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Lord Walker of Worcester: I share the view of my noble friend in relation to retaining paragraph (g). There have been a series of innovations in the history of the City of London over the decades that have given it enormous international strength. I can recall two such innovations. I was involved in the 1960s in the introduction of the first-ever equity-linked life policy in this country. All of the establishment in life insurance were against it and said that it was not safe and added to risk. However, I am pleased to say that over the years they followed our example.

In recent times we have seen direct selling of insurance. The established houses would say to their policy holders that the established insurance company, with branches all over the country, is much safer than the direct selling operations by Direct Line and other companies. In practice, it has been a great and successful innovation, bringing benefit to policy holders throughout the country.

I welcome the inclusion of paragraph (g) and hope that it will be retained.

Lord Kingsland : The Opposition Front Bench also supports the retention of paragraph (g). Two years ago there was a long debate during the passage of the Competition Bill on the relationship between the contents of paragraphs (f) and (g). The origin of paragraph (g) in this Bill is misplaced. Unlike the Bill, most of the industries that were the subject of the Competition Bill debate were nationalised industries.

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They all started off as public monopolies that were then privatised following which the process of facilitating competition had to be injected into them by the regulators.

It was very clear that the draftsman of the Competition Bill, quite rightly, did not wish to give the responsibility of initiating competition to the Director-General of Fair Trading. In the Competition Bill there was a clear distinction between the task of the Director-General of Fair Trading, to deal with the traditional problems of competition, and the task of initiating competition, or facilitating the initiation of competition, which were issues for regulators. I am not sure that it can be said that paragraph (g) represents a long tradition, but in the world of regulatory operations two years is a long time. The Minister will be surprised that at least on this occasion I support the Government's position.

4 p.m.

Lord McIntosh of Haringey: I should like to make it clear from the outset that I am not Don Cruickshank, and I shall resist the temptation to comment favourably or unfavourably on what he says. That does not mean, however, that I can resist the temptation to quote him when he seems to be supporting the Government--which I am sure is forgivable.

Paragraph 2.130 states:

    "The Review welcomes the progress the FSA has made in setting out how it will align its new regulatory approach with these objectives."

In addition, the report notes in relation to the review's interim report:

    "The Government, in response, committed itself to securing that the FSA gave full weight to competition concerns and took account of the effect of its rules on competition in the light of market developments. It has since brought forward a number of amendments to the FSMB to achieve this".

My noble friend Lord Borrie used the description "a weak competition objective". He appeared to think that facilitating was the same as promoting. I rebut both those claims. This is not a weak competition objective; it is not a competition objective at all. Competition is a matter for the competition authorities. As I said at the outset, and as the noble Lord, Lord Jenkin, recognised, it is not the FSA's job to tell people how they should compete. The purpose is not to steer the FSA to tell the markets how they should operate where there are no consumer protection or market confidence concerns; it is to encourage it to remove unnecessary competition barriers, as in the earlier example in relation to removing unnecessary barriers to innovation.

This principle of good regulation--and perhaps we should always be talking of principles of good regulation, which is how the FSA describes it, rather than just principles, as described in the Bill--should guide the FSA in deciding its policy on how quickly it processes applications for newcomers, the level of entry requirements and the issue of league tables. The more players there are in the market, the more competition there is. Provided adequate protections

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are in place, this can only be a good thing. These matters are not so precisely covered by the requirement to measure the adverse effects of competition as they are in paragraph (f).

I do not accept that facilitating is the same as promoting; and I do not accept what my noble friend Lord Borrie says about exposure to risks. None of the examples that I have given involves any increase in exposure to risks. Clause 2(3)(f) does not override the FSA's duty to provide consumers with an appropriate level of protection. The point is simply that the desirability of facilitating competition is something to which the FSA should have regard in meeting its primary objectives, including consumer protection.

I am grateful to all noble Lords who have pointed out the different roles of the FSA, the Office of Fair Trading and the Competition Commission. There would be confusion between the three if the FSA did not have a competition objective, but the matters in Clause 2(3) do not concern the aims or purposes of regulation, because that is the role of the objectives, but the manner of regulation. As the noble Lord, Lord Jenkin stated, in discharging its general functions, the FSA shall have regard to the desirability of each of these items.

There are those who wish to remove paragraph (g) and those who wish to strengthen it--although they have not been so vocal today--but I think we have the right balance. I commend the amendment to the Committee.

On Question, amendment agreed to.

[Amendment No. 50 not moved.]

Baroness Turner of Camden moved Amendment No. 51.

    Page 2, line 20, at end insert--

("(h) the desirability of facilitating as far as possible access to financial services for disadvantaged consumers.").

The noble Baroness said: I speak on this occasion as a consumer, although many years ago I worked for an insurance company and also had some connection with the PIA when I was chair of the PIA Ombudsman Council.

This is a probing amendment. It concerns the access of low income households to financial services. According to the National Consumer Council, which has kindly sent me some briefing, 1.5 million low income served households use no financial services at all. That is a serious matter.

Governments, including this Government, have increasingly turned away from social provision provided by state agencies, and the present thinking looks to the private sector to fill the gap. The Minister will not be surprised to hear from me that this is not a development that I welcome; nevertheless it appears to be a fact of life and we have to come to terms with it.

I can remember that when I was very young my mother used to put money aside for the man from Liverpool Victoria, who duly entered it in a book that she held. That kind of home insurance cover is gradually disappearing. I recently met representatives

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of Liverpool Victoria in my capacity as a member of an all-party financial services group. They informed us that they were no longer involved in this market because the amount of form-filling and general regulation involved in selling a £10 a month policy meant that the business was no longer profitable. Despite the criticisms often made of home service business, it did at least mean that poorer people had some access to financial services. But that is largely a thing of the past.

The Government recognise the need for suitable financial services to be available and accessible to consumers across a whole range of needs. I welcome the consumer protection objective, but it does not guarantee that the particular interests and needs of disadvantaged customers will be met or even properly considered. The FSA ought to be able to consider and act according to the interests of the most needy. This could, for example, involve cross-subsidy on the costs of regulation for smaller, non-profit-making organisations--perhaps credit unions. There could possibly be an information campaign to highlight products most suited to those on a low income.

Incidentally, I believe that mutual societies have done a much better job than the ordinary financial services industry in providing services to marginalised communities. I wish that some way could be found to protect mutuals from carpet-baggers. I looked very closely at the Bill but, unfortunately, I could not find a way of writing an amendment that would enable me to raise the issue. No doubt I lack the appropriate technical expertise. Nevertheless, I draw the attention of the Committee to that issue because it is a pity that such mutual societies are disappearing. In view of the social role played by financial services, it seems that a statutory requirement to facilitate access for the disadvantaged would be appropriate. I beg to move.

Lord Newby: I rise to express my support for the arguments put forward by the noble Baroness, Lady Turner. In doing so, I shall speak also to Amendment No. 61. Amendment No. 51 was moved in almost identical terms by my colleague Dr Cable in another place. In replying to his arguments, which were almost identical to those advanced by the noble Baroness, the Minister in the other place said that the Bill did not need such a provision for two reasons: first, there was already a consumer awareness objective in Clause 4; and, secondly, the consumer protection objective in Clause 5 had a bearing on the issue and, therefore, the amendment was simply unnecessary.

Much of the debate on amendments has centred around whether the Bill is permissive or specific in the sense that on many amendments both today and last Thursday we have heard the view that one can actually do things under the Bill that such amendments seek to specify and that, therefore, we do not need them. We wish to have regard to the problems of disadvantaged consumers. We want to try to ensure that this requirement is given greater weight than is currently the case. In Clauses 2 and 5 the Bill already sets out a

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whole raft of considerations to which the authority must have regard but there is nothing specific there about disadvantaged consumers.

Therefore, we have tabled an amendment not to amend the earlier part of the Bill but to amend Clause 5, which already specifies a number of types of consumer and types of business to which the FSA must pay particular attention. We believe that the interests of the disabled or chronically sick, pensioners, individuals on low incomes and individuals residing in rural areas should be mentioned specifically in the Bill so that the FSA has a positive duty in this area. In doing so, we chose our words relatively carefully. The amendment employs exactly the wording in both the Utilities Bill and Postal Services Bill as regards dealing with disadvantaged consumers. Quite frankly, if such wording is good enough for those Bills, we cannot see why it should not be included in this legislation.

One of the key thoughts in our mind is that, among the plethora of considerations that the FSA has to take into account, the concern for disadvantaged consumers should be given greater weight. There is also the question which may or may not be a problem in reality but, which, nevertheless, concerns both us and the National Consumer Council; namely, the extent to which the FSA can under this legislation do the kind of thing that it may wish to do to support disadvantaged consumers.

In respect of credit unions, Howard Davies has already said that he hopes that the way in which the FSA regulates such unions will help that movement,

    "to achieve its full potential to offer low-cost efficient financial services to local people, and make an important contribution to offset the serious problem of financial exclusion".

We agree; indeed, there could be cases where the cross- subsidy on the costs of regulation might be relevant to credit unions. However, in the absence of a statutory requirement to aid disadvantaged consumers, the FSA might find it hard to justify such measures in the future. Moreover, the authority might feel constrained from funding information campaigns that specifically highlight products most suited to those on low incomes or that warn elderly people to guard against unfair sales practices. When considering such issues, we must bear in mind that there have been many examples of unfair sales practices.

In our view, the argument for encouraging disadvantaged people to take up financial products and financial services, especially where they find it very difficult to do so, is an extremely strong one. The argument for the FSA having this as an explicit duty is equally strong. By not adding to the objectives of the authority but simply specifying a distinct group of consumers who need particular protection and care, we believe that Amendment No. 61 should be welcomed by the Government.

4.15 p.m.

Lord Alexander of Weedon: Perhaps I may express a few words of sympathy with these amendments. During my time in banking, it was clear to me that there were key issues regarding both financial literacy

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and availability of banking services that affected a significant part of the population. I saw various estimates of numbers, but I never saw an estimate lower than 20 per cent. Driven as they are by the demands of their shareholders, and however much their management would like to do so on personal grounds, it is very difficult for the mainstream banks to pursue areas of banking activity that, though not immediately profitable, would benefit the health of society as a whole.

I realise that there may be difficulties in the extent to which the FSA can act to implement such amendments. That is possibly one of the reasons why the noble Baroness tabled this as a probing amendment. However, I can see areas that the authority could consider in terms of financial education. Indeed, the noble Baroness mentioned the encouragement of credit unions.

There is also one other area for consideration in this respect. In the United States--the home of the free markets--there is, none the less, legislation that requires mainstream banks to engage in a proportion of community redevelopment banking activity. When I surveyed the US scene it seemed to me to be healthy and, interestingly enough, to be capable, when properly handled, of generating profitable clients. I do not pretend that this is an easy issue because it goes with the wider issues of inadequate literacy and numeracy across the board, to which Sir Claus Moser drew our attention with such clarity last year. I have sympathy with the desirability of an amendment that would give the FSA not only the obligation but also, as the noble Lord, Lord Newby, said, the express freedom to be active in these areas.

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