Investment Banks: Client Protection

Debate between Lord Lee of Trafford and Lord Bates

Wednesday 13th June 2018 Lords Chamber

[Lord Lee of Trafford]

To ask Her Majesty’s Government, in the light of the current Beaufort Securities situation, what steps they are contemplating to ensure that client assets are protected and ring-fenced from administrators of failed stockbroking or fund managements firms operating under rule 135 of the Investment Bank Special Administration (England and Wales) Rules 2011 (SI 2011/1301).

[The Minister of State, Department for International Development (Lord Bates) (Con)]

My Lords, the special administration regime is designed to accelerate the administration of failed investment firms, reduce costs and increase recoveries. The administrators’ plans for returning client assets and allocating expenses must be approved by the creditors’ committee and the court.

[Lord Lee of Trafford (LD)]

I hear what the Minister says but I ask him to look again at this situation. I do not think that he quite appreciates the seriousness of it. Unless this loophole is closed, the clients of small and medium-sized broking firms—very well-run broking firms—will leave those firms and go to larger ones. That is already happening, so will the Minister please look at this matter again?

[Lord Bates]

I recognise that the noble Lord has a long tradition of standing up for small shareholders in the field of investing. Small shareholders, like small businesses, are the backbone of our capital markets and we have to restore confidence among them. This issue of the fees was looked at. The noble Lord will know that last week the creditors’ committee, the Financial Services Compensation Scheme and PwC acting as the administrator met and reached an agreement which will mean that 94% of the fees will be covered by the FSCS. Out of 17,000 retail investments that the noble Lord and I are very concerned about, only 10 will suffer a loss under the current programme. We looked at this matter again with the Peter Bloxham review in 2012 and 2013, and we always keep all matters in this complex situation under review.

Overseas Aid and Defence Expenditure

Debate between Lord Lee of Trafford and Lord Bates

Monday 13th November 2017 Lords Chamber

[Lord Lee of Trafford (LD)]

My Lords, I beg leave to ask the Question standing in my name on the Order Paper and declare an interest in shareholdings as set out in the Register of Members’ Financial Interests.

[The Minister of State, Department for International Development (Lord Bates) (Con)]

My Lords, according to the latest available data, the ratio of defence expenditure to overseas aid expenditure in 2016 was more than 3:1. The UK Government spent £42.2 billion on defence and £13.3 billion on overseas aid in 2016. Both defence and overseas aid budgets are published on a calendar-year basis, in line with international standards.

[Lord Lee of Trafford]

My Lords, is the continuing hollowing out of our Armed Forces not a betrayal of all those veterans who proudly marched and paraded over the weekend? The defence budget is under huge pressure, our Army is below strength, we would be hard pushed to deliver 12 escort vessels and there is speculation over cuts to our amphibious capability, to our Royal Marines and to our minesweepers, to say nothing about finding money for the Joint Strike Fighter for our new carriers. While many of our aid programmes are vital and commendable, is it not time to revisit the 0.7% commitment? Is not the current ratio of overseas aid expenditure to defence expenditure now just unsustainable? Does development aid really need its own department?

[Lord Bates]

Perhaps I may answer the second part of that question. If we look just at the past year, overseas aid has provided humanitarian assistance to 17 million people. Some 28.7 million people have received immunisations, saving 475,000 lives, while 7.1 million children have been provided with education and 27.2 million have been provided with access to clean water. So the answer to the second part of the noble Lord’s question is yes, it is needed, and the Department for International Development is doing good work.

On defence, I do not accept the noble Lord’s premise that the Armed Forces have been hollowed out. The defence budget is increasing in real terms year on year by 0.5% over the current spending review period. In terms of aircraft—I see that the noble Lord may wish to come in on this at some point—there is our shipbuilding strategy, the details of which I will perhaps elaborate on later.