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Lord Borrie: Following the earlier welcome remarks by the noble Lord, Lord Taverne, I hesitate to criticise an amendment tabled by the Liberal Democrats who have been so helpful, and not at all obstructive, in regard to this Bill. But I am not convinced by the argument of the noble Lord, Lord Sharman. The noble Lord said that, according to the schedule, the ombudsman appeared to be merely another part of FSA: he even said that the FSA would appoint the ombudsman. That is not so. Schedule 16 appoints a scheme operator--it is the FSA that makes the appointment--which is to be a body corporate quite separate from the FSA. Schedule 16(3) provides that the terms of appointment of the board of directors of the scheme operator,

In other words, the scheme operator is a body interposed between the Financial Services Authority and the ombudsman. That is a common feature among private sector ombudsmen whose position has been set up recently, sometimes informally and sometimes by statute, in order to achieve the vital factor of independence of the ombudsman, ombudsmen or ombudspersons (if one wishes to use that phrase) who makes or make the decisions in disputes.

I hope that my noble friend Lord Bach will confirm that paragraph 3, which provides that the appointment of the board of directors of the scheme operator,

    "must be such as to secure their independence from the Authority",

means that, as historically has been the case in the past 10 or 15 years when such schemes have been set up, a majority of the board will be completely independent of the people who provide the finance, resources and so on--in this case, the authority. Surely the vital matter is that the people who determine disputes--the ombudsmen--will be independent. The panel of ombudsmen is provided for in paragraph 4. The

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ombudsmen's independence is specified in paragraph 4 so that they and the body interposed between the authority and the ombudsmen are also independent. That vital factor is already well assured by Schedule 16. To use again that delightful word, this amendment is "otiose".

4.15 p.m.

Lord Elton: It is important that the scheme shall be seen to be, as well as being, effective; and that these people are seen to be, as well as being, independent. I wonder how the interposing of a body appointed by the FSA to appoint the ombudsman will secure the feeling that it is in some way insulated from the ombudsman. Presumably any unsatisfactory appointments made by the interposing body can result in discomfort for the interposing body or perhaps departure of some of its members.

The noble Lord, Lord Borrie, has great experience of these matters to which I defer. He referred to the independence of the "ombudspeople" (if that is the correct term). However, the provision as stated in paragraph 3 seems analogous to the independence of the editor of a newspaper wholly owned by a certain person of a certain political complexion. For that reason also there is need for greater insulation and distance.

Finally, the importance of the matter is even greater than was described by the noble Lord, Lord Sharman, who spoke so graphically of the release into the landscape of a tribe of lumbering and possibly fearsome creatures. That may not be the right analogy because the creatures will not be proactive. However, they will need restraint. They are localised in one place. Perhaps a nuclear fuel reprocessing organisation would be a better analogy. If we apply his analogy of people changing and disregarding the procedure set out on the face of the Bill, the result is incalculable damage. In nuclear terms, we have Chernobyl to consider.

It is not a small issue. I hope that the noble Lord will not be lightly dissuaded by the arguments which no doubt will be put to him in due course by the Government Front Bench.

Lord Lipsey: I do not know whether the noble Lord, Lord Sharman, will be persuaded by the Government's arguments. Perhaps I may try an argument of my own in the hope of persuading him that the amendment is indeed otiose. I wonder how many "otioses" we shall get through today!

I have been a director of one of the schemes to be abolished by the Bill, under the Personal Investment Authority. For the Personal Investment Authority ombudsman there is a separate board, the PIA Ombudsman Bureau, which happens to comprise directors, for the time being, of the Personal Investment Authority, so the independence is less than that under this Bill.

In these cases, I believe that practice is worth quite a lot of theory. Having been such a director, I know that the idea that we would in any sense interfere with

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the ombudsman's independence is completely theoretical. He would have our guts for garters, publicly and privately, if we did so. There are some issues where it is helpful to have a dialogue with the ombudsman, such as about the use of resources, and how many staff he requires for certain purposes. It is right that there should be a dialogue, as I am sure there will be under the provisions for the Financial Services Authority. No one has ever questioned that the ombudsman is properly independent under the arrangements in place. I believe, therefore, that it is not necessary--although I can see its attractions--to write on the face of the Bill the provision that the noble Lord, Lord Sharman, seeks.

Lord Jenkin of Roding: There is a great deal in the Bill about the need to protect consumers, much of which we have already debated.

I am sure that I am not alone in having received in my post this morning a press release from the Financial Services Authority with the heading, "Consumer help at the click of a button". It states:

    "Baffled by all the different financial products available? Fed up with small print and jargon? Want to complain but don't know how?

    "Don't despair. A new website section is now available to answer any questions you may have about your personal finances--no jargon, no gobbledegook, just easy-to-understand, totally impartial information at the click of a mouse".

So I tried to access the website. It is called "". I tried three times; but my computer was unable to find it. I talked to one of those extremely helpful people at 2001, our helpdesk, who also tried and said, "Yes, we have succeeded. You don't write 'consumerhelp' but simply 'consumer'". So I deleted the last four letters and--bingo!--it worked. When I eventually got on to the website, it was quite good; there was quite a lot of information. But it is not very encouraging if the FSA cannot get the address right. I do not know whether that is the sort of complaint that should go to the ombudsman.

The point I want to make about the noble Lord's amendment is this. The noble Lord, Lord Lipsey, referred to previous ombudsmen. In the insurance company I used to chair, we dealt with his ombudsman. We always felt that the post was independent of the regulator. When one had an extremely intransigent policyholder who could not possibly be persuaded that what we had done for him was perfectly reasonable, we always ended our letters in reply to the complaint by giving the ombudsman's address, saying that if the individual felt unable to accept the company's decision, he should feel entirely free to take up his complaint with the ombudsman.

I was somewhat sceptical about the scheme at first, but I came to recognise that it is quite good. Its independence is important--not only its independence from the companies the authority regulates, which goes without saying, but also its independence of the authority itself. Sometimes it might be said, "Perhaps

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the company did everything perfectly all right but the regulator should have stopped what it was doing, or should have ensured that it behaved properly".

I attach great importance to the independence of the ombudsman. I hope that when the Minister replies he will satisfy us that that will be the case. It is an important arm of consumer protection. It has worked quite well in the past. It needs to work even more effectively in the future.

The Earl of Onslow: We all know the old Latin tag, quis custodiet ipsos custodes--who guards the guards themselves? It is important that the ombudsman appears to be divorced from the authority setting up the post. During the water industry privatisation, it was originally proposed that the water authorities should police themselves. Reasonably, there was an uproar, especially in this House. Michael Howard changed his mind and set up a separate policing authority for the water companies.

Everyone agrees that the proposal in the Bill is a good idea. No one is saying that the person who will be proposed by the FSA will be anything other than a totally honourable, upright man who will do his job properly.

Lord Borrie: Does the noble Earl accept that the Bill does not provide that the authority will appoint the ombudsman?

The Earl of Onslow: I understand that he is indirectly appointed by the body which in turn is appointed. If I appoint the noble Lord, Lord Borrie, to do something and he appoints someone else to do something else, there is a direct link between the person he has appointed and myself. That is not to take away from the genius of the noble Lord, Lord Borrie, or the superb appointment he makes. All one is saying is that it appears to be wrong.

For the sake of argument, let us assume that I appoint the noble Lord, Lord Borrie, to do something and that he makes a totally out-of-character error of judgment and appoints my noble friend Lord Archer who appears--and I use that word totally advisedly--not to be as good as he is appointed to be. I then get the rocket, as does the noble Lord, Lord Borrie, because he has not been appointed by someone else. Appearances are so important. We want the system to work; we want the ombudsman to protect the consumer and we want him to be at arm's length.

That metaphor may have been a little hyperbolic, but I intended no insult. I merely illustrate what can go wrong and we do not want that to happen. We want the system to work.

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