Financial Services and Markets Act 2000 (Carrying on Regulated Activities by Way of Business) (Amendment) Order 2011

Lord Davies of Oldham Excerpts

Wednesday 7th September 2011 Grand Committee

[Lord Newby]

My Lords, in view of the statement by the Deputy Chairman at the start of our proceedings about about the photographer, I am now tempted to give a 45-minute speech just to make sure that I get my picture taken in action to prove that I do things in your Lordships’ House other than turn up. However, I probably will not.

I am extremely grateful to the Minister for his introduction to the order, because it filled out the information in the Explanatory Memorandum. The phrase “sale and rent-back” is new to me; I am used to the phrase “sale and lease-back”. My first question relates to that terminology: is there a difference in law between sale and rent-back and sale and lease-back? When I think of sale and lease-back, I have commercial activity in mind. I remember that Tesco was notoriously involved in sale and lease-back of properties via the Cayman Islands a few years ago. I wondered whether this regulation meant that commercial companies involved in those kinds of deals on commercial properties are now brought into the legislative net, or whether the phrase “sale and lease-back” is already recognised in law. If I decided that I wanted to buy a Tesco store and lease it back to them, would I be covered by something that already exists or would this newly apply to me?

My other questions relates to Article 6 about the sunset clause. Within a year, more or less, of this provision coming into force a report has to be produced on how effective it has been. Presumably, the intention is that between then and 2015, if the report suggests that it has been effective, a subsequent order will be made, which no doubt will cover lots of other things as well but would continue this provision. I cannot remember, from when the Financial Services and Markets Act was going through, how this sunset provisions worked. If, as I suspect, we would expect a successor order to this one to be introduced before 1 January 2015, how long would that last for? Is this a rolling series of orders that have to be renewed every five or 10 years? Subject to that, this seems to be a sensible additional component in the consumer protection framework.

[Lord Davies of Oldham]

My Lords, I am somewhat shocked that the noble Lord, Lord Newby, feared that our proceedings might be concluded before the photographer arrives; I have my customary one-hour speech on a statutory instrument, so there is no call for anxiety on that front.

I thank the Minister for both the clear way in which he presented the issues around the SI, and for the sympathetic way in which he addressed himself to those who may be involved in this exercise by being forced by financial circumstances to engage in this operation. As he rightly says, there is an obvious imbalance between the professional service of those who provide the resources and seek to strike the agreement and the householder who most often is already entering into these arrangements through fairly dire financial circumstances. As the Minister accurately said, they are unlikely to think of recourse to financial advice or even to be able to afford it anyway, even if they thought it was a good idea.

This is consumer protection legislation, after all, and we are at one with the Government in seeking to enhance it, particularly as it is derivative from the 2009 Act passed by the previous Labour Administration. However, I ask the Minister to address himself to several points. First, because the order follows reasonably quickly from its predecessor, it is suggested that there was no need for further consultation. On the whole, all such SIs of this kind, prepared by the Treasury and other government departments, should be subject to consultation beforehand. After all, the previous consultation took place against different terms from this order. I am therefore somewhat surprised that no consultation took place specifically on this order.

Secondly, will the Minister address himself to the important point that the noble Lord, Lord Newby, expressed? I am sure that the Committee will be grateful for the clarification—and, I hope, confirmation—that the Minister will be able to give about the nature of the rent position regarding the law and this order.