Companies (Directors’ Remuneration Policy and Directors’ Remuneration Report) Regulations 2019

Baroness Kramer Excerpts

Wednesday 8th May 2019 Lords Chamber

These regulations are intended to increase further the ability of shareholders to scrutinise how directors are rewarded for their performance. In doing so, the regulations will enable the UK to implement Articles 9a and 9b of the revised shareholder rights directive, covering executive pay, and I commend them to the House.

[Baroness Kramer (LD)]

My Lords, the content of this statutory instrument is all good stuff, in my view. Greater transparency, enhancement of shareholders’ rights to challenge around remuneration, comparators now with senior executives and average pay within organisations—I would have thought that this was something we would embrace with enthusiasm. Indeed, I hope that the UK was very much engaged in the process of encouraging the shape of this directive. However, it raises a question that I hope the Minister can answer. The directive completed its process through the European Parliament and Council two years ago. The Government expected that we would have left the European Union by this time, yet they had not taken the opportunity to bring forward this statutory instrument and these improvements. They have been forced to do so now because this directive needs to be implemented in regulation by 10 June—and we have not yet left the European Union, so that requirement remains on our shoulders.

I have heard much discussion from the Brexiteer community that Brexit will be an opportunity to set aside regulation, to reduce the burden on companies and to step away from what they consider to be a European view of director and senior executive responsibilities. Is the reason we did not see this statutory instrument earlier because the Government thought we might be able to avoid ever implementing it? I know that the Minister has praised it, but one would have thought that a Government who were enthusiastic about its content would have made sure that it was passed well before the original Brexit departure date. I hope that the Minister will address that, because it will tell us a lot about the Government’s expectation of how, in reality, they will handle regulation post any Brexit.

My second set of questions is around the parts of the directive that are not included in this statutory instrument because they are the responsibility of the Financial Conduct Authority and the Department for Work and Pensions, presumably to introduce through regulation. The Minister also mentioned the Treasury, but I noticed in the briefing we had that one series of rights is the responsibility of the Department for Business, Energy and Industrial Strategy. The other parts of the directive which are not covered by this SI are due to be transposed by 10 June 2019. Does the Minister have every expectation that that date will be met—that the FCA and the others engaged in this are on track to be able to deliver against it? What will happen with the set of shareholders’ rights that do not have to be transposed until 3 September 2020? I am not quite sure what they are, so perhaps the Minister can tell us more; I think it must be the ones that are the responsibility of BEIS. Do the Government intend to make sure that those are transposed or do they intend to discard them on the grounds that they expect that by that date we will no longer be a member of the European Union?

I hope very much that the Minister can help us through this process to enable us to understand why these regulations were not brought to us earlier to ensure that they were part of our statute book at the point of departure from the European Union. Did the Government intend to discard them if they found a way to do so, and if so, what does that tell us about their philosophy and intentions when it comes to issues such as transparency around remuneration for directors and senior executives, and the power of shareholders to be able to challenge?

[Lord Stevenson of Balmacara (Lab)]

My Lords, I am grateful to the Minister for introducing this statutory instrument. I can be relatively brief, because most of my points have already been raised by the noble Baroness, Lady Kramer, and I need only add a couple more things to them. Like her, I was caught immediately by the point at paragraph 2 of the Explanatory Memorandum which explained that this statutory instrument comes from a directive passed on 17 May 2017, and I wondered about the timescale of that.

In addition to the points she made, I point out that the department has a long and distinguished record in looking at directives and regulations that come from the European Union and has always prided itself on the quality of the material brought forward in support of the changes that it wishes to make through an SI, whether it is negative or affirmative. This SI stands out as one that has not been supported by a considerable amount of consultation and debate, and nor is there an impact statement, which I find rather surprising. Perhaps I would not go quite as far as the noble Baroness, Lady Kramer, in suggesting that there is a devilish plan here behind the work done by the department to try to avoid having to do anything in the hope that it would not be necessary because exit day would be before 10 June. Even so, the department has not covered itself in glory in the sense that, although it is true that the difference between where the UK Government have already got to with legislation and this directive is relatively small, these are not unimportant issues. If the department’s heart was in the wish to ensure that shareholders and indeed wider stakeholders had good information that allowed them to assess the performance of directors and to form a view on the effectiveness or otherwise of the company’s approach to directors’ remuneration and performance, these regulations, on the back of the directive, are in fact important. In a sense, that suggests that more work on and understanding of how boards will operate it would have been useful and helpful.

In introducing this SI, the Minister tried to paint a benign picture of how this was all happening anyway and was in line with where the Government were going. But that conceals a concern which has stemmed not just from anything heard on this side of the House but which has come from the Prime Minister, no less, who said that more has to be done to improve the way in which our limited companies system operates. There has been concern from the Bank of England about the whole question of whether tomorrow’s companies will need to be significantly different in terms of powers and responsibilities: it pointed out the much wider group of people who have an interest in the success or otherwise of a company, not just the shareholders. So there is a context here which has not been addressed by the Minister and I hope that he will comment on it.

To be more specific, we could not have reasonably expected the Government on their own to have brought forward regulations to make sure that in future we require that the remuneration of persons in the role of chief executive officer and any deputy chief executive officer must be reported, even if they are not directors. That is a major change, and it will help considerably to better inform those who judge companies.

On the question of how share-based remuneration is described, detail on vesting periods, deferral and holding periods is often lacking. In future, remuneration policy will have to indicate the duration of directors’ service contracts. Again, that will be useful. The remuneration policy must also set out the decision-making process for determination of review and implementation and all significant changes. These are important matters. They may be trivial in themselves, but, taken together, they will give much more information.

The Minister mentioned the split between fixed and variable remunerations and the question of share options. Share options have been a source of long-term concern to those interested in how companies pay their staff, particularly directors. To have that nailed down now is a really important change.

So those changes in themselves are important. The context within which this happens is of political interest. There is a question about why the regulations have been delayed so that we are doing this in a rush, and there is a worry about not having the wider context around consultation and cost, which suggests that something is not quite working here. I look forward to hearing the Minister’s response on that.

Like the noble Baroness, Lady Kramer, I am concerned about the SIs that will presumably be required from DWP on disclosure by asset managers about pension funds. This is also an area of interest, but it would be wrong if the regulations were not in place by 10 June. Can the Minister give us some information on that? Like the noble Baroness, I question how the Department for Business, Energy and Industrial Strategy will take forward the provisions requiring further facilitation of shareholders’ rights. It is a longer deadline—3 September 2020—but, again, further information would be helpful.

These matters are important. The statutory instrument is of great interest and I am happy to support it.

Employment: Automation

Baroness Kramer Excerpts

Monday 1st April 2019 Lords Chamber

[Lord Henley]

My noble friend is an optimist, as the House will be aware. He is a rational optimist—if I may give a little plug for his book—but he is quite right to mention that there have always been worries that, with each new wave of automation, jobs will be lost. As my noble friend has said, what has happened is that, with each new wave of automation, we have seen jobs go but it is the boring, repetitive jobs that have disappeared to be replaced by machines. It might be that, as he points out, some of the boring, repetitive jobs that solicitors do, such as conveyancing, can be more easily done by machine.

[Baroness Kramer (LD)]

My Lords, only 19% of the digital technology workforce is female, as are only 15% of computing graduates and only 17% of fintech founders. In an age where automation will become dominant, is it not time that the Government abandoned relying on these sorts of piecemeal, scattered or small-scale initiatives to increase diversity and launched a holistic, well-resourced and high-profile strategy, along the lines of the anti-smoking campaign, to challenge everything from unconscious bias to the lack of training and role models, and to de-risk change generally?

[Lord Henley]

My Lords, I do not quite take the almost semi-Stalinist approach that the noble Baroness is putting forward. What I am saying is that society will change as a result of these things but the Government must also recognise that it is going to change. That is what the industrial strategy is all about, and we will go along with that.

Nissan in Sunderland

Baroness Kramer Excerpts

Tuesday 5th February 2019 Lords Chamber

[Lord Henley]

Things have changed. It is not solely to do with that. As other noble Lords have said, the whole car industry is going through a rather turbulent time. We only have to look at what has been happening in, for example, sales of diesels. For that reason, Nissan has to make difficult decisions. It has decided that it will go ahead with the X-Trail but will build it in Japan, no doubt for markets over there. Nissan is still committed to Sunderland. There are still 7,000 jobs there. There are still 35,000 more jobs in the supply chain. Things are not as bad as the noble Lord is trying to suggest.

[Baroness Kramer (LD)]

My Lords, as a Minister in the coalition, I had the privilege of visiting the Nissan plant in Sunderland, and I also visited most of the major Japanese car companies’ headquarters in Tokyo. As a consequence, I am very aware that British plants won the right to produce cars for these various companies by only the tiniest hair’s breadth, as a competition is run across the globe, and certainly across Europe, for each new piece of investment and for each new major production line. Does the Minister recognise that if he cannot give an assurance that there will be absolutely no increase in friction and non-tariff barriers, by definition those plants have no possibility of winning such competitions in future?

[Lord Henley]

My Lords, decisions on where to invest are very difficult. The noble Baroness is quite right to say they are made by a hair’s breadth. One of the reasons companies come to the UK is because they know that we have the right people in the right places. That is why they go to Sunderland and why we got that investment in the right place. We should be proud of that. We will continue to seek other companies to come to invest in this country, like the companies I mentioned earlier have done. The noble Lord opposite suggested that BMW and Honda made competitive decisions that went against the UK. I am advised that that is not the case and no competitive decisions have gone against the UK in recent years.

GKN/Melrose Takeover: Update

Baroness Kramer Excerpts

Tuesday 27th March 2018 Lords Chamber

[Lord Stevenson of Balmacara (Lab)]

My Lords, I thank the Minister for repeating the Statement made in another place by his right honourable friend the Secretary of State. I think that many Members of your Lordships’ House will think that it is rather troubling and a bit confused towards the end. I shall ask a number of questions in hoping to elucidate that.

GKN is a UK engineering firm, founded in south Wales in 1759, which is now a global engineering business which designs, manufactures and services systems and components for most of the world’s leading aircraft, vehicle and machinery manufacturers. GKN has various defence contracts in Luton, the Isle of Wight and in King’s Norton, including making components for the F35, A400MM, P8, Typhoon, V22, C130, and F22 vehicles. Approximately 58,000 people work in GKN companies and joint ventures in more than 30 countries, including 6,000 here in the UK. It has global sales of £9.4 billion and spends £85 million on R&D in the UK alone. As a percentage of sales, GKN spends about 4% on training, and we are hoping that that will continue.

The motto of the bidder, Melrose, is, “Buy, improve and sell”—in other words, to dismantle a business and then quickly sell each part off. On 8 January, the board of GKN received an unsolicited proposal from Melrose to purchase it; the board of GKN unanimously rejected it, on the grounds that the bid was,

“entirely opportunistic and that the terms fundamentally undervalue the company and its prospects”.

A formal offer from Melrose and various defence documents have been issued since then, and the deal closes this Thursday, 29 March. But despite growing concern it was not until yesterday, Monday 26 March, that the Secretary of State wrote to Melrose to seek the commitments referred to in the Statement and relevant undertakings on a number of key areas. So my first question is: why on earth did it take the Government so long to get involved, and why on earth leave it all so late?

I accept that there are currently strict and limited grounds for ministerial intervention in proposed mergers, in essence where one or more of national security, media plurality and financial stability are engaged. However, the Enterprise Act 2002 powers allow reference on those grounds to the Competition and Markets Authority for four months after the completion of a transaction. Better late than never, perhaps.

In the Statement the Secretary of State said that he would make such an assessment,

“following receipt of advice from the Ministry of Defence and other agencies on the final terms of a bid were it to be successful”.

So my second question is: can the Minister set out the likely timescale for this process, and how it will operate in practice? Will he guarantee to keep the House informed?

The Statement seems to suggest that the reason why the Secretary of State kept a low profile was that he did not want to jeopardise his quasi-judicial role in this takeover battle. If that really is the case, does it not prompt another question? If the Secretary of State for Business is debarred from taking an active interest—and we have to wonder whether that is a sensible position for him to adopt—who in government has the responsibility for looking after our industrial assets, including strategic and defence interests, in this and similar takeovers? I look forward to hearing from the Minister on that subject.

The Secretary of State rightly pointed out in the Statement that in the past some takeovers have had “deleterious” consequences. Presumably that is a reference to the Kraft/Cadbury debacle. He went on to say:

“In my view, this establishes the principle that we expect interests broader than pure shareholder value to be taken into account by directors and”—


this is quite important—

“in the attitude of the Government”.

He lists these as:

“a requirement for directors to have regard to … the interests of the company employees, its business relationship with suppliers, customers and others; and the impact on the community and the environment”.

That is quite wide-ranging, and all very sensible.

All those issues are directly engaged in this proposed takeover. So my fourth question to the Minster is: can he point out how and where these new principles will actually bite? How will they impact in Luton, the Isle of Wight and Norfolk? Will they ensure that the R&D spend continues, that the pensions are secure, and that the training opportunities GKN currently offers will be continued?

Finally, the Statement contains the view of the Secretary of State, as expressed in his letter yesterday to Melrose, that Melrose should set out more clearly its intentions towards wider stakeholders. He specifically requests it to make commitments in a legally binding form. I have to say that if the commitments specified by the Secretary of State were put in legally binding form, that would go a long way towards allowing us to support the Government in this matter. So my fifth question to the Minister is to ask him to confirm that the Government will refer the proposed takeover to the CMA if they have not received, by close of play on Thursday 29 March when the deal closes, legally enforceable commitments from Melrose on the issues that he has adumbrated already.

I repeat that those issues are: maintaining the business headquartered and listed in the UK; maintaining a UK workforce and respecting its employment rights as well as engaging closely with its representatives; continuing to pay tax as a UK taxpayer; continuing to invest in R&D programmes at current levels; investing in the training; treating suppliers well, including prompt payment of suppliers; making arrangements for current and future pensioners that are satisfactory both to trustees and to the Pensions Regulator; greater continuity of ownership of the defence-related businesses; and a commitment relating to the management of any defence contracts. At present only two of these “asks” will be covered by the legally enforceable commitments offered by Melrose to the Takeover Panel, and one of those only partially. The rest are not. I would be grateful if the Minister would reflect on that.

In conclusion, I have to say to the Minister that there cannot be many people in this country who think that the Government have got a grip on this issue. Voluntary agreements will not work, as we know from recent experience. Today’s weak, late and unenforceable assurances from Melrose are insufficient. There should be statutory provisions, not voluntary aspirations. In truth, without them, there is nothing there to assure the workers, the pensioners or the local communities. Nor will voluntary agreements assuage the concerns about the devastating impact that this opportunistic dawn raid will have on our industrial strategy and our national security. Both in this case and in future cases, we surely deserve better.

[Baroness Kramer (LD)]

My Lords, I want to press the Government a little more on one or two of the issues raised by the noble Lord, Lord Stevenson. One of those is the timing of the letter. The Minister will be very much aware that, presumably, it was meant to elicit information and to express some government concerns to be taken into consideration by the shareholders of GKN before they exercise their votes. However, as he will know, many of the shareholders have already declared —and I think he will confirm that a declaration once made cannot be retracted. In addition, the remaining shareholders have largely had all their internal meetings to come to their final decisions, and cannot pull those meetings back together to reconsider in the very brief timeframe of the next 48 hours. Therefore, if this is something other than public relations, will he explain to me how it is meant to inform shareholders, because I do not understand that? Will he especially, in that case, confirm that he still takes the view that the Secretary of State can call in this transaction, in whatever form it goes through, if concerns remain following the vote?

I scanned through the Melrose response very quickly but there seems to be no mention of the 6,000 workers. There are various assurances on other points but I saw no mention of them. Will the Minister comment on that? I am also concerned that all the various declarations seem to have a timeframe of five years. Considering the length of time needed to plan measures such as the industrial strategy and the sustainable relationships that need to be developed in the aerospace, defence and other fields, five years seems an infinitesimal period. Will the Minister explain why that short timeframe apparently reassures him, because I am not sure that it does me?

Does the public interest definition need to be looked at again as it does not mention workers’ rights or pensioners and does not refer to the industrial strategy, which is supposed to have a much more important role now? Airbus, for example, has expressed concerns about a potential new owner, which could undermine the direction in which the Government are trying to take industry in this country.

My last point concerns an issue I do not fully understand. However, the Minister may be able to help me. I understand that many of the shares are held by arbitration houses, and that rather than buying them and paying stamp duty they have them on loan and are exercising them in that format. Is that really appropriate and is it something else we should look at?

[Lord Henley]

My Lords, I shall make a fist at answering some of the points put to me by the noble Lord, Lord Stevenson, and the noble Baroness, Lady Kramer. However, I apologise in advance if I fail to do so on some points as this issue is highly technical. I want to be very careful about precisely what I say, bearing in mind that my right honourable friend will possibly have to make quasi-judicial decisions following advice from the Ministry of Defence. I am not party to that but the noble Baroness and the noble Lord will understand what I mean: I have to take care over what I say.

The noble Lord’s first criticism was that we were slow off the mark on this issue. I can assure him that right from the start, from the moment we knew there was a bid—it goes back only to January—the Government have monitored this and paid attention to it. As the noble Lord will know, as things have hotted up, we have taken a more active line; hence the letter from my right honourable friend yesterday, to which he and the noble Baroness referred. I will say a little more about that, and about the response today from Melrose.

The noble Lord also asked about the timescale and what we will do to keep the House informed. I can assure him that we will keep the House informed as things happen, as my right honourable friend made clear. The Secretary of State set out the statutory timeframe under the 2002 Act. He will inform the House if an intervention is ordered, again in line with his quasi-judicial powers. As I made clear, there are limits to what my right honourable friend can and cannot do. He set out in his Statement just when he could intervene under the terms of the Act. In the third paragraph of the letter to Melrose, he again makes it clear that the Act gives powers to the Secretary of State to act in a quasi-judicial manner.

He goes on to say, when talking about broader stakeholder interests, that in addition to his statutory role, he, as Business Secretary, had a wider concern that,

“where important businesses are involved, takeovers should not act against the interests of our economy, employees or the broader set of stakeholders”.

He adds that Section 172 of the Companies Act, to which he referred in his Statement, sets out that statutory requirement for directors,

“to have regard to, amongst other things, the interests of the company’s employees; the company’s business relationships with suppliers, customers and others; and the impact on the community and the environment”.

A response to that letter came through from Melrose. It is now available in the Library, and I hope the noble Lord, the noble Baroness and others have seen copies of that letter. In the letter, Melrose again set out what it felt it could do, particularly where it agreed with the takeover panel on the form of the legally enforceable undertakings:

“For a period of five years, Melrose will: maintain its UK listing; maintain its UK headquarters; ensure a majority of its directors are resident in the UK …”,


and so it goes on. There are commitments about the amount of research and development it will invest in. That is all set out in what it refers to as its takeover panel-enforceable undertakings. The letter goes on to make further long-term commitments that we hope that it, as an honourable company, will adhere to should it be successful. That is obviously, as my right honourable friend made clear, a matter for the shareholders.

Going back to those initial undertakings about legally enforceable commitments in the letter, the Secretary of State indicated in his letter his wish to see Melrose making those other commitments, to which I referred in the main letter, in good faith. I hope the company will stick to that. Since the noble Lord asked particularly about R&D and training, the commitments about R&D are listed in its letter in the paragraphs about enforceable undertakings, which state:

“Melrose will at least maintain GKN’s current level of expensed research and development investment equal to 2.2% of sales over the financial years 2019, 2020, 2021, 2022 and 2023”.


This is a legally enforceable commitment.

As I said, I am limited in what I can say, and I want to be very careful about what I do say and how far I go because the Secretary of State has to look at this thereafter. I will leave it there and take up that rather technical point that the noble Baroness made about arbitration houses—

[Baroness Kramer]

Arbitrage houses.

[Lord Henley]

Yes, arbitrage houses. I will write to her in due course, because I would not want to give a response that was in any way misleading. I hope that deals with most of noble Lords’ concerns.

Green Finance

Baroness Kramer Excerpts

Thursday 18th January 2018 Lords Chamber

[Baroness Kramer (LD)]

My Lords, I suspect that everybody in this Chamber and most people who will read Hansard are incredibly well aware of how countries across the globe—not just the traditional green players but new powerhouses, notably China and India—are now absolutely determined to achieve green economies. Our first two speakers, my noble friend Lord Teverson and the noble Lord, Lord Barker, gave us a sense of the extraordinary size of the investment that is necessary to back up that ambition. We recognise that we ourselves cannot possibly achieve our environmental goals, and those countries certainly cannot achieve theirs, unless we unleash the power of the financial markets to underpin green policies. Mark Carney has warned us that if sustainable strategies fail, our own economic future will be threatened. We therefore have every interest in making sure that the green finance agenda is a success.

So far, London has played an important role in developing green finance. There are 64 green bonds listed in London, raising over $20 billion in seven currencies. However, we need to be honest: it is not a dominant role. In 2017, London listed 27 new green bonds, raising $10 billion, but across the globe the issuance of green bonds totalled $120 billion. Part of that was purely domestic—not all of it was international—but it makes it clear that the dominance London is often used to in the sectors in which it leads is not yet established in this field. We have expertise in renewable infrastructure funds and in green indexes offered through the FTSE Russell, and we are known for our ability to innovate. But this is a wide-open market. Hong Kong, Luxembourg, Paris, increasingly, and New York are all players; the Irish and the Swedes are taking initiatives in this area. I wish to see London confirmed as the leading international financial centre for green finance. Of course, the Government’s green finance task force is looking at these issues, but let me recommend four actions the Government could adopt sooner rather than later that would be game-changers in confirming London’s role.

First, the Government should issue their own green sovereign bond. This would act as a mechanism to finance the UK’s own portfolio of commitments to green infrastructure. Clearly, the money could be used for energy-efficient home building and indeed for zero-carbon homes—an opportunity for the Government to bring back a programme that, frankly, they should never have abandoned. It could underpin pilot programmes in carbon capture and storage. It could be used for the long list of green transport, land management and energy projects the Government have signed up to. Just as significantly, it would be a prestige instrument, attractive to a wide range of investors, educating and pump-priming the market. The noble Lord, Lord Barker, talked about the importance of pump-priming technology. It is just as important to pump-prime new financial instruments, and this is an illustration of that. For those who say that this is slightly off the wall, my goodness, China, France, Nigeria and even Fiji have issued green sovereign bonds. We have a lot of catching up to do to be a major prestige player.

Secondly, for London to lead we need to develop the retail market in green finance—instruments small enough and local enough to attract the ordinary investor. We are seeing some action at the retail level: Triodos, Ecotricity and Belectric are three examples. Abundance is a world-leading platform that allows small investors to put their money into green projects—I was looking at its website this week—from a solar farm to the green use of whisky residues. However, it will require work from the Treasury to make IFAs and other advisers aware that they can recommend such options to clients who desire them, and broader public education is critical. Financial education—financial literacy, if you like—must extend to cover the green investment sector.

Undoubtedly there is potential for tax policy to support both the green bond and retail markets. The US offers tax incentives for bonds financing green buildings and renewable energy. For people who think that the US is well behind the curve, this is an example of where it is ahead of it. Brazil allows tax-free bonds to be issued for wind. China is working on proposed tax incentives for green bonds generally. Mexico and India have tax incentives for green bonds at municipal level. Even Singapore has a grant scheme to cover the costs of green bond verification.

What about a green mortgage scheme? Barclays has issued its first bond secured against mortgages on homes that meet energy specifications: what an effective way to drive both energy-efficient new build and retrofit. There should not be one or two instruments from one bank or another; they should be widely issued. Central and, especially, local government could play a significant role in helping this market by encouraging or even sponsoring similar instruments. The US, never slow to seize an opportunity, is pioneering a range of green securitisations well beyond mortgages, and Fannie Mae—going back to something close to the mortgage market—has completed one of largest ever issues to back energy-efficient housing retrofits.

Other noble Lords have said that this has to be underpinned by investor confidence that the projects financed through green instruments are genuinely green. This is an area where the UK, because its regulators are so highly respected, can lead.

All around the globe, various different entities have sprung up to provide verification for green projects. Some of them are not-for-profit, some are charities. But frankly, it is such a diverse and complex arena of verifiers that we can legitimately ask whether people and investors understand the standards they establish. Who verifies the myriad verifiers? So far, no one is playing that kind of role. That is a serious role for the FCA—verifying the verifiers and assuring standards for any green issuance in the UK. It would enhance the UK’s global status. We all recognise that in contrast, nothing would kill the market faster than a suspicion of falsely green claims.

This is not a time to be complacent. The climate change agenda is urgent and we must support it in any way we can. But if we can do it in ways that also enhance the UK’s global role in finance, that would be a second prize worth winning.

Whistleblowers

Baroness Kramer Excerpts

Monday 27th November 2017 Lords Chamber

[Baroness Kramer (LD)]

My Lords, will the Minister resist this negative connotation of whistleblowers? This summer I met whistleblowers whose lives are in complete ruins. The example given by the noble Lord, Lord Cromwell, is one of very many. The regulators have a long history of being totally passive, of providing no protection and often of being gratuitously suspicious of whistleblowers. In the United States, not only is there compensation for a life damaged and ruined but there is an Office of the Whistleblower—a concept that we attempted to get into the then Criminal Finances Bill—which provides appropriate protection from a significant, senior and high level.

[Lord Henley]

My Lords, I do not believe that we are taking these matters lightly. I know that the noble Baroness has considerable concerns about this matter. She raised them during the passage of the Criminal Finances Bill, enacted in 2017, and many of them were dealt with by my noble friend far better than I could do in the brief time I have available at the Dispatch Box. I could quote at length the answers that my noble friend gave the noble Baroness on that occasion, but suffice it to say that we note her concerns. The FCA is looking at this issue and conducting another review, and no doubt the noble Baroness will take a look at that when it comes out next year.

Queen’s Speech

Baroness Kramer Excerpts

Monday 26th June 2017 Lords Chamber

[Baroness Kramer (LD)]

My Lords, many powerful speeches have made across a range of issues and I confess before I start that I have absolutely no hope of doing this debate justice. The debate was opened by the noble Lord, Lord Callanan, and I join others in welcoming him to his role on the Front Bench. However, he described an economy that I think almost no one in this House recognised. He quoted a figure of 2% growth for the UK economy this year. Perhaps I may say to him gently that that figure was binned months ago. The British Chambers of Commerce has today given its forecast for this year of 1.5% growth, dropping to 1.3% next year, and the term now being used is “stagnant”. Part of that is the impact of Brexit—its uncertainty and the expectation of job disruption, export losses and the cost of the devaluation of sterling. It is certainly not the picture that the Minister addressed. A number of other speakers, including the noble Lords, Lord Eatwell, Lord Hain and Lord Howarth, and my noble friend Lord Thurso, questioned his analysis of the economy.

I want in particular to pick up on an issue that was raised by the noble Baroness, Lady Altmann. It is often overlooked but it is crucial. I refer to rising consumer debt. The Minister will know from IFS reports that repayment of consumer debt is now taking a bigger bite out of personal income than it did in the run-up to the 2008 crisis. That number is completely unsustainable. The buoyancy, or bubble, that we saw in economic growth shortly after the Brexit period was fuelled by consumer spending financed in turn by unsupportable and unsustainable consumer debt. This is an issue that ought to be addressed and I wish we had seen more about it in the Queen’s Speech and, frankly, in other proposals being put forward by the Government.

I also want to take this opportunity to welcome the two Members of your Lordships’ House who have made their maiden speeches today, the noble Lords, Lord Mountevans and Lord Colgrain. They were superb speeches, but it was interesting that both noble Lords talked about their experience in the City. That is highly relevant as we reach the point where we address the issue of Brexit, a subject that has probably been understated in today’s debate. There may be a certain exhaustion around it, but perhaps I may point out that the City of London and the financial services industry, described so eloquently by both our maiden speakers, are the major underpinning of the whole of the British economy. They are very much at risk as we enter the Brexit process.

This House will be aware than many organisations, having found that they got no sympathetic ear from the Government, have progressed with making their own plans. Most of the major American players have now identified a new European headquarters—it might be in Dublin or Luxembourg; some have identified two major European headquarters—to which they will begin to transfer business. Lloyd’s of London has opened, or is in the process of opening, its EU headquarters in Luxembourg. The small players—the fintechs—are part of the future and were mostly pan-European from the day they were conceived. One third of them were founded in, or have CFOs from, continental Europe. They have all started making their plans and have begun that process of shifting, not in great numbers, initially, but giving themselves the opportunity to gradually, salami slice by salami slice, decide where they can best put their business to serve their critical European clientele.

Strangely, no one referred to the decisions by the European Central Bank, soon to be ratified by the European Parliament, that will define where euro-denominated financial instruments can be cleared. The European Central Bank has set up a set of rules that are quite interesting because the UK has always argued, “We will never lose this business; Europe doesn’t have the capacity to take it”. The European Central Bank has now set up a system that will allow it to grow capacity and shift a piece of business, grow capacity and shift another piece of business, with the UK Government completely unable to intervene in this process in any way whatever. Frankly, some realism needs to be injected into this debate.

Speaking of that realism, I want to pick up the point that the noble Baroness, Lady Rock, and others made: business has been excluded from this discussion. I say to the noble Lord, Lord Leigh, that the issue for business in the whole discussion about business being listened to is essentially about Brexit, not taxation or regulation. Finally, there is some listening to business: we understand there is to be a council now that will enable various government departments at the highest level to engage with business. The problem is that in many instances, it is too little, too late. Moves have been decided and the beginning of that process is now well under way; leases have been negotiated, HR has gone through various iterations. We have to start being realistic about this, rather than talking as if nothing has happened over the past nine months: we may not have done much, but businesses and the European Union have done a great deal.

There was one fascinating area of the discussion that I had obviously not focused on to the extent I should have: concerns around agriculture. A number of Members of this House—the noble Lords, Lord Inglewood and Lord Colgrain, the noble Baroness, Lady McIntosh, the right reverend Prelate the Bishop of St Albans and the noble Duke, the Duke of Wellington—talked about the impact of Brexit on agriculture, reminding this House of the need for a workforce and access to European markets, because agriculture in this country is underpinned by its capacity to export to the European Union. The domestic agricultural system survives only because it also has that export opportunity. Those complications have been underdiscussed in this House and I hope they will be discussed more.

I particularly want to pick up on an issue that was raised by the noble Lord, Lord Colgrain, and addressed by the noble Lord, Lord Plumb: the idea that we could follow New Zealand’s system of restoring our agricultural strength after Brexit. The noble Lord, Lord Plumb, reminded us that this was achieved by much lower standards of animal welfare, health and safety and environmental standards than are acceptable in the UK today—or acceptable, I suspect, to UK consumers. I pick up on concerns about the environment expressed by my noble friend Lady Parminter, the noble Lord, Lord Oxburgh, and many others. There is a deep, underlying concern as we move into the future that we should not use this as an opportunity to water down and undermine environmental standards that our entire community now expects as a fundamental underpinning.

There are many other issues that could have been in this year’s Queen’s Speech, from productivity, raised by my noble friend, Lord Razzall, to housing issues, underlined by the noble Lord, Lord Naseby. There is a vast range of crucial issues, including those around artificial intelligence, the new economy, getting companies to invest and productivity. All are missing from this Queen’s Speech. I do not have the opportunity to continue to summarise this but I know that the Minister will look at Hansard and look at that range and depth. I hope we can bring this Government to find a way to address those absolutely key issues and not set them aside for two years, when many are vital to the future of both our economy and our young people.