Compensation Bill [HL]

moved Amendment No. 49:"Page 3, line 20, leave out subsection (5)." The noble Lord said: The amendment would leave out subsection (5), which at the moment enables the Secretary of State to pay grants to the regulator. I seek to omit that on the basis that I want to ask the Minister why it is presumed that regulation of the sector should be a drain on the public purse, because I do not believe that it should. From all my inquiries, the claims management sector is a cash-rich industry, and its abject failure to engage in self-regulation should not relieve it of any financial burden. Once again the obvious parallel is with the FSA model. It was decided at an early stage that the financial services industry should be willing to shoulder the comparatively modest cost of regulation itself, rather than inflicting it directly on the taxpayer. Claims management companies, too, are hardly impecunious. Given their failure to clean up their own act, surely it is for them to dig into their pockets as we seek to tidy up the mess. This is an appropriate moment to press the Minister on the question of how much this will cost. Do the Government have any sense of how much regulation will cost; how much public money they are prepared to make available and against what guarantees? In many ways, I am probing that aspect. But it would be wrong if I did not return, once again, to the question of who is to be the regulator. During the previous session of the Committee the Minister said that she had received a report from an independent expert. She stated:"““I have sent a copy of the report to the Claim Standards Council asking for a formal response to the findings””.—[Official Report, 16/1/06; col. GC146.]" Later she said:"““I want the Claims Standards Council to have an opportunity to reflect on it and, in fairness, to be able to make a full response””.—[Official Report, 16/1/06; col. GC178.]" I regret to inform the Minister that hardly had she said what she said on 16 January than the Claims Standards Council went into press. As I understand it, it not only dressed itself up as the regulator but assumed that it would be the regulator. In an article in Money Marketing on Thursday, 19 January, there is a reference to the policy director, Andy Wigmore, who apparently has been briefing the press, both on and off the record. In the article by Mr James Salmon it is stated that,"““The CSC is a voluntary watchdog which is expected to be installed as regulator of the sector with the passing of the Compensation Bill””," and Mr Wigmore is quoted as saying:"““when we become regulator””." I am always reluctant to criticise people who go into print because, as parliamentarians, we go into print quite often. However, I would have thought that the reaction to the Minister’s kind practice of sending a copy of the report to the Claims Standards Council would have been at least a period of silence to reflect upon the report, which it has seen. I do not know whether there is anything in the report which Mr Wigmore has seen to justify him saying,"““when we become regulator””—" we are in the dark—but it causes me to question whether, as the noble Lord, Lord Goodhart, said on the occasion, this is a suitable body to be the regulator having been, up until very recently, the membership society—or the trade body—for claims management companies. Let me, once again, set out what I believe the characteristics of the regulator should be. I was greatly assisted in this by one of the leading people involved in the industry. I asked that individual, ““What are the desired characteristics of the regulator?”” He said there were six: a focus on the customer at the heart of the process; a perspective which has no inherent conflict of interests; an understanding of the specific issues surrounding general insurance claims, endowment claims and so on; an ability to execute decisive enforcement; knowledge and capability to regulate so far as the key issues are concerned, including capital adequacy, disclosure, competence, fitness and so on; and, finally, an ability to police the advice aspects of complaint handling and to ensure that such is not given unless authorised. That was said by someone outside. I have already talked about independence, impartiality and integrity. I am worried about public money being used to provide regulation of an industry which has such a testing track record when compared to the characteristics that I have set out. In conclusion, it troubles me on a wider basis that too often we seek to impose financial penalties on the more compliant sectors of the community and allow those operators involved in rather unsavoury practices—the shadier end of the marketplace—to get away with it. This is a chance for the Government and the sensible people in claims management to prove me wrong. I beg to move.