this Bill to be practically overwhelming. It is a complex Bill, and hon. Members have argued that it should have been shorter and simpler—but it is not. It is before us now, and the choice is not good. We can try to get it through in the next fortnight, or we can do as the right hon. Member for Bromley and Chislehurst suggested and withdraw it completely. The City is anxious for the Bill to be passed. Its regulatory procedures need attention, and the Bill addresses that need. I do not honestly think that the right hon. Gentleman is really signing up to a crooks charter, with the Bill withdrawn and no progress made on the regulation that is required. That cannot be what he intends to achieve.
What we are left with is a perfectly sound procedure for this Bill, which will allow it to be examined properly and returned to the House in good order, with proper discussion. I strongly believe that the House should welcome this opportunity to use the carry-over procedures, and should be happy for this Bill to be the first example of legislation dealt with by that means.
I strongly oppose the measure, so I am disappointed that my right hon. Friend the Member for Wells (Mr. Heathcoat-Amory) indicated his acquiescence to it. I say that for a number of reasons. The first is a matter of principle: I have never accepted the argument that it is desirable for us to find means of allowing more and more legislation to emanate from this place, rather than less legislation, including fewer Bills.
I have never seen this place as a legislation factory. I have always supported procedures making the passage of legislation more difficult rather than easier, because I believe that, although there is an enormous propensity among politicians to produce more legislation in order to justify their existence, it must be in the greater interest of people for there to be fewer Bills. I therefore feel that any measure facilitating an increase in the amount of legislation is counter-productive and undesirable, which is why I was not in favour of the so-called Modernisation Committee's so-called progressive measures to facilitate that.
An important issue has arisen in the context of this motion. It is the first time that it has arisen in the House. The discipline imposed by the one-Session principle that we have employed up until now has always struck me as a good one. Governments should be forced to give proper priority to their measures, and to give greater priority to more important and more complex Bills so that they can be dealt with in the time available. That discipline is about to disappear. If we approve the motion, a major step will have been taken in the removal of an extremely desirable discipline which we have always—perhaps "enjoyed" would not the right word—imposed on ourselves.
The right hon. Gentleman referred to the discipline of a complex Bill. Few Bills are more complex than the Finance Bill, which comes before us every year. We used frequently to sit throughout the night to discuss it. On Wednesday, we shall be discussing the consequences of the Pepper v. Hart ruling, which occurred at a very awkward time and which arose from the proceedings of the Finance Bill. Decisions were taken, and were subsequently considered. What is most important, however, is that if the pressure of time is there, Committees can meet more frequently. Will this proposal not stop them from meeting more frequently, and sticking to their timetables?
I am in favour of the motion, but I think that it should be used only in exceptional circumstances, rather than being taken into account just because a Committee is rather slow in making decisions and rather leisurely in carrying out its responsibilities.
I am grateful to the right hon. Gentleman, whose experience in the House is great and almost unparalleled, for pointing out that, if it were the will of the House to find mechanisms better to examine and to scrutinise Bills, it should be able to find them, rather than take the risks that are inherent in what it is doing. He is the second right hon. Member, following my right hon. and learned Friend the Member for North-East Bedfordshire (Sir N. Lyell), to say, "We will allow it in the case of the Financial Services and Markets Bill, but I hope that it will not happen too often." Both of them have been here long enough to know that that is a pious hope. Having opened the door, the Government are almost certain to want to walk through it ever more frequently. I would never use the word "naive" in the context of right hon. Gentlemen, but it is a triumph of hope over expectation.
Although I naturally endorse and support with enthusiasm the stance of my right hon. Friend the Member for Wells (Mr. Heathcoat-Amory), does my right hon. Friend agree that possibly the real motive behind the carry-over of the Bill is nothing to do with the public interest or the rights of the House, but is the pressing need for Ministers who are not professionally qualified in these important matters to get their minds round the 367 clauses and 228 pages of said Bill?
That is entirely possible, but, having had the honour of serving on the Committee, I would hesitate to make that judgment. All I would say in the context of the comments of the right hon. Member for Ashton-under-Lyne (Mr. Sheldon) is that, if I may point it out to the House, I was largely instrumental in guiding a Bill of almost identical size through the House in the 1992–93 Session. It had 350-something clauses and 21 or 22 schedules. We managed to do that. It was, of course, a magnificent Bill. It was virtually flawless. As a result of my guidance through the parliamentary process, it completed its passage on time and without the need of any chicanery of the sort that we are being asked to consider today.
My second reason for opposing the measure is simple: I still cling to that, sadly, apparently diminishing idea that it is the job of Her Majesty's Opposition to oppose, not to connive in the passage of Government legislation. That is why I am still mystified, despite the superb and elucidatory speech by my right hon. Friend the Member for Wells, about why the Conservative Opposition should find themselves conniving with this Government, of all Governments, in the passage of legislation. I cling to the view that Oppositions are here to oppose. I see no reason to overturn that excellent principle, even in the current case. I am not persuaded that it is an exception.
My other reason has been touched on by one or two hon. Members. One of the most undesirable principles in the House is of all-party, or consensually agreed, legislation. Over many years, some of the worst measures that have emanated from this place have been agreed by all parties and driven by consensus. I am sure that the list is familiar to right hon. and hon. Members, so I will not repeat it, but it makes me rather uneasy when I am told in emollient tones, "Do not worry, we have all agreed to the measure."
The Liberal Democrats apparently agreed to it, somewhat to my surprise. My right hon. and hon. Friends agreed to it and the Government want it. That would be bad enough, but another reason has been given to the House—it has been mentioned a couple of times: the City wants the Bill, so it must be rushed on its way.
Usually, if we are told that an outside interest group wants legislation, that makes us more than a little nervous and suspicious. In other circumstances and cases, I would be suspicious if I were told that a powerful interest group was anxious to have legislation. That would make my antennae tremble more than usual and I would want to know why. In this case, however, we are being told by hon. Members on both sides of the House that the City is very anxious to have the legislation—with the implication that the House should hurry its proceedings, to ensure that the City is pleased by having the legislation in place as soon as possible.
I am very sympathetic to the argument being made by my right hon. Friend. However, on the point that he is now pursuing, I think that he is slightly off-beam. The City is very keen to have certainty—any type of certainty will do—rather than the uncertainty of being caught between two loads of legislation. The City is dead scared of the Bill—it thinks that it is a ghastly leviathan—and would rather it had never been introduced in the House. That strongly supports my right hon. Friend's argument that there should have been a much longer, more careful and thoughtful process before such comprehensive legislation was introduced to replace current regulations.
I am grateful to my hon. Friend. If he has accurately summarised the rationale behind the City's argument on the legislation, I am even less impressed with the City. If the City is saying, "This is a rotten piece of legislation and we fear it greatly, because we think it might damage us—but, please, may we have it quickly, because it is better than uncertainty", I am not very impressed with it.
I think that probably all hon. Members have today received a document appealingly headed "Justice in Financial Services". It was sent to us by a man—whom I
do not know personally—named J. R. S. Egerton. He makes some interesting assertions in his letter, dated 21 October. He states:
The Financial Services and Markets Bill has been condemned by the City editor of the Evening Standard as the greatest threat to individual liberty and the rule of law for a generation.
I am not familiar with the views of the Evening Standard's City editor on the Bill, but can assume only that the letter gives a reasonably accurate interpretation of them.
The letter goes on to say that the Bill's
excesses have been denounced by the Times and the Telegraph and received unfavourable notice in the Financial Times.
I am not suggesting that we should be driven in our legislative deliberations by the press any more than by the City, but if those press experts are making those types of arguments, it seems to be a factor that should be taken into consideration and give us pause before finding ways of hurrying the Bill's passage. As has already been alluded to in the debate, the deliberations of the famous Joint Committee—which has been hailed as such an advance in the legislative process—on the Bill were less than complete.
I have only briefly quoted the two-page letter from the Justice in Financial Services organisation. I do not know that body or its provenance, but am simply trying to make the point that there are different points of view on the matter—rather than the cosy apparent unanimity that was in danger of emerging before I managed to catch your eye, Madam Speaker.
It simply is not good enough for us to be told that we should pass an exceptional motion to give the Bill a second wind and further consideration, overturning all the House's previous tradition, because the Bill is large and complex and was introduced too late in the Session. Such a move makes me uneasy. I am not persuaded that the Bill is an exception—I do not think that there should be any exceptions.
Nevertheless, let us not use the motion as a first example of what I fear will become much more normal than my right hon. and learned Friend the Member for North-East Bedfordshire and the right hon. Member for Ashton-under-Lyne have said. I should perhaps defer to them, as they have been Members longer than I have, but do not share their confidence—if that is the right word—that such motions will be a rare exception or one-off.
I suspect that, in future, the motion will be used by the Government as a precedent. I hope that the comments of my right hon. Friend the Member for Wells reflect much more accurately the position that the Opposition will take in future. Even if we have been persuaded, or conned, to go along with the motion on this occasion, I hope that we will learn a lesson from it. If the House—in my view mistakenly—gives its go-ahead to the motion today, I hope that it will be the last time that we approve such motions, and that we will not see its like again.
There are two issues relating to the suspension motion that need to be considered: the points of constitutional principle and parliamentary procedure to which my right hon. Friend the Member for Bromley and Chislehurst (Mr. Forth) referred; and the reasons why the suspension motion should be applied to the Bill. I should like to say a few words about both issues, more on the latter than on the former.
I am sympathetic to the points made by my right hon. Friend the Member for Bromley and Chislehurst on constitutional principle and was almost completely persuaded by them. A carry-over sounds nice in theory, but it hands a good deal of further power to the Executive. The power of delay is almost all that the Opposition have and I was flabbergasted to hear the hon. Member for Hazel Grove (Mr. Stunell), who will undoubtedly be in opposition all his life, saying that its use should be further curtailed.
The relationship between the delaying power of the House of Lords and the carry-over provisions has not been mentioned so far. In certain circumstances, there is a risk that its power of delay could be eroded. That is set out clearly in a note prepared by the Clerks in the third report of the Modernisation Committee. The crucial two sentences say:
But if such a Bill were sent to the Lords late in the Session, with the intention of its being carried over, the Lords would have inadequate time to give it proper consideration. Nonetheless, the Parliament Act provisions could, legally, be applied by the Commons in the ensuing Session.
In other words, in those circumstances the key power of delay—perhaps the only major power left in the hands of the Lords after the Parliament Act 1911—would be greatly eroded.
In their desire to assist the Modernisation Committee with their support for the idea, the Clerks suggest some possible safeguards to deal with that further erosion of Lords power. Those safeguards are not well thought out and I should like the Government to come forward at the earliest opportunity with their proposals on how the House of Lords power of delay can be thoroughly safeguarded if, as the Minister said a moment ago, carry-over provisions are to become more common.
My second point relates to the Bill. We are not debating the general issue of whether carry-over provisions should be permitted. We are considering the specific issue of whether the Financial Services and Markets Bill should be subject to the provisions. That depends on two points. First, it was understood between the usual channels that there should be general agreement across the House for the Bill being carried over. Secondly, the circumstances of the Bill and the progress made on it should be relevant to the decision.
The Bill underwent pre-legislative scrutiny from a Joint Committee to enable a consensus to be developed. However, I am not convinced that the Government have stuck to their side of the bargain in delivering responsiveness and flexibility to proposals that have been made. They have not responded favourably to the proposals of the Burns Committee, and they have not shown much flexibility towards Opposition proposals in Committee. In fact we have had a mixed reaction to the Burns Committee proposals, to which I shall refer in a moment.
I wish to raise some general points on which little flexibility has been shown. First, everyone agrees that the Bill is creating a leviathan—a huge and extremely powerful body such as we have not seen in Britain before. The Government have put in insufficient checks and balances on the authority, and on its power. Secondly, a tendency to err on the side of reducing risk for the regulator at the expense of the industry pervades the Bill, and thirdly, little attention has been given to the need to make the Bill flexible to take account of changing market conditions.
It is worse than that. We need a review procedure so that, every few years, we can come back to the Bill to see how it ought to be amended. However, we have the opposite. We have clauses enabling the Treasury to institute reviews—and to make them independent—if it feels like it, or not if it does not. Indeed, the Bill states that independence itself will be defined by the Treasury.
On the leviathan point, we must remove the FSA's immunity from prosecution. I will not elaborate that point, as now is not the time to do so. However, there must be some consideration of that matter. There must be further consideration also of the need to strengthen the tribunal procedure.
Does the hon. Gentleman accept that the very weaknesses that he outlines are the justification for this House accepting the carry-over, so that we can improve the Bill? Is this not a case of strengthening the hand of the House against the Government and not weakening it, as he suggested?
It is extraordinary to suggest that we should allow the Government whatever timetable they want, and that, by doing so, we will always strengthen and improve Bills. If we use this procedure, we must at least make ad hoc assessments of whether there has been flexibility and whether the Bill has been improved. That is what we are doing today. We must also look at the progress that is being made on the Bill to make a judgment on whether to support the motion.
To return to the leviathan, there has been some progress—but by no means enough—on the tribunal procedure, in response to the Burns Committee. We should have an opportunity to debate that in Committee shortly, and I hope that the Government will show flexibility. On over-regulation, the Bill must include the objectives of competition and competitiveness to counterbalance the other objectives. The former are not included in the Bill as an objective, but as a justiciably weaker "principle", and that is unacceptable.
On the huge enabling powers given to the Treasury—including the power to make further legislation by order—we must have a commitment to regular, thoroughgoing reviews.
Does my hon. Friend think that if we agree the motion today and allow the Government more time, the chances of what he thinks should happen to the Bill being accepted will be improved or diminished?
That judgment hangs on a knife edge. I am concerned that my right hon. Friend may be right and there may be less flexibility. I said earlier that I was well on the way to being persuaded by his argument.
Everyone in the City to whom I have spoken agrees with the three points about creating a leviathan, over-regulation and the excessive enabling powers and inadequacy of review; but people in the City are too scared to speak up—as they have been prepared to say privately, at length—because they have been cowed by the powers of the FSA, the fear of investigations and the size of Labour's majority, as they know that they will have to carry on working with Labour, although we hope that before long that will no longer be the case.
It is not the universal view of the City that there will be a leviathan. There is a widespread view that, having had nine different regulators operating different codes, it is time to sort out the confusion. The Bill has been widely welcomed, as has the flexibility that has been built in by leaving regulations to secondary legislation. On both those points, the hon. Gentleman's comments are inaccurate; and they have been debated on several earlier occasions.
Yes, and I am sure that they will be debated again. I would be fascinated to see evidence from anyone in a position of influence in the City who is prepared to say in writing that this Bill is creating the opposite of a leviathan: a tame creature that will show the flexibility that the City wants. That is inconceivable; but there is an element of truth in the hon. Gentleman's point that the mishmash of regulation that is being replaced needed attention. I am not suggesting that it has been easy to regulate in this area: it has been very difficult, and the previous Government made mistakes in the mid-1980s, as I have been the first to concede.
We are straying off the main issues, and I do not want to get into what could, if we are not careful, become a Second Reading debate. The crucial point is that Conservative Members agreed to go ahead with the suspension order on the general understanding, some months ago, that the Government would show flexibility towards the recommendations of the Burns Committee. An assessment of how far that flexibility has been forthcoming is crucial to the judgment whether we should go ahead with the suspension.
I commissioned a study of that and I have had a good look at the question myself. I shall not list the 20 or 30 areas in which the Government failed to respond to the Burns Committee, but I will mention a few major areas in which they have given an inadequate response or ruled out the Committee's proposals.
Paragraph 45 of the Burns Committee report recommends that the market confidence objective in the Bill
should be expanded to include a reference to the management of systemic risk".
There is a memorandum of understanding between the FSA, the Bank of England and the Treasury on the matter, but it is a pretty feeble document which has not been adequately considered in Committee.
We are debating the fundamental question whether, in its present form, there might be an increased risk of the banking system collapsing under stress as a result of changes in the rules and the way in which we interpret them. The Government's response that all the Committee's concerns had already been met, but that they would continue to reflect on the issues, was inadequate and feeble.
In paragraph 98, the Burns Committee recommended a review of the challenges posed by communications and technology—e-commerce—and the Government's response was that that was not thought necessary: as simple as that. Paragraph 113 also recommended that the chairmanship and the post of chief executive of the FSA should be separated, to provide a quasi-constitutional check on the huge powers given to the first chairman and chief executive. The Government decided that they were content with the present arrangements.
An issue pertinent to the House was raised by the Burns Committee in paragraph 122 of its report, when it said that there should be parliamentary confirmation hearings for the FSA chairman and chief executive appointments. That was dismissed by the Government as undesirable, so we shall probably not have any confirmation hearings.
Paragraph 133 of the Burns report raised the issue of whether the FSA should be required to consult the consumer and practitioner panels and to publicise their disagreements. The Government decided that there should be no requirement to consult.
There is also the issue of compensation awards. In paragraph 146 of the Burns report the Government were asked to consider allowing the investigator to award compensation or allowing the FSA to make ex gratia payments. That was dismissed out of hand.
There are 20 more recommendations to which I could refer, but I think that I have dealt with quite enough of these matters. I think that those to which I have referred give a feel of the extent to which the Burns Committee recommendations have been ignored. As I have said, the principle that lies behind the Opposition's acceptance of the motion hinges on whether joint consultations yield fruit in terms of the Government's being responsive to our proposals and those of the Joint Committee. We have not seen enough of either.
I am worried about the suspension order. The Bill is of very mixed quality and I am not convinced that, by carrying it over, we shall improve its quality. We have seen the Government's relative unresponsiveness to proposals to try to make it better. My inclination would be to argue that that unresponsiveness is close to being a breach, if it is not an actual breach, of the agreement that was reached through the usual channels about the use of suspension orders.
My colleagues on the Opposition Front Bench are all gentlemen. I think that, if there were a Division, they would honour the deal. I think that, on balance, they have decided not to break the agreement. With some reluctance, I shall go along with their judgment. However, that still leaves me with my constitutional objections in principle to this procedure. I believe that it increases the power of the Executive and puts at risk one of the very few powers that the House of Lords possesses.
I am a member of the Committee that is considering the Financial Services and Markets Bill, and, in thinking through these constitutional issues, I am left deeply sceptical about the carry-over provisions. If the Government had shown more flexibility in this case, I might have been more inclined to be supportive of the process generally.
I apologise to you, Mr. Deputy Speaker and to those on both Front Benches for not being present to hear the opening speeches. I remark in passing that the manner in which the Government are conducting the passage of the Greater London Authority Bill—the amendments to it are approaching 500—within a month of the Queen's Speech is putting a bit of a strain on London Members, and it was that Bill which kept me out of the Chamber. I shall return to that Bill in my brief remarks.
I declare an interest as chairman of the Building Societies Ombudsman Council, which is obviously affected by the Financial Services and Markets Bill. Given my role as chairman of the council, I have deliberately not spoken on the Bill up to now. I shall speak only on the principle of the carry-over. I declare a further interest as I am the Member responsible for the City of London (Ward Elections) Bill, a private measure which is subject to a somewhat different procedural climate, but is in the same area.
I entered the Chamber to hear my right hon. and learned Friend the Member for North-East Bedfordshire (Sir N. Lyell) advance a powerful argument for exceptionality, with which I wholly agree. I disagreed with the speech of the hon. Member for Hazel Grove (Mr. Stunell), though he and I both have some mutual sympathy with each other. We both sat through the debate on procedure last Thursday in our respective capacities without either of us being called. We are veterans of different campaigns. I disagree with the hon. Gentleman's argument that this procedure should be used more often rather than less. As so often, I agree with the general thrust of the remarks by my right hon. Friend the Member for Bromley and Chislehurst (Mr. Forth). The Greater London Authority Bill—we both served on its Committee and, as he will remember, occasionally disagreed during that time—has had some 500 amendments tabled to it in the House of Lords, mainly by the Government, and that will set this House a considerable task between now and the Queen's Speech for obvious reasons. The House of Lords has not even reached Third Reading yet.
One could argue, and the hon. Member for Hazel Grove might do so, that the Greater London Authority Bill would therefore be a good candidate for a carry-over, in the interests of good legislation. However, it left Committee in this House at the end of March and it is extraordinary that it is still at Report stage in the House of Lords at the end of October. If the pressure on Governments to attend to the details of their Bills is lifted in the way that the hon. Gentleman suggests, we would soon get in a pretty pickle. It would not be good if the procedure became less exceptional.
Is my right hon. Friend satisfied that the safeguard that the procedure can be used only if those on the two Front Benches agree is sufficient to prevent the situation that he rightly warns against?
My right hon. and learned Friend, with salient perception, has anticipated a point that I intended to make later. I am grateful to him for having provided a trailer and harbinger of my later remarks. It would be a bad habit to carry over several technical Bills into another Session. Professor Parkinson's great law that work expands to fill the time available is a classic example why the procedure should be restricted, not open-ended.
I also disagree with the hon. Member for Hazel Grove about this House's historic practice on technical Bills. I agree that procedure may have to be hurried at the end, but it is not my experience in 22 years—the experience of the right hon. Member for Ashton-under-Lyne (Mr. Sheldon) is even longer—that time cannot be found for, for example, the Finance Bill, provided that people think in advance about how much time will be needed.
The Greater London Authority Bill would certainly qualify as large and complex, but it would not satisfy the requirement that notice must be given. The point made by my right hon. and learned Friend the Member for North-East Bedfordshire about agreement is a critical element of the safeguards against the misuse of the carry-over procedure. If the Government cannot secure agreement that carry-over is appropriate, a Bill cannot undergo the procedure.
My right hon. Friend the Member for Bromley and Chislehurst is an eloquent advocate, but sometimes I find when I listen carefully to his speeches that if there are five points that relate to an argument, he—like the writers of some editorials—covers the first four but does not include the fifth. On this occasion, I did not hear him deal with the issue that agreement between both sides of the House is a definitive way to ensure that too many Bills are not subjected to the procedure.
I am grateful to my right hon. Friend for allowing me to fill the lacuna. It may be that my right hon. Friend, with his infinite courtesy and consideration, has total trust in and admiration for our Front-Bench colleagues. I do not.
That is a highly pertinent observation for my right hon. Friend to have made. However, he will recognise—and I mean it in the nicest possible way—that the view that he has just expressed does not wholly surprise me.
I heard my right hon. Friend the Member for Bromley and Chislehurst assert that the Minister had said that he expected the carry-over procedure to be used more often. As I was not in the Chamber at the time, I did not hear the ipsissima verba that the Minister used, or the reasons that he gave for putting forward that view. I apologise for missing those reasons and I hope that the Economic Secretary—who I take it will wind up the debate and whom I congratulate on her promotion to the Front Bench—will explain why there will be more use of the carry-over procedure in the future. I share with my right hon. and learned Friend the Member for North-East Bedfordshire, and with the right hon. Member for Ashton-under-Lyne, a feeling that the use of that procedure should be exceptional. I sincerely hope that history will not find any of the three of us naive for having taken that view.
I, too, must apologise, Mr. Deputy Speaker, for not being present for all the debate, although I was able to catch the opening speeches. However, I had a meeting with a Home Office Minister about a constituency case that has occupied me for some three years. That meeting was arranged a long time ago: I was loth to miss it, and I hope that I have been able to achieve some success in the matter involved.
In contributing my few pennyworth to this debate, I wish to declare the interests set down in my name in the Register of Members' Interests. A handful of hon. Members in the Chamber today have lived, breathed and slept the Financial Services and Markets Bill since we were made members of the Burns Committee last September. The last thing that I want, having gone through that experience, is to have to start considering the Bill all over again because its carry-over has not been allowed.
However, the carry-over of the Bill should not be let through on the nod. If the carry-over is agreed to, it must be made absolutely clear that the Opposition are helping the Government off a hook of their own making. The Bill is very important. The City needs it, as does the financial services industry. Indeed, one could also say that the Labour party needs it: before we started considering the Bill, the present Minister for Small Business and E-Commerce, when she was Economic Secretary, said that part of the process of creating new Labour was to change Labour's attitudes to the City.
The Bill has dragged on too long already, through a very sensitive period for the financial markets. Those markets could have been affected by matters such the Y2K problem and the introduction of the euro, and by big changes to capital gains tax and the savings industry. The interregnum in regulation that has existed since last year's Bank of England Act has not helped anyone.
The City wants and needs a Bill that is workable and practical, and will help it and the financial services industry to get on with their jobs. I am afraid that this Bill—as it stands now, but even more so in its original form—does not provide that help to our satisfaction. Labour Members should worry about that, given that the industry accounts for 7 per cent. of the country's gross domestic product and, directly and indirectly, employs more than a million people.
It is the Government's fault that we are here today. The Bill has an unhappy history. It was sneaked out in July last year, on the last day before the long summer recess, in a heavily flawed form. Like my right hon. Friend the Member for Wells (Mr. Heathcoat-Amory), I was privileged to serve on the Burns Committee. That Committee did an excellent job, and Lord Burns deserves the congratulations that he has received. However, to a great degree, that Committee got the Government off the hook. The Government did not admit that the original Bill was heavily flawed: instead, they transferred responsibility for sorting out the mess to a new and innovative Joint Committee.
I believe that the Joint Scrutiny Committee did a good job and that it has a role to play in connection with exceptional pieces of future legislation—those highly technical and detailed Bills to whose consideration expert witnesses may contribute.
The time constraints imposed on the Burns Committee were crazy—two months for the first report, and rather less than four weeks for the second, on market abuse. The Committee was able practically to consider only six subjects during that time—statutory objectives, scope, accountability arrangements, discipline arrangements, market abuse and the ombudsman.
The whole consultation period for the Bill has been highly haphazard. The Treasury and the Financial Services Authority have prided themselves on pushing out a lot of purple consultation documents. When the Joint Committee began to consider the legislation in detail, 20 or so documents had been published. Only one of them had received a response from the Government. We were flailing around in the dark. The Government had not decided how to respond to their own consultation exercise responses. That was highly unsatisfactory. Both the Joint Committee and the Standing Committee have had to tease out the Government's position. In many cases, it has become blatantly clear that the Government do not know their position and can give us no time scale within which they will know it.
Unhappily—I mean no detriment to the two Ministers present—there have been three Ministers since the draft Bill was launched. There have been two Ministers since the final Bill came before the Committee. The team of three Treasury junior Ministers has changed completely over the summer. I wish the new Ministers well, but that changeover cannot be helpful. Part of the job of the previous Economic Secretary to the Treasury—I dare say she did it well—was to roll up her sleeves and become involved in the consultation exercise. Many people went in and out of her office, although perhaps not as many from the sharp end—the practitioners—as we should have liked. However, the substitution of a new set of Ministers who were not part of the consultation process weakens that process. The change is bad for continuity.
Now that the House has returned from the summer recess, the Standing Committee has begun to study the Bill. I am unhappy to hear that the Treasury door was not very open—if open at all—to practitioners during the three months of the summer recess. That is unsatisfactory when we are faced with a highly technical—and very long—Bill. Following the year between publication of the draft and final Bills, the Government have had a further three-month breathing space during the summer, and it is worrying that the situation seems not to be improving. The revised Bill remains full of flaws.
The Government are still not ready with many of their amendments. One need only read the Standing Committee Hansard to confirm that. Every week, announcements come that seem to conflict with previous pronouncements. Last week, the Economic Secretary to the Treasury said that there would be a system of light-touch regulation for non-financial service firms, which raised questions about where the dividing line is drawn for financial firms. The Government are applying varying standards to different companies and altering their interpretation of rules over time. Many questions have been raised over the even-handedness of the Bill's approach. All that should have been worked out months, if not years, ago, but it was announced to us only last week.
Hansard shows time and again that the Government are not ready. The Government say:
We therefore propose to table amendments aligning financial promotion".
Again, they say:
We will table amendments to this effect in due course.
And, again, they say:
We therefore propose to introduce amendments".—[Official Report, Standing Committee A, 19 October 1999; c. 422.]
Those statements come from just one column of one Hansard from last week. Sixteen months after they published the draft Bill, and four months after publication
of the final Bill, the Government are not able to table proper amendments for the Committee to discuss. That means that, when those amendments are eventually forthcoming—presumably on Report—they will not have been subject to the same degree of scrutiny in Committee that one would have expected for the Bill, and that certainly should have occurred. That is most worrying.
The overriding concern is that running through the Bill are—as one newspaper expressed it—the threads of a disease that has become endemic to legislation under the Labour Government: the reserve power. When the Bill is eventually enacted, it will allow the Government to change the rules without bothering with legislation in many cases. The Treasury will decide which activities will or will not be regulated by the Bill, what financial information will or will not be allowed, and so on. As my hon. Friend the Member for Chichester (Mr. Tyrie) mentioned, the Government are creating an enormous leviathan without first defining its terms of remit.
I want to flag up a few concerns. How on earth can the Government proceed to create an authority that has statutory immunity, sold to us on the rather flimsy excuses of what happened back in 1986 and on what may or may not happen in the United States, without the counter-balance of an independent inspector with the power to award compensation? That is a major issue which should have been resolved some time ago, but has not been.
The timing under the Bill of the competition objective principle that we should like to see is extraordinary—[Interruption.]—Labour Members do not seem to want to touch on those facts. During the same week that we were faced with that matter in Standing Committee, Mr. Cruickshank—who had been appointed by the Government to look into competitive practices in the banking industry—produced a draft report. We are expecting the full report later on this year. That draft report quite clearly conflicted with what we had been led to believe the Government were trying to achieve in the Bill. Therein lies an absurdity: if the Chancellor is to accept the terms of that report—if the draft becomes the full report later in the year—there will be a conflict of interest with what we are trying to debate in Committee as to the terms of competitive practices in the Bill.
My hon. Friend the Member for Chichester referred to market abuse clauses; they have still to be dealt with. However, the whole problem of conflict with the European convention on human rights, to which the attention of the Burns Committee was drawn, has still not been resolved. I am not aware that any progress has been made.
Is it not true that all these questions—the tribunal, the conflict with the European convention on human rights and all the other issues raised by the hon. Gentleman—have actually been resolved, but not in the way that he would have preferred?
If only that were so. The hon. Gentleman who, like me, served on the Standing Committee and the Joint Committee, should re-check the Burns report and the subsequent amendments to the Bill. He knows full well that those questions have not been resolved. The Bill remains wide open to be taken to the European Court for abuse of the ECHR. There have certainly been some improvements in respect of legal aid and the non-use of incriminating statements but, as the Treasury's own solicitors said, when they accompanied the then Economic Secretary, now the Minister for Small Business and E-Commerce, to give evidence to the Burns Committee on market abuse, they simply cannot be certain.
The Burns Committee heard extremely learned judgments from legal experts that threw serious doubt on the compatibility of the Bill with the ECHR. If the hon. Member for Bexleyheath and Crayford (Mr. Beard) studies the text of the report again, he will acknowledge that. By no means is the Bill in the clear.
I am grateful, Mr. Deputy Speaker, and I shall conclude my comments. Without going into the ins and outs of certain clauses, I merely wanted to illustrate my argument as to the timing of our scrutiny of the Bill. We are expected to scrutinise legislation which the Government have not yet formulated properly. That process relies on our good will in believing that the Government will table amendments on Report. Unless the Report stage is extremely long, those amendments will not receive the scrutiny that they deserve. Without returning to specifics, I emphasise that important issues have yet to be resolved.
The Bill has so far had a bad passage. Its progress has been greatly assisted by Lord Burns and his Committee coming to the Government's rescue after the Government launched a rather ill-drafted Bill in July 1998. Let the Government be in no doubt: if the Opposition agree to the carry-over, it will be because we put the needs of the financial services industry—which desperately needs the Bill—first; and because of the threat that, if the carry-over were not to pass, the Government would impose a guillotine to push through the legislation in the new Session, regardless of the detailed scrutiny that such a Bill requires.
I hope that, if the Opposition go along with the Government's proposal today, Ministers will shape up and become more responsive to the practical concerns that we have raised on behalf of many experts in the financial services industry and that, as the Bill progresses through Standing Committee, they will adopt many of the suggestions that we have tabled in the form of practical amendments to the Bill. Let us not forget that, of the 367 clauses, the Committee has reached only clause 52. In the renewed spirit of co-operation, I hope that the Government will be able to redeem themselves in the remaining weeks and months of the Bill's passage, both before and after the Queen's Speech.
I share the dislike of a carry-over and the precedent that it sets. As the hon. Member for Crewe and Nantwich (Mrs. Dunwoody) and my right hon. Friend the Member for Bromley and Chislehurst (Mr. Forth) stated, a carry-over removes the discipline of a timetable and creates a precedent that may be abused in respect of other legislation.
I accept the carry-over of the Financial Services and Markets Bill on good faith: the Opposition agreed to carry over the Bill, subject to the Government's publishing it promptly, which they did, and subject to the Government's following the recommendations of, and resolving the issues raised by, the Burns Committee. I hope that Ministers will tell the House this evening that they will address the outstanding issues raised by the Burns Committee.
As my colleagues have pointed out, there is no practical alternative to the carry-over. Many drafting problems have been discovered in the Bill and the Government are to table an enormous volume of new clauses and amendments to the Bill on Report. The imposition of a guillotine now would be against the interests of consumers, the industry and the country. From a practical perspective, all of us are forced to agree that there is little choice but to carry over the Bill. Incidentally, I should declare an interest as set out in the Register of Members' Interests.
The Parliamentary Secretary, Privy Council Office, said that the Bill was supported by the City; in fact, the Bill is by no means supported in its entirety by the City. The financial services industry, quite correctly, accepted the majority by which the Labour Government were elected and their right to legislate as set out in their manifesto. The industry desperately wants the law to be completed, because it is unsatisfactory that the Financial Services Authority is operating without statutory cover. However, the industry—by which I mean not just the City, but the industry throughout the country and the hundreds of thousands who work in it—is not content with many aspects of the Bill as it stands.
My right hon. Friend the Member for Wells (Mr. Heathcoat-Amory) noted that the Bill does not address the conflict with the European convention on human rights, and that there is a substantial body of legal opinion that the Bill remains defective.
My right hon. and learned Friend the Member for North-East Bedfordshire (Sir N. Lyell) pointed out that, as a framework Bill, it is far too long. The framework should have been dealt with in 50 pages. My right hon. and learned Friend and others drew attention to the importance of making competition an objective of the Bill. My right hon. and learned Friend also observed that better law is often made by leaving certain issues to the discretion of the courts, rather than by seeking to regulate for every situation.
My hon. Friend the Member for Chichester (Mr. Tyrie) covered some key points not referred to by others. He said that the Bill has not fully addressed the Burns Committee recommendations with regard to systemic risk—a matter on which none other than the head of the United States Federal Reserve has been critical of the proposals in the Bill. The Bill has not dealt with the proposals that there should be confirmatory hearings by the House of Commons on the appointment of the Financial Services Authority's chief executive, or the requirement for the FSA to consult consumer panels.
My hon. Friend the Member for East Worthing and Shoreham (Mr. Loughton) expressed the very human desire for the carry-over, to avoid having to go over the same ground again. He made some sound practical points, and observed that it is substantially the Government's fault that this debate is taking place.
My hon. Friend reminded us that there are about 1 million people working in the financial services industry, representing 7 per cent. of our national product, and thus of the importance of getting the legislation right. He pointed out that part of the problem has been the extraordinary succession of new Ministers being required to get their minds around such a complicated Bill.
With regard to the Burns Committee recommendations, we believe that there are important areas in which the Government have not followed the deal—perhaps they intend to do so in a different way. The Burns Committee advised that the complaints investigator should be entirely independent of the FSA and should have the ability to award damages. It also recommended that individuals should be able to defend themselves under the European convention on human rights against serious regulatory offences. The body of legal opinion has made it clear that that goes well beyond the market abuse offences.
This has everything to do with the motion. There was conditional agreement between the Opposition and the Government, and the Opposition wish to honour that in good faith. I repeat that we agreed to the roll-over on the understanding that the Government would follow the Burns Committee, so it is of great relevance to the House to know and understand where the Government have not followed the Committee's recommendations. I hope that, when the Minister winds up, she will be able to give the House comfort, and say that the Government intend to follow the recommendations of the Burns Committee.
Is my hon. Friend saying that he will recommend that Conservative Members support the motion only if he receives the assurances for which he is asking from the Government and that, by implication, we will not support it if we do not receive those undertakings? I gather that that is what he is saying. Will he confirm that?
I thank my right hon. Friend. I have made two points: one concerns the Opposition behaving honourably—something that we should do—and the other is that there is no choice but to agree a roll-over. Although the Bill is in need of substantial further correction, we do not have the time to do that and the alternative is that a measure that would seriously damage the livelihoods of 1 million people might be enacted. However, I look to the Government to give the assurances that they will honour the basis on which we agreed to the roll-over and that they intend to address the outstanding issues on which the Burns Committee made recommendations where they have not yet done so.
On the matter of parliamentary convention, which my hon. Friend is dealing with, does he agree that it would be impossible for the Government to take the Bill through the House of Lords in this state? Were the House to vote the motion down, the Bill would fall. However, does it not follow from that that the maintenance of the convention in good faith is absolutely essential and that he is entitled to insist on it?
I thank my right hon. and learned Friend, who has brought out the point that I was seeking to make. The Bill is in no state to be guillotined and to go to the House of Lords. Given that 7 per cent. of our economy and the jobs of 1 million people are at risk, any responsible Member of the House would want the Bill to be put into proper shape. It would be irresponsible to take any other stance.
If you will briefly indulge me, Mr. Deputy Speaker, I shall refer to areas on which the Burns Committee was silent, although it invited the Government to come up with proposals. Those are the areas in which the financial services industry itself is looking to the Government to sort out the various problems and to get the legislation right. The Bill attempts to regulate the business of non-UK branches and activities of UK-based businesses.
Mr. Deputy Speaker:
There has been great consistency on the part of incumbents of the Chair. We have said that the substance of the Bill can be referred to when arguments are being made for or against the motion, but the weight of emphasis should be on the procedural aspects.
As others have pointed out, there is a major mistake in the proposed regulation of E-commerce. The Government want to support E-commerce in this country and make Britain a leader in it, but clause 19 will be extremely damaging to the interests of E-commerce.
The Government have not yet demonstrated that they are keeping their side of the bargain and following the Burns Committee recommendations on certain key issues. Neither have they, by further consultation or in their proposals, responded to several key issues of widespread concern to the many people who work in the industry. We look to the Government this evening to give us comfort on those issues.
I wish to make it clear that we support this carry-over motion in the interests of common sense and of the industry, where there is little alternative.
I shall endeavour to stick to your recent injunction, Mr. Deputy Speaker, to keep to the procedural points as closely as I can, rather than stray down the path of dealing with the substance of the Bill.
After this Government came to power, we announced that the existing patchwork of financial regulators—nine in total—would be replaced by a single statutory regulator, subsequently named the Financial Services Authority. This Bill is a prime example of the Government's aim to reform and modernise Britain. It responds to the changing face of the financial services industry, brings a fair deal to both consumers and providers, and reduces the current scope for duplication and inconsistencies.
As many hon. Members have said, the Bill is complex. However, it will bring a range of positive benefits, which are pro market confidence, pro consumer protection, pro consumer awareness and anti financial crime. It will enable the FSA to be tough on City crime, malpractice and abuse, including insider dealing, rogue trading, money laundering and market manipulation, and will give the FSA wide powers to deal with those unacceptable activities. In giving the FSA a coherent set of modern regulatory powers, it constitutes a thorough and necessary overhaul of the relevant part of the statute book. That is a major task, which is why the Bill is so complex. It is a task that this Government have not shirked and on which we have been determined to consult fully. We therefore listened to and responded to the views of many individuals, institutions and groups.
Opposition Members disagree among themselves about what their response should be to the Bill, the City and this carry-over motion. This evening's debate has reflected their disagreement. We have, however, heard some voices of sanity from those who wish to honour their commitment to allow the Bill to proceed through this carry-over motion. They recognise that the Bill is extremely important and will bring substantial benefits to the financial services industry and its regulation in the UK, and therefore to the future of the global industry. It will also bring substantial benefits to consumers.
No. The hon. Gentleman has only just arrived in the Chamber.
I shall deal with some of the points made by the right hon. and learned Member for North-East Bedfordshire (Sir N. Lyell). I had some sympathy with his interest in the detail of this matter, but I sometimes felt as though I had already arrived in Standing Committee A, which will discuss the Bill tomorrow. The right hon. and learned Gentleman made a point about how much the Bill had been thought through beforehand. That needs to be addressed time and again. The purpose of the revised procedure, which the House supported, is that it enables us to produce better legislation by putting complicated Bills through the draft Bill procedure. At least two Opposition Members who are present today were members of the Joint Committee that looked at the draft Bill. That Committee arrived at its conclusions unanimously. That shows that consultation and discussion can bring about further improvements to legislation, which is why we have gone through this part of the process.
No, not at this point. I may give way later.
The hon. Member for Altrincham and Sale, West (Mr. Brady) suggested that there should be fewer Bills, so that they could be better scrutinised. The Bill has made slow progress because it is receiving such detailed scrutiny. Until the summer recess, the rate of progress was 19 or 20 clauses in 11 sittings. I am not criticising that rate of progress: I am merely pointing out that it is an important Bill and that some clauses require more detailed scrutiny than others. Consequently, we shall not make it through 367 clauses, and I have considerable sympathy with those who say that it would not be a good thing were the Bill to be guillotined.
The right hon. Member for Bromley and Chislehurst (Mr. Forth) believes that there should be fewer Bills. He put that maxim into practice—although not with the popular consequences that he foresaw in this case—when he killed the private Member's Bill to ban fur farming. His actions did not have the public support and acclamation that he thinks that principle should receive.
The right hon. Gentleman is seriously at odds with his Front-Bench colleagues on this Bill. He believes that they are conniving with the Government. It is sad that Opposition Members who are working to try to improve a Bill—often in opposition to the Government, but not always—are seen as conniving with the Government.
The right hon. Gentleman also attacked the City, which is extraordinary, and shows another dimension to the odd views expressed by Conservative Members. Let me make
it plain to the House that we have had much support from the City on this Bill. The British Bankers Association said that the
introduction of a single legislative framework for the financial services industry in the UK is welcome, as is the creation of a single industry regulator.
The Independent Financial Advisers Association said that it
broadly welcomes the objectives and provisions … fully support the objective of bringing all financial regulation under the control of a single authority.
From a different point of view, the Consumers Association said:
We are certainly enthusiastic about the Bill and we see a variety of advantages in having a single regulator".
It is a complicated task, and no one would deny that.
My right hon. Friend the Member for Ashton—under—Lyne (Mr. Sheldon) asked whether this is an exceptional arrangement, and it is worth while addressing that issue. The agreement with the Opposition is that consideration will be given on a one-by-one basis. An individual Bill will be considered for carry-over if it has been agreed beforehand that that procedure could apply, and if the Bill is still before that House at the end of the Session. Those conditions will not vary: they are safeguards built into the carry-over provision. If we do not stick to them, there would be difficulties. However, there is no danger of our not sticking to the provisions that have already been made with the agreement of both sides of the House.
I am grateful to the right hon. Gentleman for giving me the opportunity to emphasise that we shall consider each Bill one by one. That is the correct way to make a decision on such matters. We should consider how strong the evidence is on an individual Bill. In this instance, the evidence is strongly in favour of putting this Bill through this procedure.
The hon. Member for Chichester (Mr. Tyrie), who, sadly, is no longer present, referred to the Burns Committee, and our response to amendments. We believe that we have taken on board most of the Committee's points; indeed, the right hon. Member for Wells (Mr. Heathcoat—Amory) conceded that we had taken on board many, indeed the majority, of those points.
This point arose earlier. The very institution that the Minister cited has also carried out a proper audit of the Burns Committee report vis a vis the Bill—and the Government have taken on board not many, not the majority, but fewer than half of the Committee's proposals. If the Minister was so impressed by the unanimity on the Committee, why did the Government not take on board the majority of its recommendations?
We must agree to differ. I believe that we have taken on board the majority of the recommendations.
There is a danger of our losing sight of the fact that the point of a Standing Committee is to enable Bills to be debated in detail, clause by clause. Some Members are apparently tempted to try to do that here today.
We share the enthusiasm of the right hon. Member for Cities of London and Westminster (Mr. Brooke) for ensuring that the Bill reaches the statute book. We agree that its importance should be recognised. I have given the right hon. Gentleman assurances about the way in which the procedure is likely to be used.
There is a dichotomy in the views expressed by Opposition Members. They do not seem to know in which direction they are going. Some seem to believe that consultation is important, and that we have not engaged in that process well enough at times; others believe that consultation has been holding up the process, and want to know why we could not announce the results immediately, so that we could make speedier progress with the Bill. Some consider that the Bill is ill drafted, but the whole point of the new procedure is to enable Bills to be better drafted. This Bill was not ill drafted in the first place, but it has benefited from exactly the kind of discussion in which the House believes. There is no point in our spending hours debating legislation both in Committee and in the Chamber if that does not enable us to make improvements.
Some Opposition Members believe in financial services, and in support for the City—many, I trust—but there are those who do not believe in those things, and who do not believe that the City welcomes the Bill. There are those who think that the carry-over should be opposed regardless, because they do not believe in the carry-over principle, no matter how much damage that would do. There are those who have faith in their Front-Bench Members, and those who do not.
When we have accepted amendments in Committee recently, or have accepted the spirit of amendments, Opposition Members, rather than welcoming that, have criticised us on occasion, saying that it is not good enough and that there will be a longer debate on Report as a result. They cannot have their cake and eat it.
I am pleased to hear the hon. Gentleman say that the Opposition are trying to have their cake and eat it. That confirms what I suspected.
The hon. Member for Arundel and South Downs (Mr. Flight) said that the industry was not content. The industry will be even more not content if the Bill is abandoned, rather than being carried over. It is the duty of both sides in the Committee to ensure that we have a good Bill, and we believe that we have a good Bill—although no doubt we shall have a better Bill as a result of the debates that we are likely to have in Committee.
The hon. Gentleman complained about the framework, agreeing with the right hon. and learned Member for North-East Bedfordshire that it should have been tighter; but, whenever the Committee has proposed secondary legislation, Opposition Members have said that they are not happy about that either. We have to be able to address the rest of the Bill in Standing Committee in the detail that it deserves, which cannot happen in this Session.
I will not detain the House further with a list of our improvements and commitments to consider recommendations, to which we will return as the Bill continues its passage through Parliament. The Bill is bound to provoke a technically complex and wide-ranging debate. It will transform the financial sector for the better. Our policy aims are clear: to create a world-class regulator that operates in a fair, efficient, proportionate and accountable way, combining a light regulatory touch where possible, with better consumer protection where necessary. We need the legislation to pass through as quickly and efficiently as possible, so that the many benefits that I have outlined can be gained. Against that background, I commend the motion to the House.
That the following provisions shall apply to the Financial Services and Markets Bill: