Financial Services Bill

I shall be happy to go into detail with the hon. Gentleman in Committee. The shadow Chancellor said that recovery and resolution plans were a good idea. As hon. Members know, on Second Reading we debate the principle of the measure, and the principle of the plans has been welcomed on both sides of the House. The third crucial element of the Bill is remuneration. The Bill relates to improved corporate governance, which goes hand in hand with a strengthened regulatory framework. There is general consensus that remuneration practices in the financial services sector were a contributory factor in the recent financial crisis. That is why we are taking decisive action to tackle remuneration practices that incentivise excessive risk taking. There are proposals in the Bill to enhance control of the system of rewards on one hand and transparency of disclosure on the other. We are strengthening the FSA's hand as a regulator to take action against remuneration policies that encourage excessive risk taking, and ensuring greater accountability of the FSA to the Government in that area. The hon. Member for Twickenham asked whether we actually needed such legislation and suggested that the FSA could already take action. No, it cannot. We are imposing a duty on the FSA to make rules requiring some authorised persons to have a remuneration policy and to implement it, and to ensure that remuneration policies are consistent with the effective management of risk and the Financial Stability Board international implementation standards as agreed by the G20 leaders at Pittsburgh. It is fundamentally important that we do so. The shadow Chancellor and others asked about the power that we have proposed in that area and about concerns expressed by Lord Woolf. The power that we are proposing is not a power to interfere with existing contracts—the FSA is not being given retrospective powers. As a public authority, its actions are required to be compatible with the rights in the European convention on human rights, which are protected by the Human Rights Act 1998. In addition to what we are doing to strengthen the FSA's hand, we are, where appropriate, taking action to implement in full Sir David Walker's recommendations on disclosure and transparency. The hon. Member for Cities of London and Westminster (Mr. Field) raised points about remuneration, and, happily, I am sure that we will discuss them further in Committee. Through our proposals on disclosure, we are trying to support shareholders' ability to exercise effective oversight of the remuneration paid in the companies in which they invest. As my right hon. Friend the Chancellor said, the first line of defence is well-managed companies, with directors taking responsible decisions about risk, effectively overseen by active shareholders. Through the Bill, the Government will have a power to make regulations to implement the Walker recommendations, which will naturally be subject to full consultation. The fourth crucial element of the Bill is the measures designed to support and protect consumers. My hon. Friends the Members for Halton (Derek Twigg), for South Derbyshire (Mr. Todd) and for Northampton, North (Ms Keeble) made specific reference to the consumer financial education body and the powers on collective redress. Hon. Friends who serve on the Select Committee that deals with the issue made broader comments, which we will happily debate in Committee. It is important that the FSA can establish a new consumer financial education body to provide strategic leadership and increase the profile of the financial education and capability agenda. It is also important to recognise that the recession has had the greatest impact on those who are most vulnerable in our society. We are committed to improving access to financial guidance and education to address these issues. [Interruption.]