RESTRICTIONS ON POWERS OF TREASURY (Hansard, 27 January 2000)

§ Mr. Heathcoat-Amory
I beg to move, That the clause be read a Second time.

§ Mr. Deputy Speaker (Mr. Michael J. Martin)
With this it will be convenient to discuss amendment No. 52, in clause 372, page 194, line 37, leave out— other provision of this Act and insert— provision of this Act other than section (Restrictions on powers of Treasury).

§ Mr. Heathcoat-Amory
The new clause and amendment No. 52 are important because they would restrict the power of the Treasury. The Bill would subject the FSA to certain restrictions. As we have heard in a previous debate, the authority would be given objectives and principles to pursue and by which it would have to abide. However, those provisions would not be binding on the Treasury.
The Treasury has considerable powers under the Bill. In earlier debates, some Labour Members complained about the Treasury's power of appointment over certain 673 individuals and members of the authority itself. If those hon. Members believe that the Treasury should be constrained in the exercise of its powers, they have the chance to join us in supporting a new clause and an amendment that would do so.
The Treasury has major powers; for example, to grant exemptions under the financial promotion regime, and to specify what are regulated activities. Furthermore, it can exempt professional firms, such as lawyers and accountants, from the provisions of the Bill.
Those wide-ranging powers are best summed up and illustrated by clause 372, which is the subject of the new clause and the amendment. Clause 372 states: The Treasury may by order make such incidental, consequential, transitional or supplemental provision as they consider necessary or expedient for the general purposes, or any particular purpose, of this Act or in consequence of any of its provisions or for giving full effect to it. That is a Henry VIII clause. The Treasury is given the power to alter primary legislation by the use of orders.
We have debated the inadequacy of the scrutiny of the House in respect of such orders, so it is important further to constrain the Treasury in that regard. Even Henry VIII would have been jealous of clause 372. Henry VIII clauses are so called because in 1539 Parliament passed the Act of Proclamations, which authorised the use of proclamations as an alternative to statute law. I do not know the circumstances in which that Act was passed. I imagine that Parliament felt it was better to regulate matters in some way, even though it could hardly have approved of that exercise of authority by the king.
Proclamations issued by the king were always fairly minor and never affected life or property, whereas the orders that can be brought forward under the Bill may affect property in the form of people's money and investments. Proclamations in the middle ages were generally not enforced or the courts were reluctant to enforce them, whereas the Bill will be rigorously enforced. [Interruption.]

§ Mr. Deputy Speaker
Order. There is a great deal of private conversation in the Chamber and beyond the Bar of the House. Perhaps hon. Members will come to order and allow the right hon. Gentleman to continue.

§ Mr. Heathcoat-Amory
Clause 372 goes wider than any of the powers available to Henry VIII. It is important that the House wakes up to the potential for, if not abuse, at least the possibility that this primary legislation could be altered by orders and statutory instruments in a way that goes entirely unscrutinised.
New clause 1 makes it clear that orders must not restrict competition beyond protecting consumers or pursuing the Bill's other objectives. That would be a useful counterbalance to the inevitable tendency of all regulators to over-regulate and of all regulatory systems to end up with excessive costs and regulation. The Government were reluctant to accept any of our earlier amendments for elevating competition to one of the Bill's objectives. This proposal is a useful alternative and I commend it to the House.

§ Mr. Timms
I understand the thinking behind new clause 1 and have some sympathy with what it seeks 674 to achieve. It is certainly not our practice or intention to make regulations that would in any way damage competition, competitiveness or innovation.
There are a number of difficulties with new clause 1. At the heart of the problem is that its effect could not be determined until the Bill's powers were exercised. The European Union has some jurisdiction over matters covered by the Bill. Much of the Bill, to a greater or lesser extent, delivers on or is constrained by EU directives and treaties. We are required, for example, to bring within the scope of regulation any activities covered by insurance directives—life and non-life—that are undertaken by qualifying institutions. The same is true of investment and banking. We have no choice in the matter, so the new clause could cause difficulties.
Another example is where the purpose of the regulations might not properly be described as protecting consumers or maintaining confidence, but there was some other good reason for proceeding. The most obvious example is exercising powers in a way consistent with the FSA's objectives under the Bill that would prevent financial services business in the UK being used in connection with financial crime. That is not provided for in the new clause.
The right hon. Member for Wells (Mr. Heathcoat-Amory) referred to the breadth of clause 372, but his fears are not well founded. It is clear that the power is to make incidental, consequential, transitional and supplemental provision to deal with minor things where it is necessary or expedient for the purposes of the Bill, or to give effect to it. I do not agree that Henry VIII would have been envious of that power, as the right hon. Gentleman suggested.

§ Mr. Tyrie
Will the Minister give way?

§ Mr. Timms
No, I must press on.
I hope that I have been able to set out some of the difficulties with the Opposition's proposal. The Bill has been carefully formulated to ensure that the extent of the Treasury's powers is clear. It is not our intention to impose any more burdens on firms than is necessary, and wherever possible, we consult on proposals to make regulations so that those affected by them have an opportunity to comment on and influence them. The powers in the Bill are no different from the order and regulation powers under any other Act of Parliament, and I hope that that gives Opposition Members the reassurances that they seek.

§ Mr. Flight
The House may not be aware that the Bill, which proposes to set up and empower the FSA, reserves important powers to the Treasury—the most important, perhaps, is designating what are to be authorised and regulated activities. However, the Treasury's powers to exempt matters concerning promotion will be important.
We have looked at how the Treasury powers interrelate to the objectives and principles of the Bill. Clause 1 has been worded so as to pick up the relevant references, and it deals, quite appropriately, with the principles of not damaging competition or innovation. Competition is defined as both domestic competition and international competitiveness, and the Bill picks up the key objectives where the Treasury has power.
We do not accept the Minister's argument concerning technical difficulties with subjecting the Treasury to the same basic objectives and principles relevant to 675 its powers, as those objectives and principles apply to the FSA. If the Minister has sympathy with the objectives, what other proposals do the Government have to address them? As things stand—particularly where items of secondary legislation are dealt with by negative resolution, rather than positive affirmation—there is no guarantee that what the Treasury does will stick within the objectives and principles.
The amendment proposes essentially to apply the terms of clause 1 to the Henry VIII clause—which, to some extent, may limit its powers, but would tie the two together. We feel that that would address some incomplete business within the Bill, which is unsatisfactory without it. The Government have come up with no other method of tying the Treasury in with the rest of the Bill. However, this is not a matter that we would wish to put to a vote. Rather, we would hope to see what the other place could do to tie in the matter in a way that the Government would find acceptable.
Unless the matter is addressed, the two matters do not tie together—we have the FSA bound by relevant objectives and principles, while the Treasury is not so bound.

§ Mr. Deputy Speaker
Does the right hon. Gentleman wish to withdraw the motion?

§ Mr. Heathcoat-Amory
I beg to ask leave to withdraw the motion.
Motion and clause, by leave withdrawn.
Further consideration adjourned.—[Mr. Sutcliffe.]
Bill, as amended in the Standing Committee, to be further considered tomorrow.