Financial Services and Markets Bill

Lord Butler of Brockwell Excerpts

2nd reading
Tuesday 10th January 2023 Lords Chamber

[Lord Butler of Brockwell (CB)]

My Lords, it is a particular pleasure to start by congratulating the noble Lord, Lord Remnant, on his maiden speech. As it happens, I have often heard him speak before, but always in a frivolous context, so I was awaiting his speech today with particular interest—and he did not disappoint. As the noble Lord, Lord Grimstone, said, his expertise will be a great asset to this House as we consider the Bill.

The regulatory issues have been well identified in the speeches that have been made. There seems to me to be three types of balance: the balance between freedom and regulation; the balance between regulatory independence and the role of the Executive; and the balance between the Executive and Parliament. It is particularly important that we get this balance right in debating this Bill about an industry which is of such huge importance to the British economy and where international competition is so very strong.

I welcome the Bill; it has much to be commended in it. In the first place, it is based on a proper examination of the regulations inherited from the EU. That included extensive consultation with practitioners in the future regulatory framework review between 2019 and 2022. In this respect, it is markedly different from the cavalier attitude taken by the Government in other areas of inherited EU law in the Retained EU Law (Revocation and Reform) Bill. Secondly, although I have not always agreed with the noble Lord, Lord Forsyth, on Brexit, I think it is a particularly important and welcome benefit of Brexit that the United Kingdom has the freedom to establish our own regulatory regime without being bound by some of the more ponderous regulations of the European supervisory authorities. However, that freedom needs to be exercised with prudence.

There has been much reference to the provision in the Bill to give regulators a new statutory objective to promote the international competitiveness and growth of the UK economy with special reference to the financial services industry. That objective has been generally welcomed, but as the noble Lord, Lord Sharkey, said, the Government owe us an explanation. Before the 2008 crisis, the Financial Services Authority, the predecessor of the FCA and the PRA, had a duty merely to “have regard to” the competitiveness of the UK financial services sector. In the post-mortem on the 2008 crisis, the Treasury recognised this obligation as a factor in regulatory failure leading up to that crisis and, as the noble Lord, Lord Sharkey, said, it was consequently removed from the regulatory remit by the Treasury and Parliament. Just over a decade later, Ministers are seeking to give the regulators a stronger statutory requirement to make sure that their regulatory activities promote the international competitiveness of the financial services sector, not just to have regard to it. I ask the Minister to explain, in replying to the debate, why the Government have concluded that this reversal is safe.

In the proceedings on the Bill we will be debating the degree of delegation of powers to regulators, the balance between the Treasury’s power to make recommendations to the regulators and the regulators’ independence, and the mechanisms for Parliament to oversee these important operations. However, we have to recognise that parliamentary control, to which there has been much reference, is made worse by Parliament’s own procedures. Even when Parliament is given a role in approving statutory instruments, Parliament’s inability to amend such instruments, and its unwillingness to reject them, makes such power purely nominal. The remedy for that lies in our own hands.

Having said that, I believe that there is much to support in the Bill. Although there are plenty of issues for the House to consider and debate, I regard this as an important Bill, and I welcome it.