Finance: Peer-to-Peer Lending

Debate between Baroness Wheatcroft and Lord Sassoon

Wednesday 19th December 2012 Lords Chamber

[Baroness Wheatcroft]

To ask Her Majesty’s Government what is their assessment of the impact of peer-to-peer lending on major financial institutions.

[The Commercial Secretary to the Treasury (Lord Sassoon)]

My Lords—

[Lord Sassoon]

Wait for the Answer—but I believe it is a good news story.

Peer-to-peer platforms are currently small in the context of the UK lending market but they are growing fast. It is too soon to assess what impact they might have on other financial institutions but, over time, we expect alternative forms of finance, including peer-to-peer platforms, to bring additional choice and greater competition to the lending market.

[Baroness Wheatcroft]

I thank my noble friend for his response. This positively being his last time at the Dispatch Box, I take this opportunity to thank him for all his work there.

[Baroness Wheatcroft]

Although there is a place for peer-to-peer lending, small firms really require lenders who understand their business, who can see them through difficulties as they arise, who understand what they need in the way of advice and who certainly will not pull the rug away from them at the first sign of difficulty. The Government are doing what they can to encourage lending to small businesses but can my noble friend tell me whether they are managing to encourage a longer-term approach?

[Lord Sassoon]

My Lords, I am grateful for my noble friend’s remarks. I certainly agree that we want diversity in lending. I do not believe that p-to-p lending will solve every problem but I think it has an important role to play. Alongside the money that BIS put in to support two of the p-to-p businesses only last week, through the Business Finance Partnership, BIS also put some money into funds managed by lenders that I think will probably fit more with my noble friend’s model. It is also worth noting that some of the new bank lenders, such as Aldermore, have been some of the biggest takers, relatively, of funds under the Funding for Lending scheme. I agree that diversity is needed.

Autumn Statement

Debate between Baroness Wheatcroft and Lord Sassoon

Wednesday 5th December 2012 Lords Chamber

[Lord Sassoon]

My Lords, the question of corporation tax in Northern Ireland continues to be considered. The key thing is that we are making the United Kingdom as a whole a more competitive place and in corporate tax terms the most competitive place to do business among our major competitors. Of course, the position in Northern Ireland will continue to be debated.

As far as the reduction in VAT is concerned, this is a case that is made regularly. We believe that what we have announced today—the two-year increase in the investment allowance—is a better way of targeting the limited resources that we have, in addition to what we have done on the basic rate of corporation tax.

[Baroness Wheatcroft]

My Lords, I add my congratulations to my noble friend on what he has achieved in his time in the House. I wish him well in whatever he chooses to do next. I agree that it is depressing that he has to leave us on the back of a Statement that shows the growth forecast having to be lowered.

It is worth noting that in the Blue Book the GDP fall in 2008-09 has been revisited and has come down by a massive 6.3%. Given that background, it is hardly surprising that the efforts to rebuild the economy are proving difficult. Nevertheless, in this Statement there are several things that will make a major contribution to improving the economy, and I congratulate my right honourable friend the Chancellor on the things he is doing to encourage investment and infrastructure investment.

Does my noble friend share my concerns and those that were voiced recently by Sir Mervyn King, the current Governor of the Bank of England, that one thing that is going to hold back growth in the economy is if the banks do not acknowledge the real state of their balance sheets and take the hits that they should?

[Lord Sassoon]

Again, I am grateful to my noble friend for her kind words. It is also important that the House recognises that the damage done by the fall in GDP as a consequence of the structural position and the mess left behind by the previous Government, combined with the financial crisis, continues to be assessed as worse and worse. As my noble friend said, it is now estimated to be a fall in GDP of an extraordinary 6.3%.

I also agree with my noble friend that it is important that the banks are realistic about the state of their balance sheets. Linking back to the debate on the Financial Services Bill that we had earlier this afternoon, it is important that the new Financial Policy Committee—up and running now for a period in shadow form—is beginning to get to grips with these issues. These sorts of things were never debated and put on the table by the authorities in the past, when the punchbowl should have been taken away. So my noble friend is completely right.

Financial Services Bill

Debate between Baroness Wheatcroft and Lord Sassoon

Monday 15th October 2012 Lords Chamber

[Lord Sassoon]

I certainly agree that if we can get more value out of the auditors we should do so. It should be on the basis of something that helps people—I am not sure whether that is the regulator or directly the public—towards a better understanding of the risks embedded in bank accounts. On that basis, as I say, I will take the issue away. I ask my noble friend to withdraw her amendment, which would, of course—I should say for the benefit of my noble friend Lord Marlesford, who asked me to mention credit card debt—wrap up credit card debt and many other things if we can get this right.

[Baroness Wheatcroft]

I thank the Minister for his reply and for his willingness to at least consider this issue. Like my noble friend Lord Lawson, I do not see this as a total answer to the huge problem. However, I ask the Minister to consider whether the complacency of auditors might have been due to the fact that so little was required of them, and thus requiring rather more might be a step in the right direction. I look forward to hearing what he comes forward with and, if it is not very much, reserve the right to push this a little further. I beg leave to withdraw the amendment.

Financial Services Bill

Debate between Baroness Wheatcroft and Lord Sassoon

Tuesday 26th June 2012 Lords Chamber

[Lord Sassoon]

My Lords, just before the noble Lord, Lord McFall, sits down it may be worth being clear for the record that when I said the governor can be fired if he or she proves to be unfit to perform the role, that was completely right. In answer to the question from the noble Lord, Lord Peston, about whether the governor can be fired for wrecking the economy, I would suggest that at that point the Bank would probably decide that the governor was unfit. Without getting into a long debate about where unfitness comes into it, it is worth saying that at that point, unlikely though the scenario might be, wrecking the economy might lead the Bank to decide that the fitness test would apply.

[Baroness Wheatcroft]

I thank my noble friend the Minister for his reply; I confess I found it disappointing and I thank those noble Lords who spoke in support of my amendment. I was trying to find a simple means of showing that the court was held in some esteem and had powers to exercise. I do not doubt that informal conversations go on but I am slightly reluctant to rely on informal arrangements when we are trying to strengthen the corporate governance of the Bank. Not just to strengthen the corporate governance but to strengthen the perception of that corporate governance. I would ask my noble friend to think about this matter and maybe other ways in which he might strengthen perceptions of the corporate governance of the Bank. However, I shall not move my amendment.

Banking Reform

Debate between Baroness Wheatcroft and Lord Sassoon

Thursday 14th June 2012 Lords Chamber

[Baroness Wheatcroft]

My Lords, I welcome the White Paper and the accompanying Statement. Separating risky banking from core retail banking is essential but we have to be careful that the ring-fence does not become a Chinese wall. It will take some policing. We also need to be very careful in watching to what extent the hedging that will be allowed within the ring-fence is monitored by the various authorities. I have some qualms about that.

I am also concerned about the timetable. I am delighted to hear that the 2019 deadline will stay but I am puzzled as to why that needs to be the case for more than the capital requirements. I would have thought that the ring-fence might have been installed sooner than 2019, which sounds a long time away. My final point is about why on earth households would put their money into a ring-fenced bank. I cannot see why their money should be guaranteed if they put it in a riskier institution. Perhaps the Minister will answer that.

[Lord Sassoon]

I would very much like to respond to those points but I see that the clock has reached 20 minutes. I do not like to do this but I had better write to my noble friend Lady Wheatcroft on these important points.

Economy: Private Capital Investment

Debate between Baroness Wheatcroft and Lord Sassoon

Tuesday 20th December 2011 Lords Chamber

[Lord Sassoon]

My Lords, the best measure of the expected effects of the fiscal measures that I outlined in my first Answer is what business organisations have had to say. For example, the EEF, the engineering employers organisation, has said that the R&D tax credit,

“will send a powerful signal that government intends to make the UK the number one choice for R&D investment and is another step on the road to making the UK the most competitive tax system in the G20”.

I could give the noble Lord similar quotes from the CBI and others.

[Baroness Wheatcroft]

My Lords, large companies are sitting on almost unprecedented amounts of cash rather than investing it. Would the Minister consider means of encouraging those companies to invest in smaller companies and nurture them?

[Lord Sassoon]

My Lords, we are always open to new and imaginative suggestions. Large companies have been talking to us positively about how to develop the supply chain and encourage their smaller suppliers.

Economy: Government Policies

Debate between Baroness Wheatcroft and Lord Sassoon

Wednesday 7th December 2011 Lords Chamber

[Lord Sassoon]

I do not accept that at all. Of course we all wish to see a strongly growing economy. The latest forecasts from the OBR are that the private sector will generate 1.7 million jobs over the forecast period. That is strong growth in the private sector.

[Baroness Wheatcroft]

My Lords, while cutting the deficit is essential, it will undoubtedly leave many people facing financial hardship. In the light of that, does the Minister have any comment on the stories this morning about the forecast growth in what is known as payday loans and the interest rates—some might say extortionate interest rates—charged on them?

[Lord Sassoon]

I completely agree with my noble friend that it is very concerning that people on low incomes should be exploited. Therefore, it is important that this issue is fully debated. However, I would also point out that the latest forecast from the IFS shows that real household disposable income will stabilise in 2012 and sharply rise in 2013.

Autumn Budget Forecast

Debate between Baroness Wheatcroft and Lord Sassoon

Tuesday 29th November 2011 Lords Chamber

[Lord Sassoon]

My Lords, the first thing to remind the House of is that it was my right honourable friend the Chancellor who took the lead in ensuring that the Basel III reforms on capital were phased in over a period to 2019, which was accepted by the G20 precisely for the reasons that the noble Lord gives; that is, that we did not want to place more burdens on the credit situation in the short term. Similarly, the Vickers commission has recommended that certain of its reforms be on a similarly extended timetable for the same reason. As for today’s measures, the £20 billion of underpinning of the national loan guarantee scheme is directed at ensuring that the flow of credit to small and medium-sized businesses continues, as it must do as we go into the recovery phase of the economy.

[Baroness Wheatcroft]

My Lords, the noble Lord, Lord Myners, referred to the march of the myth-makers. Does the Minister agree with me that perhaps the biggest myth was that we had done away with boom and bust? As a result of that, what we are paying in interest on our debt is more than what we are spending on education, and that is with interest rates at the low level that plan A had assumed. What does the Minister think will happen to those interest rates if we do not stick to plan A?

[Lord Sassoon]

My Lords, I dread to think what would happen to interest rates. The interest rates on our 10-year money have stayed rock solid. They are slightly down today, at below 2.3 per cent. Where is Italy? It is north of 7 per cent. Every 1 per cent increase in our interest rates would cost this country £21 billion or £22 billion. To look at it another way, by keeping our interest rates below the levels which were forecast by the OBR only in March this year at the time of the Budget, we have saved £21 billion or £22 billion on our interest bill, money that can be much better spent on our public services. I dread to think where we would be, but it would be in horrendous territory.

Banking: Government Shares

Debate between Baroness Wheatcroft and Lord Sassoon

Monday 13th June 2011 Lords Chamber

[Baroness Wheatcroft]

My Lords, one of the answers to getting more lending to our small firms, who are clearly not yet being well served by Project Merlin, must be to encourage more competition. Can the Minister assure me that he sees no conflict between the desire to get the maximum price for the Government's investments in banks and ensuring more competition?

[Lord Sassoon]

My Lords, I am grateful to my noble friend as she enables me to point to the mandate which UK Financial Investments was given by the previous Government. It was that in creating and protecting value for the taxpayer it must have due regard to both financial stability and competition. At all stages, whether it is the involvement of the Independent Commission on Banking or the mandate of UKFI, competition is at the centre.