Financial Services Authority (Hansard, 17 December 2002)

§ Lord McIntosh of Haringey
My Lords, the Financial Services Authority's governance structure and how it accounts for its performance reflect its unusual status as a private company with no shareholders. These arrangements were approved by Parliament after extensive debate. The Government had, and continue to have, confidence in the FSA's governance and accountability mechanisms, including its existing board structure. We agreed to review the position in response to the Cruickshank report, and will do so now when we appoint a successor to Sir Howard Davies.

§ Lord Newby
My Lords, I thank the Minister for that Answer. However, I hope he accepts that the bulk of informed opinion, whether from the City, the media or elsewhere, strongly supports the argument for splitting the roles of chairman and chief executive of the FSA, given that body's wide powers. I urge him to ask his right honourable friend the Chancellor to take an early decision on the matter—frankly, it is not all that difficult—before proceeding quickly to make the appropriate appointments to avoid any uncertainty about the future direction and management of the FSA.

§ Lord McIntosh of Haringey
My Lords, I hear what the noble Lord, Lord Newby, says about informed City opinion. However, even when informed City opinion agrees with the noble Lord—and I am not committed on that point—it is not always right. I can assure the noble Lord that arrangements will be made for a successor to be appointed to Sir Howard Davies in good time before he leaves his post to start at the London School of Economics on 1st October next year.

§ Lord Hodgson of Astley Abbotts
My Lords, in the light of the Financial Times article entitled "Howard's way needs to divide", of the discussions in this House on the Enterprise Bill in which the settled view was that the Competition Commission should have a chairman and chief executive, and of the Government's own Strategy Unit on a review of charities recommending 536 that the chairman and chief executive should be separated, is it not time for the Government to say "Yes" to the Question asked by the noble Lord, Lord Newby?

§ Lord McIntosh of Haringey
My Lords, if the Government were going to say "Yes", they would not leave it to me to make the announcement to Parliament. Someone more important would do it. The answer to the question asked by the noble Lord, Lord Hodgson, is "No". He refers to a "settled view" about the chairmanship and chief executive, although he should have referred to the Office of Fair Trading, not to the Competition Commission. We were defeated in a vote on the Enterprise Bill, but we won in a vote on the Financial Services and Markets Bill. Parliament has therefore taken the view that the posts should be combined. I repeat that we have undertaken to review the matter when we appoint a successor to Sir Howard Davies, and we shall do so.

§ Earl Russell
My Lords, does the Minister realise that when he uses the phrase "a successor", in the singular, he begs the question raised by my noble friend Lord Newby?

§ Lord McIntosh of Haringey
My Lords, the noble Earl, Lord Russell, is of course right. I should have said, "a successor or successors".

§ The Earl of Sandwich
My Lords, what are the reasons for placing the increased workload on the shoulders of the FSA and its chief executive? Does the Minister include over-regulation among those reasons?

§ Lord McIntosh of Haringey
My Lords, Parliament gave the FSA a series of very demanding tasks. It is true that the FSA is one of the most wide-ranging regulatory systems for a financial services industry in the world. It is also true that by regulation it has been decided that the scope of the FSA will be increased twofold by the inclusion of the mortgage industry and general insurance. Yes, the size of the FSA has gone up considerably. It is of course a matter for Sir Howard Davies, his colleagues and his board to decide what effect that has on the workload of any one individual.

§ Baroness O'Cathain
My Lords, although the Minister talks of extensive consultation on, and discussion about, combining the roles during the passage of the financial services legislation, does he agree that there was also much concern? Bearing in mind that several heads of regulatory bodies report to it, what message does continuing to combine the roles of chairman and chief executive in the FSA send to the rest of British companies, which are under strong guidance to split those roles?

§ Lord McIntosh of Haringey
My Lords, I indicated in my first Answer the difference between the FSA and the private sector. In the private sector, it is widely agreed that to split the role of chairman and chief 537 executive is correct because the interests of shareholders must be considered. It is generally thought that a non-executive chairman can fulfil that role. With the FSA there are of course no shareholders. Nothing that I have said should indicate that there is a settled view among Treasury Ministers that we will continue to combine the roles of chairman and chief executive. We said that we will review the matter and we will do so.

§ Lord Saatchi
My Lords, does the Minister mind the following summary of his answers? Yesterday, he said that the Government would not conform with generally accepted accounting principles and today he says that the Government will not conform with generally accepted governnance principles. That is not a model of compliance, is it?

§ Lord McIntosh of Haringey
My Lords, yesterday, I said the exact opposite of what the noble Lord, Lord Saatchi, suggests. Yesterday, I said that the Government do conform with generally accepted accounting practice. Therefore the second part of his question does not arise.

§ Lord Wallace of Saltaire
My Lords, is the Minister aware that the post of director of the London School of Economics, to which Sir Howard Davies is moving, is carefully balanced by that of the chairman of the court of governors? Does the noble Lord believe that the Government may want to take account of that model when considering Sir Howard's successors?

§ Lord McIntosh of Haringey
My Lords, far be it from me to intervene in the governance of the London School of Economics. No, I do not believe that there is any particular analogy between the two posts. I shall be interested to have Sir Howard's views on this matter in a few years' time.