Financial Services Bill

Debate between Lord Myners and Lord Davies of Stamford

Tuesday 10th July 2012 Lords Chamber

[Lord Davies of Stamford]

My Lords, I have considered carefully over the last 24 hours whether I should say what I am now about to say to the House, but I have decided that it is right to. My noble friend’s amendment, which I support in principle, says in proposed new Section 9WA(2)(a):

“The membership of the Panel will be … the Deputy Governor for Financial Stability”.

In light of his answers yesterday to the Treasury Select Committee, it is completely wrong that the present deputy governor for financial stability should be given these responsibilities on this financial advisory panel, or any other responsibilities for financial stability. In the course of the performance yesterday, during which I assume that his answers were entirely honest and frank, he effectively made a plea of guilty to incompetence and complacency at a quite heroic level. He admitted having chaired a meeting at which several people said that there had been discrepancies between the LIBOR rate and the rate at which banks had been paying for deposits on the interbank market. In his defence yesterday, he said he thought that some of those discrepancies might have been due to transactions intermediated through brokers, but he did not ask what the position was. He did not pursue it. He did not make an attempt to discover what the real facts were. That was astonishingly negligent, to put it mildly.

The other incident, the conversation that he had with Mr Diamond of Barclays, which has been so much in the public mind in the last week or so, also casts a strange light on his actions in carrying out his responsibilities in the Bank of England. He said that he was under great pressure at the time and that there was a great financial crisis, so much so that he was not able to make a note of even very important telephone conversations. I assume that the conversation was not a casual one, but that it was deliberate and designed to achieve a particular purpose. The only purpose that it could have achieved, and the only effect that it could have had, would have been to have persuaded or encouraged Barclays to understate the cost that it was paying for deposits on the interbank market. Clearly, Barclays could not do anything about the actual cost that it was paying. It would have been taking on deposits at as low an interest rate as possible. There have been some strange things going on. I have little confidence in the personality of the present deputy governor of the Bank responsible for financial stability.

There is a defence of his actions which noble Lords might have seen in yesterday’s Financial Times. It was the first letter in the paper, with the heading going something like “Tucker and Barclays saved the British financial system”. The argument was that it was correct in difficult circumstances, when banks were being squeezed on the interbank market or the interbank market was drying up, to give a false impression of what was going on by recording and publishing false LIBOR statistics. I do not accept that defence. First, it is not a defence that either Mr Diamond or Mr Tucker is making. Secondly, even if it were their defence it would be wrong. It is important that no financial stability organisation or anyone concerned with financial stability should be tempted to believe that by falsifying statistics in a difficult situation that is contributing to a solution. That risks undermining not merely the credibility of the index that you are falsifying, but every announcement and index. If the Bank of England was prepared to collude with a clearing bank to falsify the LIBOR statistics, the markets would immediately assume that collusion might take place if it was convenient in other circumstances, and that perhaps regulators and banks would collude to understate their provisions. As soon as that rumour or suggestion got about, there really would be a crisis.

That is a road down which no one should go. I do not accept that defence of Mr Tucker’s actions. It is not of course the defence that he has been making. He has no defence because he has confessed to an extraordinary act of negligence. Had he not undertaken it, had he not let that meeting go past—and yesterday there were suggestions that at the time he had other evidence that the LIBOR market was not as straight and transparent as it ought to have been—the crisis that we have experienced recently would not have occurred. I am sorry to have to make these harsh comments about a man whom I have not met and whom I had not heard until I listened to his evidence yesterday. However, in present circumstances, it seemed to me important that if one felt sufficiently strongly about such a matter one should raise it in the House.

[Lord Myners]

My Lords, I take note of my noble friend’s comments, but I feel compelled to say a few words in response. Without drawing the ire of the Minister, I can link it back to the subject of the amendment.

I worked with Mr Tucker, the deputy governor, during the banking crisis. We should wait for the outcome of the Treasury Select Committee’s report and the Joint Committee report. It is wrong to say that if the manipulation of the LIBOR-setting process had not occurred we would not have had the global financial crisis. It was undoubtedly bad and reprehensible, in the words of Mr Diamond, but it did not itself cause the crisis. Listening to Mr Tucker yesterday and reflecting back on the extraordinary circumstances of October 2007, I sympathised with him. The banking system was on the verge of complete collapse. It is still not fully appreciated how close we came to the edge of the cliff. In those circumstances, when one seemed constantly to be in meetings and constantly to be on the telephone, not taking notes of meetings is pretty forgivable. I was delighted that Mr Tucker was able to settle the issues arising from Mr Diamond’s file note about the senior Whitehall figures. I look forward to the Chancellor of the Exchequer responding to the clarity that Mr Tucker has brought there.

Reflecting on my noble friend’s amendment, I ask whether we are creating positions in the Bank of England and in the architecture which are simply beyond the talents of any one person to fulfil? Mr Tucker is one of the outstanding candidates to be the next governor. He is not the only one, but it is not a long list and it has got decidedly shorter in the past seven days. Two people previously spoken about as candidates, Mr Varley and the noble Lord, Lord Green, have probably dropped off in the past few days, so it is not a strong list.

Looking then at the FPC and its oversight, where are we going to find the people with the necessary talents to do this job? We are on the horns of a dilemma. On the one hand, you want knowledgeable people—people who do not have to be taken through everything step by step, but come to the issues with a good and clear knowledge and the ability to spot where the critical questions lie. On the other hand, you do not want to start these committees with people who in some way are conflicted by their current employment, their past employment, their pension arrangements and so forth.

I do not have a view about whether the shadow FPC is doing a good job. I think one or two of its members appear to be. Mr Robert Jenkins, in particular, appears to be an independent spirit who is not in any way caught up in the groupthink and consensus that I associate with much of the heart of the Bank. The simple fact is that most members of the FPC have a career background in investment banking. They have a career background in the very activity which was associated with the global financial crisis. I think we have a problem here. How do we get the right people into the right committees and the right courts and the offices of governor and deputy governor? No architecture makes sense if we are creating it on the presumption that we can find people of integrity, raw talent and understanding to fill the jobs when that is not a realistic assumption. I think the heart of the matter raised by my noble friend in his amendment is: how can we be satisfied that the people sitting on the FPC are appropriately competent and are managing conflicts of interests, as they probably will always have conflicts as a prerequisite for qualification to sit on these various committees?

Parliamentary Voting System and Constituencies Bill

Debate between Lord Myners and Lord Davies of Stamford

Tuesday 8th February 2011 Lords Chamber

[Lord Davies of Stamford]

I suspect that at this stage in the proceedings and at this time of night, there is not a great appetite in the House for a long speech. I want to speak briefly to my amendment, Amendment 22, which is grouped and is about wards.

It would be churlish not to start off by saying that I recognise—and am grateful and appreciative—that the Government have moved some way in our direction. The Minister will recall that I pressed him on the matter of wards at some length in Committee. After quite a long discussion, he ended up by saying that there may be,

“some merit in placing discretionary consideration”—[Official Report; 24/1/11; 713.]—

of wards in the Bill. I place on record that I recognise that the noble and learned Lord has done what he promised to do and has tabled an amendment, which he has not yet had a chance to move, Amendment 27A, which puts wards in the same category as other local authority boundaries for the purposes of the Bill.

Your Lordships may say: why are you rising at all to speak to the amendment? The reason is that there is a significant difference between what the Government propose—I recognise that they have taken steps in the right direction—and what I propose. The essential phrase in Clause 5, which all of us will remember, is that the Boundary Commission “may, if it sees fit” take into account local government boundaries. Wards are now included for the first time as a local government boundary.

“May, if it sees fit,” is a very weak indication or encouragement to the Boundary Commission to take ward boundaries seriously.

I have a greater degree of optimism in practice, because I have a great respect for the Boundary Commission and it is as familiar as we are with the strong arguments for respecting wards made very well by my noble friend Lord Bach. They are that wards are the building blocks of both local government and the major political parties in this country. To break them up or cut across them would be an attack on democracy at the grassroots. I am quite sure that neither the Tory party nor the Liberal Democrat party really want to do that. However, there is considerable merit in having a stronger formulation as in my amendment:

“Except in circumstances they judge to be exceptional, a Boundary Commission may not allow a ward to form part of more than one constituency”.

The obligation is placed on the Boundary Commission to make a case of exceptional circumstances if it decides to split a ward. That seems a much stronger formulation and I would be grateful if the Minister could say why he cannot accept an amendment which seems to encapsulate the spirit of the debate we had in Committee.

[Lord Myners]

My Lords, I was not intending to speak to this series of amendments but I believe there is an important generality here of respect for established boundaries and division points that define one community from another, be they county council boundaries or wards or other forms of distinct governmental boundaries and definitions. The House should proceed with great care before we disturb natural groupings—natural directions in which people look to have influence and where decisions will be taken which affect their lives and communities.

I have added my name to an amendment about Cornwall which the noble Lord, Lord Teverson, will table tomorrow. Unfortunately I am unable to be in the House then so I will speak for one moment now. The people of Cornwall recognise it as a unit of great integrity; they are very proud of being Cornish. The six MPs from Cornwall, three Liberal Democrats and three Conservatives, are all agreed that Cornwall must remain an intact area in terms of preserved constituencies. I will not be able to speak tomorrow in support of the noble Lord, Lord Teverson, but I want to use this generality around respect for boundaries and traditional definitions of areas in relation to Cornwall. In would be a monstrous outcome if Cornwall was required to share a constituency with Devon.

Parliamentary Voting System and Constituencies Bill

Debate between Lord Myners and Lord Davies of Stamford

Thursday 20th January 2011 Lords Chamber

[Lord Davies of Stamford]

My Lords, I have listened to this debate with great interest. I listened with great sympathy to the paean of praise for Telford by my noble friend Lord Grocott. I happen to know Telford because, when I was Defence Procurement Minister, among the agencies for which I was responsible were the Defence Support Group and the Defence Storage and Distribution Agency. I visited them in Telford on more than one occasion. I watched them doing superb work repairing vehicles that had been repatriated from Afghanistan after having been extremely seriously damaged by improvised explosive devices. I was immensely moved—that is the only word that I can use—not only by the skill but by the extraordinary dedication of the people who were working on that job. They knew how enormously important it was for the military and they were proud to do the job, which they did with absolute perfection and dedication. If any group of men and women in this country deserves special electoral recognition, I should find it hard to deny it to the people of Telford.

Apart from that consideration, I had no idea that anybody was thinking of making a special concession to Telford. Neither was I aware of the attractions of the Scottish islands off the coast of Argyll. Having heard the idyllic descriptions of them from several quarters of the House this evening, I shall certainly make it a priority to visit that part of the country.

With the leave of the House, I will revert to the City of London and speak in support of the amendment tabled by the noble Lord, Lord Brooke, who spoke with the historical erudition that the House will associate with him. I also support the equivalent amendment tabled by my noble friend Lady Hayter, which would have a similar, although slightly more forceful, effect. The noble Lord, Lord Brooke, supported by the noble Lord, Lord Jenkin, made a case for the historic privileges of the City and for the City of London’s right to continue to be recognised as a constituency, or as part of a constituency with that name included in it, as has been the case since Parliament existed.

I follow my noble friends Lady Hayter and Lord Myners in making a more pragmatic case. I am in no way detracting from the historical case, but I think that there is an important practical reason for continuing to ensure that one individual—one man or woman—can be described as the Member for the City of London. So that I do not get into trouble, I had better declare an interest, although it is not really a current interest. Before I entered politics, I was engaged full-time in the City of London, latterly as a director of a merchant bank. I was a colleague of the noble Earl, Lord Home, with whom I shared an office at one time. I saw him in his place a moment ago, although he has now left the Chamber. Even after I had been elected to Parliament as a Back-Bencher, I continued my role in the City and subsequently, before entering the Government, I was on the council of Lloyd’s of London, which is one of the biggest insurance and reinsurance groups in the world. However, I have no current financial interest in the City of London. I am a liveryman of the Goldsmiths’ Company, which is one of the ancient City companies, but I do not know whether that in any way constitutes a material interest.

Having said that, I recognise that it is difficult to say anything favourable about the City at the present time. Bankers and politicians are the two most unacceptable groups of humanity at the moment in this country and, indeed, elsewhere and we just have to accept that for the time being. As I have said in the House, there is no doubt that in commercial banking, which is just one area of activity that takes place in the City, serious professional mistakes were made. An awful lot of the criticism and, indeed, vituperation has, I am afraid, been all too well deserved.

Nevertheless, the City of London is much more than commercial banking or investment banking, which is my field. The City of London involves stockbroking, securities trading, fund management, international fund management—an enormously important field of activity, as my noble friend Lord Myners said—commodities trading, insurance and reinsurance, both the company market and the Lloyd's market, and shipping. The Baltic Exchange is the world's greatest centre of trading in ship charters. I do not have the figures in my head, but we all know that the City generates an enormous proportion of gross domestic product. Some people may say that it is disproportionately great, which may be true in the sense that it would be nice to have a more balanced economy, but the solution to that is not to run down the great asset and generator of wealth that we have, it is to nurture it and ensure that we are in no way inhibiting the development of other sectors of economic activity.

The City is an enormous national asset. It is the envy of Europe that we should have achieved here in London, in this time zone, far and away the greatest financial market in the world. It is a great source of employment. The latest figure which I have, which may be out of date but it sticks in my mind, is that half a million people work in the City every day. The vast majority of them come into the City. We have already heard from the noble Lord, Lord Brooke, that only about 4,000 or 5,000 people live in the City and some of them do not work there, so it is an enormous generator of wealth and employment.

I think that the House is familiar with the importance of the City to the national economy and will therefore bear with me when I say that it would be an enormous mistake to deprive the City of a representative in Parliament who is explicitly that, who is the Member of Parliament for the Cities of London and Westminster, or whatever the name might happen to be. It clearly needs to be for the City and somewhere else, and Westminster seems to fit it very well, but it must be a single Member of Parliament for the City. If the City was divided between two, three or four constituencies—the neighbouring constituencies at present—that responsibility would not fall on any one man or woman. We would not have a clearly defined interlocutor for government who could say truthfully that he or she represented the City; we would not have one person to whom the City could appeal.

Before I give way to my noble friend Lord Myners, perhaps I may say that he was an enormously distinguished Minister for the City. We need a Minister for the City and it would be nice if we could again have such an able and effective Minister as my noble friend, but the Minister for the City, by definition, is not a representative of the City; he is a member of the Government constrained by collective responsibility. There may be occasions when the Government want to do something that the City does not want, or the City wants to make representations to the Government to do something else. In those situations, it is necessary that the City has a genuine representative in Parliament in the form of a man or woman who has in his or her title the phrase “Member for the City of London”.

[Lord Myners]

I am grateful to my noble friend for his correct anticipation of my point. It is disappointing that we no longer have a City Minister. We no longer have in government a Minister who is seen to have specific responsibility for the City. Instead, the responsibility is divided between Mr Mark Hoban in the other place and the noble Lord, Lord Sassoon, in your Lordships' House. It is clear that there is a dispute between the two of them as to who speaks on behalf of the City; they fight for the juicier parts of the responsibility and eschew the more burdensome ones. The need to have a powerful voice for the City should be reflected in the constituency structure. Also, I urge the Government to designate one Minister as the City Minister. That has gone unnoticed, unnoted and uncommented on at a time when the City needs representation and a direct dialogue between the Government and the City.