Financial Services Bill

My Lords, Amendment 8 amends Clause 1(7). As we have discussed in our debates today, Clause 1 allows the Treasury to prepare a statement about the functions of the Council for Financial Stability. Under subsection (7), the Treasury must keep the statement under review. My Amendment 8 says that if the statement has not been revised for two years, the Treasury must consult on whether it should be revised. This amendment was suggested to us by the Law Society of Scotland and seems to make perfect sense. It would be easy for a statement to lie neglected in the files somewhere in the Treasury, and for it to become out of date. Where is the stimulus for the Treasury to keep it up to date? There is a parallel in the commercial world, where it is normal practice for committees—such as remuneration committees or audit committees—to formally review their terms of reference once a year, because if they do not do so, they get out of touch with the things that should be in there. I am reminded that the memorandum of understanding between the Bank of England, the Treasury and the FSA was first published in October 1997, when the Bank of England Act was first published as a Bill, and long before the FSA took legal form as a result of the Financial Services and Markets Act 2000. As the noble Lord, Lord Myners, told us, that memorandum of understanding was not updated until March 2006, eight and a half years later. In between was a period during which the landscape of the financial services sector changed very considerably. So it is very easy for these sorts of documents—terms of reference and memoranda of understanding—to get stale and to fail to be reviewed. I do not know whether more frequent revisions to the memorandum of understanding would have changed the course of events that exposed the tripartite arrangements as weak and fundamentally flawed. The tripartite authorities hardly ever met at principal level before then, so it may well be the case that a memorandum of understanding in revised form would have had no impact whatever. The tripartite arrangements did fail, and were probably doomed to fail, because of the way they were operated and not the way they were written down. Going forward, we clearly have to have some in-built mechanism for the new statement to be reviewed, and simply giving the Treasury the responsibility to keep it under review does not go far enough. My amendment is a modest one, ensuring that the Treasury look at it formally every two years. I cannot think that the Government would oppose something as reasonable as this amendment, and I beg to move.