Financial Services and Markets Bill [HL]

Lord Vaux of Harrowden Excerpts

Committee stage
Monday 29th June 2026 Grand Committee

[Lord Vaux of Harrowden (CB)]

My Lords, I have added my name to the Clause 17 stand part notice. As has been explained so clearly, the Government’s intention appears to be to put most of the consideration of the regulatory principles and “have regards” into the five-year strategy created by Clause 16. They believe that, having done that and thereby provided long-term clarity as to how those principles and “have regards” will be met at a strategic level, it is no longer necessary to apply them to the nitty-gritty of individual rule-making, which is why Clause 17 effectively removes them from that process. Rightly, the Government consider the secondary competitiveness and growth objective to be extremely important, so they have singled that one out for special treatment in Clause 20, and it alone must be reported on annually. That, at least, is to be welcomed but does have the somewhat odd effect of making the secondary objective more important than even the primary objectives, or any other principles which are not subject to specific reporting.

As we have heard, there are very real problems with this overall approach in terms of the impact on the ability of Parliament to scrutinise the activities of the regulators, including the committees that have been established for that purpose. As the Minister is aware, the Financial Services Regulation Committee of this House, of which I and a number of others in this Grand Committee are members, has taken the unusual step of writing to the Minister to set out our unanimous concerns in that respect. I very much look forward to the meeting that he will attend next week on that.

In passing, just before we started today, we received a letter and a Treasury note from the Minister. Point 15 in the Treasury note would slightly bring together the strategy and the Clause 17 elements, in that it says:

“The Bill will require the regulators in their annual reports to update on the extent to which, in their opinion, they have implemented their long-term strategy”.


I spent a fair bit of time since I received that trying to find where the Bill actually says that. I may be being very dim, but I cannot find it, so perhaps the Minister could point out specifically where that is. I may well have missed it, and I apologise if I have.

I also spent part of the weekend reminding myself of what the FCA’s existing 2025-30 strategy document looks like. I lead a very exciting life, as you can see. While “vacuous” might be too strong a description, it is a classic of its type, being full of motherhood and apple pie generalities and lots of attractive diagrams and pictures, but very little of real specificity or genuine measurability. Statements such as

“We will be a smarter regulator; predictable, purposeful and proportionate”,


sound great, but is this really something that could be meaningfully scrutinised? When I compare the rules in Clause 16 with what is actually in the current strategy, it appears to me that the current strategy would actually comply with Clause 16.

During the previous day in Committee, the Minister said, in reply to a question from the noble Baroness, Lady Noakes, about the existing strategy and whether it is the model on which Clause 16 is based:

“this is the starting point. There is definitely work to do and it needs to be improved”.—[Official Report, 24/6/26; col. GC 337.]

I cannot see how Clause 16 would improve it— I think it already complies—so I have no argument with the FCA having to have a longer-term strategy, but Clause 16 does not provide a sufficient basis on its own for parliamentary scrutiny and accountability, and that is where Clause 17 becomes such a problem. Clause 17 removes the need for the regulators to have regard to the regulatory principles and other “have regards” when going about its general duties, so apart from the annual report on competitiveness and growth in Clause 20 that I mentioned earlier, the only time the regulators will have to consider the regulatory principles—including, but not only, the critical issue of proportionality—will be in its five-year strategy. This would remove the need for regulators to explain how the regulatory principles apply to any draft regulations, at a time when they should be explaining not only the application to individual regulations but the cumulative impact of those regulations.

We debated last week how there is scope for an overhaul of the regulatory principles and other “have regards”, which have a tendency to proliferate. Perhaps that is where the Bill ought to be concentrating its efforts. Clause 17 represents a considerable downgrade on the ability of Parliament and indeed the Treasury to hold the regulators to account. Even as the Bill delegates ever-increasing activities to those regulators, this is a move in the wrong direction. So, by all means let us have a long-term strategy, but that does not substitute for the need for the regulators to have regard to the principles and other “have regards” when setting regulations, and to explain how they have been met. Clause 17 should be removed from the Bill.

[Lord Eatwell (Lab)]

My Lords, I want to follow on from the noble Lord, Lord Vaux, who commented that the committee was unanimous in its letter to the Minister. It was indeed: Conservative, Liberal Democrat, Labour and Cross-Bench Members were unanimous in rejecting Clause 17. The reason is that Clause 17 embodies the requirement to remove the principles from consideration by the committee. But those principles are the essential toolkit of the committee. This actually neuters the committee and leaves it just examining five-year strategies and annual reports, and without the ability to deal with specific proposals, which is the reason why the committee was established in the first place. By removing that ability, the Bill also weakens the regulators.

I am sure there are regulators in some office who thought that that was a neat way of getting rid of a very awkward committee. But it weakens, because, as the noble Baroness, Lady Bowles, pointed out, of the need for political cover—the need for a relationship between the political decisions and regulatory decisions. At the moment there exists this “proposal, accountability, critique” relationship between the regulators and the Financial Services Regulation Committee of your Lordships’ House. Remove that and the regulators are exposed to significant issues in a way they would not have been before.

I cannot see how in any way this measure improves a regulatory system that was built on the principles relationship established in FSMA at the beginning. It became particularly important once we left the European Union and the responsibility to examine the regulatory structure shifted from the European Parliament to this Parliament; and now, Clause 17 is taking away parliamentary accountability in any serious operational sense. It really should not stand part of the Bill.