House of Commons
Prayers
This information is provided by Parallel Parliament and does not comprise part of the offical record
Mr Speaker
I am sure the House will wish to join me in offering two sets of congratulations—first, to the British and Irish Lions on their magnificent series victory over Australia. Secondly, I feel certain the House will wish to join me in offering our heartfelt congratulations to Andy Murray on becoming the first British man to win the Wimbledon singles championship since Fred Perry last did so in 1936.
Oral Answers to Questions
Margot James (Stourbridge) (Con)
1. What steps he is taking to bring empty buildings back into use.
David Rutley (Macclesfield) (Con)
3. What steps he is taking to bring empty buildings back into use.
Rebecca Harris (Castle Point) (Con)
5. What steps he is taking to bring empty buildings back into use.
Karen Lumley (Redditch) (Con)
13. What steps he is taking to bring empty buildings back into use.
Julian Smith (Skipton and Ripon) (Con)
16. What steps he is taking to bring empty buildings back into use.
The Parliamentary Under-Secretary of State for Communities and Local Government (Mr Don Foster)
Among the measures that we have introduced in addition to the powers available to councils, we have provided £235 million in grant and £130 million in new homes bonus, we have revised and are further reviewing permitted development rights, and we have offered councils increased flexibility over council tax levels for empty homes.
Margot James
High street premises in the Cradley part of my constituency have been allowed to fall into a very poor state of repair, which is not conducive to their being brought back into use. What can my right hon. Friend do to encourage local authorities to use their existing legal powers, such as serving section 215 orders, in order to oblige freeholders and landlords to maintain their properties to an acceptable standard such that they might stand a better chance of being returned to productive use?
Mr Foster
I begin by congratulating my hon. Friend on the work that she is doing on this issue and on her support for the Cradley action group. As she rightly says, empty commercial properties such as the 19% in her council area have a corrosive effect, and I urge her council to use its existing extensive powers. I hope that our recent changes to permitted development rights will make it easier to convert disused commercial buildings in her area into homes.
David Rutley
I welcome the steps that the Government are taking in this important direction. In Macclesfield, local businesses and the council are working closely together through the intown living initiative to make more empty space above shops available for residential use. Does my right hon. Friend agree that such steps not only make empty space productive and usable again but breathe new life back into our high streets?
Mr Foster
I congratulate my hon. Friend and his local council on the work they are doing to bring empty properties back into use. A reduction of 33% in empty homes since 2010 is a great achievement. He is right—tackling empty spaces above shops will certainly contribute to regenerating town centres. Two weeks ago I announced £450,000 in grant for his council area, and I hope this will help.
Rebecca Harris
I congratulate the Minister on what he is offering to help bring empty properties back into use, but in Castle Point we also have a notable number of derelict smaller sites. What advice or support can the Government give to help councils bring forward these sites as well?
Mr Foster
I congratulate my hon. Friend on her successful defence of the local green belt, and her council on a 23% reduction in empty commercial properties. She is right that we need to see small derelict plots developed before there is encroachment on the green belt, and I am confident that together with the vigorous use of existing council powers, the new permitted development rights and the community right to reclaim land will help her achieve that objective.
Karen Lumley
Does the Minister agree that in order to renovate and reoccupy unused properties in areas such as Redditch, we need to encourage local councils to use the incentives provided by Government?
Mr Foster
I certainly do. My hon. Friend is exactly right. Our new homes bonus for bringing empty properties back into use has certainly helped as there are fewer empty homes in her area than in 2010, but I note that Conservative-controlled Wychavon council is using the new powers that we have granted to allow a 50% premium on council tax on long-term empty homes, but that Labour-controlled Redditch council is apparently not doing so. Perhaps she could urge the council to reconsider.
Julian Smith
One of the difficulties in this area in Ripon and other parts of North Yorkshire is getting landlords to engage—communities are often frustrated by being unable to contact the landlord and not knowing who they are. What advice can the Minister give?
Mr Foster
My hon. Friend is right. Notwithstanding the excellent work of communities in Ripon and Bentham and their Portas town teams, it is a frustrating and challenging issue. In some cases, the right to reclaim land will help, but local councils are best placed to compile a public register of high street landlords. Spurred on by him, I will now consider how we can give still further assistance.
Graham Jones (Hyndburn) (Lab)
My local Labour council is working exceedingly hard to tackle some of the 2,500 empty properties in Hyndburn and also those in Rossendale. Does the Minister think that the introduction of a decent housing standard would make those properties more attractive to people to rent, rather than the dilapidated state that some are in at the moment?
Mr Foster
I am enormously grateful to the hon. Gentleman for the positive discussions he and I have had on the matter. I remind him that I have agreed to look at the issues he has raised, and we have already given £1.6 billion in grants to help bring council homes up to a decent standard.
Valerie Vaz (Walsall South) (Lab)
What steps will the Minister take to bring empty sites with planning permission for housing back into use?
Mr Foster
Already there is vigorous use. I remind the House that some two thirds of assets in this country are owned by local councils. We are now consulting on the need to get councils to declare a list of all their assets. We have also given additional powers on the right to reclaim that should enable local communities, and indeed individuals, to put pressure on people who own derelict sites to bring them back into use.
Andrew Gwynne (Denton and Reddish) (Lab)
Back in 2011 the Pensions Minister told the House that the bedroom tax would help tackle overcrowding, but research by the National Housing Federation now shows that, as a result of those changes, houses across the country are lying idle. Is that what the Government meant by tackling empty homes: creating more of them?
Mr Foster
What the Government intend by what the hon. Gentleman describes as the bedroom tax is a means of ensuring the effective use of existing homes, as over 1 million bedrooms are empty and a quarter of a million families are living in overcrowded homes. That is why we are tackling the issue, together with our plans to provide new affordable homes, something that the Labour party signally failed to do when it was in power.
Sheila Gilmore (Edinburgh East) (Lab)
Further to the question from my hon. Friend the Member for Denton and Reddish (Andrew Gwynne), is not the problem that no real research was done before the introduction of the bedroom tax? The position is very different up and down the country, and in some areas it is clear that an inadvertent consequence might be more empty homes. If that proves to be the case, will the Government change their mind?
Mr Foster
I must say to the hon. Lady that clearly very detailed research was done and we had a number of pilots across the country. It would be very helpful if she would assist the House by indicating whether the Labour party, which has been so opposed to the measure, now intends to reverse it.[Official Report, 18 July 2013, Vol. 566, c. 18MC.]
Ian Swales (Redcar) (LD)
On my high street, some business rates are five times the level of the rent being sought by landlords. Will the Minister consider revaluing business rates, and doing so before localisation so that poorer areas do not lose out?
Mr Foster
We have no intention of having a revaluation at the present time. That would cause huge disruption to businesses up and down the land. However, we have doubled the support we give to small businesses. In addition, we have provided financial support to those councils that wish to reduce business rates in their area.
Stephen Pound (Ealing North) (Lab)
In the early 1990s, when the Government Chief Whip was a most distinguished Housing Minister and I was an insignificant housing officer, the then Government introduced with great fanfare something called LOTS—living over the shop—which had certain similarities to what we have heard about today. It was an unmitigated disaster. There are good reasons why people do not want to live above undertakers, butchers and off-licences. I urge the Minister to look at some of the previous attempts to resolve this and to realise that it is not as simple as it looks.
Mr Foster
The hon. Gentleman could never be described, even back in the ’90s, as insignificant. We have indeed looked at all previous attempts to make use of spaces above shops, and all of them have failed, which is why we have now put direct funding in, through our Portas team pilot areas, to look at innovative new ways of dealing with this, and not least, as he will understand, the issue of security.
Rehman Chishti (Gillingham and Rainham) (Con)
2. What steps he is taking to tackle extremism and promote integration in Britain.
The Secretary of State for Communities and Local Government (Mr Eric Pickles)
Like the rest of the House, the Government believe in challenging the forces of hate and the politics of division—from Islamic preachers of hate, to English Defence League thugs, to violent Trotskyite protesters. We are championing what we have in common and what unites us as a British nation across class, colour and creed.
Rehman Chishti
I thank the Secretary of State for that answer. It has been said that
“extremism breeds not within communities, but in their gaps and margins. In places where the webs and safety nets of community that sustain dignity, self-worth, autonomy and solidarities fail.”
What steps are being taken to tackle that?
Mr Pickles
It is most important for us to concentrate on those things that unite us. Very early on in this Government, we took a decision to separate the Prevent strategy from integration. My Department’s role has been to try to ensure that those parts that we can celebrate, as British citizens together, work together.
In particular, we have carried out a number of initiatives, including working with inter-faith groups, schools and detached youth workers. I have been grateful for the co-operation in individual constituencies from both sides of the House in respect of our ability to recognise that people of good will can celebrate the differences that exist.
Keith Vaz (Leicester East) (Lab)
A recent report by Teesside university, following the atrocity in Woolwich, showed that between 22 May and 25 June this year there were 241 anti-Muslim attacks. What support are the Government giving to local community groups under the Prevent strategy to deal with that hate?
Mr Pickles
The most important thing that we did was establish a way of recording anti-Muslim attacks. We took on board what had been happening with anti-Semitic attacks and took some of it across. I have to say to the right hon. Gentleman that those statistics include things being said on Twitter as well as actual attacks against individuals, and it is important that we have a degree of grading.
In the aftermath of the tragic and unjustified recent murder of Drummer Rigby, there were a number of attacks on mosques. I talked to the imams of just about every single one, and they wanted to be clear that the attack was not in their name. They condemned it and were looking towards greater integration within society.
Bob Stewart (Beckenham) (Con)
Councils increasingly have to translate their documents into other languages. How does that help the integration of communities in our country?
Mr Pickles
I do not think that it does, and I say that as a sinner repented. I was leader of Bradford council and we did translate. I realised that that attempt to integrate was a process that further isolated. The one thing that does unite us is our language of English. We should do everything we can to ensure that people learn English.
Lisa Nandy (Wigan) (Lab)
Is the Secretary of State aware that in some areas of the country, including Bradford, extremist groups are targeting young people and offering to keep them safe from on-street grooming, purely as a way of promoting their disgusting, far-right views? Will he tell us what his Department is doing to support local councils to tackle the problem?
Mr Pickles
I thought it significant that the Friday before last, throughout the country, mosques read a sermon explaining the difficulties of grooming and ways in which we can tackle it. A number of councils right around the country have been helpful in tackling the issue. We have been in close contact to ensure that the true voices of the community are heard, and not that perversion.
Bill Esterson (Sefton Central) (Lab)
4. What recent estimate he has made of the number of families with children living in temporary accommodation.
The Minister for Housing (Mr Mark Prisk)
On 31 April this year there were 40,450 families with children in temporary accommodation. Under the previous Government the number reached 74,180.
Bill Esterson
We are talking about this Government’s abysmal record. Some 76,000 families are living in temporary housing. Of those, the number in bed-and-breakfast accommodation has gone up from 630 three years ago to 1,970 at the end of March this year. These figures show that the Government are not even following their own guidance, which says that B and B accommodation is not suitable for families with children. The truth is that this Government are failing families with children up and down the country as regards providing decent housing.
Mr Prisk
I reject that argument. After all, the number of families in bed and breakfast for more than six weeks, to which he referred directly, has gone down by 14% in the past six months. However, we are not complacent; there is a lot to do. It is appalling for families who find themselves in those circumstances. This Government are determined not to reach the peak, which was treble the current level under the previous Labour Government.
Caroline Dinenage (Gosport) (Con)
Over 80% of the families who are in bed-and-breakfast accommodation for longer than six weeks come from 15 council areas. What more can the Department do to encourage councils to share best practice in how to deal with this?
Mr Prisk
My hon. Friend is absolutely right that the problem is concentrated in certain areas. For example, the numbers in temporary accommodation in the past 12 months halved in Leeds but rose in Birmingham. We need to focus on this. We are therefore putting £1.8 million into the bed-and-breakfast taskforce to really get under the skin of why there are these local variances and to make sure that we tackle the problem at source.
Jack Dromey (Birmingham, Erdington) (Lab)
Mr Speaker, may I first echo your congratulations to the British and Irish Lions and to Andy Murray? They are remarkable sportsmen with their team at its very best.
On his appointment, the Housing Minister released a manifesto for housing entitled “Mark’s Manifesto”. In a gripping read, he said that it was wrong that tens of thousands of people should be without a home and that the Government had
“acted to cut the number of households in temporary accommodation.”
Yet only this morning a study for Centrepoint by Cambridge university has pointed to a “severe” shortage of affordable housing, leaving the most vulnerable in the cold, and said that the number of households in temporary accommodation has risen by 10% over the past year. Can the Minister explain why?
Mr Prisk
There has been a rise in temporary accommodation in the past 12 months, but the numbers as a whole show that the number of families in temporary accommodation is half what it was under the previous Labour Administration. We are trying to tackle this at its root source. That is why we need to be clear about what Labour would do. Labour has a poor record on this, but will not say what its prognosis is.
Jack Dromey
On facing up to one’s record, the truth is that the only thing that this Government have cut is the budget for affordable homes, as the National Housing Federation has said. Homelessness and rough sleeping are up by a third since the general election, eight times more families are living in bed and breakfasts than three years ago, and the number of affordable housing completions fell by 29% in the past year. Why does the Minister not accept responsibility for presiding over the biggest housing crisis in a generation, forcing thousands of decent families into temporary accommodation and costing the taxpayer £1.8 billion?
Mr Prisk
We got the lengthy rhetoric, as usual, but no analysis or thought. The reality is that we are building more affordable homes—170,000 in this Parliament, and we plan to build 200,000 in the next Parliament. Labour’s record is that it managed to oversee the loss of 420,000 social homes in 13 years; no wonder Labour Members do not want to talk about it.
Charlie Elphicke (Dover) (Con)
6. What steps his Department is taking against aggressive bailiffs engaged by local authorities.
The Parliamentary Under-Secretary of State for Communities and Local Government (Brandon Lewis)
On 14 June the Government fulfilled a coalition pledge to provide more protection for the public against aggressive bailiffs and unreasonable charges by publishing guidance to local councils on good practice in the collection of council tax arrears.
Charlie Elphicke
Is not the need for this underlined by the experience of my constituent Mr Benvenuti of Deal who had a £65 parking ticket, which he appealed against but heard nothing about, turn into a £524 demand from a bailiff following a phantom visit? Is it not right that the Government are taking action on this matter?
Brandon Lewis
My hon. Friend makes a very good point. I am sure the residents of Lewisham will have been listening carefully to how Lewisham has been spending their money. That is why it is important that councils look carefully at what they spend and how they spend it, and that it is appropriate to the issue they are dealing with at that point.
Jonathan Edwards (Carmarthen East and Dinefwr) (PC)
Following changes to Office of Fair Trading rules, Carmarthenshire county council has, as I understand it, been able to employ bailiffs who have operated without a credit licence. What protection does the Minister believe council tenants should have when faced with unscrupulous debt collectors? If they are not regulated, how are their activities to be policed?
Brandon Lewis
I appreciate the hon. Gentleman’s question. We have produced clear guidance, but that is a devolved issue for the Welsh authorities.
Henry Smith (Crawley) (Con)
7. What steps he has taken to increase the right of bloggers and journalists to report council meetings.
The Secretary of State for Communities and Local Government (Mr Eric Pickles)
It is right that journalists and taxpayers are able to use modern media to scrutinise councils. Accordingly, we have legislated to ensure that that happens.
Henry Smith
I am grateful for the steps my right hon. Friend is taking to allow local authorities to encourage journalists and bloggers to report council meetings, as they do at Crawley borough council. Will he condemn councils such as Tower Hamlets that still seek to ban such practices?
Mr Pickles
Frankly, I cannot understand it. Margaret Thatcher introduced a right for the press to be able to scrutinise local authorities, and had modern media existed all those years ago they would have been included in that. Why should councils not show the good things they are doing for their communities?
Jim Fitzpatrick (Poplar and Limehouse) (Lab)
I fully support the point made by the hon. Member for Crawley (Henry Smith) about Tower Hamlets council meetings being broadcast and reported. However, Mr Speaker, you sometimes have difficulty controlling proceedings here on a Wednesday and they have been broadcast live on television for many years. What evidence does the Secretary of State have that it will improve the conduct in Tower Hamlets, which is what we all want to see?
Mr Pickles
We have legislated to ensure that cameras should film Tower Hamlets cabinet meetings, but we have not said that they should film the main council or committees. If councils continue to refuse to do this—only a handful are doing so—we will take the necessary measures, because the public have a right to know.
David Wright (Telford) (Lab)
8. What assessment he has made of the potential effect on local authority services of the decisions announced in the spending review 2013.
The Parliamentary Under-Secretary of State for Communities and Local Government (Brandon Lewis)
The spending round announcement is a fair deal for councils and taxpayers. We are putting in place powerful incentives to enable local government to transform local services, including £3.8 billion to drive the integration of health and social care, while still helping to pay down Labour’s deficit.
David Wright
I think that Telford and Wrekin council is acknowledged by the Department as a good council. It has made £50 million of cuts since 2010. The spending review indicates that it will have to make further cuts of £10 million a year for the next two years. We are committed to driving forward and finding efficiencies, but will the Minister issue some further detailed guidance on the pooling of health and social care money? It is really important for care, particularly that of elderly people.
Brandon Lewis
The hon. Gentleman makes a good point. This is a very important step forward and a huge opportunity for people to see better care as well as better savings for local authorities. We will continue to work with local authorities and the team at the Department of Health to ensure that the integration is smooth and that we get the benefits experienced in, for example, the tri-borough, which has taken this on and saved hundreds of millions of pounds and, importantly, is giving its residents a better service and a better quality of life.
Mr Graham Stuart (Beverley and Holderness) (Con)
Following the spending review, is it not obvious that we need a fairer local government settlement? We must close the gap between urban and rural areas and redistribute central Government funding to rural areas, which have suffered for too long with higher costs and lower central Government support.
Brandon Lewis
I thank my hon. Friend for making that point. As Members will recall, in this year’s assessment we recognised sparsity and went further by making available just over £9 million more to cover it. I will continue to talk to the rural authorities group over the summer to ensure another clear and fair settlement when we get to 2014.
Mr Clive Betts (Sheffield South East) (Lab)
Has the Minister thought about what his reaction will be when a council announces that it cannot fulfil its statutory obligations with the resources available to it?
Brandon Lewis
Local authorities have a statutory duty to ensure that they balance their budgets, and they have been doing that. It is particularly interesting and impressive that since 2010 public satisfaction with local authorities has increased. It is also important that small district councils in particular, which are working with silo expensive management teams, look at sharing management to make sure that they spend the money on front-line services looking after residents, and not on bureaucracy.
Helen Jones (Warrington North) (Lab)
In the Jackanory world of the DCLG, it announced that local government spending would fall by 2.3% after 2015, but will the Minister admit that important resource spending, even on his figures, will fall by 8.5%, rising to 10% when the new homes bonus is top-sliced, and that when predictions for business rates are taken into account, some councils could lose up to 19% of their grant without the compensating growth, hitting the poorest again? Does that not mean that the most vulnerable are paying the price for this Government’s economic failure?
Brandon Lewis
I am sure that the hon. Lady remembers that we have put protections in place for the most vulnerable—councils have a duty to ensure that they look after them. In fact, about 40 authorities actually had an increase this year, because we have moved local government financing from the old Labour style of a begging bowl and “If you do badly, you get more” to a reward-based system whereby if an authority builds houses, it gets money, and if it brings about business growth through business rates retention, it gets more money. Councils can provide better services, work together and be more efficient in that way.
Steve McCabe (Birmingham, Selly Oak) (Lab)
9. What recent discussions he has had with Mary Portas on the future of the British high street.
Ian Mearns (Gateshead) (Lab)
17. What recent discussions he had with Mary Portas on the future of the British high street.
The Minister for Housing (Mr Mark Prisk)
Our high streets need to adapt to changing consumer habits. Ministers and officials are therefore working with a wide range of civic and business leaders, including Mary Portas, to strengthen local leadership, reform planning and parking policies, help small shops and boost local markets.
Steve McCabe
I recognise the Minister’s good intentions in deregulating classes of use for high street shops, but so that high streets like those in Stirchley and Cotteridge in my constituency do not become swamped with bookmakers, payday lenders and fast food outlets, will he look again at the calls of Mary Portas and others for a special restriction on such development?
Ian Mearns
Even before the credit crunch, many of our high streets had shops that were struggling on the margins. At the moment, communities around the country, but particularly in areas like the north-east of England, are hard-pressed by cuts to local government expenditure, by job losses, the suppression of real incomes, cuts in benefits and fuel price rises, all of which have been sucking disposable income out of local economies. Is it any real surprise that there is a crisis on our high streets when many people have much less to spend in real terms?
Andrew Bridgen (North West Leicestershire) (Con)
High street shops are an important source of employment for local people, especially young people. Will my hon. Friend assure the House that his focus on the high street will benefit young people across the country?
Mr Prisk
Absolutely. It is important to remember that in many of our towns, that job is often the first one that young people get. That is why we are cutting the business rates for the smallest firms and ensuring that from next April, the payroll taxes for many of those firms will be reduced. That will help young people in my hon. Friend’s constituency.
Mr Barry Sheerman (Huddersfield) (Lab/Co-op)
Is the Minister aware that towns such as Huddersfield and cities such as Leeds need massive investment? What is the point of spending more than £50 billion on High Speed 2 at a time when, if there were a poll in all the big cities in this country, people would want to spend the money not on that but on regeneration of our cities and towns?
Mr Prisk
I thought the Labour party wanted us to invest in infrastructure—that is what it spent most of the spending round debate talking about. I am committed to ensuring that our high streets can compete, which is important. High street innovations, empty properties being brought back into use and helping small shops will all help Huddersfield and elsewhere.
Neil Carmichael (Stroud) (Con)
Inspired by the Portas report and supported by the Government, we in my constituency have launched the In Our Towns project, which is encouraging small towns such as Painswick, Stroud and Dursley to support each other in developing high streets successfully. Does the Minister think that is an example of excellent local work, and do the Government support it?
Christopher Pincher (Tamworth) (Con)
10. What steps he is taking to promote the take-up of the new community rights in the Localism Act 2011.
The Parliamentary Under-Secretary of State for Communities and Local Government (Mr Don Foster)
Community rights are being promoted through local, national, social and consumer media, ministerial visits, conferences, workshops, and external partners such as Locality, the Campaign for Real Ale and Supporters Direct.
Christopher Pincher
Will the Minister impress on local authorities the importance of their using their new powers and rights to resist unwanted wind farm developments such as the one at Relay Park and that in Kingsbury in North Warwickshire, which will tower over homes in Tamworth and cause property blight?
Mr Foster
As my hon. Friend knows, the Government recently announced that they will issue new planning policy guidance stating that the need for renewable energy does not automatically override environmental protections and the planning concerns of local communities. We intend to make pre-application consultations with local communities compulsory for more significant wind applications.
Kate Green (Stretford and Urmston) (Lab)
Local authorities can be in an invidious position when it comes to the community right to bid. If they agree a proposal, the owner of the asset may pursue legal action if the bid affects the value of the property. If they turn down a proposal from a community group, that group may pursue legal action. What protections will the Minister offer local councils such as Trafford in such circumstances?
Mr Foster
I am delighted that a large number of community rights to bid have registered for local community assets, and I urge more people to do so. The hon. Lady will be aware that the right to bid is just that and should not alter the price because the community are not guaranteed to be able to buy that particular asset. It will go out to public tender, and anybody can apply.
Dan Rogerson (North Cornwall) (LD)
My right hon. Friend had the opportunity to visit St Eval on his recent visit to North Cornwall, and he knows that that community is hoping to bid for assets although it was not able to meet the Ministry of Defence deadline. Will he keep under review the correlation between sources of public funding that are available to such groups, so that the timetables can align and they do not miss the opportunity to bid?
Martin Vickers (Cleethorpes) (Con)
11. What steps he is taking to bring empty retail premises back into use.
The Parliamentary Under-Secretary of State for Communities and Local Government (Mr Don Foster)
In addition to the range of tools to tackle this issue that I mentioned earlier, we have cut red tape to help landlords make better use of their empty properties, and we have doubled small business rate relief for three and a half years.
Martin Vickers
I thank the Minister for his reply and for the initiatives the Government are taking. He will be aware that our provincial towns are scarred with empty shops as a result of changing shopping patterns. Are the Government considering further measures in partnership with the private sector and local authorities to deal with that problem?
Mr Foster
Indeed we are, and I am sure the hon. Gentleman will welcome our support for pop-up shops, including in the headquarters of our Department, as well as the financial support we are offering councils. We have set up two bodies—the future high streets forum and the industry-led distressed retail property taskforce—both of which will come forward with new ideas to help us develop the additional measures that he rightly says are needed.
Roberta Blackman-Woods (City of Durham) (Lab)
On 3 June the planning Minister said that if local authorities fear that changes to use class orders are linked to more pay-day loan companies than retail on our high streets, they should use article 4 directions to limit the potential impact. On 17 June, he said they should not. Which is it?
Mr Foster
The article 4 direction is available to all local councils and has been used successfully on a number of occasions. I remind the hon. Lady of the important review being carried out on betting shops to look at the ridiculously high—in my view—level of stakes and prices that currently exist.
Annette Brooke (Mid Dorset and North Poole) (LD)
While welcoming the small business rate relief, what discussions has the Minister had—or will he have—with the Treasury and local authorities to introduce more flexibility and try to support our streets that need regeneration, whether they are high streets or out-of-town activities?
Philip Davies (Shipley) (Con)
12. What proportion of appeals from housing developers have been upheld by the planning inspector since May 2010.
The Parliamentary Under-Secretary of State for Communities and Local Government (Nick Boles)
Since 1 May 2010, there have been 1,712 appeals in England against local authority decisions on major housing schemes in England. In just under 60% of those cases, the local authority decision was upheld by the inspector.
Philip Davies
It has been known for me to stand up and criticise the Government occasionally in the Chamber, but I also believe that credit should be given where it is due. At the risk of you thinking that I am going soft in my old age, Mr Speaker, I want to congratulate the Planning Minister and the Secretary of State on their fantastic decision to reject the planning application at Sty lane in Micklethwaite in my constituency, endorsing the decision by Bradford council planning committee and the inspector. It has been greatly welcomed locally and I want to pass on my thanks to the Minister. Does he agree that the best way to stop this community being put in the same position in the future is for the local authority to remove this site from the local development plan?
Nick Boles
This is an unfamiliar position, but I simply point out to my hon. Friend that the credit belongs entirely to the Secretary of State, who is not used to being thanked for planning decisions.
Stephen Lloyd (Eastbourne) (LD)
Planning law going back decades allows pubs to switch to supermarkets without requiring planning change of use. That allows big developers, such as supermarkets, to muscle in where they are not wanted, such as on Albert parade in Eastbourne, where Sainsbury’s is replacing a local pub. Will the Minister give me an undertaking to revisit this anomaly in the planning laws?
Nick Boles
The good news is that there is no need to revisit the issue, because the local authority in the constituency of my hon. Friend the Member for Cambridge (Dr Huppert) has produced an innovative policy for its local plan, which has been held up by the courts as sound and will put in place a process to protect pubs that are under threat from speculative development so that further use as a pub can be properly considered.
Stephen Mosley (City of Chester) (Con)
14. What steps he has taken to help councils deliver sensible savings.
The Parliamentary Under-Secretary of State for Communities and Local Government (Brandon Lewis)
We have published “50 ways to save”, an excellent practical guide to councils on how to make sensible savings. We have also provided £27 million through the transformation challenge award and the efficiency support grant to encourage and incentivise authorities to make efficiencies and improve services. That will increase to £100 million as a result of the spending review.
Stephen Mosley
Tory Cheshire West and Chester council and Labour Wirral metropolitan borough council have announced proposals to merge their back-office functions such as IT, legal services, human resources and finance, saving some £69 million. Do not such schemes show that it is possible to make huge savings in local government without impacting front-line services?
Brandon Lewis
My hon. Friend is right, and I was delighted to visit Cheshire West and Chester recently and see some of the plans. It is a really good example of how big authorities can do things. Just last week, I saw at the excellent Staffordshire Moorlands and High Peak councils, small authorities with £10 million budgets, that shared management is saving some 20%, according to the chief executives, so it can be done at all levels.
Derek Twigg (Halton) (Lab)
The problem is that some of the most deprived councils, such as Halton in my constituency, are starting at a massive disadvantage. They are having to make deeper cuts because their cut, in terms of funding per head, is twice that of Cheshire East, and a lot higher than in Cheshire West and Chester. Should not the Minister be looking at fairer funding settlements?
Brandon Lewis
The hon. Gentleman must look at where we start. That is why it is important that all authorities, ranging from £2,800 to £1,600 spending power per household, need to look at what they can do to be efficient, sharing management, services and procurement benefits to ensure that they are giving good service to their residents and spending taxpayers’ money—let us not forget that—well in the first place.
Pauline Latham (Mid Derbyshire) (Con)
18. What recent assessment he has made of the financial situation of Derby city council.
The Parliamentary Under-Secretary of State for Communities and Local Government (Brandon Lewis)
We published the local government finance settlement for 2013-14 in February. Derby city council has an overall spending power figure of £2,021 per dwelling.
Pauline Latham
Does my hon. Friend agree that the decision by Labour-run Derby city council to reduce neighbourhood funding to wards with Conservative councillors is irresponsible and shows that that left-wing Labour council is stirring up a class war for politically motivated reasons? Allestree, Mickleover, Littleover, Oakwood and Chellaston have lost up to 90% of their funding, but Labour wards have received increases of up to 54%.
Brandon Lewis
My hon. Friend makes a powerful point. We have devolved power, so it is very much a matter for local authorities how they distribute the money they spend, but I am sure that—with her making such a strong case—residents in Derby will look carefully at what the council has done and take a view on that when it comes to the next elections.
Mr Philip Hollobone (Kettering) (Con)
19. What the total departmental expenditure on financing sites for Gypsy and Traveller pitches in (a) Kettering borough, (b) Northamptonshire and (c) England was in the last 10 years.
The Parliamentary Under-Secretary of State for Communities and Local Government (Brandon Lewis)
We have taken firm action against unauthorised sites. We believe in fair play and supporting those who play by the rules. The total allocated funds for Traveller sites in England has been approximately £175 million, of which almost £120 million has already been spent. Approximately £3.4 million has been spent in Northamptonshire, including about £850,000 in Kettering.
Mr Hollobone
As the law now stands, Kettering borough council, of which I have the privilege of being a member, has to identity sites for up to 37 Gypsy and Traveller pitches by 2031. The consultation has caused huge and understandable upset and concern throughout the borough. Will the Minister, who has proved both responsive and sensitive to such issues, be kind enough to agree to visit the borough of Kettering to see how these issues might best be resolved?
Brandon Lewis
I thank my hon. Friend, who no doubt will have noted the statement we laid before the House last week. I appreciate that planning for Traveller sites can be contentious and raises a number of complex issues, so I am happy to visit him in Kettering to see them at first hand.
Mrs Emma Lewell-Buck (South Shields) (Lab)
22. What assessment he has made of the availability of one-bedroom homes.
The Minister for Housing (Mr Mark Prisk)
There are 1.1 million single-bedroom properties in the social rented sector. Overall, the social rented sector shrank by 420,000 homes between 1997 and 2010.
Mrs Lewell-Buck
In South Tyneside there are 1,026 households currently living in two-bedroom properties who are affected by the bedroom tax, but just 122 one- bedroom homes are available—more than eight households per vacancy. How can the Minister justify a policy that punishes tenants for under-occupancy when the vast majority are simply unable to move?
Mr Prisk
May I take the opportunity to welcome the hon. Lady? I think that this is the first chance we have had to debate since she was elected in May. She was a keen fighter on what she calls a bedroom tax. The question Government Members have is this: if the Labour party is so opposed to this measure, why is her party leader refusing to repeal it?
Mark Pawsey (Rugby) (Con)
T1. If he will make a statement on his departmental responsibilities.
The Secretary of State for Communities and Local Government (Mr Eric Pickles)
To change the civil service culture of more regulation and more spending, I have today announced a new scheme where civil servants will be rewarded with high street vouchers for saving taxpayers’ money. I am sure the whole House will want to congratulate firefighters on their excellent job of tackling the Smethwick blaze last week. Given its exceptional scale, I can announce that we have activated the emergency response Bellwin scheme, so we can give West Midlands fire service the support it needs.
Mark Pawsey
The new homes bonus is an effective tool in encouraging local communities to create new homes, but it benefits equally authorities that initially opposed new housing, after development consent is granted on appeal. It is important to support communities that, through their local plan, demonstrate a positive attitude towards development, so does the Secretary of State agree that such authorities should receive an enhanced level of new homes bonus?
Mr Pickles
My hon. Friend introduces a whole new concept of worthy and unworthy councillors, and that is perhaps a step too far. I am comfortable with the thought that when people object to me as Secretary of State, I can point to my hon. Friend who is a much harder man.
Hilary Benn (Leeds Central) (Lab)
I join the Secretary of State in commending the fire service for how they dealt with that very difficult fire.
Thousands of people on low incomes are now getting council tax summonses because of the Secretary of State’s new poll tax. The Sunday Mirror reports that Peterborough city council, for example, has issued double the number of summonses for non-payment compared with last year. Why does he think that so many people are finding it so difficult to pay the bills that he has imposed on them?
Mr Pickles
Let me be absolutely clear: these are local authority schemes. In some parts of the country, people on low incomes are not receiving anything additional. These are schemes put together by local authorities, and it is up to local authorities to defend them.
Hilary Benn
It will not quite do for the Secretary of State to introduce the legislation, cut the money, and then attempt to pass the buck to local authorities up and down the country. The truth is that he is out of touch with what is happening to people on low incomes.
Let me try another question. One of those summonsed is a single parent called Charlotte, who has been asked to pay £141.66. She told the newspaper:
“My priority is finding money to get food for my child.”
What choice does the Secretary of State think she should make?
Mr Pickles
We have placed before local authorities discretionary help to use in such circumstances. The most interesting thing is this: that money has gone unclaimed. This is a local authority scheme, and it is up to the local authority to defend it.
Amber Rudd (Hastings and Rye) (Con)
T2. It is good news that East Sussex county council has begun a £6 million investment in Hastings library, bringing in the new children’s library, bringing the registrar down into the library and buying the new building next door. Does that not show that a well-run county council, such as Conservative-led East Sussex county council under Councillor Keith Glazier, can achieve investment in vital libraries where it needs to?
Mr Pickles
I had the opportunity to meet Keith not so long ago. It is clear to me that East Sussex county council is revitalising a part of the country that has been neglected for such a long time, and it should be congratulated on that.
Tom Blenkinsop (Middlesbrough South and East Cleveland) (Lab)
T4. When asked about the mutualisation of Cleveland fire authority, the fire Minister told the Select Committee on Communities and Local Government on 15 May: “they are not progressing with it.”However, the latest freedom of information request to the authority was refused on the grounds of “commercial interest” and because matters are “still subject to consideration”. Who is telling the truth, and are the Government still funding this process?
The Parliamentary Under-Secretary of State for Communities and Local Government (Brandon Lewis)
I think the point I was making before the Select Committee was to clarify the fact that this Government will not be doing anything to allow for privatisation of the fire service, despite the claims of the hon. Gentleman’s shadow fire Minister, who is trying to scaremonger.
Stephen Mosley (City of Chester) (Con)
T3. Independent analysis by Ernst and Young of the four community budgets pilots show that savings of between £9 billion and £20 billion are possible over five years if the scheme is rolled out across the country. What plans does my hon. Friend have to do just that?
Brandon Lewis
My hon. Friend is quite right: the community budgets pilots have shown huge potential savings to this country and, as I said earlier, better services for residents. We are now rolling out the new network. Last week we announced the first nine authorities to take part. They are looking at bringing together the public sector not just to save money, important though that is, but to give better services in this country—something that the previous Government continually failed to do.
Mrs Mary Glindon (North Tyneside) (Lab)
T7. In North Tyneside, the new Labour administration has inherited a £21 million budget deficit from the former Tory mayor. With Government cuts, that comes to £44 million. As the Secretary of State finds his Department £271 million in the red, has he any tips that could help North Tyneside council to balance its books?
Mr Pickles
We actually underspent our budget. My tip to the hon. Lady is to get on with it.
Dr Thérèse Coffey (Suffolk Coastal) (Con)
T5. In the spirit of reducing red tape, will my right hon. Friend look again at the rules that the Homes and Communities Agency issues on the minimum size of houses that attract affordable housing finance? Frankly, these houses are rather large. One of two particular cases was that of a property built 6 inches too narrow, which was not allowed to be taken into social housing because of that mistake.
The Parliamentary Under-Secretary of State for Communities and Local Government (Mr Don Foster)
Let me assure my hon. Friend that we have recently undertaken a review of housing standards, not least to try to reduce the plethora of different standards, which are burdensome and expensive. Space and room size have been considered. We will be consulting on the outcome of the review in the near future.
Ms Karen Buck (Westminster North) (Lab)
T8. The Department’s affordable rents policy is putting housing benefit expenditure up. Over at the Department for Work and Pensions, Ministers are trying, unsuccessfully, to cut housing benefit. Meanwhile, the cuts in housing benefit that they are making have resulted in an 86% increase in homelessness applications in my borough of Westminster. Does the Department ever speak to the Department for Work and Pensions, and if so, could they not possibly agree on a single policy, rather than two contradictory ones?
The Minister for Housing (Mr Mark Prisk)
We have a clear policy, which is to ensure that we reverse the loss of social housing that we saw under the last Labour Government and that the social housing sector is managed better than it was in the past. Labour needs to realise that there are a million spare bedrooms in the social housing sector and a quarter of a million families in overcrowded accommodation. They would love the luxury of a spare bedroom. We are prepared to make those reforms; the hon. Lady’s party is not.
Robert Halfon (Harlow) (Con)
T6. My constituents welcome the scrapping of the last Government’s guidance—
Mr Speaker
I don’t know why the hon. Gentleman has resumed his seat. I was merely looking at him and listening attentively, as always.
Robert Halfon
Anything to catch your eye, Mr Speaker. My constituents welcome the scrapping of the last Government’s guidance on diversity and equality in planning, but many residents in places such as Nazeing are concerned that Travellers can apply for retrospective planning permission. Will my hon. Friend come to my constituency, meet with local residents and reassure my residents who feel the planning system is biased against them when it comes to Travellers?
Mr Pickles
One knows when one has been Tangoed. I will of course be delighted to meet my hon. Friend, but I can give his constituents this reassurance: in the Localism Act 2011 we abolished the ability to have retrospective planning appeals and enforcement at the same time. I think that will help the residents of Nazeing.
Mr Speaker
I should just say to the Secretary of State that I thought the hon. Member for Harlow (Robert Halfon) was the man in the mustard suit, but the Clerk, who is the fount of all wisdom, advises me that its colour is tangerine.
Mrs Sharon Hodgson (Washington and Sunderland West) (Lab)
T9. Despite the Government’s rhetoric on early intervention, Sunderland council’s early intervention grant is 47% lower than it was in 2010, while the Secretary of State’s council in Essex has had a cut of just 36%. Can the Secretary of State tell us by how much more the Government will cut Sure Start and other early intervention programmes over the next two years, and whether these disparities in cuts will be reversed or entrenched?
Mr Pickles
The hon. Lady should look to the extra money with regard to troubled families—Sunderland has done a remarkably good job in identifying the families concerned—and the fact that we have recently announced an extra £200 million to extend that programme.
Sir Bob Russell (Colchester) (LD)
Does the Secretary of State agree that local authorities should seek and welcome further cuts by reducing the amount of times grass is cut and encouraging wild flowers in appropriate locations?
Mr Pickles
That can also be a cut the other way, as I recall a local authority that did what my hon. Friend said, but when it came to cut the grass again, it found it had grown so high that it was not able to use its machinery.
Mr John Spellar (Warley) (Lab)
As the Member of Parliament for Smethwick, I welcome and endorse the Secretary of State’s remarks about the superb performance at the Smethwick fire by the West Midlands fire service and its firefighters, and I also welcome the extra payment under the Bellwin scheme, but is the Secretary of State aware of reports that during the first night of the fire only one West Midlands fire engine was available for the whole of the West Midlands county? Will he therefore reconsider the general cuts to West Midlands and other metropolitan authorities?
Brandon Lewis
I thank the right hon. Gentleman for his question, and the Secretary of State and I both spoke to the chief fire officer last week. The fire service did a fantastic job, but it is very disappointing that the chairman of the fire authority tried to play political games in the aftermath of this tragedy, because it is simply not true to say that only one vehicle was available. The mutual scheme between the different authorities, including Staffordshire, Herefordshire and others, worked extremely well, and a large number of engines were still available for use, and he should be getting on with doing his job instead of playing politics in that fire authority.
Robert Neill (Bromley and Chislehurst) (Con)
Does my right hon. Friend think it might be a good time to review the rules on the declaration of councillors’ interests, given that it is now compulsory for all Labour council candidates to be a member of a trade union?
Mr Pickles
I am shocked to hear that information. People will now wonder whether councillors are working for their residents or their trade union bosses, and I shall review the situation as a matter of urgency.
Natascha Engel (North East Derbyshire) (Lab)
May I give the Minister another chance to answer the question put by my hon. Friend the Member for South Shields (Mrs Lewell-Buck) and give him another example? Fifty-one per cent. of council tenants in my constituency are in rent arrears because they cannot afford to pay the bedroom tax. There are no smaller properties for them to move into, so what are they supposed to do?
Mr Foster
Let me repeat to the hon. Lady the information we gave earlier: we have already provided £350 million in discretionary housing payments to local councils. [Interruption.] Hon. Members are saying from a sedentary position that it is all gone, but may I remind them that last year more than £11 million of discretionary housing payment was not used by local councils? They could use it more efficiently.
Graham Evans (Weaver Vale) (Con)
Sandymoor free school in my constituency has had its planning permission refused by Unite-backed Labour councillors who are acting against the local authority planners’ recommendation for approval. Will my right hon. Friend look into this matter urgently so that the school can continue serving my constituents without local authority and trade union interference?
Mr Pickles
The destructive hand of Unite appears to be going now through the planning system. We look at these things in a quasi-judicial way, and I will look at any application for an appeal with a completely free mind.
Bill Esterson (Sefton Central) (Lab)
I may have missed the answer that the Secretary of State gave to my right hon. Friend the Member for Leeds Central (Hilary Benn) about what Charlotte should do, so perhaps he could just tell me: should she feed her child or should she pay her council tax?
Mr Pickles
The hon. Gentleman has to face up to the fact that these are local authority schemes, there is a hardship fund in place, and we expect local authorities to deal with these matters and not to send their spokesman here to shroud-wave.
Greg Mulholland (Leeds North West) (LD)
We need more social housing and more affordable housing, but does the Secretary of State understand the anger in north Leeds at the fact that Labour-run Leeds city council is bringing forward plans to concrete over much of our green belt with hundreds, if not thousands, of new homes?
The Parliamentary Under-Secretary of State for Communities and Local Government (Nick Boles)
The protections in the national planning policy framework for the green belt are very, very clear and very, very strong. Only in exceptional circumstances can development take place on the green belt, and the local authority will need to consult extensively with the local community to gain its support for any proposed change in the green belt.
Abu Qatada (Deportation)
(11 years, 5 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Secretary of State for the Home Department (Mrs Theresa May)
With permission, Mr Speaker, I would like to make a statement on the deportation of Abu Qatada. Yesterday—more than 10 years after this ought to have happened—Abu Qatada was deported from the United Kingdom and sent back to Jordan. On arrival in Amman, he was handed over to the Jordanian authorities and formally charged with the two offences of which he had previously been found guilty in absentia. He is now held in Muwaqqar prison.
As hon. Members know, successive Governments have sought to deport Qatada since 2001. The long delays and significant costs that his case has incurred are down to the many layers of appeal rights that were available to him, and real problems with our human rights laws. I will turn to those issues later, but first I want to make it clear that the Government have succeeded in deporting Qatada by respecting the rule of law at each and every stage of the process. We did not ignore court judgments we did not like. We did not act outside the law. We did what was right. And for a civilised nation, that is something of which we should be immensely proud.
Qatada’s deportation, which took place on Sunday morning, followed my issuing of a fresh deportation decision on 27 June, and my further decision to certify any appeal that Qatada might have brought on human rights grounds as “clearly unfounded”. That meant that the only choice open to Qatada was between challenging my decision through judicial review or conceding that the game was up. Given the strength of the agreement we reached with the Jordanian Government in March, he accepted the inevitable.
It is important to remember that the UK Government already had assurances about Qatada’s treatment in Jordan—assurances that have been upheld in the courts—but in February last year the European Court of Human Rights moved the goalposts and declared that his deportation would be unlawful because of the risk that evidence obtained through the mistreatment of others might be used against him. That was the first time ever Strasbourg had blocked a deportation on that basis. The treaty we agreed with the Jordanian Government puts the answer to that final question beyond any doubt. The treaty guarantees a fair trial for anyone deported from either of our countries. The treaty benefits both countries and I thank hon. Members in this House for ensuring its rapid ratification. It was the key that unlocked the door to deportation.[Official Report, 16 July 2013, Vol. 566, c. 5MC.]
Qatada’s deportation demonstrates both our commitment to abide by the law and our resolve to deport foreign nationals who threaten our safety and security. It also demonstrates the legal validity of our policy of deportation with assurances.
I want to turn now to the lessons we need to learn from the case. The deportation of Abu Qatada has taken 12 years and cost more than £1.7 million in legal fees for both sides. That is not acceptable to the public, and it is not acceptable to me. We must make sure it never happens again.
First, we have to do something about the legal fees spent by defendants and paid by the taxpayer, not to mention the benefits they also claim. Secondly, we have to remove the many layers of appeal that are available to foreign nationals we want to deport. Thirdly, we have to do something about the crazy interpretation of our human rights laws.
The Government are taking action to address all three concerns. First, on legal fees and benefits, in the case of Abu Qatada £220,000 of his legal fees were funded from his own accounts, which were frozen by the authorities, but the rest—some £430,000—was funded by the taxpayer, and in many other cases foreign nationals we ought to be able to remove have their legal costs paid in full by the public. That is something my right hon. Friend the Justice Secretary is addressing in his reforms to the legal aid system, and I can also tell the House that my right hon. Friend the Secretary of State for Work and Pensions is considering how we can curtail the benefits claims made by terror suspects and extremists whose behaviour is not conducive to the public good.
Secondly, we need to do something about appeal rights. Through the Crime and Courts Act 2013, the Government have already legislated for the principle that in national security cases individuals should be able to appeal only following deportation to their home country, except in cases where there is a risk of serious, irreversible harm. But we will do more, and that is why I will introduce the immigration Bill later this year. That Bill will stop illegal immigrants accessing services to which they are not entitled; it will make it easier to remove foreign nationals; it will make it harder for them to prolong their stay with spurious appeals; and it will make clear to the courts once and for all that foreign nationals who commit serious crimes will, other than in exceptional circumstances, be deported. I hope hon. and right hon. Members from all parties will give their support to that Bill.
I can also tell the House that my right hon. Friend the Justice Secretary is considering ways to speed up the pace at which the courts hear national security cases, but those reforms can achieve only so much until we make sense of our human rights laws. The Government are already taking action to address the misinterpretation of article 8 of the European convention on human rights—the right to a private and family life—and we achieved reforms to the way in which the European Court works in the Brighton declaration.
The problems caused by the Human Rights Act and the European Court in Strasbourg remain, and we should remember that Qatada would have been deported long ago had the European Court not moved the goalposts by establishing new, unprecedented legal grounds on which it blocked his deportation. I have made clear my view that in the end the Human Rights Act must be scrapped. We must also consider our relationship with the European Court very carefully, and I believe that all options—including withdrawing from the convention altogether—should remain on the table, but those are issues that will have to wait for the general election. Today we should take quiet satisfaction from the fact that a dangerous man has been deported to face justice in his home country.
I know the whole House will want to join me in paying tribute to all the Home Office officials, lawyers, police officers and members of the Security Service who have worked on this case, as well as Peter Millett, the British ambassador in Amman, and of course, the security Minister, the Under-Secretary of State for the Home Department, my hon. Friend the Member for Old Bexley and Sidcup (James Brokenshire).
Last year, I said:
“The right place for a terrorist is a prison cell. The right place for a foreign terrorist is a foreign prison cell, far away from Britain.”—[Official Report, 7 February 2012; Vol. 540, c. 166.]
Today, Abu Qatada is indeed in a foreign prison cell, and so I commend this statement to the House.
Yvette Cooper (Normanton, Pontefract and Castleford) (Lab)
The entire House should strongly welcome the work that the Home Secretary and her junior Minister have done to get Abu Qatada finally on a plane back to Jordan to stand fair trial. This is a good result for not just the Home Secretary, but the country. In his home country, Abu Qatada stands accused of plotting terror attacks against a school and tourists, and it is right that he should stand trial for those offences and for justice to be done.
After Abu Qatada was granted asylum in this country in 1994, he began preaching hatred and praising terror attacks. He is a dangerous man whose values we in this Parliament condemn, and that is why successive Home Secretaries—Labour and Conservative—have worked to deport him with the cross-party support of the House and that of the country. I strongly welcome the work of the Home Office and the Foreign Office to keep pursuing the case over many years, and we should also welcome the work of the Jordanian Government and Parliament to pass the treaties that were needed.
My right hon. Friend the Member for Blackburn (Mr Straw) agreed the first memorandum of understanding with Jordan in 2005, which led to the agreement of the British courts that Abu Qatada could be deported without the threat of torture, and the Home Secretary rightly built on that agreement after the 2012 European Court judgment. She was also right to pursue the legal route, rather than listening to those who urged her to ignore the law. Without the rule of law, we are not free.
We should be in no doubt, however, that the case has taken far too long, so change is needed to deal with such unacceptable and costly delays. The attempt to deport Abu Qatada started in 2005. It took three years for his case to reach the Court of Appeal, another year for it to reach the Law Lords and a further three years for it to reach the European Court, and it is a further 18 months since then. That is far too long—too long in the British courts and then too long in the European Court.
We will examine the Home Secretary’s proposal that layers of appeal should be removed for immigration cases, because we believe that the process needs to be speeded up and that slow justice is in no one’s interests, but I urge her and the Secretary of State for Justice to consider the practical and administrative reasons why such cases take so long. The European Court now has a backlog of 150,000 cases and badly needs major reform. However, Ministers promised progress while Britain chaired the Council of Europe, yet little of substance was achieved. The borders inspectorate has said that a quarter of foreign criminals are sent home and a third are given leave to remain, but that 40% are not deported simply for administrative and bureaucratic reasons, so those cases need to be tackled.
The Home Secretary referred to the qualified right to a family life under article 8 which can be used in immigration cases, on which we have supported the Government, although that was clearly not the issue in the Abu Qatada case. She concluded by saying that she wanted to abolish the Human Rights Act and to consider withdrawing from the European convention, yet she herself has drawn on the Human Rights Act. She used it to prevent Gary McKinnon from being deported to the USA, but without the Act, she would have had no legal justification for doing so. It is unclear whether she wants no Bill of Rights at all, which would consequently mean that there would be little restriction on what the Home Secretary’s decisions could be, but will she confirm that the Government’s commission on a draft British Bill of Rights has replicated article 3 of the Human Rights Act, on the absolute prohibition of torture? As she knows, the central issue in the Abu Qatada case was always torture, which is something that we in Britain have always abhorred, so ditching the Human Rights Act and replacing it with her British Bill of Rights would have made no difference in that case.
The Home Secretary made much in her statement of the importance for us, as a civilised nation, of not acting outside the law. However, if we were to resile from the European convention, what signal would it send to those countries that we are trying to persuade to adopt higher standards of human rights and to follow the convention, such as Russia, regarding the criminal justice system, and Turkey, regarding the treatment of Kurds?
The Government have done immensely important work in the Abu Qatada case: deporting a dangerous man; delivering new legal deportation agreements so that we can remove people to Jordan and elsewhere, with new protection against torture in Jordan; and showing the British Government’s determination to pursue what is right while respecting the rule of law and having no truck with torture. The Home Secretary rightly claimed credit for all those things in her statement, and reforms are needed to deal with the problems of this case. We are pleased that Abu Qatada has finally been deported and we cannot have such delays in the future, but she should put forward her reforms without ripping up the things that she has just achieved.
Mrs May
I thank the right hon. Lady for the references that she made to the success in deporting Abu Qatada, and for saying that the Labour Opposition will look very seriously at the proposals that we bring forward in the immigration Bill. The Opposition supported changes to the immigration rules in relation to the interpretation of article 8, and we were grateful to them for that. Sadly, a number of judges have not heard Parliament in the way that all of us hoped. I hope that we will have support on the immigration Bill, because I think these changes are important.
The right hon. Lady mentioned the administrative reasons for the lack of deportation, and issues around the speed with which these cases are dealt with in the courts. My right hon. Friend the Secretary of State for Justice is looking at that issue, because we all want to make sure that we can deal with these cases properly—with people having proper rights of appeal, so that we can ensure that their case is heard—but can deport people rather more quickly.
The right hon. Lady then sadly spent quite a bit of her response on the Human Rights Act, my views on it, and what might happen in the future in relation to it. I make two points in response. First, what she fails to appreciate is the concern that Government Members have about the role of Parliament in setting laws that operate in the United Kingdom. That is one of the issues that we are looking at in relation to the European Court and its ability to deal with cases that are taken through the courts in the UK. Secondly, she rather churlishly suggested that nothing happened when we chaired the Council of Europe. A considerable amount of work was put in by the former Justice Secretary, the Attorney-General and others, and it led to the Brighton declaration, which is bringing about change in the way in which the European Court operates, so that is another success for this Government, who took that opportunity to make some changes.
My final point is very simple. Members of the public cannot understand why, under the human rights laws that we currently operate, somebody who is a threat to this country is able to remain in it, year after year, without being deported. Frankly, if the right hon. Lady cannot understand that, she simply does not get it, and will not get an opportunity to be on the Government side of the House.
Mr James Clappison (Hertsmere) (Con)
I warmly welcome my right hon. Friend’s statement and congratulate her and her team on their steadfastness, including in the face of criticism from Opposition Front Benchers in the past. Does she agree that, in the field of human rights, now is the time for a re-examination of the balance between microscopic and extended examination of an individual’s human rights, and the safety and security of the constituents who send us to this place?
Mrs May
My hon. Friend has absolutely put his finger on the problem, which is that in all these cases we are asked to look forensically at the human rights of an individual, but there is no opportunity to balance that with the danger that an individual poses to others in society. There is no opportunity to take into account that balance of the human rights arguments. It is exactly that sort of issue that we need to address.
Keith Vaz (Leicester East) (Lab)
I congratulate the Home Secretary on the achievement of removing Abu Qatada. It is a personal triumph for her. I know that she has worked extremely hard over the past few years to secure this result; indeed, since becoming Home Secretary, she must have felt, to coin a phrase, that there were three people in her marriage. The critical part of all this has been the relationship with Jordan and securing the agreement of the King of Jordan. Will she look at drawing up treaties with other countries right at the start of the process, rather than at the end, as that is one way of removing people? Will she look at a fast track through the European Court for those cases that involve terrorism, so that they are dealt with more quickly than other cases?
Mrs May
I shall perhaps not refer to some of the right hon. Gentleman’s comments, but I am grateful to him for his kind remarks. This has been the result of a huge amount of effort by a great number of people, including Home Office officials, our ambassador in Amman, and my hon. Friend the security Minister, to make sure that we achieved the deportation of Abu Qatada. The right hon. Gentleman encourages us to enter agreements of a similar nature with other countries. We have, I think, 30 mutual legal assistance treaties with other countries, so we have already gone down that route, and that includes countries such as United Arab Emirates and Saudi Arabia. We have a number of deportation with assurances memorandums of understanding with other countries—I think we have now been able to deport 11 people as a result of those agreements—but of course we seek to increase that number where it is necessary to do so.
Sir Gerald Howarth (Aldershot) (Con)
May I award my right hon. Friend and her entire team 10 out of 10 for standing up against this man and for British interests? It is deeply offensive to the British people that £1.5 million was spent keeping this man in the country for 12 years. May I encourage my right hon. Friend to carry on with her work and, despite the remarks of the shadow Home Secretary, to look again at repealing the Human Rights Act and Britain’s membership of the European convention on human rights? Can she tell us whether the judges have got it at last? She is doing a fantastic job—keep it up, please.
Mrs May
In relation to the interpretation of article 8, sadly we have seen cases where the interpretation by the judges has not been what the intent of Parliament was when we changed the immigration rules, which is why we are going to put those changes into primary legislation in the immigration Bill later this year. I can assure my hon. Friend that I and others will continue looking at human rights and what the right human rights laws are. As our right hon. Friend the Prime Minister made clear on Sunday morning, the Conservative party will introduce our proposals at the next general election.
Hazel Blears (Salford and Eccles) (Lab)
I, too, congratulate the Home Secretary and, in particular, the security Minister on the work that they have both done to get this good result. I was just thinking that it has taken 12 years to deport Abu Qatada—I think it took Andy Murray only seven years to win Wimbledon—so the whole country will be very pleased about this.
Hazel Blears
But it is a very serious matter, and this is a dangerous individual who was a threat to this country. I urge the Home Secretary to say to other countries with which we do not have memorandums of understanding that this is a clear message that the British Government can ensure that someone is deported, that they are not tortured and that they receive a fair trial. We should say to countries that may have been a little reluctant that now is the time to step up their act and get those memorandums agreed.
Mrs May
The right hon. Lady makes an important and valid point. Absolutely, we can send that message. One of the crucial aspects of this case is that the deportation with assurances memorandum of understanding was agreed by the courts as something that worked, so we can indeed build on that.
Simon Hughes (Bermondsey and Old Southwark) (LD)
I join others in congratulating the Home Secretary and her team on achieving what the whole country wanted, which was for Abu Qatada to go home. I thank her very much for saying that one of the issues with the European convention is the backlog of cases, and for the initiatives that the Government have taken. She will know, however, that the Liberal Democrats believe that she is fundamentally wrong to argue that repealing the Human Rights Act or even thinking of pulling out of the European convention would be in Britain’s interest. If we want to set an example of human rights for majorities as well as minorities, in Jordan and around the world, we must not pull out of the best guarantee that Europe has had of them, written by Britons, and working well for the past 70 years.
Mrs May
The right hon. Gentleman should not be surprised that I or indeed any of his Conservative colleagues in the coalition should stand up and talk about repealing the Human Rights Act, because we were all elected to the House on a party manifesto that had exactly that within it. In relation to the European convention, we do, I believe, as a country, have to look at our relationship with the European Court and the operation of the convention. We need to do so because of some of the cases that we have seen, and national security cases are a particular concern when we cannot deport someone for a significant period of time—if at all, potentially—because of the interpretation by the European Court of the convention. It is only sensible when beginning to work on this that we accept that all options should be on the table, and we do not rule anything out before we have done the work.
Paul Goggins (Wythenshawe and Sale East) (Lab)
May I, too, congratulate the Home Secretary and the security Minister on all the work they have done to see Abu Qatada removed to Jordan? In all the ups and downs over the years of dealing with this man, there was a time just a few months ago when it looked as if he might be freed from prison and freed from bail. The only option the Home Secretary would have had at that point would be to put him on a terrorism prevention and investigation measure. Given that at that moment she must have realised the inadequacy of TPIMs, what plans does she have to review them, especially as David Anderson has warned that early next year a number of dangerous individuals on TPIMs will be free to roam the streets?
Mrs May
This is a debate that we have had across the House and that I have had with the right hon. Gentleman on a number of occasions. The Government brought in the Terrorism Prevention and Investigation Measures Act 2011 and we are operating those TPIMs against a number of individuals, as he knows. As he is also aware, when TPIMs were introduced instead of the control orders that his Government had brought in, we also introduced, through some extra funding, measures to enhance the ability of the Security Service and the police to deal with these individuals, and we are confident in the package that was produced.
Michael Ellis (Northampton North) (Con)
Many people pay lip service to the concept of having respect for the law, but in cases such as this, which are deeply frustrating, testing and troublesome, the Home Secretary shows real respect for the law, and I congratulate her on her conduct and that of her Ministers throughout this matter. Will she look at the many varied avenues of appeal that are open to people like Abu Qatada, which can be curtailed without any infringement of the overall rights, and will she express the thanks of this House to the Hashemite Kingdom of Jordan for its extremely friendly actions in this case?
Mrs May
My hon. Friend is right in referring to the many layers and avenues of appeal that are available. It is precisely that sort of issue that we wish to examine in considering any changes we will introduce in the immigration Bill later this year. We have been co-operating with the Jordanian Government on this matter for some time now, and that co-operation has been very good, but I am pleased that the treaty we signed with them is more general and will apply in other cases as well. There is benefit to both the United Kingdom and Jordan in that mutual legal assistance treaty.
Steve McCabe (Birmingham, Selly Oak) (Lab)
I, too, sincerely congratulate the Home Secretary and the security Minister. No wonder she is talked about as a future Tory leader. The Home Secretary very generously thanked officials and lawyers who had worked on the case, but given what she said about the cost of the case overall—this is no criticism of her—does she think there is an argument for a review of why it took those officials so long to fix on the treaty route as the best way to solve the problem, rather than run up those huge bills?
Mrs May
The reason that large legal bills built up was the time the case took, because of the various stages of appeal that were available to Abu Qatada and the fact that the European Court moved the goalposts in the unprecedented decision that it took early last year. It was because of that that we had to undertake further discussions with the Jordanian Government about the assurances that could be achieved. And of course our own Special Appeals Immigration Commission last autumn decided that despite those further assurances and its view that the Jordanian Government would bend over backwards to make sure that Abu Qatada got a fair trial, this one issue about whether evidence that was allegedly obtained by torture could be used had to be addressed. That is addressed, among other things, in the general treaty that we have signed. It is because there have been so many opportunities to appeal and because of the decisions that have come as a result of those appeals that the legal bills have built up.
Sir Edward Garnier (Harborough) (Con)
May I join all those who have offered their congratulations to the Home Secretary, and may I also thank her for the congratulations that she has offered to others—her officials and officials in other Departments? That is a very proper thing to have done. Does she agree that even before the enactment of the Human Rights Act, we probably would not have deported a terrorist suspect to be tortured or to face trial on the basis of evidence extracted by torture or to a country which might have used the death penalty upon that person? Does she also agree that the core to the success that she has had has been the bilateral agreement with Jordan, and that although we may all have our frustrations about the expense and the difficulties caused by the Strasbourg Court, the central thing that we must concentrate on is ensuring that we have with these other jurisdictions rock-solid, cast-iron treaties which permit deportation?
Mrs May
Indeed, I agree with my hon. and learned Friend. It is important that we have these assurances and agreements with other countries where there is a possibility, or where the courts have suggested that there is a possibility, that it would not be possible to deport an individual because of the situation they would find themselves in once deported. When the European Court made its judgment last year, I think that it failed to appreciate the changes that have taken place in Jordan and the work the Jordanian Government have done, for example to change their constitution in relation to torture. In a sense the judgment was unfair with regard to the Jordanian situation. Nevertheless, as a result of the judgment, we had to undertake further discussions with the Jordanian Government and put in place exactly the sorts of assurances and agreements that my hon. and learned Friend refers to.
Mr Ronnie Campbell (Blyth Valley) (Lab)
We on the left of the Gangway are delighted that this evil man is being sent back where he belongs to stand trial, but I got worried, when I watched him swagger on to the plane with a big smile on his face, that he might have a secret way back. I hope the Home Secretary has all the doors covered.
Mrs May
I am grateful to the hon. Gentleman for the support that he and, as he indicates, his hon. Friend the Member for Bolsover (Mr Skinner) have given to the action that has been taken—I must say that this is an unusual day for the Home Office, but I suspect that the normal situation will resume fairly soon. We are indeed turning our attention to ensuring that doors are closed.
Andrew Griffiths (Burton) (Con)
I join the whole House in congratulating the Home Secretary and the security Minister on their stunning success in deporting Abu Qatada. I am not sure what gave me greater pleasure on Sunday: watching Andy Murray’s victory or the news that Mr Qatada was leaving on a jet plane. What assessment have her officials made of the right of Mr Qatada’s family to remain in the United Kingdom should he be found guilty in Jordan?
Mr Jim Cunningham (Coventry South) (Lab)
I congratulate the Home Secretary, her predecessors and everyone else involved in this long haul. Further to the last question, could Abu Qatada or his family argue, after he has done his time, whatever the sentence might be, that the right to family life allows him to come back to his family in this country?
Dr Julian Huppert (Cambridge) (LD)
I add my congratulations to the Home Secretary and the security Minister. We all agree that it is very good that Abu Qatada will face justice without the risk of information derived from torture being used against him. Since the Home Secretary is keen on ensuring that people are deported to face justice, can she confirm her support for a reformed European arrest warrant that does exactly that? She will know that only this weekend we saw yet another arrest of a Briton trying to evade justice in Spain.
Mrs May
My hon. Friend tempts me to comment on a matter that I hope will more properly be the subject of announcements in this House before the summer recess. I am aware of the arguments that have been made about the operation of the European arrest warrant in relation to its usefulness and to some of the problems that apply to it.
Karl Turner (Kingston upon Hull East) (Lab)
It will be a relief to all our constituents that this man has now been deported, but what advice has the Attorney-General given the Home Secretary on scrapping the Human Rights Act and coming out of the convention?
Mrs May
As I indicated earlier, in answer to an hon. Friend who asked about the Human Rights Act, it is absolutely no surprise that a Conservative should stand here and talk about scrapping the Human Rights Act, because we were elected to this Parliament having stood in a general election on a manifesto that said exactly that.
Mr Philip Hollobone (Kettering) (Con)
Will the Home Secretary accept the thanks of a grateful nation for a job well done?
On the wider issue of deporting foreign nationals who commit crimes in this country, could it not be a condition of entry for everybody when they turn up at the airport or port that they sign to say that if they are found guilty of a criminal offence, they will be required to leave?
Mrs May
I assure my hon. Friend that we understand the public’s concern, which I share, about examples of when we are not able to deport foreign-national offenders. There are a number of reasons why that can happen—most notably, as in cases highlighted in the media, the interpretation of article 8 about the right to a family life.
Of course, the right to a family life was not one of the arguments used at all in the Abu Qatada case, although there are foreign-national offenders who have used that argument. We will look to ensure that we make it absolutely clear in the immigration Bill that, except in exceptional circumstances, foreign-national offenders will be deported.
Nicola Blackwood (Oxford West and Abingdon) (Con)
I join the whole House in congratulating the Home Secretary, the security Minister and all her officials on finally managing to deport Abu Qatada. I particularly welcome my right hon. Friend’s statement that the immigration Bill will include a simplification of the appeals process. What will that simplification do about the introduction of new evidence at a late stage of the appeals process?
Mrs May
We will consider that issue, of course. We have moved already on a different part of the appeals process—that relating to family visas. We have taken away the right of appeal for family visit visas. We saw that evidence was often produced towards the end of the process; had it been there at the beginning, it might have led to a different decision in the first place. My hon. Friend has picked up an important issue that we should consider in other contexts.
John Glen (Salisbury) (Con)
Many of my constituents were delighted to see Abu Qatada fly out of Northolt, although they may have been a little disappointed to see the plane so empty. Does the Home Secretary have a view on the family and associates of Abu Qatada? Many of my constituents find it indefensible that they should have been on benefits for so long and think that they would have been better off on the plane with him.
Mr Julian Brazier (Canterbury) (Con)
I congratulate my right hon. Friend both on this excellent result and on her commitment to reviewing and, hopefully, reforming human rights legislation. However, we will not get away from what she calls the crazy interpretation of our human rights laws if we allow our judges a completely open-ended clause in the legislation containing an unspecified phrase such as “exceptional circumstances”.
Mrs May
I understand my hon. Friend’s point. We will, of course, need to look at those issues when we come to frame the legislation so that we can be clear as a Parliament about exactly the sort of circumstances we are looking at. However, I am sure that my hon. Friend will appreciate that there may be some circumstances in which it will not be possible to deport somebody, although we want to ensure that we can deport foreign-national prisoners as far as possible. We will set out, as we have already tried to in the immigration rules, the circumstances in which we expect that a foreign-national prisoner will not be allowed to remain in the UK on the basis of article 8 but will be deported.
Mr Dominic Raab (Esher and Walton) (Con)
I congratulate the Home Secretary and welcome Abu Qatada’s removal, but I share her fears about the implications of the case. What estimate has the Home Office made of the number of extra successful deportation challenges that it expects per year as a result of Strasbourg’s novel—and, frankly, dangerous—ruling?
Mrs May
I am not able to give my hon. Friend an answer about the number, but I can say, having looked at a sample of cases, that this case was unusual in that it related to the potential torture of people other than the individual whom we were trying to deport. That is why it was such an unusual and unprecedented judgment from the Strasbourg court; it is also why the case is not likely to be replicated on many occasions.
Robert Halfon (Harlow) (Con)
I congratulate my right hon. Friend on joining the ranks of the US Navy SEALs in knowing how to get rid of perpetrators of terrorism, even if by slightly less violent means. Does she agree that the principles of the European convention on human rights are very noble but have been misinterpreted by judges, and that if we have a British Bill of Rights, we can return to a situation where the perpetrators of terrorism are not given precedence over the victims of terrorism?
Mrs May
My hon. Friend makes an extremely valid and important point. It is about the interpretation of human rights laws. We all agree that it is important to have a legislative framework that protects people’s human rights; it is then about how that is interpreted. It is also about the relative balance of responsibilities between this Parliament and another body that is external to it.
George Freeman (Mid Norfolk) (Con)
I congratulate my right hon. Friend in the strongest terms on behalf of my constituents, who watched with growing disillusionment as the will of the people and Parliament of this country was profoundly defied by a decade of spin and drift costing over £1.7 million in legal fees. I especially welcome her announcement that illegal immigrants and criminals will be deported. Does she agree that nothing fuels disillusionment as much as state-sponsored abuse of protections that are rightly the privilege of British citizens, not foreign criminals?
Mrs May
My hon. Friend is absolutely right. I share people’s frustrations and concerns when they see foreign national offenders whom we wish to be able to deport unable to be deported. He refers to illegal immigrants. One of the benefits of the change that has been made by scrapping the UK Border Agency and setting up the immigration enforcement part of the Home Office is that we will be able to put a far greater focus on ensuring that we remove illegal immigrants.
Andrew Bridgen (North West Leicestershire) (Con)
I wonder what words my right hon. Friend the Secretary of State has for the naysayers and doom-mongers on the Opposition Benches, such as the hon. Member for Walsall North (Mr Winnick), who is no longer in his place, who said on 24 April in this Chamber:
“Is it not obvious that this saga will continue for some time and that all the Home Secretary’s efforts have so far failed miserably to get this preacher of hatred out of Britain?”
The hon. Member for Glasgow South West (Mr Davidson) said:
“This farce makes the Government look incompetent as well as impotent.”—[Official Report, 24 April 2013; Vol. 561, c. 894-897.]
Christopher Pincher (Tamworth) (Con)
May I add to the bouquets under which my right hon. Friend is being buried and congratulate her and her team on succeeding where her predecessors had failed? Is she aware of the report that, contrary to what my hon. Friend the Member for Salisbury (John Glen) said, the plane back to Jordan was not quite empty because it had aboard it three security guards, a psychologist, a medical examiner, and, inevitably, a lawyer? Can my right hon. Friend confirm that the costs of those people will not fall on the British taxpayer? If they do, will she change the rules of taxpayer liability as soon as possible?
Bob Stewart (Beckenham) (Con)
When I was an intelligence officer in Northern Ireland we spent a lot of time trying to drain the water from terrorists—in other words, the people with whom they lived. However, they were coerced and frightened. Such people may well be replicated on the mainland. What steps is my right hon. Friend taking to try to identify terrorists and get them away from the society which sustains them and allows them to operate in England?
Mrs May
We do of course have a strategy for dealing with terrorism. The officials at the Office for Security and Counter-Terrorism, which is based in the Home Office, work with the police, the Security Service and the other security and intelligence agencies to make sure that we can, where possible, prevent terrorist attacks from taking place in the United Kingdom. Sadly, in the past couple of months we have of course had the incident of the murder of Drummer Lee Rigby in Woolwich. Prior to that, we had seen a number of plots by terrorists to do harm and to kill people here in the United Kingdom thwarted by the very good efforts of officials, police and members of the Security Service.
National Curriculum
(11 years, 5 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Secretary of State for Education (Michael Gove)
With permission, Mr Speaker, I should like to make a statement on the future of the national curriculum.
Our children are growing up in a world where the pace of change—economic, social and technological—is constantly accelerating. These changes promise wonderful new opportunities for future generations, but they also create immense challenges.
We are learning more every day about how our world works and how our minds work, how we can develop our civilization and extend opportunity, and how we can improve learning and extend knowledge. At the same time, however, we are also discovering just how competitive the new world is. As other nations modernise their economies and education systems, we cannot afford to be left behind in the global race.
That is why, when the coalition Government was formed, we asked officials in the Department for Education to analyse the best-performing education systems in the world. They examined the curricula used in the world’s most successful school systems, such as Hong Kong, Massachusetts, Singapore and Finland. Informed by that work and in consultation with subject experts and teachers, the Department produced a draft revised national curriculum, which we put out for public consultation five months ago. We received more than 17,000 submissions in our consultation and we have given them careful consideration. Today we are publishing a summary of the comments received and the Government’s response.
The publication of our proposals has provoked a valuable national debate on what is, and what should be, taught in our schools. I have very much enjoyed this debate and the passionate engagement of so many great teachers and concerned parents. It is absolutely right that every member of society should care about the national curriculum. It defines the ambitions that we set for our young people, and I, like the overwhelming majority of parents, want us to be more ambitious than ever before.
That is why we are demanding that children be taught how to write computer code, how to use 3D printers, how to handle more complex mathematical processes, how to appreciate a wider than ever range of literature, and how to speak, read and write in more than one language.
The updated national curriculum framework that we are publishing today features a number of revisions to the drafts published in February. The revisions have been made on the basis of evidence and arguments presented to us during the consultation period. In particular, we have revised the draft programmes of study for design and technology and for history. We have included more detail on modern design processes and more coverage of world history.
Other significant changes include the inclusion of a stronger emphasis on vocabulary development in the programmes of study for English and greater flexibility in the choice of foreign languages, which primary schools will now be required to teach.
Perhaps the most significant change of all is the replacement of ICT with computing. Instead of just learning to use programs created by others, it is vital that children learn to create their own programs. By demanding that children learn computational thinking and Boolean logic, we are determinedly raising the bar, but by equipping our children with the tools to build their own algorithms and applications we are also helping to foster a new level of creativity in our schools.
It is my hope that these changes will reinforce our drive to raise standards in all our schools. I hope that they will ensure that the new national curriculum provides a rigorous basis for teaching and a benchmark for all schools to improve their performance, and I know that it gives children and parents a better guarantee that every student will acquire the knowledge to succeed in the modern world. That is why I commend this statement to the House.
Stephen Twigg (Liverpool, West Derby) (Lab/Co-op)
I thank the Secretary of State for notice of his statement. The national curriculum should be a vehicle for raising standards, promoting innovation and strengthening great teaching.
Let me first pay tribute to the teachers, parents and pupils who have campaigned hard for changes to the Secretary of State’s original proposals. When did he come to the conclusion that it might be an idea for pupils to study climate change as part of the geography curriculum? When did he realise that speaking skills should be an integral part of the English curriculum? When did he decide to listen to business leaders, who warned him that the D and T curriculum did not include a focus on computer design and electronics? When did he decide that it might be an idea for children to study the history of China and India as well as that of our own country? Finally, when did he realise that it made no sense to limit the number of foreign languages that could be taught in primary schools? Surely it would have been a lot better if he had got his proposals right the first time round.
The Secretary of State’s new curriculum will apply to fewer than half of all secondary schools. Academies have the freedom to innovate. If that freedom makes sense for academies, surely it makes sense for maintained schools as well.
Why has the Secretary of State decided to abolish the levels by which teachers assess pupils’ progress throughout their school life? The levels system is well used, particularly in primary schools. May I urge him to think again about that?
The Department’s own impact assessment of today’s announcement warns of the risks for lower attainers and pupils with special educational needs or disabilities. How will the Secretary of State ensure that they, too, are challenged and supported and that their progress is measured effectively?
The changes are due to be implemented in just one year’s time. How will the Secretary of State ensure that teachers are qualified to teach to the new curriculum when he is letting unqualified teachers into our classrooms? Is it not time for him to reverse the decision to relax the rules on unqualified teachers? What support will there be for continuing professional development and training on the new curriculum ahead of its introduction in a year’s time?
The curriculum matters, but I am sure the Secretary of State agrees that what matters more is that we have a teaching profession that is high in quality and has high status and high morale. Does he accept that as a result of his policies and his rhetoric, teacher morale is at an all-time low? His divisive approach means that we have curriculum freedom for just some schools. Is not the time right for a reformed national curriculum that allows teachers in all schools the freedom to innovate, and therefore prepares young people for the challenges of the modern economy?
Michael Gove
I am grateful to the hon. Gentleman for his questions. He asked me first when I realised that we should have climate change in the geography curriculum. I actually realised that before we published the first drafts in February. If he had looked at those drafts, he would have seen that we said that people should understand
“place-based exemplars at a variety of scales”
and
“the key processes in physical geography pertaining to…weather and climate”.
In fact, the draft curriculum that we published in February contained more detail on the scientific processes behind climate change than the previous national curriculum, over which he presided. [Interruption.] All you need to do is read it, Stephen.
Secondly, the hon. Gentleman asked about speaking. In the English curriculum as it was drafted in February, it was perfectly clear that drama, poetry and other forms of speaking were in it. If the Labour party does not believe that drama and poetry require speaking, I would be interested in its perspective on what exactly does.
The hon. Gentleman asked about world history. It was perfectly clear that there were all sorts of examples of world history in the first draft, from decolonisation, invoking the spirit of Kenyatta and Jinnah, through to the impact that this country has had on the middle east, India and north America.
In all those areas, we have listened and made revisions. My mother always said that self-praise is no honour, so I shall not lavish any praise on myself—I will instead lavish it on my fellow Ministers at the Department for Education. They listened extensively to the best in the field, and we have revised the curriculum. Judging from the fact that the hon. Gentleman did not take exception to anything in the current draft, I presume that he thinks it is an A* curriculum. I will take his comments as an endorsement.
The hon. Gentleman asked about level descriptors. They are widely mistrusted by the very best in the teaching profession, which is why outstanding teachers are moving away from them and why the very best academies, such as ARK and Harris academies, are developing their own methods of internal assessment. It is why Dame Reena Keeble, at Cannon Lane First School in Harrow, has her own method of assessing how children are making progress, which is far more popular and rigorous than anything that we used to have.
The hon. Gentleman asked about the risks for lower attainers. We are absolutely clear that because there will be higher expectations than ever before, lower attainers will learn and achieve more in school and be happier and more fulfilled later. Instead of the culture of low expectations that prevailed in the past, we will have a culture of higher expectations that values every child.
The hon. Gentleman asks about curriculum support. Not only will the National Centre for Excellence in the Teaching of Mathematics be funded to provide improved mathematics teaching, but our national support schools will receive millions of pounds of extra money to ensure the required professional development. I have every confidence that teachers in our schools—the best generation of teachers ever—are up to the challenge. Whenever I visit schools, they say to me, “We want to ensure that our curriculum, like our teaching, is world class.” That is what we have delivered today, and I am delighted to have the, albeit grudging, endorsement of the hon. Gentleman.
Mr Graham Stuart (Beverley and Holderness) (Con)
I congratulate the Secretary of State on the statement. Some critics suggest that if someone goes out with an idea, listens to feedback, thinks and goes out again, that is a weak form of policy making, but I say the opposite. As we have seen with qualifications, so with the curriculum—it is important to listen and this is a strong set of proposals. Will the Secretary of State identify all the risks concerning the time scale and scheduling of the proposals, and say what the Government are doing to ensure that implementation is as smooth as possible?
Michael Gove
I agree with my hon. Friend. It is right to put forward a proposition, consult on it and amend it when good advice is given. That seems exactly how the Government should operate. On the implementation timetable, as I alluded to briefly in my response to the hon. Member for Liverpool, West Derby (Stephen Twigg), we are supporting a number of centres of excellence, not just in mathematics and science but also in outstanding teaching schools that are doing much to raise standards across the country and help deliver change. If evidence suggests that additional support is required in any area, of course we will provide it.
Mr Barry Sheerman (Huddersfield) (Lab/Co-op)
Both you, Mr Speaker, and the Secretary of State now have a vested interest in all things John Clare, and the more John Clare on the curriculum the better as far as I am concerned.
On a more serious note, the proposals look encouraging. I like the consultation process that the Secretary of State has gone through, but I hope it can be further refined because some statements we have heard recently, including over the weekend, seem to suggest that he puts so much emphasis on the very brightest students, rather than on the broad panoply of students. We need the right teaching and curriculum for all our children, not just some of them.
Michael Gove
I could not agree more with someone who is increasingly my honourable Friend. First, the more we can do to support the work of the John Clare Trust in bringing that fantastic working-class poet to wider attention, the better. Secondly, the English literature curriculum includes for the first time a requirement to study the romantic poets, which I hope will be broadly welcomed. Thirdly, the hon. Gentleman is absolutely right, and although we expect our brightest children to do even better, I hope the new method of secondary accountability—on which we are still consulting—will make it easier for all schools to recognise their responsibility and obligation to less able students.
Dan Rogerson (North Cornwall) (LD)
Liberal Democrats welcome the introduction of a slimmed-down curriculum, and the emphasis on teachers being able to teach and use their expertise. On continuing professional development and support for schools, there will now be a period in which teachers get ready to implement the new national curriculum. Will resources be in place, and will the Department do everything it can to give teachers confidence to move from one curriculum to the next?
Michael Gove
I am grateful for my hon. Friend’s support. What we sought to do is similar to what was argued for in the Liberal Democrat manifesto at the last general election: a core entitlement in foundation subjects and a far greater degree of freedom elsewhere. I am grateful to Liberal Democrat colleagues across the Government for the positive way they have engaged and the helpful suggestions they have made at every turn. It is right that my hon. Friend underlines the importance of ensuring we move speedily to get the right level of professional support. In particular, teaching schools—outstanding schools across the country—are generating networks of support and could not be more important. I want to do more to help them in the year ahead.
Diana Johnson (Kingston upon Hull North) (Lab)
The vast majority of parents and young people want a curriculum that is fit for life, including building life skills around self-esteem and confidence that will protect them from predators such as Jimmy Savile and Stuart Hall. I would be interested to know why the Secretary of State turns his face against introducing that to the national curriculum.
Michael Gove
The hon. Lady is a passionate campaigner on ways we can better protect our children, and there are a number of things we can do. As she may know, I had the opportunity to talk to a group of outstanding young people last week at the Stonewall conference on fighting prejudice in education and empowering young people. They made some important points about the best of personal, social, health and economic education, and we must learn from the best schools and ensure that others follow their lead.
Chris Skidmore (Kingswood) (Con)
As someone who has campaigned for some time for a greater narrative approach to history teaching in schools, may I thank the Secretary of State for retaining the chronological focus of the history curriculum, rather than the current “Doctor Who” style, time-travelling fantasy, in which pupils study the Romans, the Tudors and then the Victorians? What does he envisage happening to key stage 4 and the dovetailing with key stage 3, so that pupils will have the chance to learn narrative British history all the way up to 16?
Michael Gove
I thank my hon. Friend for his support. Several distinguished historians, from David Abulifia at Cambridge to Professor Jeremy Black at Exeter, have joined him in welcoming this curriculum. May I also congratulate him on the fantastic review of his new book on the battle of Bosworth in the books section of The Daily Telegraph on Saturday? I recommend it to everyone. The GCSE criteria on which we are consulting are designed to achieve exactly what he sets out.
Mr Graham Allen (Nottingham North) (Lab)
The Secretary of State will be aware that my constituency sends the fewest number of young people to university or college of any in the UK. One of the ways we are tackling that is through innovative early intervention, and by making great use of continuous assessment, which allows children from under-privileged backgrounds to gain the confidence to take some serious examinations at the end of the national curriculum. Would he meet with the six very hard-working head teachers in my constituency to understand how any changes to continual assessment will undermine their pupils’ prospects of going to university?
Michael Gove
I would be delighted to meet head teachers from the hon. Gentleman’s constituency.
Andrew Selous (South West Bedfordshire) (Con)
May I commend the Secretary of State for his determination to reverse this country’s slide down the international league tables? He is right to ensure that his expectations for English children are no lower than other countries’ expectations for their children.
Michael Gove
I am grateful to my hon. Friend for his comments. It is vital that we assert, across the political divide, our determination to ensure that our country becomes a world champion in English, maths and science, alongside generating world champions in tennis, rowing and other great activities.
Fiona Mactaggart (Slough) (Lab)
May I warmly welcome the remark that the Secretary of State just made? Instead of just learning to use programs created by others, it is vital that children learn to create their own programs. Where else, apart from computing, will that be the approach in the new curriculum?
Michael Gove
I should say that, in both art and design and music, it is clear that students will be encouraged to create—there is an emphasis on drawing at an earlier stage in the art and design curriculum, so that people can become familiar with one of those foundational skills. It is also the case that the design and technology curriculum will include everything from the use of 3D printers to the most sophisticated methods of contemporary design. I was inspired visiting a school in the hon. Lady’s constituency to see exactly how high-quality computer science can be delivered to a range of students who were enjoying their teaching, thanks to the support that she has consistently championed.
Andrew Griffiths (Burton) (Con)
The main complaint from local engineering businesses in my constituency is that too many young people leave school and college with good GCSEs, and sometimes A-levels, in maths and sciences, but do not have the deeper understanding of the subject to be able to pursue a career in engineering. What do these reforms do to ensure that we are growing the engineers of the future?
Michael Gove
I am delighted that the changes that we have made to the design and technology curriculum have been welcomed by James Dyson, one of the most authoritative and persuasive voices when it comes to design and engineering. The new approach that we are taking, specifically in design and technology, will complement the essential skills of maths and science that engineers need.
Kate Green (Stretford and Urmston) (Lab)
What assessment has the Secretary of State made of how well suited the new curriculum will be to closing differential educational outcomes between, for example, boys and girls or different ethnic groups?
Michael Gove
The hon. Lady raises an important point. One of the biggest problems in the English education system is the structural inequality, which we have inherited and which the previous Government worked hard, in their own way, to try to overcome. One of the things that is clear about those countries that have successfully managed to reduce educational inequality is that they have maintained high expectations for all students, and that is what this curriculum embodies.
Duncan Hames (Chippenham) (LD)
I thank the Secretary of State and his Ministers for bringing financial education into the school curriculum, following our campaign, so ably led by my hon. Friend the Member for North Swindon (Justin Tomlinson). Does the Secretary of State agree that, as well as better equipping young people for the decisions that they will make in adult life, the relevance of these questions may also improve their interest in and appetite for learning maths?
Michael Gove
My hon. Friend makes a typically acute point. The two things reinforce each other: an appreciation of financial education and mathematics and mental arithmetic all go together.
Jenny Chapman (Darlington) (Lab)
In Darlington, we have done a good job over the years to improve the performance of the worst-performing schools. One of the ways we have done that is through tracking students on an individual basis and challenging where need be. I am deeply concerned about the proposals to remove assessment levels, because tracking is so important in governors and parents, and young people themselves, challenging teachers and schools. How will tracking be done when the Secretary of State removes assessment levels?
Michael Gove
The hon. Lady makes two important points. First, by removing the current national curriculum levels we create space for more sophisticated methods of tracking. One of the problems with current level descriptors is that they are opaque and confusing, and sometimes different schools register different levels of achievement at different levels. The new method we propose will mean that there is far greater rigour in how assessment is carried out. Secondly, Darlington is a model local education authority, because it has encouraged more and more schools to take on academy freedoms. I hope that more Labour local authorities follow where Darlington has led.
Mark Garnier (Wyre Forest) (Con)
Carrying on with the subject of financial education for young people, I am grateful for my right hon. Friend’s comments. He will be well aware that the Parliamentary Commission on Banking Standards also endorsed putting financial education on the curriculum. Does he agree not only that that will reinforce mathematics as a relevant subject, but that a good grounding in financial literacy can prove to be a major engine for social mobility?
Michael Gove
My hon. Friend is absolutely right. The more confident every student is with the increasingly sophisticated range of financial temptations they face, the more that social mobility and resilience can be built in.
Mr Robin Walker (Worcester) (Con)
I echo those comments on financial education. I also congratulate the Secretary of State on the improvements to the computing curriculum, which will be warmly welcomed by businesses, such as Postcode Anywhere and those in the growing cyber-security cluster in Worcestershire, that have long been arguing for a more computing-focused and less IT learning-focused approach.
Michael Gove
My hon. Friend is absolutely right. Industry has been clear that the changes we have made from information and communications technology to computing are exactly what industry needs to ensure that young people are prepared for the opportunities that await them.
Bill Esterson (Sefton Central) (Lab)
The Secretary of State says that changing the curriculum is essential if we are to catch up with the rest of the world. I agree that that has to be the priority, but if it is so essential why is he not applying it to academies, which make up the majority of secondary schools?
Michael Gove
Academies do make up the majority of secondary schools. At the moment, academies make up only 10% of primary schools, and the curriculum is of course more specific when it comes to the foundation subjects at primary level. The curriculum generates a sense of expectation and lays the foundations for the new GCSEs, which we expect to be the principal benchmark for accountability at the age of 16 for all schools.
Guy Opperman (Hexham) (Con)
Did the Secretary of State notice Professor Black’s comments today? He said:
“You can’t debate our sense of national identity and our national interest unless you understand our national history. This curriculum put British history first as well…It kicks out woolly empathy”.
Does he agree that that is the right way forward in the longer term?
Michael Gove
I am grateful for my hon. Friend’s point. Professor Jeremy Black is one of the finest and most productive historians working in academia today. He is also one of the most engaging of teachers.
Chris Bryant (Rhondda) (Lab)
There is only one constituency in the land where Winston Churchill was never welcome, including after the second world war: the Rhondda. I am therefore delighted that this curriculum, which bizarrely insists on only one politician—Winston Churchill—being studied in the whole of the history of the 20th century, will not apply in Wales or in the Rhondda. Why will the Secretary of State still not make clear his position on sex and relationship education, which is the one thing that can make a dramatic difference to the number of teenage abortions and teenage pregnancies?
Michael Gove
My position on sex and relationship education is that I am in favour of it.
Mr Philip Hollobone (Kettering) (Con)
What emphasis will there be on spelling in the national curriculum, and by what age will primary school children be required to learn their 12 times table?
Michael Gove
The 12 times table will be required by the end of year 4, which is a significant advance on where we are at the moment, and there are indicative tables as part of the national curriculum document that lay out how we can ensure that students can spell. I should also say that, on a recent primary school visit that I undertook, I asked the students whether they had enjoyed their national curriculum tests. The universal view was that the tests were fun, but the most fun were the spelling, punctuation and grammar tests that this Government have introduced.
John Glen (Salisbury) (Con)
The changes to the history curriculum are often presented in a binary way, as a choice between endless facts and “woolly empathy”. Can the Secretary of State explain the wise logic behind the value of children learning a basic chronology of British history before they are asked to think about what it felt like to live a long time ago?
Michael Gove
My hon. Friend makes an absolutely central point. Every country that teaches history well insists on the history of its own nation being taught. Even the progressive Administration in Holyrood make a point of stressing the importance of Scottish history—I can see the hon. Member for Dundee East (Stewart Hosie), for the Scottish National party, nodding—from which other things flow. I recognise that all nations should in this respect, if in few others, emulate what Alex Salmond has done.
Justin Tomlinson (North Swindon) (Con)
I am delighted at the inclusion of financial education and computer programming, both of which are essential skills for our children. Does the Secretary of State believe that they will also help to encourage young children to engage in traditional mathematics, through real-life work and tangible examples?
Michael Gove
My hon. Friend is absolutely right. One of the key things about his successful campaign on financial education is that he always made it clear that it was about reinforcing the importance of rigour in mathematics, not simply meeting the needs of a vocal lobby outside. The way he ran the campaign is a model of how a Back Bencher can shape the education of millions for the better.
Andrew Bridgen (North West Leicestershire) (Con)
Can my right hon. Friend reassure me and the House that he has rooted out all the woolly thinking that pervaded the curriculum as drafted by the previous Government?
Michael Gove
To root out all the woolly thinking that used to pervade the curriculum would have been like cleansing the Augean stables. There may well be a piece of fluff in some corner of the curriculum that we did not manage to get to, but I hope we have managed to hose down the stables effectively.
Ian Swales (Redcar) (LD)
Since becoming an AET academy—under the Academies Enterprise Trust—Eston Park in my constituency has gone from good to special measures in less than two years. I welcome today’s proposals, but how can the Secretary of State ensure that free schools and academies benefit from all the excellent thinking that is going on in his Department?
Michael Gove
One of the best schools I have ever visited is in my hon. Friend’s constituency—Nunthorpe academy, which is run by Debbie Clinton, a school that has gone from special measures to outstanding in the last couple of years. However, he is right that one or two academy chains have not done everything they promised. In the case of the organisation he mentioned, we have taken steps to deal with that.
Neil Carmichael (Stroud) (Con)
The Secretary of State will know that the Royal Academy of Engineering has stated that we will need at least 100,000 graduates in maths and engineering to compete with the rest of the world. This is something that informed my decision to hold a festival of engineering and manufacturing in my constituency. [Hon. Members: “Hear, hear.”] Thank you very much. Does he agree that firm leadership will be required from schools to ensure that we get the best teachers in the right place to deliver on the need that the Royal Academy of Engineering has outlined?
Michael Gove
I completely agree with my hon. Friend. It is a pity that, in one of our best universities for engineering—University college London—fewer than half the undergraduates enlisting in that course are from the United Kingdom. We need to do more, and my hon. Friend is leading the way.
Sir Bob Russell (Colchester) (LD)
The Secretary of State referred to more coverage of world history. On the assumption that the 20th century will include the holocaust, will he give me an assurance that the life of Palestinians since 1948 will be given equal attention?
Michael Gove
These are delicate waters, into which I fear to tread too definitively. One thing I would say is that there has been near universal welcome and support for the centrality of the holocaust and the unique evil inherent in the holocaust being in the national curriculum. Once one gets on to the position of the state of Israel after 1948, it is probably better if I step back. I have strong views on the matter and I would not wish to impose them on the curriculum.
Mr Speaker
I hope colleagues, including the hon. Member for Colchester (Sir Bob Russell), are aware of the event taking place in Speaker’s house tonight under the auspices of the Holocaust Educational Trust.
Financial Services (Banking Reform) Bill Programme (No. 2)
Mr Speaker
Before I call the Minister to move the programme motion, I should inform the House that I have selected a manuscript amendment, amendment (a) in the name of Mr Andrew Tyrie, copies of which have been available from the Vote Office. I call the Minister, in the first instance, to move the motion.
Motion made, and Question proposed,
That the Order of 11 March 2013 in the last Session of Parliament (Financial Services (Banking Reform) Bill (Programme)) be varied as follows:
(1) Paragraphs 4 and 5 of the Order shall be omitted.
(2) Proceedings on Consideration and Third Reading shall be taken in two days in accordance with the following provisions of this Order.
(3) Proceedings on Consideration shall be taken on the days show in the first column of the following Table and in the order so shown.
(4) Proceedings on Consideration shall (so far as not previously concluded) be brought to a conclusion at the times specified in the second column of the Table.
Table | |
|---|---|
Proceedings | Time for conclusion of proceedings |
First day | |
Amendments to clauses 1 to 8 other than amendments relating to competition | 6.00 pm |
New Clauses relating to Bank of England Financial Policy Committee | 8.00 pm |
Remaining New Clauses other than any standing in the name of a Minister of the Crown or relating to competition or to portability of bank accounts | 10.00 pm |
Second day | |
New Clauses relating to competition; New Clauses relating to portability of bank accounts; remaining proceedings on Consideration | Two hours after the commencement of proceedings on Consideration on the second day |
(5) Proceedings on Third Reading shall (so far as not previously concluded) be brought to a conclusion three hours after the commencement of proceedings on Consideration on the second day.—(Greg Clark.)
Mr Speaker
I now invite Mr Andrew Tyrie to move his manuscript amendment, the essence of which is to delete reference to 6 o’clock and to substitute for it a reference to 7 o’clock.
Mr Andrew Tyrie (Chichester) (Con)
I beg to move an amendment,
“leave out ‘6.00 pm’ and insert ‘7.00 pm’.”
I am very grateful to you, Mr Speaker, as you have covered the whole of my speech in one sentence. I understand the proposal to replace 6 pm with 7 pm may receive widespread support.
Manuscript amendment agreed to.
Main Question, as amended, put and agreed to.
Ordered,
That the Order of 11 March 2013 in the last Session of Parliament (Financial Services (Banking Reform) Bill (Programme)) be varied as follows:
(1) Paragraphs 4 and 5 of the Order shall be omitted.
(2) Proceedings on Consideration and Third Reading shall be taken in two days in accordance with the following provisions of this Order.
(3) Proceedings on Consideration shall be taken on the days show in the first column of the following Table and in the order so shown.
(4) Proceedings on Consideration shall (so far as not previously concluded) be brought to a conclusion at the times specified in the second column of the Table.
Table | |
|---|---|
Proceedings | Time for conclusion of proceedings |
First day | |
Amendments to clauses 1 to 8 other than amendments relating to competition | 7.00 pm |
New Clauses relating to Bank of England Financial Policy Committee | 8.00 pm |
Remaining New Clauses other than any standing in the name of a Minister of the Crown or relating to competition or to portability of bank accounts | 10.00 pm |
Second day | |
New Clauses relating to competition; New Clauses relating to portability of bank accounts; remaining proceedings on Consideration | Two hours after the commencement of proceedings on Consideration on the second day |
(5) Proceedings on Third Reading shall (so far as not previously concluded) be brought to a conclusion three hours after the commencement of proceedings on Consideration on the second day.
Financial Services (Banking Reform) Bill
(11 years, 5 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
19:00 - The House divided: - Ayes: 225 / Noes: 274 - Question accordingly negatived.
19:57 - The House divided: - Ayes: 211 / Noes: 271 - Question accordingly negatived.
21:34 - The House divided: - Ayes: 217 / Noes: 272 - Question accordingly negatived.
The Financial Secretary to the Treasury (Greg Clark)
I beg to move amendment 1, in page 1, line 20, after ‘body’ insert ‘or of a member of a ring-fenced body’s group’.
Mr Speaker
With this it will be convenient to discuss the following:
Government amendments 2 to 4.
Amendment 17, in clause 4, page 9, leave out lines 8 to 21 and insert—
‘Reviews
142J Reviews of ring-fencing
‘(1) The Treasury must make arrangements for the carrying out of reviews of the effects of the operation of the provision made by or under this Part in relation to ring-fenced bodies, including ring-fencing rules made by the PRA and the FCA. Such arrangements shall be set out in a statutory instrument subject to approval by resolution of both Houses of Parliament.
(2) The first review must be completed before the end of the period of two years beginning with the date on which section 4 of the Financial Services (Banking Reform) Act 2013, so far as it inserts this section, comes into force.
(3) Subsequent reviews must be completed before the end of the period of two years beginning with the date on which the previous review was completed.
(4) Not less than nine months, nor more than 12 months, before the date on which a review is due to be completed, the PRA and the FCA must publish a joint assessment of the impact of the operation of their ring-fence rules.
(5) For the purposes of this section a review is completed when the report of it is published.
142JA Persons by whom reviews are to be conducted
‘(1) The Treasury shall appoint not fewer than five persons to conduct a review of whom one is to chair it.
(2) A person may not be appointed to chair a review unless the chairman of the Treasury Committee of the House of Commons has notified the Treasury that, in the chairman’s opinion, the person is likely to act independently of the Treasury, the PRA and the FCA in carrying out the review.
(3) The persons appointed to conduct a review must include at least one person with substantial experience in central banking or financial regulation at a senior level.
(4) The reference in subsection (2) to the Treasury Committee of the House of Commons—
(a) if the name of that Committee is changed, is to be treated as a reference to that Committee by its new name, and
(b) if the functions of that Committee (or substantially corresponding functions) become functions of a different Committee of the House of Commons, is to be treated as a reference to the Committee by which the functions are exercisable;
and any question arising under paragraph (a) or (b) is to be determined by the Speaker of the House of Commons.
142JB Reports of review
‘(1) The persons appointed to conduct a review must give the Treasury a report of the review.
(2) The report must include an assessment of the extent to which the provision made by or under this Part in relation to ring-fenced bodies, including ring-fencing rules made by the PRA and by the FCA, are facilitating the advancement by the PRA of the objective in section 2B(3)(c) and by the FCA of the continuity objective.
(3) If the report is made before section 4 of the Financial Services (Banking Reform) Act 2013, so far as it inserts section 142JD, has come into force it must also include a recommendation as to whether or not section 4 of that Act should be brought into force to that extent.
(4) The report must include—
(a) recommendations to the Treasury as to the provision that should be included in orders and regulations under this Part, and
(b) recommendations to the PRA and the FCA about the provision that should be included in ring-fencing rules.
(5) The Treasury must lay a copy of the report before Parliament and publish it in such manner as it thinks fit.’.
Government amendment 6, page 9, line 21, at end insert—
‘Group restructuring powers
142JA Cases in which group restructuring powers become exercisable
(1) The appropriate regulator may exercise the group restructuring powers only if it is satisfied that one or more of Conditions A to D is met in relation to a ring-fenced body that is a member of a group.
(2) Condition A is that the carrying on of core activities by the ring-fenced body is being adversely affected by the acts or omissions of other members of its group.
(3) Condition B is that in carrying on its business the ring-fenced body—
(a) is unable to take decisions independently of other members of its group, or
(b) depends on resources which are provided by a member of its group and which would cease to be available in the event of the insolvency of the other member.
(4) Condition C is that in the event of the insolvency of one or more other members of its group the ring-fenced body would be unable to continue to carry on the core activities carried on by it.
(5) Condition D is that the ring-fenced body or another member of its group has engaged, or is engaged, in conduct which is having, or would apart fro m this section be likely to have, an adverse effect on the advancement by the appropriate regulator—
(a) in the case of the PRA, of the objective in section 2B(3)(c), or
(b) in the case of the FCA, of the continuity objective.
(6) The appropriate regulator may not exercise the group restructuring powers in relation to any person if—
(a) either regulator has previously exercised the group restructuring powers in relation to that person, and
(b) the decision notice in relation to the current exercise is given before the second anniversary of the day on which the decision notice in relation to the previous exercise was given.
(7) In this section and sections 142JB to 142JG “the appropriate regulator” means—
(a) where the ring-fenced body is a PRA-authorised person, the PRA;
(b) where it is not, the FCA.
142JB Group restructuring powers
(1) In this Part “the group restructuring powers” means one or more of the powers conferred by this section.
(2) Where the appropriate regulator is the PRA, the powers conferred by this secti on are as follows—
(a) in relation to the ring-fenced body, power to impose a requirement on the ring-fenced body requiring it to take any of the steps mentioned in subsection (5),
(b) in relation to any member of the ring-fenced body’s group which isa PRA-authorised person, power to impose a requirement on the PRA-authorised person requiring it to take any of the steps mentioned in subsection (6),
(c) in relation to any member of the ring-fenced body’s group which is an authorised person but not a PRA-authorised person, power todirect the FCA to impose a requirement on the authorised person requiring it to take any of the steps mentioned in subsection (6), and
(d) in relation to a qualifying parent undertaking, power to give a direction under this paragraph to the parent undertaking requiring it to take any of the steps mentioned in subsection (6).
(3) Where the appropriate regulator is the FCA, the powers conferred by this section are as follows—
(a) in relation to the ring-fenced body, power to impose a requirement on the ring-fenced body requiring it to take any of thesteps mentioned in subsection (5),
(b) in relation to any member of the ring-fenced body’s group which is an authorised person but not a PRA-authorised person, power to impose a requirement on the authorised person requiring it to take any of the steps mentioned in subsection (6),
(c) in relation to any member of the ring-fenced body’s group which is a PRA-authorised person, power to direct the PRA to impose a requirement on the authorised person requiring it to take any of the steps mentioned in subsection (6), and
(d) in relation to a qualifying parent undertaking, power to give a direction under this paragraph to the parent undertaking requiring it to take any of the steps mentioned in subsection (6).
(4) A parent undertaking of a ring-fenced body by reference to which the group restructuring powers are exercisable is for the purposes of this Part a “qualifying parent undertaking” if —
(a) it is a body corporate which is incorporated in the United Kingdom and has a place of business in the United Kingdom, and
(b) it is not itself an authorised person.
(5) The steps that the ring-fenced body may be required to take are—
(a) to dispose of specified property or rights to an outside person;
(b) to apply to the court under Part 7 for an order sanctioning a ring-fencing transfer scheme relating to the transfer of the whole or part of the business of the ring-fenced body to an outside person;
(c) otherwise to make arrangements discharging the ring-fenced body from specified liabilities.
(6) The steps that another authorised person or a qualifying parent undertaking may be required to take are—
(a) to dispose of any shares in, or securities of, the ring-fenced body to an outside person;
(b) to dispose of any interest in any other body corporate that is a member of the ring-fenced body’s group to an outside person;
(c) to dispose of other specified property or rights to an outside person;
(d) to apply to the court under Part 7 for an order sanctioning a ring-fencing transfer scheme relating to the transfer of the whole or part of the business of the authorised person or qualifying parent undertaking to an outside person.
(7) In subsections (5) and (6) “outside person” means a person who, after the implementation of the disposal or scheme in question, will not be a member of the group of the ring-fenced body by reference to which the powers are exercised (whether or not that body is to remain a ring-fenced body after the implementation of the disposal or scheme in question).
(8) It is immaterial whether a requirement to be imposed on an authorised person by the appropriate regulator, or by the other regulator at the direction of the appropriate regulator, is one that the regulator imposing it could impose under section 55L or 55M.
142JC Procedure: preliminary notices
(1) If the appropriate regulator proposes to exercise the group restructuring powers in relation to any authorised person or qualifying parent undertaking (“the person concerned”), the regulator must give each of the relevant persons a first preliminary notice stating—
(a) that the regulator is of the opinion that the group ring-fencing powers have become exercisable in relation to the person concerned, and
(b) its reasons for being satisfied as to the matters mentioned in section 142JA(1).
(2) Before giving a first preliminary notice, the regulator must—
(a) give the Treasury a draft of the notice,
(b) provide the Treasury with any information that the Treasury may require in order to decide whether to give their consent, and
(c) obtain the consent of the Treasury.
(3) The first preliminary notice must specify a reasonable period (which may not be less than 14 days) within which any of the relevant persons may make representations to the regulator.
(4) The relevant persons are—
(a) the person concerned,
(b) the ring-fenced body, if not the person concerned, and
(c) any other authorised person who will, in the opinion of the appropriate regulator, be significantly affected by the exercise of the group restructuring powers.
(5) After considering any representations made by any of the relevant persons, the regulator must either—
(a) with the consent of the Treasury, give each of the persons a second preliminary notice, or
(b) give each of them a notice stating that it has decided not to exercise its group restructuring powers.
(6) A second preliminary notice is a notice stating—
(a) that the regulator proposes to exercise the group restructuring powers, and
(b) the manner in which it proposes to do so.
(7) The second preliminary notice must specify a reasonable period (which may not be less than 14 days) within which any of the relevant persons may make representations to the regulator about the proposals.
(8) The regulator must after considering any representations made in response to the second preliminary notice give each of the relevant person s a third preliminary notice stating—
(a) whether it has made any revisions to the proposals, and
(b) if so, what the revisions are.
142JD Procedure: warning notice and decision notice
(1) If the appropriate regulator has given a third preliminary notice, it must either—
(a) if it still proposes to exercise the group restructuring powers, give each of the relevant persons a warning notice during the warning notice period, or
(b) before the end of the warning notice period, give each of them a notice stating that it has decided not to exercise the powers.
(2) The “warning notice period” is the period of 6 months beginning with the first anniversary of the day on which the third preliminary notice was given.
(3) Before giving a warning notice under subsection (1)(a), the appropriate regulator must —
(a) give the Treasury a draft of the notice,
(b) provide the Treasury with any information that the Treasury may require in order to decide whether to give their consent, and
(c) obtain the consent of the Treasury.
(4) The action specified in the warning notice may be different from that specified in the third preliminary notice if—
(a) the appropriate regulator considers that different action is appropriate as a result of any change in circumstances since the third preliminary notice was given, or
(b) the person concerned consents to the change.
(5) The regulator must, in particular, have regard to anything that—
(a) has been done by the person concerned since the giving of the third preliminary notice, and
(b) represents action that would have been required in pursuance of the proposals in that notice.
(6) If the regulator decides to exercise the group restructuring powers it must give each of the relevant persons a decision notice.
(7) The decision notice must allow at least 5 years from the date of the decision notice for the completion of—
(a) any disposal of shares, securities or other property that is required by the notice, or
(b) any transfer of liabilities for which the notice requires arrangements to be made.
(8) The giving of consent for the purpose of subsection (4)(b) does not affect any right to refer to the Tribunal the matter to which any decision notice resulting from the warning notice relates.
(9) “The relevant persons” has the same meaning as in section 142JC.
142JE References to Tribunal
(1) A notified person who is aggrieved by—
(a) the imposition by either regulator of a requirement as a result of section 142JB(2)(a) or (b) or (3)(a) or (b),
(b) a requirement to be imposed as a result of the giving by one regulator to the other of a direction under section 142JB(2)(c) or (3)(c), or
(c) the giving by either regulator of a direction under section 142JB(2)(d) or (3)(d),
may refer the matter to the Tribunal.
(2) “Notified person” means a person to whom a decision notice under section 142JD(6) was given or ought to have been given.
142JF Subsequent variation of requirement or direction
(1) A regulator may at any time with the consent of the person concerned vary—
(a) a requirement imposed by it as a result of section 142JB(2)(a) or (b) or (3)(a) or (b), or
(b) a direction given by it as a result of section 142JB(2)(c) or (d) or (3)(c) or (d).
(2) The person concerned may at any time apply to the appropriate regulator for the variation of—
(a) a requirement imposed by it as a result of section 142JB(2)(a) or (b)or (3)(a) or (b), or
(b) a direction given by it as a result of section 142JB(2)(c) or (d) or (3)(c) or (d).
(3) Sections 55U, 55V, 55X and 55Z3 apply to an application under subsection (2) as they apply to an application for the variation of a requirement imposed by the appropriate regulator under section 55L or 55M.
142JG Consultation etc. between regulators
(1) Where a notice under section 142JC or a warning notice or decision notice under section 142JD relates to a requirement to be imposed in pursuance of a direction to be given as a result of section 142JB(2)(c) or (3)(c), the appropriate regulator must—
(a) consult the other regulator before giving the notice, and
(b) give a copy of the notice to the other regulator.
(2) The appropriate regulator must consult the other regulator before varying under section 142JF a direction given as a result of section 142JB(2)(c) or (3)(c).
(3) Directions given by the FCA as a result of section 142JB(3)(c) are subject to any directions given to the FCA under section 3I.
142JH Relationship with regulators’ powers under Parts 4A and 12A
(1) Subsection (2) applies in relation to—
(a) a ring-fenced body which is a member of a mixed group, and
(b) a parent undertaking of such a ring-fenced body.
(2) A regulator may not exercise its general powers in relation to the ring-fenced body or parent undertaking so as to achieve either of the results in subsection (3).
(3) Those results are—
(a) that no existing group member is a parent undertaking of the ring-fenced body;
(b) that the ring-fenced body is not a member of a mixed group.
(4) In subsection (3)(a) “existing group member” means a person who is a member of the ring-fenced body’s group at the time when the requirement is imposed or the direction given.
(5) Except as provided by subsections (1) to (4), the provisions of sections 142JA to 142JG do not limit the general powers of either regulator.
(6) For the purposes of this section, a regulator’s “general powers” are its powers under the following provisions—
(a) section 55L or 55M (imposition of requirements in connection with Part 4A permission);
(b) section 192C (power to direct qualifying parent undertaking).
(7) For the purposes of this section, a ring-fenced body is a member of a mixed group if a member of the ring-fenced body’s group carries on an excluded activity.
Failure of parent undertaking to comply with direction
142JI Power to impose penalty or issue censure
(1) This section applies if a regulator is satisfied that a person who is or has been a qualifying parent undertaking as defined in section 142JB(4) (“P”) has contravened a requirement of a direction given to P by that regulator as a result of section 142JB(2)(d) or (3)(d).
(2) The regulator may impose a penalty of such amount as it considers appropriate on—
(a) P, or
(b) any person who was knowingly concerned in the contravention.
(3) The regulator may, instead of imposing a penalty on a person, publish a statement censuring the person.
(4) The regulator may not take action against a person under this section after the end of the limitation period unless, before the end of that period, it has given a warning notice to the person under section 142JJ.
(5) “The limitation period” means the period of 3 years beginning with the first day on which the regulator knew of the contravention.
(6) For this purpose a regulator is to be treated as knowing of a contravention if it has information from which the contravention can reasonably be inferred.
(7) The requirements that a regulator may be required to impose as a result of a direction under section 142JB(2)(c) or (3)(c) include requirements that t he regulator would not but for the direction have power to impose.
142JJ Procedure and right to refer to Tribunal
(1) If a regulator proposes to take action against a person under section 142JI, it must give the person a warning notice.
(2) A warning notice about a proposal to impose a penalty must state the amo unt of the penalty.
(3) A warning notice about a proposal to publish a statement must set out the terms of the statement.
(4) If the regulator decides to take action against a person under section 142JI, it must give the person a decision notice.
(5) A decision notice about the imposition of a penalty must state the amount of the penalty.
(6) A decision notice about the publication of a statement must set out the terms of the statement.
(7) If the regulator decides to take action against a person under section 142JI, the person may refer the matter to the Tribunal.
142JK Duty on publication of statement
After a statement under section 142JI(3) is published, the regulator must send a copy of the statement to—
(a) the person in respect of whom it is made, and
(b) any person to whom a copy of the decision notice was given under section 393(4).
142JL Imposition of penalties under section 142JI: statement of policy
(1) Each regulator must prepare and issue a statement of policy with respect to—
(a) the imposition of penalties under section 142JI, and
(b) the amount of penalties under that section.
(2) A regulator’s policy in determining what the amount of a penalty should be must include having regard to—
(a) the seriousness of the contravention,
(b) the extent to which the contravention was deliberate or reckless, and
(c) whether the person on whom the penalty is to be imposed is an individual.
(3) A regulator may at any time alter or replace a statement issued under this section.
(4) If a statement issued under this section is altered or replaced, the regulator must issue the altered or replacement statement.
(5) In exercising, or deciding whether to exercise, a power under section 142JI(2) in the case of any particular contravention, a regulator must have regard to any statement of policy published under this section and in force at a time when the contravention occurred.
(6) A statement under this section must be published by the regulator concerned in the way appearing to the regulator to be best calculated to bring it to the attention of the public.
(7) A regulator may charge a reasonable fee for providing a person with a copy of the statement published under this section.
(8) A regulator must, without delay, give the Treasury a copy of any statement which it publishes under this section.
(9) Section 192I applies in relation to a statement under this section as it appl ies in relation to a statement under section 192H.’
Amendment (a) to Government amendment 6, at the end of subsection (5) to new section 142JA, insert—
‘(5A) Condition E is that the appropriate regulator judges that there are serious failures in the culture and standards of the ring-fenced body or another member of its group.
(6) When judging whether there are serious failures in the culture and standards of the ring-fenced body or another member of its group, the appropriate regulator must take account of the recommendations in the five reports of the Parliamentary Commission on Banking Standards.’.
Amendment (b), in the title of new section 142JC, leave out ‘notices’ and insert ‘notice’.
Amendment (c) to Government amendment 6, in subsection (1) of new section 142JC, leave out ‘first’.
Amendment (d), in subsection (2) of new section 142JC, leave out ‘first’.
Amendment (e), in subsection (2)(b) of new section 142JC, leave out from ‘require’ to end.
Amendment (f), in subsection (3) of new section 142JC, leave out ‘first’.
Amendment (g), in subsection (3) of new section 142JC, leave out ‘14 days’ and insert ‘6 weeks’.
Amendment (h), leave out from subsection (5) to end of new section 142JC.
Amendment (i), in subsection (1) of new section 142JD, leave out from ‘must’ and insert
‘At the end of the period for making representations required under section 142JC(3), the regulator’.
Amendment (j), at end of subsection (1), insert—
‘(1A) If, following representations, the regulator makes revisions to the proposals, it must inform the relevant persons of those revisions.’.
Amendment (k), in subsection (2) of new section 142JD, leave out from ‘beginning’ to end of subsection and insert
‘at the end of the period for making representations required under section 142JC(3).’.
Amendment (l), in subsection (3) of new section 142JD, leave out from ‘require’ to end of subsection.
Amendment (m), in subsection (4) of new section 142JD, leave out ‘third’.
Amendment (n), in subsection (4)(a) of new section 142JD, leave out ‘third’.
Amendment (o), in subsection (5)(a) of new section 142JD, leave out ‘third’.
Amendment (p), in subsection (7), leave out from ‘must’ to end of subsection and insert
‘specify the period for completion of the actions required by the notice.’.
Amendment 18, page 9, line 21, at end insert—
‘Full separation
142JD General requirement of separation
‘(1) Where the members of any group include one or more ring-fenced bodies and one or more other bodies, the members of the group must, before the end of the period of five years beginning with the relevant commencement date, take steps to secure that there are no members of the group that are ring-fenced bodies.
(2) If in the case of any group steps to secure that there are no members of the group that are ring-fenced bodies are not taken within the period specified in subsection (1)—
(a) at the end of that period the Part 4A permission of each member of the group that is a ring-fenced body shall be treated as having been cancelled to the extent that it relates to a core activity, and
(b) after the end of that period the appropriate regulator must refuse to give any member of the group a Part 4A permission to carry on a core activity.
(3) At the end of the period specified in subsection (1)—
(a) section 142H(1)(b) and (4) to (7), and
(b) section 142JC,
cease to have effect.
(4) In subsection (1) “the relevant commencement date” means the day appointed for the coming into force of section 4 of the Financial Services (Banking Reform) Act 2013 so far as it inserts this section.’.
Amendment 19, page 9, line 21, at end insert—
‘Power to order full separation
142JC Power to order separation in case of particular groups
‘(1) Where—
(a) the members of a group include one or more ring-fenced bodies and one or more other bodies, and
(b) it appears to the appropriate regulator that the conduct of any one or more of the members of the group is such that there is a significant risk that the appropriate regulator will not be able to advance the objective in section 2B(3)(c) (in the case of the PRA) or the continuity objective (in the case of the FCA) otherwise than by acting under this section,
the appropriate regulator may give a notice to each of the members of the group.
(2) The notice must state that the appropriate regulator proposes to require the taking of relevant steps in relation to the group before the date specified in the notice.
(3) In this section “relevant steps” means steps to secure one of the following results—
(a) that there is no member of the group with a Part 4A permission to carry on a regulated activity of a description specified in the notice;
(b) that no member of the group is a ring-fenced body;
(c) that there is no member of the group with a Part 4A permission to carry on a regulated activity which is not a ring-fenced body.
(4) The notice must—
(a) specify a period, of not less than 3 months, during which any member of the group may make representations to the appropriate regulator in relation to its proposal, and
(b) name an independent reviewer who is to report on the conduct of the members of the group and the appropriateness of the proposal made by the appropriate regulator.
(5) A person may not be named as the independent reviewer without the consent of the chairman of the Treasury Committee of the House of Commons; and the reference in this subsection to the Treasury Committee of the House of Commons—
(a) if the name of that Committee is changed, is to be treated as a reference to that Committee by its new name, and
(b) if the functions of that Committee (or substantially corresponding functions) become functions of a different Committee of the House of Commons, is to be treated as a reference to the Committee by which the functions are exercisable;
and any question arising under this paragraph (a) or (b) is to be determined by the Speaker of the House of Commons.
(6) After receiving any representations made in relation to the proposal by members of the group and the report of the independent reviewer, the appropriate regulator must decide whether it intends to implement the proposal.
(7) If the appropriate regulator decides that it does intend to implement the proposal, it must publish notice of the proposal, and of its decision to implement it, at least 60 days before it is implemented.
(8) A person who is aggrieved by the decision of the appropriate regulator that it intends to implement the proposal may refer the matter to the Tribunal.
(9) The proposal may not be implemented without the consent of the Treasury; and the Treasury must publish their decision on any application made by the appropriate regulator for consent, together with their reasons for the decision, at least 60 days before it is implemented.
(10) Once the Treasury has consented to the implementation of the proposal and either—
(a) any reference to the Tribunal under subsection (8) has been dismissed, or
(b) the period for making such a reference to the Tribunal has expired without a reference having been made,
the appropriate regulator may implement the proposal by giving notice to the members of the group requiring the taking of the relevant steps specified in the proposal before the date so specified.
(11) If the relevant steps have not been taken by the specified date, the appropriate regulator may—
(a) in a case where the relevant steps are aimed at securing the result in paragraph (a) of subsection (3), take the action specified in subsection (12),
(b) in a case where the relevant steps are aimed at securing the result in paragraph (b) of subsection (3), take the action specified in subsection (13), or
(c) in a case where the relevant steps are aimed at securing the result in paragraph (c) of subsection (3), take the action specified in subsection (14).
(12) The action referred to in paragraph (a) of subsection (11) is—
(a) to cancel the Part 4A permission of any member of the group to carry on the regulated activity specified in the notice, and
(b) to refuse to give a Part 4A permission to any member of the group to carry on that activity.
(13) The action referred to in paragraph (b) of subsection (11) is—
(a) to cancel the Part 4A permission of any member of the group that is a ring-fenced body to the extent that it relates to a core activity, and
(b) to refuse to give any member of the group a Part 4A permission to carry on a core activity.
(14) The action referred to in paragraph (c) of subsection (11) is—
(a) to cancel the Part 4A permission of any member of the group that is not a ring-fenced body, and
(b) to refuse to give a Part 4A permission to any member of the group that is not a ring-fenced body.’.
Government amendments 7 to 16.
Greg Clark
This group deals with some of the recommendations of the first report of the Parliamentary Commission on Banking Standards, which was published on 21 December last year. The Government agreed to bring forward amendments on Report to implement those recommendations, and those amendments are amendments 1 to 4, 6 to 10 and 11 to 16. I will turn to them in a few moments, but the amendment proposed by my hon. Friend the Member for Chichester (Mr Tyrie) relates to his parliamentary commission’s final report on standards and culture, which was published on 19 June, and it therefore provides a perfect opportunity—as I suspect my hon. Friend intended—to say something about that further report and how the Government intend to implement its recommendations.
The Government warmly endorse the report. It is a landmark piece of work and I commend its unflinching, clear-sighted assessment of the damage done to the reputation of banking in this country and all around the world.
Mr Andrew Love (Edmonton) (Lab/Co-op)
The parliamentary commission requested the Government to consider giving their response—and tabling amendments —well in advance of this Report stage, yet that has been given only this afternoon. Why are we faced with having to absorb this document at very short notice?
Greg Clark
I pay tribute to the hon. Gentleman for the long hours he has devoted to the work of that commission. The Government did indeed make a commitment on Second Reading and before then to make use of the Bill before us to take forward the recommendations of the commission. It was always intended that that should be at the House of Lords stages of the Bill, but I will have more to say about that in a few moments. We will absolutely give the required time to consider those amendments and to make use of a Bill that is before the House, enabling us to respond rather than wait for a further piece of legislation.
The commission’s central judgment is absolutely right:
“High standards in banking should not be a substitute for global success. On the contrary, they can be a stimulus to it.”
When I visited Germany late last year, I picked up a copy of Handelsblatt and was struck by a double-page spread with a picture of the City of London and the headline, in English, “City of shame”. That shows the impact of the events of the financial crisis and subsequently on the reputation of this country’s banking system. Exactly as the commission says, if we are to restore the system’s global success, as we must, it is imperative that we improve its standards.
Therefore, in response to the commission’s report, I can confirm today that the Government will strengthen individual accountability by introducing a tough new regime that is recommended to cover the behaviour of senior bank staff; introducing new rules to promote higher standards for all bank staff; introducing a criminal offence for reckless misconduct by senior bankers—those found guilty could face a jail sentence; working with the regulators to implement the commission’s proposals on pay, specifically to allow bonuses to be deferred for up to 10 years and enable 100% clawback of bonuses where banks receive state aid; and reversing the burden of proof so that senior staff are held accountable for regulatory breaches within their areas of responsibility. We will also ask the regulators to implement the commission’s key recommendations on corporate governance. That will ensure that firms have to have the correct systems in place to identify risks and maintain standards on ethics and culture.
We will support competition in the banking sector by providing the Prudential Regulation Authority with what the commission asked for, which was a secondary competition objective to strengthen its role in ensuring that we have banking markets that benefit from the vigorous competition that delivers good outcomes for consumers. That will be in addition to the Financial Conduct Authority’s existing competition objective. In addition to introducing seven-day account switching later this year, the Government will ask the new payments regulator, once established, urgently to examine account portability and whether the big banks should give up ownership of the payment systems. The Government have also implemented the commission’s recommendation to conduct a review to look into the case for splitting RBS into a good bank and a bad bank containing its risky assets.
When the commission’s final report was published on 19 June, I undertook to provide an accelerated Government response by way of a Command Paper before the summer recess.
Mr Pat McFadden (Wolverhampton South East) (Lab)
On a point of order, Mr Speaker. I rise to seek your guidance, because the Minister is making, in effect, a statement on a series of Government policies related not to clause 1 or amendment 1 but to policy areas where amendments have not yet been tabled. Is that in order? Should this not have been done in the proper way—making a statement and allowing the House to ask questions in the normal way?
Mr Speaker
The Minister may wish to reply, because it is important to be clear about the context in which the observations he is making are made. That is central to this matter, and it is difficult to rule on it unless there is some clarity on the subject. I am grateful to the right hon. Gentleman for his point of order and let us hear what the Minister has to say.
Greg Clark
I thought that I had explained the context at the beginning, which was that the amendment tabled by my hon. Friend the Member for Chichester deals specifically with the recommendations of the final report on the culture. As I said, I suspected that he had tabled the amendment in order to afford us the opportunity to debate these matters. I will move on to deal with the other amendments in the group if the House would prefer it.
Mr Speaker
The hon. Gentleman is absolutely right; he has been a model of restraint, on which we congratulate him. He was in mid-intervention and we do not wish to have his aircraft come down prematurely, so let us hear it.
Mr Love
My question relates to the issues covered by my right hon. Friend the Member for Wolverhampton South East (Mr McFadden) and the list of policy positions recommended by the parliamentary commission. The press release that accompanied the Government’s document today states that they endorse “the principal findings”. Would the Minister care to tell us which findings they do not endorse?
Greg Clark
Of course, and today and tomorrow we will go into some further detail on that point. Let me mention one such finding, however: the Government do not agree with the proposal to abolish UK Financial Investments. I will mention various others later. We brought forward the publication of the response, which, just before the report was published, was intended to take place just before the summer recess, because I thought it was germane to the discussions in the House and I encouraged my officials to work their best to try to make it available for today and tomorrow. It has been sent to Members.
Giving a Government response to an 11-month long, 571-page commission report in just 13 working days is, I think, quite an achievement and I thank my officials for losing a nice weekend watching the tennis to do that. I had hoped that it would help the debate.
Chris Leslie (Nottingham East) (Lab/Co-op)
This is a very interesting situation. The Minister talks about the 13-day deadline and said that we had to get this done. Correct me if I am wrong, Mr Speaker, but I thought that the Government decided when the Report stage of a Bill was to be held, so the deadline was rather self-imposed. Why on earth are we wasting this Commons consideration of the Bill in Committee and on Report when he could not get his act together either to table amendments or to get a response together in time for us to properly use our time on Report?
Greg Clark
The hon. Gentleman is perfectly aware that the standard response time for a Command Paper responding to a report is two calendar months. That would have taken us into the recess, which clearly is not possible, so we would have had to respond after the recess. I think he is being churlish when I have asked my officials to move at great speed to respond in a very short space of time—13 working days—to make the response available. I thought it was better for us to have it for these debates than to have it next week or in September. I am grateful to my officials for their alacrity, even if he is not.
Jacob Rees-Mogg (North East Somerset) (Con)
I join my right hon. Friend in commending his officials for their amazingly speedy response. The only thing I would ask is that we should have plenty of time on Lords amendments. We had an excellent discussion in Committee, but unfortunately it was on a Bill that will be completely different from the one that is ultimately passed. To maintain the supremacy of this House, I feel it is important that we should have a proper discussion of and decision on the amendments that will be made in the other place.
Greg Clark
My hon. Friend, who was a distinguished member of the Public Bill Committee, is absolutely right. I have given assurances to the House before that we will have enough time to consider these very important matters, and we always have done. In Committee, we arranged things in such a way that we were able to consider every line of the Bill and every amendment and new clause with time to spare. When I saw the amendments that had been tabled, I made representations through the usual channels to extend what in the original programme motion had been a one-day Report and Third Reading. I had said that I would reflect on the volume of amendments and was able to secure an extra half day of consideration. I repeat that assurance—when the amendments return from the House of Lords, it is absolutely right that this House should have the chance to consider them all at leisure and thoroughly. My hon. Friend has my assurance on that.
Let me turn to amendments 1, 2 and 3. In Committee, I gave a number of undertakings that I would table amendments on Report. One such commitment related to the effectiveness of the ring fence, which is the common denominator of the amendments in this group. The hon. Member for Nottingham East (Chris Leslie) will immediately spot that amendments 1, 2, 3 and 4 act on a commitment I gave to the Committee that in turn reflected the recommendations of the first report of the PCBS, on which the hon. Member for Edmonton (Mr Love) and my hon. Friend the Member for Chichester served.
For Members who did not have the privilege of being part of our discussions in Committee, let me set the context. The Independent Commission on Banking set three objectives for the ring fence: first, to insulate essential day-to-day banking services against shocks originating elsewhere in the financial system; secondly, to make banks more resolvable; and, thirdly, to curtail the perceived implicit Government guarantees to banks, which follows from the first two. The Bill turns those ring-fencing objectives into law by making them part of the statutory objectives of the regulators—the PRA and the FCA.
Jonathan Edwards (Carmarthen East and Dinefwr) (PC)
The new structure that the Minister is outlining looks good on paper, but the key to its success is the role of the PRA. How will he stop the problem of the revolving door that arose with the Financial Services Authority afflicting the PRA, because that would completely undermine the ring fence he intends to put in place?
Greg Clark
The hon. Gentleman makes a good point. He will know from our proceedings during the passage of the Financial Services Act 2012 that we needed to reverse the catastrophic decision to take supervision of the banking system away from the Bank of England, which had always exercised that role with authority and commanded respect not only in this country but throughout the world. That Act corrected the situation, and the PRA is part of the Bank of England, as he knows, so we have restored that authority.
Guy Opperman (Hexham) (Con)
Does the Minister agree that higher banking standards and the PRA’s new role were enthusiastically endorsed at the multi-level banking seminar in support of regional banking that we held in Gateshead only last month?
Greg Clark
My hon. Friend’s ingenious intervention allows me to pay tribute to the excellent event he hosted in Gateshead at which there was palpable enthusiasm for challenger banks entering the market, especially ones with a regional focus. He and I share an ambition that the north-east should be the home of such a bank, which would do wonders for the region’s economy, with its strong, vibrant business culture. The area would benefit from the local knowledge of such an institution. The PRA and the FCA were represented at the discussion, and he is right to reflect that everyone who was present on that Friday was enthusiastic about the steps the PRA is taking to make it easier for challenger banks to come forward.
Chris Leslie
If the Government are so enthusiastic about the concept of regional banking, will the Minister explain to the hon. Member for Hexham (Guy Opperman) why their report, which came out at lunchtime, explicitly rules out any review of a structural arrangement involving regional banking for the Royal Bank of Scotland?
Chris Leslie
Perhaps the hon. Gentleman did not hear me first time round. I am tempted to repeat myself, but it is important that he realises that his right hon. Friend the Minister has ruled out such an arrangement for RBS.
Greg Clark
The right way to approach this is to make it possible for regional banks to enter the market across the board, which is precisely what the PRA is doing. It has reduced the demands that entrant banks must satisfy to establish themselves as a business and speeded up the authorisation process, which is all to the good.
Guy Opperman
Does the Minister recall that in April last year, the Labour party, taking its lead from the hon. Member for Nottingham East (Chris Leslie), who is sat in a sedentary, chuntering position on the Opposition Benches, voted against the implementation of the competition regulations that would have made regional banks happen?
Mr Speaker
Order. The notion of somebody sitting not in a sedentary position is a challenging one, but I am grateful to the hon. Gentleman for raising his point while on his feet, rather than from his seat.
Greg Clark
It is certainly true that the hon. Member for Nottingham East is seated, and it is also true that he was chuntering. My hon. Friend the Member for Hexham (Guy Opperman) has done the House a service in reminding it of the voting record of the hon. Member for Nottingham East, seated or otherwise.
The amendments clarify that the PRA must seek to minimise damage to the continuity of core services caused by the failure of a ring-fenced bank or any other member of its corporate group; an investment bank could, for example, suffer losses that threatened the whole group with bankruptcy. Amendment 1 requires the PRA to minimise the harm to the continuous provision of core services caused by the failure of other group members, as well as of the ring-fenced bank itself.
Amendment 2 clarifies that the failure of a group company includes its insolvency. Amendments 3 and 4 reflect those same changes in the remit of the FCA, in the unlikely event that the FCA ever became the prudential regulator of any ring-fenced bank. I hope that the House will welcome those amendments, which the Committee that scrutinised the Bill and the Parliamentary Commission on Banking Standards suggested.
Mr Love
I thank the right hon. Gentleman for being so generous in giving way. I want to take him back to the discussion about regional banking, because one of the parliamentary commission’s recommendations was that the Government should consider measures to break up RBS into regional banking. I seek his reassurance that the Government have not forgotten that recommendation.
Greg Clark
It delights me to hear the hon. Gentleman refer to today’s publication; it confirms what I thought and hoped, which was that the publication would inform the debate. I think that tomorrow we will come on to clauses that deal with precisely those matters.
Caroline Lucas (Brighton, Pavilion) (Green)
Does the Minister understand the disappointment of those, including me, who believe that the proposals do not go far enough, and that we should look at full legal separation of investment and retail banking, and not just ring-fencing? If we do not, we risk sending a message to the public that politicians still have a surprisingly high degree of trust in the very banks and bankers who caused so much harm to our economy.
Greg Clark
I do not agree with that. We will come on to talk about what the commission referred to as the electrification of the ring fence, and whether it is appropriate to have a power to break up the whole system, so I will address that in a second, if I may. Amendments 6 to 10 concern that electrification of the ring fence, to use the memorable phrase of my hon. Friend the Member for Chichester—or, I dare say, the whole commission.
Mr McFadden
The Minister is being generous in giving way. I would like to take him back to the intervention by my hon. Friend the Member for Edmonton (Mr Love). Will the Minister confirm that paragraph 5.11 of the publication that his Department published today states:
“The Government does not believe that the case for breaking RBS’s core operations into multiple entities meets the objectives of maximising the banks’ ability to support the British economy”?
In layperson’s terms, the Government have today rejected the notion that their review will look at regional banks, as distinct from a good bank/bad bank split. Is that how we should read that?
Greg Clark
No. The right hon. Gentleman has not got it quite right. We are absolutely enthusiastic about creating regional banks, and the exchange that I had with my hon. Friend the Member for Hexham, and the changes made by the regulator to the approvals process, underline that. The right hon. Member for Wolverhampton South East (Mr McFadden) asks a specific question about whether RBS, in which we, of course, have a very substantial stake, should be broken up in that way. It is important that we have regard to value for the taxpayer. I suspect that we will talk about these things tomorrow, but I confirm that it is the Government’s view that we should not damage the potential value to the taxpayer in that way.
As members of the Bill Committee will recall, I made a commitment to introduce on Report amendments to implement electrification, and here they are. The amendments give powers to the regulator, with the consent of the Treasury, to require a group to separate completely its retail and wholesale banking operations. The regulator would be able to require the group either to sell its interests in ring-fenced or non-ring-fenced entities, or to transfer specified businesses to outside ownership. The regulator will be able to require separation if it is satisfied either that the group’s ring-fenced bank is not sufficiently independent of the rest of the group or that the conduct of any member of the group is such that it undermines the regulator’s ability to achieve its new statutory objective to ensure the continuity of core services.
The amendments set out a process for the exercise of that power. The first step is that the regulator must notify all affected members of a group that it is minded to exercise its powers and how it proposes to do so. The affected bank has the right to make representations following the receipt of each notice. Following that stage, the regulator is required to allow members of the group at least a year to take action to rectify the position. If, after that period, the regulator wishes to proceed it must issue a warning notice before a requirement to separate is imposed. The regulator would then allow five years to complete the separation required in line with the disposals required under competition law, particularly state aid interventions.
As the parliamentary commission recommended, the Treasury’s approval is required before that action can be taken. We agree with the commission that providing for a deterrent against any bank that seeks to game or evade the ring fence is a sensible reinforcement in keeping with the recommendations of the Independent Commission on Banking. Government amendments 11,12, 13 and 14 make technical adjustments to ensure that all the necessary components of structural reform comply with the ring fence and are brought within the scope of the ring-fencing transfer scheme.
Richard Fuller (Bedford) (Con)
I am grateful to my right hon. Friend for his clear explanation of how the ring fence will work. He is discussing time frames that make sense in benign economic circumstances, but some of the problems with the interaction of retail and investment banking came about in circumstances of great financial trauma. Is he confident that the measures he has proposed will work in those circumstances as well?
Greg Clark
My hon. Friend makes a good point. The use of state aid is often a response in the context of difficult circumstances. That was certainly the case in the financial crisis, and it happens in other industries as well. Five years is the standard period for these arrangements to be executed or completed, and that is the reason, anticipating an intervention from my hon. Friend, that period was chosen. I dare say, however, that that there can be reflection on that: my hon. Friend the Member for Chichester may have a different view that he may wish to share with the House later.
Government amendments 15 and 16 reflect concerns expressed both by the Commission and in Committee that the use of ring-fencing transfer schemes to restructure groups could provide unscrupulous banks with an opportunity to shirk their responsibilities, such as liability with past misconduct. The requirement for PRA approval is a substantial safeguard against that, but Government amendment 16 requires that before the PRA can consent to a ring-fencing transfer scheme it must commission an independent report to assess whether anyone other than the bank itself would be adversely affected by the transfer. Government amendment 15 requires the PRA to “have regard” to that report in deciding whether to approve a ring-fencing transfer.
The hon. Member for Nottingham East will of course have more to say about amendments tabled by the Opposition, but his first amendment was debated extensively in Committee. It requires a review of ring-fencing every two years. I am certainly not set against an independent review. Indeed, the Bill builds in future reviews, including the PRA being able to report annually on the operation of the ring fence, and being able to report every five years on whether the detailed rules it has made are still delivering the objectives of the ring fence. Requiring another review specifically to look at the case for full separation risks in many ways achieving the opposite of the Bill’s intention, which is to secure consensus, as far as that can be established, and to provide for a stable regulatory structure.
It would be paradoxical for such a review to be confined to looking at ring-fencing or full separation, but not any other remedy for deficiencies that the review might uncover. Amendment 18 is identical to an amendment that was debated in Committee. The Government’s position is clear: in the Bill, we are following the advice of the commission chaired by Sir John Vickers, which considered the case for full separation—that relates to the point made by the hon. Member for Brighton, Pavilion (Caroline Lucas)—and rejected it. It is a different policy. I know that it has some distinguished advocates, but it is a different policy. Of course, any future Government could adopt it, but they should do so properly, through thorough analysis and following parliamentary and public scrutiny.
It is worth reminding ourselves briefly of the history of the proposals before us. They were not invented during the past few weeks or months. They go right back to 2010, when the Government established the Independent Commission on Banking under the chairmanship of Sir John Vickers. The commission produced three reports, instigated two public consultations, considered 1,500 pages of written submissions and hosted more than 300 separate meetings. The Government produced a response and a White Paper, on which they again consulted fully before coming to Parliament. At each stage there was full cost-benefit analysis. Now in Parliament each detail of the policy is being debated—and has been debated in Committee—and in many cases improved.
Mr Love
The parliamentary commission consulted widely and there was considerable concern about the weaknesses and the ring-fencing that had been suggested by Vickers. That resulted in a proposal for electrification. Is the right hon. Gentleman secure in the view that we have electrified the fence enough on the basis of the amendments he is proposing today?
Greg Clark
I will be even more secure when I have persuaded the hon. Gentleman, as I hope to do. He, being a fair man, will reflect on the fact that his distinguished commission undertook pre-legislative scrutiny of the proposals made by Sir John Vickers and his commissioners. Sir John did not recommend that there should be the power to separate. In fact, he has been persuaded by the institution-specific power of separation that his commission proposed, but has reflected in evidence to his commission that to go further and introduce a system-wide power is a separate matter and should come before Parliament in an explicit way rather than, as would be the case here, through a statutory instrument following an independent review.
The proposals before us, most fair-minded colleagues would concede, fall very far short of the degree of scrutiny and rigorous assessment, including by the hon. Gentleman’s commission, that the current proposals have gone through. Parliament would not have the ability to present amendments to proposals and at that stage to take account of the recommendations even of the independent review. So the procedures proposed are less than adequate to the scale of the policy change that would be embodied in them. If we are to be serious about the need to respect the views and the role of Parliament—as I have made clear, these are important matters—we must accept that the only right and proper and democratic way of legislating for full separation is by coming back to Parliament with full primary legislation, including the rigorous process that we have undertaken.
Stephen Barclay (North East Cambridgeshire) (Con)
I very much agree with the case that my right hon. Friend is making. Is there not a danger with a fixation on structure, which the review advocated by the Opposition would promote, that we work less on making the existing electrification work and getting the behaviours right, and instead allow a focus on structure and the further review? As with any structure, it is possible to ratchet up, but it is also possible to ratchet down, and it would allow a nibbling of the electrification, which would not be constructive.
Greg Clark
My hon. Friend has some experience of these matters. I think that the debates about structure are important and that structural reform will make an essential contribution to making the system safe for the purposes of taxpayers. However, having looked into it, I think that to have hanging over the system the sword of Damocles—the origins of the metaphor were the subject of an erudite debate in the Commission—would introduce an uncertainty into proceedings that might distract from the important work of implementing the existing provisions.
Mr Love
The reality is that we are seeking to balance conflicting issues. One respects the Government’s view that Parliament should be supreme in this regard, but the alternative argument, of course, is the one that the Minister has just put to us, about the sword of Damocles keeping the feet of the banking industry to the fire. We know that the industry has not been entirely with us in relation to setting up the ring-fencing arrangements and that it needs some encouragement to make it work effectively.
Greg Clark
The hon. Gentleman gets to the nub of the matter, because of course any attempt to evade the ring fence or to nibble the electric fence, as dangerous to health as that would be, could be undertaken only on the part of a particular institution, not the system. That is why we agreed with the commission’s report—it was not part of the Vickers report—that it was necessary, for exactly the reasons the hon. Gentleman mentions, to have a sanction against that type of behaviour, and that is what we have done.
A further power to separate the whole system could not be triggered by an individual and could not punish the actions of an individual institution. That is why I think that is a very different policy. It commands the support of some very distinguished and influential people. The Glass–Steagall approach, which of course the policy is modelled on, has its place in history, but I think that history also reveals that the Glass–Steagall arrangements were not immune to the very dangers my hon. Friend the Member for North East Cambridgeshire (Stephen Barclay) pointed to. It is a good job my hon. Friend the Member for Chichester secured his amendment to the programme motion, because we are having a very interesting debate, but I would like to conclude, because there are other amendments that hon. Members would like to speak to. On that point, however, I urge the House not to allow at this stage the introduction of a very different policy into the Bill.
Let me turn to the amendments tabled by my hon. Friend the Member for Chichester, who I dare say will speak for himself in a few moments. I know that some of them were tabled to afford us the opportunity to discuss his commission’s report, and I think that this is now established as a very relevant opportunity. I will of course listen carefully to what he says. I am confident that the amendment the Government have tabled in response to the commission’s report can be improved during the Bill’s passage to take into account whatever concerns are embodied in his amendments.
Amendment (a) to Government amendment 6 would add a new condition under which the separation powers could be used: namely, when the regulator
“judges that there are serious failings in the culture and standards of the ring-fenced body or another member of its group.”
Of course, under the Government’s amendment the regulator would have the ability to separate the group if its conduct threatened to undermine the regulator’s ability to meet its continuity objective, but I think that, as the commission’s extensive deliberations showed, cultural failings might be present in banks that can result, for example, in significant harm to individual consumers or groups of consumers but nevertheless do not have systemic consequences. I think that the relevance of the proposed new power to take into account the culture is adequately covered under the provisions already in the Bill.
Amendments (b) to (p) concern the procedures for exercising the separation power. They would remove from the process: the second and third preliminary notice stages that extend to six weeks the time for banks to make representations; the requirement that the group be given a minimum of five years to effect separation; and the requirement for Treasury consent before a group can be required to separate. It is, of course, essential that a clear process be established for the exercise of the separation power. As I have said, I will listen carefully to what my hon. Friend says about reducing the number of warnings, which I think is the essence of what he is recommending, and about departing from the standard practice in financial services of allowing 14 days, rather than the six weeks that he proposes, for representations.
Mr McFadden
I want to compare the Minister’s six-year timetable with the one that the hon. Member for Chichester (Mr Tyrie) has set out in his amendments. What would be the difference for an individual group between moving to full separation under the Minister’s timetable and its doing so under the timetable that would apply if the amendments tabled by the hon. Member for Chichester were accepted?
Greg Clark
As I have said, I shall hear from my hon. Friend. I do not think there is any difference of intent between us; we have accepted the commission’s recommendation. We have taken the period of five years because that is the standard time for the disposal of assets when they are required through competition law proceedings.
I am certainly concerned, however, that the banks should be given a chance to address the concerns, and that chance would be lost if amendment (k) were followed. If amendment (p) were followed, we would deny banks the five-year period for divestments to be made that is typical under competition law. But as I have said, I remain open to considering these matters further during the Bill’s passage. I am confident that it can be improved to meet the concern, as I know that there is no disagreement in principle between me and my hon. Friend on the issue.
The requirement for Treasury consent follows from the commission’s own recommendation, without which the regulator could, on its own initiative, instigate radical structural reforms.
Amendment 19 is retabled as an alternative to Government amendment 6, providing for the specific full separation power. As I explained in Committee when the amendment was previously debated—when the hon. Member for Nottingham East was channelling my hon. Friend the Member for Chichester, as he frequently did—it suffers from technical flaws. That is why I committed to introducing a Government amendment to deliver its objectives.
Specifically, amendment 19 is rather vague, giving the regulator power to require a group to take steps to separate without specifying what those steps are. It also lacks provision for a minimum period over which groups must execute a separation, leaving the risk of the regulator’s ordering a rushed disposal that could be destabilising to the system.
The Government amendment is intended to address those technical problems, although I have signalled our willingness to make any further improvements that may be necessary as the Bill progresses. I hope that my hon. Friend the Member for Chichester will be able to withdraw his amendment at this stage, pending further consideration.
Chris Leslie
It is characteristic of the Minister, with his emollient tones, sometimes to give the impression of smoothing over all these issues. He is ever the swan on the surface, yet beneath the water line the chaotic paddling is evident from the Government’s response to the work of the parliamentary commission. That response was rushed out today, in accordance with the Government’s own artificial deadline of a debate on Report, which they could have scheduled so that we had time to consider where the Government stood on some of these issues.
Even the Minister’s hon. Friends did not seem to realise what he was recommending today on RBS—ruling out a review that might consider a regional banking network, for example. The message did not get through to the Government’s own Back Benchers. I do not know whether that is a whipping issue or whether other channels need to be reviewed, but something is not quite right. It would be remiss of me to pass over the fact that we are debating this Bill on Report having had in Committee no consideration of all the hard effort undertaken by the poor souls who had to serve on the Parliamentary Commission on Banking Standards. Hours, days, weeks and months of their lives went by, never necessarily to be regained. There was no response to that in Committee and there has been barely a nod in its direction on Report.
Greg Clark
This is uncharacteristically ungenerous of the hon. Gentleman, as in Committee he tabled a whole set of amendments drafted by the parliamentary commission, saving him, I dare say, a lot of weekend drafting work. I think he might want to thank members of the commission and note that the recommendations from its first report were exhaustively considered in Committee.
Chris Leslie
The right hon. Gentleman is right. Of course I thank them, but it is my sympathy for them that now requires us to speak in their favour. The Government ignored all those amendments. It is true: I have been channelling the wishes of the hon. Member for Chichester (Mr Tyrie) and, indeed, the rest of the commission. They dutifully drafted all those amendments and they were then totally ignored by the Government. The Government set up the parliamentary commission. They did not want to go for a broader independent inquiry; they wanted to take this route. They set up all the members to do all the work and have all the hearings. Their final report was more than a ream of paper— 570 pages. Not a jot of those amendments was accepted by the Government in Committee, and, significantly, the same applies on Report.
Let us be clear about this. House of Commons consideration of this Bill is not worth anything; all the business is to be done in the other place by members of the commission who are there. It will go to them in October, presumably they will consider it in October and November, and then we will get a little chunk of time at the end of the process for Commons consideration of Lords amendments. I hope that the Minister will allow us a little more latitude to have a look at what is put into the Bill at that time.
Greg Clark
I think the hon. Gentleman is labouring under a misapprehension. The amendments in this group are a response to the commission’s first report. The essence of this Bill is the ring-fencing of the banking system. This is a response to the independent commission to which the parliamentary commission responded. The amendments implement these changes. The Government always made it clear that the final report on standards and culture would be taken on board during the Bill’s passage through the House of Lords. The situation is exactly as envisaged and perfectly orderly. He is not seeing the wood for the trees. This is about the ring-fencing of banks.
Chris Leslie
Well, pardon me for daring to suggest that the Government have got this totally upside down and the wrong way round. They set up the commission and asked its members to come forward with recommendations, as they dutifully did, for which I thank them, and then ignored them in the Commons Committee and Report stages. That means that it is all to be debated in the detail that is required when the Bill reaches the House of Lords.
Mark Field (Cities of London and Westminster) (Con)
Given that on Second Reading I suggested that much of the real deliberation would take place in the other place, it would be churlish of me to disagree entirely with the sentiments expressed by the hon. Gentleman. The situation was ever thus, given the parliamentary majorities. This has not been a chaotic process but, understandably, a holding response by the Treasury. It is a fast-moving situation. I suspect that a further banking reform Bill will be debated in the next two or three years.
Chris Leslie
It probably will, particularly if there is a change of Administration, but we will come to that in a couple of years’ time.
Mr Love
Some very eminent members of the commission are in the House of Lords, and I have absolutely no doubt that they will do a magnificent job of scrutinising the Bill. However, this is the democratically elected Chamber where most of the debate should take place, and it is incumbent on the Government to make time available for those at this end of Parliament to scrutinise it.
Chris Leslie
My hon. Friend is 100% correct, and we have made our point; I now want to move on to issues of substance. There is a lack of time and we have to finish debating this group of amendments by 7 o’clock. It is ridiculous that the commission spent hours on these matters but only a tiny amount of time has been allocated to debating them today.
Government amendments 1 to 4 seem to be generally welcome with regard to the extension of the regulatory perimeter and the definitions of the Financial Conduct Authority and the Prudential Regulation Authority. It is intriguing that amendment 4 centres on clarifying the definition of “failure”. It is very tempting to ask if they know what failure is, especially given their weak response to the parliamentary commission today, but I will move swiftly on.
Government amendments 7 to 10 also seem to be fairly unobjectionable, although there appears to be a drafting error in amendment 8. Why has the Minister decided that the proposed subsection (3) should be inserted ahead of subsection (2) of FSMA? Something seems to be amiss, but that is only a minor point.
More importantly, will the Minister talk about the tribunal to which a lot of the issues will be referred? What sort of tribunal will it be and where will it be situated? Will its work add to the functions of an existing tribunal? That is a small point, but I would be grateful if the Minister would address it.
Government amendments 11 to 13 seem to focus on drafting issues. I cannot really see what will be achieved by changing “subsidiary” to “body”, but I do not have anything to say about those smaller, drafting amendments.
The first main issue of substance relates to our amendment 17 on the need for a thorough review process of the ring-fencing of retail banks, such that it augments what ought to be the electrification of the ring fence. We suggested this in Committee and it was a clear recommendation of the commission. It would be better to have a proper and independent review of the adequacy of ring-fencing every two years. We think that a more robust review process would be better than the Government’s PRA-led approach. It would be inadequate for the regulators to lead the process. We need a broader and more substantial review process to ensure successive ring-fencing.
Ultimately, as the commission itself has said, the jury is out on whether ring-fencing will work. It is fine in theory, but in order to keep a close eye on things—especially as these issues fall out of the media spotlight, as they inevitably will in the years to come—we must have a process in place that makes sure that we test, watch and scrutinise what happens.
The commission was right to be disappointed with the Government’s response. It noted that
“the Government did not accept our recommendation on potential ‘electrification’ with respect to the sector as a whole. As our First Report noted, crucial doubts remain about whether all the intended reforms can be put in place and, even if they are, whether this will be enough to prevent the Government from having to step in next time a crisis hits. In particular, we identified the possibility that the partial separation of a ring-fence may prove insufficient.”
That is why we feel that a more rigorous and thorough review process that involves the commissioning of independent members to produce, together with the Chair of the Treasury Committee, a report for Parliament would be far more effective. I do not want to take words out of the mouth of the hon. Member for Chichester, but he is right to say that if we leave it to the PRA to do this job and do not have a proper and more thorough process, there is a danger that the regulators will simply end up marking their own exam paper.
Caroline Lucas
Following the logic of what the hon. Gentleman is saying, does he not agree that a better way of restoring public faith in banks and, indeed, in politicians would be to legislate firmly now for the full legal separation of retail and investment banking? Even if that is not what a large number of financial institutions want, would it not be better for the taxpayer and the public?
Chris Leslie
We have tabled an amendment, which I shall discuss shortly, suggesting a clear back-stop power for the full separation of retail and investment banking across the board, in case ring-fencing does not work. We believe that we should give ring-fencing a chance, but it is important to note that the jury is still out on whether it will work. We just do not know. The Bill gives us the opportunity to ensure, as the commission recommended, that nobody has any truck with breaches of the ring fence. That must be the case both on a firm-by-firm basis for specific institutions and banks and for the sector as a whole.
Jonathan Edwards
Given what the hon. Gentleman has just said, are not the titles of the proposed new section in his amendments 18 and 19, which refer to “full separation”, slightly misleading? I will support those amendments, because they would be a step forward from what the Treasury recommends, but the Labour party is arguing for electrifying the ring fence, not for full separation.
Chris Leslie
It is true that we want to give ring-fencing a chance. That seems to be the broad consensus among those who have seriously considered the issue, either on the commission or elsewhere. However, it is important that we keep in our pocket the chance to do something serious and rigorous in case that plan does not work. I suppose we might call it a plan B, although I know the Government have an aversion to ever considering anything outside the narrow tram lines down which they career. It is important that we take this opportunity to put that plan in place.
That brings me to the Government’s rather pathetic, lettuce leaf-like attempt to claim that they are adopting a back-stop electrification power. I am not sure what voltage the Minister has opted for, but for the Government to claim the provision as a firm-by-firm back-stop power is an insult to back-stop powers. As my right hon. Friend the Member for Wolverhampton South East (Mr McFadden) said, the process in Government amendment 6 will take six years should ring-fencing fail, which is a snail’s pace. I urge hon. Members to look at the various stages involved in that amendment. First, the Treasury will look to the regulator to issue not just one preliminary notice but three—the idea of three preliminary notices seems like an impossibility—all of which will have different timetables. I do not know whether three preliminaries means, “We’re coming to get you, but not quite yet.” It is like the Education Secretary, with his firm, disciplinarian hand, saying to children, “We’re going to come and get you, but we’ll give you three preliminary notices before we do so.” The kids would be crawling all over the ring fence for months and years.
After those preliminary notices, a warning notice will be issued, followed very swiftly—not—by a decision notice. There will be at least five steps over a six-year period. “Five strikes and you might be out in six years’ time” does not strike me as an effective back-stop power for galvanising and electrifying the ring fence. If the Government recognised for six years that there was a flaw with ring-fencing but did nothing, their culpability would be almost equal to that of the banking sector. Amendment 6 could be an amendment to a misrepresentation of the people Act, and the Financial Secretary needs to take it off the table and instead consider the amendments that the Chairman of the Parliamentary Commission on Banking Standards has tabled.
This is a back-stop power in name only, and just because the Government say it is a back-stop power does not make it so. We need the ability, on a firm-by-firm basis at the very least, to take firm action to a timetable that shows flexibility and can be enacted swiftly if need be. I am afraid I tend to agree with the amendments tabled by the hon. Member for Chichester. The provision needs to be truncated and the Government must withdraw amendment 6 as it is wholly inadequate. It would have been more effective to go with amendment 19 as drafted by the commission, which was a far more effective truncated version of a back-stop power on a firm-by-firm basis. That was far clearer, the drafting was improved, and it is a mystery to me why the Government have resisted it at every stage of the process. Whether that was due to lobbying from the banks, or because they do not believe in standing up to the sector and taking on this tough issue, the weakness of the Government on this matter surprises many people.
Mark Field
Two things come to mind. First, there should be a sense of due process, which I think is present in the Government amendment. Secondly, there is genuine concern about uncertainty and the notion of an electrified ring fence. As the hon. Gentleman will know, I have questioned the whole issue of ring-fencing and the potential uncertainty it provides in this business, particularly in the fast-changing world we have seen over recent years. This is therefore a sensible response from the Treasury to the whole concern, which goes well beyond special pleading from the banking fraternity.
Chris Leslie
Most of the debate we have had in the short time available has pressed for firm action to be taken towards a sector that—let us not forget—brought down the economy, created massive deficits in our public finances, and required rescue by the taxpayer because of a blurring of the lines between issues that affected ordinary households up and down the country and high-risk investment banking activities that needed strong safeguards. Simply saying that we will have ring- fencing with no means to enforce or police that—no “electrification”, as it has been termed—would make that concept totally redundant. That is why members of the Parliamentary Commission on Banking Standards were surprised that the Government always seemed to take the path of least resistance—“Let’s not upset the banks too much; let’s try and go back to business as usual”—and are not learning the lessons of history.
We have re-tabled amendment 18 not just to have a specific firm-by-firm back-stop power for separation in case ring-fencing fails, but to have sector-wide powers as a back-stop in reserve should ring-fencing not work. We have the capability for full separation, but the Government have stubbornly refused to put that on the statute book—“Oh well, if we have such circumstances we can always legislate further down the line”—as if passing a Bill on such matters can be done quickly or effectively in any way.
Stewart Hosie (Dundee East) (SNP)
I thank the hon. Gentleman for the tone he is using on giving ring-fencing a chance and full separation being a back-stop power, or plan B, to be used only in certain circumstances. Amendment 18—the general requirement of separation and industry-wide potential for that—would clearly mean an end to universal banking, ring-fenced or otherwise. What consideration have he and his hon. Friends given to that issue, and particularly the transfer of cash between the two and the impact that might have on lending to the now retail sector, or lending for investment in business?
Chris Leslie
Those issues were covered pretty substantially by the commission in its first and second reports, and this was the conclusion it reached. Nobody wanted to go for full separation if it could be avoided; we wanted to ensure that ring-fencing arrangements could be upheld and made to work. There are some arguments in favour of that universal model, and therefore it was felt preferable to have such a power in reserve, but in the Bill. It is no wonder that the banking sector breathed a heavy sigh of relief today, when it saw the Government’s response on this and other issues. The markets judged that the banking sector got off lightly, and that there was nothing tough or difficult for the sector. That is why we have seen the market reaction today. The notion of business as usual seems to be back on the table.
I want the House to recognise that this is not an amendment that Labour has come up with in a partisan way. We are simply tabling an amendment that was drafted by the commission after days, weeks and months of deliberation and careful cross-party thought by Members of both Houses, but thrown back in the face of the commission by the Government today. It is important to have this on the statute book. A back-stop power will incentivise the banks to comply with ring-fencing. If the Government are correct in believing that ring-fencing will be adequate, the amendment will do no harm to the policy. It will sit dormant on the statute book. But if the Government are wrong, and this backstop power is not in place when it is needed, serious consequences could arise. It is nonsense for the Minister to ignore this risk, especially as the other place will want to come back to this issue. He may be forced to concede if we get into parliamentary ping-pong at some point.
I do not want to take up too much more time because many other hon. Members have spent a lot more time on this issue than I have, but I wish that the Government would listen to them and to the commission.
Mr Andrew Tyrie (Chichester) (Con)
I shall say a little more than I usually say in the House because these arrangements are quite central to the work of the banking commission and give me an opportunity— my first—to explain some of the reasoning behind that work. The two key amendments that I have tabled would empower the regulator to split up a banking group if there were serious failures in the culture and standards of the ring-fenced body or another member of its group. In deciding whether these serious failures have occurred, the regulator would be required to take account of the recommendations contained in the reports of the Parliamentary Commission on Banking Standards, which I chaired.
We produced five reports about a vitally important industry, one that has become embroiled in very serious scandals that have cost the consumer, taxpayers and the whole country a fortune. The parliamentary commission was the first of its kind for a century. The last, exactly a hundred years ago, collapsed in a heap of partisan acrimony.
We have produced five reports in under a year, all of which were agreed unanimously. We also put in an unprecedented amount of detailed work, taking evidence for 171 hours in no fewer than 76 evidence sessions, in addition to deliberating in private for a further 74 hours. I would like to thank my colleagues on the commission in both Houses for their huge contributions, injections of energy and endurance. I would also like to express my thanks for the equally impressive commitment of the commission staff and specialist advisers, led by Colin Lee and his two deputies, Adam Mellows-Facer and Lydia Menzies. Only the very limited time available prevents me from listing many more of the staff who put in so much work. I would also particularly like to thank the Front Benchers of all parties, who have offered a great deal of support.
The task now is to get the report implemented, primarily by regulators and banks, and, where necessary, supported by statute. The Government have today responded to the commission’s most recent report—our fifth. I have had a chance to flip through the response, but there has been no time to digest it fully—it is about 80 pages—and, of course, no time for anyone to table amendments as a result. In view of the extent to which it looks as if the Bill has been changed, I would be grateful if the usual channels could consider recommitting this Bill to Committee. Failing that, at the very least—as the my hon. Friend the Member for North East Somerset (Jacob Rees-Mogg) has said—an extra day should be provided for consideration of what will inevitably be a mass of Lords amendments. Bearing in mind the struggle that we had to get the half-day tomorrow, I hope that the Government will show more flexibility about this extra time.
Having said that, I warmly welcome the supportive tone of the pre-briefing given to the Financial Times about the publication that we have had today. Still, I would rather have heard about it here first. I am also very pleased that so many of the proposals and also the argumentation for them appear to have been accepted in full. But I am not fully reassured. The Government appeared to have accepted the commission’s proposal on a specific power to force the separation of an individual bank, but here we are, at the eleventh hour, trying to prevent the proposal from being severely weakened by the Government. In fact, as I will explain, the Government’s amendments would render the specific power of electrification virtually useless.
Some of the commission’s important proposals have not been accepted at all, for example on leverage, on which we support the recommendations of the Vickers commission, and on reform of the Bank of England’s antiquated governance structure, on which the commission supports the recommendations of the Treasury Committee.
Other ideas that the Government have rejected include the need to wind up United Kingdom Financial Investments Ltd and the regulatory reforms to provide statutory autonomy for the regulatory decisions committee. I find that especially regrettable. The Government have also rejected the proposal to remove the FCA’s strategic objective. No one can see much purpose to this except the Government. It can be used to trump the operational objectives of the FCA, including that of competition, and can thus serve only to weaken those operational objectives. On all those issues, I hope that their lordships will repair some of the damage that we have been left with no time to attend to here.
Mr Love
I agree with the hon. Gentleman that it is an offence to Parliament to read about the Government’s response first in the Financial Times. Give the mixed reception from the Government to our fifth report, we should have adequate time to discuss all the very important issues about which we deliberated for many days and which appeared in our recommendations.
Mr Tyrie
I strongly agree with the hon. Gentleman and I have already made both those points, which he just reinforced. All the amendments that I have tabled on behalf of the commission are about standards. Banking continues to suffer from the effects of poor standards. Even in the seven months that we took oral evidence, we had two more major LIBOR scandals, the interest rate swap scandal, a major bank found to be involved in money laundering in Latin America, and another fined $670 million for sanctions busting in Iran.
It is sometimes suggested that trying to do much about this will drive banks overseas. But all of the evidence we took pointed to exactly the opposite conclusion. Far from imperilling the UK’s global competitiveness, high standards will make the UK a more attractive place to locate. Many good things can flow from higher standards in banking, among them a restoration of trust. Trust is an essential buttress to the UK’s reputation as a global financial centre. It is also vital for the British economy. While banks are not trusted by their clients and particularly by SMEs, there will be less lending and less economic activity.
The crisis of standards and trust in banking—and it is a crisis—is multi-faceted, and so are the necessary remedies. None the less, the nub of the problem can be characterised as twofold. First, there has been a lack of individual responsibility at the top of banks. Collective decision making has diffused responsibility and a sense of duty to be vigilant. Secondly, there has been colossal failure of judgment by regulators, with an approach based on pointless data collection on a huge scale and needless box ticking.
In a nutshell, boards were negligent and the system of regulation was found seriously wanting the first time it was tested. Both boards and regulators were motivated by an understandable desire to cover their backs, but their lapses were inexcusable. The lack of personal responsibility in banks has been aggravated by misaligned incentives. By that I mean bonus and remuneration structures. They encouraged bankers to make short-term gains while the full risks and costs became evident only later. The taxpayer ended up picking up much of the tab.
Mark Field
My hon. Friend talks about the idea of incentives to find holes in the ring fence. Surely it is in the nature of the way in which one looks at regulation to try to find holes in the ring fence. There is nothing untoward about the idea of looking at a regulation or law and trying to find a way around it. Obviously, one should try to do so without breaking the spirit of the rule or regulation, but if we live in a highly regulated society it is surely inevitable that those who are regulated will look to try to find ways of avoiding them. Surely that is a fault of having over-regulated societies, whether in banking or in other fields of commerce.
Mr Tyrie
I am not going to delay the House by disagreeing for too long. It is rare that I disagree with my hon. Friend, but I wonder whether we would like surgeons to test all the time the regulations that encourage them to do a good job as they pull out their scalpels and wonder if they can get away with just one incision here or there.
Mark Field
I think my hon. Friend makes my point for me. The medical profession is a profession and relies on such things as the Hippocratic oath, and it has a centuries-old approach to how they go about their day-to-day business. An over-regulated industry is one that encourages the avoidance of regulation. Genuine professionals look on their professional responsibilities in a very different light.
Mr Tyrie
There is a heap of regulation surrounding the wielding of those scalpels. The common feature of the two industries is not the professionalisation or non-professionalisation of the industry; it is that both owe a duty beyond bettering themselves. In the case of the banks, they owe a duty because of the implicit guarantee; in the surgeons’ case, they owe a duty to the patient. I will not prolong this discussion any further, but I think most people accept that we do not want banks constantly trying to find a way around or through the ring fence.
Sir Peter Tapsell (Louth and Horncastle) (Con)
Will my hon. Friend give way?
Sir Peter Tapsell
How can anyone read the evidence that Mr Paul Volcker gave to my hon. Friend’s commission and come away with any other conclusion than that ring-fencing, whether electrified or not, simply will not work when we get the next major banking crisis?
Mr Tyrie
There is considerable force in what my right hon. Friend says. We considered the issue in great depth and published a report—the third report—on exactly that. We discussed the case for full separation, but concluded that although the ring-fence proposals had merit, they should not be reconsidered until we have given the Vickers ring-fence approach a try. We also examined the merits of a closely related proposal for the separation of proprietary trading—exactly what is being suggested—from the rest of banking activity. We concluded that further statutory support was not needed for that approach now, because the Prudential Regulation Authority might already have the powers to implement an effective separation of prop trading. We asked the PRA to present a report to the Treasury and to Parliament on its use of a range of monitoring and corrective actions, which could serve as the subsequent basis for a full and independent review of the case for full separation of prop trading. Unfortunately, as far as I can tell—I have had very little time to absorb this publication, which came out only at 12.30 pm—the Government have rejected even examining the proposal for prop trading. That is a mistake. I regret that, but I hope it will be put right in the other place.
Returning to amendment (a), the Government accepted the case for ring-fencing, arguing that banks that test the ring fence should be strongly deterred and, if necessary, prevented from doing so. However, I am afraid that that will not be the effect of the Government’s amendments. On the contrary, the Government amendments almost guarantee that banks will not get a shock, and will not be discouraged from testing or gaming the ring fence. The regulator needs a useable and credible deterrent. This proposal creates too many obstacles and delays to the sanction of full separation.
Frankly, it is inadequate for three main reasons. First, it requires the regulator to issue—we have already heard a little about this—no fewer than three preliminary notices and a warning notice before it can act. Secondly, it then requires the regulator to obtain permission from the Treasury no fewer than three times while the process is in train. Putting that requirement on the statute book would transfer most of the effective regulatory decision-making power away from the PRA and the Bank of England to the Treasury. It cannot be appropriate for the Treasury to be the regulator. The commission argued for a Treasury override at the end of the process, not at the beginning or in the middle, but the Government’s amendment requires the regulator to secure the consent of the Treasury on three occasions prior to that point. Even so-called preliminary notices—in effect, expressions of concern by the regulator—will require Treasury consent. That is absurd and compromises the regulator’s independence.
The third objection has also been alluded to. The Government’s amendments allow at least five years for the completion of the separation after a decision has been made. That would create enormous scope—indeed, it would make it ideal—for lobbying for a change of heart in the interim. It would create far too much room for that and we can do without it. It also flies in the face of what the Minister said in Committee, where he alerted Parliament to the risk of what he described as an “inordinately long” delay in implementation. A tool that is so difficult and slow to use is likely to deter no one and that is why I have proposed a number of amendments that would remove some of the obstacles erected by the Government to taking action to separate banks.
Mr McFadden
I want to ask the hon. Gentleman the same question that I asked the Minister about the difference in time scales between his amendments (a) and 19 combined, and the five to six-year timetable in total that the Government have set out. Were we to go down the road recommended in the hon. Gentleman’s amendments, how long does he think it would take between a decision on separation of an individual group being taken and that eventually happening?
Mr Tyrie
That is something on which we can usefully take advice from the regulator, but I would have thought that two years would be a reasonable maximum. Five years is ridiculous. It might take less than two years, but we have people down the road who can give us a clear view and the Government should ask them, if necessary publicly.
I have also tabled an amendment that would give effect to the Banking Commission’s proposal for allowing for full separation, as well as trying to improve the Government’s faulty amendment a bit. I recognise that the amendment has been debated in Committee and that the Government said they did not like it, but their reasons for not liking it were frankly not strong. I still find it curious that the amendment was rejected as a starting point for putting in ring-fencing. When the Bill goes to the other place, I hope that that amendment might be seen to be a better starting point than the Government’s. The Government have had several months to get this right. It is regrettable that they have made so little progress on it, but we are where we are. In any case, even ring-fencing with electrification is no cure-all for the standards problems in banks. To improve them, we all have to move forward on many other fronts.
I would like briefly to refer to the main other areas that are needed. To improve competition, we recommended a range of measures. We asked the Competition and Markets Authority to initiate a market study of the retail and SME banking sectors. I noticed that the Government were so enthusiastic about that recommendation that they announced it as soon as they received the embargoed copy of our report. We asked the Government immediately to establish an independent panel of experts to assess ways of enabling much greater personal bank account portability. The Government appear to have ridden back a little from that in the proposals they published today, although I cannot be sure.
We also took a good deal of evidence on RBS. Competition is weak partly because RBS is weak. Further restructuring may well be needed. In our view, the Government will need to be bold. We recommended that they undertake a detailed analysis of a good bank/bad bank split as part of an examination of the options for the future of RBS. That is vital work. In the field of banking reform, a healthy RBS, with the restoration of normal lending to the SME sector, is probably the biggest tonic that could be given to the British economy.
The way in which banks run themselves also needs reform. An accountability firewall had grown up that allowed senior bankers to deny responsibility for their failings. That wall has to be taken down. To give effect to that, we proposed the introduction of a senior persons regime. This would ensure that the direct personal responsibilities of board members, particularly the chairman, reflected the importance of their roles, so that it was clear to bankers and regulators who should reasonably be accountable when things went wrong, and for what. Our study of HBOS—our fourth report—provided a clear example of exactly the opposite. It guided our thinking on this and a number of other areas. Senior board members at HBOS did not take responsibility for what went wrong.
The crisis of standards was partly caused, and considerably inflamed, by the fact that bankers were rewarded for doing the wrong thing. Bonuses were often paid out well before the risks of the actions that they ostensibly rewarded became apparent. Bankers took huge rewards and when the risks turned sour, taxpayers picked up the tab. That has to stop. The Government and regulators should not set levels of remuneration. However, much more radical steps are needed to incentivise better behaviour among all staff whose actions or behaviour could seriously harm a bank, its reputation or its customers. Deferred remuneration for executives should not be viewed as an entitlement. People should keep their deferred bonuses only when it is clear that they have really been earned. That will mean long deferral, in some cases up to 10 years.
Mr McFadden
I do not propose to follow the hon. Member for Chichester (Mr Tyrie) by making a wide-ranging speech on the recommendations of the banking commission’s final report, as he has set them out perfectly adequately. However, I do want to say that I do not think the Minister has served himself or this discussion well by publishing the Government’s conclusions at lunchtime today, and then coming along and making a de facto statement of new policy, thereby simply compounding the sense of frustration in this House about the adequacy of the procedures for discussing these issues. Instead of going over all of that in great detail, however, I want to concentrate on the amendments before us, and on the discussion of ring-fencing and separation. I specifically want to talk about amendments 17 and 18 in the name of the shadow Chancellor and his shadow Treasury team colleagues; and amendment (a) to Government amendment 6 and amendment 19 in the name of the hon. Member for Chichester.
The banking commission’s first report, issued before Christmas, focused on ring-fencing and separation. It made two principal recommendations in respect of what has become known as electrification of the ring fence, which is the power to go further than the ring fence and enforce full separation between investment and retail banking.
The first of those proposed powers was in respect of individual institutions, and it was accepted by the Government, at least in name. The second power was in relation to the sector as a whole, and it was not accepted by the Government. No convincing reason has been given for accepting one and rejecting the other. The Government have today tried to make a virtue of issuing a response to the banking commission’s final report which says they broadly support its conclusions, yet in terms of the legislation before us the Government are continuing to reject a major recommendation of our first report, and as we have teased out of the Minister, even in the document published at lunchtime, they are rejecting recommendations on UKFI and regional banking. We may learn about others, too.
On the question of backstop powers to enforce separation in respect of either individual groups or the sector as a whole, one of the clearest lessons from the banking crisis of 2007-08 was how interconnected the banking system is. Institutions involved in banking are not islands cut off from one another. They lend money to one another. They engage in the same practices. Their culture is often shared. They place similar bets. When one falls, it often has the capacity to drag others down with it, as we learned to our great cost.
The same is true of the standards and culture questions we examined in such detail after Christmas. The LIBOR fixing was the straw that broke the camel’s back in terms of the establishment of the commission, but that did not just happen within one bank. Groups of traders within banks were co-operating with one another to rig the interest rates, and groups of traders across different banks were co-operating with one another to rig the interest rates. Against that background, it makes no sense at all to restrict the policy armoury that this Bill establishes to respond to the undermining of the system by taking powers that will affect only individual banking groups and not the sector as a whole. As the hon. Member for Chichester said about our recommendation on new criminal offences, some of those powers may never need to be used, but their existence on the statute book should focus the minds of those running these major organisations.
John Thurso (Caithness, Sutherland and Easter Ross) (LD)
We also discussed at length the fact that, if we do not have the weapon in the armoury, we cannot use it, and it is usually too late to put it in place once a crisis comes along. Far better to have the gun in the locker, even if we never use it, than not to have it at all.
Mark Garnier (Wyre Forest) (Con)
To follow up on that point, rather than having a gun in the locker, some of these powers should be seen as akin to a nuclear deterrent. As parliamentary commission members will remember from doing the media rounds after the publication of the report, one of the big questions was whether Fred Goodwin would have gone to prison if we had had these powers in place. The answer to that is that RBS would not have gone bust in the first place. The deterrent element of these powers, rather than the enforcement element, is what is important.
Mr McFadden
The hon. Gentleman makes a very good point. Without wishing to pursue this analogy too far, the difference between a gun in the locker and the nuclear deterrent is that it is conceivable we would use the gun in the locker, but less so the nuclear deterrent. I am therefore not entirely sure which of the two commission members has got this quite right, but deterrence is certainly part of the effect we are looking for.
To return to the issue of the power to separate in respect of one institution or the sector as a whole, my overall reflection, having served on the commission for the past year is that, although its recommendations should be supported, even if we take all the steps set out—even if we put a new system of regulation in place, including the twin peaks system, even if we have the ring-fencing powers on structure that are in this Bill, and even if we faithfully implement the standards and culture recommendations to which the hon. Member for Chichester referred—it would still be rash to come to the conclusion that we had fully resolved the problems of too big to fail or too complex to manage. These reforms should be implemented and they can make a difference, but if we think we have fully resolved the problems of this huge sector, we will be guilty of complacency and possibly kidding ourselves. The problem of too big to fail is still there.
Our recommendations will make a difference but we also need powerful weapons, even if their use is unlikely, to enforce good standards and to make those running banks think long and hard about the consequences before they decide to test or game the system in any situation in future. That is why I think my hon. Friend the Member for Nottingham East (Chris Leslie) is right to say that a periodic review of ring-fencing and how it is operating is a good idea. It is why I support a more general power, to be held by the Government, to allow broader separation if the ring-fencing reforms do not work. That is what amendments 17 and 18 are designed to achieve and they are very much in line with the recommendations of the commission’s first report.
John Thurso
May I begin by apologising to you, Mr Deputy Speaker, and to the Minister for the fact that I arrived after the start of the debate? The flight down was fine, but the Gatwick Express was not. Had it not been for that, I would certainly have been here.
May I briefly echo the words of my hon. Friend the Member for Chichester (Mr Tyrie) in praising the staff of the commission, who did a truly outstanding job? One thing we did was to break out into panels—he chaired one, as did I and nearly everyone else at some point—where we had individual staff, and they were very impressive and helpful.
I wish briefly to address a question raised by the hon. Member for Chichester, who chaired the commission, by explaining why I feel it is of the utmost importance that the proposals we made are not only taken seriously but passed into statute, and why we came to some of our conclusions. We deliberated on the issues for hours and hours. As anyone who has read the transcripts of the Treasury Committee’s meetings from years gone by will know, I started out seeing things from a full separation point of view. I am a fairly unreconstructed Glass-Steagall supporter, but I do think that one needs to be guided by the evidence. The commission received a great deal of evidence, and I came to the view that although that principle is still one that I adhere to and think is right, there were greater complications in today’s modern operation of the financial services and markets than perhaps had existed when Glass and Steagall got together and that it was wise, therefore, to listen on that. So what I looked for, as did other colleagues who came at it from different angles, was to give the best effect to what we were seeking to achieve.
The right hon. Member for Wolverhampton South East (Mr McFadden) rightly said that the commission linked structure and culture, and I was struck by the way in which the different cultures in banking are competing. One of the easiest ways to look at this, whether we are considering the Volcker rule, prop trading or whatever, is that there are two distinct cultures in every large banking organisation. The first of those is the professional culture of the people seeking to work with and to help individual clients, who are involved in investing or looking after depositors. I do not deny that the vast majority of people operating in the world of banking are professional, wish to be professional and wish to have high standards. The second is the completely separate trading culture, where there is no client at the end of the day; it is a zero-sum game where two people, or two sets of people, are trading specifically to make money and to beat the guy on the other side of the trade.
The problem so often was that although trading was necessary to give effect to that desired on the investment side, when the trading side took over in terms of profit and culture it infected the other side. The whole thing is about seeking to keep the cultures apart. People have talked about high-street commercial banking as being good and investment merchant banking as being a casino and being bad, but I do not take that view. I would split the types into three, because there is retail and commercial banking, investment banking and trading. All three have their uses, and how they relate and how they are governed is the important thing.
The universal bank clearly works, but if all the banks are universal banks, it does not, and that is the problem with it. If everybody is pursuing the same model, there is a real danger that the riskier side infects the more prudent side.
Kelvin Hopkins (Luton North) (Lab)
The ordinary depositor—the ordinary working person who puts their money in their bank and wants to use it—would be deeply worried if they felt, and if it were the case, that their money was being gambled with by these risk-taking buccaneers in the City. Is there not a very strong case for making sure that ordinary people, such as me, who do not gamble in that way can have their banking protected from such gambling?
John Thurso
The hon. Gentleman makes exactly the point I am in the process of making, but he does it more simply, and I thank him for that. That is the key point about the ring fence. The utility aspects of banking, which are operating the payment system and taking deposits, should be so constructed within an entity that when a bank fails—I say when, not if, because there will be another bank failure and our purpose is to try to make it easier for banks to be resolved so there is less likelihood of taxpayer intervention, meaning that the bank will be more likely to be allowed to go under and that bankers will be likely to be more prudent—the ring fence enables that while protecting the ordinary depositor and the payment systems.
This is a long and complicated subject, as I learned over many hours, and the flow of capital from the lady who puts some money into the bank to the company that needs it to expand and grow the economy is necessarily complex. One must therefore be careful—[Interruption.] I know that other hon. Members want to speak and I promised that my remarks would be brief, so before I get a beady eye from you, Mr Deputy Speaker, I ask the hon. Member for Luton North (Kelvin Hopkins) to let me move on.
The critical point, which I completely accept, is that the compromise we came to is the ring fence. The compromise holds good, however, only if the ring fence works properly. Our conclusion was that it would not work if it were not reinforced, and the term “electrified” was coined. The point made by the right hon. Member for Wolverhampton South East was that if one has at one’s disposal the ability to do something—the armoury, call it what you will—those who are engaged in the activity will check whether they are being looked at before they engage in it. It is the modern equivalent of the Governor’s eyebrow. If we do not have that, we will simply have a lot of regulation that might lead not to a successful conclusion but to a long dialogue that leads nowhere between the regulator, the Treasury and the institution. People must believe that when the weapon, whatever it is, is deployed, it will have a consequence. That is the essential point.
In conclusion, I think all members of the parliamentary commission came to a unanimous view. We started from different viewpoints and with different concepts, but we agreed—all five from this House, all five from the other place: all 10 of us together—that to give effect to the ring fence it needed to be reinforced. We thought it could be done in this way and my hon. Friend the Member for Chichester has laid out the arguments perfectly.
Mark Durkan (Foyle) (SDLP)
In following the hon. Member for Caithness, Sutherland and Easter Ross (John Thurso), I apologise for the fact that transit issues meant that I, too, missed the start of the debate. I will take up only a little time in the Chamber today, but, following the comments made by the hon. Gentleman and by the right hon. Member for Wolverhampton South East(Mr McFadden), it is important to make the point that it is not just those who have served the House well on the Parliamentary Commission for Banking Standards who have concerns about such issues and can see the difference between the Government’s offer and the amendments tabled by Opposition Front Benchers and by the hon. Member for Chichester (Mr Tyrie).
We talk about the electrified ring fence and, essentially, the Government are offering us a Fisher-Price electrified ring fence—a VTech model. They have looked up ring fence in the index of the Argos catalogue and gone for the one in the toy pages. There is not much point the Government’s saying they have taken everything into account, that this is the best model and that it will give everybody reliable assurances. Frankly, that is like trying to pretend that a tyre is flat only at the bottom and that this is just a minor stylistic difference about perception. The difference is about substance and reliability.
I encourage the Minister to listen to what right hon. and hon. Members on both sides of the House have said, and particularly to those who have had the best insight into these issues through the parliamentary commission and who have changed and modified their views, like the hon. Member for Caithness, Sutherland and Easter Ross. They have been able to give it more consideration than someone such as me, who comes to the question on a reflex reaction of full separation.
I recognise that the ring fence is the only show in town, but it must be reliable and meaningful. The Government’s proposed procedure in amendment 6 could take longer than the life of a Parliament to have an effect. There will be not just the preliminary decisions but the Treasury consents required for those decisions, and tribunals after the warnings and the decisions, then variations and consultation between the regulators—the whole thing will go on.
Mark Garnier
I, too, pay tribute to the members of the parliamentary commission, with whom I served for 10 months. Huge numbers of people were involved as well as huge amounts of effort. One statistic that has not come out yet is that we apparently asked 9,198 questions of our witnesses, so we certainly got stuck into it in a big way. It was truly a tour de force, as Members can see from the 571-page document I have in my hand.
The Commission was an incredibly important piece of work. We have been trying to deal with the fundamental loss of trust in banking and what pleased me enormously was that one of the passages quoted relatively early in the report, on page 83, was from one of our big banks, Lloyds Banking Group, and was about trust. Let me read it out:
“Trust goes to the heart of what banking is about. Customers need to be able to trust their bank to look after their savings. They need to trust their bank to manage their financial transactions smoothly; trust that their bank will be diligent and not provide levels of credit or mortgage that are more than the customer can re-pay; and trust their bank to provide products that genuinely meet the customer’s needs and which the customer can understand.”
That has been crucial to the problem we have had: of course we considered LIBOR and all the various scandals, but at the end of the day there is a fundamental mistrust between the consumer, who is not very well educated, and the banks, which are well educated. In part, we are seeking to resolve that misbalance of trust.
I urge the Minister not to be shy in legislating to help build that trust. As TheCityUK wrote, again cited on page 83:
“The sustainability of the UK’s position as the pre-eminent global financial services centre is grounded in the integrity of its financial markets and probity of market participants.”
That is key to the debate about ring-fencing, criminal sanctions and the various other important measures available to the Government in the arms race in which we are involved—ranging from the gun locker of the hon. Member for Caithness, Sutherland and Easter Ross (John Thurso) to my offshore nuclear deterrent—to ensure that the people who run the banks pay attention and take seriously their role in looking after those institutions. I speak as someone who spent 17 years as an investment banker and 10 years as a hedge fund manager. As I have now gone into politics, I have the hat trick of holding the three most unpopular jobs on the planet—I plan to become a traffic warden when I leave this place.
We hear threats from the banking community that if we over-regulate, that community will get up and go, but there are two incredibly important points to consider, the first of which is: where would the banks go? They do not have a big range of options. A bank that wanted to go to the far east, for example, would face several problems, not least of which is the fact that were HSBC to up sticks and go to Singapore—this would apply to the remainder of the major four banks—its balance sheet would be about 1,100% of the country’s gross domestic product, and no regulator would enthusiastically receive a bank of such a size. Secondly, we should remember that several factors in this country are incredibly important to banks, such as our robust, transparent and tried-and-tested legal system. We are a member of the single market, which gives banks access to the whole of Europe; we speak English, which is the language of the international business and banking community; and we are also at the centre of the time zones.
Our regulatory regime is also absolutely crucial. A great deal of our work was to try to get rid of the implicit guarantee whereby the Government are seen as standing behind the banks in case they fall over. That guarantee can be worth anything up to £40 billion a year, depending on the stage of the cycle, and that gives the big four banks an advantage. The problem is that that anti-competitive advantage represents another barrier to entry for challenger banks, so we need to get rid of the implicit guarantee. However, by regulating firmly, well and efficiently, and by winning the race to the top on regulation, we will replace the implicit guarantee with a cheaper funding rate for the UK banks, because they will see large amounts of international capital coming to the UK to take advantage of the protection that our regulatory and legal regimes provide. I therefore urge the Minister not to be shy about coming forward and to consider carefully the amendments proposed by my hon. Friend the Member for Chichester (Mr Tyrie), which reflect the recommendations of the Parliamentary Commission on Banking Standards and have a great deal of merit.
Greg Clark
We have had a fascinating, high-quality debate. I am grateful for the contributions of all hon. Members, but especially for those of the Members who served with such distinction on the Parliamentary Commission on Banking Standards: my hon. Friend the Member for Wyre Forest (Mark Garnier); the right hon. Member for Wolverhampton South East (Mr McFadden); the hon. Member for Edmonton (Mr Love), who is no longer in the Chamber; the Chair of the commission, my hon. Friend the Member for Chichester (Mr Tyrie); and the hon. Member for Caithness, Sutherland and Easter Ross (John Thurso). With the help of Members of the other place, they laboured hard to produce a report that not only will stand the test of time, but will be a reference document for many generations in this country and throughout the world. The report will be seen as a major contribution to addressing the less tangible aspects of culture and standards, which is something that has eluded regulators throughout the world. I am sure that the report will be read with a great deal of interest.
The report’s central judgment includes the acute point that for too long questions of standards and culture have been contracted out to regulators, rather than being an intrinsic part of the institutions themselves. That aspect of the report stood out as the essence of the required change, because it should no longer be simply for the regulators to decide on such questions, as the culture throughout the institutions should reflect the correct standards that we expect.
I spoke at length at the beginning of the debate, so I shall deal briefly with several of the points that hon. Members raised. I was asked about timetabling. On Second Reading, I made two commitments, the first of which was that the House would have adequate time to consider all provisions, including amendments proposed by the parliamentary commission. I hope that hon. Members will concede that I have been true to that in Committee and throughout our two days on Report, and I repeat that that commitment remains as the Bill goes to the other place. I also said explicitly on Second Reading that the recommendations of the commission’s final report on standards and culture would be reflected in amendments to be made in the House of Lords. Of course, those measures will subsequently be considered by this House, so our intention has not changed. It was right to expedite the response to the report so that it was available much more quickly than usual. It has been useful in informing today’s discussions, as will be the case tomorrow, and it will be available to their lordships during their consideration of the Bill.
The hon. Member for Nottingham East (Chris Leslie) asked several specific questions, including about whether Government amendment 8 contained a typo. It does not, but it would require more than the four minutes remaining for me to explain why, so I hope that he will trust me on that at least. The upper tribunal is not a new invention; it is the court that considers all references made under FSMA for adjudication.
The hon. Gentleman made a substantive point about the notice period, as did my hon. Friend the Member for Chichester and the right hon. Member for Wolverhampton South East. I was asked whether an elongated process in some way diminishes the effectiveness of the ring fence. Our intention was—and is—to implement faithfully the parliamentary commission’s recommendation on the institution-specific ring-fencing rule. As I assured my hon. Friend the Member for Chichester, I am confident that if the Government’s proposals can be improved during the Bill’s passage, all his concerns about the use of the power can be addressed. In fact, the procedure under consideration has been described as pressing the nuclear button.
Mr Tyrie
I think that was a concession, so I am extremely grateful to the Minister. I am also grateful that the response was published at the earliest opportunity—it could have been delayed, so at least we have had a chance to look at it. That shows us that the Government are listening, and the response will be helpful in the other place. Above all, it gives us more confidence that there will be full implementation of the proposals. The Government have indicated their general support for them, so I hope that we will not have to go through a rigmarole to get the necessary provisions on the statute book.
Greg Clark
I am grateful for my hon. Friend’s intervention. I always take praise when it comes—especially from him, as he is often very flinty in issuing it. I do not think that what I said amounts to a concession, because it has always been our intention to reflect the spirit of his suggestion.
Let me make an important point on the process that my hon. Friend describes. In his amendments, he does not have a time period in mind for the exercise of the power.
Greg Clark
I have one minute left, so the right hon. Gentleman will understand that I cannot give way. The proposal that there be five years to implement the action has been discussed with the regulators; it reflects best regulatory practice. In point of fact, if there were no time limit in the Bill, which is what one of the amendments tabled by my hon. Friend would ensure, that would render the use of the power without limit, so I think we are in the same territory—the right territory—in wanting to specify that there should be a limit. It should be clearly understood that there is a limit to the use of the electrification powers, in terms of a timetable, and a deadline for action. Of course it is right that the regulators should advise on the appropriate use of that. In terms of the amendment—
Chris Leslie
I beg to move, That the clause be read a Second time.
It is a delight to see the Leader of the House on the Front Bench to debate with me the question of the leverage ratio—I favour the pronunciation “leaverage”—and I am happy to give way to him if he has any concerns about it. As the Leader of the House—[Interruption]—and, indeed, the Minister will know, a bank’s leverage is the ratio of its assets to equity capital. Its equity capital is equal to the value of its assets, minus the value of its liabilities. Higher leverage rates magnify returns, because any growth in assets will be proportionately greater if equity is thin, but—and this is why it matters—the corollary is that any losses are magnified if leverage is greater. Its equity can be wiped out by a smaller shock than would wipe out the equity of a less leveraged institution.
The Government said that they intended to provide the Financial Policy Committee of the Bank of England with a time-varying leverage ratio tool, but not before 2018, and that that would be subject to a review in 2017 to assess progress internationally. The design of the tool would depend, hon. Members will be glad to hear, on European Union legislation, and will be set out in Britain in due course in secondary legislation. I know that they are keen on that particular process.
Stewart Hosie
I am very supportive of the notion of legislating now for the leverage provision, but in his new clause, the hon. Gentleman discusses
“a target for the overall leverage of the…system, to encompass…the activities of foreign financial institutions and non-bank originators of credit”—
or shadow banking. Although that might be taken into consideration in the calculation, the FPC would have no power to implement a leverage ratio in the shadow banking sector, so is there not an unintended consequence that leverage ratios may be too high in the formal banking sector to compensate for what the report found?
Chris Leslie
I am delighted that the hon. Gentleman has taken the trouble to look at the new clause, because it is our second attempt to cajole or persuade the Government to look at this issue. In Committee, we took a different approach to the question of leverage, and tried to clarify that there was a clear power for the Government to act. I hope in the spirit of consensus and trying to move the arguments forward, the Minister and the House will accept that we have taken a new approach, thinking about leverage as it affects the UK economy as a whole. Leverage—and I shall come on to make this argument—is part and parcel of the way in which an economy works, and in the new clause we have looked at a particular design that would encompass other institutions. I do not want to be misinterpreted: we mention foreign banks, for example, but I do not intend any extra-territorial reference in the new clause. It simply makes it clear that the provision has to encompass effective leverage on the UK financial services sector as a whole.
I have referred to the Vickers commission, and it is important that we do not forget the work that it did, and that we pay tribute to it. It said that
“a leverage cap of thirty-three is too lax for systemically important banks, since it means that a loss of only 3% of such banks’ assets would wipe out their capital.”
The commission recommended a 25:1 ratio—a 4% ratio—but the Chancellor dismissed that concern. It is essential that the ring fence is supported by tougher capital requirements, as well as by a leverage ratio.
The parliamentary commission said that it was not convinced by the Government’s decision to reject the Vickers recommendation to limit leverage in this way. The parliamentary commission said that it
“considers it essential that the ring-fence should be supported by a higher leverage ratio, and would expect the leverage ratio to be set substantially higher than the 3 per cent minimum required under Basel III. Not to do so would reduce the effectiveness of the leverage ratio as a counter-weight to the weaknesses of risk weighting.”
Sir Mervyn King, the former Governor of the Bank of England, said that the leverage ratio turned out to be
“a far better predictor of the institutions that failed in the crisis”
than measures of risk-weighted assets. I could go on; a great deal of debate has taken place on this issue.
Our new clause seeks a way of ensuring clarity on the powers and what sort of process would take place. We suggest that the powers of the Financial Policy Committee in the Financial Services Act 2012 should be amended to make it clear that a target should be set by the Treasury for the overall leverage of the United Kingdom’s financial system to encompass all the activities of those institutions that are originators of credit.
Mr David Ruffley (Bury St Edmunds) (Con)
May I unpick what the hon. Gentleman is saying? Does he mean a minimum leverage ratio or a target? There is a difference. Perhaps he could clarify that.
Chris Leslie
That is a very good question and I am open to debate on that. I believe that looking at that minimum leverage ratio as a target to be set for the leverage of the system as a whole in the UK would be the point of public policy, which is why it needs to be dealt with in a policy-making context by the Treasury, with reference to Parliament if need be. The key point is that it should then be for the regulators to look at the detailed implementation of that on a firm-by-firm basis.
Essentially, there is a parallel to be drawn between the way that the Chancellor of the Exchequer sets an inflation target for the Bank of England and the Monetary Policy Committee is given operational independence to find ways of meeting that target. The purpose of the debate today is to look at the potential parallel to be drawn there, with a target being set and operational independence for the implementation of that target being given to the Financial Policy Committee and the Bank of England. Over every three-month period the FPC should respond by notifying any changes and any actions that it has taken in order to regulate leverage, so that there is a dialogue and a process that is fairly self-explanatory.
Mr Ruffley
The hon. Gentleman is being very generous in giving way, but I want to be clear about his proposition. A target would imply that a bank that was just 10 times leverage would have to raise its leverage ratio to 25 times if it was a 4% target, whereas if it was a 4% minimum leverage ratio, that would be totally different. The bank that leveraged 10 times would not be in breach of that.
Chris Leslie
I understand the hon. Gentleman’s point. Let me be clear. The target that should be set would be for the financial system as a whole. It would be for the regulators to make judgments about firm-by-firm leverage arrangements, so it would be on a more sophisticated basis. There is a case to be made for a regulator to look at each individual institution. Some institutions are significantly different from one another. Some of the building societies, for example, have recently been making the point that they have different asset structures and so on, and that exactly the same leverage arrangement across the board for all firms simultaneously would not necessarily be appropriate. In an effort to work towards some way of dealing with the issue, this design is one that I have suggested.
Mr John Redwood (Wokingham) (Con)
In the proposal, the hon. Gentleman suggests that the committee has to take into account
“adequate credit availability and growth in the economy”
and report to the Treasury. Would the Chancellor and the Treasury have any right of veto or influence over that, or would they have to put up with the Bank’s judgment of what is adequate credit growth? That could be rather important if the problem were one of insufficient growth in the economy.
Chris Leslie
That raises the question of the operation of the inflation target. If I draw a parallel between a leverage target and an inflation target, clearly the Chancellor has been setting out his inflation target. It has been missed on a number of occasions—quite a few months and quarters have gone by—so the interplay between the Chancellor and the Bank of England is critical here. I am more than happy to come back to the issue. My point in the new clause today is that we need to start seriously discussing how, from a UK perspective, we are going to deal with the issue of leverage from a home-grown point of view, rather than waiting for the European Union to come along with a set of arrangements which may or may not fit our circumstances.
Jacob Rees-Mogg
There are two points that occur on the hon. Gentleman’s target weighting. One is that it is very arbitrary. If the regulator could set it for each individual bank, that would give a very strong arbitrary power to the bank to meet that overall target. The second is that although people say that their assets are particularly good ones and better than others, that is exactly what they said in the crisis and it turned out not to be reliable.
Chris Leslie
I agree with the hon. Gentleman, but it would be invidious for us as politicians to try to delve into the specific analysis of bank-by-bank asset or liability, quality and the risk weighting of assets. That is why we have regulators and what their job should be, but it is important that as a body politic, so to speak, we make a judgment about the level of leverage that we should have in the economy as a whole. That is why I raise the issue today.
For us, tackling the leverage question is incredibly important. We should not wait for the European Union to decide these things for us. We sought in Committee to clarify this in part. Rather than put it in the “too difficult to handle” box, as the Government seem to be doing, we should try to move forward constructively. The approach that we have taken is on the amendment paper. First, it is necessary to prevent the banks from over-extending themselves beyond the point of safety. Ring-fencing does not do that. We think ring-fencing changes should go alongside capital requirements and leverage regulation.
Secondly, we have been hearing arguments recently about the leverage ratio as anathema to bank lending into the real economy. Sometimes it is characterised as one or the other. I do not necessarily agree that there is a seesaw trade-off between the two. Andrew Bailey at the Prudential Regulation Authority has recently made the particularly pertinent argument that capital can be lent onwards in any case, so it should not be a case of one or the other.
For the sake of clarity, in new clause 9 we looked to address this explicitly by framing a leverage target strategy for the system as a whole, which must be constructed in such a manner so as to maintain adequate credit availability to support a growing economy. It is important to recognise that we will always operate with a degree of leverage. That is part and parcel of the way our banking system works, and our constituents rightly want us to focus on getting the economy moving, while preventing excessive risk-taking. In the spirit of constructive engagement, we hope the amendment strikes the right balance.
It is sometimes argued that leverage should be a back-stop rather than a front stop. The argument about what is a back-stop and what is a front-stop can get rather theological. Andy Haldane makes the point in his famous “The Dog and the Frisbee” speech that leverage needs to be brought much further forward as a primary tool for the regulators, and that other capital and risk-weighting issues should be subordinated. The main point is that leverage should be recognised as a key dynamic in our economy and needs to be regulated in a way not dissimilar to the regulation of inflation.
For us, there are three essential elements: set a leverage target for the system as a whole, which is a task for the Government; measure that risk—the threats to whether loans are going to be repaid—more accurately by sector, to determine which sector needs more capital to make it safe if leverage is rising and which could be dealt with in a normal way; stress-test to back-test the pressures in those particular institutions to be clear that the choice of the leverage target is correct. The regulator should do that.
New clause 9 would also augment Bank of England independence in relation to operational decisions on monetary policy and take into account the need to supply credit to the wider economy. I am glad that the Building Societies Association and others support it.
Mr Redwood
I remind the House that I provide investment advice on world markets and world economies, but I am pleased to say that it has nothing to do with banking credit or banking leverage, so I feel quite entitled to comment in this important debate.
I welcome what I hope is a probing new clause from the Opposition. It allows us to discuss something that is at the heart of what regulators need to do to have a strong banking sector and economy and to have the comfort at night of knowing that we will not live through another dreadful crisis like the credit crunch of the previous decade. The new clause goes to the heart of the issue: what action should the Government and regulators take to try to ensure that large banks and other institutions advancing credit that can be a risk to the whole system are kept under sensible control, so that we can be pretty confident that, if something goes wrong or the world economy dips, they have the necessary money to pay the bills and deal with any losses that might arise?
If we look at the tragic history of the previous decade, we can see that the then banking regulator in the United Kingdom—I think that it has now admitted this—got it wrong both ways. It wanted the banks to have too little capital, cash and protection, and in the run-up to the credit crisis in 2008 it allowed the most enormous expansion of leverage, which previous generations of regulators had not permitted. Then, in the ensuing panic, when interest rates had to rise to tackle the problem of inflation, it lurched to wanting very high amounts of capital, but at the time the banks could not generate profit and so found that very difficult. That resulted in the previous Government’s decision, in two of the worst cases, that capital should be forthcoming from the state and taxpayers themselves. I think that we all agree that we do not want to go back around that course or to get to the position again where some Members of this House feel that the only option is for the state to provide taxpayer support for organisations that have been too leveraged.
New clause 9 suggests that it is possible to set a leverage ratio for the system as a whole, and it might be, and that might be desirable, and I look forward to the Minister’s response. Of course, the regulator already does that in a way because it sets individual target ratios or capital requirements for all the major banks in the system, so if we aggregate those we get to its view of the aggregate amount of leverage. As the hon. Member for Nottingham East (Chris Leslie) has rightly said, if that overall leverage were to be set for the system as a whole, the regulator would still need to interpret that bank by bank. Some banks would be super-prudent and some would be straining at the other end of the spectrum and might be under special measures with the regulator to try to get their balance sheets into shape.
My particular worry at the moment is that it is never easy managing the transition. We would all be delighted to wake up tomorrow and discover that all the banks are super-safe, but if the price of getting to that stage too quickly is no growth in the economy or, worse still, the onset of another recession because the banks cannot finance the recovery, that would be a bad idea. Many of us would like to see the banks get to better ratios by writing more profitable business and generating more legitimate and sensible levels of profit, rather than having the regulator run the risk of moving too quickly to demand that they have much better ratios. The banks would then have to achieve those better ratios by not writing any new business and by trying to get old loans back ever more quickly from businesses that might find it difficult to repay them. Some of those banks, not being very profitable, could not trade themselves out of the difficulties that they found themselves in.
We also need to be conscious of what is happening globally, because although we should not chase the rest of the world if it has a group of regulators that are being far too generous and wish to re-enact the boom-type crisis of the previous decade—I do not think that we are in that position any more; I think that the regulators of the world are all generally trying to be more cautious—we need to ensure that we do not do anything in Britain that is particularly penal. What we need in order to have a prosperous economy is banks with sufficient profit, reserves and capital to be able to finance a normal recovery. It is very unpopular in this country to speak up for banks making profits at the moment, or indeed at any time, but it is important that they generate reasonable working profits, because that is the best way to make them more solvent.
Mr Ruffley
Is my right hon. Friend as unconvinced as I am by the relatively arbitrary figure of 4% being preferable to 3% for the leverage ratio? Like him, I believe that, if there is going to be any tightening on capital adequacy or leverage, it should be done when the recovery is more surely under way, and 3% is preferable to the 4% recommended by the Vickers commission and the parliamentary commission.
Mr Redwood
I think that I agree with my hon. Friend. What I am suggesting is that I would like to get closer to 4% and further away from 3% by growth, and I think that that could be inferred in Labour’s new clause, because I noticed that the hon. Member for Nottingham East wisely did not pledge himself firmly to 4%. Although he might secretly want 4%, like the rest of us he is probably wise enough to know that, although it might be nice to have 4% in due course, to lurch straight to a target that some big banks could not meet might be very damaging to the economy.
Neil Parish (Tiverton and Honiton) (Con)
One of the problems at the moment, as I know from my constituency, is that some companies are still finding it difficult to get money from banks, so the higher the leverage requirement, the more the banks will say that they have to keep the capital and cannot lend it. I agree with my right hon. Friend entirely that we have to be very careful about how we move from 3% to 4%, because otherwise it is companies and growth that will suffer.
Mr Redwood
I think that we have wonderful agreement across the Chamber on this, which might hearten the Minister. We would be happier with 4% than with 3% in general terms, but we do not want to get there too quickly if that means a further jolt to expectations and confidence and further actions by banks to pull back loans, rather than financing the recovery that we clearly need from them.
Mr Love
One of the banking commission’s recommendations was that that should be devolved to the regulator to decide and that we should not set a target or a figure. The Government seem to be resisting that, and for the reasons that have been outlined in relation to growth and living standards. What does the right hon. Gentleman think about the proposal to give that to the regulator earlier than the Government suggest?
Mr Redwood
I think that a Government have to take responsibility for the big calls on economic policy. They can take very good advice from independent regulators and the Bank of England, and sensible Chancellors take good advice, but ultimately it is the Chancellor of the Exchequer and the Prime Minister of the day who have their names on all that, and the electorate will expect them to be responsible. I think that people believe in independent central banks and independent regulators up to the point where they get it wrong, and then they look to politicians to take the blame. We have just been through a period when the banking regulator, by its own admission, got it very visibly wrong.
Mr Redwood
It is important that we should have proper discussion and informed debate, taking the best advice, so that we can try to get things right for a change. We owe it to all our electors and the economy generally to try to get the matter right.
Time is not generous, so I will be brief. My worry is that, under the previous Labour Government and in the early days of the coalition, we were running a strange policy in which, on the one hand, the Bank of England was trying to depress the vehicle’s accelerator by creating a lot of extra money and saying, “We really need to get some of this money out there to do some good in the economy.” On the other hand, the banking regulator was depressing the vehicle’s brake, saying, “No, you can’t possibly spend that money to create more credit and do more things. The priority is for the banks to sit on the money to have better cash and capital ratios. They probably need to wind down their loan books, which we think are too big.” My observation is that if we try to drive a vehicle with one foot on the accelerator and one on the brake, the brake normally wins.
Mr Ruffley
As has been mentioned already, some in the Bank, including Sir Mervyn King, argued that insufficient lending is a consequence of insufficient capital. I put that to Mr Bailey a few days ago in the Treasury Committee. I asked him about the net new lending level now compared with when funding for lending began last August, and he said that it was flat. Is that not evidence for his proposition that we cannot have tighter adequacy requirements on capital and lots more new lending? The figures show that lending is flat.
Mr Redwood
Indeed. That point also shows that we need banks to be profitable—particularly RBS, which is still largely state owned. Until the bank is making profits, its capital ratios will not improve quickly enough and it will then not be in a position to lend the money that the Government would like it to. The taxpayer would be grateful if it could be more profitable, because our shares would be worth more, which would be in the general interest.
I conclude by making the same point to the Minister. Yes, I want us to get to stronger banks with tighter ratios, but I want us to get there through growth and growth in bank profits—particularly for HBOS and RBS, in which we have a large state stake and whose results have been disappointing for a number of years. If we can get to that happy position, we can have a bit of growth and some more profitability and then the regulator will have to have a sensible conversation with the banks; it will say that some of the money has to be put into cash and capital so that they are stronger. We will be the better for that.
Mr McFadden
I will not detain the Chamber for long; I just want to make a few points.
The argument is really about complexity versus simplicity in how banks are regulated. One of the points that my hon. Friend the Member for Nottingham East (Chris Leslie) is trying to bring out is the inadequacy of the over-complex Basel regulations, which have allowed banks to game the system and say they had hugely different capital ratios on similar classes of assets in different institutions. The truth is that the Basel system is so complex that it does not give confidence about the safety of our banks. That is why this debate about leverage is so important.
In all the debate about ring-fencing, separation and so on, what has perhaps been under-discussed is the fact that not enough attention has been paid to leverage—a basic measure of banks’ safety or resilience against future risks and very important in respect of banks’ ability to absorb losses. One of the features consistently pointed out, both to the Treasury Committee and the Parliamentary Commission on Banking Standards, was that in the run-up to the crisis banks were hugely over-leveraged. That meant that their capacity to absorb and deal with problems when they came was minimal.
Our banks still have very high gearing today. The banks lobby hard on the issue. I counsel caution on the basic trade-off that has been raised about lending and leverage. There are other ways for banks to improve their capital ratios than simply by reducing lending. They could, for example, look at the proportion that they give out in remuneration every year; that could make a difference to their capital ratios. Over the past decade or two, vast amounts of money have been paid out in remuneration that could have improved capital ratios without having any effect at all on lending. Let us not fall for the argument that we can either have banks that lend, or safe banks, but we cannot have both. It would be wrong of us to fall into that false dichotomy. We should aim for banks that are both safe and have the ability to lend.
Greg Clark
It is a pleasure to respond to this important debate. First, I should like to correct a grievous omission in my previous remarks. During my paean to the members of the parliamentary commission, I neglected to include my hon. Friend the Member for Wyre Forest (Mark Garnier), who was behind me and therefore was invisible to me. He has been in the Chamber throughout this debate and his contribution is no less sterling and distinguished than those of the other parliamentary commission members whom I did mention. I apologise.
The new clause requires the Treasury to set a leverage target for the
“overall leverage of the…financial system”.
I welcome what I think is the spirit of the new clause. Problems with risk weights clearly contributed to the financial crisis; the right hon. Member for Wolverhampton South East (Mr McFadden) made that point. Those problems must be addressed if risk weights are to have a place in the regulatory regime of the future.
I also share the concerns raised by the parliamentary commission about the importance of having a robust minimum leverage ratio required by the regulator. As my right hon. Friend the Member for Wokingham (Mr Redwood) said, there is clearly support among Members on both sides of the House for that notion. We have consistently argued for a binding minimum leverage ratio to be implemented internationally, to supplement the risk-weighting requirements.
As has been said, the Basel III standard of 3% will come into force in 2018, following an observation period beforehand and a final calibration of the leverage ratio in 2017. Of course, national supervisors must be equipped to respond to new risks as they emerge in banks and financial markets. The PRA, in this country, is empowered to ensure that banks’ risk models are appropriately conservative and, where necessary, to set higher capital requirements.
As every hon. Member will be aware, the PRA has recently announced that major UK banks need to set out and implement plans to improve their leverage ratios and so to migrate further towards the new Basel III standard even now. The FPC has already been given a number of directive powers, including a counter-cyclical capital buffer and the power to set time-varying sectoral capital requirements. The Government have also made clear their intention to give the FPC the power to vary through time the baseline leverage ratio requirement, always subject to its never being below the requirement determined by Basel III.
Let me address the new clause, in whose support the hon. Member for Nottingham East (Chris Leslie) spoke. The first thing to say is that it requires the Treasury to give the Bank of England a target for the overall leverage of the UK’s financial system; I think I understand the hon. Gentleman correctly when I see an allusion to the inflation target perhaps given to the Bank of England. I have to say, though, that that pulls in the opposite direction to the parliamentary commission’s recommendation, which calls for the FPC—in other words, the Bank of England—to be given the power to determine leverage ratios. In its first and final reports, it noted that
“the leverage ratio is a complex and technical decision best made by the regulator and it certainly should not be made by politicians.”
The new clause cuts across the views of the parliamentary commission, if delivering that recommendation were its intention.
Moreover, the new clause would require a target for the overall leverage of the UK’s financial system. Again, this is not quite the right approach. Banks should certainly be subject to individual leverage requirements to ensure that they have sufficient capital to absorb losses, but an average leverage ratio for the entire financial sector could serve to conceal the risks in particular institutions. It would seem perverse to require the Treasury to set a target for overall leverage and so create an onus on the FPC to allow some banks to remain highly leveraged as long as this is offset by smaller or more conservative institutions running with less leverage. A system-wide average, or net, leverage ratio might be of little value in tackling excesses of leverage, and it could be positively counter-productive.
Another feature of the new clause would be dangerous. The proposal for a target requires the FPC to pursue action to meet the target. It is suggested that the FPC take action to increase leverage in the system when it is less than the target level that the Government are required to set. I am not clear how or why the FPC would want to do that. The target approach seems to me to be wrong. Financial stability is not like price stability; it cannot be boiled down to a single, symmetrical target. As a recent Bank of England paper concluded:
“No single set of indicators can ever provide a perfect guide to systemic risks, or to the appropriate policy responses…Judgement will, therefore, play a material role in all FPC decisions and policy will not be mechanically tied to any specific set of indicators.”
We need to apply caution in any consideration of enshrining in law a system that focuses on one target for systematic financial stability. Goodhart’s law is relevant in these circumstances:
“When a measure becomes a target, it ceases to be a good measure.”
I therefore hope that on reflection the hon. Gentleman will withdraw his new clause.
Chris Leslie
I am grateful for the quality of the debate that has taken place in the short time we have had.
I am glad that we tabled this new clause on leverage, because otherwise we would not have had the opportunity to start to focus on the issue. I understand what the right hon. Member for Wokingham (Mr Redwood) said about getting the balance right and the care and caution that are needed as we move towards what we want, which is a better, safer level of leverage within the overall system. It is worth reiterating that we want to do this only to make sure that banks do not over-extend themselves and become so lopsided that when they topple over they are not able to absorb the losses should things take a turn for the worse.
I am particularly grateful for the contribution from my right hon. Friend the Member for Wolverhampton South East (Mr McFadden), who rightly pointed out that saying that we need action either on leverage or on getting lending going into the real economy does not represent opposite poles of the argument. It is not as clear as that. Some are arguing not only that the extra capital could be lent out but, as he said, that compensation ratios, as they are sometimes known—the remuneration levels within banks—could also be tackled. Given that we are the major financial centre worldwide, we should not just be leaving this to international regulators. We certainly should not be leaving it to the European Union completely to decide these things for us. We have a duty in the UK to make sure that we think these things through properly and spend much more time on them.
Mark Garnier
The hon. Gentleman proposes that the individual leverage ratios of the banks be published, but if that information were in the public domain it could have implications for a bank’s funding costs. If the regulator deems that a particular institution has a greater risk, and therefore looks at a lower leverage, that will clearly have implications for the business.
Chris Leslie
I would tend to err on the side of publication and transparency. It is long overdue that we have better insight into banks’ balance sheets and the quality of their assets generally.
If we are to have this architecture, it could be a useful dynamic to have a leverage target set by policy makers—by Government. I slightly take issue with the parliamentary commission on this. There is a systemic aspect that ought to rest in the hands of politicians. Ultimately, the buck stops with us and Parliament is sovereign; the arguments about that are well known. However, as the commission said, the operational decisions taken institution by institution have to be left to the regulator. It would be invidious for that to be in the hands of the Treasury.
Mr Redwood
RBS, against the wishes of some of us, had been allowed to grow to a colossal size and to gear excessively. At the point when it got into trouble, it had a balance sheet of £2.2 trillion —almost four times the tax revenue of the state—and if it lost 2% of its asset value it lost the equivalent of the defence budget for a whole year. Is not that of interest to those conducting government?
Chris Leslie
There is a rare consensus across the Chamber in some respects. We have to agree that the UK economy, whether it is mid-sized or not, is potentially adversely affected by our vast financial sector.
I offered new clause 9 in the spirit of consensus to try to get some engagement from the Government. I am disappointed by the Minister’s attitude of saying, “We’ll just leave this and do it internationally. We’ll come to it in 2018 through the normal conveyor belt.” The Government must address this issue far more constructively and engage with it far more seriously, because it really does matter. We need action on leverage and it is important that we put on record the essential characteristics that it could and should have within our economy as a whole. I am afraid that I therefore wish to test the view of the House.
Question put, That the clause be read a Second time.
Mr Deputy Speaker (Mr Lindsay Hoyle)
With this it will be convenient to discuss the following:
New clause 3—Professional standards—
‘After section 65 of FSMA 2000 insert—
“65A Professional Standards
(1) The regulator will raise standards of professionalism in financial services by mandating a licensing regime based on training and competence. This must—
(a) apply to all approved persons exercising controlled functions, regardless of financial sector;
(b) specify minimum thresholds of competence including integrity, professional qualifications, continuous professional development and adherence to a recognised code of conduct and revised Banking Standards Rules;
(c) make provisions in connection with—
(i) the granting of a licence;
(ii) the refusal of a licence;
(iii) the withdrawal of a licence; and
(iv) the revalidation of a licensed person of a prescribed description whenever the appropriate regulator sees fit, either as a condition of the person continuing to hold a licence or of the person’s licence being restored;
(d) be evidenced by individuals holding an annual validation of competence;
(e) include specific provision for a Senior Persons Regime in relation to activities involving the exercise of a significant influence over a controlled function under section 59 of the Act.
(2) In section 59, remove “authorised” and insert “licensed” throughout the section.”.’.
New clause 4—Duty of Care—
‘At all times when carrying out core activities a ring-fenced body shall—
(a) be subject to a fiduciary duty towards its customers in the operation of core services; and
(b) be subject to a duty of care towards it customers across the financial services sector.’.
New clause 5—Remuneration reform—
‘Within six months of Royal Assent of this Act the Chancellor of the Exchequer shall, in consultation with the appropriate regulation, lay before Parliament proposals on reform of remuneration at UK financial institutions which shall include incentives to take account of the performance and stability of a UK financial institution over a five- to 10-year period.’.
New clause 7—Protection for whistleblowers—
‘(1) After section 43B(f) of the Employment Rights Act 1996 there is inserted—
“(g) that a breach of regulated activities under FSMA 2000 or the Financial Services Act 2012 has been committed, is being committed, or is likely to be committed.”.
(2) After section 43B(5) of the Employment Rights Act 1996 there is inserted—
“The chairman of the board of directors of any relevant UK financial institution will be informed of any protected disclosure made by a worker which qualifies under the terms of Part IVA of this Act.”.’.
New clause 11—Reckless misconduct in the management of a bank—
‘(1) Within the three months of Royal Assent of this Act the Government shall publish proposals for the creation of a new criminal offence of reckless misconduct in the management of a bank.
(2) The new offence in subsection (2) should cover those approved persons who are licensed under a Senior Persons Regime.
(3) The Government shall bring forward further proposals within three months of Royal Assent of this Act for the civil recovery of monies obtained by individuals who have been found guilty of reckless misconduct in the management of a bank.’.
New clause 13—Financial Services Crime Unit—
‘(1) The Treasury shall conduct a review into the creation of a Financial Services Crime Unit and consult on its proposals for the Financial Services Crime Unit’s powers and responsibilities.
(2) The Treasury shall lay its proposals before both Houses of Parliament no later than six months after this Act comes into force.’.
Stephen Barclay
In speaking to new clause 2, which I will not press to a vote, I wish to follow the line of argument pursued by my right hon. Friend the Member for Wokingham (Mr Redwood) on new clause 9. He drew attention to the tension created by building up capital while also lending more and used the analogy of driving with one foot on the accelerator and the other on the brake. If I may, I will take a step outside the car. With new clause 2, I wish to draw the House’s attention to a similar, I am sure unintended tension. The Government are taking a positive step forward, because in paragraphs 2.13 and 2.14 of their response to the parliamentary commission’s report, they make the welcome announcement that they accept the premise of reversing the burden of proof. In doing so, however, they will adopt a measure suggested in paragraphs 1170 and 1171 of the commission’s report that will create a potential handicap. A new condition will be attached to using that burden of proof, whereby the regulator must have concluded a successful enforcement action against the firm prior to doing so.
I do not think there can be any doubt about the merits of reversing the burden of proof. It is clear that if the regulator is required to sift through reams of e-mails looking for evidence to incriminate a senior banker, it will be a time-consuming and costly exercise. It is also highly likely that it will fail, because senior executives are not so stupid as to write boastful and wilful e-mails such as we saw from some of the LIBOR traders, who bragged of having their bottles of Bolly. Most senior executives are wise to the risks of e-mails and would not fall into such a trap. It is proportionate and reasonable to argue that senior executives who say that their hands-on leadership is sufficient to justify very high individual bonuses should also, on the other side of the coin, be able to demonstrate that they have personally acted reasonably.
The Government’s announcement that they will reverse the burden of proof is extremely welcome. However, the acceptance of paragraph 1171 of the Commission’s report could lead to a real impediment. If we open the door to personal enforcement, why would a chief executive wish to settle on behalf of their firm? We are trying to make it easier for the regulator to focus in a time-efficient and cost-effective manner on the individuals who should be held responsible, but that will be impeded by the additional requirement for enforcement to be concluded against the firm. The senior leadership whom we want to target will be incentivised to drag out proceedings and impede any settlement with the firm. I do not believe that is the Government’s intention, but I wished to draw the Minister’s attention to it so that the issue could be discussed in more detail and tackled in the other place.
I do not share the confidence of some colleagues who have spoken about the ability of criminal sanctions to operate effectively. They are a welcome tool to have, and many of our constituents would like the golden handcuffs to be replaced with the prison variety. Indeed, the images on US television of white-collar arrests and convictions have a powerful deterrent effect. My concern, however, is that if we look at the individual fines and enforcement to date, we see that the regulator has struggled to reach the evidential level required to prosecute individuals successfully. Now we are suggesting that it will have to meet a higher standard of proof to secure criminal convictions. It is a bit like asking a hurdler who has just failed at one level to jump over a much higher hurdle.
The reversal of the burden of proof is one aspect of what we need, and the deterrent effect of criminal sanctions is another, because it brings with it the power of the headline. The question is, will we fall into the trap that we so often fall into in this House of passing legislation that sounds tough but proves difficult to use in practice? My fear is that the standard of proof required of the regulator to deliver a criminal prosecution will make it a tool that is rarely used.
We therefore need to consider how we can target individuals, not firms, because that will drive the culture of firms. Currently, where there is wrongdoing, a firm will settle quickly and get a 30% discount. The more junior staff—the heads of the divisions responsible—are quickly exited, and the senior staff wilfully claim blindness, because the most controversial briefings are usually done orally. Reversing the burden of proof will address part of the ill, but through the new clause I wish to draw attention to the limitations of fines on firms, which at the end of the day penalise shareholders and pension funds. Our constituents pay twice—first for the bail-out, and then through the impact on their shareholding.
Cathy Jamieson (Kilmarnock and Loudoun) (Lab/Co-op)
It is a pleasure to speak to this group of new clauses, and I thank members of the banking commission—a number of whom are with us today—for their thoughtful work, and for the time and energy they put into ensuring that we had a series of recommendations, which have given us the opportunity to table a number of amendments in Committee and on Report.
The Opposition tabled amendments in Committee to reflect the commission’s recommendations, but for various reasons—some of which I could understand and some of which I could not—the Government did not see fit to accept them. There was some disappointment when we got the opportunity to scrutinise the original Bill that it was so thin—to be fair, the Government recognised that in their response published today, but we must get to annex B2 to find that acknowledgment. At times it would have been good to have a clearer indication of the Government’s direction of travel, and perhaps some of the details to discuss in Committee. As is often said, however, we are where we are, and we are now discussing the Bill in the context of the report published today.
No doubt all Members have had the opportunity to read the Government’s report, which provides a slightly more detailed response to the report by the Parliamentary Commission on Banking Standards. There are, however, some areas where clarification or further information from the Minister would be helpful. The new clauses were tabled before we were aware of which provisions the Government intended to accept, and we may have tabled a number of them differently—or not at all—had we known their intentions. Nevertheless, there are a couple of issues that we believe are not covered by the report and the Government’s response.
To put my remarks in context, the areas where quick implementation can be taken forward have been highlighted and the issues that require more detailed work have been identified. Where the Government do not agree with the commission has also identified. I will come to some specific issues in the new clauses, but it is worth noting that the Government now accept the need for change and action in a number of areas in which the Opposition have consistently made the case on Second Reading, in Committee and today.
The Government have announced plans to implement measures to improve individual accountability, and some of our new clauses relate to that in the overall context of conduct and remuneration. The Government have mentioned the tough new senior persons regime governing the behaviour of senior bank staff, outlined a willingness to take forward work on new banking standards rules to promote higher standards for bank staff, and—this was controversial in some quarters—we are pleased that they have at last decided to introduce a new criminal offence for reckless misconduct for senior bankers. We have heard from the hon. Member for North East Cambridgeshire (Stephen Barclay) about reversing the burden of proof so that bank bosses are held accountable for breaches within their areas of responsibility. The Government have made further commitments to work with regulators to implement the commission’s proposals on pay, allowing bonuses to be deferred for up to 10 years, and enabling 100% clawback of bonuses where banks receive state aid. All those areas are relevant to our discussion.
Some of the proposed reforms are either already enshrined in EU legislation or are part of forthcoming EU legislation, in some cases specifically relating to bonuses capped to salaries and bonus limits on bailed-out banks. Therefore, the Government would have had to consider the issue anyway, notwithstanding the fact that the Opposition have been pressing them to do so.
On new clause 2, the hon. Member for North East Cambridgeshire spoke eloquently about the culture involved. We can debate legislation and change as many regulations as we like, but if we do not get into the heads of those who make decisions and create that culture, we will not change enough to ensure that past scenarios do not happen in the future. The hon. Gentleman said that he did not intend to push the new clause to the vote. I had assumed that perhaps the Government would have agreed to it and that he would have been acclaimed as the favoured son who had tabled a new clause that the Government accepted—and therefore his record would have been better than mine; throughout the Bill’s time in Committee, I managed to get only one word changed, much to the chagrin of my hon. Friend the Member for Nottingham East (Chris Leslie).
New clause 3 was inspired by the commission, and builds on an amendment that was tabled in Committee and recommendations in the commission’s final report. It would introduce a licensing regime for
“all approved persons exercising controlled functions,”
to ensure that such persons have adequate standards of competence and integrity. Again, that was a feature of the discussion in Committee, and we were keen for reforms to be brought forward to ensure that future banking misconduct is prevented, whether that is fixing LIBOR rates or mis-selling financial products. In Committee we argued that similar regimes have applied to other professionals, and there is no reason in principle why that should not be the case in the banking and financial services sector. Just as with lawyers, doctors or other professionals, misconduct in banking and financial services causes potential injury, injustice or financial loss. In the financial sector, the consequences and costs of bad behaviour cost billions and harm the whole of society, so we believe it right to introduce safeguards similar to those in other professions.
We tabled new clause 3 because we wanted to introduce our senior persons regime and revised set of banking standards rules, as recommended by the Parliamentary Commission on Banking Standards, and it is good that the Government intend to take that forward. In his response, will the Minister provide a further flavour of how he intends to do that and give some detail, particularly on the scope of the legislation he proposes to introduce?
Why did the Government not feel able to introduce such a measure at an earlier stage in Committee? We would have welcomed the opportunity to scrutinise, discuss and probe the Bill in slightly more detail then. Will everything now be done in the other place, and will there be time for consideration in this Chamber? In his opening remarks I think the Minister gave an assurance that there would be ample opportunity to discuss those issues in the Chamber, but it is worth noting that when the Bill passes into statute as a result of all the work done to it, it will be very different to the one initially introduced, and it is right and proper that we have the opportunity to scrutinise it at every stage.
The Minister will be familiar with the amendment that we tabled in Committee on the duty of care, and we have now tabled new clause 4, which would introduce duties of care for ring-fenced bodies—first, a fiduciary duty in relation to the carrying out of core services, and secondly a more general duty of care across the financial services sector. As I outlined in Committee, we bring this forward because we feel that it would send an important signal to the general public, who still have some way to go before trust is restored in the banking and financial services sector.
Mr Love
The current regime for the regulator is “treating customers fairly”, which is exactly what the banks did not do in the PPI scandal. Does my hon. Friend agree that we need something stronger, and that a duty of care is a step in the right direction, signalling that we need to do something about the scandals that have happened in the past?
Cathy Jamieson
My hon. Friend is right and he speaks with great experience, both because of the work he has done in this House and on the banking commission. He is right to say that the scandal of the PPI is exactly why today’s consumers want further assurances that the banking industry and the financial services sector are not simply about using consumers’ possible lack of knowledge or understanding of the system to turn a quick profit with no thought to the longer term, either for the individuals or for the wider financial sector. That is why we have tabled the new clause.
I suspect that the Minister may say much the same to me this evening as he said in Committee, as he felt that the amendment was unnecessary. Nor was it drafted in the most technically perfect way. However, it would be helpful if he were able to confirm that at the least the idea of a fiduciary duty—a duty of care—will be significant. I feel minded to test the will of the House on this new clause.
Mr Ruffley
On a point of information, what fiduciary duties, other than a duty of care, does the hon. Lady envisage?
Cathy Jamieson
I could go back through some of the issues that were raised in Committee. As I outlined, some of the duties that would be expected are those defined and accepted in common law already. What we want to do is try to put them in legislation to give a clear signal to consumers that things have changed and to try to rebuild trust in the banking system. I do not think that the customers of the banks think that it is unreasonable to have something that says that the banks should act in consumers’ interests when looking after their money.
New clause 5 reflects another amendment that we tabled in Committee. It is important to have assurances from the Government in the absence of knowing their intentions about remuneration reform. We tabled new clause 5 because we want the banks to take account of performance and stability over a five to 10-year period. That would reduce unnecessary risk-taking, force bankers to take a longer-term view, and end rewards for short-term profit. We tabled an amendment on this in Committee, and the parliamentary commission took a similar view in its report, which states:
“The Commission recommends that the new Remuneration Code include a new power for the regulators to require that a substantial part of remuneration be deferred for up to 10 years, where it is necessary for effective long-term risk management.”
That was raised by the Treasury Committee in January, when the Bank of England director Andy Haldane called for various reforms.
Stephen Barclay
Does the hon. Lady not recognise that the difficulty with catch-all provisions, such as that for a 10-year period, is that they capture the good as much as the bad? New clause 2 would create targeted regulation to focus on those who have done wrong, instead of a catch-all provision that captures everyone.
Cathy Jamieson
I might have been tempted to support new clause 2 had the hon. Gentleman decided to put it to the vote, and I look forward with interest to hearing what the Minister has to say. I understand the issues relating to length of time and the dangers of a catch-all provision but, in the aftermath of the banking crisis, the legal and regulatory structures, and the further changes that the Government promise to introduce, we need to ensure that the banking culture really changes. New clause 5 attempts to ensure that banks think for themselves about how to ensure that their performance is sustainable. Now that the Government have moved to an acceptance of the broad principle, the devil will be in the detail of what they do next. Perhaps the Minister will have more to say on that.
Mark Garnier
The shadow Minister raises the 10-year deferral of bonuses recommended by the Parliamentary Commission on Banking Standards. We made that recommendation so that we could at least see the business of a bank through a business cycle, as it can take 10 years to expose irregularities. One problem occurs that when people in receipt of such bonuses—there are already some deferred bonuses, in particular in UBS—want to move to another institution, they are bought out of their held-back bonus. Does the hon. Lady have any proposals to deal with that?
Cathy Jamieson
The hon. Gentleman makes an extremely good point. It is perhaps worth remembering that not only did the Parliamentary Commission on Banking Standards make that recommendation, but Andy Haldane supported it when he came before the Treasury Committee. I am sure that the Minister will have something to say on that when he sets out his next set of actions.
New clause 7 relates to protection for whistleblowers. It is important to ensure that workers are protected if they make a disclosure in the “reasonable belief” that misconduct has occurred, is occurring or could occur. The new clause would amend the Employment Rights Act 1996 and impose a duty on managers to inform the bank chairman—or chairwoman, if that is the case—of any report of wrongdoing that qualifies as a “protected disclosure”. This is an updated version of a clause tabled in Committee, and reflects the final report of the parliamentary commission, which in paragraph 788 states:
“A non-executive board member—preferably the Chairman—should be given specific responsibility under the Senior Persons Regime for the effective operation of the firm’s whistleblowing regime. That Board member must be satisfied that there are robust and effective whistleblowing procedures in place and that complaints are dealt with and escalated appropriately. It should be his or her personal responsibility to see that they are.”
In new clause 7 we are attempting to trigger a cultural change in the financial services sector. There is no doubt that a bank employee would wrestle with their conscience before deciding to break ranks. If an honest trader suspects wrongdoing and is considering informing the authorities, there must be protections to mitigate his or her fear of losing their job.
The LIBOR scandal illustrates the importance of making it easier to report wrongdoing. At that time there was a quite a lot of speculation in the press and elsewhere about the accuracy of LIBOR, yet nobody came forward with the evidence. New clause 7 seeks to bolster the maintenance of law and order—I think everyone would generally agree with that—and would make it easier for the regulators and the banks’ compliance teams to do their jobs.
I looked closely at the Government’s response to the commission today, which says:
“The Government recognises the important role that whistleblowing can play in exposing wrongdoing”.
It continues:
“BIS is publishing a ‘call for evidence’ to establish a strong evidence base to help Government better understand the operation of the whistleblowing framework in today’s employment environment”.
It seems that the Government are now linking whistleblowing in the financial services sector with the wider review. We need to be careful about how a code of conduct, support for regulators and the role of regulators—including their interaction with employment tribunals, which is how the report couches this issue in context—are dealt with. Will the Minister say in his response when he anticipates the review being completed and what legislative vehicle would be proposed to implement any recommendations? It was not immediately apparent to me on reading the report that that had been established or thought through. Does he agree that any delay in dealing with the issue would risk putting that change out of sync with some of the other important changes that will be made to banking and the banking culture?
David Rutley (Macclesfield) (Con)
I am following the hon. Lady’s argument with interest. Proposed new section 43B(g) of the Employment Rights Act 1996 refers to where
“a breach of regulated activities under FSMA 2000…has been committed…or is likely to be committed.”
So that we can understand the new clause better, how would she determine whether something was “likely” to be committed?
Cathy Jamieson
The hon. Gentleman makes a useful and probing point—I wish I had had the opportunity to probe the Government’s proposals in the same way. The point is to look at patterns of behaviour and conduct. The important thing is that this change or anything that the Government introduce should be robust and should stack up. That is why I was particularly keen to know how the Minister sees this issue being taken forward. However, I recognise that there is a wider context, so if he could respond by giving me some assurances on this issue, I would probably be tempted not to press new clause 7 to a vote.
Let me briefly mention new clause 11, which deals with criminal sanctions. New clause 11 was also inspired by the work of the Banking Commission. It would require the Government to bring forward proposals for the new offence of reckless misconduct in the management of a bank covering the people licensed under the senior persons regime and would seek civil recovery of money from people found guilty of the offence. Although that might be controversial in some areas, it is important. I welcome the fact that the Government now seem to be moving on this, and I await the detail with interest. It is vital that bankers are held to account for their actions. That is important not just for any action after a future crisis, but as a deterrent, should any bank executives be tempted to take unnecessary or reckless risks.
Richard Fuller
I do not wish at this moment to be unduly partisan, but could the hon. Lady advise us on the evolution of the Opposition’s thinking? Was the imposition of criminal sanctions for the reckless management of banks discussed in the previous Government?
Cathy Jamieson
As I am sure the hon. Gentleman is aware, I was not in this place or, indeed, a member of the previous Government. [Interruption.] I hear someone saying “Shame”. I do, however, think it would be appropriate to look at the circumstances in which we are operating at present. In the same way as the hon. Gentleman did not wish to be partisan, I will resist the temptation to make an incredibly partisan response. Instead, I simply say it is important that the Government look at this. I welcome the fact that they seem to be willing to move on this, and the parliamentary commission was very clear that:
“It is inappropriate that those found guilty of criminal recklessness should continue to benefit from remuneration obtained as a consequence of the reckless behaviour.”
That statement sits in the context of the issue of being able to claw back.
Mr Love
This recommendation emerged from an all-party commission, with all parties supporting it. It is important to remember that it has the effect of signalling that we treat so seriously the misdemeanours that have occurred in the banking sector that we deem that those found guilty should face a criminal sanction.
Cathy Jamieson
Again, my hon. Friend makes an important point that this is an all-party stance and that everyone on the banking commission took this issue seriously.
It is worth remembering that in response to a question from the Leader of the Opposition last month, the Prime Minister told the House that he would use this Bill to implement the report of the parliamentary commission. The Leader of the Opposition asked:
“Following the Parliamentary Commission on Banking, can the Prime Minister confirm that he supports its important recommendations on bonuses and criminal penalties, and that he will use the banking Bill to implement them?”
The Prime Minister responded:
“Yes, I do support both those measures...Penalising, including with criminal penalties against bankers who behave irresponsibly— I say yes. Also, making sure that for banks in receipt of taxpayers’ money we can claw back and have a ban on bonuses—I say yes too.”
The Leader of the Opposition then asked a further question, to which the Prime Minister replied:
“We will be using that Bill to take these important steps.” —[Official Report, 19 June 2013; Vol. 564, c. 883.]
I hoped the Minister would have been able to bring forward appropriate amendments or new clauses—or whatever is needed—at this stage, rather than leaving that to elsewhere. I hope he will be able to give us some further information on how the work will be progressed and when he now expects to give us more detail.
New clause 13 relates to the financial services crime unit in the Serious Fraud Office. We raised this issue in Committee, and my hon. Friend the Member for Nottingham East gave an eloquent description of some of the areas that an FSCU would be able to address. This new clause would require the Treasury to report on the establishment of the FSCU and to do so within six months of the Act coming into force.
I fear the Minister might sigh and think, “Here go the Opposition once again, asking for another report to be produced.” Before he says that or any Member seeks to intervene to make that point, I will say that the reason we are asking for these reports to be produced is to ensure that progress is made and that things do not just gather dust on a shelf somewhere.
We know we have to look at the resources available to tackle white collar crime. Financial products are becoming ever more complex, and they are being traded faster, and increased resources could enable specialist police officers to develop their expertise. There are huge financial incentives in looking at developing this, too. It is worth remembering that fraud costs Britain about £73 billion a year, according to the Home Office’s National Fraud Authority. As my hon. Friend the Member for Nottingham East recalled in Committee, Andrew Bailey, the PRA chief executive, said it was “more than odd” that bank directors had not faced formal charges over the events leading up to the crisis. The Serious Fraud Office has a bit of a mixed record on tackling the high-profile cases. The Home Secretary was forced to perform a bit of a U-turn on her plans to abolish the SFO. It is clear that the SFO needs to be improved. The LIBOR scandal again shows that misconduct in financial services can have ramifications for traders, for industry, for shareholders, for the reputation of the City and, indeed, for criminal law.
Stephen Barclay
I seek to understand the scope of new clause 13 and the financial crime unit. Would it have taken criminal sanctions against the auditors of RBS, who so failed that they required the then permanent secretary of the Treasury to seek a letter of direction?
Cathy Jamieson
I am sure the hon. Gentleman will not be surprised to learn that I am not going to go into the detail of that case. He has had a career in the banking sector dealing with such issues, and he will be as aware as I am that looking at one case in isolation is sometimes not the best way to appreciate the overall picture. The overall picture is what I am interested in, and why I specifically mentioned LIBOR, because it is already a criminal offence to attempt to fix that rate. We need to seek to ensure that the SFO has the resources necessary to tackle this and to prevent any further scandals.
We have tabled new clause 13 to give Parliament a chance, once again, further down the line to discuss the creation of a new agency, and we hope it would send a firm message to those tempted to engage in criminal conduct. I hope that the Minister may be able to say something more on that in his response. He did not seem to be persuaded in Committee of the need for a new unit or even a subdivision. My recollection is that he took that view, “Its all fraud and there is no need to have a specific unit or part of an organisation dealing with it.”
I think I have covered a number of issues relating to these proposals. Once again, it is important to put on the record the fact that although we have had the opportunity to raise some of these issues in Committee and this evening, it is unfortunate that on Report we are not going to be able to scrutinise the detail of some of the new clauses—it is fair for us to assume that they might have been tabled at this stage. I seek the Minister’s further reassurance that we are going to get the important detail of how he intends to proceed, that we will see as much as is possible of the draft new clauses and legislation as things are taken forward, and that we will have an appropriate opportunity to discuss all that further in this place.
Richard Fuller
I am very grateful for the opportunity to catch your eye, Madam Deputy Speaker. I wish to discuss the proposals in this group, particularly new clauses 11 and 2. I am not a member of the Treasury Committee, I was not a member of the Parliamentary Commission on Banking Standards and I was not even on the Public Bill Committee, so I hope that other hon. Members will permit me to make a few perhaps less-informed commentaries about these proposals on conduct and remuneration, and the issues they raise, and perhaps come at this from a different perspective.
May I start by thanking the commission for its work on this issue and, in particular, my hon. Friend the Member for Wyre Forest (Mark Garnier), who made an extraordinarily strong contribution? Collectively, they have a much greater claim than Goldman Sachs to have been doing God’s work on financial services. I thank the Government and congratulate them on their speedy response to the recommendations. I also thank the Minister for allowing us to see the document ahead of today’s debate.
I remember the evening when the membership of the commission was established. It was a late evening, and quite warm. It might have been 10.30 pm, 11 pm or even later and hon. Members were keen to get back to their duties in responding to their constituents. I got up to speak with some trepidation, as hon. Members were hoping that the membership would go through on the nod, to make the point that for my constituents in Bedford and Kempston the commission would fail in its duty if, as a result of its actions, nobody went to jail. It is in that spirit that I want to comment on the new clauses today.
Richard Fuller
I am grateful for that intervention. A lot in the commission’s recommendations reflects the seriousness with which it considered that point, and rightly so. In the intervening 12 months, I have dealt with constituents whose businesses have been put at risk because of the fraud of interest rate swap mis-selling and whose lives have been rent asunder by payment protection insurance mis-selling, and the Government have also taken action on the fiddling and fixing of LIBOR. Beyond that, some of us have been dealing with regulatory failures on Equitable Life. My view is that jail for such bankers and for those responsible is the only fair outcome for the victims of those scams. Despite the intervention from the hon. Member for Edmonton (Mr Love), I must still ask where justice is to be found for the victims of those crimes in the recommendations and in the amendments tabled today.
Banking is full of honest and decent men and women. As my hon. Friend the Member for North East Cambridgeshire (Stephen Barclay) said, one of the attractions of new clause 2 is that it focuses like a laser beam on the individuals who are responsible and culpable. If we fail to do that and those people do not go to jail, where is the justice for all the other people who work in financial services honestly on behalf of their clients every day?
It is not a habit of this House to consider retrospective legislation, but I want to mention that in a minute. First, let me ask the Minister a couple of questions. In the senior persons regime and the actions that would be covered by new clause 11, the focus is on named individuals at the top. As we saw in the interest rate swaps, a lot of the decisions made by the senior ranks at the banks were translated into budgets and business plans and transferred down through the hierarchy of the banks. Perhaps the Minister, when he considers the issue of conduct, could answer the question of how those extensions beyond the senior persons regime will be handled.
Mark Garnier
I am grateful to my hon. Friend for his comments about my contribution to the Parliamentary Commission on Banking Standards. He raises a number of points and as the chairman of the sub-panel that considered below board level corporate governance I can say to him that the management structures of banks are so fiendishly complex that there is little way that the senior managers of banks can translate their wishes all the way down to the bottom. Other evidence gave reasons why the senior management in banks can effectively set up what amounts to an accountability firewall, thereby putting wilful ignorance between them and the activities that go on in the front line and absolving themselves from any responsibility for any misconduct at the bottom end of the bank. That is a very serious issue.
Richard Fuller
I am grateful for that intervention, but I do not want to attempt to get into the debate that the commission has considered thoroughly and much more knowledgably than I would be able to do.
The House does not frequently indulge in passing retrospective legislation, but if the senior persons regime is appropriate, is there merit in applying it retrospectively, if only in the form of an exercise through which to judge the conduct of those involved in financial services—in the banks and elsewhere? Whether that took the form of a self-audit conducted by the financial institutions themselves, or further work for the banking commission, to the extent to which that would be feasible, it would be welcome.
Stephen Barclay
Does my hon. Friend share my incredulity that when David Strachan conducted his review at the Financial Services Authority following the Legal and General case and brought forward his recommendations for a light-touch enforcement regime, the vice-chair of the FSA was Sir James Crosby, who is one of the three figures who are especially criticised in the banking commission’s report? We have a multi-layered, light-touch enforcement regime that often creates a disincentive to the regulator—this is why market abuse often involves criminal sanctions, not civil sanctions. One of the people criticised in the banking commission report actually designed the system that applies to the regulator.
Richard Fuller
I am appreciative of that intervention, which adds not only to my body of knowledge, but to the commonly held disgust that, following all these efforts involving the best minds we can put in place, no one is going to jail. In the absence of anyone going to jail, we have gone through all the fraud, all the mis-structured, light-touch regulation and all the mis-positioning of responsibilities without a single person being truly accountable. If there is a point on which I disagree with my hon. Friend, which I rarely do, it is that he said in his speech that financial penalties are likely to be more successful. He might have a point in saying that there will be more successful prosecutions, but the loss of one’s liberty cannot be put in a discounted cash flow—there cannot be a beta high enough. If we want to change behaviour, we have to show that people will go to jail and lose their liberty. If, having gone through the worst financial recession that we have experienced in our lifetimes, not a single person goes to jail as a result of all our work, I do not care that there is a cross-party consensus because, in my view, this is failing the people.
Jonathan Edwards
To what extent has the hon. Gentleman been influenced by events in Iceland, where the bankers were all purged? They were jailed, as were some very senior politicians, including the then Prime Minister.
Richard Fuller
I must admit that I am not particularly familiar with Iceland—certainly not as familiar as the hon. Gentleman is—but he makes an important contribution. Other regimes look at things differently, and are far stricter than we are. Normally, we would look at how United States regulations dealt with some of these things. In the past, they have been more successful than they have been recently as regards criminal prosecutions in financial services. Many people in the United States were held criminally responsible for their actions in the savings and loans scandal; the same has not happened in this financial crisis.
I respect the work of the commission, and I am nowhere near as smart as it is on these issues, but I have to say that no one has gone to jail, and that is not good enough.
Mr Love
I will comment on the commission’s thought processes on some of the issues that the hon. Gentleman mentioned. He will remember, as we all do, the evening on which we set up a special parliamentary vehicle in the wake of the LIBOR rate-rigging scandal. Since 2008, there have been a variety of critical events, including the credit crunch and the recession. All that led to a catastrophic decline in the reputation of the financial services sector. Trust in bankers sank to an all-time low, and frankly LIBOR was the last straw. This was truly shocking behaviour on an unprecedented scale. Something had to be done, and the focus was very much on our terms of reference on standards and culture.
As a result, the commission had to answer some tough questions, and the hon. Member for Bedford (Richard Fuller) has posed some of them: why had so few bankers been held to account for their failings? Why had it appeared that bankers pocketed the gains, but passed on the losses to the taxpayer? Why were customers who should have been treated fairly treated in the exact opposite way—a point that my hon. Friend the Member for Kilmarnock and Loudoun (Cathy Jamieson) raised? We tried to answer those questions through three themes that came out in our report. The first theme is individual responsibility.
When all the head bankers came before us, we were genuinely shocked to hear that they denied any responsibility for what happened in their banks. Whether it was ignorance of the serious failings happening under their noses, or because there was collective decision making, the result was the same: no one could be held to account. That, we discovered, was the result of the failure of the approved persons regime, which did not attribute responsibilities to senior staff, who, as a result, could not be held to account.
Two steps are proposed to try to address that problem. First, we have already mentioned the new senior persons regime, designed to ensure that the most important responsibilities are assigned to specific individuals, who will more easily be held to account for them. Secondly, for a much wider group—not every employee, but those who could do serious harm to the bank, or its customers, due to their customer-facing position—we propose a new licensing regime, with a set of banking standard rules that enable them to be held to account.
However, for people to be held to account, we need more effective sanctions, and that is the second theme of the commission’s report. Identification of those responsible under the new regime will provide a stronger basis for the regulator to enforce existing civil penalties, such as fines, restrictions and bans. One of the great difficulties was assigning responsibility; we hope that individual responsibility will address that.
Given the seriousness of the wrongdoings—an issue mentioned in earlier contributions—the commission is recommending two new, far-reaching powers. New clause 2 does not address this point, but under certain conditions, the regulator should be able to impose a full range of civil sanctions, unless the person can demonstrate that reasonable steps were taken to prevent or mitigate the failing. In effect, that does what new clause 2 suggests: it reverses the burden of proof, but only under certain conditions.
Stephen Barclay
In essence, the hon. Gentleman is describing the purpose of new clause 2. Earlier, I alluded to the fact that there is a condition that militates against the effectiveness of the new clause: the tool can be used only if there is a successful prosecution, which gets in the way. As much as I agree with my hon. Friend the Member for Bedford (Richard Fuller), does the hon. Member for Edmonton (Mr Love) agree that we need to be careful about changing the law retrospectively, particularly on custodial sentences? One of the issues that we are addressing today is how we get it right for the future, and what the sanctions should be.
Mr Love
Personally, I oppose retrospective legislation. It was not considered by the commission, which does not make any recommendations on it. I suspect, however, that none of its members would be in favour of addressing these issues in that way.
The other change is the much publicised criminal offence of reckless misconduct in the management of a bank, which normally carries, as has been suggested, a custodial sentence. Importantly, we have laid down preconditions before a charge of that nature can be brought. There must be a cost to the taxpayer—the bank has turned to the taxpayer to bail it out; or there are consequences for the financial system—stability is critical, and anything that destabilises the system should be subject to a criminal sanction; or there is serious harm to customers. We think that we have framed a big change in the law. Bankers continually ask why they are singled out as the only commercial group that can be charged in that way. It is a delicate balance, and I hope that the Government will look seriously at what we are trying to do.
The third area I want to touch on is remuneration and incentives. The reality is that rewards have been huge, and still are huge for a more limited supply of senior bankers. That incentivises excessive risk taking and, occasionally, misconduct. The commission concluded that risk and reward are still misaligned, particularly when making pay awards over a short period. It therefore sees advantages in making a significant portion of remuneration variable, rather than fixed. We do not have much sympathy for the European solution in relation to that, but we think that reform is necessary in this area. More variable pay should be deferred to take into account changing circumstances at the bank at which the banker works, with power for the regulator to extend the period for up to 10 years. To those who say that that is a long time, many banks have a good year, but then some less good years, and the commission wanted to recognise that that can go on for an extended period.
Regulators should be able to limit or prohibit sales-based incentives. We were shocked at the way in which sales-based incentives were used to create the mis-selling scandals of PPI and interest rate swaps. There was a cascading group of incentives from senior management through to the customer-facing end of the bank, and we think that that made a major contribution to the problems that arose. We want to give the regulator much stronger powers. Where a bank requires taxpayer support, the regulator should have discretionary power to cancel all deferred compensation. It is shocking that, as happened in some banks, they were still paying remuneration to employees after the bank had taken on taxpayer funds.
The issues of conduct and remuneration that I have raised lie at the heart of what the commission thinks needs to be done in respect of culture and standards. These recommendations have been much debated and discussed. We have done everything we can to make them practical and realisable, and I hope that, when there is an opportunity to debate them in the other House, or when they come back to this place, the Government will give serious consideration to those recommendations.
Mr Ruffley
I shall make two brief points. First, I congratulate my hon. Friend the Member for North East Cambridgeshire (Stephen Barclay) on drawing attention to something very important to the House—that it is this Government who have got behind the idea that there should be, in certain limited circumstances, a custodial sentence for breach of a new criminal offence. It is worth reminding ourselves that although the crash occurred in autumn 2008, the then Labour Government had 2009 and the first five months of 2010 to do something about it, but it is this Government who have made their intentions clear regarding custodial sentences. For that, Ministers should be congratulated.
The second and final point is that we cannot let this debate pass without reminding ourselves of the fact that existing criminal law was not being enforced in relation to the allegations of LIBOR rigging. The Parliamentary Commission on Banking Standards came into existence as a direct result of the allegations about rigging the LIBOR market. The custodial sentences available for those activities were not seriously taken on board by the Serious Fraud Office, for in 2011, it is said, the SFO inquired into whether existing criminal offences had been committed by those manipulating the LIBOR market, and concluded that they had not.
This time last year the Chancellor of the Exchequer told the House that he would ask the Serious Fraud Office to take another look to see whether criminal offences had been committed under existing criminal law. Leading counsel advised me and I said in the Chamber that there were, on the face of it, breaches of section 2 of the Theft Act 1968 through false accounting, the common law offence of conspiracy to defraud, breach of the Proceeds of Crime Act 2002, and possibly even breaches under the Fraud Act 2006.
Although the Minister clearly cannot intervene in investigations by the Serious Fraud Office because prosecutorial authorities are quite separate from the Executive, which has always been the case and will, I am sure, continue to be the case for centuries to come, it would be useful for him to indicate what the state of play is in relation to breaches of existing criminal law that might give rise to custodial sentences in the case of those engaged in LIBOR rigging.
Greg Clark
It is a pleasure to respond to this well-informed debate. I start by welcoming the hon. Member for Kilmarnock and Loudoun (Cathy Jamieson) to the Opposition Dispatch Box. She proved rather more persuasive in Committee than her hon. Friend the Member for Nottingham East (Chris Leslie), as I was able to accept at least one of her amendments. I think that it was a single word, but I am sure that it was an excellent one, historically so.
We are considering a large group of amendments, as has been evident in the range of the debate, and it has given us the opportunity to have an initial discussion of the parliamentary commission’s recommendations on questions of individual accountability and corporate governance. We agree with the recommendations that have been made. The commission’s report has at its heart the essential point that the UK banking system depends totally on the trust it commands. If it cannot count on the trust of its customers, it cannot truly serve businesses and people, which is the only purpose of banking. If it cannot count on the trust of businesses and people in this country, it cannot possibly sustain a reputation for international pre-eminence, which is what we all want to see.
The commission’s conclusions are comprehensive. Never again must directors of banks be able to preside expensively over failure or misconduct and then claim that they simply did not know what was going on. Never again must banks simply, as the commission sees it, contract out ethical judgments to the regulator. Never again must senior bankers be able to make one-way bets with the money of ordinary working people and walk away financially unscathed, leaving taxpayers with a crippling bill.
Specifically, we will enact the new senior persons regime that the commission proposes and introduce new banking standards rules to require high standards among all staff. We will introduce the new criminal offence of reckless misconduct that has been suggested for senior bankers. We will reverse the burden of proof so that the bosses are held accountable for breaches within their areas of responsibility. We will work with the regulators to implement the commission’s proposals to defer bonuses for up to 10 years and to enable 100% clawback of bonuses where banks receive state aid. We will ask the regulators to implement the commission’s recommendations on corporate governance to ensure that firms have the correct systems in place to identify risks and maintain standards of ethics. As I have said in earlier debates, where legislation is required, we will propose amendments in the autumn in the other place.
Let me deal specifically with today’s amendments and new clauses. New clause 2 was ably moved by my hon. Friend the Member for North East Cambridgeshire (Stephen Barclay). In a powerful speech delivered without notes, he explained that the new clause seeks to reverse the burden of proof when taking action against a senior person where there are regulatory failings by a firm in that person’s area of responsibility. As the hon. Member for Edmonton (Mr Love) pointed out, that is one of the parliamentary commission’s recommendations, but I think that my hon. Friend campaigned for that even before the commission reported, drawing on his own experience as a regulator. I say to the hon. Member for Kilmarnock and Loudoun that my hon. Friend needs no tawdry trinket of the Government accepting his amendment to be lionised in this House for the contribution he has made. We very much accept the thrust of his recommendation and that of the parliamentary commission.
The PCBS put it this way:
“Senior managers of banks will no longer be able to hide behind an accountability firewall, where they are too distant from the consequences of their responsibilities to be held directly accountable when things go wrong.”
At present, the regulator has to be able to show that the person knew what was going on. That cannot be right. It means that while regulators can take action against the firm’s junior employees who might be implicated, they are unable to pin responsibility on someone higher up the chain just because, as the Commission put it, the e-mail trail goes cold when it reaches their level of management. I will take on board the case my hon. Friend made on whether it is necessary to require the corporate offence to be committed, and we will reflect on that before the Bill goes to the Lords.
New clause 3 reproduces a new clause that was considered in Committee, when I predicted that the parliamentary commission would have something to say about the approved persons regime and a code of conduct. My predictions proved uncannily accurate. The commission’s recommendation that the approved persons regime should be replaced is, of course, a major feature of its report, which we accept. We will bring forward amendments to introduce the new senior persons regime to replace FSMA’s approved persons regime. As the commission recommends, the new regime will ensure that key responsibilities within banks are assigned to specific individuals who are aware of those responsibilities and have formally accepted them. As part of the regime, we will implement the commission’s more detailed recommendations, including reversing the burden of proof, which I have just mentioned, and allowing regulators to make the approval of senior persons subject to conditions and time limits.
The regulators will also be able to make rules about the conduct of senior persons, replacing the current system of statements of principle and codes of practice. The new clauses will put in place new arrangements for regulating the conduct of individuals who are not covered by the senior persons regime. The arrangements will include provisions to allow the regulators to make rules covering financial services employees whose appointments are not subject to regulatory pre-approval.
My hon. Friend the Member for Bedford (Richard Fuller) is absolutely right: it is plausible that the deficiencies in the approved persons regime may affect not just the banking sector but other parts of the financial services industry. The relevant FSMA provisions apply to all parts of the sector, so it might be operationally simpler to apply the regime to the industry as a whole. The Government will consider, with the regulators, whether the relevant provisions should allow for the wider application that my hon. Friend has in mind.
As the hon. Member for Kilmarnock and Loudoun said, new clause 3 would not deliver the extent of the reforms that the Parliamentary Commission on Banking Standards is seeking. On that basis, I hope that the hon. Lady will withdraw the new clause.
New clause 4 also reflects a debate that we had in Committee. The commission did not recommend the introduction of a fiduciary duty or duty of care, but it did recommend an alternative route. It said that the Department for Business, Innovation and Skills should consult on changing the duties of the directors of ring-fenced banks, to prioritise the safety and soundness of the firm first, over the interests of shareholders.
The Government strongly believe that bank directors must maintain an awareness of their responsibility to safeguard the security and stability of the firm. Changes that will support a focus on stability and soundness—for example, giving directors specific duties under the proposed senior persons regime—will help. We will indeed consult on whether changing directors’ duties will help further to accomplish those intentions. I hope that that will reassure the hon. Lady.
A duty of care specifically towards customers across the financial sector is difficult to make sense of, as we have previously discussed. Would it mean, for example, that a bank had a duty of care not just to its own customers and those of its competitors but, as the proposed duty is to customers across the financial sector, the customers of an insurance company with no relevance to the firm itself? The new clause has been tabled to confirm the Government’s intentions on the wider duties of banks and their directors, and I hope that the hon. Lady is satisfied.
New clause 5 refers to remuneration. Of course, the Government have already taken significant steps in that regard; under the remuneration code, large parts of bonuses must be deferred and paid in shares, and cash bonuses must be limited. However, it is a question of not just the quantum of bonuses, but how they are decided in the first place. Next year, shareholders will have a binding vote on executive pay.
We strongly support the proposals made by the parliamentary commission. In particular, the commission has recommended that the regulator should have the power to require a substantial part of remuneration to be deferred for up to 10 years when that is necessary for effective long-term risk management. There is a subtle but critical distinction between the commission’s recommendation and the new clause. The power should be with the regulator to determine whether and in what circumstances to require extended deferral; my hon. Friend the Member for North East Cambridgeshire made that point.
The commission has commented that no single deferral period is appropriate but that it should be determined in accordance with the nature of each business and the risks and activities of the employee in question. The Government agree and will ask the PRA to consider the powers that it has to extend deferral periods as part of its consultation on implementing the commission’s proposals. I hope that that commitment will reassure the hon. Member for Kilmarnock and Loudoun and that she will not feel the need to press the matter further.
New clause 7 deals with protections for whistleblowers. As the hon. Lady said, we debated this in Committee, so I do no want to detain the House further today other than to reassure her that, as I explained on that occasion, these provisions already exist in legislation. Disclosures about criminal offences are already covered by the Employment Rights Act 1996. Disclosures about regulatory breaches are covered by FSMA. This proposal would cover, for example, disclosures about the breaches of the regulatory requirements in relation to the ring-fence. I assume that the second requirement is designed to give effect to the commission’s proposal that a non-executive board member, preferably the chairman, should be given specific responsibility under the senior persons regime. Again, the powers to enact this are already available to the regulator under FSMA, and we have indicated that we support the thrust of these recommendations.
Greg Clark
This summer.
New clause 11 concerns the new criminal offence of reckless misconduct recommended by the parliamentary commissioner. As we have already announced, we agree with the commission’s recommendations and will over the summer draft amendments to create such a legally watertight criminal offence, including compliance with the European convention on human rights. As my hon. Friend the Member for Bedford suggested, the commission did not recommend retrospectivity, and these provisions are intended to enact its recommendations. I hope that he will understand that.
My hon. Friend the Member for Bury St Edmunds (Mr Ruffley) was absolutely right to point out that it was of course this Government who first raised the possibility of criminal sanctions for managerial misconduct in July last year. We are grateful to the commission for its extensive work. We will follow its advice on misconduct committed by persons covered by the regime that is being set up. The commission noted the legal challenges involved in mounting a successful prosecution, but we absolutely agree that the creation of this offence should be justified by the signal that it sends and the potential deterrent effects it can have. We have to make it clear that reckless behaviour by those in charge of our banks cannot be tolerated.
New clause 13 proposes to create a new financial services crime unit. A similar amendment was discussed at some length in Committee. I can assure hon. Members that the Government fully recognise the importance of tackling financial crime. There is to be a dedicated command within the new National Crime Agency responsible for directing the national response to economic and financial crimes. The economic crime command will have a clear remit to reduce the threat from economic and financial crimes, working collaboratively across the different sectors. Substantial progress has already been made in establishing the National Crime Agency and driving early operational success against criminals who seek to engage in economic and financial crimes.
The Government accept the broad recommendations of the parliamentary commission on each of these matters. We will be acting quickly to take the opportunity afforded by this Bill to make amendments that are legally watertight and likely to pass into law in the early part of next year, just six months after the parliamentary commission’s extensive report. In acting in this way, we are keeping faith not only with the recommendations of the parliamentary commission but with the urgency of the need to enact these reforms, which I commend to the House.
Stephen Barclay
We have had a full and constructive debate that builds on the cross-party nature of the work of the banking commission. That has been reflected in the consensual tone of hon. Members’ speeches. I am very reassured by the comments of my right hon. Friend the Minister about the Government’s willingness to look at the outcome that new clause 2 seeks, which is in line with the comments made by Members across the House. For that reason, I will not press the new clause to a vote but ask leave to withdraw it.
Clause, by leave, withdrawn.
New Clause 4
Duty of Care
‘At all times when carrying out core activities a ring-fenced body shall—
(a) be subject to a fiduciary duty towards its customers in the operation of core services; and
(b) be subject to a duty of care towards it customers across the financial services sector.’.—(Cathy Jamieson.)
Brought up, and read the First time.
Question put, That the clause be read a Second time.
Business without Debate
21:47 - The House divided: - Ayes: 274 / Noes: 214 - Question accordingly agreed to.
Care Services (Bradford)
(11 years, 5 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Mr David Ward (Bradford East) (LD)
The very first time that a son or daughter is asked by one of their parents, “And who exactly are you?”, is a chilling and frightening experience. It is a question of good days and bad days. In most cases there will be many good days—many fun days. It is not the end of the world, but it is very much the end of a world that the son or daughter knew. My hon. Friend the Minister is more conversant with the figures than I am, but they are startling for us as a nation. Some 800,000 people suffer from dementia. We are told that the figure will increase to 1 million in the next 10 years or so. The Alzheimer’s Society believes that the cost to us as nation of supporting those people is £23 billion, and that is with only half of those who have dementia being diagnosed with it.
However, I am here to tell a good story, about the work going on in Bradford. I would not be forgiven by Cathy Henwood, the dementia-friendly communities co-ordinator in the Alzheimer’s Society, if I did not point out that we were doing dementia-friendly work in Bradford before the Prime Minister’s challenge, which I will return to later. The dementia measures taken in Bradford have been well supported by the council. Stage one of the work included the recruitment of a small pilot group of organisations, such as the gurdwara, the Church of England, the community centre, a local branch of Lloyds TSB, a pharmacy and others. They were asked to review their organisations and write action plans. A checklist was produced by the Alzheimer’s Society to help them do that. That list was developed with people who had dementia and those who cared for people with dementia.
The second stage of the work is where my patch of Idle, where I live, came in. It is a village—yes, I was an Idle councillor for 26 years. The Alzheimer’s Society developed a community-based approach to supporting people with dementia which started in Idle and Thackley. The area happens to have three Liberal Democrat councillors, I am pleased to say, and they were determined to put together supportive structures for those with dementia in their ward development plans. Councillor Jeanette Sunderland leads the Lib Dem group. She and her colleagues Councillors Griffiths and Reid, working with the Alzheimer’s Society, held a community meeting on a bleak and snowy day in January—we do have some bleak and snowy days in Bradford in January. It was nearly cancelled but it went ahead despite the weather, and 40 participants turned up and 14 people signed up and agreed to stay involved. That meeting was partly for awareness raising, with a speaker who had dementia, and with information about the effects of dementia and how to help, and it was also partly a consultation, with discussion about what is good about living in Idle and what would be problematic for people with memory problems—what could be changed, and so forth.
A number of subsequent meetings have been held, as was a support group meeting, with both carers and those with dementia, at a volunteer event. All was going well. As of April, with some funding from the Joseph Rowntree Foundation and Bradford council, this work was looking to expand out of one ward out of the 30 in Bradford to work with 20 communities in total over a two-year period.
There was an announcement in the Telegraph and Argus about the Bradford District Dementia Action Alliance, which had brought together lots of groups and organisations, including the Yorkshire police, the Bradford royal infirmary and St Luke’s hospital, Bradford university and Bradford college. They have now been granted early adopter status for the dementia-friendly community recognition programme.
This is all really good news, added to which I believe it is important to congratulate the coalition Government on the focus they have placed on this, for example with the Prime Minister’s welcome launch of the dementia challenge. So far, so good, then.
The background to this at the national level is as follows. There is a £2.68 billion reduction in adult social care funding either so far or through to March 2014, and locally a 16% reduction over the last two years in adult and community service budgets, which amounts to £23 million in Bradford. A joint survey by Age UK and the College of Social Work found that 94% of people witnessed a squeeze on budgets for care services in the past three years, and 81% said they were seeing negative impacts on social care.
The Minister will, I am sure, refer to the Government funding that has recently been made available. That is focused on the crucial integration of health and social care, but integration can happen at any level of support, of course. Eligibility is the gateway to support; it provides the level at which a person can access support. As the Minister well knows, Bradford’s council is consulting on changing the criteria in Bradford, and that consultation will run until 4 August. I am pleased to say that on 15 July the former care Minister, my right hon. Friend the Member for Sutton and Cheam (Paul Burstow), will be coming to Bradford to launch the Bradford Cares campaign, which is supported by Scope. It is running a national campaign, but we will run a local version of it, in which we will seek to persuade the people of Bradford to support our campaign against the council’s proposed changes. We feel it is particularly relevant to those with dementia because, as the Minister knows, people with dementia are often physically able. With a little help and support, they are quite capable of looking after themselves.
When I was a councillor chairing the area committee we looked at the issues affecting elderly people and we assumed that they would relate to benefits, housing, adaptations and so on. It became evident that the crucial issue facing many elderly people was isolation, the impact of which, as we know, can lead to a deterioration in a person’s condition, particularly if they have dementia. Early intervention, not integrated intervention, is the key. This is about providing moderate care not only because it is relatively inexpensive, but because we know that investing in this form of support can save up to 130%.
If Bradford council’s decision goes through, it could well affect 2,000 people. We believe that if the council is doing this on the basis of concern about cost, it is very much a false economy, as it will cost the council more in the long term. I fear that despite the great strides that will be made by finally having integrated care systems, a change in eligibility thresholds will mean that hundreds of thousands of people will still not get the key early and preventive care about which I know the Minister cares passionately. They will not receive the care that they so desperately need and that is why it is so important to consider the eligibility criteria. As the Alzheimer’s Society has highlighted,
“setting the eligibility threshold at substantial will fail to make the shift to a system of prevention whereby people get the support they need to cope at home and avoid unplanned admissions to hospital and residential care.”
My Liberal Democrat colleagues on Bradford council have put down a motion for debate tomorrow, applauding the work that is going on in Bradford, particularly the Bradford District Dementia Action Alliance. We have had some cross-party coalition work on dealing with dementia, and I urge all Bradford councillors to support that motion, with the goal of making Bradford a dementia-friendly district by 2015. The dictionary definition of “to care” is to
“take thought for, provide for, look after, take care of”.
We must take care, and we must not care less.
I look forward in particular to the Minister’s response on integration. I know he sees it as a great opportunity, but my concern is that unless it operates at an appropriate level we will not only lose the savings that are possible through preventive work but see a deterioration in many people’s conditions and a growing cost. We are still at an early stage in the development of the health and wellbeing boards, and change is also happening in the national health service as a whole. These are risky days for many people, and although the additional funding to support integration must be welcomed, we must ensure that it is at the appropriate level.
The Minister of State, Department of Health (Norman Lamb)
I congratulate my hon. Friend the Member for Bradford East (Mr Ward) on securing the debate and on all the work he has done both in Bradford and to bring the stories from Bradford to a national forum. He has done more than anyone to highlight the importance of care services and working with the community to improve services for people. Indeed, the extraordinary consultation exercise he undertook following the White Paper last year was an exemplar of how to engage with the local community. The extent to which people felt able to comment and give their views and ideas was commendable.
I also congratulate the Bradford District Dementia Action Alliance on its work. My hon. Friend made the point that Cathy Henwood from the Alzheimer’s Society had identified Bradford as developing the concept of dementia-friendly communities before the Prime Minister’s dementia challenge, but I am pleased that he acknowledged that the Government have done a lot to highlight the importance of improving dementia care. The Prime Minister’s dementia challenge highlighted three strands: improving health and care services; creating dementia-friendly communities, which is exactly what is happening in Bradford; and a much greater focus on research so that we can find cures, understand better how to prevent some types of dementia, such as vascular dementia, and understand through research how best to care for people with dementia. The Government are more than doubling the amount spent on research, which is a good thing in itself.
The work about which my hon. Friend spoke started in the ward of Thackley—
Norman Lamb
Idle and Thackley—those wonderful names. Local councillors got the community involved and that is exactly what needs to happen. When we talk about how to meet the extraordinary challenges of the future, with an ageing community, there must ultimately be collaboration between statutory services and the community. Bradford appears to be showing the way in which that can be done and I stress that it requires the integration of services and care shaped around the needs of the individual with preventive care to stop the deterioration in their condition.
My hon. Friend will be aware of the need for the care and support system to change as local authorities face challenges resulting from an ageing population. That is why the coalition Government have decided to reform the system of care and support. He talked about the situation in Bradford and I understand that more than 71,000 people there are aged 65 and over, about 14% of its total population. Bradford’s joint strategic needs assessment for 2012 predicts that by 2033—not that far off—the number of local people over 90 will increase from 2,800 to 8,700, an increase of more than 200%. We all face an extraordinary challenge.
As we debate access to care and support services, I am aware that City of Bradford metropolitan district council sets its eligibility criteria at moderate. The report that my hon. Friend published earlier in the year indicated that 97% of people who replied to his survey welcomed setting the eligibility criteria at that level. Bradford council now proposes to change its band to substantial, because of pressures on its budget, and that would affect about 25% of people who currently receive care and support. I completely understand that the Bradford Cares campaign wishes to ensure that services are maintained at the existing level.
The care and support White Paper, which was published in July 2012, is an important and fundamental step towards addressing the challenges of an ageing society. Our reforms will focus more attention on people’s well-being—that is at the centre of everything that the Care Bill tries to achieve—and independence throughout their lives, rather than waiting for people to reach crisis point. They will also put people in control by giving them a far greater say about their care and support, as well as by ensuring that services are designed around what people actually want and by putting their priorities and preferences above and beyond the needs of the institution. My hon. Friend will be aware that the Care Bill, which has been widely welcomed, will be a single, modern statute for care and support. It will make legislation clearer and fairer, and it will be built around people not processes, and individuals not institutions.
As the Government’s White Paper made clear, our vision is a modern care and support system that promotes people’s well-being by enabling them to prevent and postpone the need for care and support, and puts them in control of their lives so that they may pursue opportunities, including education and employment, and realise their potential. Assessments will remain an integral part of the system, but rather than acting primarily as a gateway to the adult receiving care and support—or not, if they fail the assessment—the future system will place much more emphasis on the role of the assessment process in supporting people to identify their needs, to understand the options available, to plan for meeting care needs and caring responsibilities, and to reduce or delay needs, when possible.
Any adult who appears to the local authority to have care and support needs, whatever the level of need, has the right to an assessment. That right will cover carers, so this is an extension of their existing rights. The low threshold for entitlement to an assessment will mean that authorities will have earlier contact with far more people with low-level needs.
Mr Ward
May I say how much I welcome the policy on the assessment of carers? Many carers who visit my constituency office are on the verge of needing care themselves because of the stress that they are under. It is the failure to identify their personal needs and the support that they require that puts them in such a stressful position.
Norman Lamb
My hon. Friend is absolutely right. The Care Bill’s provisions on carers represent an enormously welcome advance. In a sense, they will give carers the same entitlements to assessment and then support, if that is deemed necessary, as the people for whom they care.
The “Fair access to care services” framework was introduced in 2003. It aimed to provide a fairer and more transparent system for the allocation of social care services. The assessment and eligibility framework was reproduced in the “Putting People First” guidance that was published in 2010. The current assessment and eligibility framework is graded into four bands: critical; substantial, which is the case for most local authorities; moderate, which applies to Bradford and some 15 other authorities; and low, which covers only two or three councils. Local authorities can choose which band they wish to set for their local criteria, and Bradford has the legal power to change its eligibility criteria, as long as it consults its local community.
People continue to tell us, however, that the process for determining who is eligible for care and support is confusing and unfair. Decisions are not transparent and there is variation across the country, and the end result is that people can be left without the support that they need. The existing assessment and eligibility framework is therefore not working effectively, and that is widely recognised. That is why we are introducing a national minimum threshold for eligibility through the Care Bill. The Bill will set out the eligibility criteria—the point at which local authorities must meet an adult’s care and support needs, or a carer’s support needs. Local authorities will remain able to meet lower needs locally, if they choose to do so.
On 28 June, we published a set of draft regulations that set out the national eligibility criteria. These are intended to describe an equivalent level to the “substantial” level used by the vast majority of councils. We have committed to providing funding that will maintain the same level of services when authorities move to the new system in April 2015. This is the beginning of engagement with stakeholders before we formally consult on the regulations next spring. I assure my hon. Friend that the setting of the threshold is about establishing a minimum standard, not taking away councils’ discretion to go further. Of course, the more preventive care that can be given, the better, because that improves well-being and ultimately reduces the cost to the system, which is exactly the point that he made.
Under the current spending review, local authorities should be able to protect access to care, but we know that not all the money that was earmarked for care services has been spent in that way. Ultimately, spending on social care is a matter for local people in local authorities, and councils such as Bradford have to make tough decisions. However, we cannot improve care and support simply by throwing ever more money into the system; on the contrary, we need to work in more innovative and effective ways, exactly as is happening in Bradford, where there is really impressive work on dementia-friendly communities. That is exactly the sort of collaboration that we need to encourage.
Local authorities across the country have already been redesigning services to find more efficient ways of working. For example, many local authorities are concentrating on better integration between health and care services, improving co-operation and reducing duplication. That means better use of money, and improved care.
My hon. Friend referred to this year’s spending review settlement. It includes a £3.8 billion pooled health and social care budget to make sure that everyone gets a proper, joined-up service, and the care that they need from whoever is best placed to deliver, whether that is the NHS or the local authority. The £3.8 billion fund, shared between the NHS and local authorities, will deliver integrated services more efficiently for older people and, crucially, disabled people. It covers ensuring that health and social care work together to improve outcomes for local people, through better sharing of information, so that people need explain their problems only once; intervening early, so that older and disabled people can stay healthy and independent at home, avoiding unnecessary hospital admissions and reducing visits to accident and emergency departments; and delivering care that is centred on the individual, rather than on what the system wants to provide. Examples include NHS and social care staff working together to provide seven-day working, and better data-sharing to ensure that people can leave hospital as soon as they are ready.
The Care Bill includes a duty to provide preventive services; that is exactly the sort of thing that my hon. Friend is advocating for Bradford. That new duty on local authorities is seen by many people as potentially transformative. The White Paper sets out our ambition for health care and support to be organised around the needs of the service user, rather than focusing on organisations and services. We want a reformed system, in which organisations work together to give individuals real control and choice over the care that they receive. Good practice already exists, and we need to learn from and build on that.
I understand that Bradford’s clinical commissioning groups are working with Bradford council to deliver a three-year integration programme, which will cover all the services that help to support people so that they can remain at home, stay in their community, and regain and retain their health, well-being and independence. We want to encourage and support local experimentation, to allow areas to provide integrated care at scale and pace. We are working to support local initiatives and to identify what needs to happen to drive change at the national level. We want to learn what works well and how to overcome barriers, and to pass those lessons on to others.
On 14 May, the national partners in health care and support, including the Department, published a document entitled “Integrated Care and Support: Our Shared Commitment”, which sets out 10 commitments that the national partners have made to enable and encourage change to scale and pace, as well as expectations on local areas in return. The national partners have invited the most ambitious areas to apply to become pioneers and act as exemplars to address local barriers and support the rapid dissemination, promotion and uptake of lessons across the country. The national partners will provide the pioneer sites with dedicated central support to help them to break down barriers to delivering integrated care and support.
It is really exciting that the coalition is acting to end that long, historical divide between health and care services and, indeed, between mental and physical health services. The potential for integrated care, with a focus on prevention, and collaboration between the statutory services provided by the national health service and the local authority and the community, exactly as is happening in Bradford, can provide the early intervention that my hon. Friend discussed, and it can address isolation. He mentioned that pernicious problem. Many people live on their own, and often lead lonely lives and, as he said, both their mental and physical health deteriorates. If we can get the community to support the statutory services, providing companionship and friendship, and giving people a better life, the combination with a much more joined-up service from the statutory services can achieve the breakthrough that he described in his community.
I conclude by applauding the impressive community work in Bradford, which began in one local community, but which has the potential to spread to 20 other local communities. That is exactly what should be done, and with the support of the Care Bill, we can make that a reality, not only in Bradford but across the country.
Question put and agreed to.