MR ADAM PHILLIPS, MR NICK PRETTEJOHN, MR SIMON BOLAM AND MR PETER VICARY-SMITH

15 DECEMBER 2008

  Q1 Chairman: Good afternoon and welcome to this session on the FSA Annual Report. Can you introduce yourselves for the shorthand writer, please, starting with Nick?

  Mr Prettejohn: Nick Prettejohn, Chairman of the Financial Services Practitioner Panel.

  Mr Bolam: Simon Bolam, Chairman of the Smaller Businesses Practitioner Panel.

  Mr Phillips: Adam Phillips, Acting Chairman of the Financial Services Consumer Panel.

  Mr Vicary-Smith: Peter Vicary-Smith, Chief Executive of Which?.

  Q2  Chairman: You are all welcome, particularly yourself, Mr Phillips. You are just taking up your appointment as Acting Chair—so congratulations. Your predecessor Lord Lipsey's letter of resignation called for a broader remit, with greater resources than the Panel currently enjoys. Do you share that ambition with him?

  Mr Phillips: I suppose I should start by saying first of all that I deeply regret the fact that Lord Lipsey decided to resign. His resignation will be a loss to the Panel. Having said that, I think that his letter of resignation created a rather unfortunate impression: first of all that the Panel's remit is rather narrow and, secondly, that the Panel sees it that way. The terms of reference we have, agreed with the FSA, give us a fairly broad remit, which goes well beyond the areas that the FSA regulates in financial services. As far as the Panel is concerned, we had a discussion with Lord Lipsey, when he joined in July, about his wish to set up an inquiry into the effectiveness of the financial regulatory system from the consumer point of view. The Panel agreed at that time that it was the wrong time to be doing something like that. As we have seen subsequently, it was definitely the wrong time to do it, and that was a good decision. We agreed that we would defer a discussion until the end of the year, with the idea that we would do something next year. In fact, the discussion was planned and is still going to be held this Wednesday. I think that we will still take the decision as a Panel that to have such a broad inquiry into the effectiveness of the regulatory system is probably too big an issue for the Panel to take on at the present time.

  Q3  Chairman: That is maybe taking us a wee bit further than I want at the moment. Perhaps I could therefore put it to you again if you share his ambitions for the Panel. I gather the answer is no, because you think that you have a broad enough remit and, if a perception has been established, it is a bit unfortunate.

  Mr Phillips: I think that is a fair analysis. We think that we already have a broad enough remit; it is the extent to which we use it.

  Q4  Chairman: Lord Lipsey did make a speech in the House of Lords and I do not think that it is a perception. I have read his speech on that. How many staff do you have?

  Mr Phillips: We have five full-time equivalent staff working for us at the moment in the secretariat. In fact, it is six people but two of them work part-time for the Panel.

  Q5  Chairman: How does that break down then?

  Mr Phillips: In ... ?

  Q6  Chairman: In the remit; in what they do?

  Mr Phillips: Two of them are policy people. One of them is a liaison person who is effectively dealing with outside organisations and also some of our relationships inside the FSA; then we have a part-time manager and a part-time PR person who deals with relationships with the media.

  Q7  Chairman: If I am looking at it from a policy point of view, you have two full-time people working with you?

  Mr Phillips: Yes.

  Q8  Chairman: Do you think two is adequate?

  Mr Phillips: When we have asked the FSA for additional resources and we have made a reasonable case, we have got the resource. Looking back at the last year, we have had the secretariat reorganised and it certainly has not been a particularly comfortable experience for the Panel. We have been under-resourced. I would hope that, going forward, we have enough to do the basic work of the Panel. I think that we will need additional resource probably, if we decide on Wednesday that we need to look at the effectiveness of the financial regulatory sector.

  Q9  Chairman: Do you think that two people are enough to take on the might of the financial services industry?

  Mr Phillips: No, I do not. I think that you need a lot more than two.

  Q10  Chairman: So we really need to step this up quite a bit then, do we not, if we want consumer examination of the financial services industry?

  Mr Phillips: I think that the Panel would certainly welcome additional resource. There is no doubt about that. The only question I would ask is whether the Panel, on its own, is the best place to look at the effectiveness of the regulation of the financial services industry.

  Q11  Chairman: What are you established for then?

  Mr Phillips: We are established to represent the consumer interest to the FSA and the FSA regulates part, but not all, of the financial services industry.

  Q12  Chairman: When I read my papers every day, there are huge issues coming up for consumers in the financial services industry. I will be asking Mr Sants about the PPI. We raised this issue with him five years ago in 2004-05, and we still have this issue going on. I think that there is a panoply of issues, and it seems to me that two people to tackle that—

  Mr Phillips: I would say that of course you do have the Panel as well. The work does not rest entirely on the shoulders of the policy people. The way in which the Panel is set up is that it is designed to work with the FSA, as we see it, as a critical friend; and the difficulty that the Panel has is to balance the role of the friend with the critic.

  Q13  Chairman: Why do you need to be a friend?

  Mr Phillips: The FSA comes to the Panel early on to talk about issues to do with the consumer interest so that it understands better the consumer interest. To that extent, we have to have a reasonable working relationship with the FSA.

  Q14  Chairman: If you are a friend, they have got you in their web.

  Mr Phillips: That is why we have the discussions about the balance of our relationship with the FSA and the extent to which we are critical.

  Q15  Chairman: That seems to me to be a little out of kilter with two policy people. I think there needs to be an examination in your committee to say, "Are we adequately representing the consumer?".

  Mr Phillips: I think that is a fair point.

  Q16  Chairman: How many members of your Panel have significant experience working in consumer organisations, as opposed to industry experience?

  Mr Phillips: I would say that at least a third of them have experience of currently working in consumer organisations. Another third are people who have a broader experience of working in the financial services industry, but only one of whom has worked in the financial services industry directly. The remainder are a couple of journalists and someone who has worked in government.

  Q17  Chairman: Would you like to see consumer representation on the board of the FSA itself?

  Mr Phillips: Yes, definitely. There is no doubt about it.

  Q18  Chairman: We therefore have a bit to go on that yet. Do you think that the FSA is too dominated by the industry on their board?

  Mr Phillips: I would agree with that view. I think that it is too dominated by the industry, yes.

  Q19  Chairman: You have the chairman of the board who worked in industry and you have the deputy chairman who is a former chief executive of one of the banks in the industry, but there do not seem to be many consumer representations in the really senior positions.

  Mr Phillips: I think that one of the issues for the FSA is that it needs people who are experienced in the industry on the board of the FSA. One of the problems the FSA faces is that people who have worked in this industry are not necessarily best equipped to understand the consumer interest, and there is a need to balance that up.