An influential committee within the House of Lords has strongly criticised the government for what it describes as the elimination of parliamentary oversight of the UK’s financial watchdogs. This significant change, introduced as part of legislation from the recent King’s Speech, has sparked concerns about accountability within the financial regulatory system.
Baroness Noakes, who chairs the Lords’ Financial Services Regulation Committee, stated in a letter that the government has “eliminated” an “integral” component of the regulatory framework. Her committee is tasked with scrutinising the actions of financial regulators, which possess the power to establish rules within the sector, guided by parliamentary regulatory principles. Traditionally, these regulators have been required to report to parliamentary committees as a key element of their accountability.
However, the Financial Services and Markets Bill reportedly removes this obligation for key bodies such as the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA). This means the explicit rule compelling them to explain their actions to parliamentary committees has been rescinded. Baroness Noakes warned that this change means the committee “will no longer be able to do the job that… parliamentary resolutions require of it,” rendering its work “ineffective.” She added that while this might not have been the government’s intention, it remains a “matter of concern.”
The committee, which has been a vocal proponent of strengthening the UK’s growth agenda, has previously criticised the FCA and PRA for what it perceived as a lack of “clear understanding of the cumulative burden of regulation.” The growth mandate for regulators was initially enshrined in the Financial Services and Markets Act 2023, with the Labour Party, led by Shadow Chancellor Rachel Reeves, also advocating for regulators to “regulate for growth.” The new Regulating for Growth Bill, announced in the King’s Speech in May, seeks to address a perceived lack of agility and responsiveness to innovation, granting ministers a new statutory power to provide strategic direction to regulators.
The letter from Baroness Noakes was addressed to Investment Minister Lord Stockwood, urging the government to discuss these changes with the group of peers. The Financial Services Bill is currently progressing through the committee stage in the House of Lords, having successfully completed its initial two readings. The Treasury has been approached for comment regarding these concerns.