Regulation of Financial Services (Land Transactions) Bill

As we develop our better regulation agenda, we consider the lessons to be learned from the global marketplace. Where there is a case of regulation being done better and more effectively, we should of course take account of it. However, it is important to place on record the fact that, in any international dialogue about best practice in regard to financial services, the FSA comes out very positively indeed in any analysis. The point that I have been making since I got this job is that it is not inconsistent to say that, while the FSA is an excellent example of best practice in regulation, there is always room for improvement and always room to work with the industry to consider better regulation, both in terms of domestic regulatory measures and in terms of those that emanate from the European Union. In this country, the FSA, the Government and the industry have been quite successful in ensuring that the financial services regulations that emanate from the European Union are consistent with many of the principles that we want to see applied in terms of proportionality and best practice. That does not mean that we always win the argument, but I think most people would accept that, largely as a result of the respect that the FSA commands, we have been able significantly to influence the agenda relating to the regulations for the financial services sector that come from the European Union. To respond further to the hon. Gentleman, we are keen to look at the regulatory bodies in the United States, as well as globally, in terms of achieving a level playing field in the regulation of the financial services sector. That is not easy to achieve, and there is an argument that liberalisation and the opening up of the market should be the greatest priorities for financial services. However, we certainly want to see an increased emphasis not only on internal regulatory systems within the European Union but on looking outwards to our relationships with the United States and with the emerging economies of India, China and elsewhere. The better regulation agenda needs to be considered domestically, as well as from a European Union point of view. It also needs to be considered in the context of the global market and the global economy. We are rightly proud of the leading role that Britain plays in that regard. There is always a difficult balance to be struck: we must protect the interests of consumers but not stifle the innovation of business, particularly in the financial services sector. We know the tremendous contribution that the sector makes to the success of the British economy, and long may it continue. I therefore hope that the hon. Gentleman is reassured by my response to his extremely interesting question, about which I may speak to him on another occasion. The issue of the costs of regulation, which has been raised by the hon. Member for Twickenham (Dr. Cable) previously, has been the subject of some discussion. It is important to know that the costings in the published regulatory impact assessment remain estimates, as I have said before. They are derived from figures published by the FSA in relation to the existing mortgage regime, and are based on future projections of market size, which have left considerable room for dynamic market growth. In addition, the precise nature of the regime that will apply to home reversion plans and ijara products will not be finalised until the FSA has consulted on its detailed rules. As it is statutorily obliged to do, the FSA will issue a detailed cost-benefit analysis alongside its consultation on the detailed rules. That CBA will enable us to further refine the costings in our RIA currently, and it is possible that in the wake of a more detailed market analysis and definition of a tailored FSA regime, the projected costs of regulation will fall. While there is always cost to regulation—to be fair, hon. Members on both sides of the House have accepted that in this context—it is important to remember that in this case the industry is willing to bear that cost, because of the benefits that it believes it will bring to the home reversion market in terms of improved consumer confidence. In the industry’s view, that will allow the reversion market to continue its dynamic growth. A deeper and more liquid market in these products should in turn create new opportunities for market entrants. I would therefore encourage Members not to see regulation in this case as purely a deadweight cost to industry, because it clearly has potential benefits and can reduce reputational risks for lenders. I therefore remain convinced that, on balance, the benefits of regulation, both in terms of consumer protection and in terms of securing the confidence necessary for future market growth, outweigh the projected costs. Having briefly outlined our discussions in Committee, let me conclude by reaffirming that the Government believe that this Bill will benefit both consumers and providers of home reversion plans and ijara home finance products. Regulation, as facilitated by the Bill, will help people to make informed choices when purchasing such products and offer valuable consumer protection in the event of any mis-selling. It will also ensure a level regulatory playing field in the equity release market and should generate the increased consumer confidence that is essential if this market is to continue to grow. On that basis, I would ask Members to support the Bill. I commend it to the House.