Well, I trust the Minister in this case then, on the Explanatory Memorandum. Let us not get carried away, although I do have a small point even on that. I am saying essentially that the Minister’s presentation and the Explanatory Memorandum, which I have studied in some depth, and the orders in as much as I was able to relate them to the Explanatory Memorandum, leave me with only a couple of direct questions.
First, the Minister spoke about the firms that are in the core. That was unexceptionable and exactly how the commission was talking. All the stuff I remember from the Explanatory Memorandum seems to fit with that. I found no surprises and the Minister has not pointed out any surprises to me. Therefore, my attention has concentrated on the Financial Services and Markets Act 2000 (Excluded Activities and Prohibitions) Order 2014.
Looking at the Explanatory Memorandum for that order, as a result of the Minister’s speech, I first lighted on paragraph 7.4, which states:
“This Order provides that dealing in commodities (e.g. precious metals, oil, agricultural products) is an excluded activity”.
The Explanatory Memorandum refers to “agricultural products”, and I am sure that if I went into it in enough depth, I could find whether or not agricultural products are excluded. The Explanatory Memorandum says that they are, but the Minister’s speech did not. I ask that as a small technical question.
It is interesting that in the rest of the order virtually everything seems to be fairly black and white. This is in; this is not. This is excluded; this is not excluded.
Paragraph 7.5 of the Explanatory Memorandum caught my eye, where it lists the key things that the order does. It states:
“Third, the Order creates an exception to permit ring-fenced bodies to sell a narrow range of simple derivatives to their customers”.
The Minister gave a perfectly satisfactory explanation of why that was useful. What was less clear to me—I have to admit that it may be deep in the order—is how one defines “simple”. Listening to the Minister, “simple” seems to be defined as small and what small businesses want, while “complex” is big and what complex businesses want. That did not seem to me a fundamentally correct definition of “simple”; it should have more depth in it if it is to be a serious limitation on what is inside and outside the ring-fence. I would value further explanation of what “simple” means.
5.30 pm
I was also interested in how policy and detail developed. As we know, there is subtle detail when orders are created to bring an Act into force. I noticed with some disappointment the rather short section in the Explanatory Memorandum on consultation. It states:
“In the light of consultation responses, the Government made a number of technical changes”.
I would have valued a little more information on how the consultation and the changes came about. Of course, I could have taken up the invitation in paragraph 8.2 to go to the link there given. I fear that, if I did, I would probably find myself facing a 200-page document and having to admit defeat by sheer volume. If the Minister could shed a little more light on the consultation, I would value it.
My mind then started to go away from where we had been together with the Bill to the reality of this becoming a ring-fence. I started to wonder who does what, which is when my thinking came back to this idea of “simple”. How does whoever is responsible for this—I assume that it is the PRA—ensure that the instruments inside the ring-fence are simple and that all other instruments are outside? Does it review every instrument that a bank is going to trade in, or does the bank have to self-certify with the PRA reviewing it afterwards? By what process does the detail in the orders come about? We can all pass rules, but, let us be honest, with this industry, a policeman—for want of a better word—has to be there making sure that the rules are obeyed and implemented. I am interested in who does what and how they do it.
Finally, we heard a number of lovely little phrases throughout the Minister’s speech referring to timetables. He talked about being in the final stages, and said that the instruments would be in place by the general election and that the Government were close to finishing the job. Can the Minister flesh that out a bit? Finishing the job means a ring-fence being in place that is properly policed. When we can we expect that? I seem to remember a dreadful date like 2019 being bandied about. If all the stuff is in place by 2015, why will it take that amount of time for it to be in place, giving the protection for the citizen that I know both the Minister and I want? Certainly, I want to see it in place as quickly as possible.