Financial Services Bill

Lord Naseby Excerpts

Monday 11th June 2012 Lords Chamber

[Lord Naseby]

My Lords, before I begin my speech I wish to offer an apology to the House in general and in particular to my noble friend on the Front Bench. Regretfully, due to the vagaries of public transport, I was not in my place as I should have been at the start of the debate. However, I have heard most of the speeches subsequently.

I wanted to take part in this debate because, as we all know, the financial sector is absolutely vital to the success of this country. It does not matter whether you are a small shopkeeper, a SME or any other form of business, a major or minor saver, the success of our country stems from the success of the financial sector. The Bill, huge as it is, has the potential to create the right conditions providing not only that the structure is there but that we can find the men and women to use, work with competence and understand the culture behind it.

I do not have the skills or the competence to make a judgment on the major financial dimensions and controls of the Bill. Others who do have such competence have spoken today and I hope that my noble friend on the Front Bench will listen to and take on board what they have said today and what will arise in discussion in Committee.

However, there is a certain area where I can claim some competence and skill. It straddles the area that my noble friend—I do treat him as a friend—Lord Borrie has half discussed this evening and I would like to add to that. He and the House will know that I have asked a number of questions about the Office of Fair Trading. Much of the work that it does is good, but there have been a number of examples, particularly in the recent past, where extensive inquiries have been undertaken over months and, indeed, years, costing millions of pounds to both the public sector and the companies or organisations that were under investigation and where it has been subsequently found that there was no wrongdoing.

It has been mentioned by a couple of noble Lords that we are now in a transition period. It is very important in a transition period, if I may use a cricket metaphor, that the ball is not dropped in the slips. One of the areas that deeply concerns me at the moment is that of payday lenders. I asked Citizens Advice whether there was a current short example that I could quote to your Lordships. In November 2011, a citizens advice bureau in the West Midlands saw a woman who was earning £880 a month. This did not prevent her taking out 19 payday loans. She was granted these short-term loans. By the time she came to the citizens advice bureau her entire wages were being taken up in debt repayments. As a result, she was having to use payday loans to replace her income, not to supplement it for short periods as payday lenders suggest in their advertisements.

I was in the world of advertising and I listen to the advertisements and it has come over in the past few days that there are a number of companies in this area. The new authority which is to take over has to have a competence not only to license particular companies in the payday loan area—there is a function there that is required—but has to have an ability to take action early before matters escalate out of control. We are in a transition period and I say to my noble friend on the Front Bench that I hope we will not allow this problem to escalate out of control.

There is a second area in which I have some competence. In the past I had the privilege of being chairman of a friendly society. I took through the House the Building Societies (Amendment) Bill, which was started in another place by a former Member of Parliament, John Butterfill. The provisions of that Bill, which came into effect just before the financial crisis in 2008, gave some flexibility to building societies in what they could or could not do and allowed them to develop as good mutuals. Yes, I am one of those who regrets the demutualisation of so much of what was the mutual movement.

When I was chairman of a friendly society we tried very hard to extend niche areas. We were a small operation with assets of only £1 billion at the time. We looked at the niche markets we could provide that were not available or on offer from the banks. Every time we tried the FSA put the claw of scrutiny upon us—which was fair enough—and it was very difficult to find new markets to move into and develop. The same applied to the credit unions. The child trust fund came forward and the friendly society movement received 25 per cent of that market. Indeed, without the drive and enthusiasm of the friendly society movement, the child trust fund would not have developed as it did. Sadly, the knife went in from the Liberal Benches. Whoever was to blame, the scheme could have been modified and need not have cost the Exchequer the money it was costing. The point I wish to make today is that the regulator has to look at the extent of the risk to smaller operations, which often tend to be community based, and not decide that just because they are small they are ultra risky.

There needs to be a change in attitude in a number of other areas. One in particular is the alleged pension mis-selling situation. There is no doubt that there was some pensions mis-selling in the late 1990s. Equally, though, by the time we had gone through the FSA’s requirements, we and many other small pension providers soon found out that, on a generous estimate, up to 25% of pensions might have been mis-sold. There is a requirement in life for a bit of caveat emptor, but the early claims companies got on the back of this and made it into a business of its own, almost regardless of the validity of the claims. Basically, the providers would say, “It is easier to settle than it is to contest this”.

The banks have also had to face challenges in relation to the selling of PPI and some other products. While a person who has genuinely been mis-sold a product should be properly compensated, with the new regulator we must not allow a situation to arise where it is far more troublesome to deal with a tidal wave of claims from the claims houses. They have very persistent people working in them, and it is cheaper to settle than to look at the validity of the claim.

I shall finish by saying that my noble friend Lord Lawson, who has been in his place for almost the whole debate, mentioned the word “cost”. Cost is a crucial feature in relation to anything in financial services, and particularly in relation to the controls and requirements being put on the industry. The new FCA will need to keep abreast of the comparative costs between what is proposed for the UK and what is happening in other major financial centres around the world. We need to remain cost competitive as well as control competitive.

Coins

Lord Naseby Excerpts

Tuesday 24th January 2012 Lords Chamber

[Lord Sassoon]

My Lords, first, on the implementation of the introduction of the new 5p and 10p pieces, the Government took the view, after consulting the industry, that there should be a delay of one year from the date of January 2011, when the previous Government had originally intended to introduce the coins. The noble Baroness refers to the Automatic Vending Association. When we announced the delay in the introduction, the association’s CEO said:

“This … is fantastic news for the vending and coin machine industries because it allows them more time to update coin mechanisms, providing a saving of £16.8 million to the vending industry—a real help in the current economic climate”.

So the introduction of the new coins has been done in full consultation.

When it comes to the £1 coin, the issue is rather different. It is one not of cost saving but of potential risk and a drop in confidence as a result of counterfeiting. The counterfeiting of £1 coins is estimated to account for almost 3 per cent of the stock, but the Royal Mint conducts regular public awareness surveys to ensure that public confidence in the pound is high, and the Government have no change to the £1 coin in mind.

[Lord Naseby]

My Lords, the consultation with business and industry and the saving are welcome, but after the new coins have been in circulation for a period, will it be obvious to the consumer which coins they have in their pocket when they arrive at a parking meter?

[Lord Sassoon]

Noble Lords may not be aware that they may have in their pocket two different sorts of 1p and 2p coins, because they were changed from cupronickel to copper-plated steel in 1992. When looking in my pocket this morning, first, I could not distinguish them and, secondly, I had not been aware of the distinction. This is well trodden territory as successive Governments have updated the coinage, and there should be no particular difficulty.

Banks: Cheques

Lord Naseby Excerpts

Monday 6th June 2011 Lords Chamber

Asked By

[Lord Naseby]

To ask Her Majesty’s Government what is their response to the proposed withdrawal of cheques by the banks.

[The Commercial Secretary to the Treasury (Lord Sassoon)]

My Lords, the Payments Council has made a clear statement that cheque facilities will continue to be available until the alternatives that are put in place, including a paper-based system, are available, acceptable and widely adopted. Many users continue to rely on cheques, particularly small businesses, charities and the elderly. The Government believe that cheques should not be phased out unless suitable alternatives are in place for all users.

[Lord Naseby]

Is my noble friend aware that the Payments Council is little more than a bankers’ quango? Is it not extraordinary that this proposal takes no account of the Federation of Small Businesses, which has 200,000-plus members, who are totally against such a change? It takes no account of the hundreds of thousands of clubs, and their treasurers, up and down the country—I declare an interest as treasurer of the Lords and Commons Tennis Club. Furthermore, there are certain technical issues in the City, where those who fail to take up a rights issue have to be presented with a cheque and where, for takeover bids that fail, there has to be a cheque drawn. There are myriads of activities that require cheques, affecting tens of millions of people. Is it not time that the bankers for once thought about the public? Should not the Government consider putting further pressure on the Payments Council to make sure that cheques remain a normal method of doing business in this country?

[Lord Sassoon]

My Lords, it is correct that the Payments Council is an industry body. It is the banks and the other industry players who pay for and maintain the payments system, but it is a body with a chairman and four other independent members, and the Bank of England is an observer on the board. Back in December 2009, the Government welcomed the commitment made by the Payments Council, which was clear that if it took a decision in 2016 to end the present system of cheque clearing in October 2018—and it will take that decision only in 2016 if it does so at all—it will do so only if there is an available, acceptable and widely adopted alternative system. The Government have been clear that that must include a paper-based system. We believe that it is appropriate to continue to work closely, as we do, with the Payments Council to make sure that it is held to the commitments that it has given. The council is consulting users widely and has another round of consultation running now, and it will I am sure continue to take note of the important views of all users of cheques.

Public Expenditure: Reserve

Lord Naseby Excerpts

Monday 9th May 2011 Lords Chamber

[Lord Naseby]

Has my noble friend seen the number of recent articles about the Office for National Statistics and the conflict between the figures that it has produced for the output of the construction industry and the figures that that industry believes are correct? The difference appears to be 0.3 per cent of national growth. This is a severe and difficult area and therefore should not the Office for National Statistics resolve that issue once and for all before the next lot of statistics come out?

[Lord Sassoon]

We are straying a bit from the subject of this Question but, as there do not seem to be many other noble Lords wanting to get in, I will say that I know how difficult it is for the ONS to produce these statistics. I am sure that it will continue to look at all ways of improving the way that it deals with the data. There was a one-off change to the way in which construction data were reported and the industry is questioning that. I am sure that the ONS is on the case.

Financial Services: Shareholder Engagement

Lord Naseby Excerpts

Wednesday 19th January 2011 Lords Chamber

[Lord Sassoon]

My Lords, the takeover panel operating independently keeps that issue and all other issues related to the good working of the takeover market under regular review. The department of business consultation, A Long-term Focus on Corporate Britain, which is currently calling for evidence, will be interested to hear what people have to say on that very topic.

[Lord Naseby]

Has my noble friend noted the recent statement from the Financial Reporting Council suggesting that annual reports shall no longer be printed? How does he think that will improve small shareholder engagement?

[Lord Sassoon]

My Lords, there is a fine balance to be struck between making sure that shareholders get all the information they require on the one hand, and on the other hand allowing companies to take advantage of electronic and other media to disseminate information in a way in which an increasing proportion of shareholders wish to receive that information and which may be environmentally friendly if it does not require large amounts of paper to be used. I am glad that the FRC is grappling with that issue.

Bankruptcy

Lord Naseby Excerpts

Tuesday 7th December 2010 Lords Chamber

[Lord Sassoon]

My Lords, when the Government came into office, we had been put on negative credit watch by one of the main rating agencies, unprecedented for the UK, and were paying interest of £120 million a day. The first or second largest holder of bonds in the world had talked of the UK as a “must to avoid” and described the UK’s gilts as,

“resting on a bed of nitroglycerine”.

The Government have restored confidence in our public finances by setting out a clear plan to restore the budget to balance and that is what enables us to borrow what we need to borrow on the international markets on reasonable terms.

[Lord Naseby]

Has my noble friend had a chance to read the statement from the shadow Chancellor in which he said that the problem for the Labour Party was that it had built up a reputation for 13 years of overspending and debt? Is that not near-bankruptcy?

[Lord Sassoon]

I completely agree with my noble friend. That is indeed it. I was looking at the Oxford English Dictionary this morning and I saw that one definition of “bankrupt” is,

“one who has brought himself into debt by reckless expenditure or riotous living”.

I would not presume to accuse the previous Government of riotous living.

Autumn Forecast

Lord Naseby Excerpts

Monday 29th November 2010 Lords Chamber

[Lord Sassoon]

My Lords, forgive me, I should have pointed out that the details of the package are still subject to final negotiation. I guess that the lawyers have to trawl over the press release, as it were, and my right honourable friend’s statement that the loan is not the loan until it is absolutely bolted down in the formal documentation. The terms of the loan are still subject to final negotiation alongside the IMF and eurozone packages.

[Lord Naseby]

Is my noble friend aware that listening to the noble Lord, Lord Eatwell, reminds me of Cambridge in November—rather dour and foggy with not much light being shown on the country’s economic situation? Is it not a fact that, since the general election, the United Kingdom’s long-term interest rates have been falling every month and that prior to that period they were going up every month?

[Lord Sassoon]

I am grateful to my noble friend for pointing out the changed direction of travel since the new Government came in. I do not want to wade into a Cambridge argument. As a mere Oxford man, I always found my economics professors rather more cheery in their outlook, but perhaps my memory is clouded.

Housing: Mortgages

Lord Naseby Excerpts

Wednesday 10th November 2010 Lords Chamber

Asked By

[Lord Naseby]

To ask Her Majesty’s Government, in the light of the Financial Services Authority’s new affordability rules, what is their assessment of the current housing mortgage market in terms of the availability and price of mortgages.

[The Commercial Secretary to the Treasury (Lord Sassoon)]

My Lords, the Financial Services Authority is engaged in a review of mortgage regulation, the Mortgage Market Review. The Responsible Lending consultation paper published in July, which looked at proposals on assessing affordability, forms one part of this ongoing consultation. The Government will continue to work with the Financial Services Authority, mortgage lenders, intermediaries and consumer groups to ensure a mortgage market that is sustainable for all participants.

[Lord Naseby]

Is my noble friend aware that mortgage lending is at a 10-year low? The main reason seems to be that, on the one hand, the lenders—that is, the building societies and the banks—are saying that they require a 25 per cent deposit and that they have to waive certain supplementary income, while, on the other hand, the FSA is saying that it has not prescribed a 25 per cent deposit but is imposing tough new proposals. Will my noble friend bring together these two parties so that couples who want to buy a modest house of, say, up to £200,000 in value, but who cannot possibly find £50,000—which is the 25 per cent requirement—are asked to put forward a 10 to 15 per cent deposit?

[Lord Sassoon]

My Lords, the level of new gross lending in the mortgage market is above levels seen throughout the 1990s, but, inevitably in this part of the economic cycle, it is low, as my noble friend said. Although loan-to-value thresholds are taken into account by the FSA for prudential purposes, they are not hard limits. The FSA says in its recent consultation paper that no case has been made for LTV caps on consumer protection grounds, and the FSA is not proposing to impose a maximum LTV cap. I note from just scanning mortgage products available on the internet this morning that there is still a range—admittedly a reduced range—of products with 80 per cent and 90 per cent LTV available.