Investment Bank Special Administration Regulations 2011

Debate between Baroness Maddock and Lord Davies of Oldham

Thursday 3rd February 2011 Lords Chamber

[Baroness Maddock]

My Lords, I strongly support many of the things that the noble Lord, Lord Myners, said in support of these orders, particularly the measures that allow for clients’ assets to be recovered more readily. I have three questions.

Not only will administrators be able to prioritise the three objectives outlined in the instrument as they see fit, but they will also be able to continue to administer their organisations with a guarantee that suppliers must provide their services for up to a period of 28 days without pay. Have the Government fully identified the potential costs to suppliers who have to continue to provide their services for this period?

Secondly, I understand that the regulations allow suppliers to gain a court order to exempt them from this duty if they can prove hardship. Again, can the Government expand a little on the definition of hardship?

Lastly, on the bar date by which time claims for assets must be made, will the Government consider setting out what they think might be a reasonable amount of time to allow for claimants to properly state their case?

Having posed those questions, in summary I support these regulations and hope that the Government will give proper attention to the suppliers who must provide their services without pay and, of course, those clients who seek to recover their assets.

[Lord Davies of Oldham]

My Lords, I bring some comfort to the Minister, as he has already had a plethora of questions, which I know he will dutifully answer in his wind-up. I have a few questions of my own but I begin by saying that we welcome these regulations, which bring investment banks within the terms of the special administration or wind-up rules for banks contained in the Banking Act, which otherwise apply only to deposit-taking banks. As my noble friend Lord Myners reminded the House, this goes back to the Banking Act 2009 on which he led for the Government—I was pleased to give him some minimal support at the time and enjoyed that experience—but there was always going to be considerable secondary legislation attendant upon that Act. The regulations are part of that process, and we welcome them and commend them to the House, as the Minister will do in his final speech.

I also want to reassure the Minister that I do not think I will go far down the line on which my noble friend Lord Myners managed to stir up the attendant House—the issue of bankers’ bonuses. There will be a time for debates on that and he will know that we are all watching the work of the independent commission on banking and awaiting its outcome. He will also know that the country expects the industry to be responsive to the obvious fact that mistakes were made and calamities visited both on this country and on the wider world economy because of the significance of the banks. In particular, he will know that their return to the bonuses concept affects our nation adversely in circumstances in which so many people are hard pressed for resources. That applies especially to the banks in which the taxpayer has a substantial stake. The Government must respond to this fundamental question: how is it that, when the rest of the country is suffering such privation, people can pay themselves such enormous sums in bonuses and do so on the basis of a taxpayer bailout? However, that is a debate for another day.

As I indicated to the Minister, I shall concentrate on one or two detailed questions. I want to ask about Regulation 6(1)(b), under which there can be an application for special administration if that is deemed “fair”. Fair by whom? Presumably, the decision is made by the Financial Services Authority or the Secretary of State, but who defines what is fair? This seems a very loose term, in what are otherwise tightly drawn regulations, so I ask the Minister to comment on that point.

Secondly, an important element in reducing the vulnerability of investment banks is to require them to hold more capital and, especially, to limit their leverage. Can the Minister outline what steps are being taken to implement either of those measures?

In what ways is this legislation future-proof? Which agency will be responsible once the FSA is wound up? There is an important element of client protection in these regulations, which my noble friend Lord Myners referred to. Who is actually going to ensure that there is consumer protection? Investment banks deal predominantly in wholesale markets, so it might be thought that the Bank of England was relevant. It is clear, however, that once the FSA goes we need to know who is going to take responsibility regarding consumers in both areas.

Energy Bill [HL]

Debate between Baroness Maddock and Lord Davies of Oldham

Wednesday 19th January 2011 Grand Committee

[Lord Davies of Oldham]

My Lords, the Committee is grateful to the noble Baroness for her amendment. She will see that we agree with her in terms of intent; but we think there are advantages in the annual report having some more specific dimensions to it. We agree with her entirely that the more general reports that are referred to will not monitor the success or otherwise of this significant scheme. As she rightly says, it does not raise the issue of commercial information; it is a question of the householder, the dweller and the landlord making their contribution in an important way to our carbon targets. We think the country will benefit from a close monitoring of this scheme.

That is why we think there are advantages in ensuring that local authorities keep a check on progress and that they ensure that as much progress as possible is being made in their areas. This is going to be a scheme, after all, to which the energies of the nation will have to respond. Therefore, all agencies that are capable of promoting this scheme should be brought on board. That is why we think the local authorities have a role to play and that small-and medium-size enterprises and local community groups can play their part. I respect the point that there may be issues involving commercial confidentiality, but we are talking about small units here and not major companies. We therefore think it is appropriate that we ask them to make their contribution. Certainly local community groups are going to be the cheerleaders of some of this work. I can think of those who will set a fine example by the community premises they hold, where they will be first into the field. We should not underestimate the extent to which progress can be made almost by word of mouth and by encouragement and example. That is why we want local communities involved.

We also think that it important that we should monitor this issue geographically across the nation. It would be very sad if it proved to be the more prosperous areas which were able to engage in the Green Deal because they had less anxiety about the additional costs. So we need to know the balance of the scheme, and whether we need to address the failure of take-up, given that the whole nation needs to contribute to this. That emphasises the obvious fact that we would need some analysis of the response by different sections of community in terms of socioeconomic groups. This scheme is not going to be successful if only those who can take the risk with extra cost are going to play their part; we need everyone to be involved in it. Therefore an annual report identifying progress in some detail would be an enormous advantage to what we all appreciate—as opposed to all our other activities aimed at carbon reduction—is the activity to which we are all committed, is among the most imaginative and requires engagement by so many people. That is why we hope the noble Baroness responding on behalf of the Government will give a fair wind to the concept of an annual report on this scheme.

[Baroness Maddock]

An amendment of mine is in this group. I support what has been said about the importance of looking at how successful things are and looking year-on-year at figures. Mine is a more general measure. Indeed, I had placed it much further on in the Bill, but it was obviously seem to be convenient to debate it at this time; I do not mind that. Mine is about the assessment of the costs and benefits of energy saving, as opposed to those of energy generation.

Energy saving is universally acknowledged on all political sides to be the cheapest and cleanest way to achieve our energy policy objectives. That view is behind the Green Deal. As I understand it, an assessment of the costs and benefits of investment in energy generation capacity compared to the costs and benefits of demand-reduction policies has never been carried out. As noble Lords have said, I have been involved in the area for a number of years and have worked closely with the Association for the Conservation of Energy. I therefore know that it has pursued the issue but has never received a satisfactory answer. Over the years, as I have looked at, sat through and taken part in all sorts of legislation—a lot of it reforming legislation—I have learnt that reviewing and taking note of what has happened before moving on to the next piece of legislation is something that Governments seem to be bad at, particularly in the area of energy efficiency.

That is important when you have a lot of sceptics around and people argue about what is the best way to do things. The European Climate Foundation reports that emissions from buildings can be reduced by 95 per cent. It breaks it up into a 40 per cent as a result of reduced demand and 45 per cent as a result of the electrification of heating. Its predictions of energy efficiency mean that overall electricity demand increases only by about 40 per cent with full electrification of heating and, largely, of transport. That is in stark contrast to DECC figures, which predict a doubling, and possibly a tripling, of UK electricity demand. It is therefore important, when debating an Energy Bill, to consider that.

I hope that I can get a positive response from the Minister that he will take the issue seriously. I am not saying that the amendment has to be in the Bill in this form, but it is an important issue—particularly now that we are moving ahead with the scheme.