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Mr. Loughton: I appreciate that Labour Members are not given much opportunity to disagree. They are given a line, which they have to feed to everybody. There is no problem if non-executive directors, chairmen, or executive managing directors of the FSA want to disagree among themselves. That is how policy is made, although events in the House in past few days suggest that the Government do not like policy to be made in that way. I do not understand the problem that the hon. Gentleman tried to identify.
There is a danger of the financial services industry becoming personified in the figure of Howard Davies because he is such an important one. I wanted to discover
why the FSA should be different not only from commercial companies but from other quangos and Government agencies and companies, so I did some research. There are numerous examples of bodies--for example, the Environment Agency--which have a chairman, a deputy chairman and a chief executive. My right hon. Friend the Member for Wells mentioned the BBC. Divisions of responsibility between chairmen and chief executives exist in other regulatory bodies--for example, in the Investment Management Regulatory Organisation, the Securities and Investment Board and the Securities and Futures Authority.
Much of the Bill was based on the experience of self-regulating organisations. Why should the FSA be different? Logic tells us that it should not be different because it is much more powerful than the other organisations that I mentioned. Investing so much power in one person in that more powerful body is dangerous.
A host of other organisations routinely divide responsibilities; for example, the New Millennium Experience Company Ltd, which the Government would doubtless like to support, the new opportunities fund, the Occupational Pensions Regulatory Authority, the Criminal Cases Review Commission and the Youth Justice Board for England and Wales. Those organisations have regulatory powers, albeit not on the scale of the FSA, and have always divided responsibilities between chairmen and chief executives.
One has to do a great deal of research to uncover organisations that do not have such a split. The Library provided me with only two examples: Trinity House Lighthouse Service and the Central Laboratory for the Research Councils, whose chairman and chief executive are embodied in the same person.
The Bill provides for an exception. That is why we argued so hard, but fruitlessly, given the attention that the Government paid to our arguments, in Committee. I strongly support amendment No. 19, because its principle goes to the heart of the FSA's accountability.
The other four other amendments in the group deal with the appointment of non-executives by the Treasury. The hon. Member for Newcastle upon Tyne, Central (Mr. Cousins) thought it more dangerous for the Treasury to have the power to appoint all those people, but if a system is working properly--which it should be, but which it does not always do under the Government--the Treasury is scrutinised by Parliament. We have the power, through debates in the Chamber or Select Committee procedure, to scrutinise the Ministers who make those decisions as to whether appointments are just and efficient. I do not see why the hon. Gentleman fears that process, because the House already has such powers and we are trying to open them up to even more scrutiny.
Mr. Cousins:
The hon. Gentleman must see that the issue here is accountability to the markets, which must feel that they have some influence on the conduct of the FSA. Such close, fine-grain operational intervention by the Treasury--to the extent that even the members of that important non-executive committee are also appointed entirely by it--is wholly absurd.
Mr. Loughton:
The hon. Gentleman holds an interesting personal view, but if he had followed our discussions in Committee he would not necessarily take
I fear that the vast majority of our deliberations in Committee have not been taken up by the Government, and I am sure that the hon. Gentleman agrees with my concern. If they do not want to make the people running the FSA more accountable to the industry they are regulating, we must make sure that they are accountable not behind closed doors, but to the House. That is the whole point of amendment No. 20.
As my right hon. Friend the Member for Wells said, amendment No. 54 would give the non-executives a greater role in reviewing and approving the budget. It is essential that other people--the non-executive directors--have greater powers of scrutiny over the value for money offered to the industry by the FSA and over whether its budget is either sufficient to do its job properly or too generous, resulting in the industry's being penalised by excessive regulation.
Amendments Nos. 21 and 22 do no more than echo the words of consultation paper No. 35 from the FSA on senior management arrangements, systems and controls. Their wording is almost identical to section 4 of the paper. If the FSA seeks powers and the Government want to give it powers to meddle--some might say--in the internal structures used by member firms to arraign their management and go about their business, surely one should at the very least expect the senior FSA board members who are setting down the regulations to adhere to the same standards and requirements. That is purely a matter of consistency, which is why we were surprised that the Government did not wish to take it up when we raised it in Committee and before.
We are considering important amendments--some might say the most important--at this early stage because they go to the heart of the accountability of the organisation and, in particular, the people who will be responsible for it and keeping a check on its budgets and the number of regulations it produces. The person who runs it now has charge of at least 2,000 people, and if mortgages are to be regulated as well, he will have charge of an awful lot more. That person has enormous power and it is only right that it be properly shared and scrutinised, and, more important, that it should be seen to be properly shared and scrutinised. Ultimate accountability should be to the House.
Mr. Andrew Tyrie (Chichester):
I have just been given a redraft of part of the Bill, which those on the Treasury Bench have kindly provided. This gives a feel for the scale of the redrafting, which is being done on the hoof. None of us has had the remotest chance to absorb the draft--we are receiving it as I speak, which is extraordinary. Frankly, it is disgraceful and disrespectful to the industry that we are trying to regulate.
I strongly support the sentiment behind the hon. Gentleman's interventions and urge him to read the last subsection of clause 10. He will see the extent to which the Treasury is being given powers. He should also consider clause 372--a jumbo, omnibus, sweep-up clause that ensures that the Treasury can do exactly what it likes, notwithstanding the preceding 371 clauses. If he looks at the last subsection of a number of other clauses, he will find that, in case the draftsmen have got it wrong, the Treasury can vary matters by order without interference from anybody else, least of all the House or the hon. Gentleman.
I want to discuss a few matters that have not been articulated by my right hon. and hon. Friends. We need to be clear that we are creating a leviathan--an institution of unprecedented power and authority. If it had not been for the Burns committee report--which flagged up the extent to which the Financial Services Authority was effectively becoming judge, jury and executioner--we should have had an even more inadequate tribunal procedure. None the less, the chairman of the authority will still be able, in the mere blink of an eye, to close down businesses, destroy reputations and impose heavy fines. While doing all that, he will have virtually complete statutory immunity. We shall have a new tier of the judicial system--the court system will have a new financial judiciary system sitting alongside it. I am not yet convinced that that is the right way to go.
We are creating the most powerful body in this country after the Government, which is why it is crucial that there should be some check on the powers of the chief executive or chairman of such an authority. Someone to whom aggrieved parties can explain their concerns independently should be looking over the Executive director's shoulder, acting as a long-stop in the event of illness or something more serious. Leaving all that power in the hands of one man is not a reasonable way to go. My hon. Friend the Member for East Worthing and Shoreham (Mr. Loughton) referred to a passage from the Cadbury report, which is very relevant, which says that it is certainly right for companies and corporate bodies to have a division at the top between a chairman and a chief executive.
I reiterate the point made by my hon. Friend that Howard Davies is a very good chap. I have known him a long time and am I sure that he does an excellent job. I more or less took over from him as special adviser in the Treasury to Nigel Lawson. In those days, he was identified as a political adviser to the then Conservative Government, but is now a much more neutral figure, particularly as he attached his name to the Rowntree report on inequality when Director General of the Confederation of British Industry. He has done, and will continue to do, an outstanding job. He, among others, has articulated three arguments as to why he does not see why he should have someone looking over his shoulder.
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