New Clause 14 — Store cards and consumer credit agreements

Part of Financial Services Bill – in the House of Commons at 9:28 pm on 25th January 2010.

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Photo of Ian Pearson Ian Pearson Economic Secretary, HM Treasury 9:28 pm, 25th January 2010

I beg to move, That the Bill be now read the Third time.

We have had an interesting debate on Report. I am grateful to everyone who took part in it, and to the members of all parties who have contributed to the debate as the Bill has passed through the House. In particular, I should like to thank those hon. Members who served on the Public Bill Committee, and I am grateful for the overall constructive approach that all sides adopted in those sittings, even when there was disagreement.

In Committee, we had the opportunity to review and discuss in depth the Bill's specific measures. That process was instrumental in teasing out further details on how we envisage that the Bill's measures will operate. I know that that process was very much welcomed by a number of the outside bodies that follow our proceedings closely.

I want to take this opportunity to remind the House of the context in which the Government are introducing this piece of legislation. Over the past couple of years, the global economy has been tested in ways that few would ever have anticipated. The origins of the crisis lie firmly in the financial sector. We have a duty, indeed an unprecedented opportunity, to review our financial landscape and ensure that the lessons of the crisis are learned by shareholders, corporate investors, management, regulators and Governments alike. We need to make absolutely sure that in future any crises will not only be less damaging but less likely altogether.

The causes of the crisis were complex, and there is no single remedy for all of them at once. We need a package of measures that address the wide variety of aspects affecting the industry, from the way it is regulated and its corporate governance, to the way it treats its consumers. That is why the Bill contains such a diverse range of provisions. The Government believe that, together, those measures will help bring a real change in emphasis, in the way we consider and address systemic risk, and in the way we protect consumers.

I am grateful to hon. Members for their probing and questioning over the past few weeks in Committee. I know there were some questions about the practical effects of some of the measures. I hope I was able to bring further clarity, and with it reassurance, to the Committee.

Specifically, I know that the Committee had concerns about the proposed new powers of the FSA on remuneration rules. The Government were happy to remove any ambiguity, and following a recommendation from the Joint Committee on Human Rights, we tabled an amendment to make it clear that any FSA rules making contractual provisions void when they breach a prohibition on remuneration will apply only to contract provisions that are agreed after the rules in question have come into force. We are not proposing-as I think some were concerned-that the powers should be in any way retrospective.

Similarly, I understand that there was some confusion about the scope of the short selling power. We had the opportunity to debate short selling today. I hope the confirmation that any prohibition would apply to identified financial instruments, or ban short selling in specified cases rather than by certain firms, will reassure hon. Members. It is not the case that one firm might be banned from short selling a stock when another was able to do so. I am happy to reaffirm that.

Overall, I was encouraged by the willingness of the Opposition to support the principle of many of the Bill's provisions. Many of the questions relating to the recovery and resolution plans sought to ascertain what they might look like in practice, rather than challenge the intention of the plans, which is to reduce the impact and likelihood of firms failing. Only recently, we heard contributions to the "too big to fail" debate.

I pay tribute to Mr. Hoban for the thorough way in which he led for the Opposition. He was keen to find out what the court rules might look like in relation to collective proceedings. I sympathise with his desire to engage on the greater detail, although I hope the House appreciates that such a level of granularity is best determined by experts in the fields, and is a matter for other channels. Those aspects will, of course, be subject to consultation.

We have discussed the shape of institutional arrangements at considerable length. I said a few moments ago that it was a well-trodden path-if not an excessively trampled one. It is an important issue, but as I have been at pains to stress on several occasions, I do not think structure is the issue. The crisis was a global one, affecting countries regardless of their institutional frameworks. What matters most is not who does the job, but that the job is done effectively, and that the institutional framework is clear and coherent. That is why the Bill focuses on making the existing arrangements work better by strengthening them further-for example, by introducing the council for financial stability, which will operate on a more formal, transparent and accountable basis than the previous arrangements, should the Bill pass into law.

It is clear that the arrangements have not received universal approval, but the Government are clear that we need the authorities to focus on reducing risk and strengthening the resilience of the financial system, and-at the risk of repeating myself-not having to deal with the disruption and uncertainty that would be caused by unnecessary institutional upheaval. I think that we need to be very clear about the real risks that would be involved in that.

Hand in hand with that, we propose to give the FSA a financial stability objective. While many have interpreted that as an erosion of the FSA's consumer protection objective, or vice versa, I believe that the objectives are in fact complementary. It is unlikely that one would succeed without the other-both are necessary.

The Bill will enhance the powers and responsibilities of the FSA, embed a structure to monitor financial stability in the UK and abroad, and give regulators additional powers in relation to remuneration in the financial services sector. It was a shame that we did not have the opportunity to debate some amendments relating to those proposals today, but the measures were considered substantively in Committee. Importantly, the Bill will also ensure that banks and building societies address the likelihood and impact of their failure by drawing up contingency recovery and resolution plans.

In parallel, the Bill includes provisions that will enable the creation of a brand new independent consumer financial education body to enhance education and awareness. It will establish new and more effective routes to redress and compensation for consumers where there has been widespread detriment. Again, although we were unable to discuss those issues on Report, we discussed the proposals extensively in Committee, and they have been widely welcomed by consumer groups.

The proposals represent the Government's considered response to some of the key lessons learned during this crisis. The Bill entrenches a new strategy to ensure the protection of financial stability and wide-ranging reforms to the financial services industry. We want to ensure that the industry on which our economy relies so much emerges on a more robust footing. This vital Bill will help to build a new environment in which a financial services industry based on both stability and prosperity can thrive. That is no small task. I am most grateful for the thoughtful and thorough scrutiny that the House and the Public Bill Committee have given the Bill, and I commend it to the House.

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