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Director of Savings
Clause 34: Administration of court funds by Director of Savings
270. This clause provides for the Director of Savings to undertake functions on behalf of the Accountant General for England and Wales where appointed to do so under court funds rules. The rules in question are the court funds rules made under section 38(7) of the Administration of Justice Act 1982.
271. Subsection (1) defines the term “relevant function”, for the purposes of this clause, as being a function of the Accountant General of the Senior Courts under court funds rules. Subsection (4) defines what is meant by the term “court funds rules”. For these purposes, court funds rules are the rules as to the administration and management of funds in court made under section 38(7) of the Administration of Justice Act 1982. (The court funds rules currently in force are the Court Funds Rules 1987.)
272. Subsection (2) provides that the Director of Savings (“the Director”) may carry out a relevant function if appointed by the Accountant General under court funds rules to do so. Section 38(8)(a) of the Administration of Justice Act 1982 provides that the court funds rules may enable the Accountant General to appoint a person or persons to discharge functions conferred on the Accountant General under the rules (i.e. functions relating to the administration and management of funds in court). This provision, therefore, enables the Director to carry out functions relating to the administration and management of funds in court where the Accountant General appoints the Director, under the court funds rules to do so.
273. Subsection (3) makes clear that the power of the Director, under the court funds rules, to carry out relevant functions falls within section 69(1)(a) of the Deregulation and Contracting Out Act 1994. This means that such power may be included in an order made under section 69(2) of that Act enabling the Director to contract out the power to such person as the Director may authorise to do so.
General
Clause 35: Orders or regulations
274. This clause contains provision about orders and regulations under the Bill.
Clause 36: Minor and consequential amendments
275. This clause introduces Schedule 2 and confers a power to make consequential amendments.
FINANCIAL EFFECTS OF THE BILL
276. The financial effects of this Bill are minimal, and largely limited to the creation of the CFEB and Money Guidance. On indicative budget forecasts, the costs of the CFEB, including delivery of Money Guidance and projects which form part of the National Strategy for Financial Capability, could rise from £37 million in 2010-11 to £56 million in 2014-15. It is expected that the costs of the CFEB to decline slowly thereafter, once the Money Guidance service is at ‘steady state’. The financial services industry, through a levy on FSA-regulated firms and OFT-licensed consumer credit firms, will provide the principal funding for the CFEB’s activity. However, it is expected that the Government will pay up to half of the costs of the Money Guidance component of the CFEB’s costs (up to £20 million by 2014-15) through dormant accounts funds and public funds.
277. There are no other significant financial effects of the Bill. National Savings and Investments administration of the Court Funds Office’s IT functions will have no additional financial effects, given that that Office’s expenditure already falls within the remit of the Consolidated Fund.
EFFECTS OF THE BILL ON PUBLIC SERVICE MANPOWER
278. This Bill has no significant effect on public service manpower. Some measures relate to redeploying some public sector staff from one organisation to another, with no impact on the overall level of public service manpower.
SUMMARY OF THE IMPACT ASSESSMENT
279. The impact assessment is published with the Bill. Members of Parliament can obtain a copy of the impact assessment from the Vote Office.
280. The Government expects this Bill to benefit the UK economy by helping prevent future financial instability and the associated costs and loss of confidence in the financial sector. The majority of the policies implemented in this Bill impose minimal costs. The minority of measures that do involve more substantial cost are the establishment of the Consumer Finance Education Body and Money Guidance service (though the measure has little impact on manpower as the CFEB’s staff will be made up of redeployed FSA staff), new consumer redress mechanisms, and allowing the cost of funding the exercise of the special resolution regime powers to be transferred to FSCS levy payers. The possible costs of these and other proposals are examined in the Impact Assessment, though the costs for levy payers of the latter provision depends on the size of any future resolution, and cannot therefore be estimated.
EUROPEAN CONVENTION ON HUMAN RIGHTS
281. The Chancellor of the Exchequer, the Rt. Hon. Alistair Darling MP, has made the following statement under section 19(1)(a) of the Human Rights Act 1998 (‘HRA’):
282. “In my view the provisions of the Financial Services Bill are compatible with the Convention rights.”
283. The Bill confers a number of powers on the FSA, Treasury, the courts and other public authorities. In exercising those powers, those public authorities will be subject to the duty imposed by section 6(1) HRA not to act in a way that is incompatible with the Convention rights (subject to the limited exceptions in section 6(2)).
284. Set out below are details of the most significant human rights issues thought to arise from the Bill.
285. The Bill contains provisions conferring powers to obtain information (whether pursuant to secondary legislation or directly) (clauses 9, 10, 13, 30 and 31 and paragraph 16 of new Schedule 1A to FSMA) and provision for information to be provided notwithstanding that it is held subject to a duty of confidence (clause 12). The Government considers it unlikely that information sought or provided would be of a type protected by Article 8(1) of the European Convention on Human Rights (‘ECHR’). To the extent that Article 8(1) is engaged, the Government considers that any interference will be potentially justifiable under Article 8(2) on the grounds that it is in accordance with the law, necessary for the economic well-being of the country and proportionate.
286. Clauses 14 to 17 extend the FSA’s disciplinary powers under FSMA. Where Article 6(1) is engaged, the entitlement granted by that Article to a fair and public hearing by an independent and impartial tribunal is satisfied by the availability of the right to refer a finding in disciplinary proceedings for determination by the Financial Services and Markets Tribunal (the ‘Tribunal’). Suspension or imposition of restrictions on an approved person under clause 17 is likely to engage Article 8(1). The Government considers that, to the extent that Article 8(1) is engaged, the interference will be potentially justifiable on the grounds that it is in accordance with the law, necessary for the economic well-being of the country and in the interests of the protection of the rights and freedom of others and proportionate.
287. Certain provisions confer power to levy sums or require the payment of penalties or contribution to costs (see clauses 15, 16, 28 and 29 and paragraphs 12 and 13 of the new Schedule 1A to FSMA). Exercise of these powers might be considered a “control [on] the use of property” within the meaning of Article 1 of the First Protocol (‘A1P1’) to the ECHR. The Government considers that any interference with property rights will be potentially justifiable on the ground that it is in the general interest, is proportionate and strikes a fair balance between the interests of the general community and the protection of the fundamental rights of those that may be required to pay the relevant sums. In relation to clause 28, the Government considers that, to the extent A1P1 is engaged, any interference will be potentially justifiable notwithstanding that clause 28(2) makes provision for calculations to be made by reference to circumstances existing on or after 19 November 2009 (being a date before commencement). The Government made an announcement on that date so that those potentially affected by any retrospective change in the law will be aware of the position in advance of that change.
288. Clauses 18 to 25 provide for a new form of “collective proceedings” in respect of certain “financial services claims”. Article 6(1) is engaged by the measure in clause 20(1) providing for represented persons to be bound by a judgment or order in the proceedings. Article 6(1) is also likely to be engaged by provision in regulations under clause 23(3) for aggregated damages and provision in court rules under clause 24(2)(k) restricting rights of appeal. The Government considers that any interference with rights protected under Article 6(1) will be potentially justifiable on the grounds that it does not impair the essence of those rights and that any such interference represents a rational way of pursuing the legitimate aim of increasing access to justice. The Government considers that any interference with claimants’ rights will be proportionate: claimants will be under no obligation to be represented in collective proceedings and, if they are not included, will be free to bring their own proceedings. The Government considers that any interference with defendants’ rights will also be proportionate. Limitations on defendants’ rights to defend proceedings individually will be offset by the benefits of legal certainty and potential saving of costs.
289. Clause 26 replaces the existing section 404 of FSMA with new provision for the FSA to require firms to carry out a past business review and make redress to consumers. To the extent that Article 6(1) is engaged by rules establishing a consumer redress scheme, the Government considers that the availability of judicial review is sufficient to ensure that the process is compliant with that Article. Where rules under section 404 make the provision referred to in section 404A(1)(k), the Government considers that the requirement in section 404A(8) for rules to confer rights on firms to refer matters to the Tribunal ensures that any resulting determination of the firm’s civil rights and obligations will meet the requirements of Article 6(1). Clause 26(2) provides for clause 26 to have effect in relation to relevant failures occurring before commencement. The Government considers that rules that make provision in relation to such a failure will be potentially justifiable. Rules establishing a consumer redress scheme may be made only in cases where a remedy or relief is available in respect of the relevant loss or damage in legal proceedings.
290. Clause 10(5) makes provision for regulations applying provisions made by or under the Companies Act 2006 to include provision creating offences (though the penalty imposed may not be more onerous than under the provision being applied). Clause 27 creates a new criminal offence for breaches of new section 51A of the Consumer Credit Act 1974. Any prosecution for such offences would be compatible with the Convention rights because the ordinary provisions of the criminal system already secure the right to a fair trial guaranteed by the ECHR.
COMMENCEMENT DATES
291. Clause 38 sets out the provisions that come into force on Royal Assent, and the provisions that come into force two months after Royal Assent. The remaining provisions come into force on an appointed day.
ANNEX A: LIST OF ABBREVIATIONS
APS - The Asset Protection Scheme
CCA - Consumer Credit Act 1974
CFEB - Consumer Financial Education Body
ECHR - European Convention on Human Rights
FSA - Financial Services Authority
FSCS - Financial Services Compensation Scheme
FSMA - Financial Services and Markets Act 2000
HMT - Her Majesty’s Treasury
NS&I - National Savings and Investments
OFT - Office of Fair Trading
RRP - Recovery and Resolution Plan
The relevant authorities - The Treasury, FSA and Bank of England
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