Royal Bank of Scotland: LIBOR

Lord Empey Excerpts

Wednesday 4th July 2012 Lords Chamber

Asked By

[Lord Empey]

To ask Her Majesty’s Government whether and when they were made aware by the Royal Bank of Scotland that the bank had dismissed employees for inappropriate behaviour in relation to setting LIBOR rates.

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

My Lords, the Government are aware that several banks are being investigated by the Financial Services Authority in relation to the setting of the LIBOR rate. While the investigation is going on, it would be inappropriate to comment on any specifics relating to the Royal Bank of Scotland. My right honourable friends the Prime Minister and the Chancellor of the Exchequer announced the Government’s response to the LIBOR issue on Monday.

[Lord Empey]

I thank the Minister for his response. Before I ask my principal supplementary question, I ask: will the Minister comment on the disastrous handling by RBS Group of the customers of Ulster Bank, who are still suffering over two weeks after the crisis began?

With regard to my main Question, will the Minister tell us what instructions he has given to UK Financial Investments Ltd, which looks after taxpayers’ interests with regard to shares held by the Government in various banks? Can he assure the House that the reporting mechanisms back to the Treasury as principal shareholder, particularly in RBS, will be such as to enable the Government to pick up evidence of any malpractice or inappropriate behaviour at an early stage?

[Lord Sassoon]

My Lords, on the RBS/NatWest/Ulster Bank IT failure, RBS has assured customers that nobody will be left out of pocket as a result of the problems. There is a Question down for tomorrow—number 4—from the noble Lord, Lord McAvoy, that touches on Ulster Bank, so I am sure we will return to that tomorrow.

On the instructions to RBS and the monitoring of them, the Government manage their shareholdings in RBS at arm’s length through UK Financial Investments and the governance arrangements are set out in the framework document and the investment mandate between UKFI and the Treasury. It is all there transparently on the website. I believe that those arrangements continue to be appropriate for the arm’s-length management. As it happens, UKFI published its annual report only this week. It sets out a very full account of the issues that it has been engaged in with RBS and with Lloyds Bank. I believe that all the appropriate channels are there and that there is a high degree of transparency. I can reassure the noble Lord on that.

FSA Investigation into LIBOR

Lord Empey Excerpts

Thursday 28th June 2012 Lords Chamber

[Lord Sassoon]

My Lords, on the noble Lord’s first point, I am sure that the board of the bank in question will listen to his views on bonus matters. That is principally a matter for the board of Barclays Bank to consider.

The noble Lord, Lord McAvoy, has said that we should not get too far into prior history here. There is a risk that I will get drawn into these matters. It was Mr Gordon Brown and Mr Ed Balls who espoused very explicitly the virtues of light-touch regulation, and that was the environment in which these traders operated.

[Lord Empey]

My Lords, LIBOR rates could not have been interfered with by one institution alone. There would have to be accomplices. I therefore presume that that is one of the directions in which the investigation will go.

Is the time ever going to come again in this country when someone takes professional responsibility for what is going on, leaving aside the criminal activities that will be pursued by the regulatory authorities? Is no one going to take professional responsibility and suffer a professional sanction if they are found in default?

Finally, sadly, we as taxpayers own substantial numbers of banks. Can the Minister assure the House that there is no such activity in institutions that are owned or partly owned by the taxpayer?

[Lord Sassoon]

My Lords, on the first point made by the noble Lord, Lord Empey, as I have said, other banks are being looked at by the relevant supervisory authorities here and in other countries. All that is ongoing. I very much endorse what the noble Lord has to say about the profession taking responsibility. If the banking industry wants to be thought of as a profession, clearly it should think about how it re-establishes professional standards. I speak as a chairman of the ifs School of Finance, the former Institute of Bankers, so I feel very strongly about that and believe that the profession needs to think about it very clearly.

I am not aware of public authorities being involved. I can be pretty clear that no public body is involved in any way in the LIBOR-setting regime and therefore in what we are discussing this afternoon.

Eurozone

Lord Empey Excerpts

Thursday 17th May 2012 Lords Chamber

Asked By

[Lord Empey]

To ask Her Majesty’s Government whether they intend to make any further financial contributions to the eurozone bailout.

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

My Lords, first, we should be clear that there are no requests on the table for further financial assistance. The Government have made clear their view that the responsibility for sorting out the problems of the euro area rests primarily with euro area Governments. The UK will not be a member of the permanent European stability mechanism, which will replace the European financial stability mechanism established under the previous Government, for which the UK holds a contingent liability.

[Lord Empey]

The Minister will be aware that there is considerable confusion in the public’s mind about what our commitments to the eurozone actually are. Although we may not have those commitments through formal European agreements, we are putting more money into the IMF and have done a bilateral deal with Ireland. Can the Minister clarify, in language that people outside can understand, exactly what our liabilities to the eurozone and its member countries are in the event of further financial turbulence?

Economy: Private Capital Investment

Lord Empey Excerpts

Tuesday 20th December 2011 Lords Chamber

Asked By

[Lord Empey]

To ask Her Majesty’s Government what additional fiscal measures they will take to encourage private capital to invest in manufacturing or tradable services in the United Kingdom.

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

My Lords, the Autumn Statement announced several measures which encourage private capital investment: an above-the-line research and development tax credit from 2013, ensuring that the relief continues to attract large-scale investment in innovation; 100 per cent capital allowances for six enterprise zones; and a new seed enterprise investment scheme in 2012 to help early-stage companies. The draft Finance Bill also set out further steps in wider corporation tax reform.

[Lord Empey]

I am sure that the Minister will agree that the best way of achieving long-term financial and strategic security for the United Kingdom is to strengthen our international trading position. A significant increase in our manufacturing capability is one of the best ways of achieving this. Can the Minister tell the House whether the Government have any plans to offer increased fiscal incentives to encourage businesses, especially SMEs, to invest in R&D spending? Can he further advise whether any additional fiscal incentives are being considered that will create sufficient confidence in the private sector to boost investment in manufacturing?

[Lord Sassoon]

My Lords, the first thing to remind the House is that the changes already made in corporation tax and the capital allowance regime will in total, in 2015, contribute an extra £700 million in reduced taxes to the manufacturing sector. For example, £1 billion of R&D relief was claimed in 2009-10, including by 7,400 SMEs. So this Government are indeed taking considerable targeted action to support our manufacturers, including SMEs, whether by way of encouraging R&D or through other aspects of the corporation tax regime.

Autumn Budget Forecast

Lord Empey Excerpts

Tuesday 29th November 2011 Lords Chamber

[Lord Empey]

My Lords, I welcome many of the comments made in the Budget Statement but there is one that I want to ask the Minister to clarify. He announced that he was asking the independent pay review bodies to consider how public sector pay can be made more responsive to local labour markets. Can he explain what that means? How are the regions geographically defined? Further, if there were to be a reduction in public sector pay in some of the regions, would that lead on inevitably to reductions in benefits in those areas as well?

[Lord Sassoon]

My Lords, I am grateful to the noble Lord, Lord Empey, for drawing attention to this critical issue because it is potentially an important structural change in the economy. We want to make sure that in the labour markets in all the regions of the country there is no unfair competition or crowding out in any way of the ability of the private sector to hire people. Private sector pay has to be reflective of local market conditions where until now public sector pay has been set on a national basis. We have said that we will be asking the independent pay review bodies to consider how pay can be made more responsive to local labour market conditions, and they will report to us by July 2012.

European Union Membership (Economic Implications) Bill [HL]

Lord Empey Excerpts

Friday 25th November 2011 Lords Chamber

[Lord Empey]

My Lords, since I came to your Lordships' House the issue that seems to get everybody’s blood up more than anything else is Europe. It is hard to plot a middle course but it seems that we have not resolved the arguments of the 1970s, which continue apace. I have no doubt that after his gruelling visit to the Gulf states this week, the Minister looked forward to nothing as much as three or four hours of us going on about Europe. I knew that that would bring his week to a perfect end.

I hope that I will be able to stay for the wind-up but I should say at the outset that the European Union has benefited my region to an extent. Indeed, I pay tribute to it for the money it gave to the fund for the peace and reconciliation process in Northern Ireland. It gave that money on exceptional terms and it was greatly appreciated. However, I hear people continuously complaining about this or that European regulation, and in many cases rightly so. The question one has to ask is why and how these regulations and directives are being made. They are being made because the successive Governments we have sent to negotiate in Brussels have put their hands up for all these directives and regulations. The Commission does not manufacture them. It is taking these decisions because we have agreed in principle to allow it to do so. That is where I believe the core of the problem lies. We can demonise the Commission, and rightly so in many regards, but it is taking those decisions because we agreed to the treaties that allow it to do so. The Commission is not acting irregularly; it has the authority to take those decisions. That authority—in many cases, regrettably—has been given by successive Governments and Parliaments because we are in the European Union as the result of a referendum.

I agree with the noble Lord, Lord Bilimoria, that the essence of this Bill is about providing a cost-benefit analysis. Like him, I had assumed that that would be an ongoing piece of work. If you are a member of any organisation, whether that be a golf club or whatever, every year you weigh up the balances of remaining a member. I had assumed that the Government were doing that consistently. I have no doubt that the Minister will confirm that when he winds up. How did we get to the present position? The idea of a wide, powerful, large single market is very attractive; there are geopolitical, emotional and other good reasons for having it. I have no objection to any of those things but I increasingly object to the suffocation of our initiative and enterprise by a plethora of rules and regulations which are being imposed on us.

As regards the single currency, people are focusing on Germany. The Germans connived and conspired with the European Commission to fiddle the books when the euro was introduced. It was perfectly obvious to everybody that the Greek, and perhaps the Irish, Portuguese and Spanish economies, were not on a par with those of northern Europe, but the Germans fiddled the books for political reasons. That is what is poisoning the whole system, which is dominated not by economics but ultimately by the politics of a small elite who believe—they are perfectly entitled to do so—that we are aping the United States and effectively becoming a single state in all but name. That fiddling of the books by the Germans in particular has been done for political reasons. One hears Angela Merkel complaining but the fact is that she and her predecessors have created this situation even against the advice of their own central bank, which made it clear that the other economies were not at the stage of development that allowed them to have a single currency. I know from our neighbours in the Irish Republic that the single interest rate led it into the mess that it got into because it caused a flood of cheap money. The interest rate was kept low to allow the Germans to rebuild their industry and become more competitive but at the same time it destroyed the weaker economies that should not have been in the eurozone in the first place. We can see that the generally good idea of co-operation with one’s neighbours, which I fully support, has become corrupted.

The whole question of investment has been raised by a number of noble Lords. I have tried to seek investment in other places. The single market is an attractive proposition but having the right labour force and cost base are far more attractive. However, our membership of the European Union pushes against us in those regards as it is raising our energy costs and other regulatory costs. Therefore, the costs and benefits are very hard to judge.

Trade imbalances are the other reason for this fundamental difficulty with the eurozone. If you keep on selling less than you are buying, sooner or later there is a problem. We have that problem now. We should be developing our economies and developing stronger relations with the Commonwealth, with its balance of developed and underdeveloped economies. We should be looking outwards and seeking trade in a much more aggressive manner. Despite our efforts in Iraq, we are already being outtraded by other countries which did not lift a finger to help it. The same will happen in Libya.

I hope that the Government will look more rigorously at how we can promote our trade because the fundamental imbalances in our trade are causing the instability in Europe. As long as you are a debtor, you will always find the person to whom you owe money will follow you up and demand proper payment in due course. I have little sympathy for the Germans because I believe that they have brought this on themselves; and brought it on us.

Economy: Growth

Lord Empey Excerpts

Thursday 31st March 2011 Lords Chamber

[Lord Empey]

My Lords, it is good that once again we are discussing matters that go to the very heart of our economic future. I, too, thank the noble Lord, Lord Hollick, for securing this debate. We have also had a banquet of maiden speeches in the House today, and it has been wonderful to hear them; they certainly enrich our proceedings.

Investment, innovation, technology, infrastructure, skills and job creation are the buzzwords we all use when talking about our nation's ability to regain economic momentum. Members may be aware that this autumn, WorldSkills 2011 will be held here in London. WorldSkills is a biannual event which was last held in Calgary in 2009. I had the privilege of attending that event as Skills Minister, along with members of the previous Government. We saw many of our young people competing with their peers from all over the world, and the UK did very well, obtaining many medals for excellence in a variety of disciplines. Even higher targets have been set for London this year. WorldSkills is a bit like the skills Olympics, although the association does not like to call it that. It gives young people, whether they are training to be tradespeople, beauticians, gardeners or workers in aerospace, the confidence to take on the best in the world.

However, my main point is that whatever training is provided or acquired by the state, the most important thing cannot be manufactured: the right attitude. I fear that the attitude towards work, especially manual and manufacturing work, is severely deficient in this country. There has been much criticism that thousands of people have come into this country, mostly from within the EU, and gained almost half of the new jobs created during the boom years up to 2008. Why did that happen? Many employers told me that the big difference between the indigenous and migrant workers was their attitude and work ethic. There were no duvet days for many of those migrant workers, no sick days, and they were always available for whatever overtime they were offered.

I know that such comparisons are dangerous. Many of those migrant workers did not have families so were freely available without other commitments. Also, many were highly skilled, so businesses did not need to pay to train them. Nevertheless, there is some truth in the anecdotal stories about their attitude to work that needs to be taken seriously. We are also in danger of leaving a pool of disillusioned indigenous workers, many of them in our inner cities.

The workforce of this country built up this nation's wealth for centuries, and many paid a heavy price with their health and often their lives. I have seen with my own eyes the skills that many of our people possess and which, under continuous upskilling of our existing workforce, they can acquire. However, there is a missing link. In many cases, people do not connect the acquisition of a skill with a rewarding lifestyle. Too many people have been sent to training schemes that have not led to a job. That has undermined the principle of work paying, as those schemes are frequently seen as a waste of time. We have much to do to break that cycle, particularly in concentrated geographical areas of our country.

I hope that the Minister can confirm that Her Majesty's Government will do all in their power to promote the type of work ethic that once made this country great. Without restoring a meaningful balance in our economy, particularly in manufacturing, we will never develop the ability once again to create the wealth that will pay for the public services that all of us so desperately want to be delivered. The information and ideas that have come from different parts of the Chamber today have demonstrated that we have the ideas that can lead us back to the greatness of our industry as it once was.

Economy: Government Policies

Lord Empey Excerpts

Thursday 24th March 2011 Lords Chamber

[Lord Empey]

My Lords, I apologise for some unavoidable absences during the debate. I, too, congratulate the noble Lord, Lord Lawson, on bringing this subject forward because I am a new Member of this place. The issues that have been debated over the past couple of months since I joined the House, such as the AV referendum proposal, fixed-term Parliaments, the Public Bodies Bill and the European Union proposals, are all matters of considerable constitutional importance and therefore of great interest to me and, no doubt, to your Lordships. However, it cannot be said of the people on the streets of Glasgow, Manchester, Cardiff or Belfast that they talk of little else. On the other hand, this debate goes to the heart of what really does matter to the people on those streets as they wrestle with rising food and fuel costs, rising unemployment and, almost as bad, the threat of unemployment, along with increased borrowing costs and now the prospect of significant inflation. These are the things that people are talking about around the breakfast and the dinner table and at work. I am therefore glad that we are addressing these issues today.

This situation has not come about overnight. It has happened as a result of over-ambition, with previous Governments perhaps believing that we could spend our way to a better economic future based on financial and other services. It has long been believed that future jobs would come largely from the service sector, particularly the financial services sector. While of course we all value those jobs, there was a bias in Government against manufacturing. A view was held that it was old hat: “Never mind about smelly businesses and people getting their hands dirty. We’ll concentrate on financial services, on derivatives and insurance”. Important as those things are, there has to be a solid manufacturing base to create the wealth that we as Governments and Parliaments want to spend.

What a difference two years has made to our perception of where we should be going. Today, manufacturing is thankfully enjoying something of a revival, fuelled in part by lower exchange rates. Land-based businesses and food production have also held steady in this uncertain world of rising commodity costs. In short, there is no substitute for a significant manufacturing sector in order to generate the wealth to pay for our public services. We must pay more attention to this sector and hold it in higher esteem.

I turn to the other point I wish to make. There is an element of snobbery in this country that seems to value those seeking a career in the manufacturing sector rather less than those who choose a career in the professions. That pervades our education system at virtually all levels and must be discouraged. The Government can give a lead here and set the tone.

In recent days, as we have seen, our Armed Forces are in harm’s way yet again. Many noble Lords have been calling for a rethink of the recent defence review. That is entirely understandable. However, the principal reason for the review, apart from strategic issues, was lack of cash. That cash can come only from the wealth creators in this country, who generate the taxes needed to pay for our military assets. Like many in this House, I would like to see an aircraft carrier with aircraft that can fly from it, able to project power in a dangerous situation and protect our national interests. Who would not? However, that will not happen unless we get our economic policies right. I wish the Chancellor well in his endeavours to cure our country's problems. We will all benefit if he succeeds.

I want to mention two things that previous speakers said. The noble Lord, Lord Renton, mentioned apprenticeships, and the noble Baroness, Lady Stedman-Scott, in her maiden speech mentioned dealing with people in the harder-to-reach areas of the labour market. We have been pushing perhaps too many people towards university and higher education, and perhaps not enough towards apprenticeships, learning trades and learning skills that can keep our businesses going. We also need that; we need a balanced economy. The noble Lord, Lord Renton, mentioned internships, which are an excellent idea. Many graduates languish on the unemployment register, stack shelves in supermarkets or do whatever they can do, and maybe there are opportunities here to introduce them to work and give them a chance.

The noble Lord, Lord Bates, made the point that the public sector in his region now accounted for 70 per cent of the economy. I can reflect on that from my region, where we are in exactly the same position. The right approach is to say not that the public sector is too big, but that the private sector is too small. Will we be able in this country to revive the concept of entrepreneurship and treat it with the esteem that it deserves? The Government can take a lead here. That would encourage people to believe that there is a future outside the accountant’s office or the law practice, valuable as they are.

The noble Lord, Lord Sugar, gave us all a lesson earlier on what it means to be confronted with the reality of seeking funds to get started in business. You have to have an idea, some back-up and the will to succeed. As a nation, we need to raise the esteem in which we hold people who carry out this function in our economy, otherwise there will be no taxes for any of us to spend.