Financial Services Bill — Committee (2nd Day) (Continued)

Part of the debate – in the House of Lords at 8:45 pm on 15th March 2010.

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Photo of Baroness Noakes Baroness Noakes - Shadow Minister, Shadow Minister 8:45 pm, 15th March 2010

Well, my Lords, I am at a loss for words. As noble Lords will be aware, that does not very often happen. I shall move Amendment 29 and speak to Amendment 32. Both of these amendments concern the differences between the financial stability objective for the Bank of England, which was created in last year's Banking Act, and that for the FSA which is created in Clause 5. The Bank of England's financial stability objective is set out in Section 2A of the Bank of England Act 1998, which says that the objective is,

"to contribute to protecting and enhancing the stability of the financial systems", in the UK. We had several discussions during the passage of the Banking Act last year about whether a more precise definition should be given, but the Government refused to budge on that.

When we come to this Bill, the FSA's new financial stability objective in the proposed new Section 3A(1) of FiSMA is phrased in much the same way as it is for the Bank, but new Section 3A(2) goes on to say that the FSA has to "have regard to" some very sensible things; namely:

"the economic and fiscal consequences for the United Kingdom of instability", in,

"the UK financial system; ... the effects ... on the growth of the economy of", the UK and,

"the impact ... on the stability of the UK financial system of events or circumstances outside", the UK. My Amendment 29 simply adds those sensible things to which the FSA should have regard to the financial stability objective for the Bank of England. I cannot think that the Government would want the two bodies to be working to substantially different terms of reference for financial stability, so I am sure that the Minister will agree with my amendment.

The second amendment in this group, Amendment 32, adds a new clause after Clause 4. It also probes a difference between the wording used for financial stability in last year's Banking Act and in this Bill. Last year, the wording referred to the financial systems of the UK, while this year the parliamentary draughtsman has used, "UK financial system"; that is, last year, there was more than one system, and this year there is one. If the courts ever come to interpret this Bill and last year's Act, there would be a prima facie case that the Government intended different things, since they have used different language. The normal interpretation from that is that the difference was deliberate. Amendment 32 says:

"For the avoidance of doubt", the financial systems wording means the same as this year's wording. I beg to move.