Joint Committee on Statutory Instruments Tenth Report


APPENDIX 10

Letter to the Clerk of the Joint Committee from the Lord Chancellor's Department

FINANCIAL SERVICES AND MARKETS TRIBUNAL (FINSMAT) RULES (S.I. 2001/2476)—CONSULTATION

1. You have asked for information about the consultation on the FINSMAT Rules. This follows correspondence that you have received from Sir Adam Ridley of the City Liaison Group. As you know, the Department is of the view that, in strict terms, your request goes beyond the Joint Committee's terms of reference since it impinges on the policy behind the Rules. However, we are more than happy to provide this information to you under the Open Government Code.

FINSMAT Rules and the Code of Practice on Written Consultation

2. You ask why the consultation on FINSMAT Rules should not have been subject to the Cabinet Office Code of Practice on Written Consultation, which came into effect on 1 January 2001. The FINSMAT Rules were issued for consultation on 5 January 2001. The covering letter that accompanied the Rules explained that the consultation was a limited one, and not subject to the Code of Practice. The Code of Practice makes it clear that the Code is directed at national consultations where views are sought from the public. The Code goes on to state that parts of it may be relevant to more limited consultations. Our view was that the subject matter of the consultation—the FINSMAT Rules—was of a technical nature and likely to be of interest only to a narrow target audience. However, where we decide a consultation is "limited", the Department's policy is still to follow as far as possible the principles of the Code—this will be explained below.

3. Another factor is that the setting up of the Financial Services and Markets Tribunal formed one aspect of Treasury's wider proposals for the reform of the regulation of the financial services industry. At the time we issued the Rules for consultation there had already been significant consultation by the Treasury on their proposals—for example, the Treasury consultation paper that was issued in 1998, prior to the introduction of the Financial Services and Markets Bill, referred to the plans to set up the new Tribunal.

Consultation Criteria

4. You ask in what respect the consultation fell short of the ideals set out in the Code. I set out below the seven consultation criteria set out in the Code, and explain to what extent consultation on the FINSMAT Rules met the criteria. Criteria 1-5 relate to pre-consultation and the drafting of the document, criterion 6 relates to post-consultation, and criterion 7 deals with the monitoring and evaluation of all consultations.

    1.  Timing of consultation should be built into the planning process for a policy (including legislation) or service from the start, so that it has the best prospect of improving the proposals concerned, and so that sufficient time is left for it at each stage.

5. The Department considers that this was met. The FINSMAT Rules were issued for consultation on 5 January 2001 and consultation ended on 30 March 2001. The Rules were made on 9 July 2001. I confirm that there was sufficient time between the end of consultation and the making of the Rules for consultation responses to be properly considered, and for appropriate and satisfactory consideration to be given to the completion of the Rules.

    2.  It should be clear who is being consulted, about what questions, in what timescale and fro what purpose.

    3.  A consultation document should be as simple and concise as possible. It should include a summary in two pages, at most, of the main questions it seeks views on. It should make it as easy as possible for readers to respond, make contact or complain.

6. I attach copies of the documents that we issued for consultation [not printed]: draft FINSMAT Rules, explanatory note, and covering letter. I consider that taken altogether the consultation documents were sufficiently clear on the above issues, and went a long way towards meeting the above two sets of criteria.

    4.  Documents should be made widely available, with the fullest use of electronic means (though not to the exclusion of others), and effectively drawn to the attention of all interest groups and individuals.

7. Hard copies of the consultation documents were sent to members of the judiciary, other departments, the Council of Tribunals and other interested organisations whom we had identified as having a particular interest in the rules—I attach a copy of our consultation list. Further, the consultation documents were placed on the LCD Website, to which the Treasury Website had a link. Also, the Treasury bulletin, which is seen by many in the City, referred to the consultation documents.

    5.  Sufficient time should be allowed for considered responses from all groups with an interest. Twelve weeks should be the standard minimum period for a consultation.

8. This was fully met as twelve weeks were allowed for consultation.

    6.  Responses should be carefully and open-mindedly analysed, and the results made widely available, with an account of the views expressed and reasons for decisions finally taken.

9. This touches upon further points you raise in your letter concerning any changes that were made to the draft Rules following consultation, and the reasons for such changes. I will address these points under this heading.

10. I attach a summary setting out the main changes to the Rules following consultation [not printed]. There were a number of issues upon which we specifically sought views from consultees, e.g. ex parte applications, and so some changes should be seen in the context of responses from consultees. Some changes were made for policy reasons whilst others were for drafting technical reasons. In some cases, we had to ensure that changes made were in line with other provisions in the Rules, and to draft changes accordingly.

11. I also attach for your information a copy of those consultation responses not marked as confidential (we have previously sent these to Sir Adam Ridley) [not printed]. We are about to write to all those that responded (copy of our letter attached [not printed], to bring them up to date with the current position, and to offer to provide a summary of the consultation responses, upon request. As I explained on the telephone, there was a great deal of correspondence about these rules up to the time they were laid, and subsequently a motion was brought calling upon the Government to withdraw the rules. This is why we are only now responding to the consultees.

    7.  Departments should monitor and evaluate consultations, designating a consultation co-ordinator who will ensure the lessons are disseminated.

12. The Department is required to produce an annual report on all the consultations it carries out, both limited and those covered by the Code, and the FINSMAT consultation will form part of the considerations of the report.

13. I think it fair to say that although we took the view that the consultation on the FINSMAT Rules was a technical one and of interest to only a very limited audience, and therefore not subject to the Code, we followed the spirit of the Code very closely. The steps we took did not differ to any significant extent from those which we would have followed for a full national public consultation. Significantly, we would not have expected responses to the Rules to have been any different to those that we received, nor for the outcome to be different.

5 November 2001


 
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Prepared 28 November 2001