(12 years, 5 months ago)
Commons ChamberRead Hansard Text Read Debate Ministerial Extracts
The Leader of the House of Commons (Sir George Young)
I beg to move,
(1) That a Committee of this House be established, to be called the Parliamentary Commission on Banking Standards, to consider and report on—
(a) professional standards and culture of the UK banking sector, taking account of regulatory and competition investigations into the LIBOR rate-setting process;
(b) lessons to be learned about corporate governance, transparency and conflicts of interest, and their implications for regulation and for Government policy;
and to make recommendations for legislative and other action.
(2) That Mr Andrew Tyrie be Chair of the Commission.
(3) That Mark Garnier, Mr Andrew Love, Mr Pat McFadden and John Thurso be members of the Commission.
(4) That the Commission have leave to join with any committee appointed by the Lords to consider the said matters.
(5) That the Commission may hold meetings under the provisions of paragraph (4) of this order at any time after the Lords has agreed to appoint a committee.
(6) That the Commission shall, except as provided for in this order, follow the procedure of a select committee of this House.
(7) That the Commission shall have power—
(a) to send for persons, papers and records;
(b) to examine witnesses on oath;
(c) to appoint specialist advisers;
(d) to invite specialist advisers (including Counsel appointed as specialist advisers) to examine witnesses;
(e) to adjourn from place to place;
(f) to sit notwithstanding any adjournment of the House; and
(g) to report from time to time.
(8) That the Commission shall have power to appoint sub-committees to consider matters specified by the Commission within the terms of this order and a subcommittee shall have—
(a) the powers in paragraph (7)(a), (b), (e) and (f); and
(b) the power to invite specialist advisers appointed by the Commission (including Counsel appointed as specialist advisers) to examine witnesses;
and the quorum of a sub-committee shall, subject to paragraph (12)(b), be one member of this House.
(9) That the Chair may report to the House an order, resolution or Special Report as an order, resolution or Special Report of the Commission which has not been agreed at a meeting of the Commission if he is satisfied that he has consulted all members of the Commission about the terms of the order, resolution or Special Report and that it represents a decision of the majority of the Commission.
(10) That the quorum of the Commission shall be two members of this House.
(11) That, whenever this House shall stand adjourned other than to the next day, any report, Special Report, order or resolution agreed to by, or evidence taken or received by, the Commission, including any under paragraph (9) of this order, may be published or printed under the authority of this House, shall be deemed to have been reported and shall be reported when this House next sits.
(12) That, when the Commission operates under the provisions of paragraph (4) of this order, the following provisions shall apply—
(a) the quorum of the Commission shall be two members of this House and two members of the House of Lords;
(b) the quorum of any sub-committee shall be one member from either House; and
(c) the power of the Chair to report under paragraph (9) may also be exercised with the Chair’s agreement by a member of the Commission who is a member of the House of Lords.
(13) That the costs of the Commission shall be assessed by the House of Commons Commission from time to time and shall be paid by Her Majesty’s Government for the credit of the House of Commons (Administration) Estimate.
(14) That the Commission shall report on legislative action no later than 18 December 2012 and on other matters as soon as possible thereafter.
(15) That a message be sent to the House of Lords to desire their concurrence.
On 5 July, the House debated professional standards in the banking industry for a full day and resolved to establish a Joint Committee of the two Houses on that matter. As I said in that debate, I do not think there is any disagreement between the Government and the Opposition on what we need to do, which is to sustain in the UK a strong, vibrant, transparent and more accountable financial sector that commands international confidence.
The motion before us is the result of negotiation following the House’s decision to establish a Joint Committee. I thank my hon. Friend the Member for Chichester (Mr Tyrie) for the work that he has undertaken while also chairing a very active Select Committee. I also thank Her Majesty’s Opposition. Following the debate, it was essential that Parliament was seen to be acting in the best interests of the public in resolving the issue before it, and that could happen only if the Joint Committee were supported not only by the parties in Government but by the Opposition. I am grateful to those who have added their signatures to the motion.
I do not intend to detain the House for long. I want to make five points, spending half a minute on each. [Interruption.]
Mr Speaker
Order. Before the Leader of the House makes his five points, to which I wish to listen carefully, may I gently say to the House that he should be heard? Any Member should be heard, but the Leader of the House is a very senior Member, and Members should not be sitting chuntering to each other; they should show him some courtesy, which they all learnt at one time.
Sir George Young
As I said, I have five points and will spend half a minute on each one.
First, the process to establish the Commission is not following the normal process for establishing a Joint Committee. The Commission, if established tonight, will be able to begin its work immediately and to meet during the recess. It is my hope that before the other place rises, it will also establish a Committee of an equal number of members to act jointly with the Commission that we are establishing tonight.
Secondly, the Commission is being established with powers that are already inherent in our parliamentary system. It will also have the novel power to invite special advisers, including counsel appointed by the Commission, to examine witnesses. I do not think that that will become the modus operandi of other Select Committees, but it will give the Commission the teeth that it needs to carry out its important investigative role quickly and effectively.
Thirdly, it is proposed that
“the Commission shall have power to appoint sub-committees to consider matters specified by the Commission”.
Unusually, the sub-committees will have a quorum of one. I have discussed that with my hon. Friend the Member for Chichester. The purpose is to allow a single member of the Commission to consider a specific issue, for example a technical matter, and to send for papers with a view to informing the wider Commission. That will feed into the Commission’s work and allow it to tackle a broad-ranging subject in a compressed time frame.
Fourthly, paragraph (13) of the motion directs the House of Commons Commission to assess the costs arising from the Parliamentary Commission to be paid by the Government. As the Chancellor said in the debate on 5 July:
“I commit to giving it any resources it needs to do its job.”—[Official Report, 5 July 2012; Vol. 547, c. 1136.]
I hope that that reassures my hon. Friend the Member for Harwich and North Essex (Mr Jenkin), who sought reassurance during our debate on 5 July that the Commission should not raid
“the staff and resources of other Committees.”—[Official Report, 5 July 2012; Vol. 547, c. 1149.]
Fifthly and finally, the motion sets a deadline for a report on legislative action of 18 December. That will include pre-legislative scrutiny of the banking reform Bill and any recommendations of the Commission’s inquiry that require a legislative vehicle in order to be implemented. The December deadline will give the Government time to consider any recommendations in time for the introduction of the banking reform Bill, which is planned for January 2013. If the Commission cannot complete all its work by 18 December, we will expect it to report on the other areas as soon as possible thereafter.
We have in this Parliament the skills, expertise and mandate to do the job. I am confident in the ability of the new Commission to rise to the challenges that confront us and to address the central issue at stake: restoring confidence in the UK banking industry. I commend the motion to the House.
Ms Angela Eagle (Wallasey) (Lab)
Like the Leader of the House, I do not wish to repeat the debate that we had on 5 July. We are in slightly calmer waters, we hope. In that debate, all parties on this side of the House felt that we needed a judge-led inquiry into the LIBOR scandal and wider issues in the banking industry. We did not win the vote so, despite our reservations, we decided to co-operate with the inquiry led by the hon. Member for Chichester (Mr Tyrie). I am grateful to the Leader of the House for his admission that the success of the Commission relies on the Opposition’s support. That gets us off on a better foot than might have been the case.
There are some novel elements to the motion, as the Leader of the House pointed out, not least the sub-committees of one. We will look with interest to see how that works in a Commission of the size that is proposed, especially given that it is a joint Commission with the other place.
I am particularly pleased with the assurances that the resources that are needed will not be taken out of House of Commons resources for other Select Committees. I wonder whether the Leader of the House has a view on what amount of resources might be used and whether we will be kept informed as the process goes on. The Opposition are keen that the ongoing work of the Treasury Committee, the primary job of which is to hold the Government to account, must not be badly affected by its members, not least its Chairman, being engaged in other important work, which may have a tendency to take them away from their day job. We will obviously keep a keen eye on the situation, to ensure that the Treasury Committee’s work of holding the Government to account does not suffer as a result of the other duties that the hon. Member for Chichester and other members of the Committee who are to sit on the Commission will take on.
Having emphasised once again our belief that we needed a judge-led inquiry, the Opposition are happy, given that the vote on that was lost, to co-operate with the hon. Gentleman’s inquiry, and we will watch its progress with interest. If the House divides this evening, we will join the Leader of the House in the Lobby.
Richard Fuller (Bedford) (Con)
I rise briefly to welcome the motion and wish all the members of the Commission the best. I recognise the willingness that my hon. Friend the Member for Chichester (Mr Tyrie) has expressed for the Commission’s work to be forward-looking, and I understand that its role will not be to act as prosecutor. However, I give its members this piece of advice. They are doing the people’s work, and the people have an expectation of the review of the financial crisis and the financial services sector. They will not understand the work of the Commission unless this is accomplished: somebody has to go to jail.
Criminal prosecutions are an essential part of cleansing our financial services sector and moving us forward, to ensure that the City can reassert itself and its reputation not only in the eyes of the world but in the eyes of the British people. That is one of the most important requirements of the parliamentary inquiry, and I leave it to the Commission to consider that comment.
John Mann (Bassetlaw) (Lab)
It appears that this Commission, which was originally described as a very narrow one, is broadening so that, as the Leader of the House said, it can now look at particular matters with sub-committees of one, and there are suggestions that it should broaden into criminal prosecutions.
The issues remain as they were, but the evidence is changing and will continue to change. That is the problem with setting up ad hoc committees. Just in the past hour, further e-mails have come from the Bank of England that have some significance for matters that have already been looked at, looked at again and looked at a third time. Those e-mails are significant to what the Treasury Committee looked at the first time, and doubtless information will continue to emerge.
This is a moving feast, and the problem with a moving feast is that setting a time limit when one does not know what will happen next can lead to a certain momentum, which can be in the wrong direction. The problem is not that it is an arbitrary time limit—any time limit is arbitrary—but that it could be an irrational one.
Tomorrow in the United States, a new court action is being initiated not on LIBOR but on other market manipulation by banks, and specifically a British bank. We will see what happens as that court action proceeds, but simply examining LIBOR, and especially only the one bank in which what has gone on has been partially exposed, rather misses the point about market manipulation by investment banks over the past 10 years.
Even within the context of LIBOR, we have only just reached the stage of seeing some of the market manipulation that happened, and only in one bank, Barclays, which has received bad publicity. There is far more to be revealed about that, and I am certain that there will be more surprises to come in the next day, week or two weeks. Those surprises may well continue to flow.
Even in the case of Barclays, the manipulation of LIBOR is one tiny part of the allegations of market manipulation and anti-competitive work. A swathe of evidence is beginning to emerge, and more people are now prepared to speak out about how a range of markets have been manipulated in a range of ways. Derivatives have been used as the basis of that manipulation, but in fact it is much more complex than that. At its heart, as Barclays has said, was the making of a quick profit. In the past two weeks, courts in Canada have specified in a non-LIBOR-related case where the judge has pronounced that it was manipulation for short-term profit on an anti-competitive basis.
That is just one bank. No one can answer—the question was not answered by the Financial Services Authority today; perhaps it is not in its remit to do so—what the contingent liability is for Barclays. That is a small concern, and of significance to people working for the bank, people who have shares in it, and the wider economy, but it is clear that the largely state-owned banks, not least the Royal Bank of Scotland but also Lloyds TSB, have been doing the same thing. The problem that we will face is not just the issues of criminality that may or may not emerge. Proving a criminal case in any of that is fiendishly difficult—both finding the person who has committed an act and finding a victim so that a case can be taken. If law suits, beginning in the United States but spreading elsewhere, start to succeed, the amounts of money that have been fiddled are so great—because of the instruments that were used—that the British taxpayer may face a huge, unquantified bill, and we do not know when it will arrive. The future of Barclays is somewhat in question.
Mr Speaker
Order. I appreciate that the hon. Gentleman is indulging in scene setting—offering the House the context—but I would politely suggest that he will wish to turn to the proceedings and composition of the intended Committee. If it is helpful to him, I gently remind him, in relation to the motion, that he has 15 paragraphs from which to choose when deciding how to focus his remarks.
John Mann
I thank you for your guidance, Mr Speaker. My initial remarks related to the remit of the Committee, rather than its composition, which is frankly an irrelevance compared with the problems of the moving feast of its remit.
The remit has been set so vaguely that it can incorporate anything and everything. We will face the economic consequences when the partially state-owned banks are hit in the same way. These issues are entirely out of our control—indeed, they are entirely out of British control. The American authorities are two years ahead of the British authorities, and have taken a lead, so they will dictate the time scale for what comes next. Whether the considerations are legal or political—there are elections coming up, so there may well be more of a political imperative to be seen to be doing things—they will have grave consequences for these financial institutions and the British taxpayer.
That is why although it may well come up with worthy and credible recommendations, the investigation cannot match the task that it has been set. Because of the course of events and the changes that will happen, arbitrary time limits are, by definition, self-defeating. There is another problem that goes alongside that, and it concerns the other options available to look at those matters. I am pleased that the Leader of the House appears to have given a commitment, and I urge him to clarify it, that no staffing resource will be removed from the Treasury Committee in that period of time. If that is the case, that is a significant step forward. If the Treasury Committee were mothballed at precisely this time, the ability of the House to respond to fast-moving events would worsen significantly.
The Treasury Committee has a heavy workload. Today, Commissioner Barnier was supposed to appear before the Committee in relation to the 17 EU directives and draft directives relating to financial services on the books at the moment. It is essential that this House properly scrutinises and takes a view on what happens with those directives, but that has not been happening—it is a key role that the Treasury Committee needs to fulfil.
Mr Kevan Jones (North Durham) (Lab)
Does my hon. Friend agree that there may well be some dispute about what the Treasury Committee should look at and what this new Commission should look at—if, for example, another scandal or something like it emerged in the next few weeks?
John Mann
My hon. Friend makes the point that I have been stressing—that we do not know and cannot predict them, but we know that there will be a lot more scandals emerging, as we are only seeing the tip of the iceberg at present. [Interruption.] I appreciate that this is not good listening for those hon. Members trying to work out how to respond to this, but if this House is to set up arbitrary ad hoc committees at random every time there is a problem, it will potentially undermine itself. Which Select Committee will be next to give away some of its powers to an ad hoc committee? Is this the appropriate way to determine such matters?
If some of the powers set out in the motion were reinforced not just in respect of the Treasury Select Committee but of other Select Committees, that would reinforce the scrutiny of this House over what goes on both in government and in the country, so there are some good proposals here. The good proposals, however, are bespoke to this particular Commission—for example, the ability to call in a QC and the ability to take evidence on oath. If they are good enough for this new Commission, they should be made available to any Select Committee looking at any issue. The House is ducking this problem.
Mr Peter Bone (Wellingborough) (Con)
I think the hon. Gentleman is making some powerful and important points. Does he share my surprise that the Treasury Select Committee was not given this role? He is absolutely right: these powers should be given to all Select Committees to make Parliament more powerful.
John Mann
I take the hon. Gentleman’s point and I agree with him, but I do not intend to go through all the previous debate on this issue—interesting though it would be to do so—because I am sticking to the detail of what is in front of us, however badly worded it is. There is, however, clearly a case for saying that if the Treasury Committee had been allowed to carry on this work, it could have done so as effectively as this Joint Committee. I am sure that the five Members from the House of Lords who are as yet unknown and unnamed will bring great wisdom to this Joint Committee, but if the House of Lords wants to look into matters, it can look into them. This is the elected Chamber, and for this elected Chamber to hand over some of these powers of scrutiny to an unelected Chamber seems a retrograde step, which will come back to haunt us in future.
Once a precedent has been established and it suits the Government, it is likely to happen again—and this was a Government initiative. I am rather surprised that the Opposition Front-Bench team, perhaps looking forward to being in government themselves, have been seduced into accepting this way of undermining the historic, developed and improving role of this House to scrutinise. That, I think, is partly what is at stake here, if this becomes the way of doing business in this House.
I do not see how a Select Committee, denuded of half its members, can in any way work as effectively as a Select Committee operating with all its members. That is the reality of what will happen, and we need to be aware of the unintended consequences that might come from a potential eurozone crisis and other problems emanating from Europe that conflict across the work of this Joint Committee—and are wrongly not referred to within it—because proposals from Brussels are, rightly or wrongly, a fundamental part of the equation, affecting decisions made by this House and by the banking industry in this country and across the world. That aspect has been ducked by the creation of the Commission, which will create unhealthy confusion in the debate.
What should have happened? The remit given to the investigation, which should have been carried out by the Treasury Committee, should have been far broader—[Interruption.] An hon. Gentleman says “Boring” from a sedentary position, but this is not boring. For example, seven investment banks colluded to rig the price of the Kraft takeover of Cadbury’s. That is the real scandal that underpins the profits in investment banking. In some areas, there is ferocious competition, but in the vast majority of investment banking, there is no competition whatever. That is the scandal that created the culture that led to the LIBOR rigging. An investment bank called in by a company to advise on a sale or takeover has so much knowledge of the workings of the company that it has the ability to manipulate the market to determine how things will go. That is the fundamental weakness in the system of investment banking. The implications for British manufacturing and manufacturing elsewhere in the world—
Mr Speaker
Order. I have noted the hon. Gentleman’s references to investment banking, but I fear—very considerably—that he is now going to proceed to discuss the state of British manufacturing and any relationship between the banking and manufacturing sectors. He is gyrating between referring to the terms of reference of the Commission and matters of composition, and then talking about matters that are quite outwith the terms of the motion, which ought to afford him adequate scope. I feel cautiously hopeful that he may be nearer to the end of his remarks than to the beginning.
John Mann
I have so far got to paragraph (1)(b) of the motion, which I shall quote, so that you are assured, Mr Speaker, that my remarks are directly pertinent. Paragraph (1)(b) refers to
“lessons to be learned about corporate governance, transparency and conflicts of interest, and their implications for regulation and for Government policy”.
That is precisely what I was talking about in relation to how investment banks operate. The lack of transparency, conflicts of interests and the narrow remit—
Mr Speaker
Order. I am sure the hon. Gentleman is public spirited and trying to be helpful, but he should not misunderstand the terms of the motion. The paragraph to which he refers underlines the importance of the inquiry in learning those lessons. It is not necessary or feasible for the House to do so tonight. It would be a triumph of optimism over reality for him to suppose that the House would do so courtesy of his speech, no matter how compelling it is.
John Mann
Thank you for that guidance, Mr Speaker. I am merely outlining my objections to the lack of breadth in the remit given to the Commission.
My final questions on paragraph (1)(b)—[Hon. Members: “Hooray!”] I am surprised hon. Members are so keen to stay and hear the debate, given some of their sedentary comments. It would be helpful if the Leader of the House confirmed unambiguously that the principles behind the setting up of the Commission will in no way—practically and in reality—undermine the ability of the Treasury Committee to meet as often as it has over the past year to discuss subjects that it chooses to investigate. It would help if he confirmed that it can call the witnesses it chooses and that it will have the access to the staffing resource and expertise that it currently has. If he can give those assurances, I will not seek to divide the House on the motion. I look forward to hearing from him.
John McDonnell (Hayes and Harlington) (Lab)
I want to make a brief point about paragraph (1)(a), which sets out the terms of reference. Some months ago there were reports, which I raised with the Prime Minister, about the Bank of England’s intervention with at least one bank, and perhaps more, about the manipulation of the quantitative easing auctions. I would welcome an assurance that paragraph (1)(a) will cover that issue as well, rather than just the LIBOR issue, because it is a matter of concern if a single bank or a number of banks sought to profiteer from the quantitative easing that was put in place by the Government to rescue the banks. Indeed, it seems extraordinary that the banks would seek to profiteer from the taxpayers’ money that was used to intervene and save them from the crisis that they had brought about. I would welcome an assurance from the Chair of the inquiry that that matter, as well as LIBOR, will be looked into when we consider the issue of transparency and the ability of the banks to manipulate the system overall.
Mark Durkan (Foyle) (SDLP)
I have quite fundamental reservations about the motion before us this evening, because, a bit like the hon. Member for Bassetlaw (John Mann), I have serious concerns about the implications for the work of the Treasury Committee. The way in which we are moving to set up the Commission, with a selection of members of the Treasury Committee—almost a Treasury Committee A team—being assigned to the Commission, will obviously have an impact on the Committee’s working capacity at a key time.
We heard from the Chancellor in the Chamber two weeks ago that he was appointing Martin Wheatley, the incoming chief executive of the Financial Services Authority, to conduct a review that would report within six weeks. That review was going to make recommendations that could feed into reconsideration of the Financial Services Bill. I would have thought that the outcome of the Wheatley review would be the subject of serious consideration by the Treasury Committee. I also wonder how the House would consider the implications of that urgent review, which the Chancellor has instigated, under Martin Wheatley. Will the Financial Services Bill Committee be reconstituted or will we just receive scrambled amendments? There will be confusion, because the Wheatley review is meant to come up with recommendations for legislative change—through the Financial Services Bill first, but possibly also through the banking reform Bill, which the Government have told us is due in the new year. Surely the journey to the banking reform Bill should involve serious consideration and pre-legislative scrutiny by the Treasury Committee, and perhaps others too.
I am not sure how the Treasury Committee can perform its usual role of giving such key legislative consideration if so many of its members and its Chairman are absorbed in the inquiry that this motion establishes—an inquiry that will be intensive and could even turn out to be extensive, in terms of the issues it gets into. We as a House are asking the Commission to surf a very dense, murky and smelly swamp in short order and come up with clear findings and recommendations. We are assigning it quite an inordinate task, which not only will be hard to achieve in itself, but will end up damaging the work of the Treasury Committee.
As someone who sat on the Financial Services Bill Committee, I was conscious of the fact that we had many members of the Treasury Committee serving on that Committee. I was also struck, however, by the fact that they resiled from positions that they had agreed to, as members of the Treasury Select Committee, in their very good report into aspects of the Financial Services Bill. It was quite common for the hon. Member for Nottingham East (Chris Leslie) to make points in that Bill Committee in which he quoted extensively from the Treasury Select Committee report, only for members of the Select Committee to disown the report or distance themselves from it. I was almost expecting them to say that they were not inextricably linked to their membership of the Select Committee in that particular capacity. That experience gives me concern about splitting the attention and capacity of the Treasury Select Committee in this way, and I worry that this might be a well-motivated misadventure in regard to its implications for the work of the Committee.
I hope that the Leader of the House will be able to clarify the Government’s hopes and intentions in relation to the timing of the Financial Services Bill and any amendments that they believe should be made to it in the light of the LIBOR scandal, given the Chancellor’s statement two weeks ago, and in relation to the banking reform Bill. There appear to be potentially overlapping and intersecting reviews going on, and if we in this Chamber are mandating them, we need to take responsibility for the possible confusion that could be caused to others and to ourselves.
I do not believe that these arrangements will be enough to deal with the scale of the problem or the questions that it raises not only about banking but about the competence and due diligence of this Parliament. Are we as parliamentarians up to the task of properly scrutinising legislation and introducing regulatory changes? Is it enough for us to devolve the task to a group of people hand-picked from the Treasury Select Committee by the Whips and expect them to come up with all the answers while we take responsibility only for receiving them? I do not think that that is good enough.
I did not vote for a parliamentary inquiry device when we voted on the matter the week before last, but I accept that this is the chosen outcome. I have serious reservations about the way in which the terms of reference for the Commission have been laid out here, and about the possibility of its composition weakening the Treasury Select Committee at a key time when two Bills are due to come back to us in the autumn, along with another Bill in the new year. I am also worried about the Committee’s ability to deal with other unfolding revelations that might emerge not only from the LIBOR scandal but from issues relating to quantitative easing, to which the hon. Member for Hayes and Harlington (John McDonnell) referred, and to deal with the outflow from the machinations in the eurozone.
There is a lot of work for the Treasury Select Committee to concentrate on, and I am not sure that it will be assisted by the creation of this device. If the Committee is content with the arrangement, I will have to accept its opinion. However, that does not absolve us in this Chamber from our legislative responsibility in respect of those two Bills, which the Chancellor has told us could be directly relevant and whose scope and reach will need to be adjusted to take account of the LIBOR scandal and possibly other scandals as well.
I have profound reservations, but I wish those who are undertaking the inquiry well. They have a difficult task ahead of them, and I do not know how they are meant to perform it if, as the motion suggests, they will sometimes be expected to work as sub-Committees of one. That would create the bizarre scenario of a sub-Committee of one relying on the hired specialist advisers and other agents who will be licensed by this motion. That would create some fairly peculiar scenarios that Parliament might find hard to stand over. Members of the Commission might also find it hard comfortably to take ownership of all the undertakings of the Commission, given the odd construct that is provided for in the motion. I accept that this is a scramble in particular circumstances, and that time is pressing. However, I am not sure that it has been a good scramble. I think that there should have been better thought and more consideration, and I think that many of the people who are comfortable with this device now may end up regretting their decision.
Mr Peter Bone (Wellingborough) (Con)
It is a great pleasure to follow the hon. Member for Foyle (Mark Durkan), who is always worth listening to, but I have to say that on this occasion I disagreed with many of the points he made. I think that this is a chance for Parliament to assert itself. I think that it is a new adventure for Parliament. If the Commission is successful—if it produces a report that is unanimous and not split along party lines, and if it uses all the additional powers that it is being given—that will be a great step forward, and the arrangement may be repeated in the future. I take a much more optimistic view than the hon. Gentleman. The fact that so many Members are in the Chamber late at night shows how interested they are in the issue.
I have just two questions to put to the Leader of the House. One concerns paragraph (3), which names the members of the Commission. I am not sure how they were selected. I would have found it understandable for all the members of the Treasury Committee to be members of the Commission, because they were elected to their positions, but how did these particular names come to be here? Certain other Members’ names are not here although perhaps they should be. I am surprised, for instance, that a certain lady Member’s name is not included. Was it purple smoke, or was it, as I fear, the usual channels? Perhaps the Leader of the House could clear that up.
I welcome the Leader of the House’s announcement of an open-ended commitment from the Treasury to provide money for the counsel to the Commission. Does he hope, like me, that the counsel will act rather like a congressional committee and will grill the witnesses, and that members of the Commission will then be able to ask questions? I think that if we set up that sort of arrangement, we shall be moving Parliament forward.
Mr Kevan Jones (North Durham) (Lab)
Let me begin by reiterating the point made by my hon. Friend the Member for Wallasey (Ms Eagle), who said that we had voted for a judge-led inquiry. We are setting an onerous task for the Commission. I think it was my hon. Friend the Member for Bassetlaw (John Mann) who said that it would be looked at very closely by members of the public, who now have very little faith in our banking system, whether because of national scandals or because of their dealings with their own local banks.
The terms of reference are set out clearly in paragraph (1)(a), which mentions the
“professional standards and culture of the UK banking sector”.
I should be interested to know how “culture” is defined in the context of banking. Does it refer only to banks, or to building societies as well? We should bear it in mind that the banking industry consists of not only high-street chains but, for instance, mutual societies. Will they be included in the Commission’s investigation?
LIBOR was the catalyst for the establishment of the Commission. Paragraph (1)(b) refers to
“lessons to be learned about corporate governance, transparency and conflicts of interest, and their implications for regulation and for Government policy”.
You pulled up my hon. Friend the Member for Bassetlaw on the issue of corporate governance, Mr Speaker, and I accept your ruling. However, many of the matters that the Commission will consider will not relate purely to banking. As my hon. Friend said, they will relate to lending and takeover bids for companies. Will the Commission look into the culture of, for example, the Kraft takeover, which my hon. Friend mentioned? If it restricts its consideration to the banking sector, will not the inquiry be of limited use, not just in view of the vehicles involved in events such as the Kraft takeover but—I hasten to add—in view of some of the things that have been going on in local government? I have raised the issue of the refinancing of Newcastle airport, for example, which was a huge scandal in the north-east two years ago. That was driven by the idea that we could get a better deal for the local council tax payer by refinancing. In fact, it got them a worse deal. Will the Commission look at such situations?
Turning to transparency and governance, Government Members had strong opinions about private finance initiative deals when they were in opposition, and they still hold to those views now. Will such financing arrangements fall within the remit of paragraph (1)(a) and (b), as they are clearly part of a new culture that has emerged, and they are a new mechanism for funding Government policy? Paragraph (1)(b) refers to
“implications for regulation and for Government policy.”
Would today’s announcements on the investment in the railways fall within the remit? That is being financed in part through Network Rail, which is a completely separate organisation and is off the Government balance sheet. The Commission’s remit could lead to such areas being investigated. There are some wider implications here, therefore, and it will be interesting to see if the Commission resists going down certain paths. If we do not have a full inquiry that looks at all these areas, the public may well think we are just concentrating on a small part of the banking and finance industry, when there are many other concerns that directly affect them, too.
I have great respect for the Chair of the Treasury Committee, the hon. Member for Chichester (Mr Tyrie), who will chair this Commission, but the hon. Member for Wellingborough (Mr Bone) mentioned the absence of any women on the nomination list from this House. Are we saying that there are no able hon. Ladies from either side of the House who could sit on this Committee? We have in the past tried to ensure that all Committees in this House included women Members. This is an omission, therefore. It may be possible that all the members from the House of Lords will be men, too. We would therefore have a Committee made up entirely of males, which would be very wrong. It would be right to include a certain—female—member of the Treasury Committee on the Commission. Obviously that hon. Lady did not fit the loyalty criteria set by the usual channels, however. Her inclusion could have been useful, especially in the light of her previous life in the banking industry.
We are going to agree this motion tonight when we do not know who the Lords members of the Commission will be. I agree with the position of my hon. Friend the Member for Bassetlaw: this is a slippery slope as we are agreeing to have a Joint Committee to scrutinise and make recommendations with some members who have never been elected—and some of whom are, perhaps, unelectable.
Another interesting question is what the powers of this Commission will be. Paragraph (7)(a) states that it will have the power to
“send for persons, papers and records”.
What will happen if an individual says, “No”? Will the Commission have the full powers of Parliament to enforce its will in this regard?
It is also stated that witnesses will be under oath, and also that the Commission will be able to appoint special advisers. That is very important in respect of the expertise it will bring to the Commission. There is a question to be asked about a possible declaration of interests by those individuals, however. Many of the people who have expertise in this field will have had direct involvement in the culture that this Commission will be examining. So what will be the restrictions on the appointment of those advisers in respect of either their past lives or any future involvement they may have? That needs to be spelt out from the beginning. We need to make sure that they have not got their fingers in any of the pies that this Commission is investigating.
I do not wish to cast aspersions on any members of the Commission from this House, but we do not know who its members will be from the other House. How are we to define declarations of interest? Are these interests that those individuals hold now or in previous lives? If they are commercial interests, that will raise questions about the impartiality of those individuals, and anything that does that will damage the Commission from the outset.
Paragraph (7)(d) has already been mentioned. It states:
“to invite specialist advisers (including Counsel appointed as specialist advisers) to examine witnesses”.
I am not sure what that means. The normal procedure that Select Committees follow is that the members ask the questions, and questions and briefing notes are clearly written in advance by advisers. This arrangement, however, is very different. This is about having special advisers being able to cross-examine witnesses. So what is the status of those individuals? As the hon. Member for Wellingborough has said, that is a huge change from the way in which Select Committees have operated in this House. When I served on the Select Committee on Defence we had some very able advisers, but the idea that they would cross-examine witnesses is a strange one. We need clarification on that matter.
What about specialist advisers and conflicts of interest? If they are going to be counsel, we need to ask whether they have ever acted for banks or financial institutions. Would that debar them from being appointed as an adviser to the Commission? It is important that we have those things laid out clearly right at the beginning. I do not think it is right to leave them up to the Committee or the Chair to determine. [Interruption.] Government Members may well think that this is frivolous, but to many of our constituents it will be very important, in terms not only of how their money is looked after, but of trying to get credibility back into a sector that is vital to this country’s economy. This is very important in terms of making sure we get it right and of the reputation of the Members of this House who are going to be serving on the Commission.
The other thing I wish to discuss is how the Commission is going to be financed. Paragraph (13) says that
“the costs of the Commission shall be assessed by the House of Commons Commission from time to time and shall be paid by Her Majesty’s Government for the credit of the House of Commons (Administration) Estimate.”
We all know that, if someone wants to control the activities of a committee or any organisation, they can starve it of money. Are we saying that this Commission has a blank cheque? Unless it has, the Government will be able to starve it of money and limit the scope of its activities.
Paragraph (7)(e) states that the Commission can
“adjourn from place to place”.
If a lot of foreign travel is involved, as may well be the case, that will create an expense. Who makes the determination on that in terms of the work the Commission does? Will the Treasury at some point try to limit it by saying, “I am sorry, but you have spent too much and so you cannot undertake that foreign travel or employ that expert witness to interrogate and produce the report”?
There are a lot of—[Interruption.] The hon. Member for Ealing Central and Acton (Angie Bray) is chuntering from a sedentary position, but she has only just come into the Chamber. I know that she did not have a very good week last week, but I wish her all the best for the future.
The financing of the Commission will be very important, so we need some assurance that we will not have interference by Government in the Commission’s work by stealth—that is, by starving it of the resources it needs.
Mr Bone
The hon. Gentleman is making serious points about parliamentary scrutiny, and it is great that so many Government Members are present to support him. Does he welcome this new initiative? If there is unlimited funding, if there can be counsel and if the Commission can cross-examine in the same way as congressional committees, is that not a good thing?
Mr Jones
It is—[Hon. Members: “Ah!] Hon. Members have not heard what I am going to say yet. I agree with the hon. Gentleman, but we have seen this problem with Select Committees, whose travel was limited in the previous Parliament, hampering their work. As the Commission will be subject to the Government’s decision on whether they can fund it or not, that is a very important point. If the situation will be that suggested by the hon. Gentleman, we should have the same arrangements for Select Committees. That would ensure that Select Committees could not only employ the proper advisers—and perhaps more of them—and see expert witnesses but undertake the detailed travel that is sometimes required.
My other concern is paragraph (12)(b), which concerns the setting up of sub-committees. There is no detail about how sub-committees will be set up or about their composition. Paragraph (12)(b) states that a sub-committee will have a quorum of one, but how big will the committees be?
I am very uncomfortable with the idea of a sub-committee of one person making decisions or taking evidence. It should include at least one person from each House: a Member from this House and one from the other House. Likewise, on the question of political balance, it could include a Government Member and an Opposition Member. If we are going to have sub-committees, surely it would be right to increase the quorum to at least two, one from each House, and, potentially, to try to get political balance.
There are many provisions in the motion that prompt many questions. The hon. Member for Wellingborough made a very good point, in that it sets a lot of precedents and, I hope, sets a way forward that Select Committees can follow to draw down more resources and increase their powers.
I also want to raise the issue of the Commission’s reports. The motion states that it will
“report from time to time.”
Who will decide? If the Commission as a whole decides to produce interim reports or short reports throughout its life, some of them will be very market sensitive. Will not the Commission have to be very cautious in what it releases? I am sure that many finance houses, banks and other parts of the financial sector will be looking very closely at what the Commission recommends, and it could affect the share prices of those organisations. There is no guidance in the motion about how those reports should be produced, according to what time scale and for what reasons.
The other question that was mentioned earlier is whether we are happy now that we have basically set up a new type of Select Committee. Personally, I am not. I think that this inquiry would have been far better done by the Treasury Committee. Obviously, those on the Front Bench from my own party argued strongly for a judicial-led inquiry, which was the right approach to get confidence in the banking system. In the absence of such an inquiry, the Treasury Committee would perhaps have been a better vehicle. I worry about the precedent that this sets and whether it will allow the Government of the day to dictate to Select Committees or hybrid Committees. That goes to the heart of the independence of those Committees and their accountability to Parliament. The Commission will have a huge job to do and I wish it well in its deliberations, but we should undertake a serious examination of the new system and the precedent that that sets for our Select Committees.
Question put and agreed to.
Ordered,
(1) That a Committee of this House be established, to be called the Parliamentary Commission on Banking Standards, to consider and report on—
(a) professional standards and culture of the UK banking sector, taking account of regulatory and competition investigations into the LIBOR ratesetting process;
(b) lessons to be learned about corporate governance, transparency and conflicts of interest, and their implications for regulation and for Government policy;
and to make recommendations for legislative and other action.
(2) That Mr Andrew Tyrie be Chair of the Commission.
(3) That Mark Garnier, Mr Andrew Love, Mr Pat McFadden and John Thurso be members of the Commission.
(4) That the Commission have leave to join with any committee appointed by the Lords to consider the said matters.
(5) That the Commission may hold meetings under the provisions of paragraph (4) of this order at any time after the Lords has agreed to appoint a committee.
(6) That the Commission shall, except as provided for in this order, follow the procedure of a select committee of this House.
(7) That the Commission shall have power—
(a) to send for persons, papers and records;
(b) to examine witnesses on oath;
(c) to appoint specialist advisers;
(d) to invite specialist advisers (including Counsel appointed as specialist advisers) to examine witnesses;
(e) to adjourn from place to place;
(f) to sit notwithstanding any adjournment of the House; and
(g) to report from time to time.
(8) That the Commission shall have power to appoint sub-committees to consider matters specified by the Commission within the terms of this order and a subcommittee shall have—
(a) the powers in paragraph (7)(a), (b), (e) and (f); and
(b) the power to invite specialist advisers appointed by the Commission (including Counsel appointed as specialist advisers) to examine witnesses;
and the quorum of a sub-committee shall, subject to paragraph (12)(b), be one member of this House.
(9) That the Chair may report to the House an order, resolution or Special Report as an order, resolution or Special Report of the Commission which has not been agreed at a meeting of the Commission if he is satisfied that he has consulted all members of the Commission about the terms of the order, resolution or Special Report and that it represents a decision of the majority of the Commission.
(10) That the quorum of the Commission shall be two members of this House.
(11) That, whenever this House shall stand adjourned other than to the next day, any report, Special Report, order or resolution agreed to by, or evidence taken or received by, the Commission, including any under paragraph (9) of this order, may be published or printed under the authority of this House, shall be deemed to have been reported and shall be reported when this House next sits.
(12) That, when the Commission operates under the provisions of paragraph (4) of this order, the following provisions shall apply—
(a) the quorum of the Commission shall be two members of this House and two members of the House of Lords;
(b) the quorum of any sub-committee shall be one member from either House;
and
(c) the power of the Chair to report under paragraph (9) may also be exercised with the Chair’s agreement by a member of the Commission who is a member of the House of Lords.
(13) That the costs of the Commission shall be assessed by the House of Commons Commission from time to time and shall be paid by Her Majesty’s Government for the credit of the House of Commons (Administration) Estimate.
(14) That the Commission shall report on legislative action no later than 18 December 2012 and on other matters as soon as possible thereafter.
(15) That a message be sent to the House of Lords to desire their concurrence.—(Sir George Young.)