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Lord Elton: In view of the rapidity with which these markets develop and the relative slowness with which committees come to conclusions, does my noble friend believe that a quinquennial meeting, taking a year to report, will look more at history than current affairs?

Lord Jenkin of Roding: I did not say the period should be five years. I felt that every two years would be too frequent. Somewhere in between, say every three years, may be better.

Lord Burns: I want to join with those who have expressed their admiration for the Comptroller and

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Auditor General. In my previous life I worked closely with him. I have been scrutinised and audited by him. Sometimes such a process went well and sometimes not so well. I can vouchsafe for his dedication and skill. I join with the noble Lord, Lord Barnett, in questioning whether it is necessary to give him a monopoly position. In my previous life we had an ongoing debate about the Comptroller and Auditor General and whether he should follow public money wherever it goes. Of course, with contracting out and with more services being bought in, the border line has become more difficult to define.

Here we have a private sector company with no taxpayers' money involved and the finance for the organisation will come from the private sector. Therefore, it seems strange that we should give the Comptroller and Auditor General a monopoly position. There is nothing to stop the Treasury appointing him to this task. But why should he get the job by default rather than through some process of competition? I am reluctant that this situation should be part of the legislation rather than being considered on an ongoing basis.

Lord McIntosh of Haringey: I am sorry to leave the tape recorder behind. I am thoroughly antagonistic to all these amendments, except government Amendment No. 83. I believe that they would severely diminish the effectiveness of the value for money review procedure proposed under Clause 10. Currently Clause 10 provides the Treasury with the power to appoint an independent person to conduct a review of the efficiency, economy and effectiveness with which the FSA has used its resources to discharge its functions--that is to say, a value for money audit. It is intended to be a flexible power allowing the Treasury to commission reviews on a large scale or into particular aspects of the FSA's operations as often as appropriate.

Amendments Nos. 79, 81 and 82 would remove that useful element of flexibility. They would set in stone a requirement to have a value for money review every two years following the coming into force of the Bill and on no other occasion and covering nothing except the whole of the activities of the FSA.

The reason that there is no provision in the Bill requiring value for money reviews to be carried out at a particular time is a simple one. We see nothing to be gained by holding a review for the sake of it and quite a lot could be lost by having it at regular fixed periods.

Clearly, reviews are an important tool in keeping costs down and ensuring that the regulator carries out his job efficiently, but they should only take place when necessary. Reviews are not cheap. They tie up a lot of the time of staff and management and divert the regulator from the job of regulation. The FSA has expressed concerns, which I share, that there could be a planning blight in the run-up to the review.

If a value for money review happens more often than is necessary, less often than necessary or at the wrong time, that could have the opposite effect to the one intended. The amendment would also have the

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unfortunate effect of making it impossible for the Treasury to commission a review at other times. Depending on the circumstances, two years may be too short a gap between reviews, as some noble Lords believe, so we need a flexible power.

We have made it clear that we shall hold a review if and when there is evidence suggesting that that would be useful. There is nothing unusual in that. Indeed, it is the same approach taken in the National Audit Act 1983 which says that the Comptroller and Auditor General may carry out examinations of the economy, efficiency and effectiveness of departments. It does not say that he must do so.

We will not be short of indicators as to when a review is appropriate. The non-executive directors will conduct a report annually on whether the FSA is using its resources in the most effective and economic way. There is a great deal of transparency around the FSA's budgeting and the setting of fees for regulated persons. Of course, it is open to anyone to suggest to the Treasury that a review may be appropriate. It could be the Treasury Select Committee of another place or, if the Deputy Chief Whip were so minded, it could be a review of a joint committee or a committee of this House. Incidentally, at the present time, no discussions have taken place with the usual channels on this point.

Of course, Treasury Ministers will be answerable to the House for their use of the powers conferred by Clause 10, as they will be accountable for the use of any other powers which they can exercise under the Bill. I thought that the attack of the Opposition would be to claim that it is the FSA which is the monster that has got out of control. However, we hear that it is the Treasury, which is accountable, but which appears to be out of control.

Amendment No. 82 presents the same problem. The deletion of subsections (2) and (3) would remove the restrictions on what area of the FSA's work the reviewer could examine. Subsection (2) is simply a reflection of the fact that the Treasury might decide to commission a review for a particular purpose. If, for example, a review was triggered by events in the building society sector, the Treasury might wish to direct the reviewer to look at the FSA's work in regulating building societies, as opposed to, say, insurance regulation.

Subsection (3) is rather different. Under the National Audit Office Act 1983, the Comptroller and Auditor General has the right to carry out reviews of the economy, efficiency and effectiveness of spending by government departments and various other bodies. However, the same statute goes on specifically to prohibit the comptroller from examining the merits of the policy objective underlying this spending. I must point out to noble Lords that this was enacted under a Conservative administration. It is now being attacked from the Opposition Front Bench.

This does not mean, of course, that these policies should be beyond question, but rather that it would compromise the independent nature of the comptroller's office for him to become involved in

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these policy questions. Subsection (3) plays a similar role in respect of this Bill. That is not to say that the FSA's performance in terms of making policy is not to be open to scrutiny. The Bill provides for a number of ways in which the FSA can be called to account in respect of its policy and principles.

Schedule 1 provides that it must comment in its annual report on how its regulatory objectives have been met. The report will be laid before Parliament and will be open to discussion at a public meeting. In addition, Clause 7 requires the FSA to make arrangements for consulting practitioners and consumers about its policies and practices, including the consumer and practitioner panels. Furthermore, it would always be open to committees of this House or of another place to decide that they wished to examine the FSA's work, just as a committee of this House examines the work of the Monetary Policy Committee of the Bank of England.

Finally, there is a government amendment to this clause, Amendment No. 83, which I commend to the Committee. Its purpose is to allow reviews commissioned under Clause 10 to cover any functions of the FSA under Part VI of the Bill, which is the part concerned with official listings. We shall come to debate the changes that we are making to take account of the proposed transfer of the competent authority function from the London Stock Exchange to the FSA when we debate Part VI of the Bill in due course. However, it is necessary to put in this amendment first.

I shall now turn to the second group of amendments which concern the role of the Comptroller and Auditor General. Again, these would restrict the scope of the Treasury's powers under Clauses 10 and 11. At present, the Treasury can commission a value-for-money review of some or all of the functions of the FSA. The clause allows the Treasury to appoint any person it thinks is best equipped to do the job, provided that that person is someone appearing to the Treasury to be independent. The amendments would remove the Treasury's discretion, placing instead a duty on the Comptroller and Auditor General to carry out reviews.

The key to Clause 10 is flexibility; getting a review of the right things at the right time by the right person. The right person might well be the Comptroller and Auditor General. There is nothing in the Bill which would preclude the Treasury from asking him to carry out this task. However, I do not believe that we would gain anything by making it a requirement that the Treasury should appoint him on every occasion. We would lose some useful flexibility.

This is no reflection on the expertise and professionalism of the comptroller or his staff at the National Audit Office. It is simply the case that it may be that a body more familiar with how the financial markets work might be more appropriate in a particular instance. I do not believe that the NAO would always be the most appropriate body, given its separate role in relation to local government and the National Health Service. For example, in 1996,

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the value-for-money review of the Securities and Investment Board was carried out by a private sector organisation.

I do not think that there is very much between us in what we seek, but I believe that the amendments of the noble Lord, Lord Saatchi, would diminish the value and effectiveness of the review procedure provided in Clause 10 of the Bill. I hope that he will not press them.

9 p.m.

Lord Saatchi: Given the Minister's response, I have a suggestion on how drastically to cut short our deliberations on the Bill this evening and, indeed, all the other stages. We could scrap the Bill as it is presently drafted and have instead a one-line Bill. That would say something along the lines of, "The FSA will be a body which will carry out duties as determined by the Treasury from time to time".

What we have heard from the Minister suggests that he wants actively to maintain the maximum possible degree of discretion and flexibility for the Treasury. However, we want actively to do the reverse; namely, to limit the Treasury's powers of discretion and flexibility. Surely this is now becoming the main gulf between the Government and the Opposition on this Bill. It is the theme that we have rehearsed on the subject of the chairman of the FSA, the role of its non-executive directors, the construct of the panels and their rights, obligations and duties, and now, on the subject of the review of the FSA. A fundamental gap is emerging between us in our approach. The Minister wishes to see less prescription and more flexibility, while we wish to see the exact opposite. We shall see how this can be worked out on Report.

Perhaps I may respond to the comments of the noble Lord, Lord Faulkner, on the question of timing. As the noble Lord will have gathered from the speeches of my noble friends, we are not particularly set on one period rather than another. However, we are determined that there ought to be a period. The point as regards timing should not be one of the Minister's discretions for the Treasury.

The noble Lord's second point concerned who should carry out such reviews. I think that he can rely on the fact that we are a "joined up" Opposition. For that reason, what the noble Lord hears from this Front Bench is joined up to my right honourable friends in another place. As regards which committee might emerge as the ideal committee to carry out reviews, that would depend very much on the Minister's response to other amendments to be moved later. However, for the time being, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 80 to 82 not moved.]

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