Financial Services and Markets Bill [HL]

Baroness Donaghy Excerpts

Committee stage
Wednesday 1st July 2026 Grand Committee

[Baroness Lawlor (Con)]

My Lords, I have added my name to Amendments 133 and 135, in the name of my noble friend Lord Bridges, and I shall say a few words about them. I have also tabled Amendment 135A, which amends Amendment 135.

Two of the questions raised by the Bill are how will the regulators operate, make, impose and judge the rules and how will Parliament’s proper role in the legislative process be ensured? In some cases, not only do we not know what we are supposed to be legislating on, as the Committee has discussed, but we do not know the basis on which the regulators will, in practice, be held to account. Indeed, as matters stand, the arrangements and the deployment of powers is not known, or not entirely, in many cases.

The amendments tabled by my noble friend Lord Bridges and supported by my noble friend Lady Noakes and the noble Baroness, Lady Bowles, to which I have added my name, would establish an office for financial regulatory accountability, which would have the specific duty of examining and reporting on the performance of the FCA and the PRA and how they perform on specific measures, would provide some of the essential answers. The office would assess how far the regulators meet their statutory objectives and principles under FSMA 2000 and, importantly, the effect of specific pieces of regulation. We need to know the impact of these regulations on the domestic development of the financial services and the market, as well as the impact internationally, and we need to know the costs and burdens of compliance. Amendment 135 contains very specific duties, and I think they have been very well thought out. I hope the Minister will take them into account and consider why we need this office, which will be independent of the process of regulation. It will be independent of Parliament, not just of the regulators, and it will help Parliament to do what it ought to do as the legislature.

My Amendment 135A would include in these independent reports examples of how the rules have been implemented and applied to different firms, including similar firms doing the same kind of activity, because we do not have an independent analysis of those rules and regulations, the process or the compliance. Very often, small businesses are at sea; they cannot look to Parliament because we do not have the basis for assessing them, they cannot look to our reports, and they cannot necessarily look to the regulators. They tell me about this and quite often explain that they are not sure. They want to take a step to grow their business, perhaps to develop some new instrument or to expand their market, but they are not quite sure how the regulators will treat it. They have no example of how these things have been seen in the past or of how the rules have been applied.

Requiring an independent office for financial regulatory accountability to provide some examples will help not only Parliament but businesses in being competitive and growing their businesses. They will see the precedents and be able to predict much more easily how the system operates. It is not an expensive way in which to make judgments. They do not have to get in expensive consultants or do little trials here and there and pilots. They would give security in knowing where the boundaries are set and judged and whether they are consistent with the opportunities they need to seize if they are to make their businesses grow.

Above all, such an office reporting and assessing these duties would encourage the regulators to be consistent and predictable and to focus on their statutory objects. As the Bill aims to focus on the competitiveness and growth objective—we have talked a lot about reporting requirements and the overall strategic plan—there is a problematic lack of transparency and accountability by the regulators, other than to the Treasury, and that relationship sometimes seems a little too cosy.

The amendments tabled by my noble friend Lord Bridges would promote an affective mechanism to ensure that we have objective, transparent and impartial evidence externally provided by an independent body. I support them for that reason but add my small amendment so we have greater transparency in how they are applied.

[Baroness Donaghy (Lab)]

My Lords, I do not want to get involved in the mechanics of the group in how we get this independent scrutiny, but I want to emphasise that it is important. We would welcome a discussion with the Minister about how it is done. We have had various inquiries over the past two and a half years, and I would ask the federations and organisations whether they thought having a concierge service would be useful to overcome some of the difficulties that the noble Baroness, Lady Lawlor, has outlined, especially to help the new boys on the block and the smaller companies to find their way around the complex barriers that they have to face. It seemed to be quite a popular suggestion, but nothing ever came of it.

The example was used was the Singapore settlement, although I am wary of international comparisons, and it is right not to follow too much because they are different, but it has a kind of concierge service to help new companies. Where we have a difficulty—I am thinking back on the history of the relationship between Governments and regulators—is that regulators are subject to political pressures. You might not agree, but that is the fact and the real politics. When things go bad, the regulator will be blamed, so they are cautious. Their very nature makes them cautious because they do not want to be the ones that go on holiday and get the sack because something has gone badly wrong. We need protections for the methodology that the regulator uses. I have to say that the cost-benefit analysis panels are on the nursery slopes. I was rude about them last week, as the Minister knows, and I do not want to be rude again, but they need nurturing. The work that they could do will be really good if they are given more clarity on their possible role so that they cannot be fobbed off by the regulator. I am not suggesting the regulator will fob them off, but there would be a tendency to stick to the law and not go beyond that.

I feel that we need to build this into a system not just because we want to protect the existence of a committee that we think is important, although I do, but because parliamentary scrutiny is important, and we sometimes search for the objective facts and figures, the granularity of why a regulator does something or neglects to do something and to what extent political pressures are involved. I know that no system, even the system that the noble Lord, Lord Bridges, has asked for, will ever get to the bottom of some of that—we are not naive—but I believe we need more transparency and, yes, less complexity, but we need a system that has more checks and balances. I think a lot in this legislation is going the wrong way and what we need to do is carefully assess what is working well, what needs to be nurtured in these very early days and what we need to be avoiding like the plague.