Secondary International Competitiveness and Growth Objective (FSR Committee Report)

Lord Kestenbaum Excerpts

Wednesday 11th March 2026 Grand Committee

[Lord Kestenbaum (Lab)]

My Lords, I congratulate the noble Baroness, Lady Noakes, on an excellent opening to the debate. I am aware that she has recently taken over the chairing of the committee and will no doubt bring to that role her hard-earned reputation for penetrating insight, intellectual rigour and—above all, for all those who have worked with her—no-holds-barred candour. This is also an opportunity to pay tribute to her distinguished predecessor as chair of the committee, the noble Lord, Lord Forsyth, whose chairmanship was nothing less than a master class and who, as noble Lords are well aware, has gone on to a higher place.

I was privileged to serve as a member of the committee and believe that the report is particularly timely, for in pursuit of economic growth in this country we continue to confront short-term headwinds and long-standing structural reform. In simple terms, the unenviable combination of no clear engine for economic growth, decades of low productivity and weak business investment compared with other advanced economies makes the Government’s secondary objective for our regulator all the more critical at this time.

With that said, and however much we would wish it otherwise, it does not seem self-evident that the primary and secondary objectives sit in perfect alignment; or at least, as evidenced from this report, much change is needed for that to be the case. With that in mind, allow me to draw three illustrations from the very subtitle of this inquiry: namely, culture change—the noble Baroness referred to it already—or, as I will suggest in my remarks, it is more like an aching need for nothing less than cultural transformation.

My first illustration of the cultural impediments that stand in the way of the regulator grasping this inquiry’s nettle is implicit in the regulator’s very own response to the report, for consider this: this has been the most comprehensive inquiry of its type on this issue. It lasted over a year, it runs to 145 pages and hundreds of hours of evidence were taken from industry, trade bodies, government, financial services and the like, all of which culminated, as the noble Baroness said, in 77 recommendations. They are 77 individual, well-evidenced, tightly argued recommendations for comprehensive change at the regulator, if this secondary objective is to be pursued in earnest. So it was rather dispiriting to read a somewhat patronising opening response from the regulator to the inquiry, whose top line is:

“We are pleased that we have work underway, or already completed, that addresses most of the Committee’s recommendations”.


Perhaps one could not wish for a more tangible illustration of the need for cultural overhaul, one that puts a premium on a regulator that acknowledges its shortcomings, embraces radical evidence-based solutions—this inquiry —and demonstrates full accountability, rather than a response that basically said, “Nothing to see here”.

My second illustration of the pressing need for the type of cultural transformation that the inquiry called for is a subtle one. It is a deft line in the report:

“We were disappointed by the difference in candour between the evidence we received from industry in public and the views expressed to us in private”.


It is the inverse of my favourite political joke: the senator who was asked what he felt of a young, promising congressman, Bill. He said, “Bill? I think so highly of him that I am even prepared to praise him in private”. In this case, it is the opposite: the suggestion—not just a suggestion—that, in public, firms and trade bodies would toe the party line but, in private, they were somewhat more forthcoming, if I can put it that way. That might say everything about the health of the ties between the regulator and the regulated and, perhaps more particularly—I am sorry to say it—the trust deficit that lies between them. The fear of the regulated in expressing a candid view in public is hardly conducive to the type of dynamic, competitive business sector that the secondary objective has in mind.

Finally, the third illustration emerging from the report also draws on my personal experience. As declared in my register of interests and elsewhere, I have spent much of my career in the financial services, particularly in listed and regulated businesses. As a result, and sadly so, I fully recognise evidence that spoke of supervisory teams mostly having limited or no experience of the fields that they were supervising. My own experience has been of enforcement being overrigid and often indifferent to the realities, complexities and uncertainties of business life. This inflexibility becomes a brake on competitive ambition and often seems to run through supervisors like a stick of rock. A slavish adherence to what has been described elsewhere as the

“total elimination of all risk”

hardly seems conducive to the innovative competitive economy that Governments of all stripes aspire to. My own experience was simple, and sometimes positive. At the top of the food chain, our interactions with regulators were often constructive, engaging and solutions-oriented. Deeper into the system, the middle and junior ranks might show a modicum of willing, but too often a lack of understanding of financial services businesses and their complex realities.

So I offer three practical illustrations based, in some measure, on my experience of not just the culture change needed, as the report suggests, but the culture transformation. If we have learned one thing about competitive economies, it is that, when you have the right culture, especially a leadership culture, you will overcome most structural impediments. Conversely, if you do not have the right culture, especially at the top, no amount of structural overhaul or, indeed, well-meaning secondary objectives will help—a cautionary tale for our regulators and their political masters.