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Cruickshank's report is important in that respect. I do not know the official Opposition position on it, but I think that it is an outstanding and brief exposition that anyone interested in these matters should read. It talks about striking the right balance--the very balance to which I have alluded. Cruickshank made that a sub-heading of the document and his letter to the Chancellor described the trade-off between the objectives of regulation and economic performance, but I will not detain the House by reading the passage out.
The question of whether the Government's new clauses respond adequately to the Cruickshank report and take those concerns into account is crucial. They were tabled only a few days ago. As they deal with the heart of what we have been discussing for months and months, it would have been immensely helpful had they been tabled earlier. The report was published in July, but the competition
clauses were not dealt with in Committee until November, so although the Government had ample time, they waited until the Bill was on Report to table new clauses. Conservative Members, the House, the City and the industry all regret that.
How far have the Government gone towards meeting Cruickshank's six recommendations? I shall not go through them all, but should refer to two. The most important recommendation is the first. The report unequivocally states:
The Government have failed to take up Cruickshank's unequivocal recommendations on a further crucial question. The report said that the Competition Commission's findings, not those of the Treasury, should be the final arbiter. I remain concerned that the revised new clause leaves much more discretion to the Treasury than initially appears to be the case. The Minister has gone some way towards assuring me about subsection (3)(a), but I remain concerned about the wording and about what "exceptional circumstances" could be taken to mean. The Treasury can decide that there are exceptional circumstances, so that it can overrule--
Miss Johnson
indicated dissent.
Mr. Tyrie:
The Minister shakes her head as if I am getting this wrong. If I am wrong I should be grateful if she would clarify where in the Bill "exceptional circumstances" are explicitly limited so that we can be sure of what the phrase means. Can she do that and go beyond the mere assurances that she has already given us?
Miss Johnson:
Briefly, I have described how "exceptional circumstances" are to be regarded. I gave the assurance that any reason why the Treasury had to override any proposal or report would be laid before the House and we would expect debate on it. I covered that fully in my earlier remarks.
Mr. Tyrie:
What assurance do we have that the Treasury cannot define "exceptional circumstances" widely? All we have are the Minister's assurances. We do
The Government's new clauses remain out of kilter with Mr. Cruickshank's central demands. He demanded that the Treasury be kept out of this altogether, but that is not what we have. He said that we should avoid a blurring of responsibility for the delivery of the competition objective, but we have blurring. The competition objective is weakly included in the FSA statement of principles. The OFT is to play a major role, the Competition Commission is to be an appeals system and the Treasury has the power of override, limited by the phrase "exceptional circumstances" which is as yet untested.
If the Minister is to reply, I should be grateful if she could clarify one point. As I understand it, under the Competition Act 1998, a ruling by the Competition Commission may go to appeal on a point of law. Would the FSA have the right to appeal against a Treasury ruling in the event of there being a dispute on a point of law, or is the FSA excluded from access to the courts in this area?
More generally, I remain concerned that Cruickshank's primary recommendations have been wholly ignored. As he himself makes clear, without that first basic building block of competition as a primary objective, most of his other recommendations will be difficult to implement. Furthermore, in the long run, the dynamic effects of the inadequate treatment of competition could be profound for the City. He points to the danger of damage to the City through inadequate consideration of the dynamic effects of weakened competition.
Finally, as my right hon. and learned Friend the Member for North-East Bedfordshire said a moment ago, the FSA is required to have no more than "regard to" the United Kingdom's competitive position. That is hopelessly inadequate. Of all the provisions in the Bill, that is the one that I hope we will find legislative time to put right when we return to power, which we will.
Miss Johnson:
It will happen a long time from now, then. It has been difficult at times to understand whether the Opposition's view is that competition should become an objective, or that competitiveness should. Conservative Members have each advanced different arguments. I am left uncertain as to what the official Opposition view is. May I explain the Government's view?
Miss Johnson:
Clearly, I am about to get clarification. I am grateful to the hon. Gentleman.
Mr. Flight:
Amendment No. 192 sets out that which we wish to add as an objective: competition and competitiveness.
Miss Johnson:
The amendment sets out what the hon. Gentleman wishes to do, but I am still not clear what Conservative Members' real position is and what the real Opposition view is. Let me tackle both questions.
If competition is an FSA objective, it will, in effect, become another competition authority. It will also have competing objectives. In the event of conflict, it would go either down a particular path, or down no particular path,
under certain conditions. It will leave the FSA in considerable difficulty as it carries out the objectives. It is not appropriate for competition to be an FSA objective.
I endorse the enthusiasm with which the hon. Member for West Worcestershire (Sir M. Spicer) pushed for recognition of the importance of competition and competitiveness. The Government recognise both the importance of competition and the value of competitiveness. We think that they are both important. None of us in the Chamber disagrees about that. We disagree about what the effect of including competition in the FSA's objectives would be and what the effect is of where it appears: under the principles in clause 2(3). We looked at the matter at considerable length. We responded to the Cruickshank review in July. A press release was issued when the matter was discussed in Committee in November. Don Cruickshank said:
Sir Nicholas Lyell:
The Minister said that if competition and competitiveness were made an objective, it would make the FSA a competition regulator and a competition authority. Will she please reconsult her advisers and inform herself that that is nonsense? It would have no such effect. It would not put the FSA into the position of the Competition Commission, which seems to be what she fears. It would do what I am pleased to hear there is common ground about: put the competitiveness of the UK financial service markets in the Bill as an objective.
Miss Johnson:
I do not agree with the right hon. and learned Gentleman on that, and I shall not change my comments on the matter. We already have a body whose prime responsibility is to ensure that competition is engaged in wholeheartedly in all sectors of the economy, and that body is the Competition Commission. The commission, not the FSA, has that role and those functions. The Government do not disagree with his point that the FSA must have regard to competition. As I said, we considered different formulations of "regard to".
"the FSA should have a primary competition objective, in addition to its regulatory objectives."
It forms the second, emboldened paragraph of annexe 3--it is crucial. Cruickshank says, more or less, that unless it is implemented, all his other recommendations, whether implemented or not, will be mere sticking plaster to patch up something that will inevitably be inadequate and second best. On page 13, he says:
"Getting the regulator's primary statutory duties right is essential . . . A competition objective that is weak relative to the regulator's other objectives is unlikely to be delivered effectively."
He makes it clear that his other recommendations would be far less effective without that central objective, but that is exactly the route the Government have taken. They have left competition as a principle and introduced changes to the competition regime without including it in the Bill as a central objective, although they have moved on Cruickshank's other recommendations, reducing the extent of the financial sector's exclusion from general United Kingdom competition law and strengthening Office of Fair Trading oversight. There has been some progress.
"I am not wedded to any particular means of achieving this, and I will welcome any changes to the Bill which deliver the outcome in practice."
The only issue has been how to deliver that in practice. There is no disagreement about the fact that competition is important and must be an issue that the FSA has regard to in all its dealings as a regulator.
6.15 pm
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