Financial Services Bill

Baroness Bowles of Berkhamsted Excerpts

Report stage
Wednesday 14th April 2021 Lords Chamber

Moved by

[Baroness Bowles of Berkhamsted]

18: After Clause 40, insert the following new Clause—
“Undertakings from regulators
The FCA and the PRA must each give and publish the modes and timing of the provision of information and responses to Parliament concerning their activities and rule-making.”Member’s explanatory statement
This amendment would require the FCA and PRA to give undertakings about liaising with Parliament.

[Baroness Bowles of Berkhamsted (LD) [V]]

My Lords, I have tabled three similar amendments in this group, with increasing levels of requirements. Although they were drafted before we had the letters from the regulators, the correspondence from the Minister and today’s letter from the Economic Secretary, the amendments still have currency. Along with other amendments in this group, they allow us to explore current provisions and the adequacy of assurances regarding Parliament’s rights. I remain concerned that there is not even the slightest recognition on the face of the Bill that increased scrutiny must come with wider powers for the regulators. It requires very substantial on the record commitments to make up, even temporarily, for that absence.

In Grand Committee we debated amendments that covered wider aspects of Parliamentary scrutiny than just rule making, as we did on day one of Report, but the heavy focus on rule-making powers is because they are changing right now. EU democratic scrutiny is gone, and the middle statutory instrument layer and formal parliamentary scrutiny are being diminished or removed. Therefore, Parliament’s role needs shoring up. The Minister can be in no doubt about the consensus on that matter, not just in this House but in industry, from replies to the consultation. However, he and the Economic Secretary seem to be maintaining the fiction that, despite the front running in this Bill, change is not actually happening until the end of the consultation.

In the recent reply to the noble Lord, Lord Tunnicliffe, which Labour colleagues have shared with us, the Minister states the caveat that the primary purpose of consultations is to consult industry, practitioners and consumers. That caveat further demonstrates why it is very necessary to have Parliament’s role explicitly reserved.

My family of Amendments 18, 19 and 20 is aimed at finding whether there is something that the Government can accept or modify. Failing that, it is a progressive list around which I ask the Minister to specify whether Parliament, including relevant committees of this House, has these rights already, and whether the regulators must co-operate even if it takes more time, effort, appearances and resource than they are used to at present. That is needed because of the significant change that is already happening—and now, not at a future date.

It did occur to me that perhaps it was necessary for there to be at least a line in legislation giving authorisation for regulators to use more resources, or to remove excuses based on resources, and that the Minister might perhaps be tempted by what is the baby of my amendments, or something similar, which requires merely an undertaking from regulators about timing, provision of information and responses to Parliament concerning their activities and rule making. The resources point is not just my concern. A former regulator, albeit not of financial services, has also wondered, in conversation with me, whether there is authorisation to expend additional resource. That concern is further heightened by the Minister’s caveat on the primary purpose of consultation.

So my question to the Minister is: will he categorically say that there is no reason, including that of resources, for the regulators to ration their appearances before committees and other engagements with Parliament? Can he assure us that, even if there is a lot going on, busyness is not an excuse for regulators to delay appearances before committees or to delay provision of information? Indeed, does he agree that it may well be the opposite, and a lot going on can be a reason for additional engagement?

If we look at what is already being front-run, in terms of Basel and investment firms and then, starting in a week or so, an abbreviated consultation on matters relating to the Hill review, with plenty more to follow, it looks as if many, even most, important changes are going to happen well before we get to the end of the review on the future regulatory framework and that moment when it is suggested that legislation concerning Parliament may be appropriate to fit the anointed changes.

If I were a cynic, I would say the Government have conveniently timed all the front running so that the big work is all done before Parliament’s role has been modified to fit—and that is an insult to parliamentary democracy. Therefore, will the Minister confirm that the regulators must provide high-level witnesses and evidence when requested, and not just to committees but also to APPGs and other parliamentary activity that is all part of wider scrutiny? Speakers are provided to industry conferences: why not to parliamentary ones? Is not engagement with Parliament an important part of communication with the public, including in the context of consultations that the Minister has said are aimed primarily at the public, as well as industry?

The second of the amendments adds a list of documents that must be provided to Parliament no later than they are provided to the public. It might seem trivial, but this is saying that Parliament is not just another consultee. The Minister’s caveat says Parliament is not the primary purpose of the consultation: in that case, there is all the more reason why separate engagement must be assured. I am very disappointed that the Economic Secretary has taken a different view by saying that the response could just be in the general consultation response.

My second amendment would also add in that there must be

“due regard to recommendations made by … Parliament.”

This “due regard” is important. It is explicitly said in the letter from the PRA, but it is not explicit in the FCA letter and it is a key commitment sought in the cross-party Amendments 45 and 48. In this matter we all await confirmation from the Minister that the regulators must—I say “must” rather than a conditional “should”—have regard to Parliament’s views. The Economic Secretary seems to agree with this, even if not specifying a dedicated response.

I turn now to my third amendment. This is definitely daddy bear porridge and no doubt too hot for the Government, but it is based on real life and is just a small part of what is in the interinstitutional agreement that I negotiated between the European Parliament and the European Central Bank concerning eurozone bank supervision. Maybe the Minister can confirm whether most of what I suggest does or can already happen, but I want to run through the thinking and culture behind the additional elements.

First, there is

“a principle of openness and sincere co-operation.”

By that I mean not being defensive and saying the minimum that can be said. We all know that there is a great deal of coaching of officials, whether from departments or regulators, before appearing at committees about how to deal with awkward questions and not to say too much. We have all suffered the “talk long, say little and use up all the available time” strategy. That is not openness and sincere co-operation, and there is a culture issue here that needs to change. I am not so naive as to think that it can be changed by a legislative amendment, but I want to make the point for the record that it is an issue.

My third amendment would also add in “regular updates” on principles and the kinds of information and indicators used in developing rules and policies. This would, of course, include policy on supervision and enforcement, as well as rule-making. Here, I want to pick up on another point that the Minister put in his reply to the noble Lord, Lord Tunnicliffe. I will read it because not everyone has seen it. The Minister says:

“And we would be comfortable about agreeing that Parliament has the principal role in terms of the broader matter of scrutiny and oversight of the regulators’ activities”.


The Economic Secretary also states a unique and special role, but we can scrutinise only what we are allowed to access. It is necessary to see the ingredients, not just the baked cake.

During the years that I was immersed in EU legislation, one of the refrains that I constantly heard from HMT and regulators was how the EU Commission and the ESAs were so reliant on information from the UK in order to calibrate rules, and that was why the UK regulators could do a better job on their own for the UK. This information, so it was claimed, was fundamental to rules and therefore it should be sufficiently available to show how the case is made, and confidentially when appropriate. So, do we, Parliament and Parliament’s committees, have access to it?

Confidentiality of data is sometimes used by regulators as a reason to be very approximate in public answers in committee. It has been my experience that, once that excuse is removed because a private briefing can be requested, it tends to be used less as an excuse during the public stage. Will the Minister therefore confirm whether all this kind of information is within the rights of Select Committees in this House, as well as the Treasury Select Committee, to require, and if not, why not?

Finally, although it is not in the amendment, can the Minister confirm that Ministers must attend committees when requested? Much is made in the future regulatory framework consultation about regular accountability of Ministers; it is at the top of page 27, for example. My recent experience on the Economic Affairs Committee has been of difficulty in getting timely—sometimes any—attendance from Ministers.

Everyone is trying to do a good job; that is what these and other amendments in this group are trying to ensure. But if Parliament is restricted from doing a proper job on all the front-run legislation, responsibility for that from this Bill forward lies clearly at the feet of the Minister and the Government. I beg to move.

--- Later in debate ---

My noble friend Lady McIntosh of Pickering asked about procedures applicable at Third Reading which, with the agreement of the House, will be taking place next Monday. I can confirm that it will not be possible to return to these amendments at Third Reading. Having said that, I am very hopeful that we can resolve the issue to everyone’s satisfaction today as a result of the assurances that I have given. I hope that they have convinced your Lordships that the Government recognise and respect the unique and special role of Parliament regarding the scrutiny of the financial services regulators. Given this, I hope I have persuaded noble Lords that their amendments are not necessary and that they therefore should not press them.

[Baroness Bowles of Berkhamsted (LD) [V]]

My Lords, we have had a long and interesting debate, showing unanimous appetite for scrutiny by Parliament, recognising at least from Parliament’s side that there are changes happening now and that therefore this enhanced scrutiny also has to happen now. As the noble Baroness, Lady Noakes, has said—echoed by my noble friend Lady Kramer—this is still a work in progress and, yes, perhaps the direction of travel is going in the right direction.

I thank the noble Lord, Lord Eatwell, for giving us the new vocabulary of the “New Scrutiny”, which certainly makes it easier to identify what we are talking about. I agree with the noble Lord that it is up to Parliament to decide the mechanisms of its own scrutiny. To some extent, that is why I phrased my amendment as I did in the context of undertakings from the regulator. I think I gave the game away in the sense that I said it was to induce discussion about the points I had put in. That we have had.