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Mr. David Gauke (South-West Hertfordshire) (Con): May I begin on a personal note as a new Member of the House? This is the first Bill for which I have been present for all House of Commons stages. I have to say that, if this is what to expect, passing law is a somewhat more painless and quicker process than I was previously led to believe. I take note of the Minister's comments about the Bill's passage possibly being a record. I certainly do not intend to go on for long and threaten any speed records for legislation passing through the House. [Hon. Members: "Hear, hear."] I thought that that would be a popular remark. I have also noted the point that the greater the all-party support, the greater the scrutiny that legislation deserves. However, I think that the Bill has received adequate, if brief, scrutiny.
The Bill has been welcomed by all parties. As I said on Second Reading, I represent a constituency with a lot of property-rich but cash-poor people. They are faced with many increased costs such as higher council tax, and welcome the opportunity for equity release. As my hon. Friend the Member for Cities of London and Westminster (Mr. Field) said, parents with children in higher education also find that some sort of equity release can be beneficial.
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The key, however, is how the FSA will enforce the Bill. Its role has been discussed as the Bill has made its way through the House, as has the tension that appears to exist between Treasury Ministers and the Prime Minister. Treasury Ministers often say that the FSA is one of the best regulators in the world. I do not necessarily disagree, but on 26 May the Prime Minister said in a speech that there is
"something seriously awry when the FSA, established to provide clear guidelines and rules for the financial services sector and to protect the consumer against the fraudulent, is seen as hugely inhibiting of efficient business by perfectly respectable companies that have never defrauded anyone."
In Committee, the Economic Secretary took a skilful line in trying to reconcile that with the position of the Chancellor and other Treasury Ministers, who have said that the FSA is wonderful, world class and the envy of the world. He remarked that some people saw the FSA as the Prime Minister had described and that it was inevitable that the regulated would so perceive the regulator.
The perception that the FSA inhibits business is, however, a serious matter, because such a perception can drive away business and reduce innovation, and the Prime Minister was right to identify that concern. We should all recognise that, whatever the reality, the perception of the FSA is significant.
The FSA adopts a risk-based approach. That is to be welcomed, but it means that FSA employees tend to err on the side of caution and follow the box-ticking route. As the Prime Minister also said:
"The regulator who fails to regulate risk that materialises will be castigated. How many are rewarded when they refuse to regulate and take the risk?"
That is one of the difficulties with the FSA. Whatever is said at the top of the organisation, FSA staff will always err on the side of caution. My concern is that the financial services sector as a whole might become too heavily regulated, with rules that are too strict and enforced too rigidly. That concern is widespread in the City and in the financial services sector, despite what the Economic Secretary has said while the Bill has passed through Parliament.
Finally, we must be aware of how the FSA treats the financial services sector, and of the dangers of overregulation that we face in this country.
5.34 pm
Mr. Ivan Lewis: With the leave of the House, I should like to reply to the debate.
First, may I say that the hon. Member for Cities of London and Westminster (Mr. Field) has applied himself to this debate with common sense, as he does to every debate? That is probably why he is not a candidate for the leadership of his party. However, I want to let him into a secret: the first chairman of the FSA was a Manchester City supporter, and the current chairman is one too. Given that the club has just decided to swap Shaun Wright-Phillips for Andy Cole, it is possible that we could do with that expertise to advise us in the boardroom.
I should also like to tell the hon. Gentleman that, when he identified the song that was No. 1 in the charts on the day of my birth, the Paymaster General asked
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that he do a similar job for her during the recess and report back when the House resumes. I am sure that he will agree to undertake that job.
Madam Deputy Speaker (Sylvia Heal): Order. We have gone from football to the pop charts, so let us now get back to the motion before the House.
Mr. Lewis: I accept your wise counsel, as ever, Madam Deputy Speaker; but, seriously, I thank the hon. Member for Cities of London and Westminster for his constructive approach to what is a consensual Bill.
The hon. Member for Twickenham (Dr. Cable) raised a reasonable issue about property investment clubs. When he spoke about the glossy leaflets offering obscure information, strange telephone numbers and dodgy advice that were being delivered, it brought to mind the "Focus" leaflets that are distributed in many of our constituencies—but I will not go there, Madam Deputy Speaker, in view of the advice that you have given to me.
On a serious point, the FSA is considering the concerns about those property investment clubs and will, of course, take appropriate action, if necessary, and advise Ministers accordingly.
I want to respond to the hon. Gentleman's comments on ijara products generally and the danger of unintended consequences. Obviously, I do not ignore his concerns, but it is important to say that those schemes are legal and already in use. In those circumstances, the FSA regulations will ensure that consumers benefit from full and clear advice. Despite the danger of unintended consequences, that is undoubtedly a significant step forward, although we will keep an eye on the concerns that he has expressed.
The hon. Member for South-West Hertfordshire (Mr. Gauke) tends to move about during debates—he was nearly called twice on one occasion recently, as a consequence of such a manoeuvre. He referred to the FSA. It is important that we are clear about the fact that this is not a complex issue: the FSA is regarded globally as a world leader, but does that mean that it is perfect or that it need not engage in the Government's better regulation agenda, as other regulators must do? Of course it does not mean that.
Do we accept that there is always a concern in any organisation that the principles and objectives articulated at the most senior level do not always play further down the organisation in terms of day-to-day interactions? That is a genuine, authentic concern. The management of any significant organisation of any nature, whether in the public sector or the private sector, must have regard for that concern. It is important that the objectives and principles that apply in respect of that organisation's leadership are also reflected in the day-to-day dealings between the regulator and those who are regulated.
The hon. Gentleman's overall point was about those in the financial services choosing to invest in this country. The FSA has arguably contributed to the fact that the financial services sector continues to regard this country as almost the best place in which to do business. Far from detracting from that, the fact that we have leading regulatory practice in the financial services sector makes this country a very attractive place to do business. Yes, we need to continue to ensure that the
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better regulation agenda applies. We do not want to be smug or complacent because the FSA has rightly earned global respect. Equally, we do not want to face false and bogus choices. We should not suggest that, on one hand, the FSA is somehow not doing its job in the most effective manner possible, while on the other, not recognising the fact that we must achieve the right balance between consumer protection and not stifling innovation and enterprise in the financial services sector. Thus far, the FSA has maintained that balance reasonably well, and we should support the work that it does.
The FSA does a lot of important work on behalf of this country in responding to regulations emanating from the European Union. Our partnership with the FSA is important in that respect because much of the regulation in the financial services sector flows from the EU rather than from domestic legislation. It is extremely important that the Government and the FSA have a constructive relationship in ensuring that this country's vision of an appropriate landscape for financial services regulation is the one that prevails in any argument that arises, not only at EU level, but in the international or global economy.
Now that I have responded to the points made during the debate, let me say a little about why the Bill is important and why putting it on the statute book is justified. We believe that its provisions will help people to make informed choices, offer valuable consumer protection and ensure that there is a level playing field in the equity release market, most of which already falls within the scope of FSA mortgage regulation.
FSA regulation will extend valuable consumer protections to elderly consumers when they are making one of the most important financial decisions that they are likely to take—a point that has not been mentioned in the debate. It will ensure that Muslim consumers are able to access all elements of the growing market in sharia-compliant home finance products while benefiting from the protections afforded by FSA regulation. It will also help people to make informed choices about the home finance products they purchase, create a level regulatory playing field in the equity release market and, by helping to improve consumer confidence in such products, facilitate future market growth. On that basis, I am pleased to commend the Bill to the House.
Bill accordingly read the Third time, and passed.
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