With this it will be convenient to discuss the following amendments: No. 20, in page 196, line 41, leave out "Authority" and insert "Treasury". No. 54, in page 197, line 8, at end insert—
(aa) reviewing and approving the Authority's annual budget of income and expenditure,".
No. 21, in page 197, line 10, leave out "and".
No. 22, in page 197, line 13, at end insert—
(d) providing an independent perspective on the overall running of the Authority, scrutinising and monitoring the approach of its executive management, the Authority's performance and its standards of conduct".
This group concerns the powers of the chief executive and chairman and whether they should be combined or separated. The amendments also make provision for changes in connection with the non-executive directors.
The Bill gives statutory backing to the Financial Services Authority, which relies in most cases on powers derived from the Financial Services Act 1986. The FSA can rely in some respects on more recent legislation such as the Bank of England Act 1998, which provided for banking supervision to be given to the FSA.
In many respects, the Bill gives statutory backing to an authority and concentrates executive authority in a way not seen before in regulatory legislation. The FSA will not only be a strong executive body but will make rules that will have the force of law. Those rules will be consulted on and I am sure that the FSA will not bring them forward without proper care and attention—but Parliament will be delegating that rule-making and, in effect, law-making process to another body. We ought to be careful of the conditions under which we do that, and need to put checks on any abuses that could occur.
The FSA will also enforce its rules. It will investigate breaches and discipline those found to be breaking them—if necessary with large fines. The authority's power to fine will be unlimited. The FSA is not part of government, so not directly accountable to the House. It is a private company limited by guarantee but has statutory functions conferred by the Bill and other measures. The authority enjoys a considerable degree of statutory immunity, which we shall debate in due course.
Even from that brief and inadequate description of the FSA, it is clear that its accountability is an important issue. The authority must be accountable to the market it serves; to those who have paid its expenses through the levy; and to consumers and Ministers—and it must be accountable at law. One safeguard is to ensure the correctness of the FSA's internal management structures—the powers of the directors and chairman and their relationship with each other and the outside world.
The amendment provides for a separate chairman and chief executive. It has been pointed out that good corporate governance now requires the separation of chairman and chief executive. That was a recommendation of the Greenbury committee, and is still accepted to be how large public companies should be structured.
Against that, it is said that the FSA is not a commercial company in the normal sense of the word. It is a company, of course, but it certainly does not have normal shareholders. On the other hand, many public bodies do have different chairmen and chief executives, the BBC being one. We can all be grateful that there is not a concentration of power in a single person at the BBC. Instead, the director general is, in some senses, accountable to the chairman and the governors. A number of regulatory agencies are similarly structured—the Environment Agency, for example, has a separate chief executive and chairman.
Against that, it has been argued fairly that most foreign financial regulators have combined the two tasks of chairman and chief executive. However, not many overseas regulators have brought together so many powers in one body. It is comparatively unusual for banking supervision to be conducted by the same body as regulates the rest of the market. Clearly, the debate could go to and fro almost indefinitely, and I am not sure if the issue can be decided in that way.
I prefer to look instead and be influenced by more long-term considerations about how the FSA should be run. Also, we should not be too influenced by any particular holder of the office. Howard Davies is the present executive chairman of the FSA. I have a high regard for him, and it is no criticism of him that we believe, as a development in the longer term, that the roles should be split. That was the recommendation also of the Joint Lords and Commons Committee which examined the issue last year.
I emphasise that we are legislating for the longer term. People come and go, personalities change and the regulatory environment alters. We must set up the necessary internal checks and balances to prevent any abuse of power, while ensuring that the FSA is a strong and effective regulator.
Absolutely. The chairman is appointed by the Treasury at present, so the chief executive should be. The hon. Gentleman has interpreted the amendment correctly.
I was about to refer to the powers and role of the non-executives; it would enhance their role if they came under a non-executive chairman. That is an important part of the thinking behind our amendments. In other amendments, we want the Treasury, and not the FSA, to appoint the members of the non-executives committee.
As I have said, it is not my intention to do anything to change the position of the current chairman, who has another two and a half years in the job. If the Government accepted the amendment, I am sure that they could devise a form of words to give clarity to the thought that the proposal is for the longer term and would not upset the present managerial structure as it affects the chairman.
I conclude by dealing with the role of the non-executive directors. The other amendments in the group are designed to give them and the committee of non-executive directors the additional and stronger functions that they need. Specifically, they should be given the tasks of reviewing and approving the annual budget and of explicitly scrutinising and monitoring the executive management. As the Bill stands, they have several specified functions, but they are somewhat insipid.
I contrast the wording in the schedule with what the FSA believes non-executives should do in the rest of the market. Consultation paper No. 35 helpfully lays out what it believes they should do. Their role should include
assisting their executive colleagues within the firm's governing body in setting, and monitoring, the firm's strategy;
providing an independent perspective to the overall running of the business, scrutinising the approach of executive management, the firm's performance and standards of conduct".
That is a fairly good description of what non-executives should do and it should be reflected in the functions required of the FSA's non-executive members. The amendments would bring the Bill's wording into line with the FSA's view of what non-executives should do.
I hope that I have said enough in this brief introduction to give our thinking about the roles of chairman and chief executive and to put that in the context of what we believe non-executives should do when they are headed, as they should be, by a non-executive chairman.
As long as you do not compare me with our famous mouse, Mr. Deputy Speaker.
I shall be very brief in urging Ministers to resist these strange amendments. Their ostensible purpose is to ensure greater accountability to the markets and an independent voice in the FSA. However, the means that they adopt to achieve that objective would increase the Treasury's power of appointment. That cannot be sensible. It cannot be right that the post of chief executive should be set up as a Government appointment on the FSA; nor is it right, as one amendment suggests, that the members of the non-executive committee, which has the scrutiny role, should also be appointed by the Treasury.
It is absurd that the Opposition should move an amendment that increases the Treasury's power of appointment over the FSA. If their objective is—I can see why it might be and I have some sympathy with it—to strengthen the FSA's accountability to the markets, then the amendments are wholly misconceived.
I ask the Government to think again on the amendments. They are not about personalities. Howard Davies is widely respected; much is hoped from him and will, no doubt, be delivered. However, history is littered with errors made under the aegis of distinguished, able and well-thought-of people; what is important is to get the structure right in the first place.
The Greenbury report stated that large commercial organisations should have both a chairman and chief executive. There are fundamentally good reasons to have two people at the top, one with the executive role and the other with the non-executive role of chairman. The post of chief executive carries enormous power and responsibility; it is therefore a function that one is happy to see Howard Davies performing. However, where there is both a chairman and a chief executive, the latter has the opportunity to consult the former.
In addition, there are greater opportunities for the world at large and those who are regulated to approach the chairman. It is difficult to make suggestions directly to someone who is doing his best as chief executive at a time when the going is rough and the climate hot. When the chief executive is embroiled in controversy, it is difficult for him to listen as open-mindedly as a chairman can. The chairman has the advantage of being one step back, as well as one rung above. That is a valuable structure, recognised by Greenbury, from which the FSA would benefit.
The same reasoning underlies our amendments dealing with the role of the non-executive directors. A problem at which I hinted during our debate on the order of consideration is that the Bill is inclined to be far too restrictive in terms of the accountability and the opportunity for supervision of the FSA, and of the accountability through the FSA of the Government of the day for the general good management of our financial services industry. Those elements will be strengthened if the role of non-executive directors includes the power to give an independent overall perspective on the running of that enormous institution.
Would not the proposals create duplication? Is not what the right hon. and learned Gentleman describes the board's job? Are not non-executive directors members of the board?
I am not sure whether duplication would result. However, reading the parts of the Bill that our amendments would amend, especially schedule 1, it is striking that the functions of the non-executive directors are deliberately boxed in, largely confined to matters of financial efficiency. I want their role to extend beyond such matters, to that of providing an overall perspective.
I cannot imagine that there will be any objection in principle to the amendments. This debate offers the Government an opportunity to change their mind here and now, or to set the scene for the debate in another place, where such matters will be carefully scrutinised. Our proposals in respect of the chairmanship and the role of non-executive directors are thoroughly sensible and constructive. I hope that they will find favour.
I echo the comments of my right hon. and learned Friend the Member for North-East Bedfordshire (Sir N. Lyell). The amendments in respect of the role of the board, especially the chief executive and chairman, are in no way personal to Howard Davies. Everyone who has followed the Bill and dealt with the FSA will have great respect for the job that he is doing and the amount of work that he is putting into it. It could be said that he is already doing the jobs of two men—or two women—and I calculate that he is being paid the equivalent of the combined salaries of the Treasury Ministers now present to do them. We are not arguing with the person now in the job. However, the point of principle goes to the heart of our problems with the thrust of the Bill. That is why we laboured it greatly and, I think, usefully in Committee.
As we know, Howard Davies's contract comes to an end in July 2002. Before or after that date, we may or may not be dealing with a different head of the Financial Services Authority. That is one of the reasons why the report of the Burns committee clearly and unequivocally, and with no objection, as I recall, from the members, recommended that the post of chairman and chief executive be separated and that a non-executive chairman be appointed. That is clear in black and white and there was no dispute about the recommendation at the time.
I hark back to the comparison with good corporate governance, which my right hon. Friend the Member for Wells (Mr. Heathcoat-Amory) mentioned, and the terms under the Cadbury recommendations that there should be
a clearly accepted division of responsibilities at the head of a company which will ensure a balance of power and authority such that no one individual has unfettered powers of decision.
We are dealing with an immensely powerful body—some of us might say too powerful—the head of which, inevitably, can wield a substantial degree of power. The FSA annual report boasts that the FSA, as a structure, complies with Cadbury. That is rather curious given that we have two roles embodied in one person. I gather that in its defence the FSA has complained that having dual heads would complicate matters with the FSA and might compromise the position of the head of the organisation when dealing with overseas counterparts.
I do not see why the FSA should be any different from other organisations, be they companies or Government agencies, which comfortably deal with foreign counterparts with a split of roles at the top. There may be a case for saying that it was justified to have one supremo during a period of turbulence and reorganisation, but not when that period came to an end.
When the Bill is enacted and becomes law, we would like the roles to be split. We would very much welcome Howard Davies staying on in the key role. We are concerned that having one head at the top affects relationships between that head and the members of the non-executive board. It has implications also for the setting of agendas for board meetings if that is down to one individual.
Does the hon. Gentleman agree that the flaw in the argument that he and his colleagues are advancing, is that they are making an analogy between a normal commercial company and the Financial Services Authority? If a chairman and a chief executive of the FSA had to consider a major investigation, there would be every incentive for investigators at all levels to try to drive a wedge between them. If there were not one authority at the top, there would be a standing invitation to do just that. The circumstances are quite different from those of a commercial organisation. The FSA is far nearer being in the position of an army in the field. No sensible person would consider that the commander of an army in the field should have a chairman above him.
That is an interesting point. I sense a slight change of tack since the hon. Gentleman debated this issue in Committee. I recall that he said then that, unlike the case with commercial companies, the head of a regulatory organisation needs to be able to act swiftly, overnight or whatever. I disputed that. A regulatory organisation is no different from a large multinational company, which needs to act quickly in a takeover. However, the hon. Gentleman now takes the tack that there may be division between the two people at the top.
If the FSA does its job properly, it will be able to agree cabinet and committee responsibility, and the chairman and the chief executive should be singing from the same song sheet. If there were two roles, there would be two views, at least behind the closed doors of the FSA, in the committee meetings to decide policy. Those views could provoke a proper, full debate, and a single resolution, which would become the FSA's policy.
The hon. Gentleman has already drawn attention to the chairman's appointment by the Treasury and made a point of mentioning his substantial salary. The amendment suggests that a chief executive should be appointed by the Treasury, also on a substantial salary. He suggests that in public, the chief executive and the chairman should agree, but that they should be allowed to disagree privately. If a Labour-controlled Much Binding in the Marsh district council did that, the hon. Gentleman's view would be different.
I appreciate that Labour Members are not given much opportunity to disagree. They are given a line, which they have to feed to everybody. There is no problem if non-executive directors, chairmen, or executive managing directors of the FSA want to disagree among themselves. That is how policy is made, although events in the House in past few days suggest that the Government do not like policy to be made in that way. I do not understand the problem that the hon. Gentleman tried to identify.
There is a danger of the financial services industry becoming personified in the figure of Howard Davies because he is such an important one. I wanted to discover why the FSA should be different not only from commercial companies but from other quangos and Government agencies and companies, so I did some research. There are numerous examples of bodies—for example, the Environment Agency—which have a chairman, a deputy chairman and a chief executive. My right hon. Friend the Member for Wells mentioned the BBC. Divisions of responsibility between chairmen and chief executives exist in other regulatory bodies—for example, in the Investment Management Regulatory Organisation, the Securities and Investment Board and the Securities and Futures Authority.
Much of the Bill was based on the experience of self-regulating organisations. Why should the FSA be different? Logic tells us that it should not be different because it is much more powerful than the other organisations that I mentioned. Investing so much power in one person in that more powerful body is dangerous.
A host of other organisations routinely divide responsibilities; for example, the New Millennium Experience Company Ltd, which the Government would doubtless like to support, the new opportunities fund, the Occupational Pensions Regulatory Authority, the Criminal Cases Review Commission and the Youth Justice Board for England and Wales. Those organisations have regulatory powers, albeit not on the scale of the FSA, and have always divided responsibilities between chairmen and chief executives.
One has to do a great deal of research to uncover organisations that do not have such a split. The Library provided me with only two examples: Trinity House Lighthouse Service and the Central Laboratory for the Research Councils, whose chairman and chief executive are embodied in the same person.
The Bill provides for an exception. That is why we argued so hard, but fruitlessly, given the attention that the Government paid to our arguments, in Committee. I strongly support amendment No. 19, because its principle goes to the heart of the FSA's accountability.
The other four other amendments in the group deal with the appointment of non-executives by the Treasury. The hon. Member for Newcastle upon Tyne, Central (Mr. Cousins) thought it more dangerous for the Treasury to have the power to appoint all those people, but if a system is working properly—which it should be, but which it does not always do under the Government—the Treasury is scrutinised by Parliament. We have the power, through debates in the Chamber or Select Committee procedure, to scrutinise the Ministers who make those decisions as to whether appointments are just and efficient. I do not see why the hon. Gentleman fears that process, because the House already has such powers and we are trying to open them up to even more scrutiny.
The hon. Gentleman must see that the issue here is accountability to the markets, which must feel that they have some influence on the conduct of the FSA. Such close, fine-grain operational intervention by the Treasury—to the extent that even the members of that important non-executive committee are also appointed entirely by it—is wholly absurd.
The hon. Gentleman holds an interesting personal view, but if he had followed our discussions in Committee he would not necessarily take such a line. I am afraid that the FSA, certainly in respect of the Bill, is not accountable only to the industry by any manner of means. We have tabled amendments and new clauses, to make it more accountable in terms of the charges and additional regulation that it might place on the industry.
I fear that the vast majority of our deliberations in Committee have not been taken up by the Government, and I am sure that the hon. Gentleman agrees with my concern. If they do not want to make the people running the FSA more accountable to the industry they are regulating, we must make sure that they are accountable not behind closed doors, but to the House. That is the whole point of amendment No. 20.
As my right hon. Friend the Member for Wells said, amendment No. 54 would give the non-executives a greater role in reviewing and approving the budget. It is essential that other people—the non-executive directors—have greater powers of scrutiny over the value for money offered to the industry by the FSA and over whether its budget is either sufficient to do its job properly or too generous, resulting in the industry's being penalised by excessive regulation.
Amendments Nos. 21 and 22 do no more than echo the words of consultation paper No. 35 from the FSA on senior management arrangements, systems and controls. Their wording is almost identical to section 4 of the paper. If the FSA seeks powers and the Government want to give it powers to meddle—some might say—in the internal structures used by member firms to arraign their management and go about their business, surely one should at the very least expect the senior FSA board members who are setting down the regulations to adhere to the same standards and requirements. That is purely a matter of consistency, which is why we were surprised that the Government did not wish to take it up when we raised it in Committee and before.
We are considering important amendments—some might say the most important—at this early stage because they go to the heart of the accountability of the organisation and, in particular, the people who will be responsible for it and keeping a check on its budgets and the number of regulations it produces. The person who runs it now has charge of at least 2,000 people, and if mortgages are to be regulated as well, he will have charge of an awful lot more. That person has enormous power and it is only right that it be properly shared and scrutinised, and, more important, that it should be seen to be properly shared and scrutinised. Ultimate accountability should be to the House.
I have just been given a redraft of part of the Bill, which those on the Treasury Bench have kindly provided. This gives a feel for the scale of the redrafting, which is being done on the hoof. None of us has had the remotest chance to absorb the draft—we are receiving it as I speak, which is extraordinary. Frankly, it is disgraceful and disrespectful to the industry that we are trying to regulate.
The hon. Member for Newcastle upon Tyne, Central (Mr. Cousins) was on the right track, but not with respect to schedule 1. He is absolutely right that the Treasury has huge power under the Bill, and that that power should be diminished. He is not right that the Treasury power of appointment over a chairman and a chief executive is necessarily wrong. [Interruption.] I shall give the hon. Gentleman the opportunity to intervene in a moment.
I strongly support the sentiment behind the hon. Gentleman's interventions and urge him to read the last subsection of clause 10. He will see the extent to which the Treasury is being given powers. He should also consider clause 372—a jumbo, omnibus, sweep-up clause that ensures that the Treasury can do exactly what it likes, notwithstanding the preceding 371 clauses. If he looks at the last subsection of a number of other clauses, he will find that, in case the draftsmen have got it wrong, the Treasury can vary matters by order without interference from anybody else, least of all the House or the hon. Gentleman.
I want to discuss a few matters that have not been articulated by my right hon. and hon. Friends. We need to be clear that we are creating a leviathan—an institution of unprecedented power and authority. If it had not been for the Burns committee report—which flagged up the extent to which the Financial Services Authority was effectively becoming judge, jury and executioner—we should have had an even more inadequate tribunal procedure. None the less, the chairman of the authority will still be able, in the mere blink of an eye, to close down businesses, destroy reputations and impose heavy fines. While doing all that, he will have virtually complete statutory immunity. We shall have a new tier of the judicial system—the court system will have a new financial judiciary system sitting alongside it. I am not yet convinced that that is the right way to go.
We are creating the most powerful body in this country after the Government, which is why it is crucial that there should be some check on the powers of the chief executive or chairman of such an authority. Someone to whom aggrieved parties can explain their concerns independently should be looking over the Executive director's shoulder, acting as a long-stop in the event of illness or something more serious. Leaving all that power in the hands of one man is not a reasonable way to go. My hon. Friend the Member for East Worthing and Shoreham (Mr. Loughton) referred to a passage from the Cadbury report, which is very relevant, which says that it is certainly right for companies and corporate bodies to have a division at the top between a chairman and a chief executive.
I reiterate the point made by my hon. Friend that Howard Davies is a very good chap. I have known him a long time and am I sure that he does an excellent job. I more or less took over from him as special adviser in the Treasury to Nigel Lawson. In those days, he was identified as a political adviser to the then Conservative Government, but is now a much more neutral figure, particularly as he attached his name to the Rowntree report on inequality when Director General of the Confederation of British Industry. He has done, and will continue to do, an outstanding job. He, among others, has articulated three arguments as to why he does not see why he should have someone looking over his shoulder.
The first argument is that comparable international bodies do not have somebody looking over their shoulders. The only remotely comparable body is the Securities and Exchange Commission in the United States, but it deals with a small proportion of what the FSA will be required to deal with. That is not a genuine comparison. We are dealing with something new and we are in uncharted territory. We are dealing with a rule-making, self-sustaining body on a scale that we have never had in the United Kingdom.
Why does the hon. Gentleman persist in minimising the considerable expertise and distinction of the board members, executive and non-executive? His line of argument seems to suggest that the board is a mere puppet. That is not and will not be the case. Does he accept that argument?
I have not yet mentioned the board, but I promise to do so before I sit down. If I may, I shall deal with that point when I come on to our other amendments that would strengthen the hands of the non-executive directors.
The second argument made by Howard Davies and others is that to make the memorandum of understanding between the Treasury, the FSA and the Bank of England work, we must have one clearly identifiable person in charge to deal with problems if they turn swiftly into crises. It is argued that we must not have responsibility so split that nobody knows who is responsible for what. I have read the memorandum and that argument does not remotely wash.
There is indeed a division of responsibility, but the main problem with the memorandum is not a putative division of responsibility within the FSA, but the division of responsibility between three groups. It will often be the FSA's job to spot early when trouble may arise in a particular firm which may generate a serious prudential or systemic problem. It is the Bank of England's responsibility to suggest and put in place a support operation and to take any action that may be required to deal with systemic risk, which may include the adjustment of interest rates in conjunction with the Monetary Policy Committee. The Chancellor is responsible for all of that to Parliament.
Furthermore, in a provision tucked in the middle of paragraph 13 of the memorandum, which has not been given remotely enough attention, we discover that the Chancellor has the option of refusing to support a given action. In other words, he has the power of veto over the other two bodies. We have, then, real scope for confusion built into the memorandum. As yet it is wholly untested. If it is tested, I worry that it might be found wanting. That is the real division of responsibility that could create problems, not any putative division of responsibility between a chairman and a chief executive of the FSA.
The third and often heard argument is a general point about accountability—that nobody would be sure to whom they should go. That is highly implausible. It does not seem to obstruct the workings of all the institutions listed by my hon. Friend the Member for East Worthing and Shoreham. They seem to be able to cope well. Indeed, so far as I know, none of them has made representations to the effect that they want to do away with the chief executive- chairman split because it makes their work difficult. Nor, indeed, did Howard Davies seem to find it difficult with such a split when he was at the Audit Commission. When he was Controller of Audit of that powerful institution, he had a chairman above him who was looking over his shoulder and to whom ultimately he was answerable. It is a well-established, intelligent and effective structure, not only for all businesses and many public sector bodies, but for the nearest we have to a powerful institution which has been headed up by Howard Davies.
Having had the responsibility in the Treasury under the previous Government that he mentioned, can the hon. Gentleman say why it was appropriate to have regulators for all the public utilities—single people regulating in similar circumstances to the head of the FSA—with no equivalent chairman, whereas when it comes to a general responsibility for the City there is suddenly perceived to be a need for a chairman to provide safeguards? Why is there that distinction?
There is a massive difference between a water regulator and a regulator of the financial services industry. For those who are interested, a large part of that debate took place in Committee, where the hon. Gentleman made exactly the same point. Rather than go through all the arguments now—
My hon. Friend says that he did. The recommendation is clear. However, we should not take that as gospel or writ. It is an indication—a group of people thought carefully about the subject and came to that conclusion. We should be able to judge for ourselves. We need to ask ourselves a few simple questions. Do we really think that the head of the FSA will be hamstrung if he has a chairman above him? Do we think that foreign regulators will look down on him because he has a split role—because there is a chairman and a chief executive? Will it demean in any way our system of financial regulation? Do we think that having a split will increase problems in a financial or systemic crisis, given the huge lacuna in the memorandum of understanding which would cause that confusion and which is of far greater proportions than any conceivable consequence of the chairman-chief executive split?
The arguments are all the weaker given the drafting of schedule 2(4), which sets out the functions of the non-executive directors. I will not linger on this point for long because I want to be brief, but it is clear from the drafting that it is intended to exclude the non-executive directors from fundamental scrutiny and monitoring of the overall workings of the authority. The amendment would put that back. We are trying to act on both issues with our amendments. That must be the way forward, and I commend the amendments to the House.
As hon. Members have persisted in their remarks about amendments and the degree of change in the Bill, I must make one point in response. The vast majority of Government amendments were tabled last Friday. Although this week we missed Wednesday officially in this House, its 24 hours nevertheless existed in reality, so the calculation of 72 hours made by the hon. Member for East Worthing and Shoreham (Mr. Loughton) is a gross understatement of the amount of time that the Opposition have had to deal with the matters before us today.
We were not here on Friday. More fundamentally, will the Minister explain why it was not possible to table the amendments a little earlier, or have the debate a week later, to give us a fortnight to consider what are serious matters, particularly as we have tried, as much as possible, to move forward on the basis of all-party agreement? Discussion of the Bill has not been highly adversarial.
I am forced to take that advice, Mr. Deputy Speaker, but we co-operated with the Conservative Front-Bench team. As Front Benchers know full well, there has been considerable co-operation on all these matters. I see the right hon. Member for Wells (Mr. Heathcoat-Amory) nodding.
On the issues of substance, first, there is accountability. It is important that there is a single public face of the FSA, a single chief point of contact who is accountable to the Treasury and can be called before parliamentary Committees—a single person with whom the buck stops.
Conservative Members have argued that accountability is important. I agree, but my experience is that, where roles are confused and more than one person could be said to be responsible for something—as might happen with the proposed split between a chairman and a chief executive—it can easily confuse the clear chain of accountability, blur the lines as to who is responsible for what, and create doubt as to the authority of any one person to represent the FSA and, ultimately, to carry the can, including being accountable to the Treasury and hon. Members.
Secondly, we need to ensure that there is a person with the wherewithal and authority to lead the FSA both in its daily business and in the international arena. The FSA is a major player on the international regulatory stage. We want it to stay there. That is an important aspect of its current role.
Virtually all other major international financial regulators—Conservative Members skated over the point hurriedly—are represented by full-time executive board chairmen. Those are the arrangements. They are public representatives of those organisations. It is important that the FSA is represented by a person of appropriate and equivalent stature in those arenas.
Some have suggested that the roles of chairman and chief executive could be split to reflect current thinking on corporate governance. Several Conservative Members dealt with that question, but parallels with ordinary companies are far from exact. The combined code is designed for companies with shareholders who do not benefit from the various accountability checks and balances provided for by the Bill.
The spirit of the code is that there should be a strong non-executive element on the board. We have more than provided for that. There will be a majority of non-executives. The non-executives will form a committee to keep under review whether the FSA is discharging its functions in the most efficient and economic way; to review the FSA's financial controls; and to determine remuneration. On top of that, there is a range of other accountability measures that a normal company would not have.
The board will be appointed by the Treasury and subject to transparent appointment procedures. There will be an annual report to Parliament, which is an important part of the accountability mechanism, and an open annual meeting, at which stakeholders can air their concerns. We have built in practitioner and consumer panels, which will be consulted on FSA general policies and practices. Last, but by no means least—it is one of the most important aspects—there are the principles and objectives that guide the way in which the FSA, and hence its governing body, will act.
I confirm that the Treasury appoints the board and will do so in line with transparent Nolan-type procedures, if that helps the hon. Gentleman.
There are other reasons why I will not accept the amendments. First, the tripartite arrangements between the Treasury, the Bank of England and the FSA are based on relationships between the organisations and their heads. It is hard to see how the FSA could easily be represented in the forum by a person with appropriate stature—
Further to the Minister's statement about who will appoint the non-executive committee, may I seek clarification? Paragraph 3(2) of schedule 1 reads:
The members of the non-executive committee are to be appointed by the Authority.
Do the Government intend to table an amendment to change that, so that henceforth they will be appointed by the Treasury?
I will come back to that point. May I finish the points that I was making because I started with a "first"? I want to round off my comments about the special factors to be taken into consideration.
Secondly, as the non-executives on the FSA board have said, the organisation is mature enough not to be merely a creature of its chairman. I am grateful for the comments of my hon. Friend the Member for Erewash (Liz Blackman) about the way in which Conservative Members suggested that the board was a mere cipher and rubber stamp for the organisation. Quite the contrary; I have been to board meetings and met board members on several occasions. It is not the case that board members are anything other than extremely competent and professional. Many views are expressed at the meetings.
This is the moment for me to ask the Minister to clarify the point that I raised in my speech. I described paragraph 4(3) of schedule 1 as boxing in the non-executive functions: the non-executive committee will review simply whether the authority is using its resources in the most efficient and economic way. She is speaking as though the committee had an overall remit of the type that we recommend in our amendment. What is she saying? Are they boxed in by paragraph 4(3) or are they not?
Perhaps I could come to the point that the hon. Member for Chichester (Mr. Tyrie) raised before coming to the right hon. and learned Gentleman's point? The Treasury appoints the members to the board. The FSA has to ensure that they form a committee under paragraph 3. Paragraph 2(3) is the one that the hon. Gentleman should look at. The FSA appoints the non-executives. Perhaps that clarifies that point. [Interruption.] I am looking at the text of the Bill. Paragraph 2(3) states:
The chairman and other members of the governing body must be appointed, and be liable to removal from office, by the Treasury.
I am talking about the non-executive committee, which must have the paragraph 4(3) functions. It will also be open to the FSA to confer functions on the committee. Therefore, paragraph 4(3) does not box in the committee; it does quite the reverse.
Will the Minister please explain why it does not box in the committee? She has received a note from those who are assisting her saying that it does not box in the committee, but why is the provision so carefully confined?
I shall deal with that point in a moment but should like first to deal with the point made by the hon. Member for Chichester on how the Government have dealt with some of the matters.
Amendment No. 19 is worded very flexibly, so that the split between the chairman and the chief executive could be undertaken in the longer term—I see the hon. Member for Chichester nodding. However, I still do not agree with the amendment, as it raises the real issue of who would allocate the roles and how they would be allocated. We have other objections to splitting the roles of chairman and chief executive, but Opposition Members have not dealt with them in their amendments.
Will the hon. Lady explain briefly why the FSA is such a unique structure that it cannot have a division of roles? It would be done by the Treasury if the flexibility provided in the paragraph to which she referred were used. Why are all the other bodies that have been mentioned perfectly able to cope with such a split and function happily, whereas the FSA cannot?
The Financial Services Authority is unique in many respects. However, it is not unique among regulators. Nor is our proposal unique among arrangements made for other international regulators. Our proposal is exactly in line with the structure of other major international regulators, which are not splitting the roles. The roles should remain combined, as we have proposed.
I should like to deal with some of the points that Opposition Members have made about the current incumbent of the post, Howard Davies. I share their enthusiasm for him and the way in which he is discharging his role, although I was a little alarmed by some of their remarks that he might leave after his contract ends, if not before. Nevertheless, the Government's arguments depend not on the current incumbent and his many undoubted qualities, but on the fact that we do not think that it is appropriate or right to make the split.
I should like briefly—I may test your patience temporarily, Mr. Deputy Speaker—to point out to the hon. Member for Chichester that the redrafts of explanatory material on amendments that he was waving deal with specific matters in which Opposition Members had expressed an interest in Committee. It is highly technical material, and we expect to deal with it not today, but on Tuesday. I regret that however helpful the Government have been on the Bill—we have tried to be extremely helpful, recognising as we do the many helpful contributions made by Opposition Members—some of them, such as the hon. Member for Chichester, seem unable to deal with that helpfulness.
I tell the right hon. and learned Member for North-East Bedfordshire (Sir N. Lyell) that paragraph 4(3) does not box in the committee because the FSA can confer further functions. Paragraph 4(3) simply specifies the minimum functions. If the right hon. and learned Gentleman still thinks that the provision boxes in the committee, perhaps he would like either to raise the issue later in the debate or to write to me.
Hon. Members on both sides of the House seem to be joining in the love-in for Howard Davies and the good job that he has been doing. After publication of the Bill, it was reported that the Treasury had taken the view that it was better to have a split between non-executive chairman, chief executive and principal, but that the Government were leaving the provision as drafted largely in deference to Howard Davies. Indeed, after the Bill was published, Lord Burns confirmed his judgment that the Government would have to look again at the unified role.
I do not want to repeat other arguments, but shall deal with the crucial points. The Investment Management Regulatory Organisation model worked extremely successfully. A non-executive chairman is not someone competing to be chief executive or to be accountable, but a person of wisdom and experience whom the chief executive can consult on difficult issues, and someone who could protect the chief executive if he or she were being leant on by Government.
I cannot resist raising a fairly major issue that is currently in Howard Davies's hands for decision. As the House will know, IMRO launched a major investigation into London and Bishopsgate, the Maxwell investment management company. Quite correctly, the investigation was not published at the time, as proceedings were pending against the Maxwell brothers. Now, the decision on publication must be taken. The Opposition argue that, in the interests of accountability and openness, it should be published. That is precisely the type of matter in which a chief executive should be able to draw on the wisdom of a non-executive chairman before taking a decision, and to seek support in dealing with Government attempts to lean on him or her.
I was the Deputy Chairman of the pre-legislative inquiry. Before the hon. Gentleman assumes too much—that there was a clear political split on the issue—I should tell him that several Committee members had reservations about splitting. I took Lord Burns's view, and rather reluctantly came to the conclusion, as it was shared by the majority of Committee members, that, for now, the role should be kept as one.
We know that there are arguments on both sides. The Opposition accept that, during the reign of the great Howard Davies, it is sensible to keep the role unified. We accept that there is much to be done in establishing the body and addressing all the issues.
We tabled amendment No. 18 because, after examining all the issues, we believe that Parliament should signal that, in the longer term, it would be wiser to have a non-executive chairman. We had thought that the Government shared that view because, as hon. Members will note, the Bill uses only the word "chairman", thereby leaving the door open to a subsequent split.
The hon. Gentleman should be aware that, although many of the witnesses appearing before the Joint Committee were practitioners who favoured not splitting the role, none of them cited Howard Davies's personality as a factor in forming their view. They said that the position should remain one for reasons of accountability and clarity.
I thank the hon. Lady for that intervention. I was not a member of the Joint Committee, and it was not my impression from the report that its contribution was so large. The issue is simple, and we concede that both sides of the argument have merit. We prefer the IMRO model and believe that the non-executive chairman position has advantages and does not damage the authority of the chief executive. However, others argue otherwise.
The case that the authority of a chief executive is damaged by the appointment of a non-executive chairman is not proven by experience. However, the opposite case—that a chief executive without a non-executive chairman may have too much power and be unaccountable in the absence of a person to consult with—can be illustrated by experience.
If amendment No. 22 is not accepted, the role of the excellent non-executive board will be emasculated because it will not be given the normal duties and responsibilities—as set out under the Cadbury guidelines—to scrutinise and monitor the work, performance and standards of conduct of the FSA executive management. We see no reason why those activities should have been excluded from the non-executive board's role.
The question of who appoints whom deserves consideration. As I thought, the authority, not the Treasury, will appoint the non-executive members. Our objection to that is that a chief executive without a chairman clearly has the power to appoint his cronies. Despite all the problems described earlier, the Treasury should make those appointments, not the FSA. Perhaps it would be better if industry representatives were to nominate members, but the Government's intention was to move away from self-regulation. Therefore, we believe that, for the time being at least, the Treasury option is to be preferred.
My point is that the roles and duties of non-executive directors that I described—and which appear in the standard list recommended by the FSA—are not included in the Bill. That is not to say that they could not be added in the future, but why on earth exclude now what are the proper and normal roles of non-executives?
I draw the hon. Gentleman's attention to paragraph 5(1) of schedule 1, which deals with this matter. It correctly leaves to the authority the responsibility for devolution of function and powers in the authority.
That reinforces my point that it should not be for the authority to make its own constitution. Schedule 1 deals with the constitution of a body entrusted with running the financial services industry. I do not see how what the hon. Gentleman said interferes with the straightforward proposition that the constitutional role of the non-executives should be set out clearly in the relevant part of the constitution.
We wanted to put on record what we consider to be the right constitutional structure, which we hope the FSA will move towards. That will have to await the end of the reign of Howard Davies, and can be dealt with subsequently. The Government do not want to admit it, but the Bill is drafted with enough flexibility to cover that. However, we have not been persuaded by the arguments advanced by the Government and Howard Davies in favour of having a single chief executive.
I beg to move amendment No. 480, in page 197, line 47, at end insert—
() The complaints scheme must be designed so that, as far as reasonably practicable, complaints are investigated quickly.".
With this it will be convenient to discuss the following amendments: No. 186, in page 198, line 27, leave out "reference" and insert "submission".
No. 187, in page 198, line 27, leave out—
which the Authority is investigating".
No. 23, in page 198, line 33, leave out "and".
No. 32, in page 198, line 36, at end insert—
(iv) to recommend to the Authority the award of such sum as appears to him to be fair and reasonable in all the circumstances of the case in relation to any maladministration by the Authority.".
No. 188, in page 198, line 36, at end insert—
(iv) to make an award against the Authority of such amounts as he considers fair compensation for loss or damage resulting from the subject matter of the complaint".
No. 189, in page 198, line 37, leave out "Authority" and insert "investigator".
No. 190, in page 198, line 37, leave out—
it must notify the investigator
and insert "must notify the complainant".
No. 191, in page 198, line 39, leave out sub-paragraph (4).
Government amendments Nos. 437 to 441.
The complaints scheme is an important part of the accountability package delivered by the Bill. The Bill should deliver an open and transparent mechanism that will allow people's complaints to be dealt with quickly, cheaply and informally.
However, the Bill delivers other important protections as well. For example, firms will be able to go to the financial services and markets tribunal to challenge the FSA's decisions. The Government introduced amendments to the complaints scheme provisions following the Joint Committee's recommendations, to make it clear that the investigator should be fully independent of the FSA. That independence will include having adequate funds and staff.
The investigator's appointment is also to be approved by the Treasury, and he or she cannot be removed from office without the Treasury's consent. It is important that everyone is happy with the independence of the arrangements, and the FSA will consult further on them fairly shortly. I understand that the issues to be studied are likely to include ways to secure the investigator's independence through the appointment arrangements and the provision of independent support staff. I recognise how important it is to secure the investigator's independence. The Government amendments, together with the provisions already in the Bill, will achieve that.
Order. Perhaps I can help the Minister. By leave of the House, she is able to speak a second time, as she would be were she tabling her own amendment. However, it may be for the convenience of the House were she to say all that she wishes to say on this occasion, in case she wishes to come back a second time later.
The amendments would partly take the FSA out of the process—or at least, they would not give it the opportunity to deal with complaints in the first instance. The Government consider that it would not be sensible to take the FSA out of the process in the way proposed. Most complaints arrangements—such as those relating to regulating firms under the current system—give the subject of the complaint the chance to put his house in order before an independent investigator is brought in. What would be the implications for the time and resources of the investigator if he or she were to investigate all complaints in the first instance? We are trying to set up a mechanism for cases which the FSA cannot resolve with complainants, not a first port of call, and not a port of call for every single case that might arise.
The scheme nevertheless ensures transparency, so if the FSA decides not to investigate a complaint, the investigator should know about it; and if the authority decides to go ahead and investigate, again, the investigator should be informed. The investigator can then take up the complaint if he or she sees fit.
Of course, if the FSA does not sort out a complaint satisfactorily, the independent investigator comes in. Taking the FSA out of the picture in the first instance would not be right or efficient.
The Joint Committee suggested that we consider the possibility of ex gratia payments. We have been doing that, and we continue to do so, but it is not appropriate to come to a decision until we see the FSA's consultation paper on the proposed arrangements for the complaints scheme. Amendment No. 188 argues for just such compensation.
It is important that the complaints scheme is not seen as a means of circumventing the FSA's statutory immunity. We do not want to encourage people to take pot shots at the FSA and distract it from its proper business of regulating. As the scheme is not part of the Court Service—indeed, the investigator need not be a lawyer—he or she would not necessarily come to a decision based on legal principles that a court would apply. The complaints scheme is an informal mechanism for investigating complaints and, where appropriate, bringing shortcomings into the open; it is not a court, nor is there a right of appeal for the FSA if the investigator makes an adverse finding against it.
Although the Bill does not give the investigator the power to award damages, the complaints scheme will have real teeth. The investigator can publish his or her reports and has the power to name and shame the FSA—or, if he or she sees fit, individuals within it. Therefore, the strength of the arrangements should not be underestimated. The FSA will also need to include details concerning complaints in its annual reports to the Treasury and to Parliament.
I hope that, once they have considered my remarks and the Government amendments, hon. Members may see fit to withdraw their amendments in this group.
Government amendment No. 480 is quite acceptable. It responds to an issue that we raised about speeding up the handling of complaints.
We are now in the single most important territory of principle. As the Burns committee set out in its doctrine, and as has been the universal response from the industry, if there is to be effective legal immunity, there must be a clearly independent system of complaints—if not with the ability legally to award compensation, with the ability to recommend and suggest fair recompense when businesses have been damaged by incorrect or wrong conduct by the FSA.
As the Minister has just said, in Committee the Government accepted the principle that the investigator could suggest ex gratia payments. There is no Government amendment to that end, and the Minister has said that the matter is still under consideration, awaiting the FSA's comments. We ourselves have had discussions with the FSA on this issue. It pointed out that, if the payments were compensation, there would be a potential problem of legal disputes, particularly over matters such as the refusal of applications, but it is perfectly happy with the principle of ex gratia payments being recommended to it. Amendment No. 32 has been worded deliberately to accommodate that. It proposes that the investigator recommend suitable sums for payment by the FSA, so that it will ultimately be an ex gratia regime.
We will wish to withdraw amendment No. 188, which is clearly stronger, and sets out a specific proposal for compensation. Our other amendments seek to create a complaints regime that is fully independent. While there may be something in the argument that the complaints investigator's time should not be wasted with minor issues, the bigger argument is that it is inappropriate for all complaints to come to the FSA first. The FSA has the power of life or death over businesses in terms of authorisation. There is considerable fear of the FSA in the industry—fear that, if offence is given or a foot is put out of line, a business may suffer. It is therefore inappropriate that complaints should first be vetted by the FSA. The investigator needs to be fully independent to receive and consider complaints, and recommend recompense if a business has been genuinely damaged by a wrong action by the FSA.
We shall come in due course to the issue of legal immunity. The two issues might best have been debated together, but it is absolutely clear that, in achieving a fair and sensible balance of power—if there continues to be effective legal immunity, as the Bill at present prescribes—it is essential, as the Burns committee made clear, to have an independent system of complaints, and for the body concerned to be able to recommend, if not award, fair payments for damage suffered by businesses as a result of the FSA's mistakes.
I agree with the points made by my hon. Friend the Member for Arundel and South Downs (Mr. Flight), including those about the importance of having an independent investigator who can award compensation, of at least a reasonable nature.
My hon. Friend pointed out that our amendments are in two forms—amendment No. 188, which requires that the investigator be able to award compensation, and amendment No. 32, which requires that he or she be able to recommend an award of compensation, leaving the ultimate decision to the authority. To that extent, it would be ex gratia. We put that in to water down our recommendation, to make it easier for the authority, and to stop it being frightened that its immunity would thereby be completely undercut.
We are the Opposition, not the Government. The Government need to reflect seriously and carefully on exactly how to handle this matter. I echo my hon. Friend's statement that the recommendation was made by the Burns committee, which gives it great weight, just as the committee's views on the chairmanship and the question of chairman and chief executive gave that great weight. I hope that both those matters will be reflected on extremely carefully.
This group of amendments and the next group, on immunity, hang together, as my hon. Friend rightly said. The Minister knows that I support a substantial degree of immunity for the FSA. I think that it is necessary, for the reasons that my hon. Friend stated. We do not want to see the authority undercut, and, as the Minister said, we do not want unreasonable pot shots. They may be much more than pot shots; they may be major attacks by extremely powerful institutions.
That is one side of the picture. The other side is that the FSA is being given immense power over the livelihoods of thousands of people whose own money is at risk. If it performs its functions badly, it should be capable of being held to account. If it does significant damage to individuals working in the market through its own fault, there should be some comeback and some financial compensation. The authority is big enough to be able to behave properly to those whom it has a duty to regulate, but whom it has let down as a result of inadvertence, stupidity or worse.
I hope that that will not happen very often, but I would feel much more confident about its being a rare occurrence if I knew that the authority was aware that it must look over its shoulder, at least to a limited extent, and realise that if it messes up those working in the market or others through its own incompetence or error, it can be held reasonably to account for at least reasonable sums to return them to the position in which they ought to have been.
We are setting up a huge institution. What we are doing is unprecedented. We really must be big about it: we must not be frightened—Governments, whatever their complexion, must not be frightened—to be prepared to pay compensation to those who suffer when misregulated. There is no reason why the whole regulatory system should collapse as a result of that balance.
If we do not get this right, Strasbourg may eventually force us to get it right. One of the problems of this Bill is that it is so defensive about the idea of judicial review. Nearly every provision that could be drafted so as to inhibit the opportunity for judicial review is thus drafted. It will not prevent judicial review on the part of financial institutions that are rich and powerful enough to afford that expensive and complex process, but judicial review would be far less necessary if the system involving the investigator and reasonable compensation were established properly.
I am in favour of that system. I am in favour of a comparatively formal process. However, if it is so boxed in—if I may use another contentious phrase—that it is not effective, people will look outside it. Eventually, they will take the cases to Strasbourg. They will rely on article 6 of the European convention on human rights in relation to lack of due process, on article 7 in relation to the right not to be punished except in accordance with the law, and on the first protocol of article 1, which relates to the right to possession of property. If someone is running a business that is also his property, and if that business is seriously damaged as a result of the authority's incompetence, possession of the property may be denied him. In one way or another, people will find a way of bringing a case outside the confines of this country.
Let us get the legislation right. Let us ensure that it is reasonable and balanced.
We are still considering the issue of ex gratia payments. The FSA is consulting on it, and I do not think it appropriate to pre-empt the results of its consultation. I am not saying that we will decide one way or the other; I am saying that we are waiting for the results.
I do not think that people should view the complaints investigator as a potential first port of call, as the Opposition seem to suggest. In any event, the post is not being established for the purpose of financial redress; the point is for the focus to be on the process, and on the importance of transparency.
We have had a short but important debate on some important amendments.
The Opposition consider the investigator's role to be crucial in providing a check on any abuse by the FSA, and any negligence or incompetence on its part. We may have regard for, or even confidence in, the authority's senior management, but that is not always reflected in people's experience of its staff at the coalface, as it were.
Hon. Members receive many complaints about regulators. It is important for complaints to be dealt with promptly by an independent inspector who is seen to be independent, and who can receive them separately from any filter mechanism that may exist in the authority. The inspector must be properly resourced, and able to respond to complaints—including, we believe, complaints involving financial awards against the authority.
Our proposals would also establish an essential counterbalance against statutory immunity. We shall debate that shortly, so I shall not go into it now, but I want to quote one sentence from the report of the Joint Committee on Financial Services, of which I was a member last year. It concluded, among other things:
We agree with those who see a robust complaints procedure as the central counterbalance to the FSA's statutory immunity.
It asked the Government to give serious consideration to the issue of financial awards.
I do not think that it is enough simply to refer to the possibility of ex gratia payments that are not mentioned in the Bill. That is not an assurance at all. I know that the Government do not want to allow the FSA to get into a legal tangle in regard to what might be compensation, and that that might have to be judged against some objective criterion. I think we should leave open exactly how awards are to be measured and made, but they must be referred to in the Bill. That is the thrust of the Joint Committee's conclusions, and it is the strong view of the Conservative Members who have spoken. We do not intend to press the other amendments, but we will press amendment No. 32.
Amendment agreed to.
Amendment proposed: No. 32, in page 198, line 36, at end insert—
(iv) to recommend to the Authority the award of such sum as appears to him to be fair and reasonable in all the circumstances of the case in relation to any maladministration by the Authority.".—[Mr. Heathcoat-Amory.]Question put, That the amendment be made:—
|Division No. 52]||[3.18 pm|
|Allan, Richard||Donaldson, Jeffrey|
|Amess, David||Dorrell, Rt Hon Stephen|
|Arbuthnot, Rt Hon James||Duncan, Alan|
|Baldry, Tony||Duncan Smith, Iain|
|Ballard, Jackie||Evans, Nigel|
|Beggs, Roy||Faber, David|
|Bercow, John||Fabricant, Michael|
|Beresford, Sir Paul||Fallon, Michael|
|Blunt, Crispin||Fearn, Ronnie|
|Bottomley, Rt Hon Mrs Virginia||Flight, Howard|
|Brady, Graham||Forth, Rt Hon Eric|
|Brake, Tom||Foster, Don (Bath)|
|Brazier, Julian||Fox, Dr Liam|
|Breed, Colin||Fraser, Christopher|
|Brooke, Rt Hon Peter||Gale, Roger|
|Browning, Mrs Angela||George, Andrew (St Ives)|
|Bruce, Ian (S Dorset)||Gibb, Nick|
|Burns, Simon||Gill, Christopher|
|Burstow, Paul||Gillen, Mrs Cheryl|
|Butterfill, John||Gorman, Mrs Teresa|
|Cable, Dr Vincent||Gray, James|
|Campbell, Rt Hon Menzies (NE Fife)||Greenway, John|
|Cash, William||Hague, Rt Hon William|
|Chope, Christopher||Hamilton, Rt Hon Sir Archie|
|Clark, Dr Michael (Rayleigh)||Hammond, Philip|
|Clifton-Brown, Geoffrey||Hayes, John|
|Collins, Tim||Heald, Oliver|
|Cotter, Brian||Heath, David (Somerton & Frome)|
|Curry, Rt Hon David||Heathcoat-Amory, Rt Hon David|
|Davies, Quentin (Grantham)||Hogg, Rt Hon Douglas|
|Day, Stephen||Horam, John|
|Howard, Rt Hon Michael||Portillo, Rt Hon Michael|
|Hunter, Andrew||Prior, David|
|Jack, Rt Hon Michael||Redwood, Rt Hon John|
|Jenkin, Bernard||Robathan, Andrew|
|Johnson Smith, Rt Hon Sir Geoffrey||Robertson, Laurence|
|Roe, Mrs Marion (Broxbourne)|
|Key, Robert||Rowe, Andrew (Faversham)|
|King, Rt Hon Tom (Bridgwater)||St Aubyn, Nick|
|Kirkbride, Miss Julie||Sanders, Adrian|
|Kirkwood, Archy||Sayeed, Jonathan|
|Laing, Mrs Eleanor||Shephard, Rt Hon Mrs Gillian|
|Lait, Mrs Jacqui||Shepherd, Richard|
|Lansley, Andrew||Smyth, Rev Martin (Belfast S)|
|Leigh, Edward||Soames, Nicholas|
|Letwin, Oliver||Spelman, Mrs Caroline|
|Lewis, Dr Julian (New Forest E)||Spring, Richard|
|Lidington, David||Stanley, Rt Hon Sir John|
|Lilley, Rt Hon Peter||Streeter, Gary|
|Lloyd, Rt Hon Sir Peter (Fareham)||Swayne, Desmond|
|Llwyd, Elfyn||Syms, Robert|
|Luff, Peter||Stunell, Andrew|
|Lyell, Rt Hon Sir Nicholas||Tapsell, Sir Peter|
|McIntosh, Miss Anne||Taylor, Ian (Esher & Walton)|
|MacKay Rt Hon Andrew||Taylor, John M (Solihull)|
|Maclean, Rt Hon David||Taylor, Sir Teddy|
|Maclennan, Rt Hon Robert||Trend Michael|
|McLoughlin, Patrick||Tyrie, Andrew|
|Madel, Sir David||Viggers, Peter|
|Major, Rt Hon John||Walter, Robert|
|Maude, Rt Hon Francis||Waterson, Nigel|
|May, Mrs Theresa||Whitney, Sir Raymond|
|Moore, Michael||Whittingdale, John|
|Moss, Malcolm||Willetts, David|
|Nicholls, Patrick||Winterton, Mrs Ann (Congleton)|
|Norman, Archie||Winterton, Nicholas (Macclesfield)|
|O'Brien, Stephen (Eddisbury)||Yeo, Tim|
|Öpik, Lembit||Young, Rt Hon Sir George|
|Pace, James||Tellers for the Ayes:|
|Paterson, Owen||Mr. Keith Simpson and|
|Pickles, Eric||Mr. John Randall.|
|Adams, Mrs Irene (Paisley N)||Butler, Mrs Christine|
|Ainger, Nick||Byers, Rt Hon Stephen|
|Ainsworth, Robert (Cov'try NE)||Caborn, Rt Hon Richard|
|Alexander, Douglas||Campbell, Alan (Tynemouth)|
|Allen, Graham||Campbell, Mrs Anne (C'bridge)|
|Anderson, Donald (Swansea E)||Campbell, Ronnie (Blyth V)|
|Anderson, Janet (Rossendale)||Campbell-Savours, Dale|
|Armstrong, Rt Hon Ms Hilary||Cann, Jamie|
|Ashton, Joe||Caplin, Ivor|
|Atkins, Charlotte||Casale, Roger|
|Austin, John||Cawsey, Ian|
|Banks, Tony||Chapman, Ben (Wirral S)|
|Barnes, Harry||Chaytor, David|
|Barron, Kevin||Clark, Dr Lynda (Edinburgh Pentlands)|
|Beckett, Rt Hon Mrs Margaret||Clarke, Charles (Norwich S)|
|Bell, Martin (Tatton)||Clarke, Eric (Midlothian)|
|Bell, Stuart (Middlesbrough)||Clarke, Rt Hon Tom (Coatbridge)|
|Benn, Hilary (Leeds C)||Clelland, David|
|Benn, Rt Hon Tony (Chesterfield)||Clwyd, Ann|
|Bennett, Andrew F||Coffey, Ms Ann|
|Benton, Joe||Cohen, Harry|
|Berry, Roger||Coleman, Iain|
|Blackman, Liz||Colman, Tony|
|Blears, Ms Hazel||Cook, Frank (Stockton N)|
|Blizzard, Bob||Corbett, Robin|
|Bradley, Keith (Withington)||Corbyn, Jeremy|
|Bradley, Peter (The Wrekin)||Cousins, Jim|
|Brinton, Mrs Helen||Cranston, Ross|
|Brown, Russell (Dumfries)||Cryer, John (Hornchurch)|
|Browne, Desmond||Curtis-Thomas, Mrs Claire|
|Burden, Richard||Davey, Valerie (Bristol W)|
|Davidson, Ian||King, Ms Oona (Bethnal Green)|
|Davies, Geraint (Croydon C)||Kumar, Dr Ashok|
|Dawson, Hilton||Ladyman, Dr Stephen|
|Dean, Mrs Janet||Laxton, Bob|
|Denham, John||Leslie, Christopher|
|Dismore, Andrew||Levitt, Tom|
|Dobbin, Jim||Lewis, Ivan (Bury S)|
|Donohoe, Brian H||Liddell, Rt Hon Mrs Helen|
|Doran, Frank||Linton, Martin|
|Dowd, Jim||Lloyd, Tony (Manchester C)|
|Drew, David||Lock, David|
|Eagle, Angela (Wallasey)||Love, Andrew|
|Eagle, Maria (L'pool Garston)||McAvoy, Thomas|
|Edwards, Huw||McCabe, Steve|
|Ellman, Mrs Louise||McCartney, Rt Hon Ian (Makerfield)|
|Field, Rt Hon Frank||McDonagh, Siobhain|
|Fisher, Mark||Macdonald, Calum|
|Fitzpatrick, Jim||McDonnell, John|
|Flint, Caroline||McGuire, Mrs Anne|
|Follett, Barbara||McIsaac, Shona|
|Foster, Rt Hon Derek||McKenna, Mrs Rosemary|
|Foster, Michael Jabez (Hastings)||Mackinlay, Andrew|
|Foster, Michael J (Worcester)||McNulty, Tony|
|Gapes, Mike||MacShane, Denis|
|Gardiner, Barry||Mactaggart, Fiona|
|Gerrard, Neil||McWalter, Tony|
|Gibson, Dr Ian||McWilliam, John|
|Godsiff, Roger||Marsden, Gordon (Blackpool S)|
|Goggins, Paul||Marsden, Paul (Shrewsbury)|
|Gordon, Mrs Eileen||Marshall, David (Shettleston)|
|Griffiths, Jane (Reading E)||Marshall, Jim (Leicester S)|
|Griffiths, Win (Bridgend)||Martlew, Eric|
|Grocott, Bruce||Maxton, John|
|Hall, Mike (Weaver Vale)||Meale, Alan|
|Hall, Patrick (Bedford)||Merron, Gillian|
|Harman, Rt Hon Ms Harriet||Michie, Bill (Shef'ld Heeley)|
|Heal, Mrs Sylvia||Miller, Andrew|
|Healey, John||Mitchell, Austin|
|Henderson, Ivan (Harwich)||Moran, Ms Margaret|
|Hepburn, Stephen||Mountford, Kali|
|Heppell, John||Mowlam, Rt Hon Marjorie|
|Hewitt, Ms Patricia||Mudie, George|
|Hill, Keith||Mullin, Chris|
|Hodge, Ms Margaret||Murphy, Denis (Wansbeck)|
|Hope, Phil||Murphy, Jim (Eastwood)|
|Hopkins, Kelvin||Murphy, Rt Hon Paul (Torfaen)|
|Hoyle, Lindsay||Naysmith, Dr Doug|
|Hughes, Kevin (Doncaster N)||Norris, Dan|
|Humble, Mrs Joan||O'Brien, Mike (N Warks)|
|Hurst, Alan||Olner, Bill|
|Hutton, John||O'Neill, Martin|
|Iddon, Dr Brian||Organ, Mrs Diana|
|Illsley, Eric||Pearson, Ian|
|Ingram, Rt Hon Adam||Pendry, Tom|
|Jackson, Helen (Hillsborough)||Perham, Ms Linda|
|Jamieson, David||Pickthall, Colin|
|Jenkins, Brian||Pike, Peter L|
|Johnson, Alan (Hull W & Hessle)||Plaskitt, James|
|Johnson, Miss Melanie (Welwyn Hatfield)||Pollard, Kerry|
|Jones, Helen (Warrington N)||Pound, Stephen|
|Jones, Ms Jenny (Wolverh'ton SW)||Prentice, Ms Bridget (Lewisham E)|
|Prentice, Gordon (Pendle)|
|Jones, Jon Owen (Cardiff C)||Prosser, Gwyn|
|Jones, Dr Lynne (Selly Oak)||Purchase, Ken|
|Jones, Martyn (Clwyd S)||Quin, Rt Hon Ms Joyce|
|Jowell, Rt Hon Ms Tessa||Quinn, Lawrie|
|Keeble, Ms Sally||Reed, Andrew (Loughborough)|
|Keen, Alan (Feltham & Heston)||Reid, Rt Hon Dr John (Hamilton N)|
|Kelly, Ms Ruth||Roche, Mrs Barbara|
|Kemp, Fraser||Rooker, Rt Hon Jeff|
|Kennedy, Jane (Wavertree)||Roy, Frank|
|Khabra, Piara S||Ruddock, Joan|
|Kilfoyle, Peter||Russell, Ms Christine (Chester)|
|King, Andy (Rugby & Kenilworth)||Ryan, Ms Joan|
|Salter, Martin||Tipping, Paddy|
|Sarwar, Mohammad||Todd, Mark|
|Savidge, Malcolm||Touhig, Don|
|Sawford, Phil||Trickett, Jon|
|Sedgemore, Brian||Truswell, Paul|
|Shaw, Jonathan||Turner, Dennis (Wolverh'ton SE)|
|Sheerman, Barry||Turner, Dr Desmond (Kemptown)|
|Sheldon, Rt Hon Robert||Turner, Neil (Wigan)|
|Shipley, Ms Debra||Twigg, Derek (Halton)|
|Simpson, Alan (Nottingham S)||Tynan, Bill|
|Singh, Marsha||Walley, Ms Joan|
|Skinner, Dennis||Ward, Ms Claire|
|Smith, Rt Hon Andrew (Oxford E)||White, Brian|
|Smith, Angela (Basildon)||Wicks, Malcolm|
|Smith, John (Glamorgan)||Williams, Rt Hon Alan (Swansea W)|
|Smith, Llew (Blaenau Gwent)|
|Snape, Peter||Williams, Mrs Betty (Conwy)|
|Soley, Clive||Wilson, Brian|
|Southworth, Ms Helen||Winnick, David|
|Starkey, Dr Phyllis||Winterton, Ms Rosie (Doncaster C)|
|Steinberg, Gerry||Wise, Audrey|
|Stewart, David (Inverness E)||Wood, Mike|
|Stinchcombe, Paul||Woolas, Phil|
|Stoate, Dr Howard||Worthington, Tony|
|Strang, Rt Hon Dr Gavin||Wray, James|
|Stuart, Ms Gisela||Wright Dr Tony (Cannock)|
|Temple-Morris, Peter||Tellers for the Noes:|
|Thomas, Gareth R (Harrow W)||Mr. Clive Betts and|
|Timms, Stephen||Mr. Greg Pope.|
Question accordingly negatived.
Amendments made: No. 437, in page 198, line 41, leave out "sub-paragraph (2)" and insert "the complaints scheme".
No. 438, in page 198, line 42, leave out "arrangements" and insert "complaints scheme".
No. 439, in page 198, line 48, leave out from beginning to second "the".
No. 440, in page 198, line 49, leave out "it" and insert "the Authority".
No. 441, in page 199, line 33, leave out "for an injunction" and insert "under sub-paragraph (5)".—[Miss Melanie Johnson.]
I beg to move amendment No. 33, in page 201, line 39, after "faith" insert "or due to recklessness".
The amendment relates to the extremely contentious issue of statutory immunity. All hon. Members should be alert to any proposal to exempt any outside body from the force of law. For that reason, we have paid special attention to schedule 1. Part IV of the schedule will exempt the authority—both the corporate body and anyone who works for it—from legal action, except in certain narrowly defined circumstances.
The matter needs careful scrutiny. It is objectionable in principle for any body or person to elevate themselves above the law. It is ironic that the Bill extends the law—indeed, it creates new law—bringing people within its ambit, in many cases for the first time, while the FSA is retreating behind the wall of statutory immunity.
The Government must explain why the FSA is taking that degree of immunity, when the trend of political development over recent years has been to remove statutory immunity. I remember a time when Crown immunity meant that if health and safety provisions were being ignored—in hospitals, for example—the law offered complete immunity from any legal action. Since that time, much has happened to bring public bodies within the law, making them accountable; for example, neither the police nor the Serious Fraud Office are statutorily immune.
However, the FSA, which has an incredible concentration of executive and law-making power, will be statutorily immune, except where it is acting in bad faith. The authority can be subject to judicial review, but the possibility of that has been considerably tightened by the wording of the Bill. Some hon. Members will discuss that matter at greater length.
The question is whether it might be wise slightly to loosen the statutory immunity, at least so as to ensure that it cannot be claimed if the authority acts recklessly.
The interpretation of all these matters is for the courts. However, the concept of recklessness is well known in the legal system. I do not know whether the hon. Gentleman has a driving licence, but I hope that he has never been accused of reckless driving. If he has, he will know that the penalties are severe.
The concept of recklessness—a good old English word—should not create any difficulties, especially as the Bill already includes concepts such as acting in bad faith or negligence. Those mean slightly different things, but they are not new departures within the legal system.
If the hon. Gentleman wants to develop his argument against recklessness, I shall listen to it with interest. We discussed the matter in Committee and encountered no problems with the concept of recklessness—only with the Government's belief that the FSA should be immune in respect of reckless behaviour.
That part of the law runs up against the European convention on human rights. Several cases of negligence in which attempts were made to claim immunity did not succeed; and some court cases brought under the convention resulted in the public bodies—the police, in one case—being made liable for negligent behaviour.
However, we shall not touch on those matters. Our aim is more modest: to net the FSA within the ambit of the law, if it acts recklessly. That is a reasonable proposition. There is a certain symmetry in the Bill. A market participant—a registered firm or an individual—would certainly be found guilty, and could be fined, if it acted recklessly or negligently. An oversight by a firm or an individual will, in some circumstances, render that body or person liable to a fine, or to the disciplinary processes outlined elsewhere in the Bill.
Intent does not necessarily have to be proved. An oversight—reckless or not—could land the regulated person on the wrong end of a fine. However, that does not apply to the FSA. As matters stand, it can act negligently or recklessly and no one can take legal action against it. If the hon. Member for Newcastle upon Tyne, Central (Mr. Cousins) finds that fair or reasonable, we shall be interested to hear his speech.
Earlier, we discussed compensation—or the financial penalty that could be levied on the FSA, or paid to the firm or individual concerned. However, the Government have turned that down in favour of the much looser concept of ex gratia payments, which are not covered in the Bill. Last year, in the Joint Committee—
My right hon. Friend made the point that the concept of recklessness is not surprising in the context of the Bill. Clause 352 makes it clear that it is an offence recklessly to make a statement in certain circumstances. That concept is already in the Bill and obviously has a meaning.
Exactly the same should apply. It is a modest request to make that if people in authority behave recklessly in the course of their duties, a penalty should apply. In the case of the FSA, that would be done through the investigator. In the case of the investigator behaving recklessly, the penalty would be imposed through legal action.
I find it objectionable that firms can have their reputations ruined even if an investigation is launched but does not reach the point of a fine being levied. Even if it is shown that the FSA was reckless in launching such an investigation and destroying the livelihoods of the people concerned, there is no redress at law. If the independent investigator reaches the same conclusion, the FSA cannot be made to pay any financial compensation—which we seek to correct. The Joint Committee took the same view last year, when it made it clear that statutory immunity in the form proposed would only be tolerable if a number of changes were made to the complaints and investigation system. Those changes, which are set out on page 40 of the Joint Committee's first report, have not all been accepted and enacted by the Government.
It therefore becomes even more important to restrict statutory immunity. I am not seeking to remove it entirely. Where the FSA makes a difficult judgment after looking at all the evidence and reaches a reasonable conclusion, it should not be open to legal challenge. Nevertheless, it should not have immunity when it acts recklessly. Removing statutory immunity entirely could inhibit the FSA from taking necessary action, but some erosion of the degree of statutory immunity in the Bill is important.
I follow my right hon. Friend in commending the amendment to add recklessness to the concept of bad faith, which would render the authority liable to civil action and damages. It is only a small step from bad faith to recklessness. In some common law definitions, an element of bad faith is one of the ingredients of recklessness. That was so in the leading case of Derry v. Peek, but bad faith is not a necessary element of recklessness.
The hon. Member for Newcastle upon Tyne, Central (Mr. Cousins) asked for the meaning of "recklessness". In civil cases over the past 30 years it has meant the following. In 1961, it meant, with gross carelessness, or unacceptable indifference to the situation of the purchaser—here one might say, of the person being regulated. In the Trades Descriptions Acts, a reckless statement is a statement made without regard for its truth or falsity. In that case, it is made recklessly whether or not there is any dishonest intention. Sometimes there has to be dishonest intention, sometimes not.
If there were dishonest intention, the authority or investigator would be caught. One hopes that dishonesty would be exceptionally rare. In cases where there was no dishonest intention but something was done without regard to the truth or falsity of the basis on which it was done, or with unacceptable indifference to the situation of the person being regulated, it is right that the authority should be answerable.
Given comments by Opposition Front Benchers and the right hon. and learned Gentleman's own references to the possible meanings of "recklessness", if the bundle of concepts being advanced—from driving licences and trade descriptions to legal decisions in a number of discrete cases—were imported to the meaning of recklessness in the Bill, would that not seriously undermine the rightful level of immunity to which the right hon. and learned Gentleman referred in the previous debate as something he wants to respect, and is that not something from which he wants to protect the FSA?
No. We are struggling to strike the right balance and I am sure the hon. Gentleman is anxious to achieve that balance. I am confident that rarely would the FSA successfully be attacked on the ground of recklessness. There is a benefit in having the FSA under an obligation to look over its shoulder at least to that extent.
Any large organisation is likely from time to time to be negligent. It is human nature to be negligent. To place such a burden on the FSA would be to go too far. The Association of Private Client Investment Managers suggests that the authority should be liable in respect of negligence. Although I respect many of the association's submissions, it goes too far in that. I feel sure that the FSA will supervise those working on its behalf sufficiently well to make the occasions on which it acts with gross carelessness rare. It will not be an undue burden on the FSA or its finances if occasionally it has to pay compensation.
No, I do not accept that. I recognise the danger that, occasionally, large firms might seek to tie up the authority, but restricting the liability of the authority to bad faith or recklessness provides adequate protection. It is a question of judgment, but I think that it is adequately protected. The authority will wish to be astute and, at least, not reckless. It will try hard not be negligent, and it ought to try hard. Members on both sides of the House think it right to make the authority immune from charges of negligence, but the likelihood of a case being successful on grounds of recklessness is much smaller, and the circumstances in which cases are successful are much less justifiable from the point of view of the authority. To draw the line there would seem to be reasonable.
As my right hon. Friend the Member for Wells (Mr. Heathcoat-Amory) pointed out, other large bodies of a prosecutorial or regulatory nature are not given this type of immunity. I do not know to what extent all regulatory bodies have absolute immunity under existing law—it would be helpful to know. We are seeking to reconsider where the line ought to be drawn, and I believe that making the authority liable for recklessness is sensible, and part of that package.
I shall be comforted if the Government accept that the investigator will be able to award compensation, either directly or in a way that will effectively shame the authority into granting it—even though there is an element of ex gratia discretion there. That is one place at which the line should be drawn. Here, we are asking whether the line should not be drawn a little more in favour of the industry and a little less in favour of this immensely powerful authority.
I believe that the authority will be adequately protected if its liability is confined to bad faith and recklessness, and I commend the amendment to the House.
This subject has aroused considerable interest and was considered in detail by the Joint Committee, which broadly approved the immunity proposed by the Bill, subject to certain proposals to strengthen the complaints arrangements. We have followed those where appropriate. It is essential that we have a structure that allows the FSA to get on with its work efficiently and effectively, and the House recognises that that is important. A strong and accountable regulator must be in the interests of the industry and consumers alike.
Immunity is vital for delivering that aim. Without it, the FSA could be frustrated by potential law suits and red tape. It would be very easy to have frivolous litigation or to distract or hinder the regulator from carrying out its duties, which could have a detrimental impact on firms as well. The absence of immunity could make the FSA more risk averse and engender a more formalistic regulatory environment. I am grateful to the House for supporting the notion of immunity in that context.
There has been much discussion about the nature of recklessness and the contribution that the amendment would make to the Bill were it to be accepted. I have to say that I oppose the amendment. We want the FSA to be a dynamic regulator, and that might mean taking some difficult or finely balanced decisions in cases where the answers are not black or white. The authority should not have to run the risk of being sued as well.
I entirely agree with the hon. Lady's last sentence, but she must recognise that finely balanced decisions are a million miles from recklessness. We are discussing, to use the language of the courts, decisions reached with gross carelessness or with unacceptable indifference to the situation of the person affected. That is very different from a finely balanced decision.
Like some of my hon. Friends, I am not sure what recklessness means in this context. It is a term with different shades of meaning in different contexts, and is primarily a concept in criminal law. The right hon. Member for Wells (Mr. Heathcoat-Amory) mentioned reckless driving, and recklessness does enter into driving matters. However, my recollection—from being on the bench as a magistrate—is that most charges relate to driving without due care and attention and driving dangerously, and do not feature the notion of recklessness.
The Bill contains within it the concept of recklessness, as clause 352 proposes to make it an offence for an individual recklessly to make a statement. Is not the main concern that a big important body such as the FSA will act in a high-handed way? In other words, it will recognise that there is a risk of damage to an individual but will go ahead anyway. That is the essence of recklessness. Why should there be immunity for acting in that way—the very thing we do not want the authority to do?
The circumstances in which this matter could arise, were we to accept the amendment, may involve occasions when financial regulators and the FSA might have to make rapid decisions or decisions that could involve a difficult question of judgment which could have serious consequences for firms and for the wider regulatory environment. They must be able to do that without fear of being sued, either by a firm or by that firm's customers. I am sure that the House accepts that the interests of the FSA and of others who may wish to pursue the authority through the courts will not always coincide.
The right hon. Member for Wells asked why the police did not have immunity for negligence. However, I have given the reasons why immunity from suit is important and I am not convinced that cutting back immunity, as the amendment suggests, is right. The police do not have immunity from damages claims for negligence. If we make a comparison with other countries and financial regulators overseas, we see that they have similar immunity to that proposed by the Bill. I am grateful to my hon. Friend the Member for Erewash (Liz Blackman) for her remarks on that point.
Am I not right in thinking that, in France, the regulator is liable for what is known as faute lourde? Is not faute lourde very similar to recklessness?
I am grateful to the right hon. and learned Gentleman for his considerable knowledge of legal systems around the world, and I agree that comparisons are difficult to draw in all cases. However, in the United States, the Securities and Exchange Commission is immune from suit for anything done in carrying out its functions or duties—regardless of whether the actions are in good or bad faith—so long as it does not violate a clearly established constitutional right. That would be established by a court ruling. Probably the strongest comparison—France is not the strongest comparison—is with Commonwealth countries such as Canada and Australia, where the immunities are similar to that proposed in the Bill.
Were the amendment to be accepted, it would potentially restrict the ability of the FSA to go about its business in the way that we want it to. Indeed, the present provision is similar to that provided for in the Financial Services Act 1986 and the Banking Act 1987, and the previous Government were instrumental in introducing the provisions for immunity in those Acts. That immunity was also supported by the late Lord Denning.
It sounds as though the Economic Secretary is about to complete her summary of the amendment. However, not only has she failed to deal with the issue of faute lourde, the French analogy to which my right hon. and learned Friend the Member for North-East Bedfordshire (Sir N. Lyell) referred: she has not provided any rationale justifying the distinction between the Government's approach to the liability of the police and their approach to the liability of the FSA. What is the rationale for the distinction? The whole purpose of Report is to go through the Government's proposals and to learn their rationale for departing from existing practice in this country. Will she answer our concrete, precise question?
I said clearly that I thought that comparisons with the French system did not hold water—there are too many differences. I thought that I had adequately covered the point about the police. I am sorry that the hon. Gentleman does not think that I did, but the police are in a very different position from the FSA for so many reasons that it is not difficult to imagine them.
I shall wind up my remarks—the hon. Gentleman has almost invited me to do so—by pointing out that core principle 1 of the Basle principles on banking regulators recognises the need for the immunity of banking supervisors. We fully support that principle. We would weaken the FSA's ability to deal effectively and quickly with difficult and finely balanced decisions if we accepted the amendment.
There is a huge body of law on the definition of recklessness. It is pointless our seeking to define it—we are not lawyers. However, to pretend that recklessness is not a clear legal concept is not right. As was pointed out, the concept occurs elsewhere in the Bill. In addition to the example given, it appears in clause 149, which deals with offences. Subsection (4)(b) refers to one who,
recklessly provides information which is false or misleading in a material particular".
The French concept of faute lourde means literally "heavy failing". Translated lawyer to lawyer, that means virtually the same as "reckless". As the Economic Secretary said, the United States Securities and Exchange Commission system is different, but it is by no means impossible to sue the SEC under the US constitution. That is a different approach to the one that we are discussing, but, as any US lawyer will say, the idea that the SEC enjoys immunity is false. There is a particular US approach to the issue.
Does my hon. Friend agree that if the Government do not give some ground, they are likely to fall foul of articles 6 and 7 and article 1 of protocol 1 of the European convention on human rights?
I thank my right hon. and learned Friend. He is a lawyer, and that point has been made to me by other lawyers. The Government's hands will, in due course, be forced when an appropriate case is taken to the European Court.
As was made clear in the previous debate, the position of the Burns committee is perfectly sensible. Either the exemption from immunity should be limited or there should be a full and proper system of complaint, award and recompense. The Government are resisting on both counts, and the one on which they should concede ultimately is debatable. However, a decision will be forced on the Government in due course.
We shall not press the amendment to a vote because we made a point in the previous debate. The Law Lords are legally well qualified to sort out the issue in the other place and to insist on the point made by my right hon. and learned Friend. Although the issue will have to be resolved by one of the two routes that we have proposed, I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.