Financial Services Bill

Debate between Lord Sassoon and Lord Desai

Wednesday 24th October 2012 Lords Chamber

[Lord Desai]

My Lords, before the Minister replies, I am puzzled, given what the noble Baroness has said, when I read the clause. What are the circumstances under which the Government will not order an inquiry? Are they things like when we had the fiasco with RBS, where an inquiry was conducted, hushed up and not published until we literally marched in the streets for the FSA to do so? Can the Minister explain under what circumstances the Treasury would not order an inquiry if such events had happened?

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

My Lords, I will try to address a number of those points. I will stick to the amendments that have been moved or spoken to rather than those that have not.

This group of amendments, as we have heard, relates to two of the mechanisms by which the PRA and the FCA can be held to account for regulatory failures. One of the key lessons learnt from the crisis, of course, is that we need greater openness and transparency about where things go wrong and about what lessons can be learnt. In that context, I think that my noble friend has got it completely right about the circumstances in which an independent inquiry might be called for, as opposed to self-investigation. I will leave that one at that.

I would also just say to my noble friend that Section 14 of FiSMA is being repealed. That is dealt with in Clause 5(1). However, the Treasury can use the new power in Clause 64 to arrange an inquiry into action that predates the Bill.

Financial Services Bill

Debate between Lord Sassoon and Lord Desai

Monday 8th October 2012 Lords Chamber

[Lord Marlesford]

May I just make one very small point to my noble friend? I declare an interest straightaway as a modest customer of the national savings bank. Along with many other people, I suspect, I assumed that if one had money in the national savings bank there was no way in which one would not be paid, however much money one had in it, in the event of any sort of default. When it transpired a couple of years ago that the national savings bank had put most of its money into the Bank of Ireland, certain fears were raised. It then became clear that the rules on the limit of compensation applied to money deposited with the national savings bank, just as they did to anything else. There was an implicit guarantee by reputation, as it were, on money put in the national savings bank, and the noble Lord’s point underlines the need for implicit guarantees to be cancelled by explicit denials of obligation.

[Lord Desai]

I add to what the noble Lord, Lord Marlesford, has said. As a depositor in the US, I had a cheque book and it said on each cheque that I wrote to what extent my deposits were guaranteed by the FDIC. It is all right for the FSA handbook to say something, but it would be much better if on my debit card or cheque book—although people do not use cheque books any more—it said to what extent my deposit was guaranteed. If it said that, it would be very good.

[Lord Sassoon]

I thought that I had said this, but I shall say it again. The detail of what is covered is a requirement that comes with your bank statement, which is a more appropriate place. It is better to have it attached to the bank statement than on a cheque when you are paying money out. So it is there, and it is completely clear in the rules in the FSA handbook.

[Lord Desai]

I do not carry my bank statement with me, but I do carry my debit card.

Banking Reform

Debate between Lord Sassoon and Lord Desai

Thursday 14th June 2012 Lords Chamber

[Lord Sassoon]

The noble Lord, Lord Rees-Mogg, of course speaks with great authority on these matters. All I do is to say that I listen with great interest to his historical analysis.

[Lord Desai]

My Lords, before we had the report from Sir John Vickers at the commission, there was talk of living wills that banks would make. Whatever happens, we are now to make quite sure that the taxpayer does not once again have to bail banks out. While it is all right to have ring-fencing and so on, we have to remember that Northern Rock was not a bank with investment banking divisions. It was a bank which failed purely because of misbehaviour. Are we sure that, whatever happens, if even a ring-fenced bank fails it will not be rescued by the taxpayer?

[Lord Sassoon]

The noble Lord, Lord Desai, as always, brings up important points. Of course, living wills are an integral part of the whole construct for better resolution of banks than we had before. Indeed, the FSA has been leading the project for a couple of years or more to make sure that all the arrangements are in place. The noble Lord draws attention to another important part of the construct.

Monetary Policy Committee

Debate between Lord Sassoon and Lord Desai

Wednesday 6th July 2011 Lords Chamber

[Lord Sassoon]

My Lords, I can confirm the first part of what the noble Lord, Lord Stern, says. What the Government will do is to stick to a very firm, clear deficit reduction plan as the background against which the Monetary Policy Committee can make its decisions with confidence.

[Lord Desai]

My Lords—

Budget Responsibility and National Audit Bill [HL]

Debate between Lord Sassoon and Lord Desai

Wednesday 1st December 2010 Grand Committee

[Lord Sassoon]

It is clearly up to Robert Chote how he deploys his staff and what they do. Noble Lords obviously have not quite grasped what is meant by the independence of the OBR. It means that it is for the office to organise its life. I have not the faintest idea how it will do it, but I am sure that it will do it professionally and appropriately and that it will devote the necessary resources.

In answer to another question, I was going to quote from page 3 of the OBR report to summarise the contacts that it has had in the build-up to producing its 150 pages, but the noble Lord, Lord Turnbull, has already pointed to the key paragraph. The OBR made it clear that it would publish the list of contacts, which, as it promised, is coming out this week, shortly after the publication of the report.

Nothing in the Bill stops the OBR publishing any minutes, reports or documents of any kind that it wants to. As well as focusing on the critical point that we should not require it to produce minutes for the sake of minutes when the output is forecasts rather than policy-making discussions, it is also important that we should recognise that if it wants to disclose anything about the way in which it goes about its business, it is entirely free to do so. It can draw on external expertise. It might have committees with external experts. There is nothing to preclude that. The core executive functions cannot be delegated, though, and the minimum output will be the two formal reports per year. However, it is already also producing a considerable amount of other information, and it will do so in future. It is for the office to be as transparent as it thinks is appropriate, consistent with its mandate.

I do not for one minute take this to be a trivial point. I made the comparison with the MPC because it is critical. However, the amendments would require the OBR and the BRC to do a number of things that on the one hand are not required—consistent with the principles of accountability, transparency and independence—and, on the other, would put minor straitjackets on it that are not necessary because it should be free to publish whatever it sees fit to publish.

This has been an interesting discussion. I am sympathetic to some of the objectives that are desired, but I am afraid that the amendments in this group do not add anything to the underlying purposes, which I understand are well intentioned. I ask noble Lords not to press their amendments.

[Lord Desai]

Perhaps I might try once more. There was a birth trauma when the OBR was established, and its independence was undermined by what happened. Sir Alan Budd has publicly said that he suffered as a result. We are trying to help the Government to re-establish trust in this body. They have taken the view that they have done enough—but that is what they said last time. It is fine for them not to accept the amendments, but they will harm the reputation of the OBR.

Comprehensive Spending Review

Debate between Lord Sassoon and Lord Desai

Wednesday 20th October 2010 Lords Chamber

[Lord Sassoon]

My Lords, I could sit here for a long time, get out my calculator and work these things out. All the numbers are set out in the book; there still seemed to be copies in the Printed Paper Office when I came into the Chamber. There are probably more important things to be talking about now.

[Lord Desai]

My Lords—

--- Later in debate ---

[Lord Sassoon]

I am very grateful to the noble Lord for drawing attention to the fact that the Presbyterian Mutual Society has been a long-running issue which was not gripped by the previous Government. Whether it is that or properly compensating the policyholders of Equitable Life, we have got on and made what we believe to be fair decisions which were dodged by the previous Government.

[Lord Desai]

My Lords—

[Lord Winston]

My Lords, would the Minister be kind enough to answer my noble friend Lord Eatwell’s question about universities? Does he agree that the Browne review can in no way cover the costs of teaching, which we need, in the universities which contribute so much to our economy beyond the STEM subjects and so much to our civilised society?

Financial Services Regulation

Debate between Lord Sassoon and Lord Desai

Wednesday 16th June 2010 Lords Chamber

[Lord Sassoon]

My Lords, I thank my noble friend Lord Stewartby for pointing out one of the critical parts of the construct we will put in place. I apologise for using the new terminology—I hope he will forgive me—but the macro-prudential regulator also needs to have oversight of the micro-prudential regulation, the supervision of individual firms. That is part of what we will come back to tomorrow.

[Lord Desai]

My Lords, the previous Government passed a financial services Act putting in new arrangements for tripartite regulation. The question remains as my noble friend Lord Richard asked. Do the Government intend to bring in a new Bill, revising the Act now on the statute book? If so, how soon will they bring such legislation? Have they prepared a draft Bill?

[Lord Sassoon]

My Lords, I thank the noble Lord, Lord Desai, for pressing on this point of legislation. I remind your Lordships that there was, indeed, provision in the Queen’s Speech for legislation. With the changes we are proposing it is safe to assume that primary legislation will be required. It will come forward in this Session. We should talk more about that, however, in relation to the further detailed arrangements.

Office for Budget Responsibility

Debate between Lord Sassoon and Lord Desai

Monday 14th June 2010 Lords Chamber

[Lord Sassoon]

I am grateful to my noble friend Lord Higgins for his questions. Funding the deficit will be critical. As I pointed out, the level of borrowing will continue to rise throughout the forecast period to £74.4 billion in public sector net debt terms in 2014-15. The scale of the task should not be underestimated. What is critical to funding the deficit in a safe way is maintaining the UK’s credit rating and central to that is having a credible plan. The foundation stone of that credible plan is the revelation today of the true state of the nation’s finances, with some decent forecasts five years out on which all else, including the funding plan, can be built.

My noble friend’s second question was about the mechanics of selling debt. The Debt Management Office operates under a clear and transparent plan, which sets out exactly what the Treasury requires it to raise in the markets each year, consistent with the Budget forecasts. So far this year, the office has carried out that plan successfully and I have every expectation that it will continue to do so.

[Lord Desai]

My Lords, if the Office for Budget Responsibility is to be independent, it is essential that its report should not be made a political football—we do not discuss the MPC’s report in the manner in which we discuss the OBR’s report. I particularly welcome the fact that the OBR has not only a fan diagram for the growth rate but one for public sector net borrowing. However, it would have been better if the report had presented a range of numbers for the debt and the deficit, as well as for growth. If growth is uncertain, as it surely is, especially as you go forward, all the numbers on the deficit and the debt are equally uncertain. I am speaking neither for nor against what the Government intend to do but, if we set up a specialist agency, it should perform its function in a way that illuminates the uncertainty surrounding public policy. That uncertainty will help the Minister’s right honourable friend the Chancellor as well as everyone else, as it is important not to pretend that the numbers for 2014-25 are hard and fast, as the noble Lord wishes to do.

[Lord Sassoon]

My Lords, the noble Lord, Lord Desai, has made an important point by drawing attention to the huge illumination, to use his word, of the public finances and the forecast going forward. He makes some interesting technical points about how some of the data should be forecast. All I can say is that, if Sir Alan Budd is not listening now, I will take back the noble Lord’s points and relay them to him, as it is for him to decide how he lays out his forecasts in future.