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TSC chair Mel Stride wants a more joined-up FCA, committee consensus where possible, and a government willing to change course.
As chair of the Treasury select committee (TSC), member of parliament for Central Devon Mel Stride has his work cut out in scrutinising public bodies such as the Financial Conduct Authority and the Bank of England.
“There is no typical day at the Treasury committee!” says Stride.
“We have regular sessions with key individuals such as the chancellor, the Bank of England governor and the FCA, and we hold pre-appointment hearings for key Bank of England committees.
“We also take evidence on our inquiries — from experts, economists, ministers and those in the sector.
“As a committee, we tend to meet twice a week to discuss correspondence we have received and the topics we want to focus on. We then hold public evidence sessions.”
The TSC is following the regulator’s transformation programme with great interest.
“We want to see the FCA go through this as quickly as possible,” says Stride, who expects the regulator to become a more joined-up organisation.
He found the FCA’s handling of the London Capital & Finance (LCF) scandal had brought some of its structural weaknesses to light.
“If you look at the problems around LCF, one part of the FCA wasn’t communicating effectively with the other,” says Stride.
“In Elizabeth Gloster’s report, she set out a litany of failings and poor communication from the FCA. There were all sorts of things in there, which were not right.
“Some advice given out by staff was that LCF’s mini-bonds were covered by compensation schemes, and yet they weren’t.”
TSC inquiry
After the publication of Gloster’s report in December 2020, the TSC launched its own inquiry into the FCA’s regulation of LCF, in February 2021. The MPs have paid particular attention to the changes the regulator has made since the release of the report.
Nonetheless, Stride is confident the FCA is in good hands.
We would have gone deep into Brexit but were swept away by the pandemic
“Nikhil Rathi is relatively new to the role but he understands what needs to be done. He seems to understand the scale of the task and has made good progress since his arrival.
“Our job will be to hold his feet to the fire and make sure he delivers.”
LCF is not the only mini-bond issuer to collapse in questionable circumstances over recent years. You may recall Basset & Gold or Blackmore Bond, for instance. Due to these scandals the government has committed to look into the regulation of mini-bonds.
“We want to see what comes out of that before potentially getting more involved,” says Stride.
Remote working
As with many of us, the pandemic has forced the committee and its chair to work in a new way.
“We went from a committee that met physically to one that met remotely,” says Stride.
In fact, meeting remotely has advantages for the lawmakers who sit on the TSC.
“It meant we could take evidence from people anywhere in the world — much more easily than if we had required them to come to see us,” says Stride.
We want to see the FCA go through its transformation programme as quickly as possible
On the downside, Stride regrets the limited interaction that results from remote working.
“You lose the things that happen in margins around committees, which are very valuable. Members may have had a chat with each other before a session or perhaps afterwards,” he continues.
Most importantly, the pandemic has changed the focus of the TSC.
“Before Covid broke out, the thought was that Brexit had happened and we were particularly interested in what effects it would have on the economy and how the government might best address those challenges,” says Stride.
“I think we would have gone quite deep into this topic, but of course we were all swept away by the extraordinary pandemic and the lockdown. Suddenly, the committee became fully engaged in how to bridge the gap between the crisis and the recovery, and how to preserve as many jobs as possible in the meantime.
“That’s basically what the mission of the government was at the time, and we spent a lot of time looking at the support measures the government brought in.
“We were very worried at an early stage that the self-employed were not being sufficiently supported. We pressed hard for the Self-Employment Income Support Scheme to come in and I think we can take some credit for it.”
We’re looking at how parliament can best scrutinise regulation given it’s no longer being created within the EU
As most of the Covid-19 restrictions have been lifted, parliamentarians can revert to former working methods. However, although committee hearings are attended in person again, Stride remains cautious.
“It will largely depend on what happens. The course of the pandemic is still an open question, unfortunately, but I think we will go back to being largely as we were before.
“During the pandemic we introduced technology that enabled us to speak to witnesses from across the world and we don’t want to get rid of the benefits it has brought. While we’re there in person now, we are keeping the option open for witnesses to appear virtually.
“This has allowed us to hear from people as far away as the West Coast of the US. It’s also eminently sensible as it enables those with health concerns to speak to us from their home.”
Economic recovery
Regardless of how the committee functions, its focus will be on the UK’s economic recovery.
“We will be very interested in what the government’s policies are and what the direction of travel for the economy is,” says Stride. “We want to examine if the recovery is progressive in the sense that those who are not so well off aren’t shouldering the greatest burden.”
Suddenly, the committee became fully engaged in how to bridge the gap between the Covid crisis and the recovery
Stride was particularly worried about how the new tax arrangements recently announced by chancellor Rishi Sunak might affect the less well off.
“The initial proposals for the National Insurance [NI] change were not very progressive; they would have hit the lower paid quite hard. But then the government also brought working pensioners into the scope of NI, along with a tax increase on dividends.
“We’ll look very closely at the measures that are taken to make sure they do not harm intergenerational fairness and to see how progressive they are.”
Stride says it can sometimes be hard to avoid sharp disagreements in a committee made up of MPs from different political parties, but he works hard to seek consensus.
“There are some subjects we look at that are relatively less contentious, and I stress ‘relative’ because politics is everywhere.
Nikhil Rathi seems to understand the scale of the task and has made good progress since his arrival
“As a chair, you have to be as collegiate as possible and really be in listening mode. You have to respect everybody’s opinion and make sure all sides of the argument are fully ventilated. I may fundamentally disagree with the line a member of the opposition on my committee takes, but it’s my duty to ensure they are given the opportunity to share their views.
“It also comes down to every committee member and I’m fortunate with my committee. We try to get a consensus wherever possible. When you produce a report, you want to avoid ‘minority reports’. You try to come forward with something that everybody has signed up to.
“Sometimes, that means very late, last-minute compromises where we haggle over a word, a comma or a full stop, but we eventually get there.”
A subject that preoccupies Stride is economic crime. He calls it “one of the biggest current challenges, if not the biggest”.
One part of the FCA wasn’t communicating effectively with the other
He says: “The resources that have been allocated towards tackling it are very low. It represents about 1% of our police expenditure. There’s a lot that needs to be done.”
Therefore Stride is expecting a lot from the upcoming Online Safety Bill. However, he insists the bill should include a ban to prevent advertisements from non-authorised firms.
“It’s really important that we include advertisements in the Online Safety Bill. The online platforms should have a duty of care when it comes to the advertisements they carry.
“That’s not something the government has agreed to at the moment, but it has been a recommendation in one of our reports and I’m pushing very hard for it.”
Positive relationship
Despite this difference of views, Stride describes the relationship between the TSC and the government as positive.
“I don’t think there has been any particular organisational or administrative friction. If we need ministers to appear, they appear, and they generally respond to our reports in reasonable detail.
During the pandemic our focus has been on ensuring that people do not fall through the cracks of this unprecedented government support
“I’ve always had good personal access to the chancellor if I needed to speak to him.
“This relationship is where it should be.”
Sunak appears before the TSC at least twice a year, but Stride communicates personally with the chancellor from time to time, such as when a major event occurs.
“I find him as an individual very prepared to engage and I think his level of engagement generally across parliament is pretty good,” says Stride.
There are, however, instances when the committee has to push the government to change course.
Economic crime is one of the biggest current challenges, if not the biggest
“There are areas where we can push, and indeed in the past have pushed, them in particular directions.
“During the pandemic our focus has been on ensuring that people do not fall through the cracks of this unprecedented government support.
“We gave a number of recommendations on helping the excluded during the pandemic, including for the Self-Employment Income Support Scheme to be extended to the newly self-employed.
“In the 2021 spring Budget the government took up this recommendation, taking the 2019–20 self-assessment into account.
“We also wrote to the chancellor at the start of the pandemic, calling for a change in tax rules on ‘benefits in kind’ for employer-provided Covid tests.
“It was clear this needed to be resolved and the government announced a change in policy the following day.”
We could take evidence from people anywhere in the world — much more easily than if we had required them to come to see us
Brexit is not off the agenda this year and it is a subject Stride and his colleagues want to address.
“We may want to unpack that a little bit. It would have been much more central without the pandemic,” he says.
“We’re looking at the future of financial services and within that you have the EU-UK relationship, the issue of equivalents and access, etcetera.
“We’re looking at how parliament can best scrutinise regulation given it’s no longer being created within the EU.”
MM Meets Mel Stride: Holding the FCA’s feet to the fire (moneymarketing.co.uk)
