Financial Services Bill

Baroness Kramer Excerpts

Tuesday 6th November 2012 Lords Chamber

[Lord Deben]

I merely suggest that in these detailed discussions, when we hear mainly from those who are very expert, it is as well to consider views from outside, from business as a whole. A trick which all businessmen know is that there are two ways in which you can control a committee. One is to have a very small committee mainly related to you, and the other is to have a very large committee in which you know very well that you can organise the dynamics. I am much impressed with the arguments of the noble Baroness, Lady Noakes, who has put her finger on a very important issue. I hope that the Government would accept that nowadays there is a good deal of expertise looking at these matters and the Tavistock Institute has much of it. I would be unhappy if we suggested that we knew better than its experience, over a very long time, of how best to do these things. I hope the Government will see this as a perfectly reasonable thing, a balanced situation. The noble Baroness, Lady Noakes, and I do not always agree on matters—indeed, there are lots we disagree on—but on this occasion, coming from my understanding of trying to run boards and companies, this would be a good thing to do and not to do it would seem a little perverse.

[Baroness Kramer]

My Lords, I cannot pretend to have the expertise on boards that the previous speakers have had and I do not want to repeat the very powerful arguments they have made; I merely add two quick comments. I think that the Minister will have understood from the debate that has gone on for much of today that there is still a general uneasiness over the amount of power that flows to the Governor of the Bank of England under this new framework. Here is a sensible way to put a bit more challenge into the system. I think that we all feel that a bit more challenge would be a good way in which to make sure that the governor has to do the thing that is the greatest check on any individual: to persuade others to go along with him. That is rather more necessary in an absolutely core function, one of financial stability and economic growth.

Secondly, we have all been somewhat concerned about the role of the FCA and the kind of status that the chief executive of the FCA may have in comparison to his peers in the regulatory family that falls more directly under the Bank of England. His role becomes a little more pivotal when you look at Amendment 4 and I suspect that that is no bad thing. It also makes sure that the FCA voice is heard rather more clearly and independently than it might have been without this amendment. I hope that the Minister will take all that on board.

[Lord Eatwell]

My Lords, I have added my name, as has my noble friend Lady Hayter, to Amendment 5, which is the second-best amendment of the noble Baroness, Lady Noakes. However, even in this second-best version, achieving what the noble Baroness, Lady Kramer, referred to as “a bit more challenge” is an excellent and desirable objective.

--- Later in debate ---

[Lord Deben]

I am distressed that the Minister should feel that on the previous occasion I suggested that he would be other than magnanimous, for he is always magnanimous. I speak in his support because we have to be very careful about constantly adding all the good things that we might like to have taken into account in all circumstances. Financial stability in these circumstances is exactly what we should be saying first and we refer to the other, perfectly rightly, because it is necessary. I find it incredible that any committee, in any circumstance, would get up and say it thinks it is a frightfully good idea to have the stability of total sterility. I do not understand where the noble Lord, Lord Eatwell, really thinks that anybody would come to that conclusion. This seems a totally unnecessary amendment and I hope very much that the Minister will refuse it.

[Baroness Kramer]

My Lords, I feel positively disturbed by this amendment. I am far more concerned that ultimately we will have to resist the optimism and buy-in to “all is going well, let’s take the leash off”, and the erosion of regulation and structural protection. It is important that financial stability should be the primary objective for the Financial Policy Committee. It was important to add the economic growth objective to sit alongside it, but in a secondary role—to say that if the requirements for financial stability are met, the committee should make sure that, alongside and within that, economic growth has the chance to take place. That is an appropriate balance, which has been achieved by earlier amendments to this Bill.

To pull away that protection now and put us back exactly where we were—perhaps I may say, under the last Labour Government—would suggest that people have not learnt their lessons. That is the great fear: we have a crisis and people immediately react to counter the crisis. However, my goodness, our memory is short. As soon as times become good, it is very hard for a regulator to continue to impose constraint and manage risk. It is absolutely crucial that we make clear that this is meant to be a permanent feature of the Financial Policy Committee, not just a feature for now.

[Lord Phillips of Sudbury]

My Lords, I will add a rather mundane legal point. I do not believe that the amendment tabled by the noble Lord, Lord Peston, would achieve anything, even if it were accepted. Subsection (1), whose two limbs cover the matters to which the Financial Policy Committee must have regard, is quite clear about the stability objective. However, in a situation where the Government had no objective for growth, it would not bite, even if you took the words “subject to that” out of the clause. That is, as I said, a very mundane lawyer’s point.