Financial Services Bill

I will endeavour to say as much of what I planned to say as I can in the existing time frame. There is no doubt that the Bill should be welcomed and that it will help right the wrongs of the former tripartite structure that contributed to the banking collapse. The tone of this debate is important. It would be easy to labour the failures of the previous Administration and highlight why Opposition Members, particularly those on the Front Bench, must accept their part in the financial crisis of 2007 onwards and the subsequent fallout. It is all too easy to use the banks as whipping boys, but in reality it was politicians and Governments who allowed many questionable practices to go on. I regret the tone of some recent news stories about bankers, whether they relate to bonuses or to other controversial issues. We must consider how such matters destabilise an extremely valuable sector that employs more than 1 million people across the United Kingdom, amounts to 10% of our GDP and contributes between £35 billion and £63 billion to the Treasury every year. I do not seek to defend the indefensible, but let us at least consider the longer-term consequences of what is said and done, and the tone in which it is said. In considering last week's debate on bonuses, for example, I hope that Stephen Hester does not choose to leave RBS any time soon, as it could cost a significantly greater sum to attract someone to fill the post, particularly in this difficult public climate. A mature debate is needed on remuneration, which many in this debate have mentioned, but we should be level-headed and remember that how we conduct the debate, as well as its outcome, will affect our economy and growth prospects. To the Minister's credit, a huge amount of work has been done on the Bill. Not only have there been several opportunities to pursue the matter here in the Chamber, the pre-legislative scrutiny Committee chaired by my right hon. Friend the Member for Hitchin and Harpenden (Mr Lilley) developed the Bill further, as did the Vickers report and the scrutiny of the Treasury Committee. My first substantive point relates to structure and culture. The tripartite structure had to end; we are all aware of its deficiencies. The twin peaks approach and the establishment of the FPC, the PRA and the FCA also make sense, but it is important to recognise the need for the legislation to be forward-looking rather than focused on the mistakes of the past. It was interesting to read evidence from a number of witnesses who supported the proposals but still refused to commit to saying that if the new structure had been in place in 2007-08 or before, the banking collapse would not have happened. It is important that we seek to develop a regulatory framework that can adapt. A simple tick-box approach—we have heard much about that—or an isolated approach set up to prevent the recurrence of the last crisis will do nothing for a dynamic industry always seeking to evolve, to be innovative and to generate income for the country and its shareholders. The Minister is taking the right decision to set up those bodies, but much will depend on the leadership that their members will offer. Several times in the past the House has been involved in the establishment of new agencies only to have to return to their shortcomings within a year or two. The culture that each chairman or chief executive develops with the Governor will be crucial to the success of this legislation. The relationship between each organisation is also important and, as ever, will inevitably depend on the Governor, chairmen and chief executives. Such relationships need to be open, and there needs to be a clear understanding of the part that each person plays. They should not operate in isolation, and there needs to be clear accountability, with the ultimate test of knowing who should get fired. I want to highlight the issue of concentration risk or groupthink, given the huge emphasis that is placed on the Governor. In that respect, amendments suggested by the Joint Committee to strengthen ties with the Treasury and Parliament are welcome. I am grateful that the Minister has accepted some of them. It is clear that, within the proposed structures, the judgments of individuals will ultimately make the difference. The Bill provides the FPC with considerable powers of direction, but the levers generally used by the PRA or FCA will also determine the fate and future of the industry. That is the area of greatest concern across all three bodies, yet there is no alternative if we are opposed to the inflexible tick-box approach criticised tonight. Regular parliamentary scrutiny will be essential, and the role of Treasury officials on many of these bodies will be crucial for feedback to the Treasury and parliamentary scrutiny. In making their judgments, the PRA and the FPC will need to respond to the evidence. A one-size-fits-all approach will not serve the economy or the financial services sector well. Their engagement with the organisations that they regulate will need to be risk-based, but that flexibility, which is needed, must not lead to inconsistent actions. Sir Mervyn King stated that judgments are undermined when we end up with a game in which regulators are continuously rewriting the rules as firms devise new products to get around the detailed legal rules in place before. A tiered approach is needed, therefore, to allow certainty and due process that also reflects the risk and culture of the organisation. The FPC and regulators do not operate in isolation, and international factors need to be considered. It is fair to be concerned, therefore, that UK authorities could seek to raise the bar, and the risk of super-equivalence is real and always worries the leaders of many of these organisation. Mr Deputy Speaker, I am sorry that time does not allow me to complete my remarks about the FPC.