I beg to move amendment 83, in schedule 4, page 64, line 27, at end insert—

‘Consumer research

16A (1) The CMA must make arrangements for ascertaining—

(a) the state of public opinion about the manner in which financial services are provided to consumers;

(b) the experiences of consumers in relation to the provision of financial services;

(c) the experiences of such consumers in relation to the handling, by institutions within the financial services sector, of complaints made to them by such consumers;

(d) the experiences of such consumers in relation to the resolution of disputes with institutions within the financial services sector; and

(e) the interests and experiences of such consumers in relation to other matters that are incidental to, or are otherwise connected with, their experiences of the provision of financial services or of the availability of associated facilities.

(2) The CMA shall consult with concurrent regulators where necessary.

(3) The CMA shall publish the conclusions from research carried out under section (1) every two years.

(4) The CMA shall produce a report stating its conclusions and any recommendations from section (1) to the Secretary of State every 2 years.

(5) The Secretary of State shall publish a response to the report within 60 days.

(6) Arrangements made by the CMA for the purposes of this section may include arrangements for the carrying out of research in one or more of the following ways—

(a) by members or employees of the CMA;

(b) by persons who are neither members nor employees of the CMA.

(7) This section does not restrict the CMA’s power to make any arrangements they consider to be incidental or conducive to the carrying out of any of their functions.

16B (1) The CMA must make arrangements for ascertaining—

(a) the level of competition in the financial services sector; and

(b) the effects of the competition environment in the financial services sector on

(i) the availability of finance to small and medium-sized enterprises;

(ii) the availability of finance to high growth businesses;

(iii) the availability of finance to businesses in general.

(2) The CMA shall consult with concurrent regulators where necessary.

(3) The CMA shall publish the conclusions from research carried out under section (1) every two years.

(4) The CMA shall produce a report stating its conclusions and any recommendations from section (1) to the Secretary of State every two years.

(5) The Secretary of State shall publish a response to the report within 60 days.

(6) Arrangements made by the CMA for the purposes of this section may include arrangements for the carrying out of research in one or more of the following ways—

(a) by members or employees of the CMA;

(b) by persons who are neither members nor employees of the CMA.

(7) This section does not restrict the CMA’s power to make any arrangements they consider to be incidental or conducive to the carrying out of any of their functions.’.

It is a great pleasure to be with you once again, Mr Bayley. Indeed, I know that the day will pass more easily and productively with your guidance and good humour.

We made a lot of progress through our amendments on Thursday, but unfortunately not in improving the Bill. The Minister seemed to share all my sentiments, but none of my conclusions. Long-termism, improved support for small and medium-sized enterprises, close monitoring of the competition activities of the new NHS competition regulator—all were rejected. Let us hope that the Minister will have more success in matching his Government’s actions with his sentiments today.

The amendment is of grave importance. On Thursday, the ex-chief executive of Barclays bank, Mr Bob Diamond, came before the Treasury Committee to account for what he knew about the LIBOR scandal, which is basically a price-fixing racket as well as a matter for the Serious Fraud Office and, in my view, a judge-led inquiry. That follows various mis-selling scandals—payment  protection insurance and credit default swaps—and widespread concern about credit card interest rates, the lack of competition in retail banking and lending to small businesses. I raise those points to emphasise what we all know, which is that financial services are of great national importance and particular public concern. Competition in and for financial services affects the people of the UK each and every day, so why does a Bill that seeks to reform our competition and market environment make absolutely no mention of them?

The Bill is a general one, as the Minister has said and will perhaps say again, but it references all the sector-specific regulators. Let me identify them: the Gas and Electricity Markets Authority, the Water Services Regulation Authority, the Office of Rail Regulation, the Northern Ireland Authority for Utility Regulation, the Civil Aviation Authority and Monitor. What about financial services regulation? Perhaps that is not mentioned in the Bill because financial services is a subject of considerable debate everywhere else. It may be specifically because of the Financial Services Bill that is making its way through Parliament and that is now in another place. I know that the Financial Conduct Authority, which is to be established by the Financial Services Bill, will have competition responsibilities, which in itself has been a subject of much debate.

The FCA’s strategic objective will be to ensure that relevant markets function well. It will also have three operational objectives: securing an appropriate degree of consumer protection; promoting and enhancing the integrity of the UK financial system; and promoting effective competition for the benefit of the consumer. However, it will not to my knowledge have competition powers, as opposed to responsibilities. Perhaps the Minister knows otherwise and can clarify that point. What specific competition powers will the FCA have concurrent with the Competition and Markets Authority?

The shadow Financial Secretary to the Treasury, my hon. Friend the Member for Nottingham East (Chris Leslie), tabled an amendment to the Financial Services Bill to enable small and medium-sized enterprises’ representatives to act as super complainants. We tabled a similar amendment, which was rejected. The shadow Financial Secretary’s amendment was considered inappropriate, although it was not clear why. The Minister hinted that the Government might introduce their own amendment, but what will be the process for raising competition issues in the financial industry? Will first and second phase investigations take place in the same organisation, but with internal Chinese walls? What will be the CMA’s relationship to the FCA? Will they have joint responsibilities? Will one appeal to the other?

I am not the only hon. Member to be a little confused by the Government’s approach to financial services regulation. The Treasury Committee’s report into the Financial Services Bill concluded that proposals for the FCA to have a “plethora of...objectives” risks confusion and should be reviewed. The Committee also warned that the FCA’s accountability mechanisms needed to be improved. It suggested that the new regulator should carry out reviews of the costs and benefits of regulation, as we proposed for the CMA.

We should be clear that the Bill would bring about a major change in the regulatory environment of financial services. The Minister lauded the actions of the Office  of Fair Trading in protecting consumers, but the OFT will no longer have such responsibilities, and, for the FCA, this will represent a significant challenge.

As the Financial Services Authority pointed out in its report, “Approach to regulation”, published in June last year,

“The FCA will need a sound economic understanding of the way relevant markets operate in order that its regulatory interventions will promote competition and will effectively address the problems identified. This requires an approach to financial services markets that is significantly different to that of the FSA, both analytically and culturally.”

The amendment seeks to address some of those issues by ensuring that, at the very least, information on the financial markets and the experience of consumers will be available to the CMA. The amendment states:

“The CMA must make arrangements for ascertaining—

(a) the state of public opinion about the manner in which financial services are provided to consumers;

(b) the experiences of consumers in relation to the provision of financial services;

(c) the experiences of such consumers in relation to the handling, by institutions within the financial services sector, of complaints...;

(d) the experiences...in relation to the resolution of disputes...and

(e) the...experiences of...consumers in relation to other matters that are incidental to, or are otherwise connected with, their experiences of the provision of financial services”.

The amendment also requires that:

“The CMA shall consult with concurrent regulators where necessary.”

That achieves two purposes. First, it ensures that the relevant consumer experience of sector-specific regulators with regard to financial services is included. It also ensures that, if there is a financial services regulator with concurrent powers for competition in financial markets, the CMA must work with it. I hope the Minister will clarify where competition powers for financial services will lie.

The Bill does not seem to envisage the CMA having concurrent powers with the financial regulator. As I have said, reference is made to Ofwat—the water regulator—Ofcom and Ofgem, as well as other sector regulators, but there is no reference in the Bill to a financial services regulator. I hope the Minister will explain why that is. It seems short-sighted. We know that the financial services sector faces many challenges because of events past and behaviours unfortunately still present.

There are also technological opportunities and challenges for financial services that might further complicate competition issues. Let me give two examples. When I was at Ofcom, I was surprised to find that premium-number services were not regarded as financial services. Calling a number could result in a charge of hundreds of pounds. Many scams were in operation and telephone calls were effectively being used as a form of currency, yet that did not attract any regulation. However, the situation did attract a lot of complaints and eventually the industry cleaned itself up with the self-regulatory body PhonepayPlus.

It was clear there was a potential overlap between financial and sector-specific regulation. That potential has been realised with the rise of mobile banking. In many countries in the developing world mobile phones are used as form of banking, with air time being a  currency, one that is accessible and tradable in the most challenging circumstances. That is often the case in countries where banks do not have the trust of the people; we are beginning to know how that feels. People would rather have their money in their phone than in a bank faraway. I saw that when I lived and worked in Nigeria. One challenge there was the question of the kind of regulation that should apply: should it be financial or communications? Can the Minister answer that point?

Last Tuesday the UK Cards Association was here in Westminster demonstrating contactless cards that will enable people to use their mobile phones as virtual wallets and as cheap terminals. Small businesses that are not able to invest in a credit card terminal will find that their mobile phone becomes one. That is a great opportunity, particularly with the supposed demise of cheques. How should regulation and competition law be applied to such telemobile banks, and who will apply it? Increasingly we see convergence between banking and telecoms, and many new business models.

My second example is similar but poses a more pressing question. There are virtual banks and service providers to whom existing regulations do not apply. I am sure the Minister is familiar with PayPal. Will he explain who will regulate competition in the market in which PayPal is a player? Will competition regulation be the responsibility of the CMA or of the FCA? What position will the CMA take on such issues? Will it be well placed to come to an informed position, given that it has no specific powers regarding the financial services industry?

The amendment would require the CMA to publish every two years the conclusions of research carried out into the financial services sector. It should also produce every two years a report stating its conclusions to the Secretary of State. The amendment would also require the CMA to consider the small and medium-sized enterprise lending market by researching the levels of competition in the financial services sector and the effects of the competition environment in that sector on the availability of finance to SMEs, high-growth businesses and businesses in general.

Yesterday, the Leader of the Opposition called for more competition in banking. He said:

“We need to take excessive power away from the banks so that they serve the interests of the consumer once again. That means better competition. Real competition. We should bring forward the competition review. And we should break the dominance of the big five banks.”

He called for the creation of two new major high street banks, so that there can be more competition between banks, both for consumers and for small businesses. He called for easier switching of bank accounts between banks. He also called specifically for the proposed Vickers competition review, currently scheduled for 2015, to be brought forward to 2013. In the Minister’s reply, will he set out whether he will do that and exactly how competition in the financial sector will be regulated?

It is a great pleasure to serve under your chairmanship, Mr Bayley.

The question at hand is how the Competition and Markets Authority will relate to business. People are asking why we cannot have just the Financial Services Authority. Like many others in the room, I have had specific experience of growing businesses. The Bill is supposed to be about how we re-engineer a business for economic growth. An obvious key question is how micro-businesses and SMEs get access in the different phases of their evolution—they might be in a fast growth phase or going through difficulties because of short-term problems with demand—and how to have a flexible approach in which the banking community is not continuously pulling the rope at a business’s weakest moment. The Minister may say, “Well, they can just go off the FSA”, but that is not what small businesses do.

I was at Swansea Metropolitan university a week or so ago. It is the most successful university in Wales for generating small businesses that pass the three-year mark. I was talking to people who were generating innovations in multi-media, computer gaming and all sorts of fast-growth, export-oriented products. I found the same old story: the big transitions were from an idea to a product, to a brand, to scalability, to market access and to brand leadership. How can a business go on that journey without proper funding? Will it be crushed or taken over during that journey and picked off, because it does not have the means to grow?

The banking community is not providing the means. One question that one could ask conceptually about the words “competition” and “market” is what the financial community is doing to help competition, market access, market building, exports and economic growth. There is clearly a failure. It is obvious that the FSA or its successor will not be focused, alongside the business community, on that key issue for British success in a global marketplace.

I welcome and support the amendment. I have already referenced the issue of starting a new product or business from infancy. Another issue is established businesses that are going through difficulty. I have had personal experience of that, as I started a travel business some time ago, during a previous Conservative boom and bust. At the time—this was in 1989, a long time ago—the business was going well and there was a pretend Tory boom, but suddenly interest rates went up and house prices went down. The question for me was how to get funding in that difficult period. As it happened, I was able to get a second mortgage on my flat. I knew that if I went to a bank, it would either have said, “Sorry,” or charged penal interest rates, even if my business had downstream orders—in that case, holiday orders—that would generate cash flow and the loan was a short-term bridge. I have met many businesses that have had such generic problems.

There are other problems, such as consumers who buy foreign currency and are told, “Look, we’re not charging any commission,” which misses the point that they should be looking at the rates, not the commission. The financial community creates intentional confusion to make out that a good deal is on the table when it is not. Perhaps the FSA’s successor can do something about that. That is a consumer issue, but we need such changes for the business basis: new product development, small-business growth and even medium-to-large business growth.

On the interface between financial transactions and small business growth, credit card facilities are of key importance. Those who run, say, a restaurant or anything online, need credit card facilities, and some credit cards have them over a barrel. In sectors such as tourism—which might be regarded at certain times, such as during recession, as high risk—over night those people can stop businesses trading or impose bonds or fees, or whatever. So it is not clear that the financial community acts in a fair and balanced way towards certain small business areas.

I am not asking for answers to all those questions, but they are key questions and reasons for the dynamics of the relationship between business and the financial community. That underlines the importance of my hon. Friend’s amendment, which I have no hesitation in supporting. I hope the Minister will think twice before hurtling ahead and saying that everything he has thought before is a complete answer to the world’s problems. I also hope he realises that the amendment would be a major improvement to the business community’s ability to grow success and would offer somewhere to turn when a bank says, “Sorry, you cannot have any money. What’s more, we have taken away what overdraft facility you have,” and the business says, “Well, we’re going to go bust, and we have orders down the road.” The bank manager, Mr Lamb, says, “That’s not my problem,” but I think it is a problem—lambs to the slaughter. The Government need to realise that this is a moment in time when the financial community has been called to order, and the Bill is a one-off opportunity to make amends. We have had reference to other markets, and surely this is the most important market because it is the lubricant for economic growth.

I join other members in confirming that it is a pleasure to serve under your chairmanship again, Mr Bayley. I also confirm that I do not have a complete answer to all the world’s problems.

The Secretary of State for Business, Innovation and Skills does.

That is why he is the boss.

The Deputy Prime Minister is the boss.

I have not made a very good start and am already facing plenty of abuse from Opposition Members.

I am grateful to the hon. Members for Newcastle upon Tyne Central, for Edinburgh South and for Hartlepool for their proposed amendment. The Government will strengthen the UK’s competition regime by creating a single Competition and Markets Authority with a strong focus on promoting competition for the benefit of consumers. The CMA will have a range of powers to deliver its objectives and, importantly, the independence to decide its own priorities. Key to the CMA’s success will be the arrangements for ensuring fair and robust decisions. The new institutional arrangements and other reforms to the competition tools are intended to streamline and improve the efficiency of the competition regime. The CMA will also work closely with the new Financial  Conduct Authority, which will have lead responsibility for promoting competition and consumer interests in the financial sector.

I will now address some of the questions raised by the shadow Minister.

Will the Minister give way?

Let me address this point, and then I will be happy to give way. To fulfil its new competition objective, the FCA will need to keep markets for financial services under review, and it will, of course, be able to review financial markets. When it wishes to engage the CMA—the overall competition authority under the new regime—the Financial Conduct Authority will have a tailored power to refer matters to it. If the CMA receives an appropriate referral from the FCA, it may refer a matter for market investigation or bring Competition Act enforcement proceedings. That mechanism was widely supported by consumer groups, the industry and the Treasury Committee. The referral mechanism will not prevent the FCA taking the lead in addressing competition issues, but it will respect the expertise and powers of the CMA.

The Government believe that the FCA should have a far stronger role in competition than that of the Financial Services Authority, which relates directly to some of the shadow Minister’s concerns. That commitment is reflected in the FCA’s objectives and constitutes a radical departure from the model of competition “have regards” currently in place with the FSA. The FCA’s new competition mandate will mean that it will able to use the powers available in its regulatory toolkit—including rule making and firm specific powers—actively in pursuit of competition, for example, promoting transparency and ease of switching, which is key, and tackling barriers to entry, which was another issue raised by the shadow Minister. There is real concern about the concentration of power in the banking sector. If one goes to Germany or the United States, one is conscious of a large number of regional and local banks and so forth, increasing competition in that sector. The FCA can look at barriers to entry as well as addressing anti-competitive conduct relating to product design and sale. That reflects the Government’s commitment to having the FCA seek market-led solutions that promote competition whenever possible, but it still allows for protection and intervention when markets fail or market-led solutions are not appropriate.

The shadow Minister made specific reference to PayPal. The CMA will work with all sector regulators—I am conscious that there are a number of them—to deal with competition issues relating to individual sectors. The regulators have different but complementary duties and powers. Under the concurrency arrangements, the CMA and regulators will discuss in specific cases which of them would undertake any Competition Act enforcement action.

The amendment would undermine the independence, focus and effectiveness of the new regime, with consumers and businesses bearing the cost. To be effective, the CMA needs to be able independently to determine its own priorities, but that would be undermined by the obligation to undertake regular reviews in one particular sector. The Government are determined to improve financial regulation and to put in place better protections for consumers. That is one of the key objectives of the new regime introduced by the Financial Services Bill.

The Minister has now said on a couple of occasions that the primary focus in terms of the mandate is consumer interest and we should respect that. However, the business community is another consumer, because businesses are consumers of financial services. It is all very well going down to the consumers—we all agree with protecting consumers, and regulators are normally completely focused on that, which is great—but small businesses’ interests are not being served in this particular case. It is not that the consumers are not. We are talking about intervention to stop businesses or banks doing the wrong thing. We want the money to go to viable businesses. We want that interest in the Bill, because it is about businesses, not consumers.

The competition principle, which is recognised internationally, is that one ultimately always looks at the interests of the consumer. Often, there is conduct in a particular market that might have a significant impact on small businesses and that will ultimately have an impact on consumers, because it may restrict, for example, competition in that market. That is why, if the hon. Gentleman will recall, the Competition Commission reached the conclusions it did while investigating the groceries market. It focused on the impact on consumers, but it took the view that there was a potential negative impact on consumers through how some supermarkets sometimes treated their suppliers, which are often small businesses. Because of that ultimate impact, it proposed a groceries code that specifically addressed the relationship between the supermarkets and their suppliers—small businesses—about which the hon. Gentleman indicated concern. It also proposed that there should be an adjudicator to enforce that code. One always looks at the effect on consumers, but consumers may be affected by how large companies deal with their suppliers. I hope that addresses his point.

The current competition authorities already undertake work in the financial sector. For example, the OFT has reviewed barriers in the retail banking sector, cash ISAs and credit card interest rates. The CMA will no doubt want to keep development in the sector under close review. The amendment does not recognise that markets and market regulation evolve, and requiring the CMA—

Atishoo!

Bless you. That was quite a shock. I cannot cope with all the shocks I am experiencing at the moment.

Requiring the CMA to carry out specific studies every two years may limit the ability of the CMA to do work in sectors that may be more of a priority at that time. Obviously everyone’s concern currently is with financial services, but at some future date the concern may lie elsewhere, be it energy markets or something else.

Throughout this Committee we have seen that both the Minister and the Government have a reputation for devising and developing policy based on anecdote. The amendment gives the Government and the Minister the opportunity to devise policies based on evidence and research and I would have thought that they would welcome that.

I am enormously grateful for that intervention, mischievous though it was. Any suggestion that the Government are basing their policies on anecdote is simply and completely untrue. The CMA is based on a lot of consultation and analysis of how the existing system operates, and the Government’s absolute intention is that the new body will always act on the basis of evidence. Requiring the CMA to undertake reviews every two years in one particular sector, wherever the priorities may actually lie, would impinge on its independence and potentially impinge on its ability to focus its resources where they are most importantly directed.

The Minister has said on a number of occasions that the requirement to carry out reviews every set number of years would impinge on the CMA’s independence, but sector-specific regulators are already required to carry out reviews of their sector every set number of years. I am familiar with the telecommunications sector and European Commission law requires that market reviews be carried out every three years. We are not saying that the financial review we are proposing has to be every two years. If the Minister would prefer another time period, then let him say that. As my hon. Friend the Member for Swansea West said, it is very important that the right evidence is available in order to monitor and make the right decisions about the financial services.

I am grateful to the hon. Lady for that intervention. The key difference is that this body has the overarching responsibility for competition across the whole of the economy. For it to have to undertake reviews every two years or any other period one might choose in one specific sector seems a bit otiose and inappropriate.

The amendment also does not recognise that the CMA needs to be able to choose which tool to deploy. The amendment may require the CMA to provide a general report on the financial sector during the course of a more targeted investigation. In these circumstances, the reporting requirement could waste resources if the CMA was trying to focus on one really significant issue in financial services that was causing concern, but then had to undertake its general review. That would be a waste of resources and could interfere with an investigation or even act as a disincentive to initiate a separate investigation. It would become process driven—we must carry out our two-yearly review—rather than focusing on the mischief that might emerge at any particular time.

Does the Minister not also accept that the nature of financial markets is moving so quickly in a global environment that a holistic evaluation on a regular basis, whether it is three, four or two years, is required? We are moving around in the global marketplace, and consumers and businesses are in danger of not getting the best deal. We need an overview from a strategic body and that is what this is. We are not PC Plod going along investigating and saying, “Oh no, we can’t look for the cat because we’ve got to do a review of strategic crime in London.” This is a strategic approach and we can do the cat stuff as well.

I do not envisage that this body will be characterised as PC Plod. As the hon. Gentleman says, it is rapidly evolving. There will need to be a constant watch over what is happening, but we have the FCA and then we have this body with the overall responsibility for competition across the economy. Keeping it under constant review is sensible, but to impose a bureaucratic requirement that there should be this process every two years seems inappropriate when we are focusing on one particular sector whose responsibility is across the whole economy.

Is it not the case that whatever the merits of the amendment—and there are some points in it that would gain approval—it is being made to the wrong Bill? The FCA is the initial competition authority. It will make a referral to the CMA, which will do a first-phase investigation as necessary. To the extent that a two-year review should be done, if that is the view of the Opposition that amendment should have been made to the Financial Services Bill which set up the FCA, not to the overarching CMA.

My hon. Friend makes a very good point. The shadow Minister made the point that other sector regulators focus on particular sectors and are charged with carrying out reviews in those sectors. Likewise, the FCA will be responsible for the financial services sector. That is where the immediate responsibility lies. Of course, this body has to be able to look at where the particular mischief lies at any particular time across the whole of the economy, rather than having a bureaucratic obligation every two years to look at a particular sector.

The amendment also does not take account of the proposed arrangements for co-operation between the FCA and the CMA. These will ensure that the two bodies work together to ensure that their respective expertise is applied to the financial sector in an efficient and effective way. The financial scrutiny regime in the Financial Services Bill includes powers for the OFT and the Competition Commission to require the FCA to respond to their advice on competition problems caused by financial regulation. The FCA will also have powers to ask the OFT to consider whether a feature of the financial services market prevents, restricts or distorts competition. The OFT will then be under a duty to respond to the FCA within 90 days. The roles of the OFT and the Competition Commission will, as we know, be transferred to the CMA once the Enterprise and Regulatory Reform Bill is enacted. So the overall effect of the legislation being pursued by this Government will be to significantly strengthen the competition oversight and scrutiny of the financial services sector which the FSA, the current body, has not had the powers to effectively undertake. I therefore ask the hon. Member to withdraw amendment 83.

I call Chi Onwurah.

Hon. Members:

Hear, hear.

Why don’t I get that?

I thank the Minister for his response and for clarifying certain points concerning the regulation of competition in the financial services for the first time, whether in this Bill Committee or in other Bill Committees, such as the Financial Services Bill Committee.  We have moved a step further in our understanding of where the key competition responsibilities and powers will lie for financial services. However, the Minister has not solved all the world’s problems, and he has raised more questions than he has answered. It is rather disingenuous of the Minister to imply that this amendment amends the wrong Bill when, before today, we were not clear as to where competition responsibilities for financial services would lie. The Minister has said clearly that the primary lead on financial services competition will be the Financial Conduct Authority.

I certainly will not accuse the hon. Lady, in a rather unfair way, of being disingenuous. Does she accept, on the basis of what I have said to her, that the new Financial Conduct Authority will have a far stronger role in competition, which is absolutely necessary, than the Financial Services Authority, an organisation established under her party’s government, has had to date?

I thank the Minister for that intervention. The clarity he has brought by answering the questions put to him makes it clear that the Financial Conduct Authority will indeed have a stronger role than the Financial Services Authority. Whether it is more effective than the OFT in addressing competition issues remains to be seen because, as the Minister himself said, the OFT has done much—not enough, but much—to address competition issues. He gave a number of examples and we hope that the FCA will have the expertise and the resources to achieve that, but we recognise that the resources and the skills of the FCA are not directly of concern here.

Let me set out what is of concern here and what remains to be answered. My understanding from what the Minister said is that the FCA will have competition powers similar to a sector-specific regulator now. He has implied that it will, for example, have the power to refer competition issues to the CMA. It will have phase 1 referral powers or, after investigating an issue, it will be able to refer to the CMA, which will then rule on whether there is a significant competition issue and what undertakings are required to address that.

Will the Minister confirm that is the model? If that is the model, it again prompts the question why all the other sector-specific regulators are named and identified in the Bill but there is no reference to the FCA. The Minister has implied that all the legislation regarding the FCA and CMA working together is to be found in the Financial Services Bill. Will the Minister confirm that it is that Bill that would require the CMA to work with the FCA?

On the subject of regular reviews, if it is the duty of the FCA to carry out regular reviews, we might be inclined to withdraw the amendment. The Minister has referred on a number of occasions to bureaucratic reviews. The requirement for regular reviews is commonplace in competition law, and happens in the telecommunications industry. Will the Minister clarify whether the FCA will be required on a regular basis to have reviews, evidence-gathering and so on?

Finally, my hon. Friend the Member for Swansea West raised a number of pertinent and compelling points about SMEs, which I do not feel that the Minister fully addressed.

He can look after himself.

That may be true, but I would like further clarity on small businesses’ access to finance. That is a great issue for us at the moment as we seek growth in the economy. The Minister’s boss, the Secretary of State for Business, Innovation and Skills, often refers to that. The market in finance for small businesses is clearly not as competitive as it should be: 85% of all loans to small businesses are with the four major banks. Will that particular market for small business finance be a subject of investigation by the FCA, despite the fact that, as my hon. Friend the Member for Swansea West pointed out, small businesses are not identified as consumers? Will that particular market be a candidate subject of investigation for the FCA? If that is not the case, where in the Government’s plans for legislation are the measures to address small business finance competition?

Given that, as my hon. Friend has already pointed out, finance, unlike gas, is not mentioned under the CMA, and given that we also have the FCA, will there not be a natural instinct for the CMA to say, “Hold on. We have all these things to do in different markets. We have got the FCA to do the finance; we don’t have to worry about that”? The linkage between the business community, economic growth and finance, which is so important for British prosperity, will therefore fall through the gap between the two bodies. With the amendment, it would be a clear that the CMA was required to look at the financial community. Its staff could not say, “We’re too busy; the FCA will do it, ” and if someone asked, “What about business?” reply, “What can you do? If they had wanted us to do that they would have written it down, and they haven’t, so we won’t.”

Chi Onwurah rose—

Will my hon. Friend give way?

The hon. Lady might want to respond to one Member before she takes another intervention.

Thank you, Mr Bayley, for that excellent guidance. My hon. Friend the Member for Swansea West makes an excellent point. As the Minister has said, the Financial Conduct Authority is a new authority, as is the CMA, and yet the Bill contains absolutely no guidance, legislation or proposals about how they should work together. Financial services are of huge importance, and one would expect that that should be made absolutely clear, at least initially, so that the business community and the rest of us who are concerned about the business community can be confident that their concerns will be addressed.

The Minister has spoken much in Committee about the public perception of employment rights. Given that we have been through probably one of the most catastrophic financial sector disasters in history, will not the public be puzzled as to why the Government  are refusing to regulate or to examine the financial authorities in detail regularly? They will be concerned that the Government are stepping back from examining those authorities. On that basis, the Government should accept the amendment.

My hon. Friend makes an excellent point. The financial crisis of 2007-08 was the greatest market failure that we have seen. Although the Minister expressed the hope that, in a matter of years, financial services might no longer need to be a priority with regulators or Governments, I fear that the public will be astonished to learn today that financial services competition and regulation is not to be a priority of the new Competition and Markets Authority.

I have asked the Minister several questions, and I want to give him the opportunity to respond before I decide whether to press the amendment to a vote.

I am grateful to the hon. Lady for her additional comments.

On the point made by the hon. Member for Swansea West, the shadow Minister has already accepted, following my intervention, that the new Financial Conduct Authority will have a much stronger focus on competition in financial services than the Financial Services Authority has hitherto had. The Government’s absolute intention is to have a much more effective regime to address competition issues in financial services. It is absolutely not the Government’s intention that the new body will be unable to focus on financial services when that needs to be its focus. It will rightly be an independent body, and it will determine its priorities and commit its resources in the most effective and optimal way.

The Government, and particularly the Secretary of State, absolutely recognise the problems of access to finance for small businesses. We have already taken several steps to seek to improve access to finance. That is a big and enduring problem, for which there is no quick fix and no easy solution, because of the shock received by the banking sector. There is a very strong case for more competition in banking, as everybody recognises. I absolutely share Opposition Members’ view about the importance of ensuring a regime in which small businesses can get access to finance when they need it.

Does the Minister agree that despite enormous quantitative easing—the billions put in—and Project Merlin and everything else, all that has happened is that banks have propped up their balance sheets and money has not gone through to the business community? There would be no great cost in accepting that there should be an explicit duty on the financial community. After all, as in gas and other markets, it is no big problem putting a line in, but it would send a clear signal to the financial community that the emerging body, alongside the FCA, will focus on the financial community and that it has to get its act together. That would be an important move in terms of perception as well.

It is actually quite important that banks rebuild their balance sheets after what happened to them—in part owing to weak and ineffective regulation  not only in this country, but internationally. The Labour Government must take their share of responsibility for the ineffective regulation that led to the crisis in 2008.

Geraint Davies rose—

Order. The Minister is not giving way.

The Chair is absolutely right. I am not giving way.

The FCA will keep competition under review. That is obviously central to its purpose, so it will constantly maintain a review of competition. The hon. Member for Newcastle upon Tyne Central was absolutely right to raise concerns, but that will be central to its objectives.

Let me say a little more about the way in which the CMA and the FCA will co-ordinate on competition. The FCA and the CMA will need a memorandum of understanding, but we do not need to provide for that in the Bill to make that happen. The OFT has MOUs in place with the FSA and other similar sectoral regulators such as Ofcom without the need for legislation. I see no reason in principle why the CMA and the FCA should not have one MOU to cover both competition and consumer protection, including, for example, co-ordination regarding the FCA’s powers to enforce unfair terms in consumer contracts regulations.

On the relationship between the CMA and the FCA, both regulators have an important role to play in promoting effective competition. The FCA needs a mechanism to engage the CMA if it is to make sure that the CMA’s powers and expertise are effectively brought to bear in the financial services sector. That addresses exactly the concerns raised by Opposition Members. The FCA will therefore have a power of referral to the CMA—first to the OFT and in due course the CMA—under a corresponding duty to respond within 90 days. The availability of the power will not prevent the FCA taking the lead in addressing competition issues where it is best placed to do so.

On an appropriate referral from the FCA, the CMA may have the information and analysis it needs to take action—for example, to launch a market investigation reference—almost immediately. It will also be able to consider whether enforcement action under the Competition Act 1998 would be more appropriate. There are clear benefits to the referral mechanism in terms of enabling the CMA in its role as the principal competition authority to bring its expertise and experience to bear in taking action to address restrictions or distortions of competition. These are pragmatic arrangements that will reflect the fact that the FCA will have no track record of or experience in making market investigation references or capacity to enforce competition law itself. As such, it will be essential that it has a mechanism to draw on the expertise and powers of the CMA.

In conclusion, the intent of the amendments to ensure that there is a focus on competition issues in the financial services sector is absolutely right. That is why the Government are legislating to create a body—the Financial Conduct Authority—that will have a much greater focus on competition in financial services than the FSA has had to date. That significantly improves the regime for ensuring proper competition in financial services. On top of that, there will be the relationship, which I have  sought to describe, between the FCA and the CMA—the overarching competition authority—so that it can use its expertise and experience in taking on those issues as appropriate.

Will the Minister give way?

I am conscious that we need to move on. I have tried to address all the issues raised by Opposition Members. I hope that, on the basis of that reassurance, the shadow Minister will withdraw the amendment.

I thank the Minister for those clarifications, and I believe that we have moved forward in our understanding of the way in which the FCA and the CMA will work together and the process by which referrals will be made from the FCA to the CMA. I am particularly pleased to learn that a memorandum of understanding will be put in place between the CMA and the FCA. However, I remain concerned that the Minister sees no need to legislate for that or to refer to that in the legislation.

I simply made the point that it has happened between the OFT and the FSA, two organisations that inevitably have to work together. It makes absolute sense for them to enter a memorandum of understanding. If that approach was appropriate under the previous Government, it would seem to be appropriate now. There is no need to legislate for something that the two organisations will obviously want to do.

While I see the sense of what the Minister is putting forward about the reasonableness of leaving the matter to the CMA and the FCA, I say again that the change to our competition environment is quite significant, which the Minister acknowledges. To carry out that change at this time but make no mention of the new authority, the FCA, or the financial services sector, which is on the minds of many of our constituents right now, in a Bill that refers to every other sector and identifies their relationship, is not the best way forward. I would like to test the Committee’s feeling on that point.

Question put, That the amendment be made.

The Committee divided: Ayes 9, Noes 12.

Question accordingly negatived.

Question put forthwith (Standing Orders Nos. 68 and 89), That the schedule be the Fourth schedule to the Bill.

Question agreed to.

Schedule 4 accordingly agreed to.

Clause 19 ordered to stand part of the Bill.