Thames Garden Bridge

Lord Forsyth of Drumlean Excerpts

Thursday 9th January 2014 Lords Chamber

[Lord Forsyth of Drumlean (Con)]

My Lords, can my noble friend tell me how many people’s entire income tax paid over the whole of their working life would be needed in order to fund this £30 million?

[Lord Deighton]

That depends which people you choose. Obviously I take the point of the question. That is why, before we commit the £30 million, we will ensure that it passes a strong business case and why, before we go ahead with the project, the Garden Bridge Trust, under the chairmanship of the noble Lord, Lord Davies of Abersoch, will have to raise £90 million so that there will be no further call on the Treasury.

Pensions

Lord Forsyth of Drumlean Excerpts

Thursday 12th December 2013 Lords Chamber

[Lord Forsyth of Drumlean (Con)]

My Lords, will my noble friend, in making his statement that it is important that those who have saved throughout their life get the best return on their savings, bear in mind that the Government’s quantitative easing programme is one of the major reasons that annuities are so poor? Can we have some indication of when the Government might abandon QE?

[Lord Newby]

My Lords, we have discussed many times the fact that low interest rates are a key determinant in supporting growth, and that growth is in the long-term interest of the entire community. The Bank of England has given forward guidance in respect of when interest rates might rise. Monetary policy is firmly in its purview rather than the Government’s.

National Infrastructure Plan

Lord Forsyth of Drumlean Excerpts

Wednesday 4th December 2013 Lords Chamber

[Lord Deighton]

That particular project, along with five or six others, is the subject of a feasibility study to determine the right solution. Next year, when all those studies are complete, we will make a decision to go ahead with the proposed solution.

[Lord Forsyth of Drumlean (Con)]

My Lords, will the Minister confirm that, had the Government stuck to Labour’s spending plans, capital expenditure would have been cut by considerably more and that, in coming into Government, we actually increased the allocation for capital expenditure? I congratulate him on his initiative, but how are the Government’s proposals to reduce the cost of electricity consistent with promoting offshore wind farms, which are the most expensive possible form of renewable energy and which will have to be paid for through people’s electricity bills?

[Lord Deighton]

With the first part of his question, as always, my noble friend forensically brings us to the detail. It is quite true that the Opposition’s plans for capital expenditure were lower than this Government’s. Subsequently, we switched current spend into capital spend in the Autumn Statements in 2011 and 2012, which further exacerbated this side’s advantage on investment. On my noble friend’s observation about offshore wind strike prices, the purpose of today’s announcement was to give the industry certainty in order to be able to get on with the building that we need, not only in nuclear but in wind and, over time, with the capacity mechanism, in gas. There are of course a variety of views about the speed at which we should decarbonise and the value of that, but the current status reflects our view on getting a diversified supply of energy.

Banking: Lending

Lord Forsyth of Drumlean Excerpts

Tuesday 12th November 2013 Lords Chamber

[Lord Newby]

My Lords, the decision on setting up the bad bank was, primarily, for the management of RBS. The Treasury and UKFI are obviously in regular contact with RBS.

[Lord Forsyth of Drumlean (Con)]

Does my noble friend not agree that one of the reasons that the banks have had difficulty in providing loans for small business is the disastrous state of their balance sheets, which was the responsibility of the ridiculous monetary policy followed by the previous Government?

[Lord Newby]

My Lords, that was clearly a major contributory factor. However, I refer noble Lords to the review undertaken by Sir Andrew Large for RBS, which found that the bank had failed to meet its own lending standards, had risk-averse staff and took longer to process applications than other banks, and that its treatment of customers in financial distress had led to major negative perceptions of the bank. The bank is now, at long last, moving to tackle many of those issues, but the failures in the way that RBS ran its business were a major contributory factor to its failure in recent years to lend to SMEs the amounts it set itself in its target.

Taxation: Tax Law Enforcement

Lord Forsyth of Drumlean Excerpts

Wednesday 30th October 2013 Lords Chamber

[Lord Newby]

I think the decision taken by Ministers to give an additional £1 billion for compliance activities was pretty clear. Many of the problems that we see with multinationals paying less tax than would appear appropriate are international by nature. That is why we have put a lot of resources into the OECD. We put another £400,000 into the work that it is doing following the G20 summit earlier this year. There is a determination across the international community, to a degree that has not been apparent before, that companies cannot get away with avoiding taxes. This must be dealt with internationally, and that is what we are promoting effectively.

[Lord Forsyth of Drumlean (Con)]

My Lords, does my noble friend agree that what the Treasury should be about is maximising the revenue that is taken in tax, and that the best way to achieve that is by having a lower, flatter, fairer tax system?

[Lord Newby]

My Lords, one of the things I learnt as a junior Customs and Excise official—

Financial Services (Banking Reform) Bill

Lord Forsyth of Drumlean Excerpts

Tuesday 8th October 2013 Lords Chamber

[Lord McFall of Alcluith (Lab)]

My Lords, it was, along with other Members, a privilege to be a member of the Parliamentary Commission on Banking Standards. I want to add a few words to what has been said. As a member of the commission whose view on this matter was for full separation, I signed up to the recommendation in order to have unanimity in the committee and because for the rest of us, with due deference to the most reverend Primate the Archbishop, it was an act of faith. That is what the recommendation from the committee was, because ring-fencing is at the moment theoretical. Without naming the person, I well remember someone on the Vickers commission saying to me, “John, we lost our nerve and advocated ring-fencing”. I do not want us to lose our nerve but I want us to be vigilant on this issue.

I well remember the evidence given to us by Paul Volcker who, noble Lords will remember, said, “I cannot really understand what the situation will be if you are the holding company which has authority over the ring-fence. If it comes to making a decision by that holding company’s executives about the future of the company, then the executives of the holding company will win over the decisions at the ring-fence”. At the end of the day, it is the holding company that matters. There is therefore something uneasy and illogical about this issue.

I also well remember another witness, not at the banking standards commission but elsewhere—Willem Buiter, when he was on the Monetary Policy Committee before he went to Citibank to be its chief economist—saying, “Remember that the half-life in the financial services industry is less than three years”. In other words, people will forget what has happened before. Having spent nine or 10 years as chairman of the Treasury Committee, all that I can say is that the banking industry is ever vigilant. If we sit back here for a four or five-year period and then return to the matter to see what has happened, the landscape will have changed completely. All that I would add to noble Lords’ comments is that if this House does not express that it has to be vigilant at all times, we are going to lose out and it could be to the disbenefit of ourselves as a Parliament and of society.

[Lord Forsyth of Drumlean (Con)]

My Lords, I did not speak at Second Reading because I could not stay for the wind-ups, but listened to most of that debate. I should like to press my noble friend on his logic. He says that we cannot have some body to police or check up on the regulator. I am very surprised that my noble friend Lord Blackwell, with whom I am normally absolutely on the same square on most issues, says that we must trust the regulator. There was a reason we got into this mess and, by the way, we still ought to have a proper inquiry into what the regulator was doing and how the crisis happened in the first place. The very last thing I feel like doing is trusting the regulator.

We have also seen the regulators going off to work for the banks at, no doubt very appropriately, very high salaries to help them with their compliance and operation of regulation. Let us face it, I am not sure where I stand on the notion that we should trust the regulator on this matter. Like the noble Lord, I was prepared to go along with ring-fencing but could not see how it could work. But it certainly is not going to work if you have very clever people in the banks and at the regulator, but no one is actually breathing down the regulator’s neck. That seems to be the lesson that we can learn with absolute clarity from the previous experience.

I have to say that my noble friend’s logic was, “We can’t possibly have the regulator being subject to second-guessing all the time. How are they going to be able to carry out the agreed policy?”. As has repeatedly been said in a number of speeches, this is an experiment because it is part of a compromise to try to get the banks reasonably on board and to proceed on the basis of consensus.

In my seven years—perhaps it was nine years—working in an investment bank, I learnt that investment bankers are extremely adept at getting between the wallpaper and the wall. If they can find a way to get around something, they will. That is their job and how they make money and resources. The notion that if we have ring-fencing there will not be lots of clever people finding very good schemes to get around the intention of it and that the regulator will stand up to them, especially if we are in a period of prosperity, flies in the face of the experience that we have had.

It is essential to have someone independent of the regulator looking at this relationship and seeing if it is working. They should report to Parliament, with Parliament ready to enforce separation if it is required. It is by putting their feet to the fire in this way that we can be sure that they realise that it is in their interests to make this ring-fence procedure work. Without that, it will not work and we will be back to where we were before you can say “renewed prosperity”.

My noble friend uncharacteristically showed a lack of logic in what he was saying. If he wants the House to commit itself to this policy, he needs to address this basic question of who will guard the guardians.

[Lord Phillips of Sudbury]

I have a lot of sympathy with what my noble friend has said. However, on my noble friend’s thesis, there is the problem that if you have a regulator of the regulator, you should have a regulator of the regulator of the regulator. At some point you have to put some trust in someone. As he has said, bankers are adept at getting around any set of regulations. Is there not a point at which you have to have trust?

[Lord Forsyth of Drumlean]

I agree, but all questions can be reduced in that way—reductio ad absurdum. On that basis, we would get rid of Parliament, which ultimately is the regulator of the regulator. The regulator is accountable to Parliament. We are dealing here with day-to-day very complex circumstances. In this great House we have many experienced people. In my view, the banking commission has done a brilliant job, as has the Treasury Select Committee in many respects. I think all of us would agree that that was appropriate and that that job has been done. However, as I understand it, in the particular instance of deciding whether this ring-fencing experiment will work, here we are talking about the need for some kind of process which will scrutinise that and will report on an informed and an in-depth basis. That is why I support the amendment in the name of the noble Lord, Lord Turnbull, which seems a sensible course of action.

In the case of the Bank of England, why did it allow interest rates to remain so low when it could see a housing bubble and an asset bubble being formed? Even the former governor, who is now a Member of this House, has acknowledged that and has said publicly that it is very difficult when everyone is making lots of money and the whole consensus is that we have abolished boom and bust. It is very difficult for a regulator to stand up to that, especially if Ministers are egging them on and in their speeches are saying the same thing.

If the purpose of this exercise is to say, as we always say, “What went wrong? What are lessons that we need to learn?”, this amendment points to one of the clear lessons that we need to learn. I am disappointed that my noble friend does not see that.

--- Later in debate ---

[Baroness Cohen of Pimlico (Lab)]

My Lords, like many in the House I did not manage to speak at Second Reading either, but I have spent a miserable summer concluding that Vickers got it wrong. This is a horrible thing to say to my good friends in the Parliamentary Commission, but they got it wrong too about separation. I come from a long career in merchant banking. I was pulled out of the Civil Service to be a merchant banker and I understand very well how ingenious they are. We had a wonderful concept in my youth called the Chinese wall. All I can say is that ivy grew over that Chinese wall and ear trumpets went through it because we are an ingenious lot.

The very complication of the debate that we are having, the horrible complication of the legislation and the very real difficulty of the amendments all stem from the fact that we are trying to do something impossible. Ring-fencing will not work. It does not matter how many people you place in charge of it, you need institutional separation. As my noble friend Lord Barnett says, we are going to have to come up against this one of these days.

I am also fairly horrified to hear Members of this House describing ring-fencing as an experiment. What are we doing experimenting with the banking system? We have experimented with it before and we should not. We should be sticking to what we actually know will work.

I am in entire sympathy with the points made by the noble Lord, Lord Forsyth. I think that his diagnosis is absolutely accurate, but I differ on the conclusion.

[Lord Forsyth of Drumlean]

I did not say that I necessarily accepted the Government's conclusion: I was merely testing the Government on the logic of their own position.

[Lord Stewartby (Con)]

My Lords, I came in this afternoon hoping for enlightenment. I received much more and varied judgment expressed from all corners of the House. But the one thing that everything leads to is an assumption that the ring-fence will not work and I am afraid to say that I agree. I do not say that with any satisfaction. A lot of time and effort has been put into this by very well-informed people, but it is against the ethos of the institutions and the markets in which they operate.

To say that we are going forward as an experiment is merely an attempt to sum up where we have got to in this afternoon's debate. We cannot just leave it like that. If there is generally—not just in this House but in a more widespread way—fundamental doubt about whether something as important as this will work, we have to assess whether we are bound to follow that structure. All I have heard so far leads me to think that ring-fencing is not workable. We ought to accept that situation as soon as possible. I leave it to others to follow more logically what I have rather stumblingly set out.

--- Later in debate ---

[Lord Forsyth of Drumlean]

My Lords, I know that noble Lords are looking forward to hearing the Statement, but this is an important point. I certainly would not be able to add anything to what the most reverend Primate has said in a very powerful speech. I am glad that he liked my analogy about wallpaper and walls. I have to say to my noble friend the Minister that the writing is on the wall here, and it is absolutely clear that if we do not have in this Bill a clear provision that gives the Government power to deal with the sector as a whole, most banks will decide to go with the culture and try to make it work. But they are in competition with each other; one will come up with a clever scheme and the others will say, “They’re getting away with this—we ought to do the same, or we will do some variation of the same thing”. You need there to be a threat to the whole sector, if some of them fall by the wayside. That is another argument, in addition to the ones made by my noble friend Lord Lawson and by the most reverend Primate.

I hope that my noble friend the Minister will think about this very carefully and see the writing on the wall. He will find it very difficult to get this Bill through this House without a provision of this kind being incorporated in it.

[The Earl of Erroll (CB)]

My Lords, I make a simple observation from experience. I have seen this attempt at ring-fencing in the past. When you have ring-fenced or non-ring-fenced entities—it does not matter which—reporting up to a group head, at the end of the day that group head can manipulate things at an investment level or at all sorts of other levels to influence the outcome in a way that is unexpected. It does not work, the moment that you have a group, because that is outside the ring-fence. I could give noble Lords instances, but it might cause problems if you did. I would rather say that I totally support the most reverend Primate and this amendment, which is very sensible.

Financial Services (Banking Reform) Bill

Lord Forsyth of Drumlean Excerpts

Wednesday 24th July 2013 Lords Chamber

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

My Lords, the Bill is a central part of the Government’s response to the financial crisis of 2007-09. Noble Lords will recall the terrible events of those years. Britain saw the first bank run in over a century. Depositors in Northern Rock queued in the streets to take their money out. The biggest bank in the world, the Royal Bank of Scotland, teetered on the brink. RBS and HBOS had to be bailed out and the Government had to inject £65 billion of taxpayers’ money to save the banking system from collapse.

Huge though this direct cost to the taxpayer was, the full costs of the crisis were still greater. Gross domestic product fell, peak to trough, by 7.2% as the supply of credit dried up and tight credit continues to be a problem for many businesses and families. This is why the Government have had to intervene to support credit supply through measures such as Funding for Lending, Help to Buy and the Business Finance Partnership. These will help to address the consequences of the crisis. To tackle its causes and to prevent a repeat, the Government are taking forward a programme of reform built on three pillars.

The first pillar is reform of financial regulation. This was achieved through the Financial Services Act 2012, which received Royal Assent last December and came into force this spring. The second pillar is structural reform of the banking industry. That is the focus of the measures in the Bill before us today. The third pillar is reform of banking standards and culture. The Parliamentary Commission on Banking Standards—the PCBS; I am afraid there will be quite a few abbreviations today—last month made important recommendations in this area. The Government have accepted the PCBS’s principal recommendations and where those require primary legislation they will be incorporated into this Bill through government amendments at Committee stage.

Let me first turn to the measures already in the Bill. The bulk of these implement key recommendations of the Independent Commission on Banking, or ICB, chaired by Sir John Vickers. As noble Lords will know, the Vickers commission was established in 2010 to consider both structural and non-structural reforms to the banking sector. It reported in September 2011 and recommended, first, the ring-fencing of retail from investment banking. The ICB also proposed measures to improve banks’ ability to absorb losses and to ensure that losses can be made to fall on banks’ creditors and not the taxpayer if a bank fails. These measures included higher capital requirements for ring-fenced banks, a bail-in power and preference in insolvency for bank depositors over other creditors. The Government accepted virtually all the ICB’s recommendations.

This Bill will implement the ring-fence as recommended by the ICB. It defines core activities—that is, taking deposits—which must be inside the ring-fence, and it defines excluded activities—that is, trading in investments as principal—which must be outside the ring-fence. As the ICB recommended, activities that are neither core nor excluded may be either in or out. The Bill makes safeguarding the continuity of services connected to deposit-taking a part of the Prudential Regulation Authority’s general objective. It requires the PRA to make rules to ensure the independence of ring-fenced banks from their wider corporate groups. In response to the recommendations of the PCBS, we have amended the Bill in the Commons to electrify the ring-fence. I will come on to the details of that shortly.

The Bill also makes deposits protected by the Financial Services Compensation Scheme preferential debts in the event of insolvency. This will increase the FSCS’s expected recovery in the event that a bank fails and the FSCS has to pay out, reducing the risk of contagion and protecting the taxpayer. The ICB also recommended that if a bank fails the authorities should have the power to bail-in creditors, imposing losses on them rather than letting those losses fall on the taxpayer. The forthcoming EU bank recovery and resolution directive should deliver a bail-in tool at European level and a requirement for national authorities to ensure that their banks have in issue a minimum amount of credibly bail-inable liabilities, necessary to ensure bail-in is effective and credible. This Bill gives the Treasury power to set the framework within which the PRA imposes requirements on banks to have in issue minimum amounts of bail-inable debt.

In addition to the ICB’s recommendations, the Bill also reforms the governance of the Financial Services Compensation Scheme manager to ensure proper oversight and accountability for its use of public funds. It extends to subsidiaries of the Bank of England exemptions from Companies Act accounting requirements given to the Bank itself where the Bank considers that necessary for reasons of financial stability. It also allows for the costs of the Treasury’s participation in international organisations dealing with financial stability to be recovered from the industry.

Before reaching this House, the Bill already received very substantial scrutiny. The Government published the Bill in draft last October for pre-legislative scrutiny by the PCBS, which of course included several Members of this House. In light of the PCBS’s report on the draft Bill, the Government made a number of changes both before the Bill was introduced to Parliament and while it was before the House of Commons. In the Commons, the Bill was scrutinised line by line over the course of eight Committee sittings and had two days of debate on Report. For a Bill of just 35 pages, that was intensive, detailed scrutiny.

Throughout this process the Government have consistently adopted a constructive approach. We have welcomed suggestions from all quarters on how the Bill might be improved. Where we found those suggestions valuable, we have amended the Bill accordingly. For example, in pre-legislative scrutiny the PCBS argued that the regulator’s objective for ring-fencing could be made clearer. We accepted this suggestion and amended the Bill before its introduction and again on Report in the Commons. The PCBS also called for specific requirements for ring-fenced bank independence to be put in the Bill. We agreed and amended the Bill in a way that the PCBS acknowledged arguably went even further than it had suggested. The PCBS proposed that the PRA be required to report on ring-fenced banks’ sale of derivatives to clients. We will amend the Bill to this effect while it is before this House.

On the procedures for exercising delegated powers, the Government not only accepted recommendations made by the House of Lords Delegated Powers Committee, but also accepted a further amendment tabled by the Opposition in Committee in the Commons.

Perhaps most significantly, as I alluded to earlier, in response to the recommendation of the PCBS, the Government amended the Bill in the Commons to provide for a power for the full separation of an individual banking group. This is what the PCBS termed “electrifying” the ring-fence. The power we have added to the Bill will substantially reinforce the ring-fence. It will allow the regulator to require a banking group to separate completely its retail from its wholesale banking operations. This power can be exercised if the regulator believes that a ring-fenced bank is insufficiently independent of the rest of its group, or that the group’s conduct might in some other way threaten the regulator’s ability to safeguard the continuity of core retail banking services. As the PCBS recommended, given the momentous consequences for a banking group of a requirement to separate, the regulator can only use this power with the consent of the Treasury.

As noble Lords will know, when this power was debated in the Commons, questions were raised about the process for exercising it set out in the Government’s amendment. Some argued that the procedure was too complicated or lengthy. The Government have listened to these arguments. We accept that the process for requiring a group to separate could usefully be streamlined. We will therefore bring forward amendments to that effect while the Bill is before this House. And we will listen to the contributions of noble Lords to ensure that the process in the Bill meets the objectives that the PCBS set out, and which the Government share.

The Government remain unpersuaded, however, that a reserve provision for full separation across the entire industry would be appropriate. A firm-specific reserve power will reinforce the ring-fence by deterring banks from seeking to undermine or weaken it. However, to move to industry-wide separation would be to abandon the ring-fence altogether, in favour of an alternative structural reform. Let us be clear: this would not be a sanction, it would be a different policy. That alternative policy was considered in detail by the ICB, which rejected it. As noble Lords will know, the ICB concluded that full separation similar to Glass-Steagall would entail very significant additional costs, for doubtful—or even negative—additional benefits to ring-fencing. The Government have accepted the ICB’s recommendation and are therefore implementing the ring-fence through this Bill.

Like the ICB, the Government believe that the ring-fence will succeed. A future Government would, of course, be within their rights to come to a different conclusion, and to shift to an alternative policy. But if they did, the only proper and democratic way to implement that new policy would be to return to Parliament with new primary legislation which could be properly debated and scrutinised. The proposal made by the PCBS would potentially lead to full separation with no more than a short debate in Parliament and a vote. This would stand in extreme contrast to the extensive consultation and scrutiny that the current policy has gone through.

We have also recently heard proposals from the PCBS on the issue of the leverage ratio. The PCBS has suggested that control over the leverage ratio should be taken out of political hands and given to the regulator. The Government strongly support the principle of a binding minimum leverage ratio, as agreed in the Basel III accord. We believe that it is entirely appropriate for minimum standards to be set in statute. This applies to all the minimum requirements in Basel III, which we continue to push to have implemented through EU legislation.

This does not mean that there is no role for the regulator. Judgment-based regulation means the regulator having the ability to impose additional requirements if it feels that these are necessary to achieve its statutory objectives. Only last month, the PRA required a number of banks to meet higher leverage standards sooner than the Basel III deadline. The PRA thus demonstrated that it already has the power to impose higher requirements on leverage. So beyond minimum requirements set in statute in line with international standards, day-to-day control over the leverage ratio lies in the hands of the PRA.

Structural reform of the banking industry is the second pillar of the Government’s reform programme. The third pillar is reform of banking standards and culture. As noble Lords well know, the Government have welcomed the recent report of the PCBS, one main theme of which was to strengthen individual accountability in financial services. The PCBS argued that the existing approved persons regime has failed in this, and that new measures are needed to replace it. The PCBS also called for criminal sanctions for reckless misconduct in the management of a bank.

The Government have accepted these recommendations. While the Bill is before this House, we will therefore bring forward amendments to introduce a new senior persons regime. We will reverse the burden of proof for senior persons so that they will be accountable for any breaches of regulatory requirements in their areas of responsibility, unless they can prove that they took all reasonable steps to prevent them. We will also amend the Bill to give regulators the power to make rules governing the conduct of anyone employed in financial services, and to extend the time limit for enforcement action from three to six years.

[Lord Forsyth of Drumlean]

I am most grateful to my noble friend. Perhaps I should declare an interest as a regulated person. This new criminal offence of reckless misconduct is to apply—according to the excellent report which was produced—only to the senior management of banks. Can the Minister explain why, if someone is responsible for major systemic difficulties arising from the collapse of a bank, this new criminal offence should be limited only to the management of the bank and not apply to regulators or Treasury officials?

[Lord Deighton]

I thank my noble friend for that interesting observation. The purpose of the Bill is to look at the management of the financial institutions themselves rather than the system. I would welcome that discussion later, in Committee, if my noble friend would like to take it further.

As a further deterrent against misconduct, the Government will table amendments to make reckless misconduct in the management of a bank a criminal offence. Those found guilty will face the possibility of prison sentences. Together, these measures represent an historic overhaul of the system for holding bankers to account for their actions. However, rules and sanctions alone will not guarantee good conduct. The PCBS argued that effective competition between banks is essential to ensuring high standards of behaviour, and the Government agree. We will therefore amend the Bill to give the PRA a secondary competition objective. This will give the PRA a greater role in championing competition in the banking market, to the benefit of consumers.

One key barrier to competition in banking, and in particular to new entrants and smaller firms looking to challenge the big high street banks, is the big banks’ control of payments systems. The Government will therefore introduce amendments establishing utility-style regulation of payments systems. To ensure the safety and stability of payments services, we will also bring forward amendments to provide for a special administration regime for payment and settlement systems. This will require critical payment and settlement services to be continued even in insolvency, until the firm recovers or alternative provision is available.

While the Bill is before this House, the Government will also make some technical amendments to provisions on the pension liabilities of ring-fenced banks and introduce amendments to modernise the rules for building societies, helping to create a level playing field between building societies and banks while preserving the distinct nature of the building society sector.

In the other place, the Government set out our intention to use this Bill to require the Bank of England to produce a resolution strategy for each major UK bank—that is, a plan for how the authorities propose to respond in the event that that bank failed. We still believe that resolution plans are necessary, but given that the European Council of Ministers and the European Parliament have recently published proposals for the EU recovery and resolution directive that include similar provisions, it may be more appropriate for this requirement to be imposed through transposition of the directive than through the Bill. The Government will continue to review this issue in the light of European developments while the Bill is before this House, with a view to bringing forward amendments if necessary.

We can all agree that this is legislation of the highest importance. It is essential that we address the causes of the terrible banking crisis of five years ago, whose consequences remain with us today. The Bill is a vital step towards ensuring that this crisis is never repeated. Its current provisions represent a once in a generation reform of the structure of British banking, while forthcoming amendments will revamp the accountability regime for bankers’ conduct and standards. I look forward to constructive engagement with all sides of this House over the months ahead. To support noble Lords’ consideration of the Bill, last week the Government published drafts of the principal secondary legislation exercising delegated powers under the Bill, and I will ensure that my officials are available to noble Lords to discuss any details of the Bill. I am pleased to present the Bill for the consideration of noble Lords. I beg to move.

Economy: Infrastructure

Lord Forsyth of Drumlean Excerpts

Tuesday 23rd July 2013 Lords Chamber

[Lord Deighton]

The actual expenditure on infrastructure is difficult to predict because, of course, the predominant portion of infrastructure is financed by the private sector. That is why we focused on developing our energy policy, so that we can trigger investments with offshore wind, with nuclear and with various gas developments. We have laid out our expenditure plans and the proportion of investment that is capital investment is laid out in the spending round for this year and for future years. We have shifted, I believe, £9.3 billion from current spending to capital spending during the time of this Government. We have put an extra £18 billion into capital investment in Budget 2013. As a result of those changes, public investment as a share of GDP will be higher on average between 2010-11 and 2020-21 than it was under the previous Government. We are trying to shift it into the more productive areas. Transport investment in 2013-14 will be higher than at any point under the previous Government despite the fact that we were in something of a boom time there, and it will rise every year until 2020.

[Lord Forsyth of Drumlean]

My Lords, can my noble friend tell the House how much less would be spent on infrastructure and capital projects if the plans of Alistair Darling and the previous Labour Government had been implemented?

[Lord Deighton]

Again we are dealing with a hypothetical question because in 2010 our plans for capital investment were broadly similar. Since then, because of our ability to focus on government efficiencies and the delivery of other programmes more cheaply, we have been able to transfer, first, the £10 billion to which I referred into capital spending within our fiscal envelope and, then, a further £18 billion through 2020-21. These capital expenditure investments are very focused on the most productive areas—economic infrastructure—but they are also all fully costed and within a fiscal envelope that is affordable.

Future Investment

Lord Forsyth of Drumlean Excerpts

Thursday 27th June 2013 Lords Chamber

[Lord Newby]

I absolutely agree that the north-east has had a high level of unemployment for many decades and compared to the rest of the country. I accept also that it has suffered particularly in recent years because there has been a high level of public sector employment there, which has fallen significantly. The attempts by the Government to shift priorities towards manufacturing and the private sector have already, in some respects, begun to bear fruit in the north-east. Nissan goes from strength to strength and the number of apprenticeships that we are funding helps people in the north-east, as elsewhere, to get skills that enable them to get jobs in the long term. That is how we will get sustainable growth in the north-east.

[Lord Forsyth of Drumlean]

My Lords, I seem to recall that we were discussing dualling the A1 when I was Secretary of State for Scotland nearly 20 years ago. What is needed now are projects that are actually happening on the ground. So what on earth are the Government doing, for example, in persisting with this HS2 project, which we were told yesterday has increased in cost by a third even before a single activity has happened on the ground? It is now set to cost more than £40 billion. It is perfectly possible to have privately funded projects, such as the third runway extension at Heathrow, going ahead, creating jobs and dealing with the very substantial disbenefit created by the chaos at Heathrow. Why is it jam tomorrow when we could have jam today?

[Lord Newby]

My Lords, the noble Lord is usually very good at reminding us about the financial constraints under which the Government are operating. It is not a case of jam tomorrow and no jam today. As I said earlier, in the housebuilding sector, we are putting more money into building affordable housing and all the big housebuilders have said in the past three months that they are increasing their plans for building private sector housing. The great thing about housing is that it starts quickly. As the noble Lord knows, we just do not agree with him on High Speed 2. We find it surprising, when the rest of Europe and much of the rest of the world are investing very significantly in high-speed rail, that some people in this country feel that it is not a sensible technology and a potential source of economic development.

Spending Review

Lord Forsyth of Drumlean Excerpts

Wednesday 26th June 2013 Lords Chamber

[Lord Forsyth of Drumlean]

My Lords, can my noble friend confirm that at the end of the previous Government’s period of office the national debt had doubled, and that on the figures presented today the national debt will have doubled again by the time of the election? Can he explain what the effects would be of a rise in interest rates of, say, 1% on the repayments which the Government will have to make on their borrowings and on the value of the government gilts held by the Bank of England? How will that hole be dealt with? He mentioned that interest rates have been held down, but we are already seeing rates beginning to rise, so what contingency plans are in place? Should we not be very much more concerned about the future of the economy, given that the outgoing Governor of the Bank of England has today warned our youngsters about the possible impact on mortgages and on the balance sheets of the bank themselves? Where is the contingency planning for that eventuality in the Government’s Statement today?

[Lord Deighton]

I thank my noble friend for raising, as he has done on many occasions before, everyone’s awareness of the fact that when we discuss the deficit we are talking about the annual addition to our stock of borrowing. Until that deficit turns into a surplus we will not reduce our stock of borrowing, and the increased stock of borrowing leaves us with a significant exposure. My noble friend Lord Newby informs me that a 1% increase in interest rates will have an economic effect of approximately £4 billion, but we will review that number.

The way to provide for the contingency to be able to cope with any additional expenditure, whether it is interest, overseas issues or events that crop up, is to continue to drive down our deficit to give us as much flexibility as possible to handle whatever events face us in the future.