Autumn Statement

Andrew Love Excerpts

Wednesday 5th December 2012 Commons Chamber

[Mr Osborne]

I suppose we are used to opportunism from the Opposition, but we see no greater opportunism from them than that relating to fuel duty. The fuel duty rises that we have cancelled were not part of some mythical plan; they were voted for by Labour Members of Parliament at the time of the last Labour Budget—including, of course, by the shadow Chancellor. My hon. Friend is absolutely right: fuel is 10p per litre cheaper than it would have been if we had adopted the shadow Chancellor’s Budget plans.

[Mr Andrew Love (Edmonton) (Lab/Co-op)]

Let me return the House to an answer that the Chancellor gave about PFI. He slipped the new PFI 2 scheme into his statement today, but is it not being criticised on the grounds that it is not good value for money—that value for money will, indeed, fall—that it will cost the taxpayer more, and that most of the projects will still be off the Government’s balance sheet? What has changed?

[Mr Osborne]

I do not accept that characterisation at all. I talked about this matter in the statement, and, of course, I expect people to look in detail at the document we have published. There are two substantial changes. First, there will be public sector investment alongside private investment. The public sector will have a share in the equity and will have representation on the boards of these projects to make sure both that we share in the upside and that we know what is going on with these projects, instead of the absolute scandal that we saw under the last Government when on many occasions the public sector was ripped off. The hospitals in south-east London are living with the consequences of that.

Secondly, there will be more on balance sheet in future, but there will also be off balance sheet, and we are going to have new off balance sheet totals and controlled totals so that there is more transparency. I will say more in the Budget about how we are going to account for off balance sheet.

Bank of England

Andrew Love Excerpts

Monday 26th November 2012 Commons Chamber

[Mr Osborne]

The Monetary Policy Committee has not requested additional headroom to conduct QE. As I have said, I think QE has been the right instrument to try to keep yields down and support demand, but any questions about Mr Carney’s view of QE in the British context will be ones that the Treasury Committee can direct at him.

[Mr Andrew Love (Edmonton) (Lab/Co-op)]

I welcome this appointment and, in particular, Mr Carney’s willingness to come before the Treasury Committee as his first duty. What discussions has the Chancellor had with the Office for National Statistics and the Office for Budget Responsibility about the £35 billion asset purchase facility coupon scheme? Does he accept that it will be an exceptional item in the Government accounts?

[Mr Osborne]

Crucially, I discussed this matter with the Governor of the Bank and he discussed it with the Monetary Policy Committee, and they thought it was a sensible move. As I have said to the shadow Chancellor, when the OBR produces its fiscal forecasts next week it will make very clear—I requested this—the distinction between the public finances with and without the APF move.

Oral Answers to Questions

Andrew Love Excerpts

Tuesday 6th November 2012 Commons Chamber

[Greg Clark]

I certainly will. I think that there has been a concentration in the number of banks as a result of the financial crisis, and that is not a situation I want to see endure. If the suggestions in the report will help to reverse that, I am all ears.

[Mr Andrew Love (Edmonton) (Lab/Co-op)]

Comparisons between banking fines for similar offences in this country and in the United States show that we are well behind the curve in that regard. Has the Minister had an opportunity to speak to the Financial Services Authority about a more robust form of regulation that will ensure that fines are appropriate to the issue at stake?

[Greg Clark]

The hon. Gentleman, who is a distinguished member of the Treasury Committee, makes an important point. It is crucial that the change we need in the culture of banking is achieved through leadership and through a clear warning that abuse, mis-selling and all the other vices that banks can fall into will be punished rigorously. The FSA knows my views on that and I will reinforce them to the authority.

--- Later in debate ---

[Mr Andrew Love (Edmonton) (Lab/Co-op)]

T4. What is the Minister going to do about all those multinational companies that are paying little or no tax? Her Majesty’s Revenue and Customs claims that it is powerless because those companies are gaming the system. Instead of pious statements issued from Mexico about what we might or might not do, may we have some action from the Minister? He could start by increasing from 65 the number of tax experts who actually deal with this problem.

[Mr Gauke]

Anyone would think that there was a completely different arrangement in 2010, but I am afraid that is not the case. The Government are working at an international level to ensure that multinationals pay the tax that is due, and that profits on their economic activity is paid where it occurs. We are also strengthening HMRC’s capacity in that area and giving it greater skills to tackle the issue. I would have thought the Labour party welcomed the progress we are making when compared with the lack of progress under the previous Government.

Banking Competition

Andrew Love Excerpts

Thursday 12th July 2012 Westminster Hall

[Andrea Leadsom (South Northamptonshire) (Con)]

What an astonishing few weeks it has been in the banking sector. It is a pleasure to serve under your chairmanship today, Mr Chope. I am sure that my colleagues my hon. Friends the Members for Wyre Forest (Mark Garnier) and for Mid Norfolk (George Freeman), the hon. Members for Strangford (Jim Shannon), for Erith and Thamesmead (Teresa Pearce) and for Wells (Tessa Munt) who supported the application for this debate with me will be feeling, as I do, that the debate could not come at a more important time for such a key British industry.

Banks are incredibly important to Britain’s economic well-being. Financial services employ more than a million people in Britain and generate more than 10% of our annual tax revenue. The vast majority of those who work in the sector are doing an honest day’s job every day for an average salary and, if they are lucky, a modest bonus at the end of the year.

Banking is a vital industry that could lead us back to economic recovery. However, that will not happen on the back of what we have heard about the fraudulent and corrupt practices of the small number of massive earners who have done so much to destroy the image of our banks. It is vital that we re-establish banks as calm, measured and instinctively cautious guardians of the trust and confidence that account holders place in them. For a long time, I and many others have believed that more competition in the banking sector is key to that turnaround, and the events of the past few weeks have brought that sharply into focus.

I know it is annoying when people say, “It’s not like it was in my day,” but that is honestly how I felt after hearing Bob Diamond’s evidence to the Treasury Committee last week. For 25 years before becoming an MP, I worked in finance, including in Barclays’ dealing room just after the big bang in 1987. It was a different world. In those days, asking the treasury team what the LIBOR setting was would be a bit like asking you what the time is, Mr Chope; I would not expect you to tell me anything other than the facts.

However, that was in the late ’80s, when there were about 45 major banks in the UK. In the past 10 years, according to the British Bankers Association, that figure has halved to just 22. Not only that, but five of those banks have between them 80% of the personal current account market and the small and medium-sized enterprise market. I feel sure that the scandals of the past few years simply point to the disastrous consequences of the mergers and takeovers that took place during the 1990s. We now have a small group of vast institutions, where the culture has been shown to be, “Heads, I win; tails, the taxpayer loses.” That is a far cry from my day when “my word is my bond” was the ruling mantra in the City.

British people across the country are furious about the behaviour of the banks and they have every right to feel that way. Banks—already seen as greedy and arrogant— have stooped to a new low of corruption and fraud. The inquiry into wrongdoing, how widespread it may be among banks, and how many other areas of finance could have been manipulated has to run its course. However, we also have to think long and hard about the future. People are quite rightly asking, “What are the Government doing about it?” The answer is, “A lot.” Since 2010, the coalition Government have put forward radical proposals to ditch Labour’s appalling tripartite regulatory regime that enabled almost every regulator off the hook for the financial crisis. We have instigated the Vickers commission and accepted the retail ring-fencing proposal, as well as faster account switching. We have also proposed a new responsibility for financial stability for the Bank of England.

However, we could do more. In light of the Commodity Futures Trading Commission and Financial Services Authority judgments against Barclays, as well as investigations into other banks, we should be re-opening the debate in three key areas. The first is regulation. There is an old saying that investment bankers operate under equal measures of fear and greed. However, for years now, there has been vast greed with no fear of consequences. Regulators in the future will need extremely sharp teeth, so that if criminal behaviour is taking place in a financial institution, all those responsible go to prison like any other thief, and there should be new criminal negligence tests for bank boards.

The bizarre evidence from Bob Diamond that he found out only one month ago about the corruption and fraud that had gone on at Barclays since 2005 should not be an acceptable excuse. Enormous earnings require enormous accountability. And I say to those who think we will never find another bank chief executive, that I do not believe for one minute that banks will struggle to find people willing to take their shilling in return for that responsibility. I would be delighted to hear from anyone who thinks that they would not give it a go for a couple of million a year. There would be plenty of takers.

The Government should be returning to the objectives of the new regulators—the Financial Conduct Authority and the Prudential Regulation Authority. They should both be given a specific objective to reduce barriers to entry and promote competition. Only one new high street bank has launched with a full banking licence in the past 100 years; that was Metro Bank. Or was it in the past 300 years—[Interruption.] Sorry, 100 years. Other recent new entrants have tended either to be backed by one of the big five, such as Marks and Spencer financial services which is backed by HSBC, or have benefited from Government sell-offs, such as Virgin buying the good bit of Northern Rock.

[Mr Andrew Love (Edmonton) (Lab/Co-op)]

Before the hon. Lady moves on from the point about greater competition for banks, will she welcome the discussions between Lloyds bank and the Co-operative bank about a possible sale to the Co-operative bank, which would create one challenger bank in the marketplace?

[Andrea Leadsom]

Absolutely. I agree with the hon. Gentleman. That is a very good move. Personally, I think that a reversal of the Lloyds-HBOS merger would be better.

Secondly, the issue of a complete separation of retail and investment banking should return to the agenda. It is right that the Government should be the ultimate guarantor of retail deposits, but that guarantee should not extend to high-risk transactions. If an investment bank goes under, the losses should be borne by those who were happy to take the profits in better times, something to which the Government are already committed. Vickers has proposed ring-fencing already, but we should be examining again the prospect of a total separation.

Thirdly, the key issue is that of competition. The Government need to take further steps to inject greater competition into the banking sector. People have lost faith in the banking industry. Small businesses are finding credit hard to come by, taxpayers are furious at the billions spent on the bail-outs, pay for bankers is too often unrelated to performance, and customer service levels are, in many cases, utterly appalling.

--- Later in debate ---

[Andrea Leadsom]

I am grateful to the hon. Lady for intervening. Not specifically, no. My point is more that we need the market to decide on diversity. I do not think that the Government, in any area of our economic life, should be the ones who pick who should be doing what. What Government need to be doing is facilitating greater competition and greater diversity so I would not be prescriptive in that way.

The key point that I want to focus on is that a real game changer for competition would be for the Government to introduce full bank account portability. We take that for granted with our mobile phones. Why should our bank accounts be any different? I have been pressing for it, along with various colleagues, since becoming an MP. If people were able to switch instantly between banks without having to change their bank account number, bank cards, standing orders, direct debits and all their online shopping, that would remove a massive barrier to entry that is currently constraining new, innovative banks.

Bank account portability has five basic benefits. The first, obviously, is that it creates greater bank competition. That is because a new bank can say to its customers, “Come and give us a try. If you don’t like us, you can move back to your old bank tomorrow.” The enormous inertia on the part of customers, who do not want to move bank because of the hassle and aggravation for them personally, would be removed instantly. They could switch between banks every day of the week if they chose to do so.

Secondly, personal and business customers would be able to force banks to compete for their business. New banks would therefore be putting forward innovative ideas—perhaps paying customers to move to them at one end and giving particular services to business account customers at the other end. That would completely change the choice available to consumers, and the consumer choice argument is a very strong one. At the moment, with the big banks, most people feel that there is no choice.

The third benefit is better regulation. The regulator would be able to shut down a failing bank while avoiding the risk of a run on the banks. With account portability, all personal and business accounts could be switched immediately to a survivor bank.

Fourthly, there would be a reduction in fraud. The highly overestimated costs of account portability need to be set against the significant reduction in bank fraud. I was talking to Intellect, the IT trade body, which reckons that bank fraud could be reduced by up to 40% if we had full account portability, because one of the major reasons for fraud is the poor legacy systems in some of the big banks.

The fifth benefit would be support for SMEs. It is crucial that we have that in our economy; we have to get businesses going again. Funnily enough, if banks had a single system, they would also have a single customer view, so they would be able to evaluate, calculate and assess their small business customers far more accurately, enabling them to meet the needs of small businesses far better.

Making it easier for people to switch bank account provider is not a new concept. Don Cruickshank, who led a review of the banking sector and whose report was published in 2000, has long been committed to the idea. In 2000, Halifax launched the stand-alone telenet bank Intelligent Finance, with the express aim of making it easier for consumers to switch bank accounts. In March 2001, the Competition Commission identified reluctance on the part of small and medium-sized businesses to switch banks as a major problem. Later that year, the Bank of Scotland announced its intention to capture business from what was at the time the big four with a new “Easy to Join” service, which would assign a staff member to oversee the account switching process and to deal with direct debits, standing orders, international transfers and the like.

In June 2002, James Crosby, then chief executive of HBOS, said that he was concerned by delays to greater account portability and that the move was vital for competition. More recently, the Independent Commission on Banking, led by Sir John Vickers, called for a system that would make account switching easier. However, the ICB’s proposals stopped short of full account portability.

This year, Virgin Money has added its support for full bank account portability. It has said that it is happy to support the ICB proposal that a current account redirection service should be established by September 2013, but that it is

“not sure that it will be sufficient to overcome consumers’ inertia, and their concerns that switching may be difficult.”

In its submission to the ICB, it expressed a preference for full account number portability.

The ICB published its final report in September 2011, following an interim report that April. The Treasury Committee took evidence in relation to both reports, and several bankers said that account switching was important. Mr Horta-Osorio, chief executive of Lloyds Banking Group, told the Committee:

“There has been progress made in terms of customers being able to switch effectively and without risk, but more progress can be made. We are proposing a seven-day automated redirection of direct debits whereby customers in seven days can be sure that their account and their direct debits are automatically redirected to the new account without any risk. All banks have now endorsed that solution and the Payments Council as well.”

At the weekend, Jayne-Anne Gadhia, Virgin Money’s chief executive, said that

“banking doesn’t have to be remote, distant and just transactional. There can be a new and different future where customers are at the centre of the banking experience…For too long, banking has been more head than heart. We want to put more heart into it.”

The ICB reported that there was a switching rate of just 3.8% for personal current accounts in 2010, that three quarters of consumers had never considered switching their current account, that 51% of SMEs had never switched their main banking relationship and that 85% of businesses surveyed by the Federation of Small Businesses had not switched their main banking provider in three years. Which?, the consumer focus group, estimates that people are more likely to get divorced than change their bank account. Those switching rates compare very unfavourably with those in other industries. In 2010, 15% of consumers changed their gas supplier, 17% switched electricity supplier, 26% switched telephone provider and 22% changed insurance provider.

Jayne-Anne Gadhia of Virgin Money says that

“retail banking has been underinvested in. When retail banking becomes the focus of senior banking executives again, which the splitting of retail and investment banking would bring about, bank customers will get a better service. If that happens, then I would be delighted.”

I agree with her. Making it easier for consumers to switch provider would be a boost to new entrants in the market and therefore to competition, because consumers would know that if they did not like the bank they had moved to, they could always move again.

[Mr Love]

The question that I am about to ask is one that I have some feeling about, as I have tried to shift my bank account in the recent past. The industry would argue that it is shortening the process and making it more secure, and that we should give that an opportunity to bed down in order to see whether it works. The industry also claims that it is very expensive. How does the hon. Lady respond to those concerns and how important does she think it is that we create a fully portable system?

[Andrea Leadsom]

I am grateful to the hon. Gentleman for asking that question. If people consider the cost to the taxpayer of the financial crisis and if people believe, as I do, that the reason for the financial crisis was that banks were too big to fail, it makes sense that if banks were no longer too big to fail, the taxpayer would no longer bear that massive liability. We need to consider the costs of achieving competition in the context of what has happened in the recent past, but yes, it would be expensive to achieve it.

The likes of VocaLink and Intellect, the IT trade body, have advised me that the costs are not in creating the centralised account-holding system required for fully transferable bank accounts, but in the big oligopoly banks changing their systems of sort codes, cheque books, bank account numbers and so on to fit in with a new system. The ultimate irony is that the challenger banks, such as Metro Bank, Virgin Money and Aldermore, would love account transferability because it is a minor cost to them; it is a major cost to those banks that, by dint of having legacy systems, have a lousy ability to feed in to a single system, so would find it very expensive.

You will be pleased to know that I am coming to a conclusion, Mr Chope. Now is not the time for timidity over reform in our banking sector and nor is it the time for false economies. We need to focus on enabling new entrants into the market, taking the steps that will be good for the consumer and for small businesses, and beginning the long process of restoring the reputation of our banking sector.

Bank of England (Appointment of Governor) Bill

Andrew Love Excerpts

Friday 6th July 2012 Commons Chamber

[Stephen Hammond]

I am grateful for the opportunity to hear the private views of my hon. Friend the Member for Chichester (Mr Tyrie), but as he is not present to justify them, it would be wrong for me to comment on them. I will say, however, that if those are indeed his private views, I am surprised that he supports this Bill. The Committee is already able to attend pre-commencement hearings with appointees to the Monetary Policy Committee and will be able to do the same in future with appointees to the Financial Policy Committee. Obviously that could potentially involve agreement with the Government.

Let me return to the issue of the independence of both the person and the institution of the Governor of the Bank of England from the Treasury Committee.

[Mr Andrew Love (Edmonton) (Lab/Co-op)]

Will the hon. Gentleman give way?

[Stephen Hammond]

Does the hon. Gentleman want to make a point about the issue of independence?

[Mr Love]

I apologise for intervening at this point, but having just spoken to the Chairman of the Treasury Committee, I think that he would want his attitude to be exemplified as a belief that the Committee should have a role in the Governor’s appointment. What he seeks, as does the hon. Member for Hayes and Harlington (John McDonnell), is a signal from the Government that they would be receptive to that idea.

[Stephen Hammond]

As I am not in the position of my hon. Friend the Financial Secretary—nor could I ever have the talent or ability to be so—that is not in my gift. We shall have to wait and see whether my hon. Friend chooses to make such a move later in the debate.

It seems to me that there are three crucial points to be made about the independence of the institution of the Governor of the Bank of England. Let me begin by saying that if the Governor were indeed appointed by the Treasury Committee, which would have the right of veto, the institution could be perceived to be tainted if the appointment reflected the politics or the political make-up of the Committee. That point was addressed by the hon. Member for North Ayrshire and Arran. The hon. Member for Hayes and Harlington said that it was not relevant in the United Kingdom, citing the report from the Institute for Government, but anyone with even a cursory knowledge of American politics knows that appointment by committee in the American House is supremely political, and therefore potentially damaging to the role of institutions in that country. I shall make the same point shortly about the role of the individual, as opposed to the institution.

As my hon. Friend the Member for Great Yarmouth (Brandon Lewis) pointed out, there is a question mark over the ability of the Treasury Committee to scrutinise the Governor, but there is also the possibility that the Governor, or the institution, might be perceived as being subservient in will to the Committee. There might come a time when there would be an impasse between the will of the Executive and that of the Committee, and that in itself could undermine the institution.

[Stephen Hammond]

I agree that Parliament must have the ability to scrutinise and that the body must be accountable, but I want the Governor to be independent as well. I am presenting some of the arguments that must be considered, or countered, if the Governor is to be independent in his operations. It is also true that the circumstance that I have just described would not arise if the Executive continued to make the appointment, because if the Treasury Committee did not have the power of veto, there could not be an impasse between the Committee and the Executive. However, my hon. Friend was probably referring to a point I made earlier.

[Mr Love]

The confirmatory hearings currently held by the Treasury Committee employ the criteria of competence and personal independence. Does the hon. Gentleman accept that the existence of a framework within which decisions must be made by Select Committees, minimises—although it does not exclude—the chance of political interference?

[Stephen Hammond]

It might and it could. I accept that point. But equally it might and it might not, and it could and it could not. That is the point I am trying to make.

The hon. Gentleman’s intervention leads me into the next part of my argument. My hon. Friend the Member for Orpington (Joseph Johnson) says the Treasury Committee Chairman wants to see some flexibility. There is already some flexibility in the system. The Committee has pre-commencement hearings for members of the Bank’s policy committees, which include both the Governors and deputy governors. The pre-commencement hearing is a process that allows parliamentary engagement, parliamentary scrutiny of appointments and parliamentary comment on appointments, but does not allow parliamentary veto. That is an evolving process that the Government have put in place and continue to support. It is, for a variety of reasons, the right mechanism.

Turning to the question of independence, there is a real risk in respect of the credibility of the individual concerned. While I am sure that all candidates will be of the highest ability and there will be no possible suggestion in the fourth estate or anywhere else that the successful candidate had been chosen on the basis of some odd criteria or that he was the only candidate the Treasury Committee would pass, others less generous than I might think that. That would lead to a credibility gap. It is also therefore clear that the person being appointed might be open to the charge that they were being appointed for their politics, not their economics. The Governor of the Bank of England must be free of the charge of being a political candidate.

--- Later in debate ---

[Brandon Lewis]

Not at all. I shall come to that in a few moments. That is not the point that I am making. There is a clear difference between a role in making an appointment to the OBR and a role in making an appointment to a position that has Executive powers and makes Executive decisions. If this were a Bill that considered the role of Select Committees, there would be an interesting debate to be had about whether Select Committees should have a power of appointment or veto, but that would apply equally to all Committees and all appointments, particularly where they have an Executive role. That is an important delineation, of which we should be aware.

It would be wrong to give one Select Committee, as important as the Treasury Committee is, a power of Executive appointment over and above that of other Select Committees, which I am sure would take the view that they have equal power and an equally important role in the House, but which would thereby potentially be put in a second category of Select Committee. Creating divisions and different types of Select Committee would impede the function of all Select Committees.

[Mr Love]

The Public Administration Committee had a debate on Executive agencies and appointments. The Public Accounts Committee has included its Chairman in the decision on the appointment of the Comptroller and Auditor General. The Treasury Committee has developed the chairmanship of the Statistics Commission. In other words, piecemeal change is going on. Does not the hon. Gentleman accept that the proposal is part of that piecemeal change, and that we ought to give the Bill a Second Reading not so that we can pass it in its current form, but so that Parliament can have an honourable debate about the arrangements between the Executive and the legislature in relation to major appointments?

[Brandon Lewis]

The hon. Gentleman makes a very strong point. I do not entirely agree because there is a clear difference between the type of appointments we are talking about and the role that those appointees take on and the powers that they have. However, a good argument can be made for the House to consider the role of Select Committees in public appointments, the associated power and at what level it sits. Perhaps he would like to come to business questions one week and make the case to the Leader of the House for time for such a debate, or make a case for it to the Backbench Business Committee.

The hon. Member for Hayes and Harlington argued that part of the aim of a private Member’s Bill such as this is to get the Government to listen, to hear a message, to take a view. The Minister will hear the points made in the debate. He will hear various arguments from various Members about the role of a Select Committee, its power or lack of power to appoint or veto an appointment, and will take that into account as part of the Government’s plans for the future. That is quite different from whether the Bill should have a Second Reading, when it is fundamentally flawed by giving priority and special treatment to one Select Committee over and above others. As much as I respect the Treasury Committee and all its members, I, as a member of the Work and Pensions Committee, do not think it fair that the Treasury Committee should be seen in a premier league, above the other Select Committees.

The Treasury Committee has argued for a role in appointing the Governor of the Bank of England by using as a precedent, as the hon. Gentleman did, the establishment of the OBR and the Budget Responsibility and National Audit Act 2011. The provisions of that Act give a statutory role, I agree, to the Committee in the appointment of the chairman of the Office for Budget Responsibility. Additionally, they give a statutory role to the Public Accounts Committee when a new Comptroller and Auditor General is appointed. However, that argument ignores a fundamental and crucial difference between the roles undertaken by those organisations and the role of the Governor of the Bank of England.

The Bank of England sets policy. Although the Office for Budget Responsibility is important, it primarily has an analytical or forecasting role, not an Executive ability to set monetary policy. It provides independent information to Government. That information is a powerful tool for Parliament to use in its scrutiny role and it is right, therefore, for Parliament to protect that role from political interference.

The Government’s position on the issue has been sensibly pragmatic. They have encouraged the involvement of the Treasury Committee in the appointment of the Governor. It has been interesting to hear from two speakers the private views of the Chairman of the Treasury Committee, my hon. Friend the Member for Chichester (Mr Tyrie), in his comment that what he thinks the Treasury Committee is looking for is the ability to have a clear and open influence on the role, which indicates that there is not necessarily a strong view from the Chair—it is a shame that he is not in his place, but he made a comment earlier—about having the power of veto or appointment. That is an important distinction from such an eminent Member of the House, who would be the Chairman who benefited from any change.

The Government made a commitment in the coalition agreement to

“strengthen the powers of Select Committees to scrutinise major public appointments”.

The key word is “scrutinise”. That emphasises a right to examine, challenge, query or inspect closely and thoroughly appointments to major public bodies. My Select Committee has done that as well. However, it rightly makes no mention of a right to appoint or veto. As my hon. Friend the Member for Wimbledon (Stephen Hammond) said, that would be a substantial constitutional change to the way in which Select Committees work.

It is worth exploring what would happen if there were a right of veto and the Government and the Treasury Committee reached a stalemate in the appointment of a new Governor. If the Government—the Treasury—were unwilling to back down, and the Treasury Committee were determined to uphold its right to veto, given to it by this Bill, that could lead to uncertainty, creating turmoil in the markets, and at the moment we do not need any more of that. We can certainly see what such turmoil means for international relationships as much as internal markets. It could lead to a loss in international confidence in the Bank of England and the United Kingdom, which we benefit from at the moment. The result would be untold economic chaos and damage.

[Brandon Lewis]

My hon. Friend makes a good point. The way in which the American system can create turmoil is the very point I am making. As my hon. Friend the Member for Wimbledon said, we in this House know that the Treasury Committee would deal with the issue properly. The problem is the perception outside of such turmoil. We have seen in the press how such matters have been dealt with in the United States, which shows that what matters is what the public and the markets would think of such an impasse, particularly if there is a lengthy process.

[Mr Love]

The hon. Gentleman uses the term “turmoil” and makes lurid comparisons with the United States. The US Congress endorses literally hundreds of appointments every year. The Treasury Committee has had confirmation hearings, and on only one occasion has it vetoed an appointment. The Committee has no buy-in; they are only confirmation hearings. Is not the so-called turmoil that the hon. Gentleman suggests vastly overstated?

[Brandon Lewis]

The argument that something has not happened so it will not happen could have been put some years ago about the present financial turmoil in the eurozone. The argument that something will not happen because it has not happened before has unfortunately been proved wrong time and again. As has been said, one sees regularly in the press and hears in the markets in America the argument that a particular appointment has been made purely because it will get through a committee. There is no disrespect to the successful applicant, but it can give the impression that the appointment is a second choice. It is a matter of the most acceptable common denominator rather than the person wanted by the Executive or any other body; it is the person they can get through the door. That in itself detrimentally affects the individual’s credibility and authority to do their job. Such an impasse here, if the Treasury Committee and the Treasury were at loggerheads for any prolonged period in deciding on the appointment of the Governor of the Bank of England, could result in chaos in international markets and our markets.

I appreciate that it is unlikely that an impasse would result in an unfilled post. It is almost unthinkable, but, as we have seen in recent years, too often now the unthinkable can become the reality. I hope that, in reality, the Treasury and the Select Committee would reach a compromise, such as extending the tenure of the incumbent Governor until a successor was confirmed. Although before my time, some hon. Members will have seen how a person’s authority wanes as soon as it is known that they are about to go. Continued uncertainty about the next appointment, with no decision and no sign of an end to the impasse, would damage the Bank of England’s credibility, which would be hugely detrimental to the role, not just of the Governor but of the Bank of England itself, in both our internal and external markets.

The constitutional quagmire would be further exacerbated if the Treasury Committee adopted the procedure proposed by the Institute for Government. After a Select Committee hearing with the proposed candidate, the Committee would deliberate before announcing its verdict. Then it would have the opportunity to call the Chancellor before it to tell him why the nominated candidate was unsuitable, expecting him to justify why it should change its mind and agree with his proposal. Then we would be into further deliberation before the Committee decided that it did not wish to change its mind. Potentially, the appointment would then be referred to the House for resolution. If, after that lengthy process, the original candidate were confirmed, there is no doubt that their credibility and authority would have been fatally undermined by the whole political ping-pong between the Government and Parliament, never mind the trouble that that would cause to the markets during the weeks or months that passed while parliamentary time was made available.

Even if the Treasury and the Select Committee could agree on a compromise candidate quickly—regardless of this morning’s examples, we all know what “quickly” can really mean—the new appointee would be undermined before they had even taken up the post. The media would portray a second-choice candidate as not having the confidence of the Treasury, the Chancellor of the Exchequer, the Government or the Select Committee, whichever had originally been against the appointment. In those circumstances, what confidence would the wider banking and financial sector have that the new Bank of England Governor would be able to fulfil their role while working closely with the Government?

As I said earlier, the very Select Committee that scrutinises the role of the Bank of England and the Governor might be the Committee that appointed the Governor. For that reason there is a strong argument for allowing the Executive to appoint the Executive-imbued role of the Governor, and for allowing the Select Committee to scrutinise and comment on it, rather than having a Bank of England Governor who is answerable to the Committee for their job in the first place. As was said earlier, we in the House know that the integrity of members of Select Committees is strong enough and powerful enough to deal with that properly, but what matters is not necessarily what we in the House think about the role of the Governor of the Bank of England, but what people outside think, and what the markets think. It is the perception that becomes the reality, and we need the markets to have confidence and faith in the Governor and in his ability and independence, which the House can scrutinise.

Why stop with the Governor the Bank of England? The Bill’s purported aim is to preserve the Governor’s independence, to remove the appointment from political considerations and pressures. As I have said, it would do quite the opposite, but why stop there? Surely if there is a suspicion that the system is sullied by political interference because the appointment is made on the recommendation of the Chancellor, the appointment of the deputy governor or any members of the court of the Bank of England are likewise politically contaminated. Yet we hear little suggestion that their appointment process politically compromises those positions. In fact, these people act as a powerful check and balance within the Bank of England’s internal governance structure, to prevent any Governor of the Bank of England acting in a politically motivated way. At the moment he does not have to be concerned about the views and role of those on the Select Committee who appointed him.

There is also a substantial list of other public appointments made by her Majesty the Queen following recommendation by the Prime Minister or other Ministers. The Bill’s supporters could end up advocating that the relevant Select Committees should have an opportunity to veto or to make those appointments too. As the hon. Member for Edmonton (Mr Love) said, with the changes that have already happened there is a drip, drip effect, and we gradually see the evolution of change around such appointments. If the Bill were to be enacted there would be a big jump, and bigger jumps would follow. Perhaps members of the Culture, Media and Sport Committee should have the ability and opportunity to veto or choose the appointment of the chairman, vice-chairman or other members of the BBC Trust. Perhaps members of the Defence Committee should have an opportunity to veto the appointment of the Chief of the Defence Staff. I have no doubt that members of the Environment, Food and Rural Affairs Committee would enjoy the power to veto the appointment of the chairman of the Forestry Commission or any of the other 10 forestry commissioners, particularly in the current climate.

Where should we stop? It is a valid question, and one that I think deserves some time in this House. Indeed, the power that Select Committees have to veto appointments might be a good topic for the Backbench Business Committee to put forward for debate. However, I do not think that it is right for a single private Member’s Bill to give that Executive power to a single Select Committee. The Minister is here and has heard the views expressed and no doubt will take those thoughts forward. Should Parliament have the final say on the president of the Valuation Tribunal for England, or on which judges are elevated to the Supreme Court, or even on who is installed as the next Archbishop of Canterbury, a debate that I am sure would be of great interest to Members on both sides of the House?

As odd as some of those examples might be, they are all appointments made by Her Majesty following recommendations from her Ministers. I could list many more examples, but I assure hon. Members that they will not have to listen to that right now. Those are all positions of which the holder has a responsibility for making decisions that affect people’s lives.

--- Later in debate ---

[Brandon Lewis]

My hon. Friend makes a valid point, and one that counters the argument made a few moments ago on the continual drip, drip in that direction. He highlights the fact that that has not been happening. There have been some changes in some areas, but in others things have moved in a different way. It is also interesting that that decision was made potentially by the same Member who decided not long ago to ignore the Treasury Committee’s comments on the appointment of a member of the Bank of England’s Monetary Policy Committee.

We must be clear that in all the positions I have mentioned the holder has responsibility for making decisions that affect people’s lives. As has been commented on a few times now, there is a clear and precise line between those positions and the appointments in which some Select Committees have been involved—the Public Accounts Committee and the Treasury Committee, with the Office for Budget Responsibility and the Comptroller and Auditor General—because those Committees have a different type of role. They have a scrutiny role and a statistics role, but they do not have Executive powers to make decisions affecting people’s lives. That is what we in this House are elected to do through legislation and the appointments that flow from Ministers.

[Mr Love]

The OBR is responsible for bringing forward an economic forecast on the basis of which the Government must set out their public expenditure plans. That makes it an incredibly important body that can have significant influence on the direction of the Government’s economic policy.

[Brandon Lewis]

It is a joy to be able to agree wholeheartedly with the hon. Gentleman, who makes a good point. He highlights and confirms the argument I am making. The OBR makes forecasts, but it does not have Executive power to set monetary policy. As he has just pointed out, it is the Government, following those forecasts, who make Executive decisions on how to move forward. Indeed, the Governor of the Bank of England might use Executive powers to decide the Bank’s monetary policy. There is a difference between the role of making forecasts and scrutinising and the Executive power that the Government hold.

[Mr Love]

The Government, through the Chancellor, set the inflation target for the Monetary Policy Committee, so it is the Government who set the benchmark. It is for the Governor and the Monetary Policy Committee to try to target that benchmark.

[Brandon Lewis]

I thank the hon. Gentleman for further enhancing my point about where Executive power actually sits, in contrast to the scrutiny and forecasting role, as important as it is, which is very different from the Executive power wielded by the Government and some of the Executive bodies we are talking about.

If we are to extend the right to veto the appointment of one public official to any given Select Committee, the natural extension is to do so for other public appointments. In doing so, we would turn our Select Committee system and this House into a new form of Executive recruitment agency. Our Select Committees were established to scrutinise, investigate, consider, report and recommend. Principally, our Select Committee system is there to hold the Executive and other public officials and bodies to account. It was not created to veto the Executive, and it was not envisaged that the Committees would be used as quasi-recruitment advisers.

We should be striving to make the Bank of England more accountable to Parliament—I have no disagreement with that—but we should be looking to do so without shackling its sovereignty with more direct control over certain aspects by Parliament. Current concerns from constituents about the Bank of England do not focus on how the Governor is appointed. I certainly have not had in my postbag any letters, let alone a deluge of letters, on that.

--- Later in debate ---

[The Financial Secretary to the Treasury (Mr Mark Hoban)]

This has been a thoughtful debate and some interesting issues have been raised by Members on both sides of the House. I commend the hon. Member for Hayes and Harlington (John McDonnell) on his success in getting the first Bill in the ballot for two years running. The odds on his being first again next year are about 14 million to one—roughly the same as winning the national lottery. If he tells us his numbers, we will all enter it, although I fear that it would make only a minor dent in the deficit that we inherited from the previous Government.

The hon. Gentleman made his arguments in a calm and considered way, but I felt that he did not do justice to some of the more complex issues that have been explored over the last few hours. I am grateful to my hon. Friends for their support in teasing out the issues that underpin the Bill. My hon. Friend the Member for Wimbledon (Stephen Hammond)—the Cliff Richard of Parliament, as he was described earlier—talked about the substantial constitutional change that the Bill would make. The hon. Member for Nottingham East (Chris Leslie), who is no longer in his place, made one of his shorter speeches at eight minutes. Those of us who served on the Financial Services Bill Committee would have welcomed more speeches of that brevity and concision.

My hon. Friend the Member for Great Yarmouth (Brandon Lewis) made a powerful and measured speech, using his experience from the Work and Pensions Committee and highlighting some of the challenges that exist. The hon. Member for Foyle (Mark Durkan), who is no longer in his place, made the second of only two Back-Bench speeches in support of the Bill. He got himself into a bit of a hole trying to justify why he voted against a parliamentary inquiry last night but was in favour of the Bill today.

My hon. Friend the Member for Watford (Richard Harrington) highlighted the importance of transparency and openness in appointments, which I hope to come on to in a moment. My hon. Friend the Member for South Derbyshire (Heather Wheeler), in her typically pithy way, made some important and powerful points about the changes that the Bill would introduce.

My hon. Friend the Member for Finchley and Golders Green (Mike Freer) came with a list of original shareholders of the Bank of England and tried to identify whether any of their successors were in the House of Commons. I have with me a list of Governors of the Bank of England. [Interruption.] No, just be patient. I wondered whether Humphry Morice, the Governor between 1727 and 1729, was related to the hon. Members for Easington (Grahame M. Morris) and for Livingston (Graeme Morrice), but unlike them he was not called Graeme or Grahame. My hon. Friend the Member for Orpington (Joseph Johnson) will be interested to know that Reginald Eden Johnston was the Governor between 1909 and 1911. My hon. Friend quoted Bagehot, and I have my own Bagehot quote to trade with him. I think it rather neatly encapsulates some of the problems with the Bill. He said:

“No result could be worse than that the conduct of the Bank and the management should be made a matter of party politics, and men of all parties would agree in this, even if they agreed in almost nothing else.”

That highlights the problem at the heart of the Bill. The power in it could be used to politicise the appointment of the Governor in a way that would be to the detriment of how the Bank functions.

My hon. Friend the Member for West Suffolk (Matthew Hancock) made an impressive speech—

[Mr Love]

Impressive in its length.

[Mr Hoban]

In its quality, too. The hon. Gentleman should acknowledge that.

Among the many facts that my hon. Friend gave, I have to correct one or two. He said that only nine banks could still issue notes in Scotland and Northern Ireland, but in fact it is only seven. The Bank Charter Act 1844 was the beginning of the move towards the Bank of England’s note issue monopoly, after which no new banks were permitted to issue notes and the stock of notes could not be increased. I am sorry that my hon. Friend the Member for North East Somerset (Jacob Rees-Mogg) is no longer in his place, because the last bank to issue notes was one called Fox, Fowler and Company, which was based in Somerset. Sticking to tradition is a feature of what my hon. Friend does, so perhaps that is not a surprise to him.

--- Later in debate ---

[Mr Hoban]

No, I think I ought to have the opportunity to summarise the Government’s position on the Bill.

We are committed to maintaining the appointments process for the Governor, which is proportionate, attracts candidates of the highest quality and represents value for money for the taxpayer. It is important to ensure the credibility of the candidate, and to safeguard his or her independence and prevent them from becoming a political pawn.

The Financial Services Bill, which is currently in the other place, already contains provisions to strengthen the Bank’s governance arrangements, including moving the Governor to a single eight-year term. Much has been made of the enhanced powers that the Financial Services Bill bestows on the Governor, but it is important to remember that the Bill does not create new responsibilities for the Bank. Rather, it is returning the Bank to a role more akin to the one it played prior to the creation of the Financial Services Authority, when it was responsible for financial stability and prudential supervision of banks. In a way, we are going back to the situation prior to the Labour Government.

The Governor is already accountable to the court and to Parliament, and the Treasury Committee holds pre-commencement hearings for the Governor and deputy governors. That is the right balance. Of course, the Governor—rightly—is regularly called before the Treasury Committee. The market-sensitive nature of the Governor’s role makes it unsuitable to be subject to the approval of the Treasury Committee. Such a step risks uncertainty, delay and disruption to financial markets. That is also true in respect of the proposal to make the dismissal of the Governor subject to the approval of the Treasury Committee. I therefore cannot offer the Government’s support for the Bill.

[Mr Love]

The Minister will be pleased to note that his speech does not come as a surprise, because the Government have laid out their position, not least in the Financial Services Bill. However, the relationship between the Executive and the legislature is evolving. Ad hoc relations, such as those with the Comptroller and Auditor General and the Electoral Commission, have been mentioned. Will the Minister give serious consideration to taking into account the views of both the Treasury Committee and Parliament? Can he envisage a role for them in the process?

[Mr Hoban]

The Treasury Committee already has a role—it conducts, for example, pre-commencement hearings for members of the Monetary Policy Committee. Paul Tucker and Charlie Bean, the two deputy governors, have been through that process, which we envisage will continue.

Even the Labour Front-Bench spokesman in the House of Lords was wary of the proposed increase of authority for the Treasury Committee. Although there has been a broader debate on the role of the House in appointments and whether there should be pre-appointment hearings, this is not the time to make those broader points. If there is to be such evolution, we need a much broader debate. Alighting on the appointment of the Government as a peg for that debate is not the right way to go about things. If I make more progress, I shall highlight the Government’s response to the Liaison Committee, which has discussed increasing the role of Select Committees.

[Mr Hoban]

That is a fair point. The weight of opinion has been to oppose the Bill. I gave a list of hon. Members who have spoken—I forgot to add my hon. Friend the Member for Spelthorne (Kwasi Kwarteng), who was the last Back-Bench speaker—but the balance of views has been against the proposal. There has been some discussion of the fact that the debate has continued until almost 2.30 pm, but the hon. Member for Hayes and Harlington, despite his three e-mails, could not get the 100 hon. Members required for the closure. The House has expressed its view today.

The appointment veto was proposed by the Treasury Committee. There was a consultation on, and pre-legislative scrutiny of, the Financial Services Bill prior to its Second Reading but, except for the Treasury Committee, no one called for the appointment of the Governor to be subject to its approval.

We need to recognise the changes being made to the accountability and governance of the Bank. It is facing pretty significant organisational change, and it is right that the arrangements for its governance and accountability be thoroughly debated as part of that process. In November, the Committee published its report on the accountability of the Bank and in it made several recommendations on governance. As a consequence, we have tabled amendments in the other place to strengthen and modernise the Bank’s governance arrangements.

Those amendments will replace the current committee of non-executive directors of the Bank with a non-executive oversight committee that will have a broad remit to oversee the Bank’s performance against its objectives and strategy, and provide for explicit powers to commission and publish internal and external reviews of the Bank’s policy-making process. In the Bank’s annual report and accounts, published on Monday, the Governor said in the foreword that the Bank must carry out its new responsibilities with

“openness and transparency, and be held accountable for them to Parliament and the public, just as”—

it is “for monetary policy”—an important signal from the Bank about its role.

Since the Bank’s nationalisation in 1946, appointments have been made by Her Majesty the Queen on the recommendation of the Chancellor and the Prime Minister. The Bill would require that the appointment be made by Her Majesty with the consent of the Treasury Committee as well. The current legislation states that the Bank may, with the Chancellor’s consent, remove the Governor from office in certain circumstances, but again the Bill would require that the Treasury Committee consent to that removal. We have made our position clear: we do not believe that giving the Treasury Committee a statutory power over appointments or dismissals is either necessary or appropriate.

[Mr Love]

The Minister indicated that we were returning to the Bank powers over financial stability and oversight of the banking industry, but he forgot to mention that it already had powers over monetary policy, which it never had in the past. In effect, the Bank and the Governor have unprecedented powers. I accept that parliamentary oversight has been strengthened—sometimes at the behest of the Treasury Committee—but, given these unprecedented powers, will the Government consider going further and putting in place appropriate parliamentary scrutiny to ensure that the powers are being used effectively?

[Mr Hoban]

We are improving the parliamentary scrutiny of the Bank. As a result of the Financial Services Bill, we will see more regular reports on regulatory failure, and I expect the Governor to appear before the Treasury Committee. On financial stability decisions, we are trying to ensure that the Bank’s six-monthly financial stability reports are transparent and open, and that they explain the risks facing the economy, what the FPC will do about them and what the consequences might be. There is, then, a great deal of transparency in the work of the Bank. That is a significant leap forward, and I pay tribute to the work of the Treasury Committee in encouraging that increase in transparency. We listen to the Committee and respond to its conclusions.

The Government believe, as did the previous one, that the existing appointment process is robust, appropriate and ensures the independence and accountability of the Governor. We are introducing a single eight-year term for the Governor, which will preserve his independence. That was a proposal from the Treasury Committee but also one that we made when in opposition. It will help to strengthen that independence. There are risks, however, in giving the Treasury Committee a veto over appointments. There could be an impact on market stability, with a risk of undermining market confidence. There is also a risk of creating a party political or politicised process—the very danger that Bagehot warned us against.

It would be wrong for the Bill to receive a Second Reading, although there is much more that I would like to say about the matter. I do not think that we have properly explored the issues, but I am grateful to hon. Members on both sides of the debate for their contributions. These are weighty matters that deserve proper parliamentary attention and—

Professional Standards in the Banking Industry

Andrew Love Excerpts

Thursday 5th July 2012 Commons Chamber

[The Leader of the House of Commons (Sir George Young)]

The debate got off to a difficult start and those watching it might have been driven to the conclusion that this was not the forum for a rational debate about the ethics and conduct of banking. Of course, the Government motion proposes a joint parliamentary inquiry, and those who have served on Select Committees and Joint Committees know that such inquiries are conducted in a far calmer atmosphere than the rather heated beginning of our debate, particularly if they are tempered by the presence of those from another place. My hon. Friend the Member for Harwich and North Essex (Mr Jenkin) made that point in his compelling speech.

I hope that Opposition Members read, if they did not listen to, the speech from my hon. Friend the Member for Chichester (Mr Tyrie), who has said that he is ready to serve as Chair of the Committee if it goes ahead. He made it absolutely clear that he was not interested in a witch hunt, that his inquiry would be forward looking, that the objective would be to get banking in better shape quickly and that he wanted a broad-based inquiry including participation from Opposition Members. I hope that Opposition Members will be reassured by his speech.

My hon. Friend also asked for an assurance about resources from the Treasury. In his statement on Monday, my right hon. Friend the Chancellor made it clear that the Treasury would be happy to give resources to the Committee.

[Mr Andrew Love (Edmonton) (Lab/Co-op)]

Will the Leader of the House give way?

[Sir George Young]

Let me make a little more progress.

I am also grateful to my right hon. Friend the Member for Haltemprice and Howden (Mr Davis). In a thoughtful speech, he made the point that the gap between the two forms of inquiry was narrower than many had implied, particularly so far as powers were concerned. He also reinforced the imperative of reaching a unanimous conclusion, which often happens with Select Committees of the House. Indeed, he drew on his own experience on the Public Accounts Committee. My right hon. Friend cast some doubt on the December target, but my hon. Friend the Member for Chichester seemed content with it.

I hope that Opposition Members will listen to what the hon. Member for Dundee East (Stewart Hosie) said. He is a signatory to motion 2 on the Order Paper and made it clear that if that motion was not carried he would not oppose motion 3. That is the right approach if we are to resolve the issue this afternoon.

I am grateful, too, to my hon. Friend the Member for Caithness, Sutherland and Easter Ross (John Thurso), who made the point that the gap between the two sides was not quite as wide as the rhetoric at the beginning of our debate implied. He underlined the urgency of making progress, particularly if we are to catch the legislative train that is going through the House in this Session.

The right hon. Member for Oldham West and Royton (Mr Meacher) asked why the Government were against the inquiry proposed by the Opposition. My right hon. Friend the Chancellor set out in his speech the timetable for public inquiries and that was one reason why we did not think that that was the right way forward.

My hon. Friend the Member for Rochester and Strood (Mark Reckless) made an interesting speech explaining the difference in culture that had occurred in the City, a point also made by my hon. Friend the Member for Macclesfield (David Rutley), who was put off a career in the City by being asked the question, “How greedy are you?” One only has to look at him to realise that the answer is not at all, as he has the figure of a pipe-cleaner.

My hon. Friend the Member for Witham (Priti Patel) spoke on behalf of the thousands of people who work in banking who were not responsible in any way for what has occurred but whose reputations are now tarnished by the actions of a minority. She spoke on behalf of the hard-working majority in our banking services and supported the parliamentary inquiry.

Many of the contributions underlined powerfully the need for urgent action to put out the fires that are threatening to engulf one of our leading financial institutions and to prevent further wrongdoing at the heart of banking. Banking employs more than 1 million people, and it generates £63 billion in Exchequer revenues and 8.9% of our gross domestic product.

I do not think that there is any disagreement between the Government and the Opposition on what we need to do, which is to sustain a strong, vibrant, transparent and more accountable financial sector in the UK that commands international confidence. Although we are united on the direction of travel, there are clearly differences on the choice of vehicle and its speed. We favour a cross-party Joint Committee of both Houses that is accountable to Parliament; in operation before the summer recess; equipped to navigate the legal minefield of criminal investigations; and well positioned to produce recommendations that can be implemented through legislation that can be introduced in this Session. The Opposition, as we have heard, prefer a more costly public inquiry led by a judge and run by Queen’s Counsel and other lawyers that would coincide with and perhaps undermine other regulatory proceedings operating on a time scale that cannot easily be controlled.

Those who support the first motion should listen to what the former Cabinet Secretary Lord O’Donnell said in the debate in the upper House on Tuesday:

“I was involved very much in setting up the Leveson inquiry, and my experience of judge-led inquiries is that you have to be incredibly careful about tying them down to specific issues and timetables.”

That is what the Opposition are seeking to do. He continued:

“What people have said they want from this specific inquiry means that it will grow bigger and take longer or that it will be incredibly superficial”.

Lord O’Donnell was not alone in expressing those concerns. Two other former Cabinet Secretaries voted against the Opposition’s proposals, and even Lord Eatwell, the Labour Treasury spokesman said:

“I am supportive of the idea of a Joint Committee moving forward to deal with the specific implications and consequences of the LIBOR element—what Mr Tyrie refers to as the ring-fence proposals.”—[Official Report, House of Lords, 3 July 2012; Vol. 738, c. 617-623.]

Some hon. Members have claimed that a parliamentary Committee will be unable to rise above the political fray. However, we all realise that a Committee report pushed through on party lines will quickly be devalued. Others have suggested that a parliamentary Committee would lack the inquisitive force of an inquiry barrister. I want to make it absolutely clear that a Joint Committee will have what it needs to carry out an inquiry including, if it wants them, resources for counsel. If we establish a Joint Committee we are fortunate to have more than 1,000 Members in both Houses with the necessary expertise to hold an inquiry. The advantage of a parliamentary Committee is that it is in a position to ensure that the recommendations are carried forward—something that we cannot have with a judge-led inquiry.

A number of my hon. Friends have made the point that today’s debate has not just been about the conduct of the banks. To a lesser extent it has been about the capacity, reputation and relevance of parliamentary institutions to rise to the challenge. I have to say to those who resist a parliamentary inquiry that I have more confidence in the ability of Parliament and its Committees to rise to the challenges that confront us this afternoon than all those who say we are the wrong people to do this.

The hon. Member for Wallasey (Ms Eagle) did not make clear—and neither did the shadow Chancellor—whether, if motion 2 is defeated and motion 3 is carried, the Opposition will participate in the inquiry. I very much hope that if motion 2 is defeated the whole House will support motion 3. I hope that all parties will nominate those with the qualities needed, of whom there are many throughout both Houses, to the Joint Committee, and I hope that we can show the country that we have the ability and self-confidence to discharge the responsibilities placed on us and address the central issue at stake today—restoring confidence in the UK’s banking industry.

Question put.

LIBOR (FSA Investigation)

Andrew Love Excerpts

Monday 2nd July 2012 Commons Chamber

[Mr Osborne]

To give a pithy reply, I certainly do find it odd.

[Mr Andrew Love (Edmonton) (Lab/Co-op)]

Does the right hon. Gentleman regret diluting the Vickers proposals, under pressure from the banks? In the light of revelations in recent days, will he ensure that the ring fence is strengthened, so that this does not happen again?

[Mr Osborne]

We are not diluting the Vickers proposals; we are putting them into law. The House will have the opportunity next year to ring-fence retail banking and separate it from banks’ investment banking arms. When I was the shadow Chancellor, I proposed changes to the structure of banking, and they were completely rejected by the former Prime Minister at this Dispatch Box. We now have an opportunity to change the structure of banking, and I hope that I will have the hon. Gentleman’s support when the law comes before us.

LIBOR (FSA Investigation)

Andrew Love Excerpts

Thursday 28th June 2012 Commons Chamber

[Mr Osborne]

The Government whom the hon. Gentleman and I both support have introduced clawback so that the bonuses that were given to executives, traders and others in the banks can be clawed back if necessary. That did not previously exist. We are looking specifically at the responsibilities of directors of failed banks. The consultation on that will be published next week as a result of the FSA inquiry into what went wrong at RBS, and as I say, we are responding to today’s report by looking at the regulation of LIBOR, at the criminal sanctions that are available for prosecution, and at what happens to the fine, so that it is the people of Bristol who benefit from the fine that is paid, rather than other banks in the City of London.

[Mr Andrew Love (Edmonton) (Lab/Co-op)]

This inquiry was started by the US authorities. The fines that have been imposed, which have been mentioned by many Members, were four times as large in the United States as they are in the United Kingdom. The US authorities also imposed stringent conditions on the operations of Barclays in this area. When will we get robust regulation in this country? When will the FSA send out e-mails entitled, “You’re nicked, big boy”?

[Mr Osborne]

It sounds like one of the e-mail exchanges that the traders were engaging in at the time, if one reads the report. The US authorities are rightly involved, because much of the manipulation happened with the US dollar market so it is perfectly understandable why they would want to be involved. I have raised this question. Perhaps it is an issue that the Select Committee would also want to consider—why in the US there seem to be more powers available to the authorities than in the UK, and what we can do in this House to make that change here so that the UK authorities have the full range of powers available to them.

Oral Answers to Questions

Andrew Love Excerpts

Tuesday 26th June 2012 Commons Chamber

[Teresa Pearce (Erith and Thamesmead) (Lab)]

1. When he expects to publish the consultation document on tackling excessive card surcharges.

[Mr Andrew Love (Edmonton) (Lab/Co-op)]

8. When he expects to publish the consultation document on tackling excessive card surcharges.

[The Financial Secretary to the Treasury (Mr Mark Hoban)]

The Department for Business, Innovation and Skills is taking forward work on excessive credit card surcharges. I understand that the consultation to seek views on how and when a ban might be applied is going on in the summer.

[Mr Hoban]

The hon. Lady is absolutely right to highlight the costs imposed by this on our constituents. Our estimate was that in 2010 nearly £500 million was spent by consumers on surcharges. It is still our intention to ban them. Both consumers and businesses should be clear that after many years of inaction by our predecessors, it is this Government’s intention to ban these excessive charges.

[Mr Love]

The super-complaint was upheld in December last year. The Government have not even started the consultation that would be necessary to introduce this measure. Meanwhile, £8 million a month has been lost just by those suffering surcharges on flights from this country. When are we going to get some action?

[Mr Hoban]

As I said, we are going to publish a consultation this summer and take action to ban these surcharges as soon as possible after that. We should be very clear not only that we are going to ban them, but that some firms have already responded to the action we are going to take, with a number of them reducing their charges on credit and debit card use. That shows that even without legislative action, consumers are getting a better deal as a consequence of our policy.

Banking Reform

Andrew Love Excerpts

Thursday 14th June 2012 Commons Chamber

[Mr Hoban]

We have considered Sir John’s recommendations carefully, including the cost on banks, the economy and business, but we felt it was in the interest of business to ensure that a wider range of products could be sold within the ring fence, including complex ones such as derivatives. We set out, in our cost-benefit analysis, to look at the cost of the package as a whole, not to break it up into particular areas. I am confident, however, that we will have a more stable banking system in a position to lend to business on a more sustainable basis. Through these reforms, we hope to increase competition in the banking system, which is in the interests of small businesses and will help to improve competition on price. I think, therefore, that this is a good package for businesses and will ensure the stability of the economy.

[Mr Andrew Love (Edmonton) (Lab/Co-op)]

Next Thursday, there will be a debate in the House on the mis-selling of derivative and hedging products to small businesses, yet the Minister has announced that these will be allowed inside the ring fence. His excuse is that there will be stricter regulation, but are these not high-risk products that should not be mixed up with deposits in retail banks?

[Mr Hoban]

The hon. Gentleman follows these matters carefully. I do not know whether he, like me, has a fixed-rate mortgage, but that is actually a form of derivative. These products are widely used and there is a need for them. It is in the interests of businesses that such products be within the ring fence—it will provide much more control over their sale—although it is important to supervise properly the conduct of the banks selling them. The Financial Conduct Authority is well placed to provide that supervision, and with the tougher powers we have given it, that supervision will apply not only to retail customers but to business customers.