Schedule 1

Financial Services Bill – in a Public Bill Committee at 1:45 pm on 7 January 2010.

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Further Provision about the Consumer Financial Education Body

Photo of Mark Hoban Mark Hoban Shadow Minister (Treasury)

I beg to move amendment 47, in schedule 1, page 52, line 31, at end insert—

‘(4) The board must include at least two members who represent the interests of consumers.’.

The amendment seeks to reserve two places on the board of the new consumer financial education body for people who represent the interests of consumers. The board composition set out in the Bill is very permissive. It states that the body must have,

“a chair; a chief executive; and a board (which must include the chair and chief executive)”.

In a body that is aimed at helping consumers and improving financial education, there should be someone who is there to represent the interests of consumers. The FSA board has no predetermined places for consumer representatives. The Consumers Association has campaigned for two places to be set aside for its representatives. The Government have gone part of the way down that route by appointing Brian Pomeroy and Mick McAteer to the FSA board, but there is no statutory requirement for the FSA board to have two consumer representatives. Arguably, the FSA’s consumer panel, which is chaired by Adam Phillips, is a way of ensuring significant consumer input into the work of the FSA. Moreover, the FSA has two practitioner panels—one deals with larger practitioners and the other with smaller practitioners—to provide an input along with the board members who come from the financial services industry. The appointment of consumer representatives would be a significant advantage for the consumer financial education board because it would give it a very clear and distinctive consumer voice on the board. It would also help to demonstrate a degree of independence from the FSA. A demonstrably independent board would ensure the credibility of the authority. Consumer groups want a dedicated body, and Citizens Advice and others have commended that. However, there will be some who ask, “Can the body be truly independent of the FSA, given that the power of appointment of board members rests with it?” I can see the basis of that argument: if someone is appointed by the FSA, would they be beholden to it? However, the experience to date of the Financial Ombudsman Service and the Financial Services Compensation Scheme, where the same power of appointment exists, suggests that both bodies are robustly independent of the FSA. There is no reason why the new body should not be similarly independent.

However, if one accepts that the body will be seen to be independent in practice, the next question is, “What other guarantees of its independence are there? What guarantees are there that it will have a wide range of  people on its board, reflecting a whole range of different stakeholder interests?” I think there will be interest from people in the industry and asset paymasters of the CFEB, but it is important to have people who are clearly representative to be the voice of consumers. That is the purpose of amendment 47.

Photo of Ian Pearson Ian Pearson Economic Secretary, HM Treasury

I assure the hon. Member for Fareham and others that the Government expect the CFEB board to have, without question, wide-ranging representation, including a significant number of board members who bring consumer insight and propose consumers’ perspectives. However, my difficulty with the amendment is that I do not believe that it is appropriate to specify that on the face of the Bill, as it does not allow flexibility in the future. Given that no other elements of the board’s composition, such as its overall size and the representation of other interests, are prescribed in the approach that we have adopted, I do not think that it is appropriate to do so in this case.

As I said, there is every expectation of strong consumer representation on the new body. It is, after all, called the consumer financial education body, and it would be absolutely amazing if it did not have strong consumer representation. However, I do not believe that we need to provide for that on the face of the Bill. If we did, we would have to put many other measures on the face of the Bill as well. Having given the Committee those assurances, I hope that the hon. Gentleman will withdraw his amendment.

Photo of Mark Hoban Mark Hoban Shadow Minister (Treasury)

I am not sure I am minded to withdraw my amendment on this occasion. One would have expected the FSA’s board to have consumer representatives, yet the appointments of Brian Pomeroy and Mick McAteer were held as a great advance.

The amendment would send a clear signal that there will be consumer representatives on the board rather than simply an expectation of such representatives. As I said, one would have expected the FSA board to have consumer representatives, but the appointment of the two new directors was clearly to make sure that consumers are heard, implying that they were not heard in the past.

The Minister could have been much more positive about the amendment than he proved to be. His view shows that consumer voices can be overlooked. They are not as numerous as industry voices, and do not necessarily have the same clout in lobbying and profile. Given that we have a body that will work on behalf of consumers and represent their interests, their voice should be heard loud and clear, and there should be a statutory requirement for them to be there. I am not minded to withdraw the amendment on this occasion and would press it to a vote.

Question put, That the amendment be made:—

The Committee divided: Ayes 4, Noes 5.

Division number 3 Decision Time — Schedule 1

Aye: 4 MPs

No: 5 MPs

Aye: A-Z by last name

No: A-Z by last name

Question accordingly negatived.

Photo of Mark Hoban Mark Hoban Shadow Minister (Treasury)

I beg to move amendment 46, in schedule 1, page 53, line 30, leave out paragraph 6.

The amendment refers to the market confidence and financial stability paragraph. It is a probing amendment, which seeks to understand how the paragraph will interact with the activities of the consumer financial education body, because it says that the body should exercise its function with

“regard to the importance of...maintaining confidence in the UK financial system; and...maintaining the stability of the UK financial system.”

In a way, paragraph 6 acts as a constraint on the activities of the consumer financial education body.

On Tuesday we discussed whether one FSMA objective took precedence over the others. The structure of FSMA is that various objectives are set, and it is then subject to other factors. Paragraph 6 mirrors that approach by saying that the objective of the consumer financial education body, which is set out in the first part of the Bill, is then limited or constrained by the duty to maintain confidence in and the stability of the UK financial system. In part, that goes back to the debate that we touched on this morning and this afternoon about what the consumer financial education body is for. Whose side is it on? Is it a consumer champion, or is it impartial when considering the interests of individuals and those of the industry sector? How will that be reflected in its work?

We have identified situations in which there are, perhaps, products with a particular problem or risk, and one of the objectives of the consumer financial education body is to advise consumers about the risks and benefits of certain financial products. If we go back to the example of payment protection insurance, the FSA’s thematic review indicated that there was a problem with the sale of such products and questioned whether they were being sold appropriately, identifying some significant flaws with the sales process. The consumer financial education body could look at the outcome of the thematic review of the sale of a product and decide that the risks were so great that it wanted to tell consumers, “We don’t want you to”, or even, “You shouldn’t buy these products”, giving clear and explicit advice through its website or face-to-face discussion with clients that the particular product should be avoided. That might be a reasonable step to take, but what happens when we then have the overlay of paragraph 6?

Such products might be fundamental to the profitability of individuals and financial institutions. Sounding some clear warnings about the products might undermine confidence in the UK financial system. A consumer financial education body might, if we consider the recent example of the bank charges, advocate that people should claim compensation for the mis-selling of products. It might see that as being part of its remit. I do not know whether it is. Part of this debate is to help tease that point out. If the financial consequences of a  large number of complaints are possible multi-billion pound claims against financial institutions, does that undermine the stability of the UK financial system?

I have presented some pretty extreme cases to make my point. How does clause 6 constrain the role of the consumer financial education body? Is it there as a consumer champion? Is it there to highlight the risks and to encourage consumers to take action, or does it adopt a more neutral position on the more difficult areas around consumer finance? Where the boundary will be set is the point that I am trying to tease out of the debate. We could argue that if we said people should not buy payment protection insurance, that would go beyond the role of generic financial advice. There should not be recommendations to buy, surrender or change a product from a specific provider. That might be going beyond its remit. Or is it within the remit of the consumer financial education body? It might be prevented from doing so where there is seen to be a wider risk of making that sort of information known, and the consumer financial education body would be constrained by paragraph 6.

Consider the run on the Rock. If at a time of financial crisis the consumer financial education body felt that it should advise consumers about the deposit protection limits, and that led to people shuffling around their deposits in bank accounts and triggered a run on a small bank, would that be putting the stability of the UK financial system at risk? I am trying to work out where the boundaries are between what the consumer financial education body can do in terms of fulfilling its core objectives of advising on risks and ensuring people understand the risks associated with particular transactions or services, and how that might then, in the sort of circumstances that we have seen relatively recently, have an impact on financial stability and market confidence. We need to understand how paragraph 6 is meant to work in practice and what it might prevent the consumer financial education body from doing.

Photo of Ian Pearson Ian Pearson Economic Secretary, HM Treasury

Let me try to shed some additional light on matters for the benefit of the Committee. The consumer financial education body will have one sole function and objective, which is to increase consumers’ understanding and knowledge of the financial system and help them to manage their financial affairs more effectively. As has been pointed out, the Bill also requires the new body to have regard to the importance of maintaining confidence in the stability of the financial system. Let me emphasise that the CFEB’s consumer financial education remit will always be its primary consideration, and it will be accountable for delivering that function.

In contrast, the have-regards in the legislation are designed to inform that function, so that the CFEB considers wider market issues when performing its functions. The have-regards allow it to consider the issues on its own terms, protecting its operational independence while also ensuring that the body links into the wider financial architecture. The have-regards will give the CFEB a broader and rational frame of reference when making policy, which we think is important. They will allow it to legitimately take into account any broader market consequences of its actions, as of course a stability crisis could ultimately have far profounder consequences for consumers. However, I strongly want to emphasise again that the primary obligation for the new body will  be to consider how to help consumers better manage their financial affairs. It is designed to do what it says on the tin; it is about consumer financial education.

The have-regards also give the new body a duty to raise any potential issues that it identifies that could affect market confidence or stability with the FSA and others as appropriate. Hence it could potentially act as an important source of market intelligence for the regulator. That flagging role should complement its consumer awareness function, not compromise it, and is a useful addition. The Government are clear that the requirements to consider financial stability and market confidence are an important counterbalance to the CFEB’s overall objective. We are very clear about the primacy of the overall objective.

The hon. Member for Fareham again raised the issue of whether the new body will be neutral or a voice for consumers. He will be aware that the majority of respondents to the “Reforming financial markets” consultation said that they thought that the new body should focus on consumer education, and not pursue consumer advocacy. There are other bodies, such as Consumer Focus, that already act as consumer advocacy organisations, and they are playing their role effectively at the moment. Obviously, the CFEB will want to work with them where appropriate. It will also liaise and work with other bodies, such as the Office of Fair Trading, and it will want to work in a collaborative way. I think that there is strong role clarity in the body’s remit, which is enshrined in legislation.

I hope that those clarifications are sufficient for the Committee, and that the hon. Gentleman will withdraw his probing amendment.

Photo of Mark Hoban Mark Hoban Shadow Minister (Treasury)

The Minister is right to point out that there is a dual nature to paragraph 6. It gives the body a reason to report issues up to the FSA where it feels that they will impact on market confidence and financial stability. Equally, it provides a broader framework for the body’s activity. My concern is that a tension could emerge between the role of the consumer financial education body and some of the wider objectives that the FSA has set up regarding market confidence and financial stability. That tension is not a bad thing, because it will provoke debate on some of the issues to do with the two bodies and how they work.

There is a fine dividing line between providing financial education, information and advice on the one hand and acting as a consumer advocate on the other. There are difficult boundaries regarding products and hot issues in the financial services. We have seen that in the work of some voluntary groups, whose experience of difficulties that they and their clients have identified, and that arose from their casework, flowed into a campaigning issue. Some of those difficulties revolve around financial services. As the consumer body develops its identity, persona and remit, there is a challenge as to where it draws the boundaries. It has to be trusted by consumers, and has to be seen to be credible by them if its work is to have value. We need to be careful that it does not compromise that by being cautious in how it approaches its remit. However, having had that debate, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Photo of Mark Hoban Mark Hoban Shadow Minister (Treasury) 2:15, 7 January 2010

I beg to move amendment 48, in schedule 1, page 54, line 32, at end insert—

‘(d) the quantitative and qualitative measures it will use to determine whether it has met its objectives.’.

This morning we discussed how we measure or evaluate the performance of the consumer financial education body. The hon. Member for South Derbyshire talked about the Treasury Committee evidence session with the FSA, at which he probed the people from the FSA about how they calculated some of the measures of success that they had used in evaluating financial education. The example he gave was that when they talked about the number of schoolchildren they had reached, it turned out to be the number of schools to which they had sent packs multiplied by the number of pupils at those schools. He suggested that the information they sent may have been put in the bin or left lying on the shelf—there was no guarantee that, having sent the information to all those schools, it would have been read, digested and used in lessons. The risk is that the focus is on input and process rather than on outcomes.

The hon. Gentleman not only raised the topic at the Treasury Committee but also expanded on it at our Committee’s evidence session. The FSA, in its additional memorandum to the Committee, talked about how it assesses or evaluates the impact of the financial capability work. Four main areas were referred to, namely reach, content, process and impact:

“Reach—the number of people reached by a programme...Content—satisfaction with, and quality of, the information and guidance received...Process—appropriateness and efficiency of the intervention; and...Impact—the intention to act and/or the actions that have been taken.”

Going back to the hon. Gentleman’s example of packs being sent to schools, the FSA would have achieved a great deal in terms of reach, and the content box may well have been ticked—there may have been a good standard of content—but I am not so sure about process and, certainly, there would have been very little impact if the information packs had all ended up in the bin. We need to make sure that there is good evaluation of the work done by the consumer financial education body, so that it can demonstrate progress—ultimately, I suppose, against the baseline study of 2006. People could then see a demonstrable level of progress. It is important to make sure that the right sorts of measures are being made of its success.

The appendix of the supplementary memorandum submitted to the Committee looks at various activities that the FSA has undertaken as part of its consumer education programme, and gives some measurements relating to what people have done as a consequence. Thus as a result of the “Parent’s Guide to Money”, which I suspect is the publication given to expectant mothers, 43 per cent. of people took action, rising to over half of people on low incomes; 67 per cent. reviewed their monthly spend and income. Some 91 per cent. of those involved in workplace seminars reported that the seminar made them better at finding financial information, and 87 per cent. reported that it had made them better at comparing prices.

The measurement made of the “Learning Money Matters” pack for schools, delivered through the Personal Finance Education Group, is as follows:

“The majority of teachers are very satisfied with the support provided by pfeg consultants”.

That sounds good, although it does not necessarily lead to actions that young people might take to manage their money. The evaluation continues:

“Involvement in Learning Money Matters often acts as a catalyst to encourage teachers to initiate or expand the teaching of Personal Finance Education in their schools.”

“Money Doctors”, the higher education programme, is making sure that it reaches out to students. Interestingly, that demonstrated some success, in that after attending the seminar, students were more likely to check their balance before withdrawing cash. The 50 per cent. of

“students who had not attended a session reported that they were constantly or usually overdrawn on their main bank account,” but

“this dropped to 40 per cent. for those students that had been to a session.”

That sounds like a bit of progress.

My point is that we need to ensure that there are good measures available to help us evaluate the work that the consumer financial education body does, and the measures should be transparent.

Amendment 48 adds to paragraph 8(4) of schedule 1 a requirement that

“the quantitative and qualitative measures it” that is, the CFEB—

“will use to determine whether it has met its objectives” be set out in the annual plan that the CFEB publishes, so that we can see clearly not only the objectives and their relative priority, and the allocation of resources between the objectives, but the measures that will be used to determine whether they have been met. I recognise that some of the measures are long term. Some 97 per cent. of people might become more aware of financial matters and might find out financial information now, but what proportion of people will use that to improve their pension provision, for example, in 10 or 15 years’ time? How do we track the long-term benefits of what they have done?

Simply ensuring that people are more comfortable finding financial information might not lead to the step change that we want in people’s preparedness for retirement, or ability to withstand a shock to their income or unexpected expenses. The real measure of success is whether it actually changes people’s outcomes. Are they better off as a consequence of being given financial education? As well as setting out its objectives, it is important that the consumer financial education body tells us in its annual plan how it will achieve and measure those objectives. That will give people more confidence in its work, and will increase transparency in measuring how successful it has been. Given the significant sums of public and private money that the body will benefit from over the years, it is important that there is proper discipline, so that we know exactly what it is doing and how well it is doing it.

Photo of John Howell John Howell Conservative, Henley

I want to follow up on a couple of points, but I spoke earlier and do not want to duplicate what I said this morning. We need to make a more subtle distinction than we have done so far. We are talking about two different things. The first is how to  measure the success of the body as a whole, in terms of increasing financial capability. The additional memorandum from the FSA sets out five tests:

“being able to make ends meet, being able to keep track of finances, planning ahead, staying informed— that is, individuals staying informed— and being able to choose financial products”.

Those are all soft targets and difficult to evaluate. It would have been helpful if the FSA had been able to provide a little more behind that. I assume that the main way in which it will measure that is through differences between the baseline survey in 2006 and the next survey, whenever that takes place. Those surveys are useful, but there comes a point when we need further qualitative information beyond that.

As for evaluating the individual projects that the new body will undertake, my hon. Friend the Member for Fareham set out four tests: reach, content, process and impact. How do those four tests for individual projects relate to the overall tests being set for the organisation as a whole? We seem to have two sets of tests, and yet there must be a sense in which the overall success of the body is represented by the cumulative success of the individual projects that it has taken up. Reach is clearly an important part of assessing a programme’s value for money, but the weight given to that in the past has led to suggestions that there has been an over-claiming of success for the projects undertaken to date.

On content, the FSA says:

“satisfaction with, and quality of, the information and guidance received satisfaction.”

From whose standpoint is that being asserted? On the basis of the material that we have been provided with, satisfaction with the content is the FSA’s view of satisfaction, whereas it should be from the consumers’ point of view. Process comes down to the appropriateness of the channel used. Again, it is not clear how that will be integrated and managed.

Lastly, impact is defined as

“the intention to act and/or the actions that have been taken.”

Ultimately, that is about behavioural change. It is only of short-term interest to talk of people’s intentions to do something. For example, when I read something I am often inspired to go off and do something—that is partly due to the sort of things that I read. However, in many cases those intentions do not get turned into action because of other things that occur in life. Intentions are great, but let us have the actuality. We do not see that happening. Where there are glimpses of that, they are only short term. For example, if we look at the money guidance pathfinder, we find that there is only two months to go back and look at its impact. A longer-term approach would have been nice.

Earlier this week, my hon. Friend the Member for Fareham mentioned how much German he had forgotten. I was very enthusiastic about ancient Greek, but I can barely understand any now except for the well known Homeric phrase, “rosy-fingered dawn”, which these days is hard to see. We forget things, and a repeat process is necessary to determine success. Therefore, the amendment is very important. It is crucial to have determinants of the quantitative and qualitative success measures that will be included for this body. Without them, we will still be asking what success looks like in a year and two years’ time.

Photo of Ian Pearson Ian Pearson Economic Secretary, HM Treasury

My point about the amendment is that although it is useful in specifying some things that will aid evaluation, that will happen anyway. For more than 20 years, I had an interest in evaluation. Unlike the hon. Member for Fareham and his German, I have kept up an interest in the literature. I am talking here about the link between inputs, outputs, outcomes and impacts and how effectively policy evaluation methodologies can be designed.

On Second Reading my hon. Friend the Member for South Derbyshire and others raised a number of concerns about how evaluation has been performed to date. The Committee will be aware that the FSA has set out the tools that it uses to address its financial capability work, and the evaluation methodology—both qualitative and quantitative—employed to measure the effectiveness of the money guidance pathfinder. For the money guidance pilot, the FSA and the Government commissioned an independent evaluator, studying both short and longer-term effects of the service, including actions taken by consumers as a result of using the service. They were trying to look at impacts, but as the hon. Member for Henley pointed out, they need to be considered over different periods. This is a complex area, but the baseline work stands comparison with that which has been done internationally. In evaluation, the game has moved on.

With the annual plan and annual report process in place, I am confident that there will be appropriate mechanisms by which we can judge the new consumer financial education body’s success and impact. Of course, we will want to ensure that the new body has clear targets to meet against its objectives, and we will also want those targets properly evaluated. I want to highlight the fact that the Bill also gives the FSA the power to commission an independent review of the economy, efficiency and effectiveness of the new body in discharging its consumer education function. That independent review would have the right of access to documents and information held by the new body that would be reasonably required. Furthermore, we would expect the National Audit Office also to play a role, certainly in reviewing the use of Government resources. Given that the FSA has recently called in the NAO to review its operation, it is also likely that the new body would be subject to NAO review at some point in the future.

I do not think that there is any difference of substance between us on this issue. We want quantitative and qualitative evaluation of the new body, which we hope will be successful. We want to examine the new body closely, but the amendment, which would put that function in the Bill, is unnecessary.

Photo of Mark Hoban Mark Hoban Shadow Minister (Treasury) 2:30, 7 January 2010

I am grateful that the Minister keeps up with the literature on evaluation. It should reassure us all that the methods that will be followed by the FSA and the consumer financial education body will be up to date, modern and efficient. That is good.

The consumer financial education body will undertake a great deal of work to assess its effectiveness and to establish to what extent it achieves its objectives, but one challenge is to ensure that the right type of measurement is used; earlier, I referred to the example given by the hon. Member for South Derbyshire. The consumer financial education body will need to consider very  carefully how it chooses to measure success, because the targets and goals that it chooses need to be credible if they are to command the confidence of the people who fund the body. Of course, there is a distinction between how effective somebody is in undertaking those tasks and whether the money is being spent wisely. I want to raise in the stand part debate an issue about funding for the new body.

However, I take on board the Minister’s remarks about what the new body will do. Therefore, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Question proposed, That the schedule be the First schedule to the Bill.

Photo of Mark Hoban Mark Hoban Shadow Minister (Treasury)

This is quite an important schedule, although I have not tabled many amendments to it. Nevertheless, I want to ask a question about the funding of the new body and how it will work in practice.

The schedule effectively sets out three sources of funding for the new consumer financial education body. The first is funding by authorised persons—people who are currently regulated by the FSA. Of course, the FSA’s existing work on financial capability is funded through the levy, so there is a continuation of the existing arrangements.

The second stream of funding comes from those who hold consumer credit licences. That is a new form of funding. It may not be welcome to people who hold credit licences, but I welcome it because one of the new body’s roles will be to help educate people on consumer debt, and not all who provide consumer credit are regulated by the FSA. There are about 120,000 consumer credit licences at the moment, which is many times the number of people who are regulated by the FSA.

The third source of funding is the Government. The Conservative party believes that consumer finance education should be funded entirely by the private sector, but that is not the reason for my speech. The Minister and I are veterans of many pieces of legislation, one of which is the Dormant Bank and Building Society Accounts Act 2008. One priority for the Government when making that legislation was financial capability; it was the second of three priorities that they set. Will the Minister say whether any of the money released from dormant bank and building society accounts will be used to fund the initiative? Is it one of the grants or loans to be made by the Treasury? I know that the funds identified under the 2008 Act will be distributed by the Big Lottery Fund, but the Bill does not refer to funding from that source. Will that emerge under paragraph 14 to schedule 1?

I turn to the other two sources of funding. A table published at page 30 of the impact assessment, which was extracted from information in the Thoresen report, sets out some of the contribution levels for various types of funds—independent financial advisers, insurance brokers, general insurance and so on. It is based on data from 2008.

The FSA will produce rules to calculate contributions, but what will be the scope of those rules? Will the contribution of the banks need to be determined by their activities in the retail market? The activities of a number of banks regulated by the FSA take place in the  wholesale markets, and they might not have a retail deposit base. The activities of some banks based in the UK are predominantly overseas. Will they be required to contribute to the levy in the same proportions as banks whose operations are predominantly UK-based? What factors will determine the amount of levy that an authorised person will contribute? I am interested in contributions relative to the size, nature and location of activities.

On consumer credit licences, it is not clear from the impact assessment or the Bill whether contributions will be made per licence or whether they will be based on the turnover of the licence holders. Dentists that offer their patients a Denplan agreement are authorised by the Office of Fair Trading to offer consumer credit. Will they have to pay the same contribution towards the scheme as a consumer finance house that lends many millions of pounds to consumers? Will there be a simple differentiation? Will the amount of consumer credit activity that the licence holder undertakes determine how much the consumer credit company should contribute to the scheme? Clarification of how that will work would be helpful.

Again on the topic of funding, paragraph 7(4)(b) states that the consumer financial education body must consult the Secretary of State. Will the Minister clarify which Secretary of State that will be? One would assume that it refers to the Chancellor of the Exchequer, but the Treasury is referred to in paragraph 7(4)(a). Does it refer to the Department for Business, Innovation and Skills, as the Department responsible for the OFT? Is it the Department for Work and Pensions, as it also has an interest in financial literacy? [Interruption.] I refer to paragraph 7(4)(b). I mentioned the Department for Business, Innovation and Skills, the sponsor of the OFT, because the OFT is listed as a consultee under paragraph 7(4)(c). I am not clear which Secretary of State is meant to be involved in the matter. I hope that there is some clarification on the points about funding and who will be consulted.

Photo of Rob Marris Rob Marris Labour, Wolverhampton South West

I want to make some brief remarks on paragraphs 3, 15, 10 and 5. Paragraph 3 will set up the consumer financial education body as something divorced from the Crown, to the point where its members, officers and staff are not to be regarded as Crown servants. It is supposed to have considerable autonomy via the FSA, another quango—regrettably, though it may be desirable in this case. We then move on to paragraph 15, which sets out that the FSA can appoint an independent person to conduct a review.

Not long ago, when we were debating amendment 48, the Minister quite understandably trotted out the line that is often used by Ministers, “Something is quite interesting and may be worth while, but we do not need it on the face of the Bill.” Under paragraph 3, an independent body is set up that is divorced from the Crown, but then in paragraph 15, continued in paragraph 16, there is a bunch of stuff about how the FSA “may”—the provision is permissive, not mandatory—appoint someone to conduct a review. Although a review might be desirable to consider how the body is functioning, I fail to see why that power needs to be on the face of the Bill. Is it because paragraph 3 divorces the CFEB so much from the FSA and the Crown?

When we were debating amendment 46, the Minister said that the CFEB will “do what it says on the tin” and that it is not a consumer advocacy group. Under paragraph 10, however, it is exempted from the Consumer Credit Act 1974 with regard to getting a licence. That suggests that the Government anticipate that the body might give advice for which it would otherwise, but for paragraph 10, require a licence. Therefore, there appears to be a contradiction.

Photo of Mark Hoban Mark Hoban Shadow Minister (Treasury)

Perhaps it is not so much about giving advice, but offering loans to its customers.

Photo of Rob Marris Rob Marris Labour, Wolverhampton South West

I very much doubt that the body will be offering loans. However, it is curious that while it seems clear to the Minister and the Government what the body will do—what it says on the tin—we have on the face of the Bill specifically an exemption from the requirement for a consumer credit licence.

Paragraph 5 seems quite extraordinary, and I would like the Minister to explain it a bit more. It is almost an “Alice in Wonderland” provision. For anything that would be against the law, the consumer financial education body can say, “It is not against the law.” The body is one that, as I adverted to earlier, under my reading of paragraph 3, is pretty much divorced from the Crown—it is a kind of super quango. As I read it—I may be misreading it—pursuant to clause 5, the body can make up its own laws, in the sense that it can say whether a person is exempt from the laws under the Consumer Credit Act 1974. Paragraph 5 seems a strange provision, and I hope that the Minister can say a little more about the rules of law that could be waived by that fairly independent body, the CFEB.

Photo of Ian Pearson Ian Pearson Economic Secretary, HM Treasury 2:45, 7 January 2010

Let us mop up all these points, shall we? First, with regard to the financing of the new consumer financial education body, the hon. Member for Fareham mentioned the Dormant Bank and Building Society Accounts Bill, for which we both served on the Committee. As he is aware, one of the intentions of that legislation is that money from dormant accounts will be made available to the new consumer financial education body, and I confirm that that remains the case.

In the pre-Budget report, we announced a joint Government-FSA commitment to provide £20 million for the roll-out of the money guidance project in 2010-11, enabling it to reach 1 million people during its first year. The PBR also announced dormant account funding of at least 25 per cent. of available funds, up to £100 million, over a number of years. Regarding the funding specifically, the hon. Gentleman will be aware that paragraph 12 gives the FSA—

Photo of Mark Hoban Mark Hoban Shadow Minister (Treasury)

Is the Minister saying that paragraph 14 enables the Big Lottery Fund to make grants to the consumer finance education body?

Photo of Ian Pearson Ian Pearson Economic Secretary, HM Treasury

It is certainly my understanding that under the dormant accounts legislation, money would go from the reclaim fund to the Big Lottery Fund and then out to good causes, which include consumer financial  education. That is the route by which funding will be provided. My officials are nodding, so my memory must be correct.

Photo of Mark Hoban Mark Hoban Shadow Minister (Treasury)

But the funding comes from authorised persons, consumer credit licensees and

“Funding by grants or loans etc. made by Treasury or Secretary of State”.

The Big Lottery Fund is distributed to good causes, but it does not feature at all as a source of funding in the funding regime set out in the schedule, unless the intention is that the Big Lottery Fund should give back money to the Treasury, which will then make the grant to the consumer finance education body.

Photo of Ian Pearson Ian Pearson Economic Secretary, HM Treasury

The hon. Gentleman is absolutely right that paragraph 14 allows the Treasury and the Secretary of State the power to make grants, loans or other financial assistance to the consumer finance education body. It does not refer to the Big Lottery Fund. The intention has always been that money from the reclaim fund will go to the consumer finance education body. I will check the exact route by which that will happen, but the policy intention is clear.

The hon. Gentleman also mentioned the FSA’s power under paragraph 12 to levy persons authorised under FSMA. The FSA must take into account

“other anticipated sources of funding” when deciding how much to levy firms. As he is aware, the FSA has a duty to ensure that the new body can function. The FSA already levies firms. It is up to the FSA to make its rules, but that is not something with which the FSA is unfamiliar. Nor, indeed, are the firms.

Paragraph 13 gives the Office of Fair Trading powers to levy Consumer Credit Act 1974 licence holders, which the hon. Gentleman welcomed. The OFT levy is exercisable by way of a general notice from time to time, and both the FSA and the OFT will be able to except certain categories or types of person partially or fully from the levy. The OFT will issue a general notice. I think that that will be sufficient explanation for him.

The hon. Gentleman asked who the Secretary of State mentioned in paragraph 7(4)(b) would be. I can confirm that the Secretary of State in that instance is the Secretary of State for Business, Innovation and Skills, because that is the sponsor Department for the Office of Fair Trading.

My hon. Friend the Member for Wolverhampton, South-West raised a number of questions. The answer to the one on paragraph 15, in short, is yes. He asked why that should be in the Bill and whether it was because we were setting up an independent body. We believe it is right that the FSA has the powers to have an independent review. They are useful backstop powers. We have every confidence that the new body will be set up so as to operate effectively and that will be demonstrated. It is useful to take the powers in legislation, so that if the FSA felt it necessary to conduct a review, it would be able to do so and have the co-operation of the new body.

Paragraph 10 exempts the new body and those acting on its behalf from certain requirements under the Consumer Credit Act. My hon. Friend probed me on why that is the case. The exemption is needed as there may be  occasions when the new body or its agents could engage in financial education activities that fall within the Consumer Credit Act. We have in mind that, in the course of a money guidance session, an adviser might take an individual through how to enter their details into an online credit card comparison tool. That would constitute an activity caught by the Act. There is no intention, as I said earlier, for the new body or its partners to offer regulated financial advice and I am happy to reinforce that point. It is clear that where the new body might be caught by the Act is very limited and incidental to its activities.

I am afraid that I do not have an immediate answer to my hon. Friend’s question about paragraph 5, but I will endeavour to write to him, if he will permit me.

Photo of Rob Marris Rob Marris Labour, Wolverhampton South West

I am grateful to my hon. Friend for agreeing to write to me. That is quite satisfactory because, in terms of what he said about paragraph 15—stressing it was an independent body—we have an independent body that apparently can waive the rules, for example, for an organisation with a royal charter or with charitable status, and that is rather odd. Perhaps when he writes to me he can let me know parallels elsewhere in the law where some independent body, such as the CFEB, has the ability, in my words, to re-write the law.

Photo of Ian Pearson Ian Pearson Economic Secretary, HM Treasury

It has come back to me—with the help of a scribbled note—and I remember the background to it, as well. Paragraph 5 enables bodies to work with the consumer financial education body, even in circumstances where their constitution might not otherwise allow them. We specifically have in mind areas where a charity might be concerned whether the activity is wholly within its charitable status. That is the only particular area of concern that I am aware of. There are charities that want to work with this new body that believe they should be helping particularly vulnerable people improve their levels of financial literacy and make better decisions. The provision enables them to do that without having concerns about their charitable status. I hope that sufficiently clarifies matters.

Photo of Rob Marris Rob Marris Labour, Wolverhampton South West

I hope that my hon. Friend will write to me.

Photo of Ian Pearson Ian Pearson Economic Secretary, HM Treasury

My hon. Friend wants me to write to him and I am more than happy to do so.

Question put and agreed to.

Schedule 1 accordingly agreed to.