Financial Services Bill

Debate between Lord Liddle and Lord Sassoon

Tuesday 10th July 2012 Lords Chamber

[Lord Liddle]

My Lords, I rise briefly to support my noble friend Lady Hayter’s amendment. She has drawn attention to a crucial issue for the United Kingdom. The fact is that we benefit greatly from the existence of the European single financial market. I believe that one of the reasons why so many overseas banks base themselves in London is that we are part of a single regulated market. There are grave dangers for us in going down the road of separating ourselves from that single market.

It is important that we keep very closely in touch with European developments at all times. It is a very fast-moving scene. As we understand the results of the last European Council, banking supervision within the eurozone will be put under the European Central Bank by the end of this year. I noted with interest the Governor’s comment, as reported in the Financial Times at any rate, that this would make it easier for the Bank of England to deal with regulatory issues because there would be, as it were, a single telephone number to ring in the European Central Bank. It is also the case that the UK has a critically important influence in the European Systemic Risk Board. It is vital that we play a crucial role in that board, of which the Governor of the Bank of England is the deputy chair.

[Lord Sassoon]

I think that he is the first deputy chair.

[Lord Liddle]

Britain’s position is given a special status given that we are the financial centre of the European single market. The governors of the central banks who make up that body are alive to London’s concerns at all times. It is very important that we play a major role there. It is therefore crucial that we keep these issues under review. I do not think that the way in which the Government have handled the proposals for a banking union is in the UK national interest. It is a bit rich to say, “It is none of our business because this is to do with the eurozone”, but then to complain that the creation of this thing might mean that there was an inbuilt majority against Britain on all financial regulatory decision-making. It is rather contradictory.

The position we have to adopt is that although we are not in the eurozone and will not be in the eurozone, we have to sustain the single financial market. That involves us having the closest possible relationship with the relevant European bodies and keeping abreast, in terms of our own arrangements, with developments there. For those reasons, I strongly support my noble friend’s amendment.

EU: Fiscal Compact Treaty

Debate between Lord Liddle and Lord Sassoon

Tuesday 7th February 2012 Lords Chamber

[Lord Sassoon]

My Lords, I do not think that it is for me to tell my right honourable friend the Prime Minister in any way where he should seek advice but I am sure that he seeks the advice of all his senior Cabinet colleagues.

[Lord Liddle]

My Lords, following on from the Question asked by the noble Lord, Lord Dykes, I recognise the concern of the Government that a caucus of eurozone member states should not compromise the integrity of the single market, but does the Minister agree that the best guardians of that integrity are the Commission and the Court? How does he expect them to act in that role if the Government keep saying that they are reserved about the position of the Commission and the Court in the treaties and there is a chorus of criticism from his own Back Benches in the House of Commons demanding that these institutions be kept out of any role?

[Lord Sassoon]

My Lords, the first thing is to be clear that the intergovernmental agreement is explicit that it cannot encroach on the competences of the EU and that the signatories to the intergovernmental agreement must not take measures that in any way undermine the single market. That is set out in the preliminary recitals and in Article 2 of the treaty. It is principally a matter for the signatories to the treaty. We have made it clear that the Government have a number of concerns about elements of this inter- governmental agreement, one of which is the use of EU institutions. Some of the proposed uses of EU institutions in this intergovernmental agreement are already in the EU treaties and others are not. The Government will watch very carefully how this develops.

EU: Economy

Debate between Lord Liddle and Lord Sassoon

Wednesday 2nd November 2011 Lords Chamber

[Lord Sassoon]

I am grateful to my noble friend for recognising the constructive role which the UK Government have played in pushing forward the many strands of important discussion in the EU at the moment. I indeed agree that the agreement signed last week has to be delivered by all member states, including Greece. We will be working hard to play our part to that end.

[Lord Liddle]

Does the Minister agree that, in this very grave moment of crisis for Europe and for Greece, we should be urging the Greeks to recognise that, for all the inevitability of hard and painful times that lie ahead for them, it is the eurozone that is forgiving half their debts, rescuing their banks and providing the financial support to keep their economy afloat? Should the British Government not hold out a hand of friendship to Greece, for whose democracy we have a proud historical record of support, and not indulge in arrogant lecturing by a Government whose economic policies are leading to depression in this country?

[Lord Sassoon]

My Lords, we hold out a hand of friendship to all our EU partners and to many other countries, but it is for Greece to make its own decisions. I am not going to lecture the Greeks, but it is clear that all parties to the deal last week have to deliver on their commitments.

Euro

Debate between Lord Liddle and Lord Sassoon

Thursday 27th October 2011 Lords Chamber

[Lord Sassoon]

My noble friend Lord Lawson of Blaby cuts to the chase with singular directness. I think that this is an onion with many layers to it and we need to go stage by stage. Having established the immediate priority of the stabilisation of the eurozone, of course the strengthening of the fiscal arrangements within the eurozone is the second priority. The Government signed up to that during the summer and the implementation of that needs to be taken forward. It is in the UK’s interest that that happens. It may lead, as the overnight statement said, to treaty changes and, as a consequence of that, the UK Government will seek to ensure that they take advantage of any opportunity to advance the UK’s interest. I think we need to regard this as a step-by-step process.

[Lord Liddle]

My Lords, will the noble Lord pass on our best wishes to the Prime Minister for many more enjoyable dinners with the Swedes and Poles, having enjoyed one yesterday evening? Does the Minister agree that in the new two-tier Europe, which this Government are bringing on, it is essential to defend Britain’s vital national interest in the single market and financial regulation by keeping Britain as close as possible to the eurozone? In the light of that, will they be reconsidering their decision not to join the euro-plus pact, which was offered? Does he not also agree that it is totally contradictory and counterproductive to talk at the same time about repatriation of powers for which, if the coalition can agree on what they mean, our partners are bound to demand a higher a price?

[Lord Liddle]

How do the Government propose to resolve this looming conflict between defence of the national interest and their own party unity?

[Lord Sassoon]

My Lords, it really is not helpful for the party opposite to try to paint this completely false picture of a two-speed Europe. As I have already explained, the euro-out countries are integral to the single market—the eurozone understands that—and we will be part of the centrality of what needs to be done to drive forward structural reform of the single market, and so on. The other thing that is completely wrong is to paint Europe now as two-speed. There is a variable geometry EU, as we have it. Remember that other important areas such as justice and home affairs, as the noble Lord, Lord Liddle, recognises, also run in different ways. Therefore the idea that there will be some fundamentally changed, two-speed Europe is again ridiculously simplistic.

Eurozone Crisis

Debate between Lord Liddle and Lord Sassoon

Thursday 27th October 2011 Lords Chamber

[Lord Sassoon]

My Lords, I congratulate the noble Lord, Lord Liddle, on asking, in my experience, the maximum number of questions in the minimum amount of time, which certainly gives me a bit of a challenge. He addressed some of the key issues that are left outstanding, which is very helpful, and I shall attempt to address as many of his questions as I can.

First, on the sufficiency of the bank recapitalisation, what is important here is that for the first time, unlike the somewhat obscure and clearly failed stress tests—failed in the sense that they were not nearly tough enough—we have a very clear direction about the hurdle of 9 per cent core tier 1 capital on the basis that sovereign debt is market to market and the European Banking Authority has done the calculations on that basis. That is materially different from the way that the assessment was made last year, which was woeful in its inadequacy. To be absolutely clear, through that process and through the ongoing process of the tripartite authorities—particularly the FSA in the UK—under this assessment UK banks do not need any new capital, as indeed is the case for banks in a number of other countries, including the Netherlands and, critically, Ireland.

The noble Lord asked about Ireland and I shall come back to that in a minute. He also asked specifically about the UK’s exposure to other peripheral countries, and it may be helpful to give the latest data on that. The information is set out on the Bank of England website, and the latest numbers that it gives are that UK financial and monetary institutions have exposures to the public sectors of the peripheral eurozone countries—that is, Greece, Ireland, Portugal, Spain and Italy—of up to $34 billion, the currency in which the numbers are reported. Twenty-five billion dollars of that relates to the public sectors of Italy and Spain, and a total of $9 billion to Greece, Ireland and Portugal—$3 billion to Greece, $4 billion to Ireland and $2 billion to Portugal. These are relatively modest numbers in most cases compared with those for other core European countries. They are much lower than the exposures of banks in France and Germany, for example, to Greece.

So far as concerns Ireland, as I just said, the first thing that came out of the statement overnight is that the Irish banks do not require further capital injections as a result of this package. I support the euro summit’s statement on Ireland—that it is making good progress on the full implementation of its adjustment programme. As we all know, it is clearly in our national interest that the Irish economy is successful and that its banking system is stable. Ireland accounts for some 6 per cent of Britain’s exports, and that is why we signed the bilateral loan agreement with it. As is clear from everything that has happened since then, the Irish Government have a strong commitment to programme implementation, and we very much welcome that.

A recently completed staff mission ahead of the fourth EU/IMF review of Ireland’s programme concluded that Ireland is indeed delivering its programme effectively and making substantial progress on deficit reduction, banking repair and structural reforms. The progress that Ireland has made is a positive lesson for other countries in Europe.

The noble Lord then asked whether the €1 trillion is sufficient. The critical point for now is that, although a lot of numbers have been bandied around in negotiating the package, we have gone up a step from €440 million to €1 trillion and that is a very significant increase. The first priority is to see to the details because, as the noble Lord, Lord Liddle, points out, important details have to be put in place. That has to be the next priority and there is a commitment that we should get the details on that by the end of November, which answers the noble Lord’s question. Otherwise, all I would say about indications of the sufficiency of the package is that the markets—whether the equity markets, the debt markets or the markets in European banks—have been positive today and although we should not set too much store by one day's reaction in the market, clearly that reaction has been positive, having looked at the statement and the package.

Turning to jobs and growth, of course we want the EU27, as well as the eurozone, to be putting in much more effort, as I have already said, to questions of structural reform, competition policy, external trade and so on. From the Statement it is clear that yesterday the Council was looking hard at these matters, not least in drawing attention to the Spanish plans for structural reform and the new Italian plan for growth. To be fair to the eurozone, both in the generality and in relation to two of the countries that wish to see speedy action, growth issues are certainly not forgotten.

On the noble Lord's jibes about the UK, I stress again that the approach of the UK Government is threefold: first, we must stick to the deficit reduction plan if we are to have the continued low interest rates which we need for sustained recovery; secondly, yes, there is room for monetary activism, as seen in the Bank of England's recent announcement on more quantitative easing but also in my right honourable friend the Chancellor's announcement that we are looking at further credit easing measures; and thirdly, yes, we need to continue to bring forward supply-side reforms, as we will do in and around the autumn Statement next month to underpin medium-term balanced growth.

The noble Lord asked about issues concerning the structure of the euro-ins and the euro-outs, treaty changes and so on. As regards what “closely informed” means, the best evidence is what happened over the past few days: the Prime Minister successfully argued that we needed to have a seat at the table yesterday for issues that concern the whole EU27 and specifically there was the bank recapitalisation. That was accepted; we were there; the other euro-outs were there and we were kept extremely closely informed about the deliberations within the eurozone. The best thing to look at is the evidence of how that worked over the past couple of days.

The eurozone Statement talks about possible treaty changes, so we must not jump the gun and say that there will be some. I do not have the wording of that paragraph in front of me, but it makes the point that they are not necessarily extensive changes—I forget the adjective.

[Lord Liddle]

Limited.

[Lord Sassoon]

I thank the noble Lord for that—possible limited treaty changes. We should not get excessively excited too soon about that but, if and when the treaty changes come forward, the first priority of the UK Government will be to ensure that those treaty changes are fit for purpose in terms of the better governance that we want in the eurozone, and the second is that we will take every opportunity at that point to see what advantage we can get for the UK out of the discussions around any package that may come forward. I hope that that rather briskly answers the noble Lord’s many questions.

EU: Budget

Debate between Lord Liddle and Lord Sassoon

Monday 16th May 2011 Lords Chamber

[Lord Sassoon]

My Lords, the analysis is carried out periodically by the Treasury. Reviews of the independent analysis of the benefits of our membership are available on the Treasury website. Europe accounts for 40 to 50 per cent of our exports. It is critical that we play a constructive part in Europe and that we work on factors such as those referred to by my noble friend Lord Newby to make sure that the market works better and that the UK takes full advantage of it.

[Lord Liddle]

My Lords, this is inevitably an extremely difficult issue at a time of stringency, but does the Minister agree that the rise in our contribution agreed in the 2005 budget deal was intended principally to meet this country’s commitment to enlargement and the increase in the structural funds that went with it? Does he also agree that, if we had not made that agreement, Poland and other new member states with living standards of a third or 40 per cent of ours would have ended up contributing to the British rebate? As for the unfairness in our contributions, does he accept that at the end of this financial period the UK net contribution will be on a par with that of France and Italy—member states of similar size and wealth?

[Lord Sassoon]

My Lords, I do not begin to accept any of that analysis. In 2005, the Prime Minister, evidently without consulting his Chancellor, gave away in the rebate a total of €10.5 billion over the current financial perspective period. What the UK got in return is a complete mystery to me. We were promised some leverage in fundamental reform of the common agricultural policy and we got nothing. This Government will not see a repeat of that.

Banking

Debate between Lord Liddle and Lord Sassoon

Wednesday 9th February 2011 Lords Chamber

[Lord Sassoon]

I am very grateful to my noble friend Lord Newby for expressing some of the sentiments that I wish I had expressed as succinctly as he did about the Opposition's abject failure to have gripped these issues earlier, and for pointing out what a dramatic difference a mere £2,000 in cash makes to a senior banker who, under previous arrangements, would have been expecting to receive many multiples of that.

We will consult on my noble friend's specific questions and have no presumption as to where the outcome of the consultation will be on the remuneration/disclosure issue. There is no particular magic about the number eight, but eight plus two executives on the board, which there might typically be, would total 10. That is about double the number disclosed in, say, the US or Hong Kong so we are already exceeding disclosure in the US and Hong Kong and going further to a position which might double the number of directors whose remuneration is detailed. That seems to be a good point to start a consultation, but it will be an open one.

As for the independent Banking Commission, I can absolutely confirm that the Government do not remotely regard this as an academic exercise. We appointed the commission early after we took office because we thought that it was so important to get to the bottom of the issues about the structure of the industry, “too big too fail”, and so on. When my right honourable friend says “Look forward”, he means in a positive sense look forward to what will be a serious and important piece of work.

[Lord Liddle]

My Lords, many commitments in Project Merlin—such as more lending to more businesses in the regions; the establishment of the equity fund promised in the Rowlands review, which was an initiative of the previous Government, as the Minister will remember; and, indeed, the support for the big society, if that comes off—if delivered on, and it is a big if, are welcome, and no one wants a vendetta against an important industry such as financial services. However, on the central question of remuneration, the Government have set themselves the important test that it should be fair and reasonable. On that basis, does the Minister agree that the Government’s proposals fail that test? Does he think that the £9 million bonus that Mr Bob Diamond will get from Barclays is fair and reasonable—yes or no? It seems to me that the Government have to be clear on these issues. That is particularly true for a Government where the Secretary of State for Communities and Local Government seems to think that the problem of local authority cuts can be solved by cutting chief executives’ pay. That is populist politics being played in the public sector, but will the Government play honest politics when dealing with bankers’ bonuses?

[Lord Sassoon]

My Lords, today is precisely about honest politics. In answer to the first part of the noble Lord’s assertions and questions, there may have been plenty of good ideas floating around—whether it was the Rowlands review, the tax code for banks, the big society bank; I could go on and on and on—but the previous Government were completely unable to deliver on any of them. My right honourable friend has today set out hard delivery on so many of these issues. As for the question of remuneration, I believe that the deal on remuneration that has been done today on behalf of the British taxpayer and the British people is a fair and reasonable one. I certainly do not know, and do not wish to know, the individual bonuses that hypothetically may go to people, and I do not intend now or in the future to comment on individual banker's bonuses. The critical thing is that we now have a fair and reasonable deal between the Government, as the representative of the taxpayers of this country, and the banks, and it is one that will be enforced.

Currency Markets

Debate between Lord Liddle and Lord Sassoon

Wednesday 2nd February 2011 Lords Chamber

[Lord Sassoon]

No, I would not want to go that far.

[Lord Liddle]

My Lords, does the Minister have a comment on reports in today’s Financial Times that the French and the Germans are negotiating for the eurozone a competitiveness pact, which would have considerable implications for the single market? What steps will the Government take to ensure that Britain is fully involved in these discussions and that this will not be another case where we will be hovering on the sidelines?

[Lord Sassoon]

My Lords, I cannot comment on any specific proposals that might come forward from France and Germany, but the Government are right at the forefront of discussions to extend the single market to make sure that competitiveness issues internally and externally for the EU competing globally are kept firmly at the forefront of the European agenda.

Loans to Ireland Bill

Debate between Lord Liddle and Lord Sassoon

Tuesday 21st December 2010 Lords Chamber

[Lord Sassoon]

My Lords, I was talking about where Members of the House stood on the Bill, which is where I ought to concentrate if the noble Lord will permit me.

I began to feel grateful to the noble Lord, Lord Davies of Oldham, when he started his response to the debate; I thought that he was going to relieve me of some of my responsibilities. However, his comments then turned in a different direction. He went into an analysis of the UK’s economic challenges—an essay that I do not quite share with him—and then he asked some questions. I shall attempt to respond to his questions and to those of other noble Lords.

The starting point, clearly, is that over the past two years Ireland has faced a series of extraordinarily difficult economic and financial challenges which have resulted in the country having debts of more than 90 per cent of its national income, high unemployment and low levels of growth—and the Irish economy, of course, remains on the brink.

The noble Lord, Lord McFall of Alcluith, reminded us of the centrality of the Irish banking situation to the Irish crisis and how the Irish banks became increasingly reliant on central bank funding. In his analysis, the noble Lord, Lord Pearson of Rannoch, referred to trading but made no mention of the interconnectedness of our two banking systems, which is central to the Irish problem and to why it is so important to the UK that we should contribute to finding a solution.

In contrast to Britain’s situation, Ireland’s credit rating remains under threat and its economy continues to struggle. The package we are discussing today is designed to contribute towards Ireland’s solution to its problem. It starts by contributing to the recapitalisation of Ireland’s banks; sets up a contingency reserve to deal with any future problems; and covers the current shortfall in the Irish budget. My noble friend Lord Tugendhat quite rightly questioned whether Ireland will grow sufficiently out of its problems. However, I remind noble Lords that the IMF has been central to the construction of the package and, from its wide experience of similar situations, it understands the importance of growth in an economy such as Ireland’s. I recommend to noble Lords the IMF’s interesting, well written and cogent analysis of the reasons for Ireland getting into this situation, and the logic for the construction of the package which is central to putting the Irish economy back on its feet.

The Bill gives the Treasury the statutory authority to deliver the UK’s bilateral contribution to the package. In this way, the UK will be ready in the new year to help one of our closest international partners in its hour of need. I was particularly grateful to the noble Lord, Lord Bew, and to my noble friends Lord Cope of Berkeley and Lord Tugendhat for pointing out the good will that has been created in Ireland by our response. We are doing this because it is in the economic interests of the UK to do so; nevertheless, it is good that we are doing it for a close friend. The noble Lord, Lord Bew, succinctly put the matter into its Irish historical context. I very much take his point that we need to think about how we build on the good will that has now been created. That point was indirectly touched on by the noble Lord, Lord McFall. It sits somewhat at odds with the stance taken by the noble Lord, Lord Liddle, who painted a picture that I do not recognise. He tried to paint us into an “our problems, their problems” situation. I thought that my noble friend Lord Tugendhat, who has deep and distinguished European experience and contributions to draw on, painted a much more nuanced and balanced picture. Of course, we are at the centre of the European debate. We are engaged with our European partners, not least for the reason that my noble friend gave: that we are one of the largest economies in Europe. Whether it is leading the way on bank stress tests and getting Europe to follow where the UK started on short-term stabilisation, or looking at the other end of the range of issues that needs now to be considered—for example, questions about structural reform programmes, the Europe 2020 vision and the lessons of this crisis—the UK is absolutely at the centre of the discussions.

[Lord Liddle]

What plan have the British Government and the Prime Minister put forward for the eurozone? Why does the Prime Minister keep saying that it is for the eurozone to sort out its problems, while knowing that so much of the growth that is being forecast, which is absolutely essential to British interests and his own prospects of re-election, requires there to be robust export growth to the eurozone?

[Lord Sassoon]

These are all factors that mean that we need, with the EU 27, to make sure that the structural reforms are driven through and that we get the benefits of completing the single market project and so on. However, my noble friend Lord Tugendhat again got it exactly right—I would not agree with every nuance of his analysis, but he got the essential point right—in saying that just because we are very positively engaged at the centre of all those other issues does not mean that there are not critical differences, because we are not part of the eurozone and this Government will not take us into it. It is therefore for the eurozone to sort out its own permanent mechanism for dealing with any other issues that arise out of membership of the euro. That is the fundamental difference between the UK’s position and that of other of our partners in Europe. I genuinely fail to see why the noble Lord, Lord Liddle, seeks to paint the position in such stark colours. The fact is that we are in a different position from that of a number of the largest trading partners in Europe, which needs to be reflected in the permanent arrangements that will be put in place. My noble friend Lord Tugendhat explained that in much more masterly terms than I will ever be able to do.

Some questions were asked about the economic and market analysis of the situation, not only of how we got here but how we go forward. I listened with interest to the exchange between the noble Lord, Lord Davies of Stamford, and my noble friend Lord Lamont of Lerwick. The rather succinct and pithy remarks of my noble friend better encapsulated the situation in which Europe finds itself and in which it is clear that the fact of the euro cannot be ignored. That takes us back to why the eurozone needs to think about the consequences and the lessons of this crisis for a permanent mechanism.

In answer to the specific question of the noble Lord, Lord Davies of Stamford, I restate that the loan to Ireland does not add to our deficit. It increases the borrowing on one side of the UK’s balance sheet, but we have an asset in terms of the money that will be owed to us by Ireland. There will be an increment to the fiscal position by the net interest margin, estimated at current interest rates to be some £440 million. That is the only element that should go through the current balance.

One or two comments were made on the process of the Bill. I am grateful to my noble friends Lord Cope of Berkeley and Lord Tugendhat for their endorsement and recognition of the fast-track approach that we have taken. It is necessary that we give confidence to our European partners and the IMF in putting this package together that the UK is ready at the earliest time to deliver on our commitments. I accept my noble friend Lord Cope’s analysis of the constitutional position in another place.

Autumn Forecast

Debate between Lord Liddle and Lord Sassoon

Monday 29th November 2010 Lords Chamber

[Lord Sassoon]

Well, I have now been reminded. I was not quite around at the time, but I am very grateful to my noble friend for reminding us of these important lessons of history.

[Lord Liddle]

My Lords, does the noble Lord agree that, while any progress in rebalancing the economy is welcome, and while it is heartening to hear that the forecast for public sector job losses is lower than it was, this is contradicted by the Local Government Association, which forecasts an increase in job losses as a result of the impact of the spending round on local government? Does he not also accept that many of us on this side of the House are worried about these job losses—about their impact on regions that are heavily dependent on the public sector and about their impact on young people? Already, there are worrying signs of a rise in unemployment and inactivity among the young. Is it not disappointing that the Statement does not contain any policies that are likely to address these problems?

[Lord Sassoon]

My Lords, I would rather stick by the forecast of the independent Office for Budget Responsibility than the forecasts of others. It is the OBR forecast that is important and central today. Of course it is regrettable that any number of public sector workers—or indeed people in any other part of the economy—will lose their jobs. However, because of the numbers—much reduced in the latest forecasts—of public sector workers who will lose their jobs, not overnight but over the next four or five years, interventions that we have already announced, such as the £1.4 billion regional growth fund, are so important. We have targeted support very much at the regions to make sure that the transition between employment in the slightly shrinking public sector and employment in the strongly growing private sector is as smooth as possible.

EU: Economic Governance

Debate between Lord Liddle and Lord Sassoon

Wednesday 27th October 2010 Lords Chamber

[Lord Sassoon]

My Lords, as I understand it, the financial framework and perspective have to be agreed unanimously. Discussions are starting on the framework that will cover the years 2014 to 2021.

[Lord Liddle]

Will the Minister confirm that tomorrow at the European Council the leaders of France and Germany are going to propose treaty changes on the debt crisis resolution mechanism? Is it not slightly odd that the British Government are going to that meeting without having a view on those proposals?

[Lord Sassoon]

My Lords, I sometimes struggle to speak for all the policy matters covered by Her Majesty’s Treasury, which are wide enough. I absolutely cannot speak for what the leaders of France and Germany are going to say when they come to the council tomorrow. I am sure that the Government will be prepared to answer any proposals that come forward. We will hear more about this after the meeting on Monday.