Financial Services Bill

Lord Tyrie Excerpts

Monday 10th December 2012 Commons Chamber

[Chris Leslie]

It is a great pleasure to welcome the new Minister to these rather long-winded proceedings. I believe we started on this Bill back in February, but he should not worry, as this is shortly to be followed by the banking reform Bill and possibly even a banking standards Bill—to be determined—so we will probably have plenty more opportunities to chew over these issues then. It is a little preposterous to have a knife coming down at 7 o’clock, by which time we have to put the Question on 150 or so of these Lords amendments. That gives us about 25 seconds per amendment [Interruption.] I will get on with it; I lost about a dozen amendments just then.

That is why we have tabled several amendments to those Lords amendments—you will be impressed with that, Mr Deputy Speaker—and I wish briefly to explain why we have done so. The first Lords amendment that we are seeking to amend is Lords amendment 3, which, as all hon. Members here know, deals with the creation of an oversight committee within the Bank of England as a sort of subset of the court of directors, where it is to have a reviewing and, supposedly, a scrutinising role. There is a problem: the oversight committee has a series of responsibilities, not one of which is set out, in overseeing what the Bank of England does. The committee has a set of responsibilities to monitor, to review procedures and to conduct performance reviews, but all of that is retrospective—it looks backwards, not forwards. May I gently suggest to the Minister that it might be more appropriate if he were to call this a “hindsight committee” rather than an oversight committee, because as things stand I do not think there is a sense in which this is a proper check and balance within the governance of the Bank of England?

Why does that matter? It matters because the Government are giving phenomenal new powers to the Bank of England within our economy as an overarching financial regulator. The Minister says that the PRA is independent and will report to Parliament, but let us be honest: this is a creature of the Bank of England and the Bank will control very much what happens in the regulatory framework. Although we welcome the concession that was made to create an oversight committee, people have misgivings—we will probably hear about some of them, perhaps from members of the Treasury Committee, in a moment—that there is still a very hierarchical and centralised set of governance structures in the Bank of England.

We therefore need to make sure that this crucial verb “oversee” is included in the oversight committee’s remit. That would help to shift the balance of power between non-executives and executives in the Bank of England framework just that bit more. These are important lessons of governance, certainly from the private sector. While we are moving towards that executive and non-executive balance, it is important that we recognise that the Bank of England is being dragged into the 21st century. If we are taking the opportunity to do that in legislation, making that particular change would be very welcome.

The other amendment we wish to make to Lords amendment 3 relates to crisis management. As I said, the Bill gives massive new powers to the Bank of England, but in a crisis there will be very little time to figure out and design standing orders, or to work out arrangements for who will meet whom and for how decisions can involve the right people. You will recall, Mr Deputy Speaker, how during the global financial crisis crucial decisions affecting billions of pounds of taxpayers’ money and whether people could access the cash machines were made in the space of hours over weekends. In hindsight, it would have been nice to have had a carefully planned set of arrangements, and this Bill needs to learn the lessons from that. We are concerned that the crisis management arrangements are still thin and inadequate. We have suggested that if there is going to be an oversight committee in the Bank of England, the Bill needs to set out explicitly that it is to have a duty to ensure the adequacy and effectiveness of arrangements with the Treasury for crisis management.

There is no role for the new financial conduct authority in the drafting of the arrangements. Apparently it does have a veto, but it is not part of the drafting of that memorandum of understanding. The Government are still resisting proposals to ensure that deputy governors and the chief executive of the FCA can consult directly with the Treasury in circumstances where there might be differences of opinion. Given the import and the size of the FCA, the PRA and the FPC within the Bank, it is important that the deputy governors have an ability and a right to talk to the Treasury, so that everything is not hidden and suppressed within one view of the Governor of the Bank of the England.

There is a very bizarre set of provisions excluding the ability of the memorandum of understanding to make provision about the relationship between the Bank of England and the PRA, which goes to prove that the PRA is very much a creature of the Bank. It also suggests that the Governor will have powers to suppress the voice of the PRA in a crisis. Shockingly, there is no parliamentary approval process for that MOU; no statutory instrument arrangement has been made, as I understand it. The crucial paragraph of the MOU that deals with what happens in the white heat of an emergency simply says, “Oh well, there will be ad hoc or standing committees just to sort these things out.”

That is not good enough. The whole of best practice in preparedness and in emergency and contingency planning would suggest that now is the time for Her Majesty’s Treasury and the Bank of England to sit down and calmly and methodically work through what would happen in those circumstances. There should be some draft standing orders to pre-empt those scenarios.

[Mr Andrew Tyrie (Chichester) (Con)]

The hon. Gentleman will recall, of course, that the poorly drafted MOU that lay behind the tripartite agreement certainly played a role in the lack of understanding of how to handle the crisis. Does that not point all the more towards a need to think things through very carefully now? That MOU was scrutinised in Parliament; I was in Committee at that time and most of the points made were largely ignored. Surely now, while we have the time, we should think through what is required in such an MOU and take the opportunity to consider that in Parliament.

[Chris Leslie]

I entirely agree with the Chairman of the Treasury Committee, who is very knowledgeable and has some strong views on these questions. It is a pity that when we flick through the luminous list of Lords amendments, we find a gaping hole on those crisis management arrangements, where none was accepted by the Government. Some clauses in the Bill deal with that set of scenarios, and it is noticeable that such provision is not included there. That is in part why we have sought to amend Lords amendment 3, as one of the few areas where we can make an amendment is in respect of the role and duties of the oversight committee. I accept that that is only half of the scenario, as we also want Her Majesty’s Treasury to have a process for reviewing the adequacy and effectiveness of its arrangements with the Bank of England, but we do not have the opportunity today to propose such an amendment.

If we are to have an oversight committee, it should be able to play a role in ensuring that the crisis management arrangements are up to scratch and that there is joined-up thinking between these variously important branches of governance to ensure that someone at the Bank of England is tasked with thinking these things through very carefully.

--- Later in debate ---

[Chris Leslie]

My hon. Friend will not be surprised to learn that there was a little argy-bargy between the Treasury and the Bank of England. As I understand it, the Bank initially said, “Loan-to-value ratios on mortgages, and loan-to-income ratios, are an awfully big decision. There is a lot of politics in that. We are not that keen. Push that back to the Treasury.” I think the Treasury has been saying, “No, Bank of England, this is a decision for you to take.” These are inherently political issues and our constituents would rightly ask whom to hold to account for such big decisions that affect their daily lives: whether or not someone can get a mortgage, what is happening in the housing market, and so on. That is why we still have some reservations about the governance structures and the lack of accountability on policy making. That is why we are asking for an assessment of the impact on economic growth whenever these levers are pulled and whenever these decisions are taken. I accept that there are careful balances to be struck. The FPC of course has to have an eye to stability, but it also needs to recognise, as the Chancellor has said, that we do not want the risk-aversion of the graveyard so that there is no economic activity. That is why we have suggested this particular change.

I am conscious of the time and I know that a number of hon. Members want to speak. Those are the main points that I have to make about our particular arrangements and it would useful if we could hear the views of others.

[Mr Tyrie]

The Bill came out of the other place only last Wednesday night and it was heavily amended there. It is the most complicated, and one of the most important, pieces of financial legislation for decades.

Much of what we are considering today amends provisions in the Bill, which themselves amend the Financial Services and Markets Act 2000 and the Bank of England Act. The Bill is incomprehensible without constant referral to FSMA. I would go further and say that it is incomprehensible in parts even after considerable referral to FSMA. We now have a piece of legislation that passeth all man’s understanding, like God’s will. FSMA itself was arguably the most complex piece of legislation ever passed by Parliament. I was on the Bill Committee and it was certainly pretty testing.

We are now legislating in a huge rush to get this on the statute book by the end of the year in order to meet an entirely arbitrary deadline. The deadline has been rendered all the more absurd by the fact that we will be back here next year anyway amending it as part of the banking Bill, which is required to give effect to the Vickers commission’s recommendations, parts of which have to be done by amending FSMA and cannot be done in any other way. I am not making some recondite point about parliamentary procedure; I am making a point about how to make the Bill effective. It is a point that is being made to me right now by senior regulators, who would very much prefer that we just take a little bit more time to get the legislation right.

This group of amendments deals largely with Bank of England governance. Everyone is agreed that Bank of England governance is in a huge mess. That is why last April the Treasury Committee took the highly unusual step of tabling a new clause in an effort to try to sort it out. I am particularly grateful to colleagues from four parties on the Committee who all co-operated to enable that amendment to go down with unanimous support. I am also particularly grateful to my deputy Chairman, who is sitting on the Opposition Benches, who assisted with the tabling of that clause. It was needed because the Bank has ramshackle governance arrangements that reflect their 17th century origins, as the name “court” demonstrates. As has already been pointed out, better governance would improve its accountability to Parliament. But much more important in some respects, it would also improve the Bank of England’s authority to act and to speak to the rest of the country as it takes tough decisions, such as those that have just been referred to. This is a point that is not lost on very senior people in the Bank of England right now, on the Monetary Policy Committee, the Financial Policy Committee, and also a number of deputy governors.

The Treasury Committee clause would not have solved all that, but it would have gone some way to bringing the Bank into line with good practice on corporate governance generally. It would have placed a duty on the court to conduct retrospective reviews of Bank performance and to publish the results, and it would have required the court to publish its minutes. I withdrew the amendment in the Commons only when the Government gave undertakings to make those changes in the Lords. I will come back to that.

In May, the Treasury Committee took another highly unusual step of reporting on the Financial Services Bill, after we had looked at it in the Commons, in order to assist the other place with its examination. Most of the conclusions that we came to in that report were raised as amendments in the Lords. The Government responded to some of them and that is what we are debating now. The Government’s Lords amendment 3 sets up, as we have heard, an oversight sub-committee of the court’s non-executives. That would give the court the power to commission retrospective reviews of the Bank’s performance —that is a step forward—to be carried out either externally or internally. The Government have also inserted an amendment to require the publication of court records of its meetings. While these amendments improve the Bill, they fall well short of what we were hoping for, and what in our view is still required, for several reasons.

First, the amendments place the power of review in the hands of a sub-committee of the court, rather than the court itself. This will further confuse the lines of accountability, not least to Parliament and to the Treasury Committee. These accountability lines are now very complex. I urge the Minister to try drawing them on the back of an envelope. I wager that he will have quite a task on his hands. Senior regulators agree that they will not do as they stand, and they have been telling us that publicly and privately. They want an improvement. They want the legitimacy for their decisions that comes with effective parliamentary scrutiny. Senior people in the Bank of England have seen how the Monetary Policy Committee has been strengthened and bolstered as a result of effective scrutiny by the Treasury Committee.

--- Later in debate ---

[Alison McGovern]

May I take the hon. Gentleman back to his fourth point? He mentioned the Treasury Committee’s ability to get information from the Bank. What specifically is he concerned about, and does he think that his Committee ought to be able to access data from the Bank as part of its oversight role? First, how would he improve on that point? What specifics of governance does he think we must look for? Secondly, is it a question of getting data out of the Bank so that group-think can be laid bare and investigated? Am I right to take those points from what he has said?

[Mr Tyrie]

If the hon. Lady will forgive me, I will not linger on those points for too long, because the Committee has set that out in some detail in a number of reports. On her first point, in a nutshell, one need only look at the corporate governance arrangements of almost any public sector body, or indeed any public company, to see that the lines of accountability are powerfully drawn between their non-executives and the executive arm. That is almost completely lacking in the court, whose role is heavily circumscribed and, until recently, involved nothing more than oversight of the Bank’s budget. Indeed, I have been told informally that until recently an unspoken requirement of membership of the court was to have no great knowledge of financial matters, and certainly not to interfere with them. That strikes me as the negation of genuine oversight, but perhaps those who whispered such thoughts in my ear were making mischief.

On the hon. Lady’s second point, it is of course crucial that somewhere in the accountability framework there is a group of people who are capable of asking for detailed information in order to make the scrutiny meaningful. The Treasury Committee, in our investigations into Royal Bank of Scotland, found that we needed to send specialist advisers into the FSA to obtain the necessary papers to ensure that they were taken into account in its report on RBS. I do not think that it would be a healthy state of affairs if the Treasury Committee ends up having to send specialist advisers into the Bank of England to perform such a role. It would be far better to have a group of non-executives in the Bank of England whose explicit task is to look for those documents and to be available to help us do the scrutiny directly. My reply to her questions touches only the surface of the more detailed reply that could be given, but it has been set out in some detail in at least two Treasury Committee reports.

Next year we will have a new Governor. He could, of course, grasp the opportunity to improve all this, and no doubt he will form views about governance, ones that might benefit from legislative change. The Banking Commission will also make recommendations on standards, culture, competition, governance, regulation and sanctions for rule-breaking by bankers. Any or all of those might require statutory action. I would be grateful for an assurance on that from the Minister, so will he commit the Government to broadening the scope of the banking Bill to ensure that further amendments to FSMA, including in the areas I have just mentioned, can, if necessary, be made next year?

[Greg Clark]

I can give my hon. Friend that assurance. The Government have already said, I think in response to the question of data on lending to deprived communities, that if we do not succeed in establishing agreement with the British Bankers Association, we will use the forthcoming banking Bill to make those changes. If the distinguished members of my hon. Friend’s Commission, following their considerations, have recommendations that will require legislative changes, we will of course have vehicles available for that.

[Mr Tyrie]

That reassurance is helpful. I will take it back to both the Treasury Committee and the Banking Commission.

[Mark Durkan (Foyle) (SDLP)]

The hon. Gentleman has referred to the new Governor. If it had been a condition of his appointment that he understood the Bill and could explain it, does the hon. Gentleman believe that he would have been appointed?

[Mr Tyrie]

Well, he is a very clever man. I am confident that at the time of his appointment he would have been unable to pass the FSMA test, but I have no doubt that by the time he comes before the Treasury Committee for his pre-appointment hearing he will have mugged up fully on it all.

I have spoken for 14 minutes already, which is four minutes longer than I make a point of ever speaking in the House these days, so I will move swiftly to one last point. The Minister, as he pointed out, started looking at the Bill three quarters of the way through the process of putting in place a new system of financial regulation. I will wager a pound to a penny that he has found the tangled web of legislation that we have just been discussing extremely confusing. In fact, I wager that he has found it, in places, to be a nightmare and impossible to understand. I wager the same amount that the officials advising him do not always understand it either, and that is no reflection on the high-quality advice he is no doubt getting. Will he be prepared at least to consider rewriting FSMA afresh when he comes to adapt it to take account of the banking Bill, because that is what regulators have told us they would prefer, what the Governor of the Bank of England said he would prefer and what would enable the industry, the public and Parliament to have a much more intelligible piece of legislation?

It is a great shame that that approach, which was vigorously put forward at the time, was rejected when the Government first announced that they would proceed with amendments to FSMA. The Governor was pressing for it very strongly, and he had allies in Parliament. We now have a second chance, and I very much hope that the Minister will consider taking it. He will need to bear in mind that there will be 100—perhaps 1,000—official voices telling him not to do that, but just occasionally there are moments when a Minister can greatly improve the quality of the statute book. Would he be prepared at least to consider rewriting the Bill so that we have one fresh piece of legislation that everyone can understand?

[Greg Clark]

This has been a short but interesting debate, and I am grateful to the hon. Member for Nottingham East (Chris Leslie) and to my hon. Friend the Member for Chichester (Mr Tyrie) for contributing to it. I think that my hon. Friend does himself a disservice. If anyone can follow, and indeed have imprinted in his mind, every clause of FSMA, and be able to relate it to any future amendment, I know that he is capable of it. Let me first respond to some of the points made in the debate, including his.

The Bank of England is obviously at the heart of the financial system, and the changes are among the important reforms of its powers in history, alongside nationalisation in 1946 and independence in matters of monetary policy in 1998. Notwithstanding the few remaining issues of debate, I think that the whole House would agree that the changes made in the Lords represent a significant improvement in this part of the Bill. The amendments will strengthen the governance and accountability of the Bank. They will give the Financial Policy Committee a more positive and proactive mandate around economic growth and shift its membership to reduce the influence of the Bank’s executives. In addition, there are clarifications to simplify the drafting and terminology, if perhaps not going as far as my hon. Friend would wish to go. The name “court” is retained, despite his preferences.

On the Opposition amendments, I do not think that there is, in practice, a huge degree of difference between us. As the hon. Member for Nottingham East said, amendment (a) to Lords amendment 1 would add the word “overseeing” to subsection (2) of new section 3A of the Bank of England Act 1998. That was well debated in the House of Lords, as he will know. Some clarity was achieved there, in that the kind of oversight in which the oversight committee is expected to engage is common to non-executive directors elsewhere. Baroness Noakes made particular reference to that. The opportunity to review decisions and to consider how they are made is well understood in the context of the term “oversight”. The hon. Gentleman is proposing something that goes beyond that: that oversight should contain a more real-time role as well as a backwards-looking role. That could involve second-guessing the Bank’s policy decisions while they are being taken, which would not be appropriate. Indeed, it would go against the recommendations of the Treasury Committee, which said in its report that it agreed with the Governor that the Bank’s governing body should place more emphasis on oversight and ex-post scrutiny that would not authorise it to become involved in second-guessing immediate policy decisions. That is the advice that we have taken.

--- Later in debate ---

[Greg Clark]

They may be fresh instructions, but I have decided not to read them. I may be countermanded, but I will not retract my statement.

I will conclude by addressing what the Chairman of the Treasury Committee has said. I am reliably informed by my predecessors that this Bill, though complex and voluminous, has been well considered in numerous Committee sittings in this House, and I think that most people will conclude that their lordships have done a good job in their scrutiny. The Bill is important and it is right that it has been scrutinised to the extent that I think it now commands the broad support of the House, as evidenced by the relatively few amendments that have been tabled to their lordships’ amendments.

As I said in response to an earlier intervention, opportunities will be presented to the House in the years ahead—new Bills are already gathering speed on the runway—to accommodate further changes, should they be necessary. If so, I am sure we will have further conversations about them.

My hon. Friend the Member for Chichester issued me a challenge to rewrite the Financial Services and Markets Act 2000 and anticipated that I would be besieged by objections from officials and others.

[Mr Tyrie]

Turn around.

[Greg Clark]

I will not turn around and look at my officials in the Box, because I am sure I would get some black looks. My hon. Friend would not expect me to make a commitment, but I know—this is the case with everything he says—that he speaks from experience and that he examines the issues meticulously. I will look at what he has said, but I ought not, at this late stage, to raise his hopes too high.

Lords amendment 1 agreed to.

Lords amendment 2 agreed to.

After Clause 2

Oversight Committee

Amendment (b) proposed to Lords amendment 3.—(Chris Leslie.)

Question put, That the amendment be made.

Autumn Statement

Lord Tyrie Excerpts

Wednesday 5th December 2012 Commons Chamber

[Mr Osborne]

The 4G licence, yes. We are using the 4G licence. [Interruption.] May I say something about the 4G licence? The shadow Chancellor had 20 minutes to make his points, but he did not make any at all. We are using the 4G money, in part, for new capital spending, including building further education colleges, one of which is called the Leeds city college, in a town called Morley in west Yorkshire. I am not sure what the local MP would make of the shadow Chancellor’s decision that that is not the best use of the money, but he can look at himself in the mirror and ask that question.

The shadow Chancellor cannot answer these basic questions. He tries to claim that all the problems in Britain began in May 2010 and that they are all the fault of this Government. Literally only the people in the Brownite cabal claim that; there is not a single other person in the Labour party, in any business organisation or in any of the international bodies who believes that. The reason he has to maintain this completely incredible position is that if he admitted that the previous Government were responsible for the problems in our country, he would have to admit that he was responsible for them.

Out of necessity not choice, therefore, the Labour party leader has a shadow Chancellor who is more associated with the economic mismanagement that led to Britain’s problems than anyone else in Britain. He will not let his party move on. He is a man trapped in the past. The one thing the Opposition need to say is: “We’re sorry. We spent too much and we borrowed too much, but we won’t do it again”, but that is the one thing the shadow Chancellor cannot say. Until he does, though, the British public will never trust him or the Labour party with the public finances again.

[Mr Andrew Tyrie (Chichester) (Con)]

What the business community—the bedrock of economic recovery—needs most of all is stability, and I believe that what we have heard today delivers more stability. Does the Chancellor agree that businesses, particularly small businesses, need banks that lend? With that in mind, will he examine the radical options to achieve that—opening up banks to much more competition from new lenders, as the Treasury Committee has recommended; cleaning up bank balance sheets, as the Bank of England has advocated in the financial stability report; and possibly even breaking up one or more of the state-owned banks to improve their funding and hence lending?

[Mr Osborne]

My hon. Friend makes a good point: many of the problems in our economy are borne of the credit constraints and the elevated bank funding costs, which I talked about when I mentioned the OBR’s assessment of the economic forecast. There are several responses. The funding for lending scheme has brought bank funding costs down. That scheme, according to the OBR’s assessment, has had an impact, and it is an important part of our macro response. I agree with him that we must do much more to encourage competition in our banking system. We have some new entrants, but we can go further, and we need a much more competitive banking system that is able to serve the public better.

Bank of England

Lord Tyrie Excerpts

Monday 26th November 2012 Commons Chamber

[Mr Osborne]

Given the many fierce exchanges that the shadow Chancellor and I have across the Dispatch Box, it is only right for me to acknowledge my real gratitude to him today for welcoming this appointment. He knows Mark Carney, and he knows that he is an outstanding candidate for the job. I shall certainly cherish the words “I commend the Chancellor”, because I will probably never hear them from the right hon. Gentleman again. I sincerely thank him for that.

One of the important things about the independence of the Bank of England, which the right hon. Gentleman helped to establish with the previous Prime Minister, is that it commands cross-party support—it did not at the time; it does now—and we must try to keep the appointment of the Governor out of the day-to-day partisan debate. The right hon. Gentleman has certainly played his role in doing that today. Let me answer specifically his questions about the new role of the Bank of England.

First, on the shadow Chancellor’s point about the new responsibilities, the Bank has heavy new responsibilities because, in our judgment, the tripartite system did not work and was not properly co-ordinated. Indeed, the Select Committee of the last Parliament, which was chaired by Lord McFall—John McFall as he was then—said that it was not clear who was in charge. By insisting that the Bank of England is in charge of macro-prudential and micro-prudential regulation, we bring those things together.

It is also important, secondly, that we recognise that the Government have an important role. When there is a material risk to public funds, there is a clear responsibility in the Bill for the Bank of England to inform the Treasury, without deluging it on a day-to-day basis with everything that is happening and not differentiating the things that are significant and really important. We have taken in the Bill the power of direction that did not previously exist. In the memoirs of my predecessor, the right hon. Member for Edinburgh South West (Mr Darling), he made it clear that at one point he was considering using the almost nuclear power of direction in the Bank of England Act 1946, which no one had ever used, but that he backed away from it because he did not have a more targeted instrument. We now have that targeted power of direction, which the elected Government can use.

Thirdly, we have discussed the role of the deputy governors. Although it is incumbent on any good Governor and any good Chancellor of the Exchequer to try to make sure that views are heard, ultimately the Bank has to reconcile its internal differences rather than, as I have said, allowing the internal differences to be expressed externally without any attempt to resolve them internally. I make it my business in doing my job to see the deputy governors and to make sure that their views are heard.

Finally, let me deal with the asset purchase facility coupons. This was done with the support and acceptance of the Governor of the Bank of England and the Monetary Policy Committee, which discussed it and agreed that that was a more transparent way of accounting for the quantitative easing coupons and how they will affect the public finances through the coming years. I can confirm for the right hon. Gentleman that when the Office for Budget Responsibility produces its report next week for the autumn statement, it will clearly show the impact of the APF coupons on the public finances, both before and after.

[Mr Andrew Tyrie (Chichester) (Con)]

May I begin by thanking Mervyn King for his outstanding public service and hard work through the appalling financial crisis with which he has had to grapple? I support what appears to be the appointment of an extremely talented and experienced Governor, who has already been welcomed on both sides of the House. I welcome the fact that the Chancellor has come out in support of the Treasury Committee’s holding a hearing prior to the appointment of the new Governor and of the reporting of its conclusions to the whole House. Does the Chancellor agree that the legitimacy of the appointment would be further bolstered by giving the House an opportunity to debate that appointment in the light of our findings?

[Mr Osborne]

These days, of course, the House of Commons can choose what it wants to debate through the Backbench Business Committee, while the Opposition are always able to table motions, too. I do not think it would be sensible to try to divide the House on something the appointment of the Governor of the Bank of England. One of the advantages of the Bank of England, as I was saying to the shadow Chancellor, is that there is an agreement that it should be kept out of party politics and the like; we have achieved that today. Mr Carney said clearly in my discussions with him that he did not want to talk about British economic policy at any great length at his press conference today or, indeed, while he continues as the Governor of the Bank of Canada, but that he did want to talk at length to my hon. Friend’s Committee. At a mutually convenient time, he will do that.

Oral Answers to Questions

Lord Tyrie Excerpts

Tuesday 11th September 2012 Commons Chamber

[Mr Osborne]

I will pursue the right hon. Gentleman’s point with all haste.

[Mr Andrew Tyrie (Chichester) (Con)]

Many Members of this House have told me of their deep concern about the development of retrospective tax measures, and the Treasury Committee shares those concerns. Does the Chancellor agree that the best way to prevent loss of revenue from avoidance schemes is to work much harder to create a simpler tax system in the beginning?

[Mr Osborne]

Yes, I agree that that is of course the best approach, but in the tax code of a western democracy there will inevitably be opportunities for abuse and avoidance, which we need to deal with. When it comes to retrospection, I say to my hon. Friend, the Chair of the Treasury Committee, that I think the House of Commons should sanction retrospective taxation only when it is very clear that the explicit wishes of Parliament have been abused and avoided. For example, in the case of a particular UK bank that his Committee and I have corresponded about, we acted retrospectively because there was a clear breach of what Parliament had expressed, and I am very pleased to note that the bank’s new chief executive has today said that the bank will be scaling down its tax structuring activities.

Bank of England (Appointment of Governor) Bill

Lord Tyrie Excerpts

Friday 6th July 2012 Commons Chamber

[John McDonnell]

That is a really useful advert—it might be one of the most constructive things said this morning.

I shall be as brief as I possibly can. The message contained in the Bill is that the appointment of the new, powerful post of Governor of the Bank of England should not be left solely to the Executive, and that Parliament, on behalf of the people, should also play a decisive role. The appointment is too important to be left in the hands of a single Minister.

[Mr Andrew Tyrie (Chichester) (Con)]

As the hon. Gentleman knows, his Bill has the support of the Treasury Committee—it is similar to the Committee’s proposals. The principle of greater parliamentary engagement that he is articulating is a strong one, but does he agree that it could be enacted in a number of ways? Does he also agree that we need flexibility from the Government on accomplishing that engagement while the Financial Services Bill is in the Lords?

[John McDonnell]

That is an incredibly constructive proposal, and I hope the Minister heard it. There are other ways of approaching this matter and we should be open to considering them. Yesterday, the Government entrusted the hon. Gentleman with a major inquiry—the inquiry Committee will comprise members of the Treasury Committee and Members of the other House. If the Government have the confidence in Treasury Committee members to undertake that inquiry, it should have the confidence in their having a decisive role in the appointment of a new Governor of the Bank of England. I therefore welcome the hon. Gentleman’s constructive comments.

May I thank Kate Emms, the Clerk, and Gordon Nardell QC for their assistance in drafting the Bill and the explanatory notes? I am extremely grateful for their assistance. The Bill amends the Bank of England Act 1998 to give effect exactly to the recommendation of the Treasury Committee from its report of October 2011 that the appointment of the Governor should be subject to the approval of the Treasury Committee.

Between the time of choosing the appointment of the Governor of the Bank of England as the subject of my private Member’s Bill and debating it, the world has changed somewhat. Last week’s revelations about the role of Barclays bank—and, more than likely, others—in the LIBOR scandal have given the Bill a new context, and there is a new significance in the appointment of the Governor of the Bank of England. Mervyn King will retire in the next year, and the new Governor will play a pivotal role in what, it is increasingly clear, will of necessity be a radical reform and reconstruction of our financial system.

Professional Standards in the Banking Industry

Lord Tyrie Excerpts

Thursday 5th July 2012 Commons Chamber

[Mr Andrew Tyrie (Chichester) (Con)]

The rigging of the LIBOR market is shocking. It is the worst case of City malpractice I can recall. The Chancellor proposed the idea of a Joint Committee to me in several phone calls over the weekend. It was an honour to be considered. None the less, I made clear right from the start what ingredients I viewed as required to make a success of it.

First, the Joint Committee’s terms of reference should be tightly drawn and forward looking. This cannot be a witch hunt. Having an exhaustive and inquisitorial committee of inquiry, whether it be within or outside Parliament, into the respective roles and responsibilities for mistakes of Ministers, civil servants, the Bank of England, regulators and commercial banks would do more for the history books than for the quality of legislation. The job of the Joint Committee must be to concentrate on how to get one part of the banking Bill into better shape, and in quick time. For that purpose it will need tightly drawn terms of reference, focused on improving standards and corporate governance in banking, and it can and should do the work quickly.

Secondly, as I said in that conversation, any committee of inquiry, particularly a parliamentary Committee, must have the support of the major parties across the House of Commons. It appears from what I am hearing here that it does not have that support at present.

[Mr Watts]

Is it not the case that any inquiry will have public support only if it is carried out on a cross-party basis? It is amazing that a Chancellor who seeks such co-operation from the Opposition should go out and the first thing that he does is tell lies about—

--- Later in debate ---

[Mr Watts]

I will withdraw that comment, Madam Deputy Speaker. I will say that the Chancellor gives the impression that he did something that he did not do, and then refuses to apologise. How does he think that he can secure co-operation across the Benches when he does that?

[Mr Tyrie]

I shall not address the second part of the hon. Gentleman’s question, but the first part was absolutely right. I think it essential for us to have cross-party support for any inquiry of whatever type.

Let me now refer to a tiny bit of history. A hundred years ago, partisanship made a mockery of an attempt by a Select Committee to investigate the Marconi scandal. The Conservative Opposition killed any value that that inquiry might have supplied, and as a result Select Committees were written out of the piece for inquiries for nearly 100 years. I think it vital for Parliament that another clash of the Titans—which seems to be going on now—does not leave us in a position in which we, as Parliament, cannot subject this issue to an inquiry of any type.

[Chris Bryant]

May I raise the issue of the powers that a Select Committee has? One of the things that we have learnt from the Leveson inquiry and the whole phone hacking experience is that the powers of the House of Commons are very, very uncertain. We do not know whether, once we have taken evidence on oath, a perjury case can be brought against anyone who has lied to Parliament, or misled Parliament. We do not know whether we can force someone to come here. However, we do know that courts can do it, which is why we—why I—support a judge-led inquiry.

[Mr Tyrie]

I am confident that can be sorted out if there is co-operation between the Front Benches, if necessary by means of Standing Orders, or by a very swift change in the statute book.

[Anna Soubry]

Will my hon. Friend give way?

[Mr Tyrie]

I will not, if my hon. Friend will forgive me. I am going to get on with my speech now.

The third point that I made to the Chancellor was that while the participation of some very experienced peers could add considerable value, any Committee should be Commons-led, should be governed by Commons rules of procedure, and should draw on existing membership of the Treasury Committee.

The fourth point—which has been made again today—was that the Committee would need full technical support, not only from private sector expertise but from officials and the Bank of England, and some legal advice as well. The absence of all that is the main factor that would inhibit the Treasury Committee from doing this work at the speed that would be required to enable it to contribute to the banking Bill.

Public confidence in banking is now very low. That is bad for Britain in so many ways, but it is particularly unfair on the hundreds of thousands of hard-working and trustworthy people in the financial services industry who do great work for this country, and who, having done nothing wrong, have found themselves impugned by implication. It is not realistic to expect that, in a few months, a Committee of this type would be able to draw the sting of the public anger about banking, but I do believe it realistic to hope that its recommendations could, once implemented, reduce the likelihood of such things happening again. The Wheatley review is due to report in about six weeks. We need to make sure that those perpetrating disgraceful practices such as the rigging of markets face stiff penalties, including jail. It is the fact that so many people have got off scot-free that really sticks in the gullet of the electorate.

Over my time here I have done what I can to strengthen the role of Parliament. If colleagues across the House—and I mean right across the House, including the Front Benches—want me to do this work, I will do everything possible to make an inquiry of this type succeed in order to clear up this scandal.

--- Later in debate ---

[Mr George Osborne]

Further to that point of order, Mr Deputy Speaker. I welcome the Opposition’s agreement in principle, as I take it, to take part in a joint parliamentary inquiry into what has happened. I suggest that the usual channels now work on the membership of that inquiry and that the Front-Bench teams and my hon. Friend the Member for Chichester (Mr Tyrie) discuss any concerns that Opposition Front Benchers have about resourcing, the secretariat and so on. What everyone now wants to do is get a resolution that all parties can agree on, which we can bring to the House before it rises, so that we can get the Joint Committee up and running, get to the bottom of what went wrong in our banking industry and with the LIBOR scandal, and make the changes needed to legislation to ensure that it never happens again. I would welcome the Opposition’s support in doing that.

[Mr Tyrie]

Further to that point of order, Mr Deputy Speaker. I think the whole House, and actually the whole country, will welcome the engagement that appears to be taking place across the Dispatch Boxes. I reiterate that I will do whatever the House asks me to do, but I believe it is worth my trying to chair the Committee only if it has the full support of all the major parties in the House of Commons.

[Mr Deputy Speaker]

I am grateful for all three points of order, and the Chair has nothing to add.

LIBOR (FSA Investigation)

Lord Tyrie Excerpts

Monday 2nd July 2012 Commons Chamber

[Mr Osborne]

First, the inquiry should be genuinely cross-party and it will, of course, be up to the Labour party to choose whom it would wish to be on the Committee, both in the Commons and in the Lords. So there will be a choice for the Labour leadership in that respect. Of course, I hope that they would consult my hon. Friend the Chair of the Treasury Committee, but it is ultimately their choice.

Secondly, the Treasury Committee, under its previous Chair, Lord McFall, did some very good work on investigating what went wrong. So the idea that the Select Committee or a Joint Committee is unable to do this work is nonsense. “The run on the Rock” was a very good report, as I think the right hon. Gentleman would concede, and it provided the basis for some of the changes in the Financial Services Bill. I think we can draw also on the expertise in the House of Lords in this area and have a Joint Committee. As I say, I hope that once tempers have cooled today, we will be able to reflect on that and have a joint-party consensus on it.

[Mr Andrew Tyrie (Chichester) (Con)]

First, may I assure the House that I will not countenance a partisan inquiry and I would not be prepared to chair one either? I do believe that Parliament—both MPs and the other place—has something to contribute to clearing this mess up; they cannot do it all on their own.

By any standards, the LIBOR scandal, for which 20 banks around the world are now being investigated, is shocking. It has corroded trust in the UK financial services industry and it is a shameful affair. I find it particularly sad that it will have unfairly damaged the reputations of hundreds of thousands of our constituents who work hard and honestly in the financial services industry. The UK’s reputation has been tarnished, but it can be restored and enhanced if we draw the right lessons. The Treasury Committee will continue with its inquiry into what exactly happened. We will be holding the inquiry on Wednesday with the chief executive of Barclays, and we will also probably call the British Bankers Association and the regulators to find out exactly how this all happened.

None the less, the immediate task to be conducted by the Financial Services Authority must be to ensure that we have appropriate sanctions for wrongdoing and a regulator strong enough to give us confidence that wrongdoers will be caught. Does the Chancellor agree that another task, on which the Joint Committee will and should concentrate, must be to learn the lessons of the LIBOR scandal for corporate governance and standards in the banking industry?

LIBOR (FSA Investigation)

Lord Tyrie Excerpts

Thursday 28th June 2012 Commons Chamber

[Mr Speaker]

Order. A very large number of hon. and right hon. Members are seeking to catch my eye, but I remind the House that there is significantly subscribed business to follow, under the auspices of the Backbench Business Committee; therefore, I must appeal for short questions and short answers.

[Mr Andrew Tyrie (Chichester) (Con)]

What is now left of trust between Parliament and the banks? Barclays and probably other banks were profiting by lying and rigging the markets at a crucial time in the last crisis, when the Government had a right to expect that they would supply the then Chancellor with reliable information on the basis of which to conduct policy. The Treasury Committee will now investigate properly. Under the current legislation, as the Chancellor has pointed out, the Financial Services Authority has no power to bring a criminal prosecution in relation to not only LIBOR, but derivatives. Will the Chancellor undertake now to amend the Financial Services Bill to include derivatives and LIBOR in the legislation before Parliament?

[Mr Osborne]

I completely agree with the sentiments that my hon. Friend has expressed. I congratulate him and his Committee on acting swiftly to ask Mr Diamond to come and account for himself. As I said in my statement, we are looking at strengthening the criminal sanctions regime in general for market abuse and market manipulation, not just of LIBOR but in other parts of the market; and next week, as planned, the consultation on potential sanctions for directors of failed banks will be published. Sadly, the Government have been in this situation before with the FSA’s report into the failure of Royal Bank of Scotland, when the authority reported to us that it did not have the powers it would have liked to hold to account those responsible for the failure.

Oral Answers to Questions

Lord Tyrie Excerpts

Tuesday 26th June 2012 Commons Chamber

[Mr Andrew Tyrie (Chichester) (Con)]

Now that the Bank of England has finally shown more willingness to provide some liquidity support, there should be no obstacle to the exercising of more flexibility by the Financial Services Authority when it comes to how the liquidity buffers are used. That is being desperately demanded by banks. Does my right hon. Friend agree that the FSA should take action as soon as possible, and that such action is what is required to provide borrowing and lending at reasonable rates for the hundreds and thousands of businesses throughout the country that need it so desperately?

[Mr Osborne]

The liquidity auction undertaken by the Bank of England last week was very welcome, and the Bank is proposing future auctions. My hon. Friend, who chairs the Treasury Committee, has been prescient in pointing to some of the procyclical nature—if unintended—of some of the liquidity regulation in the United Kingdom in recent years. The Financial Policy Committee was set up to look at risks on both the downside and the upside. The Financial Services Authority must make its own independent decisions, but I am sure that it will have paid close attention to my speech and to the speech of the Governor of the Bank of England at the Mansion House.

Interest Rate Swap Products

Lord Tyrie Excerpts

Thursday 21st June 2012 Commons Chamber

[Guto Bebb]

Again, that is an important point. In significant numbers of cases a swap product has been sold to a business as a condition of a loan being made available, so that the future availability of credit was dependent on the acceptance of a swap product. Obviously, a business in need of finance would be persuaded of the need to take up that product in order to receive finance, and that is a key issue.

[Mr Andrew Tyrie (Chichester) (Con)]

rose—

[Guto Bebb]

I will, of course, give way to the Chair of the Treasury Committee.

[Mr Tyrie]

I am grateful to my hon. Friend for securing this important debate. As he will know, the Committee is already looking into this matter and has written to the FSA and the Financial Ombudsman Service asking them to investigate fully and get back to us. He may not be aware, however, that we also raised this issue with the chairman of the FSA, who has promised to provide a progress report by the end of July. The Committee is extremely anxious, not least because a number of its members, including me, have seen constituents with exactly the sort of complaint my hon. Friend outlines.

[Guto Bebb]

I am aware that the FSA has promised to provide a progress report, and I sincerely hope that that will be with us before the end of July, if not sooner. My concern is that businesses are being put into administration as we speak—we have seen examples of that this week alone—and in the current economic climate we should not accept the loss of any businesses or jobs as a result of mis-selling.