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Lord Hunt of Wirral: I welcome the opportunity to speak to Amendment No. 74E, which is grouped with the two amendments tabled by my noble friend Lord Elton.

Under the amendment there would be established a panel known as a small business practitioner panel, which would have to be established in the general duty to consult arrangements set out in Clause 7. I have previously drawn the attention of noble Lords to the need for the small investment business to be regulated with particular sympathy and a different approach than that accorded to a much larger entity. The amendment would put on the face of the statute a requirement for the regulator to have available a source of advice which could inform him of the likely impact of its proposals on smaller firms.

I contend that it is precisely those smaller firms for whom regulatory changes can have the greatest impact. A large institution can often absorb the cost of change with greater ease. The bureaucracy of regulation can often be adapted to its own internal bureaucracies. But a small business may find it much more difficult to accommodate a regulatory requirement and, at the same time, run a healthy and profitable enterprise. There may be ways in which the regulation can be adapted to meet the needs of the smaller business without compromising the objectives of regulation but, surely, the regulator needs to be aware of the implications of his proposals before he can contemplate remedial action.

My amendment would give the regulator a source of information and would require it to be used. I am, of course, aware that such a panel already exists. Its co-chairmen are actually on the practitioner panel. But I

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believe that the standing and significance of the small business panel would be greatly enhanced by appearing on the face of the statute. A clear signal would then be given to the regulator, and to the regulated community, that the needs of small business were going to be taken properly into account. I have already mentioned that the panel exists. It meets monthly; it has had seven meetings, the first of which was in May 1999; it has 13 members; and it is very ably chaired by Roger Saunders and Michael Quick. They have led the panel with great expertise and experience. As I said, both sit on the existing practitioner panel.

I seek to entrench what is already existing practice and, as I understand it, welcomed by the present chairman of the FSA. The panel works very well with the staff of the authority. It has on it representatives of the IFAs. Perhaps I may add here how much I appreciate the references made to independent financial advisers. As Members of the Committee know, I speak as chairman of the Association of Independent Financial Advisers. Under recent work carried out by IFA Promotion, those with fewer than 10 employees represent 86 per cent of all the firms. I have set the limit here as being,


    "businesses which employ fewer than fifteen persons".

I hope that the Minister will concede that not only does this work very well in practice but also that it should not be something that is subject to the whim of the FSA. It should be placed clearly on the face of the statute.

As I said, a practitioner who runs a small financial services business does not have the time or the resources to devote himself--as the noble Lord, Lord Faulkner, reminded us--to 45 consultation documents. Although he welcomes them and has a very good dialogue with the regulator, he cannot spend the time that others may be able to devote to so doing. The effect of regulatory action can have a disproportionate effect on the success and survival of that business. Therefore, it seems only reasonable to have a mechanism in place for assessing the impact upon the smaller business and for recognising it on the face of the Bill.

Lord Jenkin of Roding: Members of the Committee are very much indebted to my noble friend Lord Elton for having drawn attention to the need to have such panels properly resourced. That will have a major impact on the panel's effectiveness and its ability to communicate the concerns of practitioners. It will also help it to maintain a public profile.

My attention was recently drawn to a survey of practitioners, which found that only one-quarter of small organisations and one-third of chief executives had even heard of this non-statutory practitioners' forum. It must have the resources to tell the industry what it is doing, what representations it is making and what impact it thinks it is having. The worth of its annual report, which it intends to publish, will equally be subject to its having enough resources properly to do so.

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At present, as no doubt the Minister will tell us, the forum has no budget. It has no staff and all its activities are being paid for on an ad hoc basis by agreement with the authority. This leaves the forum--and, indeed, if it continues, this will also apply to the panel--entirely dependent on the largesse of a body towards which it is meant to adopt a pretty arm's length relationship and of which it may from time to time be extremely critical. Its annual report admits that it is not equipped to comment fully on all the issues under consideration by the authority.

We now have an opportunity with this Bill to put some of these things right. I do not know whether the amendments of my noble friend achieve that aim. However, reinforcing the points made on the previous amendment, if this body is to succeed--this applies equally to the consumer panel as it does to the practitioner panel--it must have the resources to enable it to be effective. If such a panel is simply dependent on what it can get from the authority, I fear for its influence. I hope that the Minister will feel able to comment on the issue.

6.45 p.m.

Lord Blackwell: I should like to lend my support to the amendment proposed by my noble friend Lord Hunt of Wirral. I have some scepticism about the desirability of a panoply of panels with resourcing and functions prescribed in this way. I fear that such panels will just end up creating more delay and bureaucracy without having any consequent impact. I would favour a much looser requirement for the FSA simply to consult all those who have interests. That would save a great deal of wording in the legislation.

However, if we are to have them, the danger is that panels constituted as simply representing practitioners and consumers would tend towards answers that are in the interests of large practitioners and consumers as a mass market; and, indeed, possibly bring forward solutions that are adverse in cost and competitive terms to the smaller practitioners where, as my noble friend said, the regulatory burdens are often heavier. Therefore, I strongly support the notion that one of those panels should be charged with looking after the interests of small practitioners so as to give them a particular voice.

Lord McIntosh of Haringey: The amendments before the Committee relate to the arrangements for the funding of the practitioner panel and the structure of the arrangements for representing the interests of practitioners. Perhaps I may start with Amendment No. 74C, which deals with funding. This is really unnecessary. There is a clear obligation on the authority to consult under Clause 7. When taken with the requirements under Clause 8, it is clear that that obligation will include the provision of funding where that is appropriate or necessary. If the authority failed to ensure that adequate funding was available, it would be failing to meet its obligations under these provisions.

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The same applies to the arrangements for the practitioner panel as for the consumer panel under Clause 9, although I noticed that the noble Lord did not seek to provide amendments to deal with the consumer panel. The difference--and this may be the reason why the noble Lord has not done so--is that the consumer panel originally had an allowance for three full-time equivalent staff and now has an allowance for four full-time equivalent staff. But, as has been said, the practitioner panel does not have its own budget. The members are pro bono and any commissioned research is paid for by the FSA. It has in fact commissioned research of the order of £100,000, which is not insignificant funding for the panel.

However, if the issue is whether there should be a statutory requirement to have funding for the panel, I am afraid that Amendment No. 74C would not provide it. It states,


    "The Authority shall provide such resources as it considers necessary".

That is a matter for the authority, not the panel.

Lord Elton: I made it clear that this is a probing amendment to find out how the funding is to be achieved and that at the next stage, if it is appropriate, we can produce something which will actually work.

Lord McIntosh of Haringey: I am happy to return to the real situation; namely, that where funding has been requested, it has been made available and there has been no difficulty with that. The Joint Committee recommended that the panels should report annually on the adequacy of their budget. We have no difficulty with that. There is no need for the Bill to spell it out, but the authority has undertaken to include in its annual report a report from the chairman of each of the panels which contain--

Lord Faulkner of Worcester: Has my noble friend seen the report from the consumer panel which reached a number of noble Lords today, which points out that its budget for the 13 months to 31st December was £538,000? It states modestly that it spent only £334,000. There is no hint at all that the panel is under-resourced. It states,


    "We have provided much 'behind-the-scenes' policy advice to the FSA's Board and staff before the FSA embarks on full public consultation and before it reaches final decisions. In addition, in 1999 we made 19 formal responses to consultations by the FSA, Government, Parliament and trade bodies. We publish all our responses and research".

Surely this is not an under-resourced body or one that is whining for more money.


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