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Lord Lawson of Blaby: I am sure that the Minister performed a valuable service to the Committee in reminding it of the arrogance of the Chancellor of the Exchequer who was faced with a verdict, whether right or wrong, of the Treasury Select Committee as regards Mr Allsop. I do not propose to form a view, but the committee's view was that Mr Allsop was not fitted to be a member of the Monetary Policy Committee. The Chancellor then overrode it, just like that! He gave no reason, but said, "You're wrong and I'm right. He's going to be a member".
That makes a certain nonsense of the Bill's provision that the all-party Treasury Select Committee in the other place should interrogate and form a view. As the Minister said, as he piloted that Bill, he might have taken it a little more seriously. The situation poses a serious question about membership of the Monetary Policy Committee of the Bank of England. If the Treasury Select Committee can be treated in such a way, what is the point of having such a process?
Perhaps there is some point, particularly in the case of the regulatory body we are discussing today because it is an important body. It is not as important as the Monetary Policy Committee, but it is nevertheless of considerable importance. I seldom disagree with my noble friend Lord Peyton, but this is a matter on which he might reflect. Open hearings perform a useful democratic and public policy function, as suggested by my noble friend Lady Buscombe.
I turn to my final point. I had no intention of speaking, but the Minister provoked me when he justified the composition of the regulatory body by appealing to Cadbury and Hampel on corporate governance, saying that there should be executive and non-executive directors. Nothing could have been more absurd or ridiculous. Whether or not Cadbury and Hampel are precisely right, the point is that in business and industry the executive directors are the management and the non-executive directors are not. They exist in order to keep an eye on the management in the interests of the shareholders.
The situation is totally different in respect of a regulatory agency. Indeed, in many countries, particularly in Europe but also in other areas, such functions are considered so separate that they have two boards. They have a two-tier board system comprising a supervisory board and a board of management. This case is completely different because there are not those two functions. The regulators are performing an important function. I had a minor part in its genesis when we had to decide how to privatise the utilities and what was the appropriate form of regulation. We were in uncharted waters and we tried to put something in place. But the one thing that these people are not doing is managing the industry or the business.
It may well be that five is too small a number, but to say that there should be two categories--executive and non-executive directors--and to draw on Cadbury and Hampel and the model of corporate governance in order to justify that simply will not wash. I must say that during my years in this place I have seldom listened to a more threadbare argument than that put forward by the Minister today.
Lord McIntosh of Haringey: I wonder whether the noble Lord, Lord Lawson, was present during any of the debates on the Financial Services and Markets Bill. If he had been, he would have realised--the noble Lord, Lord Kingsland, will confirm that I am right--that the firm view of the Conservative Opposition was that the code of corporate governance, which arises from Cadbury and Hampel and other committees, should apply to the Financial Services Authority. That is despite the fact that the authority, like this gas and electricity markets authority, has no shareholders. That was the view of the Conservative Opposition, of innumerable speakers from the Conservative Benches with experience of City matters, of the Liberal Democrat Party and of a number of my noble friends. At the end of the day, we acceded to that view, which had not originally been our opinion, and introduced into the Financial Services and Markets Bill the provision that the authority and the Chancellor should have regard to the provisions of the code of corporate governance.
That was in exact contradiction to what the noble Lord, Lord Lawson, has just said. I should have welcomed his support on the matter when we debated it in Committee on the Financial Services and Markets Bill.
Lord Kingsland: For perfectly understandable reasons, time seems already to have bleached the Minister's memory. He is right in saying that the Opposition supported a role for non-executive directors in relation to the FSA. However, the circumstances were different. First, the FSA was not, as the Minister was then at great pains to say, a classic regulatory authority. It was, by contrast, established in the form of a private company. It was partly for that reason that the Opposition felt it appropriate to have non-executive directors on the board--in exactly the same way as they would be on the board of a private company.
However, there is a second and even more important reason why the Opposition felt that in that case non-executive directors were appropriate. It was that, unlike in this Bill, the FSA was given delegated legislative powers; but it was not answerable to your Lordships' House for the exercise of those powers. In those circumstances, it was right to introduce an extra check that is not necessary in this Bill; that was the check of non-executive directors. In answering the points which were made from these Benches in the course of the Financial Services Bill, the Minister was at great pains to say that the non-executive directors would always be in a majority, precisely to fulfil that supervisory role.
Lord McIntosh of Haringey: I suppose it is my fault for raising the Financial Services and Markets Bill, but the contrast between what the noble Lord, Lord Lawson, said and what his colleague said earlier was so great that I could not resist.
Perhaps I may return to the issue of the Trade and Industry Select Committee, which the noble Lord mentioned. He referred to the arrogance of the Chancellor of the Exchequer in rejecting the view of the Treasury Select Committee on the appointment of Mr Allsop. In present company, I cannot believe that any Chancellor of the Exchequer, past or present, would ever be arrogant.
Leaving that to one side, I am afraid that his recollection of the Bank of England Act is not entirely accurate. That Act does not say that there should be confirmatory hearings; it does not say that there should be consultation before an appointment is made; and it does not even say that the Treasury Select Committee should interview the candidates for appointment as members of the Monetary Policy Committee.
We have always taken the view--most recently we took this view in the consideration of the Financial Services and Markets Bill--that it is not for the Government to say what Select Committees in another place do. It is for them to set their agendas; it is for
Baroness Buscombe: I thank the Minister for his response to our amendments. With reference to the interesting debate on executive directors versus non-executive directors, if the mix is felt to be so important, why is that not referred to on the face of the Bill?
Turning to what my noble friend Lord Peyton of Yeovil said, I reconfirm our wish to see the appointments of the members of the authority scrutinised by the Trade and Industry Select Committee because we, on these Benches, believe in strengthening the powers of Parliament over the executive and that would be a good way of contributing to that aim. We have thought this matter through carefully and we are pleased that the Minister, in his response, has agreed with us, in principle, on this matter--
Lord McIntosh of Haringey: I was expressing a view, not about the provisions of this Bill, but as someone interested in public policy, that perhaps at some time in the future--if, for example, I can persuade my party to put the matter into a manifesto--it may be desirable for there to be confirmatory hearings. That has enormous implications for the relationship between the executive and the legislature, which are way outside the scope of this Bill. I, personally, and the Government, collectively, are behind the scope and the provisions of this Bill as drafted.
With regard to Amendment No. 6 and Treasury approval, the Minister stated that that used to be standard practice. We believe that it should be so again, given the degree of responsibility resting with the members of the authority in terms of cost implications.