Financial Services Bill

Lord Turnbull Excerpts

Monday 15th October 2012 Lords Chamber

[Lord Peston]

My Lords, I support my noble friend’s amendment, but I would like to place it in context. I start from the position that the Minister started from when he reminded us that the Bill and these regulators have not been picked like a rabbit out of a hat. There was a problem to be solved and this, even though I do not like aspects of it, is the Government’s best attempt to solve it. There was a problem in this sector of the economy, the public demanded that something be done to prevent it from happening again and the solution is regulation. Since the only alternative solution that I know about would be to nationalise the whole of the financial sector, which I would not favour, the Government are clearly doing the right thing in broad terms—even though, I repeat, there is a lot of this Bill that I do not like.

The second aspect of the context is the old adage, “Quis custodiet ipsos custodes?”. The trouble is that once you go down that path, you get an infinite regress; whoever you set up to regulate the regulators, you then ask, “Who’s going to regulate them?”, and it goes on for ever. We ought to bear that in mind.

My general point is that, while I hope that the Government will either agree precisely to my noble friend’s amendment or come up with a suitably tweaked amendment of their own, we should not be naive about this. The moment the regulator starts looking at any particular organisation—and certainly when it starts considering, suggesting or indeed issuing a warning notice—the idea that this will not leak out is a bit on the naive side, to put it bluntly.

Although I support my noble friend’s amendment, I think she will agree that it does not protect us from the world in which we live, a world in which there is, in a sense, money to be made by leaking secrets. I believe that the Government ought to go down the line suggested by my noble friend and respond sympathetically, but whether or not I live long enough to see the first case that arises, I would not be in the least surprised if the first warning notice gets leaked within minutes of being sent. That should not stop my noble friend from going ahead with this, but it illustrates that some of us are rather cynical when it comes to what happens in the world in which we live.

[Lord Turnbull]

Can the noble Baroness clarify for me what right the accused has to make representations to this committee? Does it simply take the presentation of a case from the FCA and examine that for its strengths and weaknesses, or is representation from those accused of the regulatory breach built in? To answer the noble Lord, Lord Peston, it is a criminal offence to leak the existence of a decision notice before its appropriate time.

[Lord Sassoon]

My Lords, I go back to the overall picture on this and to the previous group of amendments. This is a necessary area of additional powers that must be in the authority’s armoury. We will take a power to look at the whole thing again if it does not operate properly. However, on this specific amendment, we are probably all agreed—this is where I can be sympathetic if not positive in response to the challenge by the noble Lord, Lord Peston—that it is necessary for there to be appropriate checks and balances. The question is whether we can rely on the judgment and good sense of the successor regulators to do appropriate things without having the stick of legislation on them. In this specific area, everyone seems to have plenty of criticisms of the FCA, many of them justified. However, the Regulatory Decisions Committee was established by the FSA, although it is not required in statute.

I understand why people are nervous about what the successor bodies will be putting in place, but it is important to recognise that the RDC structure—which everyone this afternoon seems to love and wants to hard-wire into the legislation in some form—was put in place by a regulatory body that was given a broader remit, used its judgment as to how best to have this independent challenge and scrutiny of decisions, and put that in place. Now we are saying, which I do not agree with, “Well, the FSA did such a good job in putting it in place that we are not going to trust it to exercise appropriate judgment on your successor’s shape, so we need to hard-wire that in”.

My starting point is that the authorities will establish appropriate procedures. This afternoon we are very much talking about the FCA side of it. What is appropriate for one authority is not necessarily appropriate for the other successor authority. While I am of course sympathetic to the end objective here, the question is what it is necessary to put in place that goes beyond the current framework within which the FSA established the RDC, which people like. I believe that it is appropriate to leave the successor authorities to make their own decisions on this point.