Clause 3 - Amendment of the Financial Services Act 1986

Promotion of Volunteering Bill – in a Public Bill Committee at 3:00 pm on 5th May 2004.

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Photo of Julian Brazier Julian Brazier Shadow Minister (Foreign and Commonwealth Affairs) 3:00 pm, 5th May 2004

I beg to move that the clause stand part of the Bill.

I promised that I would be extremely brief on each clause, but as a point for discussion, I shall give a short explanation to the Committee of why I originally tabled them.

Clause 3 deals with the role of the Financial Services Authority in regulating the insurance market as it affects sporting and other recreational clubs. Someone may well ask what that means, as no one thought that the Bill would affect sporting and other recreational clubs. I agreed to include the clause simply to draw attention to the fact that, bizarrely, the FSA has announced its intention shortly to treat sporting and other governing bodies that have in-house compulsory insurance as though they were insurance advisers, with all the paperwork and bureaucracy that that entails.

To give rugby as an example, one of my sons attended a school that did not play rugby, so every Sunday I took him to Whitstable rugby football club—an excellent organisation that I am proud to have attended every Sunday for two years. It has a compulsory insurance policy as laid down by its national governing body, and the arrangement is excellent. It means that all the rugby clubs in the country and the governing body are properly insured. The whole thing is watertight; it is a good arrangement.

Under the FSA's plans, the governing body will shortly be treated as an insurance adviser, because it is giving to its members advice—in fact, more than advice; it is giving orders—about insurance. It seems absolutely bizarre that we should be imposing such bureaucracy on rugby or any other kind of sporting clubs. For the reasons that I gave earlier, I shall not insist on the clause, but I wanted to put those points on record.

Photo of Lembit Öpik Lembit Öpik Shadow Secretary of State for Northern Ireland, Northern Ireland Affairs, Shadow Secretary of State for Wales, Welsh Affairs

I did not participate in the debate on the order in which we will consider the clauses because that was a procedural point. However, it is a great shame that the simplicity of the Bill is being compromised by the fact that there must be expedience if the hon. Gentleman is to get any legislation passed.

Although I certainly do not understand the clause as well as the hon. Gentleman, it seems that we have somewhat lost the plot in this country when it comes to understanding the motivations of those who run rugby clubs, to take his example, and of those who sell insurance; they are very different. I hope that the Minister can tell us what the Government intend to do about that problem and reassure us that, in some way, the intent of clause 3 will be covered by Government action. If she does not do so, it will not only send a signal that the Government have not fully grasped the difficulties that we are discussing, but imply that those organisations that depend on the Government to act on such difficult issues are not being fully represented in her words. What I am looking for from her is a clear

explanation of how the Government would like to handle the issue.

Photo of Tim Boswell Tim Boswell Shadow Spokesperson (Business, Innovation and Skills), Shadow Minister (Constitutional Affairs)

I entirely endorse the hon. Gentleman's sentiments. Does he agree that the danger in this kind of arrangement is that, in the absence of a statutory obligation on the sports body to take out insurance—the Minister may want to comment on that—the effect of further regulation is to make it less likely that it will do so? That will make it much more likely that difficulties will be caused for someone involved in an accident.

Photo of Lembit Öpik Lembit Öpik Shadow Secretary of State for Northern Ireland, Northern Ireland Affairs, Shadow Secretary of State for Wales, Welsh Affairs

That is right. Not only would the individual suffer as a result, but so too would sport and recreational activities as a whole. An alternative for the organisations on which the legislation is being imposed is to give up completely and say, ''We won't bother.'' Certainly, no one will be more inclined to offer recreational activities on account of the regulations. It stands to reason that some people making decisions at the margins will decide that the regulations are the final straw. They will either close down their activities or not commence them in the first place. I merely expect the Minister—and I am sure that she has made considerable preparations—to explain how the Government will handle that pressing issue.

Photo of Derek Wyatt Derek Wyatt Labour, Sittingbourne and Sheppey

What sort of madness is there in our society when we have to say ''Be careful in case you're not insured'' before our families can do the things that we want them to do? The whole basis is crackers. We should welcome the fact that national governing bodies take out insurance; that gives us an assurance that we can go and play with our children. Like the hon. Member for Montgomeryshire (Lembit Öpik), I would like to know what the Government's plan is. If we are right about the FSA's intent, what is the Government's response to it?

Photo of Andy Reed Andy Reed Labour/Co-operative, Loughborough

I welcome the sentiments of the hon. Members who have just spoken; I was playing rugby at the weekend, and I have a number of injuries from that game, although I think that we were wholly and completely insured.

It is a sad indictment that matters have got to this stage. We are talking about outside bodies, and I have worked quite hard in the past few years with community and amateur sports clubs. One of the particular fears and frustrations of Back Benchers is that we take positive steps forward, but all the time, outside this place, other organisations that we have established and let loose are, drip by drip, slowly bleeding dry sports clubs up and down the country.

Sometimes, the first that we hear of such cases is when people come and complain to us in our surgeries. I hope that now is the time, as part of the Bill—perhaps the Minister can reassure us on this—that we will at last be able to take back control. At the end of the day, we are the ones who get the blame. For too long we have been passing the buck to someone else to take the blame for us. Let us bring the blame culture back in here; let us take control. It is a shame that we are losing the clause, but I hope that the Minister or

others will find another route via which we can make amendments to the Financial Services Act 1986 and bring organisations such as the Financial Services Authority back into line.

Photo of Jacqui Lait Jacqui Lait Conservative, Beckenham 3:15 pm, 5th May 2004

I have a great deal of sympathy with the Minister, because she has had a barrage of complaints, to which I would like to add. I am sympathetic because she should not be answering for the FSA. Somebody who is responsible for that organisation should be present. We are all well aware of the number of sporting activities and businesses that are affected by FSA regulations, some of which are sensible, while others lead us to raise an eyebrow.

By coincidence, I also spent part of the weekend at my local rugby club, where the new club house was being opened; the club had successfully raised enough funds and the occasion was a very happy one. However, as constituency MPs, we all know that on such occasions someone inevitably comes up, pokes us in the chest and asks, ''What about this?''. The angriest exchange that I had at the weekend was over insurance. Some 250 youngsters under the age of 17 play at Beckenham rugby club every Sunday morning. Fathers, mothers and people who have played rugby all their lives voluntarily give up Sunday mornings to teach the kids. However, the schools have backed out, possibly because of the blame culture, and it will now be left to the rugby clubs to try to recreate the triumph that we saw last year. The people with whom I discussed the issue were very angry and bitter at the thought that they would have to take out their own insurance and that the club would not be able to do so or that the bureaucracy involved would put it off. If we continue like that, we will not have an international rugby team worth the game.

Although the clause is seemingly innocuous, I am happy to support its not being insisted upon in order to get clause 2 through. I hope that the Minister will be able to tell us, certainly by the end of the Committee stage, that whichever Department is responsible for the FSA—whether it is the Treasury or the Department of Trade and Industry—is going to tell us that the FSA will withdraw such a thoroughly daft proposal.

Photo of Fiona Mactaggart Fiona Mactaggart Parliamentary Under-Secretary (Home Office)

What has been described is one of the problems with the Bill and one of the reasons why it has been difficult for us to resolve some of the issues that the hon. Member for Canterbury raised in introducing it. The Bill deals with issues that reach across a number of Departments and which require their collaboration, and not just their agreement, to settle. For example, I have spoken to my right hon. Friend the Minister for Sport and Tourism about what role community and amateur sports clubs can play in helping to resolve some of the insurance problems that sporting bodies face. He has been actively negotiating with community and amateur sports clubs to see whether they can take steps to resolve some of the issues. That is one example of how we are seeking to make progress.

One of the problems is that the bogey often gets bigger than it needs to be; I am not sure that that is the case, but it is possible. The changes that are causing concern among those in rugby football and others are a consequence of the introduction of regulations resulting from the insurance mediation directive. Standards in voluntary organisations should be as high as those in professional organisations. As the Minister with responsibility for the voluntary sector, I hold that that is a fundamental principle that we must find out how best to implement in practice.

Photo of Julian Brazier Julian Brazier Shadow Minister (Foreign and Commonwealth Affairs)

The voluntary sector shares the Minister's concerns about standards. However, we are dealing not with the matter of standards, but with legislation that is designed to prevent organisations that exist for profit from exploiting vulnerable individuals. There is no question of rugby clubs or other sporting clubs exploiting anybody through the insurance market, so it is inappropriate that they should have to carry these burdens.

Like my hon. Friend the Member for Beckenham (Mrs. Lait), I feel sorry for the Minister in having to pick up so many points from different Departments. However, members of the Committee will feel a heavy heart if I have to withdraw clause 3 because the Minister cannot offer us more than she already has.

Photo of Fiona Mactaggart Fiona Mactaggart Parliamentary Under-Secretary (Home Office)

To some extent, the sense that the voluntary sector is amateur and therefore does not need professional standards has held it back and often created an inappropriate power relationship between funders of voluntary organisations and the organisations themselves. It has sometimes created a feeling—not in the sector, but for those on whom it depends for resources—that things can be half well done. That is not the case in insurance. Nevertheless, it is important to start with a belief that minimum standards should universally apply across voluntary as well as professional organisations.

Sometimes, those minimum standards are designed to prevent profiteering and exploitation. For example, the insurance mediation directive requires that individuals or companies who carry out insurance or reinsurance mediation should be registered on the basis of the following minimum requirements: appropriate knowledge and ability; good repute; possession of professional indemnity insurance or any other comparable guarantee against liability arising out of professional negligence; and sufficient financial capacity in the case of insurance intermediaries who handle customers' money. Those requirements are designed to guarantee a high level of professionalism and competence on the part of insurance intermediaries across the European Union. That is why the directive has been developed.

In the directive, the intermediaries are defined as persons who take up or pursue their activities for remuneration. That is where the concern arises. We want to ensure that standards are adapted appropriately to the needs of the sector in question. That often happens in voluntary organisations, although it happens less in sporting organisations, for practical rather than bad reasons. As voluntary

organisations such as law centres and councils for voluntary service grow, they recognise that there is an infrastructure issue with supporting front-line volunteering. They need a more robust back-room infrastructure that can resolve some of the collective problems of the sector. Those problems are not easily fixed by the person doing the front-line service; the people who give advice in citizens advice bureaux or referee at rugby matches are not the ones to do that. There is a need for a back-office operation with the professionalism and infrastructure to provide umbrella network services.

Photo of Lembit Öpik Lembit Öpik Shadow Secretary of State for Northern Ireland, Northern Ireland Affairs, Shadow Secretary of State for Wales, Welsh Affairs

I am listening with interest, and two words come to mind: ''wood'' and ''trees''. While, technically, I can see where the Minister is going, it sounds as if she expects much more than we should realistically require from organisations that have not, fundamentally, been set up to sell insurance. If I am to be persuaded by the hon. Member for Canterbury to vote in favour of rejecting the clause, I must also be persuaded that, strategically, the Government understand that we do not need to copper-bottom every aspect of the matter.

The Minister said to begin with—I paraphrase slightly—that the question is not one of risk elimination, but one of risk management. I want her to acknowledge that point in the context of this insurance business. Perhaps she could take a step back and give a little more latitude to the organisations in question, which never will intend to get rich by selling insurance.

Photo of Fiona Mactaggart Fiona Mactaggart Parliamentary Under-Secretary (Home Office)

I do not want to give them latitude, but to create the right kind of support mechanisms to ensure that they can provide through umbrella organisations such as community amateur sports clubs advice of an appropriate standard, so that insurance can be provided. I do not think that the answer is to say that it is all right to provide badly run insurance schemes. I am not saying that that is what happens at the moment, but it could happen.

Photo of Mr Andrew Bennett Mr Andrew Bennett Labour, Denton and Reddish

My hon. Friend's defence is that Europe is now imposing a directive, but as I understand it, she said that that applies only where there is a charge. Surely a national body that gives advice about particular insurance schemes is not covered by the directive as long as it does not charge for the advice.

Photo of Fiona Mactaggart Fiona Mactaggart Parliamentary Under-Secretary (Home Office)

I think that that is probably the case, but I am nevertheless arguing for standards that I think players of sport have a right to expect. I suggest that, while we might need to establish some interim support arrangements to help those who are facing this question at present, the longer-term solution is to try to bring about in the sporting sector what was developed in the advice-giving sector. The two are not hugely different in terms of the way in which many people operate within them.

Exactly the same problems have been faced in the advice-giving sector. It is possible that the advice that is given can give rise to liability for negligence, with high costs. However, umbrella organisations have developed that have provided schemes that comply with the requirements in question in ways that are in

tune with the voluntary nature of the activities and that produce the results that we all want.

Photo of Tim Boswell Tim Boswell Shadow Spokesperson (Business, Innovation and Skills), Shadow Minister (Constitutional Affairs)

I strongly endorse the Minister's general comments about the need for appropriate professionalism in the voluntary sector. However, first, will she concede that one aspect of the voluntary sector is, by its nature, that it is often run on a shoestring? The operation need not be amateurish, but any accretion of costs makes a significant difference to its viability. That is the practical reality.

Secondly, will the Minister at least commit herself to exploring with her ministerial colleagues a way of finding sensible protocols for handling this matter in future? Again, we are not wedded to the clause—if it goes, it goes—but we need an answer to the problem that it identifies.

Photo of Fiona Mactaggart Fiona Mactaggart Parliamentary Under-Secretary (Home Office)

There is an answer in what I have been saying. The Financial Services and Markets Act 2000 sets out what the powers of the FSA cover. The key question is whether the voluntary organisations carry on the activities in question by way of business. If not, the activities are not regulated by the FSA. The problem arises at the point when there might be a margin of appreciation about whether they are doing so, and that is where I am right about raising the level of professionalism in the umbrella bodies.

I undertake to the Committee to seek to work with those bodies. In that context, I am going to haul in the my right hon. Friend the Minister for Sport and Tourism, who is the key person here, because the issue affects sport differently from other voluntary sector organisations. We shall work with sport's umbrella bodies—he regularly does that—and the new community-owned sports clubs. They will be key to resolving ways in which the infrastructure of sport can meet desirable standards.

Photo of Lembit Öpik Lembit Öpik Shadow Secretary of State for Northern Ireland, Northern Ireland Affairs, Shadow Secretary of State for Wales, Welsh Affairs 3:30 pm, 5th May 2004

I apologise if I came on a bit strong to the Minister earlier; I happened to feel strongly about the subject at that moment. I must control my blood sugar level because I have not eaten today.

I understand what the Minister is trying to do, and it is logical enough, even if I have different views about the level of risk management. However, how many times has something gone wrong as a result of bad advice on, or mis-selling of, insurance in the circumstance that the Bill seeks to tackle? I understand that she may not have that statistic, so perhaps she could write to Committee members to give us an idea of the size of the problem. It is quite plausible that there will be cases of which I have not heard, but it is also possible that the answer will be a very small number indeed.

Photo of Fiona Mactaggart Fiona Mactaggart Parliamentary Under-Secretary (Home Office)

The hon. Gentleman is right, but he must accept that it is difficult to determine an accurate figure. I shall try to find such a figure and, if I do, I shall share it with the Committee, but I am not undertaking to write to every Committee member as it is not the business of Government to give best estimates, and I have a feeling that we are in that area.

Photo of Jacqui Lait Jacqui Lait Conservative, Beckenham

I am grateful to the Minister for giving way and sorry if she feels that I am hounding her—I am not—but I am interested in the tenor of her remarks as the Minister with responsibility for the voluntary and charitable sector. She talks about the need for amateur and voluntary bodies to have the highest possible standards, and nobody disagrees with that. However, the implication is that that will add significantly to their costs. Those of us who are involved in charity work know that it is hardest to raise money for back-office costs. Does she think that there are implications for the base costs of amateur and adventure bodies? If those costs are raised, the market will come into operation and we will lose even more of those bodies than we will if they do not have a proper statement of inherent risk, for instance.

Photo of Fiona Mactaggart Fiona Mactaggart Parliamentary Under-Secretary (Home Office)

That is exactly the reason for the £80 million investment in infrastructure. As money for back-room activities is the hardest to raise, for too long there has been a kind of conspiracy—not a deliberate one—of operating on a shoestring. There is the risk that things will be done badly and possibly dangerously, although I do not think that there is any evidence that that is the case for insurance. That is not acceptable. It is, however, acceptable to have the highest standards of professionalism, compatible with amateur and voluntary activities, which would also develop the sector's capacity to do more and be more ambitious.

Photo of Frank Dobson Frank Dobson Labour, Holborn and St Pancras

I perfectly understand the Minister's desire to ensure that the insurance arrangements that any club, collection of clubs or sporting body might have will be effective and provide the cover that people want. However, if that is the case, rather than imposing the duty on Bloggsville rugby club, or whatever, would it not be best for the Financial Services Authority simply to lay out advice to all such clubs on what would be covered by their policies? Then they would not need any damn bureaucracy. If people did not comply, perhaps they would be subject to legal action.

Photo of Fiona Mactaggart Fiona Mactaggart Parliamentary Under-Secretary (Home Office)

That is a sensible suggestion. In fact, it follows the Government's approach to the Bill. Many of the issues that the Bill raises can best be dealt with by policy and advice. Clear advice, which sets out the requirements for people, will help to overcome some of the myths that have created a perception that there will be an enormous burden to meet and a level of regulation that is not actually necessary.

Photo of Mr Andrew Bennett Mr Andrew Bennett Labour, Denton and Reddish

Would it not be a good idea, then, to leave the clause in the Bill? My hon. Friend the Minister could talk to the FSA and tell it to come up with the guidance by next week, and then we could remove it.

Photo of Fiona Mactaggart Fiona Mactaggart Parliamentary Under-Secretary (Home Office)

I am making this contribution on the basis of supporting the desire of the hon. Member for Canterbury to remove the clause. Were he not to do that, I would press my amendments forcefully, but I hope that I will not need to do so. I have given the Committee an undertaking, which I will fulfil, that I will contact the FSA and try to ensure that guidance, in a form that can be understood by the referee on the front line and that properly assists the

umbrella bodies to provide the services that they want to provide, is issued.

Photo of Julian Brazier Julian Brazier Shadow Minister (Foreign and Commonwealth Affairs)

There is one other thing that the Minister, who has been very helpful in dealing with our points, could promise the Committee. She could make a pledge to write to us to let us know whether there has been any instance at any time in the past few years of the problem that we are discussing arising. It would help if she could promise to let us have that information in writing.

Photo of Fiona Mactaggart Fiona Mactaggart Parliamentary Under-Secretary (Home Office)

If such a case is drawn to my attention, I will certainly do that.

I sound as though I am trying to extend debate; I am not, as hon. Members looking at my wilting spine can tell. Either the clause is not necessary because the vast majority of those giving advice are not regulated by the FSA, or it risks creating an uneven playing field between the voluntary and the professional sectors, which we have sought to overcome. Going in a different direction that ensures the highest standards for all, with appropriate back-room support and delivery mechanisms—I understand that the FSA is designed more for commercial companies than rugby football associations—means that withdrawing the clause is the sensible thing to do.

Photo of Lembit Öpik Lembit Öpik Shadow Secretary of State for Northern Ireland, Northern Ireland Affairs, Shadow Secretary of State for Wales, Welsh Affairs

Rather than continuously intervening on the Minister, I thought it better to express my frustrations in one go. Up to this point, she has been unable to provide any evidence of an actual problem; she has talked only of a theoretical one. It reminds me of something that a physicist once said when he was not totally convinced of something: ''That's all very well in practice, but does it work in theory?''

We are in the same situation with this legislation. The Government are defending insurance arrangements and bureaucracy to solve a problem that I suspect barely exists in reality. They could take the same approach to other dangers, such as insufficient wood protection and termite control on the floor of a rugby bar, which could cause people to fall through the floor when stamping their feet and singing rugby songs. There is probably legislation somewhere to prevent that—perhaps in the building industry. I am sure that there is a health and safety regulation on noise to ensure that there is an upper limit to the level at which people can sing to avoid damaging people's hearing. There could also be regulations on potentially offensive words in such songs.

We can take the point further ad absurdum, but surely the Government's responsibility is to draw a line somewhere. The politics of common sense should intervene. Sadly, as my father said to me all too often when I was young, ''Sense is not common.'' I proved that by not really understanding what he meant for three years. If the Minister wants to convince the Committee that the Government are really cognisant of the problem that we are highlighting and, as she said at the beginning of this discussion, accept that we are not trying to eliminate risk, but to manage it in a

responsible way, we deserve a better response than we have had so far.

Photo of Julian Brazier Julian Brazier Shadow Minister (Foreign and Commonwealth Affairs)

The Minister will not take this amiss as we have had good-natured conversations all the way through, but I find her reply wholly unconvincing. Nevertheless, I will urge the Committee to remove the clause for two extremely simple reasons. First, the weight of my postbag and all the discussions and consultations suggest that the problem is not nearly as serious as the gaping hole that is dealt with in clauses 1 and 2. Secondly, there is any number of opportunities to table amendments and tackle this, including a Finance Bill every year. Indeed there is one going through the House now. I urge hon. Members, many of whom, I suspect, share my lack of conviction on the replies on this, none the less to support the removal of the clause.

Question put and negatived.

Clause 3 disagreed to.Clause 4Amendment of the Data Protection Act 1998