Contribution
My Lords, I will speak to Amendments 70, 71, 73, 74 and 76 in my name. I thank the noble Lord, Lord Vaux of Harrowden, for adding his name to Amendments 70, 73 and 76.
At first sight, Clause 16 looks like a bit of “motherhood and apple pie” legislation. After all, what is not to like about five-year strategies, which are what most businesses do in the UK and internationally? A closer look at Clause 16, however, reveals a bit of a mess. The position we have at the moment is that the PRA is required to determine a strategy, and it does this by way of annual business plans. There is no requirement in statute for the FCA to do anything but it has routinely issued annual plans; last year, it issued a five-year strategy as well. So this is clearly a slightly messy area, and the Government are right to try to tidy it up.
I fear, however, that the solution in Clause 16 will make things worse. First, the requirement for a strategy seems to be a static one, requiring a five-year strategy to be set and then replaced when the five years have nearly run out. The subsections of new Sections 1JZA and 2E, to be inserted by Clause 16, envisage that the strategies can be revised or replaced, but it is unclear what the trigger for that is other than when the Treasury issues new recommendations in a remit letter. In the business world, strategies are kept under review and are often revisited annually—certainly more often than every five years. I believe that Clause 16 needs a positive requirement for the regulators to keep their strategies under review, if only to confirm their continuing validity. My noble friend Lord Ashcombe’s Amendments 64A and 73A would partly get round the problem by shortening the period, but they still envisage a static strategy; it would be three years and then, at two years and nine months, you would do another one, which is not a satisfactory approach to drawing up strategies.
The Explanatory Notes explain that these strategies are expected to be
“high level and focus on the FCA’s and PRA’s top priorities”.
That is fine, but it is not very useful for the regulated firms that want to know how the regulators’ actions will affect them in practice. If these five-year plans are anything like the FCA’s five-year strategy—all 20 pages of it are full of drawings, photographs and big letters—firms will be very disappointed. The FCA’s four priorities of being a smarter regulator, fighting financial crimes, supporting growth and helping consumers are so high level that they mean nothing to regulated firms.
At the moment, both regulators annually set out the detail of what they plan to do for the following year. Can the Minister say whether this will continue once the Bill becomes law? There will be no requirement in law for either the FCA or the PRA as a consequence of the Bill, and, given the lightweight content of the FCA’s five-year plan and the Government’s intentions for only high-level strategies, it would be a serious error if the regulators were not required to publish their detailed annual plans as well.
These are deficiencies in Clause 16 but they are not covered by specific amendments, mainly because, when I drew up my amendments, I was working on the naive premise that asking for a five-year strategy was a sound, if unexciting, proposition. As I have explained, I now see that as flawed in many ways. For this reason, I fully support the Clause 16 stand part notice in the name of the noble Baroness, Lady Bowles; I am sorry that I did not have time to add my name to it.
On the amendments that I have tabled, I will start with Amendment 70, which requires the FCA’s strategic priorities to include its secondary competitiveness and growth objective. The equivalent provision for the PRA in new Section 2E, inserted by Clause 16, says that the strategic priorities of the PRA include secondary objectives, whereas the drafting of new Clause 1JZA for the FCA does not extend to the secondary objectives. The Minister has helpfully written to me today to say that the Government sort of accept that but that they will work up their own amendment. I thank him for that and I look forward to seeing the text of that ahead of Report.