§
Amendment made: No. 240, in page 2, line 17, leave out paragraph (f) and insert—
(f) the need to minimise the adverse effects on competition that may arise from any exercise of its general functions;
(g) the desirability of facilitating competition between those who are subject to any form of regulation by the Authority.".—[Miss Melanie Johnson.]
§ Dr. Vincent Cable (Twickenham)I beg to move amendment No. 456, in page 2, line 18, at end insert—
(g) the need to facilitate access to appropriate financial services for disadvantaged consumers.".Much of the attention of the Minister and her officials has been directed to the concerns of the City and the lightness of touch of regulation under the FSA, and we have devoted relatively little attention to the retail consumer interests, of which there are several. I raised in Committee the broad category of vulnerable consumers, which is a group of people who could be defined in terms of age, geography, mobility and income. The Minister gave a sympathetic reply, but said that such concerns 264 could be dealt with under the general objective of consumer protection contained in the Bill. I think that she accepted the spirit of the amendment I tabled in Committee, but thought that there was no reason for particular provision to be made.I return to the issue for one particular reason. In another capacity, I am increasingly involved in the scrutiny of the Utilities Bill, which came before the House a few weeks ago. It contains a clause that specifically deals with disadvantaged consumers, and that represents an evolution in thinking in Government about how regulation should be handled. Until recently, utility regulators took the view that matters of poverty and age were nothing to do with them. The hon. Member for Ochil (Mr. O'Neill), the Chairman of the Select Committee on Trade and Industry, recounts a tale of the time the gas regulator appeared before the Committee and said that poverty had nothing to do with her. She claimed that it was the business of the Department of Social Security and the Treasury and should not be brought to the regulators.
The Department of Trade and Industry now understands that poverty is a regulatory issue and that it has, and should have, direct responsibility for focusing on the distinct problems of disadvantaged consumers. There are strong analogies between regulating utility contracts, which are complex and involve switching costs, and the kind of transactions that many consumers have to deal with in the financial services market. I do not know whether the Department has compared notes with the Treasury, but it seems that the regulation of financial services may be lagging behind the regulation of utilities in that respect. Perhaps some cross-fertilisation could take place.
The issue is important and I wish to press it. We are concerned on behalf of many people who face two sets of problems. The first is the problem of financial exclusion, which is something that the Minister knows about, because the Treasury has led the interdepartmental work on financial exclusion. She will know that some 1.5 million people are effectively shut out of the system of banking and financial intermediation.
The second problem is the exploitation of vulnerable people by financial institutions. We all know of many cases of 75-year-olds who have sought advice from bank branch staff. The old people do not understand that the advice is not independent and they are persuaded to switch large sums of money into an account that yields high commission income for the bank but is not in the interests of the customers. Some of those cases have been highlighted in the Daily Mail, which has run a campaign on the issue for some years.
The issue of vulnerable consumers is, therefore, partly a question of access, but also of abuse and consumer protection, which are not sufficiently covered in the Bill. What role can the FSA play, other than in its broad commitment to consumer protection? Well, the FSA could perform various specific functions and there is the possibility of cross-subsidising some of its regulatory activities. Certain kinds of financial institutions, such as credit unions, cater to the financially excluded, and cross-subsidy within the FSA arrangements could permit such work to be given priority, together with the use of information.
Perhaps most important is encouraging or, in some cases, requiring financial institutions to have proper safeguards and codes of conduct on how to deal with 265 disadvantaged consumers. For example, some banks whose branches have brought them bad publicity, such as Lloyds TSB, have adopted codes of good practice. Senior managers must approve investments by customers over the age of 75. Such customers must have an accompanying friend or mentor to advise them; they are encouraged to take away the contract before they sign it, and are not allowed to invest in long-maturing investments. There is a series of provisions that can be, and are, built in by the more forward-looking financial institutions—Nationwide is another one—but which are not common practice. The Financial Services Authority could ensure that such practice is generalised.
4.15 pm
This is an important issue that affects many people but has been omitted from the Bill. I understand that such a provision may previously have been felt to be insufficient. However, given the way in which regulatory thinking in government is advancing, particularly when we consider the Utilities Bill, I should need to be persuaded by the Minister that there were very good reasons for not pressing the amendment to a Division.
§ Mr. FlightThe issue raises an important subject on which all parties in the House agree—that is, that more than 1.5 million people do not use financial services. However, I think that the thoughts of the hon. Member for Twickenham (Dr. Cable) might have been led up the wrong path by his experience in connection with the Utilities Bill.
With regard to this Bill's objectives, the Government, the Opposition and the FSA have all stressed that they are the key guidelines that the FSA is to follow. I am sure that the hon. Gentleman is not suggesting that in that category of objectives the FSA should be thinking about making rules that were biased towards one particular section of the community.
Many things can be done to address and help those who do not use financial services. The hon. Gentleman cited many voluntary procedures. Credit unions are being encouraged to participate, Barclays bank is doing deals with post offices, and so forth. I think that on reflection the hon. Gentleman would agree that it is not appropriate for the issue to be listed as one of the five key objectives of financial regulation. I suggest that it is playing to the gallery, rather, to raise the point in this context.
We want to hear what other initiatives the Government suggest to help those consumers, and to encourage banks and others to provide services where they do not exist. As has been pointed out, much of that will have to be done on a cross-subsidised basis. Again, it is not really the role of regulation to have an objective telling businesses to cross-subsidise.
As for the right advice and products being provided for older people in particular, that is covered in the Bill under best practice. Under the Bill, it is a sin for advisers or providers to recommend a product to older people which is not suitable for their circumstances, and they can be punished if they do so. The amendment would not add anything in that area. Furthermore, I am sure that the industry is developing codes of good practice, and the FSA can encourage such development under its objective to provide greater education.
266 There is no disagreement with the spirit of the proposal, but the amendment itself is unsuitable.
§ Miss Melanie JohnsonAs financial exclusion is a matter of concern to the whole House, I share the starting point adopted by the hon. Members for Twickenham (Dr. Cable) and for Arundel and South Downs (Mr. Flight). It is certainly a matter of great concern to the Government. We have focused on the needs of vulnerable consumers in several areas, and I shall touch on them when I come to answer the specific questions put by the hon. Member for Arundel and South Downs about action to help consumers.
Financial exclusion limits the ability of many of the poorest people in society to have access to or enjoy the benefits of an ever-increasing range of financial services. It is often more expensive for them to carry out transactions than it is for those of us with access to such services.
The Bill already contains two important provisions that help us towards our objective. First, there is the consumer awareness objective, set out in clause 4, which gives the Financial Services Authority an important role in providing the public with information. In part, of course, that is about helping those who already use financial services, but the objective is not only current users. It also gives the FSA a role in providing information and promoting the benefits—at least in general terms—of using financial services.
Hon. Members may be aware that the FSA has been working hard on this area. It has issued various consumer-oriented publications, such as its series of mini-guides. It has worked with consumer interest groups and citizens advice bureaux on consumer education initiatives. It has also worked with the Department for Education and Employment on possible topics for inclusion in the national curriculum, which will help young people to participate more actively as customers in the financial services market of the future. I very much welcome those developments, as both hon. Members will.
The consumer protection objective is also relevant. We have carefully sought to define "consumer" widely in clause 5, so that the people whom the FSA is required to protect include those not currently using financial services, but contemplating doing so. The Treasury has given considerable thought to the idea of imposing on the FSA a duty to have regard to financial exclusion, both in the context of the Bill and as part of its wider agenda on the topic. However, our conclusion was that the kind of provision proposed would not be the right way ahead. Indeed, as the hon. Member for Arundel and South Downs said, that was the drift of our argument in Standing Committee A.
As regards the points about action already taken, the main thrust of our announcements has been through policy action team report 14, which included proposals for an improved regulatory framework for credit unions, which have an important role to play; a new central services organisation to support and enhance the role of the credit unions; support for more widespread introduction of insurance-with-rent schemes so that people may have access to home contents insurance; exploring the possibility of widening the role of the social fund to help those in low-paid employment; and greater disclosure by the banks of their provision of services to the socially excluded.
267 Further steps include deregulation of the industrial insurance business—often known as the home services insurance business—which many insurers see as vital to the provision of door-to-door and locally delivered insurance and savings products. We will also provide greater freedoms for friendly societies. One of our most important initiatives aims at ensuring that people will have access to basic bank accounts, which we are pursuing with the banks and the British Bankers Association. We want to make sure that basic bank accounts are available to everyone who wants one for basic banking purposes. We are also in regular discussion with the industry—both firms and trade associations—about how we can work together.
The hon. Member for Twickenham talked about banks and codes of good practice. The BBA code of practice covers access and the identification required to open a bank account. Most major banks are party to that code. Our initiatives will lead to advances on the issues that concern the hon. Gentleman.
I agree with the hon. Member for Arundel and South Downs that the amendment would not be the right way to advance matters. It would not be sensible to add a further principle to the Bill, as the amendment would do. However, we anticipate that the FSA will consider protecting consumers as part of its general work and will seek to educate and inform consumers. We attach great importance to that principle, and I hope that the hon. Member for Twickenham will withdraw his amendment in the light of my remarks.
§ Dr. CableI thank the Minister for that reply. However, although its tone was helpful, it does not quite answer my concerns. I do not ask for much; we are not trying—as the hon. Member for Arundel and South Downs (Mr. Flight) suggested—to elevate the provision to one of the Bill's key objectives. That is not the point. We realise that consumer protection is the overriding concern.
We want our modest request to be taken into account, however. I do not know why the Government have a problem with it. If I understand the Minister's reply correctly, she said that the Government had been thinking about how they could insert a phrase so that we could have regard to financial exclusion and the difficulties faced by low-income and older consumers. But the Government have not met that requirement—perhaps it will be dealt with in another place. In the absence of a Government provision, the amendment is the only proactive suggestion for handling the matter.
I accept much of what the Minister said. A great deal is happening on the financial exclusion front; I do not want to minimise that. Many good initiatives have been taken and I welcome them. However, we have to confront an environment in which the FSA has a broad remit to examine such problems.
In debates on other clauses, we discussed the problem of what happens under different management. For example, Mr. Howard Davies will move on, and a different cultural environment will develop in which there is no pressure on the FSA management to give those issues the importance that they deserve. That is why it is essential to have some explicit commitment in the measure to oblige the FSA to treat certain issues with some importance—especially education and the prevention of abuse, both of which are serious problems for people on low incomes and for very elderly people.
§ I therefore ask the House to accept the amendment.
§ Question put, That the amendment be made:—
§ The House divided: Ayes 38, Noes 305.
270| Division No. 68] | [4.27 pm |
| AYES | |
| Allan, Richard | Kirkwood, Archy |
| Ashdown, Rt Hon Paddy | Livsey, Richard |
| Baker, Norman | Maclennan, Rt Hon Robert |
| Ballard, Jackie | Michie, Mrs Ray (Argyll & Bute) |
| Beggs, Roy | Moore, Michael |
| Brand, Dr Peter | Oaten, Mark |
| Breed, Colin | Öpik, Lembit |
| Burnett, John | Rendel, David |
| Burstow, Paul | Ross, William (E Lond'y) |
| Cable, Dr Vincent | Russell, Bob (Colchester) |
| Campbell, Rt Hon Menzies (NE Fife) | Smyth, Rev Martin (Belfast S) |
| Stunell, Andrew | |
| Cotter, Brian | Taylor, Matthew (Truro) |
| Donaldson, Jeffrey | Thompson, William |
| George, Andrew (St Ives) | Tyler, Paul |
| Hancock, Mike | Webb, Steve |
| Harvey, Nick | Welsh, Andrew |
| Heath, David (Somerton & Frome) | Willis, Phil |
| Hughes, Simon (Southwark N) | |
| Keetch, Paul | Tellers for the Ayes: |
| Kennedy, Rt Hon Charles (Ross Skye & Inverness W) | Mr. Adrian Sanders and |
| Mr. Tom Brake. |
| NOES | |
| Ainger, Nick | Caplin, Ivor |
| Ainsworth, Robert (Cortry NE) | Casale, Roger |
| Alexander, Douglas | Caton, Martin |
| Allen, Graham | Cawsey, Ian |
| Ashton, Joe | Chaytor, David |
| Atkins, Charlotte | Chisholm, Malcolm |
| Austin, John | Clapham, Michael |
| Banks, Tony | Clark, Rt Hon Dr David (S Shields) |
| Barnes, Harry | Clark, Paul (Gillingham) |
| Barron, Kevin | Clarke, Charles (Norwich S) |
| Battle, John | Clarke, Eric (Midlothian) |
| Bayley, Hugh | Clarke, Rt Hon Tom (Coatbridge) |
| Beard, Nigel | Clarke, Tony (Northampton S) |
| Beckett, Rt Hon Mrs Margaret | Clwyd, Ann |
| Benn, Rt Hon Tony (Chesterfield) | Coaker, Vernon |
| Benton, Joe | Coffey, Ms Ann |
| Bermingham, Gerald | Coleman, Iain |
| Best, Harold | Colman, Tony |
| Betts, Clive | Connarty, Michael |
| Blackman, Liz | Cooper, Yvette |
| Blair, Rt Hon Tony | Corbett, Robin |
| Blears, Ms Hazel | Corston, Jean |
| Blizzard, Bob | Cox, Tom |
| Blunkett, Rt Hon David | Cranston, Ross |
| Boateng, Rt Hon Paul | Crausby, David |
| Borrow, David | Cryer, Mrs Ann (Keighley) |
| Bradley, Keith (Withington) | Cryer, John (Hornchurch) |
| Bradley, Peter (The Wrekin) | Cummings, John |
| Bradshaw, Ben | Curtis-Thomas, Mrs Claire |
| Brinton, Mrs Helen | Dalyell, Tam |
| Brown, Rt Hon Gordon (Dunfermline E) | Darling, Rt Hon Alistair |
| Darvill, Keith | |
| Brown, Rt Hon Nick (Newcastle E) | Davey, Valerie (Bristol W) |
| Brown, Russell (Dumfries) | Davidson, Ian |
| Browne, Desmond | Davies, Rt Hon Denzil (Llanelli) |
| Buck, Ms Karen | Davies, Geraint (Croydon C) |
| Burden, Richard | Davis, Rt Hon Terry(B'ham Hodge H) |
| Burgon, Colin | |
| Butler, Mrs Christine | Dawson, Hilton |
| Campbell, Alan (Tynemouth) | Denham, John |
| Campbell, Ronnie (Blyth V) | Dismore, Andrew |
| Campbell-Savours, Dale | Dobbin, Jim |
| Cann, Jamie | Doran, Frank |
| Dowd, Jim | Lepper, David |
| Drew, David | Leslie, Christopher |
| Eagle, Angela (Wallasey) | Levitt, Tom |
| Eagle, Maria (L 'pool Garston) | Lewis, Terry (Worsley) |
| Edwards, Huw | Liddell, Rt Hon Mrs Helen |
| Ellman, Mrs Louise | Linton, Martin |
| Ennis, Jeff | Livingstone, Ken |
| Etherington, Bill | Lloyd, Tony (Manchester C) |
| Reid, Rt Hon Frank | Lock, David |
| Fisher, Mark | Love, Andrew |
| Fitzpatrick, Jim | McAvoy, Thomas |
| Fitzsimons, Lorna | McCabe, Steve |
| Flint, Caroline | McCafferty, Ms Chris |
| Foster, Rt Hon Derek | McCartney, Rt Hon Ian (Makerfield) |
| Foster, Michael Jabez (Hastings) | |
| Foster, Michael J (Worcester) | McDonagh, Stobhain |
| Fyfe, Maria | Macdonald, Calum |
| Galloway, George | McDonnell, John |
| Gardiner, Barry | McFall, John |
| Gerrard, Neil | McGuire, Mrs Anne |
| Gibson, Dr Ian | McIsaac, Shona |
| Gilroy, Mrs Linda | McKenna, Mrs Rosemary |
| Godman, Dr Norman A | McNamara, Kevin |
| Godsiff, Roger | McNulty, Tony |
| Goggins, Paul | Mactaggart, Fiona |
| Golding, Mrs Llin | McWalter, Tony |
| Gordon, Mrs Eileen | McWilliam, John |
| Griffiths, Jane (Reading E) | Mahon, Mrs Alice |
| Griffiths, Nigel (Edinburgh S) | Mallaber, Judy |
| Griffiths, Win (Bridgend) | Marsden, Gordon (Blackpool S) |
| Grocott, Bruce | Marsden, Paul (Shrewsbury) |
| Gunnell, John | Marshall, David (Shettleston) |
| Hall, Mike (Weaver Vale) | Marshall, Jim (Leicester S) |
| Hall, Patrick(Bedford) | Marshall-Andrews, Robert |
| Hamilton, Fabian (Leeds NE) | Martlew, Eric |
| Hanson, David | Maxton, John |
| Harman, Rt Hon Ms Harriet | Meacher, Rt Hon Michael |
| Heal, Mrs Sylvia | Meale, Alan |
| Healey, John | Michie, Bill (Shefld Heeley) |
| Henderson, Ivan (Harwich) | Milburn, Rt Hon Alan |
| Hesford, Stephen | Miller, Andrew |
| Hill, Keith | Mitchell, Austin |
| Hinchliffe, David | Moran, Ms Margaret |
| Hodge, Ms Margaret | Morgan, Ms Julie (Cardiff N) |
| Hopkins, Kelvin | Morley, Elliot |
| Howarth, George (Knowsley N) | Morris, Rt Hon Ms Estelle (B'ham Yardley) |
| Howells, Dr Kim | |
| Hughes, Ms Beveriey (Stretford) | Mountford, Kali |
| Humble, Mrs Joan | Mudie, George |
| Hurst, Alan | Mullin, Chris |
| Hutton, John | Murphy, Denis (Wansbeck) |
| Iddon, Dr Brian | Murphy, Jim (Eastwood) |
| Jackson, Helen (Hillsborough) | Naysmith, Dr Doug |
| Jamieson, David | O'Hara, Eddie |
| Jenkins, Brian | Organ, Mrs Diana |
| Johnson, Alan (Hull W & Hessle) | Pearson, Ian |
| Johnson, Miss Melanie (Welwyn Hatfield) | Pickthall, Colin |
| Plaskitt, James | |
| Jones, Rt Hon Barry (Alyn) | Pollard, Kerry |
| Jones, Helen (Warrington N) | Pond, Chris |
| Jones, Ms Jenny (Wolverh'ton SW) | Pope, Greg |
| Pound, Stephen | |
| Jones, Jon Owen (Cardiff C) | Powell, Sir Raymond |
| Jones, Dr Lynne (Selly Oak) | Prentice, Ms Bridget (Lewisham E) |
| Jones, Martyn (Clwyd S) | Prentice, Gordon (Pendle) |
| Jowell, Rt Hon Ms Tessa | Prescott, Rt Hon John |
| Kaufman, Rt Hon Gerald | Prosser, Gwyn |
| Keeble, Ms Sally | Purchase, Ken |
| Keen, Alan (Feltham & Heston) | Quin, Rt Hon Ms Joyce |
| Kemp, Fraser | Quinn, Lawrie |
| Khabra, Piara S | Radice, Rt Hon Giles |
| Kidney, David | Rammell, Bill |
| Kilfoyle, Peter | Rapson, Syd |
| King, Andy (Rugby & Kenilworth) | Raynsford, Nick |
| King, Ms Oona (Bethnal Green) | Reed, Andrew (Loughborough) |
| Kumar, Dr Ashok | Reid, Rt Hon Dr John (Hamilton N) |
| Rogers, Allan | Taylor, David (NW Leics) |
| Ross, Ernie (Dundee W) | Thomas, Gareth R (Harrow W) |
| Ruane, Chris | Timms, Stephen |
| Ruddock, Joan | Tipping, Paddy |
| Russell, Ms Christine (Chester) | Todd, Mark |
| Ryan, Ms Joan | Touhig, Don |
| Salter, Martin | Trickett, Jon |
| Sarwar, Mohammad | Truswell, Paul |
| Savidge, Malcolm | Turner, Dennis (Wolverh'ton SE) |
| Sawford, Phil | Turner, Dr Desmond (Kemptown) |
| Sedgemore, Brian | Turner, Neil (Wigan) |
| Shaw, Jonathan | Twigg, Derek (Halton) |
| Sheerman, Barry | Twigg. Stephen (Enfield) |
| Sheldon, Rt Hon Robert | Vis, Dr Rudi |
| Shipley, Ms Debra | Walley, Ms Joan |
| Short, Rt Hon Clare | Ward, Ms Claire |
| Simpson, Alan (Nottingham S) | Wareing, Robert N |
| Singh, Marsha | Watts, David |
| Skinner, Dennis | White, Brain |
| Smith, Rt Hon Andrew (Oxford E) | Whitehead, Dr Alan |
| Smith, Angela (Basildon) | Wicks, Malcolm |
| Smith, Jacqui (Redditch) | Williams, Rt Hon Alan (Swabsea W) |
| Smith, Llew (Blaenau Gwent) | Williams, Alan W (E Carmarthen) |
| Snape, Peter | Williams, Mrs Betty (Conwy) |
| Soley, Clive | Wills, Michael |
| Speller, John | Wilson, Brian |
| Squire, Ms Rachel | Winnick, David |
| Starkey, Dr Phyllis | Winterton, Ms Rosie (Doncaster C) |
| Steinberg, Gerry | Wise Audrey |
| Stewart, David (Inverness E) | Wood Mike |
| Stinchcombe, Paul | Woodward, Shaun |
| Stoate, Dr Howard | Woolas, Phil |
| Strang, Rt Hon Dr Gavin | Worthington, Tony |
| Stringer, Graham | Wright, Anthony D (Gt Yarmouth) |
| Stuart, Ms Gisela | Wright, Dr Tony (Cannock) |
| Sutcliffe, Gerry | |
| Taylor, Rt Hon Mrs Ann (Dewsbury) | Tellers for the Noes: |
| Mr. Kevin Hughes and | |
| Taylor, Ms Dari (Stockton S) | Mr. David Clelland. |
§ Question accordingly negatived.
§ Miss Melanie JohnsonI beg to move amendment No. 241, in page 2, line 23, leave out "advice and" and insert "general".
§ Mr. Deputy Speaker (Sir Alan Haselhurst)With this it will be convenient to discuss Government amendments Nos. 242 to 244, 90, 117, 418, 419, 448, 125, 126, 128 to 134, 449, 454, 138, 141 to 143, 330 and 443.
§ Miss JohnsonThe amendments make minor drafting changes designed to achieve accuracy and consistency in the Bill. I do not propose to speak to any of them, unless hon. Members raise specific questions.
§ Mr. FlightMany of the points covered by the amendments were raised by us in Committee. I shall comment on two issues.
In amendment No. 241, the wording limits the general functions in relation to advice and guidance to only general guidance. This is largely a semantic issue, but in our view that is wrong. It is a general function of the FSA to give ad hoc advice and information on an informal basis, and we would not want the amendment to be interpreted in such a way that that was not a general function of the FSA.
Amendments Nos. 448 and 454 empower the FSA to call for specified information and impose requirements on the operations of collective investment schemes outside 271 the UK in the designated territories, on the same basis as it is empowered to do in relation to schemes run by UK-authorised persons. That is tantamount to claiming an extraterritorial power, which is not appropriate.
Machinery already exists to remove designated status approval if the FSA is not satisfied with the way in which a scheme outside the UK is being run. I trust that the Lords will deal with the matter further. It is not appropriate, as the amendments imply, for the FSA to claim regulatory powers over other countries that have their own regulatory regimes.
Amendment agreed to.
Amendment made: No. 242, in page 2, line 26, at end insert—
( ) 'General guidance' has the meaning given in section 130(5).".—[Miss Melanie Johnson.]
§ Mr. David Heathcoat-Amory (Wells)I beg to move amendment No. 235, in page 2, line 26, at end insert—
(4A) The Authority must ensure that its staff responsible for or involved in—I am sorry that we have only a few minutes to debate a rather important issue—the qualifications of FSA staff—as it is a matter of considerable concern to the financial services industry. Although many of those in the industry have faith in the competence and ability of the senior members of the authority, they often have to deal with more junior staff, many of whom lack experience, to put it mildly. A number of the previous regulatory bodies, such as the Personal Investment Authority, achieved a reputation for having staff who did not always exhibit the required professionalism and experience.shall be suitably competent and shall have sufficient knowledge of the relevant financial sector to fulfil their functions.
- (a) monitoring, investigating or disciplining authorised or approved persons or,
- (b) investigating persons suspected of engaging in, or of requiring or encouraging another person to engage in, market abuse or any offence for which it can institute proceedings, and
- (c) drafting, or giving instructions to the draftsman of, rules, statements of principle or codes
The authority will wield substantial discretionary power. Comparatively junior staff will therefore have considerable authority. Even if firms are not frightened of them, they believe that they have a right to expect that staff are properly trained. Many firms and people in the market complain that they spend a great deal of time educating the regulatory staff in basic rules of business. That takes time and is the reason for many of the compliance costs. Will the staff hired and retained by the authority measure up to the standards that they require of others when they become authorised persons?
4.45 pm
I asked the Minister that question in Committee and did not receive an answer. The matter is especially important given that, under the compensation scheme, authority staff will run businesses, or at least make business decisions about firms—for example, when and how they can be compensated. In the case of insurance companies, they can take over businesses and make important decisions about them. It is important that the staff measure up to the standards that they require in others. Will FSA staff be required to be authorised persons? If not, why not?
272 My other question deals with the adequacy of current staffing in the FSA. On 4 February,The Timesreported that the authority was still attempting to recruit approximately 150 staff. The article stated:
An FSA spokesman admitted yesterday that the regulator was still short of the 2,000 staff it needed to carry out its revamped and expanded function, which has been set out in the Bill.That is worrying. We want an effective regulator, which has not only the right quality of staff but enough of them to discharge the functions that the House is giving it. I hope that the Minister can answer the questions about the training and competence of the staff and their number.
§ Miss Melanie JohnsonThe Joint Committee considered the staffing of the FSA. It rightly concluded that it is important for the FSA to attract appropriately qualified staff, that their salaries need to be competitive and that there is merit in seconding practitioners with up-to-date experience of trading in regulated industries. I am sure that the right hon. Member for Wells (Mr. Heathcoat—Amory) agrees with that. However, the Committee also concluded that staffing is not a matter for the Bill. That is crucial, and I agree whole-heartedly with the Committee. It is not appropriate for a Bill to go into staffing details for an organisation such as the FSA.
The Bill already deals with some of the issues about which the right hon. Gentleman is worried. It makes board members responsible for arrangements for the discharge of its functions, and gives the non-executive members a specific role in reviewing the discharge of the FSA's functions. The board, not members of its staff, will be responsible for discharging its legislative functions.
The FSA will be required to report on the discharge of its functions in its annual report. Its general policies and practices will be subject to scrutiny by the practitioner and consumer panels, as well as by the Government and, through the Treasury Committee, by Parliament. We do not think it is necessary or appropriate for the Bill to tell the FSA, any more than other bodies that exercise public functions, what staff it should employ to meet its responsibilities.
If the FSA fails to deliver its objectives, board members are ultimately accountable, so they will have every incentive to employ the right mix of staff and to make the best use of them—
It being one hour after the commencement of proceedings on consideration of the Bill, MR. DEPUTY SPEAKER,pursuant to Order [this day], put forthwith the Question already proposed from the Chair.
Amendment negatived.
MR. DEPUTY SPEAKER then proceeded to put forthwith the Questions necessary for the disposal of the business to be concluded at that hour.
§ Mr. Deputy Speaker (Sir Alan Haselhurst)I understand that the Government need to move Government amendment No. 405.
§ Mr. David Kidney (Stafford)On a point of order, Mr. Deputy Speaker. You refer to Government amendment No. 405. Am I wrong to think that that is an Opposition amendment?
§ Mr. Deputy SpeakerIt was originally an Opposition amendment, but it was accepted by the Government. The guillotine has fallen so it has to be proposed by them.