Regulation of Financial Services (Land Transactions) Bill

My Lords, I thank the noble Baroness, Lady Noakes, and the noble Lord, Lord Newby, for participating in this debate today and for the support which each has given to the Bill. A number of questions have been raised and I will try and deal with those first. The noble Lord, Lord Newby, referred to the mystery shopping exercise with regard to lifetime mortgages. He was right in identifying that there was not compliance. It underlines the point that having regulation is all very well, but it is important to make sure that that regulation is effective and implemented. The Diminishing Musharaka is a subsect of Ijara and therefore is potentially within the scope of the provisions that we are dealing with. The noble Lord, Lord Newby, and the noble Baroness, Lady Noakes, both raised the issue of costs of regulation. At this stage these are inevitably an estimate of the proceedings but those estimates were based upon experience in looking at regulation for mortgages. Clearly, in due course, when the FSA has looked at its detailed rules and done its detailed cost and benefit analysis, those costs will change. The noble Baroness suggested that they might increase. Well, they might also decrease and they are the best estimate that is currently available and must be seen in the context of the benefits that will ensue from that regulation. But the Government will keep the issue under review and look forward with interest to what comes out of the FSA in due course. On the issue of property investment clubs, we understand the concerns that have been raised, as the noble Lord, Lord Newby, identified. He is right to say that the Government have recently put out information about trying to clarify what, in their view, is a collective investment activity and that which is not, and therefore that which is already regulated by the FSA and that which is not. There are concerns and the Government remain to be convinced that for the generality of the buy-to-let market there is the need for regulation. The product is different and by definition we are not dealing with people’s primary residences and—depending on the nature of the products—they are not necessarily financial products. They clearly need to be kept under review and I imagine that we will return to this at later stages of the Bill. The Government’s response is that they do not currently see the need to regulate in this area. The noble Baroness, Lady Noakes, talked about timing and asked why has it taken so long and what is the timing going forward? There is inevitably some lead time to the introduction of regulation. If we are going to get it right and if it is going to be based on consultation then that process does take some time—perhaps longer than we would all wish. In terms of moving forward, it is hoped that the secondary legislation and the FSA could be dealt with in a timescale that would mean regulation will commence in the first quarter of 2007—just over a year from now. There are still two further processes to be gone through, each of which involves consultation. The noble Baroness raised the issue of home income plans and what had happened on them. She is right that it was a sorry tale of a product that was not properly and fully regulated at the time, and vulnerable people have suffered considerable hardship. The position is as in the letter to which she referred; namely, that a lot of lenders—most lenders, fortunately—have offered a package of measures to home-income plan investors in respect of their residual debt. The Government hope that those that have not will move towards taking a similar line.