Select Committee on Treasury Minutes of Evidence

Examination of Witness (Questions 80-99)



  80. In Parliament, we are used to a somewhat adversarial approach to public affairs. I think it would be fair to say that we always feel a little uneasy about what can be described as cosy relationships where groups of people who know each other well advise each other, have private chats and so forth. On the other hand, we do not necessarily want to turn every discussion into a boxing ring. Where do you feel the right balance here is between preserving public confidence and challenging without creating unnecessary problems?
  (Mr Brown) I share with you the worry that if things are too cosy things could go wrong. I imagine that those members of the FSA staff who do come before the Panel would not describe our relationship with them as particularly cosy. The Panel has people on it from a number of different walks of life and their style in discussing matters with the FSA is often quite robust and is certainly intellectually challenging for them. The Panel never hesitates in its business with the FSA to go direct to the point and I think it is not at present a cosy relationship. Furthermore, as you will have seen, the statements we have made in public have often been quite critical of the FSA. We have avoided reaching a cosy accommodation with the FSA.

Mr Laws

  81. Could you tell us something as well about the selection process for members of the Panel? How are the members chosen and how were you chosen as the chair?
  (Mr Brown) There is an advertising process in the national and regional press for panel members and for the chair. On the last round of appointments, there were then interviews for those people who are short listed. Those interviews are carried out by a mixture of the Panel chair, FSA staff and FSA non-executives and people who are entirely independent of the FSA.

  82. How many people interviewed you, for example?
  (Mr Brown) I was interviewed by a non-executive director of the FSA, someone entirely independent, and by a senior staff member of the FSA.

  83. You replied to one of the adverts in a newspaper?
  (Mr Brown) I did, yes.

  84. How did you emerge as vice-chair and then chair?
  (Mr Brown) I initially replied to an advertisement to become a panel member. In its first year, the Panel selected its own vice-chair by consent and that was me. In the next round of appointments to the Panel I applied to become chair of the Panel and was appointed. The final part of the appointment process is that the recommendations are approved by the board and the chair is then approved by the Treasury.

  85. Was there a competition for that or were you the only candidate to go forward?
  (Mr Brown) There was competition.

  86. Who carries out the staff work that has to be done for the Panel and panel members to support all of the work you have to do? You have mentioned there is quite a bit of it.
  (Mr Brown) We have a small secretariat, four members of staff of the FSA. They are a dedicated secretariat. Although they are FSA employees, their job is only with the Panel.

  87. Do they stay with the Panel for ever or will they go back into the FSA at some stage?
  (Mr Brown) They are FSA employees so they are free to apply for the jobs at the FSA and free to leave the FSA, so I imagine what will happen in time is that they will move on. People like working for the Panel.

  88. How long are their contracts for with you?
  (Mr Brown) I do not think the contracts have an end date, but I might be wrong about that. I can check that and let the Committee know.[5]

  89. Are you not worried, following Dr Palmer's point earlier in terms of the independence and noisiness of the Panel, that there is a danger of a regulatory or panel capsule, because there is a very big FSA input into appointing you all and there are FSA staff who are presumably doing a lot of your work who, if they are ambitious, may well be intending to go back to work for the FSA and want to get promoted and so forth. If they are unhappy when they are working for the Panel with some aspects of what the FSA is doing, it may be quite difficult for them to make a lot of noise.
  (Mr Brown) Yes. In theory, that is something that we worry about. In practice, it seems to work the other way around. Firstly, those people who are appointed onto the Panel seem to be very vigorous in their defence of consumer interests and quite happy to challenge the FSA. Staff members who work for us seem sometimes as vigorous as the Panel members and sometimes more. I do not observe, from my position as chair, that the staff are in any way attempting to cool down the Panel's critical views on the FSA. It is something we need to keep a very close eye on and I think that is one reason why I said I welcome the scrutiny of this Committee. Ultimately, as the Practitioner Panel has, we do not have a coherent, articulate constituency breathing over our shoulders. If we were to go wrong, it would be here that it would show up.

  90. Is there not a conflict of interest? Would you expect the Treasury Committee as a group to be a bit nervous if all of our staff advising us and suggesting questions to put to people to put them on the spot were employees of the Chancellor and the Permanent Secretary and nipped back, say, in a couple of years' time?
  (Mr Brown) Perhaps I could expand a little on the role of the secretariat. They do not really do that. They do not tell us what questions to ask. The Panel is very active. They meet together at least twice a month. The Panel tends to look after its policy itself. We do not look to the secretariat for much of a steer with regard to our interrogation of the FSA.

  91. It is quite an influential role, is it not, if they are doing the work and presenting things for you?
  (Mr Brown) Yes.

  92. Do you think that either of these aspects of your present set-up, the heavy role that the FSA plays in selecting you and staffing the body, might be looked at in the future in order to strengthen the independence or perceived independence of the Panel?
  (Mr Brown) These things need to be looked at all the time. It is not all loss here. Having a secretariat within the FSA is enormously useful to the Panel in terms of information flow. I am absolutely certain that, were we placed outside the FSA with a completely independent secretariat, our work on behalf of consumers would be the worse for it.

  93. What is the budget for 2001?
  (Mr Brown) The budget for the current year that we are still in is set at around £590,000 including the staffing.

  94. You are confident that it would not be in the public interest to contract that work out to some other organisation, completely separate, that would have perhaps less access to information but would be more noisy potentially and more vociferous in pursuing consumer interests, more likely to get into the press by embarrassing the FSA over some of its policies?
  (Mr Brown) I am not sure it follows that it would be more able to get into the press because many of the tough positions that the Panel is able to adopt come from being confident about the very complex issues that the Panel deals with. That rests very squarely on having a good information flow from the FSA. Were we placed outside, there would be a degree of nervousness on the part of panel members because they felt they were not quite up to speed on some of the issues. Financial services are not quite like other consumer issues. There is a critical mass of knowledge and information that is required to intervene without feeling vulnerable.

  95. Looking at the issues that the Baird Report covered, what was the flow of information like to the Panel over those particular issues?
  (Mr Brown) When the Baird Inquiry was—

  96. I mean the events that took place from the setting up of your panel in December 1998 right through to the report itself which looked back on that period of time.
  (Mr Brown) The Panel received briefings from the Insurance Directorate on the problems with Equitable Life once the House of Lords judgment had taken place, when the Panel became very interested in the issue.

  97. When was that?
  (Mr Brown) I cannot remember precisely when that very first briefing was. As the crisis became the legal crisis that it was, the Insurance Directorate came to the Panel to brief us about it.

  98. Were you aware of it from the beginning of the Consumer Panel in December 1998?
  (Mr Brown) In the same way that you were. We knew about the crisis. We were not given close briefings about the crisis.

  99. Were you given any of the briefings that the new heads of the FSA were given, for example, from the people at the Treasury and other departments that were involved in this? You recall in Baird that there was a discussion about the briefing given to Howard Davies which highlighted Equitable Life as the one specific, major problem and considered even the possibility of closing it to new business. Were you aware that that was being considered at that time?
  (Mr Brown) We had no briefings about that at that time.[6]

5   Note by Witness: All staff on the Secretariat continue to be employees of the FSA while they are working for the Panel. They do not have contracts with the Panel itself so there is no end-date as such. Back

6   Note by Witness: The Panel received its first substantive briefing on the Equitable Life situation in October 2000. Back

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