Bank of England and Financial Services Bill [HL]

Baroness Wheatcroft Excerpts

Monday 9th November 2015 Lords Chamber

[Baroness Kramer]

My Lords, I added my name to this amendment because this is a crucial discussion and an important opportunity to draw the Government’s attention to these issues. This Government, like many others and almost every speaker on financial issues in this House, have expressed their frustration with the short-termism that dominates the British financial services industry: a search for short-term profits rather than understanding the longer term perspective. Indeed, the Chancellor has often voiced frustration at the fact that UK pension funds are very unlikely to invest in the kind of long-term infrastructure projects he sees as essential for our country. Canadian pension funds will gladly invest, but not UK ones. We suffer from this ongoing blight. Of course, the ultimate frustration is that many of those who put their money into such pension funds would be absolutely delighted to see it invested in infrastructure, renewable energy and sustainable projects, because they are often looking for a 30 to 40-year horizon regarding the return on the money they invest. However, that is not the way the system works.

When the Bank of England was given responsibility for financial stability, there was an assumption that part of the thinking would then extend into that long-term arena, and that the Bank would be freed from the narrow and short-term issues of stability. In fact, I think the Chancellor talked about avoiding the stability of the graveyard and looking at the much longer term horizon. So far, the Bank has not used its wide range of powers or its influence to enter into that territory. Whether it is sustainability as defined by projects such as renewable energy, rail infrastructure or broadband, a wide range of projects need a response from the UK’s financial services. That surely requires the Bank to take some role, and to take cognisance of this issue. I hope that debates such as this will persuade the Treasury and Government to engage much more extensively in those conversations with the Bank in its various and many parts, and to consider whether the relevant committees should at least have regard to those priorities, and potentially see them as obligations and duties, given the important role that long-term investment plays in the future of the UK.

[Baroness Wheatcroft (Con)]

My Lords, listening to the debate this afternoon, it is clear that many have concerns about the power and influence of the Bank of England. However, I cannot help but feel that this amendment takes that concern a step too far. Much as I have great admiration for Mark Carney, I cannot imagine how he is expected to predict the effect of artificial intelligence. The duties we are putting on the Bank are already extremely far-reaching. The responsibilities now placed on the Financial Policy Committee are deep and will have a huge impact, but to ask it to range as far as this amendment is surely to demand something beyond common sense.

The role of ensuring financial stability is crucial. It means keeping our financial institutions on the straight and narrow, and watching out for problems. However, to ask for those decisions to be taken in the light of what may be happening 20 or 25 years from now is surely a step too far. The role of Government in thinking about such issues is clear, but we would be in very dangerous territory if we thought of the FPC as the arm of government to influence such decisions.

[Lord Davies of Oldham (Lab)]

My Lords, I would like to join in this debate because, although I respect the expertise of the noble Baroness who has just contributed, I am rather more in sympathy with the arguments of my noble friend Lady Worthington and the noble Baroness, Lady Kramer. I hear what was said about placing obligations on the Bank, but we should also appreciate that we have the benefit of the present governor—on whom I have not lavished many plaudits this afternoon as I was rather concerned about the future structure of the Bank, for which he will be responsible. Nevertheless, we all recognise the governor’s merits in taking a wider perspective on aspects of the economy than has perhaps been the case heretofore. Certainly, the speech that he made not so very long ago, in September, to Lloyd’s of London, in which he said that climate change is the “tragedy of the horizon”, ought to wake all of us with alarm, but also make us ask how we can adjust and make responsive our institutions to the anxieties that obviously flow from the developing and clearly established dangers of climate change.