Financial Services Bill

To be frank, I still regard too much of this legislation as deficient, and I shall touch on some specific concerns, but it would be remiss not to give the Treasury significant credit for some of the work it has done. The extensive and broadly constructive pre-legislative consultation by the Joint Committee is a positive step. The outstanding and ongoing contribution of the Treasury Committee will help to focus the Government's mind on some of the key institutional pitfalls. There is also an increasing recognition by the Treasury that this is an area of public policy where political judgments will need to be made, and that ultimately the buck must stop with it, not with the Bank of England, however good a Governor we may have. My general dissatisfaction relates first and foremost to the inevitable guillotine in this House, which means that the high-level sophisticated scrutiny will have to come from the other place, and I fear that that shows our House in a poor light. It is not that we lack collective experience in this crucial field, but the wish of Governments, throughout my 11 years in the House, to get legislation through by whipped votes means that we continue to fail to hold the Executive to account, particularly on such important pieces of legislation. This is probably the only area where I have some sympathy with the shadow Chancellor. The genesis of the Bill was perhaps a rather simplistic political analysis surrounding the financial collapse of 2007-08. It was not really the tripartite system of regulation that was at the heart of those concerns, but an old-fashioned debt and credit bubble and the global imbalance between the east and the west. It is important that we recognise that, because the result was not simply the failing of banks, bankers and Labour politicians; the simplistic analysis also fails to answer the core question that has dogged regulators ever since the financial crisis began: ““When the crash came, who was in charge?”” The risk is that we will replace an unsatisfactory tripartite system with a potentially even more complex four-way system. I think that there is a risk that that will come to pass, although I do not buy into the shadow Chancellor's entire analysis. In truth, the new FCA will have too few people of the requisite expertise and sound judgment. Unsurprisingly, it remains very unloved and unrespected by too many professionals in the City, and I am afraid that that matters, given the important role that it will have. Let me touch on some of the more substantial political issues that the press have not focused very much on. There is an overall concern about how prescriptive the new regime will be, and to what extent the Bill will recalibrate things in a way that will have unintended and potentially damaging consequences for the industry, the UK and the consumer. I will give a few examples. On the warning notice publicity, the Bill will change the current position whereby enforcement action becomes public only at the end of the process, after the firm has decided whether to go to tribunal, and before that stage has had two opportunities to make representations. The new approach means that there will be negative publicity at the stage of the warning notice—the first notice—and the firm will have no right to make representations before that. The reality is that, essentially, the Daily Mail test means that all the damage to the firm's reputation will be done before any due process has been gone through. The argument in favour of the change is that this is similar to a criminal case, but that misses the important difference between the cases, and represents a worrying trend in the thinking, to the effect that everyone in the industry is somehow a would-be criminal.