Clause 34 - Public consultation requirements

Financial Services and Markets Bill – in a Public Bill Committee at 2:45 pm on 27 October 2022.

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Photo of Stephen Hammond Stephen Hammond Conservative, Wimbledon 2:45, 27 October 2022

I beg to move amendment 49, in clause 34, page 47, line 38, at end insert—

“(2B) The FCA must publish a list of all of the consultees.”

Again, I guide the Committee to my entry in the Register of Members’ Financial Interests. The amendment is very simple. I welcome clause 34. It sets out public consultation requirements and, after proposed new section 1RA of FSMA 2000, inserts proposed new section 1RB, concerning requirements in connection with public consultation. The key word here is “public”. Proposed new section 1RB(2) states:

“The FCA must include information in the consultation about any engagement by the FCA with…statutory panels”.

That is a public consultation, or it should be. Therefore it seems only appropriate that the FCA and the PRA list all the consultees to the public consultation. That is what amendment 49, for the FCA, and consequential amendment 55, for the PRA, provide. That is a very simple request. If the Government cannot agree to it today, I hope that they will take it away about think about it very carefully.

Photo of Andrew Griffith Andrew Griffith The Financial Secretary to the Treasury, The Economic Secretary to the Treasury

Amendment 49 seeks to require the FCA to publish a list of all respondents to any public consultation. I recognise that my hon. Friend the Member for Wimbledon intended for the requirement in amendment 49 also to apply to the PRA, where the same issues would arise.

The Government believe that policy making is at its most effective when it draws on the views, experience and expertise of those who may be impacted by regulation. Meaningful stakeholder engagement makes it more likely that final proposals will be effective, understood and accepted as fair and reasonable. The Government also recognise the importance of transparency in supporting the effective scrutiny of the regulators, and are bringing forward a number of measures in the Bill to support that.

I remind my hon. Friend that FSMA already requires the FCA to publish information regarding responses to their public consultations. In particular, section 138I of FSMA requires the FCA to publish an account, in general terms—I accept that that is different from what my hon. Friend proposes—of representations made in response to consultation, and of the regulator’s response to them.

Although I therefore support the ambition behind the amendment, there is a risk that the additional requirement on the FCA to publish a list of all consultees to every consultation could deter stakeholders that want to respond confidentially from engaging fully with the regulators’ consultations.

The Government sympathise with my hon. Friend’s point, but I ask him to withdraw his amendment. I am happy to meet with him, with officials, to see whether there is a different way in which he can obtain the comfort he desires, or in which we can take the matter forward.

Photo of Stephen Hammond Stephen Hammond Conservative, Wimbledon

I am very pleased to hear what the Minister said, because he has broadly accepted the thrust of what I said. I think he is offering me the chance to explore with him the circumstances in which a body does not wish for its name to be published in respect of a consultation. I am prepared to have that conversation with him so that I understand why he thinks that that might constrain the FCA and PRA. With that reassurance from the Minister, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

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

Photo of Maria Miller Maria Miller Conservative, Basingstoke

With this it will be convenient to discuss clause 35 stand part.

Photo of Andrew Griffith Andrew Griffith The Financial Secretary to the Treasury, The Economic Secretary to the Treasury

FSMA 2000 requires the PRA and FCA to set up and maintain a number of stakeholder panels, also known as statutory panels. Those panels are intended to provide valuable insight, advice and challenge to the regulators’ rule making, drawing on the experience and expertise of their respective memberships. The regulators have regular meetings and discussions with their panels. In those, most major policy and regulatory proposals are presented for comment at an early stage.

The FCA’s statutory panels are the financial services consumer panel, the practitioner panel, the smaller business practitioner panel, and the markets practitioner panel. The Bill also puts the listing authority advisory panel on a statutory footing. The PRA’s statutory panel is the practitioner panel, and the Bill also puts its insurance sub-committee on a statutory footing as the insurance practitioner panel. The Payment Systems Regulator has one statutory panel, which covers the full range of the PSR’s responsibilities.

The additional responsibilities that the regulators take on following the repeal of retained EU law will result in the regulators making more rules across a broader range of topics. The UK’s departure from the EU will therefore increase the opportunities and the need for the regulators to consult their statutory panels from the outset of policy and regulatory development; that was not possible to the same extent while the UK was a member of the EU. It will strengthen the panels’ important ability to provide stakeholder input into the development of policy and regulation.

Clause 34 therefore requires the FCA and PRA to include information in their public consultations about any engagement that they have had with statutory panels. Clause 35 requires the regulators to provide information in their annual reports on their engagement with the statutory panels of the FCA, PRA and PSR over the reporting period. The FCA and PRA already voluntarily provide some information on panel engagement as part of their annual reports. This clause will formalise the existing practice, ensuring clear and consistent communication by the regulators.

The regulators, working with the panels as appropriate, will be responsible for determining how to meet these requirements. Importantly, the regulators will not be required to publish information that they deem to be against the public interest. That will ensure that the FCA and PRA can find the appropriate balance between transparency and the confidentiality crucial to ensuring an open exchange of views between panel and regulator. I therefore recommend that these clauses stand part of the Bill.

Photo of Tulip Siddiq Tulip Siddiq Shadow Minister (Treasury)

I will speak to clauses 34 and 35 together. Statutory panels make an invaluable contribution, based on panel members’ experience and expertise, to the FCA’s and PRA’s policy-making functions. However, we feel that transparency is vital in ensuring that the public feel that financial services regulation is working in their interests. That is why we support these clauses, which we recognise will increase transparency by guaranteeing consistent communication by regulators about their engagement with panels. Does the Minister agree that representation of the voices of consumers and the public on the FCA’s statutory panels also plays an important role in upholding the transparency of the regulatory process? Ultimately, it is the public, both as consumers and as taxpayers, who are most impacted when regulations go wrong and when regulators fail to adequately uphold consumer protections or financial stability.

I draw the Minister’s attention to the written evidence to the Public Bill Committee from the Finance Innovation Lab. It recommended that

“the government mandate public interest representation of at least 50% on all groups and committees providing advice and making decisions about financial services policy and regulation.”

I want to know whether the Minister has considered the Finance Innovation Lab’s argument about the transparency of statutory panels, and whether that could be strengthened by

“ensuring that the voices of consumers and citizens are given at least equal weight to the voice of industry.”

If he is not familiar with the written evidence, he is welcome to write to me later.

Photo of Angela Eagle Angela Eagle Labour, Wallasey

I support the position of my hon. Friend the Member for Hampstead and Kilburn. Given the transfer of powers from Brussels to the UK and the fact that a lot of the current structure is up for discussion and potential change—although we hope it will not all change at once—there is bound to be much more interest in the regulators’ decisions for lobbying purposes than there would be normally in any given year. That level of interest will last until the system settles down into whatever its future tracks will be.

In those circumstances, the regulators must be able to demonstrate robustly that there has been no kind of industry or regulatory capture via some of these panels, and that consumer interest has been properly represented. When I talk to consumer stakeholders and groups, there is certainly a view that the balance is not right at the moment, which is why I am so supportive of what my hon. Friend has said from the Front Bench.

We have to be able to demonstrate, in a transparent way, that meetings that may be confidential for very good reasons are not something else. Will the Minister give us some ideas about how consumer representation in these technical panels can be properly shown to be robust and how transparency can be improved, given the fluid context for a lot of these decisions and future structures?

Photo of Andrew Griffith Andrew Griffith The Financial Secretary to the Treasury, The Economic Secretary to the Treasury

I thank the hon. Members for Hampstead and Kilburn and for Wallasey for their points. We must be alive to the risk of producer capture, and these clauses are a real step forward in bringing the required transparency to the composition of these panels and their recommendations. The Government recognise the importance of the consumer voice; panels that have diverse backgrounds and different expertise avoid group-think, which is an important aspect.

Through this Bill, the Government will introduce a requirement for regulators to maintain statements of policy in relation to their process for recruiting members to panels. That in itself is a step forward. However, it would not be right to move forward with a specific numerical threshold. The panels are there to challenge the policymaking process, in order to give a voice to practitioners, as well as consumers,. They are not of themselves representative. The representative function is one that we discharge here in Parliament, and I think that is the appropriate balance.

Question put and agreed to.

Clause 34 accordingly ordered to stand part of the Bill.

Clause 35 ordered to stand part of the Bill.

Photo of Maria Miller Maria Miller Conservative, Basingstoke 3:00, 27 October 2022

We have a lot to cover this afternoon, so I urge Members to take note of the groupings of amendments so we can move through this at the appropriate pace.