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Mr. Lewis: I congratulate the hon. Gentleman on the usual temperate way in which he presented the case for the amendment. As for The Tremeloes, my grandfather was a great fan. I always thought that there was something about the hon. Gentleman that I liked, and to hear that he is a Bury supporter is really good news. However, I am a little disappointed that he defines the north-west almost as a place where we still
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wear clogs and cloth caps. He obviously needs to make more regular visits to Gigg Lane.
This is a reasonable debate to stimulate and the hon. Gentleman raised a number of substantive issues. The Bill is short and I should like to put it into context before dealing directly with the amendment. Buying a home reversion plan is a huge financial decision, often involving people's most important—and sometimes only—significant financial asset. Such schemes are generally sold to the over–60s and provide a valuable means for cash-poor pensioners to realise some of the value locked up in their homes and improve their standard of living.
Such products are not simple to understand, however. Realising a cash lump sum or income via equity release can have complex implications for a pensioner's tax and benefit situation. Hence there is a need—the Opposition have agreed—for regulation to ensure that potential purchasers of equity release schemes receive an appropriate level of advice. As the hon. Gentleman said, the Bill is designed to facilitate Financial Services Authority regulation of such plans, which will help people to make informed choices, offer valuable consumer protection and ensure a level playing field in the equity release market, most of which already falls within the scope of FSA mortgage regulation.
As the hon. Gentleman has said, another important element of the Bill is that it will ensure that Muslim consumers or others who are uncomfortable about taking out interest-bearing loans can access the growing market in sharia-compliant home finance products, while benefiting from the protections afforded by FSA regulations. In response to consultation, the Bill has also been drafted to allow for the possibility of future regulation of flexible tenure products. Those are products that allow people to buy and sell equity shares in their house, should that at some stage be thought necessary and desirable.
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The Bill has been introduced to meet the needs of consumers. Interestingly, it has also been introduced at the behest of industry, which welcomes the news that the Government are to legislate to level the regulatory playing field in the area. Jon King, who is the chairman of Safe Home Income Plans—the membership of which covers much of the home reversion market—has gone on record as saying of the Bill:
''I'm delighted this has come so soon. People should now feel safe that these schemes are worth considering. Regulation means that people will be compensated if sold the wrong plan.''
He was quoted as saying that in the Financial Times on 17 May 2005. Therefore, there is agreement that the Bill is both useful and important and is worthy of support from Members of all parties.
In response to the hon. Gentleman's amendment, which, as he accepts, is a probing amendment, I will try to explain by offering him some assurances why we want him to feel able to withdraw it. The Government do not believe that it is appropriate to set a de minimis
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threshold for the regulation of home reversion plans and ijara home finance products. The reason for that is, primarily, that there is a risk that less scrupulous providers might exploit that threshold by offering multiple loans to the same borrower, each at just under the de minimis threshold. The risk to the consumer of that cumulative borrowing would be no different from the risk attached to a single plan for more than £50,000. It would also, of course, create a potential distortion in the market.
It is also important to say something that I have mentioned to the hon. Gentleman privately. During the comprehensive consultation exercise, one of the issues considered was whether a de minimis threshold was appropriate. In fact, those who responded to the consultation were unanimous in saying that there should not be such a threshold on the value of the reversions carried out. So, the unanimous view of those who responded to the consultation was that, although such a provision was worthy of consideration, on balance the outcome was not desirable.
I hope that I have gone some way to reassuring the hon. Gentleman that we seriously considered the proposal that he and his hon. Friends made. I also hope that I have explained why, at this stage, the amendment would be neither a desirable nor an appropriate outcome. On that basis, I ask the hon. Gentleman to withdraw the amendment.
Mr. Field: It is important to stress that not only pensioners but middle-aged folk are looking to release some of the equity in their home, in order to allow their children to get a foothold on the otherwise increasingly elusive property ladder, and will therefore benefit from home reversion and equity release plans. As I mentioned on Second Reading, that is a positive development. I suspect that, in the years and perhaps decades ahead, that area will grow.
I am happy to withdraw our amendment. I am reassured by what the Minister said. I accept that there was a comprehensive consultation exercise throughout the industry. I must confess that it is a matter of some concern that unscrupulous lenders might utilise the cumulative borrowing arrangements, but that is almost an inevitable part of any de minimis provision. However, there could be serious implications; let us see how the area develops in the years ahead.
My concern is that the increasing burden of regulation, and its sheer cost, may dissuade some of the bigger operators from entering the market at anything below a particular level and that there may, in a sense, be a de facto de minimis provision, which would be regrettable. Let us see how that goes. I am reassured by the Minister's words. On that basis, I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Mr. Field: I beg to move amendment No. 3, in page 2, line 6, at end add
'(2) In Part 2 of Schedule 2 to that Act, after paragraph 26 there is inserted—
''Parliamentary monitoring
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26A On the second anniversary of the coming into force of paragraph 23A and annually thereafter the Chancellor of the Exchequer shall lay before Parliament a regulatory impact assessment of the operation of the provisions of that paragraph.''.'.
The amendment would secure more adequate parliamentary scrutiny of the Bill and, once in place, of the Act. We expressed concerns on Second Reading as to the overall role of the Financial Services Authority. The Prime Minister's unexpectedly candid, off-the-cuff comments in the immediate aftermath of the general election have, of course, raised the temperature on the issue. In his words, the FSA is a potential ''inhibitor to business''. That view contrasts with the Chancellor of the Exchequer's more complacent attitude that this super-regulator, the brainchild of his own time at the Treasury, is a beacon of financial services to the world beyond these shores.
Although it would be wrong, albeit a little tempting. for me to intrude on that private Government grief, it is sensible to analyse the role of the FSA. I shall not go into great detail, but I hope to tease from the Government today what role the FSA is likely to continue to play in equity release. These products are innovative by nature, but they will also need to be flexible in a fast-changing market. That will be a classic test of the FSA's role in a modern, global, financial world.
We believe that the regulatory framework must give legitimate protection to the consumer, and that there should be a fundamental objective of regulation in the UK. In short, we are determined comprehensively to protect investors, savers and homeowners from the mis-selling of financial services and products. As I mentioned on Second Reading, however, it is of key importance that competition and competitiveness take their place at the heart of the FSA's remit. We have made it clear that institutional business—professional to professional—should require only prudential oversight. Similarly, high-net worth individual private client business in general should be regulated with a lighter touch. That could apply at the margins to some of the equity release schemes that are being envisaged today.
In that context, I shall discuss the concerns expressed on Second Reading on the Floor of the House about the sheer costs of this procedure. Even the Treasury's regulatory impact assessment calculates that the measure will cost £11 million immediately, and will have an ongoing annual cost of £5 million to the taxpayer. That might seem to be an unwarrantedly expensive price to pay, and we would be grateful for some guidance as to how those figures were arrived at. Perhaps that is what the Prime Minister had in mind when he issued his broadside against the FSA.
The amendment would simply place on the Treasury a commitment to review the operation of the legislation. We firmly believe that an extension in the power of the regulator must go hand in hand with proper scrutiny of any unintended consequences. The very lightest touch in consumer protection and market regulation must be maintained, if at all possible.
We want to encourage both flexibility for intermediary and consumer alike and product
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innovation in what I suspect will be a very fast developing area. Ideally, we want the Treasury to produce a written regulatory assessment within two years of the Bill coming into force, and annually thereafter.
Mr. Lewis: The last person to ask me about my view of the FSA was a gentleman with whom members of the Committee will be familiar. I met him on my first visit to the City to give a speech; he was Mr. Howard Flight. He asked me my view of the FSA, I offered to assist him with his unfair dismissal claim, and he responded appropriately.
It is important to get the balance right. The first thing to say about the FSA is that it is recognised globally as an excellent regulator of its kind, and as one of the best regulators in the world both in its establishment and in the principles that guide it. In many ways, it helps to make this country one of the best places in which to do business with the financial services sector. Having said that, we expect it to play its full part in fulfilling the requirements of the Government's better regulation agenda. By implication, the FSA is not perfect, but then no regulator is, and it should constantly review the appropriate balance of regulation that it seeks to introduce by continuing a dialogue with those who are regulated. I know for a fact that the chairman of the FSA is committed to ensuring that the better regulation agenda applies fully to it.
I see no contradiction in saying both that we can be proud of the fact that we have created possibly the best regulatory framework of its type in the world, and in the context of the better regulation agenda that no organisation is immune from the need constantly to examine its practices. Organisations should do so to make sure that they introduce and impose regulation in a way that is appropriate, balanced, equitable and does not inappropriately get in the way of companies doing perfectly acceptable and desirable business. Striking that balance is always exceptionally important.
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