My Lords, I beg leave to ask the Question standing in my name on the Order Paper. I declare an interest in a winter fuel payment.

The Question was as follows:

To ask Her Majesty's Government when they expect that all those entitled to winter fuel payments will have received them.

My Lords, perhaps I may discourage the rest of your Lordships from making similar declarations of interest. 'This winter (1999–2000) for the first time all winter fuel payments were made before Christmas. We plan that that should happen again next 'winter.

My Lords, I am grateful to the noble Baroness for that Answer. Is it not the case that although the Government have made winter fuel payments to a number of people who are not on low incomes, by the end of the winter they will not have made similar payments to a number of men aged between 60 and 65 who may well be on low incomes? First, did no one in the department realise that the European Court was likely to make a ruling which would result in men aged between 60 and 65 being entitled to payments? If so, why were no contingency plans made? Secondly, the Government make winter fuel payments without a means test but last Session used their majority in the Commons to force through a major long-term contributory benefit for disabled people on a means-tested basis. On what principle do the Government now decide whether a particular benefit should be means tested?

My Lords, immediately the European Court gave its judgment the Secretary of State announced that the Government would respond to it in the spirit in which the Court intended. As the noble Lord will be aware, the original proposal was that winter fuel payments were to be awarded to pensioners over the age of 65 in the case of men and over the age of 60 in the case of women. The judgment in Taylor insists that men should get the payments on the same terms as women. It is worth emphasising that by 2020 women's retirement age will match that of men. Therefore, at that stage men and women alike will receive winter fuel payments at age 65, on the presumption that they still exist. The matter is complicated. Well over 50 per cent of the new recipients are in work, and as a result we do not have easy access to their records. The details of the delivery arrangements, including the claims process, will be announced shortly. We plan that both back-dated payments and payments to the newly eligible should be made by Christmas.

asked Her Majesty's Government:

What machinery has been established by the Organisation for Security and Co-operation in Europe to assess its experience in reconstructing civil society in Kosovo, and to reform and reduce the bureaucratic delays that have damaged its effectiveness.

My Lords, the mission of the Organisation for Security and Co-operation in Europe in Kosovo is doing a vital job under difficult circumstances as part of the United Nations-led international effort to lay the foundations for democratic stability. Management of the mission is primarily the responsibility of its head, who provides weekly reports to member states and regularly reports in person to the Permanent Council of the Organisation. However, participating states routinely feed in comments and advice gathered in particular from their offices in Pristina and from senior officials who visit the mission to review its work and operations. The combined effort has helped to ensure that the mission continues to make a vital contribution to the efforts of the international community in Kosovo, particularly in the area of human rights, preparing for elections, police training and establishing an effective judicial system.

My Lords, the Minister has my sympathy for what is an extraordinarily difficult operation. Does the noble Baroness accept that the relative slowness of the establishment of the civilian mission meant that the PBTK, the political wing of the KLA, was able to establish itself in a great many parts of the local administration in Kosovo? First, can the Minister inform the House whether the lessons learnt at the Istanbul Summit about the need for rapid reaction forces in the civilian as well as military spheres is being taken on board? Secondly, will the OSCE now work more closely with local NGOs, local women's groups and others so that the people of Kosovo feel that they themselves own the process of democratisation and that it has not been largely brought in from outside?

My Lords, I reassure the noble Baroness that, the Istanbul Summit having agreed with the OSCE that a civilian rapid response mechanism known as Rapid Expert Assistance and Co-operation Teams should be developed, the point has been taken on board. Those teams will be operational by 1st July and will link an operations centre in Vienna with matched national databases.

The noble Baroness is right to say that the OSCE has faced a huge challenge in the work that it has undertaken. The systems in place have had to be modified as time has gone on to try to meet the changes in the situation. The matter has been taken very seriously to try to ensure that the process is as smooth and seamless as possible, but we are challenged and those challenges are being met.

My Lords, does my noble friend agree that it is unfortunate, to say the least, that this situation has occurred? Does it not strengthen the developing view that the entire NATO operation against Serbia was a mistake?

My Lords, it does not. Kosovo creates huge difficulties for all of us. I do not need to remind noble Lords that for 10 years Kosovar Albanians lived in fear under the menace of Serb repression. They lost their jobs, institutions and, in many cases, their lives. In 1998 and 1999 innocent civilians were subject to systematic violence reminiscent of Europe in the 1940s. The international community had a choice: to intervene or turn away. Both were difficult; either would have led to controversy or criticism; and neither would have avoided further violence. There was no simple solution which we chose to overlook. Notwithstanding the challenges that Kosovo made us all face, we could not but have done what we did. Otherwise all of us would have been covered with shame.

My Lords, does the Minister agree that effective policing is an important part of civil society? Has the UN contributed only 2,000 of the promised 6,000 policemen? Do many of them speak neither the local language nor English? Since it will take time to train local policemen, what is being done to fill that gap?

My Lords, we have responded to the request regarding provision of police officers. Another 60 police officers are likely to go from the MoD. Twenty police officers will be helping. Your Lordships will know that 40 are already training. Training of the police service is essential. We are putting a huge amount of energy into ensuring that we make an effective and proper contribution.

My Lords, the Minister says that we had a choice of turning away or intervening. That is accepted by, I think, all noble Lords. The next question is: how do we do that? Does the noble Baroness agree with the implication of the question asked by the noble Lord, Lord Jenkins, that what we did might have been done rather better?

My Lords, I cannot agree with that. Noble Lords in this House will know how keenly all the issues were considered during the period. The reaction and response undertaken by Her Majesty's Government, together with our partners, were cogent and sound. We did that which was necessary to meet the needs of the circumstances as they then appeared. It is too easy to forget that what we did was in fact successful. Milosevic did withdraw.

My Lords, is the Minister aware that not everyone will agree with her version of the history of intervention in Kosovo. However, is not the problem at present that the KLA is determined that it will have an independent Kosovo, possibly attached to Albania as a single country? Because of that, it is increasing the violence against its Serb neighbours in the hope that NATO will once again come to its rescue and fight the Serbs to ensure that the KLA achieves its objective—an independent Kosovo?

My Lords, I hear what the noble Lord says. But we have done everything within our power to make it plain that we do not agree with that. KFOR, including General Jackson, is satisfied that demilitarisation was genuine and effective. KFOR continues to seize illegal weapons when it finds them. The Kosovo protection corps is there to support UNMIK and specified humanitarian tasks. We are facing that issue squarely.

My Lords, in the week of the anniversary of the start of NATO's campaign against Serbia there is worsening violence in the northern state of Mitrovica, where KFOR troops are targets. There is a law and order vacuum. There are not enough police, as noble Lords made clear today. There is no justice system to speak of. Organised crime is increasing. The UN Secretary-General has pleaded with the international community to provide funds and resources. Can the Minister say when this Government—they rightly prided themselves on taking a lead in winning the war—intend to take a lead in winning the peace in Kosovo before it is lost?

My Lords, we have already taken that lead. We are working very energetically with our partners to ensure that we do not, as the noble Lord said, lose the peace. In most of Kosovo the security situation has improved since last year. Mitrovica is a particular problem but the population movements have polarised that city—largely the Serb north and Albanian south. Tensions are being exploited by extremists on both sides. The goal of UNMIK and KFOR is an undivided Mitrovica in an undivided Kosovo; and the first step is enhanced security. We are doing much to ensure that that takes place.

My Lords, I admire the contribution Her Majesty's Government are making to the police force. However—it is possible I did not hear well—I felt that the Minister failed to answer whether Her Majesty's Government were satisfied with the total response of the United Nations.

My Lords, we are satisfied that we are taking all the steps necessary to meet our commitments. We are encouraging all our partners to do likewise.

asked Her Majesty's Government:

My Lords, the Government's policy on reprocessing and on the export of Mox remains unchanged. The Health and Safety Executive's report published on 18th February identified serious failures in BNFL's management of safety at Sellafield. Nevertheless, HSE confirms that the site is currently operating safely. BNFL needs to take action urgently to restore confidence and a good start has been made with the appointment of Norman Askew as the new Chief Executive.

My Lords, I thank the Minister for that Answer. Is now the time for a complete re-think of our nuclear waste strategy? Does the noble Lord agree that the Thorp plant at Sellafield, which reprocesses nuclear waste primarily for Japan and Germany, has proved to be a massive white elephant? Does he also agree that if the Government give full approval for the mixed oxide fuel plant at Sellafield, this will compound the previous government's error over Thorp?

My Lords, this is not the time for a complete reappraisal. We have a serious failure of management, not a failure in the policy or design of the processing plants. Far from being white elephants, they have huge contracts stretching into the future which are of enormous value.

My Lords, does not the Minister believe that the best way to solve BNFL's management problems is to privatise it and that the Government should not be put off from doing so by the problems with Germany and Japan?

My Lords, no. Clearly, this is a setback for the company and has implications for its performance and readiness for the introduction of a PPP. We shall continue to work on that, but it is dependent on proper safety and regulations.

My Lords, can the Minister give the up-to-date position on the Japanese contracts?

My Lords, discussions are taking place with the Japanese about the fuel at Takahama and all the options are being examined as regards progress.

My Lords, is my noble friend aware that the falsification of documents, particularly in a dangerous nuclear plant, is very serious and that the people who perpetrated such action ought to be prosecuted? Are they going to be prosecuted?

Secondly, is the Minister aware that for a long time fears have been raised about the plant not only members of this Government, but by members of the Irish Government, too?

Thirdly, will the Minister confirm that the Nuclear Installations Inspectorate has always had a permanent presence at Sellafield? Why was it unable to pick up the bad running which, in the light of what has happened, was always evident?

My Lords, I hope I made it clear at the beginning that we believe there to have been serious management failures. That is why we have a new chief executive and why five members of the staff have been dismissed. The Nuclear Installations Inspectorate picked up the failures and reported on them and steps have been taken to correct them.

My Lords, before the Minister can answer some of these questions, is it not necessary to know for what purpose the security procedures were falsified, how it was possible to do that and what steps will be taken to ensure that it never happens again? When shall we be told that?

My Lords, it is clear from the reports that the records were falsified simply because the workers in the area did not want to do the work; it was easier to produce false documentation. That is why the breach of management procedures was outrageous and why serious action has rightly been taken.

My Lords, is this not another reason why the Government should return to their emphasis on the coal industry? Is my noble friend aware that this country has millions of tonnes of unmined coal and that we are producing it more cheaply than any other country? Is that not another good reason?

My Lords, we are talking about a reprocessing plant rather than about the nuclear power stations. Again, I reiterate that we should not confuse a failure of management with the need to revise our energy policy.

My Lords, do not the events show that reprocessing breeds a climate of deception and is likely to do so in future? Therefore, should we not abandon the whole proposition of reprocessing?

My Lords, there is nothing to suggest that there was any disaffection in relation to the matter. As I said, it was a failure of both management and workers and it can happen in other plants and factories—and it does from time to time. It is important to correct the situation and regain the confidence of the public and the customers as soon as possible.

asked Her Majesty's Government:

My Lords, the Foreign and Commonwealth Office has agreed to fund a £30,000 feral cat control programme on Ascension Island. That should kill 90 to 95 per cent of the feral cat population. The control programme will promote a successful breeding season for sooty terns on Ascension.

With our non-governmental organisation partners, especially the Royal Society for the Protection of Birds, we are seeking funding for the Ascension Island management plan. The plan includes an invasive species eradication programme. Any remaining feral cats will be picked up by that eradication project.

My Lords, I am delighted to learn that the Government have had the sense to enter into partnership with the RSPB and to take it up on its offer to clear the island of feral cats. Are they aware that there are in the St Helena dependencies some of the most important biodiversity treasures in the world and that this is an important test of their willingness to put forward enough money—and by the standard of most issues which are discussed in this House it is minor—to ensure that the programme works?

My Lords, we are taking the issue most seriously. The noble Lord is correct in saying that we should be rightly concerned with the biodiversity of the region. The initiative is part of the Ascension Island management plan. The Royal Society for the Protection of Birds and the Foreign and Commonwealth Office are seeking funding for the plan, which will need in the region of £1·5 million.

My Lords, is the Minister aware that in the Adelaide Hills of South Australia a somewhat unusual professor, who wears a hat made from a cat and says that the only good cat is a dead one, has fenced off an area of 25 acres in order to keep out feral predators such as cats and foxes? The scheme has been so successful that platypuses and other animals which had found it almost impossible to breed are multiplying in the enclosed, safe area. Is she further aware that feral cats are a danger not only to birds but to mammals? Scores of Australian mammals have been wiped out this century, almost more than in any other country in the world.

My Lords, your Lordships will be surprised to know that I was not so aware, but, as always, I am most grateful to the noble Baroness for drawing it to my attention. Regrettably, it is not possible to erect fencing in the Ascension Islands. There are more than 1,200 cats, only 300 of which are domestic, and 900 people. Therefore, regrettably, fencing is not promoted.

My Lords, may I make a plea that the unfortunate cats are dealt with humanely? If the Government are calling on the RSPB, perhaps they can also call on the RSPCA or a similar organisation for advice on the matter.

My Lords, I am pleased to be able to tell the noble Baroness that such advice has been sought. In the plan, we are assured that the most humane method of disposing of the cats will be undertaken. However, I should tell your Lordships that we need to sweep away the cats in order to protect the sooty terns.

My Lords, I beg to move that the Bill be now read a second time.

Moved, That the Bill be now read a second time.—(Lord McIntosh of Haringey.)

On Question, Bill read a second time; Committee negatived.

Then, Standing Order No. 46 having been suspended (pursuant to Resolution of 17th March), Bill read a third time, and passed.

My Lords, I beg to move that the House do now again resolve itself into Committee on this Bill.

Moved, That the House do now again resolve itself into Committee.—(Lord McIntosh of Haringey.)

On Question, Motion agreed to.

House in Committee accordingly.

[THE CHAIRMAN OF COMMITTEES in the Chair.]

Clause 2 [The Authority's general duties]:

moved Amendment No. 47:

Page 2, line 2, at end insert ("and market abuse").

This may be an opportune moment to say a few words about Amendment No. 69, which is in this grouping. It is opportune that this amendment is before your Lordships on the same day as the report on banking has been received by the Government. I have not yet had the opportunity of seeing that report. However, from what I have heard on the radio, the report contains a reference to the appalling delay that we in this country all suffer from the way that the banks hang on to our cheques before clearing them. It seems that the banks have slowed down in clearing cheques through accounts in a ratio converse to the advance of technology and the benefits of speed which that has brought about. I hope that the Minister will be able to say something on that particular point this afternoon.

I am grateful to both the noble Lord and the noble Earl. These amendments fall naturally into two groups. The effect of the first group would be to convert the present objective on the reduction of financial crime into an objective concerned with the reduction of financial crime and of market abuse; in other words, to associate market abuse with that objective in particular. Although I acknowledge that there is overlap between market abuse and financial crime in some areas, the insertion of "market abuse" into this objective is not necessary and, I believe, could cause confusion and send the wrong messages.

The purpose of the market abuse regime is to protect the UK financial markets from the damage that can be caused to them by abuse. In order to operate effectively and efficiently, the markets rely on market users to observe expected standards of conduct, as we shall discuss when we reach that part of the Bill. If people do not do that, and if they abuse the trust of the markets, then confidence will be damaged. The markets will work less well as people seek to protect themselves from the risks of abuse by entering into transactions at higher prices or by entering into fewer transactions.

Therefore, the ground is covered by the objective on maintaining confidence in the financial system. That, of course, includes maintaining confidence in financial markets and exchanges. That is what the market abuse regime is all about. That is not to say that there is no overlap with the territory covered by the financial crime objective. However, the objectives all overlap to a certain extent; for example, market abuse will often also adversely affect consumers. For example, if people buy shares on the back of misleading information, they lose money.

It is true that some forms of more serious market abuse, such as insider dealing, criminal fraud, which is a matter for the common law, or money laundering, will also be criminal offences under this Bill or under other enactments. However, that will not always be the case. Behaviour which comes within the offences of insider dealing and market manipulation, for example, will, broadly speaking, be subsets of behaviour which can come within the market abuse regime. To that extent, the financial crime objective already covers some forms of market abuse. The matters which the FSA will have to consider as regards systems and controls in Clause 6(2) will also be relevant to market abuse. In any event, we should expect the FSA to have an interest in systems and controls designed to detect and prevent market abuse as a result of the market confidence objective.

However, I believe that there is a danger of confusion if we insert a reference to "market abuse" in that objective, which is concerned only with regulated business or business which should be regulated. Doing so would appear to restrict the FSA's objectives in the area of market abuse. The new regime extends to the unregulated as well as to the regulated.

I believe that market abuse is adequately and properly covered by the objective on market confidence. Maintaining market confidence is at the heart of what the market abuse regime is intended to achieve. I prefer to keep that clear, as I believe it is clear under the Bill as drafted.

The second group of amendments deals with the scope of the financial crime objective. I understand the thought underlying the first of those amendments, which would replace the reference in subsection (2)(b) to regulated persons taking measures to "prevent" crime with a requirement that those measures "reduce the risk of crime". I can see that the amendment is intended to reduce the burden on business. But I still do not believe that it is necessary.

The provisions of this clause do not impose obligations on anyone other than the FSA. The clause does not impose a responsibility on regulated persons. It is all about the responsibilities of the FSA. In deciding what to do in pursuit of the objective, among other matters, the FSA must have regard to the principle in Clause 2(3) that a burden should be proportionate to the benefits.

Clearly, the regulated community has a key role to play in reduction of financial crime, but of course we appreciate that business should not be asked to take on tasks that it cannot reasonably be expected to carry out. "Taking appropriate measures to prevent crime" does not steer the FSA into requiring that firms spend vast sums on taking the possibility of financial crimes down to zero.

We have already made changes to respond to concerns on that score. Following consultation on the draft Bill, the Government replaced the reference to "adequate" measures in the objectives to "appropriate" measures. I do not believe that the suggested amendment would have any further effect beyond that.

While I understand the aim of Amendment No. 68, I think it would be unhelpful to place a requirement on the FSA to alert regulated persons to the activities and identities of those engaged in financial crime or market abuse.

There is a whole range of functions which the FSA will be able to exercise in relation to the reduction of financial crime; for example, giving guidance, mounting prosecutions, co-operating with other agencies and putting out information. The general approach in the Bill is not, however, to tie the particular aspects of the FSA's statutory duties to particular functions. That would reduce flexibility.

If a person is convicted of an offence involving financial crime or is found to have engaged in market abuse, then it will be possible to publicise that fact. In many circumstances that will be the right thing to do. It will be right for the regulator to alert people to the activities of criminals or those engaged in market abuse. If it is appropriate, the FSA will do that.

Amendment No. 69 has been referred to by the noble Earl, Lord Caithness, particularly in the context of the Cruickshank report which was published this morning. I am sure that he will appreciate that that is a 350-page report to which the Government have made no formal response, although it is entirely possible that in his Budget tomorrow, the Chancellor may wish to pay some attention to the recommendations of Mr Cruickshank. But in advance of any formal government response, which may take some time, it may be inappropriate for me to make any further comment on that point.

I accept that the noble Lord cannot comment on the Cruickshank report, but will he comment on the principle of the amendment?

The amendment has not been spoken to by its mover. Therefore, it is not entirely appropriate for me to do that without some stimulus.

I disagree with the noble Lord. The amendment is in the hands of the Committee. It has been spoken to. Whether or not that is by the mover of the amendment is totally irrelevant. That is a poor excuse for not giving me a reply.

I am happy to give a reply but I should rather have given it, having been given the opportunity to hear the arguments put forward by the mover of the amendment. I seek only to defer a reply rather than to avoid giving a reply.

However, I shall give the noble Earl my initial thoughts on the subject. Without prejudging any response that the Government may give, I understand that the Cruickshank report pays considerable attention to the issue of cheque clearance, which is included in this amendment. I have no doubt that we shall consider very carefully our response to that.

I understand also that the Treasury and the Department of Trade and Industry have referred those aspects of the Cruickshank report to the Competition Commission. Therefore, the matter will certainly be an issue of public debate in the months to come.

Perhaps the Minister will take us a little more carefully through his opening objections to my noble friend's Amendment No. 47.

He started by resisting it on the grounds that coupling it so closely with financial crime in the same objective would confuse the issue because financial crime and market abuse are only partially coterminous. I take it that that difficulty would be removed by making the reduction of market abuse free-standing within that subsection.

But the Minister then put the pith of his argument almost into a single sentence. He said that in his view the regulatory objective of market confidence was sufficient for the purpose of creating a duty on the authority to regulate market abuse and making that an objective because, if there was market abuse, confidence would be diminished.

But if that argument is valid in relation to market abuse, which is not to be included, it must surely be valid in relation to financial crime because financial crime will also reduce confidence in the market. Therefore, what is sauce for the regulatory goose must be sauce for the regulatory gander. Perhaps the noble Lord will tell the Committee his other reason for resisting this amendment, other than that which could be overcome by tabling my noble friend's amendment as paragraph (e) rather than as part of paragraph (d).

The two parts of the argument complement and strengthen each other rather than being separate arguments which could he overcome in the way which the noble Lord, Lord Elton, suggested.

I said at the beginning that it would be wrong to associate market abuse only with financial crime as one of the objectives. I said that that was because market abuse overlaps with a number of the objectives but is associated in particular with market confidence, although I acknowledge that there was an overlap both with financial crime and with the protection of consumers.

But the implication of that is not that it would be right to have a fifth objective—market abuse—but that the coverage of market abuse was adequately achieved by the market confidence objective, with which we shall deal in more detail in the later clauses of the Bill. I said also—and it is another reason for rejecting the noble Lord's suggestion—that market abuse is covered separately for a significant reason; that is, it is designed to apply not only to the regulated community but to everyone. It must therefore be dealt with separately from the objectives and principles which relate specifically to the regulated community. For those reasons, if the noble Lord were to return with a fifth objective, it would not be acceptable to the Government.

To clear my mind entirely on the matter, is the Minister in effect saying that there are both regulatory and non-regulatory objectives for the authority; that the regulatory ones are set out in Clause 2(2) and that the others are to be deduced, as it were, from the titles of the succeeding parts of the Bill, Part VIII being concerned with market abuse?

They are all regulatory objectives. It is not that there are non-regulatory objectives, but that the objectives set out in Clause 2 with the principles set out in the subsequent clauses relate to the regulated community. There can be regulatory objectives which go beyond that, as indeed, market abuse does.

I have no great strength of opinion on the amendment itself, but do I understand my noble friend rightly? Is he saying that the authority will he able to consider all aspects of market abuse in their entirety, to expose all aspects of market abuse in their entirety and to deal with all aspects of market abuse in their entirety under the "market confidence" heading? It does not matter whether anything is specifically said, so long as the Minister can assure us that those three aspects of market abuse are all dealt with by the Bill and can and will be dealt with by the authority. I speak as someone who is a consumer in that regard and, as always, as someone who believes in Adam Smith's dictum that only consumers matter when such phenomena are judged.

It is certainly true that all market abuse can be thought of as damaging market confidence and therefore as coming under the heading, "market confidence". But I made it clear also that there are forms of market abuse which are damaging in terms of financial crime and of consumer protection.

I believe that the noble Lord, Lord Peston, and I are seeking a response on the same issue: will the authority be capable of dealing with market abuse when the market abuse is conducted by someone who is not a regulated body?

Yes. That is what the whole of Part VIII of the Bill on market abuse is about.

Will my noble friend reflect again on the amendment of my noble friend Lady Uddin and the intervention of the noble Earl, Lord Caithness, in regard to it? It seems to me absurd that we should ask my noble friend to comment on a 350-page report today. However, purely a priori in terms of first principles, in a world where one can send an e-mail message which reaches the United States virtually instantaneously and all sorts of other transactions take place through computers in such a way, does not my noble friend agree that it is ridiculous that it takes five days for a cheque to clear?

The answer I can best give is the statement made this morning in response to the Cruickshank report by the Secretary of State for Trade and Industry and the Chancellor of the Exchequer. Stephen Byers said that the health of small and medium firms is crucial to the success of the economy and the employment of many people. The provision of banking services is an important influence on their prospects for growth and success in the future. The Cruickshank report considers that there is a substantial case for a reference of the market. He considers the issues identified and the concerns expressed about this important area to be such that the provision of banking services to SMEs should be fully investigated by the competition commission.

I believe that that answers my noble friend's point about the seriousness with which the Government take the recommendations from Mr Cruickshank. It enables me also to confirm that the Chancellor will make a further response covering other recommendations of the Cruickshank report in the Budget statement tomorrow.

I yield to no one in my admiration for the draftsman of the Bill. It is a monumental achievement, but, on occasion, even giants stumble. My noble friend Lord Elton surely put his finger on the real problem: if market abuse is subsumed in "market confidence", why is not financial crime? We are entitled to conclude from the way in which the subsection is drafted that, if financial crime is incapable of falling within market confidence, then surely the same must be true of market abuse.

It would therefore be reasonable to conclude, on the current drafting, that control of market abuse is not one of the regulatory objectives. That conclusion would be extremely inconvenient for the Government, because there is no doubt whatever that where a regulated party commits an alleged act of market abuse, it will be much easier to attack that party under the rules relating to regulation than it is under the rules relating to market abuse. This is not a party political point. It is simply a question of making the Bill clear. There will be serious consequences for people who transgress under the Bill. Their lives may be ruined by it. They are entitled to understand the law clearly. Why will the Minister not add that clarification?

With enormous respect to the Minister, we had exactly the same problem on day one of Committee stage in relation to non-executive directors. We tabled four amendments to clarify the Bill. The Minister said that he agreed with the substance of each amendment, but he believed that the Bill did not need changing because it was absolutely clear. With great respect, it must have been absolutely clear only to him. It was certainly not absolutely clear to any of the Opposition Front Bench, nor indeed to any of those who advise the Opposition Front Bench. I hope that the Minister will reconsider non-executive directors by Report stage. Here is an opportunity for the Minister to reconsider now the objectives clause. Why on earth would the insertion of "market abuse" not clarify something which clearly is not clear at present?

I am afraid that I disagree about both non-executive directors and about market abuse. It seemed to me at the time and seems to me now that the amendments about non-executive directors appeared to be based on a misunderstanding of the role of non-executive directors. Noble Lords opposite have persistently referred to the functions of the non-executive directors committee, which is the committee comprised only of non-executive directors, while ignoring the fact that all of the points they were making were perfectly well covered by the role of non-executive directors as directors; in other words, as members of the board, which is wider than their responsibilities as members of the non-executive committee. That misunderstanding eviscerated the arguments for the amendments relating to non-executive directors. That is as true now as it was then.

When the noble Lord talks about the danger of confusion, I can say only that what I said at the outset seems entirely clear. There is a danger of confusion if we insert a reference to market abuse in this set of objectives, which is concerned only with regulated business or business that should be regulated. If we were to insert a reference to market abuse, we should appear to be restricting the FSA's objectives in the area of market abuse because the market abuse regime extends to the unregulated as well as to the regulated.

Of course, it is possible, as the noble Lord said, that financial crime may reduce confidence in the markets. Financial crime such as insider dealing and market manipulation can damage markets and the interests of consumers. There is an overlap between the objectives, but not all financial crime damages market confidence and it would be as inappropriate to put market abuse under the heading of financial crime as it would be to put it under the heading of consumer protection.

Having heard two-thirds of this discussion, 1 ask the Minister whether he can indicate whether the point of anxiety as expressed by other noble Lords could be met if we added to Clause 3(1), which states:

"The market confidence objective is: maintaining confidence in the financial system",

the words:

"including the prevention of market abuse".

That seems to me to suffer from the same objections to which I have referred.

I understand that Clause 3(1) not only applies to regulated activities but also to the activities of those who are not regulated. Therefore, that subsection could include a provision on the prevention of market abuse.

No, the objectives as set out in Clauses 3, 4, 5 and 6 are the regulatory objectives that are set out in Clause 2. Clauses 3, 4, 5 and 6 expand on the detail of those objectives but they do not go beyond the objectives that are concerned with regulated business or business that should be regulated. If the noble Lord or any other noble Lord were to table an amendment to that effect I would consider it with all due seriousness.

Doubtless we shall return, with great pleasure, to this issue in Part VIII. In so doing I believe that we should have regard to the language used as it will impinge on those who are not professionals in this area or lawyers. As the noble Lord has said, Part VIII applies to the unregulated market and it applies a code of conduct, with the assistance of the courts, that will regulate that market quite tightly. It seems to me that we shall need another word to describe that when we get there. However, I do not want to delay matters at this stage.

As the noble Lord has put words into my mouth, perhaps I should make it clear that market abuse applies to the unregulated as well as to the regulated community.

I am deeply disappointed with the series of replies that the Committee has received from the Minister. Tempted though I am to divide the Committee on this issue, I shall content myself with the task of reading his labyrinthine observations and return to the matter on Report. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

moved Amendment No. 49:

Page 2, line 18, leave out ("any exercise of its general functions") and insert ("anything done in the discharge of those functions").

Perhaps it is convenient for me to speak to Amendment No. 50, which is grouped with Amendment No. 49, as my noble friend Lord Eatwell has asked me to move it on his behalf, together with those who have added their names to the amendment. My noble friend is unavoidably absent at the moment but may be present in the Committee later.

I believe that all noble Lords will agree that prudential regulation, to which a lot of this Bill refers, should not stifle competition. Clause 2(3)(f) deals with it by saying that,

"In discharging its general functions, the Authority must have regard to … the need to minimise the adverse effects on competition".

However, as my noble friend Lord Eatwell has already emphasised, one of the key roles of the authority must be the management of risk. In response to my noble friend a few days ago, the Minister agreed that the management of risk is clearly part of the authority's statutory objective of securing market confidence.

Unfortunately, "facilitating" or "promoting"—I am not sure that I yet understand the Minister's distinction between those two activities—competition, as set out in paragraph (g) of this clause, may very well involve an increase in risk both to consumers and, indeed, to the financial system as a whole.

When the Financial Services Authority is properly seeking to protect the public against financial risk, in what way should it have regard to the need to facilitate competition? Does paragraph (g) mean that the authority should expose consumers to certain risks simply in order to facilitate competition? Does the Minister envisage extra risks for the consumer which he or the authority will be prepared to tolerate in order to assist competition?

To my mind, paragraph (f) is one thing, while paragraph (g) is another and they do not necessarily combine correctly in the Bill. Of course the authority should always test its activities against the criterion of any adverse effects they may have on competition. However, that is covered in paragraph (f) and also in the detailed competition scrutiny provisions set out in Part X and Part XVIII of the Bill, which we shall no doubt come to in a few weeks' time. In my view, what the authority should not be doing is promoting competition or, I suggest, facilitating it.

Along with the noble Lord, Lord Eatwell, I have also put my name down to this amendment which seeks to delete paragraph (g) in Clause 2(3). We on these Benches support the amendment because we felt that two kinds of confusion might arise in the Bill. First, there may be confusion in terms of the role of the FSA, as has already been mentioned. Secondly, we felt that confusion might arise over who is to take responsibility for competition between the FSA, the OFT and the Competition Commission.

On one of the rare occasions when it could be argued that a little delay in your Lordships' House has been beneficial, we have today received the Cruickshank report, which explicitly deals with this matter. As I began reading the relevant section, I was relieved to see that he reached a conclusion which states:

"Getting the regulator's primary statutory duties right is essential. These drive the way the regulatory body recruits, organises and rewards its staff. A competition objective that is weak relative to the regulator's other objectives is unlikely to be delivered effectively".

I feel that I can strongly agree with that statement and therefore Don Cruickshank must agree with our amendment, in that a weak competition provision in the Bill—which is what this will amount to—is clearly unsatisfactory.

Unfortunately for those on this side of the argument, Mr Cruikshank then goes on to argue that the competition responsibility of the FSA should be greatly strengthened and, indeed, that the FSA should be given primary responsibility for competition. He further states that the optimum outcome,

"will be most efficiently and accountably delivered if responsibility for it is internalised within the FSA".

Clearly, he envisages a structure in which the FSA will have primary responsibility for competition within the sector, with the OFT and the Competition Commission providing a review mechanism and some external oversight if the primary body falls down on the job. For that reason, the second part of the Cruikshank report is, in one sense, deeply depressing because it goes directly against our argument.

Having heard the Minister's initial comments on this point, in which he seemed to argue that the FSA should not have that kind of responsibility, perhaps we now all need to study the Cruickshank report. For our part, I believe that we shall need to be persuaded of the merit of giving the FSA all the additional powers proposed in the report. If the Cruickshank proposals are to be implemented, that will almost certainly require further amendments, which no doubt the Government will wish to bring forward on Report. However, given the very short time we have had to examine the report, I suspect that we all need an opportunity to read it in more detail and perhaps return to this matter at the next stage.

I am full of admiration for those who have found the time even to go along to the Printed Paper Office to collect a copy of the Cruickshank report, let alone to have begun reading it. I saw the headline announcing its publication in the Evening Standard, but that is as far as I have got.

Perhaps I may advert to what I believe is the thinking that lies behind both of these paragraphs. Those of us who were involved in financial services at the time when the first rulebooks came out following the initial raft of legislation in this field will recall feeling appalled by the amount of detailed regulation being put forward. The regulations appeared to prescribe in the most minute detail precisely how products should be described, marketed and sold. Indeed, the regulations seemed to form a salesman's handbook as to how a financial representative should present himself and his product to his customers. I can well remember the angst that was loudly voiced at the time. It was said that it would make competition between life and pension companies—I cite those because that is my area of experience—very difficult. Everyone would have to offer the same projections and present products in much the same way.

The fear was then voiced that if we continued on down that road, we would end up with a system rather like that in Germany, where for many years a new financial product in, for example, the insurance field could not in fact be marketed until it had been approved as a product by the regulators. The result was that when markets began to be opened up in the European Union, there was great demand on the part of British companies who recognised that this would be a tremendous opportunity. The UK industry was vastly more vibrant, thrusting, inventive and innovative than anything on the Continent. However, liberalisation came only extremely slowly because it did not at all suit the regulators on the Continent. They felt that their regulation would be interfered with in a profound and detailed manner.

As I read both the paragraphs in the clause, I believe that they indicate that the FSA must not go down that road. The Minister has already made the point that innovation and competition must lie at the heart of the FSA's method of operation. Whenever phrases such as, "When exercising its functions" are used, provision must be made to facilitate and encourage the industry to use the freedom it has to be competitive, while obeying the regulatory requirements in order to avoid those ills aimed at by the rest of the Bill. If that is what is intended, I have to say that I totally support that. It must be right that we do not fall into the same trap, as did the early regulators, of specifying in minute detail the requirements to be imposed on the industry.

Happily, with experience, the regulators have moved back from that early position. The rule books became progressively less detailed, less mandatory, less prescriptive and moved towards setting out the requirements in terms of principles. If that is what the amendment is aimed at, it must be right.

In relation to the point put forward by the noble Lord, Lord Borrie, perhaps I can say this. One of the early actions taken by regulators of life insurance at the instance of the Competition Commission—or the Monopolies Commission as it was then called—was to outlaw the minimum commissions agreement which existed between companies and had done for a long time. The ostensible objective was that if the minimum commission rule was removed, then competition would force commissions down. Exactly the opposite happened.

Once companies were free from what had been seen by the industry as something which they had followed in the interests of the consumers, commissions generally rose. That is an object lesson in not trying to regulate competition too precisely. The Monopolies Commission got that wrong. It worked to the disadvantage of consumers. Nevertheless, it happened and it should be an object lesson for the Financial Services Authority. So I would emphatically resist taking out paragraph (g). That ought to be retained. The paragraph which wants to,

"minimise the adverse effects on competition",

is entirely right.

I spent some happy hours over the weekend catching up with the amendments tabled by the Government, and some of those of my noble friends. Amendment No. 49 is what the Minister described as a technical amendment to paragraph (f). It is not entirely clear to me how it changes the meaning, but one has to accept the view that the draftsmen have their mysteries to which sometimes Ministers and others have to bow. But I am appalled to see the huge number of amendments that appear to be being tabled at regular intervals and are now running into hundreds. Perhaps the Minister can give us some indication as to how many more amendments of this kind, or indeed of greater substance, will be tabled during the passage of the Bill through this House.

A huge number of amendments were made—some of them very welcome—during the Bill's passage through another place. But it is somewhat shattering to discover that hundreds are still being tabled, most of which do not appear to reflect specific points made in another place or on which representations were made. They are simply the result of the Government having second thoughts as to what is the best way of putting this into legal language. While one is always searching for the optimum way of doing that, one wonders whether it is a sensible way to legislate. I have been told that we are likely to have up to 500 or 600 government amendments. In that case, one-third are already before us. Are we expecting twice as many again? Can the Minister help us on that?

Perhaps I may follow up my noble friend's last point. As chairman of the Delegated Powers and Scrutiny Committee, I am conscious that the House invites us to consider amendments whenever we can. We do so whenever we can. But it is easier when all the proposed amendments to the Bill come in one tranche rather than piecemeal. I say that at the same time as acknowledging that no one could be more scrupulous and helpful than the Minister in seeking to facilitate the work of the committee by giving us both the amendments and the explanatory memorandum as early as he can. But for all that, the need to look at them piecemeal is neither particularly attractive, nor does it make for an efficient way of working.

Even on the day that the Cruickshank report is published, perhaps I may say that I am happy to declare that I once worked for a bank. One of the reasons why I am happy to make that declaration is that, as we all know, the SME sector in this country is one of the most powerful contributors to the private economy; it has been one of the most spectacular growth engines over the past 15 years; and it is the most successful within Europe. Across that period it has had the readiest access to finance of any SME sector within Europe.

But, as I understand it, the view of Mr Cruickshank that the regulator should have the additional objective of responsibility for competition has been known for some time. As I recollect it through exchanges, so too has the view of Mr Howard Davies. But it would be absolutely inappropriate for that objective to be included in the Bill. It only takes a moment's thinking to see why. The reason is that the authority is already the largest regulatory authority in the world with a huge task. We can imagine the difficulty if it had to take on the quite separate responsibility for competition.

That is the practical objection. The principal objection is that one of the key responsibilities of the authority is consumer protection. If it were also to have the responsibility of promoting competition, it would be set two objectives that could, from time to time, come head on into conflict. It is my understanding—perhaps the Minister will confirm this—that Mr. Cruickshank's views on this issue were known to the Government when they decided (absolutely rightly) not to include a market confidence objective in the Bill.

We all know the difficulty of consumer protection in this area. We all know the extent to which, increasingly, as a society we are expecting people to take responsibility for their own pensions, insurance needs, secondary pensions and long-term healthcare. We all know the dangers if those products are mis-sold. We saw it vividly in the pensions mis-selling scandal throughout a large part of the last decade. The Institute of Financial Studies says that we are already hearing of such matters anecdotally in regard to the new ISAs. It is critical that the system of consumer protection works. It is unrealistic to say that caveat emptor can operate very far in this complex area of life where most people, unlike some in this Chamber, lack access to an independent financial adviser, let alone have the ability to understand the advice.

It is paramount that the consumer protection objective should come first. But I welcome the retention of paragraph (g). That requires the authority to take into account the desirability of promoting competition. It makes clear that if that ever comes into conflict with proper regulatory protection of consumers, the promotion of competition must take second place to consumer protection. The Government have the balance right in the Bill and I hope that we can preserve paragraph (g).

I share the view of my noble friend in relation to retaining paragraph (g). There have been a series of innovations in the history of the City of London over the decades that have given it enormous international strength. I can recall two such innovations. I was involved in the 1960s in the introduction of the first-ever equity-linked life policy in this country. All of the establishment in life insurance were against it and said that it was not safe and added to risk. However, I am pleased to say that over the years they followed our example.

In recent times we have seen direct selling of insurance. The established houses would say to their policy holders that the established insurance company, with branches all over the country, is much safer than the direct selling operations by Direct Line and other companies. In practice, it has been a great and successful innovation, bringing benefit to policy holders throughout the country.

I welcome the inclusion of paragraph (g) and hope that it will be retained.

The Opposition Front Bench also supports the retention of paragraph (g). Two years ago there was a long debate during the passage of the Competition Bill on the relationship between the contents of paragraphs (f) and (g). The origin of paragraph (g) in this Bill is misplaced. Unlike the Bill, most of the industries that were the subject of the Competition Bill debate were nationalised industries. They all started off as public monopolies that were then privatised following which the process of facilitating competition had to be injected into them by the regulators.

It was very clear that the draftsman of the Competition Bill, quite rightly, did not wish to give the responsibility of initiating competition to the Director-General of Fair Trading. In the Competition Bill there was a clear distinction between the task of the Director-General of Fair Trading, to deal with the traditional problems of competition, and the task of initiating competition, or facilitating the initiation of competition, which were issues for regulators. I am not sure that it can be said that paragraph (g) represents a long tradition, but in the world of regulatory operations two years is a long time. The Minister will be surprised that at least on this occasion I support the Government's position.

I should like to make it clear from the outset that I am not Don Cruickshank, and I shall resist the temptation to comment favourably or unfavourably on what he says. That does not mean, however, that I can resist the temptation to quote him when he seems to be supporting the Government—which I am sure is forgivable.

Paragraph 2.130 states:

"The Review welcomes the progress the FSA has made in setting out how it will align its new regulatory approach with these objectives."

In addition, the report notes in relation to the review's interim report:

"The Government, in response, committed itself to securing that the FSA gave full weight to competition concerns and took account of the effect of its rules on competition in the light of market developments. It has since brought forward a number of amendments to the FSMB to achieve this".

My noble friend Lord Borrie used the description "a weak competition objective". He appeared to think that facilitating was the same as promoting. I rebut both those claims. This is not a weak competition objective; it is not a competition objective at all. Competition is a matter for the competition authorities. As I said at the outset, and as the noble Lord, Lord Jenkin, recognised, it is not the FSA's job to tell people how they should compete. The purpose is not to steer the FSA to tell the markets how they should operate where there are no consumer protection or market confidence concerns; it is to encourage it to remove unnecessary competition barriers, as in the earlier example in relation to removing unnecessary barriers to innovation.

This principle of good regulation—and perhaps we should always be talking of principles of good regulation, which is how the FSA describes it, rather than just principles, as described in the Bill—should guide the FSA in deciding its policy on how quickly it processes applications for newcomers, the level of entry requirements and the issue of league tables. The more players there are in the market, the more competition there is. Provided adequate protections are in place, this can only be a good thing. These matters are not so precisely covered by the requirement to measure the adverse effects of competition as they are in paragraph (f).

I do not accept that facilitating is the same as promoting; and I do not accept what my noble friend Lord Borrie says about exposure to risks. None of the examples that I have given involves any increase in exposure to risks. Clause 2(3)(f) does not override the FSA's duty to provide consumers with an appropriate level of protection. The point is simply that the desirability of facilitating competition is something to which the FSA should have regard in meeting its primary objectives, including consumer protection.

I am grateful to all noble Lords who have pointed out the different roles of the FSA, the Office of Fair Trading and the Competition Commission. There would be confusion between the three if the FSA did not have a competition objective, but the matters in Clause 2(3) do not concern the aims or purposes of regulation, because that is the role of the objectives, but the manner of regulation. As the noble Lord, Lord Jenkin stated, in discharging its general functions, the FSA shall have regard to the desirability of each of these items.

There are those who wish to remove paragraph (g) and those who wish to strengthen it—although they have not been so vocal today—but I think we have the right balance. I commend the amendment to the Committee.

On Question, amendment agreed to.

moved Amendment No. 51.

Page 2, line 20, at end insert—

("(h) the desirability of facilitating as far as possible access to financial services for disadvantaged consumers.").

I rise to express my support for the arguments put forward by the noble Baroness, Lady Turner. In doing so, I shall speak also to Amendment No. 61. Amendment No. 51 was moved in almost identical terms by my colleague Dr Cable in another place. In replying to his arguments, which were almost identical to those advanced by the noble Baroness, the Minister in the other place said that the Bill did not need such a provision for two reasons: first, there was already a consumer awareness objective in Clause 4; and, secondly, the consumer protection objective in Clause 5 had a bearing on the issue and, therefore, the amendment was simply unnecessary.

Much of the debate on amendments has centred around whether the Bill is permissive or specific in the sense that on many amendments both today and last Thursday we have heard the view that one can actually do things under the Bill that such amendments seek to specify and that, therefore, we do not need them. We wish to have regard to the problems of disadvantaged consumers. We want to try to ensure that this requirement is given greater weight than is currently the case. In Clauses 2 and 5 the Bill already sets out a whole raft of considerations to which the authority must have regard but there is nothing specific there about disadvantaged consumers.

Therefore, we have tabled an amendment not to amend the earlier part of the Bill but to amend Clause 5, which already specifies a number of types of consumer and types of business to which the FSA must pay particular attention. We believe that the interests of the disabled or chronically sick, pensioners, individuals on low incomes and individuals residing in rural areas should be mentioned specifically in the Bill so that the FSA has a positive duty in this area. In doing so, we chose our words relatively carefully. The amendment employs exactly the wording in both the Utilities Bill and Postal Services Bill as regards dealing with disadvantaged consumers. Quite frankly, if such wording is good enough for those Bills, we cannot see why it should not be included in this legislation.

One of the key thoughts in our mind is that, among the plethora of considerations that the FSA has to take into account, the concern for disadvantaged consumers should be given greater weight. There is also the question which may or may not be a problem in reality but, which, nevertheless, concerns both us and the National Consumer Council; namely, the extent to which the FSA can under this legislation do the kind of thing that it may wish to do to support disadvantaged consumers.

In respect of credit unions, Howard Davies has already said that he hopes that the way in which the FSA regulates such unions will help that movement,

"to achieve its full potential to offer low-cost efficient financial services to local people, and make an important contribution to offset the serious problem of financial exclusion".

We agree; indeed, there could be cases where the cross-subsidy on the costs of regulation might be relevant to credit unions. However, in the absence of a statutory requirement to aid disadvantaged consumers, the FSA might find it hard to justify such measures in the future. Moreover, the authority might feel constrained from funding information campaigns that specifically highlight products most suited to those on low incomes or that warn elderly people to guard against unfair sales practices. When considering such issues, we must bear in mind that there have been many examples of unfair sales practices.

In our view, the argument for encouraging disadvantaged people to take up financial products and financial services, especially where they find it very difficult to do so, is an extremely strong one. The argument for the FSA having this as an explicit duty is equally strong. By not adding to the objectives of the authority but simply specifying a distinct group of consumers who need particular protection and care, we believe that Amendment No. 61 should be welcomed by the Government.

Perhaps I may express a few words of sympathy with these amendments. During my time in banking, it was clear to me that there were key issues regarding both financial literacy and availability of banking services that affected a significant part of the population. I saw various estimates of numbers, but I never saw an estimate lower than 20 per cent. Driven as they are by the demands of their shareholders, and however much their management would like to do so on personal grounds, it is very difficult for the mainstream banks to pursue areas of banking activity that, though not immediately profitable, would benefit the health of society as a whole.

I realise that there may be difficulties in the extent to which the FSA can act to implement such amendments. That is possibly one of the reasons why the noble Baroness tabled this as a probing amendment. However, I can see areas that the authority could consider in terms of financial education. Indeed, the noble Baroness mentioned the encouragement of credit unions.

There is also one other area for consideration in this respect. In the United States—the home of the free markets—there is, none the less, legislation that requires mainstream banks to engage in a proportion of community redevelopment banking activity. When I surveyed the US scene it seemed to me to be healthy and, interestingly enough, to be capable, when properly handled, of generating profitable clients. I do not pretend that this is an easy issue because it goes with the wider issues of inadequate literacy and numeracy across the board, to which Sir Claus Moser drew our attention with such clarity last year. I have sympathy with the desirability of an amendment that would give the FSA not only the obligation but also, as the noble Lord, Lord Newby, said, the express freedom to be active in these areas.

We support this amendment and hope that the Government will also do so. In that context, I was particularly struck by the words of the Minister in response to Amendment No. 47 earlier today. I sought then to say that the FSA would find it very difficult to prevent financial crime, but the Minister was not prepared to accept that. If the noble Lord thinks that the FSA can prevent financial crime, he surely must think it well within its grasp to facilitate, as far as possible, access to financial services for disadvantaged consumers.

Before I discuss my noble friend's amendment I wish to say a few words about the home service insurance business, to which she referred. The Government have announced that the industrial assurance Acts, which have always been so burdensome and have regulated home service insurance business, will be repealed. The business will be regulated under the Bill. This has been welcomed by the insurance industry. We are also taking steps to help credit unions and friendly societies to conduct their business more effectively. We recognise the importance of the role they play in helping the financially excluded.

Amendment No. 51 would introduce into Clause 2 a requirement that the IFSA has regard to the desirability of facilitating access to financial services for disadvantaged consumers. That would move the FSA towards trying to tackle financial exclusion. This is an issue that has come up before and it has been considered carefully and seriously, both by the Government and by those who have scrutinised the Bill in Parliament.

When the Joint Committee published its first report its conclusion was that, if the Government wished to impose social and ethical obligations on financial services businesses, they should do so directly rat her than via the FSA. The Government agree with that conclusion. The Joint Committee stated at paragraph 62 of its first report that additional duties,

"would make life unnecessarily difficult for a regulator responsible for prudential supervision, and would damage lines of accountability. If the Government wishes to impose social or ethical obligations on financial services business, it should do so directly".

Of course this is a matter of serious concern. My noble friend raises an important point. However, I do not believe that this is something which should be tackled through the Bill. Adding in the requirement proposed in the amendment would distract from the FSA's core role as a financial regulator, cutting across its main objectives. If we are to maintain clarity as to duties and lines of accountability, and allow the FSA to act effectively as a regulator, it is important that we should be clear in the objectives that we are setting.

In any case, the terms of the consumer protection and public awareness objectives are relevant to tackling financial exclusion. The objectives do not exclude disadvantaged consumers; they are applied to all consumers. For example, the appropriate level of protection will depend on the nature of the consumer and of the product and will affect our proposals for the deregulation of business carried on by a number of mutual societies. They will enable those societies to provide services which they are not able to provide at present.

I turn to Amendment No. 61. Clause 5 expands on what is meant by the FSA's regulatory objective of protecting consumers. It deals with the protection appropriate to different types of consumers. There will, of course, be wide experience and expertise across society as a whole. Therefore the needs of consumers for advice and information will differ, and their particular circumstances will be one factor in that equation.

But this clause already requires the FSA to have regard to that spectrum of needs. Adding a paragraph requiring that the interests of particular social groups should be taken into account would at best muddy the waters and at worst lead to an unfair focus on the needs of particular groups, possibly at the expense of the needs of consumers in other groups. I do not want to be too particular because obviously the noble Lord could have produced a whole range of disadvantaged consumers. However, I suggest that his list would place particular importance on the needs of, let us say, an experienced financial adviser who is retiring to the countryside—two of the criteria on the noble Lord' list would apply to such a person—but would exclude people who were, for example, poorly educated, or particularly inexperienced in financial matters, or who belonged to ethnic minorities, or had language difficulties, and many others. If one includes such a list, one immediately gets into all kinds of difficulties.

It is essential that the FSA, in seeking to secure the appropriate degree of protection for consumers, takes account of the various needs of all consumers, whatever the origin of those needs. Clause 5(2) currently embraces all consumers, including those consumers who might fall into one of the groups referred to in the amendment.

I appreciate that Amendment No. 51 has gained support from all sides of the Chamber. I can only repeat my sympathy with its objectives. However, it would not be an appropriate measure for a regulatory body concerned with prudential supervision. I hope that my noble friend will treat it as a probing amendment.

Before the noble Baroness decides whether or not to withdraw the amendment, I wish to ask the Minister a question. He has advanced a clear and coherent argument as to why this measure should not be imposed on a financial services regulator. At the present time the Utilities Bill is progressing through another place. I understand that the Government intend to impose certain social and ethical duties on utilities regulators which would cover disadvantaged customers. If that is an appropriate course to follow in the case of gas, electricity or water, I am baffled as to why that should not apply also to financial services.

After many years in this Chamber I have learned never to look at Commons Bills until they have finished their passage through the Commons. In that way I concentrate only on the final version rather than on a version which may be before another place at any particular time. The Utilities Bill is a particularly good example of that philosophy. I would have wasted my time had I spent days mugging up on the telecommunications and water parts of the Utilities Bill. There are differences as between financial services, utilities and postal services, which have been referred to. I can best illustrate that point by referring to what happened this morning. We take seriously the needs of disadvantaged consumers of banks. That is why we have referred the relevant aspects of the Cruickshank report to the Competition Commission. We do not intend to do nothing, but we think that such action is not appropriate for this Bill.

I thank my noble friend for that response. I described the amendment as a probing amendment. I wrote it and I was not absolutely certain whether it was technically correct. I hoped that if I spoke to it my noble friend might agree to consider it and bring back a government amendment along the same lines on Report. Unfortunately, my noble friend has not said that. However, he has commented helpfully on home service insurance and on credit unions, for which I thank him.

Nevertheless, I still feel that there is, or should be, a responsibility on the FSA to take some account of the socially disadvantaged, mainly because, as I said when I moved the amendment, the Government expect the financial services industry to play a social role and to provide services for people who many years ago may have looked to the state to provide those services. In other words, the financial services industry is expected to fill the gap, as it were, that is left by the withdrawal of the state from a number of welfare services.

I do not intend to seek the view of the Committee on the amendment this afternoon. I shall consider what has been said. The issue is sufficiently important to return to it on Report, having considered what my noble friend has said and having considered the contributions that those on all sides of the Chamber have made. I thank those who have contributed to the debate. I am grateful for the level of support that has been evidenced this afternoon. I hope that it will have convinced my noble friend that the Government should reconsider this matter before Report. In the meantime I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

moved Amendment No. 59:

Page 3, line 14, after ("take") insert ("reasonable").

I wish to speak to Amendment No. 60, which is grouped with Amendment No. 59. The amendment seeks to write into the Bill a requirement for the provision of "best advice". I am sure that we all appreciate that many of the people who become dependent on the private insurance business to provide what amounts to social support—whether through savings or to provide for retirement and so on—will have very little experience of utilising financial services at all.

When I was chair of the PIA Ombudsman Council, many of the complaints we received arose because people had no idea of what they might reasonably expect and often they had been sold a product which was not suitable for their needs. The Bill states that people must accept responsibility for their own decisions. I support the amendment of my noble friend Lord Borrie which seeks to write "reasonable" into the clause. That is fair. But the national Consumers' Association points out that this is the reverse of the situation with ordinary goods. The Sale of Goods Act provides a statutory guarantee that goods are reasonably fit for the purpose for which they are needed—my noble friend referred to that in support of his amendment—and that is surely important when it comes to financial products. Purchasers may be making decisions which are desperately important for them and for the financial security of their families.

There is of course a need for better education in relation to financial issues. When I was at the PIA. I had to produce a report each year on the work of the Ombudsman Bureau, and we made a particular point each year of emphasising that. It would be a good idea to emphasise in legislation a requirement to provide a product suitable for the client's needs, a "best advice" requirement. I hope that the Government will be prepared to accept the amendment.

Perhaps I may say a word, principally in response to the speech of the noble Baroness. The phrase "best advice"—which entered into the language because it was included in many of the rule books—is a misnomer because no one really knows in most circumstances what would be the best advice. "Good advice" can generally be described, and one can form a view as to whether the advice that was given to a particular consumer was good. In the vast majority of cases it should always be sufficient to say that the consumer had good advice. I hope that the Financial Services Authority may come to recognise that that is a better test of advice than "best advice" when, with the best will in the world, most people are not able to say which is the best advice that the consumer might have been given.

Perhaps I may take up a point made by the noble Lord, Lord Borrie. He referred to the Sale of Goods Act. That Act was the first statutory provision for the balance between buyers and sellers in the sale of goods. I was brought up to believe that it was one of the finest Acts on the statute book. It was short and made clear to everyone exactly what the duties were. My recollection is that it contained no more than 20 or 30 clauses. The Bill we are discussing must be 100 times longer in terms of the number of pages and words simply because this legislation deals with matters infinitely more complex than the sale of goods 100 years ago.

Nevertheless, the principle must remain: if someone spends money on a product, some part of the responsibility must rest with the buyer. One has heard a great deal about mis-selling. There undoubtedly was mis-selling. But, equally, there was a great deal of "mis-buying". People were no doubt induced by stories and by friends to rush in. Look at what is happening presently in the ".com" revolution. I suspect that there is a great deal of mis-buying rather than mis-selling going on. I believe that there is some responsibility on buyers, whether of goods and services or of financial products.

I am not sure whether the word "reasonable" is necessary. It always sounds churlish and unreasonable to resist the inclusion of the word "reasonable" in a statute. But I am not sure that it adds anything to this provision. The clause is based on the general principle that consumers should take responsibility: that should be enough. If this amendment is intended to water down that concept, I should resist it. I believe that consumers should take responsibility. Equally, a huge burden of regulation is being imposed on those who sell products to make sure that they sell them responsibly.

I am tempted to speak partly because the noble Lord, Lord Jenkin, referred to the difficulties with the concept of "best advice". As I am sure he knows, the rule book of the existing regulator also contains a concept of "better than best advice". If noble Lords have three or four hours to spare after our debates, I shall be delighted to explain its impact.

This is a tricky issue, and we are indebted to the noble Lord, Lord Borrie, for raising it. The trouble is that in this area it is very hard to get consumers to take responsibility. People who will not buy a microwave without touring every shop in south London before forking out £100 will, however, buy an extremely expensive pensions policy on the least possible examination. Every salesman will tell you that when he hands over the "key features" document, which he must hand over before selling a product, the customer will say, "Do I really have to read this?" That is a very difficult question for the salesman to answer. The regulator would have to say that he should answer "yes", and the salesman would like to think that he could say "no", so he probably says "yes" and "no".

It is important that the Bill should emphasise the responsibility of consumers with regard to financial products. If they rely entirely on those who are flogging them to take the full responsibility, that will never work. A much better understanding of the products and what they can deliver is needed on the part of customers in order to fulfil their objectives. But at the same time it is important that regulators, and those of us who are discussing the Bill, should realise that there will never be consumers out there in the real world who are able to give the full force of their attention and who have the full range of concepts available to assess every aspect of the product that is laid before them.

The amendment seeks to move the balance just a fraction in favour of not relying too much on consumers. It goes to the essence of that balance. I would lean by a millimetre towards accepting it and accepting the point made by my noble friend Lady Turner in speaking to her amendment. It is a narrow point. If Ministers feel that this is a carefully negotiated balance, they would be justified in saying that they believe the balance lies the other way.

In rising to support these amendments, I should like to develop the thought introduced by the noble Lord, Lord Lipsey, that this is an issue of balance. The amendment seems to suggest that in Clause 5(2)(d)the balance of responsibility has moved too far towards the consumer and away from the provider. We see that as particularly important, because financial services are complex. They are purchased relatively infrequently—probably less frequently than the microwave referred to by the noble Lord, Lord Lipsey. In many cases their performance can be judged only over a relatively long term. It is therefore important that the balance between the responsibilities of the provider and those of the consumer should be somewhat more in favour of the consumer than under the Bill as presently drafted.

I was struck by the comments of the Financial Services Consumer Panel. The noble Lord, Lord Borrie, referred to the panel's report. In the letter that transmitted that report, the chairman of the panel, Barbara Saunders, said:

"The FSA is working in an area where few consumers are confident or knowledgeable about financial products and financial advisers may not explain things well".

She went on to refer to a survey which confirms absolutely the comment of the noble Lord, Lord Lipsey, namely, that,

"few consumers shop around for investment products—one third of people in the survey looked at only one product provider".

One of Barbara Saunders' conclusions is that,

"almost one in three consumers did not feel confident about trusting banks and insurance companies with their long-term savings. And almost one quarter felt that long-term savings in the UK were not secure".

When we ally the results of that kind of survey to the balance in the Bill as it stands—very much in line with caveat emptor rather than "fitness for purpose"— I believe that the balance is wrong, and that the Bill needs the kind of adjustment that both amendments provide.

For me, too, the balance comes down fairly and squarely in support of both amendments. I understand the anxiety of my noble friend Lord Jenkin regarding the concept of "best advice" to which the noble Baroness referred. "Best advice" is an elusive ambition. It is very difficult, given the multitude of products on sale, to expect "best advice" to be achieved by every independent financial adviser. As I understand it, the amendment proposed by the noble Baroness does not import the concept of best advice; it imports effectively the concept of "sale of goods".

If that applies, say, to the purchase of a microwave, as already mentioned, I have no doubt that it ought to apply to something as important as people's long-term savings. I remain of the view that, however well products are explained to people, the choice is not easy to understand. It may be that I am over-scarred by memories of the Securities and Investments Board and the need to redress the pensions mis-selling issue. But that issue was wide in scale. It affected very respectable organisations and smaller providers alike. No one within the market was immune. The damage to confidence in the industry was considerable and there was a need for consumers to take responsibility for their pensions. Considerable anxiety was caused to consumers by the need to enter into the process of redress.

This is a dynamic industry and—I know that I have come back to this point several times—there has been a growth in the type of services, including long-term healthcare, which consumers are having to take for themselves, in my view rightly. In that sense consumers are taking rightful financial responsibility for their future. I should like to see that develop further. But I see the counterpoise as being proper consumer protection. On that basis, I think both amendments are wholly reasonable.

I rise to speak in support of the amendments. Indeed, the noble Lord, Lord Sharman, has pre-empted me by quoting from the letter sent by Barbara Saunders, which I received only today along with the annual report of Financial Services Consumer Panel. The survey to which the noble Lord referred and from which he quoted is very telling. I was struck by the panel's strong plea about the Bill's caveat emptor provisions. Early on in its report the panel fairly makes the point that the inclusion of the consumer panel as a statutory requirement was inserted at the instigation of the Joint Committee, chaired by the noble Lord, Lord Burns.

The amendment of the consumer protection objective also tilts the balance a little further in the consumer's direction as it acknowledges the consumer's need for advice and accurate information. The panel states:

"Caveat emptor already exists as a general principle in contract law and we believe that its unnecessary insertion in the Bill could be interpreted as demanding a further degree of consumer responsibility, an ambiguity that leaves the door open to mischievous legal challenges to the FSA's consumer protection activities".

That is right. The degree of ignorance that there is about financial products and the degree of mistrust that exists, which I suspect will not have been lessened by the publication of Mr Cruickshank's report today, and the fact that only 6 per cent of the people surveyed—this is the part of the survey which the noble Lord, Lord Sharman, did not quote but it is also important—could name the FSA as the official watchdog, show that the balance is still not quite right.

I hope very much that the Government will take on board the comments made by my noble friends Lord Borrie and Lady Turner in considering whether the Bill can be strengthened in favour of the consumer in this very modest way.

Perhaps I may suggest that the two amendments should be looked at in a slightly different light. As far as concerns the amendment of the noble Lord, Lord Borrie, it is a pure question of construction. Construction of an Act of Parliament must always have regard to its context. I find it difficult to believe that a court approaching subsection (2)(d) of Clause 5 would construe it as meaning other than "reasonable" responsibility. That is no reason for not putting in the word. However, we have now taken 22 minutes on this amendment so I suppose there must be a degree of doubt. Perhaps the Minister will tell me and the Committee whether what the Government really intend is that paragraph (d) should be read as meaning that the general principle is that consumers should take responsibility for their decisions even in circumstances in which it is quite unreasonable to expect them to do so.

I cannot believe that the Government intend that in the light of paragraph (c), which draws attention to,

"the needs that consumers may have for advice and accurate information".

That is why I lay stress on the context. As far as concerns the amendment of the noble Baroness, Lady Turner, I would respectfully suggest that, while it may be highly admirable and desirable in principle, the actual wording needs to be looked at rather more carefully. I am troubled by the words "as far as possible". It certainly would be possible to undertake an enormous number of activities in order to ensure that a proposed product was suitable for the consumer, but it would be wholly unreasonable to expect it to be done. I suggest that such words as "as far as is reasonably practicable" or "in all the circumstances" should be inserted and that the amendment as currently drafted should not be accepted.

Despite the thoroughly reasonable arguments that have been put forward for the amendments, I would be worried about either reaching the statute book. I say that because the cost of compliance and the cost of providing information and advice on many of these products have been so great as to make it uneconomic to sell them to the consumers who need them. There is no regulation that does not impose costs and, ultimately, costs on consumers. The danger of the amendments is that they would build in another degree of caution and another degree of prejudice which would require more compliance costs around the sale of products, which again would make them uneconomic in major parts of the market.

We should bear in mind the development of some of the new channels and the Internet selling of these products which will, in an ideal world, enable them to be sold much more effectively with adequate information. In many cases there will be tools which people can use to reach better decisions than may have been possible in the past without the provider having to be involved in any face-to-face discussion or fact finding with the consumer. Building anything into the Bill that provides a barrier to such cost-effective channels developing in the future is likely to work against the interests of consumers. Paragraph (c) of subsection (2), which refers to,

"the needs that consumers may have for advice and accurate information",

must be taken into account. To my mind, that says it all. The caveat emptor provision which follows is then a healthy rejoinder which ensures that we do not go too far overboard in the balance to which many Members of the Committee have referred.

Before my noble friend sits down, I want to understand what he is saying with regard to the amendment of the noble Baroness, Lady Turner. I understand his point that sales may be effected on the Internet. However, does he cavil with the fact that even on the Internet the seller should have a responsibility for ensuring that, as far as is reasonably practicable, the product should be suitable for the consumer?

I am grateful for that question. The wording as it stands suggests to me that the seller has some obligation to understand the particular circumstances of the consumer and to ensure that the product is tailored to that consumer whereas the circumstances I envisage are where the seller may ultimately know nothing about the consumer. He may provide tools that the consumer can use but there is nothing in what he does that ensures that the product is suitable for that consumer. That is up to the consumer to determine, based on the information provided. I may have misunderstood the implications of the wording, but that is my fear about the wording as it stands.

Perhaps I may suggest that the parallel which some Members of the Committee have tried to draw between investing £100 in a microwave and £100 in a unit trust is an inaccurate one. The only legal duty on the seller of a microwave is to ensure that the microwave itself functions properly at the time of sale, that it is properly insulated, and so on. The seller does not have to ask the purchaser whether he or she has a 13 amp socket fitted in his or her kitchen or whether his or her baking dishes fit into the microwave. But that is what in essence the seller of the unit trust would have to do if the second of the amendments were to be accepted.

I wish to express concern about the amendment proposed by the noble Lord, Lord Borrie. I hesitate to do so because we are neighbours in the same village in Worcestershire and divisiveness in one small village might cause concern. There is a difficulty when a word like "reasonable" is introduced. No noble Lord who has spoken in favour of it has defined what "reasonable" means. Those who would be pleased by the insertion of the amendment are the lawyers. The amendment would give enormous scope for legal disagreement about what was reasonable and not reasonable. Perhaps I may also say that from the Government's point of view it gives enormous scope for further amendments. If the Minister decides that he cannot reject the word "reasonable" because that would be unreasonable, we could insert the word "reasonable" into virtually every clause of the Bill and into every other piece of government legislation. The noble Lord would have the same problem.

Without anticipating the end of the debate on this amendment, I must inform the noble Lord, Lord Walker of Worcester, that later I shall move a number of amendments which seek to insert "reasonable" into the Bill.

I have some sympathy with the general purport of the amendments. While I note the observations of the noble and learned Lord, Lord Donaldson, about the wording of Amendment No. 60, I believe that the idea behind it has merit and hope that the Government will respond to it. Like my noble friend Lord Walker of Worcester, I am a little concerned about introducing "reasonable" into subsection (2)(d). I am not sure to what "reasonable" is related. Is it related to the care that the consumer takes or the behaviour of other parties in relation to the other sub-paragraphs in the subsection? I hope that the noble and learned Lord is correct in saying that it is not necessary. I believe that some confusion may be caused if the four plain statements that we now see must be looked at according to the actions of the various parties involved. I believe that there is merit in having a fairly plain statement of the matters to which the authority must have regard, provided the Government can assure the Committee that a degree of reasonableness is a thread that runs through all of them.

The great danger in arriving late is that the point one raises may already have been taken in the debate. The amendment of the noble Baroness appears to be much more appropriate to people who buy life assurance than, say, stocks and shares. It is rather extraordinary that the same degree of responsibility should be placed on the sellers of both when in one case it is clearly very relevant and in the other it is not.

In approaching the amendment moved by the noble Lord, Lord Borrie, it is important to recognise that Clause 5(2)(d) does not describe the legal position of the provider in relation to a particular transaction. It is one of four considerations to which the authority must have regard in determining the degree of protection which is appropriate to the consumer. The first three characteristics lean very heavily in favour of looking carefully not only at the particular type of instrument involved but also the susceptibility of the consumer. Paragraphs (a), (b) and (c) lean heavily in the direction of the consumer and it is not surprising, therefore, that the Government felt it necessary to reintroduce a balancing expression in paragraph (d) of the kind now before the Committee.

I have not yet heard the Minister. Perhaps he will support the amendment moved by his noble friend Lord Borrie, in which case I shall find myself in disagreement with the Government. However, I support the text of Clause 5(2)(d) of the Bill. I am further reinforced in that view by sharing, with great respect, the approach of the noble and learned Lord, Lord Donaldson, to the construction of the expression itself. As to the amendment in the name of the noble Baroness, Lady Turner of Camden, I believe that everything that she seeks in her new paragraph (e) is already provided for in Clause 5(2)(a) to (c). Therefore, I respectfully suggest to the noble Baroness that her amendment is otiose.

I like to hear the arguments before I respond, and I hope that the Committee does not disagree with that. As has been said, it is a matter of balance. I am urged to go a little bit in one direction and then in another; or, as the noble Lord, Lord Kingsland, suggested, to stand firm on the text of the Bill. I start by reminding the Committee of the recommendation of the Joint Committee:

"We recommend that the principle of caveat emptor should feature in the Bill; but that it should be redrafted in such a way that it could not be used to negate the consumer protection objective and excuse exploitation of sections of the general public".

Our response to that was to amend Clause 5 to require the FSA to take into account the need for consumers to have advice and accurate information. I believe that, as amended, the clause achieves the right balance between what is reasonable for consumers to expect and their own responsibility, to which the noble Lord, Lord Jenkin, referred.

Consumer protection is an important objective, and I am sympathetic to the intentions behind the amendments. We do not wish to place an unreasonable burden on consumers. It is certainly not our intention that firms should be allowed to mis-sell products, but we believe that the amendments are unnecessary. After all, instead of a variety of schemes we have introduced a single compensation scheme, the financial services compensation scheme, and single ombudsmen schemes. Clause 2 sets the FSA the regulatory objective to protect consumers. The general rule-making power in Clause 129 is aimed directly at the protection of consumers' interests, and we must look at all of the provisions of Clause 5 against that background.

Amendment No. 59 is designed to qualify the principle that consumers should take responsibility for their actions, but Clause 5 sets out matters to which the FSA should have regard. We must look at the whole of the provision, which includes: the differing degrees of risk involved in different kinds of investment; the differing degrees of expertise and experience that different consumers may have; the needs that consumers may have for advice and accurate information; and the general principle that they should take responsibility for their decisions. The consumer protection objective is already designed to ensure that the FSA must take account of the fact that some consumers should be expected to take more responsibility for their actions than others. The effect of the amendment may be to undermine that balance. The insertion of "reasonable" as proposed could imply that the same test should apply to all consumers, which would run counter to the idea that regard should also be had to the other matters in Clause 5(2).

The noble and learned Lord, Lord Donaldson, is correct in saying that by leaving out "reasonable" we certainly do not mean that consumers should take unreasonable responsibility. I am sure the noble and learned Lord agrees that no court would suggest otherwise. Imagine if we put in "reasonable" elsewhere. The authority would have to have regard to the differing degrees of reasonable risk involved in different kinds of investment; the differing degrees of reasonable experience and expertise; and the needs that consumers may have for reasonable advice and reasonably accurate information. One could go on for ever inserting "reasonable" in clauses of this kind without adding very much. We believe that, taking the clause as a whole, we have achieved the right balance.

The same point applies to Amendment. No. 60, which provides that the FSA should take account of the responsibility of the seller for ensuring that a product is suitable for the consumer. Of course we do not want the mis-selling scandals that have occurred in the past. However, the Bill gives the FSA adequate powers to prevent the mis-selling of financial products. The clause explicitly requires the FSA to take account of the experience and expertise of consumers and their need for accurate information. With this amendment, we could end up with the FSA attempting to prevent an experienced consumer, who had made an informed decision on the basis of all the relevant information, from exercising his right to choose how to invest his money. I do not believe that it would be right for the FSA to have such an objective. While we support the thinking behind the amendments, we do not believe that they add positively to the Bill.

I am grateful to all Members of the Committee who have taken part in this somewhat lengthy debate—in particular the noble Lord, Lord Sharman, the noble Lord, Lord Alexander of Weedon, and my noble friend Lord Faulkner of Worcester—who expressed support.

I was intrigued by the remarks of the noble and learned Lord, Lord Donaldson of Lymington. Most particularly, I listened to see whether the Minister endorsed those statements. If he had done so, the rule of Pepper v. Hart would come into play and I should be extremely happy. The curious factor about Pepper v. Hart is that although the noble and learned Lord the former Master of the Rolls has given a view in this House, it is not that which apparently matters; it is whether the Minister accepts that interpretation.

I shall read the Minister's words with great care to see whether he endorsed to a degree what the noble and learned Lord said. In the meantime, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

moved Amendment No. 62:

Page 3, line 16, leave out from ("persons") to end of line 21 and insert ("—

(a) who are consumers for the purposes of section 129; or

(b) who, in relation to regulated activities carried on otherwise than by authorised persons, would be consumers for those purposes if the activities were carried on by authorised persons.").

During debate of an earlier government amendment, I asked how many more amendments we could expect on the Marshalled List before we completed the Committee stage of the Bill. I do not think that I received an answer. Perhaps this is another occasion on which I may ask.

The noble Lord is right. I did not answer; I am sorry. We said at Second Reading that we might have between 500 and 600 amendments in Committee. The number will be somewhat lower. The good reason is that we have found ways of turning the figure of between 500 and 600 amendments into a lower number. The bad reason is that some of the amendments are still not ready and will have to be laid at Report stage. It is a serious burden for which we are deeply apologetic.

Is there a special reason for having this definition of "consumer" just for the purposes of Clause 129?

It is not just for the purposes of Clause 129. If the noble Lord looks at the other amendments, there are differences but they are all based on the core of the definition which is to be found in Amendment No. 229 in Clause 129.

I thank the Minister for having already answered the point that I was about to make. In the light of his answer, I am a little concerned about the extension of the definition to persons who have rights or interests which may be adversely affected by the use of services by other persons. That broadens the definition by moving away from some sort of causation to a general adverse effect. That causes me concern. It may well have unintended impact. It may make it necessary for the FSA to broaden the scope of the ombudsman scheme beyond complainants with a contractual customer relationship with the authorised firm to include all third parties such as third parties under motor policies following road traffic accidents. It would extend protection to third parties injured under liability policies. It might extend the definition of customer to those adversely affected by a polluting incident.

I mention those examples. I do not wish to press the point now but ask the Minister to reflect on that aspect. I can supply further details in due course.

The noble Lord was good enough to write giving me notice that he would put down the amendment. However, we saw the amendment only this morning. It is a complicated issue. Perhaps he will allow me to write to him in more detail with the benefit of more reflection.

I have lectured on consumer theory for about 40 years and believed that I understood what a consumer was. I thought that the Bill as drafted was clear. I do not understand the amendments; they are supposed to improve the Bill. The Bill states what a consumer is. I nod my head and agree with it. Paragraph (b) refers to other people who may be acting in ways for a consumer. That is perfectly clear to me. I have no difficulty with the Bill.

However, I find the amendment completely incomprehensible. With no disrespect to my noble friend I find the Minister's explanation even more incomprehensible. I cannot understand what is wrong with the Bill as drafted.

I do not want to prolong the debate, but as the noble Lord, Lord Hunt, asked my noble friend to think again, could he persuade those who are advising him to do so, too, in case they got it right the first time?

Without the amendments, there are different definitions of "consumer" in different parts of the Bill. I do not know where my noble friend looked, but he would have found different definitions in different places.

In Amendment No. 229, the core amendment in the group, the bulk of the explanation is not about who a consumer is—he is a user of services, which no doubt is what my noble friend has been saying for 40 years—but about whose services he uses. As the Bill is all about authorised and unauthorised persons, trustees and people carrying on financial services as representatives of someone else, it is important to be precise about the definition of the providers of the services. That is why, unfortunately, there are still differences between the definition of "consumer" in different parts of the Bill. At least they are all referenced to and rooted in Amendment No. 229.

I am sure that we all recognise the Government's difficulty when faced with amendments which they have only recently seen. The Minister will realise that from time to time Members of the Committee are in a similar difficulty. Therefore, he will forgive me if I ask whether in advance of h:.s correspondence he could expand on his reply to my noble friend Lord Hunt. Presumably, the issue is simple for him to explain, but not so simple for me to understand.

As regards Amendment No. 229, I understand the direct links and interests held by persons,

"who have rights or interests which…are derived from, or otherwise attributable to…the use of services by other persons".

That is a clear link. However, I cannot get my mind around the link, and therefore the right to protection, to someone whose interests may be merely adversely affected by a person with such rights. It seems to me that the world is full of people who may be adversely affected by my decision to buy, sell or insure something, but that can be of no possible interest to the regulator or impose any moral obligation on the person making the sale.

I am speaking at leisure in the hope that some succour might be granted to the Minister, but it appears not. Therefore, I shall bring my remarks to a conclusion.

I am grateful to the noble Lord, Lord Elton, for his consideration. Rather than attempt to reach a final conclusion on an amendment that has been available for only a few hours, it is better to include the noble Lord in my correspondence with the noble Lord, Lord Hunt. Indeed, if a meeting is desirable, I shall be only too happy to meet them and anyone else concerned.

I am most grateful for the offer.

As the Minister proposed to take my noble friend's amendment away and subject it to a certain degree of textual exegesis, perhaps I may add one or two reflections from the Front Bench on Amendment No. 229. It adds three subsections to Clause 129. The government amendments propose that the definition of "consumer" in Clauses 5(3), 9(7) and 12(5) would be replaced by reference to the definition in new subsection (7) in Clause 129.

We are happy with new subsection (8) and, I think, new subsection (9), although it may need consideration should occupational pensions be brought within the scope of the legislation. However, we share the concern of my noble friend Lord Hunt about the effect of new subsection (7)(b)(ii). That paragraph extends the definition to persons,

"who have rights or interests which…may be adversely affected by, the use of any such services by other persons".

In the context of Clause 129, which deals with the scope of the authority's rule-making powers, such a wide-ranging definition is perhaps understandable. But our concern is that it could extend the consumer protection objective in unpredictable ways. For example, if a company, using the services of an authorised firm in speculative dealing, loses money and has to lay off employees, would the employees be persons whose interest had been adversely affected by their employer's use of the authorised firm's services? If so, it would seem that the FSA might need to take such interests into account when determining how the consumer protection objective worked. Can that really be the Government's intended result?

Surely, the real problem is that there is no nexus, no contact, between authorised firms and the persons covered by Clause 129(7)(b)(ii). For example, the new definition of "consumer" is used in Clause 177(2)(b), which deals with the approval requirements which the FSA must assess when considering whether to object to the acquisition of control of an authorised firm. It would seem that under the definition in Clause 129(7)(b)(ii), the authority is obliged to consider the position of persons who have rights or interests which may be adversely affected by the use by other persons of the service which the authorised firm provides. It is not apparent to us how the authority can do that. Nevertheless, it seems that it would be obliged to do so because Clause 177(1) states that the FSA must be,

"satisfied that the approval requirements are met".

There is nothing between us on seeking to have a common definition of "consumer" which covers the Bill, but it is in the interests of us all to ensure that the clause does not have the unintended effects that we believe that it might have. We do not believe that the authority would be in a position successfully to deal with transactions in those unexpected situations.

I hope that I can reassure the noble Lord, Lord Kingsland, who asks why we need a reference to persons,

"who have rights or interests which…may be adversely affected by, the use of any such services by other persons".

Perhaps I may give an example. Trust beneficiaries and members of a pension scheme would not otherwise be protected where somebody apart from themselves—namely, the trustees—had used financial services offered by a third party. In that case, the beneficiaries' rights or interests continue to derive from the trust and not from the use of the services. Clearly, it would be wrong to deny them protection. These people would not necessarily be protected under the new subsection (8) of Clause 129, which is designed to protect consumers where trustees themselves are providing the service.

I realise that giving one example might not satisfy the noble Lord on the general principle, but I repeat what I said to the noble Lord, Lord Hunt: we shall look again at the scope of Clause 129 to see whether there is a danger that it might be interpreted too widely. We shall consult before deciding what to do, if anything, at a later stage.

I am grateful to the Minister and I am sure that that is an appropriate point to leave the matter. Unless I misunderstood him, the example he gave to me concerned new subsection (8) and not new subsection (7). I am content to leave the matter there and to return to it at the Report stage.

It referred to new subsection (8), but it was about new subsection (7).

On Question, amendment agreed to.

Clause 5, as amended, agreed to.

moved Amendment No. 70:

Page 4, line 5, leave out ("practitioners and consumers") and insert ("authorised persons, consumers and other practitioners").

I rise to speak to Amendment No. 73, which is intended to ensure that members of the practitioner panel should feel free to report in an independent and, if necessary, critical manner about any area with which they are concerned. We must remember that, as it stands, all the members of the panel are appointed by the FSA with the exception of the chairman, whose appointment and dismissal are subject to Treasury approval.

This amendment would require that, before the FSA appoints any person to the practitioner panel, it must consult others who represent the interests of practitioners with a view to identifying suitable candidates for appointment. I do not believe that the amendment imposes on the FSA too onerous an obligation; only one to consult such persons who represent the interests of professions as the FSA considers appropriate. The amendment would go some way to ensuring that the panels have independence and can be a force to be reckoned with.

Perhaps I may speak to Amendment No. 74B, which is grouped with these amendments. In introducing the group, the noble Lord, Lord Sharman, spoke of the need to define the practitioners. I believe that my amendment fits more comfortably with the amendment of my noble friend Lord Saatchi, to which he has just spoken. That amendment seeks to ensure that all practitioners, however defined, are embraced in the consultative and advisory process. Accordingly, I sought to draft words which would ensure that the whole of the field of market practitioners was in some way embraced in the panel.

In discussion with the BBA, it has been drawn to my attention that, by referring to those people as "representing" parts of the market, the wording of my amendment might encourage them to believe that they had some sort of constitution which they must represent in competition with other members of the panel. That, of course, is very far from what I intended. I should say that this amendment is drafted purely as a probing amendment to discover how the Government expect it to work. However, if it seemed necessary to do anything at a later stage, I would prefer wording which excluded the constituency element but which might ensure that individuals appointed between them have experience of each of the activities listed in Part I of Schedule 2, which is where the definition of where those people are drawn from lies.

The important point is that the panel should not be a "pick-and-mix" selection by the authority. The authority should be required to produce a mix which is genuinely representative of practitioners as a whole and which cannot be skewed in any one particular way to suit the inclinations of the authority at any particular time.

With these amendments, we turn to the questions of how the practitioners panel should be appointed and the interests which it might represent. It is important to understand the way in which the arrangements for the practitioner panel are to work. The purpose of the panel is not to create a super-trade association for the industry or, indeed, a super-trade union to represent the interests of those who work in the industry. Indeed, if we tried to do that, I believe that we would arouse considerable antagonism both from, for example, the British Bankers' Association and from the banking and insurance trade unions. Neither is it the case that the consumer panel is intended to be a loud but single voice for consumers. Again, if we tried to do that we might arouse the antagonism of the National Consumer Council and the Consumers' Association.

The role of the practitioner panel is to enable the authority to have access to dedicated expertise to improve its ability to perform the functions conferred on it by the Bill. I shall not rehearse at length the arguments about what the panels should do. That is the subject of another group of amendments. However, it is enough to say that the same considerations apply in determining the role of the panels as apply when we consider who they are to represent and how the members are to be appointed.

I turn, first, to the representation on the panel. Clause 8(5) sets out certain minimum requirements; that is, individuals who are authorised persons, representatives of authorised persons, recognised investment exchanges and clearing houses. That list is indicative; it is not intended to be inclusive.

Perhaps I may first explain the distinction between the classes of person in paragraphs (a) and (b). The first category is aimed at ensuring that sole traders will be represented; that is, they will be authorised in their own right. The second is aimed primarily at giving a voice to incorporated firms. Of course, a corporate bank, insurance company or securities firm cannot itself be a member of the panel. Therefore, the body must be represented perhaps by a director of such a company, just as the chairman of the panel is the chairman of Schroder. However, the wording in paragraph (b) would already cover authorised persons who are represented through trade associations.

The other two categories in Clause 8(5) make express reference to recognised bodies under Part XVIII of the Bill. Those bodies need to be represented in their own right because of the special role that they play—distinct from the authorised community—in the markets for investments, using investments in the sense that they are used in the Financial Services Act 1986.

Amendments Nos. 70 and 72 would add to the categories of persons who must be represented. A new category introduced by Amendment No. 72 is approved persons, such as certain employees and directors under Part V of the Bill. I must say that I do not see appointments to the practitioner panel as being made on a self-interest basis; on the contrary, I rather think that membership of the panel is a public service. Panel members are not paid at the moment. Therefore, if a director of a bank is appointed, he may well be appointed on the basis of the contribution he has to make to the panel.

Secondly, approved persons are in any event likely to be represented by default, since we would expect many, if not all, of the appointees to the panel to be persons who perform functions that we expect to be controlled functions for the purposes of Part V of the Bill. So most members of the panel will anyway be approved persons in their own right. That is certainly the case on the basis of the panel's current membership. It is the case also that, as representatives of firms employing approved persons, they will be able to consider relevant issues from an appropriately informed perspective.

Thirdly, it is important to remember also that the authority's legislative powers and much of the work of the panel will focus on the activities of authorised persons; that is, the firms and the regulatory implications of the authority's action on those firms. The powers in relation to approved persons form a relatively minor part of the total area of responsibility.

Another suggested addition is such other bodies as the authority considers appropriate. The clause as drafted already allows that since it specifies only the requirements imposed on the authority, not the powers which the authority has in any event.

Amendment No. 74B in the name of the noble Lord, Lord Elton, also seeks to specify the persons who should be represented on the panel, but instead of referring to them in terms of whether they are authorised, approved and so on, he sets out a list on sectoral lines. The amendment may be defective in any event since I should have thought that the different types of investment were the issue and not the activities which a person carries on in relation to that investment. However, it starts to create a potentially long list of people who would need to be represented on the panel.

We believe that it is unnecessary and undesirable to be too prescriptive about the constitution of the panel. Our approach must be to specify certain minimum categories of persons who we believe must be represented if the panel is to meet the requirements under Clauses 7 and 8. Clause 8 does not exclude the possibility of other persons being members; it simply does not require them to be. One reason for our approach is that we wish members of the panel, once appointed, to act objectively on behalf of practitioners as a whole and not to represent the interests of particular individuals, companies or industries.

I turn now to Amendment No. 73 spoken to by the noble Lord, Lord Saatchi. Again, to a degree, the appropriateness of an amendment of this kind depends on the purpose for which the panel is established. Certainly, where the intention is to provide the industry with a voice from which it can make its views known to the authority, the amendment makes perfect sense. But it is not for the authority to create and fund a trade association. The requirements for the panel are being introduced to ensure that the authority has access to the professional expertise it needs to be able to carry out its functions effectively and efficiently.

Of course, I do not rule out the possibility of enabling the authority to seek nominations for candidates to the panel from industry sources. It has done that in the past. The Bill will not prevent it from doing so in the future. But that is a decision for the authority. It should not feel obliged to accept candidates forced upon it by the industry. It may feel that it would be appropriate to adopt a Nolan approach to appointments, as I believe it has done in regard to the consumer panel.

I hope that that gives Members of the Committee who have tabled amendments some reassurance about the practitioner panel and, indeed, the consumer panel when we come to it.

I am obliged to the Minister for what he said but I am not altogether convinced by it.

He said that the introduction of activities as the criteria on which people were recruited to the panel would confuse matters. He said that people in fact should be recruited from certain categories. But my narrow experience of operation in this field is that people of those few categories may become involved in widely different and highly complex activities.

The advice of an authorised person on an activity in which he has taken no previous part, and a highly technical one at that, may be insufficient, absent or flawed. With my amendment I was seeking to elicit an explanation from the Government as to how it would be incumbent on the authority to make sure that those advising it on operations of different kinds, within the highly variegated field which it is to regulate, had personal knowledge of each of those fields.

I suppose that if the answer is that that cannot be guaranteed, then I ask how, in that case, the deficiency may be made good by other means.

It certainly cannot be guaranteed because Part I of Schedule 2 contains a very long list indeed. That would mean that we should have a very large panel. I am sure that the noble Lord remembers that his government used to set great store by the argument that bodies of people meeting together should be as small as possible. We used to have terrific arguments about the size of committees, panels and bodies of that kind.

We could not possibly cover all of them. We are slicing it in the other direction: slicing it by those activities which cross-cut the sectoral description which is in Part I of Schedule 2. We do not wish to be entirely prescriptive and so it is for the authority to make its judgment about how to cover the activities.

I am handicapped by a momentary lack of attention earlier in the day when the noble Lord gave the Committee the very important definition of the italicised words in the middle of the page. There are only 8 chapeaux in Part I of the schedule and perhaps I should be referring only to those wearing those eight hats.

The noble Lord's answer begins to throw an interesting light on how the panel is expected to work. It will work by meeting together. Another way of using panels is to bring forward selected people from a panel to give advice on particular issues. I hope that at this or a subsequent stage, we shall be told whether the advice of the panel is always to be tendered corporately; whether it is to be sought individually or in parts. All that will be a matter of great interest to practitioners. If that information is not forthcoming now, I hope that it will be forthcoming before too long.

I shall answer that point now. It is for the panel to decide how it tenders its advice, whether corporately or individually.

Then it is for the panel, is it not, to decide whether or not the number of categories which I have suggested is too many? If the number of chapeaux means a very large committee, then it will be constrained to act through sub-committees, as a later amendment of mine suggests that it should.

It seems that we are perhaps at a disadvantage in trying to determine the composition of this panel if we do not know how it is to work.

I am not trying to determine the composition of the panel. I am saying that, fundamentally, it is a matter for the authority. The control, independent of the authority, which is contained in the clause, is that the appointment of the chairman must be with the approval of the Treasury. But the composition, size, origin and destination of the individual members of the panel is a matter for the authority. What I am trying to say—and it should apply to all the amendments and not merely the one in the name of the noble Lord, Lord Elton—is that we must not be too prescriptive. The panel is there to help. It is not part of the independent inspection process which plays such a prominent part in the rest of the Bill.

I was hoping to be helpful. One difficulty that arises is that Clause 7 includes practitioners and consumers as though they are on a par, when, in fact, the two panels are completely different. One can easily be misled simply by starting with Clause 7 and thinking that other things should be added to Clause 7.

However, I concentrate on Clause 8. Will my noble friend confirm that the role of the practitioner panel is to give expert advice? It is not a representative body in any sense, whereas in Clause 9 there is a body which may well be representative. However, in Clause 8 we are looking for expert advice of the kind we are all used to; namely, someone who knows about this or that part of the market will say to the authority, "You are doing that and, if you really understood what you were doing, you just would not do it. You do not understand this or that point because you do not have the experience", and so on.

I could easily put up a case for not having a practitioner panel at all. In fact, listening to the remarks just made, it seems to me that the authority simply should be asked to obtain expert advice as and when it needs it. I believe that my noble friend said that that is what it will do in any event, if such advice were not available through the practitioner panel. But if there is going to be a practitioner panel, will my noble friend at least confirm that its role will be simply either to be asked, "What do you think of what we are doing?", or, perhaps more importantly, to say, "Oh, we see what you are doing and you're stupid; you shouldn't be doing it"; or, "We are not the right people for this. We have a sense that it is not right, but go and ask X who knows about these things"?

I see all that as the role of the practitioner panel, if there is to be one, or as the role of the authority, which I hope we can trust to do its job correctly if we suddenly decide to save some money by not having a practitioner panel. It is all to do with obtaining good expert advice. Simply trying to advise noble Lords of what we should not do is to fall into the trap of assuming that Clauses 8 and 9 are on a par because Clause 9 is about representation and representing interests, whereas Clause 8 should not remotely be about representation, interests, or anything of the sort. It should simply be about expertise.

Before the noble Lord sits down, the first subsection of Clause 8 states that it shall represent interests. Therefore, I really do not understand what the noble Lord is saying. The practitioner body is surely intended to be as much a representative body as the consumer panel.

I find myself, unusually, in agreement with quite a lot of what the noble Lord, Lord Peston, says. I accept that the Minister does not want to be too prescriptive about the number of people on the panel. But will he tell us what the minimum number on the panel must be? When advice is sought, can there be a panel of one? What is a panel quorate going to be? How many representatives of those people who are all listed in the plural under the existing drafting will be required to make up a panel before its advice can be taken seriously?

The panel is 12-strong at present. The constraint on the size and membership of the panel is in Clause 7, which states,

"The Authority must make and maintain effective arrangements for consulting practitioners and consumers on the extent to which its general policies and practices"—

that is, what it does—

"are consistent with its general duties under section 2".

If it was seriously skewed in favour of particular sectors, or indeed, missed out certain absolutely essential interests, one could doubt whether it was effective. Beyond saying that it must be effective, the Bill does not seek to prescribe its size, composition, times of meeting or any of those things which a panel might do. We should be accused of over-regulating by far if we were to seek to make the kind of provision implied in some of the comments noble Lords are making.

Will the Minister make it perfectly clear to the noble Lord, Lord Peston, that the panel is indeed intended to represent the interests of practitioners? It is not there simply as a body to be consulted. It is perfectly proper that it should say, "We don't like this and we don't like the way you're doing it. Will you now make changes?". In a sense, it is a hangover from the earlier system of what was called, quite wrongly, "self-regulation". It was never self-regulation. It was practitioner regulation. The practitioner panel is the element of that which remains; of the practitioners being in a position to make effective representations—and to report outside if necessary and to gain support for their views—against the way in which the Financial Services Authority is running its business. Is that not right?

I do not accept the noble Lord's historical description. I am not saying that he is right about why the practitioner panel was set up, but he is certainly right in saying that Clause 8(1) states that the practitioner panel represents the interests of practitioners and that Clause 9(1) states that the consumer panel represents the interests of consumers.

In that case, the Minister must surely recognise that, if those people are to represent the interests of a regulated industry, there will unavoidably be times when the industry feels that it is being unfairly constrained, trammelled, or treated and it will be at odds with the authority and pass complaints and advice to the authority. I then ask your Lordships whether it is altogether sufficient to leave it to the authority, which may receive perhaps quite valid and justified complaints, to be entirely in control—except for the need for the Treasury's approval of the appointment or dismissal of the chairman—of the way in which the panel operates; and, it would seem, the extent to which it can satisfy the requirements of listening to its advice? Should there not be something more prescriptive on the statute book after all?

We are back to square one. The British Bankers' Association will still exist. If it feels that it is being traduced or badly treated, it will say so. The panel is not a trade association; that is not its job. Its job is to provide effective arrangements for consulting practitioners and consumers on the extent to which what the authority does—the "general policies and practices"—is consistent with the general duties under Clause 2. That is not the only way in which practitioners abut on the work of the authority. The trade would not like it if it were.

That is for later discovery, but it seems that the Minister has entirely endorsed what my noble friend Lord Jenkin of Roding said; that the panel is a representative body. Indeed, the Bill states that it is,

"a panel of persons…to represent the interests of practitioners".

If practitioners see that their interests are being ridden over roughshod, I presume that it is their job to say so. If they are to say so effectively, they must have effective means of expressing that dissatisfaction. The simple question I am asking the Minister is not whether I am right in those assumptions; I cannot see how I can be wrong. I am asking him whether it is altogether prudent to leave the doorway through which representations come from the panel to the authority entirely under the authority's control.

We are discussing the membership of the panel in these amendments. Shall we discuss the other issues which the noble Lord is raising when we come to the amendments which deal with them?

They seem germane to the conversation that we have already had, but I am quite happy to resume at a later stage when I have had time to sharpen my arguments.

I have listened with great interest to noble Lords batting the argument back and forth, if I may say so. The purpose of the amendment was, as I said, to get a clearer view as to what comprises practitioners. I am conscious that the Bill, as presently drafted, deals with the practitioner panel using the words,

"to represent the interests of practitioners".

I am conscious of the words that the Minister used in saying that he did not want to be too prescriptive. Nevertheless, the Bill is prescriptive to a degree, because it sets out a number of categories which must be represented. The purpose of my amendment—in particular, the addition of "authorised persons"—was deliberate. It is important to understand that, where a representation issue arises in the corporate sphere, those who represent a corporation represent the corporation's views and, I suggest, probably disagree with them publicly in panels at their peril. There is a vast body of opinion and expertise called "authorised persons". The purpose of adding such a category was to enable the panel to have a different perspective from that of the corporate perspective. I ask the Minister to consider that point further. In the meantime, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

moved Amendment No. 71:

Page 4, line 5, after ("on") insert—

("(a) whether any proposed rules, codes, general guidance or statements, or amendments to them, are appropriate in light of the Authority's general duties; and

(b)").

I am puzzled as to why the noble Lord, Lord Saatchi, believes that this amendment is necessary. Extensive consultation requirements are listed in Clause 146, so that every time the FSA wants to make rules it has to take into account matters such as cost benefit analysis and the reasons for believing that the rules are compatible with the FSA's general duties as set out in Clause 2. Similar provisions would apply to codes of practice and so on.

It seems to me that the industry, consumers and everybody else will have ample opportunity under Clause 146 to comment on those draft rules. I would have thought that the practitioner panel and indeed the consumer panel, to which we shall turn in a moment, would be able to feed in views along with everybody else. I am puzzled as to why it is felt necessary that those two panels should be given a special position in terms of consultation when the provisions that the FSA makes under Clause 146 are so extensive.

I do not believe that the authority is backward in seeking consultation on its various procedures and plans. Since its introduction it has published no fewer than 45 consultation papers and has actively sought the views of the public, consumers and practitioners on what it is doing. Therefore, I feel that these amendments are not necessary and that we should be able to rely on the provisions contained in Clause 146.

My noble friend referred to the evidence of Mr David Challen, the chairman of the FSA Practitioner Forum. It is worth while reminding ourselves what Mr Challen told the Joint Committee. I quote from page 104 of the evidence in the second column:

"we ask ourselves what power do we have to enforce accountability in terms of the question we are addressing? The answer of course is none except the threat of public dissent. As things currently stand, however, I think we will exercise real influence. The trouble of course is that arrangements have to be inspected for their durability not just in relation to the present incumbents in the job".

We have to look at that. At the moment it is working well and there is delight, in which I join, that it will be statutory. We have to have regard to what may happen. In other walks of life one has seen that people who have substantial regulatory powers come to think of themselves as, not immune to criticism, but certainly as not having to pay too much attention to it. In relation to this panel—the same can be said of the consumer's panel where there is probably common interest—a way has to be found whereby the authority can be made to listen. As I understand it, this group of amendments is intended to make that more explicit. I believe that if we accepted these amendments we would reflect Mr Challen's concerns. I hope that the amendment will be pressed.

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.

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".

and that there should be provision for informal advice which should not be the subject of a full disagreement or discussion between the panel and the authority and that the normal traffic of every day would be without that sort of procedure. However, if there were a major issue on which the panel felt that there were strong views and that the authority had not taken sufficient account of them, it should give formal advice and the authority should then be required to give a formal reason for rejecting that advice.

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.

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.

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 clay 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.

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".

Under subsection (4) it states,

"Before making the proposed rules, the Authority must have regard to any representations made to it in accordance with subsection (2)(d)".

Furthermore, in subsection (5) it states,

"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 he 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.

I am grateful to the Minister for giving way. Does he agree that subsection (5)(b) simply allows the authority to say, "We disagree"? As the Minister says, I have spent a good deal of my life answering some of these questions. The skill, as we know, of some of my former colleagues in giving an answer without giving an answer is one of the things we are brought up to do. That is my worry.

We are too close to this. I experience difficulty in getting the Treasury to answer questions which I am asked in parliamentary terms and wish to answer straight. There is reluctance sometimes to do that. But it would be difficult for the authority to do it. It would get itself into public trouble, particularly after this debate, if it ignored the representations made to it, particularly by panels.

Finally, I turn to Amendment No. 279. Clause 404 specifies the procedures applying to powers under the Bill that are exercisable by statutory instrument. The effect of the amendment would be to require the Treasury to consult the panels before making regulations and orders under the Bill. It would impose the same requirements on the Lord Chancellor when making tribunal rules for the purposes of Part IX.

There are two aspects to this. The first is whether the Treasury and other departments should be under an obligation to consult before making secondary legislation. I suppose one could argue that they should. But if we are going to do that, it should apply to all secondary legislation and it might lead to a considerable slowing down in government. The delegated powers to make secondary legislation by statutory instrument and the procedures applying in each case were examined in the Treasury's memorandum to the Delegated Powers and Deregulation Committee. The committee substantially endorsed the approach in the Bill and the Treasury subsequently responded positively to the committee's seventh report of 16th February 2000.

The Treasury does not believe it is appropriate or desirable for there to be a statutory duty to consult. The order and regulating powers are subject to the approval of Parliament and Ministers are answerable to Parliament for their actions. The considerations are quite different as compared with the arrangements for the exercise of delegated legislative powers by the authority. Of course, as a matter of policy and practice the Treasury, like other departments, seeks wherever possible and appropriate to consult those likely to be affected by secondary legislation. It will continue that practice under this Bill and some noble Lords will be aware that the Treasury consulted publicly on a number of draft orders that it proposes to make under the powers of this Bill.

The second part concerns the role of panels in consultation. I assure noble Lords that the Treasury, when consulting on draft statutory instruments, would be interested to hear any comments from the panels, just as it would from any other person. The practitioner and consumer panels are to be established and maintained by the authority under arrangements for consulting consumers and practitioners. They are created for a specific purpose, and that purpose does not include becoming a trade association or lobby group; they are there to advise and inform the authority. It would not be appropriate for them to have a special role in scrutinising the exercise by government of its legislative functions.

We have returned to the issue that was raised in relation to the previous group of amendments when we discussed what was prescriptive and what was too prescriptive. The Bill already permits the things that the amendments seek to achieve, but there is no need for them to be set in stone. The more we seek to set put what the panels must or may do, the more we serve to cast doubt on the ability of the panels to set their own agendas. I hope that the noble Lords will not persist with the amendments.

I hope that the noble Lord will not think me obtuse, but he has frequently illustrated in relation to Clause 146 how the authority is bound to consult and be open, and he has also referred to Clause 63. The requirements contained in Clause 146 are mostly internal to it, but the requirements to consult and to be open in Clause 63 appear to be entirely external to it. I would be most grateful if the Minister could remind me how the behaviour of the authority, about which he has given an assurance, is a requirement in statute under Clause 63.

I did not say that they were exactly the same, but the analogy is quite close. Clause 146 is about rules and Clause 63 is about statements and codes of conduct. Although the wording is not identical, the purpose is the same.

Clause 146 contains many requirements in relation to the authority's behaviour, but they ire not contained in Clause 63. I take it, therefore, that the Minister is looking to Clause 7 for the requirement in relation to consultation and openness.

The noble Lord will have to read Clauses 63 and 64 together. Clause 63 sets out the details of the code and Clause 64 sets out the procedure, including the draft, the representations and the response, in exactly the same words as Clause 146.

I am grateful to the noble Lord. I said that I was probably being obtuse, and indeed I was. My only purpose in again rising to my feet, apart from that embarrassing admission, is to say that Amendments Nos. 74A and 75A in the name of my noble friend Lord Kingsland have survived the defences of the noble Lord, and I hope that my noble friend will persist in them at some stage.

In trying to sum up this group of amendments, I should like to say that it is always a pleasure to see the Minister both inside the House and outside it but, having sat through nearly a day and three-quarters in Committee, I am beginning to wonder why he feels it necessary to come along. On the basis of his responses so far, he might just as well have popped along to Dixons and got a tape recorder and tape recorded the words "I am sympathetic to the amendments, but no".

This case in point is perhaps the most striking example of that approach. Each noble Lord who has spoken, with the exception of the noble Lord, Lord Faulkner, has supported the principle behind the amendments. In addition, two very powerful voices have spoken for the amendments: the noble Lord, Lord Burns, said that at the very least the FSA should publish its reasons and that there should not be a silence. He pointed out that if the Government do not feel an overwhelming need to give reasons to a joint committee for both Houses of Parliament in rejecting its recommendations, what possible hope does the practitioner panel have?

We do not need to speculate about the meaning of the words in the Bill because we have Mr Challen saying that it would be possible for a future administration to sideline the panel. That is the concern. I am not aware that Mr Challen has withdrawn that view. Therefore, I think that the Minister and the Government could give a more practical demonstration of their sympathy for the amendments rather than just warm words.

Amendment, by leave, withdrawn.

Clause 7 agreed to.

Clause 8 [The Practitioner Panel]:

moved Amendment No. 74C.

Page 4, line 21, at end insert—

("( ) The Authority shall provide such resources as it considers necessary for the effective operation of the Practitioner Panel.").

I welcome the opportunity to speak to Amendment No. 74E, which is grouped with the two amendments tabled by my noble friend Lord Elton.

Under the amendment there would be established a panel known as a small business practitioner panel, which would have to be established in the general duty to consult arrangements set out in Clause 7. I have previously drawn the attention of noble Lords to the need for the small investment business to be regulated with particular sympathy and a different approach than that accorded to a much larger entity. The amendment would put on the face of the statute a requirement for the regulator to have available a source of advice which could inform him of the likely impact of its proposals on smaller firms.

I contend that it is precisely those smaller firms for whom regulatory changes can have the greatest impact. A large institution can often absorb the cost of change with greater ease. The bureaucracy of regulation can often be adapted to its own internal bureaucracies. But a small business may find it much more difficult to accommodate a regulatory requirement and, at the same time, run a healthy and profitable enterprise. There may be ways in which the regulation can be adapted to meet the needs of the smaller business without compromising the objectives of regulation but, surely, the regulator needs to be aware of the implications of his proposals before he can contemplate remedial action.

My amendment would give the regulator a source of information and would require it to be used. I am, of course, aware that such a panel already exists. Its co-chairmen are actually on the practitioner panel. But I believe that the standing and significance of the small business panel would be greatly enhanced by appearing on the face of the statute. A clear signal would then be given to the regulator, and to the regulated community, that the needs of small business were going to be taken properly into account. I have already mentioned that the panel exists. It meets monthly; it has had seven meetings, the first of which was in May 1999; it has 13 members; and it is very ably chaired by Roger Saunders and Michael Quick. They have led the panel with great expertise and experience. As I said, both sit on the existing practitioner panel.

I seek to entrench what is already existing practice and, as I understand it, welcomed by the present chairman of the FSA. The panel works very well with the staff of the authority. It has on it representatives of the IFAs. Perhaps I may add here how much I appreciate the references made to independent financial advisers. As Members of the Committee know, I speak as chairman of the Association of Independent Financial Advisers. Under recent work carried out by IFA Promotion, those with fewer than 10 employees represent 86 per cent of all the firms. I have set the limit here as being,

"businesses which employ fewer than fifteen persons".

I hope that the Minister will concede that not only does this work very well in practice but also that it should not be something that is subject to the whim of the FSA. It should be placed clearly on the face of the statute.

As I said, a practitioner who runs a small financial services business does not have the time or the resources to devote himself—as the noble Lord, Lord Faulkner, reminded us—to 45 consultation documents. Although he welcomes them and has a very good dialogue with the regulator, he cannot spend the time that others may be able to devote to so doing. The effect of regulatory action can have a disproportionate effect on the success and survival of that business. Therefore, it seems only reasonable to have a mechanism in place for assessing the impact upon the smaller business and for recognising it on the face of the Bill.

Members of the Committee are very much indebted to my noble friend Lord Elton for having drawn attention to the need to have such panels properly resourced. That will have a major impact on the panel's effectiveness and its ability to communicate the concerns of practitioners. It will also help it to maintain a public profile.

My attention was recently drawn to a survey of practitioners, which found that only one-quarter of small organisations and one-third of chief executives had even heard of this non-statutory practitioners' forum. It must have the resources to tell the industry what it is doing, what representations it is making and what impact it thinks it is having. The worth of its annual report, which it intends to publish, will equally be subject to its having enough resources properly to do so.

At present, as no doubt the Minister will tell us, the forum has no budget. It has no staff and all its activities are being paid for on an ad hoc basis by agreement with the authority. This leaves the forum—and, indeed, if it continues, this will also apply to the panel—entirely dependent on the largesse of a body towards which it is meant to adopt a pretty arm's length relationship and of which it may from time to time be extremely critical. Its annual report admits that it is not equipped to comment fully on all the issues under consideration by the authority.

We now have an opportunity with this Bill to put some of these things right. I do not know whether the amendments of my noble friend achieve that aim. However, reinforcing the points made on the previous amendment, if this body is to succeed—this app lies equally to the consumer panel as it does to the practitioner panel—it must have the resources to enable it to be effective. If such a panel is simply dependent on what it can get from the authority, I fear for its influence. I hope that the Minister will feel able to comment on the issue.

I should like to lend my support to the amendment proposed by my noble friend Lord Hunt of Wirral. I have some scepticism about the desirability of a panoply of panels with resourcing and functions prescribed in this way. I fear that such panels will just end up creating more delay and bureaucracy without having any consequent impact. I would favour a much looser requirement for the FSA simply to consult all those who have interests. That would save a great deal of wording in the legislation.

However, if we are to have them, the danger is that panels constituted as simply representing practitioners and consumers would tend towards answers that are in the interests of large practitioners and consumers as a mass market; and, indeed, possibly bring forward solutions that are adverse in cost and competitive terms to the smaller practitioners where, as my noble friend said, the regulatory burdens are often heavier. Therefore, I strongly support the notion that one of those panels should be charged with looking after the interests of small practitioners so as to give them a particular voice.

The amendments before the Committee relate to the arrangements for the funding of the practitioner panel and the structure of the arrangements for representing the interests of practitioners. Perhaps I may start with Amendment No. 74C, which deals with funding. This is really unnecessary. There is a clear obligation on the authority to consult under Clause 7. When taken with the requirements under Clause 8, it is clear that that obligation will include the provision of funding where that is appropriate or necessary. If the authority failed to ensure that adequate funding was available, it would be failing to meet its obligations under these provisions.

The same applies to the arrangements for the practitioner panel as for the consumer panel under Clause 9, although I noticed that the noble Lord did not seek to provide amendments to deal with the consumer panel. The difference—and this may be the reason why the noble Lord has not done so—is that the consumer panel originally had an allowance for three full-time equivalent staff and now has an allowance for four full-time equivalent staff. But, as has been said, the practitioner panel does not have its own budget. The members are pro bono and any commissioned research is paid for by the FSA. It has in fact commissioned research of the order of £100,000, which is not insignificant funding for the panel.

However, if the issue is whether there should be a statutory requirement to have funding for the panel, I am afraid that Amendment No. 74C would not provide it. It states,

"The Authority shall provide such resources as it considers necessary".

That is a matter for the authority, not the panel.

I made it clear that this is a probing amendment to find out how the funding is to be achieved and that at the next stage, if it is appropriate, we can produce something which will actually work.

I am happy to return to the real situation; namely, that where funding has been requested, it has been made available and there has been no difficulty with that. The Joint Committee recommended that the panels should report annually on the adequacy of their budget. We have no difficulty with that. There is no need for the Bill to spell it out, but the authority has undertaken to include in its annual report a report from the chairman of each of the panels which contain—

Has my noble friend seen the report from the consumer panel which reached a number of noble Lords today, which points out that its budget for the 13 months to 31st December was £538,000? It states modestly that it spent only £334,000. There is no hint at all that the panel is under-resourced. It states,

"We have provided much 'behind-the-scenes' policy advice to the FSA's Board and staff before the FSA embarks on full public consultation and before it reaches final decisions. In addition, in 1999 we made 19 formal responses to consultations by the FSA, Government, Parliament and trade bodies. We publish all our responses and research".

Surely this is not an under-resourced body or one that is whining for more money.

I knew that but I was hoping not to tell the noble Lord, Lord Blackwell, as he does not want all these panels and all this formality and prescription. However, the damage is done now.

The other two amendments in the group address the question of the representation to the authority of the views of particular groups. Amendment No. 74D addresses the way in which the practitioner panel might be advised on the way in which the authority carries out its functions. It envisages a tiered approach of consultants and advisers who are able to reflect the interests of particular groups within the practitioner community.

In the light of what I have said about the fact that the authority has funded research for the panel to the extent of £100,000, I hope that it will be recognised that there is no difficulty as regards spending money where that is necessary, but that the kind of formal approach proposed in Amendment No. 74D goes too far. There is no reason why the practitioner panel should not consult industry representatives. Indeed, where members of the panel do not think that they have enough expertise, it would be sensible for them to speak to those with a more direct interest. The authority itself might consult relevant bodies directly. It might, for example, talk with the Association of British Insurers about matters directly related to the insurance industry. Nothing in the Bill prevents the panel from doing any of these things. However, like the noble Lord, Lord Blackwell, we consider that we must avoid excessive bureaucracy.

Amendment No. 74E would put the small business practitioner panel on a statutory footing alongside the practitioner and consumer panels. The noble Lord, Lord Hunt of Wirral, was right to remind the Committee that the panel already exists and appears to be quite active. I would rather not say so in the presence of the noble Lord, Lord Blackwell, but there is a huge list of panels which the authority has set up. I refer to the Financial Advisory Group, the IMRO Training Standards Panel, the Regulation of Market Abuse Practitioner Group, the Handbook Advisory Group, the FSA Lloyd's Steering Panel and the Lloyd's Panel. I shall stop there, although the list is longer.

Surely the noble Lord has just demolished the whole case for having a big central panel, which I asked for earlier.

I have demolished the whole case for having statutory provision for these panels and a degree of bureaucracy in the way they operate which these amendments would introduce. I do not think that there is anything wrong with consulting. It could be done in the way the noble Lord, Lord Blackwell, suggests; that is, that the authority will have a duty to consult tout court. However, this is the way in which the current position has been interpreted, and surely that is right.

I return to the small business practitioner panel. Quite apart from the fact that there are other panels, I do not want to underestimate the important role of small businesses, which is as clear in the financial sector as it is in any other. As someone who has been involved with a small business all my life, I am well aware of that. However, the amendment would simply beg the question of what other kinds of people should have their own voice. I said earlier that I did not think that it was necessary for the practitioner panel to have representatives of every conceivable category of person who might be regulated by the authority. We should not place an obligation on the authority to create different statutory panels for every conceivable group of practitioners.

The arrangements in Clauses 7 to 9 were supported by the Joint Committee chaired by the noble Lord, Lord Burns. In response to a specific recommendation of that committee, the position of the panels has been enhanced by the addition of the requirement that appointment and dismissal of the chairmen should be subject to Treasury approval. We believe that we have the balance right. We believe that these amendments would be too prescriptive. I say to the noble Lord, Lord Saatchi, that I am sympathetic to his arguments, but I do not accept them.

I was immensely excited when the noble Lord, Lord Burns, said how important it was that those who take part in a consultation exercise should occasionally receive an echo from the authority that they seek to address. I, for one, greatly admire the skill of the noble Lord, Lord McIntosh. However, his remarks gave the impression that he had never heard of Jones. Jones is an important person in our country; everyone wants to keep up with him. If one finds that one is excluded from a list of people to be consulted, or one is excluded from a list of panels, one will probably feel rather affronted and upset. One finds it hard to explain to one's constituents how one allowed the Government to get away with that and not to accord one the recognition that they have given to everyone else.

I am not against the Bill; it is a splendid attempt to deal with a problem. However, it constitutes a fairly large affair now. I do not think that I am breaking all bounds of forecasting when I say that it is quite likely to be a fairly potent and fertile breeder. By the time it is finished, the rules, procedures, customs and so on that it establishes will constitute a large forest for people to find their way around. Some lawyers will enjoy that very much, but the ordinary citizen will not. I see the difficulty that the Government are in, but I should like to be given some indication of how they intend to get out of it. Having produced a huge amount of material, the Government suddenly say, "Goodness, this is getting awfully complicated. We are getting into a bureaucratic tangle and we must stop it". No one else is allowed to turn on the tap. No one else is allowed any of the largesse which has been handed out so freely to others. I believe that many people will have considerable grounds for complaint. I know that the noble Lord wishes to be fair to everyone. I am trying to express my profound sympathy with his efforts and my earnest hopes that he will be successful.

I am grateful to the Minister for reading the list of practitioner groups that have been set up, and for stopping when he did! However, I was reminded of how consultation was conducted in the past. I am thinking particularly of NEDO, as was, and the wonderful principle—that no one could disagree with—that the Government should consult with industry and with the unions. Then we had little Neddys and, before long, we had hundreds of people spending hours in all kinds of sector groupings, until one day someone said, "Does anything practical or useful come out of any of this?" The answer was "No". Noble Lords on both sides of the House may need to reflect more on what is being set up and its value, and come back to the matter at a later stage.

I am disappointed with the Minister's words. I hope he will not think me unreasonable, but, on behalf of the small business sector—particularly as the noble Lord has widespread experience of that sector—I take some offence at the amendment being dismissed on the grounds that if one extends a panel to small businesses one extends one to every conceivable group of practitioners. Surely the Minister accepts that small businesses have always received special status, not only in legislation but in directives and regulations from the European Community. In that capacity, what is working well must continue. Although I recognise why he is reluctant to accede, I think that when the moment comes I shall test the opinion of the Committee.

I am not sure whether my noble friend intends to test the opinion of the Committee at this stage or the next stage, but I should like to say a word in his support. I have been engaged with very many small businesses—and with very many very small businesses—in the regulatory field of finance for a number of years and I have witnessed very closely the distress that some of them labour under with enormous amount of regulatory work, paper and returns required of them under the relatively small agency of the Securities and Investment Board. The FSA is many times bigger and more powerful. It is proper that small businesses should be accorded special protection—or at least the notification of a special interest by Parliament in their affairs—because bureaucracies eat up small businesses quicker than anything.

Turning to my amendment, I should like the noble Lord to tell the Committee two things. First, why should the passage, read out with such pleasure and enthusiasm by the noble Lord, Lord Faulkner, about the good conduct of the authority now, when it is a voluntary agency, make us feel that there is no need to ensure that that good conduct continues after it has become a statutory body—any more than the good conduct of a private mine owner should have been enshrined in the statute which nationalised the mines many years ago?

Because the authority will have a statutory duty to maintain the panels listed in the statute.

Yes, it can maintain them, but will it maintain them to the standard to which they are accustomed—as I remember asking prospective sons-in-law sometimes? In legislation one must not assume the best but prepare for the worst.

There should be a source of funding. My noble friend Lord Jenkin of Roding is right that that source should not ideally be in the hands of a body with which this panel might quite possibly be at odds. He gave examples of how the authority had funded research by the voluntary panel. Supposing the request was for research to verify a statement which the panel had made to the authority saying that the way it was behaving was grievously damaging to a part of one sector of the market, and the authority was not of that opinion. Would it as liberally provide the resources to make those inquiries? I doubt it.

The noble Lord looks horrified. He keeps thinking of an individual known to him as the conductor of all the affairs of the authority. We know no such person. We know not who will be there in five years or ten; we do not know who will be on the authority; indeed, we do not know who will be appointed to the panel. We are trying to prepare grounds for the proper conduct of an industry vital to this country, and that must be properly financed.

My second question is whether the noble Lord will remind the Committee whence this money comes? I know that he will tell us that we will be dealing with funding later in the Bill, but am I right in thinking that the money that has so far been liberally given is drawn from the practitioners themselves? How much will it amount to in the years to come? I give way to the noble Lord.

The answer to the first question is, as I said, that Clause 7 states that the authority must make and maintain effective arrangements for consultation. That is not a statutory requirement at the moment. The fact that the authority does so before there is a statutory requirement hardly leads us to think that when there is one it is likely to break the statute and refuse funding to either of the panels.

I am sorry. Again I am asking a question to which the noble Lord obviously thinks I know the answer. Whose money is it that the authority will be giving?

The noble Lord asked two questions. I had answered one and before I had a chance to answer the second one the noble Lord stood up again. That is his privilege—we are in Committee—but I should like an opportunity to answer the second question. The answer is that the Financial Services Authority is a company, limited by guarantee, which is funded by fees from the regulated community.

I am most grateful. The Minister made a small gesture. Like the noble Lord, Lord Peston, I read into his movement that he was sitting down when he was not. I am grateful for that answer.

I shall read with great interest the answers that we have had so far. I reserve the right to come back to this issue at Report stage. In the meantime, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

moved Amendment No. 74E:

After Clause 8, insert the following new clause—