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Lord Desai: I do not have a hymn sheet, so I shall disagree with many of my noble friends. I had intended to speak only on Amendment No. 9A because I very much welcome the proposal. It is a profound defect of the constitution that it is very undemocratic. Whenever one tries to introduce democratic accountability, everyone says, "Nobody who is any good would appear to be scrutinised by a public body because it is simply beneath his dignity to do so". But it happens in the United States all the time. Alan Greenspan, who probably has more to do with "financial catastrophe" than anyone else, has to appear in order to be confirmed in his appointment.

I am sure that the whole debate on this point will be absolutely fantastic. Clearly, as there is only one Howard Davies, it will be difficult to clone him. Indeed, whoever appears the next time will be equally "unclonable" and will be too valuable to lose just by rude questioning from MPs, or even from members of a committee of this place.

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If this is an important issue, it will touch the lives of many people. In that case, it is very important that the person occupying that office should be publicly scrutinised. Everything that people say about the importance of the FSA and its head convinces me that we now have a chance to make a real constitutional innovation. I wish that happened on every appointment, including that of the Governor of the Bank of England, and so on. The noble Lord, Lord Kingsland, and I have had other democratic outbreaks like this, but they have been firmly put down, as no doubt this proposal will be. Indeed, we shall probably be "sent off" and put into a corner.

As regards the big question, I do not see why we cannot, in principle, give the person concerned two titles. The transition problem would therefore be solved. We could call Mr Howard Davies "chairman and chief executive". I do not know what he is called at present, but that title means that it would be possible in the future for those two offices to be occupied either by two separate people or by one person. It would depend upon whom we get.

Lord Haskel: That is what the Bill does.

Lord Desai: It does not say so explicitly; otherwise we would not be having this discussion.

I am aware of the "Borrie" solution, which I believe to be very subtle. However, as I read Schedule 1, I do not see why we cannot put this in writing and make our law slightly more readable and understandable by normally intelligent people, like myself, rather than leaving it obscure. I am sure that the answer will be, "It is all there, if you only look for it"--just as accountability is there, if one looks for it. Some people may say, "You are just ignorant; you are not part of the club. If you were on the inside you would know this, but you are outside. Therefore, you should not be here". I very much dislike that. Let us be explicit; let us be open and flexible. If it is necessary to have one person occupying two offices, that is fine, but it is possible that we will have to have two people occupying them. I do not really understand the problem.

Lord Elton: I believe it is my lack of qualification that qualifies me to speak in this debate. I have less experience of the financial industry than almost anyone else in this Chamber. Therefore, as a member of the public, I think that I should remind the Committee that we ought to be considering the nature of the animal that we are creating and trying to control. It is hugely important and powerful. It is subsuming large parts of the power both of Parliament and, I have to say, of the judiciary. It can extinguish the financial lives not just of individuals but also of large companies. Moreover, it can pry into the most intimate affairs of any organisation under its purview. Indeed, we shall discuss later the powers with which it can follow up what it has discovered--

Lord Jenkin of Roding: It is my recollection that, for a brief and somewhat turbulent period in its life, my

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noble friend was chairman of FIMBRA. I cannot remember what those initials stand for, but my noble friend has actually had personal experience in this matter upon which he should be able to draw.

Lord Elton: I shall be able to draw on that small experience a little later. However, from the outside, this leviathan is a fearsome creature. While controlling the whole of our financial industry, which is responsible for a great deal of the wealth and well-being of this country, it will also be capable of changing the circumstances under which the rest of us will live as a result of the decisions that it makes. So the decisions that we are now making are not unimportant. The concern of the average man and of the average--dare I say it?--voter is that it should not be an uncontrolled power unto itself and that it should not have duties that are beyond its ability to discharge.

I now turn to my brief and "turbulent" time as the chair of the Financial Intermediaries, Managers and Brokers Regulatory Association. I am not at all surprised that my noble friend could not remember the full name. I recall being a chairman with a chief executive. It seemed to me then that my experience as a Minister of the Crown was being duplicated and that anyone working under the pressures that will apply to those people whom we are now considering will, to some extent, be polarised. Those concerned will either be looking down at the regulated or out at the affected; in other words, they will either be looking at the enforcement of policy or at the effects of policy. If the policy is not properly enforced, the system will break down, the public will be let down, and the administration will have no result.

It seems to me that from a human point of view one normally needs to have two people to occupy those two positions and to hold them in tension with each other on the same board and with mutual regard. That works. It is not a recipe for disaster when catastrophe threatens. No Secretary of State is shy of having his Permanent Secretary with him in a moment of crisis, and no chairman need be shy of having his director-general with him in a crisis. But those outside need to see something which they believe can work, and not merely something that the Committee has been persuaded can work. The institution provided for giving public reassurance is Parliament itself.

Like the noble Lord, Lord Desai, whom I shall hasten to pick up if he is put down, or bring from his corner if he is put into it, I feel that Amendment No. 9A is an important one. I am not quite sure that my noble friend has it right, but I do not want to see Parliament push this great "Titanic" out with the danger that we shall all sink in it because we then have no control whatsoever over where it goes. The noble Lord who has introduced the amendment we are discussing has done us a service in drawing attention to where the true stresses lie. I was encouraged to hear that the noble Lord, Lord Burns, was, on the whole, of the same mind, until he answered a hypothetical question. That was a lesson in not answering hypothetical questions in debate! However, until that point he appeared to be on the side of those who favour

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these amendments. He introduced the idea of a change at a later date. I think that the noble Lord, Lord Desai, has put his finger on the matter. There is no reason why there should not be a change now and yet the present circumstances be left undisturbed. The Committee is anxious that the transitional body should not be fatally disturbed. All we are doing is asking one person to carry two names; that should not result in schizophrenia.

Lord Richard: I had not intended to say anything and I shall be extremely brief. I have listened to the whole of this argument but, the longer it has gone on, the less I have understood it. I thought that I understood it when the noble Lord, Lord Newby, started it. I thought that I understood it when one or two people opposed it. However, having listened to the noble Lords, Lord Jenkin and Lord Burns, and then having listened to what the noble Lord, Lord Elton, has just said, I find myself totally confused. The proposition seems to be that the post ought to be split and that there ought to be a chairman and a chief executive, except for now when it is important that the two posts should be operated by one individual. If I think about that for a moment, that seems to me to be saying that the ideal structure when things really matter is the existing one, where the post comprises one person, but that for normal working, the posts should be separated. I do not understand that.

Viscount Bledisloe: I ask the proposers of these amendments two questions. First, does the noble Lord, Lord Newby, accept that if his amendment is passed, it will not be possible to do what the noble Lords, Lord Alexander and Lord Elton, suggest; namely, sometimes having the post comprising one person and sometimes having two separate posts comprising two people? Secondly, if his amendment is passed, it will be necessary always to have a separate chairman and a separate chief executive, except at such times as there is a temporary vacancy. However, one could not say that for the next five years "X" is to be chairman and chief executive. I suggest to the noble Lord, Lord Newby, that that is the true position and that the compromise of the noble Lord, Lord Alexander, may be a wonderful one, but it is not an argument in favour of this amendment.

I now address the noble Lord, Lord Kingsland, and ask him the question that he asked the Minister earlier. Is there any precedent--and, if so, what--for the idea that posts of this kind will be subject to the appalling American practice of confirmation by the legislature, which has meant that in America only third-rate people are prepared to take jobs of this kind?

5.15 p.m.

Lord Hambro: If I may say so, in the FSA we are creating a kind of monster. As has been reiterated many times, it has powers far beyond anything which we have seen before in the financial services industry. Most of the powers of the Bank of England, the Department of Trade and Industry, and other units of enforcement, have been removed and directed to the

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FSA. When the crisis arises--as it inevitably will--in the years ahead, how will the FSA maintain the greatest credibility? The FSA will be a new instrument, a new body, in the eyes of people in this country. It will also be watched carefully internationally. My noble friend Lord Kingsland mentioned the word "systemic". If there is a systemic breakdown, it is important that everyone should consider that the FSA has the power and the wisdom to control the situation. I should have thought therefore that initially it is important that the position of the chief executive and that of the chairman--whoever they may be in the future--should be separated.

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