---

Financial Services and Markets Act 2000 (Regulated Activities) (Amendment) (No. 2) Order 2007

I am grateful to all who have contributed to the short debate and to the two noble Lords in particular. I am also grateful to the noble Baroness. I was quite shocked when the noble Lord, Lord Newby, suggested that he had underestimated the noble Baroness’s ability to find fault with government proposals. I certainly did not underestimate her, nor did I fail to predict that gold-plating would emerge at some stage in the discussion, as well as the Financial Services Authority and Northern Rock. The noble Baroness has deployed her case with her usual skill but, as I hope to convince the Committee, not with sufficient conviction. Let me make it absolutely clear that when we implemented the directive in 2003, we wanted, as it will be appreciated, to keep the regulatory burden at an absolute minimum, which is why we did not include provisions covered by the order. We brought forward the order on the basis of the weight of evidence that has emerged over the three years. We did so not because we are enthusiastic about adding burdens to industry—far from it; the Government stay committed to light-touch, minimum regulation—but because we must regulate where discerned and defined difficulties occur. The noble Baroness suggested that the Treasury Select Committee in the other place expressed little anxiety about the position. However, it said: "““In the context of meeting the challenges that face the travel insurance industry and those who sell travel insurance, we observe that there is evidence to suggest that problems in the sales process are likely to be accentuated when sales take place away from the professional regulated insurance environment through an intermediary such as a travel agent””." That was the burden of the remarks made by the noble Lord, Lord Sheikh. He identified where consumers could be at risk if they did not deal with a proper agent who knew exactly what insurance terms should obtain and did not ask the right questions. It is quite difficult to buy insurance and then commit oneself to reading the very small print. Yet the very small print is often the absolute essence of what the insurance offers. It is all too easy, particularly in a widening market where inevitably there are many players, for seductive arguments to produce the necessary impetus for the consumer to take up the offer, who then perhaps neglects the essential aspect of being sure that the insurance does what it says. The problem with travel insurance, as I indicated in my opening remarks, is that being inadequately covered can be quite disastrous, because the issues come to light only when one is already stranded abroad. We are all too well aware that, because we benefit from certain healthcare provisions in this country and have reciprocal arrangements in the European Community and with a number of other Administrations, it is easy for people to assume that they do not need to be absolutely clear about the policy or absolutely sure about the authenticity of the person who is selling it. They then go to somewhere such as the United States where medical costs can prove to be absolutely crippling when things go wrong and they are utterly inadequately covered. I appreciate the noble Baroness’s argument that we should be careful about regulation, but the Government have demonstrated their care. We did not regulate in this area after the first initiative in 2003 and we have come to this position only as a result of evidence that has been produced. I mentioned the Treasury Select Committee, but the Consumers’ Association also brought to our attention the difficulties that arise when insurance is not sold as well as it should be. The noble Baroness will therefore recognise that we are motivated not by the wish to regulate but by a clear and defined need. I do not need to repeat the arguments or the statistics that the noble Lord, Lord Sheikh, gave to the Committee. One of the benefits of this House is that someone such as he, who has vast experience and detailed knowledge of an industry of this kind, can make as good a job of understanding the issues as the Government. I cast no aspersions on the team that supports me; it is absolutely excellent. I would regale the Committee with a vast battery of statistics at this stage, but the noble Lord, Lord Sheikh, has largely presented the case for the order in detail and in such a way that I need not detain the Committee. I need to address the question of this being a distraction for the Financial Services Authority, with some noble Lords saying that it has other big fish to fry. Of course it does. How could one not be aware of the challenges facing the Financial Services Authority, given the circumstances in which we have had the Northern Rock situation over the past five or six months, which has dominated a great deal of the financial and economic agenda? To suggest that this small amount of additional regulation will break the back of the Financial Services Authority’s capacity to cope with its work stretches things somewhat far. It will be recognised that the scope of the legislation is very limited. We think that an extension is necessary, but we do not have the slightest doubt about the capacity of the FSA to monitor this position, and no one who has suggested regulation has indicated that a major problem might be the Government’s ability to guarantee that their regulatory authority would not be up to the job. On other challenges, I will listen to the noble Baroness, as I am obliged to. Some of the big challenges will not go away in the short term, as she well knows. In an area such as this, to suggest that, because a body has a major issue before it, it cannot be expected to have the regulatory capacity for a relatively marginal issue such as this is stretching credulity too far. Will small firms go under because of this additional regulatory burden?