Financial Services Bill

Debate between Lord Phillips of Sudbury and Lord Barnett

Monday 12th November 2012 Lords Chamber

[Lord Phillips of Sudbury]

My Lords, I have two amendments in this group, Amendment 26D and Amendment 27A. As I said during debate on the last group of amendments, this part of the Bill is extremely difficult and I make no pretence that what the Government and indeed the parliamentary draftsmen are contending with here is other than the greatest test of their skill.

None the less, I think that they have got the balance wrong. Noble Lords will know by now that there are three objectives that must be satisfied as far as possible under the Bill: the consumer protection objective, the competition objective, and what is called the integrity objective. My two amendments are designed to buttress the last of those three: the integrity objective. I suggest to your Lordships that of those three objectives, integrity must surely come first. It is frankly no use if the competitive aggression of the City of London remains the highest on the planet, bar perhaps Wall Street, if the standards of integrity are wanting. The same is true of consumer protection.

However, the Bill gives priority to competition over consumer protection and integrity. I dare say my noble friend the Minister will deny that, but I leave that to your Lordships to judge. Having set out those three objectives, proposed new Section 1B(4) to the FiSMA on page 20 then says the following:

“The FCA must, so far as is compatible with acting in a way which advances the consumer protection objective or the integrity objective, discharge its general functions in a way which promotes effective competition in the interests of consumers”.

That is either a pointless subsection because it has no meaning whatever, or it is a subsection which gives priority to competition. One does not need to labour the point that the tragic and appalling depths to which the City has sunk over recent decades and which it is not yet out of—let us make no bones about it—have their source in simple, ethical failure, and not in a want of competence, aggression of trades, shrewdness or anything else. We as a Parliament really owe it to the country—and, in a strange way, to the City itself—to make it clear that above, before and after all else it is integrity which must be supreme.

I must confess that I am now sorry that I did not attack proposed new Section 1B(4) head on. With other amendments, however, I have sought to strengthen the arm of the regulators in Amendment 26D, which puts as one of the issues that has to be considered when the regulator construes the integrity objective what I call,

“the fairness and integrity of policy and conduct of those directing or operating in the financial markets”.

It is a bit strange that there is no reference in this huge Bill to the regulator in relation to the individuals who are conducting business in the financial markets. My second amendment is to the proposed new section that defines the competition objective. It requires, among the matters to which the FCA must have regard,

“how far the methods or culture of any competition may undermine the integrity objective”.

I have just one more thing to say. The regulators in the City—as I said earlier, I have been there, mainly, not as a City player but within the City and acting occasionally for City entities and individuals—have an almost impossible task. That is because the law on regulation is now so voluminous and complicated, and those against the regulator are so clever, intensive and overwhelming in the resources that they can bring to resisting when it tries to intervene, that we owe it to what we are trying to achieve and, in aid of that, to the regulators to make it clear beyond peradventure that although this new Section 1B(4) will give competition priority between the three factors, none the less these additional subsections would introduce the conduct of the individuals and the concept of fairness into the equation, because they are notably absent in the wording of this Bill.

I have dealt with some of the regulators over the years and I can only pity them. We need to think what it is like when they are under huge attack and dealing with heaven knows how many cases, all of them complicated and all against businesses which will array against them 10 times the number of professionals that they have to deploy. We really need to make life that bit easier for them so that some cynical and crafty lawyer cannot say, “If you look at that clause and that clause, then that schedule and that schedule, then this Act and that Act and the rest of it, it is not clear. So, old friend, go ahead”. We do not want that.

[Lord Barnett]

The noble Lord makes a good point. He should perhaps have talked to some of his friends on the last group of amendments, when they all voted with the Government. I wonder what they might do this time. Has he convinced them, I wonder? We will have to wait and see. I was surprised by the proposed new section to which he referred because I thought I had understood the “may” or “must” argument. Those words are used profusely throughout the Bill. Indeed, the noble Lord, Lord Sassoon, told us that he had asked officials to go through the whole Bill and work out which of them they should keep. What I had not appreciated—this is a point drawn to our attention by the noble Lord, Lord Phillips—is that on page 20 we have, in new Section 1B(4), another method of having “must” or “may”. We have a qualified must:

“must, so far as is compatible”,

with the later words. In practice, it is not “must” at all. The noble Lord wants to strengthen it, and I agree. We need to strengthen the arm of regulators everywhere. That is why I voted for the previous amendment.

We may be told that we should wait for the banking Bill, which we have in draft. We cannot be sure that that Bill will appear in that form. I know that at least one noble Lord on the Opposition Benches wants to insert in it something that the Government do not have in mind to insert; namely, a Glass-Steagall amendment. The Minister will know what I mean. I do not know whether he has committed himself or the Government to the draft Bill appearing in the new year. I think he said that we will have it in the new year. Perhaps he will confirm that. We clearly need a banking Bill.

I understand when the Minister says that the Government will take into careful consideration what the banking commission says, but he has not committed himself on that either. What exactly are the Government committing themselves to? They have set up this very high-powered commission, of which colleagues on all sides of the House are Members, and I understand that they are doing a first-class job, but we have been told only that he may, after serous consideration, introduce what the commission recommends. Will he firm that up this afternoon? Will we definitely have a Bill early in the new year, based to a large extent on the work of this high-powered commission, that will deal with some of the points that have rightly been raised about integrity and care? All these matters could be in a banking Bill as well as in this Bill but, for the moment, we have only this Bill. I support my noble friend Lady Hayter and the noble Lord, Lord Phillips. I will support him when he moves his amendment, and I hope his colleagues on the Liberal Democrat Benches will do the same.

Financial Services Bill

Debate between Lord Phillips of Sudbury and Lord Barnett

Tuesday 3rd July 2012 Lords Chamber

[Lord Barnett]

My Lords, I am delighted to follow the right reverend Prelate. I was in his cathedral on Friday and it was a very happy occasion. It is as beautiful as people say.

As my noble friend Lord Peston said, the two amendments are reasonably innocuous. I can certainly accept both of them with the exception of those three little words, and this is the first time that I have heard a real defence of them. Indeed, the noble Lord probably printed them himself. Last week I said that the noble Lord, Lord Sassoon, does not need to reply to most of these debates because we have three noble Lords here in the House who would be even better able to do so. However, as I say, I have not previously heard a proper defence of the words “subject to that”. The noble Lord is the first to do so, and I am sorry to have to disagree with a potential Governor of the Bank of England, if he still thinks that after all our debates.

The words “subject to that” have always seemed to be totally unnecessary because the Government of the day will certainly want to deal with inflation and, not subject to that but always on top of that, to look at economic objectives. I cannot see why that should not be so, and if I may say so, I have still not heard a good defence of it. But the amendments seem harmless enough, subject to the removal of those three words.

The question of QE has been mentioned in this brief debate. I do not wish to extend it, but it so happens—probably luckily for the Government rather than as a result of their policies—that inflation has remained relatively low. My noble friend Lord Peston, who is my professional adviser on these matters, may be right to say that that has nothing to do with the Government. However, what concerns me about both of the amendments is that I am not sure where the objectives of the Government lie on growth. I wish they could explain them, but perhaps on another occasion rather than today. Perhaps the noble Lord, Lord Sassoon, or one of the other defenders of the Government’s policy could also tell us what their policy is on economic growth and employment, because it is not succeeding. However, I will not pursue it any further except to say that I hope that the Government will be able to accept the removal of those three words.

[Lord Phillips of Sudbury]

I have a great deal of respect for the noble Lord, Lord Barnett, who says that he wants to see the words “subject to that” taken out. Am I quite clear that, in saying that, he is not in favour of a stable and sustainable supply of finance ranking as a higher priority than growth?

[Lord Barnett]

I am saying that I find the two amendments relatively harmless, and that I would be able to accept them. That is all I was saying.