Clause 65 - Power to appoint person to hold an inquiry

Financial Services Bill – in a Public Bill Committee at 10:45 pm on 20th March 2012.

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Question proposed, That the clause stand part of the Bill.

Photo of Chris Leslie Chris Leslie Shadow Minister (Treasury)

This clause relates to the power to appoint persons to hold an inquiry. It invests a huge amount of power over inquiries solely into the Treasury’s hands. The Treasury may appoint, direct, suspend and dismiss an inquiry with no obvious oversight provided. That is a slight concern that we have about the powers invested in the Treasury by this clause. Will the Minister explain why there is no reference to some level of outside accountability, particularly parliamentary accountability?

There is serious concern over subsections (3)(c) and (3)(d) of the clause, which allow the Treasury to suspend, postpone or dismiss an inquiry, without establishing any criteria on which to make that judgment. Worse still, the clause makes no requirement on the Treasury to offer an explanation for such a decision to either Parliament or the public. That would create a serious accountability deficit, which could lead to back-room arrangements or sweetheart deals, which run contrary to the public interest. I am sure that the Minister will understand why we have those concerns.

There may be logical reasons why the Minister has gone so far in allowing the creation of these inquiries and investigations and is then pulling back great powers for the Treasury in clause 65, which is a concern. Furthermore, the clause does not set out any meaningful criteria for selecting the person who will lead that inquiry. Indeed, the only criterion is that the Treasury considers them appropriately. That does not seem to be the best means of selecting a person who will be granted significant powers under subsequent clauses.

It is difficult to look at these clauses out of the context of the clauses that surround them. We know that inquiries will be funded by the Treasury out of moneys provided by Parliament. It is therefore strange that Parliament is mentioned in this group of clauses only as a facilitator of the inquiries, and that it is not entitled to any degree of oversight of their operation.

Will the Minister say why he is taking such draconian powers for the Treasury on such arrangements? Would it not be possible to trust slightly more those who are commissioned to conduct inquiries? We have consistently argued that the new bodies established by the Bill must not become creatures of the Treasury, and the same principle also applies to new processes. The clause grants powers to the Treasury that are untempered by oversight or accountability, which is why we have serious misgivings.

Photo of Mark Hoban Mark Hoban The Financial Secretary to the Treasury 11:00 pm, 20th March 2012

It is important for Ministers to be able to satisfy themselves that the regulatory system as a whole functions correctly and to account for that to Parliament, and the investigations provision will ensure that Ministers can fulfil that role. If Ministers are to receive the comfort that they need about the functioning of the regulatory system, it is right that they should be able to  set out the terms of a review. Once a review has commenced, it will report directly back to Ministers before it is laid before Parliament.

The Bill has a range of other mechanisms by which Parliament can hold the PRA and the FCA to account for regulatory failure or other aspects of their activities—for example, for the first time the regulators will be in the remit of the National Audit Office. Powers in clauses 69 and 70 will require the FCA and the PRA to report on regulatory failure, for which the trigger will be set out in legislation, and those reports will also be laid before Parliament. In the first instance, the reports will give Ministers the insight that they need about the functioning of the regulatory system and, as appropriate, they will then be laid before Parliament.

The hon. Gentleman questioned the powers in subsection (3) to suspend or postpone an inquiry. It is perfectly possible to envisage situations in which that would be appropriate. For example, in relation to postponement, the carrying out of an inquiry may be prejudicial to ongoing enforcement action taken by the regulator. We would therefore have to decide whether it is better to have the inquiry or the enforcement, and I suspect that most hon. Members would say that the enforcement should happen first and not be jeopardised by the inquiry. It is also in the interests of consumers to ensure that enforcement action takes place.

In relation to suspension, the Treasury might order an inquiry into the failure of a bank, but if there were subsequent failures, we might wish to suspend the investigation until there is a return to stability, so that the work of the investigator and market concerns about that investigator’s recommendations do not add to the instability. When a failure is followed by a series of others, we might decide to wrap all the investigations into a large inquiry, rather than have several smaller ones.

On the issue of appointments, if it became clear that the Treasury had appointed someone who was not up to the job, we can imagine the opprobrium that would be heaped on it. It is in our interest to ensure that suitably qualified people, with the right and necessary skills and experience, hold the inquiries, and we would be foolish to appoint anyone who does not fit such criteria.

Photo of Chris Leslie Chris Leslie Shadow Minister (Treasury)

I am sure that the Minister can cite hypothetical situations in which such draconian powers are necessary, but I have misgivings about the balance of power. Ultimately, the public must have the confidence that such inquiries, if and when they happen, are genuinely independent. As hon. Members will know, what seem to be small points might in other scenarios become very important questions about the balance of power. I will not labour the point. I am afraid that the balance of power under clause 65 is too far towards clawing back powers for the Treasury, and I do not wish to support clause 65 for those reasons.

Question put, That the clause stand part of the Bill.

The Committee divided: Ayes 9, Noes 7.

Division number 45 Decision Time — Clause 65 - Power to appoint person to hold an inquiry

Aye: 9 MPs

No: 7 MPs

Ayes: A-Z by last name

Nos: A-Z by last name

Question accordingly agreed to.

Clause 65 accordingly ordered to stand part of the Bill.