(12 years, 5 months ago)
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Lord Lucas
“( ) the way in which a financial product or opportunity is drawn to the attention of or otherwise made available to members of the public;( ) the ways in which the provider of a financial product or service derives revenue therefrom, and the way that this is disclosed to the purchaser;”
Lord Lucas
My Lords, both segments of the amendment are in effect questions that ask my noble friend where he envisages that the limits of the FCA’s powers will lie in dealing with what I perceive to be a couple of current problems. The first part of the amendment is aimed at things such as tropical forestry investment. One finds full-page advertisements in supplements, in particular in the Guardian but doubtless in other places. Presumably, advertisers think that Guardian readers are notable suckers for green investment. The advertisements promise rates of return varying from 18% to 22% per annum over a period of 15 years, and are backed up by a remarkable lack of financial information of any kind—just lots of happy pictures of growing trees and talk about the value of the eventual timber and the many uses for it, about the unspecified rise in the market price of timber, and so on. As far as I can make out, they are complete scams. I investigated one of them in as much detail as I could—which turned out not to be very much, because not much was forthcoming.
The schemes escape FSA regulation because they are not considered to be collective investment schemes. Although they involve a collection of people pursuing a single investment objective—which is the way the scheme manager makes money—they are not collective in the sense that at their root is individual ownership of a separate plot of trees, land in the UK, wine or another similar separable asset. Therefore, the FSA currently is unable to regulate them.
Thanks to my noble friend, I had very helpful conversations on this matter with his department, where officials said that the tack that I was originally pursuing might lead to the FCA having all sorts of jurisdiction over arrangements that were essentially private, such as arrangements between consenting adults to do something that might or might not be to their advantage but which the FCA would have no business regulating. Therefore, I attempted to reapply myself to what must be—from the frequency and scale of the advertisements—a large-scale fraud by now, and attach myself to the concept that if something is widely advertised as a consumer investment it is something to which the FCA should be able to pay attention. That is a reasonable way of separating large-scale public frauds from minor arrangements that should be outwith the ambit of the FCA.
The second part of the amendment deals with the fees or benefits that accrue to managers of investments. I will take as a particular example stock lending fees. Over a long period the FSA has been unable to make managers declare their full benefits from managing funds. The level of fees in this country is far too high anyway. Managers take far too large a proportion of the total return. Noble Lords may have heard the Danes on the radio this morning, threatening to bring low-cost investment management to the UK. Good luck to them; I hope that they will be permitted to do so. However, we ought also to pay attention to our own business, and to making sure that, where a firm says that it charges 1.5%, that is what it will charge, and that it will not indulge in something that is essentially a risky practice and take all the benefit from it without telling its clients that that is what it is doing.
There are a number of ways in which the City has derived benefit from the investment management process. One that particularly gets my goat is high-frequency trading, which is robbery by any other name. People get a preferential supply of information about trades and are able to surf the wave of real investors’ trades. Every penny that they make is at the expense of real investors—in other words, our pensions. The only reason we tolerate it is that they are doing this to foreigners as well, so we are making more money out of it than we are losing. That is not a healthy way to go on. We should have an open and transparent arrangement for saying how money is earned in the City, and it should be clear to people who are investing exactly what bite the managers and others in the City are taking out of a scheme, so that they can make a reasonable judgment on whether this is the right place to invest or whether they should take their money off to somewhere where they will be allowed a higher share of the total return. I beg to move.
The Commercial Secretary to the Treasury (Lord Sassoon)
My Lords, I am grateful to my noble friend for bringing up these important matters. As he knows, they are not easily dealt with. I will say a few things about where we are. I will not dwell too much on the specifics of the amendment because, as he said, his intention is to provoke a discussion around some of these topics rather than around the specific drafting.
The difficulty around these unregulated activities and schemes is that a line must be drawn between regulated and unregulated activities. Around the margin, wherever the line is drawn, there will always be incentives for rogues to exploit the boundary. This may well be what people are doing on some of the schemes to which he referred—I do not want to express a view. The first thing that we need to recognise is that a line has to be drawn between regulated and unregulated activities. For example, we would not want to draw the regulatory net so wide that it would capture investments in a family farming business or investments by family and friends in a small start-up business—the sort of activity that as a Government and as a House we very much encourage.
Once one accepts that there will be investment schemes that involve a number of people that we do not want to capture in the regulatory net, there will always be a borderline, and I fear that there will also be people who seek to exploit it. It certainly appears that the schemes that my noble friend referred to were structured specifically to avoid being captured in regulations. That means that the regulator cannot act unless either the schemes fall into the regulatory net, or the promoters of the schemes hold themselves out to be regulated. Some fall into the trap of holding themselves out to be authorised and regulated, and then they can be caught. However, the majority do not. I do not think we can simply or easily change the definition of a collective investment scheme in Section 235 of FiSMA to address the point, because either the boundary will shift somewhere else, or we will capture the sorts of legitimate activity that I have referred to.
What my noble friend Lord Lucas usefully draws attention to is the role of the FSA at present, and that of the FCA in future, which is to think very hard about the preventive consumer education work that is needed to warn the public about the risks of these unauthorised schemes. The fact that my noble friend regularly comes back to them undoubtedly helps to raise that awareness. On the other side, the regulator, whether it is the FSA or the FCA, will also work with the police, trading standards, and the Insolvency Service in this space to do whatever they can. However, I appreciate that unregulated activities will be nigh on impossible to stamp out altogether. I am sorry, but it is no great surprise that I cannot give my noble friend Lord Lucas a complete answer on that.
On fund management fees, the main point is to give my noble friend reassurance that there is a substantial regime in place through the FSA’s rulebook regarding the disclosure of investment management fees. There is a lot of debate and discussion in this area at the moment. The fact that it was discussed on Radio 4 this morning shows that this is becoming an issue which is getting a lot of exposure, which must be a good thing in terms of making investors aware of how much of their capital can disappear through regular compounding of fees. Whether the fee levels in the UK are particularly high or not, compared to other jurisdictions, is clearly not a straightforward matter but is another dimension of this which has been referred to. Ultimately I suggest that these issues are not matters for the Bill beyond the fact that I am sure that the FCA will have all the powers necessary in this area. It is an area in which awareness-raising of the sort which my noble friend is engaged in will focus the regulators to use the powers that they have. I am grateful to him for raising these points, but I ask him to withdraw his amendment.
Lord Lucas
My Lords, of course, I am grateful to my noble friend for his reply, although I do not share his optimism as to the number of people listening. As far as advertisements are concerned I can see I have lost that argument, and we will wait until some crisis arises and events force the Government’s hand. There we are. People should have been more careful with their money; they should have known that 20% compound for 15 years was probably not safe.
So far as investment management is concerned, I think we have been doing some useful things in these last few years in paying real attention to fees, to executive remuneration, and to other ways in which the return to capital is being eroded and the way in which that is costing us all in terms of pensions, support for pensioners and the health of the economy. I hope we continue to make progress. I shall certainly take an interest in the way the FCA asks for disclosure in this area. However, for the moment I thank my noble friend and beg leave to withdraw the amendment.
Lord Borrie
“(h) where credit is granted to a consumer, a clear statement, in cash terms, of the total cost of such credit”
Lord Borrie
My Lords, this amendment stands in my name and that of the noble Baroness, Lady Oppenheim-Barnes, whom I am delighted to have supporting it. She was Minister for Consumer Affairs in the early years of the Thatcher Government and is a lady of tremendous knowledge and ability in this field. I will also speak on Amendment 197ZA which, rather surprisingly, is grouped with these other amendments. I will come to that in a moment.
The Financial Conduct Authority is taking over the responsibilities that are currently with the OFT in dealing with consumer credit. It is important that the Bill maintains and ensures long-term protection for consumers in future consumer credit transactions. One problem is that it is often very difficult for consumers to compare one loan, for example a pay-day loan, with another on a like-for-like basis. Indeed, it is quite difficult for people to know what the costs are of a particular loan that is granted to them. The amendment proposes that the total cost of credit “in cash terms”—I emphasise that—is quoted to the consumer whenever credit terms are granted.
As I understand it, in pay-day loans there are two elements to charges. One is the core charge or interest charges. The other comprises any other mandatory charges, such as transfer or set-up fees, that may be exacted by the creditor. It is vital to my mind that the cost of credit described includes all unavoidable charges. Those which are not discretionary but mandatory should all be disclosed, and the disclosure should be in cash terms because even the most disadvantaged debtor—even someone with less financial knowledge than others—understands cash terms. The pound sign means something, whereas the percentage sign does not. I know that the noble Baroness, Lady Oppenheim-Barnes, wishes to refer to this matter in a moment.
As I indicated, I shall speak also to Amendment 197ZA in this group. To my mind, this is almost a separate topic because it deals with plans involving arrangements managed by a debt management company that is negotiating with creditors to reschedule a debtor’s repayment of debts. As we know, there are some charitable schemes; for example, that run by the Consumer Credit Counselling Service, whose chairman, my noble friend Lord Stevenson, sits on the Opposition Front Bench. It does a tremendous amount of work and does not exact fees from the debtor, as it is a charitable organisation. Other schemes are financed sometimes by contributions from creditors but, as we have already heard in earlier debates, there are unfortunately huge numbers of debtors owing huge amounts of debt. There is a great need for them to have properly approved and fair debt management schemes and plans to enable them to start afresh, having had their debts rescheduled and paid off.
There is a practical need for commercially operated schemes to work as well as the Consumer Credit Counselling Service and other schemes to which I have referred do. The need for commercially operated schemes to exist requires that the debtor pays fees. Unfortunately, as has also come out in today’s discussions, the OFT has found, in a fairly recent review of 2010, that there have been a great many abuses in the system, including misleading advertising and excessive fees exacted by debt management companies. The OFT has used formal powers to revoke the consumer credit licences of various debt management companies but, to my mind, debt management companies that are run properly and fairly on a commercial basis are needed for debtors and in the consumers’ interests.
The nub of my amendment is that in 2007, under the previous Government, the Tribunals, Courts and Enforcement Act provided for debt management plans to be put in place, as approved by the Lord Chancellor, while in 2009—again, before the change of government—Ministry of Justice lawyers said that any implementation of such powers to approve schemes would require the provision of some form of profit element for this to be effective. These Ministry of Justice lawyers, whose opinion I have seen, thought that the present wording of Section 124 of the 2007 Act was defective because it allowed debt management scheme operators to recover only costs actually incurred; for example, staff and accommodation costs—out-of-pocket expenses, as it were. The 2007 Act does not allow for any specific profit element to be charged, yet surely, as long as the profit element is reasonable and there is nothing unfair in it to the debtor, it ought to be allowed. My amendment allows such a profit element, provided it satisfies the Lord Chancellor before he approves any debt management plan.
This is a practical and useful amendment to bring the relevant provision into line with what had been intended, as I understand it. Fair debt management plans are needed for the large numbers that, sadly, exist of multiple debtors. Given the level of need for such plans, it is not only not-for-profit organisations that should be allowed to offer debt management solutions. As Ministry of Justice lawyers have said, the problem of the defective drafting of the current law in Section 124 of the 2007 Act can be addressed only by way of an amendment to Section 124 to provide for a profit element. That is what my amendment seeks to do and I trust it will find acceptance with the present Government.
Baroness Oppenheim-Barnes
My Lords, I was very grateful to the noble Lord, Lord Borrie, for tabling this amendment. It is something that I have been passionately concerned about for many years. I am possibly the most innumerate person in your Lordships’ House. I say so on an occasion when we had speaking in our earlier debate the noble Lord, Lord May, who is one of the premier mathematicians in the world. I am very glad that he is not here at this moment.
I have been desperately concerned about the presentation of the costs of credit for any consumer at any level. When the first regulations came out, following the two Consumer Credit Acts, they were a long time coming and were very detailed. They were drafted by someone in a little office at the top of the Department of Trade and Industry and they came down very slowly. Just as I was leaving, down came the regulations for AER and APR. I took one look and said, “No—not possible. I cannot make head nor tail of this.” They were too polite to say to me, “Well, most people could, and you can’t”, so I put it to the test. This afternoon, before coming into the Chamber, I asked 20 different Members of your Lordships’ House if they knew what AER or APR stood for. None of them knew—and one of them, who is not here at present, actually moved an amendment.
When this amendment was coming up I started to look a little more deeply at what had happened since those regulations were passed, after my time there. I came across the information that we have in fact had two draft directives from the EU, which are very precise. The 2008 directive, in order to inform consumers, gives us a basic equation in numerical form. It has a big E, a big C, a little k, a bracket, 1 plus a cross, minus a little 4, equals another big E, with an M over it, and a little l equals 1, then a D1, a bracket, another 1 plus a cross, squared. That is the formula in the EU directive of 2008. There is an explanation. It says it is,
“where … X is the APR … m is the number of the last drawdown, k is the number of a drawdown”—
thus LSXM—
“Ck is the amount of drawdown k”—
I will not go on. There are at least four more lines like that.
We have been observing that particular formula in this country since that directive but there was a new directive in 2011, which is presumed to help with what has been decided, since 2008, was too difficult a problem for most consumers. It says:
“The experience gathered by Member States with the implementation of”,
that directive,
“has shown that the assumptions set out in … that Directive do not suffice”,
et cetera. They have watered it down somewhat but it is not going to come into force until January 2013, so at the moment we still have the formula that I quoted to your Lordships.
I really think that my noble friend Lord Sassoon will welcome the opportunity to accept this amendment. It is so simple and prescriptive. It is not general, like any of the other amendments. When you think of all the difficulties that people have with credit these days, even if they are more numerate than I am, then to give them the information in simple figures about how much it will cost them if they pay on time—that must always be made clear—and how much if they do not must be very attractive to any Government, or to anybody concerned with the problems facing consumers in this area today. It is simple and it is cheap. I beg my noble friend to give me some encouragement.
Lord Flight
My Lords, the noble Lord, Lord Borrie, pointed out that this chapter addresses the transfer of the regulation of consumer and small business finance from the Office of Fair Trading to the new FCA. My two amendments, Amendments 118D and 147K, address a specific point: the suggestion that the regulation of claims management companies might be transferred from the Ministry of Justice to the FCA, on the grounds that this area has attracted quite a lot of complaint.
I also wanted to make the point that, as the Minister will be aware, the industry is slightly concerned that the re-drafting of all the arrangements that presently operate through the CCA regime to come under financial regulation and to end up in an FCA rulebook is a pretty monumental task. It is questionable whether that can all be accomplished with due care to become operative by April 2014. Therefore, might it be wise and/or possible for at least some of the CCA activities to be able to continue beyond April 2014, allowing sufficient time for consultation and for rewriting everything into what is required as a new format? Apart from anything else, there is some £50 billion worth of lending finance to very small businesses, which are substantially one-man operations and represent a few million businesses. It is really quite an important commercial area, and it is important that things do not get through by mistake in the re-drafting that could cause problems.
Lord Stevenson of Balmacara
My Lords, my noble friend Lord Borrie kindly drew the Committee’s attention to my position as chair of the Consumer Credit Counselling Service and I declare my interest again. I would also like to thank him very much for his kind remarks about the work of the charity, which does so much for people who have unmanageable debt.
This is a wide-ranging group of amendments in the sense of issues that have been raised. I will focus on two areas: the claims management area and the debt management space. Claims management companies have increased in number and have come to the attention of the public, and the industries in which they operate, much more in recent years. You have only to turn on the TV or listen to the radio to be bombarded with advertisements from claims management companies. E-mail traffic is also increasing.
There are apparently more than 3,200 authorised firms operating today. Of course, many in the claims management industry act responsibly. The part of the industry that does not adhere to best practice breaches guidelines on cold calling, text messaging and e-mails. Some will take up-front fees and/or fail to disclose properly the amount of compensation that a consumer will pay if their claim is successful. Through high-pressure sales they will sign up people who have no possibility of making a successful claim on the basis that they can get you thousands of pounds in compensation.
That sort of activity is prohibited under existing regulation, but unless it is effectively policed it comes to nothing. However, large numbers of those in the industry do not adhere to best practice and a few could even be described as rogues. In a recent debate on this subject in your Lordships’ House, the noble Lord, Lord Kennedy, said that the Government need to take a long, hard look at the industry, look at existing provisions and make a number of changes to beef-up existing regulation and ensure that existing provisions are used effectively in an industry that needs effective policing.
In those circumstances, it is also fair to pick up a point made by the noble Lord, Lord Flight, that the current arrangements with the Ministry of Justice acting as both the sponsoring department and the regulator appear to have broken down. It would be good if the Minister could report on what progress has been made on this list of helpful suggestions.
My noble friend Lord Borrie drew attention to the debt management sector and in particular to the 2007 Act. There are nothing like as many private sector debt management firms in the UK, as much of the debt advice is undertaken by charitable bodies such as Citizens Advice and my own body the CCCS, which offer a free service of high quality. Collectively, commercial firms administer some 200,000 debt management plans and about 50,000 IVAs. The trade body, DEMSA, estimates that this is some 40% of all the debt management plans currently in operation.
DEMSA states that its goal is to promote best practice and protect the interests of clients and the lenders to which they owe money, but in its review of the sector in 2010 already referred to, the OFT found instances of non-compliance among DEMSA member firms, albeit DEMSA members received a clean bill of health compared to the rest of the sector, and action was taken on a number of firms.
On the publication of its report on debt management in March 2012, the chair of the BIS Select Committee, Adrian Bailey MP, said:
“During these difficult economic times, increasing numbers of people up and down the country—not least some of the most vulnerable members of our society—are relying on the provision of consumer debt management services and payday loans to make ends meet. And yet this industry remains opaque and poorly regulated. Despite a Government consultation that ended almost a year ago little has been done to remedy the situation. The Government must take swift and decisive action to prevent firms from abusing the needs of such a vulnerable customer base”.
The committee’s main recommendations are worth repeating. The Government must work to phase out up-front fees: the provision of guidance on this point by the OFT is inadequate. The Government should introduce the necessary regulations to ensure companies publish the cost of their debt advice and their outcomes if an agreement cannot be reached during discussions with the industry. The Government should establish effective auditing of debt management companies’ client accounts. The report concludes that greater transparency in the commercial debt advice market would benefit consumers hugely and that voluntary codes of practice are highly unlikely to achieve this aim. The Government must be prepared to regulate if consumers are to receive the protection and the level of information they require.
It seems clear from all this that we have reached the stage in these two sectors whereby strong and effective regulation is required. We also think it is time that the Government should take advantage of the opportunity of the Financial Services Bill to make the new regulatory bodies responsible for this currently unregulated part of the market which affects so many vulnerable customers.
Lord Sassoon
My Lords, this group contains an interesting mix of loosely related amendments, if they are related at all. I shall respond first to the amendments concerning claims management firms.
Amendments 118D and 147K seek to bring claims management companies under the regulation of the FCA. Clearly the regulation of claims management companies must be effective, but there are two reasons why a transfer of CMC regulation to the FCA is not the right course of action. First, the best way to improve regulation of CMCs is to make changes to the current regime, rather than by transferring responsibility for regulation to another body. My noble friend has already questioned whether the transfer of consumer credit responsibilities by April 2014 is achievable. I should say, in parenthesis, that I believe it is achievable, although I appreciate that there is a lot to do. There will be a consultation early in 2013 about how it will operate. However, we are talking here about making another transfer of responsibilities, which I do not believe is necessary or the best way to achieve the objective.
The Ministry of Justice, as we have heard, is the body responsible for regulating the activities of businesses providing claims management services. It carried out a review last year of claims management regulation which concluded that fundamental reform was not needed but identified a number of areas where improvements could be made. A shift in responsibilities now would not address the underlying problems in the conduct of claims management companies and would detract from the concrete steps that the Government are taking to address those problems.
Lord McFall of Alcluith
The Minister said that the Ministry of Justice undertook a review that concluded that fundamental reform was not needed. As I mentioned earlier, two months ago I chaired a meeting between the banks and consumer groups on PPI, where £8 billion is at stake. Both groups were very concerned about some rogue claims management companies and asked for an urgent meeting with the Ministry of Justice. Indeed, I hope that they will get a meeting with Ken Clarke as a result. Therefore, on the ground the situation is much different from the one the Minister describes, with the Ministry of Justice saying that fundamental reform is not needed.
Lord Sassoon
My Lords, I have said, however, that improvements are needed, as was identified in the review. If any impetus is needed in setting up the meeting which the noble Lord seeks, I shall relay the message to my colleagues in the Ministry of Justice to make sure that it happens if it is not already fixed. Yes, there are problems to fix. They include—very much to the point of the noble Lord, Lord McFall—the establishment by the claims management regulator of a specialist team to handle CMCs that pursue claims for mis-sold PPI. Not for the first time, the noble Lord is one step ahead of me, but that is one of the specific items that need to be addressed to improve the situation.
Since last November, the team has conducted more than 60 audits of claims management companies to identify any evidence of lack of compliance with the rules. That team is working with the Financial Ombudsman Service, the FSA and the Financial Services Compensation Scheme, as well as with major banks, to help identify non-compliant businesses, gather evidence and help improve the claims process for consumers. It is recognised that there is a problem, and the authorities are working in a joined-up way to deal with it. More broadly, the Government have reviewed the conduct rules which all CMCs must comply with as a condition of their licence. The Ministry of Justice will shortly launch a consultation on amending the conduct rules to tighten up on certain practices and provide further clarity. I firmly believe that improvement is needed and that the improvements to regulation of CMCs currently being proposed by the Ministry of Justice are the right course of action. Transferring responsibility for regulation to another body would not be.
Secondly, the FCA will be a conduct-of-business regulator for financial services, but claims management companies do not provide a financial service. It is true that many of those companies are active in the financial services sphere, particularly in relation to matters of PPI, but their business is not limited to claims in relation to financial services. It is therefore not clear why it would be logical for the FCA to take on this responsibility.
I turn to Amendment 108, concerning the regulation of consumer credit. The amendment would require the FCA, in considering what degree of protection is appropriate for consumers, to have regard to,
“where credit is granted to a consumer, a clear statement, in cash terms, of the total cost of such credit”.
I am conscious that, with an amendment in the names of the noble Lord, Lord Borrie, and my noble friend Lady Oppenheim-Barnes, I am facing a formidable duo with vastly more experience in these matters than I have. The Government clearly recognise that there are difficulties with APR—which, for the avoidance of doubt, refers to the annual percentage rate—representing the cost of short-term loans such as pay-day loans, but let me explain to the Committee what we are doing.
My colleagues in the Department for Business, Innovation and Skills have been working with the short-term loan industry to ensure that borrowers receive clear information about the cost of a loan in cash terms per £100 in addition to its APR. The four main trade associations, which represent over 90% of the short-term loan industry, have agreed to update their codes of practice to reflect this and made other commitments to help consumers, and that will be done by 25 July. I believe that this is very significant progress. Having said that, I would argue that the APR serves a useful purpose in enabling consumers to compare the cost of different credit products, so that will remain in place in addition to the new cash cost number that will be given.
Lord Borrie
The people who will subscribe to the new code are those who are more likely to conform to the requirements of the Government, the ministry or whatever. It is the other companies, which may not subscribe to these requirements, that one is bound to be more worried about. Those are the ones that will not provide the cost of credit in cash terms.
Lord Sassoon
My Lords, I believe that a step that takes us from no agreement in this area to a situation where over 90% of the industry has agreed through the code of practice to reflect the cash cost, and for that agreement to be in effect from 25 July, is a huge step forward. Of course, because it is done via a code of practice and a voluntary agreement, BIS has been able to do it relatively quickly. I would suggest that having it 90% done, and done quickly—which one hopes will drive fringe players out of the market if they do not buy into the codes of practice—is the right way, and an energetic and effective way, for my colleagues to address the situation. We should wait and see how that operates, but I believe that it will be effective. It is a major advance and is compatible with the difficult constraints of the European directive.
Baroness Oppenheim-Barnes
Could the motive behind the European directive possibly be their desire not to see anything quoted in euros?
Lord Sassoon
I am not going to question the motives of the directive, except to note that in this area, as in others, we are not free agents.
I turn to Amendment 118E, which seeks to insert into the list of “regulated financial services”, referred to in the FCA’s objectives,
“debt management companies or debt adjustment services companies”.
There is no explicit reference to debt management or debt adjusting on the face of the Bill. However, I would like to reassure—I am grasping for whose name is attached to this amendment—the noble Lord, Lord Eatwell, but also the noble Lord, Lord Stevenson of Balmacara, that Clause 6 enables all consumer credit activities currently regulated by the Office of Fair Trading to be transferred to the FCA, including debt management. So I hope the noble Lord will accept my assurance that no further provision in this area is necessary, because it is indeed picked up by the definition of Clause 6.
I should turn next to Amendment 197ZA, before I address some government amendments in the group. It concerns the question of the statutory debt management scheme and is also in the name of the noble Lord, Lord Borrie. It would amend enabling powers in the Tribunals, Courts and Enforcement Act 2007 for a statutory debt management scheme, if implemented, to apply to commercial as well as not-for-profit organisations.
As I said, the Government are currently working to deliver non-legislative alternatives with the debt management industry, as we have with the fee-charging pay-day loan industry. We want to give sufficient time and focus to that work to develop a voluntary code and to take account of the wider changes to the regulation of the debt management sector enabled by the Bill, which will lead to more proactive and intrusive regulation for the sector, before we look to a statutory scheme. If the Government were to resort to a statutory scheme, that would be the appropriate point to revisit the provisions in the Tribunals, Courts and Enforcement Act 2007 to ensure that they meet the policy needs, rather than addressing it at this stage through the Bill before we have bottomed out the ability of a non-legislative solution to have effect.
I shall speak briefly to the government amendments in the group, Amendments 142 and 194 to 196. Noble Lords may be aware that the Government brought forward a number of amendments at Report in another place to support the transfer of consumer credit regulation from the OFT to the FCA. Among those amendments was provision enabling local weights and measures authorities—trading standards—to continue to provide services to the national consumer credit regulator and to take action against those who provide credit on an unregulated basis following the transfer to the FCA. The amendments complete the group by creating parallel provisions for the Department of Enterprise, Trade and Investment in Northern Ireland, which plays the same role in Northern Ireland as does trading standards in England and Wales.
With those various assurances abut this rather disparate group of amendments, I ask the noble Lord, Lord Borrie, to consider withdrawing his amendment.
Lord Borrie
Yes, of course I will withdraw my amendment, but I must express disappointment with the disinclination of the Minister to take the one further step that would enable a change to be 100%, rather than whatever percentage of good boys will conform to a code of practice.
Lord Bilimoria
My Lords, I accept that there is an element of contradiction in advocating, on the one hand, that we go carefully on transferring consumer credit but, on the other, that we transfer CMCs. I just make two points on consumer credit. I argued strongly for its transfer at the time of the FSMA; I am pleased to see it happening; I think that that is correct. CMCs are basically a financial service. They are lodging claims for people, whatever the cause. I hope that, in due course, it may be transferred to the FCA.
Lord Tunnicliffe
Lord Tunnicliffe
My Lords, Amendment 111A is in the names of my noble friends Lord Eatwell and Lady Hayter, and I shall also speak to Amendments 112, 115 and 116; I shall do so briefly.
Competition has an important role to play in the financial services industry. Indeed, as the party leader, my right honourable friend Ed Miliband, has been arguing since his conference speech in the autumn of 2011, if we are to rebuild our economy so that it works in the interests of the many and not the few, we need root and branch reform of our banks. Having greater competition and more players in the market is an important element of the process. Competition, along with choice, transparency, integrity and access, is an integral part of the market working well. On this side of the House we welcome, therefore, the inclusion of a competition objective in the remit of the Financial Conduct Authority.
However, we must continue to emphasise the question “What is competition for?”. It is for the consumer. In a sense, I am disappointed that the noble and learned Lord, Lord Fraser of Carmyllie, did not move his amendment. First, it would have been an opportunity for me to say just how much I disagreed with it. Secondly, it would have been an opportunity for the Minister to say how much he agreed with me. I hope, therefore, that he will emphasise the importance of this clause to the interests of the consumer. The competition objective in the Bill is built around the consumer, so I support the amendment in the name of my noble friend Lord McFall, which requires the FCA to have regard to the factors contained in new Section 1A.
I shall turn to Amendment 111A, and I am very pleased that the noble Lord, Lord Lucas, asked a probing amendment, proving that it is respectable to do so. This is but a probing amendment, in order to understand new Section 1E(1), which states that:
“The competition objective is: promoting effective competition in the interests of consumers in the markets”.
Perhaps it is trying to say “all financial markets”; if the Minister said that was what it meant, that would be great. Clearly it covers a great chunk of financial markets with new subsection (1)(a), “regulated financial services”. However, it needs to add new paragraph (b), because—and I did not know this, until I looked it up this morning—certain recognised investment exchanges are not, apparently, regulated financial markets, because they get an exemption under Section 285(2).
We have added “or market maker” because market makers seem to be taking in the role of investment exchange in some areas. There is a move-over. If those market makers are already covered by new paragraph (a) —“regulated financial services”—I would be content with that assurance. If they are not, I would be grateful if the Minister could sketch out what exemptions there are from this new paragraph. I beg to move.
Lord McFall of Alcluith
My Lords, I would like to address briefly a number of the points in Amendments 112, 115 and 116. It is just a simple change: rather than have “may have regard”, put “must have regard”—to, for example,
“the needs of different consumers who use or may use those services, including their need for information that enables them to make informed choices”.
It is this concept of informed choice that is very important. I well remember when we had the scandal of endowment mortgages; we looked at that issue in the other place. The consumers would be presented with two types of mortgages, one which the salesperson said had a small pile of cash at the end of the day, and the other a repayment mortgage. Believe it or not, the one which had a small pile of cash was cheaper than the repayment mortgage. It defied logic, but everybody piled into it, not least because the salespersons were getting 80% of the first year’s contributions from individuals. When we looked at this, the industry said, “This was way in the past”. It was depending on a high level of inflation for its returns. If inflation is 8% then you are going to get your cash pile, but if it is only 2% or 3% then you are in trouble. We are still living with the consequences of those endowment mortgages, with people making claims for them. That was not an informed choice, and it is why it is important to be more definitive in the Bill and insist that the FSA must look at that issue, as well as at,
“the ease with which consumers who obtain those services can change the person from whom they obtain them”.
Lord Sharkey
I support Amendment 112 in the name of the noble Lord, Lord McFall. As the Bill stands, the use of “may” instead of “must”, when listing matters to have regard to in considering the effectiveness of competition in the markets under discussion, seems to have two problems. The first is that it makes the competition objective less strong than the consumer protection objective, in which the FCA is given a list of things that it must have regard to. In the competition objective, the FCA is given a list of things that it may have regard to. Why is this? Why is the consumer protection objective definite about what the FCA must have regard to, while the competition objective is not? Surely it would be more sensible to have these objectives on an equal footing and in both cases supply the FCA with a list of things that it must have regard to.
The second problem is that the use of “may”, regarding what the FCA takes into account in considering the effectiveness of competition, seems to render the whole clause without much force or substantive meaning. Why list the factors that the FCA may have regard to if it actually does not have to do so? Either the factors listed are important to consider or they are not. If they are important, surely the FCA must consider them. If they are not important and can be disregarded by the FCA, as the Bill seems to provide, why are they there at all? I hope that the Minister may see the virtue of “must” and might agree to the noble Lord’s amendment.
Lord Sassoon
My Lords, I am infinitely flexible; it depends how long we go on this evening but I can see one or two amendments coming up on which I can be more accommodating than I will be on this one.
I shall start with perhaps the easiest part: the questions from the noble Lord, Lord Tunnicliffe, around Amendment 111A. I am delighted to see the noble Lord joining the fray. We have now had four players on the Front Bench from the Opposition; I wish that we had such depth of reserves on our side. However, I will battle on.
Amendment 111A seeks to bring the activities of market makers into the scope of the FCA’s competition objective. I reassure the noble Lord and the Committee that the activities of market makers are already very much covered by the objective. Put very simply, to operate as a market maker firms will have to obtain permission to deal in investments as principal, and that is a regulated activity. That means that such firms are performing a regulated activity or a regulated service, and noble Lords will see that new Section 1A(1)(e) clearly states that markets for regulated financial services fall within the scope of the FCA’s objective, so the FCA can indeed shine its regulatory light on market makers as on any other part of the sector. For completeness and to clarify, as far as recognised investment exchanges or RIEs are concerned, they can be exempt from the general prohibition under Section 285(2) of FiSMA, but even their activities are brought within the scope of the competition objective by virtue of subsection (1)(b) of new Section 1E in the Bill. I hope that that deals with that.
Turning to Amendment 112, competition can mean many things to many people. To indicate what the Government might want the FCA to look at in deciding how to advance its competition objective, subsection (2) of new Section 1E sets out a number of matters to which the FCA may have regard in assessing the effectiveness of competition in a given market. It is an indicative and, importantly, a non-exhaustive list. The FCA cannot dodge or duck out of its overall competition objective. Had we not put the non-exhaustive list of examples down there we might not be expressing the concern that we have. There would be the simple competition objective and that would be that.
Given the list, let me explain a bit more why there is danger in changing “may” to “must”. That would mean that the FCA would always have to consider all the issues set out in new subsection (2). The FCA should not necessarily have regard to all of that list when looking at particular competition questions. There could be unintended consequences.
If the FCA wishes to take action to promote switching, the consideration of barriers to entry will not be as important as the ease with which consumers can transition between providers and how that is affected by the structures of the market or behaviours of incumbents. To enable the FCA to generate the outcomes that we want under the competition objective it is important that the list is expressed in the terms that it is. This does not make the basic objective of the FCA weaker in this area. It just means that we need to give it a degree of discretion to be able to target the particular issues that they are looking at at any one time.
That addresses the amendments that are being spoken to and I hope that the noble Lord, Lord McFall of Alcluith, will consider not pressing his amendment.
Lord Tunnicliffe
My Lords, I am sorry that the Minister did not rise to my invitation to wax a little lyrical over his commitment to consumer interest, but at this late hour I do not now invite him to. I am sorry too that he was not able to see the attraction of “must”. I have laboured on such ventures and I know the ferocity with which one’s brief has said that one must never move from “may” to “must”. Many of us would have been more satisfied if the Minister had accepted “must”, and we will have to see whether my noble friend Lord McFall brings this back later for further consideration.
I thank the Minister for his straightforward assurances on Amendment 111A and I beg leave to withdraw.
Lord Sharkey
“( ) developments in the markets for unregulated financial services that are in the interests of consumers and businesses,( ) the desirability of establishing a new authorisation regime for direct financial platform providers to protect consumers and providers,”
Lord Sharkey
I shall speak also to Amendment 119. Both amendments are to do with financial innovation and particularly with peer-to-peer lending. They add to the factors the FCA may have regard to—or must have regard to, if the Government eventually accept Amendment 112—when considering the effectiveness of competition. The first amendment would require the FCA to have regard to developments in markets for unregulated financial services that are in the interests of consumers and businesses and to have regard to the desirability of establishing a new authorisation regime for direct financial platform providers to protect consumers and providers.
That means, essentially, that the FCA would have to look carefully at new, unregulated services and would have explicitly to weigh the merits of regulating peer-to-peer lending organisations. Peer-to-peer lending has already passed the $1 billion mark in the United States, where it is regulated, and it is growing very fast in the United Kingdom. Many commentators see peer-to-peer lending as a direct way of dealing with the banks’ failure to lend to individuals and to small businesses. Andy Haldane of the Bank of England has even suggested that these non-traditional lenders could eventually replace banks.
The Government acknowledge the potential of this new lending model and have made £100 million of seed money available. However, this new model of peer-to-peer lending is not covered by existing financial services legislation and that leaves it exposed to very serious dangers. This new industry, unregulated, is extremely vulnerable to rogue players entering the market. All it takes is one rogue player, one big scandal and a lot of losses for ordinary lenders for the model to be discredited and to fail. That would be a very undesirable outcome. We desperately need new and innovative financial services to provide real competition for existing banks and to fund those areas of commercial life, particularly SMEs and start-ups, that the banks are so obviously failing to fund. It is not as though innovative, real-world consumer-orientated financial services are in good supply. In fact, it could be argued that peer-to-peer lending and crowd funding are the only significant financial innovations that are around at the moment and likely to benefit the real economy.
At Second Reading, the Minister said in response to suggestions that peer-to-peer lending be taken into regulation:
“The Government do not think that statutory regulation is appropriate at this point. The sector is very small and such regulation would be a barrier to new entrants and innovation”.—[Official Report, 11/6/12; col. 1261.]
The industry does not agree with that. The leaders of the industry are acutely alive to the danger to their business model presented by a rogue operator. They would welcome regulatory protection for consumers and providers. This protection need not be onerous. Indeed, any regulatory regime should be judged for suitability not only on the protections it provides but on how little of a barrier to entry and innovation by proper operators it offers. In fact, this is one of those occasions when the market, particularly for crowd funding into SMEs, requires regulation in order to expand. We need IFAs to distribute these products if we are to enlarge the market, and IFAs absolutely require regulation before they will consider doing that. We also need regulation that will allow these products to be located inside tax-efficient wrappers.
This is one of those asymmetrical cases where no regulation risks the complete destruction of the sector and some regulation carries only a small risk of discouragement, if any, and the strong probability of encouraging wider distribution and uptake. At Second Reading, the Minister also said,
“this is a matter that we will keep under review”.—[Official Report, 11/6/12; col. 1261.]
That is precisely what these amendments would require the FCA to do. It is important that we have that commitment in the Bill and I hope that the Minister will recognise that the balance of risk and reward here argues in favour of these amendments.
Before I close, I would like to ask the Minister for clarification. It may be that the Bill already brings peer-to-peer lending under regulation. Clause 6(3) amends paragraph 23 of Schedule 2 to FSMA 2000. This paragraph brought into the scope of regulation rights under any contract under which one person provides credit to another if the obligation of the borrower to repay is secured on land. The present Bill amends paragraph 23 by removing any reference to secured on land and substituting the phrase,
“Rights under any contract under which one person provides another with credit”.
Does this change in practice bring peer-to-peer lending under regulation, as it might appear? If it does not, as is probable, despite the apparent clarity of language, then I hope the Minister can give sympathetic consideration to the amendments. I beg to move.
Lord Flight
My Lords, I believe that the FSA has been looking in some detail at how to regulate platforms, and has been doing so for quite a while because it is difficult territory. It is either about to or just has come forward with its proposals.
Lord Lucas
My Lords, I very much support what the noble Lord, Lord Sharkey, has said in this area. My Amendment 117B in this group picks up a couple of aspects of it. The first aspect is,
“the role of regulation in enabling innovative business models to compete with established businesses”.
By regulating this area so heavily we have created a structure where it can be extremely difficult for people to be innovative. The noble Lord, Lord Sharkey, drew an obvious example of that when he talked about the regulations that independent financial advisers have to work under. If IFAs are allowed to talk about ordinary money products but not allowed to talk about peer-to-peer lending products then, by not regulating them and not bringing them under the umbrella of regulation, we are making it difficult for these new entrants to compete. We are creating a barrier to innovation.
This particular innovation is not just fluff or amusement. It promises, if it gets going in a substantial way, to alleviate some of the pressure on the national financial system: you get away from borrowing short and lending long, and away from the £85,000 guarantee, and you put those risks back on the lender. It is also a structure that may prove to be extremely useful in local lending in areas where the lenders can identify that the borrowers are part, in some way or another, of the same community and can, in that way, develop substitutions for pay-day lending and other more expensive and onerous arrangements. So there are real opportunities here to improve the financial system as a whole. The FCA really ought to have regard to the way in which regulation produces barriers for entry in the way that the noble Lord, Lord Sharkey, has described.
But it is not just without government that these barriers appear; they are also within government. One of the principal barriers to the expansion of peer-to-peer lending is the tax arrangements, that you cannot offset your losses on bad debts against the interest you earn on the good ones. Banks can but peer-to-peer lenders cannot. Among the reasons why the Treasury, which is refusing to regulate, will not extend tax concessions is that these businesses are not regulated. So the Treasury itself is causing the problem that is crippling the development of this business.
It is all very well to run a business which is restricted to borrowers of the highest quality, which is effectively what it is at the moment. All the peer-to-peer lenders that I am aware of have pretty low bad debt ratios. That is because they do not lend to risky borrowers, because there is no offset for the losses. The net return to their investors if they did start making loans with, say, an average default rate of 5% would start to become extremely low because there would be no relief for the 5% of losses and they would be paying full income tax on their 12% of income. It starts to make very little sense, so none of the peer-to-peer lenders have gone into that territory. But lending to areas of the community where there is a risk of default, such as young businesses, is exactly the sort of area where this Government are trying to push the banks with so little success, and where businesses such as the Funding Circle would love to go if the Government would make it possible.
As I say, the reasons for not going there are entirely due to the Treasury, and the reasons why the Treasury cannot grant the concessions are also down to the Treasury. It really should be open to the FCA to try to break that circle and persuade the Treasury to face one direction at a time and to promote something which is in everyone’s interests, particularly the Treasury’s. Nor would I just confine our thinking to peer-to-peer lending, which is what is there at the moment. Other peer-to-peer ideas are around. Peer-to-peer investment in start-ups already qualifies. There is an FSA-registered business called Seedrs, in which I take an interest. There are proposals for peer-to-peer investment management. That goes back to an earlier amendment in terms of trying to reduce the return that stays in the pockets of investment managers by disintermediating that business.
There are certainly proposals for doing this in the field of annuities. The opportunity is obvious: old people want income and young people want capital. If you can produce a mechanism where the two can exchange that, you are looking at something where you can cut out a very large amount of cost in the middle, where you could produce for people who are trying to settle their pension fund annuity at the moment a decent rate on which to do it, and where you could provide for young people who need capital a decent rate at which to have it.
The difficulty with doing that is the forest of regulation we have put in place to tie down the existing old-style businesses in that area. The opportunity for and the benefits of innovation in that area seem obvious. So we must have an FCA which understands not just not-regulating but also how regulating constructively will enable businesses to compete where, if they are left unregulated, they may not even be able to exist.
Lord McFall of Alcluith
My Lords, I should like to add my support. My name is not on the amendment. A number of months ago I spoke to Giles Andrew, of Zopa, about peer-to-peer lending, and I was very taken by what he said. I think back to the MPC and the American whose name escapes me but who is just departing from the MPC to take up a post at the Peterson Institute in America and his comments about a spare tyre. We lack a spare tyre in the UK in terms of our banking. Whether it is a Labour Government or this Government, none of us has solved the problem of getting lending out. We have a lot to learn in that area. Our top banks are responsible for 450% to 500% of our GDP. We will not make progress on that. This initiative should be looked at. Nothing fundamental will change tonight but it is good that it is on the agenda and I am delighted to be associated with it.
Baroness Kramer
My Lords, I am in full agreement with the three previous speakers, who have covered virtually all the territory—which at this hour I will not repeat. However, I should like to add one point. The only argument that I have received from Ministers outlining why this area should not be regulated is that regulation is potentially too heavy-handed and will prevent the sort of growth of a new, young industry. I think that in this House we have rather more faith in the regulator, which has begun to move forward and understand that appropriate and proportionate regulation is a standard that can be achieved. I say that in order to pick up the entity to which the noble Lord, Lord Lucas, referred. Unlike the peer-to-peer lenders which fall outside the current regulatory framework, Seedrs had to be regulated because it is marketing equity investments. It falls into the regulated arena and has had to seek authorisation.
I quote from the blog of the chief executive:
“The authorisation process was long and sometimes painful, but we feel that it was an absolute necessity in order to satisfy both the letter and the spirit of the law. The FSA scrutinised every aspect of our business model and operations, and after over a year of iterative questions and answers, they gave us the go-ahead.
We are proud to be the first platform of our kind to receive FSA authorisation—or, to our knowledge, approval by a major financial regulator anywhere in the world. But more importantly, we are convinced that it was the right thing to do to go down this route, and we now look forward to launching the Seedrs platform as a fully authorised business”.
It is using the authorisation as a marketing mechanism. Having talked to the regulator and then followed through with Seedrs publications, it is clear that both sides have been satisfied with this process. Rather than being too onerous, there is a sense that regulation has been appropriate and that the authorisation has matched the circumstances. If we can achieve that with the equity platform, surely we can achieve that with the lending platform.
The Lord Bishop of Durham
My Lords, my name is on this amendment and the noble Lords, Lord Lucas and Lord Sharkey, have said virtually everything I want to say. I will simply add that in the areas where the access to finance is most wanting, the creation of safe space—through regulation of the kind that the noble Lords described—is what will enable competition to start to break the stranglehold of some of our larger lenders, who neither lend in these areas themselves nor are willing to make space for others to lend in them. That is a fundamental reason why there is still a shortage of finance.
The Bank of England’s north-east agent in her report, which was published this morning, talked about inadequate supplies of finance to the SME sector in the north-east of England despite the valiant and determined efforts of the Government, through guarantee schemes, to make that possible—and those schemes are not providing finance at anything under 10%. The banks are simply layering charge upon charge upon charge. We need regulation to permit competition. It will not stop competition. I hope the Minister will see the advantage of this as it has been so eloquently put by previous speakers.
Lord Tunnicliffe
My Lords, these Benches do not have a particular view on Amendment 114. If the noble Lord, Lord Sharkey, is to press this further at a later stage in light of the response from the Minister, we will have to think through whether we will support it. It clearly has consensus support in the Chamber tonight so we will look at it very carefully. In his response, can the Minister give a view on how wide or narrow he sees his amendments, particularly the extent to which they might have a general utility in, for want of a better term, future-proofing the legislation?
Turning to Amendment 117B, we all want to support innovation. Once again we do not have a view on this amendment, but if it is pressed at a further stage, what we always have to look at with innovation and competition is proportionality. Yes, innovation creates competition, new ideas and opportunities, but it may put the customer at risk. Proportionality has to be there to balance new opportunities with proper protection.
Lord Sassoon
My Lords, in addressing Amendments 114, 119 and 117B, the Committee has drawn attention to some very topical and important issues. I cannot now remember why Adam Posen of the MPC came in; I think it was Adam Posen who the noble Lord, Lord McFall of Alcluith, referred to. This is an area that is rightly being widely discussed. The Government agree that innovative finance models such as peer-to-peer lending are important. Some £100 million of the £1.2 billion that will be invested through the Business Finance Partnership will be invested through other non-traditional lending channels, to reach smaller businesses such as peer-to-peer platforms, so the Government are putting their money in this space.
We agree that if these types of operations are to be regulated, the regulatory approach to be applied should be proportionate. However, the Government do not believe that the case for regulation has yet been made. As I said when I responded at Second Reading, this is a new and growing sector and we do not want to inhibit its growth. Nor do we want to put up barriers to new entry by protecting the incumbents. Furthermore, we would expect the costs of regulation to be passed on to consumers.
I reassure noble Lords that the Treasury is alive to the needs of the sector. My colleague the Financial Secretary has met some key players in this emerging market. While the Government do not think that statutory regulation is appropriate at this point, we will keep this under review. I say advisedly that the Treasury will keep it under review because the decision is for the Treasury and not for the FCA when it comes into operation.
I am happy to confirm to the Committee—this is important in relation to some of my noble friend’s points—that the changes being made as part of the Bill under Clause 6 would make it legally possible to bring direct platforms into scope. I stress again that we have made no decision to regulate and do not believe that we should. However, unlike the position under FiSMA, we now have an enabling provision in new Section 1J whereby we can amend the objectives to bring peer-to-peer platforms, for example, into the scope of regulation. My noble friend is right to draw attention to Clause 6 as an enabling clause.
I turn to Amendment 117B. Where innovative finance models are regulated, the FCA will of course take a proportionate approach, as I made clear when the Committee discussed social investment last week. Where they are not regulated, there is no role for the FCA, and there can also be no role for the FCA to facilitate the work of other government departments. I regret to say to my noble friend that the decisions about tax treatment, for example, will remain a policy matter for the Chancellor, as will the decision about the scope of regulation in this area. Of course, the Chancellor keeps all tax policy matters under review in the context of his Budget.
It is perhaps worth saying that there has never been a generalised income tax relief for losses on investments, which is part of what is being discussed in this area. HMRC has always sought to classify dealings in financial products by individuals as investment rather than trade, and a targeted income tax relief specifically for loans made through p-to-p platforms would be open to particular risk of avoidance, would encourage other, similar investments to request similar tax relief and might prove challengeable under EU state aid rules. Therefore, I do not want to get my noble friend’s hopes up in this area, although he was of course right to draw our attention to the issue.
Finally, I cannot support Amendment 119 because only if and when the Government decide that direct finance platforms are to be regulated will we insert relevant definitions into FiSMA. As I said, the provision is there in new Section 1J to update the definitions. I hope I have provided my noble friend with at least some assurance that the Bill takes forward the legal framework so that if a decision is made to bring p-to-p platforms into the scope of regulation, it could be achieved. Therefore, I ask him to withdraw his amendment.
Lord Lucas
My Lords, is my noble friend agreeing with me that the principal reason why there is no ability to offset tax for peer-to-peer lending activities is that they are not regulated and therefore there is scope for abuse?
Lord Sassoon
No, my Lords, I am not saying that. There are plenty of different tax treatments for all sorts of regulated and unregulated activities. I see the issues as separate. However, I have indicated a couple of areas in which changing the tax treatment would be difficult and would run counter to some of the broader accepted principles by which we run the tax system. But I would not link the two things explicitly together.
Lord Sharkey
There was a question in the debate about the scope of my suggestion. The amendments were drafted deliberately widely so that they create a “may” or a “must” for the FCA when it considers competition so that it looks at new developments in the market that may be in the interest of consumers.
I have been encouraged by a lot of the debate. There is an almost universal consensus that regulation might be important and might be a very good thing. I think I am perhaps a little encouraged by what the Minister has said, but I will read Hansard carefully tomorrow to check that I am still encouraged. There is one issue here that needs stressing, which is the matter of urgency. It takes only one rogue operator to go bang in a very serious and public way to sink this whole area. The Government should perhaps be a little more alive to that particular problem and the risk of that happening. Having said that, and looking at the clock, I beg leave to withdraw.