Budget Statement

Lord James of Blackheath Excerpts

Thursday 27th March 2014 Lords Chamber

[Lord James of Blackheath (Con)]

My Lords, I shall deal with two separate points and will make a separate declaration of interest on each. First, I was for a significant period early in my career a member of Lloyds Bank. In that context, I want to address one point which arises in the Chancellor’s address on the Budget. It is probably the only sentence in the whole thing that does not deal with the Budget. He said:

“Another abuse has been the manipulation of the LIBOR rate”.—[Official Report, Commons, 19/3/14; col. 786.]

In that context, I question the words “abuse” and “manipulation” as being too easily accepted without challenge.

When I joined Lloyds in 1959, I was sent to the training course at Ramsay Lodge in Scotland—it was part of the castle complex—which was owned by the Bank of Scotland and run by Lloyds. It was a wonderful training course, with the slight complication that it was in a building immediately adjacent to a residence for trainee nurses. There were 80 of them and 40 of us. It was a bit of an unfair match. There was a croquet lawn between the two buildings. In the course of 12 weeks, I do not think a single croquet match was played on it but by the end not a single blade of grass was left because of the clatter of boots.

Every week, we got a visit from a different director of Lloyds Bank who lectured us on a specific subject. In week 2, in September 1959, we got a lecture from a director on the subject of LIBOR. None of us had ever heard of LIBOR. I took proper lecture notes, and I still have them. I have been looking at them, and there is a very interesting distinction in them. When the director explained to us what LIBOR stood for, it was not what it was said to be when the scandal erupted three or four years ago. Then we were told it was the “London interbank offered rate”. On the training course, we were told that it was the “London interbank overnight rate”, and the director made no bones about the fact that the word “overnight” implied that it was take it or leave it, no option whatever. He freely admitted that it was the most profitable thing in the bank and made a fortune for everybody. If the word has been altered from “overnight” to “offered”, the latter would surely be manna from heaven to any lawyers defending it, because it would mean that you have a choice. If we have moved into the electronic age as regards the movement of capital, you can make that choice and manipulate it very much more easily and swiftly.

Can the Minister talk to the London clearing bankers’ association—and can the Treasury look at this—and find out when that word changed? What principles and rules were laid down for its application at that time? It may be that we have challenged and accused the banks because of the way that they operated under the old system, and that it has been replaced, and this is damaging our banking industry and the scale of fines and punishments that are now being imposed. That issue should be addressed, and I ask the Minister to look at it. The Bank of England may have some clues, and Lloyds Bank itself may have some, but there has been a significant change in that wording, which needs to be looked at.

Secondly, there is a very interesting difference between the attitudes of the two sides of this House as shown in the course of this debate, which puts me in a very interesting position. I want to declare that my father was a fully paid-up member of the British Communist Party. I do not know how many descendants of members of the British Communist Party sit on these Benches over here, but he would be horrified to see where I am now standing. He had two great hates in this life: the Conservatives and the Church of England. I think that he thought they were both the same; he never drew a distinction. He had a lifelong desire to see the destruction of both, and there were two great bad moments of my life as a young man. The first was when I joined the Young Conservatives and he immediately called me a class traitor who should be thrown out of the house. I said, “I only joined it because they’ve got the best-looking girls”. He replied “Yes—but they all stink. All Conservative women stink”. “Why, father?”. “Because they have such terrible ideas in their brains, and it rots their insides and they stink.” I said, “I’ll go and do some market research and will let you know”, and I never found any evidence to support it.

My father regarded the Conservatives as the enemy, but attributed the extreme poverty in which he had grown up to the Church of England—that was the cause of his problem with it. His mother had been the district nurse—the midwife on a bike, although nothing like the television programme—in Hammersmith. His father had died the year after he was born, and she had managed somehow to keep three children alive and fed. However, she then got a dreadful infection of her teeth, all of which had to be extracted, but could not afford the dentist’s fee. Therefore the church got the dentist who was part of the congregation to agree to do it free, but nobody would pay the seven shillings and sixpence for the anaesthetic, so she died in the chair as a result of the whole process being done in one night. The church then had three orphans to deal with, whom it initially put into a Church of England orphanage in south London. Two of the children were then sent across to Canada as boat children, where they were sold for $50 each to the first family who would take them; my father never saw them again. Meanwhile, he met my mother, who was in similarly unfortunate circumstances, in the orphanage in south London. She was 12 and he was 14, and they married 10 years later.

My father used to go on about how I had advanced to the point where I had been able to go to private school and see the comparisons and all the rest, but I should always remember that I was a working-class boy—as I always have. However, he would then talk about the socialists of the day and say, “They’re not real socialists—they’re chocolate box socialists”. Today we have seen the chocolate box socialist position on this Budget on the other side of the House. My father would have described it as “chocolate box”, first, because they have all joined because they have opinions which mean that they want to be identified with the pretty picture on the box, and secondly, the chocolates inside are soft-centred and far too bitter to swallow. That would be his reaction, and that is my reaction to the whole presentation we have had across the House. If my father had then asked me what I thought I was associated with on this side, I would say that the contrast is that this organisation has understood this political difference: you cannot spend money that you do not have, and you have to make the money first to spend it. That is the line we have taken, and it has been consistent here today.

However, my father would now be sitting on a cloud, laughing his head off and looking at me, saying, “Look, lad, I used to tell you it was clogs to clogs in three generations but you’ve done it in two, because your posh friends have just completely destroyed your entire position with your pensions”. I have five pensions, but then I was chairman of 11 public companies in 21 years, and so I had to put them together bit by bit wherever I went. I think that my pension is ruined by the Budget last week, and I would like to hear a reaction from the Minister on that. My position is that if you stop the flow of funds to the annuity companies and simultaneously withdraw funds from them, you will create a double whammy that will drive them out of business in very quick time. In that case, I expect very shortly to get a letter saying, “Sorry, we can’t pay you any pension this month, as we’ve no money left”. How long is it before that is going to happen, and what will the Treasury do to mount an oversight and monitoring process to ensure the continued health of the annuity companies?

My nightmare would be to see Labour come back into power and decide that it had to correct this by nationalising the annuity companies. The Labour Party cannot say that it would not do it, as it has form on this—to put it in criminal terms. It has had a look at taking money out of pension schemes; it has form, and it would do it if it had a chance, so it should not say that it would not do it, because it would. So we need to know how we would protect the annuity companies against that ultimate calamity.

I think that my father is having a very good laugh and saying, “I told you so—it serves you right for being on the wrong side of the House”. But I am absolutely in the right place and, from what I have heard, you guys are in the right place, too, and thank you very much.