(12 years, 9 months ago)
Lords ChamberMy Lords, I would just reinforce to my noble friend that at the G20 Britain and all the other countries agreed to ensure that the IMF continues to have all the resources that it needs. There is no lack of commitment to the IMF having those resources. We now need to see what proposals develop. I agree that the situation cannot drag on for ever.
My Lords, the noble Lord has cited the resources that are already available to the IMF but many commentators foresee that they will be inadequate to meet the depth of this crisis. If the IMF seeks to raise further funds, will the Government be contributing?
(12 years, 10 months ago)
Lords ChamberMy Lords, let me join others in welcoming this order laid before us. Like others, I think that the only regret is that we had not seen it perhaps a little sooner, but I am delighted that it has come now. I am also delighted to be able to look at it in the context of the Government’s commitment to credit unions. A project is now under way between the Post Office and ABCUL—a sort of industry spokesperson for credit unions more broadly—to find ways for the Post Office to be the front-door platform for many people to access their accounts through the Post Office structure. That would have been inadequate were these other steps not being taken to expand the capacity of credit unions.
I am particularly delighted that we now have a new definition of the common bond, which will take a real constraint away from credit unions and their capacity to build membership and to serve the community. The United States has long had much greater flexibility. Whereas in the UK the figures from ABCUL suggest that the current amount of assets under credit union management is £790 million, in the United States—even allowing for the difference in population size—some $900 billion of total assets come within the credit union structure. We are looking at a completely different dimension, which I hope the UK will be able to move towards. As the noble Lord, Lord Kennedy, has said, many people who are financially excluded can see a route into financial inclusion through credit unions that they would not find in the high street banks.
I also am encouraged by the expansion of the groups which a credit union can serve to include corporate bodies, partnerships and unincorporated associations. We have many small businesses which once again cannot find a satisfactory financial relationship through existing high street banks. They need other sources and mechanisms. Again, if we look at the United States, it is interesting that the ability to serve small business has long been part of the credit union framework. In 2011 alone, the Obama Administration are using that credit union network to push $300 million in additional credit directly to small and very small business in a way in which we have no capacity to do here in the UK. For the kind of activity that we are seeing through credit easing—obviously, that is a much broader programme—in the United States that is able to happen far more easily and fluidly through mechanisms such as the credit union and the much wider world of community development banks. We can now begin to move towards having that potential here in the UK.
With the new classes of shares and the ability to deepen investment, we are coming now to the point where there is a recognition that more diversity and provision that focuses on people who are financially excluded, and on businesses that are micro and small, is all to the positive for the growth that we need in our economy.
I join others in welcoming this order laid before us by the Government today. I express apologies from my noble friend Lord Newby, who had expected to be standing here but, because of the time, unfortunately could not cancel another commitment. I welcome this move by the Government.
My Lords, the Minister greeted my arrival at the Front Bench with a slightly wintry smile earlier. Whether he thought I was late, though I assure him I was descending from the rarefied atmosphere of the Back Benches, which is why I was slightly delayed, or whether he anticipated that this debate had some hidden horrors, I am not sure. He will, however, by now have appreciated the fact, from the contributions both of my noble friend Lord Kennedy and of the noble Baroness, Lady Kramer, that this measure is most welcome and Her Majesty’s Opposition are delighted to see it being presented today.
As noble Lords have already spoken about the virtues and possibilities of the credit union and the Minister himself paid due tribute to their work, it would be otiose of me to expand on that matter and, as I am given to brevity, noble Lords will appreciate that I will take as read the reason why this order should commend itself to the House. However, I have some questions to ask, which I hope the Minister will be able to respond to. What does he expect the removal of the limit on non-withdrawal shares to be? Will this result in dominant members of a society emerging? What steps will the FSA be taking to ensure that societies do not become subject to such dominance whereby a small number of individuals might establish a very considerable influence with regard to these non-withdrawable share holdings?
On credit unions, could I ask about the removal of the common bond, which is the whole point of a credit union, because it provides the self-regulatory strength of mutual knowledge and understanding? What does this mean as far as the future of the credit union is concerned? Does it mean that credit unions will be just another form of financial organisation rather than the distinctive sort of organisation which is being commended in the speeches made so far today in this short debate?
Finally, what does the Minister expect to be the impact of bodies corporate joining credit unions? Will this not lead to small commercial enterprises exploiting the financial strength of the credit union to further the interests of their own businesses? In other words, would credit unions become tied to businesses instead of being independent? After all, one business which might supply 10 per cent of the assets of the credit union will undoubtedly be a powerful force within it.
We welcome this legislation, but I would be grateful if the Minister could give me some assurance on those limited anxieties.
My Lords, I am grateful to the small but focused and committed group of noble Lords who have spoken with clear knowledge and some degree of passion about this, as it is important. It is clear from all sides that there is strong support for the work that co-operatives and credit unions undertake across Great Britain.
(12 years, 10 months ago)
Lords ChamberMy Lords, the Minister will have appreciated the fact that two of the more challenging questions have come from his own side, from the noble Lords, Lord Lawson and Lord Newby, about the future of RBS. What preparations are the Government making for recapitalisation of RBS if that proves to be necessary?
My Lords, it would be completely wrong in any circumstances to speculate on individual banks. The FSA, the Bank of England and the Treasury look at all sorts of scenarios in relation to banks and other systemically important parts of the financial system. As a result of the recapitalisation of the banks and the stringent stress tests which the FSA has conducted repeatedly, the UK banking system is well recognised by the credit rating agencies and by many other commentators and is in a relatively good situation. We now want to see stress tests carried out right across the European banking system as a matter of urgency to proper standards.
(12 years, 11 months ago)
Lords ChamberMy Lords, I am grateful to the Minister for repeating the Statement made in another place earlier this afternoon. Of course, we are grateful to all who contributed to the Vickers report, particularly the chairman. After all, this is probably the most important report to come before this Government during their time in office. Therefore, it is important that we recognise the points that the Minister made about the time necessary for full consideration of the important issues involved. However, if we have a clear anxiety about the Government’s response—I recognise that it is an initial response at this stage—it concerns whether it has the urgency which the nation demands. The report proposes significant reforms to an industry that contributed substantially to a huge rise in job losses and caused great uncertainty among our fellow citizens. Hundreds of thousands are seeing their living standards decline. At the root of this is the catastrophe in the financial sector that we have lived through.
Of course, the report is concerned with the UK position, UK banks and the United Kingdom Government’s response and contribution to finding a solution. However, I hope that the Minister will give greater reassurance as regards the urgency of taking the earliest possible action. I am not clear why the Government have not indicated that they look upon the financial legislation before both Houses as a vehicle for at least establishing a basic framework of the response. That would at least translate fine words into early and clear action. That is the very least that we can ask of the Government in response to a situation which has been so catastrophic for our nation.
My second point, in somewhat lower key, concerns the international dimension. Of course, we are concerned about United Kingdom legislation but it is important that the Government, particularly the Chancellor, should recognise that the solution to the financial problems which face banking in this country has to be consonant with the solutions which are put forward and engaged in by all the major economies in the world. That is why it is so important that the Chancellor should recognise the international role which he has to play in respect of the reform of the world’s financial provisions, particularly regulation.
Thirdly, I hope that the Minister will not dwell too much on the past.
We all recognise that the catastrophe which occurred in 2008 was enormously detrimental to the welfare of this country. However, I hope the noble Lord will recognise that it occurred not just in this country but constituted an international financial failure. Regulation failed in the United States of America and other countries. That international dimension is crucial to finding a solution. If the Minister merely looks on this as an opportunity for point scoring and berating the previous Government, that would ill fit the present situation and the problems that we all face, to say nothing of the fact that he would have to quote chapter and verse those senior Conservative politicians who, during the build up to the events of 2007-08, warned of the impending difficulties and demanded tighter and more effective regulation of the City. If evidence of that kind emerges at any stage, I for one would be glad to see it. However, I would be amazed if it existed.
Today’s Statement provides an opportunity to give a brief response to a fundamentally important problem. I am keeping my remarks brief confident in the fact that we shall have another opportunity to debate this matter on Thursday of this week. I hope the Government and the Minister appreciate that we shall have a greater opportunity to deploy our arguments in that debate after we have fully examined the Vickers report and the Government’s initial response to it. I look forward to that debate, as I am sure does the Minister.
(12 years, 11 months ago)
Grand CommitteeMy Lords, in view of the statement by the Deputy Chairman at the start of our proceedings about about the photographer, I am now tempted to give a 45-minute speech just to make sure that I get my picture taken in action to prove that I do things in your Lordships’ House other than turn up. However, I probably will not.
I am extremely grateful to the Minister for his introduction to the order, because it filled out the information in the Explanatory Memorandum. The phrase “sale and rent-back” is new to me; I am used to the phrase “sale and lease-back”. My first question relates to that terminology: is there a difference in law between sale and rent-back and sale and lease-back? When I think of sale and lease-back, I have commercial activity in mind. I remember that Tesco was notoriously involved in sale and lease-back of properties via the Cayman Islands a few years ago. I wondered whether this regulation meant that commercial companies involved in those kinds of deals on commercial properties are now brought into the legislative net, or whether the phrase “sale and lease-back” is already recognised in law. If I decided that I wanted to buy a Tesco store and lease it back to them, would I be covered by something that already exists or would this newly apply to me?
My other questions relates to Article 6 about the sunset clause. Within a year, more or less, of this provision coming into force a report has to be produced on how effective it has been. Presumably, the intention is that between then and 2015, if the report suggests that it has been effective, a subsequent order will be made, which no doubt will cover lots of other things as well but would continue this provision. I cannot remember, from when the Financial Services and Markets Act was going through, how this sunset provisions worked. If, as I suspect, we would expect a successor order to this one to be introduced before 1 January 2015, how long would that last for? Is this a rolling series of orders that have to be renewed every five or 10 years? Subject to that, this seems to be a sensible additional component in the consumer protection framework.
My Lords, I am somewhat shocked that the noble Lord, Lord Newby, feared that our proceedings might be concluded before the photographer arrives; I have my customary one-hour speech on a statutory instrument, so there is no call for anxiety on that front.
I thank the Minister for both the clear way in which he presented the issues around the SI, and for the sympathetic way in which he addressed himself to those who may be involved in this exercise by being forced by financial circumstances to engage in this operation. As he rightly says, there is an obvious imbalance between the professional service of those who provide the resources and seek to strike the agreement and the householder who most often is already entering into these arrangements through fairly dire financial circumstances. As the Minister accurately said, they are unlikely to think of recourse to financial advice or even to be able to afford it anyway, even if they thought it was a good idea.
This is consumer protection legislation, after all, and we are at one with the Government in seeking to enhance it, particularly as it is derivative from the 2009 Act passed by the previous Labour Administration. However, I ask the Minister to address himself to several points. First, because the order follows reasonably quickly from its predecessor, it is suggested that there was no need for further consultation. On the whole, all such SIs of this kind, prepared by the Treasury and other government departments, should be subject to consultation beforehand. After all, the previous consultation took place against different terms from this order. I am therefore somewhat surprised that no consultation took place specifically on this order.
Secondly, will the Minister address himself to the important point that the noble Lord, Lord Newby, expressed? I am sure that the Committee will be grateful for the clarification—and, I hope, confirmation—that the Minister will be able to give about the nature of the rent position regarding the law and this order.
(12 years, 11 months ago)
Lords ChamberI completely agree with my noble friend that capital and infrastructure expenditure is one of the keys to growth, which is why we were able in the spending review last year to increase the plans that we inherited—to increase, I say again, the spending plans that we inherited from the previous Government —by up to £2.3 billion a year. That is an additional £8.5 billion on capital expenditure in the review period. I therefore agree with my noble friend. As for the green investment bank, it is on course to start the first phase of operation in April 2012. Legislation will be brought forward as soon as the state aid approvals have been forthcoming from Brussels.
My Lords, the Minister referred to the predictions and forecasts of the OBR but those were produced nearly six months ago and forecasted 1.7 per cent growth at that stage. Ever since, everyone else’s predictions have been somewhat lower. In circumstances where the American economy is clearly in difficulty and we have crisis in Europe, are the Government going to continue to pursue a strategy which will take us headlong into recession, with the price being paid by middle England and low-income families if that occurs?
It has never been on such a strategy, and therefore there is no question of it continuing on such a strategy.
(12 years, 11 months ago)
Lords ChamberJust to be completely clear, inequality increased under the previous Government. The latest data show inequality coefficients to be flat, but it is too soon to see what the trends are under this Government. However, inequality increased under the previous Government—and that was in a decade when 40 per cent more in real terms was put into working-age benefits and tax credits, so this is a very difficult problem to crack. However, I agree with the noble Lord that it is important that informed and active shareholders make sure that they consider the split of rewards within companies between shareholders and employees—and that is precisely why it is high up the agenda of my right honourable friend the Business Secretary, who is considering proposals as we speak.
My Lords, the House will have appreciated the Minister’s customary lucid answers to these questions, but the country will be more interested in the obvious question. How is it that after the banking failure of three years ago banking practices in terms of remuneration are being restored to their customary outrageous level?
Unlike the mess that the previous Government left behind in banking—we really do not need a lecture on this—the Merlin agreement put in place by this Government is making sure not only that credit is delivered by the banks to our hard-pressed industry but that bankers’ remuneration was less in 2010 than it was the year before and is less than it would have been without that agreement in place. This Government are therefore very much on the case with bankers’ remuneration, as with so many other aspects of this very difficult inequality challenge.
(13 years, 1 month ago)
Lords ChamberMy Lords, I certainly do not think we should relax on the issue of high frequency trading. We only have to think back to the events of 6 May 2010. I do not need to remind your Lordships that there were two crashes on that day: one was the crash of the outgoing Government; the other was the so-called flash crash in which the Dow Jones index plummeted in a number of minutes by 9 per cent but fortunately, unlike the Labour Government, recovered by 9 per cent a few minutes later. We certainly take this issue very seriously but we need to continue to do the work and see where this leads us.
My Lords, I think the country should be on its guard when euphemisms such as “black pools” are used. I agree with the noble Lord that they are an aid to liquidity but he will know—and I am grateful to him for identifying that the Government are expressing some anxiety in this respect—that they restrict transparency in the marketplace. We all know the price that we have paid for a lack of understanding of what has gone on in the world of finance and the importance, therefore, of the Government being concerned to get as much openness and transparency as they can.
My Lords, if they were black holes as the noble Lord suggests, we would be worried, but for dark pools, IOSCO, the international regulatory organisation, has recently laid down six principles to guide the operation of the regulatory framework of dark pools, and the FSA’s assessment is that the UK and the EU are fully compliant.
(13 years, 1 month ago)
Lords ChamberMy Lords, I am conscious that the hour is moving on. Tempted though I am to summarise the contributions of all noble Lords to this debate, which has been absolutely fascinating, I will leave that particular joy to the Minister.
I will begin by emphasising those parts of the debate that I am sure will obtain the enthusiastic acceptance of the whole House. The debate was graced by the outstanding maiden speech of the noble Lord, Lord Magan of Castletown. We very much appreciated the forthrightness of his speech in the areas that he covered. It was a tour de force, and at times it was also somewhat of a tour d’horizon. The problem of a tour d’horizon in this House is that we do from time to time have to abide by certain time constraints. However, on his maiden speech he was able to deploy fully the arguments and we all very much appreciated what he had to say. We are also grateful to the Minister for introducing the Bill and for covering it in a very limited time, conscious of the fact that many dimensions of the Finance (No. 3) Bill would be covered in the debate, to which he would be expected to respond at the end.
There has been a great deal of approval on the speech and on the work of the noble Lord, Lord MacGregor of Pulham Market. We all appreciate the sterling work that he does for the committee. From the contributions to a debate of this kind we see the very constructive work that the committee does in discrete areas. I do not doubt that we all recognise the very serious recommendations about the degree of consultation that can go on with regard to taxation, encouraging the Government to go further than they have gone so far, although we recognise their good intentions. We also recognise the necessary work on anti-avoidance and in due course increased work on anti-evasion as far as taxation is concerned. In particular, I want to comment on his points about the Revenue staff. I understand fully why the committee reached its conclusions on anxieties regarding the competence of Revenue staff. We have only to compare the rates paid in the public sector against those paid to the adversaries in the private sector who seek to limit the taxation paid by companies to realise what an enormously difficult job the public sector has in those terms. That is to say nothing of the fact that it cannot help that part of the Government’s deficit reduction plan is to reduce HMRC staff. Of course that produces strains in the department in the crucial areas where extra revenues can be obtained.
All sides in the debate appreciate that this Budget has been produced at a time of great economic difficulty. We all recognise that there has been a global financial crisis which has led every country that does not have the strongest of economies into very real difficulties. We all recognise that we need to get deficits down. That is why we do not doubt that the Government had to take tough decisions on spending cuts. Nevertheless, the best way of getting the deficit down is to employ the assets of the country as fully as possible. That means retaining people in constructive work as best we can. However, a great deal of the Government’s strategy, particularly with regard to the public sector, is to reduce our productive units and the ability of people to work and to earn. People who do not earn do not, of course, pay taxes—nor do they consume or sustain demand. Therefore, it is of no great surprise, or it ought not to be, that this economy has staggered into a position of negative growth over recent quarters. It looks by all accounts, and all forecasts, as if it will be a very considerable time indeed before we see anything like significant positive growth, despite the fact that we can look at other countries—and Germany is the outstanding example—that have come through this crisis and have positive rates of growth as they tackle deficits. Of course, it is not the case, as it has been portrayed, that the United Kingdom alone ran into deficit. All these countries have had to wrestle with their budgetary plans. The problem is the extent to which they have savagely reduced demand, as this Government have—and the answer, on the whole, is that they have eschewed that.
I put it to this House that if the debate that is going on in the United States of America at present should be won by the kind of voices that we have heard from certain parts of the House on the government Benches today, by the right-wing Republicans and the Tea Party advocates, we will see a decline in the American economy that will render our capacity to recover extremely difficult indeed, if not impossible, by 2015. Therefore, we should recognise that when we are discussing this issue of global demand, we have our part to play in this, too. We have the greatest doubts about the particular strategy being followed by the Government. As the noble Lord, Lord Desai, said, it was a pity that the noble Lord, Lord Skidelsky, was not here in this debate, as he above all on these occasions has identified the strategy that a coalition Government pursued 90 years ago in the face of public crisis over finances. It took us almost to wartime and government expenditure in wartime to recover. We worry, and are critical of the fact, that the rate of deficit reduction that the Government are pursuing is one that may lead to similarly bleak prospects for this country over this period of time.
Of course, in the debate, there have been so many comments about the Bill itself, and it scarcely behoves me to seek to reply to all of them. But I hope that the Minister will pay some attention to those who have argued about particular aspects of the social impact of the Budget. I hope that he will respond to the arguments that my noble friend Lord Anderson and the noble Lord, Lord Browne, produced on the question of the extent to which the Government intend to pursue family-friendly policies, of which we have seen little at the present time. I hope that also he will appreciate those contributions of my noble friends Lord McFall and Lord Watson of Invergowrie, and several other noble friends. They emphasised the fact that the great danger is that we look once again as if we were concentrating overwhelmingly on the financial dimensions of the economy—a point that my noble friend Lord Haskell also brought late into the debate. The Government have said that it is their intention to rebalance the economy, but it is quite clear that the manufacturing industry is not getting the support, resources or opportunities from the banks to borrow in order to invest that would help to put our economy on a sounder footing.
This debate has been extremely valuable, and we recognise the very constructive comments on all sides. We hope, however, that the Minister will also appreciate that, as far as Her Majesty’s Opposition are concerned, there is a real difference between our perspective on the strategy which ought to be pursued at this present time, and at the moment we are holding the Government to account where their case is remarkably thin.
(13 years, 2 months ago)
Lords ChamberMy Lords, we will bring forward the Bill in due course when it is in good shape. I take my noble friend's point about commodity prices. It reinforces the fact that we need to ensure that all energy users get advice to use energy efficiently in order to reduce their household bills. That is part of where we are targeting government help.
My Lords, when energy prices and oil prices rise, the price to the consumer rises very quickly. When world prices fall, the price to the consumer falls very slowly. What are the Government going to do about that?