Financial Services and Markets Act 2000 (Exemption) (Amendment No. 2) Order 2011

Lord Newby Excerpts

Monday 17th October 2011 Grand Committee

[Lord Eatwell]

Perhaps, if the Minister would allow me, we can clarify this matter. In the consultation document on the FSA website, the first question is:

“Do you agree with the proposed legislative measures outlined in chapter 3?”.

The order before us today is included in Chapter 3. Does the Minister know the answer to that question from the people of Northern Ireland?

[Lord Newby]

My Lords—

[The Deputy Chairman of Committees (Baroness McIntosh of Hudnall)]

My Lords, I believe that the Minister has not yet finished the speech he wishes to make in order to put the Motion. We must first put the Motion before it can be discussed, so we must wait until he is ready to say that he wishes to put it.

--- Later in debate ---

[Lord Eatwell]

My Lords, I put a question to the noble Lord, which he has not answered, regarding the response of the people of Northern Ireland to the question about whether they agree with the order. On this side of the Committee we are entirely supportive of the objectives of the order. That is not the point that I am raising. My point is that the Merits Committee wrote to the Treasury on 13 October, reminding it to ensure that the summary of this draft instrument was available before the debate in the House. I have not been able to find a summary of the consultation on this draft instrument. Without the reactions of the people of Northern Ireland, who are closely and greatly involved in credit unions, as the Minister pointed out, it is very difficult to offer the order proper scrutiny. Therefore, I cannot continue, other than to say that it would be appropriate for the Treasury to ensure that relevant consultation material is published, as the Merits Committee requires, prior to consideration of draft legislation by the Committee.

[Lord Newby]

My Lords, there seems to be a muddle over the consultation. The Explanatory Memorandum said that the summary of responses to the March 2010 consultation will be published shortly. I think the Minister said that it was published today. I do not know when the March 2010 consultation formally finished, but it was presumably quite a long time ago. It is indeed unsatisfactory that we do not have the results of that consultation.

However, I think it is appropriate to look at what the order says. It is an extraordinarily short order, and it says nothing, as the Minister said, about the detail of how this change will be effected. All it says is that the change will be effected and that Northern Irish credit unions will be brought under the ambit of the FSA. I do not know, but I would be surprised if there was a single, solitary soul in Northern Ireland who would oppose that change, particularly if they look at what has been happening south of the border in recent weeks. Only a couple of weeks ago, the Irish Finance Minister was called upon to inject €1 billion into the credit union sector south of the border, because many of those credit unions—and we are talking about a sector that is as predominant as it is north of the border—found themselves, as a result of rising unemployment and declining income, in some difficulties. Of the 407 credit unions in the Republic of Ireland, some 79 are now in need of this injection of capital. It seems likely not only that that will need to happen but that there will have to be some consolidation in the sector and smaller credit unions will need to merge.

My question to the Minister is, in a completely different sense to that of the noble Lord, Lord Eatwell, why it has taken the Government so long to bring this legislation forward, given that the majority of the population of Northern Ireland would be affected if their credit union got into difficulty. Even if we approve this order in due course, it does not come into effect until 31 March next year. My question to the Minister was going to be, and remains, whether he has any evidence that the travails that afflict the Republic of Ireland credit union sector are spreading north. Does he envisage that any individual credit unions north of the border will get into difficulties over the coming weeks and months? In the absence of any covering FSA jurisdiction, what would the Government’s response be were they to find themselves in the same position of the Government south of the border, where a significant number—in their case about 15 per cent of credit unions—required short-term capital support?

[Lord Myners]

My Lords, I broadly welcome the intention of this order, but I find myself wanting to ask the Minister why it has taken such a long time to bring it forward when it was self-evident that it was necessary and had been agreed by the previous Government and endorsed by the coalition parties when previously discussed. It seems lamentable that the Government have allowed the situation to go on for as long as it has without taking any necessary action.

When it comes to this particular order, we do not have sight of the evidence that we were assured would be available to us in informing our discussion and agreement. What harm would be done if the Government withdrew the order and brought it back after we have had an opportunity to consider the evidence that is so clearly necessary to inform our decision on this matter? It simply cannot be acceptable that the evidence has been published only this morning. As far as I am aware, no effort has been made to make it available to those who are likely to attend this session and discuss this matter. That is an inexcusable failure by the Minister and the Treasury, for which the Minister owes us a full and proper account. The right approach would be to withdraw this order until we have had adequate opportunity to discuss the evidence.

In the mean time, I support the question that the noble Lord, Lord Newby, asked. Can the Minister give us clarity, given that the Government have been so slow in bringing this matter forward, as to the position of people with accounts and business relationships with Northern Ireland credit unions that have experienced difficulty? Do the Government stand behind them until such time as the Financial Services Compensation Scheme becomes an eligible right of those with relationships with credit unions? Will the Minister also assure us that to the best of the knowledge of the Treasury and the FSA credit unions are not currently offering products in Northern Ireland to which they are not entitled by virtue of their authorities? The Minister at the end of his speech listed some of the products that credit unions would be able to offer once this order was implemented, but which they are not currently able to.

Finally—I ask this having dealt with these matters myself—can the Minister tell us whether any further action is intended with respect of the failure of the Presbyterian Mutual Society, and in particular the directors?