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Lord Boardman: I support the amendment. It is important that the authority runs smoothly. Instead of imposing changes to the rules or guidelines which could lead to complaints, before the rules or the guidelines are altered there should be consultation with the practitioner panel and the consumer panel. I believe, in the interests of the smooth running of the whole operation, that it is right to accept this amendment.
Lord Elton: In the exchanges in relation to the previous amendment I was told to withhold any further interventions until we came to the more relevant amendment, which I take to be this one. I see from the noble Lord that it is.
We return to the matter of the actual weight and manner of the operation of the panel. The practitioners will be a major issue. When we suggested that the consultation as proposed might not be sufficiently wide, we were told that it was not the only route for consultation because of the requirement on the authority in Clause 7. When we said that they may be tempted to act as representatives as they were so described in the statute, we were told that that would be against the interests of existing trade associations. It becomes increasingly difficult. I remember the noble Lord saying that the BBA itself would object. If that is not resistance from what I venture to call a trade association, it is difficult to know what is.
We remain uncertain as to what the relationship is to be between the panel and the authority, except that the panel will be appointed by the authority with the single limitation that the chairman thereof shall be appointed only with the agreement of the Treasury. My noble friend rightly asked what weight will be given to its recommendations. To my mind, Amendment No. 75A, in the name of my noble friend Lord Kingsland, is the nub of the matter. The authority will be required to explain the reasons if it should reject the advice of the panel. In the light of what the noble Lord, Lord Peston--now sadly absent--suggested may be the manner in which the panel conducts itself and the fact that, from time to time, it may be called upon to give detailed advice on small issues, I would have thought that the amendment of my noble friend should read:
- "The Authority shall give reasons in circumstances where it intends to proceed against the Consumer Panel's formal advice",
Lord Newby: I wish to speak in support of our Amendment No. 279, the last amendment to be included on this Marshalled List, and to other amendments in this group. Our amendment deals with one particular form of rule-making on which we believe that the practitioner panel and consumer panel should be consulted and whose comments should be taken formally into account before the authority can move on to the next stage of the promulgation of those rules. We are concentrating specifically on orders here, and we argue that any orders made under the Act must be referred to the practitioner panel and consumer panel for their comments.
However, the same principle applies equally to the less formal layers of guidance to be issued by the FSA; namely, the rules, codes, general guidance, statements, schemes and other matters referred to in the amendment tabled in the names of the noble Lords, Lord Kingsland and Lord Saatchi. I agree with the principle that these two panels, having been established, should in every case where the FSA is about to issue guidance in any form--whether statutory or non-statutory--should be consulted and asked formally to submit their comments. Furthermore, in cases where the FSA proposes not to agree with their comments, the FSA should give its reasons, as proposed in Amendment No. 75A.
One area where I have a little difficulty with the amendments in the names of the noble Lords, Lord Kingsland and Lord Saatchi, is the two-stage process that they have in mind. They propose that, at the point at which the FSA has a draft with which it is satisfied, it should go to the panels. The panels will give their
comments which the FSA will consider. The FSA would then publish the draft for more general comments. It seems to me that that intermediate stage could produce delays which would be particularly unfortunate during the early life of the FSA when it will be producing so much guidance and will have a great deal of work to do. Our general view on that point is that the panels should see the draft guidance at the same time as everyone else, but unlike everyone else, they should be specifically expected to comment on it and the FSA should be formally expected to respond to those comments.The principle that lies behind all the amendments in this group is that, having set up the panels, it is of crucial importance that they have a clear view of what is expected of them and, equally, that the FSA has a clear view of its responsibilities in respect of them; namely, that any formal comments required by the authority on rules, guidance and so forth made by the panels should subsequently be promulgated.
Lord Burns: I intervene briefly to speak in support of Amendment No. 74A, which proposes that the authority should give reasons where it disagrees with the practitioner panel or the consumer panel. That follows a recommendation made by the Joint Committee.
When we were taking evidence, I was impressed by how often we heard witnesses state that one of the most frustrating aspects of any form of consultation on a proposal is when the Government do not give a clear answer and an explanation of why they disagree with that proposal. Often, consultation can appear to be a one-way street. Many arguments are put forward, but in the end those arguments are met with silence. Many witnesses found the functions of the Joint Committee helpful because they provided circumstances in which the Government were forced to give reasons why they disagreed with certain advice and proposals.
We thought it was important to provide a mechanism whereby pressure is put on the Government to give reasons. Indeed, part of my frustration at the Government's responses to some of our recommendations was the absence of clear reasons. In the longer term, I support the proposal to introduce mechanisms to ensure that the FSA--not all the blame can be laid on the Government here--must respond with reasons where there are disagreements.
6.15 p.m.
Lord Kingsland: I am particularly pleased to speak in support of my two amendments in the light of what the noble Lord, Lord Burns, has said about them.
I should like to reflect on one or two points in Amendments Nos. 74A and 75A. First, these amendments are even-handed; they refer not only to the practitioner panel, but also to the consumer panel. They have a balanced approach to consultation.
Secondly, the Minister will recall that, in the early stages of the first day of our debate in Committee, it became clear that the powers the FSA is to exercise through these codes and rules are legislative powers.
The authority's ability to use legislative powers is confined to financial regulators in this country; they are the only authorities outside Parliament which can act in a legislative manner. In the case of these codes, Parliament will not be consulted on them. For that reason, the responsibilities on the FSA in this area are boundless.I acknowledge what has been said by the noble Lord, Lord Faulkner, on Clause 146. It is true that the clause states that the FSA will be required to give notice of what it is going to do and to have regard to representations. However, as a number of noble Lords have already indicated, receiving representations is not the same as having the right to comment on them and the right to have those comments made public where they disagree with a draft code.
Two years ago when the Access to Justice Bill, now an Act, was going through your Lordships' House, a similar issue arose in relation to the code-making powers of the new legal services authority and the requirement for it to consult. That is reflected in the relationship it now has with the respective consumer consultee. At the time, the noble and learned Lord the Lord Chancellor was perfectly content to provide for the publication of any disagreements between the legal services authority and the consumer panel. Indeed, I recall that he said something along the lines of, "We are the Government who believe in transparency". If a disagreement arises during consultation with a body set up under statute then it is only right, in the interests of transparency, that that disagreement should be made public.
It is in that spirit that these amendments have been drafted. I look forward with great interest to hearing the comments of the Minister.
Lord McIntosh of Haringey: I am glad to have an opportunity to respond to the amendments in this grouping and to clarify the Government's view of how the arrangements for consultation will work, in particular as regards the panels to be established under Clauses 8 and 9.
Perhaps I may first explain the background to the whole of the consultation process. As my noble friend Lord Faulkner pointed out, the Bill contains a number of specific obligations to consult. The obligation under Clause 7 is a general duty that ties to the general duties of the authority under Clause 2(4). Other obligations to consult are set out in the context of specific legislative provisions, for example, on rules under the arrangements set out in Clause 146 or on statements of principle and codes of practice for approved persons issued under Clause 63.
Perhaps I may remind Members of the Committee of what is stated in Clause 146. If rules are to be made, a draft must be produced and, under subsection (2),
- "notice that representations about the proposals may be made to the Authority within a specified time".
- "Before making the proposed rules, the Authority must have regard to any representations made to it in accordance with subsection (2)(d)".
- "If the Authority makes the proposed rules, it must publish an account, in general terms, of--
- (a) the representations made to it in accordance with subsection (2)(d); and
- (b) its response to them".
I shall return shortly to certain points on the wording, such as "in general terms", but I believe that it cannot be said that there is no provision for consultation, for the publication of the content of that consultation or of the responses to that consultation. We regard these obligations as significant. They are part of the accountability packet that will ensure that the authority exercises its powers appropriately. It is for that reason that we brought forward these amendments to reinforce and standardise the specific consultation arrangements under the various legislative proposals.
Let me say specifically that the feedback requirements of Clause 146(5) which I have just read out were brought into the Bill after Mr Challen, the chairman of the Practitioner Forum, made his observations to the Joint Committee which have been quoted in debate this afternoon.
The obligation under Clause 7 plugs a number of gaps. It requires the authority to maintain effective arrangements for consulting consumers and practitioners on the extent to which its policies and practices are consistent with its general duties. There is no need to make it cover other matters such as rule-making; they are already covered in the provisions I have been quoting. So the amendment proposed by the noble Lord, Lord Saatchi, introduces unnecessary and undesirable duplication into Clause 7.
Clauses 8 and 9 supplement the general proposition about maintaining appropriate arrangements for consultation with practitioners and consumers by imposing an obligation on the authority as part of its arrangements under Clause 7 to establish and maintain a panel of practitioners and consumers. The panel has already been established. It is operating and making its voice felt, as we heard.
It is important to get clear that the panel is there to advise the authority, whether pro-actively or responsibly, on matters of concern to the members of the panels and the constituencies they represent. It is in a unique position because of its proximity to the authority. It will have easier access to directors and senior staff and external bodies. But we must not lose sight of its purpose or status. We are not creating competition to the existing trade associations. The role of the panels will be quite distinct. Of course, we are not saying that they should be subservient to the interests of the authorities. They are there to be independent and challenging, and that is what is happening.
I turn to the specific amendments. The Government are not unsympathetic about the points made in relation to Amendments Nos. 71, 74 and 77. We expect the panel to be consulted on proposals for rules. The relevant provisions I have been reading out require
consultation and bring the panels squarely within the scope of the consultation arrangements. The point that is more difficult is the requirement on the authority to consult the panels before issuing proposals for wider public consultation. The Bill does not say, "We cannot do that", and should not say that.Where rules are being made in response to specific anxieties made known in reports by one or other of the panels, one may well feel that the authority would speak to the relevant panels as a matter of course to ensure that their views have been fully understood. All of that can be read into Clause 146. However, to make it a statutory obligation would be quite excessive. The current practice is to allow the public three months to respond. I understand it is not uncommon for the authority, before issuing proposals, to take the panel's views on the broad policy issues. But to delay rule-making in order to give the panels an opportunity to comment prior to consultation would make the whole process slow and bureaucratic.
Clearly the panels may not need very long to give their responses. That point was made from the Liberal Democrat Benches. However, I am not sure we could always assume that that would be the case. But even if they did respond quickly, the authority would need to prepare papers for the panels to consider their responses. Perhaps there is comfort to be drawn from the fact that the panels would be aware of the consultation timetable in advance and may be able to give a public response to the authority in advance of the end of the consultation period for the benefit of others who are being consulted. They could also, in a purely pro-active way, be well-placed to consider issues that they know to be current and make recommendations during the policy-formulation process that will inform the rule drafting.
I turn to Amendments Nos. 74A and 75A. The Bill already requires the authority to make a statement in general terms in relation to representations made to it during consultation. The relevant provisions which I have read out apply to representations whether they are made by the panels, representative bodies, individual practitioners or consumers. The same is true of Clause 63 when we come to codes.
The reason for qualifying the coverage of the feedback statement in general terms is to ensure that the authority is not unduly burdened in having to respond to umpteen specific but related points, rather than explaining the crux of the points that have been made and giving a general answer. It may also be the case that in some situations the authority will need to generalise its report in order to protect the identity of a firm or consumer who had raised a valid point in confidence. Any suggestion that the authority can ignore representations from the panels is nonsense. It is expressly required to have regard to representations made to it by provisions such as Clause 146(4) and those provisions feature in the consultation provisions for all the authority's legislative powers under the Bill.
The panels have an advantage in that they will have facilities to publish their responses. I cannot see how the authority can fail to address serious issues which
are raised with it in public when it issues its feedback statement. I entirely appreciate what was said by the noble Lord, Lord Burns, in relation to the frustration which he described when government stay shtumm and do not respond to representations made to them. I suspect that he may have seen some of that from the other side from his time in the Treasury. I hope he will accept that the wording of the Bill as it now stands in practice makes that impossible.
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