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.

EU: Budget

Lord Hamilton of Epsom Excerpts

Thursday 28th April 2011 Lords Chamber

[Lord Pearson of Rannoch]

My Lords—

[Lord Hamilton of Epsom]

My Lords—

[Lord Marlesford]

My Lords, did not my noble friend’s earlier answer, when he described how information was not available, give a bit of a clue as to one way in which we can make progress? Would it not be much more satisfactory if there were full details of any failure properly to account for national expenditures in the EU budget? In that way we would at least know who was not doing things properly, by how much and when, and that shaming could have some role in getting people to behave better.

Economy: Growth

Lord Hamilton of Epsom Excerpts

Thursday 31st March 2011 Lords Chamber

[Lord Hamilton of Epsom]

My Lords, we have heard two maiden speeches, which have gone to remind us all of the richness and variety of the membership of your Lordships' House. We are very privileged to have with us the noble Lord, Lord Kestenbaum, with his experience of the Japanese and the US economy, which are two very different economies from our own. I think it is also true to say that he is extremely proud of his Jewish blood. We should pay tribute to the Jewish immigrants who come to our country, who have done so much to make it move forward and have shown so much enterprise, which has made us the country we are today. I declare an interest as I have a certain amount of Jewish blood myself on both sides—but unfortunately not enough.

I also pay tribute to my noble friend Lord Popat. I spent a certain amount of time in east Africa, in Kenya rather than Uganda, and I know the massive contribution that was made there by the Asian community. Of course, it was a tragedy for Uganda when Idi Amin decided to kick it out. There was a terrible moment here when we hesitated before actually agreeing to allow those Ugandan Asians to come to this country. What a good thing we did. Uganda’s loss was certainly our gain. Once again, we benefited from incredibly entrepreneurial immigrants who played a very massive role in the growth of our economy and the movement of our enterprises. My noble friend is, indeed, very welcome in our House, and we are very lucky to have him here.

I congratulate the noble Lord, Lord Hollick, on launching this debate. I was extremely glad, as my noble friend Lord Newby was, that he raised the whole issue of road pricing. Road pricing is certainly something that should be embraced by our Government. It has the effect of actually getting motorists to contribute to the costs of the driving which they do, but I can understand why the Government are hesitant. The motoring community is certainly one that Governments rather hesitate before they antagonise them. But I think that this is the way forward, and I hope serious consideration will be given to road pricing. We have to be very brave if we are going to do it, and we have to price existing roads to pay for future roads. I totally accept the noble Lord’s point that technology has now moved on and has made this possible.

I would like to address the question of what I would describe as the phoney war about the whole business of deficit reduction. There is a concept being put forward by the shadow Chancellor, Ed Balls, that somehow there is a rather easier way of addressing the deficit. There is a suggestion from the Labour Party that if by some extraordinary circumstance it had actually won the last election it would have stayed with the Budget of the former Chancellor, Alistair Darling. I do not think there is the slightest chance of that happening whatsoever. If we had a Labour Government today, in total or global terms their deficit reduction plan would be very similar to the one that this Government are putting forward. If they had been in power Labour, too, would have taken £6 billion-worth of savings in the current year. It is a complete load of nonsense to suggest that there is somehow an easier way of approaching deficit reduction when the problems that we have are so massive. The reason for that is that although Chancellors love to pretend that they are in total control of the economy, the bottom line is that they are not. The people who have massive influence on our economy are those in the markets.

If we had gone ahead with the Darling Budget and had done nothing to change it, we would now be paying much higher interest rates than we are on our debt. That would merely roll forward the problems that we now have of increasing debt. This is one of the sadnesses that I have with the Budget which we have just seen: we are watching the total amount of government debt climb, in the OBR’s forecast, from £759 billion in 2009-10 to £1,359 billion at the end of the Parliament. I would like to see us repaying debt. It is very sad that we are going to inflict this enormous burden of debt on future generations.

Inflation

Lord Hamilton of Epsom Excerpts

Thursday 17th March 2011 Lords Chamber

[Lord Peston]

My Lords—

[Lord Hamilton of Epsom]

My Lords—

[Noble Lords]

This side!

Deficit Reduction

Lord Hamilton of Epsom Excerpts

Tuesday 18th January 2011 Lords Chamber

[Lord Sassoon]

My Lords, they will and do appear in tables in the Office for Budget Responsibility’s forecasts and records of sales. For example, the sales of fixed assets are dealt with in table 2.2, and the sales of financial assets when they come in are—

The noble Lord, Lord Peston, shakes his head, but I am looking at page 21 of the OBR’s Budget 2010 supplementary material which has tables. There are not yet financial sale numbers to go in for future years, but table 2.2 is there on page 21.

[Lord Hamilton of Epsom]

My Lords, will the Minister ensure that he gets his timing right on selling the shares in the banks, and not make the same mistake as Gordon Brown when he was Chancellor of the Exchequer, who sold most of our gold stock for $280 an ounce when the price is now $1,300 an ounce?

[Lord Sassoon]

My Lords, I do not want to give any hostages to fortune, but it would be difficult for any Chancellor to get it as disastrously wrong as that Chancellor did on the gold sales.