Bank of England and Financial Services Bill [HL]

Debate between Lord Davies of Oldham and Lord Naseby

Tuesday 15th December 2015 Lords Chamber

[Lord Davies of Oldham]

My Lords, the amendment tabled by the noble Lord, Lord Naseby, which the Government support, is an important step. We welcome the move by the Government to commit to a more diverse financial sector, in which the mutuals are clearly key. However, it is not enough merely to put this into legislation—action is required. What are the Government doing to ensure that this is more than just a gesture? Presumably, the FCA’s remit letter will have to be changed to reflect this new principle. Will the Government therefore commit themselves to introducing an amendment at Third Reading to reflect this obvious fact?

[Lord Naseby (Con)]

My Lords, I shall speak to the new clause which stands in my name as Amendment 15. In doing so, I reflect the privilege of working with the mutual movement for 30 years. In creating this amendment, it was very clear that the Bill as it stood left some gaps of the one-size-fits-all kind. I gave some examples on Second Reading and further examples in Committee. Indeed, I can record this evening in your Lordships’ House that there is one new mutual insurer now trading, for the first time in 20 years. It is a new military mutual, serving our Armed Forces. I cannot think of a better new mutual to stand on the market than one which serves our Armed Forces.

I pay tribute to the Front Bench and in particular to the Minister. I understood that the examples I gave of misunderstandings, or of being left out or not fully understood, have been looked at by Her Majesty’s Treasury. I think that they were found to be quite genuine cases. I recognise that Her Majesty’s Government reserved the right, from the start, to look at the wording of the original new clause that I had tabled. I always had an open mind that those words might have to be amended, if necessary. They have been and are now before us.

There is still a problem in the world outside in understanding this. Half the population is being served by mutuals, yet very few people in authority really understand the driving force behind the mutual movement and why it is growing today. There is a need for all of us in society, particularly the regulators, to have a better understanding. I question whether the new regulator has anybody senior who has ever worked in a mutual. If not, then I hope there will be some appointments made hurriedly.

As far as the mutual movement is concerned—the building societies, the mutual insurers, the friendly societies and credit unions, and of course the Co-Op—tonight will be a special night if this new clause is accepted. It will recognise that their future needs will have to be considered and be better understood, so I say a huge thank you on their behalf to your Lordships’ House if this new clause is accepted.

Child Trust Funds (Amendment No. 3) Regulations 2010

Debate between Lord Davies of Oldham and Lord Naseby

Monday 19th July 2010 Lords Chamber

[Lord Davies of Oldham]

My Lords, it is always encouraging to hear the Government’s defence before the amendment has been moved. I congratulate the noble Lord on taking advantage of his position and commenting on the amendment when introducing the regulations. I recognise his need to do so. Even before we had articulated and identified the main sense of the amendment, I found his response to it rather flimsy, not least because it was clear that the Conservative Party did not go into the general election with a proposition to abolish the fund. The Conservatives spoke in their usual vague terms about the necessity for some curtailing of this constructive scheme, but they did not address the issue of bringing forward primary legislation to abolish it.

The Liberals were in favour of abolishing the scheme but, knowing the consequences for the children of the less well-off in society, they had it in mind that the Budget would protect, or even enhance, the position of children in that situation. We shall debate the coalition Budget next week, but the Liberal Democrats will be hard pressed then to defend their part in it. That is why they ought to think twice about the impending decision to scrap the whole of this scheme through primary legislation in due course.

We have heard from both parties in the coalition that savings are a priority. Earlier this year, the present Chancellor said that we need to restore our savings culture and that,

“we will build a saving society”.

This scheme has one significant advantage—it is universal in its appeal and covers each and every child, with special provisions for those families with the least propensity to save. It was because of that that it was warmly welcomed when it was introduced.

What is now being proposed is quite clear. We may, in due course, hear of some vague ameliorative measures for the poor and disabled, but what will happen as a result of these regulations is a straightforward deterioration in their position. This is an attack on the poor and disabled. I appreciate that the noble Lord made the best fist that he could of it when indicating an element of gradualness, but this will happen all too quickly and with dramatic effect.

The scheme is successful in emphasising a savings culture and long-term investment. If we were talking about sacrificing short-term investments—I imagine that there will be plenty of examples and illustrations from the government Benches over the forthcoming months and longer about the constraints necessary on investments in the short term—that would be one matter, but this is investment for the long term. It ensures that, when young people reach the age of 18 and their needs are particularly acute, they have a basis that can help them to organise their lives.

We should not underestimate the significance of the point that young people will have reached at that time. When people reach the age of 18 to 21, family expenditure increases apace. The average amount owed by 18 year-olds is just over £5,000; the average family spend on young people in this range is more than £13,000. That is before we have any idea—although how can we feel encouraged?—of what the implications of higher education finance might be for that substantial section of young people who expect to stay in full-time education beyond the age of 18. A black hole is opening up for that generation of young adults, who could have looked forward to long-term, modest savings, who could have looked forward to being part of a savings culture and who could have looked forward for the first time to having a stake in the economy and in the country, something that I would have thought had some appeal to Conservatives down the ages. This was an opportunity not just to talk in broad terms about the advantages of increasing financial literacy and improving equality of financial education among our young people but also to give a clear illustration of resources that were being developed on their behalf and would give some point to that financial education and assist in it.

None of this underestimates the fact that aspects of public expenditure need to be reined in. We made quite clear as a party before the election—and we made no bones about the issue in the debate on the Budget—the necessity for constraints on public expenditure. However, at stake today is a scheme that is long term in its investment potential and has particular advantages to the least well-off in our society. It is one that aids all the objectives that we share with regard to creating greater opportunities for young people and ensuring that they feel part of society, yet the Government are out, first, to strip the scheme of many of its benefits and, then, in the very near future, to abolish it. That is why the Opposition have put down their amendment. I beg to move.

[Lord Naseby]

My Lords, I declare an interest. I contribute to the child trust funds for both my granddaughters, Ciara and Ella. In a sense, I should declare an interest in that I am the only one in the Chamber at the moment who was involved in the creation of the child trust fund when it was originally voiced by one of the think tanks, IPPR. Some funds were transferred from the Children’s Mutual, of which I had the privilege of being the chairman at that time, so I was in at the beginning. I state now, as I stated then, that I had reservations about the supplementary contributions at seven and 11.

The scheme has worked, in the sense that 6 million children have benefited from it so far. About a third of the trust funds have been topped up by various family members and that figure is slowly increasing. Some would say that a third of young people saving anything significant is not a huge success, but it is certainly a very good start. It is certainly better than anything that had happened in any previous scheme from any other Government, so when I first heard the news I had to think hard about this whole situation.

I suppose that as an economist I am conscious of the economic situation that my noble friend on the Front Bench has been saddled with. I am not the least bit surprised that he has looked at every conceivable large sum sitting on the books—and £500 million is a large sum in anybody’s counting house. My noble friend will correct me if I am wrong, but I think that the figure is £525 million, of which £5 million is the cost of administration and £520 million is the figure for the amount given out in benefit.

I recognise that any Government facing the situation that our Government face at this time would need to claw back a significant sum from any scheme, whether for children or anyone else. However, I want to make a plea. I welcome the news that my noble friend announced from the Dispatch Box that there is to be a meeting with the providers later this week or early next week. That is a hopeful sign and could be beneficial.

Whether or not this particular scheme goes forward, the kernel of the scheme is the unique number that is issued by the Government to every child in the country. I have calculated the cost of issuing those unique numbers to be about £2 million. Whether or not the scheme continues and whether or not there is to be a mark 2 version—there was an inference on that from my noble friend on the Front Bench—without that unique number it is not possible to take it forward. My plea to him is to recognise that that is the kernel of the scheme. I am sorry to take issue with my noble friend, who has just joined us, but I think that what he said was wrong. The unique number is absolutely crucial. If that goes, the scheme is dead and I would personally regret that.