Financial Services Bill

Debate between Lord Hodgson of Astley Abbotts and Lord Sassoon

Wednesday 25th July 2012 Lords Chamber

[Lord Hodgson of Astley Abbotts]

I am extremely grateful to the Minister for suggesting that we might be able to make some progress over the summer. His example of an industrial and provident society underlines exactly the point we are making. That is one of the areas that falls between the stools. At the moment it is neither a charity nor a proper regulated body, and this is exactly what we are trying to get at. We are trying to get our arms around this space in a way for which the present regulations do not provide coverage as regards the IPSs.

[Lord Sassoon]

I entirely accept that. However, the effect of these particular amendments would be to take away all regulation and protection. We certainly do not want to go from the current situation, which it appears people are already seeking to exploit, to one where merely because the apparent purposes of the investment were perfectly worthy and the overwhelming majority of promoters would obviously be people of the highest standing, others would be allowed to fly under their banner.

Financial Services Bill

Debate between Lord Hodgson of Astley Abbotts and Lord Sassoon

Wednesday 25th July 2012 Lords Chamber

[Lord Hodgson of Astley Abbotts]

I ask my noble friend one practical question. I entirely understand what he says about the competition objective of the FCA on page 17. In his argument, that is a reason why it should not be on the PRA. There is no way that the PRA, without its competition objective, can overrule the FCA: that is, there must always be a competition objective in all cases where the PRA cannot outgun the FCA. If there are any occasions where the PRA can outplay the FCA, then of course the competition objective falls away, if there is not one for the PRA. Reading this, it looks to me as though there is a danger that the PRA will be the established centre—the capital centre and so on—and the FCA will be, in some senses, implementing what has been decided as a strategic framework by the PRA. If I have got that wrong, I am delighted to be put right.

[Lord Sassoon]

I do not think that my noble friend has got it quite right. However, I cannot hide from him the fact that we believe that, because it is right and goes to the heart of the flaws in the present tripartite arrangements, the PRA should have as its single objective the one that I have described. Therefore, the nub of his concern remains, and I cannot pretend that it is not there. All I can say is that we consciously want to have the architecture as I have described it. However, the mitigation—and I think it is an important one—is that the PRA must consult the FCA before taking any steps that could in any way harm the FCA’s objectives, including, in this case, the competition objective. I think it is a reasonable check on the PRA’s action, given the basic architecture which we think is important.

--- Later in debate ---

[Lord Hodgson of Astley Abbotts]

I return momentarily to Amendments 131 to 135. I am extremely grateful for the Minister’s comments and the comfort that he gave on operational rules and the exchangability of “person” or “firm” under the Interpretation Act 1978, of which I was not aware. On the point about “reasonable and fair”, I think that he said the firm could always take the regulator to the Upper Tribunal. That is not an answer at all. No firm, particularly not a small one, will want to take the regulator to the Upper Tribunal. That is only in theory an answer. There is no way that any firm will want to go through the risks—in publicity, time and reputational damage—to ensure that the regulator has been reasonable and fair. I am not asking my noble friend to come back on this; I understand his point; but his officials should not think that that is an answer, because it is not a practical answer in the real world.

[Lord Sassoon]

My Lords, I appreciate that the processes of challenge, whether it is by the Upper Tribunal or under the rules of natural justice, are very much back stops and expensive and difficult for firms. That does not mean that large firms have not challenged the FSA and in some cases been successful over the years. I am not sure that it would be any cheaper and easier if such requirements were written into the Bill.

It just remains for me to ask my noble friend Lord Flight to withdraw his amendment.

Financial Services Bill

Debate between Lord Hodgson of Astley Abbotts and Lord Sassoon

Tuesday 10th July 2012 Lords Chamber

[Lord Sassoon]

My Lords, we will have to disagree on the construction of some of the words here. Taking some of the amendments in the group, I appreciate that some of them are couched in the way in which my noble friend has just elaborated. However, for example, Amendment 103 inserts into new Section 1B(4) the words “and society” at the end of a very critical recital of what the FCA must do. It says it must,

“discharge its general functions in a way which promotes effective competition in the interests of consumers and society”.

I accept that it is all driven with an override,

“so far as is compatible with acting”,

in a way that advances the consumer protection objective, but it would add something which is tantamount to asking the FCA to be proactive in driving forward the social objective.

[Lord Hodgson of Astley Abbotts]

I am sorry. The hour is late, but that simply cannot be the construction. As I explained in my remarks, I could not support the amendments of the noble Baroness, Lady Hayter, because it said “promote”. The four that I have signed up to, and the only four, are the ones which are entirely neutral, and all they are is enabling. With the greatest respect to my noble friend, who has dealt with us with courtesy and kept smiling despite the most enormous amount of provocation, the fact of the matter is that a lot of what he is saying is about investor protection in conventional investments. We are not talking about conventional investments here; we are talking about social investments, where the parameters are entirely different. The Treasury will persist in seeing it as a profit-making type of investment, as opposed to a profit and a social return. It simply cannot get it into its head that this is a different type of investment. It keeps writing for my noble friend speaking notes that do not recognise that difference.

--- Later in debate ---

[Lord Hodgson of Astley Abbotts]

The FSA currently has responsibility for one particular sector of the social enterprise movement—the industrial and provident societies. I suggest that the Minister asks his officials in the morning to ring the FSA and ask how many people are working in the industrial and provident society section. The answer is half.

[Lord Sassoon]

I am not quite sure what happens to the other half of this unfortunate person.

[Lord Hodgson of Astley Abbotts]

They only work part time.

Financial Services Bill

Debate between Lord Hodgson of Astley Abbotts and Lord Sassoon

Tuesday 3rd July 2012 Lords Chamber

[Lord Hodgson of Astley Abbotts]

Just to be clear, the FPC is going to make recommendations within the Bank, so that the governor of the Bank, wearing his hat as chairman of the FPC, writes to himself as governor—is that what will happen? Have I got this right? I presume that the two deputy governors will also join in and send it in one door and walk next door to receive it—is that right?

[Lord Sassoon]

My Lords, that is broadly right. [Laughter.] We should remember that the FPC will be made up of a different group of people, including independent members, who will be making recommendations. Taking the example I gave of the supervision of payment systems, the FPC, with its independent members and statutory responsibilities, could be making recommendations to the Bank regarding its supervision of payment systems. It would therefore be a mischaracterisation—it really does not matter who signs a letter to whom, it would be the FPC making a recommendation to the Bank. To reduce it to a suggestion that the governor will be writing to himself would be a mischaracterisation of an important power that should have a degree of formality around it, in the same way that the FPC will be required to exercise its powers of making recommendations for other regulatory bodies.

Financial Services Bill

Debate between Lord Hodgson of Astley Abbotts and Lord Sassoon

Tuesday 26th June 2012 Lords Chamber

[Lord Sassoon]

My Lords—

[Lord Hodgson of Astley Abbotts]

Hear, hear!

[Lord Sassoon]

I need every cheer I can get at this hour of the evening—I am very grateful to my noble friend. Let me press on. This group deals with various aspects of FPC membership, and I will address in turn each of the amendments that have been moved.

Amendments 21 and 21A would fundamentally alter the balance of membership of the FPC by adding either two or four additional external members. Following the advice of my noble friend Lord Hodgson, I disagree with these amendments for three reasons. First, the ratio of the FPC between Bank executives and non-Bank members is six to five, which closely mirrors the MPC, where the ratio is five to four. In answer to the noble Lord, Lord Burns, I can confirm that as with the MPC, the FPC members will act as individuals, and that no change to the membership of the MPC is proposed in this. The MPC model has worked well, and is much admired around the world, and we should not fix something that is not broken.

Banking: Bonuses

Debate between Lord Hodgson of Astley Abbotts and Lord Sassoon

Tuesday 11th January 2011 Lords Chamber

[Lord Sassoon]

My Lords, clearly it depends on the level of profits they make as to how much they will benefit from the reduction in the rate of corporation tax. We look at the total package of taxation on banks, as we do for the rest of industry. We believe that by introducing in particular the levy on banks, they will be paying a fair share to the Exchequer. We need to take account of the remuneration taxes, continue to consider the costs and benefits and talk to our partners about a financial activity tax, but we must take the whole of the taxation burden on the banks in the round.

[Lord Hodgson of Astley Abbotts]

My Lords, does my noble friend not think it strange that the party opposite seeks to evade any responsibility for the situation in which we now find ourselves? Having created the situation in which the taxpayer has ended up as a very large shareholder in a number of UK banks, is it not now most important that those banks return to profitability so that the share price and the performance of the banks will enable the taxpayer to earn a profit on the investment? To do that, do the banks not need to be properly staffed and remunerated? Will not our proposal enable us to do something to mitigate the disastrous economic incompetence of the previous Government?

[Lord Sassoon]

I am grateful to my noble friend Lord Hodgson and agree with his analysis. We need a successful and vibrant banking system in this country. We need healthy banks across the system, but it is particularly important for the taxpayer that the health of RBS and Lloyds is restored so that they can get a decent return in due course from its interest in those banks.