Committee (1st Day) (Continued)

Part of Financial Services Bill – in the House of Lords at 9:15 pm on 10 March 2010.

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Photo of Lord Davies of Oldham Lord Davies of Oldham Deputy Chief Whip (House of Lords), HM Household, Parliamentary Under-Secretary, Department for Environment, Food and Rural Affairs, Captain of the Queen's Bodyguard of the Yeomen of the Guard (HM Household) (Deputy Chief Whip, House of Lords) , Parliamentary Under-Secretary (Department for Environment, Food and Rural Affairs) (and Deputy Chief Whip) 9:15, 10 March 2010

My Lords, this has been an extensive and interesting debate, with a number of cross-currents. The Government's position is quite clear: we seek to retain these clauses in the Bill. I emphasise the context in which we are working. In the White Paper Reforming Financial Markets, the Government undertook a considered analysis of the financial crisis. I understand the points noble Lords have made about things that went wrong. Of course things went wrong: that is why we had a White Paper and why we have legislation derived from it.

However, let us be clear when we are critical of the existing standing committee and the wider tripartite arrangements, which we have sought to reform, that in so far as our institutional framework did not stand up effectively to the crisis that occurred, nor did any other institutional frameworks. The simple fact is that the Opposition make a great deal of criticism of the structure that was in place in the United Kingdom, particularly regarding the Financial Services Authority-and I of course recognise the validity of that criticism. That is why we are proposing reforms of the FSA; but one cannot conclude from that that the structure was wrong, particularly as the Opposition in all their contributions have not indicated why other institutional structures different from this framework also failed. They suggested that we are fighting the last war, which is always an easy epithet to put to anyone concerned with analysing a problem in order to do better in the future, but it is at least as important to learn the lessons of the past to make the reforms necessary to ensure that we make a better fist of the situation in the future.

It is what the regulators actually do and the judgments which they exercise that count. The creation of an institutional framework whereby the regulators can exercise their judgment is important, but that is what counts-the judgment. I accept what noble Lords have said-that there were mistakes by the FSA. They have been well documented. Over the past two years we have rehearsed in this Chamber and the other place weaknesses in the position. That is why this Bill provides for an operation of the three institutions that is different from what obtained in the past. However, I shall not accept that the institutional structure per se was responsible for the financial crisis which overwhelmed every significant economy in the world. Every institutional structure failed accurately to foresee that position.