Economy

Lord Soley Excerpts

Thursday 10th September 2015 Lords Chamber

[Lord Soley (Lab)]

One of the great pleasures in taking part in a debate of my noble friend Lord Haskell is that he always comes to them with solutions, not just problems. He is absolutely right to focus on the issue of productivity. I have often argued for growth, but growth and productivity are very much part and parcel of the same thing. I do not agree with the noble Lord, Lord Howell, on the need just to put constant downward pressure on public expenditure, almost for the sake of it, which is the implication of what he was saying. The reality is that the problems we got into in the great banking and financial crash were not about public sector spending being too high in the previous years. In fact, under the Labour Government, there had been a lower public sector borrowing requirement to GDP ratio than there had been throughout the Thatcher years. That is an important factor. What blew the economy was the collapse of the banks and financial industries. At the time, anyone who would have argued against bailing out the banks would have been laughed out of the Chamber. The issue was bailing them out with public money, and that of course sent debt through the roof.

There are two ways in which to deal with debt: one is the austerity argument and the other is to get growth. Austerity, in a sense, is more of a political argument than an economic one. I know of no sensible economic policy with austerity at its heart. It is obviously a problem if there is too much debt compared with income, but the issue of growth is more important. My noble friend Lord McFall pointed out that there have been a number of occasions when the GDP-to-debt ratio in this country has been much higher than it was even after we bailed out the banks. That was particularly true, incidentally, in the 19th century. It did not matter because growth was increasing so fast that the debt level became sustainable.

That does not provide an easy answer to today’s problems, and I am certainly not in the camp that says, “We do not need to cut back public expenditure during the present time”. One needs to do that, but making it the centre of one’s policy and presenting austerity as a political issue says to the public, “I am afraid that you have got to suffer in order to do better”. That is a dangerous message because it also devalues the political process. Noble Lords should ask themselves why people are getting fed up with the political process. It is partly because they have been told, “You’ve got to suffer”. That is not necessarily true.

Britain can and will do very well. There are a lot of examples of that but we can get things wrong, and the Government are not in a good position to complain. I am bound to follow the comments of my noble friend Lord Monks: when the last Labour Government left office we had given the green light for Heathrow to expand. Since then, we have had another five years spending literally millions of pounds producing a report explaining why we cannot carry out a major infrastructure project. Similarly, the noble Baroness, Lady Wheatcroft, was right about the enormous growth of the arts and its importance to the British economy. I hope she will remember that when it comes to dealing with the BBC, which is the big economic driver in that regard. If it is cut back on the grounds that its empire is too big, there will be a knock-on effect on the rest of the economy. I could go through a whole range of areas where that argument applies, not least in the aviation and aerospace industry generally.

I welcome the Chancellor’s announcement of an increase in the minimum wage. It is significant that he will apply it from the age of 25. He recognises the difficult balance that needs to be struck—it applies to all these arguments—between increasing productivity by making labour more expensive, and the danger of increasing unemployment. This is where we need creative thinking, particularly in the Labour Party. I would far rather pay less in benefits to young people but give them instead an ordinary pay rate in order to train. I do not care too much what that training or education is. I am impressed by the way young people use modern technology to set up their own companies and do things that make money. At times I think, “That won’t work”—and the next thing I know, I am buying it. Science and technology, along with education, should be the drivers. We should focus on our young people and start paying them to train for almost anything. Then, we might have a future workforce that will meet my noble friend Lord Haskel’s demand for greater productivity.

Budget Statement

Lord Soley Excerpts

Tuesday 21st July 2015 Lords Chamber

[Lord Soley (Lab)]

My Lords, this is an interesting Budget, although as the noble Baroness, Lady Seccombe, almost implied, there is an interesting confusion between the politics of it and the economics of it. When the present Chancellor of the Exchequer starts writing articles in the Guardian, of all papers, and telling everybody on the Labour side to vote for it, you recognise there is a political message in this and really what he is saying is, “Look, we’re the new Blairites. You stay in the old-fashioned position because we are moving on”.

Actually, there is a more sophisticated argument than that and I think it is a pity if we focus excessively on the benefit cuts. There are some very painful cuts, which need to be faced up to and dealt with, and I think they are going to be more of a problem to the Government than they realise. But the underlying problem here is that I am not quite clear what the Government’s economic strategy is. As the Minister acknowledged in his opening remarks, the issue is that we need growth; we need improved productivity; we need greater investment, particularly in small companies; and I would argue massively for the advanced science and technology budget and the training that is linked to that. I will come back to that in a moment. I find the strategy a bit worrying.

Also, if you take the wider view, you cannot look at the British economy in isolation from what is happening in the rest of the world. The Government acknowledge that things could get blown off course by whatever happens with the euro or, indeed, the Chinese economy. All I would say is that if we carry on with this sort of arm’s-length approach to Europe, we will lose friends there, and they could be very important. It was significant in the Greek crisis that increasingly, the continental European papers were saying, particularly in France, “Where is Cameron?”. The argument was not that we should put money into saving the euro, but there was a very real opportunity for Britain to offer its good services, knowledge and experience in both finance and diplomacy to try to help Greece and the other euro countries reach an agreement which perhaps would have been better than the existing one.

I say this only as a passing comment—and the Minister, with his northern background, will know this—but the air passenger duty is still dangerously high on long-haul flights. If Newcastle airport loses its flights to the Emirates, Amsterdam and Frankfurt, which could well happen, that will be a severe blow to the region because Newcastle relies increasingly on those airports as an economic driver. As I have said in other debates, airports are indeed economic drivers; they do for the world economy what railways did for the British economy in the 19th century. We ignore that at our peril.

On the minimum wage—now the living wage—my immediate reaction, like that of many people, was that this is a step in the right direction. I listened to the noble Lord, Lord Blencathra, with interest. He acknowledged the change that he and the Tory Party had to make on this issue. That is welcome and right but there is a problem because, for a start, the Government are excluding the under-25s. Secondly, it comes in over a period of time, so whether it is a living wage or just a continuation of a minimum wage depends much on how it is uprated. As someone who was involved in these discussions when Labour was in government, I acknowledge that there is a relationship between the minimum or living wage that you set and unemployment, and that you have to get that balance right. I think we all acknowledge that. The danger is that we will push the younger generation—the under-25s who will not be eligible—into that lower-paid category when they are precisely those whom we ought to be getting into higher wages as they get more skills and experience.

I hear all that the Minister has said and I note what is being done on training in the Budget, including on science and technology education, to all of which I say: “Yep, that’s good”. But as I have said before in this House, we are missing a trick with the advanced training we could offer in digital technology. Just because a person has been on benefits for a long time or is from a damaged background does not mean that they cannot manage modern IT systems. In fact, they are sometimes remarkably good at it. Everybody who comes before a government department of some type and is unemployed, or is perhaps in a dead-end job, really ought to be offered the skills to enable them to be fully IT-literate. By that, I mean having full digital ability to design and set up their own websites.

It is remarkable how many young people set up their own websites when they leave school and start designing and selling things. A couple of years ago, I spoke to a young girl who started by buying shoes and putting her designs on them, and then putting them on her website and selling them. People do a range of such things and, as I indicated, many people from what are often regarded as failed backgrounds can do quite well. I am a great fan of what the noble Baroness, Lady Lane-Fox, is doing and we really need to give her her head and say, “Get on it, right across the system”. The aim of the strategy ought to be to make Britain, in Brian Cox’s words, the best place in the world to do science. There is another message about Europe there: we get more grant money from the European Union for research in our universities than any other European country, so we need to keep winning friends there, not losing them.

I say again that in talking about the lack of strategy, I worry about the linkage. The Government have done a lot of things to take benefits away from young people but they do not do that with older people, because pensioners tend to vote Tory. I am a pensioner and I am entitled to a free TV licence but I do not actually want one. Indeed, when it all blew up that the Government were using the economic system to make the BBC pay for those, it suddenly dawned on me that I was not claiming one. I do not intend to because I want the BBC to succeed. The BBC is a real economic driver and we ought to be supporting it, not undermining it.

My final point is that there is, as yet, no housing strategy. I note what the Government say about housing, but whether it is the private sector, the social sector or the purchase sector, we do not have a housing strategy. Until we do, a lot of people will be vulnerable and lose out on employment prospects.

Finance (No. 2) Bill

Lord Soley Excerpts

Thursday 26th March 2015 Lords Chamber

[Lord Soley (Lab)]

My Lords, I shall make two or three small but important points and one large and general point. I shall start with the large and general point because it follows on very neatly from my noble friend Lord Haskell’s comments on productivity. It is clear, particularly after some of the statements made in Prime Minister’s Questions yesterday, that whoever forms the next Government, they will have difficulty in raising income in a significant way. I remind the Minister of what many of us have been saying over a number of years: that one of the best ways—indeed, the best way—of getting deficits down is through growth. I know the Government will say they are achieving growth, and there is some truth in that, but one of the problems that trouble me is that that growth comes from a low-income use of labour. My noble friend’s comments on immigration are exactly right. Immigration, particularly from eastern Europe, has depressed wages, particularly in the less-skilled areas. Even though these people are often highly skilled, their skills are not recognised here in a way that enables them to get a job. So there is a problem with boosting growth by means other than just increased employment and lower incomes.

The key to addressing the issue is science and technology, as I have mentioned before. In his opening remarks the Minister rightly drew attention to Clauses 27 and 28, which increase the aid provided to small and medium-sized enterprises for research and development. If this country is really to make a success of growth over a long period, science and technology will always have to be at the forefront. We have to do far more to invest in science and technology and, above all, to give small entrepreneurs greater help.

If you look round some of the university cities of this country you will find that many small and medium-sized enterprises have sprung up around those universities. I seem to remember that, many years ago, in the early stages of the Labour Government under Mr Blair, Cambridge did increasingly well with its link between the science departments, the banks and these entrepreneurial people. Somehow or other we have to boost that so that we do not have to rely for our growth on a lower income scale, important as that is. There was a very good article about this in the Guardian the other day. Boosting growth through low-income immigration from other countries might work economically for a while but you will not keep up with what is happening in more advanced technology areas. We have to be at the cutting edge. I would love to see every Budget start with a section on what will be done to give advantage to science and technology. It will also have to be linked to the universities, and the universities will need to be linked to the banks so that the banks will more generously fund and risk-take for the small and medium-sized enterprises.

The argument about immigration needs to be seen in two ways. There is clearly a problem in social terms with the pressure on schools, housing, hospitals or whatever. However, there is also the problem of how the issue feeds into our economy. Overall, immigration has been beneficial to this country—I think that almost everybody recognises that now. However, the question is how we can produce growth out of this immigration, which is why Members on all sides of this House and people outside it take a very dim view of including the many students who come to this country in the immigration figures. That has done much damage to Britain’s reputation, particularly in India. My message to the Government is that, overall, in a Budget which does not have much in it to criticise—although there are a few good things to say about it, which, to encourage the Minister, I will do in a moment—there is not the necessary emphasis on science and technology and small and medium-sized enterprises.

I will give one example. A company in Cardington, the old RAF base up in Bedfordshire, produces in essence a very large inflatable balloon that carries very heavy goods and has already done a tour of South America. I have talked to the company and seen the balloon. This sort of technology can be very helpful environmentally and also very good for our transport infrastructure in terms of transporting very heavy goods, the need for which is becoming increasingly common. For example, the assembly centre for the Airbus industry is largely in France but many of the parts are made in this country and have to be transported to France. These parts are transported in all sorts of bizarre ways as the aircraft themselves are often not big enough to carry them. We need to be imaginative and push such industries forward.

I am sure the Minister will not be surprised if I mention air passenger duty. There has been a small step in the right direction. He said in his opening comments that he thought that Britain must have the most competitive rate in the world. At the moment, however, our air passenger duty actually encourages people to fly more. People in this country will take a short hop across the Channel and then take a long-haul flight as it is cheaper there because they have no air passenger duty. I understand that it is very difficult in the current economic climate to change that overnight. However—and I say this to my own party as well—we need to get rid of the air passenger duty tax if we are to compete with other countries, particularly European countries which can offer far better deals to the travelling public, be it for holidays, work or whatever. That is very important.

I welcome the move to make gift aid easier for intermediaries, and also declare an interest as the chairman of a charity. Our charity will not benefit from this provision, however, because the famous statue of Mary Seacole will be unveiled across the river from here in September or October, we hope, as long as I can raise a little more money. If anyone would like to talk to me about that, please see me after the debate—because I am getting worried. However, that apart, it is so much easier if intermediaries can do the gift aid bit. I welcome the movement on that. It is very helpful.

I also have a small suggestion on car duty. I have been struck by the growth in the number of electric vehicles but, as the Minister will know, in some areas it is difficult to charge them. I do not know the tax position as regards establishing charging points. However, when there is clearly a long-term and important change in vehicle technology, there should be significant tax relief for establishing charging points. There might be some relief already—I do not know. I do not think that the relief should be ongoing but while this technological change is taking place it needs to be encouraged. I am sure that as electric vehicles become more and more common, the supply of charging points will increase to meet that demand. In the short-term, however, such investment could be very useful.

Those were my main points. I will end with a plea which is totally different from the other points—it is not about the Budget per se but about Her Majesty’s income and revenue department. I am one of a fast-growing number of people in this country who hold power of attorney for a relative or friend. Going on to the tax website and trying to find a way in which to deal with it is almost impossible. The only good thing that I can say for the department on this is that it is not alone, in that the banks are equally bad. I have been trying to close down a Barclaycard for two months now. There must be a way of typing into the website on tax matters “power of attorney” and being directed to it, because the situation that I have is that there are no paper records at all. I do not know what the tax position is or where to find the information, so I wrote some weeks ago to the tax department asking where I could find it and where to send my authenticated copy of the power of attorney. I still have not had an answer.

A big advantage for Peers and MPs and so on is that they can write to the Minister, but I do not want to do that. Every department nowadays must have some place where you can quickly access information on the current situation regarding power of attorney. The situation currently is almost impossible. When I asked other people about this, I found that I was not alone in having this problem. It is a very real problem and it can cause considerable difficulties. I am not saying that I am brilliant at using the internet and the web, but I am certainly not bad; if I can pat myself on the back, I would say that I was better than average. I may be being incredibly stupid on this, but I cannot find anything of assistance on the income tax website. I can find things on power of attorney, but the website does not direct you in the right way—nor is it developed enough—to give the information that I need. But that is a non-Budget point; it is a general point about the Minister's department, and I would be very grateful if he would pass it on and get it sorted out. An awful lot of people in this country now have to manage power of attorney—it is a growing number, as I say—and need this information to be on all major websites of private and public organisations.

--- Later in debate ---

[Lord Newby]

My Lords, I thank all noble Lords who have spoken in this debate. I shall come back to the matters raised by the noble Lord, Lord Davies, but perhaps I may correct one point. He claimed, completely falsely, that there was no enthusiastic endorsement from my Benches for the Bill. My noble friends have been restraining themselves, because their enthusiasm is very considerable indeed. I am sorry that he has not picked that up. I certainly have and it has given me great strength.

[Lord Soley]

As to my noble friend Lord Davies’s speech, the reason why so many people were on the government Benches, none of whom were speaking, is that they were trying to give subtle support to my noble friend Lord Haskel’s point that you can increase numbers without productivity. That is clearly the problem.

[Baroness Jolly (LD)]

A nice try.

--- Later in debate ---

[Lord Newby]

Given the policy of the noble Lord’s party on further education, and given that if you talk to anybody in a university about their absolute fears about what will happen if a Labour Government comes in, with their policies to cut grants, and their views on what that does to university funding, I would have thought that the best thing for the Labour Party to do for the future of universities is to pursue a policy of as much silence as it can manage. In this Parliament we have seen record numbers of young people going to university, including record numbers of girls and of young people from poorer backgrounds. That is exactly the sort of change and development that I thought the Labour Party supported. We have recognised that there is a need to improve skills below university level. As I was saying, we have supported the creation of university technology colleges and overseen the increase in the number of apprentices to 2 million, which is vastly more than obtained during the previous Government.

The noble Lord, Lord Soley, quite rightly talked about the absolute importance of science and technology and the transfer of basic research into business success. We have maintained resource funding and increased capital for science in real terms during the lifetime of this Parliament. Over the period ahead, we are planning some £5.9 billion of investment in the science infrastructure. On how we get that science applied, we have consistently put money into the catapults, the purpose of which is to act as a bridge between universities and firms. These have been extremely successful: the high-end engineering ones have been very successful. I saw the National Composites Centre in Bristol, which is doing tremendous work. It is possible to do that work only because it is a partnership between government, the universities and business. This concept began under the last Government, but we have strongly supported it. We need to do more, first, because it is successful and, secondly, because all our competitors are doing something like it.

Furthermore, in science we have initiated a grand challenge fund, which will deliver some £400 million of funding on a competitive basis for new, world-leading scientific infrastructure. Within the overall area of science and technology, we have put a £100 million investment, for example, into the research and development of intelligent mobility, which is one of the leading potential growth areas on which this country wishes to be, and remain, in the lead.

The noble Lord, Lord Desai, reminded us that the Labour Party legislated to halve the deficit over a four-year period, which is almost precisely what has happened under this Government. On his radical plans for changing the basis of corporate taxes and taxation more generally, this Government increased indirect taxation on consumption by increasing VAT and they have reduced taxation on income by putting up the personal allowance. Clearly that process, at least as far as indirect taxation is concerned, will not be pursued by any party in the next Government, as we heard yesterday.

On the noble Lord’s more radical ideas on taxing consumption, I am not a tax radical, I am afraid, partly because I started my working life as a tax man. I think that grand taxation schemes often have a whole raft of unanticipated consequences. Of course, those who suffer from any tax change make about 100 times as much noise as those who benefit, so politically I wish the noble Lord luck with the sort of grand scheme that he has in mind, but I hope that I am never called upon to try to do something equally ambitious.

The noble Lord, Lord Soley, made a number of interesting and useful points. I am pleased that he welcomed the changes to gift aid, and I wish him well in finishing the funding for the Mary Seacole statue. Having been in charge of fundraising for the Lloyd George statue in Parliament Square, I know just how stressful the process is, and I hope very much that it is quickly brought to a successful conclusion.

I will pass back to my colleagues in the Treasury and the Department for Transport the point that the noble Lord made about subsidising the establishment of charging points for electric vehicles. I have considerable sympathy with what he said about the power of attorney. I have power of attorney for my mother, and trying to work out how to exercise it is really quite difficult. Having gone through the whole process, I found that it was remarkably anachronistic. As we are moving into a period where power of attorney will be required by more and more families, there is an argument for looking a bit more fundamentally at the whole thing and not just at the way in which it can be used once it has been granted.

[Lord Soley]

I agree with the noble Lord’s general point, but I ask him to do one thing before the House prorogues. Will he ask his officials to put a reference to power of attorney on the tax website so that people can follow the link and find out what to do? That is not difficult to do, actually.

[Lord Newby]

I will do that very readily. Finally, the noble Lord, Lord Davies of Oldham, described this as a mean-spirited Bill, and he did not have a huge number of positive things to say about the Government’s track record during this Parliament. This is now the end of the Parliament and we have been in government for five years. We came into the coalition to turn the public finances around and to put the economy on a positive track, and that is what has happened. I think of the position that we were in, even when I first stood at this Dispatch Box three years ago, on growth, employment and our prospects in virtually every respect, and I look at the situation now. We have the quickest growth in the G7, the claimant count has come down a third in this Parliament, there are 400,000 fewer households with children with no one in work, and record numbers of women, both absolute and proportionately, at work.

Nobody can claim that the economy has yet reached a state of perfection—that will never happen—but looking at the progress that this Government have made in turning the economy around and making it fit for the challenges that we face, I am very happy to fight a general election on that basis. This Finance Bill completes the process by the Government in that respect and I commend it to the House.

Tax Avoidance and HSBC

Lord Soley Excerpts

Monday 23rd February 2015 Lords Chamber

[Lord Newby]

My Lords, I am sure that the noble Lord, Lord Green, like many other noble Lords, will read the noble Lord’s comments with great interest.

[Lord Soley (Lab)]

My Lords, does the noble Lord recall that about two weeks ago I raised with him on the Floor of this House the question of the governance of banks and reminded him of the Bank of England’s criticism of the failure of that governance? There can hardly be a better example of the failure of governance than what has happened at HSBC. It is one thing to say that these organisations are so big that they need to be broken but, frankly, they are not so big that they cannot be better managed. The managements of these banks need to provide reports on the quality of their management. They need to give those reports to the Chancellor of the Exchequer so that they can be placed before both Houses and we can keep an eye on these organisations. They are now becoming a disgrace to the public where once they used to be regarded as one of the great strengths of the United Kingdom.

[Lord Newby]

My Lords, the important thing to note is that the problems that we are now looking at—never mind who was in government—arose before the new regulatory regime was in place, before the banking industry itself set up its new standards body, and before there was the kind of scrutiny of what is happening in the banks that there is now. Everyone agrees that there needs to be a change of culture in the banks, including many who are in senior positions in those banks. I agree completely that Parliament has a role to play in calling the banks to account, and I hope that both Houses will continue in it.

Financial Services and Markets Act 2000 (Regulated Activities) (Amendment) Order 2015

Lord Soley Excerpts

Tuesday 10th February 2015 Grand Committee

Together, these changes show the Government’s continued determination to deal with market abuses, to tackle the unacceptable behaviour of the few and to ensure that markets are fair for the many who depend on them. I beg to move.

[Lord Soley (Lab)]

I apologise to the Committee and to the Minister for being two minutes late for his opening statement, having been in the Chamber for the Recall of MPs Bill. I then heard the call of the noble Lord, Lord Newby, so I thought that I had better do that instead.

There are just a couple of points that I want to make on this very welcome SI; I have no problems with the thrust of it. The last bullet point in paragraph 7 of the Explanatory Memorandum refers to the European Union introducing powers in 2017. When the European Union brings in those rules in 2017, will we then have totally new legislation to address that? As I understand it—the Minister will correct me if I am wrong—the European Union has not decided on the content of the laws that it wishes to apply but, clearly, if we do not apply it then we will find ourselves with a different set of regulations from those that apply in European Union states. I am not sure whether they will apply to all states, but certainly they will apply to many. I want to be clear about whether we will bring in that regulation here and adjust to whatever the European Union decides after 2017, in which case we will then have to come back to the Floor of one House or the other to pass new legislation.

My understanding is that any criminal charges relating to a breach of the European Union regulations would not apply in the United Kingdom. Any breach of any European Union rule could be a criminal act, as it is here under Part 7 of the Financial Services Act. If that is to be the case, would we make our criminal offence the same as it would be in the European Union? The Minister might need to think about that, but one can see the dangers in that we would have a criminal code operating in new European Union legislation that was different from the criminal code that might apply here in the UK.

The only other matter I wanted to raise is not minor in content but is very brief. It is about where this SI applies to small businesses under Section 11. I recognise that it is very unlikely to have a big impact on small businesses of any type, but it could. I want to make sure that the Government have consulted with not only the British Chambers of Commerce but the Federation of Small Businesses. Is the FSB aware of this? Has it said that it is relaxed about it, from its members’ point of view?

[Lord Tunnicliffe (Lab)]

My Lords, I thank the Minister for presenting this order and explaining it to us. I also thank my noble friend Lord Soley for coming along to swell our numbers. We have had so many interesting debates just between the two of us that three is difficult to cope with.

As usual on these exciting Treasury SIs, which I am asked by my party to handle, I studied the paperwork with great care. The superficial presentation of the order seems to take seven indices and put them into the LIBOR legislation. I remember that to some extent from our time discussing the Bill, but I had a further look into it. The essence of the legislation is summarised in the August 2014 report by the Fair and Effective Markets Review, which led to this recommendation. It seems to me that the process in fact bears on submittance. On page 5 of the report there is a list of submitters’ responsibilities. The responsibilities of benchmark administrators are overwhelmingly to look at submitters and make sure that they are right. I am very happy to be corrected by the Minister if I have got that wrong.

Since we are using this LIBOR framework—or LIBOR-type acts—as a vehicle for this order, I first ask the Minister how well the FCA has performed its LIBOR role over the couple of years that it has been in place. I made the point about the division between administrators and submitters because if I have read the paperwork properly—I would be only too pleased to be corrected—only two of these indices, SONIA and RONIA, have submitters at all. The full effect of the primary legislation makes sense for those. Can I ask the Minister whether these are here for completeness, or has there been malpractice in these indices? Obviously you cannot prove negatives, but has any known malpractice taken place in the creation and management of these indices in recent times?

Moving on to the other five indices, looking first at ISDAFIX, as I understand it the objective is to make it mechanical. The report I referred to says:

“Where practicable, IBA plans to transition the calculation methodology from this polled submission model to an algorithm-based approach, using tradeable quotes from regulated trading venues as the input for the rate”.

That is the end of the important part of the quote. More recently, the impact assessment says:

“ISDAFIX will be transitioned to a different methodology before April 2015”.

That would create a situation where, as far as I can see, there would be just an administrator. It would be valuable if the Minister could confirm that. Can he also confirm that the transition to the algorithm-based methodology will be completed by April 2015? If that deadline is missed, what is the Government’s intention? Will they use this to supervise the old system, or will they delay the introduction of the new system?

I understand from the paperwork that the gold fixing system is once again in transition. Will the transition to the new gold fixing methodology be completed by 1 April? If not, what will happen?

I was fascinated to read that the WM/Reuters London 4 pm Closing Spot Rate is once again, as far as I can see, mechanical—that is, it is a derivation from publicly available information, or at least market-recorded information, which implies that it is a mechanical index. I am somewhat confused at this when in recent years, and indeed months, we have had scandals in the foreign exchange market. Perhaps these are markets that fall out of the control that the order seeks to relate to. If not, and the order does not relate to those scandals, what are the Government doing to ensure that those markets where we have had problems in the recent past are properly under control?

If I am right in my understanding—I could have great humiliation in a few moments when the Minister explains to me that I am completely wrong—five out of the seven indices seem to be administrator-only. That raises the interesting question: what happens if there is an error? Surprisingly to me, not being a person of the City, there were no civil actions, as far as I know, as a result of the original LIBOR scandal. Looking at it from a distance, one felt that some parties may have been disadvantaged and there would be efforts by them to secure damages from the people who created that disadvantage. The only way there could be a problem with the administrator-only indices would be if there were errors. If there were, though, would the administrators have a commercial liability? If they did, who would pay? The administrators per se, as far as I can see, are not businesses of great substance; they are businesses created for the relatively modest task of administration.

I have a couple of other points. The UK is forging ahead of the EU in this area. I have no criticism of that; it makes perfect sense. My noble friend has asked how the thing will eventually come together, and I look forward to the response to that. However, have any other countries initiated legislation in these areas, and how does that legislation interface with the orders that we are looking at today?

My other question is: why seven? Were other indices considered? None is mentioned in the report, but do we know of other indices that were considered, what were they and why were they not included?

[Lord Newby]

My Lords, I am grateful to both noble Lords who have participated in this debate, particularly to the noble Lord, Lord Soley, for breaking up our traditional duet. He asked about the relationship between this order and the developing EU plans to do roughly the same thing. Negotiations are going on at EU level in which the UK is actively participating. The aim is that the EU regulation, when it comes forward, will be compatible with these measures. When it comes in, it will replace this order automatically because it will have legal force. However, the aim—there is no reason to think that this will not be possible—is that the EU measure does not require us to make any substantial change to the way that we run this regime. It will come in and supersede what we are doing, but only, as it were, in a legal sense rather than in a practical sense. That is the plan. We do not envisage that we will need to make any significant changes in the way that the administration or the procedures work as a result of that measure coming in.

[Lord Soley]

How will this measure come off the statute book? Is it because it is identical to another? I understand that this measure will have to come off the statute book.

Barnett Formula

Lord Soley Excerpts

Tuesday 10th February 2015 Lords Chamber

[Lord Newby]

My Lords, apart from the fact that the parties have supported the Barnett formula, the effect of the changes being made is that the relevance of the Barnett formula going forward is being cut by two-thirds and therefore any disparity that it might bring about will be reduced by an equivalent proportion.

[Lord Soley (Lab)]

My Lords, does the Minister agree that this exchange reinforces the view that we must have a constitutional convention and that a core part of that must be to address the relationship between the four parts of the United Kingdom? If we do not do that, we will lose the union, and I for one would deeply regret that.

[Lord Newby]

My Lords, it is absolutely clear that a consequence of the Scottish referendum is that a raft of issues around the way the union operates, not least the way in which power works in the Commons and in England, needs to be revisited. All the parties are setting out proposals at the moment about how they propose to do that.

Banking System

Lord Soley Excerpts

Monday 9th February 2015 Lords Chamber

Asked by

[Lord Soley]

To ask Her Majesty’s Government what steps they are taking to rebuild confidence in the banking system.

[Lord Newby (LD)]

My Lords, a successful and respected banking sector is of great importance to our economy. That is why the Government have taken wide-ranging action to ensure the integrity and stability of financial services in the UK. For example, the Government now require banks to ring-fence their riskier operations. They have also criminalised the manipulation of LIBOR and a further seven benchmarks and legislated to introduce a senior managers certification regime.

[Lord Soley (Lab)]

Does the Minister accept that the latest Bank of England financial stability report indicates that this is not just about financial resilience but also about governance? As reports today in the Guardian and elsewhere demonstrate, it is governance that is such a failure at the moment. Will he say, very specifically, whether he agrees with the British Chambers of Commerce that we need a British business bank which would enable growth to take place in the UK economy? It is a very important proposal and one that ought to get urgent support.

[Lord Newby]

My Lords, we do have a business bank. This Government have created one and it is growing very rapidly. As for standards, I completely agree that the standards that are adopted by bankers need to improve. Of course, the industry has itself recognised this by establishing the Banking Standards Review Council.

--- Later in debate ---

[Lord Newby]

My Lords, the process by which people become Members of your Lordships’ House and are made Ministers involves them being vetted by the House of Lords Appointments Commission and the appropriate bodies within government. As far as I am aware, there is no evidence that the noble Lord, Lord Green, was involved in any of this sort of activity.

[Lord Soley]

The Minister cannot be allowed to get away with this. He is being incredibly complacent. The governance problem with banks has been there for years under all parties and it is fair to say that none of them has done enough about it. He is still not saying what he will do to ensure that the governance of banks, not just their financial resilience, is dramatically improved.

[Lord Newby]

My Lords, I have spent much of the past five years in this Chamber legislating to improve the governance of the banks. We have passed several major pieces of legislation to make long overdue improvements in the ways in which the financial services sector is managed. For example, we have introduced too-big-to-fail processes of various sorts, the ring fence and the bail-in, as well as new standards for senior managers in banks. All of these things will improve the way in which banks are managed and a number of them were actively opposed, when they were in government, by the previous Administration.

Money Laundering: UK Parliamentarians

Lord Soley Excerpts

Tuesday 14th October 2014 Lords Chamber

[Lord Deighton]

My noble friend is correct that the PEP definition includes close family members and business associates. I go back to the original point that it is not within the banks’ responsibility to look at every transaction of a domestic PEP; they should be assessing whether that PEP is high risk. If the PEP is not high risk, the banks should treat them like every other customer. That is where we need to focus our efforts to correct this problem.

[Lord Soley (Lab)]

My Lords, I do not think that the Minister has taken on board the full range of problems, as other companies also put an unreasonable interpretation on this requirement. I am far from convinced that the way it has operated has at any time been useful in stopping money laundering, and we need to take a much harder look at it. It would be far better to look at other methods of checking for money laundering than simply asking for a person’s occupation and then declaring that they may therefore be a risk.

[Lord Deighton]

First, my Lords, I need to make the point that having an effective, comprehensive, international campaign against money laundering is a critical weapon for us, and we are taking leadership in this area. I absolutely accept that the implementation domestically needs to be significantly refined. As I have already said, I will work with the FCA and the industry bodies to ensure that we have a more proportionate application of the rules.

Airports: Heathrow Third Runway

Lord Soley Excerpts

Tuesday 17th June 2014 Lords Chamber

[Lord Newby]

I am tempted, of course, to say “shortly”, but it is the next Government who will respond to the report of the Davies commission. However, I think that it is worth pointing out that the Davies commission concluded that although one new runway will be needed, it will not be needed in the south-east until 2030.

[Lord Soley (Lab)]

Does the Minister recognise, with the Chinese Prime Minister and trade delegation in town, that this will not be the first time that the Chinese have raised with us the lack of runway space at our premier hub airport for their expanding economy? Why, then, does the Minister persist with this silly idea that Britain is closed for business because we do not expand our airports?

[Lord Newby]

My Lords, it is not for the Government to decide the priorities of individual airlines flying out of Heathrow or anywhere else. However, the noble Lord will be aware that, in September last year, British Airways launched a new service from Heathrow to Chengdu. He will undoubtedly also be aware that our current bilateral flight agreement with China, which sets a constraint on the number of flights that we can have to China, is up for review. Discussions on that will take place next month.

Banks: Payment Protection Insurance

Lord Soley Excerpts

Monday 13th January 2014 Lords Chamber

[Lord Newby]

My Lords, the Government are not letting the banks off the hook. The banks have paid out almost £13 billion in respect of PPI claims, which is about 70% of the total we think is payable, and a lot more claims are in the pipeline. The concern raised by the noble Lord in his Question relates primarily to the way in which the detailed amounts were calculated and the extent to which individuals can understand those calculations from the material that they receive from the banks.

[Lord Soley (Lab)]

My Lords, is not the problem around individual complaints that very often those people who do not claim are the most vulnerable?

[Lord Newby]

My Lords, a great deal of publicity has been generated on this issue, and consumer organisations are looking at how they can do more. As I have said, a very considerable number of claims have already been made.