Baroness Noakes (Con)

My Lords, Amendment 77 calls for a review of the regulatory principles in Section 3B of FSMA 2000. I am grateful to the noble Lord, Lord Vaux, for adding his name to it. My amendment calls for the Treasury to review the regulatory principles and, in particular, identify those that are duplicated or no longer required. As we have already discussed in outline and will discuss further in a later group next week, FSMA currently requires the FCA and PRA to have regard to the regulatory principles in their general functions, but Clause 17 downgrades this by confining them to the new five-year strategy documents. When your Lordships’ Financial Services Regulation Committee reported last year on the secondary competitiveness and growth objectives for the PRA and the FCA, it took eight pages of our report to describe the web of objectives, principles and “have regards” that the regulators have to live with. In fact, the eight pages covered only some of the “have regards”. The FCA told us that it had around 80 “have regards”, on top of the Chancellor’s remit letters and the regulatory principles themselves. The PRA said that its number was 25. My Amendment 77 should probably have required a review of all the “have regards”, and if I bring it back on Report I may well extend it to that. In Committee, my amendment is focused on the regulatory principles, because, via Clause 17, these have become a contentious part of the Bill. There are currently eight regulatory principles in Section 3B, plus a vestigial reference to a ninth, and they include some very significant ones, such as proportionality, which we will also be discussing later in Committee. There were seven in the first iteration of FSMA, but they have been changed many times over the years and only three of the current principles directly read across to the original list—namely, efficiency and economy, proportionality and consumer responsibility—which suggests that not all the Section 3B principles are enduring in nature. We should expect the regulatory principles to represent the essential elements of how regulation should operate in practice and have some form of enduring quality. It is relatively clear that Section 3B of FSMA does not meet that test.