Dormant Assets Bill [HL]

Debate between Baroness Kramer and Lord Hodgson of Astley Abbotts

Report stage
Tuesday 16th November 2021 Lords Chamber

[Baroness Kramer (LD)]

My Lords, I am very delighted to support this amendment. My colleagues and I are great believers in empowering local communities. Indeed, in my years as an MP, I saw a number of local initiatives, driven by local people and community groups, that did some extremely good work but could not cope with the mutual demands of both providing their services and fundraising, so they were unable to grow to that kind of sustainable point that was so important in the community. It seems to me that the community wealth fund gives opportunities to those new initiatives, driven by local people, targeted very much towards the members of the local community and very much reflecting local need. It would seem ideal to do this under the structure of the dormant assets programme.

I have two other reasons for feeling that this is important. Later on Report, we will address issues of oversight over the kind of programmes funded through dormant assets. But it seems to me that there is no way that that issue can be addressed without recognising that the kind of resources for the detailed scrutiny and monitoring of programmes is in short supply. It seems to me that, when you have small local programmes, a well-structured community wealth fund arrangement can put in place that administrative oversight and make sure that, locally, the funds are well spent, provide value for money and are properly targeted. So that level of administration in fact makes up for a much broader weakness, frankly, within the overall dormant assets structure.

I am also very pleased to look at a pilot approach—this will be a case of trialling, reshaping and refining—because I am concerned to make sure that the money derived from the dormant asset funds is used in addition to the kind of services that ought to be provided, whether by central or local government. It will be really important for an entity such as the community wealth fund to work in tandem with local authorities but not substituting for what they can or should be doing. We do not want duplication of administration or service, and we certainly do not want to give central government an opportunity to further reduce the resources that it provides to local authorities on the grounds that the dormant asset fund and various charitable and local civic societies will do the work in its place and not require the normal support and resource that ought to be provided.

It therefore seems to me that this is very much a win-win approach, and I hope that the Government will take it on board. The Bill is an opportunity to expand what has been a very successful programme in significant additional directions, and this is certainly one of them.

[Lord Hodgson of Astley Abbotts (Con)]

My Lords, I have my name down in support of this amendment, which, as the noble Lord, Lord Bassam, said, builds on one that we debated in Committee. As is always the case, when you come back to the subject, there is a risk of a great deal of repetition, and I do not wish to try the patience of the House with a long exposé. During the debate in Committee, the Minister’s predecessor, my noble friend Lady Barran, raised some significant concerns that the Government had about the way that this might operate. The amendment of the noble Lord, Lord Bassam, has very neatly—if I may say so without sounding patronising—answered some of the points made then.

I will repeat, in four sentences, four reasons why I am attracted to community wealth funds. They are very local and can reflect the often highly idiosyncratic needs of a particular local community. They can provide a physical space—a building—as a focus for presenting and answering those particular needs. Thirdly, they can provide an element of professional help, without which a purely voluntary organisation can struggle. Fourthly—this is most important—they can provide the long-term capital needed to answer and build answers to the very deep-seated challenges that many of these communities face.

However, as my noble friend Lady Barran said—I am sure that if I could see my noble friend’s speaking note I would see that he will repeat it in a minute—this is a new approach and the Community Wealth Fund Alliance is setting out, brimming with confidence, hope and optimism. I certainly wish it well, but there will be difficult days ahead with hard decisions about structure, approach, governance and impact. The noble Baroness will probably raise that last issue in her speech in a minute. It is dangerous if you accept too rigid an approach in primary legislation; if it subsequently turns out to be less than ideal, you are stuck with it. So there is an element of “Be careful what you wish for”.

Then there is the issue of consultation. I think many of us would say that this was a case of putting the cart before the horse. Normally you have a consultation, get the results, draft the legislation and then discuss it in the light of what has been discovered, but that has not happened here and we are going at it the other way around. Whether we like it or not, that is where we are. So I can see why, unsatisfactory though that approach is, in the circumstances, the Government cannot and do not want to pre-empt the results of that consultation.

Conversely, primary legislation, like buses, does not come along very often; the next Bill might be in another five or 10 years—it is 15 years since the noble Lord, Lord Bassam, and I discussed the Charities Act, and we have had probably had one since—but we need to send a signal of our support for community wealth funds. How do we balance those issues? I suggested that if the noble Lord, Lord Bassam, replaced “must” in his original drafting with “may”, that might provide an answer that would not force the Government, the Secretary of State and my noble friend on the Front Bench to set up a community wealth fund but would provide them with an option to do so in light of the consultation when they had the full outcome available. Since the noble Lord was kind enough to make that change, I am delighted to support his amendment.

--- Later in debate ---

[Baroness Kramer (LD)]

My Lords, my name is attached to Amendment 4 and I would gladly support Amendment 5. Government Amendment 3 is definitely an improvement on the previous situation, which was unclear; the Government were sure they would have a public consultation but were not really required to do so.

When the original Dormant Assets Bill was passed, the purposes for which dormant assets could be used were on the face of the Bill in primary legislation. Consultation, now that the Secretary of State is in a position to expand that range significantly, is absolutely vital. In Amendment 4, we reflect some of my ongoing frustrations with consultation after consultation: they fall to the attention of the usual suspects and, indeed, the responses of the usual suspects are very often taken into serious consideration, but they never get out into the wider world. When there are lots of diverse views, perhaps supported or mentioned by only small handfuls of people because they have never occurred to others, those tend to go into the “dismiss” bucket almost immediately.

I know how difficult it is to structure a consultation that really does consult. I say that from the position of having been a Minister during the coalition years, when I wanted to use a consultation to bring in new ideas as well as to get people’s responses to possible avenues that we might go down. It was a sheer battle with my own staff to devise such a consultation and questionnaire and to leave space for open responses and gather them in. It is not the norm; I am very well aware of that. I do want to press the Minister, because this should be going to a much wider range of groups than might normally keep an eye open for a consultation —the wide range of social enterprises and charities that go out to various communities, particularly deprived communities. Those communities tend to be the least alert to the fact that there is a government consultation happening or to knowing how to respond to it.

Then there is Parliament. Most of us understand that secondary legislation is not worth the paper it is written on in terms of getting parliamentary opinion or any potential for amendment, so it is important that the relevant committees of Parliament are engaged with something as significant as this. I press the Minister: we understand that he has moved some way, but we need quality. The style is perhaps there but there is no quality or content behind it to give us full reassurance. If he will not accept Amendments 4 and 5, can he at least give us a verbal assurance of the kind of quality that we want within the consultation itself?

[Lord Hodgson of Astley Abbotts (Con)]

My Lords, I have put my name to Amendment 5 in the name of the noble Baroness, Lady Lister. I was reassured by my noble friend’s introductory speech and the deal that has been hacked out between him and the noble Lord, Lord Bassam of Brighton. The noble Baroness, Lady Kramer, has, in part, shot my fox because I wanted to talk about the usual suspects, which she referred to. That is the danger, although I say to the signatories to Amendment 4 that it looks to me like a pretty good list of usual suspects in that amendment. I was not sure that we were not just going back down the track that we were trying to avoid going down.

My reason for supporting the amendment in the name of the noble Baroness, Lady Lister, was to make sure that we would make a big effort to get down to the smaller organisations, which often had unique insights into the problems of a particular area. From my point of view, I rather doubt whether that goes well into legislation, but it is the sort of area where a good strong ministerial Statement, given on the Floor, would reassure a lot of us that there will be words that we can go back to if the consultation does not reach as far, as deep and as wide as some of us think it should.

Dormant Assets Bill [HL]

Debate between Baroness Kramer and Lord Hodgson of Astley Abbotts

Committee stage
Wednesday 23rd June 2021 Grand Committee

[Lord Hodgson of Astley Abbotts (Con)]

My Lords, I put my name to Amendment 57. The essence of the case has already been well covered so I shall be brief, but brevity should not be taken as indicating that I do not attach considerable importance to this amendment.

The Committee will recall that, a couple of minutes ago when I was moving an earlier amendment, I emphasised the need for local views to be taken into account and the fact that, to be effective, “local” must mean precisely that. It is charities and voluntary groups, which are often quite small, that can speak most authoritatively about the needs of their local areas and communities, hence the first part of this amendment. It is obvious that the groups that are the likely recipients of funding under the scheme will have the most relevant first-hand experience or views about how the scheme is or should be operating.

There is a danger, of course. I fully accept that trying to discern what local communities really want is not always easy and may require particular effort. That is why there is a temptation to fall back on what I referred to a few minutes ago as gatekeepers. While many gatekeepers are absolutely fine, we need to ensure that those who are holding themselves out are sufficiently well plugged in to the detail.

In that connection, I re-emphasise the point I made—it was also made by the noble Baroness, Lady Lister, a minute ago—that the concept of community wealth funds are relatively unknown and therefore, to get a proper consultation on how they might work, the Government are going to have to do a bit of pitch rolling, if I may use a cricketing analogy, to ensure that the contributors to the consultation process have a full understanding of what they are being asked to respond about. Having said that, Amendment 57 seems likely to provide the objectives to be fulfilled, which is why it has my support.

[Baroness Kramer (LD)]

My Lords, I welcome the noble Baroness, Lady Merron, as I think this is her first outing in a Grand Committee in the House of Lords, and she is basically doing it in a prison visitors’ set-up. We probably feel like that sometimes here. She made the absolutely key statement: that consultation needs to be meaningful. That certainly underpins everything that I have to say.

I am exceedingly troubled by the very narrow list of consultees in the Bill. The Minister talks about the public, but has felt it really important not to put public consultation in the legislation. We really need an understanding of why she is so determined that the public will not appear in that consultation list. Obviously a Secretary of State who thinks it appropriate can do so, but it is not inherently appropriate in the way that the Bill is drafted. That really is important and it needs to be justified.

The noble Baronesses, Lady Lister and Lady Merron, and the noble Lord, Lord Hodgson, talked about the importance of including charities more broadly. I would add social enterprises. The noble Lord also pointed out the significance of local views.

It may be that I am an old cynic but I deal with a lot of consultations, particularly in the finance sector—they tend to be HMRC or Treasury-driven—and I am extremely conscious that a handful of voices get listened to. They are the sort of recognised powerhouses, the usual suspects and whatever else. Everybody else might get a little answer to one particular point that they make but very rarely—in fact, never within the field that I have covered—have I seen anybody other than that central core of usual suspects have any significant impact on the outcome, and lead to a different approach as a consequence of the consultation. I am extremely troubled by the way in which all this is currently structured and by its essential identification of only one big usual suspect: the Big Lottery Fund. Frankly, it is not fair to the Big Lottery Fund to make it carry that full burden alone, in the way that has been done.

My Amendment 58, also signed by my noble friend Lady Barker, was tabled because I am spitting tacks generally at the way that there is no role for Parliament in these consultations. From the many exchanges I have had with HM Treasury I know that, when there is a consultation, regulators take exactly the same point of view: that any parliamentarian is welcome to write in. Well, first, you do not find many parliamentarians with the time to develop and do all that but, secondly, they are not among the usual suspects who ever get seriously considered. It is not worth the candle most of the time and I have no reason to think that any other department will be very different in its attitude.

The first time that parliamentarians will have any impact will thus be in the useless process of dealing with a statutory instrument that they cannot amend or kill. This seems fundamentally disrespectful to Parliament. In an area such as this, we are essentially looking at Parliament in many ways as the guardian of people’s money that they have somehow missed or lost, or whatever else, so it is even more important that there should be that much wider voice speaking.

In Amendment 58, which is slightly hopeful, I have popped in a requirement to engage directly with Parliament. This problem will have to be resolved because consultation is increasingly becoming the substitute for scrutiny and accountability. It is not designed to do that in the way that it is structured at the moment.

I will pick up the point made by the noble Baroness, Lady Lister. It is quite shocking that we do not even have a reliable framework now for a consultation: it is back to departmental discretion. That is not appropriate. It is highlighted again in the Bill and, for all these reasons, I find this very troubling. We need a justification from the Government on their approach to consultation, and the answer is not: “In this instance, we’ve decided to do something very broad and general, so be happy”. Why is it in no way captured within the legislation itself?

Corporate Insolvency and Governance Bill

Debate between Baroness Kramer and Lord Hodgson of Astley Abbotts

Report stage & Report stage (Hansard) & Report stage (Hansard): House of Lords
Tuesday 23rd June 2020 Lords Chamber

[Baroness Kramer (LD) [V]]

My Lords, my name is added to Amendment 14. I cannot better the speeches from my noble friend Lady Bowles and the noble Baroness, Lady Altmann. However, I ought to add a few words, because I am probably one of a small number of people in this House and the other place who have been a creditor to a company taken through the Chapter 11 process in the United States, as I was when I worked there for a major US bank.

It is not exceptional behaviour but standard practice to seek ways to accelerate payment to get it into the moratorium period. I would have been considered remiss in my responsibilities had I not made sure that, in the various legal contracts in which lending was arranged, clauses existed that would enable me to achieve that acceleration.

As I also know from my own experience, acceleration is not the only issue; there is also the ability to make sure that a bank can take security when a company finds itself entering into financial crisis. That helps to move the financial institution’s debts much higher up the food chain. I hope that the language in the various amendments that try to deal with this problem is understood as dealing with the issue of security as a mechanism for acceleration, and not just clauses which very directly achieve acceleration.

[Lord Hodgson of Astley Abbotts (Con)]

My Lords, I put my name to Amendment 14. Before I speak to it, I draw the House’s attention to my entry in the register of interests.

I tabled a similar amendment in Committee, looking at how financial institutions and banks might game the system. When I listened to him, my noble friend the Minister seemed to give a positive answer—for which, many thanks—but when one reads col. 2094 of the Committee stage debate on 16 June, the words are not quite as strong as I had hoped. So I support Amendment 14 and want to press my noble friend a little further, for two reasons.

The first is what I might call the Pepper v Hart reason. Courts can go to debates in your Lordships’ House and the House of Commons and use Ministerial Statements and replies to discern what Parliament’s wish was when legislation was passed. Not a lot was said in the House of Commons, because it all went through in a single day, but the words of the Lords Minister, the noble Lord, Lord Callanan, have been quoted extensively and will be so in future. He will probably have a starring role in a number of law cases in the years ahead. So I hope, as we come to the dénouement of the Bill, that he will be able to lay out the case clearly, cogently and simply.

Insolvency can seem as dry as dust, but it is about people. It is about men and women who have struggled and given months and years of their life to building up a business, only to see it collapse before their eyes. Sometimes it is because of their incompetence, but often it is because of events over which they have absolutely no control, such as the pandemic. We therefore owe it to people like them to have absolute clarity about their position, their rights and their responsibilities.

I will go back to the real-life example I gave in Committee; I ask my noble friend the Minister to boil down his response when he comes to reply. A struggling company; a £10 million term loan; £1 million is in default, and a pre-moratorium demand has been made. The company goes into the moratorium. Of course, the £1 million is a pre-moratorium debt and is therefore covered, but that demand is a default on the whole loan. Therefore, using the financial services cover, the bank says, “I want the £9 million, thank you very much.” Has that hole been blocked in what my noble friend is putting before the House today? I thought he said that he was going to, but this is quite complicated. It would be helpful for the House, and indeed for the law courts in future, if he could make it clear that that is the case—that is, that banks cannot game the system and use a pre-moratorium event that is protected under the moratorium to enforce claims under the moratorium because they are financial services.

My second question concerns what I call the “Gulag issue”. In real life, in the example I gave, the act of default will mean that the company’s loan moves from its normal relationships to what is known as the “workout division”. Notwithstanding the sensitivities of the noble Baroness, Lady Kramer, the workout division is not a place for sensitive souls. It is charged, incentivised and tasked with enforcing the rights of the lender: the bank. Banking agreements have a good many pages of closely packed print, with all sorts of terms and conditions. So many times I have heard people say, “I got 1% off my interest rate and did not think about the other terms.” If your business is going to be successful because you are paying 1% less, you are in the wrong business. It is the terms and conditions that you need to look out for.

Let me give an example of how that might work. I invite noble Lords to look at their overdraft statement when they go home tonight. It will say something like this: “You will be charged 3.5% or 4% above the bank’s base rate for the time being”—what the bank’s base rate is is a good question in itself—“but for unauthorised overdrafts you will be charged 19%.” Deep in the terms and conditions for the company I am talking about, there will be a similar clause. When you default, your interest rate goes up. Do the maths. That £10 million at 19% less the 4% that you were expecting to pay—making 15%—equals £1.5 million a year, or £30,000 a week. These are the sorts of things, and there are many other ways in which banks can enforce their conditions.

Civil Liability (Information Requirements) and Risk Transformation (Amendment) Regulations 2020

Debate between Baroness Kramer and Lord Hodgson of Astley Abbotts

Monday 16th March 2020 Grand Committee

[Baroness Kramer (LD)]

My Lords, it is a delight to follow the noble Lord, Lord Hodgson of Astley Abbotts, because I could probably just say, “I agree with Lord Hodgson”, and sit down. I want to welcome the noble Lord, Lord Parkinson, to his new role, as this is my first opportunity to do so. He is getting to meet the geeks; he has several of them here in the Room today. I am afraid we are going to be part of his future.

I know that the last point the noble Lord, Lord Hodgson, made on coronavirus does not apply to this SI, but it underscores the significance of looking at the resilience of our insurance industry. Thanks to our success in being a hub for international insurance, an awful lot of liabilities are carried in the UK as a consequence of business done well outside the UK. The resilience of this sector will be absolutely critical to overall financial stability. I wish the Minister well in trying to work his way through what will be a very sensitive and difficult process. As the noble Lord, Lord Hodgson, has reminded us, it will impact not just at the macro scale; it will come down to sectors, businesses and small and large employers, which will be impacted.

In the many hours—all late at night, for reasons I can never quite remember—when we put together the Civil Liability Act, much of my focus was on trying to determine a way to deliver a personal injury discount rate that made some sort of sense. On the rate in play prior to the Act, I think someone had probably decided in 2001 what a sensible number to use was, and then looked around for a reference rate that would provide it. It was related to the yield in gilts at that point, as I remember.

[Lord Hodgson of Astley Abbotts]

It was the Wells v Wells case, in which the noble and learned Lord, Lord Hope of Craighead, was involved—the noble Baroness may recall that he interrupted us several times on it. That is how it was set; it was linked to the index-linked gilt rate.

[Baroness Kramer]

Of course, as the years went by it became evident that it no longer made sense. If I remember right—if I am wrong, the noble Lord, Lord Hodgson, will correct me—the way in which the lump sum is calculated is that award is made on an estimate of the length of time the individual will live, and the degree of injury and cost that will be consequent over that time. Therefore, the discount rate is the mechanism for bringing it back to a number which creates the lump sum. Even a very minor variation in that number creates a very different lump sum.

As we and the Treasury hunted around, it became impossible to find a reference rate that would work for all purposes: hence the move to say that the Lord Chancellor should make that decision, but with the advice of an expert panel. The expert panel was seen as an important part of it because there were so many changing and subjective elements that, in a constantly changing set of economies, would undoubtedly have play. All we were certain of was that 2.5%, the old rate, was not right and that minus 0.75%, which as I remember was the result of the Treasury finally going back and looking at its reference rate using the same methodology as in 2001, was obviously complete nonsense. It assumed that if you had a lump sum and were going to invest it, you would, first, do so on a risk-free basis and, secondly, look at such a narrow range of instruments into which to invest it that you would get only negative yield. None of us could think that even the most incompetent financial adviser would suggest investing money in that way, when there were plenty of secure ways. Even putting it into a bank savings account with a guarantee on it would have yielded far more, so it was clearly all wrong.

What has distressed all of us—I join the noble Lord, Lord Hodgson, in this—is that the advice of that expert panel was not taken. It was overridden, and instead of a number somewhere between 0% and 1%, which gave a lot of discretion to the Lord Chancellor, we ended up with minus 0.25%. That was not as bad as the minus 0.75%, which is obviously devastating as a discount rate, giving you a huge lump sum as a consequence. But it was still a number that most people felt could be justified only by someone looking at an ultra-conservative, unrealistically constrained investment strategy of that lump sum which would have to, as it were, deliver over the remaining life of the individual who had been injured.

We were all very concerned not to disadvantage someone who was being given a proper award for injuries they had sustained. That was never the purpose. Nor was it the purpose to be unfair in the way we treated insurance companies—less because we all love insurance companies and very much more because we know the cost is passed on. We heard a great deal from those who spoke up for young drivers, who often carry the highest premiums and, as a consequence of the original assessment of minus 0.75%, were going to see huge increases to their annual premiums, perhaps as high as £75 a year added on to the premium. We all knew that was completely inappropriate.

I ask the Minister as part of this—even though it is not within the language of the statutory instrument itself—to go back and try to understand why the recommendations of the expert panel were set aside. It seems we have never heard a sufficient explanation as to why it happened. If the expert panel is not going to be the answer, it seems we have to go back and look at some other system that everybody can rely on and have faith in.

As for the SI itself, I join the noble Lord, Lord Hodgson, in thinking, “Come on, guys—2025?” We are all slightly cynical and would like assurance a lot earlier that the revenue accrued, as a consequence of the change, is being passed through to the customer. That was an assurance given to us by the industry. I know that many of us who spoke up in favour of finding a new way to provide a personal injury discount rate did so only because we had that absolute assurance from the industry: that the money would be a pass-through and not a further distribution to shareholders.

I have no problem with the more technical aspects of this SI. It is just a good lesson that statutory instruments drafted in haste nearly always need to be changed sometime within the following 18 months. This is an introduction to that for this Minister. I am sure we will meet again around the table, changing statutory instruments—I seem to spend a large part of my life doing that. I thank again the noble Lord, Lord Hodgson, who covered all the issues. I support anything he said.