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Lord Newby: My Lords, on these Benches we take account of the fact that the City institutions and stakeholders who have operated the system strongly support these regulations. Therefore, we are happy to support them. The Minister deserves at least one cheer for struggling through his speech with such a bad cold.

The Earl of Northesk: My Lords, I too thank the Minister for explaining these regulations to the House and for fleshing out some of the detail of the letter of the Economic Secretary.

CRESTco is a key component of the London financial market. Following the excellent debate initiated by the noble Lord, Lord Levene, yesterday, none of us can be unaware of the importance and significance of the City to the UK economy. Therefore, getting CRESTco and these regulations right is essential.

I am content to let the much greater expertise and knowledge of my noble friend Lord Hodgson serve as scrutiny of some of the wider issues of the measure before us. Indeed, I look forward to the answers from the Minister to the points raised by my noble friend. For my part, I recognise the accuracy of the observation that broadly the regulations are uncontroversial and have the confidence of the City of London. In those terms, we too support them.

Lord McIntosh of Haringey: My Lords, I am grateful to noble Lords for their welcome 2.6 per cent cheers. I shall deal with the points of the noble Lord, Lord Hodgson, in turn. First, it is paragraph 11 and not paragraph 12 which deals with Treasury functions. It is the intention that the Treasury functions should be delegated to the Financial Services Authority.

There is only one operator, CREST, at the moment. But we must and would consider applications from other organisations to add to or replace the CREST system—although in view of the history of that system

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and the enormous amounts of money that were expended on setting it up, I am not sure how attractive that would be. If the noble Lord is worried about the burden on the SFA, I can assure him that the burden of controlling one operator, or even two or three, compared with the many thousands of organisations which will be regulated by the SFA as from the end of this month—next week—is minimal. We do not foresee any particular problem.

Nor do we see any problem about the situation becoming too "cosy", as the noble Lord suggests. Again, the SFA regulates a large number of bodies and there have not been any accusations of the kind of relationship that worries him.

I do not see any problem with shareholder democracy. There is no difference between the proposed system and what happens now. The regulations do not alter the relationship between the shareholders and the company. They simply make it easier and safer to transfer shares.

There is no restriction—Howard Flight asked this question—on information to shareholders. Regulation 24(c) does not prevent someone from finding out if he or she is a shareholder. It is possible for other parties to inspect the regularly reconciled records of the operator register. In those circumstances, there is no threat to what the noble Lord calls "shareholder democracy".

The noble Lord, Lord Hodgson, told the House about the difference between the proposed UK system and the German or the European systems. He asked me whether we were aware of the challenge. Indeed, we are aware of it. We believe that these regulations strengthen us in our support—this is the answer to his second question—of the horizontal approach. We favour whatever approach the market finds best. The market favours the horizontal model. So the UK follows that rule. I can assure the noble Lord that we take this situation very seriously. We recognise its importance for the future of business in Europe.

On Question, Motion agreed to.

        House adjourned at twenty-four minutes past eight o'clock.

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