Financial Services and Markets Bill

Debate between Lord Vaux of Harrowden and Lord Forsyth of Drumlean

Committee stage
Monday 20th February 2023 Grand Committee

[Lord Forsyth of Drumlean (Con)]

My Lords, it might be helpful for me to speak now as my noble friend referred to my amendment, which is in the next grouping. My noble friend has always been cleverer than me; I absolutely, 100% support what she puts forward in this amendment. I have an inkling that the Minister will say, “Ah, but we cannot be instructing Parliament on what to do”; that is why my amendments are in the next group, which we may or may not come to.

My noble friend is presenting the Committee with a Rolls-Royce, whereas my amendment is a Trabant, but it provides an opportunity to do what this amendment would do: set up a powerful Joint Committee of both Houses that is properly resourced. In my view, that is the right solution. I entirely agree with everything that my noble friend said. It seems to me that for the Government to resist this is a great mistake because it actually damages the position of the regulators. The regulators themselves would benefit from having proper scrutiny and accountability.

It is important to remember what this Bill is doing, which is extraordinary. It is taking all our financial regulation, giving it to a bunch of regulators who are not in any way democratically accountable and leaving it to them to decide what they will change, at what pace and everything else. It is absolutely essential that there is parliamentary scrutiny. My noble friend is right in the structure that she is proposing, where the elected House will have a pre-eminent position, but it strikes me as very foolish in this legislation to exclude from any role of scrutiny the House of Lords, which, at the risk of flattering members of the Committee and others, contains people with considerable experience and expertise in this area who could add an enormous amount to the regulators in carrying out their duties.

I seem to recall at an earlier stage—my noble friend Lady Noakes follows these things much more closely than I do—the regulators themselves saying that we need to have proper parliamentary scrutiny in order for us to be certain that we carry the degree of consensus and support that is necessary in the regulatory framework. I hope that my noble friend the Minister will accept this amendment. Then we will be able to make enormous progress because we will not need to discuss my amendment.

[Lord Vaux of Harrowden (CB)]

My Lords, after a number of days in Committee and at Second Reading, it is clear that the major theme of scrutiny of the regulators has emerged and that we have an extraordinary level of cross-party agreement on the Bill—almost unprecedented, as the Minister will see if she turns around and looks behind her.

This is so important because, as the noble Lord, Lord Forsyth, just said, the Bill transfers huge amounts of power to the regulators but does very little to provide Parliament with the means to scrutinise what they do. This has been raised by a number of parliamentary committees, including the EU Financial Affairs Sub-Committee, of which I was a member before it was wound up, and the European Union Committee, among others. The Bill does give strong oversight, scrutiny and direction rights to the Treasury but that is not the same as parliamentary scrutiny.

The Minister said this at Second Reading:

“It is also imperative that the regulators’ new responsibilities are balanced with clear accountability to the Government and Parliament. I assure noble Lords that the Government recognise the importance of parliamentary scrutiny of the work of the Treasury and the regulators.”—[Official Report, 10/1/23; col. 1332.]


However, nothing in the Bill does that. All the Bill does at the moment is make requirements for the regulators to notify the Treasury Select Committee of the consultation and for the regulators to respond in writing to responses to any statutory consultations from any parliamentary committee.

I am sorry, but that is not the same as providing for genuine parliamentary scrutiny of the activities of the regulators. Are the regulators meeting their objectives? Are they protecting consumers from excessive risk and fraud? Are they ensuring stability? Are they carrying out their activities efficiently? Are they encouraging growth and competitiveness? Are they acting in accordance with the climate change rules? Are they horizon scanning for future risks and so on? Nothing in the Bill, as currently drafted, provides for real parliamentary scrutiny as I would understand it.

I am afraid that the noble Baroness has form in this respect. Perhaps I could take her back a few months to the discussions we had around the UK Infrastructure Bank Bill when we queried her reference to parliamentary scrutiny of various documents within that. To paraphrase, she suggested that the more informal parliamentary scrutiny, such as the ability to ask Oral Questions and such like, was sufficient. We seem to be heading down the same way with this Bill. It is not acceptable.

The other day, the noble Lord, Lord Bridges, set out with his usual clarity the three things required for effective scrutiny of the regulators. To paraphrase, they were reporting, independent analysis and parliamentary accountability. There are various amendments in this group and the next group dealing with the third of those: parliamentary accountability. I have added my name to those in the name of the noble Baroness, Lady Noakes, which aim—as she has explained—to create a bicameral committee that will focus specifically on scrutiny of the financial regulators.

I have long argued that financial regulation is such a large subject, so complex, and dealing with such an important sector of our economy, that it deserves a committee dedicated to it. It is just too big to be able to be meaningfully scrutinised by a committee that covers a wider subject area, such as the Treasury Select Committee of the Commons, the Economic Affairs Committee or the Industry and Regulators Committee, as we heard a minute ago. I strongly support the idea of creating a new bicameral committee that will focus specifically on this subject.

Importantly, Amendment 87 from the noble Baroness tries to widen the scope of parliamentary scrutiny. It says that:

“The FSRC—


the new committee—

“may examine or otherwise oversee the administration, policy and operations of”

the various regulators and may examine any consultations and reports issued by them. I am slightly nervous about the word “oversee” as I worry that might imply interference in the independence of the regulators. More importantly, I also want to add that the new committee should consider the impact of the regulators, in addition to administration, policy and operations. As I have said before, it is really important that the scrutiny is forward-looking, that we are horizon scanning for future risks, so I would widen the amendment further rather than it just being backward-looking. As I say, I wholeheartedly support the principle of a new, properly resourced bicameral committee with a much wider remit than the narrow focus that the Bill currently provides to the Treasury Select Committee. As we have heard from the noble Lord, Lord Forsyth, the involvement of this House is incredibly important. There is enormous expertise throughout the House.

I recognise that there are other ways of achieving proper parliamentary scrutiny, as we can see from the various other amendments in this and the next group in the name of the noble Lord, Lord Forsyth. I am not going to get too religious about this. It is clear that there appears to be near-unanimity on the importance of strengthening the arrangements for parliamentary scrutiny of the regulators and of the Treasury, as the Minister said at Second Reading, given the greater responsibility this Bill pushes on to the regulators.

In the interests of time, I am not going to speak on the next group. It would just be repeating what I am saying now. But I hope the Minister will take it as read that I support the theme and concept in the next group. just as I do within this one. What I hope will now happen is that the Minister and all interested Peers can get together between now and Report to try to come up with something mutually acceptable that we can all get behind. Is that something the Minister can facilitate?