Financial Services and Markets Act 2000 (Regulated Activities) (Amendment)(No. 2) Order 2006

My Lords, I thank both opposition Benches for their continued support for these provisions and the thrust of the order. I shall try to deal with their points. The noble Baroness, Lady Noakes, and the noble Lord, Lord Newby, talked about how the cost of regulation had gone down. This came about through the FSA's own calculations, which gave us better insight into what was involved, as it had become more focused on the detail of what its regulation might entail. Whether or not that is a first, I do not know, but it is certainly to be welcomed as good news. Timing was also mentioned by both the noble Baroness and the noble Lord. I accept that 6 April is just into the second quarter, although not by very much. As to why it has taken as long as it has, the Government will regulate only where there is a clear need. We are often accused of over-regulating but, on this occasion, it seems to me that we are accused of not regulating speedily enough. It is important to establish the costs and benefits of regulation before proceeding with it. These are complex products and it is important to get the regulation right. That is why two consultations were completed in advance of the Regulation of Financial Services (Land Transactions) Act 2005, and we consulted earlier this year on the technical detail of the secondary legislation. We published the results of that consultation in mid-September. In addition, the FSA has consulted on its rules, but I hope that we will now have a shared interest in ensuring that this measure is implemented as quickly as possible. The noble Baroness, Lady Noakes, asked about home income plans, which we touched upon when we debated the primary legislation. That matter comes outside the ambit of the order but I shall update the noble Baroness as best I can. There is very little that the Government can now do; it is for lenders to resolve the situation with the people who took out these products. Most lenders have offered a package of measures to home income plan investors to deal with the residual debt, and the Government hope that all lenders will continue to take as generous and sympathetic an approach as possible to that debt. The Government do not believe that it would be appropriate or desirable to go beyond the protections offered by the 1986 Act and the further steps taken to achieve retrospective redress for consumers in this instance. The Government have every sympathy with consumers who find themselves in difficulty having taken out a shared appreciation mortgage, but no evidence of misselling has been found by the Financial Ombudsman Service to date, so it is difficult to see what grounds there are for compensation. Consumers can access the Financial Ombudsman Service if they feel they have been badly advised or that the mortgage has been missold. Although I reiterate the Government’s sympathy, if there has been no misselling it is difficult to see what else might be done. The noble Lord, Lord Newby, asked an intriguing question about inheritance tax. Of course, the Government are very keen to ensure that loopholes in inheritance tax are closed at the earliest opportunity. I know there are those who would wish to abolish inheritance tax, but perhaps that is a debate for another occasion. The Government have assisted some of these products which were in danger of being caught by the pre-owned assets legislation. Regulations came into force on6 April 2005 which introduced an exemption for equity release arrangements from the pre-owned assets charge. The commitment was made by the Paymaster General in autumn 2004 that arm’s-length equity release transactions would be exempt from the pre-owned assets charge, even if the owner sells only part of their home. That was a facilitating measure and not a restrictive one. The fundamental point is that we need to keep a close eye on all transactions of this nature if they are being abused as an inheritance tax or other tax avoidance device. I thank noble Lords for their support for the order. If the order is approved tonight, the FSA will be able shortly to open its doors for applications from firms carrying out regulated activities. This will give firms the necessary time to prepare for the start of regulation next year. Subject to the order completing its passage through Parliament this evening, the FSA will take a further important step when it publishes its detailed rules and guidance next week. As set out in this legislation, regulation will take effect from 6 April 2007. In general, our approach throughout has been to establish a new regulatory regime, broadly equivalent to the existing mortgage regime. It is only right that consumers of home reversion plans and Ijara home financing arrangements benefit from consumer protections afforded by FSA regulation, and I think that that view is widely held. This will strengthen confidence in the market, and consumer confidence is an essential base for diverse and competitive markets. That is an outcome which I think your Lordships will be keen to support, therefore I commend the order to the House. On Question, Motion agreed to.