Financial Services and Markets Bill

Mel Stride Excerpts

2nd reading
Wednesday 7th September 2022 Commons Chamber

[Mel Stride (Central Devon) (Con)]

I rise to broadly support the Bill. I echo the congratulations of my right hon. Friend the Member for Richmond (Yorks) (Rishi Sunak) to my hon. Friend the Member for Salisbury (John Glen) on all his work, and I thank him for his appearances before the Select Committee in that regard—he probably bears the scars. I also welcome my good friend the Minister to his place and I thank him for setting out the Bill’s provisions with such clarity in his opening remarks.

The Bill occurs because of Brexit—because of the opportunities and the new freedoms that we have as a consequence of leaving the European Union. We have heard much about solvency II in this debate and more widely when we have discussed the new regulatory landscape that we are moving into. My right hon. Friend the Member for Richmond (Yorks) presented us with a rich tapestry of additional ideas about where he believes that the Government can go still further, which makes me feel that we should perhaps have him before the Treasury Committee again to tell us more about that; that might be a recurrent nightmare for him, however, so perhaps we will not inflict it on him at this moment.

With that greater freedom comes the critical issue of scrutiny by Parliament and by Government. When it comes to scrutiny by Parliament, I believe that the Treasury Committee is and should remain right at the centre of that process. We are moving from a bureaucratic, committee-based process within the European Union that literally goes through regulation line by line. It is important that it does that in the context of what were 28 member states, because an element of negotiation is involved at every stage of the scrutiny of those regulations. We are in a different environment now; we can be much more flexible and nimble, but we still need to be effective in that regard, which is why the Treasury Committee should be at the heart of that process.

As has already been mentioned, we have set up a Sub-Committee that will look specifically at regulation as it comes out of the statute book and cascades down to the rulebooks and manuals of the regulators. We believe that we can be selective, nimble and appropriate in the way that we address that. The Sub-Committee will have the same powers as the full Committee to send for persons and to have oral hearings. In fact, we have already had our first hearing into the Prudential Regulation Authority’s work around the strong and simple regime for the lighter-touch regulation of firms that do not come anywhere near the threshold for being potentially systemically important within the sector. In terms of staffing and resources, the Sub-Committee has the ability to, and will, take on additional resource by way of expert assistance, and it has the capacity to gear up and gear down as necessary, depending on the workload that comes its way.

I noted the Minister’s comments about the statutory duty that will come in for the regulators to inform the Select Committee when a review is published, and for the regulators to respond to its various consultations as they occur. I suspect that the Select Committee will look at some possible amendments to that, because we will be particularly interested in making sure that we have the power and authority at the centre of this process to effectively carry out the things that we need to do in that area.

I turn to the Government’s powers of scrutiny in the Bill, which touch on the balance between the independence of the regulators and the importance of holding them to account, particularly in terms of seizing the opportunities of this post-Brexit world. Prior to the Minister’s opening speech, my understanding was that there would be—as there is in the current Bill—a requirement that the regulators could be instructed by the Treasury to review rules on the basis of a public interest test and, in particular, where there had been significant market developments or where the rules were not meeting their requirements or purpose. It was to be used only in exceptional circumstances. At that point, if a review were held, as I understood it, it would not have been incumbent on the regulator to make any particular changes.

I think I heard the Minister say earlier, however, that an amendment will be tabled in Committee to allow the Treasury to have the power to direct the regulators to make changes, which is a significant shift. I know that that was welcomed a moment ago by my right hon. Friend the Member for Richmond (Yorks), and I understand the upsides of this. I think it is important that regulators are held to account, particularly when it comes to our competitiveness and so on. However, the questions arise: what is the threshold for this public interest test and how frequently will it be used? The fear must be there to some degree—this is something the Committee will want to look at very carefully—that this may be an overly overbearing power for the Treasury, which may impinge on the independence of the regulators themselves.

The Bill has the new secondary objectives for the FCA and the PRA, which I broadly welcome. I welcome the fact that they are medium and long-term objectives, not short-term objectives. I think that is very important because it means we are not going to take risks with the potential architecture, as it were, but focus on the medium and longer term when it comes to greater competitiveness. I also welcome the fact that they are secondary objectives and will not therefore interfere directly with the prudential objectives of those organisations.

Finally—I am aware of the time and know that many others want to speak—could I touch on the Bank of England and its mandate? I know that the Bank of England’s remit or mandate does not feature directly in this Bill, but much has been said about it and the importance of its independence, and I want to underscore that importance in this debate. There was a period, going back some weeks and months, when perhaps because, understandably, many Members and those who are now in government may have looked at the Bank of England and said that, because inflation is so far adrift from its target of 2%, it is therefore entirely unfit for purpose. I do not subscribe to that view. I do not believe that the Bank has been perfect, but I think it has faced extraordinary situations that have made its ability to keep inflation down to about 2% really a task that no central banker could have achieved.

It will be vital that the Bank of England maintains its independence, that politicians are kept out of monetary policy and that Chancellors do not determine interest rates if we are going to have a credible approach to monetary policy and all the benefits that brings. As my right hon. Friend the former Chancellor has said at the Government Dispatch Box on occasion in the past, if we take a 20-year view of the Bank of England’s performance, it has actually been spot-on at about 2%. Perhaps I can leave this debate with the thought that we must guard the independence of the Bank of England.

[Several hon. Members rose—]