Financial Services and Markets Bill [HL]

Debate between Lord Holmes of Richmond and Baroness Noakes

Committee stage
Wednesday 1st July 2026 Grand Committee

[Baroness Noakes (Con)]

My Lords, I thank the noble Lord, Lord Vaux, for adding his name. Unfortunately, he is not able to be in Committee today. The amendments in this group concern cost benefit panels, which were created by the 2023 Act to underpin the existing FSMA requirement for cost-benefit analysis to be undertaken and published when rules are consulted on by the PRA and the FCA. The panels were created a little under two years ago and they are doing good work, as their annual reports show. The Financial Services Regulation Committee had a private briefing session with the chairs of the two panels, and we were impressed by the progress that they have made.

My amendment has two elements. The first requires the panels to keep under review the cumulative impact of rules, including those for which a cost-benefit analysis was not required because the impact was expected to be less than the £10 million threshold used by both regulators in their cost-benefit analysis policy statements. Keeping track of the cumulative burden of regulation was a recommendation of the Financial Services Regulation Committee in its Growing Pains report on the secondary competitiveness and growth objective. It was also one of the provisional recommendations of the FCA’s panel in its first report for the period to the end of March 2025. The 2025-26 report is not out until next week, but I would be surprised if it did not feature again.

Ideally, FSMA should be changed so that the existing statutory requirement on the regulators, which is confined to cost-benefit analysis on the proposed new rules, is widened so that it will be the responsibility of the FCA and the PRA to keep the cumulative burden on regulatory activity under review. I have taken the slightly easier drafting route in my amendments by putting a narrower requirement for the role of the panels.

The second element of my amendment concerns guidance by the FCA, which was covered last time in Committee, and the PRA. I confess that proposed new subsection (4) of my amendment captures only one part of what I was trying to achieve. I realised that when I was preparing my speaking notes, but it was too late to do anything about it, so I will speak to what I intended to cover in my amendment rather than what it does cover. This is Committee, after all.

At present, the FCA and the PRA are required to issue guidance under Sections 1K and 3I of FSMA and the FCA has power to issue guidance under Section 139A. If the FCA issues guidance under Section 139A, it has to be consulted on, but no cost-benefit analysis is required to be done or published. Proposed new subsection (4) of my proposed new clause in Amendment 119 seeks to require cost-benefit analysis for Section 139A guidance. I intended, but failed, to require cost-benefit analysis for all guidance issued by both regulators—that is a difference not reflected in the amendments.

I am well aware of the Government’s plan in Clause 18 to remove all the guidance obligations from the regulators, as well as the requirement for consultation on the FSA’s guidance under Section 139A. This part of my amendment is predicated on the Government realising the folly of their ways in Clause 18 for the purposes of today’s debate.

One of the findings of the FCA’s cost-benefit panel last year was the minimalist approach taken to cost-benefit analyses by the FCA: they are undertaken only when required by statute rather than being seen as good regulatory practice underpinning the detailed actions of regulation. The Financial Services Regulation Committee, as part of our inquiry into the FCA’s naming and shaming provisions, which had a potentially very significant impact on certain firms, called for a cost-benefit analysis. However, the FCA refused, saying that it was not required to do it by law. Therefore, I believe that attaching cost-benefit analysis to pretty much everything that the regulators do is necessary. Guidance would have been a good start, but the changes required are even broader than I have tried to achieve in my amendment.

My noble friend Lady Neville-Rolfe’s Amendment 132 seeks to widen the work of the CBA panels, and I look forward to hearing what my noble friends on the Front Bench have to say on that. With that, I beg to move.

[Lord Holmes of Richmond (Con)]

My Lords, it is a pleasure to follow my noble friend Lady Noakes. I congratulate her on her purposive, rather than literal, interpretation of her amendment. I support her amendment and everything she said, as well as the other amendments in this group. I will speak to my Amendment 129.

Many noble Lords here today were in the Grand Committee debates for the then FSM Bill 2023. As my noble friend Lady Noakes rightly identified, the CBA panels have done very good work in their first couple of years of existence. My Amendment 129 seeks to give them further clarity to assist them in doing that good work, to ensure that they have the materials they need to do it, and to bring an additional element around public awareness of the panels’ work. That speaks to greater transparency, awareness and engagement, which can help not only the work of the CBA panels but the wider work of the regulators themselves. I look forward to the Minister’s response.