Financial Services and Markets Bill

Baroness Garden of Frognal Excerpts

Committee stage
Monday 20th February 2023 Grand Committee

[The Deputy Chairman of Committees (Baroness Garden of Frognal) (LD)]

My Lords, if there is a Division in the Chamber while we are sitting, the Committee will adjourn as soon as the Division Bells are rung and resume after 10 minutes, but self-evidently we are not expecting a Division.

Clause 27: Review of rules

Amendment 78

Moved by

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[Baroness Bowles of Berkhamsted (LD)]

My Lords, it is a pleasure to open day five in Committee on the Bill. First, I will relay apologies from my noble friend Lady Kramer, who is not in her place, having had knee surgery last week. She is recovering well and will return as soon as she has permission from her surgeon.

Several of today’s groups concern accountability, both how regulators are accountable to Parliament and then, as with this first group, what that accountability to Parliament means. Is it more than a hot-seat grilling every now and then? What happens to the output of that accountability?

Here I challenge the Government, who have made much of the regulators’ accountability to Parliament in the consultations but then, during the passage of the 2021 Act, said that that accountability has nothing to do with government. We can all see through that. The examples that the Government have set are: failing to reply to committee reports in the allocated time; failing to find parliamentary time for debates on committee reports; and even failing to attend Lords committees, including such important committees as the Economic Affairs Committee and the Industry and Regulators Committee, which engage in financial services matters, and on both of which I and other noble Lords present have served for many years—so we know what we are talking about.

The question is: do the Government want to be part of this scrutiny or not? Do they want the regulators and Parliament to form their own arrangements together and maybe gang up on the Government? I have had experience of organising that in order to challenge the European Commission, and I can see similar seeds being sown here. This is the last chance saloon for the Government to stand by their advertising on parliamentary scrutiny.

I have eight amendments in this group, but it is really four for each of the FCA and PRA instances. I can be brief on the detail. They all relate to the independent reviews of regulators’ rules that can be commissioned by the Government. Amendments 78 and 145 insert into the Government’s powers of review the possibility to seek thematic review as well as reviews of specific rules. They do not compel the Government to do this; it is an empowerment. The Government would still have control over what they choose to implement, but it seems a reasonable power to have. The noble Baroness, Lady Noakes, has supported this amendment so, to go by the commentary that has been made, if we two agree then there must be something in it. It may well be that a thematic review would in fact be more useful for general issues rather than having to identify specific rules, which might not be comprehensive. I would want this if I were the Government.

Amendments 81 and 148 are related and more prescriptive, in that they require the Treasury to establish a rolling programme of thematic reviews and report annually to Parliament on that programme and any changes made to it in the light of other reviews that might be carried out for other circumstances. They also require a work programme for the next three years, along with indicative timetables. The Government would still have control of the programme, but a programme is required.

I have tabled these amendments because somebody should be, if you like, regulating the regulators. My attempt during the passage of the previous Bill to establish an oversight body failed to inspire the Government. These amendments highlight that all the responsibility therefore falls on government, and it is what a responsible Government might be expected to do.

Amendments 79 and 164 include parliamentary committee requests as a potential trigger for the Government to commission an independent review. Again, this is not a compulsion, as the power to seek that independent review would still reside with the Government. The Government claim that there is parliamentary oversight of regulators; this would be a small step in recognition of that, while respecting the work of committees and the evidence that they collect.

Finally, Amendments 80 and 147 require the person appointed to do the independent reviews to be approved by the Treasury Select Committee, as well as by the Treasury. If Parliament is to be regarded as having oversight, these are the kinds of things that endorse that status. I beg to move.

[The Deputy Chairman of Committees (Baroness Garden of Frognal) (LD)]

The noble Baroness mentioned Amendment 164 but I wonder whether she meant Amendment 146, because Amendment 164 is in a later group.

[Baroness Bowles of Berkhamsted (LD)]

Yes, I think that is correct.

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[Lord Forsyth of Drumlean (Con)]

My Lords, perhaps I should repeat the declaration of interests I made at Second Reading. I am regulated by both the FCA and the PRA and am chairman of a publicly quoted bank, Secure Trust Bank. In tabling this amendment, I anticipated my noble friend’s response to the previous group. I have Amendments 89, 93, 97 and 109 in this group; Amendments 89 and 97 are the guts of it. Basically, they would enable Parliament to set up a committee—a Joint Committee or its own committee or whatever.

In making her case for the last set of amendments, my noble friend Lady Noakes pointed to a key point, which is about resources. The noble Baroness, Lady Bowles, has talked about the scale of the task that is being put before the regulators. It is hard to believe that without some kind of statutory backing, the huge resources that will be required to do this task and to do it effectively are likely to be forthcoming. I think that is in the nature of things. Certainly, my experience as chairman of the Association of Conservative Peers has been that getting any change in this place is a lifetime task. I just do not see Parliament being able to rise to the challenge.

If my noble friend cannot countenance writing into the statute book that there should be a Joint Committee of both Houses, which I believe is the right solution, these amendments at least provide for that. It is evident from this quite short debate that every member of this Committee thinks that this is desirable, although I quite understand why my noble friend’s briefs say that it is not.

I do not wish to be rude about the Treasury Select Committee in any way but, as a former chairman of the Economic Affairs Committee—I am sure my noble friend Lord Bridges agrees—I have not detected within the Treasury Select Committee the kind of commitment that we see in the Select Committees of this House. That is because their members have constituency and other responsibilities. You can see that in the committee’s attendance and in the way in which it operates. As the noble Baroness, Lady Bowles, pointed out, this is a monumental task.

Now, I hate all this consensus so I will introduce a degree of controversy. I voted for Brexit. I voted for Brexit because I believe in Parliament taking back control over our regulations. I did not vote to give all the European regulations, over which we have had insufficient parliamentary scrutiny and control, to a bunch of regulators who are not subject to any parliamentary control. From the Government’s point of view, when they keep being asked “What did Brexit ever do for us?” to refuse even minimal accountability over our most important earner and job creator is extraordinary.

We should listen very carefully to the points made by the noble and learned Lord, Lord Thomas, in the debate on the previous group: this is a central constitutional matter. Without wandering into a Second Reading debate, throughout the Bill we have endless examples of where power is being taken away from Parliament by the Executive without being subject to scrutiny.

I am actually speaking to my amendments, in the hope that, at the very least, my noble friend will say that, as I made the case against my noble friend Lady Noakes’s amendments on the basis that it is for Parliament to decide, these amendments enable Parliament to decide what it should be. At the same time, I recognise that they do not deal with the issue of resources although—believe it or not—it is entirely up to Parliament how much resources its committees adopt. It is not within the Treasury’s control; Parliament votes resources to the Treasury, not the other way round.

My noble friend is a very effective and much respected Minister at the Dispatch Box but, if I were a Minister faced with a Committee as unanimous as this, knowing the views that were expressed at the Second Reading on the Bill, I would not hope to proceed without making a major concession in this area. Not doing so would make it more difficult for the passage of this legislation.

It is a great experience for me to have the noble Lord, Lord Tunnicliffe, and the noble and learned Lord, Lord Judge, support an amendment in my name. I am not used to this degree of consensus. That in itself ought to make my noble friend aware that she needs to take this away and come back with a government amendment that establishes a Joint Committee.

I will deal with the argument about the ISC, which my noble friend said is unique. It is indeed. It is a unique committee, because the powers that are operated by the security services are great. The powers that are operated by the regulators are great. We can argue that this is about confidentiality—it certainly is—but it is also about ensuring that people who wield great power are held to account, and that is missing from the Bill, as so many have said during this debate.

The other point I make to my noble friend is that yes, it is true that it is the only statutory committee that has been established, but we have made a fundamental change in taking financial regulation away from the European Union, where it was subject to considerable scrutiny—a moment of praise from me for the European Union and the wonderful work that the noble Baroness did as chair of ECOFIN. Whatever criticism one might make of the regulations, there was proper scrutiny, and that is completely absent here. Are we really going to say that we as a Government have delivered Brexit by making sure that there is little democratic accountability and less than was achieved in respect of the European Union?

In responding, I ask my noble friend to accept the amendments, but go further if she can.

[The Deputy Chairman of Committees (Baroness Garden of Frognal) (LD)]

My Lords, I have to inform the Committee that if Amendment 89 is agreed, I cannot call Amendment 90 by reasons of pre-emption.

[Lord Bridges of Headley (Con)]

My Lords, I am grateful to my noble friend Lord Forsyth for tabling this amendment. As he said, there has been an outbreak of consensus on this point overall, and the fact that the noble Lord, Lord Tunnicliffe, and the noble and learned Lord, Lord Judge, have also put their names to the amendment, shows what we have heard time and again on this Bill: that it does not go nearly far enough to increase parliamentary accountability and scrutiny.

As I said in a previous debate, and as my noble friend mentioned, we need to improve this Bill in three ways. First, we need to ensure that the regulators publish more data about their own performance. Secondly—this is an amendment we will come to on another Committee day—we need to create a new source of independent analysis of regulators’ actions and performance. Thirdly, by this amendment, as with those in previous groupings, we need to ratchet up parliamentary scrutiny.

I see this amendment—I use this word carefully—as a backstop. My noble friends who have Brexit dispositions may take exception to the word, but it is absolutely a backstop to what we need to achieve here, given the reservations that my noble friend the Minister made about my noble friend Lady Noakes’s previous amendment. As I have said before, and as my noble friend just mentioned, the Treasury Select Committee is an admirable body. We all know that it has created a new sub-committee to scrutinise consultations published by the regulators but, as many noble Lords will be aware, although consultations are very important, they are just one aspect of the regulators’ work. Furthermore, there are numerous consultations. I spent a joyous few minutes counting the number of consultations published last year by the FCA, PRA and the Payment Systems Regulator; I counted 75.

Finally, as my noble friend pointed out, there is expertise in this House. I will spare the blushes of those in this Room, but there is enormous expertise not just here or on the Economic Affairs Committee or the Industry and Regulators Committee but in numerous other aspects. That expertise should be mobilised effectively and systematically to scrutinise this avalanche of regulation. For those reasons alone, it is critical that the Bill ensures that this House—not just the other place—is seen as a key means of increasing scrutiny and accountability.

Before I end—I know that others want to speak—I say just this: increasing accountability and scrutiny should not be portrayed as a means of undermining independence. I very much hope that no one thinks that. The scrutiny of our regulators and their accountability to Parliament should and indeed must go hand in hand with their independence. This is not just to ensure that regulators are accountable, nor simply because there should be no regulation without representation, but because if regulators wield great powers, as my noble friend said, they must be seen to account for their actions in public, and those actions must be seen to be scrutinised and judged by Parliament to be appropriate and within their remit. The point is that doing so increases the legitimacy of the regulators themselves. That is why this debate is not arcane but highly relevant to the power and the position that regulators hold.

I was grateful to hear my noble friend the Minister’s constructive tone in her response on the previous group, so I end by asking her a very simple question; it requires only a yes or no answer. Does she think that this Bill contains sufficient measures to increase parliamentary scrutiny of the regulators in the light of the powers that those regulators are now getting—yes or no?