Financial Services Bill

Debate between Lord O'Donnell and Lord Higgins

Tuesday 3rd July 2012 Lords Chamber

[Lord Higgins]

My Lords, we should be grateful for the opportunity to have a debate this afternoon because it enables us to focus on what our priorities should be. We have essentially been considering two things: how wide an inquiry do we need and how urgent is it that it should produce results quickly? What has become quite apparent is that one inquiry is not going to be enough. What has happened is this: on the one hand we need a short-term inquiry, but on the other hand we need a strategic inquiry. We also need the kind of investigation which the noble Lord, Lord Carlile, has put forward, but in a sense it is a separate issue because the outcome of that inquiry will presumably be the prosecution of particular individuals. In no way would the noble Lord’s inquiry tell us how to reform the banking system. So that is something which is self-contained and separate.

We come then to the question of the best tactical answer. I fear that the position has been somewhat confused by the references to Mr Tyrie. Let me make it absolutely clear—I speak as someone who was the chairman of the Treasury Select Committee for 14 years—that I have the greatest respect for Mr Tyrie, who has been doing a magnificent job as chairman of the committee, which I understand is to take evidence from Mr Diamond this week. But the question then arises of whether Mr Tyrie should also be the chairman of the Joint Committee, the proposal put forward by the Government. I think that this confuses the matter. The shorthand around the use of the word “Tyrie” has actually become extremely confusing. Yesterday I expressed a view that I shall repeat now: to do the jobs both of chairman of the Treasury Select Committee and chairman of the Joint Committee is too much. It will distract from the normal work of the Treasury Select Committee, while the Joint Committee will need the full attention of whoever is appointed as its chairman.

I am not clear on how it suddenly became apparent that Mr Tyrie would chair the Joint Committee. My noble friend the Minister pointed out yesterday that the Joint Committee will presumably decide who its chairman should be. I would prefer Mr Tyrie to continue as chairman of the Treasury Committee because he is doing such a good job, and I believe that someone else should chair the Joint Committee. However, that will be a matter for him and the respective committees to decide. At all events, the Joint Committee is the right way to go as regards the immediate investigation and rapid conclusions on what needs to be done urgently. That leaves unanswered some of the more fundamental positions that need to be considered. The body which could most appropriately do that was suggested by the opposition Front Bench.

To summarise, leaving the separate Carlile issue on one side, the Treasury Committee should continue with its work in the normal way; the Joint Committee should consider the immediate actions that need to be taken as it unearths the problems, as no doubt it will; and there ought also to be a longer-running inquiry. There will not then be any accusation that we are kicking the matter into the long grass, and at the same time we will get rapid results on the tactical situation. In the light of your Lordships’ debate, it is becoming increasingly apparent that that structure is the right approach.

[Lord O'Donnell]

My Lords, I support the sentiments expressed by the noble Lord, Lord Kerr, and the noble Baroness, Lady Kramer, and believe that we need to handle the very important issues raised by the noble Lords, Lord Eatwell and Lord Myners. There is a way of managing all of this.

First, importantly, we have a lot of information already. We want an inquiry to establish the facts, but we need to bear in mind that we have MoJ, CFTC, and FSA reports on the LIBOR issue that have raised enormous issues. I would very strongly support what the noble Lord, Lord Carlile said, but with the noble Lord, Lord Howard, variant, if I might put it that way; that is, that these reports have raised serious issues of criminality. We need to investigate those issues quickly, with sufficient resources, and with all the power and vigour that we would use if this were some other form of crime. That process is crucial. It should happen straight away, and it should not be resource-constrained.

Secondly, the Wheatley report will be important specifically to the way in which we handle the LIBOR issue. It is urgent, and plenty of others would like to take this business away from us. The Wheatley report, which should be with us through the summer, will suggest some amendments to this Financial Services Bill. I particularly like the suggestion of LIBOR being a qualifying financial instrument, which might well get us through a lot of these issues.

We then come to the more general set of issues on what is wrong with banking and how we can restore confidence in it. Those are very important questions. In my maiden speech, I suggested that we should have a Joint Committee of both Houses chaired by the chairman of the Treasury Select Committee who would have authority and power. Given the experience of Members of this House, it could come up with some answers that would get past the problem of reputational issue. Both Houses acting together would command confidence and such a committee more generally at what emerges from the LIBOR case.

Some issues will emerge directly from the LIBOR case which will relate to our future banking reform legislation, touching on the whole question of splits and the like. That Joint Committee could guide us as regards the changes we would need. I am in favour of changes to that legislation and I would look at total assets rather than only at risk-weighted assets, and at total leverage ratios rather than only at what is proposed. However, that is a separate issue that we will come to later in this House.