Financial Services (Banking Reform) Bill

Lord Glasman Excerpts

Tuesday 15th October 2013 Lords Chamber

[Lord Glasman (Lab)]

My Lords, I should like to speak in favour of the amendment moved by the noble Lord, Lord Sharkey. It is very important that we recognise the severity of the situation relating to the banks and precisely what happened in 2008. I commend the localism agenda of the Government in terms of politics, but I wait to see how the localism agenda applies to banking institutions and their restructuring. It is very important to see the four root causes of the crash.

The first is that it is not only the state that centralises power; it is also capital that centralises. There is a consistent tendency to oligopoly and then to monopoly, unless there are constraints on that. What we have seen, and what we continue to see, is that 80% of our banking still goes through the same failed institutions, and what we have is more of the same, rather than something distinctly different. What we have is a collapse of regional business investment, which is extremely harmful and manifests itself in two ways: in constraints on productivity on one side and, on the other, the extraordinary growth of payday lenders, as the banks cannot deal with local needs. So centralisation is one aspect of the crash, and a lack of accountability in the structures of the bank is the other. This is where I am very much in favour of what my noble friend Lord Eatwell says, with one proviso.

Relationality is crucial and, when there is representation of interests in the corporate governance of banks, you have a greater degree of honesty. If you look at the story with the Spanish banks and the German local banks, you find that the constraints on them were eased and they were, in fact, acting like normal profit-maximising banks. They had lost their regional commitment and got themselves involved in series of overextended loans, very similar to ours. I say to the noble Lord, Lord Flight, that that is not a condemnation of regional banks; it is a condemnation of the fact that they ceased to be regional.

One anecdote that crystallises the problem is the example of Northern Counties Permanent Building Society, which was established in 1850 and flourished through 150 years. It went through four depressions, grew and merged as a mutual in 1965—noble Lords will see where this story is going—with the Rock Building Society. It then became the Northern Rock Building Society, which did well until 1997, when it was demutualised. It became the fourth largest mortgage lender in the country and sponsored Newcastle United but it also, by the maximisation of returns, completely lost its asset. We do not need any symbolism here; Newcastle United Football Club used to be sponsored by Northern Rock and now it is sponsored by Wonga. That is the reality of the circumstance that you confront, and there is no virtue in that; it is of no benefit to anybody. There is centralisation, lack of accountability, recklessness and deceit. They are all part of the same story of being unable to hold anybody to account. Without incentives to virtue, unfortunately, you get incentives to vice. That was the system, and it is the system that we still have.

I want to speak for the logic and the virtue of the amendments proposed here. The first element is regionality. As I say, all the cases that my noble friend Lord Eatwell and the noble Lord, Lord Flight, referred to, concerning Germany and Spain and their regional banks, were due to those banks no longer being regional. When there is a constraint on the bank to lend within a prescribed geographic area, banks will flourish. We can see how effective that has been from the Sparkassen in Germany. I remember the noble Lord, Lord Flight, a while ago referring to the stability of the German system being based on its currency, but it is also based on the fact that there is a regional banking system that sustains business through ups and downs, and where there is a genuine local knowledge of what is going on in those businesses as well as a vocational work scheme.

The third part of this is the most important—that is, the representation of the skills and knowledge of the workforce and stakeholders in the corporate governance of the firm. This leads to a balance of interests that holds people accountable. I completely agree with my noble friend Lord Eatwell about the stress on regionality and relationships in the second part of the amendment; relational banking is absolutely essential. However, that implies local knowledge and the restoration of what we have lost, which is trust. So this is not a quick fix. I commend the work of the most reverend Primate the Archbishop of Canterbury in talking about a 10 to 15-year structure of reconstituting credit and trust in the nation. There will have to be a coalition between different stakeholders in doing so. But it is a terrible missed opportunity when we have an asset that has not been regionalised and has not been subject to proper balance of power in corporate governance, with no regional accountability in it to look at bad practice and correct it before it reaches the taxpayer. Above all, as the story of Northern Rock teaches time and again, if you maximise immediate returns on investment, you will lose the asset. There have to be constraints on that which allow capital to maintain its presence in areas and be a partner to business and families. In terms of regionality, relationships, stakeholder accountability and non-maximisation, this amendment holds the key to the establishment of the banking system that must come now.

[Baroness Liddell of Coatdyke (Lab)]

My Lords, I apologise to the Committee that I was not able to speak in the Second Reading debate, but I have followed the debate on this legislation very closely. I support my noble friend Lord Eatwell’s amendment but also wish to speak in support of some of the things discussed by the noble Lord, Lord Sharkey.

Airdrie Savings Bank is unique in Britain as it is the last mutual trustee savings bank in the country. I declare an interest as I have had an account there since I was six and my father also had an account there from the age of six. The difference between Airdrie Savings Bank and other banks is that it cannot offer the gizmos offered by the big high street banks. However, it offers a localised service that is completely trustworthy. There are no two ways about it: it has had its difficulties throughout the crisis, as has every part of the financial services industry. However, because it is unique, sometimes there is a risk that its needs are forgotten about. I ask the Minister to ask officials to look specifically at how an institution such as Airdrie Savings Bank can be protected. It is, indeed, a very venerable bank; my noble friend Lord McFall addressed an event at its 150th anniversary some eight or nine years ago. The bank is completely rooted in its community. The only perk its directors get is a fish supper once a month. There is no question of any extreme expenditure or remuneration being given to the bank’s directors.

I say to the noble Lord, Lord Flight, whose passion for financial literacy is well known in this House, that having a bank that is so extremely local means that financial literacy is not something we necessarily have to worry about. Indeed, it is located in a community that is largely financially excluded. Without Airdrie Savings Bank, many people would not have a bank account.

I have known the bank for many years. When I was Economic Secretary to the Treasury and Airdrie Savings Bank staff came down for a fiduciary interview with staff at the Bank of England, which was then in charge of regulation, there was a threat of a bribe being offered as Airdrie staff brought with them tins of shortbread. I can be extremely proud of Airdrie Savings Bank. As someone who, in various guises, has had to promote financial services in this country, there are not many other banks that I can be proud of. It would be a pity if, through this legislation and, for example, capital adequacy requirements, difficulties were put in the way of this superb institution. It is an old-fashioned institution but, frankly, would it not be a good idea if banking became boring and old-fashioned again?

Financial Services Bill

Lord Glasman Excerpts

Wednesday 28th November 2012 Lords Chamber

[Baroness Grey-Thompson]

My Lords, I very much welcome the words of the Minister as I, too, put my name to the amendment. It is essential that we get this right because it is about people who are already in very difficult financial situations. The UK has one of the largest consumer lending markets in Europe, alongside those of France and Germany, but they have their rates capped. I will say a few words on the scale of the issue, which is important. There are 1.75 million people without transactional bank accounts and 7.7 million accounts without credit facilities, so it is very easy to see why people resort to payday loans.

One of the starkest things I read was that between April and May 2011 there was a 58% rise in people applying for payday loans via moneysupermarket.com, which means that an estimated 4 million people are using these loans, with the amount advanced exceeding £2 billion per year. In 2004, that amount was £100 million. Nobody wants to see more people in poverty. The noble Baroness, Lady Kramer, is absolutely right that the devil is in the detail. I look forward to the response of the noble Lord, Lord Mitchell.

[Lord Glasman]

My Lords, I will declare an interest. I was involved in the anti-usury campaign with London Citizens after the crash of 2008. I very much want to acknowledge the work of Stella Creasy in intensifying and continuing the campaign, which was based on the common good—on an alliance between the secular and those of faith to talk about a basic issue. Before we get too carried away, I will say that not since 1854 have there been any statutory constraints on interest rates. Everything else was voluntary but, in 1854, Bentham’s influence led to that. It followed the changes in abolishing usury laws in the Long Parliament in the 1630s, so we have to say that we are at an absolutely exceptional moment. There is a consensus on a cap on interest rates, which has not existed in our country for 400 years.

What it brings to our attention, and what I wish to share in honouring my noble friend Lord Mitchell for raising this historic amendment and the Government for responding to it, is the terrible condition of the poor. To quote someone who has not always been popular in this House, the Pope, usury is a way in which the rich prey upon the misfortune and troubles of the poor. I want to share with your Lordships that this is urgent; it is happening again and Christmas is coming. Overwhelmingly, it is not the unemployed but the working poor who are taking these loans.

I will raise two issues for future discussion, as we have reached such a fantastic moment of consensus. The first is in relation to credit unions, which the right reverend Prelate the Bishop of Durham mentioned, and regional banking. The proposal that London Citizens put forward, which I do not think sounds outlandish now, is that 5% of the bailout should be used to endow local, non-usurious lending institutions. The way in which the burdens of the crash have fallen on the poor is indecent, and we have to look at credit arrangements. I acknowledge what the Government have done in freeing up credit unions, but they do not have adequate resources or reach, and the establishment of new, non-usurious lending institutions in the regions of our country is the only way forward.

The other important issue—if I might interrupt the Minister’s conversation—is that data show that there is more illegal lending in Britain than in Germany. There is a 20% cap in Germany. I am not going to be bounced into any position, but it is still the case that if you put any constraints on the power of money, it automatically leads to illegal lending.

The other thing that we need to address is a living wage. When people work, they should be paid enough not to have to go into poverty. We have to build on this and intensify the conversation and the common good between secular and faith institutions. I commend the lead taken on this because the fundamental issue of our time is that the biggest growth area in our economy is debt, and overwhelmingly it falls on poor families. We need to address it as a matter of intensity and urgency.

Sunday Trading (London Olympic and Paralympic Games) Bill [HL]

Lord Glasman Excerpts

Tuesday 24th April 2012 Lords Chamber

[Lord Glasman]

My Lords, this is the fourth time I have spoken in the House and the third time I have spoken about Sunday, and closing shops on a Sunday, in relation to the Olympics. I want to say to my noble friend Lord Judd what an inspirational speech that was. I was involved with London Citizens in the bid for the Olympics and the part of the agreement about the living wage that would be agreed with all stakeholders. We were not told then that there would be these measures about supermarkets. It remains the case that there is not a single supermarket chain in England that pays a living wage.

We succeeded with the living wage. There is over 90 per cent compliance with it—it is £7.85 an hour, plus holiday pay, sick pay and pension—but the quality of the workforce remains key, and we have neglected that. The noble Lord, Lord Bates, made an excellent point. I am very interested in the statements by the noble Lord, Lord Sassoon, in favour of Germany, and I look forward to emergency legislation being used to get workers represented on boards, vocational training and regional banks. I am sure that this is coming soon, but this is also the final echo of one of the most dismal Budgets that any of us can remember. It is another failed piece of political thought.

I am sure I am not alone in the House in being deeply grateful that, between Athens and the classical conception and London, Christianity emerged. This diminished the power of money and challenged the absolute sovereign authority of rulers. That was the problem with the classical inheritance: there was no mediation between the domination of the rich and powerful. Christianity has taught us the importance of work and rest. This is a crucial part of the Conservative tradition and an important part of the Christian inheritance, and it is absolutely central to the Labour tradition. This defies the liberal logic, which says that the only generator of wealth is technology and investment, and it also looks to the importance of the workforce and of rest.

In my campaign for London Citizens, the overwhelming majority of people working were women and there was exploitation in retail outlets. The living wage campaign was part of strengthening family life, creating a pause and some rest. What we have here is the worst kind of capitulation to the Olympic classical logic, which says that emergency measures are necessary to increase the exploitation of people. I ask noble Lords to appreciate that, when you are at the bottom end of the scale and work for a very low wage but wish to improve your life, it is often very difficult to resist the demands of the boss. That is a fact. We all wish to do better. We found all the time that the pressures to work longer and in bad conditions remained, because workers lacked the confidence to associate and to demand that day of rest.

It is very important to say that panic is a very bad basis on which to build legislation and politics. We have had a long time to think about the Olympics, and using this emergency method to bring in this legislation is also consistent with the worst aspect of the political inheritance before the emergence of Christianity because it sides with the strong against the weak, with big businesses and with big supermarket chains. Winston Churchill said that the most important British tradition was Sunday. It was the most perfect expression because it was not an obsessively religious day. It was a day for family time, a day of rest and of pause. I am really concerned about this.

[Baroness Deech]

Will the noble Lord explain why these sentiments about family togetherness, Sunday being a special day and well paid workers do not apply to nurses in the NHS—the biggest employer in western Europe—taxi drivers, garage attendants, train and bus conductors, barmaids, sports attendants et cetera? Why do they apply only to those working in shops bigger than 3,000 square feet?

[Lord Glasman]

I begin my answer by saying that, certainly within the framework of the NHS and other large employers, there is a much better organised union system. I can speak only from my experience in the retail trade to say that the conditions of its workers were characterised by a lack of organisation and extremely strong pressure to work longer hours. I will look at the other cases in due course.

The point that I was making was about supporting the strong and larger retailers against the smaller ones. It is a distinctive feature of a tradition of our country, which goes across all forms of people, that having some pause in the demands of the working week is extremely important. In relation to the type of procedure that has been used to push this through, there has been a lack of proper negotiation. One of the characteristic features of Athens and Rome was the stipulation of decrees without any form of negotiation. One of the founding points of Labour was that there should always be some form of negotiation there. Negotiation is very different from consultation, which both sides of the House should bear in mind.

The nature of the procedure and the assumption of who should benefit—that it should be businesses and consumers, without adequate recognition of the cost involved for the workforce—is an extremely important consideration, too. Therefore, while I welcome the opportunity to debate this, we should say that there are traditions involved that oppose it and do not undermine the importance of the Games. In China and Russia we heard the strong echo of a very nasty tradition in the use of the Games. I remember the Red Army being used to shield the athlete who lit the flame in China, where there were certainly no restrictions on the exploitation of workers or oppression by the state. It would be wonderful if, in England, we did not just capitulate to the corporate demands of the Games but used them as a showcase for our gentler and more humane traditions.