Financial Services and Markets Act 2000 (Exemption) (Amendment No. 2) Order 2011

Lord Eatwell Excerpts

Monday 31st October 2011 Lords Chamber

[The Commercial Secretary to the Treasury (Lord Sassoon)]

My Lords, I beg to move the Motion standing in my name on the Order Paper.

[Lord Eatwell]

My Lords, I am afraid that this may take a little longer than expected, the order having been considered previously in Grand Committee. Unfortunately, at the time of the Grand Committee consideration, noble Lords did not have available to them the results of the consultation on the order and consequently were not then able to give the order the scrutiny it deserved.

I would be grateful if the Minister could answer a couple of points raised in the consultation that the Government have not addressed. First, given the peculiar importance of credit unions in Northern Ireland, are the Government intending to address the issue raised in the consultation of whether an office of the FSA or a successor organisation should be established in Northern Ireland? This is clearly a sensitive issue in the Province, and it ill behoves the Government simply to ignore it, as they do in this document.

Secondly, I am unclear about the Government’s position on question 2(a) of the consultation on whether the Northern Ireland Assembly would retain legislative control of credit unions in Northern Ireland. As the Government acknowledge, considerable concern was expressed about the loss of Northern Ireland influence over an aspect of financial life that is very important in the Province but less so in the rest of the UK. Could the Minister please clarify the Government’s position? Again, in the consultation document the question was simply ignored. As a corollary to this last point, what are the Government doing to ensure that no adverse effects are felt in Northern Ireland from the legislation on credit unions passed in this House on Thursday, 20 October? That legislation allowed businesses to assume up to 10 per cent of the share of the capital of a credit union and eliminated the role of the common bond as the basis of a credit union.

How will the Government ensure that credit unions in Northern Ireland do not, in some cases, become dominated by local business members, with the potentially unfortunate impact on investment decisions, particularly when the credit union considers investment in the local community? How do the Government intend to monitor the impact of the loss of the common bond in Northern Ireland credit unions, when it is evident that the common bond has played an important role in the unique character of the credit union movement in the Province?

[Lord Sassoon]

My Lords, for the benefit of noble Lords who did not take part in the discussion in Grand Committee on 17 October, it is perhaps worth explaining that this statutory instrument transfers responsibility for regulation of Northern Ireland credit unions to the Financial Services Authority. It implements a policy decision of the previous Government announced in March 2010—which has the support of all three main parties—the outline of which is the subject of this statutory instrument. There will be further instruments dealing with the detail of the transfer and a number of the consequentials arising from that.

It is unfortunate that the consultation issued by the previous Government in March 2010, having said that the decision had been taken that regulation would transfer to the Financial Services Authority, slipped into a consultation about how this is best achieved and what other associated action should take place. Those matters will be the subject of further statutory instruments in due course and it is unfortunate that there was one somewhat confusing question that could have been taken as touching on the statutory instrument before us today. I regret that. Had I known that that question was there, we could have had the consultation responses out earlier, even though it was not intended that the previous Government’s consultation should have anything to do with the business before us today.

On the issues raised by the noble Lord, Lord Eatwell, the question of the FSA and the allocation of its resources to offices is a matter for it. The responses on this point were linked to concerns about what the regulatory regime was going to entail and the FSA has worked hard to address those concerns by carrying out visits to Northern Ireland and answering questions from the credit unions.

As to the common bond and possible domination of local businesses, as we discussed in Grand Committee, the credit unions do not feel that this issue will be a threat. Of course, along with seeing how the credit unions sector generally across the United Kingdom develops—it is prospering and the Government wish to see it do so—it is one of the many factors that the Government will continue to have in view. The matter does not touch directly on this instrument, but it is relevant to the whole of the credit unions sector across the United Kingdom.

The other points will be the subject of ongoing work by the FSA following another consultation that the FSA and the Treasury had issued, which closed last week and which will be the subject of further statutory instruments in due course.

[Lord Eatwell]

And what about legislative control?