Bank of England and Financial Services Bill [HL]

Debate between Lord Deben and Baroness Kramer

Wednesday 11th November 2015 Lords Chamber

[Lord Deben (Con)]

My Lords, I hope that the Government will think carefully about these proposals. I declare an interest, and therefore perhaps some knowledge of this, in the sense that I am chairman of the Association of Independent Professional Financial Advisers, am on the board of Castle Trust and also look after the Association of Mortgage Intermediaries, so this is an area in which I have a particular interest.

First, I say to the Committee that proper reporting is a crucial part of ensuring that we get changes in the world in which we live. Transparency has been brought to us partially because of the internet—we now expect to know and to be able to judge on what we know. I hope that the Government recognise that this is not an additional burden, because any financial business ought to be thinking about these things. It is not acceptable that people should carry on business without asking themselves, “Is what I do sustainable?”. If they do carry on business without thinking about that, it seems to me that it is not very good for the business. In other words, this is not a burden in the sense that we are asking business to do something that would not contribute to its own success; we are asking it to do something that is essential for its own success, and I am sorry that the industry itself has not come to the Government with its own scheme about how it should do that, because it is crucial for the future.

Secondly, when you talk to people in the financial world about these issues, they recognise them. Many of them are increasingly concerned that they should use their financial strength to promote and protect the future not only of their own businesses but of Britain, Europe and the whole globe. I think that there is a readiness to accept such a measure.

Thirdly, there is nothing that is as damaging in this area as a whole series of different ways of reporting different bits of information, so that people—sometimes without very good reason or sometimes with another agenda—can make false comparisons, because the comparisons are so difficult. It is in the interests of the industry that there should be some basic, simple and clear way of comparing one business with another.

The fourth thing that seems to me to be important is that we should recognise what a crucial role the financial services industries play in the promotion of sustainability. Choices that they make today will make a huge difference tomorrow; the choices that they make today will make an even bigger difference the day after tomorrow. We need thinking which is long term. I have been asked to speak at a whole series of meetings recently, put on not by those who are concerned with sustainable investment or socially responsible investment but by straightforward, ordinary investment businesses which believe that this is the route down which they have to go. We are not pushing people to do things that they do not want to do; we are making sure that what they do is comparable, usable and helpful. So this is an important measure for that purpose.

The last reason why I want to ask the Government to think seriously about this proposal is very simple: we need to think about these matters in every aspect of our lives. We cannot deal with the issues of climate change in particular or of environment more generally if we think that they are the perquisite of the Department of Energy and Climate Change, of Defra or even of the Department for Transport; this has to be part of what we do naturally, inevitably, all the time when we make decisions. We have to get into that mode and that mood. Therefore, I would hope that we were thinking of doing these things in a lot of other areas when we come to them.

However, we must make sure that people are not misled. I do not want to rub salt into the wounds, but the recent Volkswagen debacle reminds us how dangerous it is if we mismeasure. Measurement is a crucial part of making sure that people do things. If it is not measured, it is not done—we know that; if it is mismeasured, then it is done badly. We are trying here to suggest to the Government that ensuring that there is a sensible way of reporting what people are doing is a vital part of this legislation.

I commend to my noble friend the action of the Government on modern slavery. I do not think that there is any doubt that on all sides of the Chamber we have welcomed the Modern Slavery Act. What that Act does is tell people that they have to report what they have done to avoid modern slavery in their supply chain. That is very similar and parallel to what we are asking for here: to give the public, the campaigners and the people who care information which they deserve and ought to have.

I end by reminding my noble friend that a recent study done on behalf of the Navy discovered that there was very little difference in the way that people got information, and what they expected to get, between officers and men, men and women, and people based here in Britain and those based abroad. The one difference was between those under 30 and those over 30. Those who were under 30 expected to be able to know. This was done some years ago, so I suspect it is now those under 35, but the fact is that the internet generation does not understand why anybody does not understand that they want to know. If you ask people of that age, they do not understand why you—referring to me rather than my noble friend—do not expect information to be available. This is the world we live in.

I hope the Government will take these propositions very seriously. It may not be the right amendment and there are some bits of it that I think I would rewrite—all sorts of things might be improved, and the noble Lord who moved it on behalf of the noble Baroness would probably agree that we should settle for a different phraseology. However, we want to make sure that everybody making decisions in the financial services area recognises that they are making them in this context and reports them so that others can see that they have taken those decisions not lightly or for short-term reasons but in the context in which we all live—a world which is threatened by the most catastrophic danger that we have knowingly faced in our history.

[Baroness Kramer]

My Lords, I support the amendment in the name of the noble Baroness, Lady Worthington, and the comments of the noble Lords, Lord McFall and Lord Deben. The amendment addresses an issue which the Government now have to take seriously. The speech of the noble Lord, Lord Deben, reminded me of the old adage: “What you measure, you manage”. By measuring and reporting, which surely is not beyond any corporation of any size, we change the whole culture of short-termism which dominates at the moment throughout the financial services industry, and create the potential for many more players to start to look at the longer term and at issues of sustainability. Surely, when we have been doing so much to try to ensure financial stability, which is a long-term issue, backing that up with the kind of tools that are proposed in this amendment makes a great deal of sense.

I am very much a believer that one of the greatest risks that we face, if not the greatest risk, is climate change. However, we are also looking at a time when new technologies are disrupting the whole established structure, and we have to take that on board in some way. We are also looking at great population changes—migration and demographic changes—and this amendment seems to me to be rather good at highlighting that all those big, disruptive changes need to be captured to some extent in this reporting system.

I hope that the Government will take this seriously. I agree that no one takes particular pride in authorship of the language on these occasions, but this is about getting the principle properly embedded so that the Bank and the regulators can carry out their tasks in a way that deals not just with immediate risk but with the long term and encourage the financial services industry to play over that long-term arena as well. We have financial services businesses which are recognising the importance of long-term sustainability and are doing it exceedingly well, but it is very hard for them to communicate with potential investors when differences in reporting strategies and language make that communication so confused. Providing a level playing field in terms of reporting means that those who focus on this can get their message out and that investors to whom this is important can then shape their decisions based on that comparable information.