Bank of England and Financial Services Bill [ Lords ] (Sixth sitting)
Lord Mann Excerpts(8 years, 9 months ago)
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The Economic Secretary to the Treasury (Harriett Baldwin)
I am going to convince Opposition Members that this new clause is not necessary. I will give them an updated response on the Chancellor’s views and the process of recruitment for the new chief executive of the PRA, the deputy governor for prudential regulation. That newsworthy notification to the world is taking place in front of a large crowd, as we can see.
My understanding of the proposed new clause is that it would give the Treasury Committee a statutory veto over the appointment of the chief executive of the PRA, which is soon to be the Prudential Regulation Committee. I am well aware that the Treasury Committee, of which the hon. Members for East Lothian and for Bassetlaw are members, has proposed this measure. Last month, following the announcement of the appointment of Andrew Bailey as chief executive of the FCA, we received a letter from my right hon. Friend the Member for Chichester (Mr Tyrie), in which he argued that the Treasury Committee should have a veto over both the appointment and the removal of the chief executives of the FCA and the PRA. The Chancellor has replied to the Treasury Committee in a letter, which normally would be published by the Committee—I imagine that it has been published already. We believe that such an arrangement is neither necessary nor appropriate for the financial regulators, and I will articulate the reasons why.
First, such an arrangement is not necessary to protect the independence of the FCA and the PRA or of their chief executives. The model of independent regulation that we have in the UK gives the regulator a clear statutory framework of objectives and duties and ensures that regulatory decisions are taken in an objective and impartial way. Importantly, this legislative framework protects the independence of the PRA and the FCA chief executives. It includes provisions that require the terms of appointment to be such that the appointee is not subject to the direction of the Treasury or of any person.
We agree that it is important that the Treasury Committee holds a pre-commencement hearing before the new PRA CEO takes up their post. However, we believe that it is important that the Chancellor remains the person who is fully accountable for deciding on the right person for the job. Pre-appointment hearings are not common for chief executive posts. Hon. Members will understand that such a process would potentially introduce scope for delay and public disagreement, which would not help to recruit good candidates. For example, candidates who are otherwise very good might not want to disclose their interest to their current employer in advance of confirmation of the appointment.
The hon. Member for East Lothian has argued that the arrangements for the appointment of the chief executives of the FCA and PRA should mirror those for the senior leadership position at the Office for Budget Responsibility; that appointment requires the consent of the Treasury Committee. However, the financial regulators are materially different from the OBR. The OBR was established to examine and report on the sustainability of public finances and, by doing so, to help Parliament hold the Government to account for their fiscal policy decisions—the same argument applies to the Comptroller and Auditor General—and as such the OBR has a unique model of dual accountability to the Government and to Parliament.
The previous Government proposed the statutory veto of the Treasury Committee over appointments to provide an assurance of independence and to ensure that those individuals at the OBR have the support and approval of the Select Committee. However, we do not believe that that model of dual accountability is appropriate when regulators are independently carrying out executive functions of the state, such as regulating and supervising the financial services industry. As I have said before, I would welcome the Treasury Committee holding a pre-commencement hearing with the chief executives of the PRA and the FCA. That would provide an important opportunity for Parliament to scrutinise new appointees to those offices before they take up their posts.
Let me update the Committee on the process for appointing the next chief executive of the PRA, who will take over from Andrew Bailey. The Government are running an open competition. The post was advertised on Friday 19 February, which was last week, and the closing date for applications is 4 March—the window is still open should any members of the Committee wish to apply. The appointment is made by the Queen, on the recommendation of the Prime Minister and the Chancellor. Interviews will be conducted in mid-March by a panel chaired by Sir Nicholas Macpherson, together with the second permanent secretary, the chair of the court and one of the other deputy governors. It is expected that the new chief executive will take up the position as soon as possible, but by 1 July 2016 at the latest. You see, Mr Brady, we have all the breaking news after 2 pm in this Committee.
There is another argument that is not in my speaking notes, but which I strongly believe is the case. Let us hypothesise that whoever is appointed through that process then goes through the pre-commencement hearing with the Treasury Committee that we have agreed, and that Committee produces a report that is extremely unfavourable to the person nominated by the Government. I think we can all see that, from a practical point of view, that would be as powerful as having a pre-appointment hearing.
Let us look back at the recent examples of Andrew Bailey’s move to the FCA and, for those of us with slightly longer memories, the appointment in the previous Parliament of Mark Carney as the new Governor of the Bank of England. The Chancellor invested a lot of personal time in those appointment processes, persuading individuals to come across. Imagine if he had had to say, “It is not actually in my power to offer you these jobs; it is in the power of the Treasury Committee.” Would we have seen candidates of such quality prepared to put their names forward? I submit that we would not.
I therefore think that the Government have made the right judgment in agreeing to a pre-commencement hearing. I hope that I have explained to the Committee why I do not believe it would be appropriate to accept the new clause, and I hope that the hon. Member for East Lothian will withdraw it, or that the Committee will vote it down.
John Mann (Bassetlaw) (Lab)
Dear, oh dear. Democracy only goes so far. The United States, with all its systems, must be appointing terrible people, seeing as elected politicians there have a whole range of conferments or otherwise, from the top of the judiciary downwards. Not to give an august body such as the Treasury Committee, which is elected on a cross-party basis by Parliament, the ability to reject an unsuitable applicant demonstrates the fundamental weakness of the last few Chancellors and of the current one, in the style of his predecessor but one—Mr Brown was an example, and Mr Osborne closely mirrors him in every way. Chancellors perceive that they have all the wisdom, yet they are not confident enough to trust a cross-party Committee that would rarely even contemplate criticising, never mind vetoing.
Having sat on that Committee at four different times with a range of Members—indeed, I seem to recall that you, Mr Brady, were one of its leading members when I was first on it—I know that there has never been an instance when it has misused its powers on a partisan basis. Of course, there may be exchanges, particularly with Chancellors and Ministers, where one senses and smells more of a partisan element. However, there has never once been an inkling of that in decision making.
For the Executive to hold in these powers is dangerous for the Executive and for Parliament. The power is simply with a single name; there is no choice or selection process. The proposal from the hon. Members for East Lothian and for Kirkcaldy and Cowdenbeath, which is the same one unanimously put forward by the Treasury Committee in this Parliament, is for the ability to interview and, if necessary, vote against an applicant. That focuses on what the Government want from the post holder and the skills that the post holder will bring. It scopes out precisely how that remit is seen by Parliament. We are the elected representatives. Therefore, in exactly the same way, very successfully, Parliaments past brought in the Select Committee system and further democratised that process through elections to Select Committees. That is popular inside the House and, as time will show, it is increasingly popular outside, as the general public understand how it has strengthened our democracy.
Harriett Baldwin
Again, I have to disagree with the hon. Gentleman. There has been a very capable and competent acting chief executive at the FCA throughout this time. I submit that the hon. Member for Bassetlaw would rather that Bassetlaw were in America, from what he has said.
John Mann
The Minister should know her history. The Pilgrim Fathers and the pilgrim contract that created western democracy in the style of the United States originate from Bassetlaw, as does the Great Reform Act of 1832. The writer of the Great Reform Act lived in my house at the time. Bassetlaw and American democracy therefore go together, but we are English. We are part of the United Kingdom. We want our Parliaments to be confident enough to make decisions. If it is not good enough for the Monetary Policy Committee and the OBR, is the Minister really saying that we are not getting people of suitable calibre for those posts?
Harriett Baldwin
The Minister really is saying that. I am saying that these are Executive roles, which the Executive should continue to be able to appoint, obviously with a pre-commencement hearing by the Treasury Committee. I fear that the hon. Member for Bassetlaw’s ancestor’s ticket for this voyage must have got lost, but it was very interesting to hear about the connection with his constituency. Without more ado, I urge the Committee to reject this amendment.
John Mann
Before my hon. Friend sits down, would he like to contemplate that in the unlikely event that Scotland becomes independent and I am an elected Member of this House, I will certainly not be voting to allow Scotland to remain within sterling? Therefore, the likelihood is that Scotland will be required to have the euro as its currency. So if the name were to change and Scotland was using the euro, would the Government of the day not have to change the name back again in order to give some proper accuracy and balance?
Richard Burgon
I thank my hon. Friend for that intervention. It is very helpful. I have to say that I cannot foresee any circumstances in which my hon. Friend would not be re-elected and re-elected as the hon. Member for Bassetlaw—he truly is a man of the people—but I can foresee circumstances where the SNP’s desire might not reach fruition. My hon. Friend raises complicated and important questions and I look forward to the Minister’s response to them.
Bank of England and Financial Services Bill [ Lords ] (First sitting)
Lord Mann Excerpts(8 years, 9 months ago)
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Richard Burgon
I will comment on new clause 2, in the name of the hon. Member for East Lothian. As I said, we see merit in the proposal for wider geographical representation on the board and we believe that it complements our proposals to ensure that different stakeholders are represented. We would be interested to hear a little more detail if possible. He spoke about different centres of employment—Birmingham is one example—but I would be interested to hear specific comments on whether this proposal relates to personal residency or employment and, crucially, does the SNP believe that devolved bodies should make recommendations to the Chancellor?
To clarify, our new clause 5, on the publication of transcripts of meetings of the court, is a small tidying amendment, but we hope that it would have a significant impact by opening up the discussions of the court to wider scrutiny and that it would ensure increased transparency and accountability. That is why I will seek a Division on new clause 5 and why I invite all hon. Members to consider voting for it.
John Mann (Bassetlaw) (Lab)
It is an honour and a privilege to serve under your chairmanship, Mr Wilson. The issue of the court and its lack of transparency— the amendments attempt to bring in some transparency—is one that has bypassed the majority of commentators and the general public. Hidden in the rather grand depths of the Bank of England, the court holds significant potential power, yet it has become embodied by not a concept of nepotism within the financial sector, but something akin to that. Perhaps “revolving door” is a better term. Someone goes in one door, they fail and go out of another door, and then they turn up in the same industry and at the same heights, time and again.
The criteria for who is on the board have always been shrouded in some secrecy. The hon. Member for East Lothian raised the question of the representation of the labour movement. That is a good and interesting point to examine in this context, because it remains the case today that Mr Prentis of Unison is on the court, as was Mr Brendan Barber of the TUC before him. I believe that Mr Bill Morris was on the court before that, and Mr Gavin Laird was too, in the distant past. Indeed, I used to see the papers that Mr Laird received at the time and the contributions he made. If they had been listened to at the time it would have had a significant impact on British competitiveness. Mr Laird used to argue repeatedly, very eloquently and in beautifully scripted speeches, that we were in danger of overemphasising the importance of finance at the expense of manufacturing. That is an issue not only for the Government, but for the Bank of England itself. Industry, as opposed to finance, needs to be in at the Bank. That is a fundamental weakness, because at present it is financiers as opposed to industrialists who are evident at the Bank, not so much in the expertise but in the mindset and the thinking which lead to decision making. The Bank thinks as financiers do, and it does not think more widely.
In the same way, my hon. Friends on the Front Bench propose to broaden the court with consumer champions and others who are missing at the moment. The Chancellor is decisively, deliberately and calculatedly removing consumerism and the consumer interest from regulation. Why? Because that is seen as a barrier to the ever onward growth and recovery of the big banks, not least RBS and Lloyds. Some commentators are speculating that there might be a fuel tax increase. That is quite wrong, in my view. What the Chancellor wishes to do is maximise his returns on the sale of shares in RBS and Lloyds. In itself, that is very sensible, and it is something that the Bank of England would support, does support and will support. However, speed and timing are critical in all of this. We have the Bank of England being unduly influenced by the Chancellor and the Treasury, while at the same time it is losing external influences from the world of industry. That includes both the employer and, potentially, the trade union influence.
There is the intriguing possibility of a more regional Bank. What would the world come to if there were people in the Bank of England who did not live in London or, more likely, in the commuter belt outside London? How would the world survive? It is a shame that my hon. Friends did not go even further and suggest that the court ought to meet not in the hallowed chambers on the third or fourth floor of the Bank, but in Manchester, Birmingham, Cardiff, Edinburgh, Aberdeen or Sheffield, in order that the public can see and hear it and get a feel for it. That would be an easy, significant win, and I am sure that the Bank’s representatives listening in will take note of that. I commend the amendments to the Committee; they are excellent and should be agreed.
The Economic Secretary to the Treasury (Harriett Baldwin)
May I say what a pleasure it is to serve under your chairmanship, Mr Wilson? I will speak to clause 1 and why it should stand part of the Bill before dealing with the amendments.
The clause makes the deputy governor for markets and banking a member of the court of directors—an important position that is not currently a statutory member of court. It also provides enhanced flexibility to add or remove a deputy governor or alter the title of a deputy governor, as well as the corresponding ability to make changes to the composition of the court, the Financial Policy Committee, the Monetary Policy Committee or the new Prudential Regulation Committee where a deputy governor is added or removed. Those important provisions will simplify the governance of the Bank.
Following the expansion of the Bank’s responsibilities through the Financial Services Act 2012, a deputy governor for markets and banking was appointed with responsibility for reshaping the Bank’s balance sheet, including ensuring robust risk management practices. That important position is currently filled by Dame Minouche Shafik, who is not a statutory member of court. We have talked about regional diversity this morning, but she ticks many boxes in terms of other forms of diversity, having been born in Egypt, worked a lot in America and being a British citizen. The clause amends the Bank of England Act 1998 to make that deputy governor a member of the court, ensuring equal status for all the Bank’s deputy governors and simplifying the Bank’s governance structure.
It should be noted that the power to add or remove a deputy governor will not permit the Treasury to remove a deputy governor or change his or her title while that deputy governor is in office. The measure will ensure flexibility for future need. At present, changes such as the creation of the new position of deputy governor for markets and banking can only be affected through changes to primary legislation. Instead, as a result of the clause, the Government will in future be able, by order and after consulting with the Governor, to adjust the size and shape of the Bank’s senior management team to meet future requirements—for example, to bring in new expertise if that proved to be necessary.
The hon. Member for Bassetlaw asks why we are changing the number of non-executive directors on the court. To be clear, that change is not being made by the Bill. The Bank of England Act 1998 requires up to nine non-executive directors, and following retirements there are currently seven non-executive directors on the court. A smaller board will be better for the Bank. The strong view of the Bank’s non-executive chair, Anthony Habgood, is that a smaller board makes for more effective challenge and accountability of the executive. When there are fewer non-executive directors, each member has greater opportunity to pose questions to executive members and to debate with them. A larger court might encourage a round table of individual speeches, rather than enabling effective back-and-forth discussions with and challenge to the executive.
Harriett Baldwin
The hon. Gentleman serves as a member of the Treasury Committee, and I believe he was also a member of that Committee in the previous Parliament, so he will remember that it produced a report in 2011 called “Accountability of the Bank of England” which recommended that the court’s membership be reduced to eight—smaller than we propose. It emphasised that a smaller court would allow for
“diversity of views and expertise”
while still being
“an efficient decision-making body”.
He may want to go back and look at the evidence base that the Committee looked at. It is important to emphasise that the Bill does not make a change in terms of the membership, which remains at possibly up to nine.
Harriett Baldwin
As a distinguished academic himself, the hon. Gentleman will know that academics often differ in their points of view. It is clear that in this case the distinguished Governor Warsh has come down in one way, and here in our deliberations we have come down in favour of producing a transcript, and Hansard performs that incredibly valuable role for us. I will make some further points, which I hope will convince him of the wisdom of the position that the Government are taking on transcripts.
When Governor Warsh looked at releasing transcripts of the day one deliberations, which he described as “safe space” deliberations, he found that
“Should the transcripts of the Day 1 deliberations be made public, the quality of the deliberative process would risk being materially impaired, to the detriment of sound policymaking.”
He went on to make a clear recommendation that
“the Day 1 policy discussions should no longer be recorded nor should they be transcribed.”
Publication of transcripts of meetings of the court would have a “chilling effect” on discussion and the quality of debate and harm decision making. I therefore hope that the hon. Member for Leeds East will not press his new clause.
John Mann
Having gone through in some detail an analysis of whether transcripts of meetings of the Monetary Policy Committee should be made available, on which there has been a thorough debate, including with members of the MPC, the Minister translates that to an amendment relating to the court. In relation to the court, what is the evidence base that suggests that the hearings or decision making of the court, as opposed to the MPC, would in some way be restricted by a transcript?
Harriett Baldwin
The hon. Gentleman makes an important point. The court oversees the MPC, the FPC, and the PRC under the proposals in the Bill. We have not discussed yet—I will be happy to do so—the fact that on the prudential side of discussions, the people on that committee will looking at material that constitutes, by any judgment, non-public information on the soundness of important financial institutions in this country. I am sure that, as a member of the Treasury Committee, the hon. Gentleman will agree that such material ought to be treated as extremely market-sensitive in any circumstances.
John Mann
The Minister is now jumping to a third body. The amendment relates to the court. The court does not make decisions on interest rates. The court does not delve into the financial situation of individual banks or other financial institutions. The court oversees; the court is strategic. Will she explain the relevance of her case in relation to the court, as opposed to the committee dealing with prudential regulation or with monetary policy?
Harriett Baldwin
I would have thought that it spoke for itself. The fact that the court is overseeing all these different committees, some of which will be considering material that is non-public information—
Harriett Baldwin
If the hon. Gentleman will allow me, I will give way to him when I have replied to his previous point. We are proposing the publication of a record of the court’s meeting, and I agree with him that it is important for that record to be in the public domain. There is a clear difference between that record and a transcript.
John Mann
I thank the Minister for giving way again. I have the advantage over her of having been in the deliberations of the Treasury Committee on these matters. There is a world of difference between decision making on interest rates or the examination of whether a particular financial institution is in danger of collapse and going into that in a committee and the role of the court. The Minister seems to misunderstand the role of the court. Has she looked at and understood the transcripts the discussions of the Treasury Committee and the banking review on the question of the court? She is talking about different bodies. This amendment is about the court. The Minister said, in response to my earlier intervention, that this is self-evident. No, it is not self-evident—
Harriett Baldwin
In responding to the hon. Gentleman’s intervention I will be a little bit cheeky, if I may, and highlight the fact that even that august body, the Treasury Committee of this House, sometimes meets in private. There is a need for a safe space for discussions at certain points. We agree with the hon. Gentleman that it is important to have a degree of transparency in terms of the court. We think that the record provided is adequate. I hope that the hon. Gentleman will not press the amendment.
Harriett Baldwin
I would like to move on, but I will take another short intervention.
John Mann
I thank the Minister for giving way. Debate is important. The Minister now cites in evidence the Treasury Committee, which is a good example. The reason that minutes and transcripts of Select Committees are available is because of the strategic overview and public accountability that they provide. That is the whole point about the court. It is not making decisions on the minutiae or on the specifics. It is providing an overview and oversight, on precisely the same democratic logic as a Select Committee. That is the point of this excellent amendment. The Minister does not seem to understand the point of the court and what it is there for.
Harriett Baldwin
With great respect to the hon. Gentleman, I do understand that. Perhaps he would like some further examples. The court plays an important role in relation to emergency liquidity assistance at the time of a financial crisis. We have to agree as a Committee that there will be times when the court is discussing something that we do not want to have transcribed and put into the public domain. Personally, I thought that Governor Warsh was very convincing in comparing what happens on day one of the Monetary Policy Committee and what can happen at other times—not necessarily all the time—and how a record will be published. The hon. Gentleman will vote one way and I will vote another. I do not agree with the amendment.
Amendment 9 would require representation on the court of particular sectors, and require the Chancellor to have regard for balanced regional and national representation on the court. Obviously, the Bank of England plays a central role in the UK economy, and its policy decisions are vital to everyone in the United Kingdom. I therefore entirely agree with hon. Members about the importance of the Bank of England giving careful consideration to how its policy decisions affect people throughout the country. This is at the heart of the Bank’s mission of promoting the good of the people of the United Kingdom by maintaining monetary and financial stability—indeed, that is precisely what the Bank does.
I will give a few examples. The Bank has representatives around the country; those agents work from 12 agencies, in Scotland, Wales, Northern Ireland and the regions of England, to gather information from businesses operating across many different sectors, including financial and non-financial firms. The regional agents, often joined by the Bank’s governors and members of the policy committees, regularly meet and hold panel discussions with companies of a range of sizes across the UK to gauge economic conditions and inform the Bank’s monetary policy and financial stability work. I trust that all members of the Committee have had an opportunity to observe that activity in their constituencies. If they have not, I strongly recommend that they do so, because those Bank activities are extensive. To give hon. Members an idea of how extensive they are: in 2014-15 the agents visited some 5,200 companies drawn from firms in all sectors and in all corners of the country; also, panel discussions were held with 3,700 businesses. Undoubtedly, the Bank goes to great lengths to ensure that it develops a detailed understanding of the conditions for businesses in all sectors across the whole United Kingdom.
In addition, the Prudential Regulation Authority’s practitioner panel ensures that the interests of those who must put the PRA’s rules into practice are communicated to the regulator. The panel includes representatives of banks, insurers, building societies and credit unions. The Financial Conduct Authority’s consumer panel has a statutory right to make representations to the PRA, and the FCA chief executive sits on the Financial Policy Committee and the PRA board, and will sit on the new Prudential Regulation Committee.
Through this Bill we are going further in ensuring that the regulators take into account the diversity of business models operating in the financial sector. Specifically, we are making it clear that both the PRA and the FCA must take account of the differences between different types of firm, including mutuals, whenever they are discharging their general objectives. We argue that these amendments are unnecessary and, indeed, unhelpful. They would cloud the appointments process.
Harriett Baldwin
I do not think anyone disagrees with the idea that we would want to have a range of different abilities and skills on the court of directors. What we are fighting against in opposing the amendments is the propensity of such amendments to lead to a larger and larger group of individuals on the court. Importantly, in relation to highlighting the potential for conflicts of interest, the conflicts policy now makes it clear that, among other restrictions, members of the court should not accept or retain any interest that is in conflict with membership and should not normally be associated with a PRA or Bank-regulated firm, whether as a director, employee or adviser. That ensures that the wide-ranging expertise—we all agree that that is necessary—appointed to the court can be deployed without obstacles, and leaves the court better equipped to respond to a crisis. The amendment would unravel those arrangements, and I argue that we should oppose it; we should not allow it to take us backwards.
The third and most important concern about the amendments is that they would impose unnecessary and undesirable constraints on appointments to the court. In the past three years, the court has been transformed. The Chancellor has appointed the highest-quality team, with significant experience of running large organisations and deep expertise in matters relevant to the Bank. The Government look far and wide for the best candidates, with roles advertised in the international press. Let me be clear: obviously, there are highly competent and highly qualified individuals who work in the sectors proposed and from all the regions across the UK. The amendments would constrain the appointments process utterly unnecessarily, potentially preventing us from forming the highest-quality, most experienced board for one of the most important institutions in the country.
Harriett Baldwin
Not off the top of my head. I cannot specifically think of anything, other than to highlight the fact, in relation to the previous life of the court, when we were dealing with a much larger organisation, that all the reviews since the financial crash have highlighted the unwieldiness of that organisation and the lack of clarity in terms of conflicts of interest as being among the underlying imperfections in the financial regulation that we inherited in 2010.
John Mann
The decision in Sweden, for example, to move to negative interest rates, the collapse in oil prices, the mistake that the Chancellor made with the timing of the RBS shares sale and the successful prosecution in relation to LIBOR are all issues that have originated within the past three years. Did the court in its wisdom say anything about any of them in giving advice to the Bank?
Harriett Baldwin
As the hon. Gentleman will be aware, a number of different independent reviews have been commissioned by the oversight committee during the past few years. I completely dispute his point about the sale of RBS shares. Given how much lower they are today, I would have thought he would welcome the fact that the Government were able to sell the first £2 billion-worth in the market last August. He and I will clearly vote along different lines on this matter. The Government feel that the amendment would constrain the appointment process, to the detriment of effective decision making in the court and in effect, therefore, to the detriment of the Bank’s overall effectiveness. Undoubtedly the court should have a breadth of experience and knowledge, and we certainly want different perspectives to be brought to bear.
It is also important that the court is able, when necessary, to commission the kind of review about which the hon. Gentleman speaks. There has been the Plenderleith review to increase emergency liquidity assistance capabilities and the Stockton review, which made recommendations on how the Bank communicates its forecasts. We have even spoken this morning about the Warsh review, which has made the very recommendations that we are considering, regarding MPC procedures and the governance of the Bank of England.
The current court contains a remarkable collection of experience and talent. Among the directors are the chief executive of a major telecoms provider.
Richard Burgon
I will be brief, because the Opposition are happy with the proposal to provide for the extension of the term of office of non-executive directors. However, we feel that this is an opportunity to highlight again the important role that non-executive directors can and should play, a point made effectively by my hon. Friend the Member for Bassetlaw in the debate on clause 1. There was a clear suggestion in the other place that the Government believe that a smaller body of non-executive directors on the court would be more efficient, and the Minister has made that clear again. I take this opportunity to reiterate the point that it is necessary to ensure broad representation and the appointment of active and dedicated members. As my hon. Friend has indicated, the world would not come to a stop if there was broader representation, both geographically and in terms of life experience.
John Mann
I warmly welcome—warmly—this clause, as I do the Minister’s confirmation to the hon. Member for East Lothian that the Government have no intention of removing the trade union representative from the court. I warmly welcome that. It is an exceedingly sensible approach that will resonate well beyond this place. This clause should be unanimously adopted.
Harriett Baldwin
Excuse me if I faint from astonishment, Mr Wilson. I do not think that that has ever happened to me before with the hon. Member for Bassetlaw.
Question put and agreed to.
Clause 2 accordingly ordered to stand part of the Bill.
Clause 3
Abolition of Oversight Committee
John Mann
My view is similar to that of the hon. Member for East Lothian, in that I do not object to removing the oversight committee if the functions are effectively outlined. In addition to the example of the stress tests, there are various potential events—some would call them calamities, others opportunities—that would affect the structure and ethos of the Bank of England. They include British exit from the European Union or Scottish independence. They would require the court to act effectively and strategically. If there is a feeling of conflict in direction—direction being what should happen and what people should spend their time on—the ability to draw in external reserves and expertise is key. The power to do that has to be there.
Amendment 12 in particular would be useful to the Government and would complement their approach. I put it to the Minister that it would be helpful, given the direction of travel. I tend to concur with the Treasury Committee’s general view on this point, but only if the court is right and the non-execs have that power. The Treasury Committee, on behalf of Parliament, has made it clear that bringing the non-execs from the court into the Treasury Committee and having that dialogue in public and producing transcripts of it, which has not happened in the past, will be an important feature in the future.
Harriett Baldwin
The line-by-line consideration of this provision in the other place and here this morning has been extremely helpful. Before I speak to the amendments, let me give the Committee an example of the problems in the oversight committee’s current arrangements which I think will inform our debate. The hon. Member for Bassetlaw mentioned the 2013-14 foreign exchange market investigation, which sought to establish whether any Bank officials were involved in or aware of the FX market manipulation. In October 2013, the Bank’s governors initiated an extensive internal review, and they regularly briefed the court at its meetings from November 2013 onwards. In March 2014, it became clear that an independent investigation would be appropriate. The oversight committee took over the investigation and appointed Lord Grabiner QC. That is a very good example of the oversight functions. In practice, the executive needed to join the oversight committee discussions for the oversight functions to work and be effective, both as the investigation progressed and once attention turned to delivering the recommendations. It would be better practice to make the oversight functions the responsibility of the whole court. That is the purpose of the clause.
I welcome the opportunity to speak to the amendments and to explain the improvement in the oversight arrangements at the Bank of England and the power we have ensured for the court’s non-executive majority. The Bill brings the court closer to the model envisaged by the Treasury Committee, which called for a board with powers to conduct ex-post reviews of the performance of the Bank; for board members to be authorised to see all the papers submitted to the Monetary Policy Committee and the Financial Policy Committee; and for the board to be responsible for reviewing the processes of the Bank’s policy committees. Making the oversight functions the responsibility of the whole court makes it clear that every member of the court, executive and non-executive, can be held to account for the use of these functions. No member of court can claim that the oversight functions were not their job, since they will now rightly be the responsibility of all.
That replaces the current arrangement in which there is effectively an oversight committee overseeing the work of an oversight board. That is neither efficient, nor best practice. In fact, on Second Reading my right hon. Friend the Member for Chichester (Mr Tyrie), Chair of the Treasury Committee, put it well when he said:
“The oversight of the executive will be the responsibility of the court itself, rather than a sub-committee. Even though it was not called a sub-committee, it was, in fact, a sub-committee, and a weaker committee than the court.”—[Official Report, 1 February 2016; Vol. 605, c. 668.]
During the Bill’s passage through the House of Lords, we introduced the power, which has been welcomed by members of that House, that this amendment seeks to alter. This part of the Bill ensures that a majority of non-executives can always initiate performance reviews without needing to secure the agreement of a majority of the whole court. If just four non-executive directors want a review, they will be able to initiate it. Under our proposal to give more powers to the non-executive directors to do their job effectively, the initiators of a review would determine who should carry it out. This could be someone external or someone internal, including the Bank’s relatively new Independent Evaluation Office. The amendment would take away their discretion and make the new Independent Evaluation Office irrelevant.
The Bank’s Independent Evaluation Office reports directly to the non-executive chair of court. A few months ago, it published a review into the Bank’s use of forecasting—a clear example of where an internal review is appropriate. In our opinion, Lord Grabiner’s inquiry into Bank officials’ awareness of market manipulation in the foreign exchange market was an example of where an external review was appropriate.
The Bank’s non-executive directors, as we have heard in a previous debate, are selected for their ability to bring new perspectives and experience and to challenge and scrutinise the Bank’s executive. It is right to give them the powers to ensure they are able to fulfil this role. The amendment would send a message that we do not trust the non-executive directors to do their job. For the discretion of those high-quality non-executives to determine what reviews should be carried out and who should carry them out, it would substitute a conveyor belt of external reviews.
Those commissioning a review, whether the court as a whole or the non-executive directors, are best placed to decide whether an internal or external review is most appropriate. The Bill rightly allows that discretion for the whole court and for the non-executives. The amendment would take away that choice, which we think would be bad news for effective oversight. I hope the hon. Member for Leeds East has listened to the arguments. We all agree that the important power in the Bill for the non-executives to act independently to initiate reviews of the banks should not be constrained in this way, and I hope that after due consideration, and after the extremely valuable debate in both Houses, he will withdraw his amendment.
Richard Burgon
In the debates on the clause both on Second Reading and in Committee in the Lords, it was argued that it should not simply confer on the Bank the power to set the financial stability strategy. The original proposal was vague, but although it was subsequently clarified by the Government amendment that conferred the power on the court of directors, the Opposition are not convinced that that is sufficient.
The impact assessment says:
“At present, the Bank’s financial stability strategy is set by the Court after consultation with the FPC…and HMT.”
It goes on to say that making the Bank responsible for setting the strategy and allowing the court to delegate its production within the Bank will ensure that the court is responsible for the running of the Bank and the Bank’s policy committees are responsible for making policy. The clause does not make it clear exactly what the financial stability strategy is supposed to be. All it does is create a power and impose the responsibility to create such a strategy relating to systemic risk in the UK financial system.
I shall repeat a concern raised by my colleague Lord Tunnicliffe regarding the financial stability strategy, because the response in the other place was not sufficient. Lord Tunnicliffe highlighted how a five-page strategy document was produced in 2013; it was then revised and published in the 2014-15 report, wherein it had been reduced to one column. In the Bank’s 2015-16 report, there was no mention of a financial stability strategy in the court’s ownership. Will the Minister confirm the importance of the financial stability strategy? It should be clear who is responsible for such a strategy.
Clause 5 creates a problem. A future financial stability strategy will emerge from somewhere within the Bank of England. It would be preferable if the people who are to be directly responsible for its production were identified in the Bill, rather than responsibility being conferred on the court with powers to delegate elsewhere. It would make most sense if the people made responsible for producing the strategy were the members of the Financial Policy Committee, as we have set out in new clause 6, which we will discuss later.
John Mann
The debate on the clause is very important, because the little-discussed danger is that we are creating an all-powerful Governor who determines, in his or her ultimate wisdom, a financial stability strategy for the country—as if everything will then be fine.
The current Governor obviously has a bit more time on his hands because interest rates have not risen since 2009. The MPC, with its monthly meetings having gone down to eight a year, has not had a great deal to do other than maintain the status quo. In some ways, that is precisely the problem that was there previously. Before the 2008 crisis the Governor was responsive—looking at things, making speeches about what had happened in the past month or two and trying to tweak the system—and examination of the underlying problems in the system, in the sector and on occasion in the economy as well simply did not happen. The danger is that we again become complacent about such things. That is precisely why the Treasury Committee was keen to see an enhanced and powerful court of directors taking responsibility. It would be useful to have a clear statement from the Minister, endorsed by Parliament, that the model being created is not that of the all-powerful Governor, and nor is it one that we expect to see in future.
The Treasury Committee is a wonderful body, with great membership over the years and reasonable membership even to this day, but a clear message about what is expected of it by Parliament would be valuable: the Committee, on behalf of Parliament, is expected to hold the court to account properly and effectively. That has not been the case over the past decade. The chair of court has appeared, but the non-execs have been invisible. With the court having a more important role, it is critical that the Treasury Committee be given a clear indication by Parliament that it is expected to give a reasonable amount of its time to holding the court to account publicly for the new powers, whether the Committee likes it or not, or does it joyously or reluctantly.
It will be useful to hear from the Minister about those two points, so that we get her views on the record.
George Kerevan
In itself, the clause is innocuous. It is a tidying-up operation, but lurking beneath it is a danger. Standing back from the restructuring of the policy committees of the Bank, we appear to be ending up with an exercise in bureaucratic symmetry—a committee to do this and a committee to do that, micro, macro, prudential or supervision, and the Monetary Policy Committee. The different committees are not supposed to talk to each other, doing discrete policy. That looks all right—someone is doing it—but what we are in fact ending up with is what I want to underline to the Minister and, through her, to the Treasury team.
The danger is that in creating bureaucratic symmetry, we have not got very far in creating a workable regulatory regime that is robust enough to meet the next crisis. One of the problems is that we are creating a silo for fiscal stability—basically, checking when a bubble arises and stopping it—and a silo for monetary policy, but the two are not talking to each other, so we are in danger of creating conflicts between the two main policy committees.
It is perfectly possible for the Monetary Policy Committee to go in a separate direction. At the moment it is refusing to raise interest rates, but that is leading to the committee in charge of fiscal policy and financial stability starting to discuss whether it should use its financial buffers to slow down a bubble in the housing market. It is possible, but a bit crazy, for the two different committees to take two different stances when the whole point of putting financial stability and monetary policy under the same roof—the Bank—was meant to be a co-ordinated policy.
Assigning responsibility for financial stability to the Financial Policy Committee does not get us off the hook of someone somewhere laying down broad policy objectives. The MPC has broad monetary policy objectives—I think that in the present climate of deflation, they are probably the wrong ones—but the FPC has very vague guidelines as to what it should be doing, and so suddenly we discover, in default, that the only person in the land who is actually overseeing all the different policy options is the Governor himself, and he is not even getting clear enough direction from the Treasury. By all means support clause 5 as a tidying-up operation, but it still leaves big holes in terms of who is actually laying down the major policy directions for the committee.
John Mann
The shadow Minister is such a moderate these days. I am feeling nervous, because new clause 6 is an excellent amendment that I wholeheartedly endorse. If we look at the FPC’s membership, they have huge experience of being in companies that have not paid a great deal of tax in the United Kingdom, so some expertise is brought to bear. The multinational structure of the UK economy, lauded as being the most open in the world, is also a potential systemic risk. The tax avoidance scandal demonstrates the scale of that potential systemic risk, not only in terms of the amount of money we are not getting in—that is an ongoing problem—but in terms of the structure of our economy.
For example, if some of the commentators are right about the response of capital to a British exit from the European Union, and if that coincided with a collapse in the euro, our economy would be vulnerable. The FPC needs the ability to work through the scenarios and the options and to see whether our structures are sufficiently good—I put it to the Minister that they are not and that we remain hugely vulnerable. That is one reason.
The second reason is that our housing market has a perverse structure that is worse than that of any other advanced economy. We have an absurdity that we have not been able to deal with, whereby there is huge housing price inflation in London and the south-east, yet the vast majority of houses we are building are in areas such as mine. They take a long time to sell because there is not a huge amount of demand for that new housing, but there is plenty of land and plenty of people willing to build housing, especially if the Government subsidise it. The Government are pressing for more and more housing, yet at the same time they face a systemic risk in the housing market. That is not a problem created by this Government; it goes back several generations. If the housing bubble were to burst in a range of different ways, that would be a fundamental problem.
The third systemic risk, which we saw in 2008, is the level of indebtedness. It was the American sub-prime market that led to the chain of events that caused the world financial crisis, not a specific collapse in this country, but we are hugely vulnerable. We, as a nation, are far too indebted. What is different now from any time in our history for both the corporate sector and individual households is that interest rates are at a record low. There is therefore a whole generation of people—two generations, in effect—whose expectations and economic behaviour is predicated on permanent low interest rates.
Commentators machinate—the Treasury Committee machinates at great length—about whether there will be a 0.25% increase in interest rates, yet we only need to go back 25 years and they were at 15%. That is part of the systemic risk. We therefore do not want to rely on the same old commentators—the OECD or the IMF—who got it wrong before 2008 and are using the same old paradigms.
The FPC should do precisely what the new clause suggests: ensure robustness in the British system. In a sense, that is the point of the FPC; otherwise, it has no point at all. What is proposed in the new clause is exactly what is needed. Indeed, we probably need more than that, but it is a good start. It will get minds concentrated on the scenarios and the options and, critically, whether the financial culture in this country’s businesses and households is sufficiently understanding to deal with the shock to the system that could come and which, by definition, will be outside our national control. That seems to be the point.
I will end on this point. It is quite a feasible scenario that at 7 o’clock in the evening of 12 March, after the German regional elections, the German media will be announcing the end of Chancellor Merkel. It is also a feasible scenario that the main opposition party—Labour’s sister party, the Social Democratic party—will come an unprecedented fourth. It is being seen as the most significant political day in 50 years in Germany, and it will have a huge immediate impact on the euro and the stability of the eurozone. We do not have an approach to dealing with that, because we presume that such major shocks to the system are not going to come. That is precisely the point of having the FPC and that is why the new clause is such a good one. We ought to be robust.
Bank of England and Financial Services Bill [Lords]
Lord Mann Excerpts(8 years, 9 months ago)
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John Mann (Bassetlaw) (Lab)
I shall stick to your request that we keep to 10 minutes, Madam Deputy Speaker, not least because I hope to catch your eye in the second debate. I will therefore not speak about the FCA now, although it would be relevant.
I reiterate what can now be called the East Lothian question: if the ship goes down, should the captain not go down with it? I thank the constituent of mine who last night sent me the link to the footage of the session of the Treasury Committee in 2009 at which a Mr Andy Hornby and Mr Fred Goodwin gave evidence. Nothing could encapsulate the East Lothian question more profoundly than that hearing, their performance and their escape from real responsibility for their failures in office. The reverse burden of proof change and the dropping of the FCA’s culture review are two sides of the same coin.
The Chancellor’s actions are consistent with what he has done and said in the past. The House should remember that, speaking about regulation in 2007, one year before the crisis, he cited Ireland as an example of why there should be less regulation and greater deregulation of precisely the authorities we are talking about now. We saw in Ireland what would have happened here had we followed his advice, but we are a much bigger economy, so it would have been far worse for our people. History is not repeating itself; ideology is repeating itself.
I note some interesting clauses in the Bill. It is hard to disagree with the reduction in the number of MPC meetings from 12 to eight. There have been more than 80 since the last decision to change anything. One can begin to question, therefore, not whether there is group-think, but whether that body needs to put quite as much effort, month after month, year after year, into making no decision at all, and whether we need to put quite as much effort into scrutinising, month in, month out, its inability or unwillingness to make a decision—or perhaps even its correctness in making no decision. It shows how we are missing the point.
Some bigger things are not in the Bill. Transparency is missing at every level in the Bill. When it comes to it, there is no transparency. Minor improvements are proposed, but the workings of the Bank of England and the financial sector and its regulation remain in great secrecy. That is a fundamental problem.
In the past, I have proposed that there should be differential risk, particularly in retail banking. If I wish to speculate my money away with an Icelandic bank, the bookies or anybody else, I should be allowed and not be stopped from doing so, but I should not expect the taxpayer to pick up the tab if things go wrong. We have the principle with premium bonds, but we have not expanded that into the mutual sector, for example. There should undoubtedly be a lower interest rate. There should be absolute guarantees. We have failed to look at differentiating the risk for the consumer. That will come back to haunt us.
Lip service is paid to competition, with the Chancellor and the Treasury wanting again to dominate the FCA. Under clause 18, they want to be able to tell the FCA what it should be doing. What is missing from the bigger picture is competition. There are competition objectives, but it is the same old banks. In fact, it is far worse, as it is not just the same old banks—the building society sector has largely disappeared from the retail sector compared with 10, 20 or 30 years ago. I am certain that, if the old-style Halifax building society were resurrected, many of my constituents would wish to put their money there, as I did all my life, and as my mother, all my family and many people in the north did.
Mark Field
Is the hon. Gentleman able to answer my earlier point? If we have ever-more rigorous regulation and ever-more onerous compliance, with even the new challenger banks having to pay a large bank levy immediately, will that not provide a massive disincentive to the sort of competition that many want to see in the banking system? I am not saying it is an easy issue to resolve. We all want competition, but how will that happen in the banking sector if it is so heavily regulated—now and in the future?
John Mann
I have said many times in the past and repeat it briefly now that there should be a differential in the risk for retail banking.
We know what is going on here. The Chancellor has a problem—his accounts do not add up. I confidently predict that he will not get the surpluses he wants, as we will find out with the OBR report at the time of the Budget. He is therefore desperate to sell off the shares in Lloyds and RBS. That is what is going on. That is why all this is happening. That is why he wants a new settlement with the banks. He wants to maximise the price in order to create the surplus that he has created in his head and in his Budget for all of us. That is what is going on politically.
John Mann
I shall end now; there is plenty of opportunity to join the debate.
We have heard about Google in the past week, but we have not heard enough about the bank take. We keep being told that the banks are the engine of the British economy. Well, they are certainly not the engine of tax receipts because most of them are not paying tax. We see that with the overseas banks. We know that seven out of the biggest 10 investment and commercial banks are paying zero tax. We see Lloyds paying zero UK corporation tax. We see Citigroup paying zero UK corporation tax and Credit Suisse paying zero. We see HSBC paying £160 million out of its £11.3 billion worldwide profits. That is all the tax they are paying. Perhaps the example that sums up the problem the most is Goldman Sachs, which generated £2 billion in UK profits last year, but what tax has it paid on that? It is less than it pays to the individual partners—so less to the state and the Exchequer for the defence of the realm, the health service, broadband, the infrastructure, education and the welfare state. It paid less than it paid to one individual—a measly £27 million.
That is not good enough. That is what this Bill is missing. I look forward to contributing further.
Financial Conduct Authority
Lord Mann Excerpts(8 years, 9 months ago)
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John Mann (Bassetlaw) (Lab)
My constituent, Steven Jones, is a successful entrepreneur and businessman in my area, who was advised about and then sold an interest rate hedging product by RBS in 2009. RBS’s own investigation showed that the cost of the swap was never mentioned at all, but instead a series of emails showed that a section of RBS was desperately keen for such products to be sold.
The evidence of mis-selling is provided by RBS and is done so without ambiguity. However, the FCA system allows RBS and other banks to run their own systems of redress. Mr Jones has lost a significant amount of money through no fault of his own. He was mis-sold and misled on the product and the RBS documents, explicitly annotated, show that that was the case. He is left only with the choice of going to court against a Government-owned major bank, something that in itself would be financially extremely difficult to do. That highlights and strengthens the case made by the hon. Member for Aberconwy (Guto Bebb). There are many such people: individual entrepreneurs who have not been dealt with properly because of the rules brought in by the FCA.
Let me highlight a second case in an entirely new area, which was brought to me by Helen Scott of Eris FX. When people buy a property or car abroad, payment will be needed in the national currency where the purchase is legally taking place. This means people will need to access the Forex markets. Generally, they cannot do that themselves and need to use a broker. This market is estimated to be worth £60 billion a year. Some of the biggest specialist brokers are methodically misleading consumers with currency converters in their adverts and on their websites, which supply a rate that will not actually be offered.
Ms Scott complained to the FCA, which refused to act. She also took the case to the Advertising Standards Authority, which, on 17 September, judged in her favour that the action was non-compliant with the Consumer Protection from Unfair Trading Regulations 2008. Those are precisely the regulations given to this sector by the Department for Business, Innovation and Skills in September 2012. This means that the companies have been non-compliant with the Committee of Advertising Practice code and, by definition, that is a condition of their authorisation by the FCA under the payment services directive 2009. Game, set and match, we might think. However, provided with all the evidence by the ASA that the companies are in breach of its rules and advised that it must act, the FCA says, “It is nothing whatever to do with us.” It has knowingly failed Ms Scott and many others who are being unfairly kept out of business, and consumers who are going for a rate that has been advertised in a misleading fashion and that they will never get. There is a lack of consumer choice and those entrepreneurial businesses that could be competitive cannot expand, but the regulator—this is in the last three months—has refused to even look at the cases.
This is more than a passing problem. The FCA ought to be strengthened, but it would appear that it is being weakened. With its culture reviewed, dissipated and destroyed, it is being neutered. Two Treasury officials and two Treasury appointees decided on the appointment of the new chief executive. Everything is about “prudential risk” according to the Bank of England and the Treasury, so much so that the head of the Prudential Regulation Authority has now been appointed the head of the FCA. The consumer champions in the FCA have been systematically removed over the past four months, leaving none in place. One can only conclude that the rights of the individual, the rights of the entrepreneur and the rights of the consumer are being subsumed to the big brother of the Bank of England and the Treasury. This leads to a question: are the Government Members here listening to the debate really going to be on the side of big brother doing down the entrepreneur, doing down the individual and doing down the consumer, or will they be on the consumers’ side? Big brother is taking over.
The two examples I gave highlight the depth of the problem. These are entrepreneurs seeking to make money legitimately by widening competition and wanting to give the consumer choice: in one case, wishing to borrow money to expand the business in my constituency; in the other case, wishing to allow people who want to buy property or to make other purchases abroad, the ability to obtain a competitive rate of exchange. In a competitive economy, that ought to be what we and those on the Government Benches cherish, nourish and enthusiastically endorse, yet we have a Chancellor of the Exchequer, with his Treasury big brothers around him, and the old lady of Threadneedle Street treating the FCA like an uncle who is hidden away except when he is wheeled out at Christmas and family events. Consumer rights are being ripped away. This House should be standing up for the individual. This House should be standing up for competition. This House should be standing up against big brother. This House should be standing on the side of the entrepreneur. That is what this debate is about. I salute the hon. Member for Aberconwy for bringing it. I hope the House will endorse what he and I, and others, are saying.
Charter for Budget Responsibility
Lord Mann Excerpts(9 years, 1 month ago)
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Mr Osborne
I was about to pick up on the point that the hon. Member for Bolsover (Mr Skinner) just made, which is that the hon. Gentleman has shifted his position in the last few days. The former shadow Chancellor was telling us that the position adopted by the Labour party on this charter sends the wrong message to the general public, and in the brief period when he was shadow Chancellor he argued from this Dispatch Box that we should run a surplus. At the time I think he was trying to make the argument that the people who suffer most when Governments lose control of the public finances are precisely the most vulnerable in society and those who lose their jobs or get cast out of work. It is not trade union barons who lose their jobs when the economy fails; it is the poorest, not the richest in society who pay the price, and the most progressive thing that a Government can do is to run a sound fiscal policy and provide financial stability to the working people of this country. That is what we are debating.
What are the objections to our approach? There are those who say—including in the last couple of days—that the economy is not strong enough and that we need more growth before we cut the deficit. That advice on growth and the deficit normally comes from those who gave us the greatest recession and the largest deficit in our modern history, but let us put that aside for a moment. The British economy has been pretty much the fastest growing of any major advanced economy in the world, this year, last year and the year before.
We have had the latest jobs numbers today and they show we have more people in work than at any point in the history of this country—the highest employment rate in the history of this country. Unemployment is down 79,000, full-time work is up and, while inflation is falling, pay is now rising strongly at 3% a year. This is the strong economy that the British people have built with their hard work and sacrifice. If this is not the time to be reducing your deficit and your debt, when is? We are aiming for a budget surplus in 2019, because if we are not running a surplus nine years or more after the end of the recession, when the economy has been growing for these nine years, when will we ever run a surplus? The real answer from people who oppose this charter is never. Speaking of which, we turn to the hon. Member for Bassetlaw (John Mann).
John Mann (Bassetlaw) (Lab)
When the Labour Members of the Treasury Committee rightly identified this proposal as a gimmick in the Treasury Committee hearings in July, did the Governor of the Bank of England, or any of the other eminent economic brains we questioned, give a single word of defence for this political gimmick?
Mr Osborne
It is not a political gimmick to have sound public finances. What is a political gimmick is coming out on the eve of your conference with some policy that says you support what we are doing, and then two weeks later turning up in the House of Commons and voting against it. Indeed, the hon. Member for Bassetlaw has described the policy of the Labour party as “a huge joke”.
John Mann (Bassetlaw) (Lab)
There is a saying in literature that normal is as narrow as the street that you live in. The Chancellor lives in a little gated community—a cul-de-sac with perhaps a problem neighbour next door. The constraint on his economic plans is the backdrop to the decision tonight on whether to have this charter. Yet he cannot cite anyone supporting the charter other than those who are sitting behind him. Our friends in the CBI are not supporting his charter. The City of London is not supporting his charter. The Governor of the Bank of England was not prepared, in the Treasury Committee, to support his charter. Indeed, all the economic experts who came before the Treasury Committee when we looked at this in some depth in July did not at any stage choose to support his charter.
John Mann
There is not enough time to give way.
Indeed, the Chancellor’s own Conservative colleagues in the Treasury Committee, who are somewhat absent tonight, were reluctant to speak out in favour of his charter. The reason is that it is a political gimmick. It has no necessity other than politics. That is why he has no support anywhere in business or the City for it. Churchill said, “Don’t strive to be ‘normal’.” The Chancellor should heed Churchill’s advice, because “normal times” is the sting in the tail that makes the charter so pernicious. What has happened since Churchill? It is interesting. There has been a bigger percentage of budget surpluses under Labour Governments since Churchill was Prime Minister than under Conservative Governments.
Far be it from me to cite Margaret Thatcher as a source on this, but Margaret Thatcher, in all but one of her years, ran a budget deficit. Conservative Governments have usually run budget deficits more than Labour Governments. The Chancellor, every single year, has run a budget deficit—a record £505 billion since he came in. Yet he wishes to give us this lock-in that is purely a trap to try to entice the Labour party into stupidity.
This is Parliament, and in Parliament we vote on legislation. There is plenty of space for political games and political tricks outside, but not in here when we vote on legislation. That is precisely why everybody in the House should vote against it. There are vital economic debates on what the Budget should be—whether there should be cuts, how cuts should be made and what taxation should be, on all of which there are critical and different views—but this is a trick and a gimmick. It is something that our friends in business, our friends in the City and our friends as economists have refused to back. I therefore look forward to Conservative Members also opposing this political gimmickry.
The Economy
Lord Mann Excerpts(9 years, 5 months ago)
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Chris Leslie
Of course competition is essential, but so are important public services that support businesses and enable them to optimise the outputs from the inputs to the production process. That is the crucial point that we have to focus on.
John Mann (Bassetlaw) (Lab)
Does my hon. Friend agree that one of the issues with productivity is that we have become obsessed with mergers and acquisitions for short-term profitability, rather than allowing industry to invest for the longer term as economies such as Germany have been doing?
Chris Leslie
Long-term investment, especially production process technology and business investment, is crucial, which is why the stop-start approach of recent years from the Treasury has seen us underperform in business investment into the productive economy. It is essential.
Oral Answers to Questions
Lord Mann Excerpts(11 years ago)
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Mr Osborne
If we are able to freeze petrol prices for the rest of this Parliament, the price will 20p a litre lower than it would have been if we had stuck with the plans that the shadow Chancellor advocated at the last general election. That would mean, as my hon. Friend the Economic Secretary was just reminding us, a saving of over £10 every time people filled up their average car. That is what this Government are doing; by fixing the public finances, we are able to help people.
John Mann (Bassetlaw) (Lab)
When the Chancellor became Chancellor, unleaded petrol was £1.19 a litre. Can he tell us how much it is today?
Mr Osborne
It depends, of course, where you buy it. The last price I saw at a petrol station was around £1.35, but it would have been 20p higher if we had stuck with the last Government’s plans—the hon. Gentleman voted for them—in the last Labour Budget. That is the truth, and it is because we are fixing the public finances and fixing the economy that we can avoid these disastrous Labour tax rises.
Financial Services (Banking Reform) Bill
Lord Mann Excerpts(11 years, 4 months ago)
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John Mann (Bassetlaw) (Lab)
A vast amount of hard work has been diligently done for such a puny and inadequate set of proposals. Where does it leave us, if we look at the big picture? There is a debate about the Government’s failure to electrify the ring fence, although as I recall, the financial crisis started with Northern Rock and Lehman Brothers, where the ring fence would have made no difference whatever. What are we trying to address?
We have two banks in state ownership that are still in crisis. Clearly, the Government have no idea what to do with RBS, from who is running it and the Government’s cack-handed handling of Mr Hester’s departure, to what its role should be. Should RBS exist? Should it be broken up? How should it be broken up? Can it be broken up? How could competition emanate from breaking it up? We hear the word competition all the time. I was a signatory to the extremely modest bank account portability amendment that, rightly, was tabled. The structure of banking, however, remains pretty much as was. There is significantly less competition than there was 10 years ago. Building societies have been consolidated and about a third have vanished.
Where is the international level? This was not a British crisis, but today, as a consequence of the British LIBOR scandal, we have lost out to New York, which has played its political hand far more astutely than the Government and has grabbed business from this country. Frankfurt and Paris will be lining up to do the same. We are dealing with international banks, and the Government’s insular look at what should be done, presuming that British solutions will add to British competition, is a misnomer. We face problems with transparency in the UK dependencies, which, unlike any other country, we can influence. They remain totally opaque, specifically in relation to banking and subsidiaries—there is nothing there. On international banking agreements, the Government are hiding even from the modest proposals emanating from Brussels, of all places. This is not going to solve our problems. Competition has not moved forward, and there is no evidence that it will. The Government have an aspiration, but no strategy, for competition, so we remain with none. The problem of oligarchies running investment banking worldwide has not changed either; it remains as was—a fundamental weakness in the banking stranglehold over the rest of the economy—and totally unaddressed.
The fundamental issue that some posed at the beginning will remain the Achilles heel of all politicians and whoever is in government in this country from now on: if there is a further banking crisis and individuals—known as voters—are in a panic over their savings, there is no politician in any Government who would not bail out those accounts. No Government, whatever their colour, whatever the economic situation, would survive grabbing the electorate’s savings.
Most fundamentally, we have failed to create a concept of tiered risk for consumers to give them a choice. It has worked before. The classic example is a simple one, but a real one: the premium bond. When the premium bond was introduced, people knew that it was totally guaranteed; they knew it was not the best way of investing, but they bought them because they were absolutely guaranteed. We do not do that with our savings now. We have not created the options that would let our constituents say, “We’ll put X amount in here, knowing we’ll get a lower return than elsewhere, because the Government will give an absolute guarantee. And we can put Y amount in a middle-risk option, where there are some guarantees to certain levels, and we’ll put Z amount into something with great returns, but explicitly no Government guarantee.”
Our failure to create those options has created a fundamental weakness. I would not even describe that as radical; I would call it a rather conservative, with a small c, and moderate proposal, giving choice, creating markets and trusting people. We have not done that. At some stage, a future Government—not this one or the next one, I hope, or one in our lifetime—will face the dilemma again and will be forced to bail out a bank. There is the danger, however, that it might come more suddenly than that.
David Rutley
Does the hon. Gentleman not recognise that there are options for fully guaranteed savings with National Savings & Investment as well as the £85,000 protection? There are those opportunities for people.
John Mann
I sit on the Treasury Select Committee; the hon. Gentleman served on it, so we have a modicum more information on these matters, as do other hon. Members, than our constituents. Nothing has changed for them, however. Fundamentally, there has been no segmentation of the market, which is why the new challenger banks are getting no further. Only a tiny, tiny proportion of business is going to them. We have not restructured, even though in RBS and Lloyds TSB we have the perfect opportunity, owing to the crisis, to restructure. Across the world, we see vast numbers of people suffering and Governments of every political persuasion being voted out because of the financial crisis and the decisions they have made. This Government might face the same dilemma. I am not commenting on whether the decisions on the deficit and debt are right or wrong economically, politically or socially—that is a critical debate, but it is a different debate—but the fact that we are in this situation and we are not addressing it for the future in anything but the most micro-management way is part of that weakness.
The Government might want to give themselves plaudits and say, “Well, perhaps we’re doing a little better than the Government of Greece or Spain,” or whichever Government it is. The Americans can slap themselves on the back and say, “Unlike the Brits, we’ve got our act together. We’ve targeted their banks. We’ve portrayed them as the wrongdoers. We’ve managed to shift some of the powers to ourselves,” which is precisely what is going on among the political, banking and business classes in Washington and New York. They are winning that battle.
I will end on this point. This is a world crisis. My research document proves that every one of the top 50 banks in the world, without exception, have been involved in criminality in recent times. That is staggering for any industry. For us to hold that industry together with sticking tape, not even with the most damaged and shattered elements, including those that have had to be nationalised, such as Lloyds TSB—
Mr Deputy Speaker (Mr Lindsay Hoyle)
Order. Mr Mann, your time is up—that is the story of your life at the moment.
Corporate Structures and Financial Crime
Lord Mann Excerpts(11 years, 4 months ago)
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John Mann (Bassetlaw) (Lab)
I beg to move,
That this House has considered the use of corporate structures in the UK and money laundering, tax evasion and other financial crime.
It gives me pleasure to introduce the debate and to thank the many Members from all parties who proposed it to the Backbench Business Committee, which we also thank for granting us the time for it. Perhaps in anticipation of it, earlier this week the Financial Conduct Authority made by far its strongest ever comment, including those of its predecessor organisation the Financial Services Authority, about the banks and so on. As a relevant introduction to the debate, let me quote Tracey McDermott, head of enforcement at the FSA, who this week said that banks’ trade finance businesses
“remained particularly vulnerable to abuse by criminals and terrorists, and that in some cases the shipments being funded by lenders were just ‘fresh air’.”
Martin Wheatley, the new chief executive of the FCA, warned that organised criminal gangs “filtered, cleaned and rebottled” £10 billion in the UK every year using banks and other financial services.
John Mann
I will finish my introduction first, because banks are just one aspect of the problem and I want to focus on all aspects in my brief comments.
The problem is that we have opaque structures that mean that people can avoid tax and participate in illegal activities such as smuggling and money laundering. The amount of unregistered money involved is estimated by some analysts worldwide as being in excess of £20 trillion. A third of that is estimated to be directly linked with the European Union, and a third with UK Crown dependencies.
I will illustrate how the problem works. An individual sets up a firm in a country that keeps the names of directors a secret, then links that firm with another firm in a respectable place such as the United Kingdom, where the details of who owns a company do not have to be registered if it is owned by another company. They then set up nominees to be directors of the opaque firm, register with the corporate registry in the initial country, open a bank account for the original firm and funnel money through the firm in the legitimate area to the original firm in the opaque country.
There are many examples of that, and all areas of our national life, such as football, now seem to be covered by such structures. Whether it is illegal or legal, it is a major problem for transparency. We as legislators should be particularly concerned about any illegal aspects, and the banks have been at the forefront of those, as we have seen with the problems of money laundering. HSBC funded Iran with transactions involving £19.4 billion through shell companies over seven years, through the Channel Islands and the Cayman Islands. That broke sanctions but was incredibly hard to trace, because it happened through opaque shell companies
In the case of crime, in one year alone the same company funnelled £7 billion through the Mexican Zetas drug cartel, the biggest and most violent criminal agency anywhere in the world. Again, it did so through shell operations. Various mafias have also been involved.
The BBC’s “Panorama” exposed rather efficiently a woman called Lana Zamba, a Russian-born Cypriot yoga teacher, who was the director of a firm called Nomirex and 23 other UK-based firms. Records showed that those firms were inactive between 2007 and 2009, but “Panorama” demonstrated that £350 million had passed through them in that time.
Mr Pat McFadden (Wolverhampton South East) (Lab)
I thank my hon. Friend for his energy in securing today’s debate. In the cases he outlines, does he agree that the complexity of modern global banking should not be used as an excuse for ignorance by those charged with the stewardship of the banks, and that we should put in place regulatory—and if necessary criminal—sanctions to ensure that responsibility cannot be evaded on the basis of professed ignorance? Responsibility for running large global complex organisations must be taken by those in charge.
John Mann
My right hon. Friend makes a valid and relevant point about criminal sanctions. The banks’ uniqueness is that they are the channel for funds. Because things are recorded in this technological age, it is straightforward for banks to investigate themselves and see what is going on, so the plea of ignorance by those at the top is inexcusable.
What my right hon. Friend and I are saying, and what I interpret the Financial Services Authority to be saying, is that responsibility must be taken at the top. Pleading ignorance is simply not good enough. We are talking not about small, missed operations but about huge major operations that funnel vast amounts of money. It is easy for banks to identify and track such operations, yet they choose not to do so. There seems to be a particular problem of huge reputational risk to the City of London because banks based in the UK have been those most often caught out. However, I have produced a document that demonstrates that this is not simply a UK problem. In recent years, every one of the top 50 banks in the world has had this problem and experienced prosecutions or ongoing investigations into prosecutions.
Tessa Munt (Wells) (LD)
I thank the hon. Gentleman for securing a debate on this subject. Does he agree that a board member should be made explicitly responsibly for each bank’s compliance? Anti-money laundering and due diligence provisions should be used effectively by the authorities to apply existing rules and ensure that people even go to jail if they have committed such crimes.
John Mann
The hon. Lady makes a valuable point about the importance of compliance and how that must take place at senior level. Everyone at senior level in a bank must take responsibility and be held accountable for the structures within it.
This is not simply a banking problem. Money laundering and some aspects of criminality are the biggest problems in terms of the volume of money involved, but there is also an issue of percentages and actuality of individual companies. Banks are not setting up opaque structures to create criminality; they are turning a blind eye while their structures facilitate criminality. Others are using weaknesses in corporate structure to create criminality.
Of the half a million companies that struck themselves off the UK corporate register in 2010, 40% had never filled in accounts with Companies House, and 33% had paid no corporation tax that year. If large numbers of companies are not submitting accounts and returns to Companies House, we have a fundamental problem. Our problem in dealing with this issue is demonstrated, rather ironically, if we look at the two Front Benches. The hon. Members present are excellently and diligently representing their parties, but one notes that they come from different Departments. That is part of the problem when it comes to Companies House, and I hope the Minister will clarify—we hope on behalf of the Government —who is responsible for Companies House and who should be holding it to account in Parliament.
Companies House is underfunded, under-resourced and perhaps under-specialised, and such opaqueness in our country has grown dramatically, allowing the creation of opaque corporate entities. That encourages criminality and discourages transparency for the general public, decision makers in Parliament and others.
On the impact of such actions, valid estimates indicate that Africa is losing twice as much in tax it cannot collect because of opaque corporate structures as it gets in development aid. In other words, if we cracked this problem, the amount of development aid required from the west to Africa would diminish dramatically because the tax base itself would be generating income, which is, of course, a key component of a vibrant democracy.
Mr Jim Cunningham (Coventry South) (Lab)
I have never understood why successive British Governments have not tightened up in this area. I understand that there needs to be international agreement, but at least in America there would be some accountability; we only have to look at Lehman Brothers and others to see that. I do not understand why we allow tax havens not too far from these shores to exist.
John Mann
Let me come on to that. In Davos in 2010, the Prime Minister said that he wished to “shine a light” on corporate ownership. In the Lough Erne declaration, the calls were for more transparency, more international co-operation and stopping firms shifting profits to avoid tax.
What needs to be done by Government in these areas? On transparency, it is essential that the Government follow up their G8 commitment and create a UK register of beneficial owners, making things transparent and traceable and deterring people from using this country for illegal purposes. All major countries—not least those in the G8 and the EU—need to collaborate. I note that Italy is already suggesting that it will not collaborate, and we need to tackle those countries that are suggesting that they will not co-operate even with the modest proposals emanating from the G8.
We need effective enforcement with, as we have heard, clear sanctions for law breaking; we need criminal sanctions; we need the collecting of fines. On the corporate structure, I suggest that raising the cost of setting up a company from the current £15 and hypoth—[Interruption]—and using that money explicitly and exclusively to ensure better regulation and policing. Hon. Members know which word I mean but I will not try to spit it out; we might be here for the rest of the afternoon. Hypothecating is the word. [Hon. Members: “Hear, hear.”]
Firms that have not filed up-to-date tax returns need much greater sanction for not doing so. The fact that so many choose not to do so and get away with it is a fundamental and major weakness. This is where this House needs to put its beady eye on what is going on at Companies House. Is it properly resourced? Are its powers great enough? Is it doing the job properly? I would suggest that out of those, at least two must be at issue; perhaps all three. We must get on top of this in the near future.
The question of tax liabilities and of how much liability and responsibility are needed for directors in relation to the law needs to be reconsidered. As a specific micro-proposal that I think could have a huge impact, it should be illegal for anyone to set up a bank account outside this country without informing HMRC and Companies House first. In other words, if people are using British corporate structure, we should stop letting them set up overseas operation without anybody knowing what is going on.
We need legislation relating to the Crown dependencies. I have made this point on many occasions and I will make it again briefly now. It is unacceptable that our taxpayers provide defence and legal structures for those countries when they have an opaqueness that, whatever tax system and regime they end up having, does not allow anyone to know what is going on. The football industry in this country provides a good example. In vast numbers of football clubs nobody, including the spectators and those who are owed money when the clubs go bust, has a clue who owns what bit and where and how. These major institutions are an example of how deep the problem has become and how we have failed to deal with it. We need to look to our regulations, such as those being introduced on banking, and think about how they can be applied to UK dependencies. Leaving them as they are is simply unacceptable, and it is becoming increasingly counter-productive for this country.
Tessa Munt
I thank the hon. Gentleman for giving way again. I wanted to draw it to his attention that the power has been used several times by the UK already to make the dependencies comply with other parts of regulation, so we could just require them to do what they should do. I would give as examples the banning of the death penalty, the rules on acceptance of homosexuality, and, on a slightly minor level, an acceptance that they should ban pirate radio.
Madam Deputy Speaker (Dawn Primarolo)
Order. The hon. Lady knows, because it is repeatedly pointed out to her by occupants of the Chair, that interventions must be brief. That was another very long intervention. I think she has made her point. While I am on my feet, may I also say to the hon. Gentleman that he has been speaking for quite a long time? This is a short debate and a lot of people want to get in, including, funnily enough, the hon. Member for Wells (Tessa Munt).
John Mann
Madam Deputy Speaker, my speech was already at an end, save for the final sentence. I did not wish to hog the debate with illustrations and proposals. I wanted to set some of the terms of the debate and implore those on both Front Benches to come forward with effective proposals, because this is a major issue for the UK economy and for our democracy.
John Mann
We have had a useful debate with, I think, 16 contributions, interventions and speeches. I was a little taken aback by the number of plaudits from Government Members, but I will perhaps take up the offer from the hon. Members for Daventry (Chris Heaton-Harris) and for Banbury (Sir Tony Baldry), who spoke by proxy for other Oxfordshire Government Members. We could perhaps form a little group to take such issues forward: a friendly society, perhaps. We could call it Unite and we could all join.
The responses from those on the Front Benches were different, but there were important points from both. With vast numbers of companies not submitting returns, as they should, to Companies House; with situations such as those at Leeds United and Coventry City football clubs, where people do not who owns them, including those who work at and pay for those clubs; and with the biggest criminal gang in the world laundering vast amounts of money through a British bank, there is clearly a major issue that has not been addressed but needs to be addressed. There are different arguments and ideas on how to take this matter forward. It is important for Parliament to keep it on the agenda and hold the Government to account. I also think—
Finance Bill
Lord Mann Excerpts(11 years, 4 months ago)
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Cathy Jamieson
I appreciate what the hon. Gentleman says, and I am sure his constituents will appreciate the fact that he has raised the matter in the Chamber today. The people who make use of that homeless shelter no doubt welcome the fact that it is there for them but, with respect, that does not get away from the wider need to ensure that we have good quality, affordable housing right across the country. Although his constituents may be benefiting at present, sadly I see in the places that I visit and right across the country that there are areas where that level of investment is not happening. People are finding their living standards squeezed and they are finding it extremely difficult not only to balance their own household budgets, but to plan for the future.
The hon. Gentleman’s intervention leads me neatly on to the subject of house building, although I suspect that that is not what he intended to do. None the less, it gives me the opportunity to move seamlessly into that part of my speech. The Government have had four major housing launches in three years and they have made more than 300 announcements on housing. Some areas would have welcomed 300 houses, never mind 300 announcements. We know, notwithstanding the hon. Gentleman’s comments, that house building is at its lowest level since the 1920s, and research by the House of Commons Library confirms that no peacetime Government since the 1920s have presided over fewer housing completions than this Government have in the past two years. So for all the launches and all the statements, are things going to get any better on this Government’s watch? That is a question that the Minister has to answer.
John Mann (Bassetlaw) (Lab)
Is my hon. Friend aware that of even that paltry number of housing finishes, the Labour Government were responsible for many of them? For example, the Strata Homes development in Retford in my constituency was started under the Labour Government only because of a capital grant given to get it going, and given as a present to this lousy coalition.
Cathy Jamieson
I could not have put it better myself. My hon. Friend speaks with great passion and I know that he always seeks to do the best for his area, but he makes important points that the Government would do well to take into account.
Is the situation going to get better? From what we know already, it is getting worse rather than better. Housing starts fell by 11% in 2012 to below 100,000. The construction sector has been hit particularly hard by the Government’s policies, which are hurting rather than helping. An estimated 80,000 construction workers are out of work and there has been an estimated 8.2% fall in construction output, despite recent signs of the beginning of change. Even in respect of home ownership, which one imagines this Government of all Governments would advocate, there are 136,000 fewer home owners than when the Government came to power. Home ownership has fallen from 67.4% to 65.3%. Crucially, on affordable homes, the official figures from the Homes and Communities Agency show that the number of affordable housing starts collapsed in 2011-12 by 68%.
I referred earlier to my own experiences when I worked on a homelessness project while I was a student in London back in 1979, which was one of the reasons that I got involved in politics in the first place. It is appalling that homelessness and rough sleeping are up by a third since the election. The Government must take responsibility for some of these awful situations.
The number of families with children and pregnant women being housed in bed-and-breakfast accommodation for six weeks or more has risen by more than 800% since the coalition Government came to power. A staggering 125 councils have had to house families in B and Bs for six weeks or more. [Interruption.] My hon. Friend the Member for Bassetlaw (John Mann) is right: it is a waste of taxpayers’ money. It is not only a waste of money, which is important, but a human tragedy for the families living in those conditions. I ask hon. Members to pause for a moment and reflect on how they would cope if life events meant they had to live like that. What if they were uprooted from somewhere they had been staying and had to pack up their belongings? What if they found themselves, perhaps with children, having to live for an extended period in one room in bed-and-breakfast accommodation, with nowhere to keep their belongings, nowhere to call home, and nowhere to do all the things that we take for granted with our own families?
Cathy Jamieson
My hon. Friend puts his point powerfully on the record. His phrase, one for nine, will perhaps hit home more vividly than my expressing it as 3,495 homes sold but just 384 starting to be built. It is also right to say that those houses that are being built should meet the needs of people who are seeking either to get their first home or to move.
I do not want to spend too much time on the bedroom tax, but it is sad that the Government constantly say that people are living in homes that are far too big for their needs. I know from my own area and the work I did before coming to this place that many people who live in such housing are rooted in their local community. They do not want to move to another town, village or even another street. If homes of a decent standard that met their needs were available in their area, perhaps they would be prepared to move in order to free up some of the larger family houses.
John Mann
Does my hon. Friend agree that if we built environmentally friendly, small, local authority bungalows with a little bit of garden, like we used to, many people would queue up to move into them? If only the Government would get their act together and provide the funding to build them.
Cathy Jamieson
My hon. Friend makes another very good point. I know of areas where elderly people would welcome such an opportunity. Indeed, I know of some elderly people who have been persuaded, because they felt it was the right thing to do, to move into good-quality housing where everything is on the flat and they have a small garden, a common area and locally provided services. It is also important that such housing is environmentally friendly and has affordable heating and rent.
Jack Dromey (Birmingham, Erdington) (Lab)
My hon. Friend the Member for Kilmarnock and Loudoun (Cathy Jamieson), in her powerful speech, pointed to the biggest housing crisis in a generation that is gripping our country. House building is down to the lowest level since the 1920s. Homelessness is up by 30% since the general election, after it fell by 70% under the Labour Government. We have a mortgage market in which millions struggle to get mortgages and a private rented sector with 8.6 million tenants, or 1.1 million families. There are many good landlords, but many bad ones too. There are chronic problems of security, stability, affordability and quality. One in three homes in the private rented sector does not meet the decent homes standard.
Like my hon. Friend, my interest in housing goes back a long way. When I was a lay trade union activist, I was also secretary of the Tenants and Residents Federation. I was a founding member of the Housing Action campaign. For older Members of the House who remember the occupation of Centre Point, I was proud to be one of those who organised what was an effective demonstration against office block speculation, against the background of rapidly rising homelessness and bad housing. I never thought that we would be back here 30 years later debating a crisis worse than that one.
Jack Dromey
There was an office block speculator called Harry Hyams. Those were the days when people could build office blocks and not pay rent on them, and they would appreciate two or three times in value every year. That happened against the background of a chronic housing crisis. We rightly protested against that and the incoming Labour Government rightly changed the law for—
Jack Dromey
We have been strong supporters of self-build. The Government have promised a great deal on self-build, but done pitifully little. The figures speak for themselves: a decline in self-build under a Conservative-led Government, compared with what happened under a Labour Government.
The simple reality is that we have seen catastrophic mistakes, a succession of false dawns and, to be frank, downright cheek—the point has already been made that sometimes the Government have claimed the figure is 170,000, when 70,000 of those homes were commissioned by a Labour Government. The comprehensive spending review last week was a missed opportunity. There are indications of a moderate uptake in house building; what we needed was a major investment programme—I will say more about that in a moment. It was a missed opportunity at the worst possible time, and we now run the risk of seeing five wasted years for housing under this Government.
Let me make some brief points about the announcement made last week. It represents a cut in investment in affordable house building, instead of the necessary ambition of approach. I would simply contrast two figures. In the final comprehensive spending review under a Labour Government, £8.4 billion was committed for the three-year period from 2008 to 2011. For the three-year period from 2015 to 2018, this Government propose to invest but £3.3 billion—less than half of what Labour proposed to invest in affordable house building.
In addition, we are seeing an approach on the part of the Government that will mean the slow death of social housing—the mistakes made in 2010, with the cuts in investment; the progressive reigning back of councils’ ability to use section 106 to insist on affordable and social housing; and, now, the Housing Minister talking about the need to convert to the affordable rent model, which is unaffordable for many people and will push up housing benefit bills. We also see the Government once again restating their determination finally to crack the problem of bringing public land to market. We have heard it all before. They have promised a great deal and delivered pitifully little.
It is little wonder that the National Housing Federation was critical of the statement, despite the Government saying that the role of housing associations would be central. The federation attacked it as representing a cut in investment. It is also little wonder that the Chartered Institute of Housing said that the statement lacked the necessary ambition. Just when the country needed a sense of urgency and ambition, the Government let the country down. That is why our amendment argues for a serious approach, designed to get Britain building. First, we have to tackle the biggest housing crisis in a generation. There should be decent homes for all, to rent or buy, at prices people can afford. Secondly, history tells us that there has never been a recovery from a depression, such as that in the 1930s, from a war or from any recession since the war without a major public and private housing programme.
That is why the shadow Chancellor has said that the Government should heed the advice of the International Monetary Fund. Were they to invest that £10 billion in a house building programme, 400,000 homes would be built, and 600,000 jobs and 100,000 apprenticeships would be created. The Government need to invest now, rather than looking beyond 2015. They need to build now, in order to get people back into work now and to bring the cost of failure and the housing benefit bill down. It cannot be right that 95p in every £1 spent on housing investment goes on housing benefit. We need to get that money shifted into bricks. Such investment would ultimately bring down borrowing as well.