Independent Financial Advisers (Regulation)

George Mudie Excerpts

Monday 29th November 2010 Commons Chamber

[Mr George Mudie (Leeds East) (Lab)]

I congratulate the hon. Member for Wyre Forest (Mark Garnier) on securing the debate and on putting the case so comprehensively, in such detail and so fairly. This matter is a great problem, but it had gone under my radar as a Member of Parliament until a constituent of mine who is an independent financial advisor came to my surgery and explained what is happening. He falls into the category of being someone in his 50s who for the first time in 30 years is required to study for an examination to keep his job, regardless of how long he has been in the industry with a complaint-free record. I find that amazing.

As a member of the Treasury Committee, I have tried to aid the hon. Member for Wyre Forest—although he does not need aid—or at least stand alongside him to press for an investigation. I find it worrying that decisions can be taken by a regulator without recourse to the House, and almost without recourse to anyone. Last week, as the hon. Gentleman mentioned, both the FSA and the Governor of the Bank of England came before the Committee, which was an opportunity—although we had a full agenda—to press the matter and question them.

The background against which the decision has to be judged is interesting. The FSA, rightly, admitted to many mistakes in the operation of its light-touch regulations. It was probably more open than the Bank of England, but that is another story. After Northern Rock, the FSA was very straightforward in meeting after meeting; it came clean and accepted criticism about light-touch regulation. However, Hector Sants decided in a policy speech to project a new image—from where, I do not know. He stated that in future financial firms would fear the FSA, but there is a pendulum effect. If something is released it tends to go too far in the other direction, and I rather fear that the FSA, in attempting to salvage its reputation—if it had one—has moved too far to demonstrate that it is not a soft touch as well as a light touch.

Members may think that I exaggerate. The FSA is undertaking two reviews; retail distribution is one and the hon. Member for Wyre Forest mentioned the other—the mortgage market review. If Members have not received many letters and e-mails about the RDR, there will certainly be anguished people contacting them when the full power of the MMR comes into effect and young first-time buyers who are self-employed find it difficult to get a mortgage.

[Nicholas Soames (Mid Sussex) (Con)]

It is not just that the FSA has not listened to the industry or its professionals, which will undoubtedly damage the profession. Does the hon. Gentleman agree that the really foolish thing, which is just as serious, is that it will profoundly damage the interests of the consumer? Yet the FSA seeks to protect the consumer.

[Mr Mudie]

I completely agree.

I forgot to congratulate the hon. Member for Wyre Forest on securing the debate and on introducing it. I also congratulate all Members in the Chamber. It appears that the only thing we can do is to come to the Chamber and voice our anger and concern. When the Committee discussed with the Bank of England the new powers of the new regulator, it was the British Bankers Association, of all people, who raised the democratic deficit. The point was made that we were handing so much power to the regulators and the banks that there was great danger that they would be pronouncing and taking action on matters that affect us as representatives of our constituents —matters relating to employment and standards of living. In our humility and generosity, we are passing great power to the regulators on matters for which we will be accountable—perhaps not in law, but in the view of the public. We will be accountable for the actions of the regulators, so a rethink is very necessary.

[Alun Cairns]

I thank the hon. Gentleman for giving way. I, too, pay tribute to my hon. Friends the Members for Wyre Forest (Mark Garnier) and for West Worcestershire (Harriett Baldwin) on initiating the debate. I congratulate them on that.

Does the hon. Member for Leeds East (Mr Mudie) accept that the FSA could be acting in the context of, on the one hand, lack of regulation in the banking industry in the past, leading to a complete knee-jerk reaction and, on the other, disproportionate regulation at the consumer end of the market, such as the debate is highlighting?

[Mr Mudie]

I do not completely agree. I think the banks could be the beneficiaries if 30,000 independent financial advisers are taken out of the market. The hon. Member for Wyre Forest referred to Lord Turner, whose attitude was that the number would not be 30,000, but between 10,000 and 20,000, which was acceptable, otherwise the FSA would not be doing it. There was no explanation why the number was acceptable, or of the unintended consequences of the decision. The authority had just decided that it would be acceptable.

Ordinary people who have worked in the industry for decades will be hurt by the decision. It is not a knee-jerk response to oppose the direction of a decision and the manner in which it is being imposed on individuals who have worked in the industry without blemish. It would not happen in other industries and other practices. In addition, there seems to be a lack of interest in the diminution of choice for the ordinary consumer of all ages if the decision is forced through.

The Treasury Committee has asked for responses. I plead with every Member, whether or not they are in the Chamber, to do some writing and complain. They should ask the very able Chairman of the Committee, who is standing by the Speaker’s Chair, to call a review meeting so that we can call individuals on this subject. We do not want to tie it up in a long agenda where it receives only 10 minutes’ scrutiny; we want a full meeting where witnesses are placed under real scrutiny and asked both to account for the decision and to reconsider it.