Coalition resists social duty call on UK regulatorApril 2012
Coalition MPs have defeated an amendment to a bill that would have placed a 'duty' on the UK's planned Financial Conduct Authority (FCA) to promote social and responsible investment.
The amendment, tabled by shadow Treasury secretary Christopher Leslie and supported by some of Britain's largest SRI organisations, was voted down by ten Tory and Liberal Democrat MPs against eight Labour members at the Financial Services Bill committee stage.
The new body, which is being created by the legislation, will require an increased duty of care to consumers.
However, 20 social investment heads – including those at Uksif, the National Council for Voluntary Organisations (NCVO) and Triodos Investment Banking – had urged an extension of powers to include a social responsibility element in what would have been the most significant promotion of socially responsible investment in Britain since the sector's emergence.
The FCA, which will regulate financial businesses providing services to consumers, would have been required to conduct its work in a way that promotes the development of social finance and to establish a social responsibility panel to advise it.
Mark Hoban, the financial secretary to the Treasury, said in the debate: "If the words 'social investment' were substituted for 'other sectors and financial services', I wonder whether it would receive such a warm welcome.
"The amendment is unnecessary because the whole ethos of the FCA is to promote new providers coming forward, to encourage competition in the market, and not to close the market to others."
The Financial Services Authority – which is to be jettisoned after its colossal failure to regulate London's financial services leading up to the credit crunch, and will be succeeded by the FCA and other bodies – also resisted non-financial interference in the regulation of the City.
But Stuart Etherington, chief executive of the NCVO, said before the vote: "In these challenging economic times, social investment can form part of the solution by supporting civil society organisations to become more innovative, effective and financially secure.
"Government has a real opportunity to capitalise on this potential as it seeks to build a strong and sustainable economy."
Peter Holbrook, Social Enterprise UK's chief executive, another signatory to the call for SRI duties, said: "The exclusion of the proposed amendments to the Financial Services Bill is a missed opportunity.
"The bill provides a once-in-a-decade opportunity to inject social investment into the DNA of the financial services regulator. Without them, the Financial Conduct Authority won't be required to consider any of the unique features of social investment."
Labour MP Chris Leslie, who originally proposed the amendments, will submit further changes to the bill, in areas including employee representation and company pay ratios as part of his party's 'responsible capitalism' drive.
See Guest Column, p4
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