Brexit: Financial Services (European Union Committee Report)

Viscount Eccles Excerpts

Thursday 9th February 2017 Lords Chamber

[Viscount Eccles (Con)]

My Lords, it is very usual to say how pleased one is to follow the previous speaker but I find myself in a slight embarrassment because I so completely agree with the noble Lord, Lord Butler, that I am not going to be able to put it without repetition and nothing like so well. I congratulate the sub-committee and its chairman on this report. It is a very useful document and needs to be studied with great care. It has been slightly overtaken since the days of the referendum by the 12 principles and the White Paper. Nevertheless, that gives us a theme which is “exit from” and “a new partnership with”. I 100% endorse everybody who says that we need and want a new and productive partnership with the EU and this needs to be negotiated with the best possible will on both sides.

I hope we can achieve an agreement within the two years. There I very much agree again with the noble Lord, Lord Butler. I do not see the argument that two years is never going to be enough as a positive one. I regret that people keep saying two years is not enough. The important thing about the two years is to reach an agreement and then to be clear, because we have a new partnership, on how we are going to handle all the changes that will inevitably follow after two years, and changes would have followed whether we remained a member or not.

Within those two years there is nothing more important to negotiate than financial services. In considering the negotiation we should take very careful account of the present position. As the noble Lord, Lord Desai, said, the background is very complex and quite troubling. After all, 2008 is not so long ago and many things happened then which were unexpected. Although we have made much progress since then, there is still a great deal of risk out there in the world as a whole. Indeed, I think we would be incorrect to think about financial services in the way that we might think about the effect of the single market on, say, the building of aeroplanes or the production of motor cars. The European context does run there to a large degree but it does not run in financial services because they are truly global.

In the G20, which is representative of two-thirds of the world and 85% of its economic activity, we have got six members of the EU and the European Union itself, and based in the Bank for International Settlements there is the Basel Committee, again with nine EU members and the EU and the Financial Services Board. Much of what has been done which applies to Europe, which has 7% of the world’s population, has been achieved by these international institutions. The European Union, some of its members and ourselves have been very deeply involved in all that.

So far, so much the better as a result of all those efforts since 2008, but this is not a time to disrupt the progress. It is not a time in which either the 27 or we have an interest in disrupting the processes which have been going on. That highlights the partnership, the need for it to be approached positively and the need for it to work.

Just as a note of dissent, there is the question of the dealing and settlement in euros. If you look at that on its own, changing the rules in the way that has been suggested is nothing more nor less than a trade barrier and would be very disruptive. It cannot be in anybody’s interest to generate that disruption.

On passporting and equivalence, I hope that the effect of the great repeal Bill will be that on the day we exit, we continue to abide by all the law and regulation which has come to us through the European Union. Logically, that means that equivalence is there. I cannot quite see what the argument against it would be. If we get to that day, the question then becomes: what do the deals say about the way in which we and the 27 approach any changes that they or we feel are necessary? In that sense, we would have a “transition period” that would never cease, because we are going to need to have arrangements for dealing with changes as they take place. I am more optimistic than some other people who approach this problem. I join the noble Lord, Lord Butler, in that optimism.

Budget Statement

Viscount Eccles Excerpts

Thursday 27th March 2014 Lords Chamber

[Viscount Eccles (Con)]

My Lords, there has been much concentration on productivity during this debate, and it is clearly the case that, if recovery is to be sustained and debt and deficit are to be dealt with, productivity is a key component. But I want to think a bit about what we produce as well as how we produce it and, as my noble friend Lord Holmes concentrated on, the social effects as well as dry economic statistics.

In the Budget, the Chancellor gave a general exhortation that we should export more, build more, invest more and manufacture more. It was said, correctly, by many people that the recovery is fragile. There are worries about balance, the supply side, skills, the output gap and unemployment. There is clearly a long road ahead, during which public expenditure will continue to be under pressure. Yet if we think back to the advance of technology and the spread of knowledge as well as the opportunities that they have given us over the years, and if we think about the United Kingdom—a free society with a long and reasonably untroubled history, with a language that has become the leading language of the world and a long tradition of successful higher education—it is quite puzzling how we went into quite such a deep hole in 2008 and why it is taking us so long to climb out of that hole into a sustainable recovery.

What has happened? My first theme is that I think that we have tended to have the wrong idea about economic change. Too often, we have seen it in terms of obsolescence—that things will disappear—but, if you look around, you can see that nothing we make, have made or that we do completely disappears. The employment patterns within that marketplace change, but they do not disappear. New things come, but old things do not go. To go to the romantic end of such a theme, somebody somewhere is knapping flints and thatching a cottage; somebody is still writing a book standing up, like Voltaire or Surtees, and that book will be bound by hand. Of course, in larger industries the changes are much more dramatic—in steel or coal or the subsidiaries of the steel industries, the foundries. Those energy-intensive old industries can become very unfashionable, but there was a time when structural steel looked as if it would go out altogether in favour of prestressed concrete. I shall not trouble the House with a detailed analysis of why, but steel has come back and, largely, prestressed concrete has gone out. Then we remember British Leyland. I come from the north-east, where Middlesbrough is the leading dock for exporting and importing cars; we are now a net exporter of cars, as my noble friend the Minister said. However, what happened to our car designers?

With the opportunities for technological change in the diversity that has been available, what has held us back? Why are we not very considerably more successful in short order than we are today? I think that we can look for myths—big ideas, and worst of all Utopian big ideas, which from time to time have gripped us. The first, which has largely gone, will be all-embracing central planning. Of course, there is a role for government in infrastructural planning because there is no way in which to get the money together unless the Government get involved. But as with HS2 or Hinkley Point, there is a great struggle to get to the decision on a new airport, or whatever—and if the Government get involved in too many areas and go in the wrong direction and the end of the road comes for the National Coal Board, the British Steel Corporation or British shipbuilding, what disasters follow from that? They are distortions and long-term disasters, social as well as economic.

The second myth on which I want to touch is that of the interpretation of the post-industrial society. This was the brainchild of Daniel Bell. He foresaw and calculated the rise of the knowledge economy but he never thought that one thing would push out another. He thought only that the emphasis and proportions would change. However, in tabloid-style simplification, both the political system and, regrettably, the schools came to the wrong conclusions. No longer was it considered sensible to go into a foundry, optimise power steering pumps for motor cars, go into steel or coal—never mind about carbon capture and storage and the huge need for knowledge in that area—and still less to become a plumber or a potter. I think that Daniel Bell would be horrified by the interpretation that was put on the fashion that followed. There is a need to invest in capital, of course, and to have a capital allowance—what a good idea—but, if you do not have the people who know what capital goods to buy or how to operate them, you do not buy those tools and those machines. Again, one comes back to social influences and people. Where are the people who can make the right decisions? They are certainly not economists.

We may now be in danger of building another myth called the global race. The problem with races is that they have only one winner. However, I thought that with economic development everyone has the possibility of winning. Admittedly, some people win more than others, but are there any real losers? If we characterise life in language which implies that this is a zero-sum game, we make a mistake.

Where is the Chancellor of the Exchequer in all this? I go back to his very cautious, rather general language. I think he understands that timescales are long and that, if you go in a wrong direction, it takes a long time to put it right, and that there is much complicated interaction within the process of putting it right within society. It is not just an economic problem but a social problem and a cultural issue. A whole raft of things have to be thought through. He, quite correctly, can enable only to a degree. Success is in the hands of society; he cannot command it. It needs to be decentralised to those who live in the real world, where Utopian myths go hang.

EU: Fraud (EUC Report)

Viscount Eccles Excerpts

Wednesday 11th December 2013 Grand Committee

[Viscount Eccles (Con)]

My Lords, I go back a long way to 1949 and the Council of Europe. If ever there were a referendum, I cannot imagine voting to come out of the European Union. That does not mean that I cease to think about the problems facing Europe and speculate a bit on how much of a contribution we can make to the solutions to those problems.

I have to record that I was new to the committee when it started this inquiry, and new to the procedures of sub-committees preparing reports, although I had read quite a number of them. As I went into that I thought about the background—the financial crisis, fairly rapid change, the expansion of the membership of the Union and the identification of problems. There is of course a rather large gap between the identification of problems and the practicality of solutions to them. I was also minded to think that many empires have fallen because they were top heavy. Today we know very many things and how to do them; in fact, there is a lot that we know about how we could do them if we had the resources, but we do not. We do not have the money and, more importantly, we do not have the people. The people who are capable of implementing some of the things that we would like to see implemented are spread very thin.

In considering the report, I wondered: where do we, the United Kingdom, rightly come into this picture? The report says with great accuracy that fraud is opaque. As the noble Earl, Lord Sandwich, said, it is also endemic. It does not matter what we are going to do, it will not disappear, because human nature is best seen as a constant. Therefore, the first question that we might ask is: how many programmes do we want? What level of expenditure within those programmes do we want? What complexity do we want those programmes to have? What are we actually trying to do with them? If we had fewer programmes we would have less fraud. The more complex the programmes are, the greater the army of people. I have applied for European money in the past, and the number of people who will advise you on how to knock down that money from the tree is legion. It is a profession—and, of course, those people could be doing something else, perhaps adding more value. So is that the right use of resources? We should think rather more seriously about the objectives we are looking for.

We then come to another danger and another question. Are we right to be judging others by ourselves? Almost certainly not. The Commission, after all, is sui generis, and I join others in saying that there is absolutely no point in being highly critical of the Commission because there is fraud against its programmes. That does not make any sense at all. I completely agree with that. Then we think about the members, their objectives, the reasons why they are members in the first place and their capacity to implement programmes. If they take advice, which they do, there are many imaginative ways of providing that advice. That imagination can extend into how you spend the money, as well as how you get it in the first place.

I cannot get excited about the uncertainty in the figures. My question is: what do you do about the situation? What is the United Kingdom’s contribution to wise implementation of answers to these problems? When there are problems there is always a temptation to design new institutions or seek more legal procedures. However, in my experience, for all the people who claim to have a good plan to do this or that, few could implement such a plan if it were put into place. Therefore, for me, it is important to implement measures within the existing systems. How can we make the existing structures work better? Reference has been made to OLAF and I completely agree that there is a pressing need to co-operate and exchange data. Whether it is sensible to have that channelled into one place, I leave to others to decide. If people are willing to work with and talk to one another, we do not necessarily need just one focal point.

However, of one thing I am certain: that is, in the difficult circumstances that pertain, particularly within the eurozone, we need to work with what we have. I do not see any future in having new centralised institutions. As for the United Kingdom, we should cope better than we do with any fraud that is perpetrated here. We should seek to minimise fraud and prosecute those committing it. As regards cross-border fraud, we should offer others maximum co-operation, but seeking a centralised, European Union-wide silver bullet to solve these problems will not work and we should not contemplate it.

Economy: Growth

Viscount Eccles Excerpts

Thursday 31st March 2011 Lords Chamber

[Viscount Eccles]

My Lords, I am left wishing that I spoke more languages than I do.

That politics and sustainable economic growth are uneasy partners comes out of this debate very strongly. They do not fit well together. As the noble Lord, Lord Hollick, who introduced this debate, said:

“Much is promised, but little is delivered”.

As the noble Lord, Lord Kestenbaum, said, innovation has been and remains the key to the advance of science and technology. Of course, Governments are always behind the curve. They do not keep up with the front line of innovation. The noble Lord, Lord Hollick, took us back to Neddy, the late Lord George-Brown and 265 million tonnes of coal, if I remember rightly.

At the time, I was working for a medium-sized business that made pithead gear, mine car circuits, skip-winding plants and coal washery plants. We made a lot of them. I suspect that the average life of those plants as against the predicted and perfectly feasible life would not be better than half. They went out of commission one after another when they were still in totally good working order. As the noble Lord, Lord Sugar, reminded us in an interesting speech a week ago, Governments are really only good at scene setting. We need good technical education, as the noble Lord, Lord Newby, said, good roads, as the noble Lord, Lord Hamilton, said, and low taxes, but please keep out of the clockwork. Indeed, the noble Lord, Lord Sugar, said that Governments should always keep out of the clockwork because they do not understand the front line; they have never been in the front line, he said. That may be going a little bit far.

I was allegedly in command of a steel foundry in Stockton-on-Tees, where I was given good tips on which horse was going to win that afternoon. I was a part-time marriage counsellor. Steel foundries are quite dangerous. We used to take the factory inspector as close to the furnace as we could in order to minimise his visits. We did not have a serious hospital-type accident for the whole time I was there. The workforce kept me out of danger much more than I did them. As the noble Lord, Lord Sugar, said, we have arrived at a dependency culture, which means that we think that everybody else should solve our problems and perhaps we should not solve them ourselves.

That leads me, finally, to a health warning. The Government offer a lot of schemes. Governments always have. They say: “If you do this, you will get this grant at the end of the process”. I have suffered from these schemes for many years, but they never include a health warning. The health warning should say: “Please remember that when you apply for a government-based grant it is coming out of public money. It has come from the taxpayer and must be handled very carefully. You should calculate the amount and cost of time that it will take you to apply. When you have done that, double it”.

Financial Crime: Legislation

Viscount Eccles Excerpts

Thursday 17th March 2011 Lords Chamber

[Viscount Eccles]

My Lords, I think I must have led a very sheltered life. I knocked around the developing world for some 20 years during which I was involved with both commercial companies and the Commonwealth Development Corporation. The corporation brought with it some really quite attractive money, risk capital as well as relatively low-interest loan capital, and a lot of technology. It operated in 53 countries in the developing world and we had around 450 investments. I shall come later to the more commercial aspects. I suppose we had a reputation for being incorruptible or something really unlikely like that, if I listen to the dark messages that are coming from my noble friends to my right. I was never on any occasion offered a bribe, and never asked for one, although I spent a great deal of time with people who lived at a much higher standard than I did myself, another point I shall come back to.

I turn first to the certainties of the Bribery Act. I do not understand the degree of uncertainty in the legislation, but what I do understand is that no one working for a company in the UK would wish to go to prison, so people have a reasonable case for saying, “Please may we be as certain as possible as to what an infringement of this Act would be”. I want to give two examples, but I have to admit that they are not from the immediate past. On two occasions I negotiated in countries where you were required by law to have a local agent. You could not operate in those countries unless you could show that you had an agency agreement, which was signed off by the government of the country.

In one case, the agreed fee was 2.5 per cent of any contract you got in that country. In the event, we won a contract which, from memory, was worth around £10 million. It was to supply a major piece of equipment for a steelworks. The chairman of the company was a cigar-smoking general. I remember that when, in the middle of the negotiations, he came to stay in our spare bedroom, he put his shoes outside the door because he expected that someone would clean them, and indeed I did clean them. When we eventually got the contract, I remember the agents, a commercial company rather than an individual in that country, saying, “You know, the general has a great ambition to own a villa in Florida”. I said that I did not know, to which the response was, “We thought you might just like to know that”. The agents did not say any more and I did not ask any more questions. Noble Lords will have worked out that 2.5 per cent of £10 million is £250,000, and this was quite a long time ago. I leave this account with noble Lords as an example and would ask whether it was an offence. Was that an associated person? I do not know. Was it an offence under Section 7, or whichever section it is, or not?

I recall another occasion in a Middle Eastern country when we were one of the last two bidders for a contract, the other bidder being a German company. Again, we were required under the law of the country concerned to have formal representation. It became absolutely clear that it did not matter which of us got the contract because the adjudicating committee was going to collect a proportion of whatever was coming from the two different local agents. You did not have to be a genius to understand that that was what was going to happen. Up to a point we outflanked them, because although my company did not get the contract, the German company then very kindly gave us a large sub-contract. Everyone came out a winner from a business point of view, but what about the Bribery Act? I do not know the answer and I hope that there is someone in this House who does. But certainty about what is or is not an offence is much more important than the high moral line which, to be frank, I do not have much regard for.

Perhaps I may turn to tax avoidance. I understand from the excellent Library note that now I must remember that it is not avoidance, it is mitigation. If I put shares into my charitable trust, thus saving myself some tax, I am no longer an avoider, I have become a mitigator.

Comprehensive Spending Review

Viscount Eccles Excerpts

Monday 1st November 2010 Lords Chamber

[Viscount Eccles]

My Lords, it is complicated to follow the noble Lord, Lord Graham of Edmonton. I will not even compete on the subjects of the Scotswood Road and the Geordies, although I have a daughter who lives in Newcastle.

Listening to this debate, what can one conclude? Certainly that the Government have made a big call, sometimes described as a gamble. They have made a call to reduce and reform public expenditure, most notably welfare expenditure, to end the structural deficit within the Parliament and to set a date for peak national debt. In doing so, they have predicted that economic growth will continue and will provide the necessary returns. Of course, nothing is certain. Unfortunately, Governments of any complexion do not command economic growth; they only set the scene. To expect supply-side policies, however elegant, to do the trick, as the noble Lord, Lord Myners told us, is to deny all our post-war experience.

Is there an alternative big call on offer? Yes, possibly. It seems to be unreconstructed Keynesianism—basically, a call to leave well alone. “The deficit is not too big, the debt is sustainable. Protect aggregate demand and all will work itself out. There is no need for reform or change”.

This is not the time for a detailed analysis, but I have three points. No two recessions have ever been the same. Therefore, we cannot rely on past experience alone. Our economic circumstances are so different from those of the 1930s that we must be cautious before reading too much into a Keynesian solution. Then, the world was not global. Then, manufacturing was a much larger proportion of our economy. Who will march from Jarrow today? Then, the real incomes were a quarter of those of today. Then, we believed in high interest rates and a strong pound, no matter what.

The timing of the coalition coming into power demanded decision. People expected firm action and they were right to do so. The Government have made their call. They are right to have done so and need our full support. If they get that support, the economy can continue to grow. Science and technology have seen to that. There are plenty of opportunities. Confidence will ensure that they are seized.