Financial Services Bill

My Lords, I shall speak also to Amendment 23. We have now reached Clause 3, which deals with an annual report of the Council for Financial Stability. Under Clause 3(1) the Treasury is required to produce an annual report of the council’s work. I have suggested amending this by Amendment 22 to say that the council should prepare its annual report. Amendment 23 would amend Clause 3(1)(b) so that the report is to cover the council’s views of what is important about UK financial stability rather than the Treasury’s views as currently drafted. It seems to me that if the Government are serious about the council making a contribution to financial stability, with the three principals contributing on something near an equal basis, it cannot be seen as an outpost of the Treasury. If it is just the Treasury calling in the Bank and the FSA once a quarter, or even more frequently, to discuss their reports and then the Treasury writing up its version for the outside world and Parliament, the Government will soon undermine their own creation. There is an important issue here. It is clear from the draft terms of reference and from the minutes of the first meeting of the shadow council, both of which I refer to today, that the Treasury is in the lead. Of the 14 people attending the meeting of the council in January, eight were from the Treasury, compared with three each from the Bank and the FSA. It seems the secretariat is provided by the Treasury. This is a familiar syndrome. The Government have a problem—in this case it is the credibility of their financial stability arrangements. They then set up a body or a committee or, as in this case, a very grand council. Then they get some heavy hitters on it and then they swamp it with people from the Treasury who, being very clever people, can manoeuvre the body to their own ends. I will not name names today, but I can produce a pretty long list of people who have been sucked into these sorts of bodies only to find that they are a front for the Treasury doing its own thing. The Treasury already has its fingerprints all over the Council for Financial Stability. It sets the terms of reference and the Treasury, in the form of the Chancellor or his deputy, will always chair it. When this was debated in another place the Minister said that the Treasury had to have control over the annual report because it was the Chancellor who was accountable to Parliament and to the public. However, that is only partly true, as Parliament would expect to discuss the workings of the Council for Financial Stability with both the Governor of the Bank of England and the chairman of the FSA, both of whom are already regular attendees at the Treasury Select Committee in another place and in Select Committees in your Lordships’ House. Of course we accept that the buck stops with the Chancellor—we teased that out on our first day in Committee—but he does not need a Council for Financial Stability in order to talk to the FSA and the Bank of England. The Bill is predicated on there being some substance to the Council for Financial Stability and, if that is the case, it cannot be just a front for the Treasury. One way of demonstrating that substance is for the council to have its own annual report. The Bill is confused about the role and the real importance of the Council for Financial Stability. Our solution is not to have it at all because it would be redundant in our scheme for reuniting macro and micro-prudential supervision but, if it is to remain in the Bill, it ought to have logic and a consistency about it. I beg to move.