Privileges and Conduct

Debate between Lord McFall of Alcluith and Lord Lucas

Thursday 15th November 2018 Lords Chamber

[The Senior Deputy Speaker]

I have been the chairman for two years and this is the first case I have had; I undertake faithfully to write my noble friend on that question. That is not a problem.

My noble friend Lady Shackleton and the noble and learned Baroness, Lady Butler-Sloss, made a point about testing the evidence. The commissioner covered that point in the committee’s report, saying:

“I am not entirely sure what Lord Lester means by cross-examination … but if he means testing the evidence where there is a challenge or a good reason to do so, then the report shows that I did this, throughout the process, and where I did not, I gave my reasons”.


She refers to paragraphs 156 and 93 to 152 of her report. The evidence was tested very carefully.

The noble and learned Lord, Lord Woolf, said that the rules are not fit for purpose. Following his chairmanship, the noble and right reverend Lord, Lord Eames, looked at that point in the leader’s report and used the experience of the noble and learned Lord, Lord Woolf, so that they could take account of the problems. They did that by establishing an independent commissioner.

Other points have been made about the process being reviewed next week when the committee will meet, following the Cox report in the House of Commons. We will look at bullying and harassment. We want to ensure that the system is more accessible to complainants but there is no current suggestion to adopt a procedure involving cross-examination. If any Member wishes to put that to the committee for consideration, we are here to listen to all the evidence.

[Lord Lucas (Con)]

My Lords, in what sense is cross-examination not part of an inquisitorial system? It is perfectly possible under such a system. We are looking at precedents in the United States where a lot of students are being accused of sexual misconduct in universities and university tribunals have been taken to court for their procedures. It is quite clear that the American courts expect an inquisitorial procedure under which the fact-finder questions the evidence.

[The Senior Deputy Speaker]

We could be dancing on a pinhead here in that sense. The main issue, as outlined, is the testing of evidence. I take comfort from the fact that the sub-committee included eminent legal people such as the noble and learned Lords, Lord Brown of Eaton-under-Heywood and Lord Irvine of Lairg. They are as distinguished as they come. I take great comfort from the fact that of the 14 members of the Privileges and Conduct Committee last week, both the noble and learned Lords, Lord Hope and Lord Mackay of Clashfern, gave evidence. If I were looking for legal representatives, those four would always be in my first team; they would never be on the subs bench. I have every confidence in them.

Financial Services Bill

Debate between Lord McFall of Alcluith and Lord Lucas

Wednesday 18th July 2012 Lords Chamber

[Lord Lucas]

My Lords, I very much support what the noble Lord, Lord Sharkey, has said in this area. My Amendment 117B in this group picks up a couple of aspects of it. The first aspect is,

“the role of regulation in enabling innovative business models to compete with established businesses”.

By regulating this area so heavily we have created a structure where it can be extremely difficult for people to be innovative. The noble Lord, Lord Sharkey, drew an obvious example of that when he talked about the regulations that independent financial advisers have to work under. If IFAs are allowed to talk about ordinary money products but not allowed to talk about peer-to-peer lending products then, by not regulating them and not bringing them under the umbrella of regulation, we are making it difficult for these new entrants to compete. We are creating a barrier to innovation.

This particular innovation is not just fluff or amusement. It promises, if it gets going in a substantial way, to alleviate some of the pressure on the national financial system: you get away from borrowing short and lending long, and away from the £85,000 guarantee, and you put those risks back on the lender. It is also a structure that may prove to be extremely useful in local lending in areas where the lenders can identify that the borrowers are part, in some way or another, of the same community and can, in that way, develop substitutions for pay-day lending and other more expensive and onerous arrangements. So there are real opportunities here to improve the financial system as a whole. The FCA really ought to have regard to the way in which regulation produces barriers for entry in the way that the noble Lord, Lord Sharkey, has described.

But it is not just without government that these barriers appear; they are also within government. One of the principal barriers to the expansion of peer-to-peer lending is the tax arrangements, that you cannot offset your losses on bad debts against the interest you earn on the good ones. Banks can but peer-to-peer lenders cannot. Among the reasons why the Treasury, which is refusing to regulate, will not extend tax concessions is that these businesses are not regulated. So the Treasury itself is causing the problem that is crippling the development of this business.

It is all very well to run a business which is restricted to borrowers of the highest quality, which is effectively what it is at the moment. All the peer-to-peer lenders that I am aware of have pretty low bad debt ratios. That is because they do not lend to risky borrowers, because there is no offset for the losses. The net return to their investors if they did start making loans with, say, an average default rate of 5% would start to become extremely low because there would be no relief for the 5% of losses and they would be paying full income tax on their 12% of income. It starts to make very little sense, so none of the peer-to-peer lenders have gone into that territory. But lending to areas of the community where there is a risk of default, such as young businesses, is exactly the sort of area where this Government are trying to push the banks with so little success, and where businesses such as the Funding Circle would love to go if the Government would make it possible.

As I say, the reasons for not going there are entirely due to the Treasury, and the reasons why the Treasury cannot grant the concessions are also down to the Treasury. It really should be open to the FCA to try to break that circle and persuade the Treasury to face one direction at a time and to promote something which is in everyone’s interests, particularly the Treasury’s. Nor would I just confine our thinking to peer-to-peer lending, which is what is there at the moment. Other peer-to-peer ideas are around. Peer-to-peer investment in start-ups already qualifies. There is an FSA-registered business called Seedrs, in which I take an interest. There are proposals for peer-to-peer investment management. That goes back to an earlier amendment in terms of trying to reduce the return that stays in the pockets of investment managers by disintermediating that business.

There are certainly proposals for doing this in the field of annuities. The opportunity is obvious: old people want income and young people want capital. If you can produce a mechanism where the two can exchange that, you are looking at something where you can cut out a very large amount of cost in the middle, where you could produce for people who are trying to settle their pension fund annuity at the moment a decent rate on which to do it, and where you could provide for young people who need capital a decent rate at which to have it.

The difficulty with doing that is the forest of regulation we have put in place to tie down the existing old-style businesses in that area. The opportunity for and the benefits of innovation in that area seem obvious. So we must have an FCA which understands not just not-regulating but also how regulating constructively will enable businesses to compete where, if they are left unregulated, they may not even be able to exist.

[Lord McFall of Alcluith]

My Lords, I should like to add my support. My name is not on the amendment. A number of months ago I spoke to Giles Andrew, of Zopa, about peer-to-peer lending, and I was very taken by what he said. I think back to the MPC and the American whose name escapes me but who is just departing from the MPC to take up a post at the Peterson Institute in America and his comments about a spare tyre. We lack a spare tyre in the UK in terms of our banking. Whether it is a Labour Government or this Government, none of us has solved the problem of getting lending out. We have a lot to learn in that area. Our top banks are responsible for 450% to 500% of our GDP. We will not make progress on that. This initiative should be looked at. Nothing fundamental will change tonight but it is good that it is on the agenda and I am delighted to be associated with it.

Financial Services Bill

Debate between Lord McFall of Alcluith and Lord Lucas

Monday 11th June 2012 Lords Chamber

[Lord Lucas]

My Lords, we have to face the fact that we do not do as good a job in Grand Committee as we do in a Committee of the Whole House. There is no opportunity for Peers widely to participate in Grand Committee in the way that there is in the Chamber. Given the importance of the Bill and the depth of interest in it, I hope very much that the Government will listen to what has been said.

[Lord McFall of Alcluith]

My Lords, perhaps I may remind the House that Finance Bills in the other place are accorded the greatest status by being debated on the Floor of the House. If we are going to have equal status in terms of the scrutiny and examination of this Bill, the least we can do is send a message to the other place that we take this seriously, and that it has to be done on the Floor of the House.