Financial Services Bill

Debate between Lord Hodgson of Astley Abbotts and Lord Davies of Oldham

Wednesday 24th October 2012 Lords Chamber

[Lord Peston]

It would establish the principle which everything else must follow. That is fine; I understand what the noble Lord is saying. That leads me to ask two central questions. In Clause 73, and I think in something similar earlier, subsection (2) refers to “Relevant events” that occur in relation to,

“(b) a person who is, or was at the time … carrying on a regulated activity”.

What worries me as a matter of logic is whether we will end up with the regulator having to investigate him or herself. If these people have not met the standards, who is responsible? They are partly, of course, but this would also be an indication of regulator failure. To my way of looking at it, we have a part of the Bill that is totally bizarre. From a logical point of view, the answer to the question “Quis custodiet ipsos custodes?” is that the regulator is the custodes himself, if you like. I would certainly welcome an analysis from the Minister in his reply which shows that we are not seriously involved in a logical contradiction here.

My second question is whether the fact of an investigation of the kind we are discussing is to be in the public domain. In other words, will it be publicly known that the regulator is investigating one of the things going on here? It may be that I have not read it properly, but is not that itself potentially enormously damaging, again a point that was raised last week? I should like the answer to these two questions. It may be that Treasury officials will have to do a bit of thinking about this part of the Bill when they are not thinking about the logical nature of “may” versus “must”. As I have pointed out before, there is a vast philosophical literature on this. How much of it they will have time to read, I do not know. However, the central point is to get a rational response to the amendment moved by the noble Lord, Lord Hodgson.

[Lord Davies of Oldham]

My Lords, I am grateful to the noble Lord, Lord Hodgson, for identifying this issue, but I must say that if noble Lords opposite do not think that the nation is expecting a Bill and eventually an Act of Parliament that tightens up regulation in the wake of the circumstances we suffered four to five years ago, then all I can say is that such a position is not tenable. The noble Lord, Lord Hodgson, is indicating that the principles of the regulator should be expressed in these terms. Who can be against the principles of fairness? Of course we want and expect the regulators to act fairly, but let us remember that they may be acting under a direction from the Treasury because something has gone wrong. The idea that the first thing the regulator must do is consider the principles on which it must act rather than in fact investigate the nature of the problem, as it has been instructed by the Treasury to do, seems to put the cart very firmly before the horse.

In responding to this amendment, I am sure that the Minister will have some warm words for his noble friends who have spoken in favour of the amendments, but I hope that he will defend the basic objective of the Bill. I shall give way to the noble Lord.

[Lord Hodgson of Astley Abbotts]

I am extremely grateful. I did not want to interrupt his peroration, but dare I say that if he had listened carefully, he would know that I said that this is not about reducing regulatory stringency? I made that absolutely clear and I said it in terms; there is no question about that. This is a question about being fair and reasonable, it is not about reducing regulatory stringency. I do not want that particular line of attack attached to my amendments. I could not be clearer than that, and I think my noble friends on this side of the Committee are all as one so far as that is concerned.

[Lord Davies of Oldham]

The noble Lord will forgive me if the consideration that others might have with regard to a regulator potentially operating under direction from the Treasury to deal with a serious situation is that it should be dealing with it quickly and efficiently, and not just having regard to how much it acts appropriately or fairly, in the way in which the noble Lord has indicated. Of course, regulators know that if they act entirely improperly, even unlawfully, legal action will follow against them, but, in a Bill that is concerned to make regulation more effective, it surely cannot be that the principles upon which the regulators must act are more important than the effectiveness with which they carry out their role.