Investment Bank Special Administration Regulations 2011

Debate between Lord Sentamu and Lord Sassoon

Thursday 3rd February 2011 Lords Chamber

[Lord Sassoon]

My Lords, when we have a Project Merlin outcome to announce, the noble Lord will no doubt have every opportunity to cross-question me on these matters. I also note, just in case noble Lords missed it, that the noble Lord committed himself to that being his final intervention. He is certainly well below his batting average for interventions in my closing remarks but we will see whether he holds to it. I shall try not to provoke him. The only further thing that I wanted to say in response to the noble Lord was that, despite what I just said about banking and unfinished business on bonuses, I very much echo what he said about the importance of the City. Extraordinarily skilled work is done by many experts across the financial and business services in the City, and the City adds great value to the UK economy; we should not forget that.

I will respond to a couple of the points raised by my noble friend Lady Maddock. The supplier proposal adapts existing provisions in insolvency law, specifically within the Insolvency Act 1986. We are trying to ensure that, in the case of investment banks, those critical suppliers without whom the resolution of the investment bank cannot take place—the positions cannot be closed out—continue to supply. When we talk about 28 days, it is important that the supply is paid for but it is a question of whether it is paid for within the 28 days. The supplier can stop supplying if any charges in respect of the supply remain unpaid for more than 28 days, if the administrator consents to the termination, or if the supplier has the permission of the court. In that context, the definition of hardship will be left to the judgment of the court.

As regards the bar date, the critical protection is that sufficient time has to be allowed for publicity to be given to the fact that the investment bank has gone into special administration. There has to be sufficient time for affected clients to calculate and submit their claims and for practical difficulties in establishing claims to be sorted out. Therefore, I believe that there are sufficient protections in the regime.

The noble Lord, Lord Davies of Oldham, asked me a number of questions. I hope that I have dealt with the future-proofing and questions around the Financial Services Authority. Consumer protection will be fully taken into account in the architecture that we will propose to replace the Financial Services Authority. Central counterparties and the regulation of over-the-counter derivatives is an area which falls within the general heading that I addressed: namely, that we must work to achieve international and global solutions. I see some nodding and shaking of the head from the Benches opposite. That indicates that these things are not easy. We need to have a regime in place that is safe and appropriate for the markets in the UK, but equally we need to ensure that we have something consistent within the EU and the G20 framework as mechanisms which could provide safe solutions that might work against free investment flows. We have to ensure that this is not one of those issues where protectionism comes to the fore under the cloak of providing safe solutions. I absolutely take the point that the settlement of transactions is ongoing business in which the Government take an active part.

As regards how living wills fit with this new regime, recovery and resolution plans are again a core part of both our and the G20 authorities’ response to the “too big to fail” problem and will be required of all systemically important financial institutions. That is the critical definition in that context. It is not a question of an arbitrary definition that splits investment banks from other banks in the way that the noble Lord suggested might be the case.

On the protection of client assets, it is worth remembering that the FSA has set up a new client asset unit, which is a centre of excellence and expertise within the FSA, in further recognition of the important issues raised by the lessons learnt from Lehman. That further stresses the fact that although these instruments being put in place today are critical, they are in many respects only a part of a wider construct.

The first point that the noble Lord raised, but the last one which I should address, concerns the definition of fairness. The relevant provision is based on existing provisions in the Insolvency Act 1986 and the Financial Services and Markets Act 2000. “Fair” is the modern term for the previously used “just and equitable”. While I do not profess to be an expert on these matters, I am assured that the term “fair”—its use is based on a lot of case law defining “just and equitable”—is well defined under court rulings and will be well understood by those administering the special administration regime.

That has been a long response to a short but important debate.

[The Archbishop of York]

I did not clearly hear the noble Lord’s answer to the question of the noble Baroness, Lady Maddock, about the bar. Who will determine what sufficient time is? How would I know that as a client? Who will determine that it is sufficient?

[Lord Sassoon]

I thank the most reverend Primate for pressing me on that. The critical thing, as I said before, is not that some arbitrary time is laid down, because that will relate to the complexity of the individual administration case. The objective has to be for the administrator to fulfil his objectives. The principal objective that we are looking for is the return of the money as quickly as possible. That will be the objective that the administrator will be looking to fulfil, subject to these safeguards that I have tried to explain to make sure that absolutely everything is being done so that those with money at risk are informed and have time to calculate their claims. A date cannot be fixed in a way that applies to all circumstances, because, if so, there would be a backstop date that might disadvantage people in a simple administration.

Motion agreed.

National Insurance Contributions Bill

Debate between Lord Sentamu and Lord Sassoon

Wednesday 2nd February 2011 Lords Chamber

[Lord Sassoon]

My Lords, I will look to see how many non-trading charities have been created in past periods. However, the noble Lord is long on these questions about what might have been the case had we done the estimate on another basis. I will come on to the critical questions of what estimates have been produced in a minute, if he will permit me. I know he likes to come in on my responses to debates with more and more questions, and I shall try to answer some of the ones he asked me earlier.

The noble Lord, Lord Myners, and other noble Lords asked questions about the geographic extent of the holiday—of course we are delighted that Cornwall is included. However, London and other areas have been excluded. My noble friend Lord Newby admirably answered the question asked by the noble Lord, Lord Davies of Oldham, about London, so I would just refer him to what he already heard the noble Lord, Lord Newby, say.

The critical thing is that we are targeting the scheme, as a temporary measure, on providing assistance to those areas that are most reliant on public sector employment as we transition to a more sustainable model of economic growth. I appreciate that if we had a much more complex scheme, which we think would be disproportionate, we could pick out smaller areas. However, given the proportionality of the scheme and its administration, cost and complexity, the targeting we have done achieves the scheme’s main objectives and consciously excludes those areas that are not so dependent on public sector employment. It amuses me somewhat to note that in plenty of other contexts the Government are criticised for not targeting areas sufficiently and here we are targeting them on those areas where the transition is going to be most difficult.

The cost of extending the holiday to other regions, on the same basis that we have estimated the other costings, would be: £250 million for Greater London, £250 million for the south-east and £160 million for the east of England. These are not inconsiderable sums.

[The Archbishop of York]

Will the Minister assure us that he has done some research that tells him that Tower Hamlets and Hackney—boroughs that I knew when I was Bishop of Stepney—are not solely dependent on public services? Why are they not included?

[Lord Sassoon]

As I have tried to explain, the issue here is that we have to take broad areas of the country to make this workable. Otherwise, the scheme would be effectively unmanageable in the way that we want it. Some remarks have already been made about the cost of administering the scheme, and while of course there are boroughs in London that are very significantly deprived—and the noble Lord, Lord Myners, has raised questions about other parts of the country—we have had to work the design of the scheme around regional units. Therefore, as I have tried to explain and as my noble friend Lord Newby eloquently explained, the relatively benign employment conditions in London mean that we have had to take regions including London as a whole.

On the estimates of cost, I can reassure the noble Lord, Lord Myners. I do not talk about the Office for Budget Responsibility as an auditing body, although he might like me to do so. That is not what it does. The OBR has independently reviewed all the key figures and looked at the £940 million, the 800,000 employees and the 400,000 employers. I assure the noble Lord that, whatever term he likes to use, the OBR has put that through its machine—

Terrorist Asset-Freezing etc. Bill [HL]

Debate between Lord Sentamu and Lord Sassoon

Wednesday 6th October 2010 Lords Chamber

[The Archbishop of York]

My Lords, I do not want to detain the House. I am one of those who has been anxious about designation without involving the judiciary. I am very grateful for Amendment 7 in the names of the noble and learned Lord, Lord Davidson, and the noble Lord, Lord Davies, because, as a probing amendment, it has produced from the Minister a statement on the context in which these decisions are taken. I know that it will be in Hansard, but can a copy of what he has said to us about the Treasury taking these decisions and the responsibilities it takes be put in the Library? People could then look at that and refer to it. I am one of those who now thinks it is right that the Executive should take the decisions and the judges should then look at them. Therefore, I welcome Amendment 57, because the matter has been made clearer by the wonderful probing amendment. Without it, I was still living in a fog.

Perhaps I may end on why this clause should be part of the Bill. On page 10 of his wonderful book, The Rule of Law, the noble and learned Lord, Lord Bingham, quotes Magna Carta. I love his translation, because the old language is pretty difficult. He refers to the terms of chapters 39 and 40, which state:

“No free man shall be seized or imprisoned or stripped of his rights or possessions, or outlawed or exiled, or deprived of his standing in any other way, nor will we proceed with force against him, or send others to do so, except by the lawful judgment of his equals or by the law of the land”.

If the law of the land does it, that part of Magna Carta is right. It continues:

“To no one will we sell, to no one deny or delay right or justice”.

I thought that I heard the Minister tell us what the Treasury does. I am comforted and I should like that description to be placed in the Library.

[Lord Sassoon]

First, I should say that I am grateful to the most reverend Primate. If we have managed to raise a bit of fog through the combination of a probing amendment and a bit of detail from me, and be reminded that we are meeting part of the test in Magna Carta, we will have spent a worthwhile hour or so. He also answered rather eloquently part of the further challenge from the noble Lord, Lord Davies of Stamford, on whether it should be the responsibility of the Executive or the courts to issue the order. I do not know whether the noble Lord is still looking for an answer. He partly answered the question himself, because I was going to start by reminding him that indeed it was the previous Government who operated the regime in this way. It was the Bill passed by this House which became an Act in February—