Schmallenberg Virus

Debate between Lord Myners and Lord De Mauley

Thursday 1st November 2012 Lords Chamber

[Lord De Mauley]

If I may, I shall restrict my response to the Schmallenberg virus for these purposes. I assure noble Lords that the necessary funding has been made available particularly to carry out the testing which is so critical in this case.

[Lord Myners]

My Lords—

--- Later in debate ---

[Lord De Mauley]

Yes, my Lords. That is a topical suggestion, in view of the overnight reporting of the appearance of the virus in Northern Ireland. We are in very regular contact with the devolved Administrations, both through the Chief Veterinary Officer and at official level, exchanging information on our knowledge of the virus and our actions. Indeed, our deputy chief vet spoke yesterday to the Northern Ireland Chief Veterinary Officer about this specific case.

[Lord Myners]

I should declare that I know very little about the Schmallenberg virus, but I know that it is an insurable risk—as is flooding. I want to go back, therefore, to ask the Minister: will the Government take action to address the deficiencies of the Solvency II directive on insurance, which is significantly decreasing insurance capacity in the UK and forcing up premiums for people insuring themselves against the virus or, indeed, against flooding?

Flooding: Defence Programme

Debate between Lord Myners and Lord De Mauley

Thursday 1st November 2012 Lords Chamber

[Lord De Mauley]

I very much agree with the noble Lord. I think I said earlier, but I will repeat, that our sympathies of course remain with our own people who have suffered this summer.

[Lord Myners]

My Lords, does the—

Financial Services Bill

Debate between Lord Myners and Lord De Mauley

Tuesday 10th July 2012 Lords Chamber

[Lord Myners]

The Minister used the word “independent” on several occasions relating to oversight. Noble Lords will remember that when the Monetary Policy Committee was established, there was quite a brouhaha about whether the independent members of that committee should have access to independent advice. The Bank resisted that so the independent members had to rely upon the Bank’s own economists. It was only after a threat of resignation by one of the independent members of the MPC that they were granted the ability to appoint, I believe, a single researcher.

The culture of the Bank does not foster independence. It is a very hierarchical organisation. The view of the Bank is the view of the governor. The court has recently announced three independent reviews into aspects of the Bank’s conduct. They are all quite interesting because they date from October 2008. None of them will actually look at the real errors that were made by the Bank, which were pre-2008. We really want to ask what the Bank was doing in 2006 and 2007. These reviews exclude any examination of Northern Rock, and I think one could argue that if it had been handled in a different way, it might have had some impact on how the UK was impacted by the global financial crisis.

I put down a Question on these independent reviews. The independent reviewers were appointed through a process led by the governor. The independent reviewers do not have their own secretariat. They are reliant upon the Bank’s staff for support, so I put it to the Minister that for this approach to operate, it is important that the FPC has access to truly independent advice. In my view, advice that comes from career employees of the Bank can never have that element of total independence that is necessary in order to achieve the objective that I believe the Government have for the FPC and which my noble friend has at heart when proposing this amendment.

[Lord De Mauley]

I will, if I may, respond on that point. The noble Lord, Lord Myners, is right, and my noble friend Lord Sassoon acknowledged earlier, that previously the Bank was slow to recognise the MPC external members’ need to have access to dedicated support. The Bank has learnt its lesson.

Companies: Executive Remuneration

Debate between Lord Myners and Lord De Mauley

Wednesday 13th June 2012 Lords Chamber

[Lord De Mauley]

My Lords, I am sympathetic to my noble friend’s view. We have to balance that against the fact that, while it is not the Government’s role to micromanage company pay, we have a role to play in addressing what is, as he says, a clear market failure. The culture has to change, too. We are pleased to see institutional investors taking a tougher stance on pay than they have in the past.

[Lord Myners]

My Lords, following on from the noble Lord, Lord Tugendhat, the report produced by Manifest shows that the average UK chief executive is now paid 240 times the average earnings in this country. This is an outrageous multiple and it simply is not satisfactory for the Government to say that they are considering allowing binding resolutions on an optional basis. The time has come for the Government to get a grip on this issue and to make sure that these excessive acts of greed are stopped.

[Lord De Mauley]

My Lords, I am not sure what binding votes on an optional basis might mean, but that is not what is proposed.

Small and Micro-Business Borrowing

Debate between Lord Myners and Lord De Mauley

Thursday 24th May 2012 Lords Chamber

[Lord De Mauley]

My Lords, I thank my noble friend Lady Kramer for initiating this debate, and all noble Lords who have participated. This is a vital issue and has been for a long time; it is not a recent phenomenon, although it is even more acute in the current environment.

The Government are committed to rebalancing the economy, encouraging private sector investment and creating the conditions for confidence to return, small companies to thrive and growth to revive. Ensuring that small businesses and micro-businesses can access the finance most appropriate for them is a core priority. While we want to ensure that there are alternatives to high-street banks for businesses, the majority will remain reliant on banks. It is vital that SMEs are able to access bank finance. I will explain what we are doing in that area before dealing with alternatives.

First, the Government provide guarantees to viable SMEs lacking sufficient collateral to secure commercial finance. The enterprise finance guarantee scheme plays an important role in facilitating credit to viable small businesses and micro-businesses. Over 12,800 businesses with a turnover of under £1 million have been offered EFG loans. That equates to 70% of all the loan offers under the scheme. The enterprise finance guarantee is delivered by lenders directly. They include banks, and alternative finance providers such as community development finance institutions.

Secondly, in the Budget the Government launched the national loan guarantee scheme, which reduces the cost of bank lending to smaller businesses by up to 1%. This is achieved by the Government providing guarantees on unsecured borrowing by participating banks to enable them to borrow at a cheaper rate, and therefore to pass on the entire benefit they receive to small businesses through cheaper loans. The Government will provide up to £20 billion of such guarantees. Thousands of businesses have already benefited from LGS loans and the scheme is proving popular. Ulster Bank formally launched the scheme in Northern Ireland last Monday.

Thirdly, to improve relationships between banks and small businesses, we are working with the BBA on the delivery of a range of bank commitments. As a result—and this is very significant—the banks have put in place: first, an independent appeals process to deal with situations where businesses have been declined loans; secondly, an online mentoring portal for SMEs to find sources of advice; and, thirdly, a lending code that makes it clear what standards businesses should expect from their banks.

It is also important that we do what we can to encourage the development of diverse sources of finance for SMEs beyond just the banks, which is the gist of my noble friend’s Question. Increased competition not only between banks but between forms of finance will improve outcomes for businesses. The Business Secretary recently commissioned a report, which has been referred to in this debate, from Tim Breedon that explored alternative finance options such as supply chain finance, mezzanine finance, peer-to-peer lending, retail bonds and so on. All these should be fostered and encouraged, to create a more resilient business finance environment. The Government have a role to play but so do financial institutions and, crucially, businesses themselves.

To diversify the sources of finance available to smaller businesses further, BIS has received £100 million from the business finance partnership. This funding will focus on alternative lending channels which aim to lend specifically to smaller businesses. The key aims of this scheme are to stimulate the development of non-bank lending channels and to increase the supply of capital to smaller businesses. In support of these objectives, we are considering investing business finance partnership money through peer-to-peer lending platforms, mezzanine loans and supply chain finance products.

For businesses seeking other forms of debt finance, community development finance institutions offer an alternative to the banks. They provide microfinance and small loans to enterprises that banks consider too costly or too risky to serve. Such businesses can nevertheless be viable and tend to have a positive impact on their local community. The Government support the CDFI sector in a number of ways. A key aspect of this community investment is tax relief. This encourages investment in CDFIs by providing a tax relief worth up to 25% of the value of the investment over five years. The funds so invested are then on-lent by the CDFIs to small businesses and social enterprises. We are currently looking at ways to simplify the rules to encourage more usage and make it more effective. This is because public investment of this type has been shown to be an effective method of generating and protecting economic output. Our evaluation has demonstrated that every £1 of tax incentives generates an additional £1.89 of net gross value added. We also support CDFIs through the regional growth fund by contributing £30 million to the sector to facilitate £77 million of lending through small loans—around 4,500 loans—to small and micro-businesses.

In addition, we are about to launch a pilot scheme at the end of this month to help young entrepreneurs set up their business and access finance when doing so. Aimed at 18 to 24 year-olds, the start-up loans scheme will provide microfinance and mentoring support to enable young people to start and grow a business.

I have focused so far on debt finance. The Government are also committed to supporting equity funding. We have committed £200 million over four years to the enterprise capital funds programme, bringing our investment to more than £300 million for SMEs with the highest growth potential. We are also working to stimulate business angel investment through the establishment of a £50 million business angel co-investment fund. This partly addresses my noble friend Lord Popat’s point. Through this, we co-invest with business angels in high-growth-potential early-stage SMEs, particularly in areas most affected by public spending cuts. My colleague Mark Prisk announced the first deals under this scheme earlier this month.

However, we are not limiting our support to finance itself. To help businesses navigate the various support programmes, we have launched the “Business in You” website to help businesses access support and mentoring and determine which financial support package suits them best. The growth accelerator programme will also provide intensive management and training support to high-growth-potential SMEs.

Noble Lords asked a number of questions. I will address as many of them as I can. My noble friend Lady Kramer compared the German, US and Swiss local banks and their emphasis on localness favourably against our branch networks; my noble friend Lord Smith made a similar point. We recognise the value of the bank branch network and relationship banking for SMEs, where the manager knows the area and understands the business. Indeed, these values are still present in the UK banking sector. In particular, some of our smaller banks have chosen to adopt more traditional banking models, with an emphasis on good customer service, personal relationships with customers and local focus to operations. The larger banks, too, recognise the importance of having managers with a clear understanding of businesses and the local area.

However, my noble friend makes an important point, and the Government remain committed to ensuring that viable businesses can access the finance that they need at an affordable rate. My noble friend suggested that RBS’s network should be used as the basis of a regional banking network. The Government’s shareholding in the Royal Bank of Scotland is managed on a commercial and arm’s-length basis by UKFI, whose overarching objective is to protect and create value for the taxpayer as shareholder, with due regard to financial stability and acting in a way that promotes competition. Splitting it up into a regional banking network might be a considerable undertaking and would take a fair while. It is uncertain whether it would improve lending conditions for small and micro-businesses. However, UKFI continues to work closely with the bank’s management to assure itself of the bank’s approach to strategy and to hold it rigorously to account for performance.

My noble friend suggested that credit unions and CDFIs are too fragmented and small. That chimes with something that the noble Lord, Lord Myners, said; he was basically sceptical of alternative forms of finance in general. The Government recognise the important role that CDFIs play, but are aware that the sector needs to operate on a greater scale to widen their coverage across the United Kingdom. The Government’s regional growth fund award of £30 million will help to address this issue, as it will facilitate £77 million of lending. It will also allow the Community Development Finance Association, which developed the fund, to build its capacity and capability to act as a wholesaler to the sector. This will allow it to look to private sector funders and European institutions. This, combined with the community investment tax relief and enterprise finance guarantee scheme, will enhance the sector’s capacity to grow.

My noble friend was critical of the barriers to entry to the banking industry; a number of noble Lords referred to that. All prospective new banks must apply for and receive a banking licence from the FSA. This is an essential step to ensure that all banks in the UK operate to the required standard and that consumers are protected. It is right that standards are robust. The FSA has, however, recently implemented a number of improvements to the banking licence process which will make it easier for potential new entrants to navigate. These include holding pre-application meetings with the applicants and the introduction of a modular approach to assessing deposit-taking applications.

My noble friend suggests a less onerous licence for small, local banks with a community obligation. We are clear that prudential standards for capital and liquidity should not act to dampen the effective competition and that new banks should not be treated disproportionately subject to the level of risk. That is why we have supported the Independent Commission on Banking’s recommendation that the OFT should work closely with the Prudential Regulation Authority to review the application of prudential standards, to ensure that they do not pose excessive barriers to entry and expansion from new entrants.

My noble friend was concerned that the new online lenders should be regulated under the Consumer Credit Act and by the OFT, and about the feeling that the responsible players are bracketed with the cowboys. The Government have noted the online peer-to-peer lenders’ concerns and are keeping the case for further regulation under review. Any decision to regulate would need to balance the needs of borrowers and lenders and the possible impact on new market entrants.

I am afraid that I am running out of time, so I will write to noble Lords whose questions I am unable to address. My noble friend Lord Popat had several. He was concerned about low participation in government lending schemes and the poor publicising of schemes available. We recognise the lack of awareness of government schemes and, following the Breedon review earlier this year, we have already committed to consider how best to improve awareness of such schemes. We are working to raise understanding of the support available to SMEs, including through a new online finance finder tool at www.businesslink.gov.uk.

The noble Lord, Lord Myners, referred to the Vickers report. I enjoyed his thought-provoking speech. Let me just answer his point. The Government welcome the work of Vickers and further analysis is ongoing to confirm the detail. As the noble Lord said, a White Paper and formal consultation will be launched next month.

The noble Lord, Lord Berkeley, raised a very important point. May I say, rather rudely, that most of it was slightly outside the scope of this debate? However, I can see exactly where he is coming from. He addresses the finance that is available to suppliers—for example, to National Grid. The Government acknowledge that this is an important issue. Many SMEs report that working capital and late payment are obstacles as great as access to external finance. Mark Prisk has convened a working group with business representative bodies to explore how to tackle this issue, which also relies on SMEs agreeing payment terms in advance.

Several noble Lords referred to Project Merlin, through which the banks have lent £215 billion to businesses in the United Kingdom, including £75 billion to SMEs against a target of £76 billion. I acknowledge that they have not hit the target by £1 billion in £76 billion, but this none the less represents a 13% increase in gross lending on 2010 and Project Merlin has clearly focused the minds of senior bank officials on SME lending.

[Lord Myners]

My Lords—

[Lord De Mauley]

My Lords, I am sorry—I am out of time and I cannot allow interventions. I have to conclude.

As I hope noble Lords can see, we have a large menu of measures to support the provision of diverse sources of finance. We will carefully assess the impact of these policies to ensure that businesses of all types are able to access the finance that they need.

European Communities (Amendment) Act 1993

Debate between Lord Myners and Lord De Mauley

Wednesday 25th April 2012 Lords Chamber

[Lord De Mauley]

My Lords, I am not going to enter into this discussion any further.

The noble Lord, Lord Davies of Stamford, talked about the general anti-avoidance rule. I am not sure it is entirely relevant to this debate, but I can say that the Government will consult on the GAAR in summer 2012 with a view to bringing forward legislation in the Finance Bill 2013. A targeted GAAR is the right solution to tackle the persistent problem of artificial and abusive tax-avoidance schemes. I will take the noble Lord’s specific points back to the Treasury and write to him on them.

In an amusing speech, the noble Lord, Lord Myners, referred to, among other things, IMF and OECD support. The IMF and the OECD support the Government’s policy. The IMF’s Madame Christine Lagarde said that under the current circumstances the policy in place is the “right thing to do”, and the OECD Secretary-General said on our Budget 2012:

“The Budget announced today is another important step towards a sound fiscal position for the United Kingdom. The confirmation of the UK’s fiscal consolidation programme should keep bond yields low and support the recovery”.

[Lord Myners]

Will the Minister also acknowledge that the OECD has said that if the UK’s growth performance is lower than that forecast by the OBR, it will be necessary to revisit the fiscal strategy being pursued, and to ask whether that was contributing to the problem rather than solving it? In the interests of completeness, the Minister should give the full position of the OECD rather than a highly selective summary.

[Lord De Mauley]

Perhaps I can come back to that in a moment. The noble Lord, Lord Layard, suggested that there were optimistic assumptions in the OBR forecast, in particular on oil prices and risks from the euro area. The OBR says that,

“oil prices remain a significant uncertainty and the possibility of a further temporary spike in prices represents a risk to our forecast”.

Renewed upward pressure from the record oil prices in recent weeks is also recognised as a risk to the Bank of England’s forecast, most recently in the minutes of April’s MPC meeting.

The noble Lord, Lord Lea of Crondall, spoke about what might happen in the forthcoming French presidential election. He will appreciate that it is not for me to speculate on the outcome of the French election. Of course, the UK is not a party to the fiscal compact; it does not apply to us. The SGP was strengthened last year. Any proposal for fundamental change would require treaty change and that would require the consent of all 27 nations.

Eurozone Crisis

Debate between Lord Myners and Lord De Mauley

Thursday 1st December 2011 Grand Committee

[Lord Myners]

My Lords, before my noble friend speaks, I ask the Whip representing the Government whether we will all now be allowed, if required, 13 minutes. The Whip made very little effort to restrict the noble Lord, Lord Lawson. I personally would have liked the noble Lord to have had more time to speak because he has such rich and informed experience. The Whip allowed that to run for 13 minutes, and I hope that he will extend the same courtesy to people from the other side of the House if they so wish.

[Lord De Mauley]

My Lords, the noble Lord knows perfectly well that we are a self-regulating House. We have all agreed to time-limited debates.

Financial Services Regulation

Debate between Lord Myners and Lord De Mauley

Wednesday 16th June 2010 Lords Chamber

[Lord Myners]

My Lords, I welcome the Minister’s repeat of the response to the Urgent Question in the other place; it is good that we have this information before the Mansion House speech tonight. I also welcome the appointment of Sir John Vickers, a man ideally suited to chair this commission.

The speech by the right honourable gentleman the Chancellor of the Exchequer is charged with political overtones. It seeks to rewrite history. The Chancellor must rise to the standards and callings of his office and focus more on the future and the strategic issues and challenges rather than making cheap political points. This ill becomes a holder of one of the great offices of state. He must remember that, now the election is over, he has a duty to govern and perform an effective ministerial role and no longer act as a purely political spokesman. We want leadership from this Chancellor of the Exchequer, not soundbites.

A clear error in the Statement is a reference to the support that the taxpayers provided to the banking system, but no reference at all to the fact that the taxpayers now have a gain on the support that they showed to the banking system in excess of £10 billion, a considerable amount of money that could, for instance, be used to capitalise a new bank to support lending to SMEs.

The devil as always is in the detail. One of the problems with the commission is that its report will be too late. As my noble friend Lord Eatwell said, the Seoul meeting of the G20 will be the critical decision-maker on the structure of banking globally, yet this report will come well after Seoul. Surely it is right that there should be an interim report from Sir John Vickers before Seoul, so that we can test the Government’s position in Seoul against the recommendations coming forward from Sir John Vickers and his group.

I have a number of questions, which I raise with some fear that they may not be answered. We are still waiting for answers from the noble Lord, Lord Henley, to questions asked during the Queen’s Speech debate and an answer from the noble Lord, Lord Sassoon, in relation to the debate on competitiveness. It is unfortunate to see that the Treasury is already lagging in terms of response to questions.

Will the Minister explain where macro-prudential regulation morphs into micro-prudential oversight? In the first sentence the Minister says that macro-prudential regulation should never have been taken away from the Bank of England, but in the second sentence he says that the Government are still developing their thinking on macro-prudential supervision.

[Lord De Mauley]

My Lords, perhaps I may remind noble Lords that, although brief comments and questions from all quarters of the House are allowed, Statements should not be made the occasion for an immediate debate.

[Lord Myners]

I am asking questions, as I have made clear. I am just into the third minute and I beg the House’s indulgence to ask one or two other questions.

Economy

Debate between Lord Myners and Lord De Mauley

Monday 7th June 2010 Lords Chamber

[Lord De Mauley]

My Lords, I could not agree more with my noble friend.

[Lord Myners]

Does the Minister expect to see the banking industry’s economic contribution grow or contract in importance?

[Lord De Mauley]

My Lords, the noble Lord, Lord Myners, has put his finger on a very important point. He is right to point out that it is important that the banking sector does not contract. We need to rebalance by bringing up manufacturing and other sectors.