Clause 5 - The new Regulators

Part of Financial Services Bill – in a Public Bill Committee at 11:30 am on 6 March 2012.

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Photo of Chris Leslie Chris Leslie Shadow Minister (Treasury) 11:30, 6 March 2012

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.