Previous Section Back to Table of Contents Lords Hansard Home Page

Lord McIntosh of Haringey moved Amendment No. 83:

The noble Lord said: I have already spoken to this amendment. I beg to move.

20 Mar 2000 : Column 98

On Question, amendment agreed to.

[Amendments Nos. 84 and 85 not moved.]

Clause 10, as amended, agreed to.

Clause 11 [Right to obtain documents and information]:

[Amendment No. 86 not moved.]

Clause 11 agreed to.

Clause 12 [Cases in which the Treasury may arrange independent inquiries]:

Lord Kingsland moved Amendment No. 87:

    Page 5, line 40, leave out ("serious").

The noble Lord said: Amendments Nos. 87 and 90 to 93 relate to inquiries, which are dealt with under Clauses 12 to 16.

Amendment No. 87 is to page 5, line 40. As members of the Committee are aware, Clause 12 allows the Treasury to arrange for independent inquiries to be held in certain circumstances. The first set of circumstances, in Clause 12(2), is where,

    "events have occurred in relation to [either] a collective investment scheme, or ... a person who is, or was at the time of the events, carrying on a regulated activity ... which posed or could have posed a grave risk to the financial system or caused or risked causing significant damage to the interests of consumers".

However, there is a further requirement in Clause 12(2)(b) that,

    "those events might not have occurred, or the risk or damage might have been reduced, but for a serious failure in",

the regulatory system or the operation of that system.

Amendment No. 87 deletes the word "serious" in Clause 12(2)(b) on the basis that, if the events which occurred had posed,

    "a grave risk to the financial system or caused or risked causing significant damage to the interests of consumers",

it should not be necessary to establish that those events,

    "might not have occurred ... but for a serious failure",

in the regulatory system or the operation of that system.

I now turn to the remaining Amendments Nos. 90 to 93 to Clause 15. If an independent inquiry as contemplated by Clause 12 takes place, the person holding the inquiry must make a written report to the Treasury. Under Clause 15(2),

    "The Treasury may publish the whole, or any part, of the report".

Amendment No. 90 would require the Treasury to publish the whole of the report. Amendment No. 91 is a consequential amendment and relates to Clause 15(3). Under subsections 15(3) and (4) the Treasury may remove from any report material,

    "which relates to the affairs of a particular person whose interests would, in the opinion of the Treasury, be seriously prejudiced by publication of the material; or [where] the disclosure of which would be incompatible with an international obligation of the United Kingdom".

Amendment No. 92 makes it clear that the authority cannot be a person whose interests would be prejudiced by the publication of any material.

20 Mar 2000 : Column 99

Amendment No. 93 would require the Treasury to publish a statement if any material was removed from a report before publication, to the effect that,

    "material relating to a particular person has been removed",

from the report. I beg to move.

9.15 p.m.

Lord McIntosh of Haringey: The Treasury power to commission independent public interest inquiries into regulatory matters is an important new element of the accountability framework. For the first time it will ensure that there would be proper statutory backing for any future inquiries such as the Bingham Inquiry into the collapse of BCCI in 1991, or the inquiry by the Board of Banking Supervision into the failure of Barings in 1995.

This is a very important step. The Bingham Inquiry was an important inquiry and produced an authoritative report. But it was conducted in the absence of any formal power, for example, to call witnesses. It is inherently unsatisfactory that such a vital inquiry should have to rely on witnesses coming forward on a voluntary basis.

Clause 12 provides a new statutory power to set up an inquiry, and Clause 14 ensures that an inquiry can be conducted with the full range of powers to gather evidence of the High Court.

I will deal with each of the amendments in turn. Amendment No. 87 is the trigger for the inquiry. It deletes the word "serious" from the provision in Clause 12 to allow the Treasury to arrange a public inquiry where there has been a serious regulatory failure. It would widen the circumstances in which the Treasury could arrange an inquiry to merely where there has been a regulatory failure, however small. This would confuse the purpose of providing this new power with other mechanisms under the Bill.

We do not want inquiries of this kind to become a matter of routine. They can become very disruptive of the day-to-day working of the regulatory system and it would confuse the regulatory responsibility of the FSA if every other decision was liable to be the subject of a full-scale inquiry.

The complaints investigator is there to help call the FSA to account for failures or lapses which do not have serious implications. It is therefore right that the Bill should contain explicit provision stating that the purpose of the power is to look into serious regulatory failures.

There is nothing to be gained from removing the adjective; it would just cause unnecessary pressure to have a full independent inquiry into all sorts of regulatory decisions, which is what the Government are trying to avoid. The triggers have been deliberately set high because we do not want these inquiries to become commonplace.

Amendments Nos. 90 and 91 would have the effect that the Treasury would be required to publish the entire report of an inquiry, subject to the required excisions under Clause 15(3). We do not think it would

20 Mar 2000 : Column 100

be right to remove the discretion of the government of the day to take a view on whether publication of the whole report was in the public interest. Of course we want to see as much of the report published as possible, subject to considerations of fairness, our international obligations and the wider public interest.

It must be a decision for the government of the day. The report may well include sensitive material. Much of the Bingham report was not published. The previous government took the view that the public interest lay in publishing some but not all. People gave evidence to the Bingham inquiry in confidence, and publishing their evidence could have prejudiced future inquiries. We agree that that confidence should be respected.

It is right for the Government to exercise judgment on where the public interest lies, in the light of the particular circumstances, and to be answerable to Parliament for that decision. If we were to make publication of the whole report mandatory, it would be less likely that this valuable power would be exercised in the circumstances that warranted it; so the lessons of a serious regulatory failure might not be fully or adequately learned.

Amendment No. 92 would exclude the FSA from the protection against prejudice that is being given to other persons. Subsection (3), as currently drafted, restricts the discretion of the Treasury in that it expressly prevents publication of material that would be prejudicial to a particular person or which would be incompatible with an international obligation. This is an important restriction, given our desire to provide for fairness throughout this legislation.

It is not clear why we should make a special case for the FSA if there was material published which might prejudice the ability of the FSA, or members of its staff, to defend themselves against charges brought in connection with events in this report. We must remember that the purpose of inquiry is to learn the lessons of regulatory failure, not to facilitate other legal actions. In particular, we would always expect the FSA to co-operate fully with an inquiry, but it would be less likely if the FSA was not afforded the same protection as other witnesses.

Amendment No. 93 on disclosure of excisions would require the Treasury to make public material that is related to a particular person that has been removed by means of a statement. I understand the intention behind the amendment. In the interests of openness and transparency, we would expect to make it clear when parts of the report had been removed, but we cannot rule out circumstances where even this disclosure would be prejudicial or contrary to the wider public interest.

These inquiries are not intended to become commonplace. They are to enable lessons to be learned from serious regulatory failures. As much as possible should be made public, but it should not be at the expense of basic principles of fairness, our wider international obligations or the public interest. These judgments must be taken by the government of the

20 Mar 2000 : Column 101

day, as they were taken in relation to the Bingham report. I hope that noble Lords will not press the amendment.

Lord Boardman: I regret that the Minister does not feel able to accept the amendment. The damaging aspect of publishing only part of a report is that it creates an atmosphere of great suspicion about the parts that are concealed. Very often, an amendment of this kind will mean that those who are supposed to be protected will face even greater exposure.

I hope that the Minister will reflect again on that matter. People can be severely damaged by omission, far more than by a statement of the material facts.

Lord Kingsland : The most remarkable thing about the Minister's statement is that he succeeded in reading it out while maintaining a completely straight face. With the greatest possible respect to the Minister, his reply to the amendments is wholly inadequate. The noble Lord said that these inquiries were established and pursued in the public interest. Can it really be right that, at the end of this process, the Treasury can say that it is not in the public interest for a report produced in the public interest to be published? That seems to me to be "nonsense upon stilts", to quote a famous 19th century philosopher.

I also wholly endorse the remarks made by my noble friend Lord Boardman. It was not just that the Minister said that it was wholly proper for the Treasury to allow only the partial publication of a report; if I heard the noble Lord correctly, he also went on to say that the Treasury was not obliged to say that it was only permitting partial publication. In that case, what is published would appear to the general public to be the whole story. That simply cannot be right.

Moreover, your Lordships find that the authority is allowed to protect itself by not publishing certain passages in the report or not revealing the identity of certain of its employees, even though, in another part of the Bill, the Minister seeks total statutory immunity for the FSA and its employees. I hope that the noble Lord will forgive me if I find his answer wholly unsatisfactory. It is not a matter that I intend to press on behalf of the Opposition at the moment, but the noble Lord can be assured that we shall return to it on Report. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Next Section Back to Table of Contents Lords Hansard Home Page