Financial Services Bill

Earl Howe Excerpts

Committee stage
Wednesday 10th March 2021 Grand Committee

[Lord Eatwell (Lab)]

My Lords, my initial reaction to the amendment of the noble Baroness, Lady Neville-Rolfe, was to puzzle over exactly what sort of impact assessment she had in mind. Was she perhaps thinking of the famous remark by the noble Lord, Lord Turner, that the banking sector in the UK does much that is not socially useful? After all, the ultimate rationale for regulatory activity is the enhancement of the common good—the goal of good government.

However, this debate has clarified the issue before us, which is that an effective impact assessment requires not just thorough analysis but a definition of an objective or, perhaps, objectives. The lack of clear objectives is the key weakness of Amendment 103. Amendment 104, therefore, is much stronger in that it lays out a number of objectives against which an impact assessment might be calibrated. The key to resolving the dilemma—I apologise for sounding a bit like a broken record—is to take the parliamentary role referred to in Amendment 103 and combine it with the sense of Amendment 104. An effective parliamentary process and, dare I say, a parliamentary committee, could define the objectives to be addressed in any impact assessment of the type referred to in Amendment 103—“We want to know the impact of this regulation on problem x, y or z”—and then seek annual reviews focusing on matters that are deemed to be important at any given time, thereby avoiding the template issue referred to by the noble Baroness, Lady Noakes.

That is what is missing from the amendment—a means of making the impact assessment an effective means of acquiring information and an insight into the thinking of regulators, which can then be scrutinised in a coherent and consistent manner.

[Earl Howe (Con)]

My Lords, as my noble friend Lady Neville-Rolfe has explained, these amendments bring us to the question of how we report on the impact that regulation has on firms. Every noble Lord who has spoken today has referred to the value of impact assessments for Parliament and the Government in particular, and I do not dissent from that general proposition. My noble friend Lord Trenchard in particular spoke about the value of measuring the burden imposed by certain EU rules when we were an EU member. I hope that it is of comfort to him if I remind him that the Chancellor has said that decisions about financial services regulation after the end of the transition period—we have of course now passed through it—would be based on what was right for the UK, taking account of what is necessary to ensure financial stability, market integrity and consumer protection.

Amendment 103 would require the Government to lay impact assessments for each of the regulations made under the Bill. It would also require the PRA and the FCA to publish any rules made using the powers in the Bill in draft, alongside an impact assessment. I do not believe that the amendment is necessary, as the Government and the regulators are already committed to identifying and publishing the expected impacts of subsequent rules and regulations made under the Bill.

The Government have of course published an impact assessment alongside the Bill. In line with the guidance set out in the Government’s Better Regulation Framework, the impact assessment sets out HM Treasury’s current understanding of the costs and benefits of the measures. Where appropriate, further details will be set out in the impact assessments that will accompany the secondary legislation made under the Bill. I remind my noble friend Lady Neville-Rolfe that the regulators are required by FSMA 2000, with some very limited exceptions, to undertake a cost-benefit analysis for proposed new rules, and to publish those alongside their draft rules as part of their consultation. The PRA and FCA have already published their first consultations on the draft rules that they intend to make in relation to the prudential measures in the Bill, and they include comprehensive cost-benefit analyses.

Amendment 104 would require the Secretary of State to report on the impact on business that measures taken by the regulators and the Government to regulate financial services may have, and particularly to report on the impact on small businesses, innovation and competitiveness. We have spoken at length in this Committee about competitiveness, and I hope that I have demonstrated how importantly the Government take this issue. Additionally, my noble friend Lady Penn recently wrote to my noble friend Lady Neville-Rolfe about how the Government support smaller financial services firms.

I am sure that my noble friend Lady Neville-Rolfe does not need to hear me say that the Government are committed to ensuring that the financial services sector supports competition and innovation, allowing new firms to compete and grow. Of course, both the FCA and the PRA have a statutory objective to promote effective competition.

In earlier debates, we have talked about the new accountability frameworks that the Bill puts in place for the prudential measures. Those require the PRA and the FCA to have regard to UK competitiveness, among other things, when making rules to implement Basel or the investment firms prudential regime. They are required to report on how having regard to that has affected their proposed rules. The FCA and PRA are of course already required to prepare annual reports, which are laid before Parliament for scrutiny. These reports cover the extent to which the regulators’ objectives, which include promoting effective competition, have been advanced, and how they have considered existing regulatory principles in discharging their objectives.

On this basis, I hope that my noble friend Lady Neville-Rolfe agrees that I have said enough to make her feel comfortable in withdrawing her amendment.

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[Lord Eatwell (Lab)]

My Lords, my noble friend Lord Sikka has made a powerful case for greater transparency in regulatory matters. I think it is clear to everybody that nothing undermines confidence in the regulatory system so much as the sort of cases to which my noble friend referred. What is often evident is that these matters eventually come out, and so the traditional rule that the cover-up is worse than the original transgression exerts itself once again.

The Government have made a virtue of transparency and openness in several aspects of the regulatory system. Not least, for example, we have discussed in this Committee the case of beneficial ownership, and we heard the noble Baroness, Lady Penn, make the argument for transparency of the beneficial ownership record of Companies House as a great virtue at an earlier stage of our considerations. Surely that commitment to transparency should be quite general, covering all regulatory matters, and not limited just to selected parts of the regulatory system.

[Earl Howe (Con)]

My Lords, Amendment 107 would require the FCA to make a public statement on the nature of any intervention a Minister may make into an FCA investigation into an individual firm.

The current legislative framework established the FCA as an independent, non-governmental body responsible for regulating and supervising the financial services industry. I listened with great care to the noble Lord, Lord Sikka but, with respect to him, and without belittling the value of lessons from history, the examples of investigations that he cited are ones that are unrelated to investigations carried out by the Financial Conduct Authority. That is a key point because, although the Treasury sets the legal framework for the regulation of financial services, it has strictly limited powers in relation to the FCA.

The Treasury is the FCA’s sponsor in government but, in view of the regulator’s independence, it is not appropriate for the Treasury or Ministers to seek to intervene in individual cases. In particular, the Treasury has no general power of direction over the FCA. I will write to the noble Baroness, Lady Kramer, on the content of the Ministerial Code, but I am not aware of any loopholes in the code that would permit the kind of conduct that has been talked about.

We are talking here about an independent organisation. The independence of the FCA is vital to its role. Its credibility, authority and value to consumers would be undermined if it were possible for the Government to intervene in its decision-making. I realise that the noble Baroness, Lady Bennett, has some mistrust of Government Ministers, but I hope that that fact is of at least some reassurance to her.

That is not to say that the FCA is not accountable for its actions when investigating potential wrongdoing or malpractice by firms because, equally, the noble Baroness, Lady Bennett, should be reassured that the FCA is governed by the framework of duties set out in legislation by Parliament. It would be unlawful for it to act outside this framework in order to further vested interests. The decisions of the FCA can be subject to judicial review and, under legislation, the FCA must maintain arrangements for the investigation of complaints.

In the event of a significant failure to secure an appropriate degree of protection for consumers, where those events might not have occurred but for a serious failure in the regulatory system, Section 73 of the Financial Services Act 2012 imposes a duty on the FCA to investigate. Situations can arise in which the Government determine that it is appropriate to intervene. In such situations, the relevant legislation—Section 77 of FSMA —provides a mechanism for the Treasury to direct the FCA to conduct an investigation where it suspects that there may have been regulatory failure.

Under Section 77, the Treasury can require the regulators to conduct an investigation into relevant events where the Treasury considers there to be a public interest. In addition, Section 77 investigations can consider aspects outside the regulatory system as established by FSMA, allowing a comprehensive review to be undertaken in the public interest. However, it is important to note that a Minister cannot use a Section 77 direction to do anything else at all, or to stop the FCA doing anything else.

The most recent example of Section 77 in action was in relation to the regulation of London Capital & Finance, when the Economic Secretary to the Treasury laid a direction before Parliament on 23 May 2019, and formally directed the FCA to launch an independent investigation. The direction was public and transparent, as we would always expect to be the case. The report was laid before Parliament on 17 December 2020.

I hope that this has clarified the legal underpinning of the FCA’s independence, and the very limited powers that Ministers and the Treasury have in this area. I hope that what I have said has reassured the noble Lord that appropriate legislation is in place, and that he is content to withdraw his amendment.

[Lord Sikka (Lab) [V]]

I am grateful to all noble Lords for their contributions, but somewhat disappointed by the Minister’s response. The examples I gave—if I had time, I could add another dozen—all inevitably relate to the past, when, despite government efforts, things have come to public attention. At no point have Ministers ever volunteered information or made statements that they have stymied investigations.

In the parliamentary debate on the Banking Act 1987, which formally made the Bank of England the supervisor of banks, Ministers claimed that the Bank would be an independent regulator. Then we discovered that there was a whole process of cover-up—the BCCI case, for example. When the Bank of England ceased to be an independent regulator, the next one, the Financial Services Authority, came in. Again, it was claimed that that was independent. Well, under ministerial pressure, it did not intervene. It did not investigate HSBC’s misdemeanours in the UK, and indeed it was a party to cover-up in the US. The US House of Representatives committee report contains some correspondence showing how the Bank of England, the FSA and the Chancellor were pressuring the officials there to go easy on HSBC. The idea that somehow the FCA is some brand new version of independence which we ought to believe simply neglects what has happened in the past, and that is not really very helpful. Of course, Ministers can allay all public fears by simply saying, “Yes, we will embrace independence.” What is wrong with that?

I have visited the US on many occasions. I have met many academics, regulators and businesspeople, and I always ask them two questions when I deliver a seminar or after a meeting. The first question I ask is, “If you could commit financial crime, where would you like to commit it?” The response is always, “The US, because there is a lot of money to be made.” The next question I ask is, “If you are caught, where would you like to be prosecuted?” At that point, laughter sets in and they all say, “The UK.” Indeed, this country has become kind of a standing joke in regulatory circles. If I were referring to any other country and explaining how Ministers and regulators have colluded to protect organisations which, by their own admission, engage in criminal conduct, many Members of the House would say, “Well, that country is corrupt” or “It is a banana republic”. But I find it surprising that the ministerial response is basically “Well, we are good, and we don’t really need to take account of any of these events.” That is really the tip of a corrosive iceberg, because this corruption goes very deep.

I have asked Ministers a number of times to comment on the public statement of Anthony Stansfeld—the Thames Valley police and crime commissioner—that there is a “cover-up” at Cabinet level of the HBOS and RBS frauds. It is interesting that no Minister has denied it, and no Minister has confirmed it. I have quoted a statement from a very senior law enforcement officer—what could be a greater indictment of the UK’s regulation?

Finally, could the Minister please tell us why the Sandstorm report, which is sitting in 1,300 US libraries, is still a state secret in this country after 30 years? I do not know if it is appropriate for him to reply but I would not be opposed to that.

[The Deputy Chairman of Committees (Lord Duncan of Springbank) (Con)]

Does the Minister wish to respond?

[Earl Howe (Con)]

My Lords, the noble Lord has the advantage over me, because I am not personally privy to the case history that he cited, which is now 30 years or so old. However, I will consult my officials and write to him with an answer to his question.

[The Deputy Chairman of Committees (Lord Duncan of Springbank) (Con)]

Can I confirm with the noble Lord, Lord Sikka, that he does not wish to press his amendment?

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[Earl Howe (Con)]

My Lords, I am grateful to my noble friend Lord Hodgson for directing the Committee’s attention to a set of issues that lie at the heart of the agenda for workers’ rights and social justice in the workplace. Let me begin by saying to him that the Government are committed to making the UK the best place in the world to work, and I found myself in considerable sympathy with a great deal of what he said about the connection between employee well-being, high-quality work and national prosperity.

The Government certainly have a role in furthering those ends, and I hope that my noble friend will agree that we have already made good progress in bringing forward measures that support our flexible labour market, while also ensuring the protection of workers’ rights, such as: banning the use of exclusivity clauses in zero-hours contracts; extending the right to a written statement of core terms of employment to all workers; closing a loophole whereby agency workers are employed on cheaper rates than permanent workers; introducing a right for agency workers to receive a key facts page when signing to a company; and quadrupling the maximum fine for employers who treat their workers badly.

The Government are committed to bringing forward measures to establish an employment framework that is fit for purpose and keeps pace with the needs of modern work practices, in due course. We are also committed to building back better from Covid-19. Alongside the Budget, we published our wider economic plan for significant investment in skills, infrastructure and innovation, in Build Back Better: Our Plan for Growth.

During the pandemic we have taken unprecedented action to protect jobs, most notably through the coronavirus job retention scheme—one of the most generous such schemes in the world. And from April 2021, the national living wage will increase by 2.2%, from £8.72 to £8.91, and will be extended to 23 and 24 year-olds for the first time. Taken together, these increases are likely to benefit around 2 million workers.

I fully appreciate that if we are to build back better, progress should be measured by more than just dry economic trends. However, most people would agree that a large part of human and civic well-being lies in people’s livelihoods, and I remind the Committee that in last week’s Budget the Chancellor set out his plan to protect the jobs and livelihoods of the British people.

Amendments 108, 109, and 110 would essentially require the FCA to have regard to “sustainable good work” when conducting their functions, and to embed this principle in the financial system as a whole. Financial services firms would then be required to apply the principle in all their activities, including investment decisions.

The FCA is responsible for a large number of firms and has been given three operational objectives: to protect consumers; to protect and enhance the integrity of the UK financial system; and to promote competition. So I am afraid I do not believe that the FCA is the right body for this function, given its current role, particularly as the issues go far beyond the subject of financial services.

Amendment 122 would require the FCA and the PRA to consider the impact of employee share schemes on sustainable economic growth. The Government want to support hard-working people to share in the success of the businesses for which they work. To encourage this, we offer several tax-advantaged employee share schemes. These provide a range of tax benefits to participating employees and businesses. We keep all employee share schemes under review, to ensure that they remain effective in these ways.

However, once again I do not believe that the UK’s financial services regulators are best placed to carry any changes forward. It is important that they remain focused on their core objectives. Giving them a diffuse set of objectives could undermine focus on consumer protection, financial stability and the sound functioning of financial markets. The body best placed to keep employee share schemes under review is the Government, and we see no need to impose this additional condition on the FCA and the PRA. So, while I am the first to acknowledge the importance of the matters that my noble friend has raised in this debate, I hope he will understand why I do not think it appropriate to amend the Bill in the way that he proposes.

[Lord Hodgson of Astley Abbotts (Con) [V]]

My Lords, I am exceptionally grateful to everybody who has taken part in this debate, including the noble Lord, Lord Knight of Weymouth, who was the first to raise the concept of building back better, which was later picked up by everybody, including my noble friend the Minister.

I am grateful to the noble Baroness, Lady Bowles, who always brings a degree of detailed and forensic expertise to these areas. Of course, I am well aware of her work with the employee share ownership association, as I am of the work of my noble friend Lord Holmes of Richmond on employee ownership trusts, which are critical. I share the interest of the noble Lord, Lord Tunnicliffe, in finding out the results of the consultation that is under way in this general area. It is not often that I find myself supported by the noble Baroness, Lady Bennett of Manor Castle, but I am glad to have her along for the ride. The noble Baroness, Lady Kramer, was certainly right to remind us all how fast everything is changing and that we need to make sure that we are not trying to tackle yesterday’s problems and failing to tackle tomorrow’s.

I am not surprised that my noble friend the Minister could not accept these amendments. He rightly emphasised the work that the Government have done both in employment generally and as a result of the pandemic. If he had accepted the amendments, I probably would have fainted with surprise and been unable to reply to the debate. However, this issue is not going to go away. The weakness of our present regulatory system is that it merely catches and tries to prosecute the bad. In this part of the century, given all the challenges we face, the system should be doing more than that; it should be encouraging the good. This is an area where good could be encouraged, and that would have a huge trickle- down effect on our society as a whole.

Perhaps I may leave noble Lords with a quote from Robert Kennedy, who said that GDP measures

“everything … except that which makes life worthwhile”.

I beg leave to withdraw the amendment.

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[Lord Tunnicliffe (Lab) [V]]

My Lords, the interesting amendment tabled by my noble friend Lord Sikka is another demonstration of the considerable unease felt on all sides of the Grand Committee about the governance of the FCA and the PRA, and their relationship with one another. The amendments moved on Monday by the noble Lord, Lord Blackwell, addressed similar concerns. The question still to be answered is: what would be the composition and terms of reference of such a supervisory board? Is the Treasury not deemed to be performing that role? How can we be confident that the supervisory board would have the authority and expertise to perform a task that my noble friend Lord Sikka rightly identified as being necessary?

I am sorry to sound like a broken record. Are not my noble friend Lord Sikka’s concerns another example of the lack of an effective mechanism of parliamentary scrutiny? Whether an effective parliamentary mechanism can be created is a question that we do not hear or have the ability to address but it must be addressed. I am sure that the Minister will agree.

[Earl Howe (Con)]

My Lords, the Government agree that effective oversight of the FCA and PRA is a crucial component of our regulatory framework. Indeed, noble Lords will remember that in earlier debates we discussed the existing mechanisms to ensure effective independent oversight of the regulators by a diverse range of stakeholders. For example, both the FCA and PRA are required under the Financial Services and Markets Act 2000 to consult independent panels on the impact of their work.

I should say that in general I do not recognise the picture of regulatory capture that the noble Lord, Lord Sikka, painted in relation to our two financial regulators, although I shall of course read his comments in Hansard and make sure that I understand all that he said.

For the PRA, this involves consulting an independent practitioner panel of industry representatives, while the FCA must consult four different statutory panels, representing consumers as well as the financial services industry. Furthermore, the regulators are already under a statutory obligation to publish the results of their public consultations, including on proposed new rules.

The amendment proposes that the FCA and PRA should attend hearings in front of a supervisory board. I simply observe that both bodies must already attend such hearings before parliamentary committees, and those committees may also hear evidence from stakeholders about the performance of the regulators. The FCA, for example, must attend general accountability hearings before the Treasury Select Committee twice a year, while the PRA must appear before that committee after the publication of its annual report. Parliamentary committees of both Houses are also able to summon the regulators to give evidence whenever they may choose. For example, the CEO and chairman of the FCA appeared before the Treasury Select Committee on 1 March to answer questions on their regulation of London Capital & Finance.

The amendment proposes that a supervisory board should have the power to inquire into the adequacy of resources used and available to the FCA and the PRA. However, as we have discussed in previous debates, the Treasury already has the capacity to order independent reviews into the regulators’ economy, efficiency and effectiveness. Therefore, all told, the amendment would result in a duplication of existing opportunities for scrutiny and oversight of the regulators’ resourcing.

I realise that the noble Lord, Lord Sikka, has a close interest in the issue of supervision, but I hope I have convinced him that the PRA and FCA are already accountable in meaningful and tangible ways, and that a diverse range of stakeholders has opportunities to participate in scrutiny of their actions.

Finally, let me say that the Government are not closing down debate on these issues. As I have set out during other debates, the future regulatory framework review is already exploring how our framework needs to adapt to reflect our new position outside the EU. It would be premature to make changes to these arrangements before we consider stakeholder responses to the ongoing consultation. However, I have noted the contributions from the Committee on what form that may take. Against that background, I ask that the amendment be withdrawn.

[Lord Sikka (Lab) [V]]

I am grateful to all noble Lords for their contributions to the debate, and it would be helpful if I could respond to a few points. First, under my amendment both the FCA and the PRA would need a supervisory board. Indeed, if I were redesigning the entire regulatory architecture in the UK, every regulatory body would have a supervisory board, because that is the only way of putting ordinary people, who are practised upon, inside the organisation, to check the conduct of executive boards and reshape the organisational culture, which has given us such problems.

The amendment does not duplicate in any way whatever what any parliamentary committee or review board might do. The supervisory board would simply be engaged in day-to-day strategic oversight. Those people would be in the organisation on a permanent basis, observing, requiring reports, making recommendations and in many ways hoping to prevent the major scandals that we read about later—often some years later. It has been suggested that such regulatory architecture would be cumbersome and expensive. My response, as always, is, “What do you think the cost of the status quo is?” How many more banking crashes can we afford? How many more London Capital & Finances, how many more Connaughts, and other scandals, can we afford? We simply cannot afford them.

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[Lord Tunnicliffe (Lab) [V]]

My Lords, the provision of country-by-country data by banks and investment firms will be an important step forward both in combating financial crime and in addressing the vexed question of the fair taxation of international entities. These problems will be solved only by international negotiation and agreement. It is important that we are seen as an exemplar, and satisfactory country-by-country reporting is surely part of that.

[Earl Howe (Con)]

My Lords, Amendment 121 aims to ensure that banks and investment firms engage in country-by-country reporting related to the provision of tax information. I am happy to assure the noble Baroness that there is no need for this amendment, because such requirements already exist for these firms in legislation.

Banks and most investment firms are already subject to country-by-country reporting requirements as a result of the fourth capital requirements directive, or CRD IV, which we implemented in the UK while we were an EU member state. This was done through a statutory instrument in 2013, and it requires firms to report relevant information on tax and revenue in each country where they have operations. This statutory instrument remains in place today. In order to implement the investment firms prudential regime, this Bill removes investment firms from the prudential requirements for banks in the capital requirements regulation—in order to allow the FCA to implement the new regime. But Schedule 1 to the Bill ensures that country-by-country reporting requirements will continue to apply to FCA investment firms.

There is an exception for small and non-interconnected investment firms. This is because this new regime aims to ensure proportional requirements for investment firms consistent with their size and activities. These firms are, by definition, small and non-interconnected with the wider financial system, and it would be disproportionate for these requirements to apply to them. This is the same approach that the EU took in the investment firms directive.

Amendment 121 would have the effect of preventing small and non-interconnected firms from being carved out in this way. For the reasons just mentioned, I do not think that this is appropriate. Therefore, when it comes to banks and investment firms, I am confident that the existing country-by-country reporting requirements for these firms are appropriate, and I ask the noble Baroness, Lady Bowles, to withdraw the amendment.

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[Lord Tunnicliffe (Lab) [V]]

My Lords, I think the whole subject of supervision and the presentation of information for decision-making is very important. I do not think that it could be shoehorned into this Bill. I hope that the Government will note the concerns about this and meet it where we can in parts of the Bill, but perhaps there has to be an ongoing debate, which will hopefully come to some consensus about how we improve the supervision and accountability of the financial services sector.

[Earl Howe (Con)]

My Lords, I listened carefully to the noble Baroness, Lady Bennett, in her clear introduction to these amendments, and I thank her for the background briefing papers that she kindly sent me this morning. Having said that, I hope she will forgive me if I do not turn the end of these Committee proceedings into an off-the-cuff economics seminar. Indeed, she will not be surprised if, on behalf of the Government, I adopt an orthodox stance on the role of our financial services sector.

It is the Government’s firm contention that the financial services sector is a vital part of our economy. It employs more than a million people, and two-thirds of the people employed in financial and professional services work outside London. It has been a critical source of tax revenue, whatever the exact figure, especially in these difficult times.

The IMF has described the UK’s financial system as a global public good, so the Treasury is not persuaded by the arguments of the Tax Justice Network around “too much finance” or that finance is inherently a bad thing for the real economy. The financial services sector supports British businesses to expand, manage cash flow, invest in themselves and create jobs. The sector is also one of our leading industries in its own right, driven by a concentration of international, and therefore internationally mobile, firms.

Amendment 123 would require regular reports on the impact of the financial services sector on a range of topics including growth, inequality and risk. Amendment 124 would establish a new oversight body which would consider the impact of this sector on the “real economy”.

I have already set out some of the positive impacts that the sector has in its own right on growth, jobs and tax revenue in the UK. But let us not forget that it is also a sector on which all other parts of our economy rely. This means that the sector is a vital source of funding and services for other sectors of the economy. But, of course, it can also mean that if there are problems in the financial services sector, they can affect other parts of our economy. That is why the sector is so vital, and it is why I am able to assure noble Lords that the Government are absolutely committed to transparency around financial risks and welcome independent scrutiny of risk exposure.

The Bank of England’s Financial Policy Committee also has a responsibility to identify, monitor and take action to remove or reduce systemic risks. The committee was established under the Financial Services Act 2012 and must publish and lay before Parliament a financial stability report twice a year. As part of its assessment of financial stability risks, the Financial Policy Committee already considers and reports on risks arising from shadow banking, also referred to as “non-banks”. Given the rapid growth of non-banks, the Treasury has asked the Financial Policy Committee to publish a detailed assessment of the risk oversight and mitigation systems in place for non-banks. That is expected in the first half of this year.

The Office for Budget Responsibility produces and presents a fiscal risks report to Parliament every two years, and it has previously explored risks posed by and to the financial sector. More generally, the FCA and PRA are required to prepare and lay annual reports before Parliament, assessing how effectively their objectives have been advanced. These objectives are set by Parliament, as noble Lords are well aware.

Of course, as I said, one key role of the financial services sector is to provide funding to the so-called real economy. The Government have recognised that, in this Bill, the provisions on the implementation of Basel require the PRA to have regard to the likely effect of its rules on the ability of the firms affected to continue to provide finance to businesses and consumers in the UK, on a sustainable basis in the medium and long term.

The amendment refers to inequality. On that issue, I can reassure the Committee that the Treasury, the FCA and the PRA are all bound by the public sector equality duty. As part of that duty, all three are required by the Equality Act 2010 to have due regard to the need to eliminate discrimination and to promote equality of opportunity in carrying out their policies, services and functions. The FCA publishes a diversity annual report to set specific measurable equality objectives and publish relevant, proportionate information demonstrating its compliance with the public sector equality duty.

Amendment 124 mentions the impact of the financial services sector on climate change and biodiversity. The Committee will I hope forgive me if I do not repeat what I said in earlier debates on that topic, as I have already set out the actions that the regulators are taking in that space.

I turn briefly to the composition of the oversight network that the noble Baroness proposes. I am completely with her in believing that the regulators should take on board a variety of different views; it is important that they do so. In fact, the FCA already has a statutory requirement to consult independent panels representing consumers and practitioners, and the Bank of England has strong links with many academics. Of course, all the groups mentioned are able to respond to consultations, which the regulators are required to undertake, and where their responses must be considered.

As a general comment, I just say that the topics raised by the noble Baroness are those which the Treasury and the regulators consider every day when making financial services policy. I assure her that the Government are committed to ensuring that the sector has a positive impact for consumers and for the economy as a whole. No Government could do otherwise.

Given all that I have said, which I hope has provided some useful perspectives on this topic, I hope that the noble Baroness will feel comfortable in withdrawing her amendment.

[The Deputy Chairman of Committees (Lord Faulkner of Worcester) (Lab)]

My Lords, I have had a request to speak after the Minister from the noble Lord, Lord Sikka. I point out to him that we are almost out of time for this Committee tonight, and I ask him please to be as brief as possible.