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Investment Exchanges and Clearing Houses Bill

I welcome you as Chair of the Committee, Mrs. Heal. The drafting of the provision is subtle, and there is no disagreement between Government and Opposition about what we are trying to achieve. We have talked about the paradox of regulating to make sure that we have less regulation. Another paradox is that we wish to protect our regime—the measure is an act of protection—so that we can achieve a non-protectionist approach to ownership. We wish to be open and global rather than protectionist. The amendment is carefully worded, as it refers to"““the competitiveness of United Kingdom markets.””" It does not refer to institutions, firms or individuals. I accept that we judge the success of a global approach to financial markets by the breadth and the depth of the market, rather than the market share of a particular UK-domiciled firm. A less global, more protectionist view could be characterised as one in which we judge the successful competitiveness of the markets according to whether a domestic firm has a growing market share, even if that leads to a decrease in the depth and richness of global markets. We are concerned that if we accept the amendment, its language for competitiveness could be misinterpreted, and it could take us down the protectionist route. I accept the intention behind the amendment tabled by the hon. Member for Fareham (Mr. Hoban), but I fear that reference to the ““competitiveness”” of UK markets could be mistaken for a reference to protecting the market share of UK firms, individuals and institutions, which is contrary to what we are trying to achieve. The reference in proposed new subsection (4)(b) to"““the global character of financial services and markets””" captures our more open, global approach. The amendment would not add anything to what we are trying to achieve, and we fear that it could be misinterpreted in some circles. The hon. Member for South-West Hertfordshire (Mr. Gauke) was concerned about extra-territoriality, and he asked whether the reference to the global character of financial services meant that the FSA would be forced to accept excessive regulatory provision outside the UK by a UK-recognised body. The test in the Bill for excessive regulatory provision is whether such provision extends beyond UK or European Community law, and whether it fails to pursue a reasonable regulatory objective or is disproportionate to such an objective. That test cannot be levelled up just because a foreign jurisdiction applies an excessive standard that it characterises as global. It is not for the foreign regulator to make the judgment, and we will not level the test up. It is for the FSA to make the judgment under the Bill and the rules that it sets. We do not believe, therefore, that there is such a risk.