Queen’s Speech

Lord Altrincham Excerpts

Monday 16th May 2022 Lords Chamber

[Lord Altrincham (Con)]

My Lords, I welcome the right reverend Prelate to this House, and I look forward to hearing more about his greenhouse in the future. I also thank all noble Lords for their courage in staying past position 50 in the speaking order; those of us who are past 50 are particularly touched that you are all still here.

I declare my interests as a regulated director of the Co-operative Bank in Manchester and South Molton Street Capital. I shall make a few remarks on the financial services Bill. My noble friend Lady Penn opened this debate with comments on that Bill. We might feel a little disheartened that we have to look at these things, particularly given the weight of business that we have ahead of us in the Session, but we have also heard about the range of other Bills that are coming. We have heard from noble Lords through the afternoon about various different important plans for the future—spending on battery technology and hydrogen. We have heard about tidal from the noble Earl, Lord Liverpool, and the noble Baronesses, Lady Whitaker and Lady Hayman. More broadly, we have infrastructure and digital commitments, with the transition to net zero and the green economy. They all have in common the need for private sector financing. The key to making that possible is in the financial services Bill.

Unfortunately, at the moment we are going through a period in which regulation and financing in this country are extremely cautious. We are at the part of the cycle of maximum caution, which is mixed with a kind of absence of scrutiny, which makes it really difficult to finance almost anything long term. It is very hard for the banks to put long-term debt on their balance sheets, and it is very hard for a lot of investment companies to make long-term investments. We have seen in recent years great commitments made and stuff not happening, with half-built nuclear power stations and that kind of stuff. The key to unlocking this is in the financial services Bill, in the supervision of financial services.

All of that is to say that prudential supervision is very important. I worked closely with the Government in the bank rescues in 2008, and I very much appreciate that bank stability must be at the heart of our economy. However, with bank stability we get a bunch of other things. For example, we get extremely poor service. We all use the ring-fenced retail banks in this country, and we tolerate extremely poor service and long waiting times from businesses that are supported by the Government as public utilities. They have the taxpayer behind them—this is on the ring-fenced side, not the broader side—in return for their public utility service. But we are seeing them close down branch after branch, right down to the last branch in a community, and we are actually regulating down to the last branch and beyond. Could we ask the regulators to pause the closure of the last branch in a town, at this point? These are utilities—it is extraordinarily important. We have heard about the importance of access to cash, but it is not just about that; it is about access to regular banking services.

More broadly in banking, with this culture of prudential caution that we have, we are seeing incredible restrictions on investment activity because of the need to gold plate bank capital standards. We ask the banks to have such high bank capital standards—actually, the highest in the world—that it restricts access to long-term investment capital. There is no challenge to this at the moment until we rebalance regulation. Alongside that, we have a culture that we have heard about quite a few times in glancing references to what is happening at the Bank of England—a culture of defensiveness, and a reluctance to bear scrutiny and bear challenge. That is part of the regulatory position, but there are other things as well; we have a regulator that will delay for months approval of positions in banks, showing a complete disregard for the private sector. That is an absolutely intolerable way in which to behave—again, unsupervised. We also have a culture in which the regulators put enormous costs on to the private sector. A very good example of this was the incredible cost put on the private sector through the LIBOR transition last year—and that passes unsupervised.

I have hit my time limit, but I ask the Minister just to comment on the access to long-term capital and rebalancing the supervision of financial services. I look forward to hearing more.