Examination of Witness (Questions 80-99)|
TUESDAY 5 FEBRUARY 2002
80. In Parliament, we are used to a somewhat
adversarial approach to public affairs. I think it would be fair
to say that we always feel a little uneasy about what can be described
as cosy relationships where groups of people who know each other
well advise each other, have private chats and so forth. On the
other hand, we do not necessarily want to turn every discussion
into a boxing ring. Where do you feel the right balance here is
between preserving public confidence and challenging without creating
(Mr Brown) I share with you the worry that if things
are too cosy things could go wrong. I imagine that those members
of the FSA staff who do come before the Panel would not describe
our relationship with them as particularly cosy. The Panel has
people on it from a number of different walks of life and their
style in discussing matters with the FSA is often quite robust
and is certainly intellectually challenging for them. The Panel
never hesitates in its business with the FSA to go direct to the
point and I think it is not at present a cosy relationship. Furthermore,
as you will have seen, the statements we have made in public have
often been quite critical of the FSA. We have avoided reaching
a cosy accommodation with the FSA.
81. Could you tell us something as well about
the selection process for members of the Panel? How are the members
chosen and how were you chosen as the chair?
(Mr Brown) There is an advertising process in the
national and regional press for panel members and for the chair.
On the last round of appointments, there were then interviews
for those people who are short listed. Those interviews are carried
out by a mixture of the Panel chair, FSA staff and FSA non-executives
and people who are entirely independent of the FSA.
82. How many people interviewed you, for example?
(Mr Brown) I was interviewed by a non-executive director
of the FSA, someone entirely independent, and by a senior staff
member of the FSA.
83. You replied to one of the adverts in a newspaper?
(Mr Brown) I did, yes.
84. How did you emerge as vice-chair and then
(Mr Brown) I initially replied to an advertisement
to become a panel member. In its first year, the Panel selected
its own vice-chair by consent and that was me. In the next round
of appointments to the Panel I applied to become chair of the
Panel and was appointed. The final part of the appointment process
is that the recommendations are approved by the board and the
chair is then approved by the Treasury.
85. Was there a competition for that or were
you the only candidate to go forward?
(Mr Brown) There was competition.
86. Who carries out the staff work that has
to be done for the Panel and panel members to support all of the
work you have to do? You have mentioned there is quite a bit of
(Mr Brown) We have a small secretariat, four members
of staff of the FSA. They are a dedicated secretariat. Although
they are FSA employees, their job is only with the Panel.
87. Do they stay with the Panel for ever or
will they go back into the FSA at some stage?
(Mr Brown) They are FSA employees so they are free
to apply for the jobs at the FSA and free to leave the FSA, so
I imagine what will happen in time is that they will move on.
People like working for the Panel.
88. How long are their contracts for with you?
(Mr Brown) I do not think the contracts have an end
date, but I might be wrong about that. I can check that and let
the Committee know.
89. Are you not worried, following Dr Palmer's
point earlier in terms of the independence and noisiness of the
Panel, that there is a danger of a regulatory or panel capsule,
because there is a very big FSA input into appointing you all
and there are FSA staff who are presumably doing a lot of your
work who, if they are ambitious, may well be intending to go back
to work for the FSA and want to get promoted and so forth. If
they are unhappy when they are working for the Panel with some
aspects of what the FSA is doing, it may be quite difficult for
them to make a lot of noise.
(Mr Brown) Yes. In theory, that is something that
we worry about. In practice, it seems to work the other way around.
Firstly, those people who are appointed onto the Panel seem to
be very vigorous in their defence of consumer interests and quite
happy to challenge the FSA. Staff members who work for us seem
sometimes as vigorous as the Panel members and sometimes more.
I do not observe, from my position as chair, that the staff are
in any way attempting to cool down the Panel's critical views
on the FSA. It is something we need to keep a very close eye on
and I think that is one reason why I said I welcome the scrutiny
of this Committee. Ultimately, as the Practitioner Panel has,
we do not have a coherent, articulate constituency breathing over
our shoulders. If we were to go wrong, it would be here that it
would show up.
90. Is there not a conflict of interest? Would
you expect the Treasury Committee as a group to be a bit nervous
if all of our staff advising us and suggesting questions to put
to people to put them on the spot were employees of the Chancellor
and the Permanent Secretary and nipped back, say, in a couple
of years' time?
(Mr Brown) Perhaps I could expand a little on the
role of the secretariat. They do not really do that. They do not
tell us what questions to ask. The Panel is very active. They
meet together at least twice a month. The Panel tends to look
after its policy itself. We do not look to the secretariat for
much of a steer with regard to our interrogation of the FSA.
91. It is quite an influential role, is it not,
if they are doing the work and presenting things for you?
(Mr Brown) Yes.
92. Do you think that either of these aspects
of your present set-up, the heavy role that the FSA plays in selecting
you and staffing the body, might be looked at in the future in
order to strengthen the independence or perceived independence
of the Panel?
(Mr Brown) These things need to be looked at all the
time. It is not all loss here. Having a secretariat within the
FSA is enormously useful to the Panel in terms of information
flow. I am absolutely certain that, were we placed outside the
FSA with a completely independent secretariat, our work on behalf
of consumers would be the worse for it.
93. What is the budget for 2001?
(Mr Brown) The budget for the current year that we
are still in is set at around £590,000 including the staffing.
94. You are confident that it would not be in
the public interest to contract that work out to some other organisation,
completely separate, that would have perhaps less access to information
but would be more noisy potentially and more vociferous in pursuing
consumer interests, more likely to get into the press by embarrassing
the FSA over some of its policies?
(Mr Brown) I am not sure it follows that it would
be more able to get into the press because many of the tough positions
that the Panel is able to adopt come from being confident about
the very complex issues that the Panel deals with. That rests
very squarely on having a good information flow from the FSA.
Were we placed outside, there would be a degree of nervousness
on the part of panel members because they felt they were not quite
up to speed on some of the issues. Financial services are not
quite like other consumer issues. There is a critical mass of
knowledge and information that is required to intervene without
95. Looking at the issues that the Baird Report
covered, what was the flow of information like to the Panel over
those particular issues?
(Mr Brown) When the Baird Inquiry was
96. I mean the events that took place from the
setting up of your panel in December 1998 right through to the
report itself which looked back on that period of time.
(Mr Brown) The Panel received briefings from the Insurance
Directorate on the problems with Equitable Life once the House
of Lords judgment had taken place, when the Panel became very
interested in the issue.
97. When was that?
(Mr Brown) I cannot remember precisely when that very
first briefing was. As the crisis became the legal crisis that
it was, the Insurance Directorate came to the Panel to brief us
98. Were you aware of it from the beginning
of the Consumer Panel in December 1998?
(Mr Brown) In the same way that you were. We knew
about the crisis. We were not given close briefings about the
99. Were you given any of the briefings that
the new heads of the FSA were given, for example, from the people
at the Treasury and other departments that were involved in this?
You recall in Baird that there was a discussion about the briefing
given to Howard Davies which highlighted Equitable Life as the
one specific, major problem and considered even the possibility
of closing it to new business. Were you aware that that was being
considered at that time?
(Mr Brown) We had no briefings about that at that
5 Note by Witness: All staff on the Secretariat
continue to be employees of the FSA while they are working for
the Panel. They do not have contracts with the Panel itself so
there is no end-date as such. Back
Note by Witness: The Panel received its first substantive
briefing on the Equitable Life situation in October 2000. Back