With this it will be convenient to discuss the following:
‘(6) In making the appointments, the FCA must have regard to the desirability of ensuring the representation of practitioners carrying on a range of regulated activities.’.
Amendment 137, in clause 5, page 21, line 20, at end insert—
‘(6) In making the appointments, the FCA must have regard to the desirability of ensuring the representation of practitioners carrying on a range of regulated activities.
(7) The Panel must in particular include representatives of—
(a) smaller businesses, and
(b) practitioners who are likely to be affected by the exercise by the FCA of its functions relating to markets, including its functions under sections 6, 8A and 18.’.
Amendment 138, in clause 5, page 21, line 21, leave out from beginning to end of line 26 on page 22.
Amendment 132, in clause 5, page 22, line 17, after ‘persons’, insert ‘across the United Kingdom’.
Amendment 133, in clause 5, page 22, line 18, after ‘appropriate’, insert
‘, with consideration for diversity in the composition of the panel’.
Amendment 134, in clause 5, page 22, line 36, after ‘consumers’, insert
‘in all parts of the United Kingdom’.
Amendment 135, in clause 5, page 22, line 37, after ‘appropriate’, insert
‘, with due consideration for diversity in the composition of the panel’.
Amendment 46, in clause 5, page 22, line 37, at end insert
‘in making the appointments, the FCA must have regard to the desirability of ensuring the representation of consumers of a range of financial products from across all parts of the United Kingdom and from a range of income levels.’.
Amendment 45, in clause 5, page 23, line 4, leave out from ‘must’ to ‘responses’ in line 5 and insert ‘publish’.
Amendment 59, in clause 5, page 27, line 6, at end insert ‘and consumers’.
Amendment 60, in clause 5, page 27, line 9, after ‘consulting’, insert ‘consumers and’.
Amendment 74, in clause 5, page 27, line 10, after ‘persons’, insert ‘or the public’.
Amendment 61, in clause 5, page 27, line 12, after ‘2G’, insert—
‘(1A) When undertaking a consultation, the PRA must have regard to the desirability of ensuring a broad representation of practitioners and consumers in the UK financial services sector.’.
Amendment 62, in clause 5, page 27, line 13, leave out from ‘arrangements’ to end of line 14 and insert
‘must include the maintenance and consultation of those panels established under sections 1N, 1O, 1P and 1Q’.
Amendment 63, in clause 5, page 27, line 16, after ‘section’, insert
‘and must report annually on its consultation activities.’.
Amendment 83, in clause 5, page 27, line 19, at end insert
‘and by the Consumer Panel’.
Amendment 129, in clause 5, page 27, line 19, at end insert—
‘(1A) Unless the PRA has established a panel as provided for in section 2K(2) to reflect consumer interests, it must consider representations from the Consumer Panel established under section 1Q where such representations relate to the PRA’s general policies and practices, the co-ordination of the exercise of PRA and FCA functions as provided for in section 3D(1), or the exercise of the PRA power in section 3I.’.
It is a pleasure to serve under your chairmanship this morning, Mr Leigh.
Effectively, amendments 136 to 138 form a suite of probing amendments, and we will see whether we receive clarification in Committee. They give us the possibility of achieving something that the Minister says he wants, which is to restrain the size and complexity of the Bill in relation to all the different bodies and the confusing arrangements. The amendments create the possibility of having a single practitioner panel, just as there will be a single consumer panel, but would ensure that that panel can take account of all the market issues and of the needs of small business practitioners.
That suite of amendments aims to replace the three different practitioner panels. During its pre-legislative scrutiny, the Joint Committee was told that such panels are a hangover from previous arrangements. Many people believe that they give rise to the risk of regulator capture, and to lots of confusion between different areas of the market and in regulatory relationships with different practitioner interests. The consumer interest is represented by a singular panel, the consumer panel, but the Minister told us in previous sittings that all sorts of people can be consumers—they can come in many shapes and forms—and that those who some of us regard as practitioners could, for certain purposes, be regarded as consumers.
There is potential clutter and confusion in the Bill, but the amendments provide the possibility of having a single business and practitioner panel to match the single consumer panel. They would ensure that the diverse interests that the different panels are meant to cover are dealt with by one strong singular panel. Other amendments would make sure that that panel’s composition takes full account of diversity, including geographic spread and the geographic differential of markets.
Some amendments that I have tabled, including amendments 132 to 135, relate to the Bill as it stands, with its provision for the different panels—the practitioner panel, the smaller business practitioner panel and the markets practitioner panel. Those amendments aim to ensure that certain issues, such as diversity and the geographic differential of market experiences and access, are at least considered during the formation of such panels. If we are to have those three different panels, which some people believe are an over-provision, at least there should be room for making sure that issues of diversity and market differential are taken into account. That could be one justification for having such different panels.
Amendments 59 and 60 would ensure that consumer interests are duly and specifically reflected, because, as I said in a previous sitting, if the provision in the Bill is the new regulatory bucket, it has several consumer holes, which the amendments are aimed at plugging. The intention is to give confidence to consumers that the regulators will not always be driven by the interests of practitioners, but will pay due regard to consumers. By front-loading that in the Bill, we would assure people that Parliament has active and due regard for the interests and needs of consumers, and that we did not just take it for granted that someone out there will always be inspired to take such matters into account.
May I say what a pleasure it is to continue to serve under your chairmanship, Mr Leigh. I thank my hon. Friend the Member for Foyle for tabling his amendments, which have been grouped with others that relate to the strength of the Government’s proposition in designing the practitioner panels properly to catch the right range of practitioners and to ensure that we have the right degree of consultation at the right time, with the right set of persons and corporate bodies.
The amendments are crucial because we want a regulatory system that is not aloof or remote from the real economy and from the concerns of consumers, never mind the firms being supervised. We must ensure that we have regulators who are in tune with the needs and the experiences of those working on the front line. That is why we have supplemented the important amendments tabled by my hon. Friend with a series of other amendments to make that point in more detail.
Amendment 47, for example, relates to the practitioner panel set up as part of the FCA’s consultative arrangements. Although we welcome the fact that there is to be a practitioner panel, we are not satisfied that practitioners carrying on a range of regulated activities will necessarily be properly represented in the appointments made to it. As my hon. Friend said, we need to ensure that the banking sector does not overly dominate the arrangements and that there is a voice for the insurance sector and the broad range of practitioners in professional and legal services who might be affected by the regulatory changes. Will the Minister explain how we can ensure that the practitioner panel will involve a range of such interests?
Amendment 46 has been drafted in a similar vein. Currently, under the Bill, the FCA can appoint to the consumer panel
“such consumers, or persons representing the interests of consumers, as it considers appropriate”,
It is for the FCA to decide which consumers it appoints. I have two anxieties about the provision. First, historically, public appointments such as these tend to be dominated by people in the south-east and London areas. Practitioner panels frequently meet in the capital, so those responsible are less disposed to appoint people who come from other parts of the United Kingdom. Consumers in Yorkshire, Scotland, Northern Ireland, Wales or elsewhere might have very different experiences. It is important to have an eye to diversity when considering which consumers might be relevant to panels, but we should also try to get a mix of people that is as broadly representative as possible of the whole United Kingdom.
Another crucial ingredient is missing from the provision: people with a range of income levels should be represented on the panels. Consumer bodies and representative organisations can do a good job of advocating the interests of lower-income consumers, but it is sometimes important to hear the actual voices of those who have faced difficulties in getting credit or have faced bureaucracy with organisations that do not always treat people in such circumstances as prized customers—
I will endeavour to face the Chair, Mr Leigh. The purpose of amendment 46 is to ensure that all consumer groups are properly represented, particularly those from income levels that might be affected significantly by regulatory change.
Amendment 45 relates to the FCA’s duty to publish responses to representations made to the various panels. In an interesting drafting anomaly, the Bill states that the FCA must
“from time to time publish in such manner as it thinks fit responses to the representations.”
The subsection is fairly redundant, because although it requires the FCA to publish representations, it caveats that requirement with the phrases “from time to time” and “as it thinks fit”, which negates the provision’s purpose. To make such publishing a requirement, we want to delete those caveats. Doing so would not be onerous and would be an important part of the transparency process. The Government are under considerable pressure from their own Members on the Treasury Committee regarding publishing the FCA’s minutes. I hope that, in his torment about how to resolve such matters, the Minister is thinking about relenting on that point. Amendment 45 proposes another important aspect of transparency.
Amendments 59 and 60, 74, 61 to 63, 83 and 129 relate to the Prudential Regulation Authority’s engagement with industry and consumers, and having an annual disclosure of such consultations. This is another crucial part of the Bill. We have discussed the panels that the FCA must establish and maintain, but the PRA is far less engaged with practitioners, consumers and those working in the real economy, because no similar consultation duties are required of it.
The pre-legislative scrutiny Committee spent many days and hours considering the Bill and thoughtfully came to a set of recommendations. It was worried about how the PRA would undertake its own consultation arrangements and that it did not have the same obligations as the FCA. Many outside bodies, such as the Association of British Insurers and other representative organisations, have voiced such concerns. The Bill does not include such responsibilities on the PRA to consider representations, even though the PRA has, in some ways, direct responsibility for product regulation, particularly in relation to with-profits policies and so on. At the very least, we need to know more about how the PRA will approach its consultative exercises. The Bill does not include such arrangements, and we think that the PRA’s duty to consult needs to be strengthened to provide proper safeguards for regulated persons and practitioners. Those are the arguments in favour of this considerable group of amendments. I hope that is helpful to the Minister.
It is a pleasure, Mr Leigh, to serve again under your chairmanship.
These amendments all relate to how regulators engage and consult with others. The consultation arrangements in the Bill have been the product of careful thought and engagement over three rounds of public consultation, as well as having the input of the Treasury Committee and the pre-legislative scrutiny Committee. It is in the FCA’s best interests to ensure that panels are able to provide the best possible advice. As part of that, it will need to ensure that panel members have a diverse mix of experience and skills and can represent a range of perspectives. We should also ensure that the panels are not so large as to become unwieldy and ineffectual.
Amendments 46 and 47 and 132 to 135 are aimed at ensuring diversity in the composition of panels and ensuring that they represent a broad range of constituents. I have no problem at all with the intention of the amendments; it is important that the panels are diverse and are able to represent a wide range of views. I am not, however, sure that the amendments are necessary. They could undermine the effectiveness of the panels’ advisory role.
I am confident that the FCA will ensure that panels have the right mix of skills, experience and perspectives to ensure that they can properly perform their advisory role. If one looks currently at the panels on the practitioner side, yes, they include representatives from insurance and retail banking, but they also include representatives from building societies, asset management, exchanges, clearing houses, financial advisers, professional services and accountancy. The current composition of the panels provides us with the confidence needed that the Financial Services Authority now, and the FCA in the future, will be able to put together panels that reflect the wide range of services on offer.
We could put all sorts of things in the Bill, but one should look at what is happening currently and how the FSA responds to the need to ensure that there is diversity and a range of experiences. For the regulators to retain the consent and support of the regulated firms, it is important that they ensure that the consultation arrangements in place are appropriate and gather a wide range of views. It is in the self-interest of the regulators to ensure that these practitioner panels are broad-based, because failing to do so would suggest that the regulator is not interested in consultation. There is public accountability for that through the annual report to both the FCA and the PRA.
On the risk of making the panels so large as to be unwieldy, if we were to follow the line of the amendments that every part of the United Kingdom, all income levels and consumers of a range of financial products should be represented, there would be a risk that the consumer panel would become so large and unwieldy that it could not operate effectively. We need to ensure that it operates effectively, which will require it to have people who represent a broad range of views, rather than simply a narrow sectional interest, and the FCA must bear that in mind in identifying people to serve on the panels.
It is slightly peculiar that the hon. Member for Foyle has tabled amendments not only to expand the number of people on panels but to reduce the number of panels—to one on the practitioner side—which would be the effect of amendments 136 to 138. That would be a backward step that would undermine effective consultation. The FSA created a non-statutory smaller business practitioner panel, because it found that the needs of smaller businesses, such as independent financial advisers, could not be represented effectively in the practitioner panel. The smaller business practitioner panel has long sought to be established on a statutory footing, which the Government have agreed to. That decision has been widely welcomed, as has the proposal for a new markets practitioner panel, which also flowed from the consultation. If we removed the provision for those panels, we would lose the advice of focused forums. If only the practitioner panel represents the interests of smaller businesses and market practitioners, the risk is that the practitioner panel would become excessively large and unwieldy.
On amendment 45, proposed new section 1L of the Financial Services and Markets Act 2000 will require the FCA to publish responses to representations made under new section 1M, including representations from the panels and any of the consumers and firms, or their representatives, consulted under that new section. That duty is already significantly broader than the equivalent duty under FSMA, which required the FSA to respond only if it did not agree with the proposals or views of the panels, and which did not require it to publish such responses. The FCA should not be required to publish responses to each and every representation as and when it is received; it should be able, for example, to wait until a period of consultation is over and to opt to provide a collective response. In its response to our White Paper, the consumer panel stated that
“the wording of section 1L is a sound foundation for such input to the FCA”.
I therefore encourage hon. Members not to persist with amendments relating to the FCA that are unnecessary.
Some of amendments 59 to 63, 74, 83 and 129 would require the PRA to put in place specific new arrangements for consulting consumers and the public, while others would require it to maintain a practitioner panel or consult the FCA’s panel. It is not appropriate to require the PRA to put in place additional arrangements for seeking detailed advice from consumers and their representatives. It is already required to carry out a public consultation when making rules, and to run an annual consultation, which is open to the public, about the effectiveness of its strategy over each year.
The PRA’s policies will focus principally on firm resilience, covering issues such as capital, liquidity and leverage. Its supervisory interventions will be informed by forward-looking assessments of prudential risk, on which consumers and their representatives are not best placed to provide detailed advice. The PRA will consult the FCA when its prudential decisions may impact on consumers, potentially affecting the FCA’s ability to achieve its objective, and that consultation is required by the general duty to co-ordinate.
The Joint Committee agreed with the Government that it would not be appropriate to require the PRA to have a practitioner panel. We should bear in mind that the FSA’s panel structure was devised to support the regulator in looking at many firms across the whole sector, whereas the PRA will look in detail at a limited number of firms and will focus solely on prudential risk. The PRA will look to expert practitioners to offer technical and detailed feedback on different ways to achieve its aims. Arrangements must be flexible, and it is not therefore appropriate to have a requirement for “broad representation”. For example, the PRA might want to establish a narrow sectoral working group to consider a particular issue. It would not be helpful for consultative arrangements to be shared between the PRA and FCA. The FCA panels will be constituted to provide advice on FCA issues, and will not have the right balance, background or expertise to give advice on PRA issues. Amendment 63 would require the PRA to report annually on its consultation, but I reassure members of the Committee that the PRA is already required to include that as part of its annual report.
To conclude, I recognise the importance of consultation and engagement. It is right that we have arrangements that are fit for purpose, reflecting the priorities and range of the regulatory bodies. The arrangements in place for the FCA, with its three industry panels, the consumer panel and the more flexible set of arrangements for the PRA strike the right balance and ensure that regulators can consult and engage when appropriate and that voices can be heard when decisions do count and have an impact on businesses or consumers.
In relation to the PRA, although the Bill provides for widespread or general consultation, without specifying exactly how that should be carried out, such consultation could in many circumstances be either not very widespread or not in the detail that is required. It is easy for organisations of all sorts, including Departments, to invite people to respond to a consultation through a website. Given the issues involved, however, the public, consumers or even consumer organisations might be better able to comment and engage through a consumer panel or practitioner panel that met often and developed its own understanding and expertise, than through an ad hoc response that merely satisfied the requirement for consultation. Consumer interests must be allowed to develop the ability to comment intelligently, to understand fully the implications of what is proposed and how the PRA is operating, and to stand up for consumers’ interests in a way that is important and that enables them to be a force in such matters. Simply to say that there will be a duty to consult could result in consultation that is superficial, that is not particularly meaningful and that will not give the consumer the voice in the process for which we had hoped.
The same applies to certain aspects of the work of practitioners, who could give the PRA the challenge and the necessary support at times, as well as information from their experience that would enable better regulation. After all, the Bill should be about better regulation based on the experience of those who work in the field and of consumers, who will be directly affected.
It would be beneficial for the PRA to set up such bodies or, if not, to make use of those that exist. I can understand the Minister’s argument that it might not be entirely satisfactory to share the panels, because they will be monitoring different matters, but the answer to that is not to say that there should be no panels, but for the PRA to set up its own panels.
I am somewhat disappointed, albeit not entirely surprised by some of the Minister’s arguments. As for what he said about amendments 136 to 138, he might not have heard me say when introducing them that they were tabled as probing amendments precisely to flush out the Government’s justification for three different practitioner panels and only one consumer panel. He argued that three practitioner panels must be established because experience has shown that the different practitioner interests cannot be properly represented in one large panel. We are being told, however, that the very different and wide-ranging consumer interests can be represented in such a panel. The imbalance seems odd. Diversity at the practitioner end can be specifically accommodated by bespoke panels, but diversity, range of perspective and interests at the consumer end cannot be accommodated even by the FCA’s having regard to diversity when forming the consumer panel.
The amendments are modest in requiring that the FCA have due regard to a range of consumer interest and diversity of experience and expectation, but perhaps that is too much to ask. Any little difficulties, frustrations or fears on the practitioner side will be covered by the bespoke panels, which themselves, as the Minister said, will ensure a range of diversity in the due spread of professional, vocational and other market interests. His argument therefore reinforces the glaring disparity between the treatment of and concern for consumers’ range of interests and needs, and those of practitioners.
Amendments 83 and 129 aim to deal with the neglect of consumer regard in the PRA’s functions. In rejecting the amendments, the Minister told us that the PRA does not need to have direct engagement with consumers. He also told us that the consumer panel will not be able to deal with PRA issues—he did not say that the membership might not be equipped, but that it will not be equipped or have the experience to deal with the PRA’s responsibilities. I have more confidence in the qualities of people appointed by the FCA to the consumer panel to be able to deal with PRA issues too. That is why amendment 83 would require the PRA to take account of representations made to it by the consumer panel in addition to those made by any other panel that it appoints under proposed new section 2K(2). The Bill provides that the PRA will have the power to appoint panels, but the Minister seems to be telling us that it will not need to appoint a consumer panel of its own. The amendment would therefore provide for the PRA to take representations from the consumer panel.
The Minister also rejects amendment 129, which is even more particular. I should have thought that the drafting takes account of some of his concerns. Unless the PRA had established its own panel under proposed new section 2K(2) with a brief to take account of consumer interests, the consumer panel appointed by the FCA could make representations to the PRA. That would be qualified, however—the panel could not make random fishing or all sorts of recommendations. Representations would be related only to the PRA’s general policies and practices and the co-ordination of the exercise of PRA and FCA functions as provided for in proposed new section 3D(1).
The Minister alluded to the co-ordination function between the FCA and the PRA in his response. It could well be that that co-ordination function relates quite heavily to some of the FCA’s work on consumer interests. It would be odd if consumers were told that they could only relate to the FCA on one side of that co-ordination duty and function, and not to the PRA, when under the rules on the co-ordination function it could be that the PRA is agreed to be the lead handler. If the PRA was in the lead in some regard of the co-ordination function, it would be odd if the PRA was not able to receive representations in that instance from the consumer panel appointed by the FCA.
The third specific qualification in amendment 129, for the consumer panel to be able to make representations to the PRA, is in relation to the exercise of the PRA power under proposed new section 3I, which gives power to the PRA to require the FCA to refrain from specified action. The new section gives the PRA override powers over the FCA. We are told that the FCA is the consumer-facing arm of regulation. If the FCA has undertaken action in response to consumer concerns and to uphold consumer rights, the PRA, under proposed new section 3I, has the right to tell the FCA to refrain from that or activity that might have implications for some of the FCA’s consumer supporting work. It seems strange that we would deliberately exclude from the Bill the possibility that the consumer panel would not have the right to make representations to the PRA about the implications of measures that the PRA is taking and restrictions that it is placing on the FCA. That is why, as I have said, some of the other amendments on going to one practitioner panel were probing amendments. I have already indicated that I will not be pressing those to a vote.
We have made the point on the need for wider diversity in other panels, reflected in amendments 132 to 135, on other clauses. I do not intend to press those to a vote either. There are other amendments in this group that we could usefully divide on, including amendment 62. Amendment 129, however, meets some of the Minister’s concerns about going too wide in providing for consumer representation or engagement with the PRA with well qualified justification that references specific provisions elsewhere in the Bill, so I intend to press it to a vote, if needs be.
It is difficult, when debating the number of amendments that have been put in the group, to properly capture the array of issues that need to be tested. If we divided the Committee on every amendment in the group, we would be here for a considerable period of time. I am conscious that we have to make some progress.
I would be happy, with the agreement of the Opposition, to start sitting at 8.55 on a Thursday morning. That would give the Committee an extra half hour, which would enable us to make more progress.
The hon. Gentleman knows why we are not meeting next Tuesday: I am attending ECOFIN in the place of the Chancellor of the Exchequer. We have therefore agreed an extra sitting in the programme motion to ensure that we get this right. We are happy to sit later tonight, as the hon. Gentleman knows. I suggest that we sit a half hour earlier on Thursday mornings, to give an hour and a half for that sitting.
I am grateful to the Minister for his clarification. If he does not wish to attend on Tuesday, the Whip and plenty of other Government Members could advocate the Bill, or it would be perfectly possible, if he so wished, to send one of his ministerial colleagues to a meeting elsewhere. We feel that the Bill is very important and needs consideration—[ Interruption. ] Perhaps we should talk about that matter at another time. However, I digress, because we should address the amendments. I was making the point that, for the efficient transaction of the Committee’s business today, we will not want to test every single amendment, some of which are probing amendments, while others involve important points of principle.
The representations from the Financial Services Practitioner Panel—the current practitioner panel for the FSA—are extremely serious and should be properly considered. It has stated that it is
“concerned that some of the people who know best how to analyse whether new regulatory policies will be effective, are potentially being sidelined in key aspects of the new system.”
Its three particular concerns about the Bill are that
“The duty to consult the Practitioner Panel and indeed other Panels for the FCA is being weakened;…There is no statutory duty for the PRA to set up a Practitioner Panel or other Panels;…The new Markets Panel for the FCA needs to have a responsibility to engage on markets regulation aspects in the Bank, as well as the FCA.”
The key concern—amendment 62 is an exemplar of the issues that are most at stake—relates to the need for some sort of obligation on the PRA to have more formal consultation mechanisms.
The Financial Services Practitioner Panel states that it would be possible to have consultation with the panel that will be set up under the auspices of the FCA. My hon. Friend the Member for Foyle said that he might press amendment 129 to a Division, and I am happy to support that as an efficient means to ensure that we do not have duplicative panels. The Minister has been careful to point out that if they had to encompass every aspect of consultation, the panels would become top-heavy, which we would not want. However, amendment 62 would ensure that the panel to be set up under the FCA could also be used as a consultative device for the PRA, which seems a perfectly possible arrangement.
By not persisting with the amendments, other than amendments 62 and 129, we do not want in any way to send a signal that they are not important. I certainly want to test the Committee on amendment 62, and I think that my hon. Friend the Member for Foyle said that he would do so on amendment 129. Such tests will be useful proxies on very important principles.
Mr Leslie and Mr Durkan have intimated that they wish to have votes on amendments 62 and 129, but we will take those Divisions later—do not worry—when we come to the right place in the Bill.
I beg to ask leave to withdraw the amendment.
Amendment 57 relates to a change suggested by the pre-legislative scrutiny Committee. Its report stated:
“Competition within the financial sector is an important part of developing a stronger, more diverse system. The actions of the PRA have the potential to affect the costs of individual firms or of particular types of institution, and affect the barriers to entry and expansion in the market.”
That is important. The Committee said,
“we believe it is a factor that ought to be considered in the course of PRA decision making.”
There was dialogue with the Treasury on that point.
As the Minister may tell us, the Government responded by pointing to other competition scrutiny powers elsewhere in the Bill, but I am not entirely clear that they will have sufficient strength to ensure that the PRA has regard to the competition consequences of some of its decisions. Therefore, inserting the proposed requirement would be an important principle.
Which?—the consumer association—made a similar set of points, suggesting that the PRA
“should have a specific duty to promote competition. This would help support its focus on not preserving the status quo or existing institutions.”
Which?also makes the important point that it wants to create a market in which there is a realistic prospect of a firm being able to fail safely, rather than have moral hazard built permanently into the system. Which?believes that is
“vital to allow market discipline to drive firms to make informed and balanced commercial decisions that affect their solvency. It would also ensure that the PRA does not impose excessive barriers on new entrants.”
That is a fairly straightforward set of recommendations on the need to promote competition that external bodies submitted to the pre-legislative scrutiny Committee.
Amendment 58 is slightly different. It refers to the need for the PRA to have the objective of reducing the potential costs of failure. Earlier, we debated the extent to which the Financial Policy Committee should have regard to public funds, but the amendment would make it specifically a duty for the PRA. The point came up in the deliberations of the pre-legislative scrutiny Committee, which noted:
“In order to align its objectives with its own activities and with international best practice, the Bill should explicitly give the PRA a microprudential objective alongside its concern with avoiding risks to the whole system.”
The Committee said there should be a secondary objective: to reduce the potential costs of failure to the Financial Services Compensation Scheme, the taxpayer and customers. Neither objective, the Committee said, would require the PRA to be a “zero failure regulator”. The second objective would mean
“ensuring firms comply with rules on for example, capital adequacy, solvency and liquidity that will reduce but not eliminate the likelihood of failure.”
The Government responded to that PLS suggestion by saying that they understood it, but that on balance they believed it was more appropriate to frame the PRA’s objectives more broadly.
It is important to recognise that the FSCS insurance arrangements are not moneys that can be drawn from thin air; they are levies that hit practitioners in various affected sectors. We need to ensure that we take care of risks of failure not only on the taxpayer fund, but also on funds that might eventually need to be paid from the FSCS. It is not unreasonable to have minimal recourse to FSCS funds as far as possible, so our proposal would be a proportionate way of inserting those considerations in the Bill.
The amendments cover slightly different aspects. One relates to the need to promote competition and the other to reducing the potential costs of failure where they fall. I hope they are fairly self-explanatory.
Let me set out why the Government have framed the general objectives of the PRA in such a way, and why I believe that it will be an important step in improving the stability of the UK’s financial system, as a way of providing a backdrop to the two amendments. The FSA was required to balance multiple competing objectives, which led to a lack of institutional focus on prudential matters.
To avoid that previous mistake, we have decided that the PRA should have a single general objective, against which it can be held to account by Parliament and the public. That will be supplemented by tailored, focused objectives that are specific to particular regulated activities, such as the insurance objective under proposed new section 2C. The Government have built in flexibility for adding more objectives, but only if the PRA’s scope were extended. The objective gives the PRA a clear mandate to intervene to ensure that firms address possible prudential and systemic risks for the benefit of all, while ensuring that firms are also prepared for their own orderly failure if they run into difficulty.
Respondents to the consultation on the reforms broadly supported the move to more focused regulators and the proposed PRA objective. The amendments relate to proposed new section 2B to establish the PRA’s general objective, which is the promotion of the safety and soundness of PRA-authorised funds. The primary means by which the PRA is to advance that objective is by seeking to ensure that the way in which the business of PRA-authorised persons is carried on avoids an adverse impact on the UK financial system and, by seeking to ensure that, if a PRA-authorised person fails, that failure occurs in as orderly a manner as possible.
As for amendment 57, the Government are committed to ensuring that consideration of competition is a key feature in the new system of financial services regulation. Therefore, we have given the FCA a competition objective and the power to initiate enhanced referrals to the Office of Fair Trading. The proposed amendment would give the PRA an additional duty to promote competition, but all PRA-authorised firms will also be regulated by the FCA and will fall under the FCA’s objective to promote effective competition in the interests of consumers. Thus, giving the PRA a role in competition as proposed would risk diluting its focus on key prudential matters and cause confusing overlap with the responsibilities of the FCA.
Let me remind the Committee that, in his evidence to the pre-legislative scrutiny Committee, Sir John Vickers, the head of the Independent Commission on Banking, which was responsible for considering the place of competition in banking, argued that there was no place for a PRA competition objective under the new system of regulation. That is not to say that the PRA will actively work against competition in the UK financial services industry. The general duty to co-ordinate requires the FCA and the PRA to consult each other to avoid taking steps that will harm each other’s objectives, and that includes the FCA’s competition objective.
We have retained arrangements for the OFT’s competition scrutiny of both the PRA and the FCA. That will include oversight of the PRA’s rules. The OFT will have its own information-gathering powers; it will have the power to give advice to the PRA, make recommendations that require a response from the regulators and, if the OFT deems it necessary, it can call on the Treasury’s backstop power of direction if it were not satisfied with the regulator’s response to an OFT recommendation. The arrangements will ensure that competition will be considered to an appropriate extent by the PRA.
The Government’s view is that, in the new framework, the FCA and the OFT are the best-placed regulators to recognise and safeguard the importance of competition, leaving the PRA as the prudential regulator focused on the safety and soundness of firms with the potential to impact the stability of the UK financial system. I hope that the hon. Gentleman will appreciate why I do not consider it appropriate for the PRA to be given a competition objective.
Amendment 58 is old ground, which we went over when we debated the FPC. Let me reiterate the fact that we recognise the importance of the need to protect taxpayer money when there are problems in the financial system. Indeed, it is one of the reasons why the Government set up the Independent Commission on Banking in 2010 and tasked it with identifying effective options to reduce risks to the public purse arising from the position as a global financial centre. By implementing the ICB’s recommendations, we will ensure that British banks are better able to withstand losses and, if a bank gets into trouble, it can fail in a way that protects vital banking services without the use of public funds.
I emphasise that the primary reason why the Government would use public funds to support or rescue financial services firms is to avoid the risk of disorderly failure. The PRA is tasked with avoiding such risk, so in advancing its objective, it will automatically have a clear aim that overlaps with reducing the potential for public funds to be called on. Under the new regulatory system, if there is a material risk of circumstances in which public funds might be needed, the Bank is under a statutory duty to notify the Treasury. Effectively, from that point, ultimate responsibility for the situation—including any use of public funds—passes to the Chancellor. However, as I said in relation to the FPC, giving the PRA an explicit duty to minimise the use of public funds would risk diluting and undermining the principle that it is ultimately the Government’s responsibility to protect those funds, and the Government are accountable to Parliament for that.
The arguments against giving the PRA such a duty are even stronger than those relating to the FPC. The PRA is a micro-prudential regulator of particular financial firms. Although that is a key function, we cannot argue—as hon. Members tried to do in relation to the Bank and the FPC—that the PRA is a key part of the macro-economic policy apparatus of the UK economy. The argument for giving the PRA the objective in the amendment is therefore even less compelling than it was in relation to the FPC.
To summarise, introducing an explicit public funds element into the PRA’s responsibilities would risk diluting its focus, blurring lines of responsibility and creating muddled accountability. Although I agree about the importance of minimising the use of public funds to rescue parts of the UK financial services industry, I hope I have explained clearly why I cannot accept the blurring of responsibilities that amendment 58 would cause. I hope that the hon. Gentleman will withdraw the amendment.
I do not wish to detain the Committee any longer than is necessary. I disagree with the Minister about the protections that could be introduced in the Bill for taxpayers’ funds. I was going to intervene on him specifically about protections that might be necessary for the Financial Services Compensation Scheme element, because those are slightly different from protections for the taxpayer fund, but I think he got the gist of our point. The matters relating to the amendments are important, but I have had the opportunity to air them. Even though we feel strongly about the amendments, for brevity, I shall be happy not to press them. Perhaps we will return to them at another time. I beg to ask leave to withdraw the amendment.
Amendment proposed: 129, in clause 5, page 27, line 19, at end insert—
‘(1A) Unless the PRA has established a panel as provided for in section 2K(2) to reflect consumer interests, it must consider representations from the Consumer Panel established under section 1Q where such representations relate to the PRA’s general policies and practices, the co-ordination of the exercise of PRA and FCA functions as provided for in section 3D(1), or the exercise of the PRA power in section 3I.’.—(Mark Durkan.)
I shall be brief. This is a small amendment to proposed new section 2M(1), where there is a provision to allow the Treasury to appoint a
“person to conduct a review of the economy, efficiency and effectiveness with which the PRA has used its resources in discharging its functions.”
The amendment would mean that when that happens, the Treasury would inform the Treasury Committee of the nature of and arrangements for that review. If the Treasury has concerns about the PRA’s operation, it needs to find a way to flag that up more publicly. As a responsible organisation, the PRA has a heavy responsibility on its shoulders. If the Treasury has doubts about whether it is fulfilling some of those functions in the right way, those concerns need to be flagged up to the Treasury Committee. We felt that an amendment was necessary to facilitate that.
These are new powers. Proposed new section 2M(5) already requires the Treasury to lay a copy of the report before Parliament. That means that the Treasury Committee will get to see a copy of the report and if it is not happy with the terms, or if a review has not been commissioned at all, Ministers are held to account by the Treasury Committee. Requiring the Treasury to inform the Treasury Committee of the nature of and arrangements for the review would simply add another bureaucratic complication, with little benefit in added transparency, given that it is already required to place a report before Parliament. I hope that that reassurance will be enough for the hon. Gentleman.
It is not quite enough, because the review’s report will be published after a period of investigation has taken place. The amendment seeks to say to the Treasury Committee at an early stage, “We have our concerns. This is our intuition and this is going on.” It can be a while before a review is concluded and a report is laid before Parliament. It is a moot point, I suppose. I am just concerned as to why the Treasury would want the power to undertake the review, but keep it quiet for so long. However, the point has been made, so I beg to ask leave to withdraw the amendment.
‘, including but not limited to, the UK Corporate Governance Code’.
I hope that there is general agreement across the House that better corporate governance standards are needed, particularly in the financial services sector. It is therefore welcome that the Bill includes a duty to follow principles of good governance. That important change has been at the centre of debate; some hon. Members have written books about the topic, so they may have something to say about it. The amendment, which is supported by the London stock exchange, for example, would ensure that reference is made to the UK corporate governance code.
The code was established in 1992 and has been supported by successive Governments. It was updated in 2010 to address issues raised by the financial crisis, with a renewed focus on ensuring that the spirit as well as the letter of the code is adhered to, a development which should be of interest to Committee members. With the establishment of a clear mechanism for corporate reporting and risk management, the principles of the code provide important guidance for the financial services industry, and it should therefore be referenced in legislation.
The Secretary of State for Energy and Climate Change, who was then an Under-Secretary of State for Business, Innovation and Skills, made a useful statement in support of the UK corporate governance code in October. He said:
“The Financial Reporting Council’s…Code sets out principles and best practice for good corporate governance”.
Citing the Financial Reporting Council, he also said that
“One of the key conclusions is that a company’s ability to understand and articulate its business model leads naturally to a better understanding of risk and how it should be prioritised.”—[Official Report, 18 October 2011; Vol. 533, c. 944W.]
The purpose of the amendment is to enshrine the code more formally.
We have already expressed our concern, in relation to the Bill, about the different ways in which the FRC does not get a look in. There has been high-level and voluminous debate on particular concerns relating to responsible capitalism and crony capitalism and, as I have made clear, the amendment provides an important opportunity to enshrine a code that should have cross-party support in the Bill.
It is important for the regulators to have a duty to follow the principles of good governance, which are currently enshrined in the UK corporate governance code. They should follow the relevant principles and I expect them to do so. Proposed new section 3C of FSMA is phrased to make it future-proof. Only two years ago, the UK corporate governance code was known as the combined code; in two years’ time the name might be changed to something completely different. There is therefore no merit in having in the Bill a name that could easily be changed. It is important to follow the principles, and the articulation of the objective in the Bill will ensure that the legislation is future-proof. The hon. Gentleman’s comments about adhering to the code are well made, but we do not need to name the code in the Bill.
The Minister has given a drafting rationale for not including a reference to the code. I do not think that it would be impossible to refer to the code in the Bill and to ensure that the FRC can still update the code without necessarily changing its title. After all, we will always have concerns about UK corporate governance, so there is likely always to be a need for some sort of code. To say that the name of the code might be changed is not a particularly strong argument, because that could be addressed. It is important to have a thread leading back from the rather ambiguous commitment to good governance in the proposed new section to the more specific set of practices and ideas that are set out in the code.
The Committee may well feel that they can support the principles of the code, which includes concepts about good leadership and the effectiveness of good corporate governance and accountability. The code has an interesting section on remuneration and how proportionate that should be, and an important section about relations with shareholders and the necessity for having mutual dialogue. Those crucial components should be on the shoulders of those being regulated and, therefore, factors in the minds of the regulators. We have other amendments elsewhere in the Bill relating to the stewardship code, which the Minister did not accept. In welcoming the particular change in proposed new section 3C, it is important to evolve it in a way that gives it more teeth. The public outside and the wider media have been poring over some of these considerations in great detail. We have talked about remuneration in the financial services sector for many months and yet when it comes to wanting to enshrine something in the Bill that might give the regulator a strong and firmer locus on this issue, the Minister steps back, and falls back into the vagaries of the language before us. It is a great pity that the Minister does want to do this, but it is something that should be tested, so I will be pushing my amendment to a Division.
‘(d) that the regulators coordinate in such a manner as to minimise unnecessary additional expenses that might be incurred by virtue of the separate administration of the FCA and the PRA, and to maximise any common administrative savings achievable through close coordination.’.
‘(d) that each regulator engages with the other where they identify any gaps in or between their regulatory remits, or the exercise of these, that may become apparent in relation to any product, provider, institution, market practice, responsible shareholder interest or consumer concern;
(e) that as appropriate both regulators can identify areas where they can share services and information, acting to minimise burdens on firms supervised by both regulators and/or to maximise the understanding of consumers and facilitate the exercise of their responsible interests.’.
Amendment 116, in clause 5, page 30, line 4, at end insert—
Amendment 78, in clause 5, page 31, line 24, at end insert—
‘(8A) The memorandum shall contain an estimate of the additional annual costs involved in the administration of the FCA and PRA when compared with the estimated costs of the administration of the Financial Services Authority.’.
Amendment 140, in clause 9, page 42, line 28, at end insert—
‘(6) The regulators must co-ordinate their procedures for, and provide clear and detailed guidance on, the processes for applying for, varying and cancelling permission that are applicable to authorised persons regulated by both the PRA and the FCA.’.
We move on to a different set of topics, albeit related to the new regulators that the Bill is creating—the FCA and the PRA. These amendments, which are also in the name of my hon. Friend the Member for Kilmarnock and Loudoun, concern the need to ensure transparency around the costs incurred in running a dual regulator in this way. Whether it is twin peaks or the quartet system, we are seeing new quangos or regulators on the block and those things do not come for free; they have significant costs. Even if the costs are falling on the shoulders of the industry rather than on the taxpayer, we can be sure that the money will hit the consumer or the taxpayer at some point. In this case, the consumer will be hit for those extra costs. It is important, therefore, that stronger efforts are made to bear down on the costs and expense of creating these new superstructures.
In proposed new section 3D there are a series of duties on the FCA and the PRA to ensure that they co-ordinate the exercise of their functions. We think it is important to add a fourth duty in that respect, so that the regulators co-ordinate in such a manner as to minimise unnecessary additional expenses that might be incurred by virtue of the separate administration of the FCA and the PRA, and to maximise any common administrative savings achievable through close co-ordination.
Taking that argument forward, amendment 78 would ensure that the memorandum between the two bodies contained
“an estimate of the additional annual costs involved in the administration of the FCA and the PRA when compared with the estimated costs of the administration of the Financial Services Authority.”
No doubt the Minister will say that it is like apples and pears and we cannot compare the two, but it is important for the industry that somebody has a crack at it, so that we can see each year what the projected extra costs are likely to be. In essence, that is the purpose of the amendment.
Despite the rather laughable suggestion in the White Paper that
“running costs should not be materially different (in real terms) in aggregate from the current FSA”,
most people recognise that the costs are likely to increase substantially, partly due to the plans of the PRA to move to the City of London, away from Canary Wharf, so that it can be nearer the Bank of England, while the FCA stays at Canary Wharf. The Minister needs to answer some questions about the PRA’s plans to move. We have heard that offices at Moorgate have been identified, with many extra thousands of square feet taken under the auspices of the PRA. Is it a necessity to move to those new and expensive offices?
Given that we live in a society where methods of communication are so good that people on different sides of the world can communicate in a matter of seconds, why does my hon. Friend think it is necessary for the PRA to be so close physically to the Bank of England?
I hope it is not empire building by the Bank of England. I hope it is not simply a matter of pride that the Bank wants to bring the new adjuncts under its wing, next door to Threadneedle street, as its empire extends. It would be rather egotistical and churlish if that were the motive for uplifting the PRA and moving it to those expensive Moorgate offices, where it would incur not just extra rental costs but extra fit-out costs. We need a check on the growth of those extra elements.
Government members of the Committee may scoff at the suggestion that we should care about the costs, but these things matter. According to some newspaper reports, estate agents estimate that the cost per square foot in the City near Threadneedle street is between £50 and £55.
My hon. Friend makes a very good point about the cost. Does he agree that many of our great cities, such as Leeds, could offer first-class accommodation for those organisations at a fraction of the cost?
It is funny that my hon. Friend says that; I was just thinking that Nottingham might be a useful base. The fact is that the PRA is being moved to one of the most expensive parts of the country’s real estate, so I should like the Minister to spill the beans and at the very least tell us what the extra cost of the move to Moorgate is likely to be. He must have an estimate, given that he knew the amendments were coming up. Will the rent bill be roughly £6.5 million a year? That is one figure that has been reported, but I do not know whether it is accurate. When we add the amount for business rates and so forth, what is the cost likely to be? The Evening Standard is very interested in the matter and has been reporting on it.
I understand the hon. Gentleman’s concerns about cost, but returning to the Bill, can he explain why the amendment will be useful when there are other routes for determining what the costs might be? The Bill will last for a period of time; his concerns are probably short term and there are other forms of parliamentary scrutiny that will highlight the costs.
I doubt very much that there will be other opportunities for parliamentary scrutiny of the cost of setting up an FCA and a PRA. Ultimately, the clause sets up those regulators from the Financial Services Authority. If we do not ask now about the cost of establishing the bodies, with the associated offices, fitting costs and so on, I do not know when we could do so, so it is highly relevant to the Bill.
Similarly, in our amendments, we are not saying, “Do not incur those costs,” although we should be more careful with the money; we are simply saying, “What are those costs?” The Bill should not only ensure that the regulators explain the relative costs in contrast to the FSA, but should impose a duty on those regulators to try to co-ordinate their functions. The bodies should not be so duplicative, particularly in back-office, administrative arrangements, which Government Members so often discuss in relation to local authorities or the public sector. With the FCA and the PRA, they have a blind spot when it comes to trying to ensure that administrative costs are kept as low as possible.
I do not know how the Minister could assure us, because costs will be passed on to the consumer, but he must address the question. These are not small points; we are talking about millions of pounds. My understanding—perhaps he can confirm this—is that the lease on the Financial Services Authority’s premises in Canary Wharf does not expire until 2018, so ample space is available to house both the FCA and the PRA at those offices. What is the rationale for the move? Does he support it, is he concerned about it or is he entirely washing his hands of it? We need to get a sense of how that is going.
At the beginning of February, in its annual funding review for 2012-13, the FSA announced that it will increase its budget by 15.6%. A third of that increase results from regulatory reform, but another third is for changes to IT infrastructure before the organisation splits into the two regulators. I have no objection whatever to expending the monies necessary to get a grip on the regulatory tasks at hand, but I have a problem with aggrandising expenditure on plush offices that might not be wholly necessary. It might be viable to keep those offices in their current location.
“We knew that there would be a cost involved in moving to twin peaks regulation but, in this difficult financial environment, all organisations need to be focussed on controlling their costs.”
I could not agree more. Many other practitioners have done more than raise their eyebrows at the plan for vast expenditure. I would like to hear the Minister’s justification for it.
I tabled amendment 86, which I shall discuss shortly. Amendments 77 and 78 would be useful in further colouring in the FCA’s and PRA’s duty to co-ordinate the exercise of their functions, as required under proposed new section 3D. Perhaps that is not provided for completely, so amendments 77 and 78 add to that. Amendment 116 would further clarify proposed new section 3D(2). Amendment 140 offers useful lighting to reduce the twilight zone difficulties that might leave too much room for confusion and capricious interpretation or behaviour relating to proposed new section 55A(5).
Amendment 86, which is in my name, would take up what seems to be a limited provision in proposed new section 3D (1) in respect of the duty of the FCA and the PRA to ensure a co-ordinated exercise of their functions. As it stands, proposed new subsection (1) will provide for co-ordination under three paragraphs, (a), (b) and (c), all relating to the views and interests of the regulators. The limitation of amendments 77 and 78 is that they relate only to the regulators and their costs. They do not address the consequential costs or problems that might be created for others, whose interests the regulators should be taking into account, whether practitioners in the market or consumers.
Also, as proposed new section 3D (1) stands, it relates to the question of possible overlaps in the regulators’ functions and does not address the possibility of gaps in their functions or remits, or of gaps in their, the wider market’s, or the consumer’s understanding of their functions. That seems, in likely practice, to be as serious an issue as the question of confusion with overlapping functions or interests. Therefore, amendment 86 would add paragraphs (d) and (e).
Paragraph (d) would deal with the question of any gaps
“in or between their regulatory remits, or the exercise of these, that may become apparent in relation to any product, provider, institution, market practice, responsible shareholder interest or consumer concern”.
We must make that provision, because if a provision has specifically been made for the duty to co-ordinate, and we are talking about particular instances or concerns that might cause regulators to activate that duty, we should anticipate considerations other than those arising in just the regulators themselves and for their convenience and mutual relationship.
In my experience as a Northern Ireland representative, I dealt with the issue regarding the Presbyterian Mutual Society, where the regulatory gap became the problem. That is why no one moved or acted, because everyone said that they were behind a pillar, and they had no particular mandate to ask or look. People had no mandate even to consider that there might be a gap. Who was acting on the matter? Who was doing anything about it? Those who were carrying out the registration function did not believe that they had any more active regulatory function. Those who should have had a regulatory function over products that were being sold by the PMS and investments that were being made by the PMS, namely the people in the FSA, said that they were not aware that the PMS was doing that; they assumed that the PMS was doing only the business that they were regulated for as an industrial and provident society.
That was an experience of the regulatory gap and the different excuses that everyone could credibly make regarding why they did not act. As far as the consumers who were deeply affected—savers, in this instance—were concerned, it was the overall regulatory system and everyone responsible for that regulatory system who were responsible for the faults. For those affected, that applied to legislators as well, because they say, “If you are going to legislate for a regulatory system and tell us to have confidence in it, at least make sure that it is complete, joins up where it needs to, and does not leave serious gaps. Then blame the consumer, or the saver in this instance, for those gaps.” The insertion of paragraph (d) in amendment 86 would help to meet the gaps. I have deliberately framed the paragraph so that it can relate to a range of issues, whether it is the product, provider or institution, because the scope needs to be broad.
The second part of amendment 86—in terms of trying to make the duty of the FCA and the PRA more rounded and more complete to ensure the co-ordination of their functions—relates to the question of the burdens that regulators will impose on others by virtue of the possible duplication of their functions or the confusion that might arise from the differential exercise of their functions. Paragraph (e) states:
“that as appropriate both regulators can identify areas where they can share services and information, acting to minimise burdens on firms supervised by both regulators and/or to maximise the understanding of consumers and facilitate the exercise of their responsible interests.’.”
It seems right and proper that when it comes to talking about why the regulators should be minded to co-ordinate their functions, we should be thinking about not just minimising their own costs, as amendments 77 and 78 rightly emphasise, but minimising the costs to the businesses that are actually coping with their different and sometimes dual regulation. It is right that that should be put in the Bill, given that the other considerations are there. Why should the regulators be mandated to have only their own operational considerations in mind and not those of other people who are out there working in the field, or who are active as consumers or as providers and/or professionals acting in different roles at different stages of the market?
That duty to co-ordinate would not simply be about minimising the burden on practitioners, but maximising the information and the understanding of consumers. As we know from discussion of the Bill, there are broad ranges of consumers. There is a wide opportunity for presumption and confusion. Many products that are quite different have similar names. Again, that was a factor in my own experience in Northern Ireland in relation to the Presbyterian Mutual Society. People got confused between industrial and provident societies, credit unions and suchlike. The two regulators can share services and information to minimise costs and to maximise understanding and awareness. Under the Bill, consumers are being told that they have to bear responsibility for their choices, so we should make sure that consumers are as clear as possible about their choices, and we should make sure that regulators, where they can, add to the understanding of consumers. It would be an absolute dereliction of this Parliament’s duty to continue to leave such considerations out of the Bill. When we specify other grounds for co-ordination, it would be preposterous for us not to allow such considerations to be factored into the Bill as well.
On the importance of the transparency of fees, let me say that there are already concerns, even in advance of the reorganisation, as my hon. Friend the Member for Nottingham East mentioned earlier. Some of the fees that have been charged already appear to be being increased for reasons that are not altogether transparent to those who are paying them in advance of the reorganisation. It is not clear that those increases are all to do with transitional costs.
For example, the Association of Financial Mutuals has stated that its members are anticipating an increase of 40%, on average, in fees for the coming year. Apparently, that is in part about the transitional costs, as well as increases in what it would describe as the business-as-usual fees for insurers. At this stage, it is not clear exactly why that is or what justification there is for the increases. In some senses, fees have been raised in anticipation of the reorganisation. It might appear that fees have been raised now rather than in future. Given those questions about transparency and the reasons for the fees being charged, it is important that such matters are properly looked at. The amendments would result in such issues being covered more clearly in the Bill and produce transparency because, although fees are a huge matter for organisations such as financial mutuals, they will ultimately feed through to what consumers pay for financial services.
The amendments would place various additional requirements on the PRA and the FCA to ensure that they are co-ordinating effectively. In relation to amendment 77, the Government agree that, where possible, costs arising from the duplication of effort should be avoided. However, the provisions are not necessary, and I shall explain why. The regulators are under a duty to co-ordinate. Subsection (1)(c) of proposed new section 3D specifies that one of the three purposes of co-ordination is how the regulators use their resources in the most efficient and economic way, and that is a reference back to proposed new section 3B(1)(a) and
“the need to use the resources of each regulator in the most efficient and economic way”.
The provision is not just about the cost of the regulators, but contains a reference to the cost imposed on regulated firms: the proportionality principle set out under proposed new section 3B(1)(b). On the duty of the PRA and the FCA to co-ordinate, there is a link back to the regulatory principles that deal with cost and proportionality.
The PRA and the FCA must also prepare a co-ordination memorandum of understanding, setting out how the duty to co-ordinate will be delivered. That will be reviewed annually. The regulators will also be under an obligation to include in their annual reports an account of how they have co-ordinated during the year. Parliament and others will have ample opportunity to scrutinise the effectiveness of arrangements put in place by the regulators.
If the Bill were amended in the way suggested, it would be a distraction. The PRA and the FCA will be separate regulators, focusing on delivering their own goals. There might be administrative costs above and beyond what would be incurred by a single monolithic regulator such as the FSA, but they are the necessary costs of delivering a better system of regulation. I will come back to rents and transitional costs towards the end of my remarks.
Of course, administrative costs are an important factor and should be minimised, but good regulation is vital. Will my hon. Friend the Minister ensure that, if he puts any figures into the public domain, he puts them not only in pounds sterling, but as a percentage of the cost to the economy of the crisis that was brought on in part by the previous regulatory system?
My hon. Friend makes an absolutely vital point. There is a genuine issue, which is that effective regulation can reduce the cost to society of regulatory failure, which could be on the scale of a banking crisis, or it could be a mis-selling issue that affects our constituents dearly. I caution Opposition Members to recognise that effective regulation can reduce the costs to society of financial failure, so a balance needs to be struck. The Bill is about moving to a regulatory system that is better focused on attacking some of the problems that have occurred in regulation over the past 10 years. That will help to deliver better outcomes for consumers through the work of the FCA, in financial stability through the work of the FPC, and in the safety and soundness of individual firms through the remit of the PRA.
Amendment 78 would require that the co-ordination memorandum of understanding includes an estimate of the costs of the new system of regulation compared with the old. I am not sure what would be gained by that, as the annual requirement can go on for years. It is essential to bear in mind that what is new and important in the Bill is that the National Audit Office has the power to consider the effective use of money by the regulators. That external check on the cost of regulation is vital, and in the long term it will address some of the concerns of regulated firms about the use to which their money is being put. That goes way beyond the Financial Services and Markets Act 2000, and gives better accountability for firms on where their money is spent.
Amendment 116 would require the FCA and the PRA to publish guidance explaining the circumstances in which a general duty to co-ordinate does not apply. However, the MOU sets out how regulators will comply with the duty as a whole, including the limitations on the duty established in subsection (2). I do not think that it is necessary to publish additional guidance on top of that.
Amendment 86 would place a requirement on the regulator to identify areas of regulatory underlap. It is important to monitor those issues, but the Bill already has mechanisms in place. The FCA will have a general role of monitoring the regulatory perimeter for breaches. That is the issue that the hon. Member for Foyle raised in the context of the Presbyterian Mutual Society, which acted outside the regulatory perimeter in how it was established. The FPC will be responsible for monitoring the regulatory perimeter and looking at whether activities that have been carried out outside the scope should be brought within the scope of regulation.
The MOU between the PRA and FCA sets out the regulators’ roles in relation to various regulatory processes. The Treasury has a power to determine whether one regulator should lead on a particular area of regulation.
Enhancing consumer understanding, which is included in amendment 86, is a useful goal. It does not belong to the general duty to co-ordinate and the FCA already has a clear consumer protection objective. Amendment 140 is unnecessary, because there are explicit and detailed provisions on the authorisation and variation of permission in proposed new section 9A of FSMA, recognising the fundamental importance of these processes. Those provisions already require the regulators to consult each other and obtain the others’ consent where appropriate. The duty to co-ordinate already applies to the granting and bearing of permissions.
On the costs issue, I have said that the Bill strengthens the protection for regulated firms through the engagement of the NAO in looking at value for money. That is important. There will, however, be transitional costs, which the impact assessment published alongside the Bill made clear. Paragraph 8 of the impact assessment states:
“The Bank’s view is that to deliver the objectives of judgment-based regulation, integrated with the Bank’s analytical capacity”— let us not forget that one of the reasons for bringing prudential regulation within the ambit of the Bank is to have synergistic benefits—
“the PRA will need to be physically located in or very close to the Bank, and given the likely staff numbers involved, a new building will be required.”
Let us also recognise that paragraph 11 states:
“The Bank and the FSA are committed to ensuring that the transitional costs are minimised and controlled, and to achieving long-run cost savings to offset the transition costs.”
The Bank is clear on what it expects on the long-run trajectory of the PRA’s costs, assuming that there is a regulatory steady state and that no additional responsibilities are imposed on it. Paragraph 7 of the impact assessment states:
“The Bank’s approach to creating the PRA is founded on an expectation that costs of prudential regulation will fall in the medium term. This will flow from improved quality of system support”— benefiting from the Bank’s existing IT structure—
“from eliminating duplication between the PRA and the Bank, and also from tight control of costs.”
Yes, there are transitional costs arising from the move from the existing regulatory structure to the new regulatory structure, but there is a clear commitment from both the FSA and the Bank to minimise those. In the long run, the costs of regulation for the PRA will be lower than they would otherwise be.
As I understand it, the arrangements are yet to be finalised, for any new offices. We are being given a reminder of the good old days of micro-management, so beloved of the previous Government, when every detail was scrutinised by an over-mighty Treasury, whether it was the cost of a building or the price per ream of the paper used.
It is vital that there should be clear accountability for costs. That is exactly why we, unlike the previous Government, introduced the duty to enable the NAO to scrutinise value for money. The previous Government did not think it necessary, but this Government think it is, with the vital aim of ensuring value for money and effectiveness in the new regulators’ use of resources.
Is my hon. Friend aware of Parkinson’s law, which reminds us that groups may often ignore the high costs on their doorstep, while attending to others that are much smaller? It might be appropriate to mention the contrast between the micro-management in this instance and the previous Government’s decision to sell gold at the price they did. At current rates, that has cost us about £7 billion.
I do not want to detain the Committee. I hear what the Minister says about the final figures for the PRA’s move to Moorgate offices not yet being settled. Is he saying that the Treasury, or his officials, have no estimated figure, and have been given no information by the PRA on that? If that is not what he is saying, will he at least share with the Committee the information that the Treasury has?
The Treasury is working closely with the FSA and the Bank on implementation, but it should be recognised that there are a number of decisions that it is the responsibility of the Bank and the FSA to make. There is a host of transitional issues, including the cost of premises, who fills which job, and where people are moved to in the operational hierarchy. It is important that the Bank and the FSA should be transparent about those costs, but there are many micro-decisions to be taken as part of the transition. The key safeguard for the levy payers who are financing the PRA and the FSA is the NAO power.
I suspect it will generate more light than heat, as the debate on the issue so far this morning has done. The negotiations in question are commercial ones, and the hon. Member for Nottingham East wants, I think, to ensure that we get best value for money out of the arrangements.
I say “we” as we are talking about safeguarding the general interests of people here. It is not appropriate at this point to share information, because it could be prejudicial to negotiations.
Inspiration finally came to the Minister. Government Members need occasionally to stand up for what I thought some of them believed in—the need to ensure that the levy payers who fund the regulators have a degree of protection against extravagant or aggrandising expenditure.
I am not convinced that the Minister’s explanation for the PRA’s move to Moorgate offices is particularly strong. The PRA needs to be in close proximity to the Bank of England, although Canary Wharf is not exactly in close proximity, as things stand. Then the Minister resorted to the usual accusations of micro-managing—apparently these are micro-decisions, as they concern only many millions of pounds—and drew parallels, I think, with the cost of reams of paper. What a signal that sends out to those firms who pay the levy for this regulation.
This is a crucial part of the Bill. In establishing new regulators, the Minister wants to set up new organisations, with all the structures, personnel and buildings that come with them. Nobody disputes the amount of money required to get the right regulation, and misrepresenting the debate in such a way does the Minister no credit whatever. We are simply talking about a responsibility for such organisations properly to co-ordinate and share administrative back-office costs, and transparency about the costs. The NAO issue, which is always ex post, does not cut it. I want a provision in the Bill about the regulators’ control of such costs.
Does the hon. Gentleman not recognise that, compared with the current regime, the NAO role provides a vital enhancement of the scrutiny of the costs of such organisations?
I have said previously that I welcome that change. I am very familiar with the work of the National Audit Office and the Public Accounts Committee, as I was a member of the PAC for several years—before pretty much every Member on this Committee came into Parliament, except for my hon. Friend the Member for Leeds North East, perhaps—but, with respect, the NAO role is not sufficient. A legal responsibility to co-ordinate should fall on the shoulders of the regulators. They should not be regulated by moral conscience—by the possibility that they might be caught out by an auditor at some distant time in the future—but by a legal duty in the Bill.
I counsel the hon. Gentleman to read the Bill, which, in proposed new section 3B(1)(a), links back with the duty of co-ordination. Provision is in the Bill already.
In that case, why does the Minister object to amendment 77? New section 3B(1)(a) does not capture the co-ordination point sufficiently, and does not add that extra duty. We have rehearsed the arguments, and there is no point going over them. The Government are sticking their heels in the mud yet again. Not an iota of criticism is allowed of all the new edifices and expense involved—we almost feel we should apologise for daring to table amendments. I will not press amendments 78, 116 and 140 to a Division, although we might return to them at a later stage, but I will divide the Committee on amendment 77.
The Minister sought to dismiss the need for amendment 86, but he did not clarify why the provisions in proposed new section 3D(1)(a), (b) and (c) need to be in the Bill—and why we cannot assume that the relevant considerations will be taken care of anyway in the normal course of events—but the provisions in (d) and (e) proposed by amendment 86 do not need to be in the Bill. Under the provisions on the co-ordination of the exercise of such functions, the PRA and FCA have to have eyes only for themselves and each other, and for nobody else whose interests or work is affected by how they do their business, either separately or together. That is a serious omission from the Bill. Those who may have to cope with being regulated by both the PRA and the FCA have the right to expect us to put into the Bill that the PRA and the FCA, with their duty to co-ordinate, should at least consider the potentially burdensome interface and the confusion that might arise. What is wrong with our meeting the needs of many people in the market by clarifying the consideration that is owed to them?
On the consumer interest, the Minister, in rejecting amendment 86, again relied on the FCA’s consumer-facing role. However, the amendment does not relate only to the FCA’s role; it touches on issues that will be in the PRA’s remit, and those on which the regulators need to co-ordinate. Surely the consumer interest might apply to both regulators. The Minister’s fixed mindset—his view that anything about consumers will come up only on the FCA’s side of any discussion, and can be adequately dealt with by the FCA—is simply delusional. Based on our experiences and all natural expectations, the financial services market will not stay static: things will change and mutate, and new market players will emerge. There will be hybrid products, so, from time to time, line calls will have to be made about which regulator is concerned, and they will need to co-ordinate. The Bill rightly makes provision for a duty to co-ordinate, but it is inadequate when it comes to anticipating the need for that duty to co-ordinate. Reducing the consideration of practitioners and consumers—amendment 86 would provide for that consideration—would be a serious omission.
I referred earlier to the Presbyterian mutual society; I do not propose—pardon the pun, Mr Leigh—to give chapter and verse on the whole experience. The Minister said that the situation arose because the Presbyterian mutual society was outside the regulatory perimeter, but that was not the perception of consumers, of Northern Ireland Ministers—whether direct-rule or devolved Ministers—or of the Assembly, so even legislators were unclear. The lesson for us all is that we should not presume that someone will take care of such matters; we must ensure that the legislation states that someone must have regard to them, otherwise we are not learning that lesson. The regulatory gap in that case was between the scope of the FSA and that of the devolved regulatory and registration function, but a similar or comparable situation might arise between the FCA and the PRA.
There is another issue pertinent to my background and experience as a Northern Ireland MP. Over the past few years, we have all worked to change the regulatory footing for credit unions in Northern Ireland, so that they can provide their large membership with far more services that compare with those available to members of credit unions in England. I pay tribute to the Minister, who has been engaged and constructive on that issue. In the context of the discussions about those regulatory changes, for some time there has been confusion about which body will succeed the FSA as the regulator of credit unions in Northern Ireland.
Many references have been made to the role of the FCA. We received direction and advice that the coming FCA would do the regulatory job for credit unions but, in fact, the PRA will do that job. Credit unions are a substantial feature in Northern Ireland, with a strong membership and savings base, and they want to offer new products, so it is important that they have positive and clear relationships with the new regulator. It is also important that consumers know that everybody understands the new regulatory environment.
Of course, some of the products that the credit unions will provide will come under the FCA’s area of interest as well. Credit unions in Northern Ireland will come under FSA, or FSA successor, regulation for the first time. The regulators will have different windows of interest on the conduct of credit union business, or at least some of the products and services that they might be getting into. It is right and proper that we should know that the two regulators can, under statute, co-ordinate their functions with a view to easing the burden for practitioners, in this case the credit unions, and maximising information, understanding and confidence for the consumers—those who would be savers and members of credit unions in Northern Ireland.
Those practical experiences, and the confusion that already seems to exist among people whom we might presume would be relatively well informed, motivated me to table amendment 86. I know that the Minister will not accept the amendment, but I hope that he will accept that there is a need—if not in this part of the Bill, then somewhere else—to take better account of the range of interests and information needs that would need to be considered in relation to the co-ordination of the functions of the FCA and the PRA. The Bill is clearly deficient as it stands.
‘(9) In exercising its functions under this section, the PRA must make and maintain effective arrangements for consulting the panel established under section 1Q, consumers, or where appropriate, persons appearing to represent the interests of consumers’.
The amendments relate to provisions on page 32 of the Bill that ensure that the with-profits insurance policy arrangements fall under the auspices of the PRA and its insurance objective. We have not touched much on this so far, but the Bill has this slightly messy demarcation of responsibilities when it comes to with-profits insurance policies. The PRA has been given responsibility for the regulation of that particular market. It is obviously very significant, amounting to hundreds of billions of pounds. Apparently, around 25 million with-profits policies are held by UK consumers, so there is an extremely important consumer interest in these particular issues.
We think that the amendments would strengthen the FCA’s influence over an area that falls well within its wider remit, and would also benefit the PRA in working from the specialist knowledge that the FCA might have. Amendment 66 seeks to establish recognition of the FCA’s expertise on some of the consumer aspects. Amendment 67 would place a requirement on the PRA to consult the FCA and the panels established under it on some of the policy decisions relating to with-profits policy regulation.
We have talked about the oddities of the PRA not having some links across to the panels that form under the FCA’s ambit. However, this is a specific area where the PRA will not necessarily be acting in a wholly prudential way if it adheres strictly to its core responsibilities, but will instead roll up its sleeves and get involved in some of the conduct aspects of with-profits policy regulation. It would be odd if the Government’s new consumer watchdog—or champion, as others have called it—did not have some role in the set of regulatory decisions on these important areas of policy.
We know that historically there have been serious questions about with-profits policies regulation. The FSA has looked into some of those questions on a number of occasions. The amendments seek at least an acknowledgment that the PRA could benefit from consultation arrangements with consumer groups, and also with the FCA. This is a fairly straightforward set of amendments; I do not want to labour the point.
The issue of with-profits and the appropriate regulator has been difficult to resolve. After several rounds of consultation, and the support of respondents including the ABI, the Government decided that one authority should take full responsibility for regulatory decisions that relate to ensuring that with-profits policyholders are appropriately protected in relation to making discretionary payments. We decided that the PRA should have that role, as provided for in new section 3F. However, in explicit recognition of the value that the FCA can bring to the process, we have included subsection (5), which requires the PRA and the FCA to work together on appropriate matters when it comes to regulating with-profits policies. It is in the Bill. My concern about amendment 66 is that it narrows rather than widens the FCA’s engagement. It refers to two of the FCA’s objectives, not all three, and limits them to consumer protection and competition. One of the FCA’s other objectives is integrity. The FCA may have other sources of information or guidance that could help the PRA but, if the amendment were accepted, unless they fell within consumer protection and competition, it could not offer them to the PRA, which seems a slightly odd position. The Bill provides for the FCA to engage with the PRA on with-profits insurance and I do not think the elaboration in amendment 66 is helpful. In fact, I think it is unhelpful, given the formulation.
Amendment 67 goes over familiar ground, on which we touched to some extent in the debate on amendment 60. I do not believe that the consumer panel that the FCA is setting up—given that it is there to advise the FCA on its activities around promoting its objectives, about user duty and competition to promote its regulatory goals—will be set up in a way that will give information and guidance on with-profits policies. To get round that, we expect the FCA to play a strong role in providing expertise on consumer protection issues and consumer interests. Given that the FCA is engaged in this way, as it was under subsection (5), we do not necessarily need to add an additional duty to consult the consumer panel, which will not be set up in a way that necessarily meets the PRA’s needs. It is much better for the PRA and the FCA to engage in these things and for the FCA to represent consumer interests in the way set out in subsection (5).
I appreciate the Minister’s explanation of the Government’s view on amendment 66. It is a moot point whether it is covered by subsection (5). The point has been made that it is important that we have a read-across between the two organisations.
On amendment 67, I am not sure I totally agree with the Minister. It is important that representations and consultation processes are put in place in the Bill. Given the size and scale of the with-profits insurance market, and its importance to consumers, there should be a thread that feeds back to the FCA consumer panel or some similar arrangement. However, I do not want to press the point. The Minister has heard the arguments. We have tested the point in previous votes and amendments, and the Government refused to budge, so I doubt whether we would win a Division on this.
The Minister should, however, bear it in mind that these are important issues, and consumers need not only to be represented in regulatory decisions, but to have a dialogue and to have their voice heard. If he can at least urge the PRA to put in place more detailed arrangements on the consultative system, that would be useful. For the time being, however, I beg to ask leave to withdraw the amendment.
The clause includes a set of further provisions about directions that the PRA can give. It says the Treasury must lay before Parliament any document received by the PRA and publish it. However, that does not apply
“in a case where the PRA considers that compliance with those subsections would be against the public interest.”
That is a minor point, but I do not quite see why the test for public interest disclosure should sit in the hands of the PRA, not Her Majesty’s Treasury. After all, the disclosure requirements are, naturally, important, and decisions to withhold disclosure should be taken by persons who can be held accountable in Parliament. Theoretically, a Minister needs to be able to account for such decisions.
The amendment would slightly finesse the arrangement in the Bill to ensure that the PRA and the Treasury should agree if information is to be withheld from Parliament in the public interest. It is difficult to envisage the circumstances where this might apply, because we are talking about hypothetical situations, but the amendment would frame the Bill in such a way that the Treasury did not feel constrained by a body beyond its remit.
Subsection (8) merely requires the PRA
“from time to time to review” any decision and to notify the Treasury if it feels that the Treasury should lay a document before Parliament under subsection (5).
Although this is a small point, it is, in some respects, quite an important constitutional one, and the Committee has come back to it on a number of occasions. We need to establish the principles of transparency, parliamentary scrutiny and democratic accountability in the Bill, and I want to make sure that the Treasury is in a place where it can make decisions on public disclosure.
This is an important point. One consequence of the way in which we have set up the new regulatory arrangements is that things that are currently wrapped up in the FSA are laid bare by having a separate conduct and prudential regulator. I suspect that these decisions are made at the moment within the FSA but they are not necessarily brought to light because they are resolved internally, whereas under the new regime they will be resolved externally between the PRA and the FCA, which are two separate bodies.
My default position on that is that where the PRA overrules the FCA, that information should be in the public domain. It is important that people know that that has happened. There may be circumstances where putting that information in the public domain immediately could breach confidential information or create public disquiet, and so it may not be appropriate to do so. There may be a whole set of circumstances that we have yet to envisage in which it would not be appropriate to place the fact that that veto has been exercised in the public domain.
Equally, however, I am not sure that giving the PRA and the Treasury the joint power to decide what is in the public domain is appropriate either. That could lead to conflict and if the PRA and the Treasury disagree, what is the process for resolution of that disagreement? It is not clear from the amendment.
I take on board the point that we need to be very careful that we do not err on the side of non-publication of these details and that we do not create a culture whereby it is assumed that publication should not happen as a matter of course, when the thrust of our reforms are for there to be transparency and disclosure.
Therefore, although I do not accept the amendment, it may be appropriate for us to consider whether there is some other mechanism whereby there can be a check on the PRA’s exercising of its veto and the decision not to publish the fact that it has exercised its veto. It may be that the PRA has to notify the Treasury before it decides not to publish the information or that there is a form of consultation, rather than saying there should be a joint agreement.
I take on board the hon. Gentleman’s point and I will look at this issue and perhaps return to it on Report.
I feel like smiling. It feels like a major achievement to have the Minister in such a reflective and reasonable mood. I am very happy that he is willing to reflect on this particular issue. I accept his point about the difficulty of drafting the measure in a particular way and about how disagreements would be resolved if we put responsibility on both the PRA and the Treasury simultaneously.
Therefore, in the spirit of co-operation that is breaking out at quarter to 1 this afternoon, I am more than happy to withdraw the amendment in the hope that the Minister might find either a legislative or non-legislative way of resolving this particular issue. I am very grateful to him and I beg to ask leave to withdraw the amendment.
Amendments 80 and 81 are possibly totally different in size and importance. Amendment 80 is a drafting point as much as anything else and it relate to the way I was reading the Bill; perhaps the Minister could explain the drafting point to me. If Members look at page 37, they will see a section relating to the consumer financial education body, which is now called the Money Advice Service, and several functions for it are set out from line 31 onwards. Those functions shall include, as set out in paragraph (a) of proposed new section 3R(4) of FSMA 2000,
“promoting awareness of the benefits of financial planning”,
and so forth. However, paragraph (b) says that the functions include,
“promoting awareness of the financial advantages and disadvantages in relation to the supply of particular kinds of goods or services”.
I am focusing on “supply”, but with financial products, most consumers do not supply but consume a good or service. Therefore, promoting the awareness of the advantages or disadvantages of those who are supplying such services seems to frame the provision inaccurately and possibly misleadingly. It would be far better if the Bill read, “promoting awareness of the financial advantages and disadvantages in relation to the consumption of particular kinds of goods or services”, because ultimately it is about the consequences for consumers at large—for those individuals who consume or use a particular service. I am happy to change the word, but the drafting seemed anomalous, and I would be grateful if the Minister explained why we use “supply” in the provision. The point is a small one but, given that we are trying to do things properly, I wanted to flag it up.
Amendment 81, which is perhaps more substantive, relates to the constitution or driving philosophy of the Money Advice Service, the consumer financial education body, and how it should not only have regard to
“the provision of information and advice to members of the public”,
but in particular to those members of the public on lower incomes. That is an incredibly important part of what the Money Advice Service needs to focus on. Although there have been some important steps forward in how the Money Advice Service has been working, there has also been some criticism of its move to focusing almost exclusively on web-based advice. Some are concerned that those in greatest need and the financially excluded are not being prioritised in its work.
There have been wide reports of job cuts affecting many services of the Money Advice Service. The desire obviously is to put resources heavily into marketing and web-based provision, but I am concerned that some of the face-to-face services or those services more accessible to vulnerable consumers might be deprioritised or jeopardised if a requirement on the Money Advice Service to focus on such issues is not included in the Bill. That is important.
The issue of face-to-face as against web-based is not simply to do with access, which I accept is increasing, but with the often multifaceted nature of people’s problems. Those who provide debt advice know that someone’s presenting issue is not necessarily the most important, so without that kind of face-to-face guidance and wider advice, many people will simply not get as good a service as they might otherwise have, even if they can access whatever is on a website.
My hon. Friend is spot on. That is a good analysis of some of the difficulties that can occur. If we vest so much importance in the work of the Money Advice Service, we need to ensure that it captures everything that Parliament intends, not only in a wider educational context but in the support and assistance that is necessary to those in the greatest difficulty and the most specific jeopardy.
Several clouds have already passed over the Money Advice Service, such as the disparities in some of its investment choices versus some of the significant costs and remuneration arrangements of its senior executives. I do not wish to open that box any further; suffice it to say that we must ensure that the Money Advice Service has the trust and confidence of all consumers and, in particular, those in greatest need. Therefore, it would be a virtuous step forward if the Minister acknowledged that the Money Advice Service ought to be focused very much on the most vulnerable in society. That is incredibly important. I am sure he understands my point.
Let me turn to amendment 80. I am not particularly theological about what words should be included in the Bill unless I think they are absolutely vital. My concern about “consumption” is the potential ambiguity. Do we think that the Money Advice Service is falling down in the way it provides its service to users at the moment? My sense is that it provides the sort of information and advice that we would expect it to cover across a wide range of financial service products on different aspects of needs. I am not sure what “consumption” adds.
Paragraph (e), which refers to
“the provision of information and advice to members of the public”,
is very broad. I do not think it would cover all aspects of a consumer’s decision-making process about what type of products to buy—the supply—or what type of products they had bought; perhaps the consumption. I am not clear that “consumption” adds much. We need to be clear that the Money Advice Service is there to provide information and guidance to people looking to purchase financial services products and to enable them to shop around and look for the best interest rates. There was an announcement yesterday about the enhanced role that the Money Advice Service would play in helping people to buy annuities in future. The language already covers what we expect the Money Advice Service to do.
I do not think the Minister is quite getting the point that I was making about the small first amendment. How does it help to promote awareness of the supply of a particular type of good or service to a customer? Surely that customer needs to know about the use or the consumption or some other more demand-side element as it affects that consumer. It is the choice of the word “supply” really.
As I say, I am not particularly theological about this. The Money Advice Service provides information about the types of products that are out there, what the consumer benefits from and the disadvantages of these products. I am not sure whether it is “supply” or “consumption”. If a tweak is required to the wording, let us think about tweaking it. At the moment I do not see a huge difference between “supply” and “consumption” that is worth spending many hours debating.
Adjacent to that and on the functions of the Money Advice Service, paragraph (f) refers to
“assisting members of the public with the management of debt”.
That sounds as though there is some connection with a debt management function. Does the Minister agree that co-ordination and provision of debt advice might be a more helpful description of what it is intended to do? They are not debt managers, but they provide that debt advice.
My hon. Friend makes an important point. The problem is that the management of debt covers a multitude of things, including advice and the budgeting tools that are provided on the Money Advice Service website. The management of debt can encompass quite a few things. I do not believe it encompasses debt management plans. I hope that that is the reassurance that she seeks.
On amendment 81, one of the key features of the Money Advice Service is the breadth of consumer it is there to serve. It is not meant to lead to a narrow segmenting of the market, but to cover consumers across a wide range of income, from the lowest upwards. There is a clear commitment from the Money Advice Service to this. That is why it continues, for example, to provide face-to-face debt advice. It contracts for the provision of face-to-face debt advice through the CAB, for example. There is a clear, ongoing commitment to meet the needs of people on the lowest income to find a variety of distribution channels that will enable them to do that. No one should be under the misapprehension that the Money Advice Service is not there to do it.
I congratulate the Committee on the calm way in which it deliberated this morning. I spent 14 hours invigilating the Russian presidential elections on Sunday and I can say that the conduct of this Committee is almost as good as that of the Russian political class.