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Sir Nicholas Lyell: Will the Economic Secretary clarify whether the competition authorities in this country can intervene if the FSA regulates in a way that damages our international competitiveness, or do the authorities have power only in relation to internal competitiveness?
Miss Johnson: The best way that I can answer that question is to come to the point that I was just about to make. It deals with the relationship between competition and international competitiveness--an issue that the right hon. and learned Gentleman and the hon. Member for West Worcestershire have raised.
If the FSA regulates in accordance with its objectives and principles and in a way that does not have a significantly adverse effect on competition, what is there for the competition authorities to examine? I certainly acknowledge that there is the separate issue of the competitive position of the UK, but the problem with the Opposition amendment is that it would introduce that issue into the competition scrutiny regime. The issue is whether the regulatory framework to be set up by the Bill, including its objective and principles, remains the right one in the light of developments in the UK and the world financial markets. That is a legitimate issue, but it is not appropriate for the competition scrutiny regime.
Ministers will keep the legislation under continual review and, as a part of that process, they will consider its impact on the UK's competitive position. They will be responsible for their policies to Parliament in the usual way. If appropriate, they could decide to commission a review of the impact of the regulatory regime on competition and the competitive position of the UK.
6.30 pm
Mr. Tyrie: The Minister is now telling the regulated community and the country that the Treasury may decide to call for a review if things start to go wrong. Why not give them an assurance that, in three years, there will be the review that almost everyone involved in the Bill has called for?
Miss Johnson: If the issue arose, we would have to consider carefully whether the competition authorities would be the right body to carry out such a review, as suggested by Opposition Members, including the hon. Gentleman.
Mr. Tyrie: That was not the point that I was making. The Minister is conceding that it is possible that the Government may be wrong on this issue. I am happy to concede that we may be wrong on the issue, but we are not content that the Government should decide whether to have a review in due course, if they feel like it. Surely they should be prepared to commit themselves to re-examining the issue in three years or so in a thorough
review. If they do that, many of the regulatory community's concerns will be assuaged at a stroke. Will the Minister now give such an undertaking?
Miss Johnson: Competition policy is about preventing and removing unfair barriers that hinder firms from competing. The Bill's competition provisions are intended to stop the FSA adding to those barriers, except when that is an unavoidable price to be paid for achieving the necessary regulatory purpose. Competition is undoubtedly beneficial to consumers. However, international competitiveness involves the strength and ability of UK industry as a whole to compete and secure business in home and international markets.
Sir Michael Spicer: Will the Minister give way?
Miss Johnson: I would like to answer the question asked by the hon. Member for Chichester (Mr. Tyrie), but I should be happy to give way in a moment.
The regulator's key job is to ensure that regulation in the UK is set at the right level and strikes the right balance between costs and benefits, as I said earlier. To ensure that UK business remains internationally competitive, we must ensure that it keeps costs down and innovation up. In the long term, the best way of doing that is to ensure that it is exposed to vigorous competition at home. On the other hand, the most effective way of restricting competitiveness is to stifle competition at home.
I do not believe that there is anything between the Opposition and the Government in relation to the importance that we attach to the UK's international competitiveness. However, we differ on the question of who should carry out a review, if appropriate, of the impact of regulation on the UK's competitive position. As I said, the Opposition are arguing that the job should be done by the competition authorities, but we do not want that requirement in the Bill. Of course, Ministers are fully accountable to Parliament, so if in the light of events we decide that a competitiveness review is appropriate, we shall commission one. However, we do not want to hold a review just for the sake of it. I hope that Opposition Members who are arguing--rightly, in this case--that we do not want bureaucracy and red tape for the sake of it, will support the view that we should not commit ourselves to something that may prove to be unnecessary.
Sir Michael Spicer: The Minister argued that competitiveness concerned the whole industry and its relationship with industries abroad, so was different from competition at home. Does she accept that competition and competitiveness have a much greater link? For example, British Airways' defence against the charge that it had a quasi-monopoly on internal competition was that it had strong competition abroad. Therefore, the argument about competition partly concerns competitiveness, and the two are closely linked, even if they are separate in the Minister's mind. They should be treated as one entity, as, indeed, they are by the Competition Commission and the Office of Fair Trading in competition arguments.
Miss Johnson: I was arguing that competition and competitiveness are two distinct concepts. None the less, in many ways they are closely related. It is pretty hard to think of a credible example in which the long-term interests of competition and competitiveness point in
opposite directions. Therefore, by ensuring that internal competition in the UK flourishes, we are addressing international competitiveness to a significant extent. Given the value of the financial services industry to the UK economy and its standing as a contributor, Treasury Ministers in any Government must, at all times, take due regard to ensure that our international competitive edge is maintained. This Government will certainly make sure that that is so in all that they do. I therefore commend most of the amendments, but I oppose the Opposition amendment and ask them not to press it.
Sir Michael Spicer: Once again, I shall declare an interest as president of the Association of Electricity Producers, in case there is an obscure read-across between what I am going to say about the amendments and the electricity industry.
Under the previous Conservative Administration, regulation involved moves towards competition. However, under the present Administration, regulation is, by and large, antithetical to competition. There are many examples of that in the FSA and the financial industry, as well as other industries. Indeed, that applies to every major regulator, such as the Rail Regulator, that is concerned with planning and integration, but not competition. The Post Office regulator is concerned about the degree of privatisation. The electricity regulator deals with fuel poverty, Oftel with the full coverage of telecommunications, Ofwat with the environment, and so on.
In all cases, especially that of the FSA, the regulatory regime is antithetical to competition. Therefore, the role of the Competition Commission, with which the amendments are concerned, together with the role of the Office of Fair Trading and the Director General of Fair Trading is of paramount importance in a discussion of a Labour regulatory Bill. The Lords amendments are therefore extremely important, as is our amendment. Of course, we welcome the sharpening of the competition rules and the restraints on the FSA's role with respect to competition, and that is why we agreed to amendment No. 82, and to clause 72, which certainly sharpened the competitive element in Parliament's instructions to the regulator.
As has been said already, page after page of the Bill shows that the regulator's basic rules and objectives are antithetical to competition and involve risk aversion. With other members of the Select Committee on the Treasury, some of whom are in the Chamber tonight, I spent a day at the FSA. I was struck by the enormous panoply of bureaucracy and expertise on intervention that was building up in the FSA that was against competition. I am sure members of the other party were also struck by that, but they were happy about it. A mass of economists were there to look in a detailed way at future risk taking by undertakings and to try to second-guess the market, presumably with the aim of introducing rules that are meant to be risk-aversive: anti-competitive. Unless one has risk, one will not have competition; they are two sides of the same coin.
Mr. Nigel Beard (Bexleyheath and Crayford): The essential purpose of the legislation and the Financial Services Authority is to secure the integrity and probity of financial markets in Britain. Without such integrity and
probity, immense damage will be done to the competitive position of a major piece of industry in Britain. Is that not the central purpose? Is not the legislation therefore a vital ingredient to our financial industry competing internationally?
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