Skip to main content

The City (Regulatory Framework)

Volume 84: debated on Wednesday 23 October 1985

The text on this page has been created from Hansard archive content, it may contain typographical errors.


asked the Secretary of State for Trade and Industry what progress has so far been made in establishing the regulatory framework for the City.

Good progress is being made. The preparation of legislation based on the financial services White Paper is well advanced. In the City, arrangements for setting up the new regulatory structure are in hand under the direction of the Securities and Investments Board and the Marketing of Investments Board Organising Committee.

Does my right hon. and learned Friend agree that, on reflection, and following the debates in the House before the recess, it might be better to have one overall body to regulate the City, rather than two bodies as originally proposed, but subject to reconsideration?

I know that a strong body of opinion feels that way. We are awaiting the views of the SIB and MIBOC as to whether there should be one board or two. If a single board is recommended, I shall have absolutely no objection to that.

Will the Home Secretary—or rather the ex-Home Secretary, complete with his new job and new hairpiece—[Interruption.] I think that it is very fancy. Will the right hon. and learned Gentleman lake appropriate steps to ensure that there is a proper inquiry into the Lloyd's fiasco? Will he also acknowledge that a major body blow to the City and to the taxpayer has been the loss by the Export Credits Guarantee Department of £400 million in the last financial year, resulting in a £350 million bail-out from the Consolidated Fund? Will he also make inquiries in Nigeria to see where the fraudulent practices took place that resulted in a substantial loss to the taxpayer and take appropriate steps, with the Attorney-General, to see that those involved are brought to book?

The only part of the hon. Gentleman's supplementary that has anything to do with the main question is that related to Lloyd's. Disciplinary proceedings by Lloyd's have been taking place. In addition, the Director of Public Prosecutions is considering a number of matters relating to some of the affairs concerning Lloyd's that have achieved wide publicity. I believe that that process should be allowed to continue.

Is my right hon. and learned Friend aware that if the new proposals for large conglomerates in the City and the merger between jobbers and brokers go ahead there will have to be careful consideration of the whole law of agency to avoid the conflict of interest that may be expected? Will he examine that very carefully in the forthcoming Session?

I shall certainly look very carefully at the point made by my hon. Friend. We shall wish to consider the impact on the law of agency of any changes in the City. In saying that, however, I do not wish to give the impression that we have reached any conclusions whatever on the subject.

Does the right hon. and learned Gentleman accept that his plans for regulating the City would carry more credibility if he were prepared to take seriously the abuses and irregularities that have come to light in respect of the British Telecom flotation? While some of the cases have rightly been referred to the Director of Public Prosecutions, does he agree that with further privatisations pending it is essential that a full departmental inquiry should take place into what went wrong with the BT flotation so that we can all know the extent to which killings were made at the expense of the taxpayer and in defiance of the Government's own rules?

I do not believe that such investigation is called for. I believe that the inquiries now being made, to which the hon. Gentleman rightly referred, are the appropriate ones and that that is the right way to proceed in this matter.

To pursue the answer given by my right hon. and learned Friend to the supplementary question of my hon. Friend the Member for Surrey, North-West (Mr. Grylls), would it not be most remarkable if either the SIB or the MIBOC were to recommend its own abolition? I support my hon. Friend and urge my right hon. and learned Friend to give serious consideration to the representations that have been made from both sides of the House during the many debates that have taken place on this issue. We must have legislation that provides for one stratified authoritative body to have control of the regulation of the City.

I assure my hon. Friend that I shall give most serious consideration to the issue that he has raised. He is right to say that he is by no means the only person raising it.

In view of the revelations of pending prosecution of representatives of the Bank of England and the attention that is being directed to its own regulatory role, when matters have been cleared up will the Secretary of State make a statement to the House on the future of the Bank's regulatory role in respect of the commodity markets?

The hon. Gentleman must have said inadvertently what he did not intend to say. Certain matters are being investigated, and until the investigations are completed it would be quite wrong to jump to the conclusion to which the hon. Gentleman has jumped.