The proposed Financial Services Bill still advocates lumping bank and insurers together in regulation. That just won’t wash, says Lord Hunt
The general election is suddenly very close at hand and it will soon be time for parliament to go into what’s known as ‘wash-up’. Despite the recent headlines about allowances, expenses and lobbyists, this does not refer to some ritual expiation of sins, but to the procedure we use to deal rapidly with unfinished parliamentary business once an election has been called.
One or two of the bills currently being considered in parliament may make it onto the statute book before Gordon Brown fires the starting pistol, but most won't. They will go into the very brisk wash-up procedure, in which only legislation the opposition is willing to support will make it through.
Some bills may go down in flames, whereas others will survive, naturally having had substantial parts shot out at the behest of the opposition. One such bill is likely to be the controversial Financial Services Bill, which has been through the Commons but seems unlikely to complete its passage through the Lords in time to avoid wash-up.
Gordon Brown’s last Queen’s Speech was unusually political and many – or even most – of the bills within it contain at least one booby trap, designed to catch out an unwary opposition.
Those aspects of the Financial Services Bill that deal with the pay of bankers amount to precisely such a trap. I am certain ministers would love to go to the country in May blaming others for their own failure to clip the wings of the highly paid and little-loved bankers whom so many people blame for the recession.
Other aspects of the Bill have earned fewer headlines, but they too must be weighed up very carefully indeed. The proposal to amend section 404 of the Financial Services and Markets Act (FSMA)?2000 has won both plaudits and brickbats from different quarters.
Furthermore, the CBI in particular has campaigned very effectively against the clauses in the FSMA dealing with possible class actions.
In some respects, the bill would entrench a tripartite regulatory system that my own party has pledged to abolish. I strongly support the proposal of bringing the FSA under the aegis of the Bank of England, and I am delighted by the growing recognition that the insurance and banking sectors are very different from one another, and should be regulated in distinct and complementary ways.
The insurance sector was not the cause of the recent economic crisis. Indeed, I doubt we would have survived without the strength and durability that the insurance industry was uniquely able to provide. Therefore, it would be quite wrong for it to be tarred with the same brush that is being so vigorously applied to the banks.
There won’t be time during wash-up to make all these points in detail, but they have already been heard and understood by senior figures at Westminster.
Meanwhile, even though the polls have been sending out mixed signals in recent weeks, I am an old enough hand in this game to know that there is only one poll that really matters – the real poll, almost certainly on Thursday 6 May. IT
Lord Hunt is a partner and chairman of the financial services group at national commercial law firm, Beachcroft.