National Citizen Service Bill [HL]

Debate between Lord Ashton of Hyde and Lord Hodgson of Astley Abbotts

Committee: 2nd sitting (Hansard): House of Lords
Tuesday 22nd November 2016 Grand Committee

[Lord Ashton of Hyde]

I will certainly consider what the noble Baroness has said and will write to her if there is anything more. I think this goes back to what the noble Baroness said at the beginning of the previous day in Committee about the uniqueness of the NCS Trust. The NCS Trust is unique and therefore a direct comparison, especially with the charitable sector, which has been referred to a lot, is not necessarily appropriate. This is not a charity. I take the point that it uses a lot of taxpayers’ money and it must be held accountable but I do not think there is a direct comparison with it as a commissioner of work from the voluntary sector. It is not part of the voluntary sector itself. That is off the top of my head, but of course I will go back and check with my officials that I have not said something awful.

[Lord Hodgson of Astley Abbotts]

The Minister gave a very thorough and lengthy reply to all these amendments. I am seeking clarification. Is he saying that the Government believe that an internal letter written by the Government to the NCS Trust and a no doubt very worthy investigative body at DCMS answers all the points that have been made in this group of amendments, that the Government do not intend to make any movement towards any of the points that have been made this afternoon, that in the Government’s view the situation as presently described provides a perfectly adequate balance and a perfectly adequate way of ensuring that small groups of charities are not squeezed out, and that we are going to depend on an entirely internal process with once a year an overview at the very high level from the National Audit Office? Is that where we have arrived?

[Lord Ashton of Hyde]

I do not think that is exactly what I said in the course of my very lengthy remarks, but we are in the middle of two different views here, possibly represented by my noble friends Lady Finn, Lord Maude and Lord O’Shaughnessy on one side and practically all other noble Lords on the other. I may be miscategorising that. We think there should be value for money and accountability. That is part of the point of the Bill and why the National Audit Office will come in, why parliamentary committees can hold the NCS to account and why we have asked it to report in these seven categories. They are not just numeric; they include more qualitative things such as the quality of the programmes provided or arranged by the NCS Trust.

On my noble friend’s point about where we leave it, as I said in my remarks, we think this is a good balance. I said that we would write to the NCS Trust because we expect it to report on relevant provisions, but we do not want to mandate it in the Bill with a host of extra reporting requirements.

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[Lord Ashton of Hyde]

My Lords, I am grateful to the noble Lord for his amendment. He reminds us all of the value of heritage railways to this country and how important their upkeep is. I agree that many heritage railways are reliant on volunteers for their maintenance and operation. I also agree that volunteering for a heritage railway can provide young people with many of the skills that the NCS wishes to instil.

On the noble Lord’s concerns about the existing law, I agree that there should be no barriers to young people volunteering their time to support heritage railways. NCS participants work with the local provider delivering the programme to choose a local cause, or charity, to work with during the social action phase of the NCS. Sometimes the provider will invite local charities to present to the young people; sometimes the young people themselves have a clear idea about what they want to dedicate their efforts towards. We agree that it would be wonderful if a group of young people were to choose a local heritage railway as the focus of their efforts—either to fundraise for it or to spend time on site.

I understand the noble Lord’s reasons for tabling this amendment—to seek to amend the law in this area. While it may not be appropriate to do this in this Bill, which does not identify particular areas in which the trust should or should not intervene, I commit to take away the points raised today and to engage with the noble Lord to explore the issue further. There are other things that we need to look at, such as what we mean by “young people” and making sure that it is consistent across the Bill. I hope that the noble Lord accepts my points on this and my commitment to look at the matter further, and feels able to withdraw it for the time being.

[Lord Hodgson of Astley Abbotts]

I had not cottoned on to this issue before, but I have been listening to this debate. There is, of course, the Canal & River Trust. I am not sure whether a canal would fall within the requirements of the 1920 Act as mentioned by the noble Lord, Lord Faulkner.

[Lord Hodgson of Astley Abbotts]

That is an important area, where there is a lot of work going on. It is an important charity and it gathers together a lot of volunteers. It is working very hard with regional groups—so if this conversation goes on, could its requirements also be built into the discussion that the Minister is having with the noble Lord, Lord Faulkner?

[Lord Ashton of Hyde]

The noble Lord makes a good point which also illustrates why it takes time to go through all the ramifications; for example, this would not be just canals. I am sure there are many other organisations which might fall foul of the Act that the noble Lord talks about. That is something to consider, and it may therefore be why it is not possible in the time to add it to this Bill, but I will take that on board and I accept the point that it could apply to more than just railways.

National Citizen Service Bill [HL]

Debate between Lord Ashton of Hyde and Lord Hodgson of Astley Abbotts

Committee: 1st sitting (Hansard): House of Lords
Wednesday 16th November 2016 Grand Committee

[Lord Ashton of Hyde]

I am grateful to the noble Lord. As a general point, I agree with him entirely that we want to find a way through all the issues being raised in debate. The point of today is, in a way, to raise these issues, and I certainly commit to us trying, over the next two weeks until Report, to find our way through everything so that we can have a very easy Report stage. We will wait and see; we are only on the first group at the moment, so I will move on.

I turn to the subject of non-departmental public bodies and Amendments 14 and 15 from the noble Lord, Lord Blunkett. The body will be incorporated by royal charter and there is nothing in the Bill to say that it will be incorporated as an NDPB, which is not a legal status but a means of classification used by the Cabinet Office. The Cabinet Office has chosen those particular words to describe a body with certain characteristics, but it may use different words in future. None of this is established in legislation, and there seems little need to define a unique category in the Bill only to say that the trust is not in it. However, I acknowledge that the noble Lord, Lord Blunkett, and my noble friend Lord Maude have had rather more experience in government than I, so of course commit to thinking about this before we come back on Report.

The noble Lord, Lord Stevenson, mentioned the accounting officer. I can confirm to him that, in practice, the Government will require the trust to have an accounting officer, as set out in the government guidelines, Managing Public Money. The chief executive will be the accounting officer, as the noble Lord suggested, and will be the person to appear before the Public Accounts Committee. I am not sure about the Permanent Secretary in this arrangement, but I will check and come back to him.

The noble Lord is right that the Bill does not explicitly mention an accounting officer, but we are prepared to think about how that could be clarified. In doing so, we will have to take on my noble friend Lord Maude’s point about how not having an accounting officer is crucial to making the organisation acceptable. I commit to thinking about that and coming back. In practice, there will be an accounting officer: the chief executive.

On the noble Lord’s second amendment in the group, in the case of serious operational or financial issues with the trust’s provider network or staff, the accounting officer would normally be the individual responsible for informing the Government. However, we have left this open in the Bill in case the accounting officer was absent at a precise moment and needed to delegate this function to another officer. If this flexibility were not available, the trust might risk delaying its notification of the Government. As provided for in the Bill, the trust—that is, the members of the board—has that responsibility.

Finally in this group, your Lordships will be relieved to hear, I thank my noble friend Lord Hodgson for tabling his amendment, as we talk again about the functions of the trust and its governance. We entirely agree with the point that the NCS Trust must not be encumbered by excessive regulation. The royal charter and the Bill have been drafted to ensure operational autonomy for the trust, and we must be sure that its governance arrangements complement this intention.

The amendment aims to prevent a cumbersome process for amending the royal charter and clarifies the role of—or inserts a role for—the Charity Commission. However, the NCS Trust, as a royal charter body, will be a public body. This is an essential point. As it is not a charity, it will not be subject to regulation by the Charity Commission at all, and I suggest that the Charity Commission will have no desire to get involved. The charter contains provision for how it may be amended, without any role for the Charity Commission. I hope that my noble friend will be reassured that the existing amendment process is simpler than he fears.

The amendment would also introduce a process for amending by-laws, again with the good intention of streamlining the process. In fact, we have no intention of introducing an extra set of regulations for the body in the form of by-laws. The royal charter gives the trust a broad-ranging power to do anything calculated to facilitate, or incidental or conducive to, the carrying out of any of its functions. It is also expressly given full autonomy over its own procedures. This leaves it with more freedom than if it had further regulation in the form of by-laws.

I know that my noble friend has come across examples of charities that have experienced the cumbersome side of royal charter regulation, but in this case, the body in question is not subject to charity regulation and will be regulated only by the charter and the contents of the Bill. I hope that I have provided sufficient clarification on this point so that all noble Lords will feel able not to press their amendments.

[Lord Hodgson of Astley Abbotts]

I thank my noble friend for giving way at the end of a rather long and turgid debate. It is not that the Charity Commission wishes to get involved, it is that it will be forced to. The Privy Council is worried that something will be done with a semi-charitable body that will provide a loophole that is available to a royal charter company that is not available to charities generally. I am not asking him to answer the question now, but will his officials look at that between now and Report to be satisfied that the Charity Commission will not, willy-nilly, be pulled in to give its opinion every time the National Citizen Service Trust wants to change the trust?

[Lord Ashton of Hyde]

Of course we will look at that.

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[Lord Hodgson of Astley Abbotts]

My Lords, the word “aspiration” has been used—the noble Lord, Lord Stevenson, used it, as did the Minister—and this is another aspirational amendment. It would make a simple change to provide for the activities of the National Citizen Service to benefit society,

“in Great Britain or overseas”,

and it is the “or overseas” that I want to focus on. I make it clear at this stage that my amendment is permissive and not prescriptive. It does not require the Government or the NCS to do anything now; it just enables something to happen in the future. Therefore, it is not “requiring”; it is purely enabling.

In my view, the possibility of developing an international perspective increases one of the attractions of the NCS and, indeed, I think it will be particularly attractive to the more adventurous sort of people who participate in the NCS. It will be a shame if, by limiting it to just a UK view—and the Bill will not be changed again—we do not have the option of giving it a slightly wider canvas in the future.

As I explained at Second Reading, the International Citizen Service—the ICS—already exists. I explained to the House at Second Reading that I have had the privilege of going to Tanzania and seeing it in operation. Slightly alarmingly, they kept referring to the ICS as ISIS. I thought, “What’s happening? Am I in the right room or should I leave quickly?”. However, ICS has operated in Tanzania for a number of years, with 140 to 160 young UK men and women going out there. I met a group of about 40 young Tanzanians and very impressive they were too. They greatly valued their involvement and links with the UK volunteers. Through social media they were sharing experiences and building links between this country and Tanzania. One or two of them were particularly impressive. A young woman in a hijab from Zanzibar, which is 98% Muslim, sought me out particularly to say that it was really good to have somebody from the UK of my age and background facing the troubles that she was facing. She said she was able to realise that people around the rest of the world were thinking about what they were trying to do and prepared to encourage and help them, making them think that they were part of a wider community when things in that country were not always going as well as they might.

In my view, the UK is going to need all the friends it can get in the years ahead. This is not a Brexit speech but a tectonic plate speech. It is about the relative power of the US, China and India, which will shift dramatically over the next 25 or 50 years. ICS, if it is built into NCS, would give us a chance to develop friends overseas and find them growing into positions of influence and power in different countries around the world. Some of the 40 or so young men and women who I saw in Tanzania will clearly rise to the top of that society, and what happens in Tanzania will clearly happen in the other countries where ICS takes place.

When my noble friend comes to reply—I can of course look over his shoulder at the notes that have been written for him by his officials—he will say, “I don’t oppose International Citizen Service; it just shouldn’t be part of National Citizen Service because, inter alia, it is designed for people still at school”. That is all very well but the Bill, as we see in Clause 1(2)(a), refers to people,

“under the age of 25”,

which obviously takes it straight into the chronological bracket of the International Citizen Service. Leaving that aside, other noble Lords have referred to the briefings we have had from the NCVO and other groups about how NCS should be a first step in a journey—a piece in a jigsaw which encourages and leads on to a lifetime of civic involvement. I would argue strongly that building an international piece into our National Citizen Service would provide another potential step, or another potential piece in that jigsaw.

With this amendment, I seek only to include the possibility of an international bit in the NCS Bill because this is a once-in-a-lifetime opportunity. When the Bill has gone through, our chance of being able to introduce an international element will be gone for ever. This bus will not come round again. I therefore seek this because it fits with the aspirational nature of NCS, because the age range allowed for in the Bill would certainly encompass an ICS component and because it would represent a further step in trying to create a way whereby people became involved in voluntary groups throughout their lives. Last but not least, it would be very good for the reputation of this country. It would build our soft power and reputation around the world over a period when the world is changing fast and we will need all the help and influence we can get. I beg to move.

[Lord Ashton of Hyde]

My Lords, I do not oppose an International Citizen Service—my noble friend really was looking over my shoulder. But seriously, I thank my noble friend for his points on the potential of international volunteering. We agree that it opens minds and enhances the UK’s reputation abroad. I shall be brief because we need to make progress.

We support International Citizen Service. I am pleased to say that the UK Government are committed to tripling the size of the ICS programme during this Parliament and are working with VSO to deliver that, which means that more than 32,000 volunteers will complete placements during this Parliament. I am in complete agreement with my noble friend on that but I am afraid that I do not agree that the NCS is the place to do it. It does not malign the NCS to say that it does not have the expertise or reach. We are talking about and have been debating where NCS is going to go, how it should be accountable, how it should be controlled and how it should remain flexible. I am afraid we do not agree that to add this extra burden to it is a good thing at this time. On a positive note, however, there are already strong links between the NCS and the ICS. The ICS is already offered as a next step for NCS graduates, who are guaranteed an interview to take part in ICS if they apply when they become eligible.

As for my noble friend’s point about the age group, of course the age group in the Bill includes up to 24 year-olds, but that is simply to allow people who are outside the core group of 16 and 17 year-olds to have access to the programme if they have disabilities or particular circumstances at home. I am afraid that he is hanging too much on that allowance.

To be very brief, we want to make NCS a rite of passage for the young people of this country. This Bill, and the delivery arrangements that it creates, has that intention in mind. It would not be feasible for ICS to operate on this scale, and so the Bill focuses on NCS. I hope my noble friend will take some encouragement from the increased commitment we have made to international volunteering programmes, because we agree with him that they are important. I hope he will feel able to withdraw his amendment tonight.

[Lord Hodgson of Astley Abbotts]

I am grateful to my noble friend for his answer and glad that I was able to read his notes so clearly over his shoulder. He will understand that I am very disappointed by his somewhat peremptory dismissal of this concept. International Citizen Service is run through DfID and has no statutory protection at all. If this Government or another Government, or a Secretary of State, were to change their mind and say that we will not have International Citizen Service any more and put the aid budget into something else, it would be gone. One great argument for NCS, which I entirely support, is that it makes sure that it is there for the long term. ICS may be there for the long term, but you cannot be certain of it in the way that we are clear about NCS—that is what we have this Bill for.

I will not delay the Committee any longer—because the Whip will turn around to look at me in a second or two—except to say something about the argument that NCS does not have the reach. As we have been discussing, NCS is going to use voluntary groups to reach out and find the people. The way that ICS recruits are found is by VSO reaching out—beating the bushes—to find young men and women to come forward who would like to do ICS. The process that we are using for NCS, and which will be increasing, is paralleled already by what is going on in ICS. So I do not accept the argument that NCS does not have the reach. I think it is a shame that, as a country, we are not going to use this opportunity to build our reputation. However, it is too long an argument to have out today. I am disappointed by what the Minister has said. I will read carefully what he said, but I may wish to bring this matter back at a later stage.

[Lord Ashton of Hyde]

I say to my noble friend that my response was not meant to be peremptory or discourteous; I was just trying to be quick.

[Lord Hodgson of Astley Abbotts]

I can tell my noble friend that I was not offended by him in the least. I beg leave to withdraw my amendment.

Financial Services and Markets Act 2000 (Relevant Authorised Persons) Order 2015

Debate between Lord Ashton of Hyde and Lord Hodgson of Astley Abbotts

Tuesday 27th October 2015 Grand Committee

[Lord Ashton of Hyde (Con)]

My Lords, I beg to move that the Committee considers the draft Financial Services and Markets Act 2000 (Relevant Authorised Persons) Order 2015, the draft Financial Services and Markets Act 2000 (Misconduct and Appropriate Regulator) Order 2015, and the draft Financial Services and Markets Act 2000 (Regulated Activities) (Amendment) (No. 3) Order 2015. For the sake of brevity, I shall refer to these as the relevant authorised persons order, the misconduct and appropriate regulator order and the regulated activities amendment order.

The first two orders under consideration today are related, and it may be helpful if I start by outlining the background to this legislation. In December 2013, Parliament passed the Financial Services (Banking Reform) Act 2013, which, for convenience, I shall refer to as the banking reform Act. Among other things, this Act provided the legislative framework for implementing the recommendations of the Parliamentary Commission on Banking Standards, on which several Members of your Lordships’ House served with distinction. This included making provision for introducing the senior managers and certification regime for the banking sector—banks, building societies, credit unions and certain systemically important investment firms. The Government have now included provision in the Bank of England and Financial Services Bill to extend this regime to all other types of financial services firms, but these two orders are part of the original work programme to apply this new regime to banking.

When the parliamentary commission reported in June 2013, it made a number of recommendations for reforming the way in which individuals who work in banks are regulated. These formed the basis for what is now the senior managers and certification regime and include: a tougher regulatory approval regime for a smaller number of the most senior individuals in a bank; annual certification by banks themselves that other key individuals are “fit and proper”; and rules of conduct covering a wider range of bank employees, not just those subject to regulatory pre-approval.

The relevant authorised persons order will extend the scope of the senior managers and certification regime to include UK branches of foreign banks. It was initially decided to confine the senior managers and certification regime to UK institutions: that is, businesses incorporated in the UK. This includes those global financial institutions that operate here through a UK subsidiary company. The subsidiary company is incorporated here and so counts as a UK institution in its own right.

However, it does not include global banks which operate here through a branch in the UK. A branch is not a separate legal entity from its parent and so is not incorporated here. Nevertheless, a branch can have senior managers and staff who could be subject to annual certification or required to comply with rules of conduct. But, of course, the fact that a branch is not separate from its parent was bound to raise a number of issues which could not be fully considered at the time.

A power was therefore included in the Banking Reform Act enabling the Treasury to bring branches of foreign banks into the senior managers and certification regime after appropriate consultation. The consultation document was published last November and the Government announced in March this year that they would make the necessary order. Subject to your Lordships’ approval, all parts of the senior managers and certification regime will from 7 March 2016 apply to foreign banks that operate in the UK through branches here: that is, the same date as that on which the senior managers and certification regime comes into force for UK banks.

There are two points that it might be helpful to be clear about at this stage. First, the Banking Reform Act also included a new criminal offence relating to decisions which cause a bank to fail—sometimes called the “reckless mismanagement” offence. This offence was also recommended by the parliamentary commission and was included in the Banking Reform Act at the same time as the senior managers and certification regime provisions. However, it can be committed only by persons who are senior managers in banks, building societies and systemic investment banks.

This criminal offence is not part of this regime. I want to make it clear that the order does not extend the new offence to UK branches of foreign banks. There is no power in the Banking Reform Act to do that, nor would it be appropriate. The offence is concerned with decisions that cause a bank to fail. As a branch is not a separate legal entity from its parent, it can fail only if the parent fails. The failure of a branch, and any action arising from that, could be taken only by the authorities in the parent’s home state.

Secondly, I want to assure the Committee that the UK regulators have the powers to ensure that the regime can be applied flexibly and appropriately to different types of branch. They can also differentiate where appropriate between “passporting” branches from other EEA states, non-passporting branches from countries outside the EEA, subsidiaries and UK-owned banks.

The misconduct and appropriate regulator order makes some technical changes to the legislation that are needed before the senior managers and certification regime comes into operation in the banking sector next March. The first of these simply ensures that the revised provisions relating to enforcement action by the FCA will cover cases where an approved person has been knowingly concerned in a breach of regulatory requirements imposed by the Alternative Investment Fund Managers Regulations 2013. Those regulations implement the EU alternative investment fund managers directive in the UK.

The second group of technical amendments makes some consequential changes to Section 204A of the Financial Services and Markets Act 2000. Section 204A sets out which of the FCA and PRA is responsible for enforcing certain requirements in that Act. The misconduct and appropriate regulator order makes changes to Section 204A to ensure that the PRA can enforce new requirements where it is the lead regulator for the senior managers and certification regime. If this order were not made, the FCA would have to enforce obligations that should, in effect, be owed to the PRA.

I move now to the draft regulated activities amendment order. In March, Parliament approved the Mortgage Credit Directive Order, which ensures that the UK implements the EU mortgage credit directive, or MCD, on time and with a limited impact on the UK mortgage market. The Mortgage Credit Directive Order 2015 was due to come into effect in March 2016. Since this point, the Government have been actively monitoring the progress of the mortgage industry towards implementation to ensure a smooth transition so that consumers do not see any disruption.

During the course of this routine monitoring, it came to light that, due to the complexity of superimposing a new wave of legislation on top of existing legislation, there were some areas where the Mortgage Credit Directive Order did not achieve what it was intended to. The Government therefore decided to act by making a small number of amendments to the scope of the regulation to ensure that the regulatory framework continued to operate as intended.

The draft regulated activities amendment order under consideration makes a number of changes, all of which aim to ensure that the existing legislation delivers on previously agreed policy. The most significant of these is to ensure that mortgages dating from before 31 October 2004 that are currently regulated as credit agreements will move across to be regulated as mortgages from 31 March 2016. This is part of the Government’s widely supported aim to consolidate the regulation of mortgages within a single framework, reducing the burden on firms and ensuring that customers get a consistent experience.

Taken together, the changes made by the statutory instruments under consideration are another important step to ensure that the UK’s financial system is resilient and works for the good of the nation. I hope that noble Lords will therefore support the Motion to consider these instruments. I beg to move.

[Lord Hodgson of Astley Abbotts (Con)]

My Lords, I am grateful to my noble friend for his explanation of what are quite technical orders. Before I go any further, I declare an interest as an authorised approved person under the Financial Services and Markets Act. I am therefore accountable to the Financial Conduct Authority. I will focus on the practical implications of what we are discussing, in particular the misconduct and appropriate regulator order, which is one of the three orders we are considering; how these tie in with the Bank of England and Financial Services Bill, which had its Second Reading yesterday evening; and how the regulatory footprint will come to be felt by companies, banks and individuals.

As I understand it—I am sure my noble friend will put me right if I am wrong—we essentially have a structure of two pillars. The Prudential Regulation Authority is concerned with the strategic aspects—corporate discussions, decisions and difficulties—and the Financial Conduct Authority is concerned more with the behaviour of individuals. It therefore operates at a slightly lower level. I will quote from the Minister’s letter to my noble friend Lord Trefgarne, in his role as chairman of the Secondary Legislation Scrutiny Committee. Harriett Baldwin wrote:

“Both Orders relate to the government’s implementation of the Senior Managers & Certification Regime (SM&CR), which is designed to manage individual conduct and standards in the banking sector”.

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[Lord Ashton of Hyde]

I am able to give that assurance.

Both regulators look at fitness and propriety. Both the PRA and the FCA are concerned with whether an individual is fit and proper. This is the position now; the senior managers and certification regime does not change that. That is why, as I said before, both regulators may need enforcement powers.

To answer my noble friend’s question, there will not be another regulator. The PRA and FCA will run the senior managers and certification regime in the same way that they are involved in the approved persons regime, so there is no change in that. To follow on from the point raised by the noble Lord, Lord Tunnicliffe, there will not be another regulator. The PRA will have an enforcement role only when obligations are owed to it. As I said, normally which regulator matters is clear from primary legislation because they have different remits and focus.

The noble Lord, Lord Tunnicliffe, asked for some sense of the numbers. I will give him some today, but if I have not given him all the numbers he wants I am happy to write later. Obviously I will copy in my noble friend Lord Hodgson. There are currently about 155 banks and nine PRA-regulated investment firms. Those are investment banks that do not have a deposit-taking commission. These 164 firms will be within the senior managers and certification regime from next March as a result of the changes made by the banking reform Act. This order will add between 155 and 175 foreign banks, split approximately 50:50 between EEA and non-EEA firms.

The banking reform Act also brings approximately 45 building societies and approximately 550 credit unions into the senior managers and certification regime. Any foreign equivalents of these firms would be included as banks. Less than 10% of those banks would be considered large. The Bank of England and Financial Services Bill will not add any banks or other deposit-takers to the SM&CR. The Bill will add only insurers, investment firms and consumer credit firms, assuming that it is passed.

[Lord Hodgson of Astley Abbotts]

The Minister has dealt with all the questions with great courtesy and care. As we get to a situation where the SM&CR is covered by both the FCA and the PRA and they deal with everything, why would we need to have the two organisations? It seems to me that we are getting closer and closer to a situation where one organisation could do it. We then get away from all this trouble of possible regulatory overlap and people being pulled in different directions. That is not a question to be answered today, but it is a question that the Government should think about if we are to follow up the issue of deregulation and try to avoid multiple masters, with the inevitable problems that arise. I am sure that the Government, the Treasury and the authorities will assure us that there is no way that those two will ever get out of step, but from the point of view of the regulated individuals and entities, you can be certain that they will be out of step before too long.

[Lord Ashton of Hyde]

I will not try to give a comprehensive answer today, but I will make the point that that was the position with the Financial Services Authority, which both Houses of Parliament decided was not an effective regulator. Everyone accepts that there were problems with having one regulator and that tripartite system. I will not go beyond that, but I take the point; I have noted it.

The noble Lord, Lord Tunnicliffe, asked whether the changes to the PRA required changes to these orders; they are not required. He also asked whether the regulated activities amendment order only affects credit agreements relating to property—I refer here to equitable loans that are normally used in Scotland—and the answer to that is that it does. If there are other points, I will take advantage of both noble Lords’ suggestions and write when we have reviewed what I have said today.

Can I make a couple of final points about the orders under consideration? First, the relevant authorised persons order is not about placing a more onerous regime on UK branches of foreign banks or for that matter letting them off the hook. We aim to ensure a proportionate and appropriate regime that reflects the status of branches and the nature of the business that they do.

The misconduct and appropriate regulator order makes some necessary technical changes arising from the introduction of the senior managers and certification regime. Finally—