Select Committee on Treasury Minutes of Evidence

Examination of Witness (Question 20-39)



Mr Beard

  20. I was on the Joint Committee and the Committee for this Act and my recollection of what the Act could do and the promises ministers made is quite different from Mr Tyrie's, because the issue of the budget for the Practitioner Panel was substantially debated at the same time as the budget for the Consumer Panel. There is provision there for the Practitioner Panel to have a budget, and if the Practitioner Panel does not feel that it is appropriate, it has got a place in the FSA Annual Report whereby it can make that observation, and likewise it can make the observation here, so that if the budget is not provided, it must be that the Practitioner Panel have not asked for it.
  (Mr Brydon) That is correct.

  21. There is absolute provision there for a budget which is independent. You have plenty of scope for complaint if the budget is not adequate, and the FSA are obliged to listen to that, and if they do not provide for that budget, to answer you why they did not. So it is not the case to say that you do not have an independent budget.
  (Mr Brydon) As of now, we have not asked for it, and from our point of view there is no issue at this stage; we are very happy with the way things are, and at the end of the day, the whole of the FSA's budget is paid for by our practitioners. So it is us one way or the other. The fact that we do not have a budget means that we do not charge for our time, but our industry is taking the cost by definition.

Mr Fallon

  22. The Chairman referred to this report as being rather thin. If you take out the appendices which are tacked on, it is seven pages, and your 1999 report was 27 pages. Why?
  (Mr Brydon) There is one attitudinal answer and there is one practical answer. The attitudinal one is we wanted to show that we were not going to waste our practitioners' money by producing great, big, glossy reports, and we wanted to be very clear and concise about what we wanted to say. The second one is that the 2001 report which we are about to produce will be somewhat longer than last year's, because there is more to write about. Remember, at that stage we were very much in that lull before the storm.

  23. When does it come out? This report is over a year old now.
  (Mr Brydon) I have the final draft in my briefcase. We are almost there.

  24. Why are you reporting on a calendar year when the FSA is operating on a financial year?
  (Mr Brydon) I think it reflects the time we were set up. There is no particular reason. We are not precise and prissy about exactly what the year is. What really matters is that all the issues are ongoing and, apart from the budget, they are not year-specific issues in that sense.

  25. If you are producing an annual report, I think you do have to be a little less vague than that. You have to relate it to the year you are reporting on. Why not align it with the FSA's year?
  (Mr Brydon) I am happy to look at that.[2] It is not a big issue for us.

  26. Can I refer you to comments made in the 1999 report and the survey back then. Do you think it is too early to conclude that some of those fears were actually unfounded? I am quoting: "The greatest fear is that the new regime will turn out to be more bureaucratic and dictatorial".
  (Mr Brydon) If you look at the task the Government gave Howard Davies and the Board to bring together and merge all these organisations and then succeed in creating the style of regulatory regime they wanted, that was an enormous task. The cultures of the different-self-regulatory organisations that came together were all quite different, and their way of doing things was different. Different places have seen virtually no change in the way in which their interface with the regulator works. Other places are seeing significant change. I honestly think that only when we have done our survey and published it, which will be, I would expect, by June, will we have a clear picture. Most importantly, and one of the reasons for doing that survey so early, as you were referring to, was to put down some markers so we could ask the same questions again at the first practical opportunity so we can measure whether there has been any movement or not. Then we will know the answer to your question. There is an enormous number of people employed in this industry. Very few of them give detailed thought to the philosophy of regulation and the detail of how the FSA works other than when it affects them at a minutely practical level. There is a lot of loose talk, people saying this and that about the FSA. It has got a lot of people and so on. That all may be true, but until we see the evidence, we would be wise not to form strong opinions.

  27. The big fear in the initial survey that you did was that this whole structure would lead to much higher costs, particularly for the smaller practitioners.
  (Mr Brydon) We know that to be true.

  28. That is true?
  (Mr Brydon) Yes. We know that our individual costs in almost every business for compliance have risen through the process. That is a fact. I am sure we do not have a piece of paper with the numbers on but I doubt if you would find any company that will tell you that the costs of regulation have fallen for them in the last couple of years. It is a question we ought to be asking in the survey, so we can comment on it on the basis of fact.

  29. I was going to ask you whether there was any way of measuring that.
  (Mr Brydon) I think it is a reasonable question to enquire into in the survey.

  30. So you will be doing that?
  (Mr Brydon) At the moment the survey is being designed by a small group, led by Matthew Bullock from the Norwich & Peterborough Building Society, who is a member of the Panel. They are in the process of coming to us with the final draft of the survey, and we will be debating that at either our next meeting or the one after that.

  31. So this might be included in it?
  (Mr Brydon) It might well be, but since we are trying to be reasonably democratic, I ought not to insist that it will be at this stage.

  32. Coming back to the thinness of the report, do you not think it would be a little more useful to put some more detail in to show people outside the industry what the Panel actually does?
  (Mr Brydon) It may be there is an issue for us about how we operate. So far the way we have operated is to meet once a month. In general we have had senior executives from the FSA come and discuss in advance policy initiatives, consultation documents and so on, so they could test the temperature of the practitioners in general, and we can input their views about international competitiveness and other things that might not have been centre-stage in their minds. But now we have passed N2 and that big body of rule-making is largely passed, we are now moving into an environment where we are going to be watching how the FSA behaves and performs, which is different. In that sense, we are likely to start interfacing with the trade associations, and possibly with others, more frequently than hitherto. Up till now we have been focussed on the FSA and getting the thing built, but in future we want to perhaps have the trade associations come to our meetings and discuss their practical problems in a detailed way with us, so we can begin to pick up pictures, common threads which run through the whole industry, which our unique access to the Chairman of the Board gives us the chance to communicate to him in a way that is slightly detached from the blood-curdling part of the battle. Therefore, you would expect to see our Annual Reports in years to come having more of that flavour in them than they have so far.

Mr Ruffley

  33. My colleague Mr Fallon talked about the thinness of your Annual Report.
  (Mr Brydon) I should say that I was not Chairman when that report was written.

  34. Would you agree 11 pages is a bit thin?
  (Mr Brydon) No. I do not think one page is thin or that 10 pages are fat.

  35. I think it is a bit thin, and for that reason I am going to ask you one or two questions so you can amplify what I think is a rather thin treatment of some of the issues. On page 5 of your 2000 Annual Report you say: "We argued that if a situation should arise in which the FSA rejected formal advice offered by the Panel it should be bound to explain its reasons in writing, which the Panel would be free to expose in taking the debate into the public domain." Can you give me any examples of when you have done that?
  (Mr Brydon) No. We have not done it yet.

  36. Can you say why you have not?
  (Mr Brydon) Because there has not been such an issue that we felt we wanted to use that option for.

  37. So there is no issue that the FSA handles that you think requires any written notice at all? That is what you are saying to the Committee.
  (Mr Brydon) I have not stopped beating my wife yet either. That is not a fair question.

  38. It is a perfectly fair question. Are there any issues that you think need flushing out into the public domain and to which you have not had a satisfactory response verbally, thus requiring a written statement from the FSA?
  (Mr Brydon) That is a different question, and the answer is no, there have not been.

  39. None at all? That is interesting. On page 6 under "(b) Consultation", ". . . . we rely on being given by the FSA at the end of the consultation period a synthesis of the key issues which have arisen and being told how they propose to address these issues." Do you not think that is rather strange? You rely on the FSA to do a summary of the issues. Why do you not do your own?
  (Mr Brydon) We do. We are not entirely stupid people, I hope.

2   Note by Witness: In fact the different year ends give the FSA an opportunity to respond to our comments in their Annual Report. Back

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