My Lords, I thank the noble Lord, Lord McKenzie, for tabling these amendments to Clause 5, which provides for the Secretary of State to issue guidance and directions to the single financial guidance body about the exercise of its functions. It requires the body to comply with any directions and have regard to any guidance, and requires the Secretary of State to publish any directions.
Amendment 47A would require any guidance to be made by statutory instrument subject to annulment in pursuance of a resolution of either House of Parliament. Amendment 48 would place an obligation on the Secretary of State to publish any guidance.
Clause 5 facilitates a sensible working relationship between the body and the sponsoring Minister. It allows the body flexibility and independence in managing its business but balances this with a recognition of Ministers’ responsibilities to Parliament. Conferring functions on an arm’s-length body involves recognition that operational independence from Ministers in carrying out those functions is appropriate. Nevertheless, the sponsoring Minister remains answerable to Parliament for the activities of the body, including any failures.
I believe we are in agreement that creating the body is the right thing to do. I also agree with the comment of the noble Lord, Lord Stevenson, at Second Reading that it is important that we learn from the experiences with the Money Advice Service about what worked and what did not work successfully. One issue highlighted by the independent Farnish review of the MAS in 2015 was that the MAS’s formal accountability regime needed to be strengthened. The review concluded that it was not possible for any party, including the FCA and HM Treasury, to hold the MAS fully to account, either for the way it discharged its role or for the money it spent.
In setting up the single financial guidance body, it is therefore important that a balance is struck between enabling the sponsoring Minister to fulfil his responsibilities and giving the body the desired degree of independence. An arm’s-length body needs to have a degree of autonomy in order to deliver effectively but it also needs to have a good and constructive relationship with its sponsoring department. Arm’s-length bodies represent an extension of the department’s delivery, so it is important that we think about a department and its arm’s-length bodies as a total delivery system. Building trust between the department and the new body—this is critical to the point—will be essential in enabling the right balance to be struck between the body’s autonomy and the Government’s accountability.
In drafting Clause 5, and the Bill more widely, we have sought to provide a legislative framework that allows the body flexibility and independence to make the most of expertise and innovation in managing its business, and to balance that within the context of it
being a public body. The single financial guidance body will be a non-departmental public body, responsible for supporting the delivery of government policy.
Clause 5 provides for the Secretary of State to give guidance to the body and requires it to have regard to that guidance in exercising its functions. Amendment 47A would require regulations to be made by statutory instrument, subject to annulment, in pursuance of a resolution of either House of Parliament. I consider that this would represent a degree of scrutiny unwarranted by the non-binding nature of the guidance in question.
Guidance provided by the Secretary of State to the arm’s-length body could cover myriad topics. Guidance could also be sought by the body; it is not necessarily just given. The relationship between an arm’s-length body and its sponsoring Minister and department is critical to the successful delivery of its functions. As in all professional relationships, whether between a sponsoring Minister and an arm’s-length body or a board and its executive team, being able to seek and give guidance in a straightforward and candid way will be important.
Having regard to guidance does not mean that the body must act on that guidance. For example, in commissioning or contracting services, the single financial guidance body may seek guidance concerning government procurement rules or the interpretation of those rules. Guidance may also be given or sought by the body to inform business planning. For example, where government develops a new policy that could affect the services it provides, the body will need guidance to enable it to prepare for potential change. Noble Lords will recall that the Pension Wise guidance service went live at the same time as the pension freedoms were introduced. This required considerable advance planning and service design.
In all those circumstances, it would be disproportionate to expect a statutory instrument to be drafted and for Parliament to scrutinise it. Also, the Secretary of State publishing guidance would not be consistent with the informal nature of much of the guidance that may be given. It would inhibit the critical relationship between the sponsoring Minister and the body supporting the delivery of government policy, and it could deter the body from seeking guidance, or the Minister giving guidance when it would be more sensible to do so. Further, a requirement to publish a guidance could lead to a position where the body feels obliged to respond publicly should it not act on the guidance, or feels under undue pressure to follow the guidance provided regardless whether it makes sense or is appropriate in the circumstances.
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However, where it is necessary, Clause 5 provides for the Secretary of State to give directions to the body and, in these circumstances, the body must comply with any directions and the Secretary of State must publish them. This is appropriate in terms of governance and accountability. For example, if the body was not dedicating appropriate resources to debt advice, was spending too much on advertising or was failing to act on justified recommendations by the FCA—these are among a number of things we considered on the
second day in Committee—in its review of its body standards, this power enables the Secretary of State to require the body to act.
The measures in Clause 5 facilitate a sensible working relationship between the body and the sponsoring Minister. Alongside other measures in the Bill, they provide a legislative framework that allows the body flexibility and independence in managing its business and balance that in the context of it being a public body responsible for supporting the delivery of government policy.
On the basis of that long, full explanation—for which I make no apology—I urge the noble Lord to withdraw his amendment.