Financial Services Bill

Lord Tunnicliffe Excerpts

Monday 8th October 2012 Lords Chamber

[Lord Tunnicliffe]

My Lords, we are very happy, in a sense, to accept the blanket assurance that these amendments are minor and technical and we will not probe them in any detail. However, we are going to have a host of government amendments to the Bill, as was discussed earlier. We did, on this first day back, request a written explanation of this group of amendments so that we could study them at our leisure before the Committee met. Unfortunately, there has been no response to that request. It is important that the Government get into the habit of extremely comprehensive supporting documentation for their amendments. Therefore, I will study with care what the noble Lord has said and make sure that I can be comfortable that they are minor and technical, but it would have been much better if we had had a response to our request. I would value an assurance from the noble Lord that, as these amendments come along over the rest of the Bill—we will all try to work together to ensure the success of debates about new government amendments—the Government will facilitate those debates by providing proper documentary support.

[Lord Newby]

I hope I can give the noble Lord two assurances. First, I can assure him that the amendments are indeed technical and have no policy substance attached to them. I also assure him that, wherever possible, we will make available adequate written information about government amendments in good time so that people can look at them and ensure they are what they say on the tin.

--- Later in debate ---

[Lord Tunnicliffe]

My Lords, I agree with all the points that my noble friend Lord Whitty has made and I will not rehearse them. Coming at the whole thing from a slightly different direction, it seems to me that Clause 25 is highly admirable. It seems to say that if you have an authorised person and that authorised person is owned by someone else, the regulator must be able to get at the someone else. It is a sensible clause in that it uses terms such as,

“may have a material adverse effect on the regulation by the regulator”.

It uses that twice, in both of the conditions in which it can happen. It is a very narrow clause. It is what we who like regulation find very good at setting out what the regulator may do.

Clause 25 also says that a regulator must adhere,

“to the principle that a burden or restriction which is imposed on a person should be proportionate to the benefits, considered in general terms, which are expected to result from its imposition”.

So the whole idea that the owner of a regulated person should come under regulation seems entirely a sign of good principle, and has proper safeguards set against it.

However, for the life of me I cannot understand what new Section 192B(4) is doing there. It states:

“Condition C is that the parent undertaking is a financial institution of a kind prescribed by the Treasury by order”.

Any owner of an authorised person should be susceptible to regulation within the limitations set out in Clause 25. This was debated in the Commons, but we make no apology for bringing it back here. In the Commons, Mr Hoban said:

“This is a proportionate expansion. We want to avoid the sense that the FCA or the PRA could intervene in the price of bread at Tesco or Sainsbury’s”.—[Official Report, Commons, Financial Services Bill Committee, 8/3/12; col. 466.]

That is an absolutely ridiculous reason to deny it. Clearly, the body of this clause says that it shall be used for serious material things in a proportionate way, which could have nothing to do with the price of bread at Sainsbury’s. I hope that the Minister will give a really full explanation of why this clause should not apply universally to all owners of authorised persons, not just to those as set out in condition C in subsection (4) of new Section 192B.

[Lord Sassoon]

My Lords, the noble Lords, Lord Whitty and Lord Tunnicliffe, have been very clear about the purpose of these three amendments: that they seek to extend the power to capture all parent undertakings, including non-financial parents. The starting point here has to be the recognition, which was partly given by the noble Lord, Lord Tunnicliffe, that we are talking about some new and important powers that go significantly beyond anything that the previous Government put in place in their architecture.

I know that the noble Lord, Lord Tunnicliffe, said that he approved of a lot of this. The fact is that we are moving the boundary forward very significantly, but to an appropriate place for the time being, while nevertheless taking the power—the noble Lord, Lord Whitty, recognised this—to move the boundary further if appropriate. I would have been rather happier if there had been more of a tone of approving of and recognising a significant shift, and gently encouraging us onwards, rather than a tone of outraged incomprehension that we have not moved very much further.

[Lord Tunnicliffe]

If I can help the Minister, I am entirely happy to welcome this clause—my opening remarks welcomed it—but I cannot understand why it has this serious limitation. The rest of the clause is beautifully balanced and seems entirely appropriate. Why does it not apply to more owners?

[Lord Sassoon]

My Lords, we are getting into significant new territory here. These are untried and untested powers in the United Kingdom. We want to make sure that they are targeted and used in a proportionate manner. That is why the Government have proposed limiting the powers to parent undertakings that are financial institutions of the kind described by the Treasury, which helps to keep this new and very significant power within acceptable bounds—and bounds within which Parliament can be clear about the movement of the regulatory boundary. I take the case of the supermarkets because they are an important area and the clearest case of where the boundary should be under focus. It is important and helpful for noble Lords to raise this matter in debate now, because it is quite proper that as experience of these new powers is gained and the evolution in the structures of holding companies for financial services institutions moves forward, these matters are kept under some form of scrutiny.

Let me deal first of all with the specific matter of data sharing, because this is a granular thing that affects customers in these groups now. The Data Protection Act 1998 already provides robust safeguards around the disclosure of customers’ personal information, including disclosure to another group company. Therefore, in the case which the noble Lord, Lord Whitty, postulates, the movement of data from one part of a group—the non-financial part—to the financial part will require consent from the consumer.

The Act also requires that the personal data have been obtained fairly from the customer in the first place, which would involve identifying any third parties to which the information would be disclosed. We believe that the current provisions in the Bill—in that specific respect and more broadly—strike the right balance between giving the regulator more intrusive powers over unregulated parent undertakings, protecting the personal data of consumers and ensuring that the net regulatory burden imposed on industry is proportionate.

However—and I restate this—the Government are very much alive to the concerns raised by noble Lords, and it is precisely for that reason that they have taken a power to remove the requirement that the parent undertaking be a financial institution. We have not put that in there unthinkingly; we have put it in there because we recognise the concerns that noble Lords have raised. I am sorry if the noble Lord, Lord Tunnicliffe, does not think that I have recognised the positivity with which he has come at this clause, but he does not perhaps recognise or give enough weight to the fact that we really are making a significant step forward and need to pause and think carefully before going further. The power, however, is there and the Government will use that power as and when it becomes clear that the balance needs to be struck differently. I am happy to restate that, so I hope that what I have said will reassure noble Lords that the Government take this matter very seriously.