Part of Financial Services and Markets Bill – in a Public Bill Committee at 12:15 pm on 27 October 2022.
Andrew Griffith
The Financial Secretary to the Treasury, The Economic Secretary to the Treasury
12:15,
27 October 2022
I thank my hon. Friends the Members for Wimbledon and for North Warwickshire for raising some important matters, and those on the Opposition front bench for their support for Clause 24. They clearly speak with a great deal of authority from their own experience, and the Government will take away their points and consider them further. Let me describe the clause, and then I will try to come back to the points that have been made.
The Bill asserts our domestic model of financial services regulation, whereby the Government and Parliament set a policy framework within which the regulators are generally responsible for setting the detailed rules. It is therefore necessary to ensure that the regulators’ objectives, as set out in the Financial Services and Markets Act 2000, are appropriate, given their expanded responsibility and the UK’s position outside the EU. The Government believe that the regulators’ current objectives set broadly the right strategic considerations, but we also consider it right that the regulators’ objectives reflect the need to support the growth and international competitive-ness of the UK economy, particularly the financial services sector. I welcome Members’ support for that.
The clause introduces new secondary objectives for the FCA and PRA in relation to growth and competitiveness. The new objectives will require the FCA and PRA to act in a way that, subject to aligning with relevant international standards, facilitates the international competitiveness of the UK economy, including the financial services sector, and its growth in the medium to long term. For the FCA, that objective will be secondary to its strategic objective to ensure that markets function well—I believe the hon. Member for Wallasey mentioned the importance of that, which is clearly paramount—and to its three operational objectives, which sit below the strategic objective, to ensure that consumers receive appropriate protection, to protect and enhance the integrity of the financial system, and to promote effective competition. Again, the hon. Member for Wallasey mentioned financial inclusion, and we will talk about that when we debate later clauses. For the PRA, the growth and competitiveness objective will be secondary to the PRA’s general objective to ensure that UK firms remain safe and sound, and to its insurance-specific objective to contribute to the securing of an appropriate degree of protection for those who are or may become policyholders.
The new objectives do not require or authorise the FCA or PRA to take any action inconsistent with the existing objectives. I will come back to the hon. Member for Wallasey on that, but they are subordinate objectives and secondary to their financial stability and prudential objectives, which they talk about. The new objectives will give the regulators a legal basis for advancing growth and international competitiveness for the first time. It does not go quite as far as my hon. Friends the Members for Wimbledon and for North Warwickshire have suggested in the Amendment. Nevertheless, it is a significant enhancement in that respect on the status quo. As they said, it moves us in line with other international jurisdictions. That is a balanced approach. By making those objectives secondary, we are nevertheless giving the regulators an unambiguous hierarchy of objectives that prioritises safety and soundness, and market integrity. I therefore commend clause 24 to the Committee.
Amendments 46 and 47 seek to amend the new secondary objectives and require the regulators to promote, rather than facilitate, the international competitiveness of the UK economy and its growth in the medium to long term. The wording of the objectives in clause 24 aligns with the PRA’s existing secondary objective, which is to facilitate effective competition. The vast Majority of respondents to the November 2021 future regulatory framework review consultation supported the Government’s proposal to introduce new secondary objectives for the FCA and the PRA to facilitate growth and competitiveness.
I reassure my hon. Friends about the importance of the Government’s plans on growth and competitiveness. We expect that there will be a step change in the regulators’ approach to the issue that will be similar to the change that took place following the introduction of the PRA’s secondary competition objective in 2014, which led to a significant number of new policies to facilitate effective competition. I therefore ask my hon. Friend the Member for Wimbledon to withdraw the amendment.
In responding to the hon. Member for Wallasey, I will not assume to myself a degree of expertise about the energy market or any failings in that market. However, I completely agree about the need to avoid an overly binary or unbalanced approach to competition in any market. I think we all agree that we need to get the right balance. On how the regulators can safely advance the objectives, my response is as follows: with a balanced approach; with the right level and volume of resources, in terms of both the quality of expertise and the people they attract and retain; and with good governance. The hon. Lady herself, like all Members of Parliament, is also part of the regulators’ governance model.
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A parliamentary bill is divided into sections called clauses.
Printed in the margin next to each clause is a brief explanatory `side-note' giving details of what the effect of the clause will be.
During the committee stage of a bill, MPs examine these clauses in detail and may introduce new clauses of their own or table amendments to the existing clauses.
When a bill becomes an Act of Parliament, clauses become known as sections.
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