My Lords, I congratulate the Minister on his patience and courtesy in always being the Minister to answer my criticisms of the Bill. The patience and courtesy with which he meets my generosity in this regard fairly ought to be shared at some stage by the noble Lord, Lord Deighton.
The purpose of the amendments is to raise with the House and the Government two broad questions: first, on the need to avoid regulatory overload; and, secondly, on the need to ensure the adoption of robust regulatory principles in dealing with different sectors of the banking world. The amendments are directed at card payment systems, not the interbank arrangements to do with BACS, CHAPS, the clearance of cheques and so on, which have caused a great deal of difficulty.
First, on regulatory overload, this system, described in more than 60 sections, will be under the overall control of the Financial Conduct Authority, albeit the payment system regulatory structure will have its own chairman and board. It is a matter of real concern to note how much the FCA is being given to do in so many different regulatory contexts. This is a concern, first, as to manpower; secondly, as to skill and competence; and, therefore, thirdly, as to effectiveness.
Yesterday afternoon, in one of our debates, it was pointed out to me that the banking sector, or the financial sector, will pay for these regulatory costs. That is to state the obvious. The reality is, I assume, that the regulatory system hereby created will not be permanently in debt and bailed out annually by the financial services sector. Rather, it sets a budget a year ahead and the financial system pays it at the end of the second year in arrears. That gives the regulators two years of a relatively fixed budget. So, in determining how much responsibility to give to the regulators, including the Payment Systems Regulator, particular regard should be had to their capacity to carry out the job effectively.
It is therefore very important for the regulatory principle that the FCA and the PSR should not be given jobs they feel they have to do when present circumstances do not require them to do them.
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The card payment system works whereby you go into a shop and use your own bank card to acquire goods, the merchant bank and your bank exchange information, and the transaction is completed. The way it is carried out is that MasterCard, Visa and Amex act as the intermediate processors. It involves £140 billion a year of purchases in this country. We are number one in volume of e-commerce. The vast majority of the consultation rounds that took place in 2012 and 2013 was directed at bank lending arrangements such as I have described, CHAPS and so on, not the card payment system. Indeed, references to that system in the consultation papers were modest in the extreme and gave no real cause for any present concern. As a result, no serious regulatory impact assessment has been made of how these new powers will affect our card payment system. In the rush to put so much into this Bill in order to make sure that everything is covered, the card payment has been put in on the side, so to speak—just in case and while we are at it—not because of any present need.
In the circumstances, good regulatory principles would suggest that where a regulator is given the task of managing a sector where at present there is no significant risk, the task should be circumscribed. Do not create teams. Do not multiply unless the evidence and the circumstances require it. If you are going to interfere in a system of such great commercial importance to ordinary life in this country, make sure that the evidence is strong enough, be transparent about it and involve all those who play a part in making the system work, so that the consumer is properly looked after. Do not lurch from one temporary, superficial assessment to another inadequate reaction. This is serious stuff. If the card payment system were to be adversely affected by ill judged and inadequately prepared financial regulatory systems, in terms of their competence, our economy would rapidly suffer, as it has in several countries where people have tried to interfere without proper cause.
I am not here simply to describe the card payment system. I have put these amendments down to ensure that the regulators are not drowned in a series of things that they are expected to cover when circumstances do not presently require that. I am not objecting to an ultimate designation power provided that it is based on proper evidence which is fully debated at the time, or to the exercise of proper regulatory powers if that step becomes necessary, provided that the same regulatory standards are applied. Finally, if the objectives of all this are to promote competition and innovation, as the statute states, that also should be a high regulatory principle to be observed by the people who will be carrying out the regulation. We are being put under pressure to pass this Bill in order to ensure that the public are safeguarded. Regulation at this level is of the highest national importance in order to remedy that which is wrong, but not to overload the system by telling people to get ready to deal with that which is not yet wrong, nor is there any evidence that it might be. Yesterday, I was talking about anti-money-laundering and the fact that there were only 22 people dealing with it. The answer is not that the financial services sector will pay for it; the answer is to make it efficient and have an Act when it is necessary.
I turn briefly to the amendments, which I shall not go into in detail. The first batch of amendments, dealing with Clauses 35 and 36, relates to designation. If the regulator feels that he must interfere, he must do so by reference to clear principle and good evidence. The second set refers to process—to make sure that everybody is properly involved and consulted. The third set of amendments aims to promote competition and innovation. I assume that means that the regulator is not just a disciplinary entity: it has a range of disciplines, where required, to improve competition and innovation. Is the PSR equipped for that? Do we know—I certainly do not—how expertise is to be introduced into it to meet its statutory objectives? I do not want to be unduly critical of the Government. It is a major piece of legislation of great public importance, but it is our responsibility to ensure that it is made to work for the benefit of the public.
I close on a reasonably reassuring note: the sentiment expressed by the Government is that the PSR, and above it the FCA, will do their best to produce the best kind of regulatory activity. We are really here to talk about regulators following principles, not just rules. I hope that the Government, in reply, will seek to satisfy the House that in this particular area of card payments, safety from commerce, high principle and effective regulation will be the order of the day.