Financial Services Bill
Debate between Lord Sassoon and Lord Phillips of Sudbury(12 years ago)
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Lord Phillips of Sudbury
My Lords, I concur with what the noble Lord, Lord Flight, has said, and I am a bit foxed by the way in which the noble Lord, Lord Eatwell, introduced this amendment. I think I heard him say that these appointments have become more and more politicised, and that he regretted that. It strikes me that to require a debate to be held in the House of Commons after the appointment has been made is an invitation to the utmost politicisation, especially because, as far as I can see, there would be no consequence to that debate, in that the appointment would already have been made.
Lord Sassoon
My Lords, before I turn to the detail of this amendment, I thank the Bill team for dealing with a significant hatful of amendments, this being the first, that turned up from the noble Lord, Lord Eatwell, rather late yesterday evening.
Lord Sassoon
My Lords, I thought that was what I had done in the last three minutes. I explained that this is not an exhaustive list. Yes, the factor that the noble Lord identifies is an important consideration, but we have included the much more specific categories of systemic risk which are identified in the research. If we started putting looser considerations in there, it would be difficult to know where the list should stop. Indeed, as one extends lists like this, it risks by implication leaving out other important factors. I do believe that subsection (3) and the whole of proposed new Section 9C as drafted completely embrace the ability and the requirement for the FPC to pick up what the noble Lord is getting at, but does not run the risk of us trying to draft in some of the other things that we all might be able to think of.
Lord Phillips of Sudbury
Before my noble friend sits down, will he comment on the essential point made by the noble Lord, Lord Eatwell, about the risks defined in subsection (3) covering only “micro” rather than “macro” risks? It does seem that the language is actually “macro”. It talks about systemic risks, structural features and so on. Does the Minister agree?
Taxation: Avoidance
Debate between Lord Sassoon and Lord Phillips of Sudbury(12 years, 4 months ago)
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Lord Sassoon
My Lords, the estimate of the tax gap in 2004-05 was 8.5% and it is now 7.9%. It still means that there is a tax gap of £35 billion, which HMRC will vigorously pursue. That is why only this week we made further announcements and consultations to make sure that aggressive tax schemes and the people who market them are targeted more effectively and why HMRC has reinvested £900 million of its spending in this spending round to target this area.
Lord Phillips of Sudbury
My Lords, is it not seriously damaging to social cohesion—and demoralising in the literal sense of that word—when some of the highly paid and some would say highly overpaid public company directors are paying a much lower rate of tax on their grotesque earnings than the lowest paid employees in their companies?
Lord Sassoon
My Lords, what is important is that we have a tax system that is fair and which means that those with the broadest shoulders pay the most, which is exactly what the most recent Budget did, and that we have a tax system whereby in all parts of the earning scale people are incentivised to work. That is why raising the tax threshold on the way to our target of £10,000 is one component of making a real, radical change to the tax system in this country.
Financial Services Bill
Debate between Lord Sassoon and Lord Phillips of Sudbury(12 years, 4 months ago)
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Lord Phillips of Sudbury
My Lords, I support the purport of the amendment moved very effectively by the noble Baroness, Lady Drake, and supported entirely fairly by the noble Lord, Lord Peston. I confess that for 26 years I tried to deal with the British public’s legal problems as the legal eagle on the “Jimmy Young Show”. I suppose that I take a particular interest in the effect of legislation such as this on the ordinary consumer. There are a number of practices at large these days in what I call big business that leave the individual consumer way behind in terms of any fairness of dealing. The big battalions will call in aid lawyers, often paid on a conditional fee basis, and it is frankly terrifying if you are a small bloke and have a dispute with a large company. You will quickly be given the clear indication by the large company that if you do not buckle and pay up you will be crushed. I put that a little dramatically, but not much.
As it happens, I have been dealing with one of the large energy companies lately over a disputed electricity Bill. I have been astonished at the general tenor of the dealings and the way in which it so organises its affairs that if I were not an old fart of a lawyer I would easily have been overborne by its tactics and approach.
Lord Phillips of Sudbury
I am glad to see that my noble friend doubts that I am an old fart of a lawyer, but I am—55 years in the saddle and still riding.
I appreciate that the Minister has, at all stages along the way, tried to protect the Treasury, the FCA and so forth against all these vague and difficult notions of fairness. Indeed, he might like to clarify in summing up whether he thinks that the ill to which the amendment addresses itself could be healed by the integrity objective. The amendment is to the competition objective, but the integrity objective could enable the FCA to take account of the matters raised by the noble Baroness, Lady Drake, in order to improve things. But I seem to recollect from one of the amendments in my name and that of my colleagues that the Government think that the integrity objective is not about fairness: it is about the mechanics of the system, if I can put it that way. I have the same general misgiving as the noble Lord, Lord Peston, and many others in the House, that the Bill does not address issues of fundamental fairness that affect ordinary citizens. I shall be very interested if there is any consolation that my noble friend can give.
Lord Phillips of Sudbury
I seek to help my noble friend. Regarding the language of new Section 1E(2), where it states:
“The matters to which the FCA may have regard”—
there is no danger of the kind he suggested in the amendment of the noble Lord, Lord Barnett. This is because there is the crucial word “include” at the end of the preamble to the new section, which states:
“The matters to which the FCA may have regard … include”,
paragraphs (a), (b), (c) and (d). That is a clear indication that this is non-exhaustive. One could therefore add a number of further provisions without endangering the ability to think more widely.
Lord Sassoon
My Lords, my clear legal advice is that the FCA does not require this additional “have regard” and that there is, notwithstanding the wording to which my noble friend draws attention, a danger that if the list becomes longer and suggestive that it is intended to be exhaustive, that may give rise to legal challenge. That is the advice that I have received from the best legal advisers that the Government have to hand and it is all that I can say on the matter.
I want to wrap up this discussion by going back to some of the things that noble Lords have drawn attention to in new Section 1C on the consumer protection objective. The noble Lord, Lord Peston, for example, is of course quite right to say that some or the majority of consumers of financial services are not “rationally well informed,” to use his term. This is precisely why, among other things, new Section 1C(2)(b) refers to,
“the differing degrees of experience and expertise that different consumers may have”.
This is also why, among other things, we have discussed the important work of the Money Advice Service in improving the ability of consumers to make informed choices, which we will come back to. I therefore agree with the noble Lord’s starting position, but I suggest that the way to deal with it is not through this amendment. I could point to a number of the other provisions in the consumer protection objective which go to the heart of many of the concerns raised in this debate. Coming back to my fundamental analysis that the legal analysis on which this is based is, in the view of the Government, flawed, I ask the noble Baroness to withdraw her amendment.
Lord Sassoon
I entirely accept that. However, the effect of these particular amendments would be to take away all regulation and protection. We certainly do not want to go from the current situation, which it appears people are already seeking to exploit, to one where merely because the apparent purposes of the investment were perfectly worthy and the overwhelming majority of promoters would obviously be people of the highest standing, others would be allowed to fly under their banner.
Lord Sassoon
Perhaps I may make one other point and then I will let my noble friend in. My noble friend Lord Hodgson mentioned the exceptions to the financial promotions order for sophisticated persons. Although I should not discuss the advice I gave Ministers in my previous life as an official, all I would say is that I am extremely familiar with the construction of that order in that particular respect. In my view, Ministers at the time made a very wise decision about that particular provision. I do have form, as it were, in this space. I encourage practical ideas for amending, which will be seriously considered, and although it is not easy to amend the financial promotions orders as regards the Red Tape Challenge, Ministers will look at them. Specifically, Amendment 121A is not needed in order to make that happen.
Lord Phillips of Sudbury
In his final remarks, my noble friend pre-empted what I was going to ask him, which was to confirm that it is not beyond the wit of this House to take account of the very proper points he raises and, at the same time, to take account of this big, potentially vital sector of social investment. However, I think that he has already impliedly agreed with that.
Lord Sassoon
I have drawn the Committee’s attention to the opportunity that exists at the moment, and of course the Red Tape Challenge is a cross-government initiative. No. 10 and others take it very seriously; it is not simply a Treasury matter; and it goes with the wider drive in this area. I shall leave it at that.
I should say just a little about Amendment 128AA. I do not believe that the FCA needs to have a dedicated panel for representatives of social investors. As the FSA’s panels already do, the FCA’s panels will advise on a wide range of policies and regulations from a broad range of perspectives, and I do not believe that it is necessary or proportionate to establish another panel, at additional cost, purely to represent the interests of social investors and social sector firms. Social sector organisations will be able to feed in their views through public consultations. The interests of socially oriented financial services firms can be adequately represented by the Practitioner Panel and Smaller Businesses Practitioner Panel, and many of the FSA’s Practitioner Panel members belong to firms which are involved in social investment.
However, again in the spirit of wanting to be helpful in response to the amendment, and accepting that the interests of smaller specialist firms also need to be appropriately represented, I have sought and gained assurance from the FSA that from now on it will approach trade associations which represent social investors, such as the UK Sustainable Investment and Finance Association, asking them to put forward nominations to the Smaller Businesses Practitioner Panel. I hope that that will give additional reassurance to the noble Lord, Lord Tunnicliffe, about the approach in this area. Given all that, I ask my noble friend to withdraw her amendment.
Financial Services Bill
Debate between Lord Sassoon and Lord Phillips of Sudbury(12 years, 4 months ago)
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Lord Sassoon
My Lords, let me begin by saying that, as with the previous group, I wholeheartedly support the sentiment underpinning these amendments. The Government want markets which serve the wider economy, underpin growth and contribute to a more prosperous society as a whole. We want more proactive and judgment-based regulation, and we want the FCA to be tough and decisive in identifying and acting on bad practice in the financial services sector.
The Government have been very clear that they want social ventures to create positive change in our society and that to achieve this we need to make it easier for them to access the capital and advice they need. There is a growing social investment market which seeks to combine financial return with social impact. Investors are often willing to accept higher risk and a lower financial return because of the social value that their investment can make. However, as has also been noticed, the market is embryonic and needs support. The Government are committed to providing that support. In a moment, I will describe how we seek to do that. Before I do so, I will turn to some of the specific amendments to which noble Lords have spoken.
There are a number of reasons why I cannot support Amendments 104, 104ZA, 120, 137, and 139. First, where their intention is to promote social investment, that is simply not an appropriate role for the regulator. Although I agree with my noble friend Lord Phillips of Sudbury that the Government need to act in support of the social investment sector, we will not create a healthy UK financial services market, including for social financial services, by giving the FCA the job of taking forward what should be and is part of the Government’s wider social policy agenda. Let me be clear: the FCA’s job should be to administer a regulatory regime, policing it so that consumers are appropriately protected, regardless of what they invest in, that there is effective competition, and that markets are clean and operate with integrity.
Secondly, where the intention behind the amendments is to—
Lord Phillips of Sudbury
I am sorry to interrupt my noble friend, but he did make a provocative remark just now, I suspect without realising it. He said that I was asking in these amendments for the FCA to “take forward” the social investment market. That is not the case. These amendments are couched extremely carefully, and not in any proactive way. To take Amendment 104, they merely ask the FCA,
“so far as is compatible with acting”,
in accordance with “its operational objectives”, to take,
“account of the distinctive features of social investment”,
and not to inhibit the development of it. On no basis can that be characterised as asking the FCA to “take forward”. It is merely asking the FCA to note the particularities of this sector and not to impede it.
Lord Sassoon
My Lords, we will have to disagree on the construction of some of the words here. Taking some of the amendments in the group, I appreciate that some of them are couched in the way in which my noble friend has just elaborated. However, for example, Amendment 103 inserts into new Section 1B(4) the words “and society” at the end of a very critical recital of what the FCA must do. It says it must,
“discharge its general functions in a way which promotes effective competition in the interests of consumers and society”.
I accept that it is all driven with an override,
“so far as is compatible with acting”,
in a way that advances the consumer protection objective, but it would add something which is tantamount to asking the FCA to be proactive in driving forward the social objective.
Lord Sassoon
My Lords, one of the problems is that I am speaking here to a group of amendments. If we had longer or they were all degrouped, we could tease out one from another in more detail. I appreciate that some are more directive than others. However, perhaps I may move on to my second area of difficulty here. It probably will not help but I have a number of difficulties with this group of amendments.
Where the intention behind the amendments is to ensure proportionate regulation of this budding social investment sector, I reassure the Committee that the FCA will indeed take a proportionate and risk-based approach. Both regulators must take a proportionate approach to the regulation of small or socially orientated firms, particularly in comparison with large and complex banks.
My noble friend Lord Phillips of Sudbury referred to new Section 137R, which enables different rules to be made in relation to different authorised persons. I could also draw the Committee’s attention to new Section 1C(2)(a), which requires the FCA to have regard to the differing degrees of risk involved in different transactions. Another is new Section 3B(1)(b), which requires the FCA to have regard to the principle of proportionality. Therefore, I believe that there are appropriate layers of protection there without this series of amendments highlighting the social investment sector in the way that they seek to do.
Lord Sassoon
Perhaps I may finish this part of the argument and then of course I will let my noble friend come in again. I believe that this proportionate approach that I have described will be vital in supporting effective competition, as well as helping the social sector, and the requirement to make regulation proportionately has to be an important tool in delivering that. However, equally, consumers have to be reassured that if they deposit money with, or buy financial products from, socially oriented financial institutions, they will be subject to the same level of protection and security as would be the case with any other institution. My noble friend may come back and say that that is not what the words actually say. He compared the activity of the big banks with the very well meaning institutions—which I accept they are—in this budding sector. Nevertheless, we have to be very clear and careful in making sure that those who deposit money are subject to the protection that they would expect, regardless of whom they transact with. I believe that in this area the Bill as currently drafted will deliver a proportionate balance for both regulated firms and consumers. I will continue to listen to the full range of arguments on this important issue and we will continue with important strands of work.
My noble friend Lady Kramer referred to the ability of financial advisers to advise on social investments as an asset class. I agree that this is a concern. That is why it is one of several regulatory issues that are currently being considered by the Cabinet Office review. Therefore, there are other avenues through which these issues are being actively considered, as they should be.
Lord Phillips of Sudbury
I am grateful to my noble friend for giving way. I am sorry to detain the Committee at this time of night but this is an important group. My noble friend Lord Hodgson of Astley Abbotts made one extremely telling intervention. I recognise what a difficult task my noble friend the Minister has in piloting this incredibly complicated measure through this place. He called in aid—reasonably, because I myself referred to it—new Section 137R, which is headed “General supplementary powers”. I quoted from the first part of that new section in what I said. My point, which I do not think my noble friend has taken account of, was, and remains, that unless there are some indicators in the first part of the Bill as to the considerations that are legitimate for the regulator to take into account, being naturally conservative, it will not take them into account. It will not differentiate. The wording in Amendment 103 therefore adds “and society” to the part of the new section that instructs FCA as to what it must do. That section says:
“The FCA must, so far as is compatible with acting in a way which advances the consumer protection objective or the integrity objective, discharge its general functions in a way which promotes effective competition in the interests of consumers”.
The Minister objects to the addition of the words “and society”. Surely we have learnt over the past three years that the objectives of consumer protection, integrity and competition depend on a financial sector that, in promoting competition, does not just take into account the interests of its customers but also of society at large. Society is what social investment is about. It slightly gives the Government’s game away for the Minister to argue as he did. I repeat that this important section that he referred to, which gives the FCA and the PRA the power to make rules, seems to cut off the prospect that he afterwards says is there; namely, the power to differentiate between different types of financial organisation, including the social financial organisations.
I am sure this is a discussion we perhaps had better have outside the Committee. It is late at night. I am only registering—I think I have some support in this—disappointment that the Government are not construing their own provisions in a way that seems consistent with how my noble friend started when he said they were wholly behind the development of the social finance sector.
Lord Sassoon
I will keep saying it and no doubt we will have to disagree on this. On the narrow point of new Section 137R, that is a power to make different provisions. However, the other relevant provisions that sit with it are duties. There is a duty to act proportionately and a duty to have regard to different degrees of risk. When it sets rules, the FCA will have to explain and justify those matters in the consultation processes it goes though. It cannot simply escape from this.
I will again directly address the points made my noble friend Lord Phillips of Sudbury on Amendment 103. The same thing applies to Amendment 111. There are certain things that we can expect of the FCA and there are other things that would place entirely unrealistic expectations on it. When the FCA is assessing whether there is effective competition in a market, we can expect it to consider the needs of consumers and act on its assessment. However, the needs of society as a whole are another matter entirely. It is not, and cannot be, the responsibility of the FCA to consider, even in a passive way—which I agree is different here from the way that it is formulated in some of the other amendments—what the best outcome for society is at any given point. It simply does not have the mandate to do that. It would not have the expertise or the powers fully to act on its findings. This is not in any way to say that these are not important matters. It is simply that I contend, as with the previous group of amendments, that these are judgments not for the FCA but the Government. The Government will not shirk these judgments.
I have referred to a number of the initiatives that are going on and there are others that I could mention, such as the Treasury’s current review of financial barriers to social enterprise. Recommendations from that review will sit along with the community interest tax relief revisions that were announced at the Budget. There are multiple strands of work at the Treasury and the Cabinet Office that are aimed, among other things, at making it easier for investors to invest in community development finance institutions. Those must go on. They are not the proper province of the FCA.
Lord Sassoon
I understand. I will check on that but I hear what my noble friend says. The FSA is under pressure in a lot of areas. I stress again that I do not mean to say that there are no barriers. I have explained the ways in which we are looking at them but this is a Bill about the regulatory structure. There are other avenues through which the structure of the industry is being looked at, not least through the Bill that will enact the Vickers reform. In the most fundamental ways we are prepared to take on the structure of the industry. It is just that we want to keep this Bill and this architecture to what it is intended to be, which is about financial regulation and not about wider social issues, however important they are, even though there is great interlinkage with what we are talking about in the Bill.
I should do justice to Amendment 109, which is the last one that I have not directly touched on. It is another amendment over which I have some concerns. It seeks to ensure that the FCA considers social responsibility in advancing its market integrity objective. Social responsibility sits rather oddly alongside the other matters listed in new Section 1D that elaborate on what is meant by integrity. All the matters in the non-exhaustive definition of integrity in that section have a clear expectation of action associated with them. The FCA will act to prevent or root out and punish activities such as insider dealing or other market misconduct and abuse as well as money laundering, terrorist finance and corruption; it will test the reliability and robustness of computers and wider systems and controls to see whether it can guarantee the operational soundness, stability and resilience of the system, its orderly operation and the transparency of the price-formation process. These are all concrete actions, critical to ensuring that the financial system is effective in meeting the needs of people who use it and is, I suggest, rather different from social responsibility which very much stands out from that list.
Before I let my noble friend come in again, I want to repeat that determining what social responsibility is and how it should be delivered is a matter for the Government.
Lord Phillips of Sudbury
I am grateful to my noble friend for giving way and hope this will be my last intervention. In new Section 1D, the integrity of the UK financial system—which is of course crucial, because it is one of the FCA’s operational objectives—is said to include soundness, stability and resilience. In Amendment 109, I have suggested adding “and social responsibility”. The Minister asks what on earth social responsibility has to do with the FCA which is all about banking things such as stability and soundness and so on. My point is that we are dealing here with a financial sector that marches to a completely different drum. It is about social responsibility: that is its purpose. For that not to be an element in the section of the Bill which, in effect, defines integrity, first, does not face that reality, and, secondly, demeans it. Thirdly, I hark back to the matters which the two regulators have the duty to have regard to when making rules and so on. Lastly, I put it to the Minister that if we had social responsibility in this list, it would mean that in future the regulator could and indeed should look at, for example, mis-selling. Mis-selling is not a crime, it does not impact on the soundness, stability or resilience of the bank, but it is none the less a practice which I am sure he will agree has been powerfully damaging to all concerned. That phrase in this part of this section would, I believe, put the regulator on its mettle to look beyond the conventional issues and take account of the social impact of some of the practices of the banks.
Lord Sassoon
My Lords, I cannot agree with that construction of what is intended here. Mis-selling very clearly comes under new Section 1C, the consumer protection objective. We have, perhaps, teased out of this discussion that if we are talking about social responsibility in the sense that my noble friend intends and in the way he has described it, it is more linked to the consumer protection objective, rather than the integrity of the UK financial system. The difficulty may partly be in the different uses of “integrity”. We are not talking in new Section 1D about integrity in the direct sense of the behaviour of the individuals in the system. We are talking about the wholeness and stability and soundness of the financial system, which is why these particular factors are listed in Section 1D(2). They are linked to concrete actions that would be expected of the FCA, examples of which I have just given. We may be partly mixing up apples and pears here because I do not think that social responsibility fits into this clause of the Bill.
If my noble friend came back and tried to attach it to proposed new Section 1C, I would still argue that social responsibility is a matter for government. Social responsibility in the sense that he is talking about will go to the heart of what the Joint Committee will look at in response to the LIBOR scandal. The responsibility of the participants in the sector will be tackled in different ways.
I have tried to reassure the Committee—I can see that I may have given only partial reassurance—that the Government firmly believe that the financial industry should serve society. There is a big unfinished agenda and the Government will not shy away from driving it forward. The right way to do so is through different avenues but not through expecting the FCA to be responsible for these particular areas. I ask my noble friend to consider withdrawing his amendment.
Financial Services Bill
Debate between Lord Sassoon and Lord Phillips of Sudbury(12 years, 5 months ago)
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Lord Sassoon
It is something that used to exist and the concept is still out there in the ether, but it has fallen out of common use over the past 20 years. For this Bill, there is no Keeling schedule but there is the 658-page, fully amended version of FSMA, which is accessible on the Treasury website. It serves the purpose of a Keeling schedule and does more than that.
Lord Phillips of Sudbury
I am reluctant to intervene on the Minister again, but it is important that even if he does not provide a print-off of this labour of love, hard copies of this mammoth work should at least be available in the Library. Some of us find that the time that it takes to run off 658 pages on our clapped-out machines is itself unnecessary.
Finally, the Minister may find that a Keeling schedule is exactly what has been done by the Treasury in this regard. That is my understanding of a Keeling schedule.
Lord Sassoon
My Lords, it may be the largest Keeling schedule ever known to this House. I will certainly make sure that the Library is aware of where to find the amended version of FiSMA, and I am sure that it will print copies off on request in the normal way.
I turn now to the substance of this clause. The amendments put forward by the noble Lord, Lord Eatwell, seek to convert the court of directors into a supervisory board. We will discuss in detail later—as has already been identified by the noble Lord, Lord Burns, and others—government Amendment 13 and related amendments which, I suggest, address all the points of substance behind the amendments of the noble Lord, Lord Eatwell, by creating a statutory oversight committee. I will have a lot more to say about that when we get to Amendment 13.
The only substantive difference, as the noble Lord, Lord Eatwell, has said, between the Government’s amendments and those in his name appears to be in the name of the Bank’s governing body. The noble Lord’s amendments do not seek to change the structure or membership of the court; it is simply, as he identified, that he does not like the term “court”. I agree with other members of the Committee that simply changing the name is not what we should be focusing on. The name of the Bank’s governing body is largely irrelevant. It is important that it is a body that is fully equipped and prepared to fulfil its role in the new structure effectively and that the non-executives on the court have a clear and explicit remit to oversee the Bank’s performance, both in policy terms and operationally. We will come on to why the Government believe the amendments to the Bill that we have put down are needed.
In answer to the questions about why we put the amendments down when we did, I listened very carefully to all the points on governance and other issues that were made at Second Reading and have come forward, at the earliest practicable date, with amendments ahead of discussion in Committee rather than after it, both in relation to oversight and growth. I make no apology, but your Lordships will appreciate that there was not much time between Second Reading and today to get some important amendments sorted out in detail. I hope that explains what we have done.
Lord Sassoon
My Lords, it may be helpful if I speak early in this group because there are substantial government amendments here. The Treasury Committee’s report last November concluded that the increased responsibilities given by this Bill to the Bank of England warranted another look at the Bank’s governance arrangements. The Bank’s Court of Directors has been statutorily responsible for managing the Bank’s affairs since nationalisation in 1946, albeit with some modernising changes brought in by the Bank of England Act 1998 and the Banking Act 2009. I expect the court, as it has done over the decades, to adapt and evolve to the Bank’s changing role, which was brought in by this Bill to enable it to continue to operate as an effective governing body.
However, we should not—and I am already clear from our Second Reading debate that we do not as a House—underestimate the court’s task. It must effectively oversee the transition to the new arrangements, ensure that the Bank is adequately resourced to meet its new responsibilities, and at the same time provide a vital link of accountability to Parliament.
Recognising this challenge, in January the court published its response to the Treasury Committee’s recommendations, proposing the creation of a new oversight committee made up of the court’s non-executive directors. The court accepted the Treasury Committee’s recommendation for retrospective reviews of policy, proposing that the oversight committee commission these reviews from expert external bodies. The court also accepted that an ex-post review or reviews be published, subject to the need to maintain appropriate confidentiality. In line with the Treasury Committee’s proposals, the court proposed to give the oversight committee the papers from the meetings of the MPC and FPC.
Some hours ago, the noble Lord, Lord Eatwell, somewhat mischaracterised the Government’s approach to governance. The Government’s position has been that governance is in the first instance for the Bank itself, but we have not sought to distance ourselves. We listened to the Treasury Committee’s and then to the Bank’s response and have come forward, in the light of those responses and the Second Reading debate, with these amendments.
Subsequent to both the Treasury Committee’s and the court’s response, the Chancellor agreed with the governor and the chairman of court that the oversight committee’s remit would be extended to encompass the commissioning of internal reviews of the Bank’s policy performance. Finally, as part of our response to the Treasury Committee and the Joint Committee that scrutinised the Bill in draft, the Government committed to considering further whether the proposed reforms ought to placed on a statutory basis.
My honourable friend the Financial Secretary to the Treasury restated this position in another place. As I said during Second Reading, the Government have now determined that that should be done, and we are tabling these amendments.
Amendment 13 writes the new oversight committee into the Bill, simplifying the governance structure of the Bank by subsuming the role and responsibilities of the existing committee of non-executive directors—the so-called NedCo—into the new oversight committee.
Subsection (2)(a) of new Section 3A provides that the oversight committee will be responsible for keeping under review the Bank’s performance in relation to its objectives and strategy. This includes both monetary policy and financial stability, including the responsibilities of the MPC and the FPC.
Subsections (2)(b) and (c) give the oversight committee responsibility for overseeing the Bank’s financial management and internal financial controls, and subsection (4) lists a number of additional responsibilities in relation to the procedures of the MPC and the FPC and the terms and conditions and remuneration of key posts within the Bank. I hope that when we hear from the noble Lord, Lord Eatwell, he will accept that that provision fulfils the purpose behind his Amendment 29, which would make the non-executive committee of court responsible for overseeing the activities as well as the procedures of the FPC.
The oversight committee will be made up of all the non-executive directors of court, but in some cases it may be inappropriate for particular directors to have an active role in certain of the oversight committee’s functions. For example, a director of court who is also an external member of the FPC—as is the case with Michael Cohrs at present—should not have a role in directly overseeing the FPC’s performance. Subsection (4) of new Section 3B therefore allows the oversight committee to delegate any of its functions to two or more of its members.
New Sections 3C and 3D give the oversight committee an express power to commission and publish external and internal performance reviews. I hope that that satisfies the noble Lord, Lord McFall of Alcluith, whose Amendment 11 is also intended to implement the Treasury Committee’s recommendation for retrospective reviews of the Bank. In fact, in a number of respects, government Amendment 13 in the names of the noble Lord and my noble friend Lady Noakes goes further than that. Amendment 11 relates only to reviews carried out by the court itself; whereas Amendment 13 provides for reviews to be commissioned from an external person, such as an academic or independent expert, or from an officer or employee of the Bank itself.
I also note that Amendment 11 is limited to reviews of past conduct; whereas government Amendment 13 allows reviews of current practice to be carried out that may be appropriate to the functions of the oversight committee in the financial management and internal financial controls of the Bank.
Consistent with the Treasury Committee’s recommendations, subsection (5) requires the oversight committee to ensure that sufficient time has elapsed before commissioning any review, to allow it to be effective and to avoid impeding the ability of the Bank to continue to operate effectively while the review takes place.
In line with the Treasury Committee’s recommendation and the amendment tabled by the noble Lord, Lord McFall of Alcluith, new Section 3D would require the oversight committee to publish its reviews, unless publication would be against the public interest. Published reviews will also be laid before Parliament. Where publication of all or part of a review is delayed, the oversight committee must keep that decision under review and publish that material as soon as the sensitivity has reduced.
New Section 3E requires the oversight committee to monitor the Bank’s response to the report and ensure that it fully implements recommendations that it accepts. That gives the oversight committee an explicit role in ensuring that reviews translate into real action, and that the Bank fully takes on board the lessons learnt.
The Treasury Committee recommended that non-executives have access to all papers considered by the MPC and the FPC. New Section 3F implements that recommendation and goes even further by allowing members of the oversight committee to attend all MPC and FPC meetings in order to observe their discussions.
The remainder of the new clause and government Amendments 28, 30, 33, 91 to 96, 98, 99 to 101 and 145 to 147 make consequential amendments to implement the new oversight committee, and I do not intend to take up the Committee’s time by making any further reference to them.
In conclusion, the Government fully recognise the importance of strong lines of accountability for the Bank, given its expanded responsibility and powers. The amendments represent the most significant legislative reform of the governance arrangements of the Bank of England since nationalisation, and on that basis I hope that the Committee will support them.
Lord Phillips of Sudbury
My Lords, in the provisions setting up the oversight committee, which obviously has a hugely important and wide-ranging job to do, my noble friend mentioned the right of delegation in new Section 3B, but that is limited to two or more of its members. He mentioned under new Section 3C the right of delegation of a review to a person whom the committee can appoint. May there be wisdom in having a slightly wider power of delegation, so that one could under new Section 3B have an outside person or persons as part of that sub-committee and, in new Section 3C, more than one delegated reviewer? There may be occasions when that would be helpful.
Lord Sassoon
My Lords, I think I have covered the point but perhaps I can reflect on that and respond to it, because I suspect that the Committee might want me to respond to other points after we have heard the debate.
Lord Phillips of Sudbury
I see:
“There is to be a sub-committee of the court of directors … consisting of the directors of the Bank”.
It is not all the directors, some of the directors. I have got you.
Lord Sassoon
I have been restraining myself from clarifying a number of other points, but I think that there is perhaps a point that will help the Committee. A director, as defined, is a non-executive director, so the executive members—the governor and the deputy governors—do not, under the definitions here, count as directors. It is only the non-executive directors, which may help my noble friend.
Lord Phillips of Sudbury
I am grateful for that, and I apologise for the error. However, I want to reinforce the importance of extending the power of delegation under new Section 3B. That could be very important to the work of the committee and strengthen it because it would bring in outside voices and give strength to its deliberations. I hope, therefore, that the Government may review this and decide to extend the power of delegation, not just to members but to outsiders as well. Subsection (3) already provides that outsiders can attend and speak at meetings of the committee, but to be members of a delegated body is crucial, as, indeed, in the review structure under new Section 3C, it would be helpful on occasions to have more than a single person appointed to conduct a review. If it is a complex review, there could be a lot of point in having a small team of three. At the moment that is not permitted by the wording of new Section 3C.
Lord Sassoon
I am grateful to the noble Lord because I think that we are getting into very detailed drafting points. I will certainly have a look at those points and write to the noble Lord and copy the letter to others who have spoken in this debate, just to check that nothing has gone astray in the drafting here. We will take that on board.
Lord Phillips of Sudbury
I hope that my noble friend agrees that the noble Lord, Lord Burns, had quite a point. It harks back to earlier discussions about the complexity of drafting. It is the fact, as I hope my noble friend will confirm, that the definition of Court of Directors in Clause 1 of the Bill includes the four executive directors and “not more than 9” non-executive directors—which makes 13. The interplay of the phrase Court of Directors and the new body that is the subject of the government amendment makes for extraordinary complexity in understanding. One thing that my noble friend might consider for the next stage is that when the Bill and his amendment refer to non-executive directors they say non-executive directors, because there are four executive directors—the governor and three deputy governors. They are directors too.
Banking: Accounting Standards
Debate between Lord Sassoon and Lord Phillips of Sudbury(12 years, 8 months ago)
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Lord Sassoon
Again, this is an important issue. The Government have taken significant steps to increase both the transparency and the FSA rules around the payment of bonuses. However, we should be careful about this. First, it is worth noting that under UK GAAP, before IFRS was introduced, banks were required to account at fair value for their trading portfolios. Of course, accounting at fair value requires assets to be marked both up and down. It is certainly the case that under IFRS there were certain portfolios that previously would not have been counted as trading portfolios, which now are. However, we have to be very careful about attributing all that went on with banking bonuses to the accounting requirements. If I may suggest so, that was a small part of what was undoubtedly a series of inappropriate behaviours at the heart of the industry.
Lord Phillips of Sudbury
My Lords, given the importance of the matters to which my noble friend has alluded in answering this Question, might he put a plain Peers’ guide to the intricacies of the various bodies he has enumerated in the Library?
Lord Sassoon
My Lords, I will see what I can do. I have mentioned everything this afternoon from the G20 through to the Bank of England, the FSB and the FRC. I will see what I can do, but it is a big ask.
Taxation: Avoidance
Debate between Lord Sassoon and Lord Phillips of Sudbury(12 years, 10 months ago)
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The Commercial Secretary to the Treasury (Lord Sassoon)
My Lords, I am grateful to my noble friend Lord Dykes for giving us an opportunity to discuss the important issue of tax avoidance and to remind the House of what the Government are doing to clamp down on it. However, we should put the whole subject into perspective. It is an important topic. There have been few speakers, but a considerable degree of heat has been thrown at the topic that may occasionally have obscured the light.
We must remember what we need to achieve in this area, particularly in the current economic situation, when we are faced with reducing the largest peacetime deficit on record. It is of course more important than ever and fair that everyone, whether businesses or individuals, pays their fair share of tax, but we have to remember that we must keep this country competitive. We are competing in a global economy, so we have to have a tax regime that is competitive for businesses, is fair for individuals and incentivises individuals to get off benefits and into work. Yes, the tax-avoidance question is critical, but we have to remember the wider context in which it operates.
A fair tax system means closing the tax gap and ensuring, as I have said, that businesses and individuals pay in full what they owe. My noble friend Lord Dykes asked questions about the size of the tax gap and whether we really understand its make-up. The figures for 2009-10 are that the tax gap was estimated at 7.9 per cent of liabilities, £35 billion in cash terms, which means that HMRC collects over 90 per cent of all the tax that is theoretically due. We have to do better. HMRC has to do better and it is working on that—I shall come on to that shortly—but, if someone heard this debate in isolation, they might think that the performance of HMRC was much worse. It collects over 90 per cent of all the tax that is theoretically due, or £468.9 billion in revenue in 2010-11. We should also remind ourselves that the latest figures show an overall decrease in the overall net tax gap of £7 billion from 2008-09 to 2009-10.
We should therefore be cautious about the methodology, but the 8 per cent tax gap in the UK compares well with other economies. For example, the USA’s tax gap is 14 per cent and, to take a country in Europe that is widely regarded as a model of fiscal rectitude, in Sweden the tax gap is 10 per cent.
The Government’s approach to tackling avoidance builds on HMRC’s anti-avoidance strategy. There are three core elements to that approach: prevention, detection and counteraction, with a clear focus on preventing avoidance before it can occur. I say “avoidance”; I do not of course share my noble friend Lord Phillips of Sudbury’s contention. I know that it is nothing new that he feels strongly that avoidance and evasion are the same thing.
Over the past 20 months we have demonstrated real progress. In answer to the challenge from the noble Lord, Lord Eatwell, about the concrete actions that we are taking, in the most recent Finance Act we closed down a range of avoidance schemes to bring in yields of around £1 billion a year over the course of this Parliament. Only this month, we acted quickly to stop a particularly significant avoidance scheme aimed at artificially exploiting an income tax relief. That scheme posed a significant risk to the Exchequer, and our quick action ensured that this risk did not materialise. That is the sort of concrete action that we will take.
In answer to the questions about whether HMRC has the capacity to deal with the threat of avoidance, the Government have underlined our commitment to tackling avoidance with the reinvestment in HMRC, which I am sure noble Lords are aware of, of over £900 million, which should bring in around £7 billion each year by 2014-15 in additional tax—again, concrete additional targeted action.
Lord Phillips of Sudbury
Can my noble friend then reassure the House on the figure about which I asked earlier and say that the reduction in staffing of 12,000 will not affect the front-line effort to reduce tax avoidance/evasion?
Lord Sassoon
My Lords, as I am sure my noble friend would recognise, all government departments are having to tighten their belts; otherwise, the deficit is not going to be tackled. I hope to reassure him by explaining where HMRC is focusing its efforts. The recruitment of over 1,200 staff in new posts to tackle non-compliance is significantly upping HMRC’s efforts in this area and will bring in significant additional revenue in each tax year, so the answer to his question is yes.
The customer relationship model that HMRC uses has considerably improved its ability to identify risk and to handle these issues. The report by the National Audit Office on HMRC’s 2010-11 accounts, which underlay one of the reports referred to by the noble Lord, Lord Eatwell, noted that HMRC’s high-risk corporate programme has brought in a yield of over £9 billion and that it contributed to reduced avoidance activity by major companies. The investment is there. On another point made by my noble friend Lord Dykes, we do not forget the cash economy in those efforts.
I am grateful to the noble Lord, Lord Eatwell, for drawing attention to the question of the general anti-avoidance rule, the GAAR. We are exploring that option to see whether such a rule could help to deter and counter tax avoidance in a fair way. Attention has been drawn to the work of Graham Aaronson and his colleagues and their report. We received the report in November last year. We will be considering it and are actively discussing its implications with businesses and tax professionals. We will respond to the report at the Budget and set out our plans if appropriate. We have said clearly that we would not introduce a GAAR without a further formal round of public consultation, so that is very much work in progress.
I am also grateful to the noble Lord, Lord Eatwell, for applauding the introduction and the work of the Office of Tax Simplification. The complexity of the tax system has been much remarked on, and I can echo many of the remarks made by noble Lords on that. The OTS has started its work and published recommendations on tax relief, avoidance legislation and IR35, as well as an interim report on small business tax. More is coming down the pipeline and this ongoing work will be an important part of what we all want to see: a simpler tax system that is easier for individuals to comply with. I may disagree with the emphasis of my noble friend Lord Phillips of Sudbury on some things, but I certainly agree that this is fundamentally about individuals doing what they are required by the law to do.
Another critical component of preventing avoidance is the way in which HMRC engages with the largest taxpayers proactively to identify and tackle avoidance. We do not have the time to go into the detail of this but, in response to some of the somewhat one-sided interpretation and selective quoting of the recent Public Accounts Committee report, I draw the attention of the House to HMRC’s detailed rebuttal on many factual points in the conclusion of that report. In brief, to be clear, this effort with large businesses is not in any way HMRC being soft on large business or on those with complex tax affairs. HMRC treats all taxpayers even-handedly and does not allow them to settle for anything less than the full amount due. It is through its engaged and intelligent approach to tax avoidance that the additional revenue to which I have already referred is coming in.
Fraud: Staffing Levels
Debate between Lord Sassoon and Lord Phillips of Sudbury(13 years, 6 months ago)
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Lord Phillips of Sudbury
To ask Her Majesty’s Government what assessment they have made of the staff levels at Government agencies dealing with financial, banking and tax fraud.
The Commercial Secretary to the Treasury (Lord Sassoon)
My Lords, the Government are determined to step up the fight against fraud. This important work is done by both government and non-government bodies, including the Serious Fraud Office, Her Majesty’s Revenue and Customs, the Serious Organised Crime Agency and the Financial Services Authority. Ensuring that staff levels are adequate is a matter for each individual body, but I understand that the SFO expects to be able to adjust its numbers as necessary to meet its business needs, and that HMRC will be increasing the number of staff tackling fraud and tax avoidance.
Lord Phillips of Sudbury
I am grateful to the Minister for his reply, but he must be aware that HMRC will suffer massive cuts over the next three years, and that the current level of tax fraud and avoidance, on its own estimate, is £40 billion a year. Will he therefore look urgently at that state of affairs and have regard to the position of the Serious Fraud Office, which has lost roughly half its most senior personnel in the past few months to American law firms and banks, which makes its role in tackling complex fraud super difficult?
Lord Sassoon
My Lords, this is an extraordinarily difficult area. As my noble friend says, the level of tax fraud and uncollected tax receipts is extraordinarily large. That is precisely why, within a tight settlement for HMRC and every other department, HMRC has been allocated an additional £900 million over the spending review period. That will take up the number of full-time equivalent staff dealing with fraud and other tax avoidance matters from 20,000 at present to some 23,000 by 2014-15. That adjustment has already been planned for. As far as the SFO is concerned, we are clearly not talking about remotely the same order of magnitude of numbers of people, as that body has fewer than 400 people. The new management of the SFO has taken enormous strides since 2008, when the management changed. For example, the average time taken over its investigations has dropped from an average of five years on pre-2008 cases to some 15 months on newer cases, and the conviction rate has significantly increased, so the SFO is very much showing how it has become more effective with less resource.
Financial Crime: Legislation
Debate between Lord Sassoon and Lord Phillips of Sudbury(13 years, 8 months ago)
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The Commercial Secretary to the Treasury (Lord Sassoon)
My Lords, we have had an excellent debate and I thank all noble Lords who have spoken. I particularly thank my noble friend Lady Williams of Crosby, who comes at this whole subject from a position of great authority.
The noble Lord, Lord Davies of Oldham, has pointed out the challenge that I face in attempting to respond to the huge number of points that have been made. This has been a more than normally physically challenging debate to sit through. It is one thing to watch a tennis match that is being played out in front of me, but it is even more challenging to watch one that at times has been played out intensively behind me. However, it has been a fascinating debate.
I start by reminding noble Lords that Britain is, and continues to be, a great trading nation. This Government are committed to encouraging British business to seize opportunities around the world. We all know that globalisation brings huge opportunities not just for businesses themselves but for all those who work in those businesses and for the consumers of goods. However, there are significant threats and risks in this globalised world. We have discussed some of the most insidious threats that jurisdictions around the world face. My noble friend Lady Williams talked about the most serious issues. I certainly agree that some of the most insidious threats are those posed by bribery, corruption and money-laundering. I shall take in turn bribery, tax avoidance, corruption, if I have time, and money-laundering, which were the main areas covered in the debate.
I make it absolutely clear that the Government are committed—lest anybody doubts it—to implementing the Bribery Act. We are determined to ensure that it is implemented in a way that tackles corruption while not imposing unnecessary cost and uncertainty on legitimate business and trade. Bribery should not be considered an acceptable way to win business. It distorts free markets and causes immense damage in developing and emerging economies. The Government believe that the Bribery Act will have positive benefits for UK business through an enhanced reputation for ethical standards, reduced costs incurred in doing business and a clearer business framework. The Act will contribute towards a level playing field internationally. The UK stands alongside our partners, whether in the OECD, the UN, the EU or the Council of Europe, in recognising that bribery needs to be met with robust criminal offences. Indeed, the Act modernises and clarifies the existing law, which has rightly been criticised as complex, fragmented and out of date. However, I hope that the main issue concerns not the Government’s commitment to implementation but when the Act will be implemented and whether there has been unreasonable delay, as some have painted it.
I fully respect the views on both sides of the argument. On the one side, we had the pithy intervention of my noble and learned friend Lord Mackay of Clashfern and the contributions of my noble friends Lord Thomas of Gresford, Lord Marks of Henley-on-Thames, Lord Goodhart and Lady Williams. I very much appreciate their sentiments. However, I find it slightly harder to accept the criticism of the noble Lords, Lord Eatwell and Lord Davies of Oldham, on the timetable for implementation given, as we have been reminded, that it took until 2009 for the previous Government to introduce the relevant legislation.
On the other side of the discussion, we have heard powerful and relevant interventions from my noble friends Lord Hodgson of Astley Abbotts, Lady Wheatcroft and Lord Eccles—the noble Lord, Lord Hannay of Chiswick, also recognised this—regarding some of the difficulties for business in this area. We should not minimise those. There was a depressing lack of mutual appreciation by the two camps in this debate, with one notable exception. I am grateful to my noble friend Lord Newby for his contribution, to which I listened with interest. He recognised that two distinct interests are involved in implementation that need to be reconciled and that the implementation of the Act will indeed—certainly, in the short term—impose costs on business.
One of the questions asked by my noble friend Lady Williams concerned responsibility. Responsibility for implementation is with my right honourable friend the Justice Secretary, who is concerned to ensure that the Act is implemented in a way that tackles bribery effectively but avoids imposing costs or uncertainty on business and certainly does not make this another gold mine for lawyers advising on either implementing or picking up the consequences of the Act. It is the intention of my right honourable friend and the Government to publish guidance shortly. Implementation of the Act will follow publication after three months, in order to give businesses time to prepare themselves. On the other question about responsibility, I can confirm that enforcement of the legislation will be a matter for the Serious Fraud Office and the police.
Lord Phillips of Sudbury
Is it fair or unfair of me to ask my noble friend what his answer is to the circumstance enunciated by the noble Lord, Lord Hodgson of Astley Abbotts, where a business is faced with either compliance with the Bribery Act or losing a valuable order?
Lord Sassoon
My Lords, that is a perfectly fair question, but I am not going to stand at the Dispatch Box—no Minister would—and suggest that anyone should break the law. I hope that that is a clear answer to the question.
The point that I wanted to make about implementation was that I know that my right honourable friend the Justice Secretary has been speaking regularly to the secretary-general of the OECD, because there has rightly been reference to the OECD’s important contribution to driving forward standards in this area. My right honourable friend has been speaking regularly, including this week and last month, to the secretary-general to keep the OECD informed and updated on our plans for implementation.
My noble friend Lord Phillips and the noble Lord, Lord Eatwell, mentioned the fall in the UK’s ranking. The noble Lord, Lord Eatwell, leads with the chin, but it is interesting to note that that fall in the ranking happened under the previous Administration. I hope that implementation of the Bribery Act will contribute to the UK’s ranking increasing again.
I acknowledge the point made by my noble friend Lord Hodgson about SMEs. In all that the Government are doing in the regulatory space, we need to be sensitive to the particular needs of SMEs. It is the intention to publish a quick-start guide, as it will be called, that focuses particularly on the needs of small businesses. UK Trade & Investment and overseas posts will be geared up to provide guidance and support on managing risks of corruption in particular export markets.
Lastly in this area, questions relating to extractive industries were raised by the noble Lord, Lord Hannay of Chiswick, and my noble friend Lord Newby. It is a topic that my right honourable friend the Chancellor has recently addressed. He drew particular attention to it at the February G20 Finance Ministers’ meeting in Paris, where he raised the issue of new international rules; he believes that this was the first time that that has happened. My right honourable friend, along with my right honourable friend the Business Secretary, will be arguing for a European agreement that matches the new standards set in the US in this area. This is very much on our agenda.
Let me turn now to the issue of tax avoidance. For the avoidance of doubt—I am sure that the noble Lord, Lord Haskel, has no doubt, but he raised the question—let me say again clearly that the Government are fully committed to making sure that everyone contributes to reducing the deficit by paying their fair share of tax. Tax avoidance and evasion damage the ability of the tax system to deliver its objectives. They impose additional costs on all taxpayers and undermine the tax system.
The noble Lord, Lord McFall of Alcluith, and others raised a number of questions about HMRC resources. I was grateful to the noble Lord for drawing attention to the announcement last year that more than £900 million will be made available to HMRC over the spending review period to raise additional revenues by tackling non-compliance. This is expected to bring in around £7 billion in additional tax each year by 2014-15. However, I recognise that the noble Lord bracketed, as did other noble Lords, recognition of that approach by HMRC with concerns about its resources more generally. That point was mentioned in particular by my noble friends Lord Newby and Lord Phillips of Sudbury. It is the case that HMRC workforce levels are projected to reduce. That reflects continuing improvements in the underlying efficiency in the way in which HMRC conducts its business. I should point out that, since the 2005 merger between the Inland Revenue and Her Majesty’s Customs and Excise, a reduction in headcount has had no negative impact on revenue flows. As with many other parts of the public sector, although there is a big challenge on management and implementation, HMRC has recently proved that it is able to rise to that challenge.
The noble Lords, Lord McFall and Lord Parekh, and others drew attention to the size of the tax gap, which is estimated to be around £42 billion, but I was pleased that there was recognition for some of the important steps that the Government are taking in this area, including the specific case to which my noble friend Lord Palmer of Childs Hill referred on the arrangements with Liechtenstein. That was the best answer to some of the concerns raised by my noble friend Lord Dykes. The steps that are being taken are very practical and raise considerable sums of money. In respect of Liechtenstein, the facility will run until the end of March 2015 and it is forecast that it will raise £940 million. These are considerably important initiatives to make sure that we tackle offshore financial centres and repatriate tax revenue to this country.
I recognise the questions around tax transparency. My noble friend Lord Goodhart touched on this area, but I will not repeat the names of all noble Lords who mentioned it. In the past year, we have seen unprecedented progress on tax information exchange. More than 500 tax information exchange agreements have been negotiated to the international standard. This means that there are fewer and fewer places for evaders to hide their money.
The noble Lord, Lord Haskel, raised the question of Caroline Lucas’s Bill in another place. My understanding is that the Second Reading of that 10-minute rule Bill is scheduled for June. The Government will decide at that stage whether to support it. I understand its import.
In my final couple of minutes, I will deal with the remaining two issues that were raised. The noble Lord, Lord Hannay of Chiswick, raised the issue of corruption. At the risk of stating the obvious, I stress that the Government recognise that corruption is bad for development, bad for people in developing countries and bad for business in those countries. As we maintain our aid budget, looked after by DfID, there will be great focus on raising standards of governance. It is very much on the agenda of my right honourable friend the Secretary of State.
I turn lastly to money-laundering. I am grateful to my noble friend Lady Williams for recognising that the Government have been assiduous on asset freezing. I say to the noble Lord, Lord Hannay, that we should not rely too much on reports in the newspapers. As my noble friend Lord Howell of Guildford said in the House a couple of days ago, we are investigating and watching carefully to see what links there may be between pirates and terrorism in the region linked to Somalia. However, as he said, we have no firm evidence of particular patterns of transactions, although we recognise that there may be personal, entrepreneurial or other links between groups. The noble Lord is right to emphasise that we need to be on the case, as we are. The noble Lord, Lord Parekh, raised general concerns in this area. As we discussed in the House recently, particularly in the context of Libya but also of other countries, the Government have been and continue to be at the forefront of calling for and implementing asset freezes against corrupt regimes.
My time is up. I have attempted to answer as many points as possible. It has been a very stimulating debate in which important questions were asked. I end by thanking my noble friend Lady Williams of Crosby for stimulating such an interesting two and a half hours.
Credit Unions
Debate between Lord Sassoon and Lord Phillips of Sudbury(13 years, 8 months ago)
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Lord Sassoon
My Lords, that is exactly what we are doing by bringing forward the various reforms that I have described, which will help to modernise and drive forward the credit union movement—a movement that now numbers some 760,000 members in Great Britain. In Northern Ireland, where the movement has a different history, it has some 400,000 members. We wish to see the total in the United Kingdom growing, which is why the measures that we are bringing forward will promote this area of financial activity.
Lord Phillips of Sudbury
My Lords, is it not the case that the Governor of the Bank of England, Mervyn King, less than a week ago drew attention to the exploitation by the clearing banks of what he called unsuspecting and unsophisticated depositors through their wholly unethical manipulation of interest rates? Should the strictures that the noble Minister has placed on loan sharks not be somewhat directed at the clearing banks as well?
Lord Sassoon
My Lords, we are talking about credit unions this afternoon. I have explained what an important and growing role they have to play in the diversity and choice of our financial services sector in the UK. That is what we should work to promote.