EU: UK Net Contributions

Lord Hamilton of Epsom Excerpts

Wednesday 24th October 2012 Lords Chamber

[Lord Sassoon]

What I can confirm is that the UK’s priorities for expenditure include the following: substantial cuts to the common agricultural policy. However, I agree with the noble Lord that priorities for the UK include growth and competitiveness, climate change and external action. I am not going to speculate on how the negotiations will play out.

[Lord Hamilton of Epsom]

Will my noble friend confirm that, in the absence of any compromise, what is being asked for by the European Commission is a 6.8% increase in the budget? Is this not an extraordinarily high figure which shows an unbelievable insensitivity to the problems that Governments are facing across the EU as they try to rein back their deficits?

[Lord Sassoon]

Yes, I completely agree with my noble friend.

Financial Services Bill

Lord Hamilton of Epsom Excerpts

Monday 11th June 2012 Lords Chamber

[Lord Sassoon]

My Lords, I beg to move that this Bill be committed to a Grand Committee.

[Lord Hamilton of Epsom]

My Lords, this Bill is of major importance—this is not my idea; it comes from the Minister—and is very significant indeed. However, for some reason the Minister wants to shuffle it off into the Grand Committee Room. The Bill needs close scrutiny and will bring forth the exquisite qualities of your Lordships’ House. There is a massive amount of expertise here that can make positive comment on the Bill and make it better than it is today. It would be quite wrong if we were to vote for the Bill to go into the Grand Committee Room. It should be debated in Committee on the Floor of the House and I hope that the committal Motion will be negatived by the House.

[Lord Foulkes of Cumnock]

My Lords, it is seldom that the noble Lord, Lord Hamilton, and I agree. We were introduced into the House on the same day and I found it a privilege to be introduced on that day. However, I fully agree with him on this issue. I returned from the Recess to find this Motion on the Order Paper. I was not aware of it before and, as far as I know, there was no consultation about it. Members did not know that it was going to be remitted to a Grand Committee. I may have shown a lack of acuity in picking this up but I have discussed today the fact that many Members were not aware that it was going to be suggested that this important Bill should be committed to a Grand Committee.

As the noble Lord, Lord Hamilton, said, this is an important issue. It may not be politically contentious but it is vital. As the Minister said, it arises to some extent from a major financial crisis that hit the headlines. He described the Bill as major legislation and, after talking with Members who have been in the House much longer than me, I believe it is very unusual for such major legislation to be remitted to a Grand Committee for discussion. As the noble Lord, Lord Hamilton, said, it would be normal for it to be taken on the Floor of the House.

There may be other reasons—far be it from me to suggest them—why the Government want to remit the Bill to a Grand Committee, but our decisions as Members of the House should be on the merits of the Bill and not on any secondary reasons beyond the basis of the Bill.

It would be unfortunate if we had to divide on this, so I urge the Minister to withdraw his Motion on the basis that there will be further discussion and consultation with all parties and all sides of the House. I hope he will see fit to do so.

EU: Euro Area Crisis

Lord Hamilton of Epsom Excerpts

Thursday 24th May 2012 Lords Chamber

[Lord Hamilton of Epsom]

What does my noble friend think about the article in the Times yesterday in which the German Foreign Minister said that within the European budget there were resources that could be used to stimulate the eurozone economy, including about €80 billion which remains unspent as we speak?

[Lord Sassoon]

My Lords, within what needs to be tight discipline—tighter than has been exhibited in recent years—over the overall European budget, certainly these ideas of targeting funds better within the existing budget envelope need to be looked at very hard.

Euro Area Crisis: EUC Report

Lord Hamilton of Epsom Excerpts

Monday 21st May 2012 Lords Chamber

[Lord Marlesford]

When Sub-Committee A looked at the bailout, we saw again and again that the figures produced as necessary to prevent a catastrophe became ever greater by magnitudes. There is the old cliché about “A billion here and a billion there—you are talking serious money”; we almost reached the stage where it was “A trillion here and a trillion there”. If the prospects are for bailout, and that just continues, whatever happens and however much worse it gets, it has been fairly conclusively proved that people will take advantage of a bailout. It is human nature. It was the present governor of the Bank who said that if there is a run on the bank, the sensible thing is to join it. Therefore, if the bank is prepared to bail you out, the sensible thing is to accept the money.

My solution is that you impose a requirement to earn the euros—but with some help through the IMF, eurobonds, or eurobond investments—and you are thus able to rebuild your economy. I do not see, from the point of view of people living in Greece, that there is much difference between perhaps starting off with saying, “We are going to recreate the drachma; and the drachma is equal to a euro”, and then finding that the next day it is worth only half a euro, or, as the noble Lord, who likes speculating on these matters, might think, the drachma would soon be worth only a quarter of the euro. It would be a great deal better to recognise that the flexibility of having to have the euros with which to buy and pay for things would itself generate a reality that, I believe, is lacking.

[Lord Hamilton of Epsom]

I am rather uncertain as to how, if the Greeks basically default but stay with the euro, they would raise new debt in euros.

[Lord Marlesford]

I do not think that they could do so as such, except that, as I say, you might have a euro project in which people would invest. It would perhaps be somewhat similar to the private finance initiatives that have been used by the British Government—not entirely with success, maybe, but on balance they have been a useful source of making things actually happen. If people could see a good return, they would invest in it. That is a perfectly sensible way of doing it and, therefore, Greece would not be able to raise euro debt as such, unless the markets thought that that was viable. That is where the self-discipline is. The self-denial of recourse to the printing press would be a solution. I suppose I am really saying that if we get this form of self-discipline, which reality should require, and if this were to work in the case of Greece, it could be an example to other countries either not to follow suit and to grasp the nettle for themselves, or to recognise that this would be a viable way forward.

Independent Commission on Banking

Lord Hamilton of Epsom Excerpts

Monday 19th December 2011 Lords Chamber

[Lord Sassoon]

My Lords, the ICB estimates that the increased cost of borrowing could be of the order of 0.09 per cent to 0.16 per cent as a result of implementing these proposals. That is a very modest additional cost which is well within the smallest ever incremental change to the bank rate introduced by the Bank of England. I will not speculate about what might happen to bank customers where they are sold from one bank to another, but I believe that it is completely right that we should make it easier in all circumstances for bank customers to be able to switch their accounts. That is what the banking system is going to deliver.

[Lord Hamilton of Epsom]

My Lords, like my noble friend Lord Lawson, I shall sleep at night only when retail banks and investment banks have separate shareholders. Will the noble Lord answer my noble friend’s point about the ingenuity of those who run banks to find a way round the ring-fencing, thereby enabling retail banks to continue to back investment banks?

[Lord Sassoon]

My Lords, as I have said, the way that the governance will work is that the ring-fenced subsidiary will have to have independent directors in the way that, for example, regulated utilities have to have directors who are independent of the holding company’s board. That is the principal protection in these circumstances.

EU: Credit Rating Agencies

Lord Hamilton of Epsom Excerpts

Monday 3rd October 2011 Lords Chamber

[Lord Sassoon]

My Lords, I have already said that the credit rating agencies got it completely wrong when it came to the rating of structured products. As a result of that, there have already been two regulations, so-called CRA1 and CRA2, out of Europe since the crisis and a third set of proposals is expected in November this year. The first two sets of proposals address the matters which the noble Lord raises. There is now a system of registration. There are new regulations around conflicts and how to handle them, as well as around transparency and disclosure. I agree that the issues he raises are serious, but they are very much the ones which the European regulations have addressed.

[Lord Hamilton of Epsom]

My Lords, does my noble friend accept that there are great shortcomings among the credit agencies when it comes to derivatives and so forth, but that that does not extend to their rating of sovereign debt? Does he further accept that when Standard and Poor’s downgraded American debt, that debt then became cheaper and bonds went up?

[Lord Sassoon]

I agree with my noble friend. I know that he was a member of your Lordships’ sub-committee which produced an excellent report published in July. Among its conclusions is that:

“The criticism that credit rating agencies precipitated the euro area crisis is largely unjustified; their downgrades merely reflected the seriousness of the problems that some Member States are currently facing”.

Banking: Northern Rock

Lord Hamilton of Epsom Excerpts

Thursday 30th June 2011 Lords Chamber

[Lord Sassoon]

I have made clear on this and previous occasions that the Government regard mutualisation as a desirable model. It would be wrong to say that it is the best model, as the noble Lord has suggested, but, indeed, we want to see variety of provision of financial services in this country by organisations with different models, of which mutualisation should be one.

[Lord Hamilton of Epsom]

Will the noble Lord explain how we can have mutualisation and the taxpayer get his money back at the same time?

[Lord Sassoon]

My Lords, the overarching aim of any sales process, as well as getting a clear exit, is to obtain best value for the taxpayer. There are of course tensions between that objective and certain methods of sale, and that is precisely what the experts conducting the sale will assess.

Greece: Default Contingency

Lord Hamilton of Epsom Excerpts

Monday 20th June 2011 Lords Chamber

[Lord Hamilton of Epsom]

My Lords, would my noble friend like to comment on press reports that Standard Chartered Bank is ceasing to be involved in short-term interbank transfers with European banks? Does he believe that to be true? Is it happening with other British banks? If so, what are the implications?

[Lord Sassoon]

My Lords, I am not going to comment on what is going on in the markets and with individual banks at all, and I am sure that my noble friend would not expect me to. However, I would make the point, which was also made in the Statement, that UK banks have been able, in very tough market conditions, to improve their funding position very considerably over the past year and more. The overall situation of the interbank market is far better—although we should not take any of these things for granted—than it has been at points during the financial crisis. It is therefore important, as my noble friend reminds us, that confidence within the banking system enables there to be liquidity. As I say, we are in a much better position in that respect than we were during the financial crisis itself.

EUC Report: Economic Governance

Lord Hamilton of Epsom Excerpts

Thursday 16th June 2011 Lords Chamber

[Lord Hamilton of Epsom]

My Lords, the whole question of the economic governance of the EU is, in anybody's business, a very big topic, and our committee had to restrict itself somewhat. But it was a slight pity that we failed completely to address the whole question of the competitiveness of the EU, which is a subject that perhaps we should turn to at some stage. When you talk to people in Europe and in Brussels they rather like to feel that there is no global market out there at all and that the massive competitive forces building up in China and India can be ignored. The EU is incredibly introverted in the way that it looks at things. As it is, our report did look at the proposals produced by the Commission.

The Commission produced the stability and growth pact originally, and we are now armed with proposals for the stability and growth pact part 2. Of course, part 1 was a total, abject failure. The conditions were broken by the French and the Germans very early in its life. Have we really any confidence in this one? I suspect, although I cannot speak for all my fellow members of the committee, that we felt the chances of this second go from the Commission producing new stability and growth pact proposals was unlikely to be any more successful than the last lot.

We need to think slightly outside the box. I echo the words of the chairman of the committee, the noble Lord, Lord Harrison, that we should be very concerned about what happens in the eurozone. It would be nice if we could stand back and watch the whole thing implode, but if it did, such is the exposure of British banks and of the whole financial sector in Europe that the effect would be devastating. We would move into a serious banking crisis. We have to look to the success of the eurozone. We cannot stand back and watch Greece collapse either. That would have the effect of the collapse of Lehman Brothers, where the collateral damage was very serious indeed. It would have the effect of spreading all across the eurozone. Contagion is a big problem.

The eurozone has to address where it goes from here. I do not believe that there is any will among the nation states to see the eurozone collapse. But if they are not to see it collapse they must move forward into a much more federal structure. We have to see a much bigger role played by the European Central Bank and the eurozone reconciling itself to the fact that there will have to be fiscal transfers to some of these nations. A great date has been dreamt up of 2013. When that was originally dreamt up it seemed quite a long way away but it is getting nearer and nearer. Sovereign debt is guaranteed up until 2013 but one has to start asking now what will happen after 2013. Will places such as Greece and Portugal suddenly become competitive when they are not competitive today? The answer is no and there has to be a completely new construction of how the eurozone is managed. I am afraid that that all points to it becoming a much more federal organisation. Whether that means that the eurozone will succeed, I do not know. If it becomes federal, it will certainly survive for much longer than it otherwise would.

Taxation: Healthcare Insurance

Lord Hamilton of Epsom Excerpts

Thursday 9th June 2011 Lords Chamber

[Lord Sassoon]

My Lords, I can only repeat that there is no intention to change the relationship between private healthcare provision and entitlement to NHS care.

[Lord Hamilton of Epsom]

Can my noble friend clear my mind on this? If someone privately insures, whether they get tax relief or not, surely they remove a burden off the National Health Service.

[Lord Sassoon]

My Lords, they may to some extent at the margin remove a burden off the National Health Service, but, equally, under the previous arrangements where partial tax relief was given, there was considerable additional cost to the taxpayer. It is estimated that putting in place some new allowance would immediately cost the Exchequer at least £700 million—probably considerably more—because of the dead-weight effect of offering that relief to people who already have medical insurance.