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Mr. Howard Flight (Arundel and South Downs): The Minister said that the board would be appointed by the Treasury. Will she clarify the matter? Our amendment was intended to achieve that, but surely the schedule requires the authority to appoint the governing body. If the authority does that, it will be able to appoint its chums.

Miss Johnson: I confirm that the Treasury appoints the board and will do so in line with transparent Nolan-type procedures, if that helps the hon. Gentleman.

There are other reasons why I will not accept the amendments. First, the tripartite arrangements between the Treasury, the Bank of England and the FSA are based on relationships between the organisations and their heads. It is hard to see how the FSA could easily be represented in the forum by a person with appropriate stature--

Mr. Tyrie: Further to the Minister's statement about who will appoint the non-executive committee, may I seek clarification? Paragraph 3(2) of schedule 1 reads:

"The members of the non-executive committee are to be appointed by the Authority."

Do the Government intend to table an amendment to change that, so that henceforth they will be appointed by the Treasury?

Miss Johnson: I will come back to that point. May I finish the points that I was making because I started with a "first"? I want to round off my comments about the special factors to be taken into consideration.

Secondly, as the non-executives on the FSA board have said, the organisation is mature enough not to be merely a creature of its chairman. I am grateful for the comments of my hon. Friend the Member for Erewash (Liz Blackman) about the way in which Conservative Members suggested that the board was a mere cipher and rubber stamp for the organisation. Quite the contrary; I have been to board meetings and met board members on several occasions.

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It is not the case that board members are anything other than extremely competent and professional. Many views are expressed at the meetings.

Sir Nicholas Lyell: This is the moment for me to ask the Minister to clarify the point that I raised in my speech. I described paragraph 4(3) of schedule 1 as boxing in the non-executive functions: the non-executive committee will review simply whether the authority is using its resources in the most efficient and economic way. She is speaking as though the committee had an overall remit of the type that we recommend in our amendment. What is she saying? Are they boxed in by paragraph 4(3) or are they not?

Miss Johnson: Perhaps I could come to the point that the hon. Member for Chichester (Mr. Tyrie) raised before coming to the right hon. and learned Gentleman's point? The Treasury appoints the members to the board. The FSA has to ensure that they form a committee under paragraph 3. Paragraph 2(3) is the one that the hon. Gentleman should look at. The FSA appoints the non-executives. Perhaps that clarifies that point. [Interruption.] I am looking at the text of the Bill. Paragraph 2(3) states:

"The chairman and other members of the governing body must be appointed, and be liable to removal from office, by the Treasury."

Sir Nicholas Lyell: Hansard will record that the Minister said that that was done by the authority. Now she has rightly read out that it is done by the Treasury.

Miss Johnson: I am talking about the non-executive committee, which must have the paragraph 4(3) functions. It will also be open to the FSA to confer functions on the committee. Therefore, paragraph 4(3) does not box in the committee; it does quite the reverse.

Sir Nicholas Lyell: Will the Minister please explain why it does not box in the committee? She has received a note from those who are assisting her saying that it does not box in the committee, but why is the provision so carefully confined?

Miss Johnson: I shall deal with that point in a moment but should like first to deal with the point made by the hon. Member for Chichester on how the Government have dealt with some of the matters.

Amendment No. 19 is worded very flexibly, so that the split between the chairman and the chief executive could be undertaken in the longer term--I see the hon. Member for Chichester nodding. However, I still do not agree with the amendment, as it raises the real issue of who would allocate the roles and how they would be allocated. We have other objections to splitting the roles of chairman and chief executive, but Opposition Members have not dealt with them in their amendments.

Mr. Tyrie: Will the hon. Lady explain briefly why the FSA is such a unique structure that it cannot have a division of roles? It would be done by the Treasury if the flexibility provided in the paragraph to which she referred

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were used. Why are all the other bodies that have been mentioned perfectly able to cope with such a split and function happily, whereas the FSA cannot?

Miss Johnson: Will the hon. Gentleman repeat his last sentence?

Mr. Tyrie: Why are all those other bodies able to cope with a division of roles and find a way of dividing responsibilities between chairman and chief executive, whereas the FSA is held to be so unique that it would be incapable of doing so?

Miss Johnson: The Financial Services Authority is unique in many respects. However, it is not unique among regulators. Nor is our proposal unique among arrangements made for other international regulators. Our proposal is exactly in line with the structure of other major international regulators, which are not splitting the roles. The roles should remain combined, as we have proposed.

I should like to deal with some of the points that Opposition Members have made about the current incumbent of the post, Howard Davies. I share their enthusiasm for him and the way in which he is discharging his role, although I was a little alarmed by some of their remarks that he might leave after his contract ends, if not before. Nevertheless, the Government's arguments depend not on the current incumbent and his many undoubted qualities, but on the fact that we do not think that it is appropriate or right to make the split.

I should like briefly--I may test your patience temporarily, Mr. Deputy Speaker--to point out to the hon. Member for Chichester that the redrafts of explanatory material on amendments that he was waving deal with specific matters in which Opposition Members had expressed an interest in Committee. It is highly technical material, and we expect to deal with it not today, but on Tuesday. I regret that however helpful the Government have been on the Bill--we have tried to be extremely helpful, recognising as we do the many helpful contributions made by Opposition Members--some of them, such as the hon. Member for Chichester, seem unable to deal with that helpfulness.

2.45 pm

I tell the right hon. and learned Member for North-East Bedfordshire (Sir N. Lyell) that paragraph 4(3) does not box in the committee because the FSA can confer further functions. Paragraph 4(3) simply specifies the minimum functions. If the right hon. and learned Gentleman still thinks that the provision boxes in the committee, perhaps he would like either to raise the issue later in the debate or to write to me.

Mr. Flight: Hon. Members on both sides of the House seem to be joining in the love-in for Howard Davies and the good job that he has been doing. After publication of the Bill, it was reported that the Treasury had taken the view that it was better to have a split between non-executive chairman, chief executive and principal, but that the Government were leaving the provision as drafted largely in deference to Howard Davies. Indeed, after the Bill was published, Lord Burns confirmed his judgment that the Government would have to look again at the unified role.

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I do not want to repeat other arguments, but shall deal with the crucial points. The Investment Management Regulatory Organisation model worked extremely successfully. A non-executive chairman is not someone competing to be chief executive or to be accountable, but a person of wisdom and experience whom the chief executive can consult on difficult issues, and someone who could protect the chief executive if he or she were being leant on by Government.

I cannot resist raising a fairly major issue that is currently in Howard Davies's hands for decision. As the House will know, IMRO launched a major investigation into London and Bishopsgate, the Maxwell investment management company. Quite correctly, the investigation was not published at the time, as proceedings were pending against the Maxwell brothers. Now, the decision on publication must be taken. The Opposition argue that, in the interests of accountability and openness, it should be published. That is precisely the type of matter in which a chief executive should be able to draw on the wisdom of a non-executive chairman before taking a decision, and to seek support in dealing with Government attempts to lean on him or her.

Mr. Barry Sheerman (Huddersfield): I was the Deputy Chairman of the pre-legislative inquiry. Before the hon. Gentleman assumes too much--that there was a clear political split on the issue--I should tell him that several Committee members had reservations about splitting. I took Lord Burns's view, and rather reluctantly came to the conclusion, as it was shared by the majority of Committee members, that, for now, the role should be kept as one.

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