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That this House takes note of European Union Document No. 7455/05, Commission Staff Working Document on "Principles for a European Union Contribution to the Global Fund to fight HIV/AIDS, Tuberculosis and Malaria (GFATM) with a view to the 2006/07 Replenishment Process"; welcomes the European Union update; considers this an important area for reducing poverty; and encourages the European Union and Commission to do more to maintain their strong support for tackling the three diseases, in particular through the current high level of funding for the Global Fund.[Claire Ward.]
2. Proceedings on consideration and Third Reading shall (so far as not previously concluded) be brought to a conclusion three hours after commencement of proceedings on consideration at this day's sitting[Claire Ward.]
The aim of the Bill, as I am sure hon. Members already know, is to extend the full protection of Financial Services Authority regulation to consumers purchasing home reversion plans and ijara sharia-compliant home finance products. That will help people to make informed choices about what may be the most significant financial decision that they make and ensure that there is a level regulatory playing field in the equity release market, much of which already falls within the FSA's remit.
I am grateful to Opposition Members for constructive debate in Committee and for their continuing support for this useful and important measure. Indeed, the Bill may have gone through its various stages at record speed, although I do not want to tempt fate.
As the hon. Member for Cities of London and Westminster (Mr. Field) pointed out in Committee, it is when there is unanimous support for a Bill's objectives that it is perhaps most important that proper scrutiny of its detail should take place. I congratulate the hon. Gentleman and the hon. Member for Richmond Park (Susan Kramer), who is not present this afternoon, on ensuring that scrutiny took place constructively and effectively. I should also like to place on record my thanks to my hon. Friend the Member for Gower (Mr. Caton) for so ably steering our scrutiny of the measure in Committee. I think it was the first time he had performed that role and we were all grateful for the efficient and effective way in which he did so.
Our deliberations in Committee focused on two main points: first, whether a de minimis limit should be applied to regulation; and, secondly, the need for continuing parliamentary scrutiny of the costs of regulation.
I hope that I was able to assure the hon. Member for Cities of London and Westminster that the Government had considered the de minimis threshold carefully when drawing up the Bill. Indeed, we included a specific question on whether a de minimis limit was appropriate in our public consultation. As I made clear in Committee, the Government do not believe that it is appropriate to set a de minimis threshold for the regulation of home reversion plans and ijara home finance products because of the risk that less scrupulous providers might exploit it by offering multiple loans just under the de minimis threshold to the same borrower. The risks to the consumer of cumulative borrowing would be no different from those attached to a single plan for more than £50,000. We also believe that that could create a potential distortion in the market. The view received unanimous support in the consultation.
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The second issue is the proper and appropriate scrutiny of costs. The debate in Committee focused on this issue, particularly in relation to regulation in this area, in order to ensure that the costs remain proportionate. I made it clear to the Committee that ensuring proportionality of regulation is hard-wired to the DNA of the Financial Services Authority. The Financial Services and Markets Act 2000 obliges the FSA to ensure that regulation for which it is responsible is proportionate and takes into account the effects on competition, innovation and international competitiveness. Should the Bill pass successfully through Parliament, the FSA will consult publicly on the detailed rules that it intends to apply to home reversion plans and ijara home finance products. Included in the consultation will be a full cost-benefit analysis.
Furthermore, the FSA is already accountable to Parliament. Its annual report is subject to parliamentary scrutiny and must set out how the authority has met its statutory objectives and principles of good regulation throughout each year. Those principles include the requirement always to ensure that the costs of regulation are proportionate. I was therefore able to reassure the hon. Member for Cities of London and Westminster that the proposed amendment requiring additional impact assessments was unnecessary and would simply create an additional burden for industry, without providing any clear benefit.
John Bercow (Buckingham) (Con): The Minister is prudent to have regard to the importance of proportionality. Given the commitment that he has just made to proportionality and to keeping regulation to a necessary minimum, what assessment has he made of the merits of incorporating some of the provisions of the Regulatory Flexibility Act 1980 and of the Small Businesses Regulatory Enforcement Fairness Act 1996, both of which hail, as he knows, from the experience of the United States?
Mr. Lewis: As we develop our better regulation agenda, we consider the lessons to be learned from the global marketplace. Where there is a case of regulation being done better and more effectively, we should of course take account of it. However, it is important to place on record the fact that, in any international dialogue about best practice in regard to financial services, the FSA comes out very positively indeed in any analysis.
The point that I have been making since I got this job is that it is not inconsistent to say that, while the FSA is an excellent example of best practice in regulation, there is always room for improvement and always room to work with the industry to consider better regulation, both in terms of domestic regulatory measures and in terms of those that emanate from the European Union. In this country, the FSA, the Government and the industry have been quite successful in ensuring that the financial services regulations that emanate from the European Union are consistent with many of the principles that we want to see applied in terms of proportionality and best practice. That does not mean
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that we always win the argument, but I think most people would accept that, largely as a result of the respect that the FSA commands, we have been able significantly to influence the agenda relating to the regulations for the financial services sector that come from the European Union.
To respond further to the hon. Gentleman, we are keen to look at the regulatory bodies in the United States, as well as globally, in achieving a level playing field in the regulation of the financial services sector. That is not easy to achieve, and there is an argument that liberalisation and the opening up of the market should be the greatest priorities for financial services. However, we certainly want to see an increased emphasis not only on internal regulatory systems within the European Union but on looking outwards to our relationships with the United States and with the emerging economies of India, China and elsewhere.
The better regulation agenda needs to be considered domestically, as well as from a European Union point of view. It also needs to be considered in the context of the global market and the global economy. We are rightly proud of the leading role that Britain plays in that regard. There is always a difficult balance to be struck: we must protect the interests of consumers but not stifle the innovation of business, particularly in the financial services sector. We know the tremendous contribution that the sector makes to the success of the British economy, and long may it continue. I therefore hope that the hon. Gentleman is reassured by my response to his extremely interesting question, about which I may speak to him on another occasion.
The issue of the costs of regulation, which has been raised by the hon. Member for Twickenham (Dr. Cable) previously, has been the subject of some discussion. It is important to know that the costings in the published regulatory impact assessment remain estimates, as I have said before. They are derived from figures published by the FSA in relation to the existing mortgage regime, and are based on future projections of market size, which have left considerable room for dynamic market growth. In addition, the precise nature of the regime that will apply to home reversion plans and ijara products will not be finalised until the FSA has consulted on its detailed rules. As it is statutorily obliged to do, the FSA will issue a detailed cost-benefit analysis alongside its consultation on the detailed rules. That CBA will enable us to further refine the costings in our RIA currently, and it is possible that in the wake of a more detailed market analysis and definition of a tailored FSA regime, the projected costs of regulation will fall.
While there is always cost to regulationto be fair, hon. Members on both sides of the House have accepted that in this contextit is important to remember that in this case the industry is willing to bear that cost, because of the benefits that it believes it will bring to the home reversion market in terms of improved consumer confidence. In the industry's view, that will allow the reversion market to continue its dynamic growth. A deeper and more liquid market in these products should in turn create new opportunities for market entrants. I would therefore encourage Members not to see regulation in this case as purely a deadweight cost to
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industry, because it clearly has potential benefits and can reduce reputational risks for lenders. I therefore remain convinced that, on balance, the benefits of regulation, both in terms of consumer protection and in terms of securing the confidence necessary for future market growth, outweigh the projected costs.
Having briefly outlined our discussions in Committee, let me conclude by reaffirming that the Government believe that this Bill will benefit both consumers and providers of home reversion plans and ijara home finance products. Regulation, as facilitated by the Bill, will help people to make informed choices when purchasing such products and offer valuable consumer protection in the event of any mis-selling. It will also ensure a level regulatory playing field in the equity release market and should generate the increased consumer confidence that is essential if this market is to continue to grow.
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