Financial Services Bill

Debate between Baroness Kramer and Lord Stevenson of Balmacara

Committee stage
Monday 8th March 2021 Grand Committee

[Lord Stevenson of Balmacara (Lab) [V]]

My Lords, I believe the House owes a great debt of gratitude to the noble Lord, Lord Sharkey, for the work he has been doing on this issue over the last nine years. I have been involved in part of the process, which is why I put my name down to speak: like him, I feel rather confused and not a little embarrassed that no action has been taken in recent years.

Like the noble Lord, Lord Sharkey, I first got involved in this when policy changed in the early part of the coalition Government and new arrangements were introduced for interest-bearing loans and, eventually, maintenance loans. I recall that in about 2014 there was the consultation process described by the noble Lord, Lord Sharkey. As I was then the Labour spokesperson on higher education in your Lordships’ House, I got a lot of correspondence, exactly as he described, from potential students and some existing students. Potential students wanted to know whether at the time they applied and went to higher education there would be a real chance of there being loans that they could take out that would not be a problem in terms of sharia compliance. More worryingly, students who were already at university in the middle of their course found that they could not continue without a guarantee in some form that finance would be available to allow them to see out their course.

In a sense, we were all trying to do the same thing. Indeed, I sat in on meetings with the Higher Education Minister at the time, Jo Johnson, and other colleagues in the House. We had meetings with representatives of Muslim students and the community at which a lot of these issues were explored. When the Government took powers in the 2018 Act, as described by the noble Lord, Lord Sharkey, to ensure that they could facilitate the production of loans of this type, we thought the matter was over. Indeed, I wrote to a number of people I had been working with saying that we thought that the process had reached its natural conclusion and that it was just a matter of time before the Government brought forward the necessary proposals.

As we have discovered, that has not happened, and although there have been promises and suggestions that it was coming, it has not. The Government have got themselves into a very bad position here. I cannot believe that it is impossible to go forward—as the noble Lord, Lord Naseby, said, just to do it—and I am looking forward to hearing the Minister’s response. If there is anything we can do to help, he should be sure that there is, as the noble Lord, Lord Sharkey, said, no politics in this. We simply want a good job done to make sure that all people who contribute and wish to contribute to higher education in this country can do so and are not in any sense disadvantaged simply because of their religion.

[Baroness Kramer (LD)]

My Lords, any one of us can go on to our smartphone and find an app for halal financing for someone who wants to buy a car or a house—they are called “halal mortgages”—or who needs money to support a small business. It is incredible and quite incomprehensible that we do not have a sharia-compliant version of student loans. It is not as though we do not know how to do it or the institutions do not exist in the UK. I suspect that many noble Lords have been, like I have, at general meetings of the financial services industry where, as well as talking about being world leading in terms of green finance, we have talked about London as a very important centre for sharia-compliant finance as we attempt to expand and have a much greater global reach. Six years is an incredible time to wait. It has been four years since enabling legislation was put in place.

I was looking at a Metro article on the web about students who were interviewed in 2019. Some had managed to put together a way to pay their student fees. One said:

“I was constantly broke as a student and never, ever did anything remotely fun. I always felt too guilty if I spent any money on myself.”


Students who started out and found that they just could not keep going left and went to work, but then found that, as this lady said,

“to progress further I need that degree so the plan is to go back.”

However, this young woman has no idea how to finance it. Another youngster talked about the stress of

“having to live scrupulously and scrape up enough to pay each instalment in time.”

We really should not be putting any student into this situation. I do not understand the delay. There does not seem to be an obstacle in terms of designing the appropriate facility or the appropriate legislation. I hope that the Ministers who are here, all of whom are people of understanding and sympathy, will go and put pressure on the Government to take this from the bottom of the in-tray and put it at the top. It could be a minor amendment that we make on Report.

Financial Services Bill

Debate between Baroness Kramer and Lord Stevenson of Balmacara

Committee stage & Lords Hansard
Wednesday 3rd March 2021 Grand Committee

[Lord Stevenson of Balmacara (Lab) [V]]

My Lords, that was a very interesting intervention from the noble Baroness, Lady Noakes, which enhances her reputation as a banker of some repute. I am sure her figures are absolutely right; I was still writing them down as she finished. She has made the case that you need to be able to do these sorts of sums and mathematics if you are dealing with the sorts of debts we have been talking about for most of the afternoon.

I put my name down to speak on this debate, but not because I have a particular view on the merits of the amendment, which I thought was extremely well argued by the noble Baroness, Lady Bennett of Manor Castle. She raised issues on the wider context of how debts are managed in society, which I think the Committee will be very grateful for having on its mind as we focus on the issues. She gave us a tour d’horizon of the various ways in which those who run into unmanageable debt have to deal with the process of repaying, absent a debt respite scheme and absent a scheme under which statutory repayments are organised. They are extremely tough and, to go through an IVA, a debt relief order or full bankruptcy is not something that one would recommend to people if there was another way of doing it.

Indeed, part of the debates we have been having are about how wide we should take this discussion. As my noble friend Lord Davies of Brixton mentioned, the way debt impacts on society is something that is worthy of wider consideration in a more general sense rather than in relation to the particularity of the processes that we are involved in.

That said, it is good that we are having this debate about the wider context within which debt operates in society. It is not a debate that you hear very often, and it is an area of policy that could be afforded a lot more consideration. As such, I will join with the noble Baroness, Lady Noakes, in suggesting that the amendment should not progress at this stage, but for completely different reasons. I think there is a better way of dealing with this relating to the way debts are sold.

The argument that the noble Baroness, Lady Noakes, made, which is that this is how financial institutions obtain the liquidity necessary to maintain the cycle of lending on which we all depend, means that we need to have a better understanding of what happens when debts go wrong and when big institutions of the type that she talked about have to deal with the consequences. I do not mean to go through that in any real detail, but perhaps when the Minister responds he could take into account some of the thinking on this for when we look in detail at the regulations that he has promised us sight of on the statutory debt management plan, and in relation to what I think will be necessary at some point in the not-too-distant future: a reconsideration of the role of the debt relief order and the IVA’s structure, which is part and parcel of the process of dealing with this.

The essential point here is about how, and on what basis, those who have decisions to make about debt make them about individuals who have repayments to make. My understanding, picked up over the time that I was at StepChange, was that, by and large, we are not dealing with a very large proportion of society who are feckless about incurring debts. What tended to come across to me from looking at StepChange’s clients, listening in to the calls that were made to it and observing some of the emails and discussions around electronic systems was that most people—the huge majority—were appalled to be in unmanageable debt situations and were desperate to make a repayment. However, they did not have the financial knowledge and understanding of the system and the world in which they were operating to deal with it themselves. They needed help, which led to the debt advice and the subsequent process of repayment that we have been talking about.

However, at the heart of this is the same calculation that the noble Baroness, Lady Noakes, made: if someone in a credit card organisation or bank is lending money to someone and learns that that debt is going wrong, then there is an immediate calculation of the likely return from it. While we in this country stick to the idea that the creditor must always be repaid in full—or as close to it as possible—the reality is, as the noble Baroness, Lady Noakes, explained it, that a decision has to be reached about what proportion of that debt will be repaid and over what timescale.

My impression is that we are talking about a very large difference in perception. I return to the noble Baroness’s example of a £100 debt that goes bad—she says that one in five will not repay. In a sense, that is the start of the conversation that the person who made the loan has to have with their boss to assess what rate of recovery the loan will have. I believe that we need to have further understanding—not necessarily today or on this Bill—about how that process needs to work better for society. I agree with my noble friend Lord Davies of Brixton: a social issue needs to be addressed at some point, not necessarily today.

If it is true that a loan of £100 has a default rate of at least one in five—I suspect it is higher than that—then we should not be thinking in terms of trying to get a 100% return; we should set in our minds a figure that society could accept and which would be more reasonable in relation to the overall quantum of debt, better afforded by those who need to make repayments and more acceptable to those who do the lending. We are not yet there, and I do not have a solution to this; we are probably too early in the process of discussion and debate. I look forward to the Minister’s comments. This is a conversation that we should have more generally, away from a Bill, on a broader understanding of debt in society.

[Baroness Kramer (LD)]

My Lords, the noble Baroness, Lady Noakes, and I very rarely seem to agree on the types of issues covered in this amendment, but on this one we are totally of one mind. I am very grateful because I tried to write an explanation of how this process would work and it was so inferior. The noble Baroness, Lady Noakes, not only explained it very clearly, step by step, but included numbers, which makes it much more evident.

I think there must be some misunderstanding. As the noble Baroness, Lady Noakes, explained, it is perfectly normal for an originating company to sell off the loans it has, sometimes because it can sell them to someone who has a different funding profile or a different tolerance for the average duration of the book of loans being sold, or because somebody may take a different view on how many of the loans will pay in full, pay in part or default. It is a perfectly standard process and provides liquidity to the market. As the noble Baroness, Lady Noakes, said, if an organisation had to keep all the loans it generated on its books and could not sell them off, it would find very quickly that it was constrained in doing any new business. That would be hugely damaging to many of the people who go out and borrow. It tends to be a completely different business that will buy loans in the secondary market.

The question that underpins this is: is the Statutory Debt Repayment Plan right and fair when it is put in place? If that is true, it should not matter if the money is paid to the originating company or to the secondary buyer. Within the portfolio, there will be some people who can and do meet the full obligations of the Statutory Debt Repayment Plan, and surely that is appropriate. There will be others who fail and end up in bankruptcy, and whoever is holding the loan will lose out.

My question is whether there is any read-over from the kind of issues we have had with mortgage prisoners. It is important that where there are expectations about how the original lender will behave, they are carried over to the secondary lender. For example, if the original lender is quite likely to offer an alternative loan or new terms and conditions or whatever else, you would expect to see that reflected in the secondary lender. I would not want a situation where the secondary lender was able to levy additional charges or put additional costs on the borrower that would not have been expected by the original lender but perhaps are not covered in the minutiae of the contract.

Otherwise, the honest truth is that I just do not understand this amendment. I am absolutely certain that it completely seizes up any possibility of having a secondary market, and the people who will pay the greatest consequence for that are those who need to go out and borrow from time to time and are at the margins of being appropriate borrowers.

Trade Bill

Debate between Baroness Kramer and Lord Stevenson of Balmacara

Committee stage
Thursday 15th October 2020 Lords Chamber

[Baroness Kramer (LD)]

My Lords, I join the noble Lord, Lord Rooker, my noble friend Lady Bowles and the noble Baroness, Lady Ritchie, in favouring transparency, in particular for its salutary effect on the independence of a body such as the Trade Remedies Authority. I say that after looking at the report from the Select Committee on the Constitution, which is hot off the press. It speaks with real frustration when it says:

“We remain of the view that the Bill’s skeletal approach to empowering the Trade Remedies Authority is inappropriate.”


The committee points out that the TRA must have regard to guidance published by the Secretary of State but says, quite accurately:

“There is no further indication of the content of such guidance.”


It emphasises that

“it is not clear why, more than two years after the previous version of the Bill was introduced, the functions and powers of the Trade Remedies Authority cannot be set out in more detail in this Bill.”

So I think we can all agree with the underlying purpose of the amendments tabled by the noble Lord, Lord Rooker, and others that focus on trying to flesh out the contents of the Bill so that this House, and the other House, have a clue about what exactly we are signing off on.

Transparency is particularly crucial when it has direct implications for consumers, especially where safety is a concern. I am sure that is the logic behind the powers of the Food Standards Agency to make disclosures; I would like to see that logic carried over into the TRA. However, as my noble friend Lady Bowles identified, we must recognise that the TRA will be drawn into a wide range of industry sectors, where revelations may well have no safety implications and might be commercially sensitive. So, like my noble friend, I would like a more comprehensive set of criteria than those in the amendment as drafted. I say this in case the noble Lord, Lord Rooker, decides to bring the amendment back on Report. I recognise that, in Committee, we are discussing the principles of an amendment and not the precise wording. I am sure that none of us wishes to discourage applications to the TRA when justified, and nor would we want it used as a weapon of unfair competition. So getting the language right is important, and it is something that could be addressed in a further drafting exercise.

[Lord Stevenson of Balmacara (Lab) [V]]

My Lords, I thank my noble friend Lord Rooker for his very good probing amendment. He has a habit of picking up on issues which, on first sight, seem not to be mainstream—but he is absolutely right that this is important, and I think it will be of long-lasting concern.

We believe that the creation of the Trade Remedies Authority is both necessary and welcome, but we are worried that, as presently constituted, the TRA lacks the stakeholder engagement or parliamentary oversight and accountability that would give it the visibility and independence that it needs. To this list, thanks to my noble friend Lord Rooker, we should add the question of transparency. It is up to the Minister, when he comes to respond, to explain how independence and accountability will be achieved without the TRA having the power to publish such information as it sees fit. I look forward to his response.

Trade Bill

Debate between Baroness Kramer and Lord Stevenson of Balmacara

Committee stage & Committee: 1st sitting (Hansard) & Committee: 1st sitting (Hansard): House of Lords
Tuesday 29th September 2020 Grand Committee

[Baroness Kramer (LD) [V]]

My Lords, I thank the noble Lord, Lord Berkeley, and the noble Baroness, Lady Neville-Rolfe, and bow to their expertise. I am stepping in in the place of my noble friend Lord Bradshaw, who is, unfortunately, not able to speak today. I know that the three of them have had sufficient conversation to enable me to be sure that I can support everything that has been said up to this point.

Many of us are utterly frustrated that, in this era when we are so concerned with climate change, the advancement of rail is frequently constrained by the concerns of rail equipment companies about the security of their rolling stock. This protocol addresses that issue. It provides a public registry for rolling stock, which would hugely facilitate cross-border operations of freight and passenger trains, and the certainty that a registry offers. It would free up financing for rail stock, because it provides mechanisms for repossession of collateral in cases of insolvency.

Stimulating private investment in this arena is absolutely critical. This is not a burden that most countries around the world can carry at government level, so ensuring private participation is crucial. We move now into an era where our concern about climate change means that rail options, in contrast to aviation or road options, are increasingly attractive because of the environmental benefits, and very often it is far more cost-effective for exporters and importers.

As the noble Baroness, Lady Neville-Rolfe, said, the UK has increasingly become a player once again in the manufacture of rail equipment and it needs international markets. It would of course be of benefit if those markets had much greater certainty and confidence in those who are selling.

I am somewhat concerned because, when I last looked—and perhaps the Minister might correct me—only Luxembourg had actually ratified this treaty, although many countries have signed it, as the UK did in 2016. We really want to make sure that there is no obstacle to UK ratification, which would undoubtedly give others the confidence to go ahead and ratify, lifting the whole platform of rail as part of the ongoing future, so that it has much more significant international consequences than even domestic consequences.

I hope very much that we can use this opportunity to bring the issue once again to the Government’s attention. I am very comforted: it sounds as though the Government have found a route for ratification to be achieved. I do not think any of us particularly care what the route is, provided that it is secure and effective. I look forward to hearing the Minister’s comments on this issue.

[Lord Stevenson of Balmacara (Lab) [V]]

My Lords, I am grateful to my noble friend Lord Berkeley for introducing this amendment. I am afraid that it is outside my normal expertise area, and I listened with interest to what he had to say. We should support his argument that if it is possible through this Bill to facilitate the rail sector and its development, we should do so. I am happy to back up the points made by other speakers.

UK Internal Market: White Paper

Debate between Baroness Kramer and Lord Stevenson of Balmacara

Wednesday 29th July 2020 Lords Chamber

[Lord Stevenson of Balmacara (Lab) [V]]

My Lords, we support the principle of maintaining the UK’s internal market, which is vital for trade, jobs and prosperity across the whole United Kingdom. It is good that the White Paper has been issued, and I am sure that the responses to the consultation will be of value. Will the Minister outline the timetable for the consultation and the legislation to follow, which I assume will have to be in place by 1 January 2021? He will understand that, with the Trade Bill due to start its return journey through your Lordships’ House on 8 September, there is a danger of some overlap, which we should at least identify before we start.

It is already clear from the reactions in the devolved Administrations that there are some knotty problems to be addressed in the consultation, some of which, of course, span beyond internal trade issues, important though these are. The key issue that needs to be addressed is how we establish which powers being repatriated from Brussels can be passed directly to the devolved Administrations. I understand that a lot is agreed, but there are a number of areas where overlapping interests mean that this has not yet been formally determined. What is the current situation on the common frameworks? The unanswered question on this issue is: if a settlement cannot be agreed, or future problems arise, what resolution mechanisms will be used? The proposed independent advisory body is neither flesh nor fowl and will be problematic. However, in previous discussions a number of possible solutions have been canvassed. In this regard I reference the proposal made by the noble and learned Lord, Lord Mackay of Clashfern, who is to speak shortly after me, on the first Trade Bill.

Can the Minister confirm that the solution to this must be de minimis, involving a joint government council, with recourse to the UK Parliament where decisions by the UK Government may impact on areas of competence which are not reserved? Can he further confirm that these arrangements need to be established on the principle of co-operation and transparency? It is surely self-evident that these arrangements will work in practice only if they are based on a secure statutory framework, establishing without doubt a set of high-quality standards which must be applied across the whole United Kingdom— these were, of course, guaranteed while we were in the EU—relating to human rights, employment rights, consumer protection, animal welfare, food safety standards and environmental standards. There must be no question of a race to the bottom here.

There should be an understanding that, where a devolved Administration want to raise standards on an issue on which they have competence, that should be encouraged: the subsidiary principle can and should operate here, possibly to the extent that we could envisage separate devolved administration trade deals in the future. The Minister will have noticed that the Government have resisted all recent attempts to legislate, in successive Bills, for exactly these standards. Will he take this opportunity to look again at the ongoing Agriculture Bill and the soon-to-start Trade Bill and support measures that would achieve this vital underpinning? If not, why not?

Finally, the White Paper raises the question of state aid rules, albeit in the guise of subsidy. We are aware that this issue is one of the key concerns of the current Brexit discussions but, even so, the lack of clarity here is worrying, particularly at a time when state aid has been so crucial to the Covid-19 response and will continue to be so during the recovery. Will the Minister please confirm when further details, including the role to be played by the CMA, will be made available?

[Baroness Kramer (LD) [V]]

My Lords, I agree, as does my party, that an internal market is vital to our economic future, but we are a country of nations, and even this Government must recognise that any internal market requires building a significant consensus between the UK Government and the devolved Administrations. Will the Government commit to an impartial UK body to deal with compliance and dispute resolution, to ensure that the devolved Administrations’ concerns on trade and regulations are respected? How will this proposed legislation operate with the Northern Ireland protocol? I can see no way that unfettered access, which this Statement contemplates, fits with the technical and administrative processes required as a consequence of the protocol. Will the Minister explain how much of the internal market framework is essentially designed to enhance the Government’s flexibility to make concessions without engagement with the devolved Administrations, in order to achieve trade deals with countries such as the United States?

Business and Planning Bill

Debate between Baroness Kramer and Lord Stevenson of Balmacara

Report stage & Report stage (Hansard) & Report stage (Hansard): House of Lords
Monday 20th July 2020 Lords Chamber

[Baroness Kramer (LD) [V]]

My Lords, first, I thank the noble Baroness, Lady Penn, for her willingness to talk virtually to a number of us who have been focused on this issue; however, I came away from those discussions almost more confused than I went into them. This House will be aware that the financial regulators—certainly the FCA—do not regulate institutions but activities. One of the activities it cannot regulate is commercial lending, which is on the far side of what is generally called the regulatory perimeter. A slight sleight of hand is, to some extent, made available to sole traders, micro-companies and the very small end of small businesses so that they do merit some protection, that typically coming in the form of an appeal to the ombudsman. Although the ombudsman has very limited power to actually make sure that any remedy is effected, there is at least one to go to.

For companies that do not fall into this category—my noble friend Lady Bowles provided the detail, so I will not repeat it—there is no form of protection; the FCA has no standing. Therefore, when those companies are put into default and the banks come to collect on their debts, their only resort has been to the courts. Under this arrangement, that is now removed from those companies if they have taken out a bounce-back loan. I really do not understand why the ability to go to the courts to protest unfair treatment has been removed.

The Government have full knowledge that the FCA cannot act under these circumstances. I suppose that, occasionally, somebody in government will argue that the FCA can turn to the Senior Managers Regime, but, as we all know, having listened frequently to the testimony from Andrew Bailey, only in very rare instances would the regime apply. Indeed, the FCA has been very reluctant to use it, even in some very egregious cases; in fact, I would be interested to hear from the Minister the number of times the FCA has actually used it. It is not a workable mechanism for trying to force the banks to provide fair treatment to the larger end of SMEs if they go into default under their bounce- back loans.

The Bounce Back Loan Scheme is brilliant, but I am very concerned that it will end up with a stain on its character when, in 18 months’ or two years’ time, we have a chain of companies that are clearly being treated unfairly by the banks and both the Government and the regulators stand back and say, “There is nothing we can do. This was an unregulated activity, only contract law applied, and we have disallowed these companies’ ability to go to the courts to seek any form of redress”. Frankly, it is a tragedy and a scandal in the making.

I am not sure it has been made clear to companies that when they apply for bounce-back loans, it is caveat emptor and they will be without even the normal range of protections should they go into default. If I understand correctly, the Government have decided to disapply the right to turn to the courts as part of an enticement to the banks to participate in the Bounce Back Loan Scheme. I cannot believe that that concession should be given; and if it was asked for by the banks, I am even more worried because, as we know, the banks seek opportunities to make profit—that is the business they are in.

Perhaps the Minister is not that familiar with the RBS and GRG scandals. The GRG was a profit centre. The RBS staff who were part of the GRG were looking not only to get loans and interest repaid but to make an additional profit, particularly by seizing assets. Under the various contract terms, they could identify firms that would value those assets. The owners or borrowers could argue that the assets were being valued at well below market value, but had no means of enforcing that, and of course we know from the various reports that followed that it was not infrequently the reality that assets were valued very low, triggering the default, and months later, having been seized by the bank, were resold for multiples of the valuation.

The mechanisms that the banks use when they have the opportunity to put a company into default are frequently outside the boundaries of what any of us would consider fair and appropriate. I do not understand stripping away from companies any possible route to a remedy under those circumstances.

[Lord Stevenson of Balmacara [V]]

My Lords, my name is on this amendment, and I am in general support of the points powerfully made by the noble Baroness, Lady Bowles, in Committee and today, and by others who have spoken. They have made the main arguments, which I will not repeat.

The Government argue that the key driver for this initiative is to get the bounce-bank loans out to as many small businesses as want them and can use them, and to reduce barriers to that effect. I sympathise—it is very hard to be against that aim—but there are clearly risks here, as we have heard. While my concerns are not identical to those of the noble Baroness, Lady Bowles, they are very similar, and I would like to make three points on the issue.

First, there is general agreement that the Consumer Credit Act 1974 urgently needs bringing up to date, to be fit for purpose regarding the changed regulatory landscape of different lending practices and the tighter financial circumstances of the 2020s, now and post Covid-19. The current lender/borrower relationship envisaged under the Act does not work but, as others have said, it is very risky to remove all the court protections, and I sympathise with that.

Secondly, the Government have put on record the very tight constraints that they are putting on lenders who wish to engage with bounce-back loans, including banning fees, banning punitive interest and forbidding reach-through sanctions to personal assets such as houses and vehicles, but is that enough? There is a powerful tool in the Government’s armoury.

Thirdly, the 100% guarantee that we have been talking about is on the lender, not the borrower, but that gives the Government considerable powers which they say they will use to drive good behaviour. For me, the key question is whether, in removing access to the courts under the unfair trading clauses of the 1974 Act, the Government have put the bounce-back loan borrowers in a worse position than if they had left it all in place, or—as suggested in the amendment—just the affordability issue. It is a close call.

I would be very grateful if the Minister, when responding, could deal fully with the following points. First, will she confirm that the Government will undertake to overhaul the Consumer Credit Act 1974 in the near future, taking full account of the issues raised in this debate? Secondly, can she list concisely the limits on lenders’ ability under the bounce-back loan to penalise borrowers who are in default or otherwise transgress, irrespective of the amount of money borrowed, and the statutory and non-statutory opportunities for borrowers to protect themselves and their possessions if lenders attempt to penalise them absent the core protection of the 1974 Act?

Thirdly, can the Minister set out what she called “the steely determination” of the Government to use their power to reduce or cancel the 100% underwriting of loans made under the BBL scheme, if lenders transgress? This could be a very powerful weapon. It would be useful to know who will have the power to trigger certain sanctions, and how borrowers will be informed about the process. The noble Lord, Lord Carlile, suggested that an arbitration structure was needed, and he may well be right. If the Minister can confirm that these points are in play and give assurances on them, then I suggest that the noble Baroness, Lady Bowles, does not press her amendment to a vote this evening, as we will not support her.

Business and Planning Bill

Debate between Baroness Kramer and Lord Stevenson of Balmacara

Committee stage & Committee: 1st sitting (Hansard) & Committee: 1st sitting (Hansard): House of Lords
Monday 13th July 2020 Lords Chamber

[Baroness Kramer [V]]

My Lords, I support Amendments 46, 47 and 48 and regard all three as exceedingly important. I will start by picking up on an issue described by my noble friend Lord German. We know now that the major banks, which have been able to participate in the bounce-back scheme because they have been provided with cheap funding from the Bank of England under its term funding scheme, have failed in what I was told was an obligation to also pass that cheap money through to the fintech industry and other alternate lenders, so that a broad and diverse coterie of lending institutions would be involved in bounce-back schemes and a mechanism to ensure that qualifying small companies would be able to find a source, even if it was not from one of the major banks. We now know that that funding process has not taken place and that relatively few bounce-back loans are being provided by alternate lenders because they cannot find cheap enough funding, since they have no direct access to the Bank of England scheme.

The reason I mention this is that it describes to us the culture of major banks today. Many of us had hoped that after the 2008 crisis we would see a dramatic change in culture among the major high street banks. We have certainly seen some changes, and some are better than others, but we are still dealing with a group of institutions that, frankly, if given a loophole will use it. Amendments 46 and 47 are designed to close off two major sets of loopholes to make sure that proper consumer protection continues to be provided to SMEs that use the bounce-back schemes and to make sure that these do not become mechanisms that enable them to be taken advantage of in ways that they never anticipated. Therefore, Amendments 46 and 47 are vital to limit any potential for abuse.

Amendment 48 is important because it will help us track exactly what is happening under the Bounce Back Loan Scheme arrangements. We have all heard anecdotally that the big banks are cherry picking those to whom they make bounce-back loans. Some of them choose only existing customers because they do not want to overexpand their balance sheets; others pick from within those customers. As I understand it, the whole spirit of the bounce-back scheme is anathema to cherry picking, but it is taking place.

Amendment 48, in the name of the noble Lord, Lord Stevenson, would very rapidly make clear how many people are applying and who is rejected, and it would give us the ability to try to track exactly what is happening under this scheme. I know that something like £30 billion has already been lent through bounce-back loans but, frankly, that is well below the level that the Government expected. Those loans are a lifeline for many companies and we really cannot allow this scheme to be abused. If we are not careful, by the time we intervene, many businesses will already have closed their doors.

[Lord Stevenson of Balmacara (Lab) [V]]

My Lords, I have added my name to Amendments 46 and 47, moved and spoken to respectively by the noble Baroness, Lady Bowles of Berkhamsted, and I support the points that she has made. I also welcome the expert contributions from the noble Baroness, Lady Altmann, the noble Lord, Lord German, and the noble Baroness, Lady Kramer.

The Consumer Credit Act 1974 has long been criticised because of its extensive, complex information disclosure requirements. These are a problem in their own right but they can make it problematic for lenders to be flexible in cases where they might, for example, wish to offer forbearance to consumers experiencing difficulties in making repayments or to those suffering from unmanageable personal debts, as many do. Clearly, if small businesses are being affected by Covid-19 issues, it makes sense to ensure that their access to bounce-back loans is not hampered by requests for unnecessary evidence and detail or by extensive time delays in processing such data.

However, as the Explanatory Notes make clear, SI 2020/480 changed the rules for small loans to individuals and small partnerships so that they are no longer regulated credit agreements. However, as the noble Baroness, Lady Bowles, pointed out, the SI does not affect Sections 140A to 140C of the Consumer Credit Act 1974—the so-called unfair relationship provisions. The problem identified by the noble Baroness seems to be important. In a laudable attempt to simplify the processes, the Government might, perhaps inadvertently, have removed the statutory underpinning of Sections 140A to 140C, which, for example, through the courts protect borrowers from any subsequent attempts by lenders to act unfairly. That can often be the case, as we have heard this evening.

I believe that this issue might need to be reviewed separately once we are through the pandemic. Perhaps when she comes to respond, the Minister will agree that it needs further work. I hope that she will also be able to reassure us that our concerns are unfounded. I have my doubts but am willing to be convinced. The change in law needs to be securely attached only to bounce-back loans and the Covid-19 pandemic. We also need to know that the application of this disregard is proportionate and appropriate to lenders.

Turning to Amendment 48 in my name, I am grateful for the support of my noble friend Lady Uddin and the noble Baroness, Lady Kramer. I hope that the Minister recognises that the amendment covers ground raised in the powerful comments made at Second Reading by the noble Earl, Lord Shrewsbury, who shared his personal experience of the wide variability of responsiveness by the individual banks and lending institutions authorised by the British Business Bank to issue bounce-back loans.

My amendment calls for regular reports. I appreciate that there are confidentiality issues here, but this is also about transparency. If a private company such as MoneySavingExpert can do a survey which reveals that a substantial number of bounce-back applicants suffer delays, rejections and unrelated credit checks, surely the Government can do better. It is true that the MSE report is based on a sample, albeit a large one, but it shows that consumers have had variable responses from the major banks, and some of the smaller challenger banks had very high rejection rates. The transparency which the amendment looks for may improve that situation. I hope that the Minister can offer some movement on this issue, which would help with the task of getting bounce-back loans out to those who can use them. She said in her response to an earlier group of amendments that the Government were constantly reviewing and improving the Bounce Back Loan Scheme. I hope that she recognises that to do that without the sort of information that my amendment proposes might be otiose.

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

Debate between Baroness Kramer and Lord Stevenson of Balmacara

Wednesday 8th May 2019 Lords Chamber

[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.

Trade Agreement between the United Kingdom of Great Britain and Northern Ireland and the Swiss Confederation

Debate between Baroness Kramer and Lord Stevenson of Balmacara

Wednesday 1st May 2019 Lords Chamber

[Baroness Kramer (LD)]

My Lords, I cannot pretend expertise on trade Bills. We have heard brilliant speeches here today, but I want to raise four issues with the Minister.

The first is services. As the noble Lord, Lord Whitty, explained, financial services is the second largest arena in the services sector. Excluding the treaty on long-term insurance, many other sectors are governed by a number of equivalency agreements between the European Union and Switzerland, many of them designed with the City and the UK market in mind. I am completely unaware of what has happened to those and what the consequences of that could be. I would normally have seen any SIs concerning the financial services sector and I do not recall having seen SIs in this area, so I am quite worried, particularly as all this work was done with the expectation that we would have left the European Union by now and that those would have kicked in.

The second issue I want to pick up on is one that a number of noble Lords have spoken about: accumulation. If I were sitting in the Swiss position and allowing only a three-year period for accumulation triangulation to continue before it came up for review, I would be expressing the expectation that it would take three years for most companies to reorganise their supply chains in order to make accumulation in the triangular mode unnecessary. That would seem to greatly disadvantage the UK in the long run. Does the Minister have a reading on why that particular deadline was put in place?

The third area is mutual recognition agreements. I recognise that only about 10% of trade in goods between the UK and Switzerland is governed currently by mutual recognition agreements, but the continuity agreement basically covers only three-quarters of that. So about £500 million of exports from the UK to Switzerland each year are not covered by the rollover of mutual recognition agreements. Can the Minister tell us what the consequences of that are and whether she thinks that the additional cost of becoming certified in two jurisdictions is de minimis, or whether she sees that trade disappearing or transferring over to the EU? There is nothing here to give us any sense of the impact of that.

The last area that I wanted to pick up on was the authorised economic operator, but from a slightly different angle from that of my colleague. As I look at the document that was helpfully produced in February by the Department for International Trade, it says, interestingly, although most of the trade between the UK and Switzerland is indeed governed by firms which have taken out authorised economic operator status or have been awarded it, that,

“Switzerland applies broadly the same checks to AEO and non-AEO traders”.

I raise this because that coincides with most of the information that I have had from companies, that getting authorised economic operator status is exceedingly expensive, both to get in the first place and then to maintain, and it makes not the slightest difference when you get to a border—you are held up for just as long. Since this is the structure on which so many Brexiteers are building their expectation of how we would deal with the Irish border, will the department look at its own experience and understand that this mechanism does not work well at present and that no one seems to have come forward with any way for it to work efficiently or effectively in the future? It is evident from the department’s own document that this is not an answer to the Irish border problem.

I will make one last comment and then sit down. My attention was originally drawn to this trade deal by the press releases at the time, and I was pleased that they were so positive, as was the press coverage: no disruption in economic and trade relationships between the UK and Switzerland. Yet when I dug into this—which others have done far better and more forensically than me—it was full of holes. I ask for there to be much greater consciousness of giving a full picture when reports are made both to the public and generally to this House. We all understand that these are difficult, but the pretence that they are easy, complete and deliver no change is a poor message to give the companies that will bear the burden of the loss of opportunity and access that is consequent on the shift from the current circumstance to this continuity arrangement.

[Lord Stevenson of Balmacara (Lab)]

My Lords, this has been a very good debate, and, not the first time, your Lordships’ House owes a considerable debt of gratitude to the EU Committee, and in particular to this sub-committee, for the hard work it has done in trying to bring together the arguments, the pluses and the minuses and the difficulties that we face in relation to this agreement. In addition, through this Motion today, my noble friend the chairman has been able to bring forward a much broader context within which we have to think harder about the processes and procedures we will need to have in place if we are not to repeat the mistakes that he has drawn to our attention today.

The regret in the Motion before us today is about the fact that the trade agreement that has been given to Parliament to consider does not have sufficient on services—all the arguments have been made clearly about that. However, in addition to the points about the specificity of services, is there not a slightly bigger worry behind all this? It must have been obvious to those negotiating on our behalf that, even though the figure of 80% of our economy may be different in practice, the relationship we have with Switzerland is based on a substantial volume of services activity.

If we have been unable to agree anything on services in this relationship, what does this say about our future ability to negotiate in a much broader context with all the countries of the EU, if we have to? What about the US and other countries for which our services, although valuable to us, may not stand in the same arrangement? Our failure to do it with a supportive friend—a country that has always been engaged with the UK—raises wider questions and leaves uncomfortable echoes for future arrangements.

When we look at the detail that the committee has pointed out, we see the omissions, changes, adjustments and disapplications. Although what we have today is a substantial document—my goodness it is; if those who have read it right through to the end are not concerned about how it distinguishes between the customs duties that will be applicable for gherkins, fresh or chilled, while aubergines go free, they are not doing their work, and I am glad someone else did it for me because I would have given up at that point, although it is quite late on—surely the issue here is that we are not getting what we think is the complete package. It is just a trade agreement, not the trade agreement that should be there. Therefore, my second worry is that we have been given something which is more to satisfy the vanity of those responsible for the department in relation to the promises given about the ability to do trade deals than it is about the specificity of our exporters and importers in relation to the country of Switzerland. That leaves me a little concerned.

The wider context of this is the question of scrutiny. Others have raised all the points and I do not need to go back through them again. We are still stuck trying to use 19th century resources and processes, relying on the royal prerogative, to try to take forward our treaties, when we need to replace them with a system that engages with the obvious interests in this House and the other place, the wider world and the devolved Administrations, to make sure that we can do something positive with our trade. That concept was debated at length on the Trade Bill, and I shall not go back over the issues. As has been pointed out, that Bill awaits Commons consideration of Lords amendments, but the irony is that if the Commons were willing to accept, at least in part, what has been put forward today—and we are certainly happy to talk about that—we would have a system that would set mandates, require Parliament to be kept abreast of developments and changes in the negotiations and recommend whether Parliament itself should ratify the end conclusion.

The Minister may reflect on the following question when she responds. If our EU Committee—or whatever committee structure is set up in future—had been given the chance to look at the mandate for this trade agreement and given periodic reviews of the discussions and debate and had the power to recommend whether it should be ratified, would we really be in such a mess on this issue as we are?

Trade Bill

Debate between Baroness Kramer and Lord Stevenson of Balmacara

Committee: 2nd sitting (Hansard - continued): House of Lords
Wednesday 23rd January 2019 Lords Chamber

[Lord Stevenson of Balmacara]

My Lords, in speaking to Amendment 29 in my name I will also speak briefly to the amendment with which it has been grouped: Amendment 56 from the noble Baroness, Lady Kramer.

At the forefront of my amendment is whether we should retain the rather disputed separate mechanism for resolving investor settlement disputes—this applies to rollover and new FTAs. The concept of ISDS is not new; it certainly predates us joining the EU in 1972. Over the years, we have had a very large number of trade agreements—some several hundred—which Members of the House will be aware of, and many of these contain clauses under which the ISDS was created. In the early days, it was done with some justification in some countries to try to ensure that investment from third parties—particularly private investment, which was obviously necessary to unlock the activity that was the focus of the trade agreement—could be protected in situations where political issues or other issues intervened. Given that the legal systems in some countries will not be regarded as being as well-developed as in other countries such as ours, it is not unreasonable to therefore concede that some sort of special protection was required. That is really where it came from.

I do not think that there is very much more to say about it, except that our argument is that these ISDS schemes are of a bygone age. They relate to a situation in the world that does not really exist anymore. It certainly does not apply to many of the countries with which we will be creating free trade agreements or rolling over existing arrangements. In so far as they have legal systems that we can respect, there should be no question that we should work with our own legal system and with theirs to reflect any requirement for the need to ensure that parties to the agreement can pursue the establishment of a tribunal and appellate mechanism for the resolution of investment disputes.

I should wait for the noble Baroness, Lady Kramer, to introduce her amendment, but in case she has any doubt at all, I do not support where she is coming from. I want to make it very clear that I am not alone in this: the most numerous of the very large number of submissions we received on the Bill were on ISDS. I am sure the Ministers are aware of that. It is worth thinking about the role that civil society more generally will play, but if just about everybody is saying that the Government should move away from these as a model and should think, as the EU is doing, about moving to a system that relies on existing tried and tested systems in the countries, this is something we should bear in mind. I beg to move.

[Baroness Kramer (LD)]

My Lords, I share one point with the noble Lord, Lord Stevenson, on this issue: many of the various systems for investor and trade dispute resolution are broken. A search is on for new, more effective mechanisms to deliver much more satisfactory resolution, particularly as trade arrangements become far more complex and encompassing, and disputes have much greater significance for the global economy.

The Committee will be aware that the WTO’s arbitration system is on the verge of collapse. It relies on a panel that includes a minimum of three judges and a maximum of seven. The panel, through death and retirement, is now down to three. The United States has made it clear that one further death or retirement will mean the end of the WTO’s arbitration mechanism—it will not agree to replace any retired or dying judges. That mechanism is now effectively teetering on the verge.

Many will also have been involved in the debates around TTIP when that was active in this House and will understand that the resolution methods contemplated under it created a great deal of concern that private companies—specifically American companies—would be able to use the mechanism to wade in and counter local law and local decisions. The structure under TTIP relied on arbitration panels chosen specially for the purpose, against which there was no appeal. They were not part of a traditional judicial system.

We do, however, have an example of a system that works exceptionally well for trade resolution: the European Court of Justice, working for the currently 28 members of the European Union. As Trade Minister, when I talked with the Chinese, the Japanese and a number of other countries with which we were trying to build trade relationships, it was very often in the casual relationships that the issue of dispute resolution would come up. They all spoke, with sad envy, of the system we had in the European Union, known to be incorruptible, fair and efficient, and to have judging panels of real intelligence that were then supported by the collective Governments. They kept wistfully saying what a pity it was that, on a global level, there is nothing that mirrors that.

This is why I differ from the noble Lord, Lord Stevens, who is basically saying that a British company with a complaint will go to the British courts, an American company will go to the American courts and a Japanese company will go to the Japanese courts. It would be hard to persuade anybody that they would be justly treated under those circumstances and that there would not be national bias. I can see this becoming an inhibitor to trade. I also believe that on trade issues generally we need to look to international co-operation and shared sovereignty solutions. We need to recognise that, frankly, the best example we have of trade resolution is the ECJ, and see what lessons and mechanisms we can pick out of that. This is relevant in discussing the continuity agreements as well as future agreements. As this House and the Minister will know, the European Union is now making dramatic changes to the way it structures dispute resolution, recognising the problems and criticisms around the existing system.

The noble Lord, Lord Stevenson, referred to the investor-state dispute settlement system. That is largely an ad hoc arbitration system, but it is in many of the EU’s various trade agreements. He will know, or certainly the Minister will know, that the EU is now migrating from that. In CETA, we have an example of the first new version of the European system: the investment court system. It is a permanent standing court with a panel of judges; it is not ad hoc; and it is two-tier, so there is an appeal mechanism. Interestingly, under CETA, the EU and Canada will collectively appoint 15 judges—five from the EU, five from Canada and five third-country nationals—who will hear cases on a rotational basis. It is therefore bringing in a much more multilateral dispute resolution system with a great deal of independence and the opportunity to create a much more broad template. There is an intention to migrate many of the existing EU trade agreements on to this system over the coming years, which is why the continuity arrangements pose real questions that have to be answered. In the continuity arrangements, are we copying over the rather unsatisfactory investor-state dispute settlement system? Are we going to try to migrate? It is going to be difficult. Look at the EU and Canada. You can see that the capacity to create a panel of 15 judges might be a little tricky if you were trying to do it simply between the UK and Canada. I do not know what sort of system the UK is looking at as it tries to establish a continuity agreement with CETA, but we need some answers on all this.

GKN/Melrose Takeover: Update

Debate between Baroness Kramer and Lord Stevenson of Balmacara

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?

Financial Guidance and Claims Bill [HL]

Debate between Baroness Kramer and Lord Stevenson of Balmacara

Report: 1st sitting: House of Lords
Tuesday 24th October 2017 Lords Chamber

[Baroness Kramer]

My Lords, I join in thanking the Minister for bringing these amendments forward. I think she recognises that the three existing bodies to be merged all have a reputation for impartiality. Their services are free and she is making it absolutely clear that those vital elements which she respects and appreciates so much in the existing bodies will carry through into the new body. It seems to me that stating it clearly, rather than leaving it to be read and potentially misconstrued, is exceptionally helpful.

[Lord Stevenson of Balmacara (Lab)]

My Lords, I thank the noble Baroness for making the statement she did at the Dispatch Box at the start of this debate. We are very appreciative of the acceptance of Amendment 7, which goes with the spirit of the way we have conducted the discussions over the Dispatch Box and in meetings over the period of the Bill. It has been one of the happiest Bills I have been involved in and I have been involved in some very happy Bills. I extend the thanks to the Bill team for their good supportive work. It has been a very good experience all round. This amendment is another example of that, because Members will recall that in Committee the Government’s line was that—although they absolutely agreed that advice, guidance or information given by the new body or by its contracted other bodies must be free at the point of use—they did not think it necessary to amend the Bill. However, over the time we have been talking about it, it has grown on them that there might be an advantage in doing so, for all the reasons my noble friend Lady Drake gave. Having those words at the heart of its mission statement and affecting all the work it does will make it a much better body, so we are very grateful and we support the amendment.

Financial Guidance and Claims Bill [HL]

Debate between Baroness Kramer and Lord Stevenson of Balmacara

Committee: 1st sitting (Hansard - continued): House of Lords
Wednesday 19th July 2017 Lords Chamber

[Lord Stevenson of Balmacara (Lab)]

My Lords, this is a brief amendment and stands on its own, I think primarily to ensure that the next group gets enough focus. We are back to the definition of words, which is obviously going to bedevil us as we go through the Bill. This one is slightly more generic than the others, in the sense that the description we have been given of the task of this new body is that of creating a mixture of direct provision and commissioning. However, sometimes the wording does not seem to match up to that, so the amendment suggests a better form of wording that would leave out “provide” and insert “ensure provision of”. When we look up the dictionary definition of “provide”, we see that it is basically an active verb whose primary meaning is to make available for use or to supply.

As I read it, it is there as an active verb, which means that the body to which it is applied will be doing things—implementing in an active way. Substituting “ensuring provision of” would mean a much greater accent on working with others to make sure that these things happened. The amendment applies to the pensions arrangements referred to in line 19 of page 2. In many cases, the pensions guidance function would be carried out mainly in house, or others would be commissioned to do the work, so it may not be the most appropriate place for the amendment, but we pick up the same idea as we move through the Bill and look at the other aspects of the work of the organisation.

It is a probing amendment at this stage to invite the Minister better to articulate what “provide” means here. We want to know in particular whether commissioning work is envisaged in this limb, whether it involves any direct provision and, if so, what that would be. Can the Minister give some broad breakdown of the balance between those two aspects? I beg to move.

[Baroness Kramer (LD)]

My Lords, I agree with the noble Lord, Lord Stevenson, that the amendment is possibly sitting in the wrong spot, because the various pension bodies being absorbed into this single body have provided guidance directly. It is advice provided through a commissioning, contractual arrangement, which I am sure everyone intends should remain in place. However, the underlying spirit of the point the noble Lord makes and the request for clarification are important.

I rise to speak merely because the Minister may answer that such issues are covered somewhat in Clause 4. I simply wanted to point out that that clause regularly uses “may”, whereas I think the Government’s intention —and that, I suspect, of many others in this Committee —is that this be a “must”. So, the argument that Clause 4 is the answer to the question raised may not exactly work.

Financial Guidance and Claims Bill [HL]

Debate between Baroness Kramer and Lord Stevenson of Balmacara

Committee: 1st sitting (Hansard): House of Lords
Wednesday 19th July 2017 Lords Chamber

[Lord Stevenson of Balmacara (Lab)]

I understand that a note has come at pace with its best advice. It might be sensible to ask for a letter on this point because it is at the heart of not so much the naming game but functions. If advisers of the body will not be able to move seamlessly, however many hot keys they are able to employ, from pensions to general expenditure and back again, it is a different body to the one we are trying to set up. As I understand the situation—this is what I would like to be checked back—it is possible for an individual to be authorised to give advice on both debt and pensions, but the debt advice community has broadly not chosen to go down that route, regarding pensions as needing expertise that would be difficult and expensive to acquire. What the noble Baroness has said is not entirely wrong, but it is not entirely right either.

[Baroness Kramer]

Perhaps I may add to that. Partly this is problematic because individuals receiving the debt advice may not understand that there is no discussion of their pension pot, because the adviser is unable to raise the issue and, therefore, they may not recognise that they are being offered a series of potential solutions within a limited framework that does not make use of the full financial resource that describes essentially who they are and what they have available to them. We use advice only in the regulated sense, but the person listening thinks that it is advice in common terminology, and that is why we end up with the problems that the noble Baroness, Lady Altmann, is trying to address.

High Speed Rail (Preparation) Bill

Debate between Baroness Kramer and Lord Stevenson of Balmacara

Tuesday 19th November 2013 Lords Chamber

[Baroness Kramer]

My Lords, what a tremendous debate. Every time this issue comes before the House I learn more, which adds very much to the pleasure. I, too, was appreciative that the Secretary of State came to listen to the early speeches; he then had to leave to vote, but I know that he will read the rest of this debate. I know that that information flow to him is very much appreciated on his part.

Obviously, the overwhelming majority of noble Lords who spoke today spoke so strongly and positively in favour of HS2 and the high-speed rail network that once again I feel almost that the comments that I can make are somewhat redundant; they have been almost better covered by other noble Lords who have spoken. I will begin by trying to pick up on the questions from noble Lords who were perhaps more sceptical, and in particular that issue of cost that the noble Lord, Lord Davies of Oldham, mentioned, which was also mentioned by other noble Lords—by the noble Lord, Lord Howard of Rising, in particular, and in a slightly different way by the noble Lord, Lord Adonis.

The cost of the project—the budget—has been set at £42.6 billion. The noble Lord, Lord Howard of Rising, mentioned the figure of £73 billion, which was floated in the Financial Times and some other parts of the press. That is a mischievous number, because of the way in which it is constructed; I was quite sad to see it in a respectable newspaper. It included things like VAT, which obviously comes back to the Treasury and is therefore not a cost to the taxpayer. It also included inflation, although we look at infrastructure projects using current numbers rather than inflated numbers because we do not look at the benefits in inflated numbers. A mischief-making number has, unfortunately, been introduced into this conversation.

I shall say more about cost, because it is important—and what I have to say about it will also address some of the other issues that have been raised. The work that has been done in preparation for High Speed 2, to the point where it is now ready for phase 1 to appear in a hybrid Bill, is far more intense than that for any previous hybrid Bill. I think that that degree of preparation is a good thing, and I am cleared to say that the hybrid Bill will be introduced in the Commons on Monday. That degree of detailed examination and preparation gives us far greater confidence in the actual numbers, particularly for phase 1.

As the noble Lord, Lord Davies, will know—he has read the strategic case—High Speed 2 now estimates that, without any contingency, it could bring in phase 1 at £15.6 billion. The Secretary of State has said that we need to have a little contingency, but he wants to see this come in at £17.16 billion or less. That is the pressure being put on Sir David Higgins, and he feels that it is pressure that he can accept. That is a much crisper number than the more overarching number, including contingency, that we have generally been using. I ask that, as people look at the strategic case, they understand that we are talking about the overarching budget, but that underneath that there is huge pressure to ensure that the cost is pushed down, and we can do that with more and more confidence because of the level of detail that we now have. I hope that that also explains to the noble Lord, Lord Adonis, why there is a generous contingency in all this. The contingency does not reflect the fact that there is very detailed work going on to push the cost down.

That consideration also speaks somewhat to the governance point raised by the noble Lord, Lord Rodgers of Quarry Bank. Sir David Higgins, when he comes in, will make governance and driving down cost two of his highest priorities. The governance programme, which sounds incredibly complex as it is read out in a paragraph, actually reflects a number of bodies that have come together to increase the downward pressure on costs. That is part of the reason why there have been so many parties so absolutely focused on ensuring that the costs of the project have been reduced to the greatest extent possible.

In the same context, Sir David Higgins has said that he will look at delivering HS2 faster. There is an underlying question here, which I picked up from a number of people today—for example, from the noble Lord, Lord Smith of Leigh—along the lines of, “Why don’t we start both phases pretty much at the same time?” The answer is that we have the detailed work to be able to go ahead with the hybrid Bill for phase 1, and to hold that up in order to bring phase 2 to the same degree of preparation would hold back the whole project. We are in a position to move much faster on phase 1. I have heard many people in the House today talking about the importance of going as fast as possible; they compared us unfavourably with France, and I can understand why. We are doing this in phases so that we can get into the ground at the earliest possible date.

Benefits will flow from phase 1 alone. It is true that the maximum benefits will come when phase 2 is completed, but from phase 1 alone there is already an advantage, both in capacity going from London through to Birmingham—on the most congested set of routes that we could possibly have—and also in terms of starting the time reduction, which, as others have said, adds to the connectivity and the potential for development in the north and the Midlands.

The noble Lord, Lord Cormack, referred to the Bill as a blank cheque and asked why it does not have a monetary figure in it. The Bill gives permission for preparatory expenditure and contains a very vigorous reporting process under which the Government must report back annually and record any deviation from budget, and the consequences of that. The wording of the Bill has been strengthened somewhat in the other place, which has put in place a very intense scrutiny process around the budget.

One of the reasons why there is no monetary figure is because this is not just the paving Bill for HS2 but allows us to look at extensions. The noble Lord, Lord Dubs, talked about the importance of going beyond HS2 and looking at Scotland. I was up in Glasgow and Edinburgh just over a week ago, announcing formally the initiation of a study which will look at bringing the benefits of high speed to Scotland. Automatic benefits come from bringing High Speed 2 as far as Leeds and Manchester. In fact, Scotland benefits even from the run to Birmingham. However, taking it beyond that, the study will look at how to maximise high speed on existing rail lines and at potentially building what some people have dubbed “High Speed 3”. This paving Bill creates the context for what in the end will be a high-speed rail network. The word “network” matters in the context of some of the questions about economic growth. Dedicated high-speed trains can run only on high-speed lines. However, in addition, these lines can be used by the classic trains which currently operate on our long-distance services. They can travel part of their journey on a high-speed line and then deviate off on to the west coast main line and various other lines, creating a much more interconnected network.

The noble Lords, Lord Stevenson of Balmacara and Lord Cormack, and, to some extent, the noble Lord, Lord Rodgers, raised concerns about the Chilterns and its highly valued landscape. We all value that landscape; I do not think there is any question about that. However, I think that we have also always understood that there are circumstances in which we have to weigh the significance of infrastructure projects against that value. We must mitigate any effects to the extent that we can. I listed earlier many of the mitigations. Looking much more narrowly at the Chilterns, I say to the noble Lord, Lord Stevenson, that, between Chalfont St Peter and Hyde Heath, which is a distance of 8.3 miles, of which 5.8 miles lies in the area of outstanding natural beauty, the route will be in a tunnel. To minimise the visual impact in the AONB, the following mitigation measures will also be taken: 3.5 miles in cuttings; 1.5 miles in “green tunnel”; 0.6 miles on viaducts; and 1.4 miles with embankments. This means that fewer than two miles of the 13 miles of the route through the Chilterns area of outstanding natural beauty will be at surface level or above. The noble Lord, Lord Stevenson, has asked why we cannot extend the tunnel. Unfortunately, that would require the construction of ventilation shafts and an emergency access station at Little Missenden. Weighing that damaging environmental impact against the current mitigations has led us to the conclusion that we have used tunnelling to the best effect.

[Lord Stevenson of Balmacara]

I am very sorry to interrupt the noble Baroness, and it is a very trivial point, but it would have helped if we had been able to have the meeting that I requested over a month ago. It has not yet happened and if it had, we could have explained this. This canard about having to open up an opening near Little Missenden is not what is proposed. The alternative, which I sketched out for her and which I am happy to present to her in more detail, provides for an opening, required under European law, to be within the 22 miles covered by the AONB. It is near Wendover—in fact, at Wendover Dean—it is agreed by residents, agreed by all the authorities around and does not affect the central part of the Chilterns. This point was raised by her predecessor in a debate more than a year ago, and I tried to correct it then. I am clearly not effective at doing that, so can we please meet?

[Baroness Kramer]

As we agreed earlier, I am looking forward to that meeting and I apologise. Because I am new to the department, it has basically been triage. I regret that we did not have the chance to have that meeting before this debate, but we will have it. As the noble Lord, Lord Stevenson, recognises, the course of the hybrid Bill will address many of these issues.

The noble Lord, Lord Cormack, was very concerned that HS2 is a London-centric project rather than one which will spread economic opportunity out across the country. I could make the case in the other direction— I thought that I had in my opening speech, as had the noble Lord, Lord Adonis, and others, in the course of their speeches. I pray in aid the noble Lord, Lord Smith of Leigh, who from his position in Greater Manchester has been able to represent to this House today the great potential that Manchester and the other great cities of the north and the Midlands have seen in this project.

They are using this opportunity in a very positive way, which perhaps is relatively new as a British approach to infrastructure. So often, we have built an infrastructure project in a silo and left it to see if anything good generates around it. In this case, the noble Lord, Lord Smith, and others are working within the various local authorities and within the various key cities. My noble friend Lord Deighton, too, is working with his task force in order to try to reinforce and support the process. This is a very different approach that will ensure that we garner the economic benefits.

A number of noble Lords, including the noble Lord, Lord Rooker, and the noble Lord, Lord Davies of Oldham, reiterated the idea of the noble Lord, Lord Heseltine, of development corporations. It is certainly true that the Mayor of London would be able to initiate them—that is already within his competencies. However, the Government are waiting to see how local communities in the areas that will be impacted by HS2 will wish to take these issues forward. It is within the concept of devolution that Whitehall should not always know best how each individual area should approach these questions, but I suspect that in many of the schemes and developments that develop, we will look to capture development gain in various ways. Indeed, the Government have already said that they expect all the stations to be built, essentially, with private money, which in and of itself is a development-gain process. So I fully appreciate those comments and I know that they will be studied closely as we go forward.

The noble Lord, Lord Howard of Rising, raised an issue that has been in some of the literature that has been coming through people’s doors and which I would like to take on. He argues that we are not at capacity, citing an example quoted by one of the campaigning organisations, that trains are only 52% full in the evening peak. I think he is referring to a Virgin long-distance train. Certainly, regional and commuter trains are incredibly heavily used. To remove that Virgin train from the train paths in order to allow expansion of regional and commuter traffic would be a drastic option, widely opposed by passengers. There is sometimes no easy trade-off between the issue of train paths and usage at particular times. I also point out that the evening peak is a very well spread peak. During the morning peak we are pretty close to anyone’s definition of being out of capacity as it is, never mind in the circumstances that we will face as we get to the 2020s.

Perhaps I may move on to thank those who spoke so effectively and with much knowledge in favour of this high-speed rail network project. The noble Lord, Lord Adonis, called on the spirit of the Victorian pioneers and the spirit of cross-party working. Both have to inform the way in which we move forward. The noble Lord, Lord Bradshaw, talked from his experience of actually running the four lines that go out of London. That is always an invaluable and incredibly practical touchstone as we move forward in these debates.

My noble friend Lord Freeman brought to us the experience of being the Transport Minister for HS1. That project gave us the confidence to move ahead with HS2, and the lessons that he is able to bring to this debate are therefore crucial. The noble Lord, Lord Berkeley, again reminded us of the freight conundrum that we face. In passing, he also reminded us that it is not just the Chilterns that have an issue but the area around Camden, Euston station and the HS1-HS2 link. We must appreciate and do everything we can to achieve the necessary mitigations. In this case, there is close working now between Camden Council and Network Rail, although many issues have yet to be resolved and answered.

The noble Lord, Lord Faulkner, provided a constant reminder of the lack of alternatives to HS2. The point was put more clearly by the noble Lord, Lord Snape, when he said: if not HS2, what? One alternative is likely to be an exceedingly intrusive motorway. I am afraid that there would be not just one six-lane motorway if we do not build HS2 but probably two. The impact of that on the environment, communities and areas of natural beauty would be something that this House would, frankly, not relish.

I cannot remember whether it was my noble friend Lord Cormack or my noble friend Lord Howard of Rising who talked about aviation as an alternative. Again, the noble Lord, Lord Smith of Leigh, hit the nail on the head; the discussion around aviation capacity is primarily around international capacity rather than around attempts to build up a domestic aviation network of much greater intensity, but I will obviously bow to the Davies commission as it considers capacity issues in the south-east.

I should say thank you to the noble Lord, Lord Lea of Crondall, because on this occasion and previously he made a point that was picked up by others about the cluster potential. That was echoed by the noble Lord, Lord Smith, from the perspective that he and Manchester are looking at development. My noble friend Lord Teverson shared with us reports from Kent of the change from a negative to a positive attitude because of the experience of the benefits of regeneration as a result of HS1.

I am sure that in this whole process there are questions that I have failed to answer. I am reminded that I am coming to my boundary of 20 minutes. I feel that I have had the opportunity to listen to an exciting debate, and if I have not responded to questions we will do so afterwards. Perhaps I may conclude by saying this: let us protect the Victorian spirit that built our railroads, but let us look for an infrastructure that is not Victorian but modern and 21st-century so that we can build the economy of the future. I thank this House and I formally ask that the Bill be now read a second time.

Financial Services Bill

Debate between Baroness Kramer and Lord Stevenson of Balmacara

Wednesday 25th July 2012 Lords Chamber

[Baroness Kramer]

My Lords, I will speak to Amendment 140A, which is in this group. It is slightly different but we did not seek to have it regrouped, just in the interest of time. Amendment 140A would establish in the Bill that the PRA and FCA are considered equal in status. We have a letter from the noble Lord, Lord Sassoon, dated 18 June, which indicates that it is the Government’s intention to have parity of status, but I would defy anyone to read the Bill and come away with that particular conclusion. In the Bill, as your Lordships will be aware, the PRA has the right to veto certain of the FCA’s regulatory actions. I have no problem with that—it can be right and proper—but it reads over very quickly into a sense that the PRA is the superior body. The PRA is also part of the Bank of England family, a very powerful family. The FCA stands outside of that, which is right and proper. However, it creates the issue about the balance between those two regulators, particularly since the Governor of the Bank of England chairs the PRA as well as the FPC and the MPC. The FCA therefore stands in a different relationship to the governor and has a very different role. The governor is a very important individual in the international community in terms of public recognition and public standing.

Building a little on the comments just made about culture and behaviour by the noble Lord, Lord Hodgson, we must recognise that within departments there tends to be a sort of default behaviour to live in a silo. It is very difficult to persuade organisations to co-ordinate effectively with each other, and to have the kind of respect that goes with parity. Although there is a memorandum of understanding, a great deal of judgment is involved in that memorandum in terms of deciding when it is appropriate to share information, to consult and to co-ordinate. It depends a great deal upon attitude. I have been in at least two meetings with members who were a fairly broad representation of the financial services sector when it has been evident that the assumption of the sector is that the PRA is the lead institution and the tough guy, and that the FCA plays a somewhat secondary role.

This is of particular concern because of the range of financial services sectors that the FCA will regulate. It comprises 27,000 firms contributing £63 billion in tax revenues, providing over 2 million jobs, two-thirds of which are outside London. We must be very careful that it is not regarded as second class in its role. The London Stock Exchange is particularly concerned about this issue because of the role that the FCA must play in Europe. As your Lordships know, it has the seat of ESMA, which is highly significant. The UK market accounts for between 60% and 80% of EU securities trading but has only 8% of the vote on ESMA. Therefore, the status, standing and significance of the FCA will matter enormously in those European discussions which affect the City, the financial services industry, and the international world of finance more generally.

This amendment seeks to, in a sense, make it clear in the Bill that the FCA does not have second-class status and that it is equal in its standing with the PRA. It seeks to make sure that that then gets embedded into the culture of how these regulators relate to each other and co-ordinate with each other, and that the FCA has standing in international eyes, and is recognised by international regulators as the body they can appropriately talk to, and not as a body that they must go around in order to speak to the genuine powerhouses.

[Lord Stevenson of Balmacara]

My Lords, I rise to speak to Amendments 140A, 140BA, 140DA, 143C and 144JA. Amendments 140AA to 140DA appear to be, to use the words of the noble Lord, Lord Flight, in the same territory as those amendments that he was proposing and which have also been supported by the noble Lord, Lord Hodgson. Therefore, I do not think that we need to say much more except that we support them. We hope that our points will also be taken into account—they are relatively self-explanatory. We look forward to hearing the Minister’s response.

Amendments 143C and 144JA, raised in the other place, are intended to probe the practical aspects of co-ordination behind the FCA and the PRA on the ground—for example, across the membership of the boards. Schedule 3 on page 177 makes provision for the Bank’s deputy governor for prudential regulation to be on the FCA board. However, paragraph 6 states that:

“The Bank’s Deputy Governor … must not take part in any discussion by or decision of the FCA which relates to (a) the exercise of the FCA’s functions in relation to a particular person, or (b) a decision not to exercise those functions”.

Similarly, new Schedule 1ZB(5) states that:

“The chief executive of the FCA must not take part in any discussion by or decision of the PRA which relates to”—

I do not need to quote it further, it is very similar. There we have two deputy governors, supposedly sitting on these two boards to aid the co-ordination of these two bodies and to have cross-membership, and yet there is a provision that gags those two individuals and prevents them getting involved in discussions in certain areas. There may be a rational reason for this but it beats me as to what might be.

There is a further point. Paragraph 5 on page 177 of the Bill states;

“The validity of any act of the FCA is not affected”,

if there is a vacancy in the office of deputy governor, or if there is

“a defect in the appointment of a person”,

to those boards. However, if a deputy governor happens to stray in discussions into areas that relate to a particular person or to a decision on exercising a function, might there not be a serious risk that on judicial review—for example, a third party could challenge the validity of any act of the FCA—should it be discovered that the deputy governor had uttered a phrase or misspoken in a particular way about a particular person or issue?

One must be concerned about enshrining restrictions on the things that board members can and cannot utter so that they cannot take part in a decision. How would that be implemented? Would they have to leave the room when one of these topics came up? Would every single decision of the FCA and the PRA have to be separated into generic and operational questions? It would surely not be right to fetter internal discussions in this way. If it is right to put them on the boards of both organisations, it must be right to let them discuss everything that comes up on those boards. I look forward to hearing the Minister’s response to these points.

--- Later in debate ---

[Lord Stevenson of Balmacara]

In moving the amendment, I shall speak also to Amendments 143ZB to 143ZD as well as Amendment 144EA. This group of amendments relate to the consumer advice functions of the FCA, currently delivered through the Money Advice Service, and the separate responsibility that the MAS has for co-ordinating debt advice. I declare my interest as a chair of the Consumer Credit Counselling Service, the country’s leading debt advice charity, which has helped more than 1.3 million people in the last few years to deal with their unmanageable debts.

I start by asking the Minister if he can confirm the Government’s intention to retain the status quo in this area in so far as the body known as the Money Advice Service is concerned. MAS has responsibility for delivering money advice to members of the public as part of its consumer education function and has recently assumed responsibility for co-ordinating debt advice, which is currently delivered by a number of charitable bodies, including Citizens Advice, the Money Advice Trust and the Consumer Credit Counselling Service.

As your Lordships’ House will be aware, although the Bill continues the FSA’s current responsibilities regarding these functions to the FCA, new Section 3R in Clause 5 confirms that a consumer financial education body undertakes this function on behalf of the FSA at present and it is intended in this section of the Bill that the body corporate, originally established by the FSA under Section 6A of FiSMA, will continue to deliver these services for the FCA. So the Bill assumes that the MAS will continue.

I invite the Minister to clarify the situation, because rumours have begun to circulate, following the hearings held recently by the Treasury Select Committee on the Money Advice Service. These were fairly rumbustious sessions, and for long parts of them the committee was focusing on what it clearly saw as an unsatisfactory situation regarding the FSA’s current responsibilities for the MAS, its business plans and its operations. I gather that it would not surprise many observers if the Government intended to bring forward amendments on this topic. I will not repeat the rumours that have reached me, but the stories authoritatively report a range of decisions including the abolition of the MAS, to giving it its own statutory position within the Bill. I would be happy to give way to the Minister if he would like to clarify what the position is at this point. He does not wish to do so now so I shall continue.

These amendments seek to clarify the role of the Money Advice Service in respect of its money advice services, to ensure that it focuses with laser-like intensity on the needs of members of the public on low incomes and to ensure that it provides,

“targeted, proactive and easily accessible advice to those encountering economic disadvantage, financial exclusion or financial exploitation”.

In respect of the co-ordination of debt advice, the amendments seek to make sure that this means that the MAS will be explicitly focused on promoting the work of registered charities such as the MAT, CCCS and the citizens advice bureaux, so that people struggling with debt are made much more aware of the excellent free, independent and impartial support that is available to them.

There is one point which I hope the Minister will be able to help me with when he replies. While the MAS is a direct provider of money advice, it is not the Government's intention that the MAS should become a direct provider or regulator of debt advice, in direct competition with and duplicating the work of these long-established registered charities. He will recall that in the other place, the Treasury Minister, Mr Mark Hoban, said:

“The role of MAS is to commission free debt advice, not … to provide [it].”—[Official Report, Commons, Financial Services Bill Committee, 6/3/12; col. 345.]

That having been said, there is an issue here which it would be good to recognise—about whether it is credible to view money advice and debt advice as separate activities. We in our charity certainly take the view that when people come to us with debt problems, our priority is obviously to get them to repay their debts in as short a time as is possible, without jeopardising their basic needs and livelihood; and we are not into debt forgiveness.

However, another of our functions is to use the process that they are going through to educate them about how to deal better with credit in the future. In that sense, I have sympathy with those who argue that money advice and debt advice are two sides of the same coin, if you will excuse the pun. However, that may be an issue for the future. For the moment I am anxious to ensure that the Government are not seeking to complicate the debt advice space. There is a need for co-ordination, a reduction of duplication, and for all concerned to bear down on costs, as well as increase throughput. However, there is no need for additional direct provision of services by the Government. The registered charity sector can and will deliver a brilliant service here.

Recent research by the Financial Inclusion Centre has shown that there are 6.2 million households in the UK that are financially vulnerable. Half of those are already behind with debt repayments or face insolvency action; 3 million are living so close to the edge that they do not know how they would cope if there were to be even a small increase in their regular household bills. That is why the MAS needs to focus on those members of the public who are on lower incomes, and to target advice to those encountering economic disadvantage, financial exclusion or exploitation.

Around half of our debt advice clients have struggled on their own for more than a year before seeking help and many feel ashamed of their financial problems. When people do summon up the courage to ask for help, they need advice about the best remedies for them, and we would argue that they should seek free advice. Around 400,000 people in the UK are thought to be on commercially provided debt management plans, which cost them £250 million in fees every year. We estimate that for a typical debt of £23,000, a client of a debt management company pays more than £4,000 in fees to that company. Clients of charitable providers by contrast only pay back what they owe, and the time taken to get free of their debts is about 18 months less than with a commercial provider.

That is why we suggest in this group of amendments that a key function for the Money Advice Service must be to get financially vulnerable consumers to seek help earlier from charities such as National Debtline, Citizens Advice and CCCS by promoting free debt advice. The public interest here, surely, is to encourage people with debt problems to recognise the free debt advice sector as the best place to go for rehabilitation. Raising the profile of the free debt advice sector is necessary if we are to counter the aggressive advertising of fee-charging debt management companies which seems to be everywhere. However, this is difficult for the charitable sector to do under its own steam, as its charitable funding should really be used to deliver direct charitable benefit. In December last year, the chief executive of the Money Advice Service said that he wanted to build the profile of the free debt advice sector so that ultimately, everybody in need of debt help sees the free debt advice sector as the “better option for them”. I welcome that approach and beg to move.

[Baroness Kramer]

My Lords, I want to comment on Amendment 143ZE. I have great respect for the CCCS and the work that it does, but there is also at least one commercial player—I am thinking of Payplan—which, I understand, provides free debt advice on a basis very similar to that of the CCCS, and in fact Citizens Advice frequently refers people to it to deal with debt management. Like the CCCS, it gets its funding from the creditor and not by turning to the individual who is in debt.

Although I entirely agree with all the statements that have been made about those—perhaps not all but certainly many—who advertise and often provide a very unsatisfactory and highly questionable service to individuals who are in debt, leaving them in a worse situation than when they started, I am slightly cautious about the suggestion that only the charitable sector can provide free debt advice. We need all the players we can get in this business and, provided they do it in the appropriate way, we should surely encourage all of them.

I question why the companies that seek to have the debts repaid to them should not be more influential in this process. My understanding is that they would far rather work with those who provide free debt advice than those who muddy the waters by essentially taking the fee-paying attitude and offering and delivering a less satisfactory solution for everybody involved.

Postal Services Bill

Debate between Baroness Kramer and Lord Stevenson of Balmacara

Wednesday 16th March 2011 Lords Chamber

[Lord Stevenson of Balmacara]

My Lords, the purpose of this amendment is to require the Secretary of State to give full consideration of how more use can be made of Post Office card accounts and to extend the services available in respect of them. The Post Office card account was launched in April 2003 as an alternative for those who could not or did not want to open a basic bank account when the direct payment of benefits was introduced. The contract for that account is extremely important to the post office network, being worth around £1 billion to post offices between 2003 and 2010.

There were, it is fair to say, some issues around the Post Office card account contract. Suffice it to say that the matter was resolved in November 2008, not least because of the intervention by my noble friend Lord Mandelson. He was able to announce then that the Post Office card account had been saved for the Post Office. On 13 November 2008, Richard Bates, head of community services at Consumer Focus, said:

“Post Office card account users will be delighted that they can continue to access their money in an environment they trust and that is within easy reach. The decision is good news for consumers and provides a bedrock for the viability of the post office network”.

He went on to say:

“Consumer Focus thinks the Post Office Limited is in a strong position to play a much more expanded role in financial services. … Today's decision is a good step in the right direction. People tell us they need the option to deposit money, pay bills and make savings in their Post Office card account. The Government must now provide and promote these services”.

It is interesting, given some of our recent debates, that there was a particular cheer at the news in Northern Ireland, where 190,000 people have their pensions and benefits paid into a Post Office card account using nearly 500 Post Office outlets.

In many ways, the Post Office card account has been a major success. Around 4.3 million people now receive benefits via such accounts, of whom approximately 40 per cent are pensioners. The account plays a central role in service provision in a whole host of areas, providing great benefit to communities across the country. Each week, 6.5 million visits are made to the post office network with a view to withdrawing funds from the Post Office card account, and it has been calculated that those under 65 who hold such an account are 28 times more likely to be “unbanked”. These same people—those in receipt of state benefits and tax credits—are also the most likely to use high-cost credit, while those without bank accounts are the least likely to hold any other financial product.

We have heard already today that the Government are looking for ways to extend appropriate, inclusive and functional services to Post Office customers. We welcome that commitment. The National Federation of Sub-Postmasters, in its Six Steps to a Sustainable Post Office Network, emphasised that:

“The Post Office card account … reminds vital for the post office network and”—

I stress these words—

“its functionality should be increased”.

That is what this amendment is about.

Post Office card account customers are some of the least well served by financial services in society. They make up 20 per cent of visits to Post Office branches each week and spend as much as £2 billion in the network each year. It should be a priority for the Government, in seeking to protect and grow the network, to find ways to develop that account. A robust Post Office card account must be an essential part of the portfolio of financial services that the Government are now proposing for the Post Office, not least because it will provide valuable bridges to financial inclusion and much needed committee support. Before the Government transfer the Post Office to a mutual, we think it sensible to require the Secretary of State to give full consideration to how more use can be made of the Post Office card accounts and to extend the services available in respect of them. I beg to move.

[Baroness Kramer]

My Lords, I shall speak briefly on my very short Amendment 23A, which I put before this House partly to have the excuse to name and shame and, perhaps more importantly, to give the Secretary of State in his annual report to Parliament the opportunity to name and shame. My decision to put forward this amendment came through a conversation with Age UK, which was careful to point out to me that in 2006, when it did its survey of older people,

“44% … used the post office to collect their pension, 43% for access to cash and 56% used it to pay their bills”.

That demonstrates what an important role the Post Office played in the financial life of older people.

Age UK welcomed the Government’s announcement, as did I, last November that their ambition is for all UK current accounts to be accessible through the post office network. Of course, the significant majority of high street banks are now going along with providing that service, but there are two major exceptions. Here is my opportunity to name them: HSBC and Santander. They do not make their standard current accounts accessible at post offices. Age UK has pointed out that older people could say, “This is very inconvenient”. Perhaps they are in deprived areas or in rural communities where there are no easily accessible bank branches. They could transfer their accounts to one of the banks that use the Post Office, but the reality is that switching accounts is complex and difficult. There are endless forms to fill out and I know from experience that it frequently goes wrong. To put that additional burden on older people is unacceptable.

We had a good discussion not long ago when in every part of this House there was real concern for the post office network, but even more for the communities to see more financial services available through the Post Office with its trusted name and accessibility and to keep people out of the hands of loan sharks. There were endless reasons, and it is important to provide the Secretary of State with the little reminder that there is a mechanism that can be used to name and shame. I hope that it will not be needed and that the banks will have fallen into line, but if they have not they ought to hear themselves declared on at least one of the Floors of Parliament.