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6.15 pm
Sir Nicholas Lyell: I have been following the Minister's argument closely. I think that she is telling us that, as a result of the amendments, the Office of Fair Trading will be able to supervise the FSA in that, if the authority introduces rules that are anti-competitive, the OFT would have some influence. Is that the case?
Miss Johnson: Yes, but it would be more technically correct to say that the Competition Commission, rather than the OFT, would be in that position.
The third point is that drafting amendments were made to clause 153 concerning the role of the Competition Commission to bring it into line with similar provisions under the Fair Trading Act 1973. Those were amendments Nos. 192, 193, 196, 198, 199, 201 and 203.
Amendment No. 103 inserts a new clause after clause 92, giving the Treasury a power to subject the regulating provisions of the competent authority--the listing rules and general guidance it produces--and its practices to a competition scrutiny regime. The Treasury proposes to use that power to create a competition scrutiny regime for the competent authority that is broadly similar to the regime for the FSA--in its role as financial services regulator--as provided for by chapter III of part X. The power will enable the Treasury to provide for exclusions from the provisions of the Competition Act analogous to those for which chapter III of part X makes provision.
Mr. Andrew Tyrie (Chichester): The proposed new clause states:
- The Treasury may by order provide for.
- to be kept under review.
Miss Johnson: Because that is what we wanted the new clause to say--that is the obvious answer. The hon. Gentleman may wish that it said something different, but it says what we want it to say. That seems perfectly reasonable.
Sir Nicholas Lyell: The point of my earlier question is also relevant to that put by my hon. Friend the Member for Chichester (Mr. Tyrie). I have been much concerned by a questionnaire sent to me by an independent financial adviser--I have passed it to the Minister. It contains 171 detailed questions that have to be answered every month. That will bear heavily on all independent financial
advisers, but especially heavily on small ones. Under the provisions that the Minister describes, would the Competition Commission be able to intervene to make representations to, or to impose controls on, the FSA in respect of such over-regulatory questionnaires?
Miss Johnson: Yes, it would be able to do so and that is one way in which the provision may work.
Before the interventions, I was discussing amendment No. 103. It will insert a new clause after clause 92 that will give the Treasury a power to subject the regulating provisions of the competent authority--that is to say the listing rules and general guidance that it produces--and its practices to a competition scrutiny regime. The Treasury proposes to use that power to create a competition scrutiny regime for the competent authority that is broadly similar to the regime for the authority in its role as financial services regulator.
Arrangements were made in part XVIII to align the competition scrutiny arrangements for recognised bodies under chapters II and III of part XVIII with those applying to the authority under chapter III of part X and to reflect the fact that it is possible that a recognised body may itself exploit the strength of its market position. The relevant amendments are amendments Nos. 337, 338 and 353 to 371, 377 to 390 and 392. They will broadly align the roles of the director general, the Competition Commission and the Treasury with those provided for in part X in respect of the FSA. The only significant difference, and complication in terms of the drafting, arises from the fact that scrutiny arrangements apply to applicants for recognition as well as to bodies that are already recognised. Obviously, that is not the case with the FSA.
Amendments Nos. 442 and 660 will introduce a new clause and new schedule respectively that will make provision for the protection of information obtained by the director general and the commission under their powers of competition scrutiny under the Bill. These provisions closely reflect the equivalent provisions on protection of confidential information in section 55 and schedule 11 of the Competition Act 1998. I ask hon. Members to agree to the changes made in another place that align the competition regime for recognised bodies and the competent authority with those that we introduced in this House for the FSA and that make minor improvements to the drafting of the Bill.
Sir Michael Spicer (West Worcestershire): I have been thinking about the Economic Secretary's answer to the question of my right hon. and learned Friend the Member for North-East Bedfordshire (Sir N. Lyell). If burdens were imposed on a particular sector of the industry, he asked whether that would be a matter for Competition Commission referral to the Office of Fair Trading. She said that it would, but surely, if the burdens were imposed equally on everybody and it was just a matter of internal competition, it would not be a matter for referral. That is why our amendment to amendment No. 183, which distinguishes between internal and external competition, should apply. In the light of the answer to my right hon. and learned Friend's question, it appears that burdens will become anti-competitive only when they are seen to be
externally anti-competitive in relation to other countries. Therefore, given the amendments that the Government have tabled, the Economic Secretary's answer was wrong.
Miss Johnson: The hon. Gentleman's interpretation of the question of the right hon. and learned Member for North-East Bedfordshire (Sir N. Lyell) may be no better than mine. We can guess what the right hon. and learned Gentleman's intention was, but perhaps he will confirm that his point was that independent financial advisers, as small businesses, would be disadvantaged in some way. His point was about a level playing field between IFAs and other sectors of the financial services industry and that is different from the one that the hon. Member for West Worcestershire (Sir M. Spicer) has just raised.
Sir Nicholas Lyell: My question related to the comparative competitive position within the United Kingdom financial services industry. I was concerned that small businesses would find it even more difficult than larger ones to comply with what I regard as over- burdensome regulation. However, there is a second aspect to the issue. If there is over-burdensome regulation in the United Kingdom, it will drive business abroad and disadvantage consumers.
Miss Johnson: The right hon. and learned Gentleman is right in that regard. However, the hypothesis that he has described will not result from the Bill or from the work of the FSA. Among other things, the authority is bound to try to be proportionate in what it does. We have striven in drawing up the Bill and in our scrutiny of it to make sure that there is a balance between regulation and ensuring that competition is able to flourish. I believe that we have the balance right.
The Opposition's amendment to amendment No. 183 would insert a reference to
- prejudicing the competitive position of the United Kingdom
- a significantly adverse effect on competition.
It is hard to think what can be said that has not been said many times before about the relationship between competition and competitiveness, so I shall confine myself to repeating a few general remarks that I made on a previous occasion. I shall explain why the amendment would be undesirable.
Competition within the UK market and the UK's competitiveness are closely related, but they are nevertheless quite distinct. All regulation has an impact on competition. Regulation involves placing restrictions on who can perform a regulated activity and the way that
they perform it. No one doubts that an appropriate level of regulation is necessary, but nor can they doubt that too much can be counter-productive. That is why we extended and improved the special competition scrutiny regime for financial services that was first provided for in the Financial Services Act 1986. If the FSA regulates in a way that has a significantly adverse effect on competition, the competition authorities can investigate and, ultimately, the FSA can be directed to change its rules or practices.
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