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(4) Any scheme agent who reneges on their contract of employment will be subject to a penalty.
(5) The Chancellor of the Exchequer may make such regulations as are necessary for the establishment of a penalty.
(6) The power to make regulations under subsection (5) is exercisable by statutory instrument.
(7) A statutory instrument containing regulations under subsection (5) may not be made unless a draft of it has been laid before and approved by resolution of the House of Commons..
I shall not detain the Committee too long. I just want to tease out from the Minister the purpose behind giving the FSA powers to appoint a scheme agent. I understand that the FSA is the scheme manager. I suppose that, as much as anything else, my concern revolves around responsibility. We always like to put layers between us and decision making. I want the FSA to be responsible. If it has to employ someone new to be the person who organises matters, let it do so. I am not particularly in favour of saying that it delegate functions. Even the explanatory note states:
Before entering into arrangement the FSCS must be satisfied that the person is competent to carry out the function.
I should jolly well hope so, and that the person is given sufficient direction. Our excellent staff have drafted a rather convoluted amendment, but is there an absolute necessity for such a provision. Let us leave the FSA to get on with it and to be responsible for managing matters and not delegate that responsibility to other people. While such people may well be able to do the job properly, we all know of wonderful examples of when the Government have delegated powers to contractors and agents, and things have gone belly up. I do not know why it is absolutely necessary for the FSA not to be wholly responsible for such matters. If it wants to employ some proper people to do the job, that is fine, but why must delegated power be given to some sort of scheme agent?
I appreciate the probing nature of the amendment, but it is the Governments view that it is unnecessary and almost certainly unworkable. I fear that it might have arisen from a misunderstanding of what the proposed new section 221A of the 2000 Act will do and how it will work. I shall explain the Governments thinking behind it and, if the hon. Gentleman has further questions, I shall be happy to hear them.
The purpose of proposed new section 221A is to allow the compensation scheme to delegate its decisions to a contractor, referred to as the scheme agent. The person might be the liquidator appointed under the bank insolvency procedure, another firm of accountants or a suitable firm, but the key point is that the decisions necessary for enabling speedy payouts from the FSCS have to be made quickly, in large numbers and in an automated way. That could not happen if all decisions had to be referred to the FSCS itself, even if all that took place was that the decisions were then ratified by the FSCS computers.
The decision-making process will therefore have to be delegated. Of course, the FSCS will keep the ultimate responsibility for the decisions. The scheme agent will be an agent of the FSCS and carry out functions on its behalf, not an independent decision maker. Rather than appoint a person to perform its functions, proposed new section 221A would simply provide that arrangements may be made with another person to perform any of the FSCS functions. Those arrangements are likely to take the form of a normal contract for services rather than a contract of employment and, if the contractor fails to perform, the FSCS will be able to take action for breach of contract in the normal way through the courts.
I appreciate the probing nature of amendment No. 10, but the mechanism that it proposes is unnecessary and could cut across the normal ways of dealing with breaches of contract in an unhelpful way. I hope that my explanation of proposed new section 221A has been helpful to the hon. Gentleman.