Examination of Witness (Question 20-39)|
TUESDAY 5 FEBRUARY 2002
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.
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.
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
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
(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.
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,
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