My Lords, I congratulate the noble Baroness, Lady Worthington, on venturing into commodities. I remember many happy hours—I call them that—when I was chair of ECON, discussing commodities with the chair of the CFTC, Gary Gensler, in particular, and the chairs of the agriculture committees in the Senate, which deal with a lot of the derivatives. It is an impossible task to get a grip on everything, but that does not mean you should not try to get a grasp of things that might go wrong.
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I share some of the concerns about the way this is being implemented. I am less concerned about exchanges doing the position limits: they have the trading and the information, and they can act more quickly, as long as there is a sound framework against which they make those decisions. The problem with commodities is that there are some with freely flowing markets and lots of participants, so they will not very easily corner the market. Then there are some with very few traders, and it is very difficult, and some where there are even fewer and it gets extremely complicated. Steps have to be taken, especially in times of upheaval, as we have just seen with the war in Ukraine, when you get demand for sensitive metals, for example.
My concern is that part 4 of Schedule 2 says:
“The FCA may by rules require relevant persons to establish and apply … position limits”.
There is no compulsion for anything whatsoever. That goes back to the point I made when we debated my noble friend Lord Sharkey’s amendment. This means that this policy and the scope of the regulatory perimeter is to be entirely determined by the Financial Conduct Authority. It does not say that we will have rules about what might be dangerous concentrations, cornerings and so on in the market; it says that it is up to the regulator to analyse and work out the rules for when it will intervene when certain things happen. It might sometimes decide that it is not possible to intervene and it will let things be, but it is the business of government to set the regulatory perimeter. That is what I am always being told. I would quite like it if it was a bit more flexible, but that is what we are told.
Then we come to the things the FCA has to take into consideration. The noble Baroness, Lady Worthington, has something in looking at the nested way in which we read through the different strategic and operational objectives and so on. I used to think that the integrity objective was strong, and governed behaviour and all kinds of things. Then you keep wandering through and discover that it has been redefined; in the end, it is only if the market is regulated. I do not think it is regulated when it is a “may”, so maybe nothing applies. Setting it back to where it was with the adjustments made by the noble Baroness, Lady Worthington, at least would mean that we would know what is regulated.
Schedule 2 says that, in making rules,
“the FCA must have regard to its competitiveness and growth objective in section 1EB of the Act”,
but it will obviously have to have regard to all its objectives. Why oh why are we singling out the competitiveness and growth objective when here, the fundamentals are humanitarian, not competition and growth? I cannot see anything in the objectives, and their nesting in the various principles that have to be followed, about sustainability or humanitarian issues. This means that, if the FCA does take any action, it has been directed to pay attention to the competitiveness and growth objective. It might set it aside, but it has been given some kind of priority when dealing with issues that do not even properly seem to be covered in what it is supposed to do.
There are various amendments later that try to set that straight, but it is now right at the top of the tree to say something about sustainability. In particular, we have to balance the competitiveness and growth objective with a reference to sustainability, otherwise the whole commodities set-up comes tumbling down and is saying, “We don’t care”. So I think that the formulation here from the noble Baroness, Lady Worthington, is safer for now. If it went to a vote I would support it, but I really hope that the Government will make some other amendments or adjustments to ensure that we have properly considered, and definitely got within the regulatory perimeter, the humanitarian, social and very basic issues that affect the everyday lives of everybody.
It is not a matter of looking at whether there might be public interest. This Parliament knows that the public interest is in the lives of people—the heating in their homes, the food they eat, the materials that make the things in which they live, the vehicles in which they travel and the electric cars they hope to buy. All these things come down to commodities, and therefore we need to pay a lot more attention here. I hope that, by the time the Bill finishes its passage, we have made changes.