| Previous Section | Index | Home Page |
Mr. Tyrie: The hon. Lady says that competition and competitiveness are fundamentally different. In a sense, they are because competitiveness is concerned with overall economic performance, but could any action be taken to improve competition that would be deleterious to competitiveness?
Miss Johnson: I do not think the two things link in that simple way. I should like to come back to another point that the hon. Gentleman raised with me, but it does not fit very well here, so may I finish dealing with competitiveness?
It is not clear what role the FSA will have to take on in promoting competitiveness, but if it entailed the FSA trying to pick winners among United Kingdom firms or telling them how to run their businesses, it would be more likely to do harm than good. However, I am not saying that the FSA has absolutely no interest in competitiveness. We realise that, as with competition, the way in which the FSA regulates can have an impact on competitiveness, and subsection 3(d) requires the FSA to have regard to that fact. However, as I said, such a requirement is very different from a competitiveness objective.
The hon. Member for Chichester (Mr. Tyrie) asked about the purpose of subsection 3(a) of new clause 29. The paragraph deals with situations in which, as a result of a Competition Commission report, the FSA decides to abandon the rule or practice that has been condemned. If the FSA acts to abide by the commission's conclusions, there is no need for the Treasury to give a direction. New clause 29(3)(a) allows for that position. It deals with situations in which action has been taken.
The Opposition have suggested, in amendment No. 49, a formulation to be inserted in the "seek to" formula. That formulation would require the FSA to take action to try to achieve the objectives in clause 2(3). I agree that that is what we want the FSA to do, and I am grateful to Opposition Members for confirming that that is also how they want the Bill to work. However, that is also the effect of the "have regard to" formula, and the "seek to" wording does not really work with the other provisions of clause 2. It makes no sense, for example, to talk about the FSA "seeking to impose burdens or restrictions on a person" or "seeking to impede or distort competition", regardless of the wording that follows.
The second change that the amendment would make is to require the FSA to seek to ensure that it does not intrude unnecessarily in the commercial affairs of authorised persons--I assume that "such persons" refers to authorised persons. Although that is certainly part of what the principle is about, it is not the only thing. Additionally, I am not convinced that it would be very helpful to spell out the various elements in that manner.
Amendment No. 49 also seeks to address the issue of facilitating innovation, and the desirability of doing so. It would provide that the FSA should seek to ensure that it does not unnecessarily impede innovation. Although that is clearly an important consideration, it is covered adequately by the existing principle in the Bill and by other principles. If the FSA has regard to the desirability of facilitating innovation, it should not do things that unnecessarily impede it.
Earlier, I said that I was sympathetic to the general provisions of Opposition amendment No. 232. Although I ask the House to reject that version of the provision, I repeat my assurance that similar provision will be made--requiring that the director can request only
information that is relevant to his investigation, and reproducing a provision on documents currently in the clause--and that, later in the Bill's passage, we shall return to the issue and make changes if we think that they are necessary.
I hope that hon. Members will support the Government's new clauses and amendments in this group and oppose the Opposition amendments.
Sir Michael Spicer (West Worcestershire):
Collectively, the Government new clauses and amendments in this group are quite admirable in their intent. The problem is that they are completely in conflict with the majority and thrust of the Bill. Clause 2 lists market confidence, public awareness and consumer protection as the regulatory objectives. Clauses 3 to 6 set out the details of the regulatory objectives. I still do not understand what promoting awareness will mean in practice for the FSA, but clause 5 covers the protection of consumers and specifies that the FSA must have regard to
If the new clauses and amendments are passed, the Director General of Fair Trading will go rushing off to promulgate competition, but he will be pulled back because the Bill will require the FSA to intervene and distort the market--the opposite of competition.
The regulatory regimes that the Government are imposing right across the commanding heights of the British economy use the words--and often the institutions--of the previous, Conservative Administration. The Government amendments use words such as "consumer" and "competition", but they would achieve and impose the opposite of what the previous Government had in mind. The concept of fuel poverty, for example, is no doubt admirable, but it is being imposed as an overriding objective for the electricity regulator. Similarly, Oftel has been burdened with the concept of total coverage, and the Post Office with that of social obligations. Even the FSA is required to engage in the concept of social banking.
Such notions conflict with the objectives that the Conservative Government set for the regulatory bodies. The amendments are a perfect example of how we are seduced into believing that the Bill is about competition rather than its opposite. The intervention proposed in the Bill is the exact opposite of what is proposed in the amendments.
The previous Administration set up the regulatory bodies with competition as the primary objective. When I took the Bill to privatise the electricity industry through Standing Committee, it was clearly understood that competition and the protection of competition was the Bill's primary objective. The Conservative Government privatised the utilities across the board. The intention was that, once they began to benefit from competitive pressure, the regulatory bodies would begin to withdraw and retract. Control of the utilities and the interests of consumers would be left to market forces.
In the electricity industry, for example, the regulatory regime became lighter as competitive pressure built up. However, the exact opposite is happening under this
Government, and that is illustrated by the Bill: as competitive pressures increase, the Government's objectives move away from allowing the marketplace and competition to work and towards greater intervention.
It is precisely because these clauses will be made totally ineffective--I would say because of their hypocritical nature--that I object to them. They form, as the whole Bill forms, part of a panoply of new parallel government which is being set up throughout the commanding heights of the economy. It is socialism by the back door, nationalisation by the back door, and control and intervention by the back door, through the regulatory regime.
Mr. Beard:
The clauses that so aggravate the right hon. Gentleman are there to provide for a watchdog over the Financial Services Authority, so that nothing it does unnecessarily impedes competition. That seems to be entirely reasonable. It divides the role on competition between the FSA and the Director General of Fair Trading. I do not understand why the right hon. Gentleman sees such dire consequences arising from what is plain common sense.
Sir Michael Spicer:
For the precise reasons that I have given, the entire thrust of the Bill is in opposing directions. The objectives set for the FSA, in particular, are entirely opposite to that of competition. To have a fig leaf in the form of the new clauses will make it extremely difficult for the bodies that exist to oversee the tribunals and the various review arrangements in the Bill for overseeing the FSA. It will be extremely difficult to come to a judgment in terms of the law that we are passing, because the whole thrust of the Bill is in the opposite direction to competition; it is in the direction of protectionism and interventionism. Therefore, at the very best it will make it extremely difficult for the tribunals, other bodies and fair trading organisations to take a view, because, if we pass the Bill, they will face legislation the thrust of which is in opposing directions.
"the differing degrees of risk involved in different kinds of investment or other transaction . . . the differing degrees of experience and expertise that different consumers may have in relation to different kinds of regulated activity . . . the needs that consumers may have for advice and accurate information".
In other words, the Bill conflicts with the Government amendments and new clauses that we are discussing. It gives the FSA powers to intervene in the market, and even to promote and develop particular products, in the interests of consumer protection.
| Next Section
| Index | Home Page |